As filed with the Securities and Exchange Commission on January 18, 2012
File No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-14
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
¨ Pre-Effective Amendment No.
¨ Post-Effective Amendment No.
NUVEEN MULTISTATE TRUST II
(Exact Name of Registrant as Specified in Charter)
333 West Wacker Drive
Chicago, Illinois 60606
(Address of Principal Executive Offices, Zip Code)
Registrant’s Telephone Number, including Area Code (312) 917-7700
Kevin J. McCarthy
Vice President and Secretary
333 West Wacker Drive
Chicago, Illinois 60606
(Name and Address of Agent for Service)
Copy to:
Deborah Bielicke Eades Vedder Price P.C. 222 North LaSalle Street Chicago, Illinois 60601 | Eric F. Fess Chapman and Cutler LLP 111 West Monroe Street Chicago, Illinois 60603 |
Approximate date of proposed public offering: As soon as practicable after the effective date of this Registration Statement.
TITLE OF SECURITIES BEING REGISTERED: Shares of Beneficial Interest (par value $0.01 per share) of the Registrant.
No filing fee is required because of reliance on Section 24(f) and an indefinite number of shares have previously been registered pursuant to Rule 24f-2 under the Investment Company Act of 1940.
It is proposed that this filing will become effective on February 17, 2012 pursuant to Rule 488 under the Securities Act of 1933.
Important Information for Shareholders of
Nuveen California Tax Free Fund and Nuveen California Municipal Bond Fund 2
At a joint special meeting of shareholders of Nuveen California Tax Free Fund (the “Tax Free Fund”), a series of Nuveen Investment Funds, Inc. (the “Corporation”), and Nuveen California Municipal Bond Fund 2 (the “Municipal Bond Fund 2”), a series of Nuveen Multistate Trust II (the “Trust”), you will be asked to vote upon an important change affecting your fund. The purpose of the joint special meeting is to allow you to vote on a reorganization of your fund into Nuveen California Municipal Bond Fund (the “Acquiring Fund”), a series of the Trust. If your fund’s reorganization is approved and completed, you will become a shareholder of the Acquiring Fund. Tax Free Fund and Municipal Bond Fund 2 are collectively referred to herein as the “Acquired Funds,” and the Acquired Funds and the Acquiring Fund are collectively referred to herein as the “Funds.”
Although we recommend that you read the complete Joint Proxy Statement/Prospectus, for your convenience, we have provided the following brief overview of the issue to be voted on.
| Q. | Why am I receiving this Joint Proxy Statement/Prospectus? |
| A. | In December of 2010, Nuveen Investments, Inc. and certain of its affiliates (“Nuveen”) completed a strategic combination with U.S. Bank National Association and its wholly-owned subsidiary, FAF Advisors, Inc., the investment adviser to the First American Funds. Pursuant to this transaction, Nuveen acquired a portion of the investment advisory business of FAF Advisors, Inc., including assets related to the non-money market open-end funds in the First American family of funds. Effective January 1, 2011, these former First American Funds became part of the Nuveen family of funds and were re-branded as Nuveen Funds. As part of its efforts to integrate the portfolio management teams and investment products it offers following the closing of the transaction and in order to eliminate certain redundancies among its investment products, Nuveen has recommended a number of reorganizations between funds with similar investment objectives and policies. The reorganizations of the Acquired Funds into the Acquiring Fund has been proposed as part of this initiative. |
| Q. | What advantages will the reorganizations produce for Acquired Fund shareholders? |
| A. | Nuveen Fund Advisors, Inc. (“Nuveen Fund Advisors”), the Funds’ investment adviser, and the Board of Directors/Trustees of the Corporation and the Trust (the “Board”) believe that shareholders of each Acquired Fund will benefit from operational efficiencies and economies of scale that are expected to arise as a result of the larger net asset size of the Acquiring Fund following the reorganizations. These operational efficiencies and economies of scale are expected to result in lower total operating expenses for each Acquired Fund. |
| Q. | What are the similarities between the investment policies of the Funds? |
| A. | The investment objective of the Acquiring Fund and Municipal Bond Fund 2 is to provide as high a level of current interest income exempt from regular federal, California state and, in some cases, California local income taxes as is consistent with preservation of capital. The investment objective of the Tax Free Fund is to provide maximum current income that is exempt from both federal income tax and California state income tax to the extent consistent with prudent |
| investment risk. Each Fund has similar principal investment strategies and risks. While there are differences in the current portfolio compositions of the Funds, the Funds currently have the same portfolio manager. A more detailed comparison of the investment objectives, policies and risks of the Funds is contained in the Joint Proxy Statement/Prospectus. |
| Q. | What happens if shareholders of one Acquired Fund do not approve its reorganization but shareholders of the other Acquired Fund do approve its reorganization? |
| A. | The closing of each reorganization is contingent upon the Acquired Fund obtaining the requisite shareholder approval and satisfying its other closing conditions. An unfavorable vote on a reorganization by the shareholders of one Acquired Fund will not affect the implementation of the reorganization with respect to the other Acquired Fund, if the other reorganization is approved by the shareholders of such other Acquired Fund. If a reorganization is not approved by shareholders of an Acquired Fund, the Board will take such actions as it deems to be in the best interests of that particular Acquired Fund, which may include additional solicitation or continuing to operate that Fund as a stand-alone fund. |
| Q. | Will Acquired Fund shareholders receive new shares in exchange for their current shares? |
| A. | Yes. If shareholders approve the reorganization of their Fund and it is completed, each Acquired Fund shareholder will receive shares of the Acquiring Fund in an amount equal in total value to the total value of the shares of their Fund surrendered by such shareholder. |
| Q. | Will the reorganizations create a taxable event for me? |
| A. | No. Each reorganization is intended to qualify as a tax-free reorganization for federal income tax purposes. It is expected that you will recognize no gain or loss for federal income tax purposes as a direct result of a reorganization. Prior to the closing of their respective reorganizations, each Acquired Fund expects to distribute all of its net investment income and net capital gains, if any. Except to the extent that this distribution is designated as an exempt-interest dividend, it will be taxable to the Acquired Fund’s shareholders for federal income tax purposes. All or a portion of this distribution may be subject to the federal alternative minimum tax. However, it is not expected that any material portfolio sales (i.e., more than [5%] of an Acquired Fund’s assets) will occur in connection with the reorganization. |
| Q. | How do total operating expenses compare between the Funds? |
| A. | The total operating expenses of the Acquiring Fund immediately following the reorganizations are expected to be lower than the total operating expenses of each Acquired Fund for all share classes. In addition, even though the Acquiring Fund currently operates below its expense cap, such expense cap will remain in place following the reorganization. |
| Q. | Who will bear the costs of the reorganizations? |
| A. | The reorganizations are expected to result in cost savings for each Fund. In light of these anticipated cost savings, the costs of the reorganizations will be allocated among the Funds ratably up to each Fund’s projected cost savings during the first year following the reorganizations. Nuveen Fund Advisors estimates that the costs of the reorganizations will be approximately $146,000 and that the cost savings during the first year following the reorganizations will be approximately $89,000 for the Tax Free Fund, approximately $49,000 for the Municipal Bond Fund 2, and approximately $51,000 for the Acquiring Fund. As a result, the |
| Tax Free Fund is expected to be charged approximately $69,000, the Municipal Bond Fund 2 is expected to be charged $38,000, and the Acquiring Fund is expected to be charged approximately $39,000. Because the payment by the Tax Free Fund of any portion of these costs would cause the Tax Free Fund to exceed its expense cap currently in effect, Nuveen will reimburse all expenses charged to the Tax Free Fund. It is anticipated that none of the expenses charged to the Municipal Bond Fund 2 or the Acquiring Fund will be reimbursed by Nuveen. The Acquiring Fund and Municipal Bond Fund 2 are expected to recover their costs of the reorganizations within the first year following the reorganizations assuming that annual cost savings occur at the levels shown above. To the extent such reorganization expenses exceed the projected cost savings for the Funds, Nuveen will pay such expenses. If a reorganization is not approved or completed with respect to either Acquired Fund, Nuveen will pay all the reorganization expenses that would have been charged to that Fund and the Acquiring Fund in connection with such reorganization. |
| Q. | What is the timetable for the reorganizations? |
| A. | If approved by shareholders on , 2012, the reorganization is expected to occur at the close of business on , 2012. |
| Q. | Whom do I call if I have questions? |
| A. | If you need any assistance, or have any questions regarding the proposal or how to vote your shares, please call Computershare Fund Services, your proxy solicitor, at (866) 612-5814 from 8 a.m. to 10 p.m. Central time on Monday through Friday or 11 a.m. to 5 p.m. Central time on Saturday. Please have your proxy material available when you call. |
| Q. | How do I vote my shares? |
| A. | You may vote by mail, telephone or over the Internet: |
| • | To vote by mail, please mark, sign, date and mail the enclosed proxy card. No postage is required if mailed in the United States. |
| • | To vote by telephone, please call the toll-free number located on your proxy card and follow the recorded instructions, using your proxy card as a guide. |
| • | To vote over the Internet, go to the Internet address provided on your proxy card and follow the instructions, using your proxy card as a guide. |
| Q. | Will Nuveen contact me? |
| A. | You may receive a call from representatives of Computershare Fund Services, the proxy solicitation firm retained by Nuveen, to verify that you received your proxy materials and to answer any questions you may have about the reorganization. |
| Q. | How does the Board suggest that I vote? |
| A. | After careful consideration, the Board has agreed unanimously that the reorganizations are in the best interests of each Fund and recommends that you vote “FOR” the reorganization for your Fund. |
, 2012
Dear Shareholders:
We are pleased to invite you to the joint special meeting of shareholders of Nuveen California Tax Free Fund and Nuveen California Municipal Bond Fund 2 (the “Special Meeting”). The Special Meeting is scheduled for , 2012, at 2:00 p.m., Central time, at the offices of Nuveen Investments, Inc., 333 West Wacker Drive, Chicago, Illinois 60606.
At the Special Meeting, you will be asked to consider and approve a very important proposal for your Fund. Subject to shareholder approval, Nuveen California Municipal Bond Fund (the “Acquiring Fund”) will acquire all the assets and liabilities of Nuveen California Tax Free Fund (the “Tax Free Fund”) and of Nuveen California Municipal Bond Fund 2 (the “Municipal Bond Fund 2” and together with the Tax Free Fund, the “Acquired Funds”) in exchange solely for shares of the Acquiring Fund, which will be distributed in complete liquidation of each Acquired Fund to the shareholders of such Acquired Fund (each, a “Reorganization” and collectively, the “Reorganizations”).
Nuveen Fund Advisors, Inc. (“Nuveen Fund Advisors”), each Fund’s investment adviser, has proposed the Reorganizations involving each Acquired Fund, as well as a number of other reorganizations involving other funds advised by Nuveen Fund Advisors, to eliminate certain redundancies among the products it offers and in an effort to achieve certain operating efficiencies.
The Reorganizations are being proposed because Nuveen Fund Advisors and the Board of Directors/Trustees of Nuveen Investment Funds, Inc. and Nuveen Multistate Trust II (the “Board”) believe that the shareholders of each Acquired Fund will benefit from potential operating efficiencies and economies of scale that may be achieved by combining the Funds pursuant to the Reorganizations. Following the Reorganizations, the Acquiring Fund is expected to have lower total operating expenses than each Acquired Fund had prior to the Reorganizations. The Board believes the Reorganizations are in the best interests of each Acquired Fund, and recommends that you vote “For” the proposed Reorganization for your Fund.
The attached Joint Proxy Statement/Prospectus has been prepared to give you information about this proposal.
All shareholders are cordially invited to attend the Special Meeting. In order to avoid delay and additional expense, and to assure that your shares are represented, please vote as promptly as possible, whether or not you plan to attend your Fund’s Special Meeting. You may vote by mail, telephone or over the Internet.
| • | To vote by mail, please mark, sign, date and mail the enclosed proxy card. No postage is required if mailed in the United States. |
| • | To vote by telephone, please call the toll-free number located on your proxy card and follow the recorded instructions, using your proxy card as a guide. |
| • | To vote over the Internet, go to the Internet address provided on your proxy card and follow the instructions, using your proxy card as a guide. |
We appreciate your continued support and confidence in Nuveen and our family of funds.
Very truly yours,
Kevin J. McCarthy
Vice President and Secretary
, 2012
NUVEEN CALIFORNIA TAX FREE FUND
AND
NUVEEN CALIFORNIA MUNICIPAL BOND FUND 2
NOTICE OF JOINT SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON , 2012
To the Shareholders:
Notice is hereby given that a joint special meeting of shareholders of Nuveen California Tax Free Fund, a series of Nuveen Investment Funds, Inc., a Maryland corporation (the “Corporation”) and Nuveen California Municipal Bond Fund 2, a series of Nuveen Multistate Trust II, a Massachusetts business trust (the “Trust”), will be held at the offices of Nuveen Investments, Inc., 333 West Wacker Drive, Chicago, Illinois 60606, on , 2012, at 2:00 p.m., Central time (the “Special Meeting”), for the purposes described below. The Tax Free Fund and the Municipal Bond Fund 2 are referred to herein as the “Acquired Funds.”
1. (Tax Free Fund only) To approve an Agreement and Plan of Reorganization (and the related transactions) which provides for (i) the transfer of all the assets of the Nuveen California Tax Free Fund (the “Tax Free Fund”), to Nuveen California Municipal Bond Fund (the “Acquiring Fund”) in exchange solely for voting shares of beneficial interest of the Acquiring Fund and the assumption by the Acquiring Fund of all the liabilities of the Tax Free Fund; and (ii) the distribution by the Tax Free Fund of Class A shares of the Acquiring Fund to the holders of Class A and Class C1 shares of the Tax Free Fund and Class I shares of the Acquiring Fund to the holders of Class I shares of the Tax Free Fund in complete liquidation and termination of the Tax Free Fund (a “Reorganization”). A vote in favor of the Reorganization will be considered a vote in favor of an amendment to the Corporation’s Articles of Incorporation effecting the Reorganization.
2. (Municipal Bond Fund 2 only) To approve an Agreement and Plan of Reorganization (and the related transactions) which provides for (i) the transfer of all the assets of the Nuveen California Municipal Bond Fund 2 (the “Municipal Bond Fund 2”) to Nuveen California Municipal Bond Fund (the “Acquiring Fund”) in exchange solely for voting shares of beneficial interest of the Acquiring Fund and the assumption by the Acquiring Fund of all the liabilities of the Municipal Bond Fund 2; and (ii) the distribution by the Municipal Bond Fund 2 of Class A, Class B, Class C and Class I shares of the Acquiring Fund to the holders of Class A, Class B, Class C and Class I shares, respectively, of the Municipal Bond Fund 2 in complete liquidation and termination of the Municipal Bond Fund 2 (a “Reorganization”).
3. To transact such other business as may properly come before the Special Meeting.
Only shareholders of record as of the close of business on , 2012 are entitled to vote at the Special Meeting or any adjournments or postponements thereof.
All shareholders are cordially invited to attend the Special Meeting. In order to avoid delay and additional expense, and to assure that your shares are represented, please vote as promptly as possible, whether or not you plan to attend the Special Meeting. You may vote by mail, telephone or over the Internet.
| • | To vote by mail, please mark, sign, date and mail the enclosed proxy card. No postage is required if mailed in the United States. |
| • | To vote by telephone, please call the toll-free number located on your proxy card and follow the recorded instructions, using your proxy card as a guide. |
| • | To vote over the Internet, go to the Internet address provided on your proxy card and follow the instructions, using your proxy card as a guide. |
Kevin J. McCarthy
Vice President and Secretary
Joint Proxy Statement/Prospectus
Dated , 2012
Relating to the Acquisition of the Assets and Liabilities of
NUVEEN CALIFORNIA TAX FREE FUND
and NUVEEN CALIFORNIA MUNICIPAL BOND FUND 2
by NUVEEN CALIFORNIA MUNICIPAL BOND FUND
This Joint Proxy Statement/Prospectus is being furnished to shareholders of Nuveen California Tax Free Fund (the “Tax Free Fund”), a series of Nuveen Investment Funds, Inc. (the “Corporation”), a Maryland corporation and an open-end investment company registered under the Investment Company Act of 1940, as amended (the “1940 Act”), and Nuveen California Municipal Bond Fund 2 (the “Municipal Bond Fund 2”), a series of Nuveen Multistate Trust II (the “Trust”), a Massachusetts business trust and an open-end investment company registered under the 1940 Act, and relates to the joint special meeting of shareholders of the Tax Free Fund and the Municipal Bond Fund 2 to be held at the offices of Nuveen Investments, Inc., 333 West Wacker Drive, Chicago, Illinois 60606, on , 2012, at 2:00 p.m, Central time and at any and all adjournments and postponements thereof (the “Special Meeting”). The Tax Free Fund and the Municipal Bond Fund 2 are referred to herein together as the “Acquired Funds” and individually as an “Acquired Fund.” This Joint Proxy Statement/Prospectus is provided in connection with the solicitation by the Board of Directors of the Corporation and Board of Trustees of the Trust of proxies to be voted at the Special Meeting, and any and all adjournments or postponements thereof. The Board of Directors of the Corporation and the Board of Trustees of the Trust, which are made up of the same individuals, are referred to herein as the “Board.” The purpose of the Special Meeting is to consider the proposed reorganization (each, a “Reorganization” and collectively, the “Reorganizations”) of each Acquired Fund into Nuveen California Municipal Bond Fund (the “Acquiring Fund”), a series of the Trust. The Acquired Funds and the Acquiring Fund are referred to herein collectively as the “Funds” and individually as a “Fund.” If shareholders approve the Reorganization of the Tax Free Fund and it is completed, holders of Class A and Class C1 shares of the Tax Free Fund will receive Class A shares of the Acquiring Fund, and holders of Class I shares of the Tax Free Fund will receive Class I shares of the Acquiring Fund, with the same total value as the total value of the Tax Free Fund shares surrendered by such shareholders. If shareholders approve the Reorganization of the Municipal Bond Fund 2 and it is completed, holders of Class A, Class B, Class C and Class I shares of the Municipal Bond Fund 2 will receive Class A, Class B, Class C and Class I shares, respectively, of the Acquiring Fund with the same total value as the total value of the Municipal Bond Fund 2 shares surrendered by such shareholders. The Board has determined that each Reorganization is in the best interests of the corresponding Acquired Fund. The address, principal executive office and telephone number of the Funds, the Trust and the Corporation is 333 West Wacker Drive, Chicago, Illinois 60606, (800) 257-8787.
A vote in favor of the Reorganization of the Tax Free Fund will be considered a vote in favor of an amendment to the Corporation’s Articles of Incorporation effecting such Reorganization.
The implementation of the Reorganization with respect to one Acquired Fund is not contingent upon the implementation of the Reorganization with respect to the other Acquired Fund.
The enclosed proxy and this Joint Proxy Statement/Prospectus are first being sent to shareholders of each Acquired Fund on or about , 2012. Shareholders of record as of the close of business on , 2012 are entitled to vote at the Special Meeting and any adjournments or postponements thereof.
The Securities and Exchange Commission has not approved or disapproved these securities or determined whether the information in this Joint Proxy Statement/Prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The Funds are using this Joint Proxy Statement/Prospectus for the Special Meeting in light of the similar matters being considered and voted on by the shareholders.
This Joint Proxy Statement/Prospectus concisely sets forth the information shareholders of the Acquired Funds should know before voting on the Reorganizations (in effect, investing in Class A, Class B, Class C and Class I shares of the Acquiring Fund, as applicable) and constitutes an offering of Class A, Class B, Class C and Class I shares of beneficial interest, par value $0.01 per share, of the Acquiring Fund. Please read it carefully and retain it for future reference.
The following documents have been filed with the Securities and Exchange Commission (“SEC”) and are incorporated into this Joint Proxy Statement/Prospectus by reference and also accompany this Joint Proxy Statement/Prospectus:
| (i) | the Trust’s prospectus dated June 30, 2011, as supplemented through the date of this Joint Proxy Statement/Prospectus, relating to the Acquiring Fund and the Municipal Bond Fund 2; and |
| (ii) | the audited financial statements contained in the Trust’s Annual Report relating to the Acquiring Fund and the Municipal Bond Fund 2 for the fiscal year ended February 28, 2011 and the unaudited financial statements contained in the Trust’s Semi-Annual Report relating to the Acquiring Fund and the Municipal Bond Fund 2 for the six-month period ended August 31, 2011; |
The following documents contain additional information about the Acquired Funds and Acquiring Fund, have been filed with the SEC and are incorporated into this Joint Proxy Statement/Prospectus by reference:
| (i) | the Statement of Additional Information relating to the proposed Reorganization, dated , 2012 (the “Reorganization SAI”); |
| (ii) | the Corporation’s prospectus dated June 30, 2011, as supplemented through the date of this Joint Proxy Statement/Prospectus, relating to the Tax Free Fund; |
| (iii) | the Corporation’s statement of additional information dated June 30, 2011, as supplemented through the date of this Joint Proxy Statement/Prospectus, relating to the Tax Free Fund; |
| (iv) | the audited financial statements contained in the Corporation’s Annual Report relating to the Tax Free Fund for the fiscal year ended February 28, 2011 and the unaudited financial statements contained in the Corporation’s Semi-Annual Report relating to the Tax Free Fund for the six-month period ended August 31, 2011; and |
| (v) | the Trust’s statement of additional information dated June 30, 2011, as supplemented through the date of this Joint Proxy Statement/Prospectus, relating to the Acquiring Fund and the Municipal Bond Fund 2. |
No other parts of the documents referenced above are incorporated by reference herein.
Copies of the foregoing may be obtained without charge by calling or writing the Funds at the telephone number or address shown above. If you wish to request the Reorganization SAI, please ask for the “Reorganization SAI.” In addition, the Acquiring Fund will furnish, without charge, a copy of its most recent annual report and subsequent semi-annual report to a shareholder upon request. Any such request should be directed to the Acquiring Fund by calling (800) 257-8787 or by writing the Acquiring Fund at 333 West Wacker Drive, Chicago, Illinois 60606.
The Corporation and the Trust are subject to the informational requirements of the Securities Exchange Act of 1934, as amended, and the 1940 Act, and in accordance therewith file reports and other information with the SEC. Reports, proxy statements, registration statements and other information filed by the Corporation or the Trust (including the Registration Statement relating to the Acquiring Fund on Form N-14 of which this Joint Proxy Statement/Prospectus is a part) may be inspected without charge and copied (for a duplication fee at prescribed rates) at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549 or at the SEC’s Northeast Regional Office (3 World Financial Center, New York, New York 10281) or Midwest Regional Office (175 W. Jackson Boulevard, Suite 900, Chicago, Illinois 60604). You may call the SEC at (202) 551-8090 for information about the operation of the Public Reference Room. You may obtain copies of this information, with payment of a duplication fee, by electronic request at the following e-mail address: publicinfo@sec.gov, or by writing the SEC’s Public Reference Branch, Office of Consumer Affairs and Information Services, Securities and Exchange Commission, Washington, D.C. 20549. You may also access reports and other information about the Funds on the EDGAR database on the SEC’s Internet site at http://www.sec.gov.
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Distribution, Purchase, Redemption, Exchange of Shares and Dividends | 4 | |||
Material Federal Income Tax Consequences of the Reorganizations | 4 | |||
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Distribution, Purchase, Redemption, Exchange of Shares and Dividends | 18 | |||
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Payments to Broker-Dealers and Other Financial Intermediaries | 20 | |||
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Continuation of Shareholder Accounts and Plans; Change in Exchange Privileges; Share Certificates | 22 | |||
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Comparison of Massachusetts Business Trusts and Maryland Corporations | 25 | |||
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Information Filed with the Securities and Exchange Commission | 32 | |||
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Appendix I – Forms of Agreements and Plans of Reorganization | I-1 | |||
ii
The following is a summary of, and is qualified by reference to, the more complete information contained in this Joint Proxy Statement/Prospectus and the information attached hereto or incorporated herein by reference, including the Agreements and Plans of Reorganization. As discussed more fully below and elsewhere in this Joint Proxy Statement/Prospectus, the Board believes the proposed Reorganizations are in the best interests of each Fund and that the interests of each Fund’s existing shareholders would not be diluted as a result of the Reorganizations. If each Reorganization is approved and completed, shareholders of the Acquired Funds will become shareholders of the Acquiring Fund and will cease to be shareholders of the Acquired Funds.
Shareholders should read the entire Joint Proxy Statement/Prospectus carefully together with the Acquiring Fund’s Prospectus that accompanies this Joint Proxy Statement/Prospectus, which is incorporated herein by reference. This Joint Proxy Statement/Prospectus constitutes an offering of Class A, Class B, Class C and Class I shares of the Acquiring Fund.
On December 31, 2010, Nuveen Investments, Inc. and certain of its affiliates (“Nuveen”) completed a strategic combination with U.S. Bank National Association (“U.S. Bank”) and its wholly owned subsidiary, FAF Advisors, Inc. (“FAF Advisors”), the investment adviser to the First American Funds. As part of that transaction, U.S. Bank received a 9.5% ownership interest in Nuveen and cash consideration in exchange for Nuveen’s acquisition of a portion of FAF Advisors’ investment advisory business, including assets relating to the non-money market open-end funds in the First American family of funds (the “FAF Transaction”). Shareholders of these funds received a proxy statement in connection with the FAF Transaction pursuant to which Nuveen Fund Advisors, Inc. (“Nuveen Fund Advisors” or the “Adviser”) was appointed as the investment adviser to the funds and Nuveen Asset Management, LLC (“Nuveen Asset Management”) was appointed as the subadviser to the funds. Effective January 1, 2011, these former First American Funds became part of the Nuveen family of funds, and were re-branded as Nuveen Funds. Key investment and other personnel of FAF Advisors have become employees of Nuveen Fund Advisors and Nuveen Asset Management. The Reorganizations are two of several reorganizations being proposed as part of Nuveen’s ongoing efforts to integrate the portfolio management teams and investment products it offers following the FAF Transaction and eliminate certain redundancies in its investment products. The proposed Reorganizations seek to combine portfolios with similar objectives and investment strategies within the combined organization.
This Joint Proxy Statement/Prospectus is being furnished to shareholders of the Acquired Funds in connection with the proposed combination of each Acquired Fund with and into the Acquiring Fund pursuant to the terms and conditions of the Agreements and Plans of Reorganization dated , 2012 (i) by the Corporation, on behalf of the Tax Free Fund, the Trust, on behalf of the Acquiring Fund, and Nuveen Fund Advisors and (ii) by the Trust, on behalf of the Municipal Bond Fund 2 and the Acquiring Fund, and Nuveen Fund Advisors (each, an “Agreement” and collectively, the “Agreements”). With respect to the Tax Free Fund, the Agreement provides for (i) the transfer of all the assets of the Tax Free Fund to the Acquiring Fund in exchange solely for Class A and Class I voting shares of beneficial interest, par value $0.01 per share, of the Acquiring Fund and the
1
assumption by the Acquiring Fund of all the liabilities of the Tax Free Fund; and (ii) the distribution by the Tax Free Fund of Class A shares of the Acquiring Fund to the holders of Class A and Class C1 shares of the Tax Free Fund and Class I shares of the Acquiring Fund to the holders of Class I shares of the Tax Free Fund in complete liquidation and termination of the Tax Free Fund as soon as practicable following the Closing Date (as defined herein).
With respect to the Municipal Bond Fund 2, the Agreement provides for, (i) the transfer of all the assets of the Municipal Bond Fund 2 to the Acquiring Fund in exchange solely for Class A, Class B, Class C and Class I voting shares of beneficial interest, par value $0.01 per share, of the Acquiring Fund and the assumption by the Acquiring Fund of all the liabilities of the Municipal Bond Fund 2; and (ii) the distribution by the Municipal Bond Fund 2 of Class A, Class B, Class C and Class I shares of the Acquiring Fund to the holders of Class A, Class B, Class C and Class I shares, respectively, of the Municipal Bond Fund 2 in complete liquidation and termination of the Municipal Bond Fund 2 as soon as practicable following the Closing Date.
If shareholders of an Acquired Fund approve the Reorganization for their Fund and it is completed, such Acquired Fund shareholders will become shareholders of the Acquiring Fund. The closing of the Reorganization with respect to one Acquired Fund is not contingent upon the closing of the Reorganization with respect to the other Acquired Fund. The Board has determined that each Reorganization is in the best interests of the participating Acquired Fund and that the interests of existing shareholders will not be diluted as a result of the Reorganization. The Board unanimously approved the Reorganizations and Agreements at a meeting held on November 14, 2011. The Board recommends a vote “FOR” each Reorganization.
If shareholders approve the Reorganization for their Fund, such Fund and the Acquiring Fund will be charged for expenses incurred in connection with the Reorganization based on its portion of the projected cost savings to the Funds during the first year following the Reorganizations. Nuveen Fund Advisors estimates that Reorganization costs will be approximately $146,000 and that the cost savings during the first year following the Reorganizations will be approximately $89,000 for the Tax Free Fund, approximately $49,000 for the Municipal Bond Fund 2 and approximately $51,000 for the Acquiring Fund. As a result, the Tax Free Fund is expected to be charged approximately $69,000, the Municipal Bond Fund 2 is expected to be charged approximately $38,000, and the Acquiring Fund is expected to be charged approximately $39,000. To the extent that the payment of these expenses would cause any Fund’s expenses to exceed the expense cap then in effect, Nuveen would reimburse such expenses to the extent necessary to operate within the cap. Based on current expense levels, it is anticipated that Nuveen will reimburse all expenses charged to the Tax Free Fund and none of the expenses charged to the Acquiring Fund or the Municipal Bond Fund 2. To the extent the Reorganization costs exceed the projected cost savings for the Funds, Nuveen will pay such expenses. If a Reorganization is not approved or completed with respect to either Acquired Fund, Nuveen will pay all the Reorganization expenses that would have been charged to that Fund and the Acquiring Fund in connection with such Reorganization.
The Board is asking shareholders of each Acquired Fund to approve their Fund’s Reorganization at the Special Meeting to be held on , 2012. With respect to the Reorganization of the Tax Free Fund, approval of the Reorganization requires the affirmative vote of the holders of a majority of the total number of Acquired Fund shares outstanding and entitled to vote. With respect to the Reorganization of the Municipal Bond Fund 2, approval of the Reorganization requires the affirmative vote of the lesser of (i) 67% or more of the shares of the Fund entitled to vote thereon present at the
2
meeting if the holders of more than 50% of such outstanding shares are present in person or represented by proxy; or (ii) more than 50% of such outstanding shares of the Fund entitled to vote thereon. See “Voting Information and Requirements” below.
If shareholders of an Acquired Fund approve the Reorganization for their Fund, it is expected that such Reorganization will occur at the close of business on , 2012 (the “Closing Date”), but it may be at a different time as described herein. If a Reorganization is not approved, the Board will take such action as it deems to be in the best interests of the applicable Acquired Fund. The Closing Date may be delayed and a Reorganization may be abandoned at any time by the mutual agreement of the parties. In addition, any Fund may at its option terminate its Agreement at or before the Closing Date due to (i) a breach by any other party of any representation, warranty, or agreement contained in the Agreement to be performed at or before the Closing Date, if not cured within 30 days, (ii) a condition precedent to the obligations of the terminating party that has not been met and it reasonably appears that it will not or cannot be met, or (iii) a determination by the Board that the consummation of the transactions contemplated by the Agreement is not in the best interests of the Fund.
Reasons for the Proposed Reorganizations
The Board believes that the proposed Reorganizations would be in the best interests of the applicable Funds. In approving the Reorganizations, the Board considered a number of principal factors in reaching its determinations, including the following:
| • | the similarities and differences in the Funds’ investment objectives and principal investment strategies; |
| • | the Funds’ relative risks; |
| • | the Funds’ relative sizes; |
| • | the relative investment performance of the Funds and portfolio manager; |
| • | the relative fees and expense ratios of the Funds, including any caps on the Funds’ expenses agreed to by the Adviser; |
| • | the anticipated tax-free nature of the Reorganizations; |
| • | the expected costs of the Reorganizations and the extent to which the Funds would bear any such costs; |
| • | the terms of the Reorganizations and whether the Reorganizations would dilute the interests of shareholders of the applicable Funds; |
| • | the effect of the Reorganizations on shareholder services and shareholder rights; |
| • | alternatives to the Reorganizations; |
| • | any potential benefits of the Reorganizations to the Adviser and its affiliates as a result of the Reorganizations; and |
| • | differences in expected yields, expense ratios and Reorganization costs based on if the Reorganization of each Acquired Fund, or only the Reorganization of the Tax Free Fund, occurs. |
3
For a more detailed discussion of the Board’s considerations regarding the approval of the Reorganizations, see “The Board’s Approval of the Reorganizations.”
Distribution, Purchase, Redemption, Exchange of Shares and Dividends
The Funds have substantially similar procedures, which were harmonized in connection with the FAF Transaction, for making distributions and for purchasing, redeeming and exchanging shares, except that because the Funds have different transfer agents, the funds available as exchange options to the Tax Free Fund and the Acquiring Fund shareholders are different. Municipal Bond Fund 2 and the Acquiring Fund have the same transfer agents and therefore the same exchange options. The Tax Free Fund offers three classes of shares: Class A, Class C1 and Class I Shares. The Acquiring Fund and the Municipal Bond Fund 2 offer four classes of shares: Class A, Class B, Class C and Class I Shares. Each share class of the Municipal Bond Fund 2 has the same investment eligibility criteria as the corresponding Acquiring Fund share class. In addition, Class A and Class I shares of the Tax Free Fund have the same investment eligibility criteria as Class A and Class I shares, respectively, of the Acquiring Fund. Class C1 shareholders of the Tax Free Fund will receive Class A, rather than Class C, shares of the Acquiring Fund in the Reorganization in order to avoid raising Rule 12b-1 fees for such shareholders. Class C shares of the Acquiring Fund have higher Rule 12b-1 fees than Class C1 shares, whereas Rule 12b-1 fees for Class A shares are lower. Class C1 shares of the Tax Free Fund and Class B shares of the Acquiring Fund and the Municipal Bond Fund 2 are not available for new accounts or additional investment into existing accounts, but Class C1 and Class B shares may be issued for purposes of dividend reinvestment. See “Comparison of the Funds—Distribution, Purchase, Redemption, Exchange of Shares and Dividends” below for a more detailed discussion.
Material Federal Income Tax Consequences of the Reorganizations
As a condition to closing, the Funds will receive an opinion from Vedder Price P.C. (which will be based on certain factual representations and certain customary assumptions and exclusions) substantially to the effect that each Reorganization will qualify as a tax-free reorganization under Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”). Accordingly, it is not expected that any Fund will recognize gain or loss for federal income tax purposes as a direct result of the Reorganizations. In connection with each Reorganization, a portion of the Acquired Fund’s portfolio assets may be sold prior to such Reorganization, which could result in such Acquired Fund declaring taxable distributions to its shareholders on or prior to the Closing Date. However, it is not expected that any material portfolio sales (i.e., more than [5%] of an Acquired Fund’s assets) will occur solely in connection with a Reorganization. For a more detailed discussion of the federal income tax consequences of the Reorganizations, please see “The Proposed Reorganizations—Material Federal Income Tax Consequences” below.
4
The Funds have similar investment objectives. The investment objective of the Acquiring Fund and Municipal Bond Fund 2 is to provide as high a level of current interest income exempt from regular federal, California state and, in some cases, California local income taxes as is consistent with preservation of capital. The investment objective of the Tax Free Fund is to provide maximum current income that is exempt from both federal income tax and California state income tax to the extent consistent with prudent investment risk. The investment objective of the Tax Free Fund is not fundamental and may be changed without shareholder approval upon providing notice at least 60 days in advance. The Acquiring Fund’s and the Municipal Bond Fund 2’s investment objectives are fundamental and may not be changed without shareholder approval.
Each Acquired Fund and the Acquiring Fund also have similar principal investment strategies and risks. The similarities and differences of the principal investment strategies of the Funds are:
Tax Free Fund | Municipal Bond Fund 2 | Acquiring Fund | ||
• Under normal market conditions, the Fund invests at least 80% of its net assets (plus the amount of any borrowings for investment purposes) in municipal securities that pay interest that is exempt from federal and California income tax, including the federal and state alternative minimum tax (“AMT”). | • Under normal market conditions, the Fund invests at least 80% of its net assets in municipal bonds that pay interest that is exempt from regular federal and California personal income tax. | • Under normal market conditions, the Fund invests at least 80% of its net assets in municipal bonds that pay interest that is exempt from regular federal and California personal income tax. | ||
• The Fund normally may invest up to 20% of its net assets in taxable obligations, including obligations the interest on which is subject to the federal and state AMT. | ||||
• The Fund invests mainly in securities that, at the time of purchase, are either rated investment grade or are unrated and determined to be of comparable quality by the Fund’s sub-adviser. | • The municipal securities in which the Fund invests are, at the time of purchase, (i) rated BBB/Baa or higher; (ii) unrated, but judged to be of comparable quality by the Fund’s sub-adviser; or (iii) backed by an escrow or trust account containing sufficient U.S. Government or U.S. government agency securities to ensure timely payment of principal and interest. | • The Fund invests at least 80% of its net assets in investment grade municipal bonds rated BBB/Baa or higher at the time of purchase by at least one independent rating agency, or, if unrated, judged by the Fund’s sub-adviser to be of comparable quality. | ||
5
Tax Free Fund | Municipal Bond Fund 2 | Acquiring Fund | ||
• The Fund may invest up to 20% of its total assets in securities that, at the time of purchase, are rated lower than investment grade or are unrated and of comparable quality (securities commonly referred to as “high-yield” securities or “junk bonds”). | • The Fund may invest up to 20% of its net assets in below investment grade municipal bonds, commonly referred to as “high yield” or “junk” bonds. | |||
• The Fund may utilize futures contracts and options on futures contracts in an attempt to manage market risk, credit risk and yield curve risk, and to manage the effective maturity or duration of securities in the Fund’s portfolio. | ||||
• The Fund may invest up to 15% of its net assets in municipal securities whose interest payments vary inversely with changes in short-term tax-exempt interest rates (i.e., inverse floating rate securities). | • The Fund may invest up to 15% of its net assets in municipal securities whose interest payments vary inversely with changes in short-term tax-exempt interest rates (i.e., inverse floating rate securities). | |||
• The Fund will attempt to maintain the weighted average maturity of its portfolio securities at 10 to 25 under normal market conditions. | ||||
Comparison of Principal Investment Strategies
Each Acquired Fund and the Acquiring Fund have similar principal investment strategies and risks. However, there are some differences. The Tax Free Fund has a limit of investing 20% of its net assets in taxable obligations, including those subject to the federal and state AMT, while the Municipal Bond Fund 2 and the Acquiring Fund do not have a limitation on investing in obligations subject to the federal or state AMT. Each of the Tax Free Fund and the Acquiring Fund may invest up to 20% of its assets in high yield securities as a principal investment strategy, while the Municipal Bond Fund 2 invests only in bonds that, at the time of purchase, are rated investment grade (or are unrated, but judged to be of comparable quality by the Fund’s sub-adviser, or are backed by an escrow or trust account containing sufficient U.S. Government or U.S. government agency securities to ensure timely payment of principal and interest). Each Fund mainly invests in investment grade securities. Also, the Municipal Bond Fund 2 and the Acquiring Fund may invest up to 15% of their net assets in inverse floaters as a principal investment strategy; whereas, the Tax Free Fund may invest in inverse floaters, but it is not a principal investment strategy of the Fund. In addition, the Tax Free Fund may utilize futures contracts and options on futures contracts as a principal investment strategy and has a principal investment strategy of maintaining a weighted average maturity of its portfolio securities of 10 to 25
6
years, while the Municipal Bond Fund 2 and the Acquiring Fund do not have similar principal investment strategies. However, the Municipal Bond Fund 2 and the Acquiring Fund may each utilize futures contracts, swap contracts, options on futures and swaps and other derivatives as non-principal strategies. In addition, the Municipal Bond Fund 2 normally maintains a weighted average portfolio maturity of approximately 15 to 30 years as a non-principal strategy. The Acquiring Fund will maintain, under normal market circumstances, an investment portfolio with an overall weighted average maturity in excess of 10 years as a non-principal strategy. Also, the Municipal Bond Fund 2 and the Acquiring Fund are diversified funds, while the Tax Free Fund is non-diversified, which means that the Tax Free Fund may invest a larger portion of its assets in the securities of a limited number of issuers.
In evaluating the Reorganization of their Acquired Fund, Acquired Fund shareholders should consider the risks of investing in the Acquiring Fund. The principal risks of investing in the Acquiring Fund are described in the section below entitled “Risk Factors.”
With respect to each Reorganization, the Reorganization may result in one-time brokerage costs for the Acquired Fund to the extent it is necessary for such Acquired Fund to sell holdings prior to the Reorganization so that the Acquiring Fund’s portfolio immediately following the Reorganization remains in compliance with its investment policies and restrictions. If each Reorganization had occurred as of December 31, 2011, the Acquiring Fund would not have been required to dispose of securities of either Acquired Fund in order to comply with its investment policies and restrictions, and would not have sold any material portion (i.e., more than [5%] of an Acquired Fund’s assets) of the securities in the Acquired Fund’s portfolio solely as a result of the Reorganization.
The tables below provide information about the fees and expenses attributable to each class of shares of the Funds, and the pro forma fees and expenses of the combined fund (i) assuming both Reorganizations occurred, and (ii) assuming only the Reorganization of the Tax Free Fund into the Acquiring Fund occurred. You may qualify for sales charge discounts on purchases of Class A shares if you and your family invest, or agree to invest in the future, at least $50,000 in a Fund or other Nuveen mutual funds. Shareholder fees reflect the fees currently in effect for each Fund. Annual Fund Operating Expenses for the Tax Free Fund have been restated to take into account the new fee and expense structure adopted by the Fund as of January 1, 2011 following the closing of the FAF Transaction. The fees and expenses for the Tax Free Fund are estimated based on the actual fees and expenses incurred by the Fund from January 1, 2011 through February 28, 2011, which have been annualized. Annual Fund Operating Expenses for the Acquiring Fund and the Municipal Bond Fund 2 reflect each Fund’s fees and expenses as of its fiscal year ended February 28, 2011. Because the Reorganizations are not contingent and one Reorganization may occur whether or not the other Reorganization is approved, several Fund combinations are possible. The two Combined Fund Pro Forma scenarios presented below capture the range of possible pro forma outcomes, based on if the Reorganizations of both Acquired Funds into the Acquiring Fund were consummated, and if only the Reorganization of the Tax Free Fund into the Acquiring Fund was consummated. Both scenarios assume the Reorganization(s) occurred as of February 28, 2011.
Because the Acquiring Fund does not offer Class C1 shares, Class C1 shareholders of the Tax Free Fund will receive Class A shares of the Acquiring Fund in the Reorganization.
