NUVEEN Exchange-Traded Funds
August 31, 1999
Annual Report
Dependable, tax-free income to help you keep more of what you earn.
NPC
NCL
NCU
California
Photo of: People on dock
<PAGE>
Highlights
As of August 31, 1999
Credit Quality Performance Highlights
Nuveen Insured California Premium Income Municipal Fund, Inc. (NPC)
o Taxable-equivalent market yield of 8.74% *
o Has provided steady or increasing dividends
for 49 consecutive months
Pie Chart:
Insured 80%
U.S. guaranteed 18%
Insured and U.S. guaranteed 2%
Nuveen Insured California Premium Income Municipal Fund 2, Inc. (NCL)
o Taxable-equivalent market yield of 8.88% *
o Has provided steady or increasing dividends
for 49 consecutive months
Pie Chart:
Insured 85%
Insured and U.S. guaranteed 12%
U.S. guaranteed 3%
Nuveen California Premium Income Municipal Fund (NCU)
o Taxable-equivalent market yield of 9.47% *
o Has provided steady or increasing dividends
for 52 consecutive months
Pie Chart:
AAA/U.S. guaranteed 56%
AA 13%
A 11%
BBB/NR 20%
Contents
1 Dear Shareholder
3 Portfolio Manager Roundtable
6 NPC Performance Overview
7 NCL Performance Overview
8 NCU Performance Overview
9 Report of Independent Auditors
10 Portfolio of Investments
20 Statement of Net Assets
21 Statement of Operations
22 Statement of Changes in Net Assets
23 Notes to Financial Statements
29 Financial Highlights
32 Build Your Wealth Automatically
33 Fund Information
* For investors in the combined 37.5% federal and state income tax bracket.
<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 am pleased to report to you on the annual performance of your Nuveen
Exchange-Traded Fund. Providing an attractive tax-free dividend is the Fund's
main objective. Over the past year, your Fund has continued to achieve this
goal. During the period covered by this report, we have seen some shifts in U.S.
economic trends and the fixed-income environment in which your Nuveen
Exchange-Traded Fund operates. I appreciate the opportunity to discuss these
changes with you, as does the portfolio manager of your Fund, who reviews fund
performance later in this report.
A Challenging Investment Environment
Over the past 12 months, the U.S. economy continued to be characterized by
surprisingly robust growth, benign inflation, and unemployment levels that
remained among the lowest in three decades. However, concerns about the
persistent pace of the economy's expansion continued to test the new paradigm,
which holds that improvements in productivity enable us to have both economic
growth and low inflation at the same time. With investors and the various
markets watching and reacting to each announcement concerning economic
statistics, volatility increased, especially in the equity markets, and the
spectre of inflation seemed to lurk behind every report.
In an effort to pre-empt this threat of inflation, the Federal Reserve moved to
raise interest rates by a quarter-point at the end of June and again in late
August. This brought the federal funds rate - which represents the amount banks
charge one another on overnight loans, establishing the standard for other
short-term rates - from 4.75% to 5.25% and reversed two of the three rate cuts
made by the Fed in the fall of 1998. Despite the Fed's statement that it would
return to a neutral bias concerning future interest rate action, comments by Fed
Chairman Alan Greenspan about the need for closer attention to activity in the
financial markets kept open the possibility of additional rate hikes.
Municipal Bond Performance
Over the past year, our exchange-traded municipal bond funds continued to offer
attractive, stable income in a market that places a high premium on yield. At
the end of August 1999, the ratio between long-term municipal yields and 30-year
Treasury yields stood at 96%, compared with the historical average of 86% for
the period 1986-1999. For investors, this meant that quality long-term municipal
bonds offered yields comparable to those of long Treasury bonds - even before
the tax advantages of municipals were taken into account. On an after-tax basis,
municipal bonds continued to present an exceptionally attractive investment
option relative to Treasuries.
In the coming months, we expect to see a good supply of new municipal bonds,
although total volume is expected to drop from the near-record levels of 1998.
This is due to the dramatic decrease in refundings, as interest rates moved
above last year's levels and removed much of the incentive for issuers to refund
existing bonds. To date, municipal supply has declined by approximately 25% from
the levels of a year ago. This, in turn, has enhanced the attractiveness of the
municipal bonds that are brought to market, as demand especially from individual
investors - remains strong. We anticipate that this demand will continue to
strengthen as investors increasingly look at rebalancing their portfolios. With
the outlook for tighter supply and continued demand in the months ahead,
Nuveen's established market position as the leading sponsor of exchange-traded
municipal bond funds ensures that we will have excellent access to the bond
offerings that have the potential to add value for our shareholders.
A Balanced Portfolio: Enhanced Growth with Reduced Risk
If you are like most investors in the marketplace today, your goals for tax-free
investing probably include capturing high after-tax total returns while
moderating risk. To demonstrate the role that municipal bonds can play in
achieving this goal, Nuveen tracked a balanced portfolio consisting of equities
and municipal bonds and compared its hypothetical investment performance - based
on appropriate market indexes and tax rates - with that of a balanced portfolio
composed of equities and taxable bonds.
Our research showed that, over the past 20 years, the pairing of equities
with municipal bonds had provided both superior after-tax total returns and
lower levels of risk than the combination of equities and taxable bonds.
Incorporating even a 20% allocation of municipal bonds into an all-equity
portfolio cut risk substantially, with only a small reduction in after-tax total
return. Purchasing shares of a Nuveen Exchange-Traded Municipal Bond Fund
provides an easy way to incorporate the benefits of municipal bonds into a
balanced portfolio.
Nuveen Funds: An Answer to Your Investment Needs
In light of the recent shifts in the economic environment, your financial
adviser can serve as a valuable resource in helping you determine if adjustments
are needed in your current asset allocation plan and suggesting investments that
can accomplish this. By investing in other Nuveen funds, you can bring balance
to your portfolio and provide proper exposure to the different types of
investments needed to enhance your potential for success. In addition, if you
are satisfied with the performance of your Nuveen Exchange-Traded Fund, your
adviser can set up a reinvestment plan designed to purchase additional shares of
that fund. For more information on all of Nuveen's funds, contact your financial
adviser for a prospectus detailing all charges and expenses, or call Nuveen at
(800) 621-7227. Please read the prospectus carefully before you invest or send
money.
Since 1898, Nuveen has been synonymous with investments that stand the test of
time. As we look ahead to the new millennium, we are committed to maintaining
that reputation and finding the best ways to serve your evolving investment
needs. Thank you for your continued confidence.
Sincerely,
Timothy R. Schwertfeger
Chairman of the Board
October 15, 1999
sidebar text: "Purchasing shares of a Nuveen Exchange-Traded Municipal Bond
Fund provides an easy way to incorporate the benefits of municipal bonds into a
balanced portfolio."
<PAGE>
Nuveen California Premium Income Exchange-Traded Funds
Portfolio Manager Roundtable
Portfolio managers Mike Davern and Bill Fitzgerald review the California
municipal market, fund performance, and the outlook for the Nuveen California
Premium Income Exchange-Traded Funds. Mike, who has 17 years of experience as an
investment professional, including eight years with Nuveen, has managed NPC and
NCL since July 1998. Bill, who also assumed portfolio management responsibility
for NCU in July 1998, has more than 10 years of experience as an investment
professional at Nuveen and manages several other California municipal funds.
What factors contributed to the performance of the California economy during the
past 12 months?
Strength, diversification, and favorable prospects are three key phrases that
have been used to describe the state of the California economy over the past
year. Although the state's heavy reliance on exports to Asia caused some concern
in the aftermath of 1998's global financial crisis, California's continued
diversification into sectors such as services, motion pictures,
telecommunications, and construction helped to balance out the state economy and
minimize the impact of the decline in exports, which was felt mainly by the
high-tech industries of the Silicon Valley. To avert situations like the
statewide recession of the early 1990s, which was touched off by a downturn in
the aerospace and defense industry, California has moved to strategically
protect itself from financial declines by broadening its economic base beyond
one dominant industry. Despite some layoffs attributable to the situation in
Asia, job growth in California reached almost 4% in 1998. In August 1999, the
state unemployment figure was 5.1%, down from 5.9% in August 1998 but higher
than the current national average of 4.2%. In recent years, state residents have
seen personal income grow significantly, driven by gains in the equity and real
estate markets, although per capita income now seems to have stabilized at 104%
of the national average. In other recent economic news of note, the state's
budget for 2000 was adopted on schedule for the first time in a number of years.
In recognition of the state's strong growth, diversifying economy, and
manageable debt levels, Standard & Poor's Corporation (S&P) upgraded the rating
on California's general obligation debt to AA- from A+ in August 1999. This put
S&P in line with two other rating agencies, Moody's Investors Service, Inc. and
Fitch IBCA, Inc., which had previously raised the state's credit rating to Aa3
and AA-, respectively.
Over the past 12 months, what has municipal supply been like for California?
For the first eight months of 1999, new California municipal supply fell 18%
from the levels recorded during the same period in 1998, compared with a 24%
decline in national municipal supply. These numbers reflect the extremely tight
supply at the beginning of 1999, as figures for the past six months
(March-August 1999) show that issuance in the California municipal market
actually increased 10%, bucking the national trend, where issuance has been
virtually flat. The state also approved several significant bond authorizations
that have not yet come to market, so expectations are for strong supply over the
next several years. Demand for California paper from individual investors
seeking relief from the state's high taxes has been exceptionally strong over
the past year, especially for newly established funds, while good demand for
individual bonds by institutional investors enabled us to sell selected bonds at
attractive prices.
How did the Nuveen California Premium Income Funds perform in this environment?
For the 12 months ended August 31, 1999, the Nuveen California Premium Income
Funds produced total returns on net asset value (NAV) ranging from -4.35% to
- -2.50%, providing taxable-equivalent total returns(1) between -1.22% and 0.73%
for shareholders in the combined 37.5% federal and state income tax bracket, as
shown in the table on page 4. The annual total returns for the Funds'
benchmarks, the Lehman Brothers California Insured Tax-Exempt Bond Index and
California Tax-Exempt Bond Index(2), and the average returns for the appropriate
Lipper California Peer Group category(3) are also provided.
1 The taxable-equivalent total return represents the total return that must be
earned on a taxable investment in order to equal the total return of the
Nuveen fund on an after-tax basis. The taxable-equivalent total return is
based on the Fund's annualized total return and a combined federal and state
income tax rate of 37.5%.
2 The two insured funds, NPC and NCL, are compared with the Lehman Brothers
California Insured Tax-Exempt Bond Index, an unleveraged index covering a
broad range of insured California municipal bonds. NCU is compared with the
Lehman Brothers California Tax-Exempt Bond Index, an unleveraged index
comprising a broad range of California investment-grade municipal bonds.
