Nuveen
Exchange-Traded Funds
August 31, 1998
Annual Report
Dependable, tax-free income to help you keep more of what you earn.
NPC
NCL
NCU
California
Photo of: People talking on dock.
<PAGE>
Highlights
As of August 31, 1998
Contents
1 Dear Shareholder
3 Portfolio Manager Roundtable
5 NPC Performance Overview
6 NCL Performance Overview
7 NCU Performance Overview
8 Report of Independent Auditors
9 Portfolio of Investments
19 Statement of Net Assets
20 Statement of Operations
21 Statement of Changes in Net Assets
22 Notes to Financial Statements
26 Financial Highlights
28 Building Better Portfolios
29 Fund Information
================================================================================
Nuveen Insured California Premium Income Municipal Fund, Inc. (NPC)
o Taxable-equivalent yield of 8.24% *
o One-year total return net asset
value of 11.51%
o Dividend increase in August, 1998
Pie Chart:
Insured 71%
U.S. Guaranteed 29%
Nuveen Insured California Premium Income Municipal Fund 2, Inc. (NCL)
o Taxable-equivalent yield of 8.21% *
o One-year total return net asset
value of 10.95%
o Dividend increase in August, 1998
Pie Chart:
Insured 93%
U.S. Guaranteed 7%
Nuveen California Premium Income Municipal Fund (NCU)
o Taxable-equivalent yield of 8.42% *
o One-year total return net asset value of
10.83%
o Stable dividend for 40 consecutive months
Pie Chart:
AAA/U.S. Guaranteed 65%
AA 9%
A 13%
BBB/NR 13%
* For investors in the 37.4% federal and state income tax bracket. See your
funds' Performance Overview in this report for more information.
<PAGE>
Photo of: Timothy R. Schwertfeger
Chairman of the Board
Sidebar text: Wealth takes a lifetime to build. Once achieved, it should
be preserved.
Dear Shareholder
I'm pleased to report that over the past 12 months, the Nuveen California
Exchange-Traded Funds have continued to perform well, meeting their primary
objective of providing you with competitive levels of tax-free income. The
strong market in fixed-income securities, bolstered by investor demand for
quality investments such as these, benefited the funds and led to generally
higher share prices over the past year. Competitive tax-free income, enhanced by
strong share price performance, illustrates once again that municipal bonds
provide an excellent investment for income-oriented investors.
THE ECONOMY IN REVIEW
Over the past year, the markets endured bouts of volatility, as the Asian
financial crisis spilled over into emerging markets and affected economies
around the globe. Investors responded by seeking a haven from the ongoing
uncertainty in more conservative investments, such as municipal bond funds. As
interest rates on municipal bonds continued to trend downward, the competitive
yields offered by these funds stimulated additional investor interest.
As a result, the market for exchange-traded municipal bond funds has been
exceptionally strong. Exchange-traded funds continue to represent a bright spot
among fixed-income investments. These funds have paid competitive current market
yields in a market that places a high premium on yield. In addition, the funds
have generally maintained excellent levels of call protection, resulting in
relatively stable income streams. Bond calls may occur in these portfolios,
however, resulting in a dividend reduction for the fund. But, the very nature of
exchange-traded funds helps them retain call protection and competitive yields
because, unlike mutual funds, exchange-traded funds can focus on maintaining a
fully invested portfolio without the need to raise cash for redemption
requirements. These qualities have generated strong demand for most of the
funds, which should lead to improved share prices overall.
In the coming months, we will continue to watch several key factors affecting
the future of the economy, including the strength of the dollar, employment
figures, corporate earnings reports, and further interest rate indications from
the Federal Reserve. These factors will influence the outlook for fixed-income
markets during the remainder of the year.
MUNICIPAL MARKET REVIEW
Over the past year, the declining interest rate environment drove yields on
30-year Treasuries to their lowest levels since the U.S. government began
selling these bonds in 1977. The story in the municipal market, however, was
quite different. As yields on the long Treasury bond reached historic lows, the
yield on the Bond Buyer 40, an unmanaged index of long-term municipal bonds,
fell just 42 basis points - from 5.53% to 5.11% - compared with the dramatic
134-point drop in Treasury yields over the past 12 months. As of August 31, 1998
the ratio between Treasury yields and municipal yields stood at 92%, compared
with the more typical range of 80-82%. For investors, this means that municipal
bonds offered 92% of the yield of a Treasury bond with comparable
characteristics - before taxes are taken into account.
<PAGE>
One of the main factors in the steep decline in Treasury yields was the
strong interest in these investments by both international and conservative
investors. As problems in Asia continued to spread and the dollar strengthened
against foreign currencies, the demand for U.S.-dollar denominated Treasury
securities increased overseas. Similarly, conservative investors made a "flight
to quality" in search of shelter from global concerns by moving assets into
high-quality U.S. Treasury bonds. In addition, the federal budget surplus
resulted in a cutback in issuance at that level, leaving fewer bonds to meet the
strong demand.
In the municipal market, where foreign demand was limited by the inapplicability
of tax advantages, low interest rates and a strong economy combined to generate
high levels of new issuance and a dramatic increase in the refinancing of
existing bonds. The first six months of 1998 saw $146 billion of new municipal
bond issuance, up 51% over the same period in 1997, and $42 billion in refunding
activity, an increase of 118% from last year. The continued strength of the U.S.
economy has brought about improvements in the fundamental financial health of
many municipalities and boosted the overall credit quality of municipal bonds.
This enhanced credit quality also contributed to the funds' performance, as the
upgraded bonds increased in value.
NUVEEN EXPERTISE IS KEY
The key to taking advantage of the exceptional values currently available in the
municipal market is the expertise of a proven investment manager. At Nuveen, we
recognize the value of time-tested expertise. The high level of recent municipal
issuance, for example, highlights the value of our expertise in the municipal
market, as our portfolio management teams carefully analyze the flood of issues
to select those securities best suited to helping the funds achieve their
investment objectives.
Nuveen has assembled a group of Premier AdvisersSM that can provide years of
experience and time-tested expertise in a given asset class. In addition to
Nuveen Advisory Corporation, our Premier Adviser for tax-free investing, you can
rely on our growing group of other advisers to provide the expertise that makes
the difference in the equity market, including Institutional Capital Corporation
for value investing and Rittenhouse Financial Services for growth investing. For
more information about our funds managed by other Nuveen Advisors, including
charges and expenses, contact your financial adviser for a prospectus or Nuveen
at (800) 621-7227. Read it carefully before you invest or send money.
We encourage you to talk with your financial adviser about the ways Nuveen's
expanding selection of investments, together with our expertise, can help you
establish the foundation of a diversified portfolio designed to build and
sustain long-term financial security. When seeking quality investment solutions
that withstand the test of time, you can count on Nuveen. Our expertise provides
the key to building a well-balanced portfolio that can help you achieve your
financial goals.
Sincerely,
Timothy R. Schwertfeger
Chairman of the Board
October 15, 1998
Sidebar text: "Our expertise provides the key to building a well-balanced
portfolio that can help you achieve your financial goals."
<PAGE>
Nuveen California Premium Income Municipal Funds
Portfolio Manager Roundtable
Portfolio managers Mike Davern and Bill Fitzgerald discuss the California
municipal market, fund performance, and key investment strategies for the Nuveen
California Premium Income Municipal Funds. Mike and Bill assumed portfolio
management responsibilities for the funds on July 1, 1998, as part of Nuveen's
efforts to enhance the efficient use of staff resources and portfolio manager
expertise. Mike, who joined Nuveen in 1991, has 15 years of experience as an
investment professional and manages a range of Nuveen state municipal bond
funds. Bill has over a decade of experience as an investment professional at
Nuveen and manages several other California municipal bond funds.
CALIFORNIA STATE UPDATE
The California economy has continued to expand, as it diversifies away from a
reliance on aerospace and defense spending into a variety of sectors, including
service industries, high technology, and financial services. This
diversification has broadened the state's economic base and strengthened its
position by reducing the risk that a downturn in one industry will result in
recession for the entire state, as happened in the early 1990's. While
California's heavy use of Asian intermediaries in the manufacturing process has
caused recent concern about a potential slowdown in some industries, in light of
Asia's recent financial troubles, the overall picture is strong. Employment has
reached levels unseen since before the recession, and the state government is in
good shape fiscally, with improved cash flows and a positive balance sheet. With
increasing state revenues, California is now trying to remedy some of the
financial stress it placed on cities and counties during the recession when it
took over local revenue and passed along expenses. The state's improving credit
was recently recognized with an upgrade by one rating agency, and California
bonds are already trading at prices above what their current credit rating of A+
might warrant.
In response to low interest rates, the expanding economy, and California's
continued population growth, the state's municipal bond issuance during the
first eight months of 1998 increased by 65% over the same period in 1997.
Issuance by the land-based financing sector has been particularly strong, as
real estate values in the state continue to improve and development activity
accelerates in this favorable environment. Supply is expected to remain heavy
over the next few years due to the continuing need for infrastructure financing,
increased school spending, and new prison construction. In recent months,
volatility in the equity markets, combined with the high level of California
taxes, has boosted demand for municipal bonds. Demand from institutional buyers
such as insurance companies and hedge funds has also increased, as these
investors recognized the exceptionally attractive values currently offered by
these bonds.
FUND PERFORMANCE
For the year ended August 31, 1998, the Nuveen Insured California Premium Income
Municipal Fund, Inc. (NPC) and the Nuveen Insured California Premium Income
Municipal Fund 2, Inc. (NCL) produced total returns at net asset value of 11.51%
and 10.95%, respectively, compared with 9.31% for the Lehman California Insured
Municipal Bond Index. The taxable equivalent returns were 14.74% and 14.19%,
respectively, for investors in the 37.4% federal and California state income tax
bracket. For the same period, the Nuveen California Premium Income Municipal
Fund (NCU) produced a total return on net asset value of 10.83%, outpacing the
Lehman California Municipal Bond Index's annual return of 8.91% and providing a
taxable-equivalent return of 14.15% for investors in the combined 37.4% federal
and California state income tax bracket.
While attractive levels of tax-free income from bonds purchased when yields were
higher contributed to the total returns of these funds, the majority of the
funds' outperformance can be attributed to longer leverage-adjusted durations.
The leverage adjusted durations for NPC and NCL were 11.62 years and 9.44 years,
respectively, versus 8.88 years for the leveraged insured California index.
NCU's duration was 10.25 years, compared to the leveraged California index's
7.95 years. Over the past 12 months, as financial turmoil abroad sparked a
degree of volatility in the U.S. interest rate markets, yields for all types of
bonds generally trended downward. In this environment, longer duration proved to
be beneficial to performance. Duration measures a bond fund's price volatility,
or reaction to interest rate movements. The longer the duration, the more
sensitive the fund is to changes in interest rates. During a period of falling
interest rates and market rallies, longer duration enabled all three funds to
participate more fully in market gains. However, when rates rise, longer
duration can make the funds more vulnerable to potential price declines.