7
Shareholder Fees
(paid directly from your investment)
| Tax Free Fund | Municipal Bond Fund 2 | Acquiring Fund | Combined Fund Pro Forma (Both Acquired Funds into Acquiring Fund) | Combined Fund Pro Forma (Tax Free Fund into Acquiring Fund) | ||||||||||||||||
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) | ||||||||||||||||||||
Class A | 4.20% | 4.20% | 4.20% | 4.20% | 4.20% | |||||||||||||||
Class B | N/A | None | None | None | None | |||||||||||||||
Class C | N/A | None | None | None | None | |||||||||||||||
Class C1 | None | N/A | N/A | 4.20% | 1 | 4.20% | 1 | |||||||||||||
Class I | None | None | None | None | None | |||||||||||||||
Maximum Deferred Sales Charge (Load) (as a percentage of the lesser of purchase price or redemption proceeds) | ||||||||||||||||||||
Class A | None | None | None | None | None | |||||||||||||||
Class B | N/A | 5.00% | 5.00% | 5.00% | 5.00% | |||||||||||||||
Class C | N/A | 1.00% | 1.00% | 1.00% | 1.00% | |||||||||||||||
Class C1 | 1.00% | N/A | N/A | None | 1 | None | 1 | |||||||||||||
Class I | None | None | None | None | None | |||||||||||||||
Maximum Sales Charge (Load) Imposed on Reinvested Dividends | ||||||||||||||||||||
Class A | None | None | None | None | None | |||||||||||||||
Class B | N/A | None | None | None | None | |||||||||||||||
Class C | N/A | None | None | None | None | |||||||||||||||
Class C1 | None | N/A | N/A | None | 1 | None | 1 | |||||||||||||
Class I | None | None | None | None | None | |||||||||||||||
Exchange Fees | ||||||||||||||||||||
Class A | None | None | None | None | None | |||||||||||||||
Class B | N/A | None | None | None | None | |||||||||||||||
Class C | N/A | None | None | None | None | |||||||||||||||
Class C1 | None | N/A | N/A | None | 1 | None | 1 | |||||||||||||
Class I | None | None | None | None | None | |||||||||||||||
Annual Low Balance Account fee (for accounts under $1,000)2 | ||||||||||||||||||||
Class A | $ | 15 | $ | 15 | $ | 15 | $ | 15 | $ | 15 | ||||||||||
Class B | N/A | $ | 15 | $ | 15 | $ | 15 | $ | 15 | |||||||||||
Class C | N/A | $ | 15 | $ | 15 | $ | 15 | $ | 15 | |||||||||||
Class C1 | $ | 15 | N/A | N/A | $ | 15 | 1 | $ | 15 | 1 | ||||||||||
Class I | $ | 15 | $ | 15 | $ | 15 | $ | 15 | $ | 15 | ||||||||||
| 1 | The Combined Fund Pro Forma information for Class C1 shares is the information applicable to Class A shares because Class C1 shareholders of the Tax Free Fund will receive Class A shares in the Reorganization. The combined fund will not offer Class C1 shares in the Reorganization. |
| 2 | Fee applies to the following types of accounts held directly with the Fund: accounts established pursuant to the Uniform Transfers to Minors Act (UTMA) or Uniform Gifts to Minors Act (UGMA). |
8
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)
| Tax Free Fund | Municipal Bond Fund 2 | Acquiring Fund | Combined Fund Pro Forma (Both Acquired Funds into Acquiring Fund)1 | Combined Fund Pro Forma (Tax Free Fund into Acquiring Fund)2 | ||||||||||||||||
Management Fees | ||||||||||||||||||||
Class A | 0.65% | 0.53% | 0.52% | 0.52% | 0.52% | |||||||||||||||
Class B | N/A | 0.53% | 0.52% | 0.52% | 0.52% | |||||||||||||||
Class C | N/A | 0.53% | 0.52% | 0.52% | 0.52% | |||||||||||||||
Class C1 | 0.65% | N/A | N/A | 0.52% | 3 | 0.52% | 3 | |||||||||||||
Class I | 0.65% | 0.53% | 0.52% | 0.52% | 0.52% | |||||||||||||||
Distribution and Service (12b-1) Fees | ||||||||||||||||||||
Class A | 0.20% | 0.20% | 0.20% | 0.20% | 0.20% | |||||||||||||||
Class B | N/A | 0.95% | 0.95% | 0.95% | 0.95% | |||||||||||||||
Class C | N/A | 0.75% | 0.75% | 0.75% | 0.75% | |||||||||||||||
Class C1 | 0.65% | N/A | N/A | 0.20% | 3 | 0.20% | 3 | |||||||||||||
Class I | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% | |||||||||||||||
Other Expenses | ||||||||||||||||||||
Class A | 0.19% | 0.10% | 0.09% | 0.09% | 0.09% | |||||||||||||||
Class B | N/A | 0.10% | 0.09% | 0.09% | 0.09% | |||||||||||||||
Class C | N/A | 0.10% | 0.09% | 0.09% | 0.09% | |||||||||||||||
Class C1 | 0.19% | N/A | N/A | 0.09% | 3 | 0.09% | 3 | |||||||||||||
Class I | 0.19% | 0.10% | 0.09% | 0.09% | 0.09% | |||||||||||||||
Total Annual Fund Operating Expenses | ||||||||||||||||||||
Class A | 1.04% | 0.83% | 0.81% | 0.81% | 0.81% | |||||||||||||||
Class B | N/A | 1.58% | 1.56% | 1.56% | 1.56% | |||||||||||||||
Class C | N/A | 1.38% | 1.36% | 1.36% | 1.36% | |||||||||||||||
Class C1 | 1.49% | N/A | N/A | 0.81% | 3 | 0.81% | 3 | |||||||||||||
Class I | 0.84% | 0.63% | 0.61% | 0.61% | 0.61% | |||||||||||||||
| 1 | Pro forma expenses do not include the expenses to be charged to the Funds in connection with the Reorganizations. The Tax Free Fund is expected to be charged approximately $69,000 (0.07% of net assets), the Municipal Bond Fund 2 is expected to be charged approximately $38,000 (0.02% of net assets), and the Acquiring Fund is expected to be charged approximately $39,000 (less than 0.01% of net assets). Based on current expense levels, it is anticipated that Nuveen will reimburse all expenses charged to the Tax Free Fund. See “The Proposed Reorganizations—Reorganization Expenses” for additional information about these expenses. |
| 2 | Pro forma expenses do not include the expenses to be charged to the Funds in connection with the Reorganization. The Tax Free Fund is expected to be charged approximately $81,000 (0.08% of net assets), and the Acquiring Fund is expected to be charged approximately $24,000 (less than 0.01% of net assets). Based on current expense levels, it is anticipated that Nuveen will reimburse all expenses charged to the Tax Free Fund. See “The Proposed Reorganizations—Reorganization Expenses” for additional information about these expenses. |
| 3 | The Combined Fund Pro Forma information for Class C1 shares is the information applicable to Class A shares because Class C1 shareholders of the Tax Free Fund will receive Class A shares in the Reorganization. The combined fund will not offer Class C1 shares in the Reorganization. |
9
Example
The example below is intended to help you compare the cost of investing in each Fund and the pro forma cost of investing in the combined fund (i) assuming both Reorganizations occurred and (ii) assuming only the Reorganization of the Tax Free Fund into the Acquiring Fund occurred. The example assumes you invest $10,000 in a Fund for the time periods indicated (based on information in the tables above) and then either redeem or do not redeem your shares at the end of a period. The example assumes that your investment has a 5% return each year and that a Fund’s expenses remain at the level shown in the table above. Class B shares automatically convert to Class A shares, which have lower 12b-1 fees, eight years after you buy them. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
| Tax Free Fund | Municipal Bond Fund 2 | Acquiring Fund | Combined Fund Pro Forma (Both Acquired Funds into Acquiring Fund) | Combined Fund Pro Forma (Tax Free Fund into Acquiring Fund) | ||||||||||||||||
1 Year | ||||||||||||||||||||
Assuming you sold your shares at the end of each period | ||||||||||||||||||||
Class A | $ | 522 | $ | 501 | $ | 499 | $ | 499 | $ | 499 | ||||||||||
Class B | N/A | $ | 561 | $ | 559 | $ | 559 | $ | 559 | |||||||||||
Class C | N/A | $ | 140 | $ | 138 | $ | 138 | $ | 138 | |||||||||||
Class C1 | $ | 152 | N/A | N/A | N/A | N/A | ||||||||||||||
Class I | $ | 86 | $ | 64 | $ | 62 | $ | 62 | $ | 62 | ||||||||||
Assuming you kept your shares | ||||||||||||||||||||
Class A | $ | 522 | $ | 501 | $ | 499 | $ | 499 | $ | 499 | ||||||||||
Class B | N/A | $ | 161 | $ | 159 | $ | 159 | $ | 159 | |||||||||||
Class C | N/A | $ | 140 | $ | 138 | $ | 138 | $ | 138 | |||||||||||
Class C1 | $ | 152 | N/A | N/A | N/A | N/A | ||||||||||||||
Class I | $ | 86 | $ | 64 | $ | 62 | $ | 62 | $ | 62 | ||||||||||
3 Years | ||||||||||||||||||||
Assuming you sold your shares at the end of each period | ||||||||||||||||||||
Class A | $ | 737 | $ | 674 | $ | 668 | $ | 668 | $ | 668 | ||||||||||
Class B | N/A | $ | 799 | $ | 793 | $ | 793 | $ | 793 | |||||||||||
Class C | N/A | $ | 437 | $ | 431 | $ | 431 | $ | 431 | |||||||||||
Class C1 | $ | 471 | N/A | N/A | N/A | N/A | ||||||||||||||
Class I | $ | 268 | $ | 202 | $ | 195 | $ | 195 | $ | 195 | ||||||||||
Assuming you kept your shares | ||||||||||||||||||||
Class A | $ | 737 | $ | 674 | $ | 668 | $ | 668 | $ | 668 | ||||||||||
Class B | N/A | $ | 499 | $ | 493 | $ | 493 | $ | 493 | |||||||||||
Class C | N/A | $ | 437 | $ | 431 | $ | 431 | $ | 431 | |||||||||||
Class C1 | $ | 471 | N/A | N/A | N/A | N/A | ||||||||||||||
Class I | $ | 268 | $ | 202 | $ | 195 | $ | 195 | $ | 195 | ||||||||||
10
| Tax Free Fund | Municipal Bond Fund 2 | Acquiring Fund | Combined Fund Pro Forma (Both Acquired Funds into Acquiring Fund) | Combined Fund Pro Forma (Tax Free Fund into Acquiring Fund) | ||||||||||||||||
5 Years | ||||||||||||||||||||
Assuming you sold your shares at the end of each period | ||||||||||||||||||||
Class A | $ | 970 | $ | 861 | $ | 851 | $ | 851 | $ | 851 | ||||||||||
Class B | N/A | $ | 960 | $ | 950 | $ | 950 | $ | 950 | |||||||||||
Class C | N/A | $ | 755 | $ | 745 | $ | 745 | $ | 745 | |||||||||||
Class C1 | $ | 813 | N/A | N/A | N/A | N/A | ||||||||||||||
Class I | $ | 466 | $ | 351 | $ | 340 | $ | 340 | $ | 340 | ||||||||||
Assuming you kept your shares | ||||||||||||||||||||
Class A | $ | 970 | $ | 861 | $ | 851 | $ | 851 | $ | 851 | ||||||||||
Class B | N/A | $ | 860 | $ | 850 | $ | 850 | $ | 850 | |||||||||||
Class C | N/A | $ | 755 | $ | 745 | $ | 745 | $ | 745 | |||||||||||
Class C1 | $ | 813 | N/A | N/A | N/A | N/A | ||||||||||||||
Class I | $ | 466 | $ | 351 | $ | 340 | $ | 340 | $ | 340 | ||||||||||
10 Years | ||||||||||||||||||||
Assuming you sold your shares at the end of each period | ||||||||||||||||||||
Class A | $ | 1,638 | $ | 1,402 | $ | 1,380 | $ | 1,380 | $ | 1,380 | ||||||||||
Class B | N/A | $ | 1,677 | $ | 1,655 | $ | 1,655 | $ | 1,655 | |||||||||||
Class C | N/A | $ | 1,657 | $ | 1,635 | $ | 1,635 | $ | 1,635 | |||||||||||
Class C1 | $ | 1,779 | N/A | N/A | N/A | N/A | ||||||||||||||
Class I | $ | 1,037 | $ | 786 | $ | 762 | $ | 762 | $ | 762 | ||||||||||
Assuming you kept your shares | ||||||||||||||||||||
Class A | $ | 1,638 | $ | 1,402 | $ | 1,380 | $ | 1,380 | $ | 1,380 | ||||||||||
Class B | N/A | $ | 1,677 | $ | 1,655 | $ | 1,655 | $ | 1,655 | |||||||||||
Class C | N/A | $ | 1,657 | $ | 1,635 | $ | 1,635 | $ | 1,635 | |||||||||||
Class C1 | $ | 1,779 | N/A | N/A | N/A | N/A | ||||||||||||||
Class I | $ | 1,037 | $ | 786 | $ | 762 | $ | 762 | $ | 762 | ||||||||||
Each Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the example, affect each Fund’s performance. During their most recent fiscal periods for which audited financial statements are available, the Funds had the following portfolio turnover rates:
Fund | Fiscal Period | Rate | ||
Tax Free Fund | Eight months ended 2/28/11 | 8% | ||
Municipal Bond Fund 2 | Twelve months ended 2/28/11 | 3% | ||
Acquiring Fund | Twelve months ended 2/28/11 | 18% |
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After each Reorganization is completed, the portfolio manager of the Acquiring Fund may, in his discretion, sell securities acquired from each Acquired Fund. To the extent that the portfolio manager chooses to sell a significant percentage of such securities, the Acquiring Fund’s portfolio turnover rate and brokerage costs may be higher than they otherwise would have been.
In evaluating the Reorganizations, you should consider carefully the risks of the Acquiring Fund to which you will be subject if your Fund’s Reorganization is approved and completed. Investing in a mutual fund involves risk, including the risk that you may receive little or no return on your investment or even that you may lose part or all of your investment. Because of these and other risks, you should consider an investment in the Acquiring Fund to be a long-term investment. An investment in the Acquiring Fund may not be appropriate for all shareholders. For a complete description of the risks of an investment in the Acquiring Fund, see the section in the Acquiring Fund’s Prospectus entitled “Principal Risks.”
Because the Funds have similar investment strategies, the principal risks of each Fund are similar. The principal risks of investing in the Acquiring Fund are described below. An investment in each Acquired Fund is also subject to each of these risks, except that the Tax Free Fund is not subject to Leveraged Securities Risk as a principal risk (although it may invest in such securities as a non-principal investment strategy) and the Municipal Bond Fund 2 generally is not subject to high yield securities risk. In addition, as noted above, the Acquiring Fund and Municipal Bond Fund 2 each may invest more of its assets in securities subject to the federal and state AMT, and the principal risks of the Tax Free Fund include futures contract risk and non-diversification risk.
Alternative Minimum Tax Risk. The Fund has no limit as to the amount that can be invested in bonds subject to the federal and state AMT; therefore, all or a portion of the Fund’s otherwise exempt-interest dividends may be taxable to those shareholders subject to the federal and state AMT.
Credit Risk. Credit risk is the risk that an issuer of a municipal bond may be unable or unwilling to make interest and principal payments when due and the related risk that the value of a bond may decline because of concerns about the issuer’s ability or willingness to make such payments. Credit risk is heightened for the Fund because it may invest up to 20% of its net assets in below investment grade (“high yield” or “junk”) municipal bonds. High yield bonds, while generally offering higher yields than investment grade bonds with similar maturities, involve greater risks, including the possibility of default or bankruptcy, and are regarded as predominantly speculative with respect to the issuer’s capacity to pay interest and repay principal.
Income Risk. The income from the Fund’s portfolio may decline because of falling market interest rates. This can result when the Fund invests the proceeds from new share sales, or from matured or called bonds, at market interest rates that are below the portfolio’s current earnings rate. Also, if the Fund invests in inverse floating rate securities, the Fund’s income may decrease if short-term interest rates rise.
Interest Rate Risk. Interest rate risk is the risk that the value of the Fund’s portfolio will decline because of rising interest rates. Interest rate risk may be increased by the Fund’s investment in inverse floaters because of the leveraged nature of these investments.
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Leveraged Securities Risk. The Fund may invest in inverse floating rate securities which create effective leverage. Because these securities create leveraged exposure to underlying municipal bonds, the amount the Fund invests in such securities exposes it to risks and potential returns to a greater extent than the amount actually invested. The interest payments the Fund receives on such securities vary inversely with the short-term financing rates paid by the securities’ issuers, and those interest payments will decrease if short-term interest rates increase. In addition, the value of these securities will vary by more than the value of the underlying bonds due to the leveraged nature of the investments. Also, the holder of the floating rate securities that has provided the leverage associated with a Fund’s inverse floating rate securities may cause the Fund to purchase or otherwise retire those floating rate securities (i.e., to effectively cause the Fund to repay the leverage provided by such holder), which may require the Fund to raise cash through the sale of portfolio securities at times and at prices that are not desirable for the Fund.
Market Risk. The market values of municipal bonds owned by the Fund may decline, at times sharply and unpredictably.
State Concentration Risk. Because the Fund primarily purchases municipal bonds from California, the Fund is more susceptible to adverse economic, political or regulatory changes affecting municipal bond issuers in that state. California’s credit rating is among the worst of any state in the country.
Tax Risk. Income from municipal bonds held by the Fund could be declared taxable because of unfavorable changes in tax laws, adverse interpretations by the Internal Revenue Service or state tax authorities, or noncompliant conduct of a bond issuer. On September 12, 2011, President Obama submitted to Congress the American Jobs Act of 2011 (the “Jobs Act”). If enacted in its proposed form, the Jobs Act generally would limit the exclusion from gross income of tax-exempt interest (which includes exempt-interest dividends received from the Fund) for individuals whose adjusted gross income for federal income tax purposes exceeds certain thresholds for taxable years beginning on or after January 1, 2013 in order to provide a tax benefit not greater than 28% of such interest. Such proposal could affect the value of the municipal bonds owned by the Fund. The likelihood of the Jobs Act being enacted in the form introduced or in some other form cannot be predicted. Shareholders should consult their own tax advisors regarding the potential consequences of the Jobs Act on their investment in the Fund.
Fundamental Investment Restrictions
The Funds have similar fundamental investment restrictions that cannot be changed without shareholder approval, with the exception that the Tax Free Fund’s investment objective may be changed by the Board without shareholder approval. In accordance with federal securities laws, each Fund’s policy to invest at least 80% of its net assets in municipal bonds that pay interest that is exempt from regular federal and state income tax and, in the case of the Tax Free Fund, federal and state AMT, is fundamental. Also, each Fund has adopted a policy of not concentrating its investments in any industry, except that the U.S. government and state or municipal governments and their political subdivisions are not considered members of any industry. For purposes of each Fund’s concentration policy, each Fund classifies tax-exempt bonds backed only by the assets and revenues of non-governmental users as issued by such non-governmental users and as subject to the Fund’s concentration policy.
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The total returns of the Funds for the periods ended December 31, 2011, based on historical fees and expenses for each period, is set forth in the chart and tables below.
The bar chart below illustrates annual calendar year returns for each Fund’s Class A shares. The bar chart and highest/lowest quarterly returns that follow do not reflect sales charges, and if these charges were reflected, the returns would be less than those shown. The tables below illustrate average annual returns for the periods ended December 31, 2011 for each Fund. The tables also show how each Fund’s performance compares with the returns of a broad measure of market performance (Tax Free Fund), broad measures of market performance (Municipal Bond Fund 2 and Acquiring Fund) and an index of funds with similar investment objectives. This information is intended to help you assess the variability of Fund returns (and consequently, the potential risks of a Fund investment).
All after-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. After-tax returns are shown for Class A shares only; after-tax returns for Class B, Class C, Class C1 and Class I shares will vary. Returns for market indices do not include expenses, which are deducted from Fund returns, or taxes.
Your own actual after-tax returns will depend on your specific tax situation and may differ from what is shown here.
Performance reflects fee waivers, if any, in effect during the periods presented. If any such waivers were not in place, performance would be reduced. Past performance (before and after taxes) does not necessarily indicate future performance. Updated performance information is available at www.nuveen.com or by calling (800) 257-8787.
Tax Free Fund – Class A Annual Total Return
During the periods shown in the bar chart, the Tax Free Fund’s Class A highest and lowest calendar quarter returns were 8.83% and -5.11%, respectively, for the quarters ended September 30, 2009 and December 31, 2010.
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Municipal Bond Fund 2 – Class A Annual Total Return
During the periods shown in the bar chart, the Municipal Bond Fund 2’s Class A highest and lowest calendar quarter returns were 10.04% and -5.99%, respectively, for the quarters ended September 30, 2009 and December 31, 2010.
Acquiring Fund – Class A Total Return
During the periods shown in the bar chart, the Acquiring Fund’s Class A highest and lowest calendar quarter returns were 10.57% and -7.42%, respectively, for the quarters ended September 30, 2009 and December 31, 2008.
| Average Annual Total Returns for the Periods Ended December 31, 2011 | ||||||||||||
Tax Free Fund | 1 Year | 5 Years | 10 Years | |||||||||
Class A (return before taxes) | 7.44 | % | 3.86 | % | 4.56 | % | ||||||
Class A (return after taxes on distributions) | 7.43 | % | 3.82 | % | 4.48 | % | ||||||
Class A (return after taxes on distributions and sale of fund shares) | 6.34 | % | 3.88 | % | 4.46 | % | ||||||
Class C1 (return before taxes) | 11.66 | % | 4.26 | % | 4.56 | % | ||||||
Class I (return before taxes) | 12.28 | % | 4.90 | % | 5.23 | % | ||||||
Barclays Capital Municipal Bond Index (reflects no | 10.70 | % | 5.22 | % | 5.38 | % | ||||||
Lipper California Municipal Debt Classification | 11.72 | % | 3.60 | % | 4.38 | % | ||||||
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| Average Annual Total Returns for the Periods Ended December 31, 2011 | ||||||||||||
Municipal Bond Fund 2 | 1 Year | 5 Years | 10 Years | |||||||||
Class A (return before taxes) | 6.79 | % | 2.46 | % | 3.65 | % | ||||||
Class A (return after taxes on distributions) | 6.79 | % | 2.44 | % | 3.61 | % | ||||||
Class A (return after taxes on distributions and sale of fund shares) | 5.95 | % | 2.67 | % | 3.72 | % | ||||||
Class B (return before taxes) | 6.72 | % | 2.41 | % | 3.46 | % | ||||||
Class C (return before taxes) | 10.90 | % | 2.79 | % | 3.53 | % | ||||||
Class I (return before taxes) | 11.76 | % | 3.55 | % | 4.30 | % | ||||||
Standard and Poor’s National Municipal Bond Index (reflects no deduction for fees, expenses or taxes) | 10.62 | % | 4.86 | % | 5.35 | % | ||||||
Standard & Poor’s California Municipal Bond Index | 12.25 | % | 4.75 | % | 5.30 | % | ||||||
Lipper California Municipal Debt Classification | 11.72 | % | 3.60 | % | 4.38 | % | ||||||
| Average Annual Total Returns for the Periods Ended December 31, 2011 | ||||||||||||
Acquiring Fund | 1 Year | 5 Years | 10 Years | |||||||||
Class A (return before taxes) | 7.73 | % | 3.25 | % | 4.30 | % | ||||||
Class A (return after taxes on distributions) | 7.71 | % | 3.25 | % | 4.30 | % | ||||||
Class A (return after taxes on distributions and sale of fund shares) | 6.69 | % | 3.39 | % | 4.32 | % | ||||||
Class B (return before taxes) | 7.67 | % | 3.21 | % | 4.12 | % | ||||||
Class C (return before taxes) | 11.91 | % | 3.60 | % | 4.17 | % | ||||||
Class I (return before taxes) | 12.71 | % | 4.37 | % | 4.95 | % | ||||||
Standard & Poor’s National Municipal Bond Index (reflects no deduction for fees, expenses or taxes) | 10.62 | % | 4.86 | % | 5.35 | % | ||||||
Standard & Poor’s California Municipal Bond Index (reflects no deduction for fees, expenses or taxes) | 12.25 | % | 4.75 | % | 5.30 | % | ||||||
Lipper California Municipal Debt Classification | 11.72 | % | 3.60 | % | 4.38 | % | ||||||
Investment Adviser and Sub-Adviser
Each Fund is managed by Nuveen Fund Advisors, which offers advisory and investment management services to a broad range of mutual fund clients. Nuveen Fund Advisors has overall responsibility for management of the Funds, oversees the management of the Funds’ portfolios, manages the Funds’ business affairs and provides certain clerical, bookkeeping and other administrative services. Nuveen Fund Advisors is located at 333 West Wacker Drive, Chicago, Illinois 60606. Nuveen Fund Advisors is a subsidiary of Nuveen Investments, Inc. (“Nuveen Investments”). On November 13, 2007, Nuveen Investments was acquired by investors led by Madison Dearborn Partners, LLC, which is a private equity investment firm based in Chicago, Illinois. The Nuveen family of advisers has been providing advice to investment companies since 1976.
Nuveen Fund Advisors has selected its affiliate, Nuveen Asset Management, located at 333 West Wacker Drive, Chicago, Illinois 60606, to serve as a sub-adviser to each of the Funds. Nuveen Asset Management manages the investment of the Funds’ assets on a discretionary basis, subject to the supervision of Nuveen Fund Advisors.
Prior to the FAF Transaction, the Tax Free Fund was advised by FAF Advisors, a wholly-owned subsidiary of U.S. Bank National Association.
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The Funds have been managed by the same portfolio manager since the FAF Transaction. Scott R. Romans, CFA, is the portfolio manager for the Funds. He has served as the portfolio manager for the Acquiring Fund since January 2003, for the Municipal Bond Fund 2 since May 2005 and the Tax Free Fund since January 2011. He joined Nuveen in 2000 as a senior analyst covering higher education, charter schools and private secondary schools and assumed certain portfolio management responsibilities in 2003. As of December 31, 2011, he managed 32 Nuveen-sponsored investment companies, with a total of approximately $4.77 billion under management.
For a complete description of the advisory services provided to the Acquiring Fund, see the section of the Fund’s Prospectus entitled “Who Manages the Funds” and the section of the Fund’s Statement of Additional Information entitled “Adviser and Sub-Adviser.”
Pursuant to investment management agreements between Nuveen Fund Advisors and the Corporation, on behalf of the Tax Free Fund, and Nuveen Fund Advisors and the Trust, on behalf of the Municipal Bond Fund 2 and the Acquiring Fund, each Fund pays Nuveen Fund Advisors fund-level fees, payable monthly at the annual rates set forth below:
Tax Free Fund - Management Fee | Municipal Bond Fund 2 and | |||||||||
Average Daily Net Assets | Fee Rate | Average Daily Net Assets | Fee Rate | |||||||
For the first $125 million | 0.4500% | For the first $125 million | 0.3500% | |||||||
For the next $125 million | 0.4375% | For the next $125 million | 0.3375% | |||||||
For the next $250 million | 0.4250% | For the next $250 million | 0.3250% | |||||||
For the next $500 million | 0.4125% | For the next $500 million | 0.3125% | |||||||
For the next $1 billion | 0.4000% | For the next $1 billion | 0.3000% | |||||||
For net assets over $2 billion | 0.3750% | For the next $3 billion | 0.2750% | |||||||
| For net assets over $5 billion | 0.2500% | |||||||||
In addition to the fund-level fee, each Fund pays a complex-level fee. The maximum complex-level fee is 0.20% of the Fund’s average daily net assets, based upon complex-level “eligible assets” of $55 billion. Therefore, the maximum management fee rate for each Fund is the fund-level fee rate plus 0.20%. As complex-level eligible assets increase, the complex-level fee rate decreases pursuant to a breakpoint schedule. Each Fund’s individual complex-level fee rate is determined by taking the current overall complex-level fee rate, which is based on the aggregate amount of the “eligible assets” of all Nuveen funds, and making an upward adjustment to that rate (subject to the maximum 0.20% rate noted above) based upon the percentage of the Fund’s assets, if any, that are not “eligible assets.”
Nuveen Fund Advisors has agreed to waive fees and reimburse expenses for the Tax Free Fund so that total annual fund operating expenses, after fee waivers and/or expense reimbursements and excluding the fees and expenses of other investment companies in which the Fund invests, do not exceed 0.85%, 1.35% and 0.70% for Class A, Class C1 and Class I, respectively, through June 30, 2012. The Tax Free Fund’s fee waiver and expense reimbursement will not be terminated prior to that time without approval of the Board. Nuveen Fund Advisors also has agreed to an expense cap for the Municipal Bond Fund 2 and the Acquiring Fund, which will remain in place for the Acquiring Fund following the Reorganizations, so that total annual fund operating expenses, excluding 12b-1 distribution and service fees, interest expenses, taxes, fees incurred in acquiring and disposing of
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portfolio securities, and extraordinary expenses, do not exceed 0.975% and 0.75%, respectively, of the average daily net assets of any class of Fund shares. Even though the Municipal Bond Fund 2 and the Acquiring Fund currently operate below their expense caps, such expense caps may be terminated or modified only with the approval of shareholders of such Funds.
For the Tax Free Fund’s annualized two-month period ended February 28, 2011 and for the Municipal Bond Fund 2’s and the Acquiring Fund’s fiscal year ended February 28, 2011, each Fund paid Nuveen Fund Advisors the following management fees (net of fee waivers and expense reimbursements, where applicable) as a percentage of average net assets:
| Management Fee Rate | ||||
Tax Free Fund | 0.02 | % | ||
Municipal Bond Fund 2 | 0.53 | % | ||
Acquiring Fund | 0.52 | % | ||
Each Fund has adopted a distribution and service plan (the “Plans”) pursuant to Rule 12b-1 under the 1940 Act. Under the Plans, Class B shares, Class C shares and Class C1 shares are subject to a distribution fee, and Class A shares, Class B shares, Class C shares and Class C1 shares are all subject to a service fee. Class I shares are not subject to either distribution or service fees.
Under the Plans, for each Fund, Class A shares are subject to an annual service fee of 0.20% of the average daily net assets of Class A shares. Under the Plans for the Municipal Bond Fund 2 and the Acquiring Fund, Class B shares and Class C shares are subject to (i) an annual distribution fee of 0.75% and 0.55% of the average daily net assets of Class B shares and Class C shares, respectively, and (ii) an annual service fee of 0.20% of the average daily net assets of Class B shares and Class C shares. Under the Plan for the Tax Free Fund, Class C1 shares are subject to (i) an annual distribution fee of 0.40% of the average daily net assets of Class C1 shares and (ii) an annual service fee of 0.25% of the average daily net assets of Class C1 shares. For a complete description of these arrangements for the Acquiring Fund, see the section of the Fund’s Prospectus entitled “What Share Classes We Offer” and the section of the Fund’s Statement of Additional Information entitled “Distributor.”
As of the closing of the FAF Transaction, the same individuals constitute the Board of each Fund, and the Corporation and the Trust have the same officers. The management of each Fund, including general oversight of the duties performed by Nuveen Fund Advisors under the Investment Management Agreement for each Fund, is the responsibility of the Board. There are currently ten members of the Board, one of whom is an “interested person” (as defined in the 1940 Act) and nine of whom are not interested persons (the “independent board members”). The names and business addresses of the board members and officers of the Acquiring Fund and their principal occupations and other affiliations during the past five years are set forth under “Directors and Executive Officers” in the Statement of Additional Information for the Acquiring Fund incorporated herein by reference.
Distribution, Purchase, Redemption, Exchange of Shares and Dividends
The Tax Free Fund offers three classes of shares: Class A, Class C1 and Class I shares. The Acquiring Fund and the Municipal Bond Fund 2 each offers four classes of shares: Class A, Class B, Class C and Class I shares. You may purchase, redeem or exchange shares of the Funds on any business day, which is any day the New York Stock Exchange is open for business. You may purchase,
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redeem or exchange shares of each Fund through a financial advisor or other financial intermediary or directly from such Fund. Class C1 shares of the Tax Free Fund are not available for new accounts or additional investment into existing accounts, but Class C1 shares may be issued for purposes of dividend reinvestment. As discussed above, Class C1 shareholders of the Tax Free Fund will receive Class A, rather than Class C, shares of the Acquiring Fund in the Reorganization. As a result, after the Reorganization, current Tax Free Fund Class C1 shareholders will be able to make additional investments into their accounts by purchasing Class A shares. The Acquiring Fund’s initial and subsequent investment minimums generally are as set forth in the following table, although the Fund may reduce or waive the minimums in some cases. The Tax Free Fund’s investment minimums for Class A and Class I shares are identical to the Acquiring Fund’s investment minimums for Class A and Class I shares, respectively. The Municipal Bond Fund 2’s investment minimums for Class A, Class C and Class I shares are identical to the Acquiring Fund’s investment minimums for Class A, Class C and Class I shares. Class B shares of the Municipal Bond Fund 2 and the Acquiring Fund are only available through exchanges and dividend reinvestment by current Class B shareholders.
| Class A and Class C | Class I | |||||
| Eligibility and Minimum Initial Investment | $3,000 | Available only through fee-based programs and to other limited categories of investors as described in the prospectus.
$100,000 for all accounts except:
• $250 for clients of financial intermediaries and family offices that have accounts holding Class I shares with an aggregate value of at least $100,000 (or that are expected to reach this level).
• No minimum for certain other categories of eligible investors as described in the prospectus. | ||||
| Minimum Additional Investment | $100 | No minimum. | ||||
Shareholders of the Acquiring Fund and the Acquired Funds are eligible to exchange their shares for shares of the same class of another Nuveen mutual fund available in the shareholder’s state provided the funds have the same transfer agent. Because the Acquiring Fund and the Tax Free Fund have different transfer agents, funds available as exchange options to Tax Free Fund and Acquiring Fund shareholders are different; whereas, the Municipal Bond Fund 2 and the Acquiring Fund have the same transfer agents, and the same funds are available as exchange options.
No initial sales charge or contingent deferred sales charges will be imposed on shares of the Acquiring Fund received or shares of an Acquired Fund exchanged in connection with the Reorganizations. Any purchases of any class of shares made after the Reorganizations will be subject to the standard fee structure applicable to such class.
For a complete description of purchase, redemption and exchange options, see the section of the Acquiring Fund’s Prospectus entitled “How You Can Buy and Sell Shares” and “General Information,” and the section of the Acquiring Fund’s Statement of Additional Information entitled “Purchase and Redemption of Fund Shares.”
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Each Fund declares dividends daily and pays such dividends monthly. Each Fund declares and pays any taxable capital gains or other taxable distributions once a year at year end. If the Reorganizations are approved by the shareholders of the Acquired Funds, each Acquired Fund intends to distribute to its shareholders, prior to the closing of its Reorganization, all its net investment income and net capital gains, if any, for the period ending on the Closing Date.
The Funds intend to make distributions that are exempt from regular federal and California state income tax. All or a portion of all distributions, however, may be subject to the federal and state AMT. The Funds’ distributions that are not designated as exempt-interest dividends are generally taxed as ordinary income or capital gains for regular federal income tax purposes.
Payments to Broker-Dealers and Other Financial Intermediaries
If you purchase shares of a Fund through a broker-dealer or other financial intermediary (such as a bank or financial advisor), the Fund, its distributor or its investment adviser may pay the intermediary for the sale of Fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other financial intermediary and your salesperson to recommend the Fund over another investment. Ask your financial advisor or visit your financial intermediary’s website for more information.
Additional information concerning the Acquiring Fund and each Acquired Fund is contained in this Joint Proxy Statement/Prospectus and additional information regarding the Acquiring Fund is contained in the accompanying Acquiring Fund prospectus. The cover page of this Joint Proxy Statement/Prospectus describes how you may obtain further information.
The proposed Reorganizations will be governed by the Agreements, forms of which are attached as Appendix I. Each Agreement provides that the applicable Acquired Fund will transfer all its assets to the Acquiring Fund solely in exchange for the issuance of full and fractional voting shares of the Acquiring Fund and the assumption by the Acquiring Fund of all the liabilities of the Acquired Fund. The closing of the Reorganizations will take place at the close of business on the Closing Date. The following discussion of the Agreements is qualified in its entirety by the full text of the Agreements.
With respect to each Reorganization, the Acquired Fund will transfer all its assets to the Acquiring Fund, and in exchange, the Acquiring Fund will assume all the liabilities of such Acquired Fund and deliver to the Acquired Fund a number of full and fractional shares of the Acquiring Fund having a net asset value equal to the value of the assets of the Acquired Fund less the liabilities of the Acquired Fund assumed by the Acquiring Fund. At the designated time on the Closing Date as set forth in each Agreement, each such Acquired Fund will distribute in complete liquidation of the Acquired Fund, pro rata to its shareholders of record, all Acquiring Fund shares received by the Acquired Fund. This distribution will be accomplished by the transfer of the Acquiring Fund shares credited to the account of the applicable Acquired Fund on the books of the Acquiring Fund to open accounts on the share records of the Acquiring Fund in the name of such Acquired Fund shareholders,
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and representing the respective pro rata number of Acquiring Fund shares due such shareholders. All issued and outstanding shares of the applicable Acquired Fund will simultaneously be canceled on the books of that Acquired Fund.
As a result of the proposed Reorganization of the Tax Free Fund, each Acquired Fund Class A and Class C1 shareholder will receive a number of Acquiring Fund Class A shares, and each Acquired Fund Class I shareholder will receive a number of Acquiring Fund Class I shares, equal in value, as of the close of regular trading on the New York Stock Exchange on the Closing Date, to the value of the Acquired Fund Class A, Class C1 or Class I shares surrendered by such shareholder. As a result of the proposed Reorganization of the Municipal Bond Fund 2, each Acquired Fund Class A, Class B, Class C and Class I shareholder will receive a number of Acquiring Fund Class A, Class B, Class C and Class I shares, respectively, equal in value, as of the close of regular trading on the New York Stock Exchange on the Closing Date, to the value of the Acquired Fund shares surrendered by such shareholder.
The Board has determined that the proposed Reorganizations are in the best interests of each Fund and that the interests of shareholders will not be diluted as a result of the transactions contemplated by the Agreements.
The consummation of the Reorganizations is subject to the terms and conditions of, and the representations and warranties being true as set forth in, the Agreements. Each Agreement may be terminated by mutual agreement of the subject Funds. In addition, any Fund may at its option terminate its Agreement at or before the Closing Date due to (i) a breach by any other party of any representation, warranty, or agreement to be performed at or before the Closing Date, if not cured within 30 days, (ii) a condition precedent to the obligations of the terminating party that has not been met and it reasonably appears that it will not or cannot be met, or (iii) a determination by the Board that the consummation of the transactions contemplated by the Agreement is not in the best interests of the Fund. The implementation of the Reorganization with respect to one Acquired Fund is not contingent upon the implementation of the Reorganization with respect to the other Acquired Fund.
Each Acquired Fund will, within a reasonable period of time before the Closing Date, furnish the Acquiring Fund with a list of the Acquired Fund’s portfolio securities and other investments. The Acquiring Fund will, within a reasonable period of time before the Closing Date, furnish each Acquired Fund with a list of the securities, if any, on each respective Acquired Fund’s list referred to above that do not conform to the Acquiring Fund’s investment objective, policies, and restrictions. Each Acquired Fund, if requested by the Acquiring Fund, will dispose of securities on the Acquiring Fund’s list before the Closing Date. In addition, if it is determined that the portfolios of the Funds, when aggregated, would contain investments exceeding certain percentage limitations imposed upon the Acquiring Fund with respect to such investments, each Acquired Fund, if requested by the Acquiring Fund, will dispose of a sufficient amount of such investments as may be necessary to avoid violating such limitations as of the Closing Date. The sale of such investments could result in taxable distributions to shareholders of an Acquired Fund prior to the Reorganizations. Notwithstanding the foregoing, nothing in an Agreement will require an Acquired Fund to dispose of any investments or securities if, in the reasonable judgment of the Board or the Adviser, such disposition would adversely affect the tax-free nature of the Reorganizations for federal income tax purposes or would otherwise not be in the best interests of an Acquired Fund. See “Material Federal Income Tax Consequences” below. However, it is not expected that any material portfolio sales (i.e., more than [5%] of an Acquired Fund’s net assets) will occur in connection with the Reorganizations.
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As noted above, if the Reorganizations had occurred as of December 31, 2011, the Acquiring Fund would not have been required to dispose of securities of an Acquired Fund in order to comply with its investment policies and restrictions, and would not have sold any material portion (i.e., more than % of its net assets) of the securities in an Acquired Fund’s portfolio solely as a result of the Reorganizations.
Description of Securities to be Issued
Shares of Beneficial Interest. The Acquiring Fund has established and designated four classes of shares, par value $0.01 per share. The Trust’s declaration of trust (the “Declaration of Trust”) permits the Board, in its sole discretion, and subject to compliance with the 1940 Act, to further subdivide the shares of the Acquiring Fund into one or more other classes of shares.
Voting Rights of Shareholders. Holders of shares of the Acquiring Fund are entitled to one vote per share on matters as to which they are entitled to vote, with fractional shares voting proportionally. The Acquiring Fund operates as a series of the Trust, an open-end management investment company registered with the SEC under the 1940 Act. The Trust currently has seven series, including the Acquiring Fund and the Municipal Bond Fund 2, and the Board may, in its sole discretion, create additional series from time to time. Separate votes generally are taken by each series on matters affecting an individual series. In addition to the specific voting rights described above, shareholders of the Acquiring Fund are entitled, under current law, to vote with respect to certain other matters, including changes in fundamental investment policies and restrictions. Moreover, shareholders owning at least 10% of the outstanding shares entitled to vote may request that the Board call a shareholders’ meeting.
Continuation of Shareholder Accounts and Plans; Change in Exchange Privileges; Share Certificates
With respect to each Reorganization, if the Reorganization is approved, the Acquiring Fund will establish an account for each Acquired Fund shareholder containing the appropriate number of shares of the appropriate class of the Acquiring Fund. Shareholders of an Acquired Fund who are accumulating shares through systematic investing, or who are receiving payments under the systematic withdrawal plan, will retain the same rights and privileges after the Reorganizations through plans maintained by the Acquiring Fund. The shareholder services and shareholder programs of the Funds are substantially similar, and services provided to shareholders generally are not expected to change, except to the extent services differ because the Tax Free Fund has a different transfer agent. The Funds currently have exchange procedures that provide that shareholders may exchange their shares into the same class of another Nuveen mutual fund provided that such funds utilize the same transfer agent. Accordingly, because the Tax Free Fund utilizes a different transfer agent than that utilized by the Municipal Bond Fund 2 and the Acquiring Fund, if the Reorganization for the Tax Free Fund is approved and completed, the funds available as exchange options for Tax Free Fund shareholders will change, and there will be more exchange options than currently available to such shareholders. No certificates for Acquiring Fund shares will be issued as part of the Reorganizations.
U.S. Bank National Association serves as the custodian for the assets of the Tax Free Fund and State Street Bank & Trust Company serves as the custodian for the assets of the Municipal Bond Fund 2 and the Acquiring Fund. U.S. Bancorp Fund Services, LLC serves as transfer agent for the Tax
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Free Fund and Boston Financial Data Services, LLC serves as transfer agent for the Municipal Bond Fund 2 and the Acquiring Fund. Ernst & Young LLP serves as the independent auditors for the Tax Free Fund and PricewaterhouseCoopers LLP serves as independent auditors for the Municipal Bond Fund 2 and the Acquiring Fund.