Results for both Lehman indexes do not reflect any initial or ongoing
expenses.
3 The Lipper California Peer Group returns represent the average annualized
returns of the funds in the Lipper California Municipal Debt Funds category.
NPC and NCL are compared with a peer group of 10 insured California funds,
while NCU is compared with a peer group of 17 California funds in the Lipper
database. Returns assume reinvestment of dividends and do not reflect any
applicable sales charges.
<PAGE>
Lehman California Lipper California
Total Return on NAV Total Return(2) Average(3)
- --------------------------------------------------------------------
1-Year Ended Taxable- 1-Year Ended 1-Year Ended
8/31/99 Equivalent(1) 8/31/99 8/31/99
- --------------------------------------------------------------------
NPC -4.35% -1.22% -0.22% -2.98%
- --------------------------------------------------------------------
NCL -2.50% 0.71% -0.22% -2.98%
- --------------------------------------------------------------------
NCU -2.57% 0.73% 0.39% -1.73%
- --------------------------------------------------------------------
For additional information on your fund, see the individual Performance
Overviews in this report.
The underperformance of the Funds' total returns on NAV relative to their Lehman
benchmarks can be attributed to their durations. As of August 31, 1999, the fund
durations(4) of NPC and NCL were 14.54 and 13.03, respectively, compared with
9.20 for the Lehman California Insured index, while NCU had a fund duration of
13.18 versus the Lehman California index's 8.20.
Duration measures a bond fund's price volatility, or reaction to interest rate
movements. The longer the duration, the more sensitive the fund's NAV is to
changes in interest rates. During a period of falling interest rates, longer
duration enables a fundNAV to participate more fully in market gains. However,
when interest rates rise, longer duration can make the fund's NAV more
vulnerable to price declines. Between September 1, 1998, and August 31, 1999,
the yield on the Bond Buyer Revenue Bond Index(5) rose from 5.26% to 5.83%. This
meant that funds with longer leveraged durations, like the Nuveen California
Premium Income Funds, were more likely to underperform the market, as
represented by the unleveraged Lehman index.
The lengthening of the durations in NPC and NCL over the past year came about as
we focused on adding incremental income and supporting the distribution yields
of these funds. To accomplish these goals, we sold short-call, prerefunded bonds
with limited upside potential and reinvested the proceeds into securities with
longer durations. Although this negatively impacted the performance of NPC and
NCL over the near term, the Funds should benefit from these trades through
increased prices and added income over the interest rate cycle. For NCU, the
longer duration was caused by bond calls that removed shorter bonds from the
Fund. Proceeds from the called bonds were then reinvested in issues with longer
durations, which provided incrementally more attractive yields. Longer durations
should help position all three funds to regain net asset value as the bond
market recovers.
Over the past year, strong supply in the California municipal market led to the
issuance of several new municipal bond funds by Nuveen and other fund companies.
The availability of these new funds negatively impacted the market demand for
older California funds such as the Nuveen California Premium Income Funds,
especially as the Nuveen funds began to trade at premiums to their net asset
values over the past year. This resulted in declines in share price across the
board. At the same time, the prevailing interest rate environment, which was
generally higher than that of August 1998, led to a decline in the NAV of each
fund. As a result of these factors, all three funds saw their discounts (share
price below NAV) move to premiums (share price above NAV) over the past 12
months.
Market Premium/ Total Return
Yield Discount(6) on Share Price
- -------------------------------------------------------------------------------
Taxable- 1-Yr. Ended Taxable-
8/31/99 Equivalent(1) 8/31/98 8/31/99 8/31/99 Equivalent(1)
- -------------------------------------------------------------------------------
NPC 5.46% 8.74% -2.28% 3.81% 1.62% 4.82%
- -------------------------------------------------------------------------------
NCL 5.55% 8.88% -0.05% 4.93% 2.27% 5.48%
- -------------------------------------------------------------------------------
NCU 5.92% 9.47% -2.10% 1.40% 0.81% 4.19%
- -------------------------------------------------------------------------------
How were the Funds' dividends affected?
During the past 12 months, good call protection helped support the dividends of
the Nuveen California Premium Income Funds and shield the income of these three
funds from erosion. In addition, excellent dividend management strategies,
including the prudent use of leverage, enabled us to increase NPC's dividend in
February 1999, NCL's dividend in February 1999 and again in August 1999, and
NCU's dividend in November 1998 and again in May 1999. As of August 31, 1999,
NPC and NCL had produced steady or increasing dividends for 49 consecutive
months while NCU had provided shareholders with steady or increasing dividends
for 52 consecutive months.
Additionally, all of the Nuveen California Premium Income Funds issue preferred
shares that pay short-term interest rates to investors seeking short-term
liquidity. The proceeds from the preferred shares are used to buy additional
long-term bonds for the Funds' portfolios, which can generate additional income
for the portfolio but which may increase volatility. When short-term interest
rates remain below long-term rates, common shareholders can potentially earn
extra income from the difference between the rate earned on the Fund's long-term
portfolio and the short-term rate paid to
<PAGE>
preferred shareholders. While leveraged funds carry higher risk than
non-leveraged funds, investors are compensated for this additional risk in the
form of higher yields.
1 The taxable-equivalent yield/total return represents the yield/total return
that must be earned on a taxable investment in order to equal the yield/total
return of the Nuveen fund on an after-tax basis. The taxable-equivalent yield
is based on the Fund's current market yield and a combined federal and state
income tax rate of 37.5%, while the taxable-equivalent total return is based
on the annualized total return and the 37.5% tax rate.
2 The two insured funds, NPC and NCL, are compared with the Lehman Brothers
California Insured Tax-Exempt Bond Index, an unleveraged index covering a
broad range of insured California municipal bonds. NCU is compared with the
Lehman Brothers California Tax-Exempt Bond Index, an unleveraged index
comprising a broad range of California investment-grade municipal bonds.
Results for both Lehman indexes do not reflect any initial or ongoing
expenses.
3 The Lipper California Peer Group returns represent the average annualized
returns of the funds in the Lipper California Municipal Debt Funds category.
NPC and NCL are compared with a peer group of 10 insured California funds,
while NCU is compared with a peer group of 17 California funds in the Lipper
database. Returns assume reinvestment of dividends and do not reflect any
applicable sales charges.
4 Fund duration, also known as leverage-adjusted duration, takes into account
the leveraging process for each fund and therefore differs from the duration
of the actual portfolio of individual bonds that make up the fund. References
to duration in this commentary are intended to indicate fund duration unless
otherwise noted.
5 The Bond Buyer Revenue Bond Index is an unmanaged index of long-term municipal
revenue bonds.
6 A fund's premium or discount represents the percentage difference between the
fund's share price and its NAV.
<PAGE>
What key strategies were used to manage the Nuveen California Premium Income
Funds during the past 12 months?
Over the past year, these funds were managed with the goal of enhancing dividend
yields and maximizing distribution rates. To achieve this goal, our focus was on
taking advantage of the present market environment to purchase well-structured
bonds that could help us increase tax-exempt income and enhance the Funds' tax
efficiency by offsetting potential capital gains with capital losses.
Currently, all three funds offer excellent levels of call protection. In the
insured funds, NPC has only 1.5% of its portfolio subject to bond calls prior to
2002, while 2.2% of NCL's portfolio is scheduled to be called before 2002. NCU
is facing bond calls affecting 6.5% of its portfolio in the last part of 1999.
To minimize the effect of calls, we are already at work on strategies for
managing through this period. Currently, we plan to hold high-yielding bonds for
as long as possible to maximize income.
Overall, NCU continued to offer excellent credit quality, with 69% of its
portfolio invested in bonds rated AAA/U.S. guaranteed and AA as of August 31,
1999. (Credit quality is not a concern in NPC and NCL, which are 100% invested
in insured or U.S. guaranteed bonds.) NCU also had an allocation of 20% in BBB
and non-rated bonds, up from 13% at the end of August 1998. These lower-rated
bonds generally provided enhanced levels of yield, especially as credit spreads
(or the difference between higher credit quality securities and those of lower
credit quality) widened in recent months. As lower-rated securities became more
attractive on a risk-adjusted basis, we used the expertise of Nuveen Research to
investigate these issues as they came to market and were able to discover those
bonds that offered adequate compensation for their risk levels. For example, we
continued to add to our position in bonds that are secured by real estate
investment trusts (REITs), most notably the BBB rated securities issued by the
California Statewide Communities Development Authority for Irvine Apartment
Communities. This planned community provides affordable housing built with
tax-exempt financing and is backed by a successful real estate company. The
Irvine Apartment bonds provide an excellent example of the types of purchases we
made to support NCU's dividend. The purchase of these bonds also enables us to
participate in the opportunities we anticipate over the next few years in the
multi-family housing sector. As California property values continue to improve,
we expect that the quality ratings on these bonds should also improve, resulting
in price appreciation.
What is Nuveen's outlook for the California Premium Income Funds?
In the months ahead, we plan to take advantage of the higher yields currently
available in the California municipal market to enhance our portfolio holdings.
All three funds are currently well positioned for the recovery of the bond
market. With their longer fund durations and excellent call protection, we
expect the Funds to react favorably as we begin to see a return to more normal
valuations. In NCU, we continue to be interested in participating in
California's strong and stable real estate market by investing in bonds issued
by the California Housing Finance Agency, a state agency that offers low
interest loans to families making their first home purchase.
Implementing strategies that have the potential to benefit the Funds
demonstrates the value that can be added by an active bond manager such as
Nuveen. As an experienced investment manager knowledgeable about the unique
aspects of the California municipal market, we are in the marketplace every day,
monitoring market dynamics, looking for opportunities, and capitalizing on them
to the benefit of shareholders.
<PAGE>
Nuveen Insured California Premium Income Municipal Fund, Inc.