<PAGE>
Despite the low interest rate environment of the past year, good call protection
helped to support the dividends of the three funds and protect income from
erosion. NCU has now provided shareholders with 40 consecutive months of steady
income. As of August 31, 1998, the fund offered a very competitive current
market yield of 5.27%, which translates to 8.42% on a taxable-equivalent basis
for investors in the combined 37.4% federal and state income tax bracket. NPC
and NCL increased their dividends effective August 1998. These funds now offer
current market yields of 5.16% and 5.14%, respectively, equivalent to taxable
yields of 8.24% and 8.21%.
As Tim mentioned in his letter to shareholders, share price performance among
the Nuveen exchange-traded funds has been strong over the past 12 months.
Falling interest rates caused the share prices of the Nuveen California Premium
Income funds to improve. As a result, the discounts on these funds narrowed
dramatically over the course of the year. As of August 31, 1998, each fund was
trading at a slight discount to its net asset value, presenting excellent
opportunities for investors to acquire additional shares.
KEY STRATEGIES
Maintaining dividends is the top priority for each of these funds, and our
strategies continue to focus on accomplishing this objective. For the two
insured funds, NPC and NCL, this includes capturing the premiums earned by the
funds as the market rallied by selling selected bonds at a profit, reinvesting
the proceeds, and using tax loss carry-forwards to offset capital gains. This
strategy enables us to avoid capital gain distributions to shareholders and grow
the funds' principal, effectively providing an additional way to grow income in
a declining interest rate environment. For NCU, we have focused on investing in
lower-rated and non-rated securities to capture the additional yield offered by
these bonds and increase portfolio earnings.
OUTLOOK FOR THE FUTURE
The current market environment - influenced by declining interest rates, benign
inflation, and good municipal supply - has helped to position municipal bonds as
one of the most compelling values available in the market today. We expect the
excellent municipal-to-Treasury ratio, combined with continued volatility in the
equity markets and investors' needs to rebalance their equity and bond
portfolios, will result in increasing demand for municipal bonds. Investors who
take advantage of current opportunities in the municipal market will be rewarded
with healthy returns and attractive yields as the market recognizes the value of
these quality investments.
Looking ahead for the California Premium Income Municipal Funds, our focus will
continue to be on supporting the income streams of these funds, especially if we
remain in a low interest rate environment. Over the next two years, NPC will
face bond calls affecting about 7% of its portfolio. Our goal will be to
maintain the dividend by reinvesting the proceeds of these calls in bonds with
attractive yields. We currently favor bonds issued by sectors such as water and
sewer projects, where scarcity has enhanced value. Nuveen's expertise as an
experienced investment manager knowledgeable about the unique aspects of the
California municipal market is key to our ability to select the right securities
for our portfolios and add value for our investors.
<PAGE>
Nuveen Insured California Premium Income Municipal Fund, Inc.
Performance Overview
As of August 31, 1998
NPC
Portfolio Statistics
==================================================
Inception Date 11/92
- --------------------------------------------------
Share Price 15 15/16
- --------------------------------------------------
Net Asset Value Per Share $16.31
- --------------------------------------------------
Current Market Yield 5.16%
- --------------------------------------------------
Taxable-Equivalent Yield (Federal Only)(1) 7.48%
- --------------------------------------------------
Taxable-Equivalent Yield
(Federal and State)(1) 8.24%
- --------------------------------------------------
Fund Net Assets ($000) $149,478
- --------------------------------------------------
Average Weighted Maturity (Years) 21.49
- --------------------------------------------------
Leverage-Adjusted Duration (Years) 11.62
- --------------------------------------------------
Annualized Total Return
==================================================
On Share Price On NAV
- --------------------------------------------------
1-Year 15.85% 11.51%
- --------------------------------------------------
3-Year 13.95% 9.84%
- --------------------------------------------------
5-Year 6.63% 7.05%
- --------------------------------------------------
Since Inception 6.92% 8.29%
- --------------------------------------------------
Taxable-Equivalent Total Return(2)
==================================================
On Share Price On NAV
- --------------------------------------------------
1-Year 19.27% 14.74%
- --------------------------------------------------
3-Year 17.56% 13.18%
- --------------------------------------------------
5-Year 10.26% 10.48%
- --------------------------------------------------
Since Inception 10.42% 11.65%
- --------------------------------------------------
Top Five Sectors (as a % of total investments)
==================================================
U.S. Guaranteed 29%
- --------------------------------------------------
Water and Sewer 20%
- --------------------------------------------------
Tax Obligation (Limited) 17%
- --------------------------------------------------
Utilities 11%
- --------------------------------------------------
Tax Obligation (General) 6%
- --------------------------------------------------
1 Taxable-equivalent yield represents the yield on a taxable investment
necessary to equal the yield of the Nuveen fund on an after-tax basis. The
federal only rate is based on the current market yield and a federal income
tax rate of 31%. The rate shown for federal and state highlights the added
value of owning shares that are also exempt from state income taxes. It is
based on a combined federal and state income tax rate of 37.4%.
2 Taxable-equivalent total return is based on the annualized total return and a
combined federal and state income tax rate of 37.4%. It represents the return
on a taxable investment necessary to equal the return of the Nuveen fund on an
after-tax basis.
Bar Chart:
1997-1998 Monthly Tax-Free Dividends Per Share
September 1997 0.0675
October 1997 0.0675
November 1997 0.0675
December 1997 0.0675
January 1998 0.0675
February 1998 0.0675
March 1998 0.0675
April 1998 0.0675
May 1998 0.0675
June 1998 0.0675
July 1998 0.0675
August 1998 0.0685
Mountain Chart:
Share Price Performance
Weekly Closing Price
9/5/97 14.75
15
14.813
14.75
15.375
14.875
15.188
15.25
15
14.688
14.813
14.625
15.188
15.063
14.938
15.188
15.188
15.313
15.375
15.25
15.563
15.625
15.438
15.563
15.5
15.75
15.875
15.625
15.875
15.813
15.813
15.5
15.313
15.438
15
15
15.063
15.188
15.5
15.75
15.813
16.125
15.938
16.063
15.75
15.438
15.438
15.5
15.5
15.563
8/31/98 15.9375
Past performance is not predictive of future results.
<PAGE>
Nuveen Insured California Premium Income Municipal Fund 2, Inc.
Performance Overview
As of August 31, 1998
NCL
Portfolio Statistics
==================================================
Inception Date 3/93
- --------------------------------------------------
Share Price 14 13/16
- --------------------------------------------------
Net Asset Value Per Share $14.82
- --------------------------------------------------
Current Market Yield 5.14%
- --------------------------------------------------
Taxable-Equivalent Yield (Federal Only)(1) 7.45%
- --------------------------------------------------
Taxable-Equivalent Yield
(Federal and State)(1) 8.21%
- --------------------------------------------------
Fund Net Assets ($000) $281,399
- --------------------------------------------------
Average Weighted Maturity (Years) 19.06
- --------------------------------------------------
Leverage-Adjusted Duration (Years) 9.44
- --------------------------------------------------
Annualized Total Return
==================================================
On Share Price On NAV
- --------------------------------------------------
1-Year 15.70% 10.95%
- --------------------------------------------------
3-Year 15.14% 10.16%
- --------------------------------------------------
5-Year 6.07% 6.21%
- --------------------------------------------------
Since Inception 5.65% 6.65%
- --------------------------------------------------
Taxable-Equivalent Total Return(2)
==================================================
On Share Price On NAV
- --------------------------------------------------
1-Year 19.08% 14.19%
- --------------------------------------------------
3-Year 18.81% 13.56%
- --------------------------------------------------
5-Year 9.78% 9.70%
- --------------------------------------------------
Since Inception 9.18% 10.01%
- --------------------------------------------------
Top Five Sectors (as a % of total investments)
==================================================
Tax Obligation (Limited) 30%
- --------------------------------------------------
Water and Sewer 16%
- --------------------------------------------------
Education and Civic Organizations 15%
- --------------------------------------------------
Tax Obligation (General) 10%
- --------------------------------------------------
U.S. Guaranteed 7%
- --------------------------------------------------
1 Taxable-equivalent yield represents the yield on a taxable investment
necessary to equal the yield of the Nuveen fund on an after-tax basis. The
federal only rate is based on the current market yield and a federal income
tax rate of 31%. The rate shown for federal and state highlights the added
value of owning shares that are also exempt from state income taxes. It is
based on a combined federal and state income tax rate of 37.4%.
2 Taxable-equivalent total return is based on the annualized total return and a
combined federal and state income tax rate of 37.4%. It represents the return
on a taxable investment necessary to equal the return of the Nuveen fund on an
after-tax basis.
Bar Chart:
1997-1998 Monthly Tax-Free Dividends Per Share
September 1997 0.062
October 1997 0.062
November 1997 0.062
December 1997 0.062
January 1998 0.062
February 1998 0.062
March 1998 0.062
April 1998 0.062
May 1998 0.062
June 1998 0.062
July 1998 0.062
August 1998 0.0635
Mountain Chart:
Share Price Performance
Weekly Closing Price
9/5/97 13.5
13.75
13.688
13.875
14.125
13.75
13.75
13.688
13.375
13.625
13.438
13.375
13.563
14.063
13.75
13.813
13.813
13.875
14.375
14.313
14.125
14.375
14.188
14.188
14.438
14.625
14.75
14.688
14.188
14
14
13.875
13.625
13.938
13.938
13.813
13.5
13.875
14.25
14.188
14.125
13.875
13.938
14
14.063
14.063
14
14.25
14.375
14.438
8/31/98 14.8125
Past performance is not predictive of future results.
<PAGE>
Nuveen California Premium Income Municipal Fund
Performance Overview
As of August 31, 1998
NCU
Portfolio Statistics
==================================================
Inception Date 6/93
- --------------------------------------------------
Share Price 14
- --------------------------------------------------
Net Asset Value Per Share $14.30
- --------------------------------------------------
Current Market Yield 5.27%
- --------------------------------------------------
Taxable-Equivalent Yield (Federal Only)(1) 7.64%
- --------------------------------------------------
Taxable-Equivalent Yield
(Federal and State)(1) 8.42%
- --------------------------------------------------
Fund Net Assets ($000) $125,066
- --------------------------------------------------
Average Weighted Maturity (Years) 18.15
- --------------------------------------------------
Leverage-Adjusted Duration (Years) 10.25
- --------------------------------------------------
Annualized Total Return
==================================================
On Share Price On NAV
- --------------------------------------------------
1-Year 12.54% 10.83%
- --------------------------------------------------
3-Year 15.72% 10.71%
- --------------------------------------------------
5-Year 5.11% 5.83%
- --------------------------------------------------
Since Inception 4.73% 6.20%
- --------------------------------------------------
Taxable-Equivalent Total Return(2)
==================================================
On Share Price On NAV
- --------------------------------------------------
1-Year 15.98% 14.15%
- --------------------------------------------------
3-Year 19.54% 14.22%
- --------------------------------------------------
5-Year 8.94% 9.42%
- --------------------------------------------------
Since Inception 8.40% 9.66%
- --------------------------------------------------
Top Five Sectors (as a % of total investments)
==================================================
Water and Sewer 15%
- --------------------------------------------------
Tax Obligation (Limited) 14%
- --------------------------------------------------
Housing (Multifamily) 13%
- --------------------------------------------------
Health Care 13%
- --------------------------------------------------
U.S. Guaranteed 12%
- --------------------------------------------------
1 Taxable-equivalent yield represents the yield on a taxable investment
necessary to equal the yield of the Nuveen fund on an after-tax basis. The
federal only rate is based on the current market yield and a federal income
tax rate of 31%. The rate shown for federal and state highlights the added
value of owning shares that are also exempt from state income taxes. It is
based on a combined federal and state income tax rate of 37.4%.