Material Federal Income Tax Consequences
As a condition to each Fund’s obligation to consummate its Reorganization, each Fund will receive a tax opinion from Vedder Price P.C. (which opinion will be based on certain factual representations and certain customary assumptions and exclusions) with respect to its Reorganization substantially to the effect that, on the basis of the existing provisions of the Code, current administrative rules and court decisions, for federal income tax purposes:
| 1. | The transfer of all the assets of the Acquired Fund to the Acquiring Fund in exchange solely for Acquiring Fund shares and the assumption by the Acquiring Fund of all the liabilities of the Acquired Fund, followed by the pro rata distribution to the Acquired Fund shareholders of all the Acquiring Fund shares received by the Acquired Fund in complete liquidation of the Acquired Fund, will constitute a “reorganization” within the meaning of Section 368(a) of the Code, and the Acquiring Fund and the Acquired Fund will each be a “party to a reorganization” within the meaning of Section 368(b) of the Code, with respect to such Reorganization. |
| 2. | No gain or loss will be recognized by the Acquiring Fund upon the receipt of all the assets of the Acquired Fund solely in exchange for Acquiring Fund shares and the assumption by the Acquiring Fund of all the liabilities of the Acquired Fund. |
| 3. | No gain or loss will be recognized by the Acquired Fund upon the transfer of all of the Acquired Fund’s assets to the Acquiring Fund solely in exchange for Acquiring Fund shares and the assumption by the Acquiring Fund of all the liabilities of the Acquired Fund or upon the distribution (whether actual or constructive) of all such Acquiring Fund shares to Acquired Fund shareholders solely in exchange for such shareholders’ shares of the Acquired Fund in complete liquidation of the Acquired Fund. |
| 4. | No gain or loss will be recognized by the Acquired Fund shareholders upon the exchange of their Acquired Fund shares solely for Acquiring Fund shares in the Reorganization. |
| 5. | The aggregate basis of the Acquiring Fund shares received by each Acquired Fund shareholder pursuant to the Reorganization will be the same as the aggregate basis of the Acquired Fund shares exchanged therefor by such shareholder. The holding period of the Acquiring Fund shares received by each Acquired Fund shareholder will include the period during which the Acquired Fund shares exchanged therefor were held by such shareholder, provided such Acquired Fund shares are held as capital assets at the effective time of the Reorganization. |
| 6. | The basis of the Acquired Fund’s assets acquired by the Acquiring Fund will be the same as the basis of such assets to the Acquired Fund immediately before the Reorganization. The holding period of the assets of the Acquired Fund in the hands of the Acquiring Fund will include the period during which those assets were held by the Acquired Fund. |
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No opinion will be expressed as to (1) the effect of a Reorganization on (A) an Acquired Fund or the Acquiring Fund with respect to any asset as to which any unrealized gain or loss is required to be recognized for federal income tax purposes at the end of a taxable year (or on the termination thereof) under a mark-to-market system of accounting, (B) any Acquired Fund shareholder that is required to recognize unrealized gains and losses for U.S. federal income tax purposes under a mark-to-market system of accounting, or (C) an Acquired Fund or the Acquiring Fund with respect to any stock held in a passive foreign investment company as defined in Section 1297(a) of the Code or (2) any other federal tax issues (except those set forth above) and all state, local or foreign tax issues of any kind.
Prior to the closing of its Reorganization, each Acquired Fund will declare a distribution to its shareholders, which together with all previous distributions, will have the effect of distributing to shareholders all its net investment income and realized net capital gains (after reduction by any available capital loss carryforwards), if any, through the closing of its Reorganization. Except to the extent that this distribution is designated as an exempt-interest dividend, it will be taxable to shareholders for regular federal income tax purposes and may include net capital gains resulting from the sale of portfolio assets discussed below. All or a portion of this distribution may be subject to the federal or state AMT. Additional distributions may be made if necessary. All dividends and distributions will be reinvested in additional shares of the respective Acquired Fund unless a shareholder has made an election to receive dividends and distributions in cash. Dividends and distributions are treated the same for federal income tax purposes whether received in cash or additional shares.
To the extent that a portion of an Acquired Fund’s portfolio assets are sold prior to the Reorganizations, the federal income tax effect of such sales would depend on the holding periods of such assets and the difference between the price at which such portfolio assets were sold and the Fund’s basis in such assets. Any net capital gains (net long-term capital gain in excess of any net short-term capital loss) recognized in these sales, after the application of any available capital loss carryforwards (capital losses from prior taxable years that may be used to offset future capital gains), would be distributed to an Acquired Fund’s shareholders as capital gain dividends. Any net short-term capital gains (in excess of any net long-term capital loss and after application of any available capital loss carryforwards) would be distributed as ordinary dividends. All such distributions would be made during or with respect to an Acquired Fund’s taxable year in which the sale occurs and would be taxable to shareholders for federal income tax purposes.
After the Reorganizations, the Acquiring Fund’s ability to use an Acquired Fund’s or the Acquiring Fund’s pre-Reorganization capital losses, if any, may be limited under certain federal income tax rules applicable to reorganizations of this type. Therefore, in certain circumstances, shareholders may pay federal income tax sooner, or may pay more federal income taxes, than they would have had the Reorganizations not occurred. The effect of these potential limitations, however, will depend on a number of factors, including the amount of the losses, the amount of gains to be offset, the exact timing of the Reorganizations and the amount of unrealized capital gains in the Funds at the time of the Reorganizations.
In addition, shareholders of each Acquired Fund will receive a proportionate share of any taxable income and gains realized by the Acquiring Fund and not distributed to its shareholders prior to the Reorganizations when such income and gains are eventually distributed by the Acquiring Fund. As a result, shareholders of each Acquired Fund may receive a greater amount of taxable distributions than they would have had the Reorganizations not occurred.
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This description of the federal income tax consequences of the Reorganizations is made without regard to the particular facts and circumstances of any shareholder. Shareholders are urged to consult their own tax advisors as to the specific consequences to them of the Reorganizations, including the applicability and effect of state, local, non-U.S. and other tax laws.
Each Acquired Fund, the Acquiring Fund and Nuveen will each be responsible for a portion of the expenses associated with the Reorganizations, including but not limited to, legal and auditing fees, the costs of printing and distributing this Joint Proxy Statement/Prospectus, and the solicitation expenses discussed below, if the Reorganizations are approved. Nuveen Fund Advisors estimates that expenses for the Reorganizations will be approximately $146,000. It is anticipated that these expenses will be offset over time by the lower operating expenses of the Acquiring Fund that are expected to result after the Reorganizations. Each of the Funds will be responsible for expenses incurred in connection with the Reorganizations ratably up to each Fund’s projected cost savings during the first year following the Reorganizations. If the Reorganizations were completed on August 31, 2011, Nuveen Fund Advisors estimates that Tax Free Fund shareholders, as shareholders of the Acquiring Fund, would save approximately $89,000 in the first year after the Reorganizations, that Municipal Bond Fund 2 shareholders, as shareholders of the Acquiring Fund, would save approximately $49,000 in the first year after the Reorganizations, and that Acquiring Fund shareholders would save approximately $51,000 in the first year after the Reorganizations. As a result, the Tax Free Fund is expected to be charged approximately $69,000, the Municipal Bond Fund 2 is expected to be charged approximately $38,000, and the Acquiring Fund is expected to be charged approximately $39,000. Because the payment by the Tax Free Fund of any portion of these costs would cause the Acquired Fund to exceed its expense cap currently in effect, Nuveen will reimburse all expenses charged to the Tax Free Fund and none of the expenses charged to the Municipal Bond Fund 2 or the Acquiring Fund. The Municipal Bond Fund 2 and the Acquiring Fund are each expected to recover its costs of the Reorganizations within the first year following the Reorganizations assuming that annual cost savings occur at the levels shown above. To the extent the Reorganization costs exceed the projected cost savings for the Funds, Nuveen will pay such expenses. If a Reorganization is not approved or completed with respect to either Acquired Fund, Nuveen will pay all the Reorganization expenses that would have been charged to that Fund and the Acquiring Fund in connection with such Reorganization.
The Acquired Funds have engaged Computershare Fund Services to assist in the solicitation of proxies at an estimated cost of $4,000, which is included in the expense estimate above.
Comparison of Massachusetts Business Trusts and Maryland Corporations
The following description is based on relevant provisions of applicable Massachusetts law and the Maryland General Corporation Law (the “MGCL”) and each Fund’s operative documents. This summary does not purport to be complete and we refer you to applicable Massachusetts law, the MGCL and each Fund’s operative documents.
In General
The Acquiring Fund and the Municipal Bond Fund 2 are each a series of a Massachusetts business trust. A fund organized as a series of a Massachusetts business trust is governed by the trust’s declaration of trust or similar instrument. Massachusetts law allows the trustees of a business trust to
25
set the terms of a fund’s governance in its declaration. All power and authority to manage the fund and its affairs generally reside with the trustees, and shareholder voting and other rights are limited to those provided to the shareholders in the declaration. Because Massachusetts law governing business trusts provides more flexibility compared to typical state corporate statutes, the Massachusetts business trust has become a common form of organization for mutual funds. However, some consider it less desirable than other entities because it relies on the terms of the applicable declaration and judicial interpretations rather than statutory provisions for substantive issues, such as the personal liability of shareholders and trustees, and does not provide the level of certitude that corporate laws like those of Maryland, or newer statutory trust laws, such as those of Delaware, provide.
The Tax Free Fund is a series of a Maryland corporation. A fund organized as a series of a Maryland corporation is governed both by the MGCL and the Maryland corporation’s charter and bylaws. For a Maryland corporation, unlike a Massachusetts trust, the MGCL prescribes many aspects of corporate governance.
Shareholders of a Maryland corporation generally are shielded from personal liability for the corporation’s debts or obligations. Shareholders of a Massachusetts business trust, on the other hand, are not afforded the statutory limitation of personal liability generally afforded to shareholders of a corporation from the trust’s liabilities. Instead, the declaration of trust of a fund organized as a Massachusetts business trust typically provides that a shareholder will not be personally liable, and further provides for indemnification to the extent that a shareholder is found personally liable, for the fund’s acts or obligations. The Declaration of Trust contains such provisions.
Similarly, the trustees of a Massachusetts business trust are not afforded statutory protection from personal liability for the obligations of the trust. The directors of a Maryland corporation, on the other hand, generally are shielded from personal liability for the corporation’s acts or obligations by the MGCL. Courts in Massachusetts have, however, recognized limitations of a trustee’s personal liability in contract actions for the obligations of a trust contained in the trust’s declaration, and declarations may also provide that trustees may be indemnified out of the assets of the trust to the extent held personally liable. The Declaration of Trust contains such provisions.
Massachusetts Business Trusts
The Acquiring Fund and the Municipal Bond Fund 2 are governed by the Trust’s Declaration of Trust and the Trust’s amended and restated by-laws (the “By-Laws”). Under the Declaration of Trust, any determination as to what is in the interests of the Trust made by the trustees in good faith is conclusive, and in construing the provisions of the Declaration of Trust, there is a presumption in favor of a grant of power to the trustees. Further, the Declaration of Trust provides that certain determinations made in good faith by the trustees are binding upon the Trust and all shareholders, and shares are issued and sold on the condition and understanding, evidenced by the purchase of shares, that any and all such determinations shall be so binding. The following is a summary of some of the key provisions of the Acquiring Fund’s and the Municipal Bond Fund 2’s governing documents.
Shareholder Voting
The 1940 Act requires a vote of shareholders on matters that Congress has determined might have a material effect on shareholders and their investments. For example, shareholder consent is required under the 1940 Act to approve new investment advisory agreements in many cases, an increase in an
26
advisory fee or a 12b-1 fee, changes to fundamental policies, the election of directors or trustees in certain circumstances, and the merger or reorganization of a fund in certain circumstances, particularly where the merger or consolidation involves an affiliated party. The Declaration of Trust requires a shareholder vote on matters in addition to those required under the 1940 Act, such as certain mergers, consolidations and sales of assets, derivative actions (to the same extent as shareholders of a Massachusetts business corporation) and certain amendments to the Declaration of Trust. Shareholders have no power to vote on any matter except as required by applicable law, the governing documents, or as otherwise determined by the trustees.
There are ordinarily no annual meetings of shareholders, but special meetings may be called by the trustees and by the written request of shareholders owning at least 10% of the outstanding shares entitled to vote. The By-Laws provide that the holders of a majority of the voting power of the shares of beneficial interest of the Acquiring Fund and the Municipal Bond Fund 2 entitled to vote at a meeting shall constitute a quorum for the transaction of business. Except as may otherwise be required by the 1940 Act, the Declaration of Trust or the By-Laws, the Declaration of Trust provides that the affirmative vote of the holders of a majority, except in the case of the election of trustees which shall only require a plurality, of the shares present in person or by proxy and entitled to vote at a meeting of shareholders at which a quorum is present is required to approve a matter.
Election and Removal of Trustees
The Declaration of Trust provides that the trustees determine the size of the Board, subject to a minimum of two and a maximum of twelve, and to set and alter the terms of office of the trustees, and may make their terms of unlimited duration. It also provides that vacancies on the Board may be filled by the remaining trustees, except when election by the shareholders is required under the 1940 Act. Therefore, there will normally be no meetings of shareholders for the purpose of electing trustees unless and until such time as required by law. Trustees are then elected by a plurality vote of the shareholders. A trustee may only be removed for cause by action of at least two-thirds of the remaining trustees or by action of at least two-thirds of the outstanding shares.
Issuance of Shares
Under the Declaration of Trust, the trustees are permitted to issue an unlimited number of shares for such consideration and on such terms as the trustees may determine. Shares are subject to such other preferences, conversion, exchange or similar rights, as the trustees may determine.
Series and Classes
The Declaration of Trust gives broad authority to the trustees to establish series and classes in addition to those currently established and to determine the rights and preferences, conversion rights, voting powers, restrictions, limitations, qualifications or terms or conditions of redemptions of the shares of the series and classes. The trustees are also authorized to merge or terminate a series or a class without a vote of shareholders under certain circumstances.
Amendments to Declaration of Trust
Amendments to the Declaration of Trust generally require the consent of shareholders owning more than 50% of shares entitled to vote, voting in the aggregate and not by class except to the extent that applicable law may require voting by class, although certain amendments may be made by the trustees without a shareholder vote.
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Shareholder, Trustee and Officer Liability
The Declaration of Trust provides that shareholders have no personal liability for any debt or obligation of the Trust and requires the Trust to indemnify a shareholder from any loss or expense arising solely by reason of his or her being or having been a shareholder and not because of his or her acts or omissions or for some other reasons. In addition, the Trust will assume the defense of any claim against a shareholder for personal liability at the request of the shareholder. Similarly, the Declaration of Trust provides that any person who is a trustee, officer or employee of the Trust is not personally liable to any person in connection with the affairs of the Trust, other than to the Trust and its shareholders arising from bad faith, willful misfeasance, gross negligence or reckless disregard for his or her duty. The Declaration of Trust further provides for indemnification of such persons and advancement of the expenses of defending any such actions for which indemnification might be sought. The Declaration of Trust also provides that the trustees may rely in good faith on expert advice.
Preemptive Rights
Pursuant to the Declaration of Trust, shareholders of the Acquiring Fund and the Municipal Bond Fund 2 have no preemptive rights or other rights to subscribe to additional shares.
Derivative Actions
Massachusetts has what is commonly referred to as a “universal demand statute,” which requires that a shareholder make a written demand on the board, requesting the board members to bring an action, before the shareholder is entitled to bring or maintain a court action or claim on behalf of the entity.
Maryland Corporations
A Maryland corporation is governed by the MGCL, its charter and bylaws. Some of the key provisions of the MGCL are summarized below.
Shareholder Voting
Under the MGCL, a Maryland corporation generally cannot dissolve, amend its charter, or engage in a statutory share exchange, merger or consolidation unless approved by a vote of shareholders. Depending on the circumstances and the charter of the corporation, there may be various exceptions to these votes. Shareholders of Maryland corporations are generally entitled to one vote per share and fractional votes for fractional shares held. The Corporation’s charter (the “Charter”) and bylaws contain such provisions.
Election and Removal of Directors
Shareholders of a Maryland corporation generally are entitled to elect and remove directors. Provided the charter or bylaws so provide, the MGCL does not require a corporation registered as an open-end investment company to hold an annual meeting in any year in which the election of directors is not required by the 1940 Act. The Charter contains such a provision. Under the bylaws of the Corporation, a special meeting of shareholders shall be called upon the written request of the holders of shares entitled to cast not less than 10% of all votes entitled to vote at such meeting. The bylaws of the Corporation provide that shareholders may, at any meeting of shareholders duly called and at which a
28
quorum is present, by the affirmative vote of the holders of a majority of the votes entitled to be cast thereon, remove any director or directors from office and may select a successor or successors to fill any resulting vacancies.
Amendments to the Charter
Under the MGCL, shareholders of corporations generally are entitled to vote on amendments to the charter. However, the board of directors of a Maryland corporation is authorized, without a vote of the shareholders, to amend the charter to change the name of the corporation, to change the name or other designation of any class or series of stock and to change the par value of any class or series of stock. Under the MGCL, generally a change in the name or other designation of a class or series of stock, however, may not change the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends, or terms or conditions of redemption. The board of directors of a Maryland corporation may, however, if permitted by the charter, without a vote of the shareholders, classify or reclassify any unissued stock by setting or changing the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends, qualifications, or terms or conditions of redemption. The Charter permits the Board to do so. The MGCL permits the board of directors of an open-end investment company to supplement the charter without a vote of the shareholders to increase the aggregate number of authorized shares or the number of shares in any class or series, unless prohibited by the charter. The Charter does not prohibit the Board from doing so.
Issuance of Shares
The board of directors of a Maryland corporation has the power to authorize the issuance of stock and, prior to issuance of shares of each class or series, the board of directors of a Maryland corporation is required by Maryland law to set the terms, preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications and terms or conditions of redemption for each class or series.
Shareholder, Director and Officer Liability
Under Maryland law, shareholders generally are not personally liable for debts or obligations of a corporation. Maryland law provides that a director who has met his or her statutory standard of conduct has no liability for reason of being or having been a director. Maryland law provides that a corporation may indemnify and advance expenses to its directors for acts and omissions in their official capacity, subject to certain exceptions, and the Charter requires the Corporation to do so. The indemnification provisions and the limitation on liability are both subject to any limitations of the 1940 Act, which generally provides that no director or officer shall be protected from liability to the corporation or its shareholders by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his or her office. The provisions governing the advance of expenses are subject to applicable requirements of the 1940 Act or rules thereunder.
Preemptive Rights
Pursuant to the Charter, shareholders of the Tax Free Fund have no preemptive rights.
Derivative Actions
Under Maryland law, applicable case law at the time of a particular derivative action will establish any requirements or limitations with respect to shareholder derivative actions.
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The foregoing is only a summary of certain rights of shareholders under the governing documents of the Trust and the Corporation and under applicable state law, and is not a complete description of provisions contained in those sources. Shareholders should refer to the provisions of those documents and state law directly for a more thorough description.
The following tables set forth the unaudited capitalization of the Tax Free Fund, the Municipal Bond Fund 2 and the Acquiring Fund as of August 31, 2011, and the pro forma capitalization of the combined fund as if (i) the Reorganizations of the Tax Free Fund and the Municipal Bond Fund 2 into the Acquiring Fund had occurred on that date and (ii) the Reorganization of the Tax Free Fund into the Acquiring Fund had occurred on that date. These numbers may differ at the Closing Date.
Capitalization Table as of August 31, 2011 (Unaudited) (if both Reorganizations had occurred)
| Tax Free Fund | Municipal Bond Fund 2 | Acquiring Fund | Pro Forma Adjustments | Pro Forma Combined Fund (Both Acquired Funds into Acquiring Fund) | ||||||||||||||||
Net Assets | ||||||||||||||||||||
Class A | $18,940,395 | $56,746,148 | $132,374,269 | $5,472,622 | (a) | $213,533,434 | (a) | |||||||||||||
Class B | N/A | 906,248 | 1,308,780 | (3,685 | )(a) | 2,211,343 | (a) | |||||||||||||
Class C | N/A | 12,626,760 | 32,627,594 | (53,164 | )(a) | 45,201,190 | (a) | |||||||||||||
Class C1 | 5,763,514 | N/A | N/A | (5,763,514 | )(a) | N/A(a) | ||||||||||||||
Class I | 78,799,391 | 84,772,550 | 140,093,217 | (518,429 | )(a) | 303,146,729 | (a) | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | $103,503,300 | $155,051,706 | $306,403,860 | $(866,170) | $564,092,696 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Shares Outstanding | ||||||||||||||||||||
Class A | 1,716,093 | 5,702,825 | 13,291,556 | 732,915 | (b) | 21,443,389 | (b) | |||||||||||||
Class B | N/A | 90,779 | 131,561 | (23 | )(b) | 222,317 | (b) | |||||||||||||
Class C | N/A | 1,274,943 | 3,286,528 | (7,844 | )(b) | 4,553,627 | (b) | |||||||||||||
Class C1 | 521,652 | N/A | N/A | (521,652 | )(b) | N/A | ||||||||||||||
Class I | 7,143,245 | 8,503,536 | 14,085,795 | 751,457 | (b) | 30,484,033 | (b) | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | 9,380,990 | 15,572,083 | 30,795,440 | 954,853 | 56,703,366 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net Asset Value Per Share | ||||||||||||||||||||
Class A | $11.04 | $9.95 | $9.96 | $9.96 | ||||||||||||||||
Class B | N/A | $9.98 | $9.95 | $9.95 | ||||||||||||||||
Class C | N/A | $9.90 | $9.93 | $9.93 | ||||||||||||||||
Class C1 | $11.05 | N/A | N/A | N/A | ||||||||||||||||
Class I | $11.03 | $9.97 | $9.95 | $9.94 | ||||||||||||||||
Shares Authorized | ||||||||||||||||||||
Class A | 2 billion | Unlimited | Unlimited | Unlimited | ||||||||||||||||
Class B | N/A | Unlimited | Unlimited | Unlimited | ||||||||||||||||
Class C | N/A | Unlimited | Unlimited | Unlimited | ||||||||||||||||
Class C1 | 2 billion | N/A | N/A | N/A | ||||||||||||||||
Class I | 2 billion | Unlimited | Unlimited | Unlimited | ||||||||||||||||
| (a) | Figures reflect the costs associated with the proposed Reorganization (unless otherwise indicated below), estimated to be approximately $146,000, of which $69,000 will be charged to the Tax Free Fund, $38,000 will be charged to the Municipal Bond Fund 2, and $39,000 will be charged to the Acquiring Fund if the Reorganizations are approved. To the extent that payment of these expenses would cause a Fund to exceed its expense cap, Nuveen will reimburse the portion of the expenses necessary for the Fund to operate within the cap. Based on current expense levels, it is anticipated that |
30
| Nuveen will reimburse the $69,000 that would be borne by the Tax Free Fund, and, therefore, the figures do not reflect the $69,000 to be charged to the Tax Free Fund. The $38,000 attributable to the Municipal Bond Fund 2 and the $39,000 attributable to the Acquiring Fund would be allocated among such Fund’s share classes based on relative net assets. Furthermore, figures assume the Tax Free Fund distributes its undistributed net investment income of $126,694 and accumulated net realized gains of $98,646 to its shareholders, and the Municipal Bond Fund 2 distributes its undistributed net investment income of $563,830 to its shareholders, prior to the Reorganizations. |
| (b) | Figures reflect the issuance by the Acquiring Fund of approximately 1,897,886 Class A shares, 577,522 Class A shares and 7,906,711 Class I shares to Class A, Class C1 and Class I shareholders, respectively, of the Tax Free Fund, and the issuance by the Acquiring Fund of approximately 5,676,425 Class A shares, 90,756 Class B shares, 1,267,099 Class C shares and 8,491,527 Class I shares to shareholders of each respective class of the Municipal Bond Fund 2 in connection with the proposed Reorganizations. |
Capitalization Table as of August 31, 2011 (Unaudited)
(if only the Tax Free Fund Reorganization had occurred)
| Tax Free Fund | Acquiring Fund | Pro Forma Adjustments | Pro Forma Combined Fund (Tax Free Fund into Acquiring Fund) | |||||||||||||
Net Assets | ||||||||||||||||
Class A | $18,940,395 | $132,374,269 | $5,699,361 | (a) | $157,014,025 | (a) | ||||||||||
Class B | N/A | 1,308,780 | (103 | )(a) | 1,308,677 | (a) | ||||||||||
Class C | N/A | 32,627,594 | (2,556 | )(a) | 32,625,038 | (a) | ||||||||||
Class C1 | 5,763,514 | N/A | (5,763,514 | )(a) | N/A(a) | |||||||||||
Class I | 78,799,391 | 140,093,217 | (182,528 | )(a) | 218,710,080 | (a) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $103,503,300 | $306,403,860 | $(249,340) | $409,657,820 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Shares Outstanding | ||||||||||||||||
Class A | 1,716,093 | 13,291,556 | 759,193 | (b) | 15,766,842 | (b) | ||||||||||
Class B | N/A | 131,561 | — | 131,561 | ||||||||||||
Class C | N/A | 3,286,528 | — | 3,286,528 | ||||||||||||
Class C1 | 521,652 | N/A | (521,652 | )(b) | N/A | |||||||||||
Class I | 7,143,245 | 14,085,795 | 763,079 | (b) | 21,992,119 | (b) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | 9,380,990 | 30,795,440 | 1,000,620 | 41,177,050 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net Asset Value Per Share | ||||||||||||||||
Class A | $11.04 | $9.96 | $9.96 | |||||||||||||
Class B | N/A | $9.95 | $9.95 | |||||||||||||
Class C | N/A | �� | $9.93 | $9.93 | ||||||||||||
Class C1 | $11.05 | N/A | N/A | |||||||||||||
Class I | $11.03 | $9.95 | $9.94 | |||||||||||||
Shares Authorized | ||||||||||||||||
Class A | 2 billion | Unlimited | Unlimited | |||||||||||||
Class B | N/A | Unlimited | Unlimited | |||||||||||||
Class C | N/A | Unlimited | Unlimited | |||||||||||||
Class C1 | 2 billion | N/A | N/A | |||||||||||||
Class I | 2 billion | Unlimited | Unlimited | |||||||||||||
| (a) | Figures reflect the costs associated with the proposed Reorganization (unless otherwise indicated below), estimated to be approximately $107,000, of which $81,000 will be charged to the Tax Free Fund and $24,000 will be charged to the Acquiring Fund if the Reorganization is approved, allocated ratably up to each Fund’s projected cost savings during the first year following the Reorganization. Nuveen will absorb the remaining reorganization costs of $2,000. To the extent that payment of these expenses would cause a Fund to exceed its expense cap, Nuveen will reimburse the portion of the expenses necessary for the Fund to operate within the cap. Based on current expense levels, it is anticipated that Nuveen |
31
| will reimburse the $81,000 that would be borne by the Tax Free Fund, and, therefore, the figures do not reflect the $81,000 to be charged to the Tax Free Fund. The $24,000 attributable to the Acquiring Fund would be allocated among the Fund’s share classes based on relative net assets. Furthermore, figures assume the Tax Free Fund distributes its undistributed net investment income of $126,694 and accumulated net realized gains of $98,646 to its shareholders prior to the Reorganization. |
| (b) | Figures reflect the issuance by the Acquiring Fund of approximately 1,897,793 Class A shares, 577,493 Class A shares and 7,906,324 Class I shares to Class A, Class C1 and Class I shareholders, respectively, of the Tax Free Fund in connection with the proposed Reorganization. |
Certain legal matters concerning the issuance of Class A, Class B, Class C and Class I shares of the Acquiring Fund will be passed on by Vedder Price P.C., 222 North LaSalle Street, Chicago, Illinois 60601, and the federal income tax consequences of the Reorganizations will also be passed on by Vedder Price P.C.
Information Filed with the Securities and Exchange Commission
This Joint Proxy Statement/Prospectus and the related Statement of Additional Information do not contain all the information set forth in the registration statements and the exhibits relating thereto and the annual and semi-annual reports which the Funds have filed with the SEC pursuant to the requirements of the Securities Act of 1933, as amended, and the 1940 Act, to which reference is hereby made. The SEC file number for the registration statement containing the current Prospectus and Statement of Additional Information for the Tax Free Fund is Registration No. 811-05309 and the SEC file number for the registration statement containing the current Prospectus and Statement of Additional Information for the Acquiring Fund and Municipal Bond Fund 2 is Registration No. 811-07755. Such Prospectuses and Statements of Additional Information relating to the Funds are incorporated herein by reference.
THE BOARD’S APPROVAL OF THE REORGANIZATIONS
Based on the considerations described below, the Board of each Fund has determined that the Reorganizations would be in the best interests of the applicable Funds and that the interests of the existing shareholders of the Funds would not be diluted as a result of the Reorganizations. The Board has approved the Reorganizations and recommends that the shareholders of the Acquired Funds vote in favor of their Fund’s Reorganization.
In preparation for the meeting of the Board held on November 14, 2011 (the “Meeting”) at which the Reorganizations were considered, the Adviser provided the Board with information regarding the proposed Reorganizations, including the rationale therefor and alternatives considered to the Reorganizations of the Funds. Prior to approving the Reorganizations, the independent board members reviewed the foregoing information with their independent legal counsel and with management, reviewed with independent legal counsel applicable law and their duties in considering such matters, and met with independent legal counsel in a private session without management present. In approving the Reorganizations, the Board considered a number of principal factors in reaching its determinations, including the following:
| • | the similarities and differences in the Funds’ investment objectives and principal investment strategies; |
| • | the Funds’ relative risks; |
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| • | the Funds’ relative sizes; |
| • | the relative investment performance of the Funds and portfolio manager; |
| • | the relative fees and expense ratios of the Funds, including any caps on the Funds’ expenses agreed to by the Adviser; |
| • | the anticipated tax-free nature of the Reorganizations; |
| • | the expected costs of the Reorganizations and the extent to which the Funds would bear any such costs; |
| • | the terms of the Reorganizations and whether the Reorganizations would dilute the interests of shareholders of the applicable Funds; |
| • | the effect of the Reorganizations on shareholder services and shareholder rights; |
| • | alternatives to the Reorganizations; |
| • | any potential benefits of the Reorganizations to the Adviser and its affiliates as a result of the Reorganizations; and |
| • | differences in expected yields, expense ratios and Reorganization costs based on if the Reorganization of each Acquired Fund, or only the Reorganization of the Tax Free Fund, occurs. |
Investment Similarities and Differences
Based on the information presented, the Board noted that the investment objectives of the Funds were similar. In this regard, the investment objective of the Acquiring Fund and the Municipal Bond Fund 2 is to provide as high a level of current interest income exempt from regular federal, California state and in some cases, California local income taxes as is consistent with preservation of capital. The investment objective of the Tax Free Fund is to provide maximum current income that is exempt from both federal income tax and California state income tax to the extent consistent with prudent investment risk. The Board further noted that the principal investment strategies of the Acquired Funds and Acquiring Fund appear similar, subject to certain differences. Under normal market conditions, the Acquiring Fund and the Municipal Bond Fund 2 invest at least 80% of their respective net assets in municipal bonds that pay interest that is exempt from regular federal and California personal income tax, and the Tax Free Fund invests at least 80% of its net assets (plus the amount of any borrowings for investment purposes) in municipal securities that pay interest that is exempt from federal and California income tax. Five principal distinctions in their investment strategies, however, include (a) the Acquiring Fund and the Municipal Bond Fund 2 may invest in inverse floaters as a principal investment strategy whereas the Tax Free Fund may invest in inverse floaters, but not as a principal investment strategy, (b) the Acquiring Fund and the Municipal Bond Fund 2 have no limit on investments in obligations that may be subject to the federal and state alternative minimum taxes (“AMT bonds”), whereas the Tax Free Fund may not invest more than 20% of its net assets in taxable obligations, including AMT bonds, (c) the Acquiring Fund and the Municipal Bond Fund 2 operate as diversified funds, whereas the Tax Free Fund operates as a non-diversified fund, (d) as a principal investment strategy, the Acquiring Fund may invest up to 20% of its net assets in below investment grade municipal bonds and the Tax Free Fund may invest up to 20% of its total assets in securities that,
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at the time of purchase, are rated lower than investment grade or are unrated and of comparable quality, whereas the Municipal Bond Fund 2 does not have a principal investment strategy with respect to investments in the foregoing types of bonds and securities (such bonds and securities, are collectively “high yield securities”) and (e) the Tax Free Fund may utilize futures contracts and options on futures contracts for certain purposes as a principal investment strategy, whereas the Acquiring Fund and the Municipal Bond Fund 2 do not have similar principal investment strategies. The Board also recognized that, prior to May 31, 2011, the Municipal Bond Fund 2 was required to invest at least 80% of its net assets in insured municipal securities; earlier in the year, however, the Board approved the elimination of the insurance mandate.
The Board noted that because the Funds’ investment strategies are similar, the principal risks of investing in the Funds are also similar, subject to certain differences, including the following. First, because the Acquiring Fund and the Municipal Bond Fund 2 may invest in inverse floaters as part of a principal investment strategy, they are each subject to leveraged securities risk; the Tax Free Fund may also invest in inverse floaters, but it is not a principal investment strategy for such Fund. In addition, because the Acquiring Fund and the Municipal Bond Fund 2 have no limit on investments in AMT bonds, they may generate more income that is subject to the federal and state alternative minimum taxes than the Tax Free Fund. Further, although the Acquiring Fund and the Municipal Bond Fund 2 are diversified funds, the Tax Free Fund is non-diversified and subject to non-diversification risk. Additionally, the Acquiring Fund and the Tax Free Fund are subject to high yield securities risk in light of their principal investment strategies relating to investments in high yield securities noted above. Moreover, the principal risks of the Tax Free Fund include futures contracts risk in light of its principal investment strategy relating to investments in futures contracts and options on futures contracts noted above.
The Board noted that the Acquiring Fund is significantly larger than either of the Acquired Funds and that combining the Funds should provide additional benefits to shareholders as fixed operating expenses of the Acquiring Fund following the Reorganizations will be spread over a larger asset base. The Reorganizations may therefore lower the total expense ratio borne by shareholders of the Acquired Funds as noted in more detail below. The Adviser further believes that the Acquiring Fund may experience trading efficiencies when purchasing bonds in the market due to the size of the Acquiring Fund following the Reorganizations.
Investment Performance and Portfolio Manager
The Board considered the investment performance of the respective Funds over various periods. In reviewing past performance, the Board observed that although the Funds are currently managed by the same portfolio manager, until recently, the Tax Free Fund was managed by other portfolio managers. The current portfolio manager of the Funds has managed or co-managed the Acquiring Fund since January 2003 and the Municipal Bond Fund 2 since May 2005, but has managed the Tax Free Fund since January 2011. The Board noted, among other things, that, with respect to Class A shares, the Acquiring Fund outperformed each of the Acquired Funds for the one-year period ending August 31, 2011 and, in addition, outperformed the Municipal Bond Fund 2 over the three-year, five-year and ten-year periods ending August 31, 2011. In reviewing the performance of the Municipal Bond Fund 2, the Board noted that, as indicated above, until recently, such Fund was operating under
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an insurance mandate. The Board also considered the differences in yields among the Acquiring Fund and the Acquired Funds noting that the SEC, embedded and distribution yields of the Acquiring Fund were higher than those of each Acquired Fund as of August 31, 2011. In addition, the Board noted that the estimated SEC yield of the Acquiring Fund following the Reorganizations was above the SEC yield average for its Lipper category although lower than its SEC yield as of August 31, 2011. The Board also considered the factors that caused the differences in the yields, including differences in credit quality, sector allocation and duration positioning.
The Board considered the fees and expense ratios of each class of the Funds (including estimated expenses of the Acquiring Fund following the Reorganizations) and the impact of expense caps, if any. The Board noted that the management fees of the Acquiring Fund are lower (when compared to the Tax Free Fund) or slightly lower (when compared to the Municipal Bond Fund 2) than for each Acquired Fund, and the management fees of the Acquiring Fund are expected to remain the same following the Reorganizations. In addition, the Board considered the estimated expenses of each class of the Acquiring Fund following the Reorganizations. In this regard, the Board noted that, taking into account the proposed distribution of Class A shares (rather than Class C shares) of the Acquiring Fund to holders of Class C1 shares of the Tax Free Fund, the Reorganizations were expected to result in a decrease in total operating expenses for all share classes of both Acquired Funds. With respect to Class C1 shares of the Tax Free Fund, the Board noted that under the applicable Reorganization, Class C1 shareholders, which are subject to distribution and service fees of 0.65% would be receiving Class A shares of the Acquiring Fund, which are subject to distribution and service fees of 0.20%. The Class C1 shareholders of such Acquired Fund therefore would experience a significant decrease in expenses as Class A shareholders of the Acquiring Fund.
The Board also recognized that the management fees for the Funds are comprised of fund-level and complex-level fees. Pursuant to the complex-wide fee arrangement, the fees of funds in the Nuveen complex are reduced as assets in the fund complex reach certain levels. The complex-wide fee arrangement seeks to provide the benefits of economies of scale to fund shareholders when total fund complex assets increase, even if assets of a particular fund are unchanged or decrease. The complex-level fees are lower for the Acquiring Fund and the Municipal Bond Fund 2 than for the Tax Free Fund because when the Tax Free Fund became part of the Nuveen complex, a portion of such Fund’s assets were deemed ineligible for purposes of calculating the effective complex-wide fee rate, whereas none of the assets of the Acquiring Fund or the Municipal Bond Fund 2 are ineligible. After its Reorganization, a portion of the assets of the Tax Free Fund will retain their “ineligible asset” status for purposes of calculating the complex-wide level fee. Accordingly, the combined fund will participate in complex-wide fee savings to a slightly lesser degree than the Acquiring Fund since a percentage of the combined fund’s assets will be excluded from the complex-wide fee calculation.
Tax Consequences of the Reorganizations
The Board noted that each Reorganization will be structured with the intention that it qualify as a tax-free reorganization for federal income tax purposes. The Board further recognized that with fund reorganizations, applicable tax laws could impose limits on the amount of capital loss carryforwards that an acquiring fund may use in any one year. The Board further noted that there may be some gains or losses resulting from portfolio realignment related to the Reorganizations.
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The Board considered the projected cost savings of each Fund following the Reorganizations. The Board considered that the costs of the Reorganizations would be allocated among the Funds ratably up to the respective Fund’s projected cost savings during the first year following the Reorganizations (subject to expense cap limitations). Based on current expense limitations, it is anticipated that Nuveen will reimburse all expenses charged to the Tax Free Fund, but none of the expenses charged to the Acquiring Fund or the Municipal Bond Fund 2. If a Reorganization is not ultimately completed, Nuveen will bear all costs of such proposed Reorganization.
The terms of each Reorganization are intended to avoid dilution of the interests of the shareholders of the respective Funds. In this regard, shareholders of Class A, Class B, Class C and Class I shares of the Municipal Bond Fund 2 will receive the same class of shares in the Acquiring Fund equal in value to the shares of the respective class of such Acquired Fund held. Shareholders of Class A shares and, as noted above, Class C1 shares, of the Tax Free Fund will receive Class A shares of the Acquiring Fund and shareholders of Class I shares of the Tax Free Fund will receive Class I shares of the Acquiring Fund, in each case, equal in value to the shares of such Acquired Fund held.
Effect on Shareholder Services and Shareholder Rights
The Board noted that it was anticipated that the services provided to shareholders generally would not change, except to the extent services differed because the transfer agent of the Tax Free Fund is different from that of the other Funds. In this regard, the eligible exchange options for shareholders of the Tax Free Fund will change as a result of the change in such Fund’s transfer agent. Shareholders of Class A and Class I shares of the Tax Free Fund and shareholders of the Municipal Bond Fund 2 will receive the same class of shares as they held in the Acquiring Fund, which are subject to the same distribution and service fees. Shareholders of Class C1 shares of the Tax Free Fund will receive Class A shares of the Acquiring Fund, which are subject to lower distribution and service fees.
The Board also considered that the Tax Free Fund is a series of a Maryland corporation, whereas the Acquiring Fund and the Municipal Bond Fund 2 are each a series of a Massachusetts business trust. As a result, the rights of shareholders of the Tax Free Fund differ from those of the other Funds. In this regard, while the rights of shareholders of the Municipal Bond Fund 2 and the Acquiring Fund are the same, the Tax Free Fund shareholders’ rights will be slightly diminished after the Reorganization. Notwithstanding the foregoing, the principal attributes of a share in each Fund are comparable as a share in each Fund is entitled to one vote per share held and fractional votes for fractional shares held.
Alternatives to the Reorganizations
The Board could have decided to continue the Funds in their present form managed by the same portfolio manager or to liquidate one or both of the overlapping Funds, but did not believe either alternative would be in the best interests of shareholders. The Board recognized that continuing to offer three very similar overlapping Funds may cause confusion among the distribution network and sales team and dilute their selling efforts. As a result, one or more of the Funds may be unable to continue to grow assets, potentially increasing investor overall expenses if assets decrease. With the proposed Reorganizations, Nuveen’s distribution and marketing efforts can focus on one fund. The shareholders
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of all Funds can therefore benefit from the potential of greater sales and economies of scale that could be achieved in one combined fund rather than diluted among three very similar funds. The Board also could have decided to liquidate a Fund; however, the Board did not believe this option was in the best interests of shareholders of the liquidating funds as liquidation is a taxable event which could result in the realization of taxable capital gains at both the fund, and depending on the shareholders’ cost basis, the shareholder level, and the loss of any potential benefit that the fund’s capital loss carryovers (if any) might have provided. Further, shareholders of the non-liquidating or acquiring fund would be prevented from experiencing the benefits provided by an increase in assets.
Potential Benefits to Nuveen Fund Advisors and Affiliates
The Board recognized that the Reorganizations may result in some benefits and economies for the Adviser and its affiliates. These may include, for example, a reduction in the level of operational expenses incurred for administrative, compliance and portfolio management services as a result of the elimination of each Acquired Fund as a separate Fund in the Nuveen complex.
The Board of each Fund, including the independent board members, approved the respective Reorganizations, concluding that the Reorganizations are in the best interests of the respective Funds and that the interests of existing shareholders of the Funds will not be diluted as a result of the Reorganizations.
The following tables set forth the percentage of ownership of each person who, as of , 2012, the record date with respect to the Special Meeting, owns of record, or is known by the Funds to own of record or beneficially, 5% or more of any class of shares of any Fund. The tables also set forth the estimated percentage of shares of the combined fund that would have been owned by such parties if the Reorganizations had occurred on , 2012. These amounts may differ on the Closing Date. Shareholders who have the power to vote a larger percentage of shares (at least 25% of the voting shares) of a Fund can control the Fund and determine the outcome of a shareholder meeting.
Tax Free Fund | ||||||
Class | Name and Address of Owner | Percentage of Ownership | Estimated Pro Forma Percentage of Ownership of the Combined Fund After the Reorganization | |||
Class A Shares | % | % | ||||
Class C1 Shares | % | % | ||||
Class I Shares | % | % | ||||
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Municipal Bond Fund 2 | ||||||
Class | Name and Address of Owner | Percentage of Ownership | Estimated Pro Forma Percentage of Ownership of the Combined Fund After the Reorganization | |||
Class A Shares | % | % | ||||
Class B Shares | % | % | ||||
Class C Shares | % | % | ||||
Class I Shares | % | % | ||||
Acquiring Fund | ||||||
Class | Name and Address of Owner | Percentage of Ownership | Estimated Pro Forma Percentage of Ownership of the Combined Fund After the Reorganization | |||
Class A Shares | % | % | ||||
Class B Shares | % | % | ||||
Class C Shares | % | % | ||||
Class I Shares | % | % | ||||
[At the close of business on , 2012, there were Class A shares, Class C1 shares and Class I shares of the Tax Free Fund outstanding. As of , 20 , the board members and officers of the Tax Free Fund as a group owned less than 1% of the total outstanding shares of the Tax Free Fund and as a group owned less than 1% of each class of shares of the Tax Free Fund.]
[At the close of business on , 2012, there were Class A shares, B shares, Class C shares and Class I shares of the Municipal Bond Fund 2 outstanding. As of , 20 , the board members and officers of the Acquiring Fund as a group owned less than 1% of the total outstanding shares of the Acquiring Fund and as a group owned less than 1% of each class of shares of the Municipal Bond Fund 2.]