Performance Overview
As of August 31, 1999
NPC
Portfolio Statistics
Inception Date 11/92
- --------------------------------------------------
Share Price $15 3/8
- --------------------------------------------------
Net Asset Value $14.81
- --------------------------------------------------
Market Yield 5.46%
- --------------------------------------------------
Taxable-Equivalent Yield
(Federal Tax Rate)(1) 7.91%
- --------------------------------------------------
Taxable-Equivalent Yield
(Federal and State Tax Rate)(1) 8.74%
- --------------------------------------------------
Fund Net Assets ($000) $140,091
- --------------------------------------------------
Average Effective Maturity (Years) 22.03
- --------------------------------------------------
Leverage-Adjusted Duration 14.54
- --------------------------------------------------
Annualized Total Return
On Share Price On NAV
- --------------------------------------------------
1-Year 1.62% -4.35%
- --------------------------------------------------
5-Year 9.47% 7.19%
- --------------------------------------------------
Since Inception 6.12% 6.32%
- --------------------------------------------------
Taxable-Equivalent Total Return(2)
On Share Price On NAV
- --------------------------------------------------
1-Year 4.82% -1.22%
- --------------------------------------------------
5-Year 13.08% 10.57%
- --------------------------------------------------
Since Inception 9.59% 9.66%
- --------------------------------------------------
Top Five Sectors (as a % of total investments)
Water and Sewer 23%
- --------------------------------------------------
U.S. Guaranteed 20%
- --------------------------------------------------
Tax Obligation/Limited 18%
- --------------------------------------------------
Utilities 14%
- --------------------------------------------------
Housing/Multifamily 6%
- --------------------------------------------------
Bar Chart:
1998-1999 Monthly Tax-Free Dividends Per Share
9/98 0.0685
10/98 0.0685
11/98 0.0685
12/98 0.0685
1/99 0.0685
2/99 0.07
3/99 0.07
4/99 0.07
5/99 0.07
6/99 0.07
7/99 0.07
8/99 0.07
Line Chart:
Share Price Performance
9/4/98 15.625
15.813
15.813
16.125
16.375
16
16.188
16
16
16.13
16.13
16.13
16.56
16.5
16.81
16.5
16
15.44
15.81
15.56
16
16.31
16.19
16.38
16.56
16.5
16.5
16.38
16.4375
16.56
16.56
16.5
16.25
15.63
15.19
15.5
15.25
15.31
15.38
15.56
15.63
15.75
15.69
15.56
15.25
15.5
15.44
15.38
8/31/99 15.375
Weekly Closing Price
Past performance is not predictive of future results.
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 37.5%.
2 Taxable-equivalent total return is based on the annualized total return and a
combined federal and state income tax rate of 37.5%. It represents the return
on a taxable investment necessary to equal the return of the Nuveen fund on an
after-tax basis.
<PAGE>
Nuveen Insured California Premium Income Municipal Fund 2, Inc.
Performance Overview
As of August 31, 1999
NCL
Portfolio Statistics
Inception Date 3/93
- --------------------------------------------------
Share Price $14 3/8
- --------------------------------------------------
Net Asset Value $13.70
- --------------------------------------------------
Market Yield 5.55%
- --------------------------------------------------
Taxable-Equivalent Yield
(Federal Tax Rate)(1) 8.04%
- --------------------------------------------------
Taxable-Equivalent Yield
(Federal and State Tax Rate)(1) 8.88%
- --------------------------------------------------
Fund Net Assets ($000) $267,833
- --------------------------------------------------
Average Effective Maturity (Years) 18.51
- --------------------------------------------------
Leverage-Adjusted Duration 13.03
- --------------------------------------------------
Annualized Total Return
On Share Price On NAV
- --------------------------------------------------
1-Year 2.27% -2.50%
- --------------------------------------------------
5-Year 10.06% 7.22%
- --------------------------------------------------
Since Inception 5.12% 5.17%
- --------------------------------------------------
Taxable-Equivalent Total Return(2)
On Share Price On NAV
- --------------------------------------------------
1-Year 5.48% 0.71%
- --------------------------------------------------
5-Year 13.74% 10.67%
- --------------------------------------------------
Since Inception 8.61% 8.53%
- --------------------------------------------------
Top Five Sectors (as a % of total investments)
Tax Obligation/Limited 33%
- --------------------------------------------------
U.S. Guaranteed 15%
- --------------------------------------------------
Transportation 11%
- --------------------------------------------------
Water and Sewer 10%
- --------------------------------------------------
Tax Obligation/General 7%
- --------------------------------------------------
Bar Chart:
1998-1999 Monthly Tax-Free Dividends Per Share(3)
9/98 0.0635
10/98 0.0635
11/98 0.0635
12/98 0.0635
1/99 0.0635
2/99 0.065
3/99 0.065
4/99 0.065
5/99 0.065
6/99 0.065
7/99 0.065
8/99 0.0665
Line Chart:
Share Price Performance
9/4/98 14.75
14.813
14.813
15
15.188
14.75
15.375
15.13
15.06
15
15
15
15.06
15.19
15.44
15.31
14.94
14.38
14.31
14.5
14.81
15
15.06
15.25
15.44
15.5
15.44
15.38
15.38
15.06
15.25
15.25
15
14.31
14.25
14.25
14.44
14.63
14.38
14.38
14.69
14.81
15
14.81
14.69
14.44
13.94
14.25
8/31/99 14.375
Weekly Closing Price
Past performance is not predictive of future results.
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 37.5%.
2 Taxable-equivalent total return is based on the annualized total return and a
combined federal and state income tax rate of 37.5%. It represents the return
on a taxable investment necessary to equal the return of the Nuveen fund on an
after-tax basis.
3 The Fund also paid shareholders net ordinary income distributions in December
of $0.0077 per share.
<PAGE>
Nuveen California Premium Income Municipal Fund
Performance Overview
As of August 31, 1999
NCU
Portfolio Statistics
Inception Date 6/93
- --------------------------------------------------
Share Price $13 3/8
- --------------------------------------------------
Net Asset Value $13.19
- --------------------------------------------------
Market Yield 5.92%
- --------------------------------------------------
Taxable-Equivalent Yield
(Federal Tax Rate)(1) 8.58%
- --------------------------------------------------
Taxable-Equivalent Yield
(Federal and State Tax Rate)(1) 9.47%
- --------------------------------------------------
Fund Net Assets ($000) $118,877
- --------------------------------------------------
Average Effective Maturity (Years) 17.99
- --------------------------------------------------
Leverage-Adjusted Duration 13.18
- --------------------------------------------------
Annualized Total Return
On Share Price On NAV
- --------------------------------------------------
1-Year 0.81% -2.57%
- --------------------------------------------------
5-Year 10.08% 7.87%
- --------------------------------------------------
Since Inception 4.09% 4.73%
- --------------------------------------------------
Taxable-Equivalent Total Return(2)
On Share Price On NAV
- --------------------------------------------------
1-Year 4.19% 0.73%
- --------------------------------------------------
5-Year 13.92% 11.44%
- --------------------------------------------------
Since Inception 7.72% 8.18%
- --------------------------------------------------
Top Five Sectors (as a % of total investments)
Healthcare 17%
- --------------------------------------------------
Tax Obligation/Limited 17%
- --------------------------------------------------
Housing/Multifamily 15%
- --------------------------------------------------
U.S. Guaranteed 11%
- --------------------------------------------------
Tax Obligation/General 11%
- --------------------------------------------------
NCU Bar Chart:
1998-1999 Monthly Tax-Free Dividends Per Share(3)
9/98 0.0615
10/98 0.0615
11/98 0.0635
12/98 0.0635
1/99 0.0635
2/99 0.0635
3/99 0.0635
4/99 0.0635
5/99 0.066
6/99 0.066
7/99 0.066
8/99 0.066
Line Chart:
Share Price Performance
9/4/98 14
14.125
14.063
14.188
14.438
14.063
14.563
14.63
14.69
14.69
14.94
14.94
15.06
14.88
14.88
14.63
14.38
14.06
13.94
14
14.38
14.31
14.5
14.31
14.56
14.5
14.31
14.5
14.31
14.56
14.69
14.63
14.5
14.44
14.63
14.5
14.5
14.44
14.31
14.19
14.31
14.31
14.44
14.31
14
14.13
13.44
13.5
8/31/99 13.375
Weekly Closing Price
Past performance is not predictive of future results.
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 37.5%.
2 Taxable-equivalent total return is based on the annualized total return and a
combined federal and state income tax rate of 37.5%. It represents the return
on a taxable investment necessary to equal the return of the Nuveen fund on an
after-tax basis.
3 The Fund also paid shareholders net ordinary income distributions in December
of $0.0029 per share.