2 Taxable-equivalent total return is based on the annualized total return and a
combined federal and state income tax rate of 37.4%. It represents the return
on a taxable investment necessary to equal the return of the Nuveen fund on an
after-tax basis.
Bar Chart:
1997-1998 Monthly Tax-Free Dividends Per Share
September 1997 0.0615
October 1997 0.0615
November 1997 0.0615
December 1997 0.0615
January 1998 0.0615
February 1998 0.0615
March 1998 0.0615
April 1998 0.0615
May 1998 0.0615
June 1998 0.0615
July 1998 0.0615
August 1998 0.0615
Mountain Chart:
Share Price Performance
Weekly Closing Price
9/5/97 13.313
13
13.25
13.25
13.438
13.438
13.25
13.125
13.125
13.125
12.938
13.125
13.188
13.25
13
13.438
13.5
13.813
14.188
13.688
14.438
14.375
14.313
13.938
14.25
14.063
14.25
13.875
13.938
14
13.625
13.75
13.625
13.563
13.438
13.438
13.625
13.563
13.813
14.375
14.25
14.25
14.375
14.125
13.875
13.625
13.563
13.75
13.875
13.938
8/31/98 14
Past performance is not predictive of future results.
<PAGE>
Report of Independent Auditors
The Boards of Directors, Trustees and Shareholders
Nuveen Insured California Premium Income Municipal Fund, Inc.
Nuveen Insured California Premium Income Municipal Fund 2, Inc.
Nuveen California Premium Income Municipal Fund
We have audited the accompanying statements of net assets, including the
portfolios of investments, of Nuveen Insured California Premium Income Municipal
Fund, Inc., Nuveen Insured California Premium Income Municipal Fund 2, Inc. and
Nuveen California Premium Income Municipal Fund as of August 31, 1998, and the
related statements of operations, changes in net assets and the financial
highlights for the periods indicated therein. These financial statements and
financial highlights are the responsibility of the Funds' management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of investments owned as of
August 31, 1998, by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial positions of
Nuveen Insured California Premium Income Municipal Fund, Inc., Nuveen Insured
California Premium Income Municipal Fund 2, Inc. and Nuveen California Premium
Income Municipal Fund at August 31, 1998, and the results of their operations,
changes in their net assets and financial highlights for the periods indicated
therein in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
Chicago, Illinois
October 16, 1998
<PAGE>
<TABLE>
Portfolio of Investments
Nuveen Insured California Premium Income Municipal Fund, Inc. (NPC)
August 31, 1998
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Education and Civic Organizations - 1.7%
$ 2,670,000 The Regents of the University of California, Refunding Revenue Bonds (Multiple Purpose Projects),
Series B, 4.750%, 9/01/21 9/03 at 102 Aaa $2,565,256
- ------------------------------------------------------------------------------------------------------------------------------------
Health Care - 4.9%
3,000,000 California Health Facilities Financing Authority, Insured Revenue Bonds (Sutter Health), Series 1998A,
5.000%, 8/15/37 8/08 at 101 Aaa 2,936,940
4,000,000 California Statewide Communities Development Authority, Sutter Health Obligated Group, Certificates
of Participation, 6.125%, 8/15/22 8/02 at 102 Aaa 4,351,080
- ------------------------------------------------------------------------------------------------------------------------------------
Housing/Multifamily - 5.4%
3,650,000 California Housing Finance Agency, Multi-Unit Rental Housing Revenue Bonds, 1992 Series A,
6.625%, 2/01/24 (Alternative Minimum Tax) 2/03 at 102 Aa2 3,858,926
4,000,000 The City of Los Angeles, California, Tax-Exempt Mortgage Revenue Refunding Bonds, Series 1993A
(FHA Insured Mortgage Loans-Section 8 Assisted Projects), 6.300%, 1/01/25 7/02 at 102 Aaa 4,180,360
- ------------------------------------------------------------------------------------------------------------------------------------
Housing/Single Family - 1.6%
2,295,000 California, Various Purpose General Obligation Bonds II, 1997 Series A, 6.000%, 8/01/20
(Alternative Minimum Tax) 2/07 at 102 Aaa 2,441,123
- ------------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General - 5.7%
3,000,000 State of California, Various Purpose General Obligation Bonds,
6.500%, 9/01/06 No Opt. Call Aaa 3,492,420
1,225,000 Fresno Unified School District (Fresno County, California), 1998 General Obligation Refunding Bonds,
Series A, 6.550%, 8/01/20 2/13 at 103 Aaa 1,469,731
3,000,000 Pomona Unified School District, General Obligation Refunding Bonds, Series 1997-A,
6.500%, 8/01/19 8/11 at 103 Aaa 3,543,390
- ------------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited - 16.5%
4,000,000 Los Angeles County Metropolitan Transportation Authority (California), Proposition A, Sales
Tax Revenue Refunding Bonds, Series 1993-A, 5.000%, 7/01/21 7/03 at 100 Aaa 3,954,120
5,000,000 Los Angeles County Metropolitan Transit Authority, Proposition C, Sales Tax Revenue Second Senior
Bonds, Series 1993-B, 4.750%, 7/01/13 7/03 at 102 Aaa 5,009,800
4,000,000 Norco Redevelopment Agency, Norco Redevelopment Project Area No. One, 1992 Refunding Tax
Allocation Bonds, 6.250%, 3/01/19 3/02 at 102 Aaa 4,349,240
2,135,000 City of San Buenaventura, California, 1993 Refunding Certificates of Participation (Capital
Improvements Project), 5.500%, 1/01/17 1/03 at 100 Aaa 2,191,428
9,500,000 Redevelopment Agency of the City of San Jose, Merged Area Redevelopment Project, Tax Allocation
Bonds, Series 1993, 4.750%, 8/01/24 2/04 at 102 Aaa 9,103,470
- ------------------------------------------------------------------------------------------------------------------------------------
Transportation - 3.6%
4,000,000 Airports Commission, City and County of San Francisco, California, San Francisco International
Airport, Second Series Refunding Revenue Bonds, Issue 3 Bonds, 6.200%, 5/01/20
(Alternative Minimum Tax) 5/03 at 102 Aaa 4,333,080
1,000,000 Airports Commission of the City and County of San Francisco, California, San Francisco International
Airport, Second Series Revenue Bonds, Issue 8B, 6.000%, 5/01/15 5/04 at 101 Aaa 1,090,640
<PAGE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Guaranteed - 28.3%
$ 6,000,000 Huntington Park Redevelopment Agency, Single Family Residential Mortgage Revenue Refunding Bonds,
1986 Series A, 8.000%, 12/01/19 No Opt. Call Aaa $8,413,260
4,000,000 The City of Los Angeles, California, Wastewater System Revenue Bonds, Series 1991-A,
7.100%, 2/01/21 (Pre-refunded to 2/01/99) 2/99 at 102 Aaa 4,141,080
3,750,000 City of Los Angeles, California, Wastewater System Revenue Bonds, Series 1991-D, 6.700%, 12/01/21
(Pre-refunded to 12/01/00) 12/00 at 102 Aaa 4,074,000
4,015,000 Los Angeles County Transportation Commission (California), Sales Tax Revenue Bonds, Series 1991-A,
6.750%, 7/01/18 (Pre-refunded to 7/01/01) 7/01 at 102 Aaa 4,423,366
5,135,000 Community Redevelopment Agency of the City of Palmdale, Restructured Single Family Mortgage
Revenue Bonds, Series 1986A (Escrowed to Maturity), 8.000%, 3/01/16
(Alternative Minimum Tax) No Opt. Call Aaa 7,046,966
1,450,000 County of Riverside, Asset Leasing Corporation, Leasehold Revenue Bonds, 1989 Series A (County of
Riverside Hospital Project), 7.200%, 6/01/10 (Pre-refunded to 6/01/99) 6/99 at 102 Aaa 1,519,411
6,220,000 County of Riverside, California, Single Family Mortgage Revenue Bonds (GNMA Mortgage-Backed
Securities Program), Issue A of 1987, 9.000%, 5/01/21
(Alternative Minimum Tax) No Opt. Call Aaa 9,496,384
1,000,000 City and County of San Francisco, General Purpose Sewer Revenue Bonds, Series 1991,
6.500%, 10/01/21 (Pre-refunded to 10/01/99) 10/99 at 102 Aaa 1,052,610
1,485,000 City of San Jose, California, Single Family Mortgage Revenue Bonds, 1985 Series A (Escrowed to
Maturity), 9.500%, 10/01/13 No Opt. Call Aaa 2,233,157
- ------------------------------------------------------------------------------------------------------------------------------------
Utilities - 10.5%
4,000,000 California Pollution Control Financing Authority, Pollution Control Revenue Bonds (Southern California
Edison Company), 1992 Series B, 6.400%, 12/01/24 (Alternative Minimum Tax) 12/02 at 102 Aaa 4,382,160
4,000,000 City of Chula Vista, Industrial Development Revenue Bonds (San Diego Gas and Electric Company),
1992 Series A, 6.400%, 12/01/27 (Alternative Minimum Tax) 12/02 at 102 A1 4,346,320
2,000,000 Sacramento Municipal Utility District (California), Electric Revenue Refunding Bonds, 1992 Series A,
5.750%, 8/15/13 8/02 at 100 Aaa 2,115,960
5,000,000 Sacramento Municipal Utility District (California), Electric Revenue Refunding Bonds, 1993 Series G,
4.750%, 9/01/21 9/03 at 100 Aaa 4,803,850
- ------------------------------------------------------------------------------------------------------------------------------------
Water and Sewer - 20.1%
2,000,000 Cucamonga County Water District (San Bernardino County, California), Certificates of Participation
(1992 Water Facilities Refinancing), 6.300%, 9/01/12 9/01 at 102 Aaa 2,158,740
The City of Los Angeles, California, Wastewater System Revenue Bonds, Series 1993-D:
3,250,000 4.700%, 11/01/17 11/03 at 102 Aaa 3,144,083
11,000,000 4.700%, 11/01/19 11/03 at 102 Aaa 10,564,400
5,440,000 City of Santa Monica, Wastewater Enterprise Revenue Bonds (Hyperion Project), 1993 Refunding
Series, 4.500%, 1/01/15 1/04 at 102 Aaa 5,217,667
5,000,000 Wheeler Ridge-Maricopa Water Storage District (Kern County, California), 1996 Water Refunding
Bonds, 5.700%, 11/01/15 11/06 at 102 Aaa 5,427,050
3,425,000 City of Woodland (Yolo County, California), Certificates of Participation (1992 Wastewater System
Refunding Project), 5.500%, 3/01/18 3/03 at 100 Aaa 3,510,557
- ------------------------------------------------------------------------------------------------------------------------------------
$ 134,645,000 Total Investments - (cost $128,439,088) - 98.3% 146,942,025
=============
<PAGE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Temporary Investments in Short-Term Municipal Securities - 0.5%
$ 200,000 California Health Facilities Authority, Variable Rate Revenue Bonds (St. Joseph Health System),
Series 1991B, Variable Rate Demand Bonds, 3.150%, 7/01/09+ VMIG-1 $ 200,000
200,000 Irvine Ranch Water District, Variable Rate Demand Consolidated Refunding Bonds,
Series A, 3.000%, 5/01/09+ VMIG-1 200,000
400,000 Orange County, Irvine Coast Assessment District #88-1, Variable Rate
Demand Bonds, 3.150%, 9/02/18+ VMIG-1 400,000
- ------------------------------------------------------------------------------------------------------------------------------------
$ 800,000 Total Temporary Investments - 0.5% 800,000
=============
Other Assets Less Liabilities - 1.2% 1,735,893
--------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $149,477,918
====================================================================================================================
All of the bonds in the portfolio, excluding temporary investments in
short-term municipal securities, are either covered by Original Issue Insurance,
Secondary Market Insurance or Portfolio Insurance, or are backed by an escrow or
trust containing sufficient U.S. government or U.S. government agency
securities, any of which ensure the timely payment of principal and interest.