[At the close of business on , 2012, there were Class A shares, Class B shares, Class C shares and Class I shares of the Acquiring Fund outstanding. As of , 20 , the board members and officers of the Acquiring Fund as a group owned less than 1% of the total outstanding shares of the Acquiring Fund and as a group owned less than 1% of each class of shares of the Acquiring Fund.]
The Funds generally do not hold annual shareholders’ meetings, but will hold a special meeting as required or deemed desirable. Because the Funds do not hold regular meetings of shareholders, the
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anticipated date of the next shareholder meeting cannot be provided. To be considered for inclusion in the proxy statement for any meeting of shareholders, a shareholder proposal must be submitted a reasonable time before the proxy statement for the meeting is mailed. Whether a proposal is included in the proxy statement will be determined in accordance with applicable federal and state laws. The timely submission of a proposal does not guarantee its inclusion. Shareholders wishing to submit proposals for inclusion in a proxy statement for a shareholder meeting should send their written proposal to the respective Fund at 333 West Wacker Drive, Chicago, Illinois 60606.
Shareholders who want to communicate with the Board or any individual board member should write to their Fund, to the attention of Lorna Ferguson, Manager of Fund Board Relations, Nuveen Investments, 333 West Wacker Drive, Chicago, Illinois 60606. The letter should indicate that you are a Fund shareholder, and identify the Fund (or Funds). If the communication is intended for a specific board member and so indicates, it will be sent only to that board member. If a communication does not indicate a specific board member, it will be sent to the chair of the nominating and governance committee and to the Board’s independent legal counsel for further distribution as deemed appropriate by such persons.
Joint Proxy Statement/Prospectus Delivery
Please note that only one Joint Proxy Statement/Prospectus may be delivered to two or more shareholders of an Acquired Fund who share an address, unless the Fund has received instructions to the contrary. To request a separate copy of the Joint Proxy Statement/Prospectus, or for instructions as to how to request a separate copy of such document or as to how to request a single copy if multiple copies of such document are received, shareholders should contact the applicable Acquired Fund at 333 West Wacker Drive, Chicago, Illinois 60606 or by calling (800) 257-8787.
VOTING INFORMATION AND REQUIREMENTS
Holders of shares of each Acquired Fund are entitled to one vote per share on matters as to which they are entitled to vote, with fractional shares voting proportionally.
With respect to the Reorganization of the Tax Free Fund, approval of the Reorganization will require the affirmative vote of the holders of a majority of the total number of shares outstanding and entitled to vote of the Acquired Fund. A vote in favor of the Reorganization of the Tax Free Fund will also be considered a vote in favor of an amendment to the Corporation’s Articles of Incorporation effecting the Reorganization. With respect to the Reorganization of the Municipal Bond Fund 2, approval of the Reorganization requires the affirmative vote of the lesser of (i) 67% or more of the shares of the Fund entitled to vote thereon present at the meeting if the holders of more than 50% of such outstanding shares are present in person or represented by proxy; or (ii) more than 50% of such outstanding shares of the Fund entitled to vote thereon.
Each valid proxy given by a shareholder of an Acquired Fund will be voted by the persons named in the proxy in accordance with the instructions marked thereon and as the persons named in the proxy may determine on such other business as may come before the Special Meeting on which shareholders are entitled to vote. If no designation is made, the proxy will be voted by the persons named in the proxy, as recommended by the Board, “FOR” approval of the applicable Reorganization. Abstentions
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and broker non-votes (i.e., shares held by brokers or nominees, typically in “street name,” as to which (i) instructions have not been received from beneficial owners or persons entitled to vote and (ii) the broker or nominee does not have discretionary voting power on a particular matter) count as present for purposes of determining quorum but do not count as votes “FOR” the proposal and have the same effect as a vote “AGAINST” the proposal. With respect to the Reorganization of the Tax Free Fund, the presence in person or by proxy of the holders of ten percent (10%) of the shares issued and outstanding and entitled to vote at the Special Meeting shall constitute a quorum for the transaction of any business. With respect to the Reorganization of the Municipal Bond Fund 2, the presence in person or by proxy of the holders of at least a majority of the voting power of the shares of beneficial interest of the Fund entitled to vote on the proposal at the Special Meeting shall constitute a quorum for the transaction of any business. Abstentions and broker non-votes will be deemed present for quorum purposes.
Shareholders who execute proxies may revoke them at any time before they are voted by filing with an Acquired Fund a written notice of revocation, by delivering a duly executed proxy bearing a later date, or by attending the Special Meeting and voting in person. The giving of a proxy will not affect your right to vote in person if you attend the Special Meeting and wish to do so.
It is not anticipated that any action will be asked of the shareholders of an Acquired Fund other than as indicated above, but if other matters are properly brought before the Special Meeting, it is intended that the persons named in the proxy will vote in accordance with their judgment.
If a quorum is not obtained or if a quorum is present but sufficient votes in favor of a proposal are not received by the scheduled time of the Special Meeting, the holders of a majority of shares present in person or by proxy and entitled to vote shall have the power to adjourn the Special Meeting to permit further solicitation of proxies. The Special Meeting may be adjourned without notice other than announcement at the Special Meeting for not more than 120 days after the Record Date for the Special Meeting. At such adjourned meeting at which the requisite shares entitled to vote thereat shall be represented, any business may be transacted which could have been transacted at the meeting as originally notified. Prior to being convened, the Special Meeting may be postponed for not more than 120 days after the Record Date for the Special Meeting.
Proxies of shareholders of each Acquired Fund are solicited by the Board. Additional solicitation may be made by mail, telephone, telegraph or personal interview by representatives of the Adviser or Nuveen, or by dealers or their representatives.
, 2012
Please sign and return your proxy promptly.
Your vote is important and your participation in the affairs of your Fund does make a difference.
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AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the “Agreement”) is made as of this day of , 2012 by Nuveen Multistate Trust II, a Massachusetts business trust (the “Trust”), on behalf of and between Nuveen California Municipal Bond Fund, a series of the Trust (the “Acquiring Fund”), and Nuveen California Municipal Bond Fund 2, a series of the Trust (the “Acquired Fund” and, together with the Acquiring Fund, the “Funds”), and Nuveen Fund Advisors, Inc., the investment adviser to the Funds (the “Adviser”) (for purposes of Section 9.1 of the Agreement only).
This Agreement is intended to be, and is adopted as, a plan of reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”), and the Treasury Regulations promulgated thereunder. The reorganization will consist of: (i) the transfer of all the assets of the Acquired Fund to the Acquiring Fund in exchange solely for Class A, Class B, Class C and Class I voting shares of beneficial interest, par value $0.01 per share, of the Acquiring Fund (“Acquiring Fund Shares”) and the assumption by the Acquiring Fund of all the liabilities of the Acquired Fund; and (ii) the pro rata distribution of all the Acquiring Fund Shares to the shareholders of each corresponding class of the Acquired Fund, in complete liquidation and termination of the Acquired Fund as provided herein, all upon the terms and conditions set forth in this Agreement (the “Reorganization”).
WHEREAS, each Fund is a separate series of the Trust, and the Trust is an open-end, management investment company registered under the Investment Company Act of 1940, as amended (the “1940 Act”);
WHEREAS, the Acquired Fund owns securities that generally are assets of the character in which the Acquiring Fund is permitted to invest;
WHEREAS, the Acquiring Fund is authorized to issue the Acquiring Fund Shares; and
WHEREAS, the Board of Trustees of the Trust (the “Board”) has made the determinations required by Rule 17a-8 under the 1940 Act with respect to the Acquired Fund and Acquiring Fund, respectively.
NOW, THEREFORE, in consideration of the premises and of the covenants and agreements hereinafter set forth, the parties hereto covenant and agree as follows:
ARTICLE I
TRANSFER OF ASSETS OF THE ACQUIRED FUND IN EXCHANGE FOR ACQUIRING FUND SHARES AND THE ASSUMPTION OF THE ACQUIRED FUND LIABILITIES AND TERMINATION AND LIQUIDATION OF THE ACQUIRED FUND
1.1 THE EXCHANGE. Subject to the terms and conditions contained herein and on the basis of the representations and warranties contained herein, the Acquired Fund agrees to transfer all of its assets, as set forth in Section 1.2, to the Acquiring Fund. In consideration therefor, the Acquiring Fund agrees: (i) to deliver to the Acquired Fund the number of full and fractional Class A, Class B,
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Class C and Class I Acquiring Fund Shares, computed in the manner set forth in Section 2.3 herein; and (ii) to assume all the liabilities of the Acquired Fund, as set forth in Section 1.3. All Acquiring Fund Shares delivered to the Acquired Fund shall be delivered at net asset value without a sales load, commission or other similar fee being imposed. In the event that Class A shares of the Acquiring Fund are transferred in the Reorganization to former holders of Class A shares of the Acquired Fund with respect to which the front-end sales charge was waived due to a purchase of $1 million or more, the Acquiring Fund agrees that, in determining whether a deferred sales charge is payable upon the sale of such Class A shares of the Acquiring Fund, it shall give credit for the period during which the holder thereof held such Acquired Fund shares. Such transactions shall take place at the closing provided for in Section 3.1 (the “Closing”).
1.2 ASSETS TO BE TRANSFERRED. The Acquired Fund shall transfer all of its assets to the Acquiring Fund, including, without limitation, all cash, securities, commodities, interests in futures, dividends or interest receivables owned by the Acquired Fund and any deferred or prepaid expenses shown as an asset on the books of the Acquired Fund on the Closing Date as such term is defined in Section 3.1.
The Acquired Fund will, within a reasonable period of time before the Closing Date, furnish the Acquiring Fund with a list of the Acquired Fund’s portfolio securities and other investments. The Acquiring Fund will, within a reasonable period of time before the Closing Date, furnish the Acquired Fund with a list of the securities, if any, on the Acquired Fund’s list referred to above that do not conform to the Acquiring Fund’s investment objective, policies, and restrictions. The Acquired Fund, if requested by the Acquiring Fund, will dispose of securities on the Acquiring Fund’s list before the Closing Date. In addition, if it is determined that the portfolios of the Acquired Fund and the Acquiring Fund, when aggregated, would contain investments exceeding certain percentage limitations imposed upon the Acquiring Fund with respect to such investments, the Acquired Fund, if requested by the Acquiring Fund, will dispose of a sufficient amount of such investments as may be necessary to avoid violating such limitations as of the Closing Date. Notwithstanding the foregoing, nothing herein will require the Acquired Fund to dispose of any investments or securities if, in the reasonable judgment of the Board or the Adviser, such disposition would adversely affect the status of the Reorganization as a “reorganization” as such term is used in the Code or would otherwise not be in the best interests of the Acquired Fund.
1.3 LIABILITIES TO BE ASSUMED. The Acquired Fund will endeavor to discharge all of its known liabilities and obligations to the extent possible before the Closing Date. Notwithstanding the foregoing, any liabilities not so discharged shall be assumed by the Acquiring Fund, which assumed liabilities shall include all of the Acquired Fund’s liabilities, debts, obligations, and duties of whatever kind or nature, whether absolute, accrued, contingent, or otherwise, whether or not arising in the ordinary course of business, whether or not determinable at the Closing Date, and whether or not specifically referred to in this Agreement.
1.4 LIQUIDATING DISTRIBUTION. As of the Effective Time, the Acquired Fund will make a liquidating distribution of the Acquiring Fund Shares received pursuant to Section 1.1 to its shareholders of record with respect to each corresponding class of shares, determined as of the close of business on the Closing Date, as such term is defined in Section 3.1 (the “Acquired Fund Shareholders”), on a pro rata basis within that class. Such distribution will be accomplished with respect to each class of shares of the Acquired Fund by the transfer of the Acquiring Fund Shares of the corresponding class then credited to the account of the Acquired Fund on the books of the
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Acquiring Fund to open accounts on the share records of the Acquiring Fund in the names of Acquired Fund Shareholders of such class. The Acquiring Fund shall not issue certificates representing Acquiring Fund Shares in connection with such transfer. As of the Effective Time, all issued and outstanding shares of the Acquired Fund shall be cancelled on the books of the Acquired Fund and retired.
1.5 OWNERSHIP OF SHARES. Ownership of Acquiring Fund Shares will be shown on the books of the Acquiring Fund’s transfer agent. Acquiring Fund Shares will be issued simultaneously to the Acquired Fund, in an amount computed in the manner set forth in Section 2.3.
1.6 TRANSFER TAXES. Any transfer taxes payable upon the issuance of Acquiring Fund Shares in a name other than the registered holder of the Acquired Fund shares on the books of the Acquired Fund as of that time shall, as a condition of such issuance and transfer, be paid by the person to whom such Acquiring Fund Shares are to be issued and transferred.
1.7 LIQUIDATION AND TERMINATION. The Acquired Fund shall completely liquidate and be dissolved, terminated and have its affairs wound up in accordance with Massachusetts state law, promptly following the Closing Date and the making of all distributions pursuant to Section 1.4, but in no event later than 12 months following the Closing Date.
1.8 BOARD REPORTING. Any reporting responsibility of the Acquired Fund including, without limitation, the responsibility for filing of regulatory reports, tax returns or other documents with the Securities and Exchange Commission (the “Commission”), any state securities commission and any federal, state or local tax authorities or any other relevant regulatory authority, is and shall remain the responsibility of the Acquired Fund.
1.9 BOOKS AND RECORDS. All books and records of the Acquired Fund, including all books and records required to be maintained under the 1940 Act, and the rules and regulations thereunder, shall be available to the Acquiring Fund from and after the Closing Date and shall be turned over to the Acquiring Fund as soon as practicable following the Closing Date.
ARTICLE II
VALUATION
2.1 VALUATION OF ASSETS. The value of the Acquired Fund’s assets and liabilities shall be computed as of the close of regular trading on the New York Stock Exchange (“NYSE”) on the Closing Date (such time and date being hereinafter called the “Valuation Time”), using the valuation procedures set forth in the Acquiring Fund’s Prospectus and Statement of Additional Information (in effect as of the Closing Date) or such other valuation procedures as shall be mutually agreed upon by the parties.
2.2 VALUATION OF SHARES. The net asset value per share per class of Acquiring Fund Shares shall be the net asset value per share for such class computed as of the Valuation Time, using the valuation procedures set forth in Section 2.1.
2.3 SHARES TO BE ISSUED. The number of Acquiring Fund Shares to be issued (including fractional shares, if any) in consideration for the net assets as described in Article I, shall be
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determined with respect to each class by dividing the value of the assets net of liabilities with respect to each class of shares of the Acquired Fund determined in accordance with Section 2.1 by the net asset value of an Acquiring Fund share of the corresponding class determined in accordance with Section 2.2.
2.4 EFFECT OF SUSPENSION IN TRADING. In the event that on the Closing Date, either: (a) the NYSE or another primary exchange on which the portfolio securities of the Acquiring Fund or the Acquired Fund are purchased or sold shall be closed to trading or trading on such exchange shall be restricted; or (b) trading or the reporting of trading on the NYSE or elsewhere shall be disrupted so that accurate appraisal of the value of the net assets of the Acquiring Fund or the Acquired Fund is impracticable, the Closing Date shall be postponed until the first business day when trading is fully resumed and reporting is restored.
ARTICLE III
CLOSING AND CLOSING DATE
3.1 CLOSING DATE. The Closing shall occur on , 2012 or such other date as the parties may agree (the “Closing Date”). Unless otherwise provided, all acts taking place at the Closing shall be deemed to take place as of immediately after the Valuation Time on the Closing Date (the “Effective Time”). The Closing shall be held as of the close of business at the offices of Vedder Price P.C. in Chicago, Illinois or at such other time and/or place as the parties may agree.
3.2 CUSTODIAN’S CERTIFICATE. The Acquired Fund shall cause State Street Bank & Trust Company, as custodian for the Acquired Fund, to deliver to the Acquiring Fund at the Closing a certificate of an authorized officer stating that: (a) the Acquired Fund’s portfolio securities, cash, and any other assets shall have been delivered in proper form to the Acquiring Fund on the Closing Date; and (b) all necessary taxes, including all applicable federal and state stock transfer stamps, if any, shall have been paid, or provision for payment shall have been made, in conjunction with the delivery of portfolio securities by the Acquired Fund.
3.3 TRANSFER AGENT’S CERTIFICATE. The Acquired Fund shall cause Boston Financial Data Services, Inc., (“BFDS”) as transfer agent for the Acquired Fund, to deliver to the Acquiring Fund at the Closing a certificate of an authorized officer stating that its records contain the names and addresses of all the Class A, Class B, Class C and Class I Acquired Fund Shareholders, and the number and percentage ownership of outstanding shares per class owned by each such shareholder immediately prior to the Closing. The Acquiring Fund shall issue and deliver or cause BFDS, its transfer agent, to issue and deliver to the Acquired Fund a confirmation evidencing the Class A, Class B, Class C and Class I Acquiring Fund Shares to be credited on the Closing Date to the Secretary of the Trust or provide evidence satisfactory to the Acquired Fund that such Acquiring Fund Shares have been credited to the Acquired Fund’s account on the books of the Acquiring Fund.
3.4 DELIVERY OF ADDITIONAL ITEMS. At the Closing, each party shall deliver to the other such bills of sale, checks, assignments, share certificates, receipts and other documents, if any, as such other party or its counsel may reasonably request to effect the transactions contemplated by this Agreement.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 REPRESENTATIONS OF THE ACQUIRED FUND. The Trust, on behalf of the Acquired Fund, represents and warrants as follows:
(a) The Trust is a business trust duly organized, validly existing and in good standing under the laws of the Commonwealth of Massachusetts.
(b) The Acquired Fund is a separate series of the Trust duly authorized in accordance with the applicable provisions of the Trust’s Declaration of Trust.
(c) The Trust is registered as an open-end management investment company under the 1940 Act, and such registration is in full force and effect.
(d) The Acquired Fund is not, and the execution, delivery, and performance of this Agreement (subject to shareholder approval) will not result, in the violation of any provision of the Trust’s Declaration of Trust or By-Laws or of any material agreement, indenture, instrument, contract, lease, or other undertaking to which the Acquired Fund is a party or by which it is bound.
(e) Except as otherwise disclosed in writing to and accepted by the Acquiring Fund, the Acquired Fund has no material contracts or other commitments that will be terminated with liability to it before the Closing Date.
(f) No litigation, administrative proceeding, or investigation of or before any court or governmental body is presently pending or to its knowledge threatened against the Acquired Fund or any of its properties or assets, which, if adversely determined, would materially and adversely affect its financial condition, the conduct of its business, or the ability of the Acquired Fund to carry out the transactions contemplated by this Agreement. The Acquired Fund knows of no facts that might form the basis for the institution of such proceedings and is not a party to or subject to the provisions of any order, decree, or judgment of any court or governmental body that materially and adversely affects its business or its ability to consummate the transactions contemplated herein.
(g) The financial statements of the Acquired Fund as of February 28, 2011, and for the year then ended have been prepared in accordance with generally accepted accounting principles and have been audited by independent auditors, and such statements (copies of which have been furnished to the Acquiring Fund) fairly reflect the financial condition of the Acquired Fund as of February 28, 2011, and there are no known contingent liabilities of the Acquired Fund as of such date that are not disclosed in such statements.
(h) The financial statements of the Acquired Fund as of August 31, 2011 and for the period then ended have been prepared in accordance with generally accepted accounting principles, and such statements (copies of which have been furnished to the Acquiring Fund) fairly reflect the financial condition of the Acquired Fund as of August 31, 2011, and there are no known contingent liabilities of the Acquired Fund as of such date that are not disclosed in such statements.
(i) Since the date of the financial statements referred to in subsection (h) above, there have been no material adverse changes in the Acquired Fund’s financial condition, assets, liabilities
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or business (other than changes occurring in the ordinary course of business) and there are no known contingent liabilities of the Acquired Fund arising after such date. For the purposes of this subsection (i), a decline in the net asset value of the Acquired Fund shall not constitute a material adverse change.
(j) All federal, state, local and other tax returns and reports of the Acquired Fund required by law to be filed by it (taking into account permitted extensions for filing) have been timely filed and are complete and correct in all material respects. All federal, state, local and other taxes of the Acquired Fund required to be paid (whether or not shown on any such return or report) have been paid, or provision shall have been made for the payment thereof and any such unpaid taxes are properly reflected on the financial statements referred to in subsection (h) above. To the best of the Acquired Fund’s knowledge, no tax authority is currently auditing or preparing to audit the Acquired Fund, and no assessment for taxes, interest, additions to tax or penalties has been asserted against the Acquired Fund.
(k) All issued and outstanding shares of the Acquired Fund are, and as of the Closing Date will be, duly and validly issued and outstanding, fully paid and non-assessable by the Acquired Fund (recognizing that under Massachusetts law, Acquired Fund shareholders, under certain circumstances, could be held personally liable for the obligations of the Acquired Fund). All the issued and outstanding shares of the Acquired Fund will, at the time of the Closing, be held by the persons and in the amounts set forth in the records of the Acquired Fund’s transfer agent as provided in Section 3.3. The Acquired Fund has no outstanding options, warrants or other rights to subscribe for or purchase any shares of the Acquired Fund, and has no outstanding securities convertible into shares of the Acquired Fund.
(l) At the Closing, the Acquired Fund will have good and marketable title to the Acquired Fund’s assets to be transferred to the Acquiring Fund pursuant to Section 1.2, and full right, power, and authority to sell, assign, transfer, and deliver such assets, and the Acquiring Fund will acquire good and marketable title thereto, subject to no restrictions on the full transfer thereof, including such restrictions as might arise under the Securities Act of 1933, as amended (the “1933 Act”), except those restrictions as to which the Acquiring Fund has received notice and necessary documentation at or prior to the Closing.
(m) The execution, delivery and performance of this Agreement have been duly authorized by all necessary action on the part of the Acquired Fund including the determinations of the Board required by Rule 17a-8(a) of the 1940 Act. Subject to approval by the Acquired Fund shareholders, this Agreement constitutes a valid and binding obligation of the Acquired Fund, enforceable in accordance with its terms, subject as to enforcement, to bankruptcy, insolvency, reorganization, moratorium, and other laws relating to or affecting creditors’ rights and to general equity principles.
(n) The information to be furnished by the Acquired Fund for use in no-action letters, applications for orders, registration statements, proxy materials and other documents that may be necessary in connection with the transactions contemplated herein shall be accurate and complete in all material respects and shall comply in all material respects with federal securities and other laws and regulations.
(o) From the effective date of the Registration Statement (as defined in Section 5.7), through the time of the meeting of the Acquired Fund shareholders and on the Closing Date, any
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written information furnished by the Trust with respect to the Acquired Fund for use in the Proxy Materials (as defined in Section 5.7), or any other materials provided in connection with the Reorganization, does not and will not contain any untrue statement of a material fact or omit to state a material fact required to be stated or necessary to make the statements, in light of the circumstances under which such statements were made, not misleading.
(p) For each taxable year of its operations (including the taxable year ending on the Closing Date), the Acquired Fund has been treated as a separate corporation for federal income tax purposes pursuant to Section 851(g) of the Code, has met the requirements of Subchapter M of the Code for qualification as a regulated investment company and has elected to be treated as such, has been eligible to compute and has computed its federal income tax under Section 852 of the Code, and will have distributed on or prior to the Closing Date all its investment company taxable income (determined without regard to the deduction for dividends paid), the excess of its interest income excludable from gross income under Section 103(a) of the Code over its deductions disallowed under Sections 265 and 171(a)(2) of the Code, and its net capital gain (as such terms are defined in the Code) that has accrued or will accrue on or prior to the Closing Date.
4.2 REPRESENTATIONS OF THE ACQUIRING FUND. The Trust, on behalf of the Acquiring Fund, represents and warrants as follows:
(a) The Trust is a business trust duly organized, validly existing and in good standing under the laws of the Commonwealth of Massachusetts.
(b) The Acquiring Fund is a separate series of the Trust duly authorized in accordance with the applicable provisions of the Trust’s Declaration of Trust.
(c) The Trust is registered as an open-end management investment company under the 1940 Act, and such registration is in full force and effect.
(d) The Acquiring Fund is not, and the execution, delivery and performance of this Agreement will not result, in a violation of the Trust’s Declaration of Trust or By-Laws or of any material agreement, indenture, instrument, contract, lease, or other undertaking to which the Acquiring Fund is a party or by which it is bound.
(e) No litigation, administrative proceeding or investigation of or before any court or governmental body is presently pending or to its knowledge threatened against the Acquiring Fund or any of its properties or assets, which, if adversely determined, would materially and adversely affect its financial condition, the conduct of its business or the ability of the Acquiring Fund to carry out the transactions contemplated by this Agreement. The Acquiring Fund knows of no facts that might form the basis for the institution of such proceedings and it is not a party to or subject to the provisions of any order, decree, or judgment of any court or governmental body that materially and adversely affects its business or its ability to consummate the transaction contemplated herein.
(f) The financial statements of the Acquiring Fund as of February 28, 2011 and for the fiscal year then ended have been prepared in accordance with generally accepted accounting principles and have been audited by independent auditors, and such statements (copies of which have been furnished to the Acquired Fund) fairly reflect the financial condition of the Acquiring Fund as of February 28, 2011, and there are no known contingent liabilities of the Acquiring Fund as of such date that are not disclosed in such statements.
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(g) The financial statements of the Acquiring Fund as of August 31, 2011 and for the period then ended have been prepared in accordance with generally accepted accounting principles, and such statements (copies of which have been furnished to the Acquired Fund) fairly reflect the financial condition of the Acquiring Fund as of August 31, 2011, and there are no known contingent liabilities of the Acquiring Fund as of such date that are not disclosed in such statements.
(h) Since the date of the financial statements referred to in subsection (g) above, there have been no material adverse changes in the Acquiring Fund’s financial condition, assets, liabilities or business (other than changes occurring in the ordinary course of business) and there are no known contingent liabilities of the Acquiring Fund arising after such date. For the purposes of this subsection (h), a decline in the net asset value of the Acquiring Fund shall not constitute a material adverse change.
(i) All federal, state, local and other tax returns and reports of the Acquiring Fund required by law to be filed by it (taking into account permitted extensions for filing) have been timely filed and are complete and correct in all material respects. All federal, state, local and other taxes of the Acquiring Fund required to be paid (whether or not shown on any such return or report) have been paid or provision shall have been made for their payment and any such unpaid taxes are properly reflected on the financial statements referred to in subsection (g) above. To the best of the Acquiring Fund’s knowledge, no tax authority is currently auditing or preparing to audit the Acquiring Fund, and no assessment for taxes, interest, additions to tax or penalties has been asserted against the Acquiring Fund.
(j) All issued and outstanding shares of the Acquiring Fund are, and, as of the Closing Date will be, duly and validly issued and outstanding, fully paid and non-assessable by the Acquiring Fund (recognizing that under Massachusetts law, Acquiring Fund shareholders, under certain circumstances, could be held personally liable for the obligations of the Acquiring Fund). The Acquiring Fund has no outstanding options, warrants, or other rights to subscribe for or purchase shares of the Acquiring Fund, and there are no outstanding securities convertible into shares of the Acquiring Fund.
(k) The execution, delivery and performance of this Agreement have been duly authorized by all necessary action on the part of the Acquiring Fund, including the determination of the Board required pursuant to Rule 17a-8(a) of the 1940 Act. This Agreement constitutes a valid and binding obligation of the Acquiring Fund, enforceable in accordance with its terms, subject as to enforcement, to bankruptcy, insolvency, reorganization, moratorium, and other laws relating to or affecting creditors’ rights and to general equity principles.
(l) The Acquiring Fund Shares to be issued and delivered to the Acquired Fund for the account of the Acquired Fund Shareholders pursuant to the terms of this Agreement will, at the Closing Date, have been duly authorized. When so issued and delivered, such shares will be duly and validly issued shares of the Acquiring Fund, and will be fully paid and non-assessable.
(m) The information to be furnished by the Acquiring Fund for use in no-action letters, applications for orders, registration statements, proxy materials, and other documents that may be necessary in connection with the transactions contemplated herein shall be accurate and complete in all material respects and shall comply in all material respects with federal securities and other laws and regulations.
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(n) From the effective date of the Registration Statement (as defined in Section 5.7), through the time of the meeting of the Acquired Fund shareholders and on the Closing Date, any written information furnished by the Trust with respect to the Acquiring Fund for use in the Proxy Materials (as defined in Section 5.7), or any other materials provided in connection with the Reorganization, does not and will not contain any untrue statement of a material fact or omit to state a material fact required to be stated or necessary to make the statements, in light of the circumstances under which such statements were made, not misleading.
(o) For each taxable year of its operation, the Acquiring Fund has been treated as a separate corporation for federal income tax purposes pursuant to Section 851(g) of the Code, has met the requirements of Subchapter M of the Code for qualification as a regulated investment company and has elected to be treated as such, has been eligible to compute and has computed its federal income tax under Section 852 of the Code. In addition, the Acquiring Fund will satisfy each of the foregoing with respect to its taxable year that includes the Closing Date.
(p) The Acquiring Fund agrees to use all reasonable efforts to obtain the approvals and authorizations required by the 1933 Act, the 1940 Act, and any state securities laws as it may deem appropriate in order to continue its operations after the Closing Date.
ARTICLE V
COVENANTS OF THE FUNDS
5.1 OPERATION IN ORDINARY COURSE. Subject to Sections 1.2 and 8.5, each of the Acquiring Fund and the Acquired Fund will operate its respective business in the ordinary course between the date of this Agreement and the Closing Date, it being understood that such ordinary course of business will include customary dividends and distributions, any other distribution necessary or desirable to avoid federal income or excise taxes, and shareholder purchases and redemptions.
5.2 APPROVAL OF SHAREHOLDERS. The Trust will call a special meeting of the Acquired Fund shareholders to consider and act upon this Agreement (or transactions contemplated thereby) and to take all other appropriate action necessary to obtain approval of the transactions contemplated herein.
5.3 INVESTMENT REPRESENTATION. The Acquired Fund covenants that the Acquiring Fund Shares to be issued pursuant to this Agreement are not being acquired for the purpose of making any distribution, other than in connection with the Reorganization and in accordance with the terms of this Agreement.
5.4 ADDITIONAL INFORMATION. The Acquired Fund will assist the Acquiring Fund in obtaining such information as the Acquiring Fund reasonably requests concerning the beneficial ownership of the Acquired Fund’s shares.
5.5 FURTHER ACTION. Subject to the provisions of this Agreement, each Fund will take or cause to be taken, all action, and do or cause to be done, all things reasonably necessary, proper or advisable to consummate and make effective the transactions contemplated by this Agreement, including any actions required to be taken after the Closing Date.
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5.6 STATEMENT OF EARNINGS AND PROFITS. As promptly as practicable, but in any case within 60 days after the Closing Date, the Acquired Fund shall furnish the Acquiring Fund, in such form as is reasonably satisfactory to the Acquiring Fund and which shall be certified by the Trust’s Controller or Treasurer, a statement of the earnings and profits of the Acquired Fund for federal income tax purposes, as well as any net operating loss carryovers and capital loss carryovers, that will be carried over to the Acquiring Fund pursuant to Section 381 of the Code.
5.7 PREPARATION OF REGISTRATION STATEMENT AND PROXY MATERIALS. The Trust will prepare and file with the Commission a registration statement on Form N-14 relating to the Acquiring Fund Shares to be issued to the Acquired Fund Shareholders (the “Registration Statement”). The Registration Statement shall include a proxy statement of the Acquired Fund and a prospectus of the Acquiring Fund relating to the transaction contemplated by this Agreement. The Registration Statement shall be in compliance with the 1933 Act, the Securities Exchange Act of 1934, as amended (the “1934 Act”), and the 1940 Act, as applicable. Each party will provide the other party with the materials and information necessary to prepare the proxy statement and related materials (the “Proxy Materials”), for inclusion therein, in connection with the meeting of the Acquired Fund’s shareholders to consider the approval of this Agreement and the transactions contemplated herein.
5.8 TAX STATUS OF REORGANIZATION. The intention of the parties is that the Reorganization will qualify as a reorganization within the meaning of Section 368(a) of the Code. None of the Acquired Fund, the Trust or the Acquiring Fund shall take any action, or cause any action to be taken (including, without limitation, the filing of any tax return), that is inconsistent with such treatment or results in the failure of the transaction to qualify as a reorganization within the meaning of Section 368(a) of the Code. At or prior to the Closing Date, the Acquired Fund, the Trust and the Acquiring Fund will take such action, or cause such action to be taken, as is reasonably necessary to enable counsel to render the tax opinion contemplated herein in Section 8.8.
ARTICLE VI
CONDITION PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND
The obligations of the Acquired Fund to consummate the transactions provided for herein shall be subject to the following condition:
6.1 All representations, covenants, and warranties of the Acquiring Fund contained in this Agreement shall be true and correct in all material respects as of the date hereof and as of the Closing Date, with the same force and effect as if made on and as of the Closing Date. The Acquiring Fund shall have delivered to the Acquired Fund a certificate executed in the Acquiring Fund’s name by the Trust’s President or Vice President and its Controller, in form and substance satisfactory to the Acquired Fund and dated as of the Closing Date, to such effect and as to such other matters as the Acquired Fund shall reasonably request.
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ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND
The obligations of the Acquiring Fund to consummate the transactions provided for herein shall be subject to the following conditions:
7.1 All representations, covenants, and warranties of the Acquired Fund contained in this Agreement shall be true and correct in all material respects as of the date hereof and as of the Closing Date, with the same force and effect as if made on and as of the Closing Date. The Acquired Fund shall have delivered to the Acquiring Fund on the Closing Date a certificate executed in the Acquired Fund’s name by the Trust’s President or Vice President and the Controller or Treasurer, in form and substance satisfactory to the Acquiring Fund and dated as of the Closing Date, to such effect and as to such other matters as the Acquiring Fund shall reasonably request.
7.2 The Acquired Fund shall have delivered to the Acquiring Fund a statement of the Acquired Fund’s assets and liabilities, together with a list of the Acquired Fund’s portfolio securities showing the tax basis of such securities by lot and the holding periods of such securities, as of the Closing Date, certified by the Controller or Treasurer of the Trust.
ARTICLE VIII
FURTHER CONDITIONS PRECEDENT
The obligations of the Acquired Fund and the Acquiring Fund hereunder shall also be subject to the following:
8.1 This Agreement and the transactions contemplated herein, with respect to the Acquired Fund, shall have been approved by the requisite vote of the holders of the outstanding shares of the Acquired Fund in accordance with applicable law and the provisions of the Trust’s Declaration of Trust and By-Laws. Notwithstanding anything herein to the contrary, neither the Acquiring Fund nor the Acquired Fund may waive the conditions set forth in this Section 8.1.
8.2 On the Closing Date, the Commission shall not have issued an unfavorable report under Section 25(b) of the 1940 Act, or instituted any proceeding seeking to enjoin the consummation of the transactions contemplated by this Agreement under Section 25(c) of the 1940 Act. Furthermore, no action, suit or other proceeding shall be threatened or pending before any court or governmental agency in which it is sought to restrain or prohibit, or obtain damages or other relief in connection with this Agreement or the transactions contemplated herein.
8.3 All required consents of other parties and all other consents, orders, and permits of federal, state and local regulatory authorities (including those of the Commission and of state securities authorities, including any necessary “no-action” positions and exemptive orders from such federal and state authorities) to permit consummation of the transactions contemplated herein shall have been obtained.
8.4 The Registration Statement shall have become effective under the 1933 Act, and no stop orders suspending the effectiveness thereof shall have been issued. To the best knowledge of the parties to this Agreement, no investigation or proceeding for that purpose shall have been instituted or be pending, threatened or contemplated under the 1933 Act.
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8.5 The Acquired Fund shall have declared and paid a dividend or dividends which, together with all previous such dividends, shall have the effect of distributing to its shareholders all of the Acquired Fund’s investment company taxable income for all taxable periods ending on or before the Closing Date (computed without regard to any deduction for dividends paid), if any, plus the excess of its interest income excludible from gross income under Section 103(a) of the Code, if any, over its deductions disallowed under Sections 265 and 171(a)(2) of the Code for all taxable periods ending on or before the Closing Date and all of its net capital gains realized in all taxable periods ending on or before the Closing Date (after reduction for any available capital loss carry forward).
8.6 The Acquired Fund shall have delivered to the Acquiring Fund on the Closing Date a certificate executed in its name by the Trust’s President or Senior Vice President, in a form reasonably satisfactory to the Acquiring Fund and dated as of the Closing Date, to the effect that the representations and warranties of the Trust, on behalf of the Acquired Fund, made in this Agreement are true and correct on and as of the Closing Date and as to such other matters as the Acquiring Fund shall reasonably request. The Acquiring Fund shall have delivered to the Acquired Fund on the Closing Date a certificate executed in its name by the Trust’s President or Senior Vice President, in a form reasonably satisfactory to the Acquired Fund and dated as of the Closing Date, to the effect that the representations and warranties of the Trust, on behalf of the Acquiring Fund, made in this Agreement are true and correct on and as of the Closing Date and as to such other matters as the Acquired Fund shall reasonably request.
8.7 The Funds shall have received on the Closing Date an opinion from counsel, dated as of the Closing Date, substantially to the effect that:
(a) Each Fund is a legally designated, separate series of the Trust, and the Trust is a validly existing voluntary association with transferable shares of beneficial interest under the laws of the Commonwealth of Massachusetts.
(b) The Agreement has been duly authorized, executed and delivered by the Trust, on behalf of the Funds, and constitutes a valid and legally binding obligation of the Trust, on behalf of the Funds, enforceable in accordance with its terms.
(c) The execution and delivery of the Agreement by the Trust, on behalf of the Funds, did not, and the exchange of the Acquired Fund’s assets for Acquiring Fund Shares pursuant to the Agreement and the issuance of Acquiring Fund Shares pursuant to the Agreement will not, violate the Trust’s Declaration of Trust or By-Laws.
(d) To the knowledge of such counsel, and without any independent investigation, (i) the Trust is registered as an investment company with the Commission and is not subject to any stop order; and (ii) all regulatory consents, authorizations, approvals or filings required to be obtained or made by a Fund under the federal laws of the United States of America or the laws of the Commonwealth of Massachusetts for the transfer of the Acquired Fund’s assets and liabilities for Acquiring Fund Shares, and for the issuance of Acquiring Fund Shares, as applicable, pursuant to the Agreement have been obtained or made.
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8.8 The Funds shall have received an opinion of Vedder Price P.C. addressed to the Acquiring Fund and the Acquired Fund substantially to the effect that for federal income tax purposes:
(a) The transfer of all the Acquired Fund’s assets to the Acquiring Fund in exchange solely for Acquiring Fund Shares and the assumption by the Acquiring Fund of all the liabilities of the Acquired Fund followed by the pro rata distribution to the Acquired Fund Shareholders of all the Acquiring Fund Shares received by the Acquired Fund in complete liquidation of the Acquired Fund will constitute a “reorganization” within the meaning of Section 368(a) of the Code and the Acquiring Fund and the Acquired Fund will each be a “party to a reorganization,” within the meaning of Section 368(b) of the Code, with respect to the Reorganization.
(b) No gain or loss will be recognized by the Acquiring Fund upon the receipt of all the assets of the Acquired Fund solely in exchange for Acquiring Fund Shares and the assumption by the Acquiring Fund of all the liabilities of the Acquired Fund.
(c) No gain or loss will be recognized by the Acquired Fund upon the transfer of all the Acquired Fund’s assets to the Acquiring Fund solely in exchange for Acquiring Fund Shares and the assumption by the Acquiring Fund of all the liabilities of the Acquired Fund or upon the distribution (whether actual or constructive) of such Acquiring Fund Shares to the Acquired Fund Shareholders solely in exchange for such shareholders’ shares of the Acquired Fund in complete liquidation of the Acquired Fund.
(d) No gain or loss will be recognized by the Acquired Fund Shareholders upon the exchange of their Acquired Fund shares solely for Acquiring Fund Shares in the Reorganization.
(e) The aggregate basis of the Acquiring Fund Shares received by each Acquired Fund Shareholder pursuant to the Reorganization will be the same as the aggregate basis of the Acquired Fund shares exchanged therefor by such shareholder. The holding period of the Acquiring Fund Shares received by each Acquired Fund Shareholder will include the period during which the Acquired Fund shares exchanged therefor were held by such shareholder, provided such Acquired Fund shares are held as capital assets at the time of the Reorganization.
(f) The basis of the Acquired Fund’s assets transferred to the Acquiring Fund will be the same as the basis of such assets to the Acquired Fund immediately before the Reorganization. The holding period of the assets of the Acquired Fund in the hands of the Acquiring Fund will include the period during which those assets were held by the Acquired Fund.
No opinion will be expressed as to (1) the effect of the Reorganization on (A) the Acquired Fund or the Acquiring Fund with respect to any asset as to which any unrealized gain or loss is required to be recognized for federal income tax purposes at the end of a taxable year (or on the termination thereof) under a mark-to-market system of accounting, (B) any Acquired Fund shareholder that is required to recognize unrealized gains and losses for federal income tax purposes under a mark-to-market system of accounting, or (C) the Acquired Fund or the Acquiring Fund with respect to any stock held in a passive foreign investment company as defined in Section 1297(a) of the Code or (2) any other federal tax issues (except those set forth above) and all state, local or foreign tax issues of any kind.
Such opinion shall be based on customary assumptions and such representations as Vedder Price P.C. may reasonably request of the Funds, and the Acquired Fund and the Acquiring Fund will cooperate to make and certify the accuracy of such representations. Notwithstanding anything herein to the contrary, neither the Acquiring Fund nor the Acquired Fund may waive the conditions set forth in this Section 8.8.
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ARTICLE IX
EXPENSES
9.1 Each of the Acquired Fund and the Acquiring Fund will pay expenses incurred in connection with the Reorganization based on its portion of the projected cost savings during the first year following the Reorganization. Reorganization expenses include, without limitation: (a) expenses associated with the preparation and filing of the Registration Statement and other Proxy Materials; (b) postage; (c) printing; (d) accounting fees; (e) legal fees incurred by each Fund; (f) solicitation costs of the transaction; and (g) other related administrative or operational costs. To the extent that the payment of Reorganization expenses would cause the Acquired Fund or the Acquiring Fund to exceed its expense cap then in effect, the Adviser or an affiliate will reimburse the portion of expenses necessary for the Fund to operate within its cap. The Adviser or an affiliate will pay the expenses incurred in connection with the Reorganization to the extent such expenses exceed the projected cost savings. If the Reorganization is not consummated, the Adviser or an affiliate will bear the expenses incurred in connection with the Reorganization.
9.2 Each party represents and warrants to the other that there is no person or entity entitled to receive any broker’s fees or similar fees or commission payments in connection with the transactions provided for herein.
9.3 Notwithstanding the foregoing, expenses will in any event be paid by the party directly incurring such expenses if and to the extent that the payment by the other party of such expenses would result in the disqualification of the Acquired Fund or the Acquiring Fund, as the case may be, as a regulated investment company within the meaning of Section 851 of the Code.
ARTICLE X
ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
10.1 The parties agree that no party has made to the other parties any representation, warranty and/or covenant not set forth herein, and that this Agreement constitutes the entire agreement between and among the parties.
10.2 The representations, warranties, and covenants contained in this Agreement or in any document delivered pursuant to or in connection with this Agreement shall not survive the consummation of the transactions contemplated hereunder.
ARTICLE XI
TERMINATION
11.1 This Agreement may be terminated by the mutual agreement of the parties and such termination may be effected by the Trust’s President or Vice President without further action by the Board. In addition, either Fund may, at its option, terminate this Agreement at or before the Closing Date due to:
(a) a breach by any other party of any representation, warranty, or agreement contained herein to be performed at or before the Closing Date, if not cured within 30 days;
(b) a condition precedent to the obligations of the terminating party that has not been met and it reasonably appears that it will not or cannot be met; or
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(c) a determination by the Board that the consummation of the transactions contemplated herein is not in the best interests of the Acquired Fund or Acquiring Fund.