<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, 1999, 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, 1999, 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, 1999, 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 15, 1999
<PAGE>
<TABLE>
Portfolio of Investments
Nuveen Insured California Premium Income Municipal Fund, Inc. (NPC)
August 31, 1999
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Education and Civic Organizations - 1.3%
$ 1,000,000 California Educational Facilities Authority, Revenue Bonds (University 11/08 at 101 Aaa $ 915,420
of the Pacific), Series 1998, 5.000%, 11/01/23
1,000,000 California Educational Facilities Authority, Revenue Bonds (University 10/09 at 101 Aaa 905,690
of San Diego), Series 1998, 5.000%, 10/01/28
- ------------------------------------------------------------------------------------------------------------------------------------
Health Care - 4.8%
3,000,000 California Health Facilities Financing Authority, Insured Revenue Bonds 8/08 at 101 AAA 2,673,030
(Sutter Health), Series 1998A, 5.000%, 8/15/37
4,000,000 California Statewide Communities Development Authority, Sutter 8/02 at 102 AAA 4,099,200
Health Obligated Group, Certificates of Participation, 6.125%, 8/15/22
- ------------------------------------------------------------------------------------------------------------------------------------
Housing/Multifamily - 5.6%
3,650,000 California Housing Finance Agency, Multi-Unit Rental Housing Revenue 2/03 at 102 Aa2 3,769,246
Bonds, 1992 Series A, 6.625%, 2/01/24 (Alternative Minimum Tax)
4,000,000 The City of Los Angeles (California), Tax-Exempt Mortgage Revenue 7/02 at 102 AAA 4,121,400
Refunding Bonds, Series 1993A (FHA-Insured Mortgage Loans -
Section 8 Assisted Projects), 6.300%, 1/01/25
- ------------------------------------------------------------------------------------------------------------------------------------
Housing/Single Family - 4.6%
2,150,000 California Housing Finance Agency, Single Family Mortgage Bonds II, 2/07 at 102 AAA 2,176,080
1997 Series A, 6.000%, 8/01/20 (Alternative Minimum Tax)
California Housing Finance Agency, Home Mortgage Revenue Bonds,
1998 Series E Remarketed:
3,190,000 5.150%, 8/01/19 2/09 at 101 1/2 AAA 2,915,182
1,500,000 5.250%, 2/01/33 (Alternative Minimum Tax) 2/09 at 101 1/2 AAA 1,358,340
- ------------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General - 3.3%
1,225,000 Fresno Unified School District (Fresno County, California), 2/13 at 103 AAA 1,366,353
1998 General Obligation Refunding Bonds, Series A, 6.550%, 8/01/20
3,000,000 Pomona Unified School District, General Obligation Refunding Bonds, 8/11 at 103 AAA 3,320,250
Series 1997-A, 6.500%, 8/01/19
- ------------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited - 17.9%
4,000,000 Anaheim Public Financing Authority, Lease Revenue Bonds (Anaheim No Opt. Call AAA 1,072,680
Public Improvements Project), Subordinate Lease Revenue Bonds,
1997 Series C, 0.000%, 9/01/22
4,000,000 Los Angeles County Metropolitan Transportation Authority (California), 7/03 at 100 AAA 3,697,080
Proposition A, Sales Tax Revenue Refunding Bonds, Series 1993-A,
5.000%, 7/01/21
1,000,000 Marin Emergency Radio Authority (California), 1999 Revenue Bonds 8/09 at 101 AAA 880,120
(Marin Public Safety and Emergency Radio System), 4.750%, 8/15/21
4,000,000 Norco Redevelopment Agency, Norco Redevelopment Project 3/02 at 102 AAA 4,207,640
Area No. One, 1992 Refunding Tax Allocation Bonds, 6.250%, 3/01/19
4,000,000 Oakland State Building Authority, Lease Revenue Bonds 4/08 at 101 AAA 3,670,600
(Elihu M. Harris State Office Building), 1998 Series A, 5.000%, 4/01/23
2,135,000 City of San Buenaventura, California, 1993 Refunding Certificates 1/03 at 100 AAA 2,117,173
of Participation (Capital Improvements Project), 5.500%, 1/01/17
1,300,000 San Francisco Bay Area Rapid Transit District (California), Sales Tax 7/08 at 101 AAA 1,137,695
Revenue Bonds, Series 1998, 4.750%, 7/01/23
9,500,000 Redevelopment Agency of the City of San Jose, Merged Area 2/04 at 102 AAA 8,289,415
Redevelopment Project, Tax Allocation Bonds, Series 1993,
4.750%, 8/01/24
<PAGE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Transportation - 5.6%
$ 7,200,000 Alameda Corridor Transportation Authority (California), Tax-Exempt 10/09 at 101 AAA $ 6,263,496
Senior Lien Revenue Bonds, Series 1999A, 4.750%, 10/01/25
1,545,000 Airports Commission of San Francisco City and County, California, 5/03 at 101 AAA 1,589,712
San Francisco International Airport, Second Series Refunding
Revenue Bonds, Issue 4, 6.200%, 5/01/20 (Alternative Minimum Tax)
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. Guaranteed - 19.9%
6,000,000 Huntington Park Redevelopment Agency, Single Family Residential No Opt. Call AAA 7,778,040
Mortgage Revenue Refunding Bonds, 1986 Series A,
8.000%, 12/01/19
5,135,000 Community Redevelopment Agency of the City of Palmdale, California, No Opt. Call AAA 6,551,490
Single Family Mortgage Revenue Bonds, Series 1986A Restructured,
8.000%, 3/01/16 (Alternative Minimum Tax)
6,220,000 County of Riverside, California, Single Family Mortgage Revenue No Opt. Call AAA 8,816,228
Bonds (GNMA Mortgage-Backed Securities Program),
Issue A of 1987, 9.000%, 5/01/21 (Alternative Minimum Tax)
2,455,000 Airports Commission of San Francisco City and County, California, 5/03 at 102 AAA 2,664,436
San Francisco International Airport, Second Series Refunding
Revenue Bonds, Issue 4, 6.200%, 5/01/20
(Alternative Minimum Tax) (Pre-refunded to 5/01/03)
1,485,000 City of San Jose, California, Single Family Mortgage Revenue No Opt. Call AAA 2,093,731
Bonds, 1985 Series A, 9.500%, 10/01/13
- ------------------------------------------------------------------------------------------------------------------------------------
Utilities - 13.5%
4,000,000 California Pollution Control Financing Authority, Pollution Control 12/02 at 102 AAA 4,222,080
Revenue Bonds (Southern California Edison Company), 1992 Series B,
6.400%, 12/01/24 (Alternative Minimum Tax)
4,000,000 City of Chula Vista, Industrial Development Revenue Bonds 12/02 at 102 AA- 4,197,480
(San Diego Gas and Electric Company), 1992 Series A,
6.400%, 12/01/27 (Alternative Minimum Tax)
2,000,000 Northern California Power Agency, Capital Facilities Revenue Bonds, 2/09 at 101 AAA 1,820,320
1999 Refunding Series A, 5.000%, 8/01/25
2,000,000 Sacramento Municipal Utility District (California), Electric 8/02 at 100 AAA 2,037,120
Revenue Refunding Bonds, 1992 Series A, 5.750%, 8/15/13
7,000,000 Sacramento Municipal Utility District (California), Electric 7/04 at 101 AAA 6,608,000
Revenue Refunding Bonds, 1999 Series M, 5.250%, 7/01/28
- ------------------------------------------------------------------------------------------------------------------------------------
Water and Sewer - 22.4%
2,000,000 Cucamonga County Water District (San Bernardino County, California), 9/01 at 102 AAA 2,104,400
Certificates of Participation (1992 Water Facilities Refinancing),
6.300%, 9/01/12
1,000,000 East Bay Municipal Utility District (Alameda and Contra Costa 6/08 at 101 AAA 864,480
Counties, California), Water System Subordinated Revenue Bonds,
Series 1998, 4.750%, 6/01/28
2,400,000 The City of Los Angeles, California, Wastewater System Revenue 6/08 at 101 AAA 2,198,664
Bonds, Series 1998-A, 5.000%, 6/01/23
The City of Los Angeles, California, Wastewater System Revenue Bonds,
Series 1993-D:
1,250,000 4.700%, 11/01/17 11/03 at 102 AAA 1,118,600
8,000,000 4.700%, 11/01/19 11/03 at 102 AAA 7,055,600
2,875,000 Pomona Public Financing Authority (California), 1999 Revenue Bonds, 5/09 at 101 AAA 2,835,440
Series AC (Water Facilities Project), 5.500%, 5/01/29 (WI)
1,900,000 Public Facilities Financing Authority of the City of San Diego
(California), Sewer Revenue Bonds, Series 1999B, 5.000%, 5/15/29 5/09 at 101 AAA 1,719,234
5,440,000 City of Santa Monica, Wastewater Enterprise Revenue Bonds (Hyperion 1/04 at 102 AAA 4,842,090
Project), 1993 Refunding Series, 4.500%, 1/01/15
<PAGE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Water and Sewer (continued)
$ 5,000,000 Wheeler Ridge-Maricopa Water Storage District (Kern County, 11/06 at 102 AAA $ 5,123,250
California), 1996 Water Refunding Bonds, 5.700%, 11/01/15
3,425,000 City of Woodland (Yolo County, California), Certificates of Participation 3/03 at 100 AAA 3,423,011
(1992 Wastewater System Refunding Project), 5.500%, 3/01/18
- ------------------------------------------------------------------------------------------------------------------------------------
$ 139,980,000 Total Investments - (cost $132,954,377) - 98.9% 138,619,496
=============
Other Assets Less Liabilities - 1.1% 1,471,579
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $140,091,075
====================================================================================================================================
All of the bonds in the portfolio 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.
(WI) Security purchased on a when-issued basis (note 1).
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
Portfolio of Investments
Nuveen Insured California Premium Income Municipal Fund 2, Inc. (NCL)
August 31, 1999
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Education and Civic Organizations - 5.7%
$ 5,000,000 California Educational Facilities Authority, Revenue Bonds (University 10/06 at 102 AAA $ 5,135,250
of San Francisco), Series 1996, 6.000%, 10/01/26
2,400,000 California Educational Facilities Authority, Revenue Bonds (Santa Clara 9/06 at 102 AAA 2,412,552
University), Series 1996, 5.750%, 9/01/21
2,655,000 California State University, Housing System Revenue Bonds, 11/05 at 102 AAA 2,739,535
Series 1996, 5.700%, 11/01/13
4,900,000 The Regents of the University of California, University of California 11/03 at 102 AAA 4,905,929
Housing System Revenue Bonds, Series A, 5.500%, 11/01/18
- ------------------------------------------------------------------------------------------------------------------------------------
Health Care - 3.1%
2,000,000 California Health Facilities Financing Authority, Kaiser Permanente 6/08 at 102 AAA 1,823,960
Revenue Bonds, Series 1998A, 5.000%, 6/01/24
1,450,000 California Health Facilities Financing Authority, Insured Health Facility 7/06 at 102 AAA 1,478,217
Refunding Revenue Bonds (Mark Twain/ St. Josephs Healthcare),
1996 Series A, 6.000%, 7/01/19
5,000,000 California Health Facilities Financing Authority, Insured Health Facility 7/06 at 102 AAA 5,132,150
Refunding Revenue Bonds (Catholic Healthcare West), 1996 Series A,
6.000%, 7/01/25
- ------------------------------------------------------------------------------------------------------------------------------------
Housing/Multifamily - 4.7%
4,620,000 The Community Redevelopment Agency of the City of Los Angeles, 6/05 at 105 AAA 5,154,211
California, Multifamily Housing Revenue Refunding Bonds,
1995 Series A (Angelus Plaza Project), 7.400%, 6/15/10
7,400,000 Housing Authority of the County of Santa Cruz, Tax-Exempt Multifamily 5/03 at 102 Aaa 7,540,082
Housing Revenue Refunding Bonds, Series 1993A (GNMA
Collateralized-Meadowview Apartments), 6.125%, 5/20/28
- ------------------------------------------------------------------------------------------------------------------------------------
Housing/Single Family - 4.3%
5,670,000 California Housing Finance Agency, Single Family Mortgage 8/07 at 101 1/2 AAA 5,523,544
Bonds II, 1997 Series C-2, 5.625%, 8/01/20 (Alternative Minimum Tax)