* Optional Call Provisions (not covered by the report of independent
auditors): Dates (month and year) and prices of the earliest optional call or
redemption. There may be other call provisions at varying prices at later dates.
** Ratings (not covered by the report of independent auditors): Using
the higher of Standard & Poor's or Moody's rating.
+ The security has a maturity of more than one year, but has variable
rate and demand features which qualify it as a short-term security. The rate
disclosed is that currently in effect. This rate changes periodically based on
market conditions or a specified market index.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
Portfolio of Investments
Nuveen Insured California Premium Income Municipal Fund 2, Inc. (NCL)
August 31, 1998
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Education and Civic Organizations - 15.0%
$ 1,250,000 California Educational Facilities Authority, Revenue Refunding Bonds (University of San Diego),
Series 1998, 5.000%, 10/01/22 10/08 at 101 Aaa $1,239,575
5,000,000 California Educational Facilities Authority, Revenue Bonds (University of San Francisco), Series 1996,
6.000%, 10/01/26 10/06 at 102 Aaa 5,510,300
10,050,000 California Educational Facilities Authority, Revenue Bonds (Santa Clara University), Series 1991,
5.750%, 9/01/21 9/06 at 102 Aaa 10,813,700
2,655,000 California State University, Housing System Revenue Bonds, Series 1996,
5.700%, 11/01/13 11/05 at 102 Aaa 2,883,834
3,000,000 The Regents of the University of California, Refunding Revenue Bonds (1989 Multiple Purpose
Projects), Series C, 10.000%, 9/01/02 No Opt. Call Aaa 3,678,600
5,000,000 Regents of the University of California, Revenue Bonds (Multiple Purpose Projects), Series E,
9.250%, 9/01/05 No Opt. Call Aaa 6,566,400
4,900,000 The Regents of the University of California, University of California Housing System Revenue Bonds,
Series A, 5.500%, 11/01/18 11/03 at 102 Aaa 5,095,020
6,350,000 The Regents of the University of California, Refunding Revenue Bonds (Multiple Purpose Projects),
Series C, 5.000%, 9/01/12 9/03 at 102 Aaa 6,483,414
- ------------------------------------------------------------------------------------------------------------------------------------
Health Care - 3.6%
California Health Facilities Financing Authority, Insured Health Facility Refunding Revenue Bonds
(Mark Twain St. Joseph's Health Care Corporation), 1996 Series A:
1,450,000 6,000%, 7/01/19 7/06 at 102 Aaa 1,592,883
5,000,000 6,000%, 7/01/25 7/06 at 102 Aaa 5,492,700
3,110,000 California Health Facilities Financing Authority, Hospital Revenue Refunding Bonds (Sutter Health),
Series 1989A, 6.700%, 1/01/13 1/99 at 101 Aaa 3,170,116
- ------------------------------------------------------------------------------------------------------------------------------------
Housing/Multifamily - 4.7%
4,860,000 The Community Redevelopment Agency of the City of Los Angeles, California, Multifamily Housing
Revenue Refunding Bonds, 1995 Series A (Angelus Plaza Project), 7.400%, 6/15/106/05 at 105 AAA 5,626,762
7,400,000 Housing Authority of the County of Santa Cruz, Tax-Exempt Multifamily Housing Revenue Refunding
Bonds, Series 1993A (GNMA Collateralized-Meadowview Apartments), 6.125%, 5/20/285/03 at 102 Aaa 7,710,948
- ------------------------------------------------------------------------------------------------------------------------------------
Housing/Single Family - 2.8%
6,000,000 California Housing Finance Agency, Single Family Mortgage Bonds II, 1997 Series C-2,
5.625%, 8/01/20 (Alternative Minimum Tax) 8/07 at 101 1/2 Aaa 6,230,340
1,500,000 California Housing Finance Agency, Home Mortgage Revenue Bonds, 1996 Series E,
6.150%, 8/01/25 (Alternative Minimum Tax) 2/06 at 102 Aaa 1,598,070
- ------------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General - 9.5%
5,000,000 State of California, Veterans General Obligation Bonds, Series BH, 5.500%, 12/01/24
(Alternative Minimum Tax) 12/03 at 102 Aaa 5,134,750
State of California, Various Purpose General Obligation Bonds:
3,000,000 6.500%, 9/01/06 No Opt. Call Aaa 3,492,420
2,130,000 5.750%, 11/01/17 11/02 at 102 Aaa 2,245,467
2,575,000 Calipatria Unified School District, Imperial County, California, 1996 Series A, General Obligation Bonds,
5.625%, 8/01/13 8/06 at 102 Aaa 2,792,356
<PAGE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tax Obligation/General (continued)
$ 3,000,000 Central Unified School District, Fresno County, California, General Obligation Bonds, Election 1992,
5.625%, 3/01/18 3/03 at 102 Aaa $3,134,250
3,000,000 Escondido Union High School District, San Diego County, California, General Obligation Bonds
(1996 Election), 5.700%, 11/01/10 11/06 at 102 Aaa 3,314,640
1,000,000 City of Los Angeles, California, Unified School District, General Obligation Bonds,
1997 Series A, 6.000%, 7/01/15 No Opt. Call Aaa 1,150,610
3,000,000 City and County of San Francisco, General Obligation Bonds, Various Purpose Bonds, Series 1993,
5.500%, 6/15/11 6/01 at 102 Aaa 3,139,050
2,250,000 Santa Monica Community College District, County of Los Angeles, California, General Obligation
Bonds, 1992 Election, Series B, 5.750%, 7/01/20 7/05 at 102 Aaa 2,404,755
- ------------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited - 29.1%
1,800,000 California Public School District Financing Authority, Lease Revenue Bonds (Richgrove Elementary
School District Projects), Series 1996B, 5.800%, 9/01/16 9/06 at 102 Aaa 1,957,230
3,865,000 Certificates of Participation (1991 Financing Project), County of Alameda, California, Alameda
County Public Facilities Corporation, 6.000%, 9/01/21 9/06 at 102 Aaa 4,246,050
7,985,000 County of Alameda, California, 1993 Refunding Certificates of Participation (Santa Rita Jail Project),
5.700%, 12/01/14 12/03 at 102 Aaa 8,540,836
1,500,000 Anaheim Public Financing Authority, Lease Revenue Bonds (Anaheim Public Improvements Project),
Senior Lease Revenue Bonds, 1997 Series C, 0.000%, 9/01/22 No Opt. Call Aaa 452,325
5,000,000 Community Redevelopment Agency of the City of Compton, California, Compton Redevelopment
Project, Refunding Tax Allocation Bonds, Series 1995A (Project TaxRevenues, Subventions and
Housing Tax Revenues), (Insured/Tax Exempt), 6.500%, 8/01/13 8/05 at 102 Aaa 5,744,250
4,000,000 County of Contra Costa, California (Merrithew Memorial Hospital Replacement Project), Refunding
Series of 1997, 5.500%, 11/01/22 11/07 at 102 Aaa 4,213,040
3,000,000 Galt Schools Joint Powers Authority, Sacramento County, California, 1997 Refunding Revenue Bonds,
Series A (High School and Elementary School Facilities), 5.875%, 11/01/24 11/07 at 102 Aaa 3,279,030
5,585,000 Los Angeles County Transportation Commission, California, Sales Tax Revenue Refunding Bonds,
Series 1991-B, 6.500%, 7/01/13 7/01 at 102 Aaa 6,063,635
2,135,000 Menifee Union School District, Riverside County, California, Certificates of Participation (1996
School Project), 6.125%, 9/01/24 9/06 at 102 Aaa 2,369,167
2,690,000 Norwalk Community Facilities Financing Authority, Los Angeles County,California, Tax Allocation
Refunding Revenue Bonds, 1995 Series A, 6.000%, 9/01/15 9/05 at 102 Aaa 2,948,106
5,000,000 City of Pasadena, Community Facilities District No. 1 (Civic Center West Public Improvements),
1997 Special Tax Bonds, 5.250%, 12/01/25 12/08 at 101 Aaa 5,116,950
9,000,000 City of Redlands, California, Certificates of Participation (1993 Refunding of 1986 and 1987 Projects),
5.800%, 9/01/17 9/03 at 102 Aaa 9,562,140
1,930,000 Santa Margarita/Dana Point Authority, Orange County, California, Revenue Bonds, Series A
(1994 Improvement Districts Nos. 1, 2, 2A and 8, General Obligation Bond Refinancing),
7.250%, 8/01/05 No Opt. Call Aaa 2,303,088
South Orange County, Public Financing Authority, Special Tax
Revenue Bonds, 1994 Series C (Foothill Area):
4,000,000 8.000%, 8/15/08 No Opt. Call Aaa 5,193,960
7,330,000 8.000%, 8/15/09 No Opt. Call Aaa 9,664,385
4,075,000 Redevelopment Agency of the City of Suisun City, Suisun City Redevelopment Project, 1993 Tax
Allocation Refunding Bonds, County of Solano, California, 5.900%, 10/01/23 10/03 at 102 Aaa 4,357,031
5,450,000 City of Visalia, California (Motor Vehicle License Fee Enhancement), Fisalia Public Finance Authority,
Series 1996A, 5.375%, 12/01/26 12/06 at 102 Aaa 5,640,641
<PAGE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Transportation - 4.9%
$ 9,000,000 Airports Commission of the City and County of San Francisco, California, San Francisco International
Airport, Second Series Revenue Bonds, Issue 8B, 6.100%, 5/01/20 5/04 at 101 Aaa $9,891,450
3,750,000 City of San Jose, California, Airport Revenue Bonds, Series of 1993, 5.700%, 3/01/18
(Alternative Minimum Tax) 3/03 at 102 Aaa 3,909,975
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. Guaranteed - 6.5%
3,370,000 California State, Various Purpose General Obligation Bonds, Series 1992, 5.750%, 11/01/17
(Pre-refunded to 11/01/02) 11/02 at 102 Aaa 3,691,464
1,000,000 Kern High School District, County of Kern, California, General Obligation Bonds, Election of 1990,
Series D, 5.600%, 8/01/15 8/03 at 102 Aaa 1,082,540
4,320,000 County of Riverside, California, Single Family Mortgage Revenue Bonds (GNMA Mortgage-Backed
Securities Program), Issue B of 1987, 8.625%, 5/01/16 (Alternative Minimum Tax)No Opt. Call Aaa 6,182,568
5,000,000 Riverside County Transportation Commission, Sales Tax Revenue Bonds, 1991 Series A (California),
6.500%, 6/01/09 (Pre-refunded to 6/01/01) 6/01 at 102 Aaa 5,464,650
1,720,000 City of Torrance, Floating Rate Demand Hospital Revenue Bonds (Little Company of Mary Hospital),
1985 Series A, 7.100%, 12/01/15 (Pre-refunded to 12/01/05) 12/05 at 100 AAA 1,992,517
- ------------------------------------------------------------------------------------------------------------------------------------
Utilities - 6.3%
3,215,000 Modesto Irrigation District Financing Authority, Refunding Revenue Bonds, Series A,
6.000%, 10/01/15 10/06 at 102 Aaa 3,545,438
2,425,000 Northern California Power Agency, Hydroelectric Project #1, Revenue Bonds, Series 1998A
5.200%, 7/01/32 7/08 at 101 Aaa 2,458,004
3,395,000 Pasadena Electric Revenue Bonds, Series 1998, 4.900%, 8/01/16 (WI) 8/09 at 101 Aaa 3,391,232
1,205,000 Sacramento, California, Municipal Utility District, Electric Revenue Refunding Bonds, 1993 Series D,
5.250%, 11/15/12 11/03 at 102 Aaa 1,255,863
6,750,000 Turlock Irrigation District, California, Revenue Refunding Bonds, Series 1992-A,
5.750%, 1/01/18 7/02 at 100 Aaa 6,982,335