11.2 In the event of any such termination, in the absence of willful default, there shall be no liability for damages on the part of the Trust, the Trustees, the Acquired Fund, the Acquiring Fund, the Adviser, or the Trust’s or Adviser’s officers.
ARTICLE XII
AMENDMENTS
12.1 This Agreement may be amended, modified, or supplemented in such manner as may be mutually agreed upon in writing by the officers of the Trust as specifically authorized by the Board; provided, however, that following the meeting of the Acquired Fund shareholders called by the Acquired Fund pursuant to Section 5.2 of this Agreement, no such amendment may have the effect of changing the provisions for determining the number of Acquiring Fund Shares to be issued to the Acquired Fund Shareholders under this Agreement to the detriment of such shareholders without their further approval.
ARTICLE XIII
HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT; LIMITATION OF LIABILITY
13.1 The article and section headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.
13.2 This Agreement may be executed in any number of counterparts, each of which shall be deemed an original.
13.3 This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts.
13.4 This Agreement shall bind and inure to the benefit of the parties hereto and their respective successors and assigns, but, except as provided in this section, no assignment or transfer hereof or of any rights or obligations hereunder shall be made by any party without the written consent of the other parties. Nothing herein expressed or implied is intended or shall be construed to confer upon or give any person, firm, or corporation, other than the parties hereto and their respective successors and assigns, any rights or remedies under or by reason of this Agreement.
13.5 It is expressly agreed that the obligations of the Funds hereunder shall not be binding upon any of the Trustees, shareholders, nominees, officers, agents, or employees of the Trust personally, but shall bind only the property of such Fund, as provided in the Trust’s Declaration of Trust. The execution and delivery of this Agreement have been authorized by the Trustees of the Trust, on behalf of each Fund, and signed by authorized officers of the Trust acting as such. Neither the authorization by such Trustees nor the execution and delivery by such officers shall be deemed to have been made by any of them individually or to impose any liability on any of them personally, but shall bind only the property of a Fund as provided in the Trust’s Declaration of Trust.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties have duly executed this Agreement, all as of the date first written above.
| NUVEEN MULTISTATE TRUST II, on behalf of Nuveen California Municipal Bond Fund 2 | ||
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| NUVEEN MULTISTATE TRUST II, on behalf of Nuveen California Municipal Bond Fund | ||
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ACKNOWLEDGED:
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| The undersigned is a party to this Agreement for the purposes of Section 9.1 only: | ||
| NUVEEN FUND ADVISORS, INC. | ||
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ACKNOWLEDGED:
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AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the “Agreement”) is made as of this day of , 2012 by Nuveen Multistate Trust II, a Massachusetts business trust (the “Trust”), on behalf of Nuveen California Municipal Bond Fund, a series of the Trust (the “Acquiring Fund”), and Nuveen Investment Funds, Inc., a Maryland corporation (the “Corporation”), on behalf of Nuveen California Tax Free Fund, a series of the Corporation (the “Acquired Fund” and, together with the Acquiring Fund, the “Funds”), and Nuveen Fund Advisors, Inc., the investment adviser to the Funds (the “Adviser”) (for purposes of Section 9.1 of the Agreement only).
This Agreement is intended to be, and is adopted as, a plan of reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”), and the Treasury Regulations promulgated thereunder. The reorganization will consist of: (i) the transfer of all the assets of the Acquired Fund to the Acquiring Fund in exchange solely for Class A and Class I voting shares of beneficial interest, par value $0.01 per share, of the Acquiring Fund (“Acquiring Fund Shares”) and the assumption by the Acquiring Fund of all the liabilities of the Acquired Fund; and (ii) the pro rata distribution of all the Acquiring Fund Shares to the shareholders of each corresponding class of the Acquired Fund, in complete liquidation and termination of the Acquired Fund as provided herein, all upon the terms and conditions set forth in this Agreement (the “Reorganization”). The foregoing will be effected pursuant to this Agreement and to an amendment to the Corporation’s Amended and Restated Articles of Incorporation (“Articles of Incorporation”) in substantially the form attached hereto as Exhibit A (the “Amendment”) to be adopted in accordance with the Maryland General Corporation Law.
WHEREAS, the Acquired Fund is a separate series of the Corporation and the Acquiring Fund is a separate series of the Trust, and the Corporation and the Trust are each an open-end, management investment company registered under the Investment Company Act of 1940, as amended (the “1940 Act”);
WHEREAS, the Acquired Fund owns securities that generally are assets of the character in which the Acquiring Fund is permitted to invest;
WHEREAS, the Acquiring Fund is authorized to issue the Acquiring Fund Shares; and
WHEREAS, the Board of Directors of the Corporation (the “Acquired Fund Board”) and the Board of Trustees of the Trust (the “Acquiring Fund Board”) have made the determinations required by Rule 17a-8 under the 1940 Act with respect to the Acquired Fund and Acquiring Fund, respectively.
NOW, THEREFORE, in consideration of the premises and of the covenants and agreements hereinafter set forth, the parties hereto covenant and agree as follows:
ARTICLE I
TRANSFER OF ASSETS OF THE ACQUIRED FUND IN EXCHANGE FOR ACQUIRING FUND SHARES AND THE ASSUMPTION OF THE ACQUIRED FUND LIABILITIES AND TERMINATION AND LIQUIDATION OF THE ACQUIRED FUND
1.1 THE EXCHANGE. Subject to the terms and conditions contained herein and on the basis of the representations and warranties contained herein, the Acquired Fund agrees to transfer all of its assets, as set forth in Section 1.2, to the Acquiring Fund. In consideration therefor, the Acquiring
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Fund agrees: (i) to deliver to the Acquired Fund the number of full and fractional Class A and Class I Acquiring Fund Shares, computed in the manner set forth in Section 2.3 herein; and (ii) to assume all the liabilities of the Acquired Fund, as set forth in Section 1.3. All Acquiring Fund Shares delivered to the Acquired Fund shall be delivered at net asset value without a sales load, commission or other similar fee being imposed. In the event that Class A shares of the Acquiring Fund are transferred in the Reorganization to former holders of Class A shares of the Acquired Fund with respect to which the front-end sales charge was waived due to a purchase of $1 million or more, the Acquiring Fund agrees that, in determining whether a deferred sales charge is payable upon the sale of such Class A shares of the Acquiring Fund, it shall give credit for the period during which the holder thereof held such Acquired Fund shares. Such transactions shall take place at the closing provided for in Section 3.1 (the “Closing”).
1.2 ASSETS TO BE TRANSFERRED. The Acquired Fund shall transfer all of its assets to the Acquiring Fund, including, without limitation, all cash, securities, commodities, interests in futures, dividends or interest receivables owned by the Acquired Fund and any deferred or prepaid expenses shown as an asset on the books of the Acquired Fund on the Closing Date as such term is defined in Section 3.1.
The Acquired Fund will, within a reasonable period of time before the Closing Date, furnish the Acquiring Fund with a list of the Acquired Fund’s portfolio securities and other investments. The Acquiring Fund will, within a reasonable period of time before the Closing Date, furnish the Acquired Fund with a list of the securities, if any, on the Acquired Fund’s list referred to above that do not conform to the Acquiring Fund’s investment objective, policies, and restrictions. The Acquired Fund, if requested by the Acquiring Fund, will dispose of securities on the Acquiring Fund’s list before the Closing Date. In addition, if it is determined that the portfolios of the Acquired Fund and the Acquiring Fund, when aggregated, would contain investments exceeding certain percentage limitations imposed upon the Acquiring Fund with respect to such investments, the Acquired Fund, if requested by the Acquiring Fund, will dispose of a sufficient amount of such investments as may be necessary to avoid violating such limitations as of the Closing Date. Notwithstanding the foregoing, nothing herein will require the Acquired Fund to dispose of any investments or securities if, in the reasonable judgment of the Acquired Fund Board or the Adviser, such disposition would adversely affect the status of the Reorganization as a “reorganization” as such term is used in the Code or would otherwise not be in the best interests of the Acquired Fund.
1.3 LIABILITIES TO BE ASSUMED. The Acquired Fund will endeavor to discharge all of its known liabilities and obligations to the extent possible before the Closing Date. Notwithstanding the foregoing, any liabilities not so discharged shall be assumed by the Acquiring Fund, which assumed liabilities shall include all of the Acquired Fund’s liabilities, debts, obligations, and duties of whatever kind or nature, whether absolute, accrued, contingent, or otherwise, whether or not arising in the ordinary course of business, whether or not determinable at the Closing Date, and whether or not specifically referred to in this Agreement.
1.4 LIQUIDATING DISTRIBUTION. As of the Effective Time, the Acquired Fund will make a liquidating distribution of the Acquiring Fund Shares received pursuant to Section 1.1 to its shareholders of record with respect to each class of shares, determined as of the close of business on the Closing Date, as such term is defined in Section 3.1 (the “Acquired Fund Shareholders”), on a pro rata basis within each class, (i) Acquiring Fund Class A Shares to Acquired Fund Class A Shareholders, (ii) Acquiring Fund Class A Shares to Acquired Fund Class C1 Shareholders, and
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(iii) Acquiring Fund Class I Shares to Acquired Fund Class I Shareholders. Such distribution will be accomplished with respect to each class of shares of the Acquired Fund by the transfer of the Acquiring Fund Shares of the corresponding class then credited to the account of the Acquired Fund on the books of the Acquiring Fund to open accounts on the share records of the Acquiring Fund in the names of Acquired Fund Shareholders of such class. The Acquiring Fund shall not issue certificates representing Acquiring Fund Shares in connection with such transfer. As of the Effective Time, all issued and outstanding shares of the Acquired Fund shall be cancelled on the books of the Acquired Fund and retired.
1.5 OWNERSHIP OF SHARES. Ownership of Acquiring Fund Shares will be shown on the books of the Acquiring Fund’s transfer agent. Acquiring Fund Shares will be issued simultaneously to the Acquired Fund, in an amount computed in the manner set forth in Section 2.3.
1.6 TRANSFER TAXES. Any transfer taxes payable upon the issuance of Acquiring Fund Shares in a name other than the registered holder of the Acquired Fund shares on the books of the Acquired Fund as of that time shall, as a condition of such issuance and transfer, be paid by the person to whom such Acquiring Fund Shares are to be issued and transferred.
1.7 LIQUIDATION AND TERMINATION. The Acquired Fund shall completely liquidate and be dissolved, terminated and have its affairs wound up in accordance with Maryland state law, promptly following the Closing Date and the making of all distributions pursuant to Section 1.4, but in no event later than 12 months following the Closing Date.
1.8 BOARD REPORTING. Any reporting responsibility of the Acquired Fund including, without limitation, the responsibility for filing of regulatory reports, tax returns or other documents with the Securities and Exchange Commission (the “Commission”), any state securities commission and any federal, state or local tax authorities or any other relevant regulatory authority, is and shall remain the responsibility of the Acquired Fund.
1.9 BOOKS AND RECORDS. All books and records of the Acquired Fund, including all books and records required to be maintained under the 1940 Act, and the rules and regulations thereunder, shall be available to the Acquiring Fund from and after the Closing Date and shall be turned over to the Acquiring Fund as soon as practicable following the Closing Date.
ARTICLE II
VALUATION
2.1 VALUATION OF ASSETS. The value of the Acquired Fund’s assets and liabilities shall be computed as of the close of regular trading on the New York Stock Exchange (“NYSE”) on the Closing Date (such time and date being hereinafter called the “Valuation Time”), using the valuation procedures set forth in the Acquiring Fund’s Prospectus and Statement of Additional Information (in effect as of the Closing Date) or such other valuation procedures as shall be mutually agreed upon by the parties.
2.2 VALUATION OF SHARES. The net asset value per share per class of Acquiring Fund Shares shall be the net asset value per share for such class computed as of the Valuation Time, using the valuation procedures set forth in Section 2.1.
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2.3 SHARES TO BE ISSUED. The number of Acquiring Fund Shares to be issued (including fractional shares, if any) in consideration for the net assets as described in Article I, shall be determined with respect to each class by dividing the value of the assets net of liabilities with respect to each class of shares of the Acquired Fund determined in accordance with Section 2.1 by the net asset value of an Acquiring Fund share of the corresponding class determined in accordance with Section 2.2.
2.4 EFFECT OF SUSPENSION IN TRADING. In the event that on the Closing Date, either: (a) the NYSE or another primary exchange on which the portfolio securities of the Acquiring Fund or the Acquired Fund are purchased or sold shall be closed to trading or trading on such exchange shall be restricted; or (b) trading or the reporting of trading on the NYSE or elsewhere shall be disrupted so that accurate appraisal of the value of the net assets of the Acquiring Fund or the Acquired Fund is impracticable, the Closing Date shall be postponed until the first business day when trading is fully resumed and reporting is restored.
ARTICLE III
CLOSING AND CLOSING DATE
3.1 CLOSING DATE. The Closing shall occur on , 2012 or such other date as the parties may agree (the “Closing Date”). Unless otherwise provided, all acts taking place at the Closing shall be deemed to take place as of immediately after the Valuation Time on the Closing Date (the “Effective Time”). The Closing shall be held as of the close of business at the offices of Vedder Price P.C. in Chicago, Illinois or at such other time and/or place as the parties may agree.
3.2 CUSTODIAN’S CERTIFICATE. The Acquired Fund shall cause U.S. Bank National Association, as custodian for the Acquired Fund, to deliver to the Acquiring Fund at the Closing a certificate of an authorized officer stating that: (a) the Acquired Fund’s portfolio securities, cash, and any other assets shall have been delivered in proper form to the Acquiring Fund on the Closing Date; and (b) all necessary taxes, including all applicable federal and state stock transfer stamps, if any, shall have been paid, or provision for payment shall have been made, in conjunction with the delivery of portfolio securities by the Acquired Fund.
3.3 TRANSFER AGENT’S CERTIFICATE. The Acquired Fund shall cause U.S. Bancorp Fund Services, LLC as transfer agent for the Acquired Fund, to deliver to the Acquiring Fund at the Closing a certificate of an authorized officer stating that its records contain the names and addresses of all the Class A, Class C1 and Class I Acquired Fund Shareholders, and the number and percentage ownership of outstanding shares per class owned by each such shareholder immediately prior to the Closing. The Acquiring Fund shall issue and deliver or cause Boston Financial Data Services, Inc., its transfer agent, to issue and deliver to the Acquired Fund a confirmation evidencing the Class A and Class I Acquiring Fund Shares to be credited on the Closing Date to the Secretary of the Corporation or provide evidence satisfactory to the Acquired Fund that such Acquiring Fund Shares have been credited to the Acquired Fund’s account on the books of the Acquiring Fund.
3.4 DELIVERY OF ADDITIONAL ITEMS. At the Closing, each party shall deliver to the other such bills of sale, checks, assignments, share certificates, receipts and other documents, if any, as such other party or its counsel may reasonably request to effect the transactions contemplated by this Agreement.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 REPRESENTATIONS OF THE ACQUIRED FUND. The Corporation, on behalf of the Acquired Fund, represents and warrants as follows:
(a) The Corporation is a corporation duly organized, validly existing and in good standing under the laws of the State of Maryland.
(b) The Acquired Fund is a separate series of the Corporation duly authorized in accordance with the applicable provisions of the Corporation’s Articles of Incorporation.
(c) The Corporation is registered as an open-end management investment company under the 1940 Act, and such registration is in full force and effect.
(d) The Acquired Fund is not, and the execution, delivery, and performance of this Agreement (subject to shareholder approval) will not result, in the violation of any provision of the Corporation’s Articles of Incorporation or By-Laws or of any material agreement, indenture, instrument, contract, lease, or other undertaking to which the Acquired Fund is a party or by which it is bound.
(e) Except as otherwise disclosed in writing to and accepted by the Acquiring Fund, the Acquired Fund has no material contracts or other commitments that will be terminated with liability to it before the Closing Date.
(f) No litigation, administrative proceeding, or investigation of or before any court or governmental body is presently pending or to its knowledge threatened against the Acquired Fund or any of its properties or assets, which, if adversely determined, would materially and adversely affect its financial condition, the conduct of its business, or the ability of the Acquired Fund to carry out the transactions contemplated by this Agreement. The Acquired Fund knows of no facts that might form the basis for the institution of such proceedings and is not a party to or subject to the provisions of any order, decree, or judgment of any court or governmental body that materially and adversely affects its business or its ability to consummate the transactions contemplated herein.
(g) The financial statements of the Acquired Fund as of February 28, 2011, and for the eight-month period then ended have been prepared in accordance with generally accepted accounting principles and have been audited by independent auditors, and such statements (copies of which have been furnished to the Acquiring Fund) fairly reflect the financial condition of the Acquired Fund as of February 28, 2011, and there are no known contingent liabilities of the Acquired Fund as of such date that are not disclosed in such statements.
(h) The financial statements of the Acquired Fund as of August 31, 2011 and for the period then ended have been prepared in accordance with generally accepted accounting principles, and such statements (copies of which have been furnished to the Acquiring Fund) fairly reflect the financial condition of the Acquired Fund as of August 31, 2011, and there are no known contingent liabilities of the Acquired Fund as of such date that are not disclosed in such statements.
(i) Since the date of the financial statements referred to in subsection (h) above, there have been no material adverse changes in the Acquired Fund’s financial condition, assets, liabilities
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or business (other than changes occurring in the ordinary course of business) and there are no known contingent liabilities of the Acquired Fund arising after such date. For the purposes of this subsection (i), a decline in the net asset value of the Acquired Fund shall not constitute a material adverse change.
(j) All federal, state, local and other tax returns and reports of the Acquired Fund required by law to be filed by it (taking into account permitted extensions for filing) have been timely filed and are complete and correct in all material respects. All federal, state, local and other taxes of the Acquired Fund required to be paid (whether or not shown on any such return or report) have been paid, or provision shall have been made for the payment thereof and any such unpaid taxes are properly reflected on the financial statements referred to in subsection (h) above. To the best of the Acquired Fund’s knowledge, no tax authority is currently auditing or preparing to audit the Acquired Fund, and no assessment for taxes, interest, additions to tax or penalties has been asserted against the Acquired Fund.
(k) All issued and outstanding shares of the Acquired Fund are, and as of the Closing Date will be, duly and validly issued and outstanding, fully paid and non-assessable by the Acquired Fund. All the issued and outstanding shares of the Acquired Fund will, at the time of the Closing, be held by the persons and in the amounts set forth in the records of the Acquired Fund’s transfer agent as provided in Section 3.3. The Acquired Fund has no outstanding options, warrants or other rights to subscribe for or purchase any shares of the Acquired Fund, and has no outstanding securities convertible into shares of the Acquired Fund.
(l) �� At the Closing, the Acquired Fund will have good and marketable title to the Acquired Fund’s assets to be transferred to the Acquiring Fund pursuant to Section 1.2, and full right, power, and authority to sell, assign, transfer, and deliver such assets, and the Acquiring Fund will acquire good and marketable title thereto, subject to no restrictions on the full transfer thereof, including such restrictions as might arise under the Securities Act of 1933, as amended (the “1933 Act”), except those restrictions as to which the Acquiring Fund has received notice and necessary documentation at or prior to the Closing.
(m) The execution, delivery and performance of this Agreement have been duly authorized by all necessary action on the part of the Acquired Fund including the determinations of the Acquired Fund Board required by Rule 17a-8(a) of the 1940 Act. Subject to approval by the Acquired Fund shareholders, this Agreement constitutes a valid and binding obligation of the Acquired Fund, enforceable in accordance with its terms, subject as to enforcement, to bankruptcy, insolvency, reorganization, moratorium, and other laws relating to or affecting creditors’ rights and to general equity principles.
(n) The information to be furnished by the Acquired Fund for use in no-action letters, applications for orders, registration statements, proxy materials and other documents that may be necessary in connection with the transactions contemplated herein shall be accurate and complete in all material respects and shall comply in all material respects with federal securities and other laws and regulations.
(o) From the effective date of the Registration Statement (as defined in Section 5.7), through the time of the meeting of the Acquired Fund shareholders and on the Closing Date, any written information furnished by the Corporation with respect to the Acquired Fund for use in the
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Proxy Materials (as defined in Section 5.7), or any other materials provided in connection with the Reorganization, does not and will not contain any untrue statement of a material fact or omit to state a material fact required to be stated or necessary to make the statements, in light of the circumstances under which such statements were made, not misleading.
(p) For each taxable year of its operations (including the taxable year ending on the Closing Date), the Acquired Fund has been treated as a separate corporation for federal income tax purposes pursuant to Section 851(g) of the Code, has met the requirements of Subchapter M of the Code for qualification as a regulated investment company and has elected to be treated as such, has been eligible to compute and has computed its federal income tax under Section 852 of the Code, and will have distributed on or prior to the Closing Date all its investment company taxable income (determined without regard to the deduction for dividends paid), the excess of its interest income excludable from gross income under Section 103(a) of the Code over its deductions disallowed under Sections 265 and 171(a)(2) of the Code, and its net capital gain (as such terms are defined in the Code) that has accrued or will accrue on or prior to the Closing Date.
4.2 REPRESENTATIONS OF THE ACQUIRING FUND. The Trust, on behalf of the Acquiring Fund, represents and warrants as follows:
(a) The Trust is a business trust duly organized, validly existing and in good standing under the laws of the Commonwealth of Massachusetts.
(b) The Acquiring Fund is a separate series of the Trust duly authorized in accordance with the applicable provisions of the Trust’s Declaration of Trust.
(c) The Trust is registered as an open-end management investment company under the 1940 Act, and such registration is in full force and effect.
(d) The Acquiring Fund is not, and the execution, delivery and performance of this Agreement will not result, in a violation of the Trust’s Declaration of Trust or By-Laws or of any material agreement, indenture, instrument, contract, lease, or other undertaking to which the Acquiring Fund is a party or by which it is bound.
(e) No litigation, administrative proceeding or investigation of or before any court or governmental body is presently pending or to its knowledge threatened against the Acquiring Fund or any of its properties or assets, which, if adversely determined, would materially and adversely affect its financial condition, the conduct of its business or the ability of the Acquiring Fund to carry out the transactions contemplated by this Agreement. The Acquiring Fund knows of no facts that might form the basis for the institution of such proceedings and it is not a party to or subject to the provisions of any order, decree, or judgment of any court or governmental body that materially and adversely affects its business or its ability to consummate the transaction contemplated herein.
(f) The financial statements of the Acquiring Fund as of February 28, 2011 and for the fiscal year then ended have been prepared in accordance with generally accepted accounting principles and have been audited by independent auditors, and such statements (copies of which have been furnished to the Acquired Fund) fairly reflect the financial condition of the Acquiring Fund as of February 28, 2011, and there are no known contingent liabilities of the Acquiring Fund as of such date that are not disclosed in such statements.
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(g) The financial statements of the Acquiring Fund as of August 31, 2011 and for the period then ended have been prepared in accordance with generally accepted accounting principles, and such statements (copies of which have been furnished to the Acquired Fund) fairly reflect the financial condition of the Acquiring Fund as of August 31, 2011, and there are no known contingent liabilities of the Acquiring Fund as of such date that are not disclosed in such statements.
(h) Since the date of the financial statements referred to in subsection (g) above, there have been no material adverse changes in the Acquiring Fund’s financial condition, assets, liabilities or business (other than changes occurring in the ordinary course of business) and there are no known contingent liabilities of the Acquiring Fund arising after such date. For the purposes of this subsection (h), a decline in the net asset value of the Acquiring Fund shall not constitute a material adverse change.
(i) All federal, state, local and other tax returns and reports of the Acquiring Fund required by law to be filed by it (taking into account permitted extensions for filing) have been timely filed and are complete and correct in all material respects. All federal, state, local and other taxes of the Acquiring Fund required to be paid (whether or not shown on any such return or report) have been paid or provision shall have been made for their payment and any such unpaid taxes are properly reflected on the financial statements referred to in subsection (g) above. To the best of the Acquiring Fund’s knowledge, no tax authority is currently auditing or preparing to audit the Acquiring Fund, and no assessment for taxes, interest, additions to tax or penalties has been asserted against the Acquiring Fund.
(j) All issued and outstanding shares of the Acquiring Fund are, and, as of the Closing Date will be, duly and validly issued and outstanding, fully paid and non-assessable by the Acquiring Fund (recognizing that under Massachusetts law, Acquiring Fund shareholders, under certain circumstances, could be held personally liable for the obligations of the Acquiring Fund). The Acquiring Fund has no outstanding options, warrants, or other rights to subscribe for or purchase shares of the Acquiring Fund, and there are no outstanding securities convertible into shares of the Acquiring Fund.
(k) The execution, delivery and performance of this Agreement have been duly authorized by all necessary action on the part of the Acquiring Fund, including the determination of the Acquiring Fund Board required pursuant to Rule 17a-8(a) of the 1940 Act. This Agreement constitutes a valid and binding obligation of the Acquiring Fund, enforceable in accordance with its terms, subject as to enforcement, to bankruptcy, insolvency, reorganization, moratorium, and other laws relating to or affecting creditors’ rights and to general equity principles.
(l) The Acquiring Fund Shares to be issued and delivered to the Acquired Fund for the account of the Acquired Fund Shareholders pursuant to the terms of this Agreement will, at the Closing Date, have been duly authorized. When so issued and delivered, such shares will be duly and validly issued shares of the Acquiring Fund, and will be fully paid and non-assessable.
(m) The information to be furnished by the Acquiring Fund for use in no-action letters, applications for orders, registration statements, proxy materials, and other documents that may be necessary in connection with the transactions contemplated herein shall be accurate and complete in all material respects and shall comply in all material respects with federal securities and other laws and regulations.
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(n) From the effective date of the Registration Statement (as defined in Section 5.7), through the time of the meeting of the Acquired Fund shareholders and on the Closing Date, any written information furnished by the Trust with respect to the Acquiring Fund for use in the Proxy Materials (as defined in Section 5.7), or any other materials provided in connection with the Reorganization, does not and will not contain any untrue statement of a material fact or omit to state a material fact required to be stated or necessary to make the statements, in light of the circumstances under which such statements were made, not misleading.
(o) For each taxable year of its operation, the Acquiring Fund has been treated as a separate corporation for federal income tax purposes pursuant to Section 851(g) of the Code, has met the requirements of Subchapter M of the Code for qualification as a regulated investment company and has elected to be treated as such, has been eligible to compute and has computed its federal income tax under Section 852 of the Code. In addition, the Acquiring Fund will satisfy each of the foregoing with respect to its taxable year that includes the Closing Date.
(p) The Acquiring Fund agrees to use all reasonable efforts to obtain the approvals and authorizations required by the 1933 Act, the 1940 Act, and any state securities laws as it may deem appropriate in order to continue its operations after the Closing Date.
ARTICLE V
COVENANTS OF THE FUNDS
5.1 OPERATION IN ORDINARY COURSE. Subject to Sections 1.2 and 8.5, each of the Acquiring Fund and the Acquired Fund will operate its respective business in the ordinary course between the date of this Agreement and the Closing Date, it being understood that such ordinary course of business will include customary dividends and distributions, any other distribution necessary or desirable to avoid federal income or excise taxes, and shareholder purchases and redemptions.
5.2 APPROVAL OF SHAREHOLDERS. The Corporation will call a special meeting of the Acquired Fund shareholders to consider and act upon this Agreement (or transactions contemplated thereby) and to take all other appropriate action necessary to obtain approval of the transactions contemplated herein.
5.3 INVESTMENT REPRESENTATION. The Acquired Fund covenants that the Acquiring Fund Shares to be issued pursuant to this Agreement are not being acquired for the purpose of making any distribution, other than in connection with the Reorganization and in accordance with the terms of this Agreement.
5.4 ADDITIONAL INFORMATION. The Acquired Fund will assist the Acquiring Fund in obtaining such information as the Acquiring Fund reasonably requests concerning the beneficial ownership of the Acquired Fund’s shares.
5.5 FURTHER ACTION. Subject to the provisions of this Agreement, each Fund will take or cause to be taken, all action, and do or cause to be done, all things reasonably necessary, proper or advisable to consummate and make effective the transactions contemplated by this Agreement, including any actions required to be taken after the Closing Date.
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5.6 STATEMENT OF EARNINGS AND PROFITS. As promptly as practicable, but in any case within 60 days after the Closing Date, the Acquired Fund shall furnish the Acquiring Fund, in such form as is reasonably satisfactory to the Acquiring Fund and which shall be certified by the Corporation’s Controller or Treasurer, a statement of the earnings and profits of the Acquired Fund for federal income tax purposes, as well as any net operating loss carryovers and capital loss carryovers, that will be carried over to the Acquiring Fund pursuant to Section 381 of the Code.
5.7 PREPARATION OF REGISTRATION STATEMENT AND PROXY MATERIALS. The Trust will prepare and file with the Commission a registration statement on Form N-14 relating to the Acquiring Fund Shares to be issued to the Acquired Fund Shareholders (the “Registration Statement”). The Registration Statement shall include a proxy statement of the Acquired Fund and a prospectus of the Acquiring Fund relating to the transaction contemplated by this Agreement. The Registration Statement shall be in compliance with the 1933 Act, the Securities Exchange Act of 1934, as amended (the “1934 Act”), and the 1940 Act, as applicable. Each party will provide the other party with the materials and information necessary to prepare the proxy statement and related materials (the “Proxy Materials”), for inclusion therein, in connection with the meeting of the Acquired Fund’s shareholders to consider the approval of this Agreement and the transactions contemplated herein.
5.8 TAX STATUS OF REORGANIZATION. The intention of the parties is that the Reorganization will qualify as a reorganization within the meaning of Section 368(a) of the Code. None of the Acquired Fund, the Corporation, the Acquiring Fund or the Trust shall take any action, or cause any action to be taken (including, without limitation, the filing of any tax return), that is inconsistent with such treatment or results in the failure of the transaction to qualify as a reorganization within the meaning of Section 368(a) of the Code. At or prior to the Closing Date, the Acquired Fund, the Corporation, the Acquiring Fund and the Trust will take such action, or cause such action to be taken, as is reasonably necessary to enable counsel to render the tax opinion contemplated herein in Section 8.9.
ARTICLE VI
CONDITION PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND
The obligations of the Acquired Fund to consummate the transactions provided for herein shall be subject to the following condition:
6.1 All representations, covenants, and warranties of the Acquiring Fund contained in this Agreement shall be true and correct in all material respects as of the date hereof and as of the Closing Date, with the same force and effect as if made on and as of the Closing Date. The Acquiring Fund shall have delivered to the Acquired Fund a certificate executed in the Acquiring Fund’s name by the Trust’s President or Vice President and its Controller, in form and substance satisfactory to the Acquired Fund and dated as of the Closing Date, to such effect and as to such other matters as the Acquired Fund shall reasonably request.
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ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND
The obligations of the Acquiring Fund to consummate the transactions provided for herein shall be subject to the following conditions:
7.1 All representations, covenants, and warranties of the Acquired Fund contained in this Agreement shall be true and correct in all material respects as of the date hereof and as of the Closing Date, with the same force and effect as if made on and as of the Closing Date. The Acquired Fund shall have delivered to the Acquiring Fund on the Closing Date a certificate executed in the Acquired Fund’s name by the Corporation’s President or Vice President and the Controller or Treasurer, in form and substance satisfactory to the Acquiring Fund and dated as of the Closing Date, to such effect and as to such other matters as the Acquiring Fund shall reasonably request.
7.2 The Acquired Fund shall have delivered to the Acquiring Fund a statement of the Acquired Fund’s assets and liabilities, together with a list of the Acquired Fund’s portfolio securities showing the tax basis of such securities by lot and the holding periods of such securities, as of the Closing Date, certified by the Controller or Treasurer of the Corporation.
ARTICLE VIII
FURTHER CONDITIONS PRECEDENT
The obligations of the Acquired Fund and the Acquiring Fund hereunder shall also be subject to the following:
8.1 This Agreement and the transactions contemplated herein, with respect to the Acquired Fund, shall have been approved by the requisite vote of the holders of the outstanding shares of the Acquired Fund in accordance with applicable law and the provisions of the Corporation’s Articles of Incorporation and By-Laws. Notwithstanding anything herein to the contrary, neither the Acquiring Fund nor the Acquired Fund may waive the conditions set forth in this Section 8.1.
8.2 On the Closing Date, the Commission shall not have issued an unfavorable report under Section 25(b) of the 1940 Act, or instituted any proceeding seeking to enjoin the consummation of the transactions contemplated by this Agreement under Section 25(c) of the 1940 Act. Furthermore, no action, suit or other proceeding shall be threatened or pending before any court or governmental agency in which it is sought to restrain or prohibit, or obtain damages or other relief in connection with this Agreement or the transactions contemplated herein.
8.3 All required consents of other parties and all other consents, orders, and permits of federal, state and local regulatory authorities (including those of the Commission and of state securities authorities, including any necessary “no-action” positions and exemptive orders from such federal and state authorities) to permit consummation of the transactions contemplated herein shall have been obtained.
8.4 The Registration Statement shall have become effective under the 1933 Act, and no stop orders suspending the effectiveness thereof shall have been issued. To the best knowledge of the parties to this Agreement, no investigation or proceeding for that purpose shall have been instituted or be pending, threatened or contemplated under the 1933 Act.
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8.5 The Acquired Fund shall have declared and paid a dividend or dividends which, together with all previous such dividends, shall have the effect of distributing to its shareholders all of the Acquired Fund’s investment company taxable income for all taxable periods ending on or before the Closing Date (computed without regard to any deduction for dividends paid), if any, plus the excess of its interest income excludible from gross income under Section 103(a) of the Code, if any, over its deductions disallowed under Sections 265 and 171(a)(2) of the Code for all taxable periods ending on or before the Closing Date and all of its net capital gains realized in all taxable periods ending on or before the Closing Date (after reduction for any available capital loss carry forward).
8.6 The Acquired Fund shall have delivered to the Acquiring Fund on the Closing Date a certificate executed in its name by the Corporation’s President or Senior Vice President, in a form reasonably satisfactory to the Acquiring Fund and dated as of the Closing Date, to the effect that the representations and warranties of the Corporation, on behalf of the Acquired Fund, made in this Agreement are true and correct on and as of the Closing Date and as to such other matters as the Acquiring Fund shall reasonably request. The Acquiring Fund shall have delivered to the Acquired Fund on the Closing Date a certificate executed in its name by the Trust’s President or Senior Vice President, in a form reasonably satisfactory to the Acquired Fund and dated as of the Closing Date, to the effect that the representations and warranties of the Trust, on behalf of the Acquiring Fund, made in this Agreement are true and correct on and as of the Closing Date and as to such other matters as the Acquired Fund shall reasonably request.
8.7 The Acquiring Fund shall have received on the Closing Date an opinion from counsel, dated as of the Closing Date, substantially to the effect that:
(a) The Corporation is a corporation validly existing and in good standing under the laws of the State of Maryland.
(b) The Agreement has been duly authorized, executed and delivered by the Corporation, on behalf of the Acquired Fund, and constitutes a valid and legally binding obligation of the Corporation, on behalf of the Acquired Fund, enforceable in accordance with its terms.
(c) The execution and delivery of the Agreement by the Corporation, on behalf of the Acquired Fund, did not, and the exchange of the Acquired Fund’s assets for Acquiring Fund Shares pursuant to the Agreement will not, violate the Corporation’s Articles of Incorporation or By-Laws.
(d) To the knowledge of such counsel, and without any independent investigation, (i) the Corporation is registered as an investment company with the Commission and is not subject to any stop order; and (ii) all regulatory consents, authorizations, approvals or filings required to be obtained or made by the Acquired Fund under the federal laws of the United States of America or the laws of the State of Maryland for the transfer of the Acquired Fund’s assets and liabilities for Acquiring Fund Shares pursuant to the Agreement have been obtained or made.
8.8 The Acquired Fund shall have received on the Closing Date an opinion from counsel, dated as of the Closing Date, substantially to the effect that:
(a) The Trust is a validly existing voluntary association with transferable shares of beneficial interest under the laws of the Commonwealth of Massachusetts.
(b) The Agreement has been duly authorized, executed and delivered by the Trust, on behalf of the Acquiring Fund, and constitutes a valid and legally binding obligation of the Trust, on behalf of the Acquiring Fund, enforceable in accordance with its terms.
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(c) The execution and delivery of the Agreement by the Trust, on behalf of the Acquiring Fund, did not, and the issuance of Acquiring Fund Shares pursuant to the Agreement will not, violate the Trust’s Declaration of Trust or By-Laws.
(d) To the knowledge of such counsel, and without any independent investigation, (i) the Trust is registered as an investment company with the Commission and is not subject to any stop order; and (ii) all regulatory consents, authorizations, approvals or filings required to be obtained or made by the Acquiring Fund under the federal laws of the United States of America or the laws of the Commonwealth of Massachusetts for the issuance of Acquiring Fund Shares pursuant to the Agreement have been obtained or made.
8.9 The Funds shall have received an opinion of Vedder Price P.C. addressed to the Acquiring Fund and the Acquired Fund substantially to the effect that for federal income tax purposes:
(a) The transfer of all the Acquired Fund’s assets to the Acquiring Fund in exchange solely for Acquiring Fund Shares and the assumption by the Acquiring Fund of all the liabilities of the Acquired Fund followed by the pro rata distribution to the Acquired Fund Shareholders of all the Acquiring Fund Shares received by the Acquired Fund in complete liquidation of the Acquired Fund will constitute a “reorganization” within the meaning of Section 368(a) of the Code and the Acquiring Fund and the Acquired Fund will each be a “party to a reorganization,” within the meaning of Section 368(b) of the Code, with respect to the Reorganization.
(b) No gain or loss will be recognized by the Acquiring Fund upon the receipt of all the assets of the Acquired Fund solely in exchange for Acquiring Fund Shares and the assumption by the Acquiring Fund of all the liabilities of the Acquired Fund.
(c) No gain or loss will be recognized by the Acquired Fund upon the transfer of all the Acquired Fund’s assets to the Acquiring Fund solely in exchange for Acquiring Fund Shares and the assumption by the Acquiring Fund of all the liabilities of the Acquired Fund or upon the distribution (whether actual or constructive) of such Acquiring Fund Shares to the Acquired Fund Shareholders solely in exchange for such shareholders’ shares of the Acquired Fund in complete liquidation of the Acquired Fund.
(d) No gain or loss will be recognized by the Acquired Fund Shareholders upon the exchange of their Acquired Fund shares solely for Acquiring Fund Shares in the Reorganization.
(e) The aggregate basis of the Acquiring Fund Shares received by each Acquired Fund Shareholder pursuant to the Reorganization will be the same as the aggregate basis of the Acquired Fund shares exchanged therefor by such shareholder. The holding period of the Acquiring Fund Shares received by each Acquired Fund Shareholder will include the period during which the Acquired Fund shares exchanged therefor were held by such shareholder, provided such Acquired Fund shares are held as capital assets at the time of the Reorganization.
(f) The basis of the Acquired Fund’s assets transferred to the Acquiring Fund will be the same as the basis of such assets to the Acquired Fund immediately before the Reorganization. The holding period of the assets of the Acquired Fund in the hands of the Acquiring Fund will include the period during which those assets were held by the Acquired Fund.
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No opinion will be expressed as to (1) the effect of the Reorganization on (A) the Acquired Fund or the Acquiring Fund with respect to any asset as to which any unrealized gain or loss is required to be recognized for federal income tax purposes at the end of a taxable year (or on the termination thereof) under a mark-to-market system of accounting, (B) any Acquired Fund shareholder that is required to recognize unrealized gains and losses for federal income tax purposes under a mark-to-market system of accounting, or (C) the Acquired Fund or the Acquiring Fund with respect to any stock held in a passive foreign investment company as defined in Section 1297(a) of the Code or (2) any other federal tax issues (except those set forth above) and all state, local or foreign tax issues of any kind.
Such opinion shall be based on customary assumptions and such representations as Vedder Price P.C. may reasonably request of the Funds, and the Acquired Fund and the Acquiring Fund will cooperate to make and certify the accuracy of such representations. Notwithstanding anything herein to the contrary, neither the Acquiring Fund nor the Acquired Fund may waive the conditions set forth in this Section 8.9.
ARTICLE IX
EXPENSES
9.1 Each of the Acquired Fund and the Acquiring Fund will pay expenses incurred in connection with the Reorganization based on its portion of the projected cost savings during the first year following the Reorganization. Reorganization expenses include, without limitation: (a) expenses associated with the preparation and filing of the Registration Statement and other Proxy Materials; (b) postage; (c) printing; (d) accounting fees; (e) legal fees incurred by each Fund; (f) solicitation costs of the transaction; and (g) other related administrative or operational costs. To the extent that the payment of Reorganization expenses would cause the Acquired Fund or the Acquiring Fund to exceed its expense cap then in effect, the Adviser or an affiliate will reimburse the portion of expenses necessary for the Fund to operate within its cap. The Adviser or an affiliate will pay the expenses incurred in connection with the Reorganization to the extent such expenses exceed the projected cost savings. If the Reorganization is not consummated, the Adviser or an affiliate will bear the expenses incurred in connection with the Reorganization.
9.2 Each party represents and warrants to the other that there is no person or entity entitled to receive any broker’s fees or similar fees or commission payments in connection with the transactions provided for herein.
9.3 Notwithstanding the foregoing, expenses will in any event be paid by the party directly incurring such expenses if and to the extent that the payment by the other party of such expenses would result in the disqualification of the Acquired Fund or the Acquiring Fund, as the case may be, as a regulated investment company within the meaning of Section 851 of the Code.
ARTICLE X
ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
10.1 The parties agree that no party has made to the other parties any representation, warranty and/or covenant not set forth herein, and that this Agreement constitutes the entire agreement between and among the parties.
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10.2 The representations, warranties, and covenants contained in this Agreement or in any document delivered pursuant to or in connection with this Agreement shall not survive the consummation of the transactions contemplated hereunder.
ARTICLE XI
TERMINATION
11.1 This Agreement may be terminated by the mutual agreement of the parties and such termination may be effected by the Corporation’s President or Vice President and the Trust’s President or Vice President without further action by the Acquired Fund Board or Acquiring Fund Board. In addition, either Fund may, at its option, terminate this Agreement at or before the Closing Date due to:
(a) a breach by any other party of any representation, warranty, or agreement contained herein to be performed at or before the Closing Date, if not cured within 30 days;
(b) a condition precedent to the obligations of the terminating party that has not been met and it reasonably appears that it will not or cannot be met; or
(c) a determination by the Acquired Fund Board or Acquiring Fund Board that the consummation of the transactions contemplated herein is not in the best interests of the Acquired Fund or Acquiring Fund, respectively.
11.2 In the event of any such termination, in the absence of willful default, there shall be no liability for damages on the part of the Corporation, the Directors, the Acquired Fund, the Trust, the Trustees, the Acquiring Fund, the Adviser, or the Corporation’s, Trust’s or Adviser’s officers.
ARTICLE XII
AMENDMENTS
12.1 This Agreement may be amended, modified, or supplemented in such manner as may be mutually agreed upon in writing by the officers of the Corporation and officers of the Trust as specifically authorized by the Acquired Fund Board or Acquiring Fund Board; provided, however, that following the meeting of the Acquired Fund shareholders called by the Acquired Fund pursuant to Section 5.2 of this Agreement, no such amendment may have the effect of changing the provisions for determining the number of Acquiring Fund Shares to be issued to the Acquired Fund Shareholders under this Agreement to the detriment of such shareholders without their further approval.