1,500,000 California Housing Finance Agency, Home Mortgage Revenue Bonds, 2/06 at 102 AAA 1,533,480
1996 Series E, 6.150%, 8/01/25 (Alternative Minimum Tax)
2,000,000 California Housing Finance Agency, Home Mortgage Revenue Bonds, 2/09 at 101 AAA 1,807,900
1998 Series N, 5.250%, 8/01/29
15,000,000 California Housing Finance Agency, Home Mortgage Revenue No Opt. Call AAA 2,596,650
Bonds, 1999 Series B, 0.000%, 2/01/30 (Alternative Minimum Tax)
- ------------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General - 7.1%
5,000,000 State of California, Veterans General Obligation Bonds, 12/03 at 102 AAA 4,852,850
Series BH, 5.500%, 12/01/24 (Alternative Minimum Tax)
2,130,000 State of California, Various Purpose General Obligation Bonds, 11/02 at 102 AAA 2,157,775
5.750%, 11/01/17
2,575,000 Calipatria Unified School District, Imperial County, California, 8/06 at 102 AAA 2,643,856
1996 Series A, General Obligation Bonds, 5.625%, 8/01/13
3,000,000 Escondido Union High School District, San Diego County, California, 11/06 at 102 AAA 3,270,570
General Obligation Bonds (1996 Election), 5.700%, 11/01/10
Golden West Schools Financing Authority (California), 1999
Revenue Bonds, Series A (School District General Obligation
Refunding Program):
2,480,000 0.000%, 2/01/20 No Opt. Call AAA 769,470
2,000,000 0.000%, 8/01/20 No Opt. Call AAA 603,020
1,000,000 City of Los Angeles, California, Unified School District, General No Opt. Call AAA 1,069,300
Obligation Bonds, 1997 Series A, 6.000%, 7/01/15
<PAGE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tax Obligation/General (continued)
$ 4,950,000 Murrieta Valley Unified School District (Riverside County, California), No Opt. Call AAA $ 1,407,434
1998 Series A, General Obligation Bonds, 0.000%, 9/01/21
2,250,000 Santa Monica Community College District (County of Los Angeles, 7/05 at 102 AAA 2,261,768
California), General Obligation Bonds, 1992 Election, Series B,
5.750%, 7/01/20
- ------------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited - 32.5%
3,865,000 Certificates of Participation (1991 Financing Project), County 9/06 at 102 AAA 3,982,689
of Alameda, California, Alameda County Public Facilities
Corporation, 6.000%, 9/01/21
7,985,000 County of Alameda, California, 1993 Refunding Certificates of 12/03 at 102 AAA 8,167,218
Participation (Santa Rita Jail Project), 5.700%, 12/01/14
Anaheim Public Financing Authority, Lease Revenue Bonds (Anaheim
Public Improvements Project), Subordinate Lease Revenue Bonds,
1997 Series C:
5,130,000 0.000%, 9/01/18 No Opt. Call AAA 1,758,513
8,000,000 0.000%, 9/01/21 No Opt. Call AAA 2,274,640
1,500,000 0.000%, 9/01/22 No Opt. Call AAA 402,255
1,800,000 California Public School District Financing Authority, Lease Revenue 9/06 at 102 AAA 1,843,704
Bonds (Richgrove Elementary School District Projects), Series 1996B,
5.800%, 9/01/16
5,000,000 Community Redevelopment Agency of the City of Compton, California, 8/05 at 102 AAA 5,442,350
Compton Redevelopment Project, Refunding Tax Allocation Bonds,
Series 1995A (Project Tax Revenues, Subventions and Housing Tax
Revenues) (Insured/Tax-Exempt), 6.500%, 8/01/13
4,000,000 County of Contra Costa, California, Certificates of Participation 11/07 at 102 AAA 3,950,640
(Merrithew Memorial Hospital Replacement Project), Refunding
Series of 1997, 5.500%, 11/01/22
3,000,000 Galt Schools Joint Powers Authority (Sacramento County, 11/07 at 102 AAA 3,054,870
California), 1997 Refunding Revenue Bonds, Series A (High School
and Elementary School Facilities), 5.875%, 11/01/24
2,500,000 Lancaster Housing Authority (California), Lease Refunding Revenue 4/08 at 102 AAA 2,248,650
Bonds (Brierwood Mobilehome Park Project), Issue of 1999,
5.000%, 4/01/24 (Optional put 4/01/10)
5,585,000 Los Angeles County Transportation Commission (California), 7/01 at 102 AAA 5,892,119
Sales Tax Revenue Refunding Bonds, Series 1991-B, 6.500%, 7/01/13
2,100,000 Menifee Union School District (Riverside County, California), 9/06 at 102 AAA 2,174,865
Certificates of Participation (1996 School Project), 6.125%, 9/01/24
2,690,000 Norwalk Community Facilities Financing Authority (Los Angeles 9/05 at 102 AAA 2,815,811
County, California), Tax Allocation Refunding Revenue Bonds,
1995 Series A, 6.000%, 9/01/15
4,000,000 Oakland State Building Authority, Lease Revenue Bonds 4/08 at 101 AAA 3,670,600
(Elihu M. Harris State Office Building), 1998 Series A,
5.000%, 4/01/23
9,000,000 City of Redlands, California, Certificates of Participation 9/03 at 102 AAA 9,145,170
(1993 Refunding of 1986 and 1987 Projects), 5.800%, 9/01/17
3,000,000 San Dieguito Public Facilities Authority (California), Revenue Bonds, 8/08 at 102 AAA 2,706,270
1998 Series A (Tax-Exempt), 5.000%, 8/01/30
1,500,000 San Francisco Bay Area Rapid Transit District (California), 7/08 at 101 AAA 1,358,970
Sales Tax Revenue Bonds, Series 1998, 5.000%, 7/01/28
1,930,000 Santa Margarita/Dana Point Authority, Orange County, California, No Opt. Call AAA 2,206,144
Revenue Bonds, Series A (1994 Improvement Districts
Nos. 1, 2, 2A and 8 General Obligation Bond Refinancing),
7.250%, 8/01/05
South Orange County Public Financing Authority (California),
Special Tax Revenue Bonds, 1994 Series C (Foothill Area):
4,000,000 8.000%, 8/15/08 No Opt. Call AAA 4,927,680
7,330,000 8.000%, 8/15/09 No Opt. Call AAA 9,119,546
4,005,000 Redevelopment Agency of the City of Suisun City, Suisun City 10/03 at 102 AAA 4,066,076
Redevelopment Project, 1993 Tax Allocation Refunding Bonds
(County of Solano, California), 5.900%, 10/01/23
5,450,000 City of Visalia, California (Motor Vehicle License Fee Enhancement), 12/06 at 102 AAA 5,253,364
Visalia Public Finance Authority, Refunding Certificates of
Participation, Series 1996A, 5.375%, 12/01/26
2,400,000 Yorba Linda Redevelopment Agency (Orange County, California), No Opt. Call AAA 447,528
Yorba Linda Redevelopment Project, 1998 Tax Allocation Parity
Refunding Bonds, Series A, 0.000%, 9/01/28
<PAGE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Transportation - 11.1%
$ 2,800,000 Alameda Corridor Transportation Authority (California), Tax-Exempt 10/09 at 101 AAA $ 2,435,804
Senior Lien Revenue Bonds, Series 1999A, 4.750%, 10/01/25
6,500,000 Foothill/Eastern Transportation Corridor Agency (California), 1/10 at 65 5/16 AAA 2,219,490
Toll Road Refunding Revenue Bonds, Series 1999, 0.000%, 1/15/18
10,000,000 Airport Commission of the City and County of San Francisco, California, 5/09 at 101 AAA 9,231,500
San Francisco International Airport, Second Series Revenue Bonds,
Issue 23B Bonds, 5.125%, 5/01/30
6,500,000 San Joaquin Hills Transportation Corridor Agency, Toll Road Refunding 1/07 at 102 AAA 6,119,620
Revenue Bonds, Series 1997A, 5.250%, 1/15/30
14,065,000 San Joaquin Hills Transportation Corridor Agency, Toll Road Refunding No Opt. Call AAA 5,995,066
Revenue Bonds, Series 1997A, 0.000%, 1/15/15
3,750,000 City of San Jose, California, Airport Revenue Bonds, Series of 1993, 3/03 at 102 AAA 3,752,625
5.700%, 3/01/18 (Alternative Minimum Tax)
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. Guaranteed - 14.9%
7,650,000 California Educational Facilities Authority, Revenue Bonds (Santa 9/06 at 102 AAA 8,352,576
Clara University), Series 1996, 5.750%, 9/01/21
(Pre-refunded to 9/01/06)
3,000,000 Central Unified School District (Fresno County, California), General 3/03 at 102 AAA 3,196,560
Obligation Bonds, Election 1992, 5.625%, 3/01/18
(Pre-refunded to 3/01/03)
1,000,000 Kern High School District (County of Kern, California), General 8/03 at 102 AAA 1,006,530
Obligation Bonds, Election of 1990, Series D, 5.600%, 8/01/15
9,000,000 The Metropolitan Water District of Southern California, Water 7/05 at 102 AAA 9,780,030
Revenue Bonds, 1995 Series A, 5.750%, 7/01/21
(Pre-refunded to 7/01/05)
4,320,000 County of Riverside, California, Single Family Mortgage Revenue No Opt. Call AAA 5,779,728
Bonds (GNMA Mortgage-Backed Securities Program),
Issue B of 1987, 8.625%, 5/01/16 (Alternative Minimum Tax)
9,000,000 Airports Commission of the City and County of San Francisco, 5/04 at 101 AAA 9,777,420
California, San Francisco International Airport, Second Series
Revenue Bonds, Issue 8B, 6.100%, 5/01/20 (Pre-refunded to 5/01/04)
1,675,000 City of Torrance, Floating Rate Demand Hospital Revenue Bonds 12/05 at 100 AAA 1,854,376
(Little Company of Mary Hospital), 1985 Series A, 7.100%, 12/01/15
(Pre-refunded to 12/01/05)
- ------------------------------------------------------------------------------------------------------------------------------------
Utilities - 6.2%
2,500,000 California Pollution Control Financing Authority, Pollution Control 9/09 at 100 AAA 2,447,575
Refunding Revenue Bonds (Southern California Edison Company),
1999 Series C, 5.450%, 9/01/29 (WI)
3,215,000 Modesto Irrigation District Financing Authority, Refunding 10/06 at 102 AAA 3,372,181
Revenue Bonds, Series A, 6.000%, 10/01/15
2,425,000 Northern California Power Agency, Hydroelectric Project Number 7/08 at 101 AAA 2,257,554
One Revenue Bonds, 1998 Refunding Series A, 5.200%, 7/01/32
6,750,000 Turlock Irrigation District (California), Revenue Refunding Bonds, 7/02 at 100 AAA 6,790,500
Series 1992-A, 5.750%, 1/01/18
2,000,000 Turlock Irrigation District (California), Revenue Refunding Bonds, 1/08 at 102 AAA 1,819,000
1998 Series A, 5.000%, 1/01/26
- ------------------------------------------------------------------------------------------------------------------------------------
Water and Sewer - 9.5%
1,250,000 City of Barstow, California, Certificates of Participation 10/04 at 102 AAA 1,212,575
(1994 Wastewater Reclamation Improvement Project),
5.250%, 10/01/18
3,530,000 Castaic Lake Water Agency (California), Refunding Revenue No Opt. Call AAA 4,075,209
Certificates of Participation (Water System Improvement Projects),
Series 1994A, 8.000%, 8/01/04
2,975,000 Chino Basin Regional Financing Authority, Revenue Bonds, 8/04 at 102 AAA 3,098,492
Series 1994 (Chino Basin Municipal Water District Sewer System
Project), 6.000%, 8/01/16
1,000,000 The City of Los Angeles, California, Wastewater System 6/08 at 101 AAA 906,080
Revenue Bonds, Series 1998-A, 5.000%, 6/01/28
2,875,000 Pomona Public Financing Authority (California), 1999 Revenue Bonds, 5/09 at 101 AAA 2,835,440
Series AC (Water Facilities Project), 5.500%, 5/01/29 (WI)
<PAGE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Water and Sewer (continued)
$ 1,000,000 Public Facilities Financing Authority of the City of San Diego 5/09 at 101 AAA $ 904,860
(California), Sewer Revenue Bonds, Series 1999B, 5.000%, 5/15/29
2,900,000 City and County of San Francisco, Sewer Revenue Refunding Bonds, 10/02 at 102 AAA 2,903,014
Series 1992, 5.500%, 10/01/15
4,000,000 South San Joaquin Irrigation District (San Joaquin County, California), 1/03 at 102 AAA 4,004,240
1993 Refunding Revenue Certificates of Participation (1987 Project
and 1992 Project), 5.500%, 1/01/15
5,410,000 City of Tulare, California, 1996 Sewer Revenue Bonds, 5.750%, 11/15/21 11/06 at 102 AAA 5,438,240
- ------------------------------------------------------------------------------------------------------------------------------------
$ 301,840,000 Total Investments - (cost $260,654,715) - 99.1% 265,295,460
=============
Other Assets Less Liabilities - 0.9% 2,537,338
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $267,832,798
====================================================================================================================================
All of the bonds in the portfolio 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.