- ------------------------------------------------------------------------------------------------------------------------------------
Water and Sewer - 15.5%
2,000,000 City of Barstow, California, Certificates of Participation (1994 Wastewater Reclamation Improvement
Project), 5.250%, 10/01/18 10/04 at 102 Aaa 2,036,160
3,530,000 Castaic Lake Water Agency, California, Refunding Revenue Certificates of Participation (Water
System Improvement Projects), Series 1994A, 8.000%, 8/01/04 No Opt. Call Aaa 4,245,566
2,975,000 Chino Basin Regional Financing Authority, Revenue Bonds, Series 1994 (Chino Basin Municipal
Water District Sewer System Project), 6.000%, 8/01/16 8/04 at 102 Aaa 3,272,203
13,000,000 The Metropolitan Water District of Southern California, Water Revenue Bonds 1995 Series A,
5.750%, 7/01/21 7/05 at 102 Aaa 13,894,140
7,000,000 San Diego Water Utility System, Revenue Bonds, 5.000%, 8/01/21 8/08 at 101 Aaa 6,929,020
2,900,000 City and County of San Francisco, Sewer Revenue Refunding Bonds, Series 1992,
5.500%, 10/01/15 10/02 at 102 Aaa 3,012,839
4,000,000 South San Joaquin Irrigation District, San Joaquin County, California, 1993 Refunding Revenue
Certificates of Participation (1987 Project and 1992 Project), 5.500%, 1/01/151/03 at 102 Aaa 4,161,040
5,410,000 City of Tulare, California, 1996 Sewer Revenue Bonds, 5.750%, 11/15/21 11/06 at 102 Aaa 5,827,218
- ------------------------------------------------------------------------------------------------------------------------------------
$ 252,790,000 Total Investments - (cost $255,293,784) - 97.9% 275,379,046
=============
<PAGE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Temporary Investments in Short-Term Municipal Securities - 0.3%
$ 250,000 California Health Facilities Authority, (St. Joseph Health System), Series 1991B,
Variable Rate Demand Bonds, 3.150%, 7/01/09+ VMIG-1 $ 250,000
700,000 Orange County Sanitation District, Certificates of Participation, Variable Rate Demand Bonds,
3.150%, 8/01/17+ VMIG-1 700,000
- ------------------------------------------------------------------------------------------------------------------------------------
$ 950,000 Total Temporary Investments - 0.3% 950,000
=============
Other Assets Less Liabilities - 1.8% 5,070,105
--------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $281,399,151
====================================================================================================================
All of the bonds in the portfolio, excluding temporary investments in
short-term municipal securities, are either covered by Original Issue Insurance,
Secondary Market Insurance or Portfolio Insurance, or are backed by an escrow or
trust containing sufficient U.S. government or U.S. government agency
securities, any of which ensure the timely payment of principal and interest.
* Optional Call Provisions (not covered by the report of independent
auditors): Dates (month and year) and prices of the earliest optional call or
redemption. There may be other call provisions at varying prices at later dates.
** Ratings (not covered by the report of independent auditors): Using
the higher of Standard & Poor's or Moody's rating.
+ The security has a maturity of more than one year, but has variable
rate and demand features which qualify it as a short-term security. The rate
disclosed is that currently in effect. This rate changes periodically based on
market conditions or a specified market index.
(WI) Security purchased on a when-issued basis (note 1).
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
Portfolio of Investments
Nuveen California Premium Income Municipal Fund (NCU)
August 31, 1998
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Education and Civic Organizations - 6.5%
$ 3,500,000 California Educational Facilities Authority, Revenue Bonds (University of Southern California Project),
Series 1989B, 6.750%, 10/01/15 10/99 at 102 AA $3,678,115
1,995,000 California State Public Works Board, Lease Revenue Bonds (Various California Community
College PJS), Series 1996A, 5.625%, 3/01/16 3/06 at 102 Aaa 2,129,583
2,225,000 The Regents of the University of California, University of California Housing System Revenue Bonds,
Series A, 5.500%, 11/01/18 11/03 at 102 Aaa 2,313,555
- ------------------------------------------------------------------------------------------------------------------------------------
Health Care - 12.9%
8,100,000 California Statewide Communities Development Authority, Sherman Oaks Health System, Revenue
Bonds, Series 1998A Refunding, California Mortgage Insured, 5.000%, 8/01/22No Opt. Call Aaa 8,150,382
4,000,000 California Statewide Communities Development Authority, Revenue Certificates of Participation
(Cedars-Sinai Medical Center), 6.500%, 8/01/15 8/02 at 102 A1 4,414,480
2,000,000 City of Loma Linda California, Hospital Revenue Bonds (Loma Linda University Medical Center Project),
Series 1993A, 6.000%, 12/01/06 12/03 at 102 BBB 2,135,920
1,355,000 Palomar Pomerado Health System, Insured Revenue Bonds, Series 1993,
5.000%, 11/01/13 11/03 at 102 Aaa 1,374,051
- ------------------------------------------------------------------------------------------------------------------------------------
Housing/Multifamily - 13.1%
2,000,000 California Statewide Communities Development Authority, Apartment Development Revenue
Refunding Bonds (Irvine Apartment Communities LP), 98-A4, 5.250%, 5/15/25
(Mandatory put 5/15/13) 7/08 at 101 BBB 2,034,280
8,715,000 The Community Redevelopment Agency of the City of Los Angeles, California, Multifamily Housing
Revenue Refunding Bonds, 1995 Series A (Angelus Plaza Project),
7.400%, 6/15/10 6/05 at 105 AAA 10,089,966
4,000,000 City of Stanton, Multifamily Housing Revenue Bonds (Continental Gardens Apartments), Series 1997,
5.625%, 8/01/29 (Alternative Minimum Tax) (Mandatory put 8/01/09) 8/07 at 102 AAA 4,256,680
- ------------------------------------------------------------------------------------------------------------------------------------
Housing/Single Family - 9.0%
4,290,000 California Housing Finance Agency, Single Family Mortgage Bonds II, 1997 Series A, 6.000%, 8/01/20
(Alternative Minimum Tax) 2/07 at 102 Aaa 4,563,144
1,000,000 California Housing Finance Agency, Home Mortgage Revenue Bonds,
1994 Series A, 6.550%, 8/01/26 8/04 at 102 Aa 1,077,400
1,000,000 California Housing Finance Agency, Home Mortgage Revenue Bonds, 1994 Series F-3, 6.100%, 8/01/15
(Alternative Minimum Tax) 8/05 at 102 Aaa 1,062,780
2,000,000 California Housing Finance Agency, Home Mortgage Revenue Bonds, 1997 Series B, 6.000%, 8/01/16
(Alternative Minimum Tax) 2/07 at 102 Aaa 2,133,960
2,105,000 California Rural Home Mortgage Finance Authority, Single Family Mortgage Revenue Bonds (Mortgage-
Backed Securities Program), 1996 Series C, 7.500%, 8/01/27
(Alternative Minimum Tax) No Opt. Call AAA 2,460,829
- ------------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General - 5.9%
2,380,000 State of California, Various Purpose General Obligation Bonds,
6.250%, 9/01/12 No Opt. Call A1 2,791,502
1,025,000 Calipatria Unified School District, Imperial County, California, 1996 Series A, General
Obligation Bonds, 5.800%, 8/01/20 8/06 at 102 Aaa 1,107,185
3,000,000 Pomona Unified School District, General Obligation Refunding Bonds, Series 1997-A,
6.150%, 8/01/15 8/11 at 103 Aaa 3,497,340
- ------------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited - 14.2%
2,000,000 Carson Redevelopment Agency (California), Redevelopment Project Area No. 2, Refunding Tax
Allocation Bonds, Series 1993, 5.875%, 10/01/09 10/03 at 102 BBB 2,124,640
1,760,000 Carson Redevelopment Agency (California), Redevelopment Project Area No. 1, Tax Allocation Bonds,
Series 1993, 5.625%, 10/01/08 10/03 at 102 Baa1 1,878,730
<PAGE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tax Obligation/Limited (continued)
$ 2,160,000 Community Redevelopment Financing Authority of the Community Redevelopment Agency of the
City of Los Angeles, California, Grand Central Square, Multifamily Housing Bonds, 1993 Series A,
5.750%, 12/01/13 (Alternative Minimum Tax) 6/03 at 102 BB $2,170,562
2,500,000 Los Angeles County Metropolitan Transportation Authority, Sales Tax Revenue Refunding Bonds,
Proposition C Senior Subordinate, Series A, 5.000%, 7/01/23 7/08 at 101 Aaa 2,478,750
1,000,000 Poway Community Facilities District, Special Tax No. 88-1, Parkway Business Center,
6.500%, 8/15/09 8/08 at 102 N/R 1,084,440
1,500,000 City of Richmond, Limited Obligation Refunding Improvement Bonds, Reassessment District No. 855
(Atlas Road West and Interchange), 6.600%, 9/02/19 9/98 at 103 N/R 1,551,885
2,100,000 Sacramento City Finance Authority, Lease Revenue Refunding Bonds, Series 1993 B,
5.400%, 11/01/20 No Opt. Call A1 2,213,064
750,000 Redevelopment Agency of the City of San Jose, Merged Area Redevelopment Project Tax Allocation
Bonds, Series 1993, 5.000%, 8/01/21 2/04 at 102 Aaa 741,398
1,500,000 San Marcos Public Facilities Authority, Community Facilities District 88-1, Special Tax Bonds,
5.800%, 9/01/18 9/08 at 101 N/R 1,513,560
2,000,000 San Marcos Public Facilities Authority, Revenue Refunding Bonds, 5.800%, 9/01/279/08 at 101 N/R 2,009,440
- ------------------------------------------------------------------------------------------------------------------------------------
Transportation - 4.1%
2,750,000 Airport Commission, City and County of San Francisco, California, San Francisco International Airport,
Second Series Revenue Bonds, Issue 5, 6.500%, 5/01/24
(Alternative Minimum Tax) 5/04 at 102 Aaa 3,045,240
2,000,000 Airports Commission City and County of San Francisco, California, San Francisco
International Airport, Second Series Revenue Bonds, Issue 10, 5.700%, 5/01/26
(Alternative Minimum Tax) 5/06 at 102 Aaa 2,114,780
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. Guaranteed - 11.7%
3,200,000 State Public Works Board of the State of California, Lease Revenue Bonds (The Trustees of the
California State University), 1994 Series A (Various California State University Projects),
6.375%, 10/01/14 (Pre-refunded to 10/01/04) 10/04 at 102 A*** 3,676,640
1,500,000 ABAG Finance Authority for Nonprofit Corporations, Certificates of Participation (Stanford University
Hospital), California, Series 1993, 5.250%, 11/01/20 11/03 at 102 A1*** 1,532,655
4,100,000 Imperial Irrigation District, California, Certificates of Participation (1994 Electric System Project),
6.000%, 11/01/15 (Pre-refunded to 11/01/04) 11/04 at 102 Aaa 4,640,708