ARTICLE XIII
HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT; LIMITATION OF LIABILITY
13.1 The article and section headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.
13.2 This Agreement may be executed in any number of counterparts, each of which shall be deemed an original.
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13.3 This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts.
13.4 This Agreement shall bind and inure to the benefit of the parties hereto and their respective successors and assigns, but, except as provided in this section, no assignment or transfer hereof or of any rights or obligations hereunder shall be made by any party without the written consent of the other parties. Nothing herein expressed or implied is intended or shall be construed to confer upon or give any person, firm, or corporation, other than the parties hereto and their respective successors and assigns, any rights or remedies under or by reason of this Agreement.
13.5 It is expressly agreed that the obligations of the Acquiring Fund hereunder shall not be binding upon any of the Trustees, shareholders, nominees, officers, agents, or employees of the Trust personally, but shall bind only the property of the Acquiring Fund, as provided in the Trust’s Declaration of Trust. The execution and delivery of this Agreement have been authorized by the Trustees of the Trust, on behalf of the Acquiring Fund, and signed by authorized officers of the Trust acting as such. Neither the authorization by such Trustees nor the execution and delivery by such officers shall be deemed to have been made by any of them individually or to impose any liability on any of them personally, but shall bind only the property of the Acquiring Fund as provided in the Trust’s Declaration of Trust.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties have duly executed this Agreement, all as of the date first written above.
| NUVEEN INVESTMENT FUNDS, INC., on behalf of Nuveen California Tax Free Fund | ||
By: |
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Title: |
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ACKNOWLEDGED:
By: |
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Name: |
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Title: |
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| NUVEEN MULTISTATE TRUST II, on behalf of Nuveen California Municipal Bond Fund | ||
By: |
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Name: |
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Title: |
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ACKNOWLEDGED:
By: |
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Name: |
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Title: |
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| The undersigned is a party to this Agreement for the purposes of Section 9.1 only: | ||
| NUVEEN FUND ADVISORS, INC. | ||
By: |
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Name: |
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Title: |
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ACKNOWLEDGED:
By: |
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Name: |
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Title: |
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EXHIBIT A TO AGREEMENT AND PLAN OF REORGANIZATION
ARTICLES OF AMENDMENT
TO
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
NUVEEN INVESTMENT FUNDS, INC.
The undersigned officer of Nuveen Investment Funds, Inc. (the “Corporation”), a Maryland corporation, hereby certifies that the following amendments to the Corporation’s Amended and Restated Articles of Incorporation have been advised by the Corporation’s Board of Directors and approved by the Corporation’s stockholders in the manner required by the Maryland General Corporation Law, such amendment to become effective :
WHEREAS, the Corporation is registered as an open-end management investment company (i.e., a mutual fund) under the Investment Company Act of 1940 and offers its shares to the public in several classes (i.e., series), each of which represents a separate and distinct portfolio of assets;
WHEREAS, it is desirable and in the best interests of the holders of the Class I I shares of the Corporation (also known as “Nuveen California Tax Free Fund”) that the assets belonging to such class be transferred to Nuveen California Municipal Bond Fund, a series of Nuveen Multistate Trust II, a Massachusetts business trust, in exchange for Class A and Class I shares of Nuveen California Municipal Bond Fund, which are to be delivered to former Nuveen California Tax Free Fund holders;
WHEREAS, Nuveen California Tax Free Fund and Nuveen California Municipal Bond Fund have entered into an Agreement and Plan of Reorganization providing for the foregoing transactions; and
WHEREAS, in order to bind all holders of shares of Nuveen California Tax Free Fund to the foregoing transactions and as set forth in the Agreement and Plan of Reorganization, and in particular to bind such holders to the exchange of their shares of Nuveen California Tax Free Fund for Class A and Class I shares of Nuveen California Municipal Bond Fund shares, it is necessary to adopt an amendment to the Corporation’s Amended and Restated Articles of Incorporation.
NOW, THEREFORE, BE IT RESOLVED, that effective as of the Effective Time referred to below, the Corporation’s Amended and Restated Articles of Incorporation be, and the same hereby are, amended to add the following Article IV(CC) immediately following Article IV(BB) thereof:
Article IV(CC). (a) For purposes of this Article IV(CC), the following terms shall have the following meanings:
“Corporation” means this corporation.
“Acquired Fund” means the Corporation’s Nuveen California Tax Free Fund, which is represented by the Corporation’s Class I I shares.
“Class A Acquired Fund Shares” means the Corporation’s Class I I Common Shares.
A-1
“Class C1 Acquired Fund Shares” means the Corporation’s Class II, Series 2 Common Shares.
“Class I Acquired Fund Shares” means the Corporation’s Class II, Series 3 Common Shares.
“Acquiring Fund” means Nuveen California Municipal Bond Fund, which is a series of Nuveen Multistate Trust II.
“Class A Acquiring Fund Shares” means Nuveen California Municipal Bond Fund’s Class A Shares of Beneficial Interest.
“Class I Acquiring Funds Shares” means Nuveen California Municipal Bond Fund’s Class I Shares of Beneficial Interest.
“Closing” means the occurrence of the transactions set forth in (b) and (c) below on the Closing Date.
“Closing Date” means .
“Effective Time” means immediately after the Valuation Time on the Closing Date.
“Plan” means the Agreement and Plan of Reorganization dated , 2012 on behalf of the Acquiring Fund and the Acquired Fund.
“Valuation Time” means the close of regular trading on the New York Stock Exchange on the Closing Date.
(b) As of the Effective Time, the Acquired Fund will transfer all of its assets to the Acquiring Fund, including, without limitation, all cash, securities, commodities, interests in futures, dividends or interest receivables owned by the Acquired Fund and any deferred or prepaid expenses shown as an asset on the books of the Acquired Fund on the Closing Date.
(c) As of the Effective Time, the Acquiring Fund will: (i) deliver to the Acquired Fund the number of full and fractional Class A and Class I Acquiring Fund Shares, computed in the manner set forth in (d) below; and (ii) assume all the liabilities of the Acquired Fund not discharged by the Acquired Fund, which assumed liabilities shall include all of the Acquired Fund’s liabilities, debts, obligations, and duties of whatever kind or nature, whether absolute, accrued, contingent, or otherwise, whether or not arising in the ordinary course of business, whether or not determinable at the Closing Date, and whether or not specifically referred to in the Plan or herein.
(d) The number of Class A, Class A and Class I Acquiring Fund Shares to be delivered to holders of Class A Acquired Fund Shares, Class C1 Acquired Fund Shares and Class I Acquired Fund Shares, respectively, shall be determined as follows:
(i) Acquiring Fund Shares to be issued (including fractional shares, if any) in consideration for the Acquired Fund’s net assets as described (b) and (c) above, shall be determined with respect to Class A, Class C1 and Class I of the Acquired Fund Shares by dividing the value of the assets net of liabilities with respect to each such class of shares determined in accordance with (ii) below by the net asset value of an Acquiring Fund share of the corresponding class determined in accordance with (iii) below.
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(ii) The value of the Acquired Fund’s assets and liabilities shall be computed as of the Valuation Time, using the valuation procedures set forth in the Acquiring Fund’s Prospectus and Statement of Additional Information (in effect as of the Closing Date) or such other valuation procedures as shall be mutually agreed upon by the parties.
(iii) As of the Effective Time, the Acquired Fund will distribute the Acquiring Fund Shares received pursuant to (c) above to its shareholders of record with respect to each class of shares, determined as of the close of business on the Closing Date (the “Acquired Fund Shareholders”), on a pro rata basis within each class, (A) Class A Acquiring Fund Shares to Class A Acquired Fund Shareholders, (B) Class A Acquiring Fund Shares to Class C1 Acquired Fund Shareholders, and (C) Class I Acquiring Fund Shares to Class I Acquired Fund Shareholders. Such distribution will be accomplished with respect to Class A, Class C1 and Class I Acquired Fund Shares by the transfer of the Acquiring Fund Shares of the corresponding class then credited to the account of the Acquired Fund on the books of the Acquiring Fund to open accounts on the share records of the Acquiring Fund in the names of Acquired Fund Shareholders of such class. The Acquiring Fund shall not issue certificates representing Acquiring Fund Shares in connection with such transfer. As of the Effective Time, all issued and outstanding shares of the Acquired Fund shall be cancelled on the books of the Acquired Fund and retired.
(iv) As soon as practicable after the Closing Date and the making of the foregoing distribution, the Acquired Fund will thereupon proceed to completely liquidate and be dissolved, terminated and have its affairs wound up in accordance with Maryland state law.
(e) From and after the Effective Time, the Acquired Fund shares cancelled and retired pursuant to paragraph (d)(iii) above shall have the status of authorized and unissued Class II common shares of the Corporation, without designation as to series.
The undersigned officer of the Corporation hereby acknowledges, in the name and on behalf of the Corporation, the foregoing Articles of Amendment to be the corporate act of the Corporation and further certifies that, to the best of his or her knowledge, information and belief, the matters and facts set forth therein with respect to the approval thereof are true in all material respects, under the penalties of perjury.
IN WITNESS WHEREOF, the Corporation has caused these Articles of Amendment to be signed in its name and on its behalf by its President or a Vice President and witnessed by its Secretary or an Assistant Secretary on [ ], 2012.
| NUVEEN INVESTMENT FUNDS, INC. | ||
| By: | ||
| [ ] | ||
| Its: | [Title] | |
| WITNESS: | ||
| [Title] | ||
A-3
EVERY SHAREHOLDER’S VOTE IS IMPORTANT
| EASY VOTING OPTIONS: | ||
 | VOTE ON THE INTERNET Log on to: www.proxy-direct.com Follow the on-screen instructions available 24 hours | |
 | VOTE BY PHONE Call 1-800-337-3503 Follow the recorded instructions available 24 hours | |
 | VOTE BY MAIL Vote, sign and date this Proxy Card and return in the postage-paid envelope | |
 | VOTE IN PERSON Attend Shareholder Meeting 333 West Wacker Dr. Chicago, IL 60606 on , 2012 | |
Please detach at perforation before mailing.
| PROXY | NUVEEN CALIFORNIA TAX FREE FUND | PROXY | ||
| SPECIAL MEETING OF SHAREHOLDERS | ||||
| TO BE HELD ON , 2012 |
THIS PROXY IS BEING SOLICITED BY THE BOARD OF TRUSTEES. The undersigned shareholder(s) of the Nuveen California Tax Free Fund, revoking previous proxies, hereby appoints Kevin J. McCarthy, Kathleen Prudhomme and Christopher Rohrbacher, or any one of them true and lawful attorneys with power of substitution of each, to vote all shares of Nuveen California Tax Free Fund which the undersigned is entitled to vote, at the Special Meeting of Shareholders to be held on , 2012, at :00 .m. Central time, at the offices of Nuveen Investments, 333 West Wacker Drive, Chicago, Illinois, 60606, and at any adjournment or postponement thereof as indicated on the reverse side. In their discretion, the proxy holders named above are authorized to vote upon such other matters as may properly come before the meeting.
Receipt of the Notice of the Special Meeting and the accompanying Proxy Statement/Prospectus is hereby acknowledged. The shares of Nuveen California Tax Free Fund represented hereby will be voted as indicated or FOR the proposal if no choice is indicated.
| VOTE VIA THE INTERNET: www.proxy-direct.com | ||||||||||
| VOTE VIA THE TELEPHONE: 1-800-337-3503 | ||||||||||
Note: Please sign exactly as your name(s) appear(s) on this card. When signing as attorney, executor, administrator, trustee, guardian or as custodian for a minor, please sign your name and give your full title as such. If signing on behalf of a corporation, please sign the full corporate name and your name and indicate your title. If you are a partner signing for a partnership, please sign the partnership name, your name and indicate your title. Joint owners should each sign these instructions. Please sign, date and return. | ||||||||||
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| Signature and Title, if applicable | ||||||||||
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| Signature (if held jointly) | ||||||||||
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| Date | XXX_23114_111611 | |||||||||
EVERY SHAREHOLDER’S VOTE IS IMPORTANT
Important Notice Regarding the Availability of Proxy Materials for the
Nuveen California Tax Free Fund
Shareholders Meeting to Be Held on , 2012.
The Proxy Statement and Proxy Card for this meeting are available at: www.proxy-direct.com/nuv
IF YOU VOTE ON THE INTERNET OR BY TELEPHONE,
YOU NEED NOT RETURN THIS PROXY CARD
Please detach at perforation before mailing.
The Board of Trustees recommends a vote “FOR” the following proposal.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK. Example: ¢
| FOR | AGAINST | ABSTAIN | ||||||
1. | To approve an Agreement and Plan of Reorganization (and the related transactions) which provides for (i) the transfer of all the assets of Nuveen California Tax Free Fund (the “Acquired Fund”) to Nuveen California Municipal Bond Fund (the “Acquiring Fund”) in exchange solely for voting shares of beneficial interest of the Acquiring Fund and the assumption by the Acquiring Fund of all the liabilities of the Acquired Fund; and (ii) the distribution by the Acquired Fund of all the shares of each class of the Acquiring Fund to the holders of shares of the corresponding class of the Acquired Fund in complete liquidation and termination of the Acquired Fund (the “Reorganization”). A vote in favor of the Reorganization will be considered a vote in favor of an amendment to the Corporation’s Articles of Incorporation effecting the Reorganization. | ¨ | ¨ | ¨ | ||||
2. | To transact such other business as may properly come before the Special Meeting or any adjournment or postponement thereof. | |||||||
PLEASE SIGN AND DATE ON THE REVERSE SIDE
XXX_23114_111611
EVERY SHAREHOLDER’S VOTE IS IMPORTANT
| EASY VOTING OPTIONS: | ||||
| VOTE ON THE INTERNET Log on to: www.proxy-direct.com Follow the on-screen instructions available 24 hours | |||
| VOTE BY PHONE Call 1-800-337-3503 Follow the recorded instructions available 24 hours | |||
| VOTE BY MAIL Vote, sign and date this Proxy Card and return in the postage-paid envelope | |||
| VOTE IN PERSON Attend Shareholder Meeting 333 West Wacker Dr. Chicago, IL 60606 on , 2012 | |||
Please detach at perforation before mailing.
| PROXY | NUVEEN CALIFORNIA MUNICIPAL BOND FUND 2 SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON , 2012 | PROXY |
THIS PROXY IS BEING SOLICITED BY THE BOARD OF TRUSTEES. The undersigned shareholder(s) of the Nuveen California Municipal Bond Fund 2, revoking previous proxies, hereby appoints Kevin J. McCarthy, Kathleen Prudhomme and Christopher Rohrbacher, or any one of them true and lawful attorneys with power of substitution of each, to vote all shares of Nuveen California Municipal Bond Fund 2 which the undersigned is entitled to vote, at the Special Meeting of Shareholders to be held on , 2012, at :00 .m. Central time, at the offices of Nuveen Investments, 333 West Wacker Drive, Chicago, Illinois, 60606, and at any adjournment or postponement thereof as indicated on the reverse side. In their discretion, the proxy holders named above are authorized to vote upon such other matters as may properly come before the meeting.
Receipt of the Notice of the Special Meeting and the accompanying Proxy Statement/Prospectus is hereby acknowledged. The shares of Nuveen California Municipal Bond Fund 2 represented hereby will be voted as indicated or FOR the proposal if no choice is indicated.
| VOTE VIA THE INTERNET: www.proxy-direct.com | ||||||||||
| VOTE VIA THE TELEPHONE: 1-800-337-3503 | ||||||||||
Note: Please sign exactly as your name(s) appear(s) on this card. When signing as attorney, executor, administrator, trustee, guardian or as custodian for a minor, please sign your name and give your full title as such. If signing on behalf of a corporation, please sign the full corporate name and your name and indicate your title. If you are a partner signing for a partnership, please sign the partnership name, your name and indicate your title. Joint owners should each sign these instructions. Please sign, date and return. | ||||||||||
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| Signature and Title, if applicable | ||||||||||
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| Signature (if held jointly) | ||||||||||
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| Date | XXX_23114_111611 | |||||||||
EVERY SHAREHOLDER’S VOTE IS IMPORTANT
Important Notice Regarding the Availability of Proxy Materials for the
Nuveen California Municipal Bond Fund 2
Shareholders Meeting to Be Held on , 2012.
The Proxy Statement and Proxy Card for this meeting are available at: www.proxy-direct.com/nuv
IF YOU VOTE ON THE INTERNET OR BY TELEPHONE,
YOU NEED NOT RETURN THIS PROXY CARD
Please detach at perforation before mailing.
The Board of Trustees recommends a vote “FOR” the following proposal.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK. Example: ¢
| FOR | AGAINST | ABSTAIN | ||||||
1. | To approve an Agreement and Plan of Reorganization (and the related transactions) which provides for (i) the transfer of all the assets of Nuveen California Municipal Bond Fund 2 (the “Acquired Fund”) to Nuveen California Municipal Bond Fund (the “Acquiring Fund”) in exchange solely for voting shares of beneficial interest of the Acquiring Fund and the assumption by the Acquiring Fund of all the liabilities of the Acquired Fund; and (ii) the distribution by the Acquired Fund of all the shares of each class of the Acquiring Fund to the holders of shares of the corresponding class of the Acquired Fund in complete liquidation and termination of the Acquired Fund (the “Reorganization”). | ¨ | ¨ | ¨ | ||||
2. | To transact such other business as may properly come before the Special Meeting or any adjournment or postponement thereof. | |||||||
PLEASE SIGN AND DATE ON THE REVERSE SIDE
XXX_23114_111611
NUVEEN CALIFORNIA HIGH YIELD MUNICIPAL BOND FUND
NUVEEN CALIFORNIA MUNICIPAL BOND FUND
NUVEEN CALIFORNIA MUNICIPAL BOND FUND 2
NUVEEN CONNECTICUT MUNICIPAL BOND FUND
NUVEEN MASSACHUSETTS MUNICIPAL BOND FUND
NUVEEN MASSACHUSETTS MUNICIPAL BOND FUND 2
NUVEEN NEW JERSEY MUNICIPAL BOND FUND
NUVEEN NEW YORK MUNICIPAL BOND FUND
NUVEEN NEW YORK MUNICIPAL BOND FUND 2
SUPPLEMENT DATED SEPTEMBER 26, 2011
TO THE PROSPECTUS DATED JUNE 30, 2011
| 1. | Effective December 1, 2011, the first two paragraphs of the section “How You Can Buy and Sell Shares—Special Services—Exchanging Shares” will be deleted in their entirety and replaced with the following two paragraphs: |
Nuveen Mutual Funds currently utilize two transfer agents. You may exchange fund shares into an identically registered account for the same class of another Nuveen Mutual Fund available in your state provided that the funds have the same transfer agent. Exchanges between funds with different transfer agents are not allowed. Your exchange must meet the minimum purchase requirements of the fund into which you are exchanging. You may also, under certain limited circumstances, exchange between certain classes of shares of the same fund, subject to the payment of any applicable CDSC. Please consult the statement of additional information for details.
Each fund reserves the right to revise or suspend the exchange privilege, limit the amount or number of exchanges, or reject any exchange. Shareholders will be provided with at least 60 days’ notice of any material revision to or termination of the exchange privilege.
| 2. | Effective October 1, 2011, the following sentence is hereby added after the first sentence of the section “How You Can Buy and Sell Shares—How to Reduce Your Sales Charge”: |
Nuveen Mutual Funds currently utilize two transfer agents and the ability to use the methods described below to reduce your sales charge is limited to aggregating values or purchases of funds that have the same transfer agent.
| 3. | Effective October 1, 2011, the following two sentences are hereby added to the end of the paragraph in the section “How You Can Buy and Sell Shares—Special Services—Reinstatement Privilege”: |
Nuveen Mutual Funds currently utilize two transfer agents. The reinstatement privilege is limited to reinvestment in a fund which has the same transfer agent as the fund from which you redeemed.
| 4. | The first sentence of the third paragraph of the section “How You Can Buy and Sell Shares—How to Reduce Your Sales Charge—Class A Sales Charge Reductions” is hereby deleted in its entirety and replaced with the following sentence: |
For purposes of calculating the appropriate sales charge as described under Rights of Accumulation and Letter of Intent above, you may include purchases by (i) you, (ii) your spouse or domestic partner and children under the age of 21 years, and (iii) a corporation, partnership or sole proprietorship that is 100% owned by any of the persons in (i) or (ii).
PLEASE KEEP THIS WITH YOUR
FUND’S PROSPECTUS
FOR FUTURE REFERENCE
MGN-MS2P-0911P
NUVEEN CALIFORNIA MUNICIPAL BOND FUND 2
SUPPLEMENT DATED NOVEMBER 18, 2011
TO THE PROSPECTUS DATED JUNE 30, 2011
Proposed Reorganization of
Nuveen California Municipal Bond Fund 2 and Nuveen California Tax Free Fund into Nuveen California Municipal Bond Fund
The Board of Trustees/Directors of Nuveen Multistate Trust II (“NMT II”) and Nuveen Investment Funds, Inc. (“NIF”) has approved the reorganization of Nuveen California Municipal Bond Fund 2 (“California Municipal Bond Fund 2”), a series of the NMT II, and Nuveen California Tax Free Fund (“California Tax Free Fund”), as series of NIF, into Nuveen California Municipal Bond Fund (the “Acquiring Fund”), a series of NMT II. California Municipal Bond Fund 2 and California Tax Free Fund are referred to together as the “Acquired Funds.” In order for the reorganization to occur for California Municipal Bond Fund 2, it must be approved by the shareholders of that fund. There is no requirement that shareholders of both California Municipal Bond Fund 2 and California Tax Free Fund approve the reorganization. Therefore, it is possible that the reorganization could occur between the Acquiring Fund and only one of the Acquired Funds.
If California Municipal Bond Fund 2’s shareholders approve the reorganization, California Municipal Bond Fund 2 will transfer all of its assets and liabilities to the Acquiring Fund in exchange for Acquiring Fund shares of equal value. These Acquiring Fund shares will then be distributed to California Municipal Bond Fund 2 shareholders and California Municipal Bond Fund 2 will be terminated. As a result of these transactions, California Municipal Bond Fund 2 shareholders will become shareholders of the Acquiring Fund and will cease to be shareholders of California Municipal Bond Fund 2. Each California Municipal Bond Fund 2 shareholder will receive Acquiring Fund shares with a total value equal to the total value of that shareholder’s California Municipal Bond Fund 2 shares immediately prior to the closing of the reorganization.
A special meeting of California Municipal Bond Fund 2’s shareholders for the purpose of voting on the reorganization is expected to be held in mid-to-late March 2012. If the required approval is obtained, it is anticipated that the reorganization will be consummated shortly after the special shareholder meeting. Further information regarding the proposed reorganization will be contained in proxy materials that are expected to be sent to shareholders of California Municipal Bond Fund 2 in mid-February 2012.
California Municipal Bond Fund 2 will continue sales and redemptions of its shares as described in the prospectus until shortly before its reorganization. However, holders of shares purchased after the record date set for California Municipal Bond Fund 2’s special meeting of shareholders will not be entitled to vote those shares at the special meeting.
PLEASE KEEP THIS WITH YOUR PROSPECTUS
FOR FUTURE REFERENCE
MGN-MS2P-1111P
NUVEEN CALIFORNIA MUNICIPAL BOND FUND
NUVEEN CONNECTICUT MUNICIPAL BOND FUND
NUVEEN MASSACHUSETTS MUNICIPAL BOND FUND
NUVEEN NEW JERSEY MUNICIPAL BOND FUND
NUVEEN NEW YORK MUNICIPAL BOND FUND
SUPPLEMENT DATED JANUARY 4, 2012
TO THE PROSPECTUS DATED JUNE 30, 2011
The last sentence of the first paragraph of the section “How We Manage Your Money—More About Our Investment Strategies—Portfolio Maturity” is hereby deleted in its entirety and replaced with the following three sentences:
The funds buy municipal bonds with different maturities in pursuit of their investment objectives. Each fund, other than Nuveen California High Yield Municipal Bond Fund and Nuveen California Municipal Bond Fund 2, will maintain, under normal market conditions, an investment portfolio with an overall weighted average maturity in excess of 10 years. Nuveen California High Yield Municipal Bond Fund and Nuveen California Municipal Bond Fund 2 normally maintain a weighted average portfolio maturity of approximately 15 to 30 years.
PLEASE KEEP THIS WITH YOUR
FUND’S PROSPECTUS
FOR FUTURE REFERENCE
MGN-MS2P-0112P
Mutual Funds
Prospectus
June 30, 2011
Nuveen Municipal Bond Funds
Dependable, tax-free income because it’s not what you earn, it’s what you keep.®
| Class / Ticker Symbol | ||||||||
| Fund Name | Class A | Class B | Class C | Class I | ||||
Nuveen California High Yield Municipal Bond Fund | NCHAX | — | NCHCX | NCHRX | ||||
Nuveen California Municipal Bond Fund | NCAAX | NCBBX | NCACX | NCSPX | ||||
Nuveen California Municipal Bond Fund 2 | NCAIX | NCABX | NCAKX | NCIBX | ||||
Nuveen Connecticut Municipal Bond Fund | FCTTX | FCTBX | FCTCX | FCTRX | ||||
Nuveen Massachusetts Municipal Bond Fund | NMAAX | NMABX | NMACX | NBMAX | ||||
Nuveen Massachusetts Municipal Bond Fund 2 | NMAIX | NINSX | NMAKX | NIMAX | ||||
Nuveen New Jersey Municipal Bond Fund | NNJAX | NNJBX | NNJCX | NMNJX | ||||
Nuveen New York Municipal Bond Fund | NNYAX | NNYBX | NNYCX | NTNYX | ||||
Nuveen New York Municipal Bond Fund 2 | NNYIX | NNIMX | NNYKX | NINYX | ||||
The Securities and Exchange Commission has not approved or disapproved these securities or passed upon the adequacy of this prospectus. Any representation to the contrary is a criminal offense.
June 30, 2011
| Section 1 Fund Summaries | ||||
| Nuveen California High Yield Municipal Bond Fund | 2 | |||
| Nuveen California Municipal Bond Fund | 6 | |||
| Nuveen California Municipal Bond Fund 2 | 10 | |||
| Nuveen Connecticut Municipal Bond Fund | 14 | |||
| Nuveen Massachusetts Municipal Bond Fund | 18 | |||
| Nuveen Massachusetts Municipal Bond Fund 2 | 22 | |||
| Nuveen New Jersey Municipal Bond Fund | 26 | |||
| Nuveen New York Municipal Bond Fund | 30 | |||
| Nuveen New York Municipal Bond Fund 2 | 34 | |||
| Section 2 How We Manage Your Money | ||||
| Who Manages the Funds | 38 | |||
| More About Our Investment Strategies | 40 | |||
| How We Select Investments | 44 | |||
| What the Risks Are | 44 | |||
| Section 3 How You Can Buy and Sell Shares | ||||
| What Share Classes We Offer | 47 | |||
| How to Reduce Your Sales Charge | 49 | |||
| How to Buy Shares | 50 | |||
| Special Services | 52 | |||
| How to Sell Shares | 53 | |||
| Section 4 General Information | ||||
| Dividends, Distributions and Taxes | 56 | |||
| Distribution and Service Plans | 58 | |||
| Net Asset Value | 59 | |||
| Frequent Trading | 60 | |||
| Fund Service Providers | 61 | |||
| Section 5 Financial Highlights | 62 | |||
| Section 6 Glossary of Investment Terms | 71 | |||
NOT FDIC OR GOVERNMENT INSURED MAY LOSE VALUE NO BANK GUARANTEE
Nuveen California High Yield Municipal Bond Fund
Investment Objective
The investment objective of the fund is to provide high current income exempt from regular federal, California state and, in some cases, California local income taxes. Total return is a secondary objective when consistent with the fund’s primary objective.
Fees and Expenses of the Fund
This table describes the fees and expenses that you may pay if you buy and hold shares of the fund. You may qualify for sales charge discounts if you and your family invest, or agree to invest in the future, at least $50,000 in the fund or in other Nuveen Mutual Funds. More information about these and other discounts, as well as eligibility requirements for each share class, is available from your financial advisor and in “What Share Classes We Offer” on page 47 of the fund’s prospectus, “How to Reduce Your Sales Charge” on page 49 of the prospectus and “Purchase and Redemption of Fund Shares” on page S-46 of the fund’s statement of additional information.
Shareholder Fees
(fees paid directly from your investment)
| Class A | Class C | Class I | ||||||||||
| Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) | 4.20% | None | None | |||||||||
Maximum Deferred Sales Charge (Load) (as a percentage of the lesser of purchase price or redemption proceeds) | None | 1.00% | None | |||||||||
| Maximum Sales Charge (Load) Imposed on Reinvested Dividends | None | None | None | |||||||||
| Exchange Fee | None | None | None | |||||||||
| Annual Low Balance Account Fee (for accounts under $1,000)1 | $15 | $15 | $15 | |||||||||
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)
| Class A | Class C | Class I | ||||||||||
| Management Fees | 0.58% | 0.58% | 0.58% | |||||||||
| Distribution and Service (12b-1) Fees | 0.20% | 0.75% | — | |||||||||
| Other Expenses | 0.12% | 0.12% | 0.12% | |||||||||
| Total Annual Fund Operating Expenses | 0.90% | 1.45% | 0.70% | |||||||||
| 1 | Fee applies to the following types of accounts held directly with the fund: accounts established pursuant to the Uniform Transfers to Minors Act (UTMA) or Uniform Gifts to Minors Act (UGMA). |
Example
The following example is intended to help you compare the cost of investing in the fund with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the fund for the time periods indicated and then either redeem or do not redeem your shares at the end of a period. The example also assumes that your investment has a 5% return each year and that the fund operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
| Redemption | No Redemption | |||||||||||||||||||||||||||
| A | C | I | A | C | I | |||||||||||||||||||||||
| 1 Year | $ | 508 | $ | 148 | $ | 72 | $ | 508 | $ | 148 | $ | 72 | ||||||||||||||||
| 3 Years | $ | 695 | $ | 459 | $ | 224 | $ | 695 | $ | 459 | $ | 224 | ||||||||||||||||
| 5 Years | $ | 898 | $ | 792 | $ | 390 | $ | 898 | $ | 792 | $ | 390 | ||||||||||||||||
| 10 Years | $ | 1,481 | $ | 1,735 | $ | 871 | $ | 1,481 | $ | 1,735 | $ | 871 | ||||||||||||||||
Portfolio Turnover
The fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes
2
Section 1 Fund Summaries
when fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the example, affect the fund’s performance. During the most recent fiscal year, the fund’s portfolio turnover rate was 17% of the average value of its portfolio.
Principal Investment Strategies
Under normal market conditions, the fund invests at least 80% of its net assets in municipal bonds that pay interest that is exempt from regular federal and California personal income tax. The fund invests at least 65% of its net assets in medium- to low-quality bonds rated BBB/Baa or lower or in unrated bonds of comparable quality and may invest up to 10% of its net assets in defaulted municipal bonds (i.e., bonds on which the issuer has not paid principal or interest on time). The fund may invest up to 15% of its net assets in municipal securities whose interest payments vary inversely with changes in short-term tax-exempt interest rates (i.e., inverse floating rate securities). The fund’s sub-adviser uses a research-intensive investment process to identify high-yielding municipal bonds that offer attractive value in terms of their current yields, prices, credit quality, liquidity and future prospects. The sub-adviser may choose to sell municipal bonds with deteriorating credit or limited upside potential compared to other available bonds.
Principal Risks
Market Risk—The market values of municipal bonds owned by the fund may decline, at times sharply and unpredictably.
Credit Risk—Credit risk is the risk that an issuer of a municipal bond may be unable or unwilling to make interest and principal payments when due and the related risk that the value of a bond may decline because of concerns about the issuer’s ability or willingness to make such payments. Credit risk is heightened for the fund because it invests at least 65% of its net assets in medium and lower rated municipal bonds, including below investment grade (“high yield” or “junk”) municipal bonds. High yield bonds, while generally offering higher yields than investment grade bonds with similar maturities, involve greater risks, including the possibility of default or bankruptcy, and are regarded as predominantly speculative with respect to the issuer’s capacity to pay interest and repay principal.
Interest Rate Risk—Interest rate risk is the risk that the value of the fund’s portfolio will decline because of rising interest rates. Interest rate risk may be increased by the fund’s investment in inverse floating rate securities because of the leveraged nature of these investments.
State Concentration Risk—Because the fund primarily purchases municipal bonds from California, the fund is more susceptible to adverse economic, political or regulatory changes affecting municipal bond issuers in that state. California’s credit rating is among the worst of any state in the country.
Income Risk—The income from the fund’s portfolio may decline because of falling market interest rates. This can result when the fund invests the proceeds from new share sales, or from matured or called bonds, at market interest rates that are below the portfolio’s current earnings rate. Also, if the fund invests in inverse floating rate securities, the fund’s income may decrease if short-term interest rates rise.
Leveraged Securities Risk—The fund may invest in inverse floating rate securities which create effective leverage. Because these securities create leveraged exposure to underlying municipal bonds, the amount the fund invests in such securities exposes it to risks and potential returns to a greater extent than the amount actually invested. The interest payments the fund receives on such securities vary inversely with the short-term financing rates paid by the securities’ issuers, and those interest payments will decrease if short-term interest rates increase. In addition, the value of these securities will vary by more than the value of the underlying bonds due to the leveraged nature of the investments. Also, the holder of the floating rate securities that has provided the leverage associated with a fund’s inverse floating rate securities may cause the fund to purchase or otherwise retire those floating rate securities (i.e., to effectively cause the fund to repay the leverage provided by such holder), which may require the fund to raise cash through the sale of portfolio securities at times and at prices that are not desirable for the fund.
Tax Risk—Income from municipal bonds held by the fund could be declared taxable because of unfavorable changes in tax laws, adverse interpretations by the Internal Revenue Service or state tax authorities, or noncompliant conduct of a bond issuer. In addition, a portion of the fund’s otherwise exempt-interest dividends may be taxable to those shareholders subject to the federal alternative minimum tax.
As with any mutual fund investment, loss of money is a risk of investing. An investment in the fund is not a deposit of a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
Section 1 Fund Summaries
3
Fund Performance
The following bar chart and table provide some indication of the potential risks of investing in the fund. The fund’s past performance (before and after taxes) is not necessarily an indication of how the fund will perform in the future. Updated performance information is available at www.nuveen.com/MF/products/performancesummary.aspx or by calling (800) 257-8787.
The bar chart below shows the variability of the fund’s performance from year to year for Class A shares. The performance of the other share classes will differ due to their different expense structures. The bar chart and highest/lowest quarterly returns that follow do not reflect sales charges, and if these charges were reflected, the returns would be less than those shown.
Class A Annual Total Return*
| * | Class A year-to-date total return as of March 31, 2011 was -1.68%. |
During the four-year period ended December 31, 2010, the fund’s highest and lowest quarterly returns were 18.05% and -24.02%, respectively, for the quarters ended September 30, 2009 and December 31, 2008.
The table below shows the variability of the fund’s average annual returns and how they compare over the time periods indicated with those of broad measures of market performance and an index of funds with similar investment objectives. All after-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. After-tax returns are shown for Class A shares only; after-tax returns for other share classes will vary. Your own actual after-tax returns will depend on your specific tax situation and may differ from what is shown here.
Both the bar chart and the table assume that all distributions have been reinvested. Performance reflects fee waivers, if any, in effect during the periods presented. If any such waivers were not in place, performance would be reduced.
Average Annual Total Returns for the Periods Ended December 31, 2010 | ||||||||
| 1 Year | Since Inception (March 28, 2006) | |||||||
| Class Returns Before Taxes: | ||||||||
Class A | -1.63 | % | -1.45 | % | ||||
Class C | 2.01 | % | -1.10 | % | ||||
Class I | 2.91 | % | -0.36 | % | ||||
| Class A Returns After Taxes: | ||||||||
On Distributions | -1.63 | % | -1.45 | % | ||||
On Distributions and Sales of Shares | 1.10 | % | -0.45 | % | ||||
4
Section 1 Fund Summaries
Average Annual Total Returns for the Periods Ended December 31, 2010 | ||||||||
| 1 Year | Since Inception (March 28, 2006) | |||||||
| Standard & Poor’s National Municipal Bond Index (reflects no deduction for fees, expenses or taxes) | 2.45 | % | 3.43 | % | ||||
| Standard & Poor’s High Yield Municipal Bond Index (reflects no deduction of fees, expenses or taxes) | 7.06 | % | 1.80 | % | ||||
| Standard & Poor’s California Municipal Bond Index (reflects no deduction for fees, expenses or taxes) | 2.71 | % | 3.52 | % | ||||
| Lipper California Municipal Debt Funds Average (reflects no deduction for taxes or certain expenses) | 1.82 | % | 2.26 | % | ||||
Management
Investment Adviser
Nuveen Fund Advisors, Inc.
Sub-Adviser
Nuveen Asset Management, LLC
Portfolio Manager
Name | Title | Portfolio Manager of Fund Since | ||
| John V. Miller, CFA | Managing Director and Co-Head of Fixed Income | March 2006 |
Purchase and Sale of Fund Shares
You may purchase, redeem or exchange shares of the fund on any business day, which is any day the New York Stock Exchange is open for business. You may purchase, redeem or exchange shares of the fund through a financial advisor or other financial intermediary or directly from the fund. The fund’s initial and subsequent investment minimums generally are as follows, although the fund may reduce or waive the minimums in some cases:
| Class A and Class C | Class I | |||
| Eligibility and Minimum Initial Investment | $3,000 | Available only through fee-based programs and to other limited categories of investors as described in the prospectus.
$100,000 for all accounts except:
• $250 for clients of financial intermediaries and family offices that have accounts holding Class I shares with an aggregate value of at least $100,000 (or that are expected to reach this level).
• No minimum for certain other categories of eligible investors as described in the prospectus. | ||
| Minimum Additional Investment | $100 | No minimum. |
Tax Information
The fund intends to make distributions that are exempt from regular federal and California state income tax. All or a portion of these distributions, however, may be subject to the federal and state alternative minimum tax.
Payments to Broker-Dealers and Other Financial Intermediaries
If you purchase shares of the fund through a broker-dealer or other financial intermediary (such as a bank or financial advisor), the fund, its distributor or its investment adviser may pay the intermediary for the sale of fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other financial intermediary and your salesperson to recommend the fund over another investment. Ask your financial advisor or visit your financial intermediary’s website for more information.
Section 1 Fund Summaries
5
Nuveen California Municipal Bond Fund
Investment Objective
The investment objective of the fund is to provide you with as high a level of current interest income exempt from regular federal, California state and, in some cases, California local income taxes as is consistent with preservation of capital.
Fees and Expenses of the Fund
This table describes the fees and expenses that you may pay if you buy and hold shares of the fund. You may qualify for sales charge discounts if you and your family invest, or agree to invest in the future, at least $50,000 in the fund or in other Nuveen Mutual Funds. More information about these and other discounts, as well as eligibility requirements for each share class, is available from your financial advisor and in “What Share Classes We Offer” on page 47 of the fund’s prospectus, “How to Reduce Your Sales Charge” on page 49 of the prospectus and “Purchase and Redemption of Fund Shares” on page S-46 of the fund’s statement of additional information.
Shareholder Fees
(fees paid directly from your investment)
| Class A | Class B | Class C | Class I | |||||||||||||
| Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) | 4.20% | None | None | None | ||||||||||||
Maximum Deferred Sales Charge (Load) (as a percentage of the lesser of purchase price or redemption proceeds) | None | 5.00% | 1.00% | None | ||||||||||||
| Maximum Sales Charge (Load) Imposed on Reinvested Dividends | None | None | None | None | ||||||||||||
| Exchange Fee | None | None | None | None | ||||||||||||
| Annual Low Balance Account Fee (for accounts under $1,000)1 | $15 | $15 | $15 | $ | 15 | |||||||||||
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)
| Class A | Class B | Class C | Class I | |||||||||||||
| Management Fees | 0.52% | 0.52% | 0.52% | 0.52% | ||||||||||||
| Distribution and Service (12b-1) Fees | 0.20% | 0.95% | 0.75% | — | ||||||||||||
| Other Expenses | 0.09% | 0.09% | 0.09% | 0.09% | ||||||||||||
| Total Annual Fund Operating Expenses | 0.81% | 1.56% | 1.36% | 0.61% | ||||||||||||
| 1 | Fee applies to the following types of accounts held directly with the fund: accounts established pursuant to the Uniform Transfers to Minors Act (UTMA) or Uniform Gifts to Minors Act (UGMA). |
Example
The following example is intended to help you compare the cost of investing in the fund with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the fund for the time periods indicated and then either redeem or do not redeem your shares at the end of a period. The example also assumes that your investment has a 5% return each year and that the fund operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
| Redemption | No Redemption | |||||||||||||||||||||||||||||||||||
| A | B | C | I | A | B | C | I | |||||||||||||||||||||||||||||
| 1 Year | $ | 499 | $ | 559 | $ | 138 | $ | 62 | $ | 499 | $ | 159 | $ | 138 | $ | 62 | ||||||||||||||||||||
| 3 Years | $ | 668 | $ | 793 | �� | $ | 431 | $ | 195 | $ | 668 | $ | 493 | $ | 431 | $ | 195 | |||||||||||||||||||
| 5 Years | $ | 851 | $ | 950 | $ | 745 | $ | 340 | $ | 851 | $ | 850 | $ | 745 | $ | 340 | ||||||||||||||||||||
| 10 Years | $ | 1,380 | $ | 1,655 | $ | 1,635 | $ | 762 | $ | 1,380 | $ | 1,655 | $ | 1,635 | $ | 762 | ||||||||||||||||||||
Portfolio Turnover
The fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes
6
Section 1 Fund Summaries
when fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the example, affect the fund’s performance. During the most recent fiscal year, the fund’s portfolio turnover rate was 18% of the average value of its portfolio.
Principal Investment Strategies
Under normal market conditions, the fund invests at least 80% of its net assets in municipal bonds that pay interest that is exempt from regular federal and California personal income tax. The fund invests at least 80% of its net assets in investment grade municipal bonds rated BBB/Baa or higher at the time of purchase by at least one independent rating agency, or, if unrated, judged by the fund’s sub-adviser to be of comparable quality. The fund may invest up to 20% of its net assets in below investment grade municipal bonds, commonly referred to as “high yield” or “junk” bonds. The fund may invest up to 15% of its net assets in municipal securities whose interest payments vary inversely with changes in short-term tax-exempt interest rates (i.e., inverse floating rate securities). The fund’s sub-adviser uses a value-oriented strategy and looks for higher-yielding and undervalued municipal bonds that offer above-average total return. The sub-adviser may choose to sell municipal bonds with deteriorating credit or limited upside potential compared to other available bonds.
Principal Risks
Market Risk—The market values of municipal bonds owned by the fund may decline, at times sharply and unpredictably.
Credit Risk—Credit risk is the risk that an issuer of a municipal bond may be unable or unwilling to make interest and principal payments when due and the related risk that the value of a bond may decline because of concerns about the issuer’s ability or willingness to make such payments. Credit risk is heightened for the fund because it may invest up to 20% of its net assets in below investment grade (“high yield” or “junk”) municipal bonds. High yield bonds, while generally offering higher yields than investment grade bonds with similar maturities, involve greater risks, including the possibility of default or bankruptcy, and are regarded as predominantly speculative with respect to the issuer’s capacity to pay interest and repay principal.
Interest Rate Risk—Interest rate risk is the risk that the value of the fund’s portfolio will decline because of rising interest rates. Interest rate risk may be increased by the fund’s investment in inverse floating rate securities because of the leveraged nature of these investments.
State Concentration Risk—Because the fund primarily purchases municipal bonds from California, the fund is more susceptible to adverse economic, political or regulatory changes affecting municipal bond issuers in that state. California’s credit rating is among the worst of any state in the country.