(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, 1999
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Education and Civic Organizations - 3.6%
$ 1,995,000 California State Public Works Board, Lease Revenue Bonds (Various 3/06 at 102 AAA $ 2,019,179
California Community College Projects), Series 1996A,
5.625%, 3/01/16
2,225,000 The Regents of the University of California, University of California 11/03 at 102 AAA 2,227,692
Housing System Revenue Bonds, Series A, 5.500%, 11/01/18
- ------------------------------------------------------------------------------------------------------------------------------------
Health Care - 17.0%
5,150,000 California Health Facilities Financing Authority, Hospital Revenue 5/03 at 102 A- 5,120,542
Bonds (Downey Community Hospital), Series 1993, 5.750%, 5/15/15
4,000,000 California Statewide Communities Development Authority, 8/02 at 102 A2 4,281,360
Certificates of Participation (Cedars-Sinai Medical Center),
6.500%, 8/01/15
8,100,000 California Statewide Community Development Authority, Revenue No Opt. Call AAA 7,471,602
Refunding Bonds (Sherman Oaks Project), Series 1998A,
5.000%, 8/01/22
2,000,000 City of Loma Linda California, Hospital Revenue Bonds (Loma Linda 12/03 at 102 N/R 2,014,880
University Medical Center Project), Series 1993-A, 6.000%, 12/01/06
1,355,000 Palomar Pomerado Health System, Insured Revenue Bonds, Series 1993, 11/03 at 102 AAA 1,312,792
5.000%, 11/01/13
- ------------------------------------------------------------------------------------------------------------------------------------
Housing/Multifamily - 14.5%
2,000,000 California Statewide Communities Development Authority, 7/08 at 101 BBB 1,924,200
Apartment Development Revenue Refunding Bonds (Irvine Apartment
Communities, L.P.), Series 1998A, 5.250%, 5/15/25
(Mandatory put 5/15/13)
8,285,000 The Community Redevelopment Agency of the City of Los Angeles, 6/05 at 105 AAA 9,242,995
California, Multifamily Housing Revenue Refunding Bonds,
1995 Series A (Angelus Plaza Project), 7.400%, 6/15/10
4,000,000 City of Stanton Multifamily Housing Revenue Bonds (Continental 8/07 at 102 AAA 4,136,480
Gardens Apartments), Series 1997, 5.625%, 8/01/29 (Alternative
Minimum Tax) (Mandatory put 8/01/09)
2,000,000 City of Vista, California, Mobile Home Park Subordinate Revenue 3/09 at 102 N/R 1,893,920
Bonds (Vista Manor Mobile Home Park Project), Series 1999B,
5.750%, 3/15/29
- ------------------------------------------------------------------------------------------------------------------------------------
Housing/Single Family - 8.6%
4,010,000 California Housing Finance Agency, Single Family Mortgage 2/07 at 102 AAA 4,058,641
Bonds II, 1997 Series A, 6.000%, 8/01/20
(Alternative Minimum Tax)
1,000,000 California Housing Finance Agency, Home Mortgage Revenue Bonds, 8/04 at 102 Aa 1,042,750
1994 Series A, 6.550%, 8/01/26
1,000,000 California Housing Finance Agency, Home Mortgage Revenue Bonds, 8/05 at 102 AAA 1,023,230
1994 Series F-3, 6.100%, 8/01/15 (Alternative Minimum Tax)
2,000,000 California Housing Finance Agency, Home Mortgage Revenue Bonds, 2/07 at 102 AAA 2,046,060
1997 Series B, 6.000%, 8/01/16 (Alternative Minimum Tax)
1,800,000 California Rural Home Mortgage Finance Authority, Single Family No Opt. Call AAA 2,020,500
Mortgage Revenue Bonds (Mortgage-Backed Securities Program),
1996 Series C, 7.500%, 8/01/27 (Alternative Minimum Tax)
- ------------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General - 10.4%
10,000,000 State of California, Veterans General Obligation Bonds, Series BR, 6/04 at 101 AA- 9,176,900
5.300%, 12/01/29 (Alternative Minimum Tax)
3,000,000 Pomona Unified School District, General Obligation Refunding Bonds, 8/11 at 103 AAA 3,239,520
Series 1997-A, 6.150%, 8/01/15
<PAGE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tax Obligation/Limited - 16.8%
$ 4,500,000 Bonita Canyon Public Facilities Financing Authority (California), 9/99 at 103 N/R $ 4,022,460
Community Facilities District No. 98-1, Special Tax Bonds,
Series 1998, 5.375%, 9/01/28
2,500,000 City of Carlsbad (California), Assessment District No. 96-1 9/99 at 103 N/R 2,270,425
(Rancho Carillo), Limited Obligation Improvement Bonds,
5.500%, 9/02/28
2,000,000 Carson Redevelopment Agency (California), Redevelopment Project 10/03 at 102 BBB 2,036,680
Area No. 2, Refunding Tax Allocation Bonds, Series 1993,
5.875%, 10/01/09
1,760,000 Carson Redevelopment Agency (California), Redevelopment Project 10/03 at 102 BBB+ 1,808,189
Area No. 1, Tax Allocation Bonds, Series 1993, 5.625%, 10/01/08
2,160,000 Community Redevelopment Financing Authority of the Community 6/03 at 102 BB 2,106,518
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)
1,000,000 Community Facilities District No. 88-1 of the City of Poway, California 8/08 at 102 N/R 1,045,800
(Parkway Business Center), Special Tax Refunding Bonds,
Series 1998, 6.500%, 8/15/09
1,265,000 City of Richmond, Limited Obligation Refunding Improvement Bonds, 9/99 at 103 N/R 1,304,734
Reassessment District No. 855 (Atlas Road West and Interchange),
6.600%, 9/02/19
2,100,000 Sacramento City Finance Authority, Lease Revenue Refunding Bonds, No Opt. Call A+ 2,050,671
Series 1993 B, 5.400%, 11/01/20
San Marcos Public Facilities Authority (California), Refunding Revenue
Bonds, Series 1998:
1,500,000 5.800%, 9/01/18 9/08 at 101 N/R 1,454,700
2,000,000 5.800%, 9/01/27 9/08 at 101 N/R 1,919,920
- ------------------------------------------------------------------------------------------------------------------------------------
Transportation - 4.1%
2,750,000 Airport Commission of the City and County of San Francisco, 5/04 at 102 AAA 2,915,358
California, San Francisco International Airport, Second Series
Revenue Bonds, Issue 5, 6.500%, 5/01/24 (Alternative Minimum Tax)
2,000,000 Airport Commission of the City and County of San Francisco, 5/06 at 102 AAA 1,976,860
California, San Francisco International Airport, Second Series
Revenue Bonds, Issue 10, 5.700%, 5/01/26 (Alternative Minimum Tax)
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. Guaranteed - 10.5%
1,500,000 ABAG Finance Authority for Nonprofit Corporations, Certificates 11/03 at 102 AAA 1,439,745
of Participation (Stanford University Hospital), California,
Series 1993, 5.250%, 11/01/20
3,200,000 State Public Works Board of the State of California, Lease Revenue 10/04 at 102 A1*** 3,555,584
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)
4,100,000 Imperial Irrigation District, California, Certificates of Participation 11/04 at 102 AAA 4,498,397
(1994 Electric System Project), 6.000%, 11/01/15
(Pre-refunded to 11/01/04)
2,735,000 City of Torrance, Floating Rate Demand Hospital Revenue Bonds 12/05 at 100 AAA 3,027,891
(Little Company of Mary Hospital), 1985 Series A, 7.100%, 12/01/15
(Pre-refunded to 12/01/05)
- ------------------------------------------------------------------------------------------------------------------------------------
Utilities - 3.5%
1,000,000 California Pollution Control Financing Authority, Pollution Control 12/02 at 102 AAA 1,055,520
Revenue Bonds (Southern California Edison Company), 1992 Series B,
6.400%, 12/01/24 (Alternative Minimum Tax)
2,000,000 Department of Water and Power of the City of Los Angeles (California), 9/03 at 102 AAA 1,939,700
Electric Plant Refunding Revenue Bonds, Issue of 1993,
5.375%, 9/01/23
1,095,000 Sacramento Municipal Utility District (California), Electric Revenue 5/03 at 102 A 1,114,874
Bonds, 1993 Series E, 5.700%, 5/15/12
- ------------------------------------------------------------------------------------------------------------------------------------
Water and Sewer - 9.5%
4,205,000 State of California, Department of Water Resources, Central Valley 6/03 at 101 1/2 AA 4,299,024
Project, Water System Revenue Bonds, Series L, 5.750%, 12/01/13
1,000,000 Eastern Municipal Water District (Riverside County, California), Water 7/01 at 101 AAA 1,031,640
and Sewer Revenue Refunding Certificates of Participation,
Series 1991A, 6.300%, 7/01/20
<PAGE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Water and Sewer (continued)
$ 1,000,000 City of Riverside, California, Water Revenue Bonds, Issue of 1991, No Opt. Call AA $ 1,099,880
9.000%, 10/01/01
2,000,000 Public Facilities Financing Authority of the City of San Diego 5/09 at 101 AAA 1,809,720
(California), Sewer Revenue Bonds, Series 1999B, 5.000%, 5/15/29
3,100,000 City and County of San Francisco, Sewer Revenue Refunding Bonds, 10/02 at 102 AAA 3,052,229
Series 1994, 5.375%, 10/01/16
- ------------------------------------------------------------------------------------------------------------------------------------
$ 116,390,000 Total Investments - (cost $115,819,278) - 98.5% 117,089,762
=============
Other Assets Less Liabilities - 1.5% 1,787,446
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $118,877,208
====================================================================================================================================
* 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, 1999
<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) $138,619,496 $265,295,460 $117,089,762
Cash 2,862,064 5,098,446 160,974
Receivables:
Interest 2,047,018 3,759,156 1,964,516
Investments sold -- 35,000 242,050
Other assets 14,238 34,345 8,335
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets 143,542,816 274,222,407 119,465,635
- ------------------------------------------------------------------------------------------------------------------------------------
Liabilities
Payable for investments purchased 2,781,369 5,276,369 --
Accrued expenses:
Management fees (note 6) 77,329 146,408 65,801
Other 114,373 138,326 138,199
Preferred share dividends payable 28,907 49,117 4,711
Common share dividends payable 449,763 779,389 379,718
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 3,451,741 6,389,609 588,429
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets (note 7) $140,091,075 $267,832,798 $118,877,208