1,400,000 City of Santa Clara, California, Electric Revenue Bonds, Series 1991A, 6.250%, 7/01/13
(Pre-refunded to 7/01/01) 7/01 at 102 Aaa 1,523,718
2,805,000 City of Torrance, Floating Rate Demand Hospital Revenue Bonds (Little Company of Mary Hospital),
1985 Series A, 7.100% 12/01/15 (Pre-refunded to 12/01/05) 12/05 at 100 AAA 3,249,424
- ------------------------------------------------------------------------------------------------------------------------------------
Utilities - 7.0%
1,000,000 California Pollution Control Financing Authority, Pollution Control Revenue Bonds (Southern California
Edison Company), 1992 Series B, 6.400%, 12/01/24 (Alternative Minimum Tax) 12/02 at 102 Aaa 1,095,540
2,000,000 Department of Water and Power of The City of Los Angeles, Electric Plant Refunding
Revenue Bonds, Issue of 1993, 5.375%, 9/01/23 9/03 at 102 Aaa 2,052,740
3,560,000 Northern California Power Agency, Hydroelectric Project Number One, Revenue Bonds, 1992
Refunding Series A, 10.000%, 7/01/03 No Opt. Call Aaa 4,503,364
1,095,000 Sacramento Municipal Utility District (California), Electric Revenue Bonds, 1993 Series E.
5.700%, 5/15/12 5/03 at 102 A 1,157,590
- ------------------------------------------------------------------------------------------------------------------------------------
Water and Sewer - 14.5%
4,705,000 State of California, Department of Water Resources, Central Valley Project, Water System Revenue
Bonds, Series L, 5.750%, 12/01/13 6/03 at 101 1/2 AA 5,003,485
1,000,000 Eastern Municipal Water District (Riverside County, California), Water and Sewer Revenue Refunding
Certificates of Participation, Series 1991A, 6.300%, 7/01/20 7/01 at 101 Aaa 1,068,100
1,000,000 City of Los Angeles, California, Wastewater System Revenue Bonds, Series 1992-B,
6.250%, 6/01/12 6/02 at 102 Aaa 1,094,980
1,000,000 City of Norco, Refunding Certificates of Participation, Series 1998 (Sewer System and Water
System Improvement Project), 5.125%, 10/01/28 10/08 at 102 Aaa 1,000,850
<PAGE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Water and Sewer (continued)
$ 3,515,000 City of Riverside, California, Sewer Refunding Revenue Bonds, Series 1993,
7.000%, 8/01/07 No Opt. Call Aaa $4,236,173
1,000,000 City of Riverside, California, Water Revenue Bonds, Issue of 1991,
9.000%, 10/01/01 No Opt. Call Aa 1,152,260
3,100,000 City and County of San Francisco, Sewer Revenue Refunding Bonds, Series 1994,
5.375%, 10/01/16 10/02 at 102 Aaa 3,182,243
1,005,000 City of Santa Monica, Wastewater Enterprise Revenue Bonds (Hyperion Project),
1993 Refunding Series, 12.000%, 1/01/04 No Opt. Call Aaa 1,383,794
- ------------------------------------------------------------------------------------------------------------------------------------
$ 113,695,000 Total Investments - (cost $115,036,625) - 98.9% 123,751,905
=============
Other Assets Less Liabilities - 1.1% 1,314,265
--------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $125,066,170
====================================================================================================================
* Optional Call Provisions (not covered by the report of independent
auditors): Dates (month and year) and prices of the earliest optional call or
redemption. There may be other call provisions at varying prices at later dates.
** Ratings (not covered by the report of independent auditors): Using
the higher of Standard & Poor's or Moody's rating.
*** Securities are backed by an escrow or trust containing sufficient
U.S. government or U.S. government agency securities which ensures the timely
payment of principal and interest. Securities are normally considered to be
equivalent to AAA rated securities.
N/R Investment is not rated.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
Statement of Net Assets
August 31, 1998
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Insured
Insured California California California
Premium Income Premium Income 2 Premium Income
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets
Investments in municipal securities, at market value (note 1) $146,942,025 $275,379,046 $123,751,905
Temporary investments in short-term municipal securities,
at amortized cost, which approximates market value (note 1) 800,000 950,000 --
Cash 190,191 204,800 217,640
Receivables:
Interest 2,158,127 4,593,271 1,658,718
Investments sold -- 7,210,000 --
Other assets 13,383 11,484 3,832
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets 150,103,726 288,348,601 125,632,095
- ------------------------------------------------------------------------------------------------------------------------------------
Liabilities
Payable for investments purchased -- 5,855,765 --
Accrued expenses:
Management fees (note 6) 81,563 152,196 68,538
Other 84,034 104,627 119,967
Preferred share dividends payable 21,445 38,178 24,378
Common share dividends payable 438,766 798,684 353,042
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 625,808 6,949,450 565,925
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets (note 7) $149,477,918 $281,399,151 $125,066,170
====================================================================================================================================
Preferred shares, at liquidation value $ 45,000,000 $ 95,000,000 $ 43,000,000
====================================================================================================================================
Preferred shares outstanding 1,800 3,800 1,720
====================================================================================================================================
Common shares outstanding 6,405,350 12,577,707 5,740,512
====================================================================================================================================
Net asset value per Common share outstanding (net assets less Preferred shares
at liquidation value,
divided by Common shares outstanding) $ 16.31 $ 14.82 $ 14.30
====================================================================================================================================
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
Statement of Operations
Year Ended August 31, 1998
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Insured
Insured California California California
Premium Income Premium Income 2 Premium Income
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment Income (note 1) $ 7,863,232 $14,648,326 $6,672,880
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses
Management fees (note 6) 952,522 1,779,355 800,001
Preferred shares - auction fees 112,500 237,498 107,500
Preferred shares - dividend disbursing agent fees 10,001 19,998 10,001
Shareholders' servicing agent fees and expenses 15,140 23,013 11,265
Custodian's fees and expenses 40,464 54,121 39,398
Directors'/Trustees' fees and expenses (note 6) 1,271 2,405 1,069
Professional fees 17,846 18,214 17,382
Shareholders' reports - printing and mailing expenses 39,763 69,464 38,274
Stock exchange listing fees 16,170 24,262 5,366
Investor relations expense 11,669 21,067 9,661
Portfolio insurance expense 13,762 6,261 --
Other expenses 14,220 19,380 13,851
- ------------------------------------------------------------------------------------------------------------------------------------
Total expenses 1,245,328 2,275,038 1,053,768
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income 6,617,904 12,373,288 5,619,112
- ------------------------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain from Investments
Net realized gain from investment transactions
(notes 1 and 4) 5,603 798,085 539,431
Net change in unrealized appreciation or depreciation
of investments 5,944,476 8,807,703 3,467,586
- ------------------------------------------------------------------------------------------------------------------------------------
Net gain from investments 5,950,079 9,605,788 4,007,017
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $12,567,983 $21,979,076 $9,626,129
====================================================================================================================================
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
Statement of Changes in Net Assets
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Insured California Premium Income Insured California Premium Income 2 California Premium Income
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
8/31/98 8/31/97 8/31/98 8/31/97 8/31/98 8/31/97
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Operations
Net investment income $ 6,617,904 $ 6,683,785 $ 12,373,288 $ 12,486,504 $ 5,619,112 $ 5,658,432
Net realized gain (loss) from investment
transactions (notes 1 and 4) 5,603 193,918 798,085 (7,580) 539,431 (471,163)
Net change in unrealized appreciation
or depreciation of investments 5,944,476 5,715,236 8,807,703 9,860,840 3,467,586 5,537,743
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets
from operations 12,567,983 12,592,939 21,979,076 22,339,764 9,626,129 10,725,012
- -----------------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders (note 1)
From undistributed net investment income:
Common shareholders (5,220,819) (5,188,336) (9,376,562) (9,357,929) (4,234,452) (4,233,151)
Preferred shareholders (1,439,964) (1,443,769) (3,086,048) (2,950,385) (1,384,389) (1,365,049)
- -----------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets from
distributions to shareholders (6,660,783) (6,632,105) (12,462,610) (12,308,314) (5,618,841) (5,598,200)
- -----------------------------------------------------------------------------------------------------------------------------------
Capital Share Transactions (note 2)
Net proceeds from Common shares
issued to shareholders due to
reinvestment of distributions -- -- -- -- 63,519 --
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets 5,907,200 5,960,834 9,516,466 10,031,450 4,070,807 5,126,812
Net assets at beginning of year 143,570,718 137,609,884 271,882,685 261,851,235 120,995,363 115,868,551
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year $149,477,918 $143,570,718 $281,399,151 $271,882,685 $125,066,170 $120,995,363
===================================================================================================================================
Balance of undistributed net
investment income at end of year $ 317,414 $ 360,293 $ 556,257 $ 645,579 $ 244,590 $ 244,319
===================================================================================================================================
See accompanying notes to financial statements.