Income Risk—The income from the fund’s portfolio may decline because of falling market interest rates. This can result when the fund invests the proceeds from new share sales, or from matured or called bonds, at market interest rates that are below the portfolio’s current earnings rate. Also, if the fund invests in inverse floating rate securities, the fund’s income may decrease if short-term interest rates rise.
Leveraged Securities Risk—The fund may invest in inverse floating rate securities which create effective leverage. Because these securities create leveraged exposure to underlying municipal bonds, the amount the fund invests in such securities exposes it to risks and potential returns to a greater extent than the amount actually invested. The interest payments the fund receives on such securities vary inversely with the short-term financing rates paid by the securities’ issuers, and those interest payments will decrease if short-term interest rates increase. In addition, the value of these securities will vary by more than the value of the underlying bonds due to the leveraged nature of the investments. Also, the holder of the floating rate securities that has provided the leverage associated with a fund’s inverse floating rate securities may cause the fund to purchase or otherwise retire those floating rate securities (i.e., to effectively cause the fund to repay the leverage provided by such holder), which may require the fund to raise cash through the sale of portfolio securities at times and at prices that are not desirable for the fund.
Tax Risk—Income from municipal bonds held by the fund could be declared taxable because of unfavorable changes in tax laws, adverse interpretations by the Internal Revenue Service or state tax authorities, or noncompliant conduct of a bond issuer. In addition, a portion of the fund’s otherwise exempt-interest dividends may be taxable to those shareholders subject to the federal alternative minimum tax.
As with any mutual fund investment, loss of money is a risk of investing. An investment in the fund is not a deposit of a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
Section 1 Fund Summaries
7
Fund Performance
The following bar chart and table provide some indication of the potential risks of investing in the fund. The fund’s past performance (before and after taxes) is not necessarily an indication of how the fund will perform in the future. Updated performance information is available at www.nuveen.com/MF/products/performancesummary.aspx or by calling (800) 257-8787.
The bar chart below shows the variability of the fund’s performance from year to year for Class A shares. The performance of the other share classes will differ due to their different expense structures. The bar chart and highest/lowest quarterly returns that follow do not reflect sales charges, and if these charges were reflected, the returns would be less than those shown.
Class A Annual Total Return*
| * | Class A year-to-date total return as of March 31, 2011 was -0.50%. |
During the ten-year period ended December 31, 2010, the fund’s highest and lowest quarterly returns were 10.57% and -7.42%, respectively, for the quarters ended September 30, 2009 and December 31, 2008.
The table below shows the variability of the fund’s average annual returns and how they compare over the time periods indicated with those of broad measures of market performance and an index of funds with similar investment objectives. All after-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. After-tax returns are shown for Class A shares only; after-tax returns for other share classes will vary. Your own actual after-tax returns will depend on your specific tax situation and may differ from what is shown here.
Both the bar chart and the table assume that all distributions have been reinvested. Performance reflects fee waivers, if any, in effect during the periods presented. If any such waivers were not in place, performance would be reduced.
| Average Annual Total Returns for the Periods Ended December 31, 2010 | ||||||||||||
| 1 Year | 5 Years | 10 Years | ||||||||||
| Class Returns Before Taxes: | ||||||||||||
Class A | -1.86 | % | 1.76 | % | 3.37 | % | ||||||
Class B | -2.18 | % | 1.72 | % | 3.21 | % | ||||||
Class C | 1.93 | % | 2.08 | % | 3.25 | % | ||||||
Class I | 2.78 | % | 2.87 | % | 4.02 | % | ||||||
| Class A Returns After Taxes : | ||||||||||||
On Distributions | -1.86 | % | 1.76 | % | 3.36 | % | ||||||
On Distributions and Sales of Shares | 0.37 | % | 2.13 | % | 3.54 | % | ||||||
8
Section 1 Fund Summaries
| Average Annual Total Returns for the Periods Ended December 31, 2010 | ||||||||||||
| 1 Year | 5 Years | 10 Years | ||||||||||
| Standard & Poor’s National Municipal Bond Index (reflects no deduction for fees, expenses or taxes) | 2.45 | % | 3.83 | % | 4.82 | % | ||||||
| Standard & Poor’s California Municipal Bond Index (reflects no deduction for fees, expenses or taxes) | 2.71 | % | 3.43 | % | 4.57 | % | ||||||
| Lipper California Municipal Debt Funds Average (reflects no deduction for taxes or certain expenses) | 1.82 | % | 2.34 | % | 3.57 | % | ||||||
Management
Investment Adviser
Nuveen Fund Advisors, Inc.
Sub-Adviser
Nuveen Asset Management, LLC
Portfolio Manager
Name | Title | Portfolio Manager of Fund Since | ||
| Scott R. Romans, PhD | Senior Vice President | 2003 |
Purchase and Sale of Fund Shares
You may purchase, redeem or exchange shares of the fund on any business day, which is any day the New York Stock Exchange is open for business. You may purchase, redeem or exchange shares of the fund through a financial advisor or other financial intermediary or directly from the fund. Class B shares are available only through exchanges and dividend reinvestments by current Class B shareholders. The fund’s initial and subsequent investment minimums generally are as follows, although the fund may reduce or waive the minimums in some cases:
| Class A and Class C | Class I | |||
| Eligibility and Minimum Initial Investment | $3,000 | Available only through fee-based programs and to other limited categories of investors as described in the prospectus.
$100,000 for all accounts except:
• $250 for clients of financial intermediaries and family offices that have accounts holding Class I shares with an aggregate value of at least $100,000 (or that are expected to reach this level).
• No minimum for certain other categories of eligible investors as described in the prospectus. | ||
| Minimum Additional Investment | $100 | No minimum. |
Tax Information
The fund intends to make distributions that are exempt from regular federal and California state income tax. All or a portion of these distributions, however, may be subject to the federal and state alternative minimum tax.
Payments to Broker-Dealers and Other Financial Intermediaries
If you purchase shares of the fund through a broker-dealer or other financial intermediary (such as a bank or financial advisor), the fund, its distributor or its investment adviser may pay the intermediary for the sale of fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other financial intermediary and your salesperson to recommend the fund over another investment. Ask your financial advisor or visit your financial intermediary’s website for more information.
Section 1 Fund Summaries
9
Nuveen California Municipal Bond Fund 2
Investment Objective
The investment objective of the fund is to provide you with as high a level of current interest income exempt from regular federal, California state and, in some cases, California local income taxes as is consistent with preservation of capital.
Fees and Expenses of the Fund
This table describes the fees and expenses that you may pay if you buy and hold shares of the fund. You may qualify for sales charge discounts if you and your family invest, or agree to invest in the future, at least $50,000 in the fund or in other Nuveen Mutual Funds. More information about these and other discounts, as well as eligibility requirements for each share class, is available from your financial advisor and in “What Share Classes We Offer” on page 47 of the fund’s prospectus, “How to Reduce Your Sales Charge” on page 49 of the prospectus and “Purchase and Redemption of Fund Shares” on page S-46 of the fund’s statement of additional information.
Shareholder Fees
(fees paid directly from your investment)
| Class A | Class B | Class C | Class I | |||||||||||||
| Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) | 4.20% | None | None | None | ||||||||||||
| Maximum Deferred Sales Charge (Load) (as a percentage of the lesser of purchase price or redemption proceeds) | None | 5.00% | 1.00% | None | ||||||||||||
| Maximum Sales Charge (Load) Imposed on Reinvested Dividends | None | None | None | None | ||||||||||||
| Exchange Fee | None | None | None | None | ||||||||||||
| Annual Low Balance Account Fee (for accounts under $1,000)1 | $15 | $15 | $15 | $ | 15 | |||||||||||
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)
| Class A | Class B | Class C | Class I | |||||||||||||
| Management Fees | 0.53% | 0.53% | 0.53% | 0.53% | ||||||||||||
| Distribution and Service (12b-1) Fees | 0.20% | 0.95% | 0.75% | — | ||||||||||||
| Other Expenses | 0.10% | 0.10% | 0.10% | 0.10% | ||||||||||||
| Total Annual Fund Operating Expenses | 0.83% | 1.58% | 1.38% | 0.63% | ||||||||||||
| 1 | Fee applies to the following types of accounts held directly with the fund: accounts established pursuant to the Uniform Transfers to Minors Act (UTMA) or Uniform Gifts to Minors Act (UGMA). |
Example
The following example is intended to help you compare the cost of investing in the fund with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the fund for the time periods indicated and then either redeem or do not redeem your shares at the end of a period. The example also assumes that your investment has a 5% return each year and that the fund operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
| Redemption | No Redemption | |||||||||||||||||||||||||||||||||||
| A | B | C | I | A | B | C | I | |||||||||||||||||||||||||||||
| 1 Year | $ | 501 | $ | 561 | $ | 140 | $ | 64 | $ | 501 | $ | 161 | $ | 140 | $ | 64 | ||||||||||||||||||||
| 3 Years | $ | 674 | $ | 799 | $ | 437 | $ | 202 | $ | 674 | $ | 499 | $ | 437 | $ | 202 | ||||||||||||||||||||
| 5 Years | $ | 861 | $ | 960 | $ | 755 | $ | 351 | $ | 861 | $ | 860 | $ | 755 | $ | 351 | ||||||||||||||||||||
| 10 Years | $ | 1,402 | $ | 1,677 | $ | 1,657 | $ | 786 | $ | 1,402 | $ | 1,677 | $ | 1,657 | $ | 786 | ||||||||||||||||||||
Portfolio Turnover
The fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes
10
Section 1 Fund Summaries
when fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the example, affect the fund’s performance. During the most recent fiscal year, the fund’s portfolio turnover rate was 3% of the average value of its portfolio.
Principal Investment Strategies
Under normal market conditions, the fund invests at least 80% of its net assets in municipal bonds that pay interest that is exempt from regular federal and California personal income tax. The municipal securities in which the fund invests are, at the time of purchase, (i) rated BBB/Baa or higher; (ii) unrated, but judged to be of comparable quality by the fund’s sub-adviser; or (iii) backed by an escrow or trust account containing sufficient U.S. Government or U.S. government agency securities to ensure timely payment of principal and interest. The fund may invest up to 15% of its net assets in municipal securities whose interest payments vary inversely with changes in short-term tax-exempt interest rates (i.e., inverse floating rate securities). The fund’s sub-adviser uses a value-oriented strategy and looks for higher-yielding and undervalued municipal bonds that offer above-average total return. The sub-adviser may choose to sell municipal bonds with deteriorating credit or limited upside potential compared to other available bonds.
Principal Risks
Market Risk—The market values of municipal bonds owned by the fund may decline, at times sharply and unpredictably.
Credit Risk—Credit risk is the risk that an issuer of a municipal bond may be unable or unwilling to make interest and principal payments when due and the related risk that the value of a bond may decline because of concerns about the issuer’s ability or willingness to make such payments.
Interest Rate Risk—Interest rate risk is the risk that the value of the fund’s portfolio will decline because of rising interest rates. Interest rate risk may be increased by the fund’s investment in inverse floating rate securities because of the leveraged nature of these investments.
State Concentration Risk—Because the fund primarily purchases municipal bonds from California, the fund is more susceptible to adverse economic, political or regulatory changes affecting municipal bond issuers in that state. California’s credit rating is among the worst of any state in the country.
Income Risk—The income from the fund’s portfolio may decline because of falling market interest rates. This can result when the fund invests the proceeds from new share sales, or from matured or called bonds, at market interest rates that are below the portfolio’s current earnings rate. Also, if the fund invests in inverse floating rate securities, the fund’s income may decrease if short-term interest rates rise.
Leveraged Securities Risk—The fund may invest in inverse floating rate securities which create effective leverage. Because these securities create leveraged exposure to underlying municipal bonds, the amount the fund invests in such securities exposes it to risks and potential returns to a greater extent than the amount actually invested. The interest payments the fund receives on such securities vary inversely with the short-term financing rates paid by the securities’ issuers, and those interest payments will decrease if short-term interest rates increase. In addition, the value of these securities will vary by more than the value of the underlying bonds due to the leveraged nature of the investments. Also, the holder of the floating rate securities that has provided the leverage associated with a fund’s inverse floating rate securities may cause the fund to purchase or otherwise retire those floating rate securities (i.e., to effectively cause the fund to repay the leverage provided by such holder), which may require the fund to raise cash through the sale of portfolio securities at times and at prices that are not desirable for the fund.
Tax Risk—Income from municipal bonds held by the fund could be declared taxable because of unfavorable changes in tax laws, adverse interpretations by the Internal Revenue Service or state tax authorities, or noncompliant conduct of a bond issuer. In addition, a portion of the fund’s otherwise exempt-interest dividends may be taxable to those shareholders subject to the federal alternative minimum tax.
As with any mutual fund investment, loss of money is a risk of investing. An investment in the fund is not a deposit of a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
Section 1 Fund Summaries
11
Fund Performance
The following bar chart and table provide some indication of the potential risks of investing in the fund. The fund’s past performance (before and after taxes) is not necessarily an indication of how the fund will perform in the future. Updated performance information is available at www.nuveen.com/MF/products/performancesummary.aspx or by calling (800) 257-8787.
The bar chart below shows the variability of the fund’s performance from year to year for Class A shares. The performance of the other share classes will differ due to their different expense structures. The bar chart and highest/lowest quarterly returns that follow do not reflect sales charges, and if these charges were reflected, the returns would be less than those shown.
Class A Annual Total Return*
| * | Class A year-to-date total return as of March 31, 2011 was -1.70%. |
During the ten-year period ended December 31, 2010, the fund’s highest and lowest quarterly returns were 10.04% and -5.99%, respectively, for the quarters ended September 30, 2009 and December 31, 2010.
The table below shows the variability of the fund’s average annual returns and how they compare over the time periods indicated with those of broad measures of market performance and an index of funds with similar investment objectives. All after-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. After-tax returns are shown for Class A shares only; after-tax returns for other share classes will vary. Your own actual after-tax returns will depend on your specific tax situation and may differ from what is shown here.
Both the bar chart and the table assume that all distributions have been reinvested. Performance reflects fee waivers, if any, in effect during the periods presented. If any such waivers were not in place, performance would be reduced.
Average Annual Total Returns for the Periods Ended December 31, 2010 | ||||||||||||
| 1 Year | 5 Years | 10 Years | ||||||||||
| Class Returns Before Taxes: | ||||||||||||
Class A | -3.81 | % | 1.16 | % | 2.91 | % | ||||||
Class B | -4.13 | % | 1.08 | % | 2.74 | % | ||||||
Class C | -0.10 | % | 1.44 | % | 2.79 | % | ||||||
Class I | 0.64 | % | 2.20 | % | 3.56 | % | ||||||
| Class A Returns After Taxes: | ||||||||||||
On Distributions | -3.81 | % | 1.13 | % | 2.87 | % | ||||||
On Distributions and Sales of Shares | -1.06 | % | 1.59 | % | 3.10 | % | ||||||
12
Section 1 Fund Summaries
Average Annual Total Returns for the Periods Ended December 31, 2010 | ||||||||||||
| 1 Year | 5 Years | 10 Years | ||||||||||
| Standard & Poor’s National Municipal Bond Index (reflects no deduction for fees, expenses or taxes) | 2.45 | % | 3.83 | % | 4.82 | % | ||||||
| Standard & Poor’s California Municipal Bond Index (reflects no deduction for fees, expenses or taxes) | 2.71 | % | 3.43 | % | 4.57 | % | ||||||
| Lipper California Municipal Debt Funds Average (reflects no deduction for taxes or certain expenses) | 1.82 | % | 2.34 | % | 3.57 | % | ||||||
Management
Investment Adviser
Nuveen Fund Advisors, Inc.
Sub-Adviser
Nuveen Asset Management, LLC
Portfolio Manager
Name | Title | Portfolio Manager of Fund Since | ||
| Scott R. Romans, PhD | Senior Vice President | 2003 |
Purchase and Sale of Fund Shares
The fund is closed to new investors. Investors who held shares of the fund as of April 27, 2011 may continue to invest in the fund, including through the reinvestment of dividends and capital gain distributions. Eligible investors may purchase, redeem or exchange shares of the fund on any business day, which is any day the New York Stock Exchange is open for business. Eligible investors may purchase, redeem or exchange shares of the fund through a financial advisor or other financial intermediary or directly from the fund. Class B shares are available only through exchanges and dividend reinvestments by current Class B shareholders. The fund’s initial and subsequent investment minimums generally are as follows, although the fund may reduce or waive the minimums in some cases:
| Class A and Class C | Class I | |||
| Eligibility and Minimum Initial Investment | $3,000 | Available only through fee-based programs and to other limited categories of investors as described in the prospectus.
$100,000 for all accounts except:
• $250 for clients of financial intermediaries and family offices that have accounts holding Class I shares with an aggregate value of at least $100,000 (or that are expected to reach this level).
• No minimum for certain other categories of eligible investors as described in the prospectus. | ||
| Minimum Additional Investment | $100 | No minimum. |
Tax Information
The fund intends to make distributions that are exempt from regular federal and California state income tax. All or a portion of these distributions, however, may be subject to the federal and state alternative minimum tax.
Payments to Broker-Dealers and Other Financial Intermediaries
If you purchase shares of the fund through a broker-dealer or other financial intermediary (such as a bank or financial advisor), the fund, its distributor or its investment adviser may pay the intermediary for the sale of fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other financial intermediary and your salesperson to recommend the fund over another investment. Ask your financial advisor or visit your financial intermediary’s website for more information.
Section 1 Fund Summaries
13
Nuveen Connecticut Municipal Bond Fund
Investment Objective
The investment objective of the fund is to provide you with as high a level of current interest income exempt from regular federal, Connecticut state and, in some cases, Connecticut local income taxes as is consistent with preservation of capital.
Fees and Expenses of the Fund
This table describes the fees and expenses that you may pay if you buy and hold shares of the fund. You may qualify for sales charge discounts if you and your family invest, or agree to invest in the future, at least $50,000 in the fund or in other Nuveen Mutual Funds. More information about these and other discounts, as well as eligibility requirements for each share class, is available from your financial advisor and in “What Share Classes We Offer” on page 47 of the fund’s prospectus, “How to Reduce Your Sales Charge” on page 49 of the prospectus and “Purchase and Redemption of Fund Shares” on page S-46 of the fund’s statement of additional information.
Shareholder Fees
(fees paid directly from your investment)
| Class A | Class B | Class C | Class I | |||||||||||||
| Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) | 4.20% | None | None | None | ||||||||||||
| Maximum Deferred Sales Charge (Load) (as a percentage of the lesser of purchase price or redemption proceeds) | None | 5.00% | 1.00% | None | ||||||||||||
| Maximum Sales Charge (Load) Imposed on Reinvested Dividends | None | None | None | None | ||||||||||||
| Exchange Fee | None | None | None | None | ||||||||||||
| Annual Low Balance Account Fee (for accounts under $1,000)1 | $15 | $15 | $15 | $ | 15 | |||||||||||
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)
| Class A | Class B | Class C | Class I | |||||||||||||
| Management Fees | 0.52% | 0.52% | 0.52% | 0.52% | ||||||||||||
| Distribution and Service (12b-1) Fees | 0.20% | 0.95% | 0.75% | — | ||||||||||||
| Other Expenses | 0.08% | 0.08% | 0.08% | 0.08% | ||||||||||||
| Total Annual Fund Operating Expenses | 0.80% | 1.55% | 1.35% | 0.60% | ||||||||||||
| 1 | Fee applies to the following types of accounts held directly with the fund: accounts established pursuant to the Uniform Transfers to Minors Act (UTMA) or Uniform Gifts to Minors Act (UGMA). |
Example
The following example is intended to help you compare the cost of investing in the fund with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the fund for the time periods indicated and then either redeem or do not redeem your shares at the end of a period. The example also assumes that your investment has a 5% return each year and that the fund operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
| Redemption | No Redemption | |||||||||||||||||||||||||||||||||||
| A | B | C | I | A | B | C | I | |||||||||||||||||||||||||||||
| 1 Year | $ | 498 | $ | 558 | $ | 137 | $ | 61 | $ | 498 | $ | 158 | $ | 137 | $ | 61 | ||||||||||||||||||||
| 3 Years | $ | 665 | $ | 790 | $ | 428 | $ | 192 | $ | 665 | $ | 490 | $ | 428 | $ | 192 | ||||||||||||||||||||
| 5 Years | $ | 846 | $ | 945 | $ | 739 | $ | 335 | $ | 846 | $ | 845 | $ | 739 | $ | 335 | ||||||||||||||||||||
| 10 Years | $ | 1,368 | $ | 1,643 | $ | 1,624 | $ | 750 | $ | 1,368 | $ | 1,643 | $ | 1,624 | $ | 750 | ||||||||||||||||||||
Portfolio Turnover
The fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes
14
Section 1 Fund Summaries
when fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the example, affect the fund’s performance. During the most recent fiscal year, the fund’s portfolio turnover rate was 10% of the average value of its portfolio.
Principal Investment Strategies
Under normal market conditions, the fund invests at least 80% of its net assets in municipal bonds that pay interest that is exempt from regular federal and Connecticut personal income tax. The fund invests at least 80% of its net assets in investment grade municipal bonds rated BBB/Baa or higher at the time of purchase by at least one independent rating agency, or, if unrated, judged by the funds’ sub-adviser to be of comparable quality. The fund may invest up to 20% of its net assets in below investment grade municipal bonds, commonly referred to as “high yield” or “junk” bonds. The fund may invest up to 15% of its net assets in municipal securities whose interest payments vary inversely with changes in short-term tax-exempt interest rates (i.e., inverse floating rate securities). The fund’s sub-adviser uses a value-oriented strategy and looks for higher-yielding and undervalued municipal bonds that offer above-average total return. The sub-adviser may choose to sell municipal bonds with deteriorating credit or limited upside potential compared to other available bonds.
Principal Risks
Market Risk—The market values of municipal bonds owned by the fund may decline, at times sharply and unpredictably.
Credit Risk—Credit risk is the risk that an issuer of a municipal bond may be unable or unwilling to make interest and principal payments when due and the related risk that the value of a bond may decline because of concerns about the issuer’s ability or willingness to make such payments. Credit risk is heightened for the fund because it may invest up to 20% of its net assets in below investment grade (“high yield” or “junk”) municipal bonds. High yield bonds, while generally offering higher yields than investment grade bonds with similar maturities, involve greater risks, including the possibility of default or bankruptcy, and are regarded as predominantly speculative with respect to the issuer’s capacity to pay interest and repay principal.
Interest Rate Risk—Interest rate risk is the risk that the value of the fund’s portfolio will decline because of rising interest rates. Interest rate risk may be increased by the fund’s investment in inverse floating rate securities because of the leveraged nature of these investments.
State Concentration Risk—Because the fund primarily purchases municipal bonds from Connecticut, the fund is more susceptible to adverse economic, political or regulatory changes affecting municipal bond issuers in that state.
Income Risk—The income from the fund’s portfolio may decline because of falling market interest rates. This can result when the fund invests the proceeds from new share sales, or from matured or called bonds, at market interest rates that are below the portfolio’s current earnings rate. Also, if the fund invests in inverse floating rate securities, the fund’s income may decrease if short-term interest rates rise.
Leveraged Securities Risk—The fund may invest in inverse floating rate securities which create effective leverage. Because these securities create leveraged exposure to underlying municipal bonds, the amount the fund invests in such securities exposes it to risks and potential returns to a greater extent than the amount actually invested. The interest payments the fund receives on such securities vary inversely with the short-term financing rates paid by the securities’ issuers, and those interest payments will decrease if short-term interest rates increase. In addition, the value of these securities will vary by more than the value of the underlying bonds due to the leveraged nature of the investments. Also, the holder of the floating rate securities that has provided the leverage associated with a fund’s inverse floating rate securities may cause the fund to purchase or otherwise retire those floating rate securities (i.e., to effectively cause the fund to repay the leverage provided by such holder), which may require the fund to raise cash through the sale of portfolio securities at times and at prices that are not desirable for the fund.
Tax Risk—Income from municipal bonds held by the fund could be declared taxable because of unfavorable changes in tax laws, adverse interpretations by the Internal Revenue Service or state tax authorities, or noncompliant conduct of a bond issuer. In addition, a portion of the fund’s otherwise exempt-interest dividends may be taxable to those shareholders subject to the federal alternative minimum tax.
Section 1 Fund Summaries
15
As with any mutual fund investment, loss of money is a risk of investing. An investment in the fund is not a deposit of a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
Fund Performance
The following bar chart and table provide some indication of the potential risks of investing in the fund. The fund’s past performance (before and after taxes) is not necessarily an indication of how the fund will perform in the future. Updated performance information is available at www.nuveen.com/MF/products/performancesummary.aspx or by calling (800) 257-8787.
The bar chart below shows the variability of the fund’s performance from year to year for Class A shares. The performance of the other share classes will differ due to their different expense structures. The bar chart and highest/lowest quarterly returns that follow do not reflect sales charges, and if these charges were reflected, the returns would be less than those shown.
Class A Annual Total Return*
| * | Class A year-to-date total return as of March 31, 2011 was 0.05%. |
During the ten-year period ended December 31, 2010, the fund’s highest and lowest quarterly returns were 7.30% and
-4.37%, respectively, for the quarters ended September 30, 2009 and September 30, 2008.
The table below shows the variability of the fund’s average annual returns and how they compare over the time periods indicated with those of broad measures of market performance and of an index of funds with similar investment objectives. All after-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. After-tax returns are shown for Class A shares only; after-tax returns for other share classes will vary. Your own actual after-tax returns will depend on your specific tax situation and may differ from what is shown here.
Both the bar chart and the table assume that all distributions have been reinvested. Performance reflects fee waivers, if any, in effect during the periods presented. If any such waivers were not in place, performance would be reduced.
| Average Annual Total Returns for the Periods Ended December 31, 2010 | ||||||||||||
| 1 Year | 5 Years | 10 Years | ||||||||||
| Class Returns Before Taxes: | ||||||||||||
Class A | -2.05 | % | 2.62 | % | 4.02 | % | ||||||
Class B | -2.39 | % | 2.58 | % | 3.86 | % | ||||||
Class C | 1.67 | % | 2.95 | % | 3.90 | % | ||||||
Class I | 2.41 | % | 3.72 | % | 4.67 | % | ||||||
| Class A Returns After Taxes: | ||||||||||||
On Distributions | -2.05 | % | 2.59 | % | 3.98 | % | ||||||
On Distributions and Sales of Shares | 0.05 | % | 2.81 | % | 4.06 | % | ||||||
16
Section 1 Fund Summaries
| Average Annual Total Returns for the Periods Ended December 31, 2010 | ||||||||||||
| 1 Year | 5 Years | 10 Years | ||||||||||
| Standard & Poor’s National Municipal Bond Index (reflects no deduction for fees, expenses or taxes) | 2.45 | % | 3.83 | % | 4.82 | % | ||||||
| Standard & Poor’s Connecticut Municipal Bond Index (reflects no deduction for fees, expenses or taxes) | 2.24 | % | 3.98 | % | 4.70 | % | ||||||
| Lipper Connecticut Municipal Debt Funds Average (reflects no deduction for taxes or certain expenses) | 1.24 | % | 2.91 | % | 3.85 | % | ||||||
Management
Investment Adviser
Nuveen Fund Advisors, Inc.
Sub-Adviser
Nuveen Asset Management, LLC
Portfolio Manager
Name | Title | Portfolio Manager of Fund Since | ||
| Michael S. Hamilton | Senior Vice President | January 2011 |
Purchase and Sale of Fund Shares
You may purchase, redeem or exchange shares of the fund on any business day, which is any day the New York Stock Exchange is open for business. You may purchase, redeem or exchange shares of the fund through a financial advisor or other financial intermediary or directly from the fund. Class B shares are available only through exchanges and dividend reinvestments by current Class B shareholders. The fund’s initial and subsequent investment minimums generally are as follows, although the fund may reduce or waive the minimums in some cases:
| Class A and Class C | Class I | |||
| Eligibility and Minimum Initial Investment | $3,000 | Available only through fee-based programs and to other limited categories of investors as described in the prospectus.
$100,000 for all accounts except:
• $250 for clients of financial intermediaries and family offices that have accounts holding Class I shares with an aggregate value of at least $100,000 (or that are expected to reach this level).
• No minimum for certain other categories of eligible investors as described in the prospectus. | ||
| Minimum Additional Investment | $100 | No minimum. |
Tax Information
The fund intends to make distributions that are exempt from regular federal and Connecticut state income tax. All or a portion of these distributions, however, may be subject to the federal and state alternative minimum tax.
Payments to Broker-Dealers and Other Financial Intermediaries
If you purchase shares of the fund through a broker-dealer or other financial intermediary (such as a bank or financial advisor), the fund, its distributor or its investment adviser may pay the intermediary for the sale of fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other financial intermediary and your salesperson to recommend the fund over another investment. Ask your financial advisor or visit your financial intermediary’s website for more information.
Section 1 Fund Summaries
17
Nuveen Massachusetts Municipal Bond Fund
Investment Objective
The investment objective of the fund is to provide you with as high a level of current interest income exempt from regular federal, Massachusetts state and, in some cases, Massachusetts local income taxes as is consistent with preservation of capital.
Fees and Expenses of the Fund
This table describes the fees and expenses that you may pay if you buy and hold shares of the fund. You may qualify for sales charge discounts if you and your family invest, or agree to invest in the future, at least $50,000 in the fund or in other Nuveen Mutual Funds. More information about these and other discounts, as well as eligibility requirements for each share class, is available from your financial advisor and in “What Share Classes We Offer” on page 47 of the fund’s prospectus, “How to Reduce Your Sales Charge” on page 49 of the prospectus and “Purchase and Redemption of Fund Shares” on page S-46 of the fund’s statement of additional information.
Shareholder Fees
(fees paid directly from your investment)
| Class A | Class B | Class C | Class I | |||||||||||||
| Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) | 4.20% | None | None | None | ||||||||||||
| Maximum Deferred Sales Charge (Load) (as a percentage of the lesser of purchase price or redemption proceeds) | None | 5.00% | 1.00% | None | ||||||||||||
| Maximum Sales Charge (Load) Imposed on Reinvested Dividends | None | None | None | None | ||||||||||||
| Exchange Fee | None | None | None | None | ||||||||||||
| Annual Low Balance Account Fee (for accounts under $1,000)1 | $15 | $15 | $15 | $ | 15 | |||||||||||
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)
| Class A | Class B | Class C | Class I | |||||||||||||
| Management Fees | 0.53% | 0.53% | 0.53% | 0.53% | ||||||||||||
| Distribution and Service (12b-1) Fees | 0.20% | 0.95% | 0.75% | — | ||||||||||||
| Other Expenses | 0.12% | 0.12% | 0.12% | 0.12% | ||||||||||||
| Total Annual Fund Operating Expenses | 0.85% | 1.60% | 1.40% | 0.65% | ||||||||||||
| 1 | Fee applies to the following types of accounts held directly with the fund: accounts established pursuant to the Uniform Transfers to Minors Act (UTMA) or Uniform Gifts to Minors Act (UGMA). |
Example
The following example is intended to help you compare the cost of investing in the fund with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the fund for the time periods indicated and then either redeem or do not redeem your shares at the end of a period. The example also assumes that your investment has a 5% return each year and that the fund operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
| Redemption | No Redemption | |||||||||||||||||||||||||||||||||||
| A | B | C | I | A | B | C | I | |||||||||||||||||||||||||||||
| 1 Year | $ | 503 | $ | 563 | $ | 143 | $ | 66 | $ | 503 | $ | 163 | $ | 143 | $ | 66 | ||||||||||||||||||||
| 3 Years | $ | 680 | $ | 805 | $ | 443 | $ | 208 | $ | 680 | $ | 505 | $ | 443 | $ | 208 | ||||||||||||||||||||
| 5 Years | $ | 872 | $ | 971 | $ | 766 | $ | 362 | $ | 872 | $ | 871 | $ | 766 | $ | 362 | ||||||||||||||||||||
| 10 Years | $ | 1,425 | $ | 1,699 | $ | 1,680 | $ | 810 | $ | 1,425 | $ | 1,699 | $ | 1,680 | $ | 810 | ||||||||||||||||||||
Portfolio Turnover
The fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes
18
Section 1 Fund Summaries
when fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the example, affect the fund’s performance. During the most recent fiscal year, the fund’s portfolio turnover rate was 7% of the average value of its portfolio.
Principal Investment Strategies
Under normal market conditions, the fund invests at least 80% of its net assets in municipal bonds that pay interest that is exempt from regular federal and Massachusetts personal income tax. The fund invests at least 80% of its net assets in investment grade municipal bonds rated BBB/Baa or higher at the time of purchase by at least one independent rating agency, or, if unrated, judged by the fund’s sub-adviser to be of comparable quality. The fund may invest up to 20% of its net assets in below investment grade municipal bonds, commonly referred to as “high yield” or “junk” bonds. The fund may invest up to 15% of its net assets in municipal securities whose interest payments vary inversely with changes in short-term tax-exempt interest rates (i.e., inverse floating rate securities). The fund’s sub-adviser uses a value-oriented strategy and looks for higher-yielding and undervalued municipal bonds that offer above-average total return. The sub-adviser may choose to sell municipal bonds with deteriorating credit or limited upside potential compared to other available bonds.
Principal Risks
Market Risk—The market values of municipal bonds owned by the fund may decline, at times sharply and unpredictably.
Credit Risk—Credit risk is the risk that an issuer of a municipal bond may be unable or unwilling to make interest and principal payments when due and the related risk that the value of a bond may decline because of concerns about the issuer’s ability or willingness to make such payments. Credit risk is heightened for the fund because it may invest up to 20% of its net assets in below investment grade (“high yield” or “junk”) municipal bonds. High yield bonds, while generally offering higher yields than investment grade bonds with similar maturities, involve greater risks, including the possibility of default or bankruptcy, and are regarded as predominantly speculative with respect to the issuer’s capacity to pay interest and repay principal.
Interest Rate Risk—Interest rate risk is the risk that the value of the fund’s portfolio will decline because of rising interest rates. Interest rate risk may be increased by the fund’s investment in inverse floating rate securities because of the leveraged nature of these investments.
State Concentration Risk—Because the fund primarily purchases municipal bonds from Massachusetts, the fund is more susceptible to adverse economic, political or regulatory changes affecting municipal bond issuers in that state.
Income Risk—The income from the fund’s portfolio may decline because of falling market interest rates. This can result when the fund invests the proceeds from new share sales, or from matured or called bonds, at market interest rates that are below the portfolio’s current earnings rate. Also, if the fund invests in inverse floating rate securities, the fund’s income may decrease if short-term interest rates rise.
Leveraged Securities Risk—The fund may invest in inverse floating rate securities which create effective leverage. Because these securities create leveraged exposure to underlying municipal bonds, the amount the fund invests in such securities exposes it to risks and potential returns to a greater extent than the amount actually invested. The interest payments the fund receives on such securities vary inversely with the short-term financing rates paid by the securities’ issuers, and those interest payments will decrease if short-term interest rates increase. In addition, the value of these securities will vary by more than the value of the underlying bonds due to the leveraged nature of the investments. Also, the holder of the floating rate securities that has provided the leverage associated with a fund’s inverse floating rate securities may cause the fund to purchase or otherwise retire those floating rate securities (i.e., to effectively cause the fund to repay the leverage provided by such holder), which may require the fund to raise cash through the sale of portfolio securities at times and at prices that are not desirable for the fund.
Tax Risk—Income from municipal bonds held by the fund could be declared taxable because of unfavorable changes in tax laws, adverse interpretations by the Internal Revenue Service or state tax authorities, or noncompliant conduct of a bond issuer. In addition, a portion of the fund’s otherwise exempt-interest dividends may be taxable to those shareholders subject to the federal alternative minimum tax.
Section 1 Fund Summaries
19
As with any mutual fund investment, loss of money is a risk of investing. An investment in the fund is not a deposit of a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
Fund Performance
The following bar chart and table provide some indication of the potential risks of investing in the fund. The fund’s past performance (before and after taxes) is not necessarily an indication of how the fund will perform in the future. Updated performance information is available at www.nuveen.com/MF/products/performancesummary.aspx or by calling (800) 257-8787.
The bar chart below shows the variability of the fund’s performance from year to year for Class A shares. The performance of the other share classes will differ due to their different expense structures. The bar chart and highest/lowest quarterly returns that follow do not reflect sales charges, and if these charges were reflected, the returns would be less than those shown.
Class A Annual Total Return*
| * | Class A year-to-date total return as of March 31, 2011 was -0.29%. |
During the ten-year period ended December 31, 2010, the fund’s highest and lowest quarterly returns were 10.56% and -6.24%, respectively, for the quarters ended September 30, 2009 and December 31, 2008.
The table below shows the variability of the fund’s average annual returns and how they compare over the time periods indicated with those of broad measures of market performance and an index of funds with similar investment objectives. All after-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. After-tax returns are shown for Class A shares only; after-tax returns for other share classes will vary. Your own actual after-tax returns will depend on your specific tax situation and may differ from what is shown here.
Both the bar chart and the table assume that all distributions have been reinvested. Performance reflects fee waivers, if any, in effect during the periods presented. If any such waivers were not in place, performance would be reduced.
| Average Annual Total Returns for the Periods Ended December 31, 2010 | ||||||||||||
| 1 Year | 5 Years | 10 Years | ||||||||||
| Class Returns Before Taxes: | ||||||||||||
Class A | -2.05 | % | 2.50 | % | 3.88 | % | ||||||
Class B | -2.36 | % | 2.46 | % | 3.70 | % | ||||||
Class C | 1.75 | % | 2.81 | % | 3.76 | % | ||||||
Class I | 2.62 | % | 3.59 | % | 4.54 | % | ||||||
| Class A Returns After Taxes: | ||||||||||||
On Distributions | -2.05 | % | 2.47 | % | 3.87 | % | ||||||
On Distributions and Sales of Shares | 0.26 | % | 2.74 | % | 3.95 | % | ||||||
20
Section 1 Fund Summaries
| Average Annual Total Returns for the Periods Ended December 31, 2010 | ||||||||||||
| 1 Year | 5 Years | 10 Years | ||||||||||
| Standard & Poor’s National Municipal Bond Index (reflects no deduction for fees, expenses or taxes) | 2.45 | % | 3.83 | % | 4.82 | % | ||||||
| Standard & Poor’s Massachusetts Municipal Bond Index (reflects no deduction for fees, expenses or taxes) | 1.92 | % | 4.32 | % | 5.04 | % | ||||||
| Lipper Massachusetts Municipal Debt Funds Average (reflects no deduction for taxes or certain expenses) | 0.82 | % | 2.94 | % | 3.93 | % | ||||||
Management
Investment Adviser
Nuveen Fund Advisors, Inc.
Sub-Adviser
Nuveen Asset Management, LLC
Portfolio Manager
Name | Title | Portfolio Manager of Fund Since | ||
| Michael S. Hamilton | Senior Vice President | January 2011 |
Purchase and Sale of Fund Shares
You may purchase, redeem or exchange shares of the fund on any business day, which is any day the New York Stock Exchange is open for business. You may purchase, redeem or exchange shares of the fund through a financial advisor or other financial intermediary or directly from the fund. Class B shares are available only through exchanges and dividend reinvestments by current Class B shareholders. The fund’s initial and subsequent investment minimums generally are as follows, although the fund may reduce or waive the minimums in some cases:
| Class A and Class C | Class I | |||
| Eligibility and Minimum Initial Investment | $3,000 | Available only through fee-based programs and to other limited categories of investors as described in the prospectus.
$100,000 for all accounts except:
• $250 for clients of financial intermediaries and family offices that have accounts holding Class I shares with an aggregate value of at least $100,000 (or that are expected to reach this level).
• No minimum for certain other categories of eligible investors as described in the prospectus. | ||
| Minimum Additional Investment | $100 | No minimum. |
Tax Information
The fund intends to make distributions that are exempt from regular federal and Massachusetts state income tax. All or a portion of these distributions, however, may be subject to the federal alternative minimum tax.
Payments to Broker-Dealers and Other Financial Intermediaries
If you purchase shares of the fund through a broker-dealer or other financial intermediary (such as a bank or financial advisor), the fund, its distributor or its investment adviser may pay the intermediary for the sale of fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other financial intermediary and your salesperson to recommend the fund over another investment. Ask your financial advisor or visit your financial intermediary’s website for more information.
Section 1 Fund Summaries
21
Nuveen Massachusetts Municipal Bond Fund 2
Investment Objective
The investment objective of the fund is to provide you with as high a level of current interest income exempt from regular federal, Massachusetts state and, in some cases, Massachusetts local income taxes as is consistent with preservation of capital.
Fees and Expenses of the Fund
This table describes the fees and expenses that you may pay if you buy and hold shares of the fund. You may qualify for sales charge discounts if you and your family invest, or agree to invest in the future, at least $50,000 in the fund or in other Nuveen Mutual Funds. More information about these and other discounts, as well as eligibility requirements for each share class, is available from your financial advisor and in “What Share Classes We Offer” on page 47 of the fund’s prospectus, “How to Reduce Your Sales Charge” on page 49 of the prospectus and “Purchase and Redemption of Fund Shares” on page S-46 of the fund’s statement of additional information.
Shareholder Fees
(fees paid directly from your investment)
| Class A | Class B | Class C | Class I | |||||||||||||
| Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) | 4.20% | None | None | None | ||||||||||||
| Maximum Deferred Sales Charge (Load) (as a percentage of the lesser of purchase price or redemption proceeds) | None | 5.00% | 1.00% | None | ||||||||||||
| Maximum Sales Charge (Load) Imposed on Reinvested Dividends | None | None | None | None | ||||||||||||
| Exchange Fee | None | None | None | None | ||||||||||||
| Annual Low Balance Account Fee (for accounts under $1,000)1 | $15 | $15 | $15 | $ | 15 | |||||||||||
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)
| Class A | Class B | Class C | Class I | |||||||||||||
| Management Fees | 0.53% | 0.53% | 0.53% | 0.53% | ||||||||||||
| Distribution and Service (12b-1) Fees | 0.20% | 0.95% | 0.75% | — | ||||||||||||
| Other Expenses | 0.13% | 0.13% | 0.13% | 0.13% | ||||||||||||
| Total Annual Fund Operating Expenses | 0.86% | 1.61% | 1.41% | 0.66% | ||||||||||||
| 1 | Fee applies to the following types of accounts held directly with the fund: accounts established pursuant to the Uniform Transfers to Minors Act (UTMA) or Uniform Gifts to Minors Act (UGMA). |
Example
The following example is intended to help you compare the cost of investing in the fund with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the fund for the time periods indicated and then either redeem or do not redeem your shares at the end of a period. The example also assumes that your investment has a 5% return each year and that the fund operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
| Redemption | No Redemption | |||||||||||||||||||||||||||||||||||
| A | B | C | I | A | B | C | I | |||||||||||||||||||||||||||||
| 1 Year | $ | 504 | $ | 564 | $ | 144 | $ | 67 | $ | 504 | $ | 164 | $ | 144 | $ | 67 | ||||||||||||||||||||
| 3 Years | $ | 683 | $ | 808 | $ | 446 | $ | 211 | $ | 683 | $ | 508 | $ | 446 | $ | 211 | ||||||||||||||||||||
| 5 Years | $ | 877 | $ | 976 | $ | 771 | $ | 368 | $ | 877 | $ | 876 | $ | 771 | $ | 368 | ||||||||||||||||||||
| 10 Years | $ | 1,436 | $ | 1,710 | $ | 1,691 | $ | 822 | $ | 1,436 | $ | 1,710 | $ | 1,691 | $ | 822 | ||||||||||||||||||||
Portfolio Turnover
The fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes
22
Section 1 Fund Summaries
when fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the example, affect the fund’s performance. During the most recent fiscal year, the fund’s portfolio turnover rate was 5% of the average value of its portfolio.