====================================================================================================================================
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 6,419,740 12,613,940 5,753,535
====================================================================================================================================
Net asset value per Common share outstanding (net assets less
Preferred shares at liquidation value, divided by Common shares outstanding) $ 14.81 $ 13.70 $ 13.19
====================================================================================================================================
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
Statement of Operations
Year Ended August 31, 1999
<CAPTION>
Insured Insured
California California California
Premium Income Premium Income 2 Premium Income
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment Income (note 1) $ 8,263,939 $ 14,991,811 $ 6,790,690
- -----------------------------------------------------------------------------------------------------------------------------------
Expenses
Management fees (note 6) 958,536 1,798,384 806,237
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 14,179 21,402 10,572
Custodian's fees and expenses 48,610 64,058 41,134
Directors'/Trustees' fees and expenses (note 6) 1,394 2,635 1,172
Professional fees 17,769 18,137 17,305
Shareholders' reports - printing and mailing expenses 43,410 67,588 37,595
Stock exchange listing fees 16,169 24,262 5,365
Investor relations expense 11,925 21,436 9,844
Portfolio insurance expense 13,691 6,161 --
Other expenses 10,684 15,553 9,175
Total expenses before custodian fee credit 1,258,868 2,297,112 1,055,900
Custodian fee credit (note 1) (8,113) (9,856) (1,703)
- -----------------------------------------------------------------------------------------------------------------------------------
Net expenses 1,250,755 2,287,256 1,054,197
- -----------------------------------------------------------------------------------------------------------------------------------
Net investment income 7,013,184 12,704,555 5,736,493
- -----------------------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) from Investments
Net realized gain from investment transactions (notes 1 and 4) 2,811,060 1,092,203 953,072
Change in net unrealized appreciation or depreciation of investments (12,837,818) (15,444,517) (7,444,796)
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations $ (3,013,574) $ (1,647,759) $ (755,231)
===================================================================================================================================
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
Statement of Changes in Net Assets
<CAPTION>
Insured California Insured California California
Premium Income Insured Premium Income 2 Premium Income
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
8/31/99 8/31/98 8/31/99 8/31/98 8/31/99 8/31/98
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Operations
Net investment income $ 7,013,184 $ 6,617,904 $ 12,704,555 $ 12,373,288 $ 5,736,493 $ 5,619,112
Net realized gain from investment
transactions (notes 1 and 4) 2,811,060 5,603 1,092,203 798,085 953,072 539,431
Change in net unrealized
appreciation or depreciation
of investments (12,837,818) 5,944,476 (15,444,517) 8,807,703 (7,444,796) 3,467,586
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets
from operations (3,013,574) 12,567,983 (1,647,759) 21,979,076 (755,231) 9,626,129
- -----------------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders
(note 1)
From undistributed net
investment income:
Common shareholders (5,336,428) (5,220,819) (9,879,332) (9,376,562) (4,435,082) (4,234,452)
Preferred shareholders (1,268,146) (1,439,964) (2,643,521) (3,086,048) (1,186,689) (1,384,389)
- -----------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets from
distributions to shareholders (6,604,574) (6,660,783) (12,522,853) (12,462,610) (5,621,771) (5,618,841)
- -----------------------------------------------------------------------------------------------------------------------------------
Capital Share Transactions (note 2)
Net proceeds from Common shares
issued to shareholders due to
reinvestment of distributions 231,305 -- 604,259 -- 188,040 63,519
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets (9,386,843) 5,907,200 (13,566,353) 9,516,466 (6,188,962) 4,070,807
Net assets at the
beginning of year 149,477,918 143,570,718 281,399,151 271,882,685 125,066,170 120,995,363
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets at the end of year $140,091,075 $149,477,918 $267,832,798 $281,399,151 $118,877,208 $125,066,170
===================================================================================================================================
Balance of undistributed net
investment income at the
end of year $ 726,024 $ 317,414 $ 737,959 $ 556,257 $ 359,312 $ 244,590
===================================================================================================================================
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, 1999, Insured California Premium Income and Insured California
Premium Income 2 had outstanding when-issued purchase commitments of $2,781,369
and $5,276,369, respectively. There were no such purchase commitments in
California Premium Income.
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, 1999, 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 monthly as a dividend 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.
<PAGE>
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:
Insured Insured
California California California
Premium Premium Premium
Income Income 2 Income
- -------------------------------------------------------------------------------
Number of shares:
Series M -- -- 1,720
Series T 1,800 1,900 --
Series Th -- 1,900 --
- -------------------------------------------------------------------------------
Total 1,800 3,800 1,720
===============================================================================
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, 1999.
Custodian Fee Credit
Each Fund has an arrangement with the custodian bank whereby the custodian fees
and expenses are reduced by credits earned on each Fund's cash on deposit with
the bank. Such deposit arrangements are an alternative to overnight investments.
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.
<PAGE>
2. Fund Shares
Transactions in Common shares were as follows:
Insured California Insured California
Premium Income Premium Income 2
- --------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended
8/31/99 8/31/98 8/31/99 8/31/98
- --------------------------------------------------------------------------------
Shares issued to shareholders
due to reinvestment
of distributions 14,390 -- 36,233 --
================================================================================
California
Premium Income
- --------------------------------------------------------------------------
Year Ended Year Ended
8/31/99 8/31/98
- --------------------------------------------------------------------------
Shares issued to shareholders
due to reinvestment
of distributions 13,023 4,535
==========================================================================
3. Distributions to Common Shareholders
The Funds declared Common share dividend distributions from their tax-exempt net
investment income which were paid October 1, 1999, to shareholders of record on
September 15, 1999, as follows:
Insured Insured
California California California
Premium Premium Premium
Income Income 2 Income
- --------------------------------------------------------------------------------
Dividend per share $.0700 $.0665 $.0660
================================================================================
<PAGE>
4. Securities Transactions
Purchases and sales (including maturities) of investments in long-term municipal
securities and short-term municipal securities during the fiscal year ended
August 31, 1999, were as follows:
Insured Insured
California California California
Premium Premium Premium
Income Income 2 Income
- --------------------------------------------------------------------------------
Purchases:
Long-term municipal securities $74,586,498 $101,694,715 $43,697,702
Short-term municipal securities 24,500,000 26,500,000 11,800,000
Sales and maturities:
Long-term municipal securities 73,354,769 97,409,863 43,689,841
Short-term municipal securities 25,300,000 27,450,000 11,800,000
================================================================================
At August 31, 1999, 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, 1999, 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:
Insured Insured
California California California
Premium Premium Premium
Income Income 2 Income
- --------------------------------------------------------------------------------
Expiration year:
2002 $ -- $ -- $ 29,822
2003 -- 2,032,923 1,893,938
2004 -- 4,345,091 2,742,449
2005 165,897 1,283,948 1,049,994
- --------------------------------------------------------------------------------
Total $ 165,897 $7,661,962 $5,716,203
================================================================================
<PAGE>
5. Unrealized Appreciation (Depreciation)
Gross unrealized appreciation and gross unrealized depreciation of investments
at August 31, 1999, were as follows:
Insured Insured
California California California
Premium Premium Premium
Income Income 2 Income
- --------------------------------------------------------------------------------
Gross unrealized:
appreciation $ 8,399,188 $ 8,804,796 $ 3,815,707
depreciation (2,734,069) (4,164,051) (2,545,223)
- --------------------------------------------------------------------------------
Net unrealized appreciation $ 5,665,119 $ 4,640,745 $ 1,270,484
================================================================================
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 assets of each Fund as
follows:
Average Daily Net Assets 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.