</TABLE>
<PAGE>
Notes to Financial Statements
1. General Information and Significant Accounting Policies
The California Funds (the "Funds") covered in this report and their
corresponding stock exchange symbols are Nuveen Insured California Premium
Income Municipal Fund, Inc. (NPC), Nuveen Insured California Premium Income
Municipal Fund 2, Inc. (NCL) and Nuveen California Premium Income Municipal Fund
(NCU). Insured California Premium Income and Insured California Premium Income 2
are traded on the New York Stock Exchange while California Premium Income is
traded on the American Stock Exchange.
Each Fund invests primarily in a diversified portfolio of municipal obligations
issued by state and local government authorities within the state of California.
The Funds are registered under the Investment Company Act of 1940 as closed-end,
diversified management investment companies.
The following is a summary of significant accounting policies followed by the
Funds in the preparation of their financial statements in accordance with
generally accepted accounting principles.
Securities Valuation
The prices of municipal bonds in each Fund's investment portfolio are provided
by a pricing service approved by the Fund's Board of Directors/Trustees. When
price quotes are not readily available (which is usually the case for municipal
securities), the pricing service establishes fair market value based on yields
or prices of municipal bonds of comparable quality, type of issue, coupon,
maturity and rating, indications of value from securities dealers and general
market conditions. Temporary investments in securities that have variable rate
and demand features qualifying them as short-term securities are valued at
amortized cost, which approximates market value.
Securities Transactions
Securities transactions are recorded on a trade date basis. Realized gains and
losses from such transactions are determined on the specific identification
method. Securities purchased or sold on a when-issued or delayed delivery basis
may have extended settlement periods. The securities so purchased are subject to
market fluctuation during this period. The Funds have instructed the custodian
to segregate assets in a separate account with a current value at least equal to
the amount of the when-issued and delayed delivery purchase commitments. At
August 31, 1998, Insured California Premium Income 2 had an outstanding
when-issued purchase commitment of $3,388,578.
There were no such outstanding purchase commitments in either of the other
Funds.
Investment Income
Interest income is determined on the basis of interest accrued, adjusted for
amortization of premiums and accretion of discounts on long-term debt securities
when required for federal income tax purposes.
Income Taxes
Each Fund is a separate taxpayer for federal income tax purposes. Each Fund
intends to comply with the requirements of the Internal Revenue Code applicable
to regulated investment companies and to distribute all of its tax-exempt net
investment income, in addition to any significant amounts of net realized
capital gains and/or market discount realized from investment transactions. The
Funds currently consider significant net realized capital gains and/or market
discount as amounts in excess of $.01 per Common share. Furthermore, each Fund
intends to satisfy conditions which will enable interest from municipal
securities, which is exempt from regular federal and California state income
taxes, to retain such tax-exempt status when distributed to shareholders of the
Funds. All monthly tax-exempt income dividends paid during the fiscal year ended
August 31, 1998, have been designated Exempt Interest Dividends. Net realized
capital gain and market discount distributions are subject to federal taxation.
Dividends and Distributions to Shareholders
Tax-exempt net investment income is declared as a dividend monthly and payment
is made or reinvestment is credited to shareholder accounts on the first
business day after month end. Net realized capital gains and/or market discount
from investment transactions are distributed to shareholders not less frequently
than annually. Furthermore, capital gains are distributed only to the extent
they exceed available capital loss carryforwards.
Distributions to shareholders of tax-exempt net investment income, net realized
capital gains and/or market discount, if any, are recorded on the ex-dividend
date. The amount and timing of distributions are determined in accordance with
federal income tax regulations, which may differ from generally accepted
accounting principles. Accordingly, temporary over-distributions as a result of
these differences may occur and will be classified as either distributions in
excess of net investment income, distributions in excess of net realized gains
and/or distributions in excess of net ordinary taxable income from investment
transactions, where applicable.
Preferred Shares
The Funds have issued and outstanding $25,000 stated value Preferred shares.
Each Fund's Preferred shares are issued in one or more Series. The dividend rate
may change every seven days, as set by the Auction Agent. The number of shares
outstanding, by Series and in total, for each Fund is as follows:
<TABLE>
<CAPTION>
Insured Insured
California California California
Premium Premium Premium
Income Income 2 Income
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Number of shares:
Series M -- -- 1,720
Series T 1,800 1,900 --
Series Th -- 1,900 --
- -------------------------------------------------------------------------------
Total 1,800 3,800 1,720
===============================================================================
</TABLE>
Insurance
Insured California Premium Income and Insured California Premium Income 2 invest
in municipal securities which are either covered by insurance or are backed by
an escrow or trust account containing sufficient U.S. government or U.S.
government agency securities, both of which ensure the timely payment of
principal and interest. Each insured municipal security is covered by Original
Issue Insurance, Secondary Market Insurance or Portfolio Insurance. Such
insurance does not guarantee the market value of the municipal securities or the
value of the Funds' shares. Original Issue Insurance and Secondary Market
Insurance remain in effect as long as the municipal securities covered thereby
remain outstanding and the insurer remains in business, regardless of whether
the Funds ultimately dispose of such municipal securities. Consequently, the
market value of the municipal securities covered by Original Issue Insurance or
Secondary Market Insurance may reflect value attributable to the insurance.
Portfolio Insurance is effective only while the municipal securities are held by
the Funds. Accordingly, neither the prices used in determining the market value
of the underlying municipal securities nor the net asset value of the Funds'
shares include value, if any, attributable to the Portfolio Insurance. Each
policy of the Portfolio Insurance does, however, give the Funds the right to
obtain permanent insurance with respect to the municipal security covered by the
Portfolio Insurance policy at the time of its sale.
Derivative Financial Instruments
The Funds may invest in transactions in certain derivative financial instruments
including futures, forward, swap, and option contracts, and other financial
instruments with similar characteristics. Although the Funds are authorized to
invest in such financial instruments, and may do so in the future, they did not
make any such investments during the fiscal year ended August 31, 1998.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of increases and decreases in net
assets from operations during the reporting period. Actual results may differ
from those estimates.
2. Fund Shares
There were no share transactions during the fiscal year ended August 31, 1998,
except for 4,535 shares issued to shareholders due to reinvestment of
distributions by California Premium Income. There were no share transactions
during the fiscal year ended August 31, 1997.
3. Distributions to Common Shareholders
The Funds declared Common share dividend distributions from their tax-exempt net
investment income which were paid October 1, 1998, to shareholders of record on
September 15, 1998, as follows:
<TABLE>
<CAPTION>
Insured Insured
California California California
Premium Premium Premium
Income Income 2 Income
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Dividend per share $.0685 $.0635 $.0615
================================================================================
</TABLE>
<PAGE>
4. Securities Transactions
Purchases and sales (including maturities) of investments in municipal
securities and temporary municipal investments during the fiscal year ended
August 31, 1998, were as follows:
<TABLE>
<CAPTION>
Insured Insured
California California California
Premium Premium Premium
Income Income 2 Income
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Purchases:
Investments in municipal securities $4,326,182 $37,865,021 $30,468,994
Temporary municipal investments 7,600,000 22,650,000 14,300,000
Sales and Maturities:
Investments in municipal securities 3,181,970 34,152,637 24,952,845
Temporary municipal investments 8,600,000 26,500,000 19,300,000
- --------------------------------------------------------------------------------
</TABLE>
At August 31, 1998, the identified cost of investments owned for federal income
tax purposes was the same as the cost for financial reporting purposes for each
Fund.
At August 31, 1998, the Funds had unused capital loss carryforwards available
for federal income tax purposes to be applied against future capital gains, if
any. If not applied, the carryforwards will expire as follows:
<TABLE>
<CAPTION>
Insured Insured
California California California
Premium Premium Premium
Income Income 2 Income
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Expiration year:
2001 $ 4,397 $ -- $ --
2002 -- -- 982,894
2003 2,373,250 3,125,126 1,893,938
2004 228,384 4,345,091 2,742,449
2005 373,309 1,283,948 1,049,994
- --------------------------------------------------------------------------------
Total $2,979,340 $8,754,165 $6,669,275
================================================================================
</TABLE>
5. Unrealized Appreciation (Depreciation)
Gross unrealized appreciation and gross unrealized depreciation of investments
at August 31, 1998, were as follows:
<TABLE>
<CAPTION>
Insured Insured
California California California
Premium Premium Premium
Income Income 2 Income
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Gross unrealized:
appreciation $18,502,937 $20,085,262 $8,715,280
depreciation -- -- --
- --------------------------------------------------------------------------------
Net unrealized appreciation $18,502,937 $20,085,262 $8,715,280
================================================================================
</TABLE>
<PAGE>
6. Management Fee and Other Transactions with Affiliates
Under the Funds' investment management agreements with Nuveen Advisory Corp.
(the "Adviser"), a wholly owned subsidiary of The John Nuveen Company, each Fund
pays to the Adviser an annual management fee, payable monthly, at the rates set
forth below, which are based upon the average daily net asset value of each Fund
as follows:
Average Daily Net Asset Value Management Fee
- --------------------------------------------------------------------------------
For the first $125 million .6500 of 1%
For the next $125 million .6375 of 1
For the next $250 million .6250 of 1
For the next $500 million .6125 of 1
For the next $1 billion .6000 of 1
For net assets over $2 billion .5875 of 1
================================================================================
The fee compensates the Adviser for overall investment advisory and
administrative services and general office facilities. The Funds pay no
compensation directly to those of its Directors/Trustees who are affiliated with
the Adviser or to their officers, all of whom receive remuneration for their
services to the Funds from the Adviser or its affiliates.