<PAGE>
7. Composition of Net Assets
At August 31, 1999, 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 64,197 126,139 57,535
Paid-in surplus 88,801,632 174,989,917 79,906,080
Balance of undistributed net investment income 726,024 737,959 359,312
Accumulated net realized gain (loss)
from investment transactions (165,897) (7,661,962) (5,716,203)
Net unrealized appreciation of investments 5,665,119 4,640,745 1,270,484
- ---------------------------------------------------------------------------------------------------------
Net assets $140,091,075 $267,832,798 $118,877,208
=========================================================================================================
Authorized shares:
Common 200,000,000 200,000,000 Unlimited
Preferred 1,000,000 1,000,000 Unlimited
=========================================================================================================
</TABLE>
<PAGE>
<TABLE>
Financial Highlights
Selected data for a Common share outstanding throughout each
year:
<CAPTION>
Investment Operations
------------------------------------
Net
Realized/
Beginning Net Unrealized
Net Asset Investment Investment
Value Income Gain (Loss) Total
Insured California
Premium Income
Year Ended 8/31:
<S> <C> <C> <C> <C>
1999 $16.31 $1.09 $(1.56) $ (.47)
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
<CAPTION>
Insured California
Premium Income 2
<S> <C> <C> <C> <C>
Year Ended 8/31:
1999 14.82 1.01 (1.14) (.13)
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
<CAPTION>
California
Premium Income
<S> <C> <C> <C> <C>
Year Ended 8/31:
1999 14.30 1.00 (1.13) (.13)
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
<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:
1999 $(.83) $(.20) $-- $-- $(1.03)
1998 (.81) (.22) -- -- (1.03)
1997 (.81) (.23) -- -- (1.04)
1996 (.79) (.23) -- -- (1.02)
1995 (.83) (.26) -- -- (1.09)
<CAPTION>
Insured California
Premium Income 2
<S> <C> <C> <C> <C> <C>
Year Ended 8/31:
1999 (.78) (.21) -- -- (.99)
1998 (.75) (.24) -- -- (.99)
1997 (.74) (.23) -- -- (.97)
1996 (.74) (.24) -- -- (.98)
1995 (.79) (.27) -- -- (1.06)
<CAPTION>
California
Premium Income
<S> <C> <C> <C> <C> <C>
Year Ended 8/31:
1999 (.77) (.21) -- -- (.98)
1998 (.74) (.24) -- -- (.98)
1997 (.74) (.24) -- -- (.98)
1996 (.74) (.24) -- -- (.98)
1995 (.77) (.28) -- -- (1.05)
<PAGE>
<CAPTION>
Total Returns
------------------
Based
Ending Based on
Net Ending on Net
Asset Market Market Asset
Value Value Value* Value*
<S> <C> <C> <C> <C>
Insured California
Premium Income
Year Ended 8/31:
1999 $14.81 $15.3750 1.62% (4.35)%
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
<CAPTION>
Insured California
Premium Income 2
<S> <C> <C> <C> <C>
Year Ended 8/31:
1999 13.70 14.3750 2.27 (2.50)
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
<CAPTION>
California
Premium Income
<S> <C> <C> <C> <C>
Year Ended 8/31:
1999 13.19 13.3750 .81 (2.57)
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
<PAGE>
<CAPTION>
Ratios/Supplemental Data
-------------------------------------------------------------------
Before Credit
-------------------------------------------------------
Ratio of Net Ratio of Net
Ratio of Investment Ratio of Investment
Expenses Income to Expenses Income to
to Average Average to Average Average
Ending Net Assets Net Assets Total Total
Net Applicable Applicable Net Assets Net Assets
Assets to Common to Common Including Including
(000) Shares++ Shares++ Preferred++ Preferred++
Insured California
Premium Income
<S> <C> <C> <C> <C> <C>
Year Ended 8/31:
1999 $140,091 1.22% 6.82% .85% 4.74%
1998 149,478 1.22 6.49 .85 4.50
1997 143,571 1.25 6.96 .85 4.74
1996 137,610 1.26 7.08 .85 4.81
1995 137,323 1.35 7.74 .89 5.10
<CAPTION>
Insured California
Premium Income 2
<S> <C> <C> <C> <C> <C>
Year Ended 8/31:
1999 267,833 1.24 6.86 .82 4.53
1998 281,399 1.25 6.79 .82 4.46
1997 271,883 1.28 7.24 .83 4.67
1996 261,851 1.29 7.39 .83 4.73
1995 258,628 1.36 8.23 .84 5.11
<CAPTION>
California
Premium Income
<S> <C> <C> <C> <C> <C>
Year Ended 8/31:
1999 118,877 1.30 7.08 .85 4.63
1998 125,066 1.32 7.02 .86 4.57
1997 120,995 1.34 7.47 .86 4.76
1996 115,869 1.39 7.63 .88 4.83
1995 114,304 1.73 8.34 1.05 5.08
<PAGE>
<CAPTION>
Ratios/Supplemental Data
-----------------------------------------------------------------------------
After Credit**
---------------------------------------------------------------
Ratio of Net Ratio of Net
Ratio of Investment Ratio of Investment
Expenses Income to Expenses Income to
to Average Average to Average Average
Net Assets Net Assets Total Total
Applicable Applicable Net Assets Net Assets Portfolio
to Common to Common Including Including Turnover
Shares++ Shares++ Preferred++ Preferred++ Rate
Insured California
Premium Income
Year Ended 8/31:
<S> <C> <C> <C> <C> <C>
1999 1.22% 6.82% .85% 4.74% 50%
1998 1.22 6.49 .85 4.50 2
1997 1.25 6.96 .85 4.74 9
1996 1.26 7.08 .85 4.81 9
1995 1.35 7.74 .89 5.10 24
<CAPTION>
Insured California
Premium Income 2
Year Ended 8/31:
<S> <C> <C> <C> <C> <C>
1999 1.24 6.86 .82 4.53 35
1998 1.25 6.79 .82 4.46 13
1997 1.28 7.24 .83 4.67 24
1996 1.29 7.39 .83 4.73 27
1995 1.36 8.23 .84 5.11 24
<CAPTION>
California
Premium Income
<S> <C> <C> <C> <C> <C>
Year Ended 8/31:
1999 1.30 7.08 .85 4.63 36
1998 1.32 7.02 .86 4.57 21
1997 1.34 7.47 .86 4.76 44
1996 1.39 7.63 .88 4.83 25
1995 1.73 8.34 1.05 5.08 26
* 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 for periods less than one year.
** After custodian fee credit, where applicable (note 1).
+ The amounts shown are based on Common share equivalents.
++ Ratios do not reflect the effect of dividend payments to Preferred
shareholders; income ratios reflect income earned on assets attributable to
Preferred shares.
</TABLE>
<PAGE>
Build Your Wealth Automatically
sidebar text: Nuveen offers a number of convenient ways to add to your portfolio
and earn the tax-free income you need to achieve your financial goals.
Nuveen makes reinvesting easy. A phone call is all it takes to set up your
reinvestment account.
Nuveen Exchange-Traded Funds Dividend Reinvestment Plan
Your Nuveen Exchange-Traded Fund allows you to conveniently reinvest dividends
and/or capital gains distributions in additional fund shares. If you do not
elect to reinvest distributions, all distributions are paid by check or can be
deposited directly into your bank or brokerage account.
By choosing to reinvest, you'll be able to invest money regularly and
automatically, and watch your investment grow through the power of tax-free
compounding. You'll also benefit from dollar-cost averaging, a technique of
investing at regular intervals, which allows you to build a high-quality,
tax-free portfolio conveniently and cost effectively over time.
Easy and convenient
To make recordkeeping easy and convenient, each month you'll receive a statement
showing your total dividends and distributions, the date of investment, the
shares acquired and the price per share, and the total number of shares you own.
Income or capital gains taxes may be payable on dividends or distributions that
are reinvested.
How shares are purchased
The shares you acquire by reinvesting will either be purchased on the open
market or newly issued by the Fund. If the shares are trading at or above net
asset value at the time of valuation, the Fund will issue new shares at the
then-current market price. If the shares are trading at less than net asset
value, shares for your account will be purchased on the open market. Dividends
and distributions received to purchase shares in the open market will normally
be invested shortly after the dividend payment date. No interest will be paid on
dividends and distributions awaiting reinvestment. Because the market price of
shares may increase before purchases are completed, the average purchase price
per share may exceed the market price at the time of valuation, resulting in the
acquisition of fewer shares than if the dividend or distribution had been paid
in shares issued by the fund. A pro rata portion of any applicable brokerage
commissions on open market purchases will be paid by Plan participants. These
commissions usually will be lower than those charged on individual transactions.
Flexibility
You may, of course, change your distribution option or withdraw from the Plan at
any time, should your needs or situation change. Should you withdraw, you can
receive a certificate for all whole shares credited to your reinvestment account
and cash payment for fractional shares, or cash payment for all reinvestment
account shares, less brokerage commissions and a $2.50 service fee.
You can also reinvest if your shares are registered in the name of a brokerage
firm, bank, or other nominee. Just ask your investment adviser if the firm will
participate on your behalf. If not, it's easy to have the shares registered in
your name and to apply for a reinvestment account directly. Participants whose
shares are registered in the name of one firm may not be able to transfer the
shares to another firm and continue to participate in the Plan.
The Fund reserves the right to amend or terminate the Plan at any time. Although
the Fund reserves the right to amend the Plan to include a service charge
payable by the participants, there is no direct service charge to participants
in the Plan at this time.
For more information on the Nuveen Automatic Reinvestment Plan or to enroll in
or withdraw from the Plan, speak with your financial adviser or call us at (800)
257-8787.
<PAGE>
Fund Information
Board of Directors/Trustees
Robert P. Bremner
Lawrence H. Brown
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, we have updated or replaced our trading, fund
management, and pricing systems at Nuveen - systems that directly affect our
investors and their financial advisers - to address Year 2000 concerns.
We continue to work closely with our transfer agent, custodian, firms through
whom we buy and sell portfolio securities, and other service partners to monitor
the Year 2000 readiness of their systems, while addressing other remaining
systems issues.
In addition, the Funds hold securities of issuers whose business operations
leave them susceptible to Year 2000 concerns. We seek to evaluate an issuer's
Year 2000 readiness as part of our initial and ongoing research of these
issuers. This is only one of the many factors considered in determining whether
to buy, sell, or continue holding a particular security.
Our Year 2000 review, repair, and testing program has been substantially
completed. This program included industry-wide testing of critical systems and
receipt of satisfactory assurances from critical service providers, vendors, and
issuers regarding their Year 2000 readiness. We will continue more refined
testing of our systems and their relationships with other parties' systems and
will regularly discuss the results of this testing with those parties. We are
also making Year 2000 contingency plans to guide recovery efforts in the event
that, despite our remediation attempts, Year 2000 issues adversely affect the
Funds. Although we can never have complete assurance that the steps we take will
be sufficient to prevent any problems that would impact the Nuveen
Exchange-Traded Funds, we can assure you that we will take all reasonable steps
to prevent disruption of the services provided by your Fund.
Fund Policies
The Board of Trustees of your Fund recently modified certain investment policies
of the Fund. The Fund was formerly not permitted to invest more than 5% of its
total assets in Municipal Leases that contain "non-appropriation" clauses. In
addition, your Fund was not permitted to invest more than 10% of its total
assets in Municipal Leases and securities that are unmarketable, illiquid or not
readily marketable. The Municipal Lease market has matured since the Fund's
inception, and non-appropriation leases have become more liquid and widely
accepted. The Nuveen Exchange-Traded Fund Board has eliminated the restrictions
noted above, replacing them with requirements that the Funds limit investments
in non-appropriation Municipal Leases to those that meet one or more of six
criteria that indicate that the issuer will be motivated to continue to
appropriate monies to make the payments under the Municipal Lease.
The Board also eliminated the Fund's policy not to invest more than 5% of its
total assets in unsecured obligations of issuers which, together with their
predecessors, have been in operation for less than three years.
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, 1999. 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.
LOGO: NUVEEN
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
www.nuveen.com
FAN-2-8-99