7. Composition of Net Assets At August 31, 1998, net assets consisted of:
<TABLE>
<CAPTION>
Insured Insured
California California California
Premium Premium Premium
Income Income 2 Income
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Preferred shares, $25,000 stated value per share,
at liquidation value $ 45,000,000 $ 95,000,000 $ 43,000,000
Common shares, $.01 par value per share 64,054 125,777 57,405
Paid-in surplus 88,572,853 174,386,020 79,718,170
Balance of undistributed net investment income 317,414 556,257 244,590
Accumulated net realized gain (loss)
from investment transactions (2,979,340) (8,754,165) (6,669,275)
Net unrealized appreciation of investments 18,502,937 20,085,262 8,715,280
- --------------------------------------------------------------------------------------------
Net assets $149,477,918 $281,399,151 $125,066,170
============================================================================================
Authorized shares:
Common 200,000,000 200,000,000 Unlimited
Preferred 1,000,000 1,000,000 Unlimited
============================================================================================
</TABLE>
<PAGE>
Financial Highlights
Selected data for a Common share outstanding throughout each period is
as follows:
<TABLE>
<CAPTION>
Investment Operations
Net
Realized/
Beginning Net Unrealized
Net Asset Investment Investment
Value Income Gain (Loss) Total
Insured California
Premium Income
<S> <C> <C> <C> <C>
Year Ended 8/31:
1998 $15.39 $1.03 $ .92 $ 1.95
1997 14.46 1.04 .93 1.97
1996 14.41 1.05 .02 1.07
1995 13.72 1.05 .73 1.78
1994 15.31 1.07 (1.61) (.54)
<CAPTION>
Insured California
Premium Income 2
<S> <C> <C> <C> <C>
Year Ended 8/31:
1998 14.06 .98 .77 1.75
1997 13.27 .99 .77 1.76
1996 13.01 1.00 .24 1.24
1995 12.75 1.02 .30 1.32
1994 14.57 1.02 (1.85) (.83)
<CAPTION>
California Premium Income
<S> <C> <C> <C> <C>
Year Ended 8/31:
1998 13.60 .98 .70 1.68
1997 12.70 .99 .89 1.88
1996 12.43 .98 .27 1.25
1995 12.01 1.00 .47 1.47
1994 14.47 .97 (2.26) (1.29)
<PAGE>
<CAPTION>
Less Distributions
Net Net
Investment Investment Capital Capital
Income Income Gains Gains
To Common To Preferred To Common To Preferred
Shareholders Shareholders+ Shareholders Shareholders+ Total
Insured California
Premium Income
<S> <C> <C> <C> <C> <C>
Year Ended 8/31:
1998 $(.81) $(.22) $ -- $ -- $(1.03)
1997 (.81) (.23) -- -- (1.04)
1996 (.79) (.23) -- -- (1.02)
1995 (.83) (.26) -- -- (1.09)
1994 (.85) (.20) -- -- (1.05)
<CAPTION>
Insured California
Premium Income 2
<S> <C> <C> <C> <C> <C>
Year Ended 8/31:
1998 (.75) (.24) -- -- (.99)
1997 (.74) (.23) -- -- (.97)
1996 (.74) (.24) -- -- (.98)
1995 (.79) (.27) -- -- (1.06)
1994 (.82) (.17) -- -- (.99)
<CAPTION>
California Premium Income
<S> <C> <C> <C> <C> <C>
Year Ended 8/31:
1998 (.74) (.24) -- -- (.98)
1997 (.74) (.24) -- -- (.98)
1996 (.74) (.24) -- -- (.98)
1995 (.77) (.28) -- -- (1.05)
1994 (.82) (.17) (.02) -- (1.01)
<PAGE>
<CAPTION>
Total Returns
Organization and
Offering Costs and
Preferred Share Ending
Underwriting Net Asset Ending Based on Based on Net
Discounts Value Market Value Market Value* Asset Value*
<S> <C> <C> <C> <C> <C>
Insured California
Premium Income
Year Ended 8/31:
1998 $-- $16.31 $15.9375 15.85% 11.51%
1997 -- 15.39 14.5000 10.69 12.30
1996 -- 14.46 13.8750 15.39 5.83
1995 -- 14.41 12.7500 4.67 11.68
1994 -- 13.72 13.0000 (10.88) (4.99)
<CAPTION>
Insured California
Premium Income 2
<S> <C> <C> <C> <C> <C>
Year Ended 8/31:
1998 -- 14.82 14.8125 15.70 10.95
1997 -- 14.06 13.5000 14.36 11.82
1996 -- 13.27 12.5000 15.36 7.76
1995 -- 13.01 11.5000 3.55 8.80
1994 -- 12.75 11.8750 (15.01) (7.07)
<CAPTION>
California Premium Income
<S> <C> <C> <C> <C> <C>
Year Ended 8/31:
1998 -- 14.30 14.0000 12.54 10.83
1997 -- 13.60 13.1250 17.16 13.20
1996 -- 12.70 11.8750 17.51 8.15
1995 -- 12.43 10.7500 3.65 10.53
1994 (.16) 12.01 11.1250 (20.07) (11.51)
<PAGE>
<CAPTION>
Ratios/Supplemental Data
Ratio of Net
Ratio of Investment
Ending Expenses to Income to Portfolio
Net Assets Average Average Turnover
(000) Net Assets++ Net Assets++ Rate
<S> <C> <C> <C> <C>
Insured California
Premium Income
Year Ended 8/31:
1998 $149,478 .85% 4.50% 2%
1997 143,571 .85 4.74 9
1996 137,610 .85 4.81 9
1995 137,323 .89 5.10 24
1994 132,806 .85 4.94 29
<CAPTION>
Insured California
Premium Income 2
<S> <C> <C> <C> <C>
Year Ended 8/31:
1998 281,399 .82 4.46 13
1997 271,883 .83 4.67 24
1996 261,851 .83 4.73 27
1995 258,628 .84 5.11 24
1994 255,244 .84 4.80 24
<CAPTION>
California Premium Income
<S> <C> <C> <C> <C>
Year Ended 8/31:
1998 125,066 .86 4.57 21
1997 120,995 .86 4.76 44
1996 115,869 .88 4.83 25
1995 114,304 1.05 5.08 26
1994 69,710 .95 4.79 40
* Total Investment Return on Market Value is the combination of
reinvested dividend income, reinvested capital gains distributions, if any, and
changes in stock price per share. Total Return on Net Asset Value is the
combination of reinvested dividend income, reinvested capital gains
distributions, if any, and changes in net asset value per share. Total returns
are not annualized.
+ The amounts shown are based on Common share equivalents.
++ Ratios do not reflect the effect of dividend payments to Preferred
shareholders.
</TABLE>
<PAGE>
Building a Better Portfolio Can Make You a Successful Investor
Nuveen Family
of Mutual Funds
Nuveen offers a variety of funds designed to help you reach your financial
goals.
Growth
Nuveen Rittenhouse
Growth Fund
Growth and Income
European Value Fund
Growth and
Income Stock Fund
Balanced Stock
and Bond Fund
Balanced Municipal
and Stock Fund
Tax-Free Income
National Funds
Long-Term
Insured
Intermediate-Term
Limited-Term
State Funds
Arizona
California
Colorado
Connecticut
Florida
Georgia
Kansas
Kentucky
Louisiana
Maryland
Massachusetts
Michigan
Missouri
New Jersey
New Mexico
New York
North Carolina
Ohio
Pennsylvania
Tennessee
Virginia
Wisconsin
Successful investors know that a well-diversified portfolio - one that balances
different types of investments, levels of risk and tax management - can be the
foundation for building and sustaining wealth. That's why Nuveen offers you and
your financial adviser a wide range of quality investments that can help you
build a better portfolio in the pursuit of your financial goals
EXCHANGE-TRADED FUNDS
Nuveen Exchange-Traded Funds offer investors actively managed portfolios of
investment-grade quality municipal bonds. The fund shares are listed and traded
on the New York and American stock exchanges. Exchange-traded funds provide the
investment convenience, price visibility and liquidity of common stocks.
MUNIPREFERRED(R)
Nuveen MuniPreferred offers investors a AAA rated investment with an attractive
tax-free yield for the cash reserves portion of an investment portfolio.
MuniPreferred shares are backed 2-to-1 by the long-term portfolios of Nuveen
dual-class exchange-traded funds and are available for national as well as a
wide variety of state-specific portfolios.
MUTUAL FUNDS
Nuveen offers a family of equity, balanced and municipal bond funds featuring
Premier AdvisersSM including Institutional Capital Corporation, Rittenhouse
Financial Services, and Nuveen Advisory Corp. Each brings a specialized
expertise in a particular investment style or asset class, time-tested
investment strategies and a focus on consistent, long-term performance. With
Nuveen's Premier Adviser funds, you have all the advantages of a family of funds
plus the benefits of specialized investment expertise.
PRIVATE ASSET MANAGEMENT
Rittenhouse Financial Services and Nuveen Asset Management offer comprehensive,
customized investment management solutions to investors with assets of $250,000
or more to invest. A range of actively managed growth, balanced and municipal
income-oriented portfolios are available, all based upon a disciplined
investment philosophy.
DEFINED PORTFOLIOS
Nuveen Defined Portfolios are fixed portfolios of quality securities that are a
convenient, attractive alternative to purchasing individual securities. They
provide low-cost diversification to reduce risk, while also offering
experienced, professional security selection and surveillance. In addition,
Nuveen Defined Portfolios provide daily liquidity at that day's net asset value
for quick access to your assets.
<PAGE>
Fund Information
BOARD OF DIRECTORS/TRUSTEES
Robert P. Bremner
Lawrence H. Brown
Anthony T. Dean
Anne E. Impellizzeri
Peter R. Sawers
William J. Schneider
Timothy R. Schwertfeger
Judith M. Stockdale
FUND MANAGER
Nuveen Advisory Corp.
333 West Wacker Drive
Chicago, IL 60606
CUSTODIAN, TRANSFER AGENT
AND SHAREHOLDER SERVICES
The Chase Manhattan Bank
4 New York Plaza
New York, NY 10004-2413
(800) 257-8787
LEGAL COUNSEL
Morgan, Lewis &
Bockius LLP
Washington, D.C.
INDEPENDENT AUDITORS
Ernst & Young LLP
Chicago, IL
Year 2000
The concern that computer systems may have problems processing date-related
information in the year 2000 and beyond has challenged businesses and
organizations to thoroughly review all aspects of their operations. We have
undertaken just such an approach at Nuveen in preparation for the millennium.
Over the last 10 years, our trading, fund management and pricing systems at
Nuveen - the systems that directly affect our investors and their financial
advisers - have been updated or replaced to address the Year 2000 concerns.
We continue to work closely with our transfer agent, custodian and other service
partners to monitor readiness and address other remaining systems issues. Our
initial testing indicates we are on schedule, and we have targeted year-end 1998
to complete verification of vendor compliance and service partner readiness.
However, we can give no complete assurance at this time that the steps we have
taken will be sufficient to prevent any problems that would impact the Nuveen
Exchange-Traded Funds.
Each fund intends to repurchase shares of its own common or preferred stock in
the future at such times and in such amounts as is deemed advisable. No shares
were repurchased during the 12-month period ended August 31, 1998. Any future
repurchases will be reported to shareholders in the next annual or semiannual
report.
<PAGE>
Serving Investors for Generations
Photo of: John Nuveen, Sr.
Since our founding in 1898, John Nuveen & Co. has been synonymous with
investments that withstand the test of time. Today we offer a broad range of
quality investments designed for individuals seeking to build and sustain
wealth. In fact, more than 1.3 million investors have trusted Nuveen to help
them pursue their financial goals.
The cornerstone of Nuveen's investment philosophy is a commitment to disciplined
long-term investment strategies focused on providing consistent, attractive
performance over time - with moderated risk. We emphasize quality securities
carefully chosen through in-depth research, and we follow those securities
closely over time to ensure that they continue to meet our exacting standards.
Whether your focus is long-term growth, dependable current income or sustaining
accumulated wealth, Nuveen offers a wide variety of investments and services to
help meet your unique circumstances and financial planning needs. Our equity,
balanced, and tax-free income funds, along with our defined portfolios and
private asset management, can help you build a better, well-diversified
portfolio.
Talk with your financial adviser to learn more about how Nuveen investment
products and services can help you. Or call us at (800) 257-8787 for more
information, including a prospectus where applicable. Please read that
information carefully before investing.
GRAPHIC:
NUVEEN 1898-1998
OUR SECOND CENTURY
helping investors sustain the wealth of a lifetime.(tm)
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
www.nuveen.com
FAN-2-8-98