Principal Investment Strategies
Under normal market conditions, the fund invests at least 80% of its net assets in municipal bonds that pay interest that is exempt from regular federal and Massachusetts personal income tax. The municipal securities in which the fund invests are, at the time of purchase, (i) rated BBB/Baa or higher; (ii) unrated, but judged to be of comparable quality by the fund’s sub-adviser; or (iii) backed by an escrow or trust account containing sufficient U.S. Government or U.S. government agency securities to ensure timely payment of principal and interest. The fund may invest up to 15% of its net assets in municipal securities whose interest payments vary inversely with changes in short-term tax-exempt interest rates (i.e., inverse floating rate securities). The fund’s sub-adviser uses a value-oriented strategy and looks for higher-yielding and undervalued municipal bonds that offer above-average total return. The sub-adviser may choose to sell municipal bonds with deteriorating credit or limited upside potential compared to other available bonds.
Principal Risks
Market Risk—The market values of municipal bonds owned by the fund may decline, at times sharply and unpredictably.
Credit Risk—Credit risk is the risk that an issuer of a municipal bond may be unable or unwilling to make interest and principal payments when due and the related risk that the value of a bond may decline because of concerns about the issuer’s ability or willingness to make such payments.
Interest Rate Risk—Interest rate risk is the risk that the value of the fund’s portfolio will decline because of rising interest rates. Interest rate risk may be increased by the fund’s investment in inverse floating rate securities because of the leveraged nature of these investments.
State Concentration Risk—Because the fund primarily purchases municipal bonds from Massachusetts, the fund is more susceptible to adverse economic, political or regulatory changes affecting municipal bond issuers in that state.
Income Risk—The income from the fund’s portfolio may decline because of falling market interest rates. This can result when the fund invests the proceeds from new share sales, or from matured or called bonds, at market interest rates that are below the portfolio’s current earnings rate. Also, if the fund invests in inverse floating rate securities, the fund’s income may decrease if short-term interest rates rise.
Leveraged Securities Risk—The fund may invest in inverse floating rate securities which create effective leverage. Because these securities create leveraged exposure to underlying municipal bonds, the amount the fund invests in such securities exposes it to risks and potential returns to a greater extent than the amount actually invested. The interest payments the fund receives on such securities vary inversely with the short-term financing rates paid by the securities’ issuers, and those interest payments will decrease if short-term interest rates increase. In addition, the value of these securities will vary by more than the value of the underlying bonds due to the leveraged nature of the investments. Also, the holder of the floating rate securities that has provided the leverage associated with a fund’s inverse floating rate securities may cause the fund to purchase or otherwise retire those floating rate securities (i.e., to effectively cause the fund to repay the leverage provided by such holder), which may require the fund to raise cash through the sale of portfolio securities at times and at prices that are not desirable for the fund.
Tax Risk—Income from municipal bonds held by the fund could be declared taxable because of unfavorable changes in tax laws, adverse interpretations by the Internal Revenue Service or state tax authorities, or noncompliant conduct of a bond issuer. In addition, a portion of the fund’s otherwise exempt-interest dividends may be taxable to those shareholders subject to the federal alternative minimum tax.
Non-Diversification Risk—As a non-diversified fund, the fund may be more susceptible to changes in the financial condition of individual municipal bond issuers in which it invests as well as any single political, regulatory or economic occurrence affecting such issuers. The fund’s relative lack of diversity may subject investors to greater market risk than other mutual funds.
Section 1 Fund Summaries
23
As with any mutual fund investment, loss of money is a risk of investing. An investment in the fund is not a deposit of a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
Fund Performance
The following bar chart and table provide some indication of the potential risks of investing in the fund. The fund’s past performance (before and after taxes) is not necessarily an indication of how the fund will perform in the future. Updated performance information is available at www.nuveen.com/MF/products/performancesummary.aspx or by calling (800) 257-8787.
The bar chart below shows the variability of the fund’s performance from year to year for Class A shares. The performance of the other share classes will differ due to their different expense structures. The bar chart and highest/lowest quarterly returns that follow do not reflect sales charges, and if these charges were reflected, the returns would be less than those shown.
Class A Annual Total Return*
| * | Class A year-to-date total return as of March 31, 2011 was 0.15%. |
During the ten-year period ended December 31, 2010, the fund’s highest and lowest quarterly returns were 6.86% and -4.26%, respectively, for the quarters ended September 30, 2009 and December 31, 2010.
The table below shows the variability of the fund’s average annual returns and how they compare over the time periods indicated with those of broad measures of market performance and an index of funds with similar investment objectives. All after-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. After-tax returns are shown for Class A shares only; after-tax returns for other share classes will vary. Your own actual after-tax returns will depend on your specific tax situation and may differ from what is shown here.
Both the bar chart and the table assume that all distributions have been reinvested. Performance reflects fee waivers, if any, in effect during the periods presented. If any such waivers were not in place, performance would be reduced.
| Average Annual Total Returns for the Periods Ended December 31, 2010 | ||||||||||||
| 1 Year | 5 Years | 10 Years | ||||||||||
| Class Returns Before Taxes: | ||||||||||||
Class A | -2.13 | % | 2.62 | % | 3.70 | % | ||||||
Class B | -2.64 | % | 2.54 | % | 3.52 | % | ||||||
Class C | 1.48 | % | 2.93 | % | 3.56 | % | ||||||
Class I | 2.31 | % | 3.71 | % | 4.35 | % | ||||||
| Class A Returns After Taxes: | ||||||||||||
On Distributions | -2.23 | % | 2.50 | % | 3.62 | % | ||||||
On Distributions and Sales of Shares | 0.05 | % | 2.76 | % | 3.73 | % | ||||||
24
Section 1 Fund Summaries
| Average Annual Total Returns for the Periods Ended December 31, 2010 | ||||||||||||
| 1 Year | 5 Years | 10 Years | ||||||||||
| Standard & Poor’s National Municipal Bond Index (reflects no deduction for fees, expenses or taxes) | 2.45 | % | 3.83 | % | 4.82 | % | ||||||
| Standard & Poor’s Massachusetts Municipal Bond Index (reflects no deduction for fees, expenses or taxes) | 1.92 | % | 4.32 | % | 5.04 | % | ||||||
| Lipper Massachusetts Municipal Debt Funds Average (reflects no deduction for taxes or certain expenses) | 0.82 | % | 2.94 | % | 3.93 | % | ||||||
Management
Investment Adviser
Nuveen Fund Advisors, Inc.
Sub-Adviser
Nuveen Asset Management, LLC
Portfolio Manager
Name | Title | Portfolio Manager of Fund Since | ||
| Michael S. Hamilton | Senior Vice President | January 2011 |
Purchase and Sale of Fund Shares
The fund is closed to new investors. Investors who held shares of the fund as of April 27, 2011 may continue to invest in the fund, including through the reinvestment of dividends and capital gain distributions. Eligible investors may purchase, redeem or exchange shares of the fund on any business day, which is any day the New York Stock Exchange is open for business. Eligible investors may purchase, redeem or exchange shares of the fund through a financial advisor or other financial intermediary or directly from the fund. Class B shares are available only through exchanges and dividend reinvestments by current Class B shareholders. The fund’s initial and subsequent investment minimums generally are as follows, although the fund may reduce or waive the minimums in some cases:
| Class A and Class C | Class I | |||
| Eligibility and Minimum Initial Investment | $3,000 | Available only through fee-based programs and to other limited categories of investors as described in the prospectus.
$100,000 for all accounts except:
• $250 for clients of financial intermediaries and family offices that have accounts holding Class I shares with an aggregate value of at least $100,000 (or that are expected to reach this level).
• No minimum for certain other categories of eligible investors as described in the prospectus. | ||
| Minimum Additional Investment | $100 | No minimum. |
Tax Information
The fund intends to make distributions that are exempt from regular federal and Massachusetts state income tax. All or a portion of these distributions, however, may be subject to the federal alternative minimum tax.
Payments to Broker-Dealers and Other Financial Intermediaries
If you purchase shares of the fund through a broker-dealer or other financial intermediary (such as a bank or financial advisor), the fund, its distributor or its investment adviser may pay the intermediary for the sale of fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other financial intermediary and your salesperson to recommend the fund over another investment. Ask your financial advisor or visit your financial intermediary’s website for more information.
Section 1 Fund Summaries
25
Nuveen New Jersey Municipal Bond Fund
Investment Objective
The investment objective of the fund is to provide you with as high a level of current interest income exempt from regular federal, New Jersey state and, in some cases, New Jersey local income taxes as is consistent with preservation of capital.
Fees and Expenses of the Fund
This table describes the fees and expenses that you may pay if you buy and hold shares of the fund. You may qualify for sales charge discounts if you and your family invest, or agree to invest in the future, at least $50,000 in the fund or in other Nuveen Mutual Funds. More information about these and other discounts, as well as eligibility requirements for each share class, is available from your financial advisor and in “What Share Classes We Offer” on page 47 of the fund’s prospectus, “How to Reduce Your Sales Charge” on page 49 of the prospectus and “Purchase and Redemption of Fund Shares” on page S-46 of the fund’s statement of additional information.
Shareholder Fees
(fees paid directly from your investment)
| Class A | Class B | Class C | Class I | |||||||||||||
| Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) | 4.20% | None | None | None | ||||||||||||
| Maximum Deferred Sales Charge (Load) (as a percentage of the lesser of purchase price or redemption proceeds) | None | 5.00% | 1.00% | None | ||||||||||||
| Maximum Sales Charge (Load) Imposed on Reinvested Dividends | None | None | None | None | ||||||||||||
| Exchange Fee | None | None | None | None | ||||||||||||
| Annual Low Balance Account Fee (for accounts under $1,000)1 | $15 | $15 | $15 | $15 | ||||||||||||
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)
| Class A | Class B | Class C | Class I | |||||||||||||
| Management Fees | 0.53% | 0.53% | 0.53% | 0.53% | ||||||||||||
| Distribution and Service (12b-1) Fees | 0.20% | 0.95% | 0.75% | — | ||||||||||||
| Other Expenses | 0.09% | 0.09% | 0.09% | 0.09% | ||||||||||||
| Total Annual Fund Operating Expenses | 0.82% | 1.57% | 1.37% | 0.62% | ||||||||||||
| 1 | Fee applies to the following types of accounts held directly with the fund: accounts established pursuant to the Uniform Transfers to Minors Act (UTMA) or Uniform Gifts to Minors Act (UGMA). |
Example
The following example is intended to help you compare the cost of investing in the fund with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the fund for the time periods indicated and then either redeem or do not redeem your shares at the end of a period. The example also assumes that your investment has a 5% return each year and that the fund operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
| Redemption | No Redemption | |||||||||||||||||||||||||||||||||||
| A | B | C | I | A | B | C | I | |||||||||||||||||||||||||||||
| 1 Year | $ | 500 | $ | 560 | $ | 139 | $ | 63 | $ | 500 | $ | 160 | $ | 139 | $ | 63 | ||||||||||||||||||||
| 3 Years | $ | 671 | $ | 796 | $ | 434 | $ | 199 | $ | 671 | $ | 496 | $ | 434 | $ | 199 | ||||||||||||||||||||
| 5 Years | $ | 856 | $ | 955 | $ | 750 | $ | 346 | $ | 856 | $ | 855 | $ | 750 | $ | 346 | ||||||||||||||||||||
| 10 Years | $ | 1,391 | $ | 1,666 | $ | 1,646 | $ | 774 | $ | 1,391 | $ | 1,666 | $ | 1,646 | $ | 774 | ||||||||||||||||||||
Portfolio Turnover
The fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes
26
Section 1 Fund Summaries
when fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the example, affect the fund’s performance. During the most recent fiscal year, the fund’s portfolio turnover rate was 7% of the average value of its portfolio.
Principal Investment Strategies
Under normal market conditions, the fund invests at least 80% of its net assets in municipal bonds that pay interest that is exempt from regular federal and New Jersey personal income tax. The fund invests at least 80% of its net assets in investment grade municipal bonds rated BBB/Baa or higher at the time of purchase by at least one independent rating agency, or, if unrated, judged by the funds’ sub-adviser to be of comparable quality. The fund may invest up to 20% of its net assets in below investment grade municipal bonds, commonly referred to as “high yield” or “junk” bonds. The fund may invest up to 15% of its net assets in municipal securities whose interest payments vary inversely with changes in short-term tax-exempt interest rates (i.e., inverse floating rate securities). The fund’s sub-adviser uses a value-oriented strategy and looks for higher-yielding and undervalued municipal bonds that offer above-average total return. The sub-adviser may choose to sell municipal bonds with deteriorating credit or limited upside potential compared to other available bonds.
Principal Risks
Market Risk—The market values of municipal bonds owned by the fund may decline, at times sharply and unpredictably.
Credit Risk—Credit risk is the risk that an issuer of a municipal bond may be unable or unwilling to make interest and principal payments when due and the related risk that the value of a bond may decline because of concerns about the issuer’s ability or willingness to make such payments. Credit risk is heightened for the fund because it may invest up to 20% of its net assets in below investment grade (“high yield” or “junk”) municipal bonds. High yield bonds, while generally offering higher yields than investment grade bonds with similar maturities, involve greater risks, including the possibility of default or bankruptcy, and are regarded as predominantly speculative with respect to the issuer’s capacity to pay interest and repay principal.
Interest Rate Risk—Interest rate risk is the risk that the value of the fund’s portfolio will decline because of rising interest rates. Interest rate risk may be increased by the fund’s investment in inverse floating rate securities because of the leveraged nature of these investments.
State Concentration Risk—Because the fund primarily purchases municipal bonds from New Jersey, the fund is more susceptible to adverse economic, political or regulatory changes affecting municipal bond issuers in that state.
Income Risk—The income from the fund’s portfolio may decline because of falling market interest rates. This can result when the fund invests the proceeds from new share sales, or from matured or called bonds, at market interest rates that are below the portfolio’s current earnings rate. Also, if the fund invests in inverse floating rate securities, the fund’s income may decrease if short-term interest rates rise.
Leveraged Securities Risk—The fund may invest in inverse floating rate securities which create effective leverage. Because these securities create leveraged exposure to underlying municipal bonds, the amount the fund invests in such securities exposes it to risks and potential returns to a greater extent than the amount actually invested. The interest payments the fund receives on such securities vary inversely with the short-term financing rates paid by the securities’ issuers, and those interest payments will decrease if short-term interest rates increase. In addition, the value of these securities will vary by more than the value of the underlying bonds due to the leveraged nature of the investments. Also, the holder of the floating rate securities that has provided the leverage associated with a fund’s inverse floating rate securities may cause the fund to purchase or otherwise retire those floating rate securities (i.e., to effectively cause the fund to repay the leverage provided by such holder), which may require the fund to raise cash through the sale of portfolio securities at times and at prices that are not desirable for the fund.
Tax Risk—Income from municipal bonds held by the fund could be declared taxable because of unfavorable changes in tax laws, adverse interpretations by the Internal Revenue Service or state tax authorities, or noncompliant conduct of a bond issuer. In addition, a portion of the fund’s otherwise exempt-interest dividends may be taxable to those shareholders subject to the federal alternative minimum tax.
Section 1 Fund Summaries
27
As with any mutual fund investment, loss of money is a risk of investing. An investment in the fund is not a deposit of a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
Fund Performance
The following bar chart and table provide some indication of the potential risks of investing in the fund. The fund’s past performance (before and after taxes) is not necessarily an indication of how the fund will perform in the future. Updated performance information is available at www.nuveen.com/MF/products/performancesummary.aspx or by calling (800) 257-8787.
The bar chart below shows the variability of the fund’s performance from year to year for Class A shares. The performance of the other share classes will differ due to their different expense structures. The bar chart and highest/lowest quarterly returns that follow do not reflect sales charges, and if these charges were reflected, the returns would be less than those shown.
Class A Annual Total Return*
| * | Class A year-to-date total return as of March 31, 2011 was -0.28% |
During the ten-year period ended December 31, 2010, the fund’s highest and lowest quarterly returns were 8.90% and
-5.38%, respectively, for the quarters ended September 30, 2009 and December 31, 2010.
The table below shows the variability of the fund’s average annual returns and how they compare over the time periods indicated with those of broad measures of market performance and an index of funds with similar investment objectives. All after-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. After-tax returns are shown for Class A shares only; after-tax returns for other share classes will vary. Your own actual after-tax returns will depend on your specific tax situation and may differ from what is shown here.
Both the bar chart and the table assume that all distributions have been reinvested. Performance reflects fee waivers, if any, in effect during the periods presented. If any such waivers were not in place, performance would be reduced.
| Average Annual Total Returns for the Periods Ended December 31, 2010 | ||||||||||||
| 1 Year | 5 Years | 10 Years | ||||||||||
| Class Returns Before Taxes: | ||||||||||||
Class A | -2.78 | % | 2.48 | % | 3.81 | % | ||||||
Class B | -3.27 | % | 2.40 | % | 3.64 | % | ||||||
Class C | 0.81 | % | 2.78 | % | 3.69 | % | ||||||
Class I | 1.58 | % | 3.56 | % | 4.47 | % | ||||||
| Class A Returns After Taxes: | ||||||||||||
On Distributions | -2.78 | % | 2.45 | % | 3.79 | % | ||||||
On Distributions and Sales of Shares | -0.37 | % | 2.69 | % | 3.87 | % | ||||||
28
Section 1 Fund Summaries
| Average Annual Total Returns for the Periods Ended December 31, 2010 | ||||||||||||
| 1 Year | 5 Years | 10 Years | ||||||||||
| Standard & Poor’s National Municipal Bond Index (reflects no deduction for fees, expenses or taxes) | 2.45 | % | 3.83 | % | 4.82 | % | ||||||
| Standard & Poor’s New Jersey Municipal Bond Index (reflects no deduction for fees, expenses or taxes) | 1.67 | % | 3.90 | % | 4.92 | % | ||||||
| Lipper New Jersey Municipal Debt Funds Average (reflects no deduction for taxes or certain expenses) | 1.48 | % | 2.82 | % | 3.96 | % | ||||||
Management
Investment Adviser
Nuveen Fund Advisors, Inc.
Sub-Adviser
Nuveen Asset Management, LLC
Portfolio Manager
Name | Title | Portfolio Manager of Fund Since | ||
| Paul L. Brennan | Senior Vice President | January 2011 |
Purchase and Sale of Fund Shares
You may purchase, redeem or exchange shares of the fund on any business day, which is any day the New York Stock Exchange is open for business. You may purchase, redeem or exchange shares of the fund through a financial advisor or other financial intermediary or directly from the fund. Class B shares are available only through exchanges and dividend reinvestments by current Class B shareholders. The fund’s initial and subsequent investment minimums generally are as follows, although the fund may reduce or waive the minimums in some cases:
| Class A and Class C | Class I | |||
| Eligibility and Minimum Initial Investment | $3,000 | Available only through fee-based programs and to other limited categories of investors as described in the prospectus.
$100,000 for all accounts except:
• $250 for clients of financial intermediaries and family offices that have accounts holding Class I shares with an aggregate value of at least $100,000 (or that are expected to reach this level).
• No minimum for certain other categories of eligible investors as described in the prospectus. | ||
| Minimum Additional Investment | $100 | No minimum. |
Tax Information
The fund intends to make distributions that are exempt from regular federal and New Jersey state income tax. All or a portion of these distributions, however, may be subject to the federal and state alternative minimum tax.
Payments to Broker-Dealers and Other Financial Intermediaries
If you purchase shares of the fund through a broker-dealer or other financial intermediary (such as a bank or financial advisor), the fund, its distributor or its investment adviser may pay the intermediary for the sale of fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other financial intermediary and your salesperson to recommend the fund over another investment. Ask your financial advisor or visit your financial intermediary’s website for more information.
Section 1 Fund Summaries
29
Nuveen New York Municipal Bond Fund
Investment Objective
The investment objective of the fund is to provide you with as high a level of current interest income exempt from regular federal, New York state and, in some cases, New York local income taxes as is consistent with preservation of capital.
Fees and Expenses of the Fund
This table describes the fees and expenses that you may pay if you buy and hold shares of the fund. You may qualify for sales charge discounts if you and your family invest, or agree to invest in the future, at least $50,000 in the fund or in other Nuveen Mutual Funds. More information about these and other discounts, as well as eligibility requirements for each share class, is available from your financial advisor and in “What Share Classes We Offer” on page 47 of the fund’s prospectus, “How to Reduce Your Sales Charge” on page 49 of the prospectus and “Purchase and Redemption of Fund Shares” on page S-46 of the fund’s statement of additional information.
Shareholder Fees
(fees paid directly from your investment)
| Class A | Class B | Class C | Class I | |||||||||||||
| Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) | 4.20% | None | None | None | ||||||||||||
| Maximum Deferred Sales Charge (Load) (as a percentage of the lesser of purchase price or redemption proceeds) | None | 5.00% | 1.00% | None | ||||||||||||
| Maximum Sales Charge (Load) Imposed on Reinvested Dividends | None | None | None | None | ||||||||||||
| Exchange Fee | None | None | None | None | ||||||||||||
| Annual Low Balance Account Fee (for accounts under $1,000)1 | $15 | $15 | $15 | $15 | ||||||||||||
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)
| Class A | Class B | Class C | Class I | |||||||||||||
| Management Fees | 0.52% | 0.52% | 0.52% | 0.52% | ||||||||||||
| Distribution and Service (12b-1) Fees | 0.20% | 0.95% | 0.75% | — | ||||||||||||
| Other Expenses | 0.09% | 0.09% | 0.09% | 0.09% | ||||||||||||
| Total Annual Fund Operating Expenses | 0.81% | 1.56% | 1.36% | 0.61% | ||||||||||||
| 1 | Fee applies to the following types of accounts held directly with the fund: accounts established pursuant to the Uniform Transfers to Minors Act (UTMA) or Uniform Gifts to Minors Act (UGMA). |
Example
The following example is intended to help you compare the cost of investing in the fund with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the fund for the time periods indicated and then either redeem or do not redeem your shares at the end of a period. The example also assumes that your investment has a 5% return each year and that the fund operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
| Redemption | No Redemption | |||||||||||||||||||||||||||||||||||
| A | B | C | I | A | B | C | I | |||||||||||||||||||||||||||||
| 1 Year | $ | 499 | $ | 559 | $ | 138 | $ | 62 | $ | 499 | $ | 159 | $ | 138 | $ | 62 | ||||||||||||||||||||
| 3 Years | $ | 668 | $ | 793 | $ | 431 | $ | 195 | $ | 668 | $ | 493 | $ | 431 | $ | 195 | ||||||||||||||||||||
| 5 Years | $ | 851 | $ | 950 | $ | 745 | $ | 340 | $ | 851 | $ | 850 | $ | 745 | $ | 340 | ||||||||||||||||||||
| 10 Years | $ | 1,380 | $ | 1,655 | $ | 1,635 | $ | 762 | $ | 1,380 | $ | 1,655 | $ | 1,635 | $ | 762 | ||||||||||||||||||||
Portfolio Turnover
The fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes
30
Section 1 Fund Summaries
when fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the example, affect the fund’s performance. During the most recent fiscal year, the fund’s portfolio turnover rate was 7% of the average value of its portfolio.
Principal Investment Strategies
Under normal market conditions, the fund invests at least 80% of its net assets in municipal bonds that pay interest that is exempt from regular federal and New York personal income tax. The fund invests at least 80% of its net assets in investment grade municipal bonds rated BBB/Baa or higher at the time of purchase by at least one independent rating agency, or, if unrated, judged by the funds’ sub-adviser to be of comparable quality. The fund may invest up to 20% of its net assets in below investment grade municipal bonds, commonly referred to as “high yield” or “junk” bonds. The fund may invest up to 15% of its net assets in municipal securities whose interest payments vary inversely with changes in short-term tax-exempt interest rates (i.e., inverse floating rate securities). The fund’s sub-adviser uses a value-oriented strategy and looks for higher-yielding and undervalued municipal bonds that offer above-average total return. The sub-adviser may choose to sell municipal bonds with deteriorating credit or limited upside potential compared to other available bonds.
Principal Risks
Market Risk—The market values of municipal bonds owned by the fund may decline, at times sharply and unpredictably.
Credit Risk—Credit risk is the risk that an issuer of a municipal bond may be unable or unwilling to make interest and principal payments when due and the related risk that the value of a bond may decline because of concerns about the issuer’s ability or willingness to make such payments. Credit risk is heightened for the fund because it may invest up to 20% of its net assets in below investment grade (“high yield” or “junk”) municipal bonds. High yield bonds, while generally offering higher yields than investment grade bonds with similar maturities, involve greater risks, including the possibility of default or bankruptcy, and are regarded as predominantly speculative with respect to the issuer’s capacity to pay interest and repay principal.
Interest Rate Risk—Interest rate risk is the risk that the value of the fund’s portfolio will decline because of rising interest rates. Interest rate risk may be increased by the fund’s investment in inverse floating rate securities because of the leveraged nature of these investments.
State Concentration Risk—Because the fund primarily purchases municipal bonds from New York, the fund is more susceptible to adverse economic, political or regulatory changes affecting municipal bond issuers in that state.
Income Risk—The income from the fund’s portfolio may decline because of falling market interest rates. This can result when the fund invests the proceeds from new share sales, or from matured or called bonds, at market interest rates that are below the portfolio’s current earnings rate. Also, if the fund invests in inverse floating rate securities, the fund’s income may decrease if short-term interest rates rise.
Leveraged Securities Risk—The fund may invest in inverse floating rate securities which create effective leverage. Because these securities create leveraged exposure to underlying municipal bonds, the amount the fund invests in such securities exposes it to risks and potential returns to a greater extent than the amount actually invested. The interest payments the fund receives on such securities vary inversely with the short-term financing rates paid by the securities’ issuers, and those interest payments will decrease if short-term interest rates increase. In addition, the value of these securities will vary by more than the value of the underlying bonds due to the leveraged nature of the investments. Also, the holder of the floating rate securities that has provided the leverage associated with a fund’s inverse floating rate securities may cause the fund to purchase or otherwise retire those floating rate securities (i.e., to effectively cause the fund to repay the leverage provided by such holder), which may require the fund to raise cash through the sale of portfolio securities at times and at prices that are not desirable for the fund.
Tax Risk—Income from municipal bonds held by the fund could be declared taxable because of unfavorable changes in tax laws, adverse interpretations by the Internal Revenue Service or state tax authorities, or noncompliant conduct of a bond issuer. In addition, a portion of the fund’s otherwise exempt-interest dividends may be taxable to those shareholders subject to the federal alternative minimum tax.
Section 1 Fund Summaries
31
As with any mutual fund investment, loss of money is a risk of investing. An investment in the fund is not a deposit of a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
Fund Performance
The following bar chart and table provide some indication of the potential risks of investing in the fund. The fund’s past performance (before and after taxes) is not necessarily an indication of how the fund will perform in the future. Updated performance information is available at www.nuveen.com/MF/products/performancesummary.aspx or by calling (800) 257-8787.
The bar chart below shows the variability of the fund’s performance from year to year for Class A shares. The performance of the other share classes will differ due to their different expense structures. The bar chart and highest/lowest quarterly returns that follow do not reflect sales charges, and if these charges were reflected, the returns would be less than those shown.
Class A Annual Total Return*
| * | Class A year-to-date total return as of March 31, 2011 was 0.04%. |
During the ten-year period ended December 31, 2010, the fund’s highest and lowest quarterly returns were 8.93% and
-4.69%, respectively, for the quarters ended September 30, 2009 and December 31, 2010.
The table below shows the variability of the fund’s average annual returns and how they compare over the time periods indicated with those of broad measures of market performance and an index of funds with similar investment objectives. All after-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. After-tax returns are shown for Class A shares only; after-tax returns for other share classes will vary. Your own actual after-tax returns will depend on your specific tax situation and may differ from what is shown here.
Both the bar chart and the table assume that all distributions have been reinvested. Performance reflects fee waivers, if any, in effect during the periods presented. If any such waivers were not in place, performance would be reduced.
| Average Annual Total Returns for the Periods Ended December 31, 2010 | ||||||||||||
| 1 Year | 5 Years | 10 Years | ||||||||||
| Class Returns Before Taxes: | ||||||||||||
Class A | -2.00 | % | 2.80 | % | 4.08 | % | ||||||
Class B | -2.32 | % | 2.73 | % | 3.92 | % | ||||||
Class C | 1.71 | % | 3.10 | % | 3.96 | % | ||||||
Class I | 2.47 | % | 3.86 | % | 4.74 | % | ||||||
| Class A Returns After Taxes: | ||||||||||||
On Distributions | -2.00 | % | 2.77 | % | 4.04 | % | ||||||
On Distributions and Sales of Shares | 0.17 | % | 2.99 | % | 4.12 | % | ||||||
32
Section 1 Fund Summaries
| Average Annual Total Returns for the Periods Ended December 31, 2010 | ||||||||||||
| 1 Year | 5 Years | 10 Years | ||||||||||
| Standard & Poor’s National Municipal Bond Index (reflects no deduction for fees, expenses or taxes) | 2.45 | % | 3.83 | % | 4.82 | % | ||||||
| Standard & Poor’s New York Municipal Bond Index (reflects no deduction for fees, expenses or taxes) | 2.52 | % | 4.14 | % | 4.92 | % | ||||||
| Lipper New York Municipal Debt Funds Average (reflects no deduction for taxes or certain expenses) | 1.62 | % | 2.81 | % | 3.86 | % | ||||||
Management
Investment Adviser
Nuveen Fund Advisors, Inc.
Sub-Adviser
Nuveen Asset Management, LLC
Portfolio Manager
Name | Title | Portfolio Manager of Fund Since | ||
| Scott R. Romans, PhD | Senior Vice President | January 2011 |
Purchase and Sale of Fund Shares
You may purchase, redeem or exchange shares of the fund on any business day, which is any day the New York Stock Exchange is open for business. You may purchase, redeem or exchange shares of the fund through a financial advisor or other financial intermediary or directly from the fund. Class B shares are available only through exchanges and dividend reinvestments by current Class B shareholders. The fund’s initial and subsequent investment minimums generally are as follows, although the fund may reduce or waive the minimums in some cases:
| Class A and Class C | Class I | |||
| Eligibility and Minimum Initial Investment | $3,000 | Available only through fee-based programs and to other limited categories of investors as described in the prospectus.
$100,000 for all accounts except:
• $250 for clients of financial intermediaries and family offices that have accounts holding Class I shares with an aggregate value of at least $100,000 (or that are expected to reach this level).
• No minimum for certain other categories of eligible investors as described in the prospectus. | ||
| Minimum Additional Investment | $100 | No minimum. |
Tax Information
The fund intends to make distributions that are exempt from regular federal, New York state and New York City personal income tax. All or a portion of these distributions, however, may be subject to the federal, state and local alternative minimum tax.
Payments to Broker-Dealers and Other Financial Intermediaries
If you purchase shares of the fund through a broker-dealer or other financial intermediary (such as a bank or financial advisor), the fund, its distributor or its investment adviser may pay the intermediary for the sale of fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other financial intermediary and your salesperson to recommend the fund over another investment. Ask your financial advisor or visit your financial intermediary’s website for more information.
Section 1 Fund Summaries
33
Nuveen New York Municipal Bond Fund 2
Investment Objective
The investment objective of the fund is to provide you with as high a level of current interest income exempt from regular federal, New York state and, in some cases, New York local income taxes as is consistent with preservation of capital.
Fees and Expenses of the Fund
This table describes the fees and expenses that you may pay if you buy and hold shares of the fund. You may qualify for sales charge discounts if you and your family invest, or agree to invest in the future, at least $50,000 in the fund or in other Nuveen Mutual Funds. More information about these and other discounts, as well as eligibility requirements for each share class, is available from your financial advisor and in “What Share Classes We Offer” on page 47 of the fund’s prospectus, “How to Reduce Your Sales Charge” on page 49 of the prospectus and “Purchase and Redemption of Fund Shares” on page S-46 of the fund’s statement of additional information.
Shareholder Fees
(fees paid directly from your investment)
| Class A | Class B | Class C | Class I | |||||||||||||
| Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) | 4.20% | None | None | None | ||||||||||||
| Maximum Deferred Sales Charge (Load) (as a percentage of the lesser of purchase price or redemption proceeds) | None | 5.00% | 1.00% | None | ||||||||||||
| Maximum Sales Charge (Load) Imposed on Reinvested Dividends | None | None | None | None | ||||||||||||
| Exchange Fee | None | None | None | None | ||||||||||||
| Annual Low Balance Account Fee (for accounts under $1,000)1 | $15 | $15 | $15 | $15 | ||||||||||||
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)
| Class A | Class B | Class C | Class I | |||||||||||||
| Management Fees | 0.52% | 0.52% | 0.52% | 0.52% | ||||||||||||
| Distribution and Service (12b-1) Fees | 0.20% | 0.95% | 0.75% | — | ||||||||||||
| Other Expenses | 0.10% | 0.10% | 0.10% | 0.10% | ||||||||||||
| Total Annual Fund Operating Expenses | 0.82% | 1.57% | 1.37% | 0.62% | ||||||||||||
| 1 | Fee applies to the following types of accounts held directly with the fund: accounts established pursuant to the Uniform Transfers to Minors Act (UTMA) or Uniform Gifts to Minors Act (UGMA). |
Example
The following example is intended to help you compare the cost of investing in the fund with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the fund for the time periods indicated and then either redeem or do not redeem your shares at the end of a period. The example also assumes that your investment has a 5% return each year and that the fund operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
| Redemption | No Redemption | |||||||||||||||||||||||||||||||||||
| A | B | C | I | A | B | C | I | |||||||||||||||||||||||||||||
| 1 Year | $ | 500 | $ | 560 | $ | 139 | $ | 63 | $ | 500 | $ | 160 | $ | 139 | $ | 63 | ||||||||||||||||||||
| 3 Years | $ | 671 | $ | 796 | $ | 434 | $ | 199 | $ | 671 | $ | 496 | $ | 434 | $ | 199 | ||||||||||||||||||||
| 5 Years | $ | 856 | $ | 955 | $ | 750 | $ | 346 | $ | 856 | $ | 855 | $ | 750 | $ | 346 | ||||||||||||||||||||
| 10 Years | $ | 1,391 | $ | 1,666 | $ | 1,646 | $ | 774 | $ | 1,391 | $ | 1,666 | $ | 1,646 | $ | 774 | ||||||||||||||||||||
Portfolio Turnover
The fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes
34
Section 1 Fund Summaries
when fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the example, affect the fund’s performance. During the most recent fiscal year, the fund’s portfolio turnover rate was 6% of the average value of its portfolio.
Principal Investment Strategies
Under normal market conditions, the fund invests at least 80% of its net assets in municipal bonds that pay interest that is exempt from regular federal and New York personal income tax. The municipal securities in which the fund invests are, at the time of purchase, (i) rated BBB/Baa or higher; (ii) unrated, but judged to be of comparable quality by the fund’s sub-adviser; or (iii) backed by an escrow or trust account containing sufficient U.S. Government or U.S. government agency securities to ensure timely payment of principal and interest. The fund may invest up to 15% of its net assets in municipal securities whose interest payments vary inversely with changes in short-term tax-exempt interest rates (i.e., inverse floating rate securities). The fund’s sub-adviser uses a value-oriented strategy and looks for higher-yielding and undervalued municipal bonds that offer above-average total return. The sub-adviser may choose to sell municipal bonds with deteriorating credit or limited upside potential compared to other available bonds.
Principal Risks
Market Risk—The market values of municipal bonds owned by the fund may decline, at times sharply and unpredictably.
Credit Risk—Credit risk is the risk that an issuer of a municipal bond may be unable or unwilling to make interest and principal payments when due and the related risk that the value of a bond may decline because of concerns about the issuer’s ability or willingness to make such payments.
Interest Rate Risk—Interest rate risk is the risk that the value of the fund’s portfolio will decline because of rising interest rates. Interest rate risk may be increased by the fund’s investment in inverse floating rate securities because of the leveraged nature of these investments.
State Concentration Risk—Because the fund primarily purchases municipal bonds from New York, the fund is more susceptible to adverse economic, political or regulatory changes affecting municipal bond issuers in that state.
Income Risk—The income from the fund’s portfolio may decline because of falling market interest rates. This can result when the fund invests the proceeds from new share sales, or from matured or called bonds, at market interest rates that are below the portfolio’s current earnings rate. Also, if the fund invests in inverse floating rate securities, the fund’s income may decrease if short-term interest rates rise.
Leveraged Securities Risk—The fund may invest in inverse floating rate securities which create effective leverage. Because these securities create leveraged exposure to underlying municipal bonds, the amount the fund invests in such securities exposes it to risks and potential returns to a greater extent than the amount actually invested. The interest payments the fund receives on such securities vary inversely with the short-term financing rates paid by the securities’ issuers, and those interest payments will decrease if short-term interest rates increase. In addition, the value of these securities will vary by more than the value of the underlying bond itself. The fund may not be able to sell inverse floating rate securities at prices commensurate with the value of the underlying bonds due to the leveraged nature of the investments. Also, the holder of the floating rate securities that has provided the leverage associated with a fund’s inverse floating rate securities may cause the fund to purchase or otherwise retire those floating rate securities (i.e., to effectively cause the fund to repay the leverage provided by such holder), which may require the fund to raise cash through the sale of portfolio securities at times and at prices that are not desirable for the fund.
Tax Risk—Income from municipal bonds held by the fund could be declared taxable because of unfavorable changes in tax laws, adverse interpretations by the Internal Revenue Service or state tax authorities, or noncompliant conduct of a bond issuer. In addition, a portion of the fund’s otherwise exempt-interest dividends may be taxable to those shareholders subject to the federal alternative minimum tax.
As with any mutual fund investment, loss of money is a risk of investing. An investment in the fund is not a deposit of a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
Section 1 Fund Summaries
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Fund Performance
The following bar chart and table provide some indication of the potential risks of investing in the fund. The fund’s past performance (before and after taxes) is not necessarily an indication of how the fund will perform in the future. Updated performance information is available at www.nuveen.com/MF/products/performancesummary.aspx or by calling (800) 257-8787.
The bar chart below shows the variability of the fund’s performance from year to year for Class A shares. The performance of the other share classes will differ due to their different expense structures. The bar chart and highest/lowest quarterly returns that follow do not reflect sales charges, and if these charges were reflected, the returns would be less than those shown.
Class A Annual Total Return*
| * | Class A year-to-date return as of March 31, 2011 was 0.18%. |
During the ten-year period ended December 31, 2010, the fund’s highest and lowest quarterly returns were 6.59% and
-3.99%, respectively, for the quarters ended September 30, 2009 and September 30, 2008.
The table below shows the variability of the fund’s average annual returns and how they compare over the time periods indicated with those of broad measures of market performance and an index of funds with similar investment objectives. All after-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. After-tax returns are shown for Class A shares only; after-tax returns for other share classes will vary. Your own actual after-tax returns will depend on your specific tax situation and may differ from what is shown here.
Both the bar chart and the table assume that all distributions have been reinvested. Performance reflects fee waivers, if any, in effect during the periods presented. If any such waivers were not in place, performance would be reduced.
| Average Annual Total Returns for the Periods Ended December 31, 2010 | ||||||||||||
| 1 Year | 5 Years | 10 Years | ||||||||||
| Class Returns Before Taxes: | ||||||||||||
Class A | -2.33 | % | 2.28 | % | 3.77 | % | ||||||
Class B | -2.80 | % | 2.22 | % | 3.60 | % | ||||||
Class C | 1.40 | % | 2.61 | % | 3.65 | % | ||||||
Class I | 2.16 | % | 3.37 | % | 4.43 | % | ||||||
| Class A Returns After Taxes: | ||||||||||||
On Distributions | -2.33 | % | 2.25 | % | 3.68 | % | ||||||
On Distributions and Sales of Shares | -0.19 | % | 2.51 | % | 3.82 | % | ||||||
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Section 1 Fund Summaries
| Average Annual Total Returns for the Periods Ended December 31, 2010 | ||||||||||||
| 1 Year | 5 Years | 10 Years | ||||||||||
| Standard & Poor’s National Municipal Bond Index (reflects no deduction for fees, expenses or taxes) | 2.45 | % | 3.83 | % | 4.82 | % | ||||||
| Standard & Poor’s New York Municipal Bond Index (reflects no deduction for fees, expenses or taxes) | 2.52 | % | 4.14 | % | 4.92 | % | ||||||
| Lipper New York Municipal Debt Funds Average (reflects no deduction for taxes or certain expenses) | 1.62 | % | 2.91 | % | 3.86 | % | ||||||
Management
Investment Adviser
Nuveen Fund Advisors, Inc.
Sub-Adviser
Nuveen Asset Management, LLC
Portfolio Manager
Name | Title | Portfolio Manager of Fund Since | ||
| Scott R. Romans, PhD | Senior Vice President | January 2011 |
Purchase and Sale of Fund Shares
The fund is closed to new investors. Investors who held shares of the fund as of April 27, 2011 may continue to invest in the fund, including through the reinvestment of dividends and capital gain distributions. Eligible investors may purchase, redeem or exchange shares of the fund on any business day, which is any day the New York Stock Exchange is open for business. Eligible investors may purchase, redeem or exchange shares of the fund through a financial advisor or other financial intermediary or directly from the fund. Class B shares are available only through exchanges and dividend reinvestments by current Class B shareholders. The fund’s initial and subsequent investment minimums generally are as follows, although the fund may reduce or waive the minimums in some cases:
| Class A and Class C | Class I | |||
| Eligibility and Minimum Initial Investment | $3,000 | Available only through fee-based programs and to other limited categories of investors as described in the prospectus.
$100,000 for all accounts except:
• $250 for clients of financial intermediaries and family offices that have accounts holding Class I shares with an aggregate value of at least $100,000 (or that are expected to reach this level).
• No minimum for certain other categories of eligible investors as described in the prospectus. | ||
| Minimum Additional Investment | $100 | No minimum. |
Tax Information
The fund intends to make distributions that are exempt from regular federal, New York state and New York City personal income tax. All or a portion of these distributions, however, may be subject to the federal, state and local alternative minimum tax.
Payments to Broker-Dealers and Other Financial Intermediaries
If you purchase shares of the fund through a broker-dealer or other financial intermediary (such as a bank or financial advisor), the fund, its distributor or its investment adviser may pay the intermediary for the sale of fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other financial intermediary and your salesperson to recommend the fund over another investment. Ask your financial advisor or visit your financial intermediary’s website for more information.
Section 1 Fund Summaries
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Section 2 How We Manage Your Money
To help you better understand the funds, this section includes a detailed discussion of the funds’ investment and risk management strategies. For a more complete discussion of these matters, please see the statement of additional information, which is available by calling (800) 257-8787 or by visiting Nuveen’s website at www.nuveen.com.
Nuveen Fund Advisors, Inc. (“Nuveen Fund Advisors”), the funds’ investment adviser, offers advisory and investment management services to a broad range of mutual fund clients. Nuveen Fund Advisors has overall responsibility for management of the funds, oversees the management of the funds’ portfolios, manages the funds’ business affairs and provides certain clerical, bookkeeping and other administrative services. Nuveen Fund Advisors is located at 333 West Wacker Drive, Chicago, Illinois 60606. Nuveen Fund Advisors is a subsidiary of Nuveen Investments, Inc. (“Nuveen Investments”). On November 13, 2007, Nuveen Investments was acquired by investors led by Madison Dearborn Partners, LLC, which is a private equity investment firm based in Chicago, Illinois. The Nuveen family of advisers has been providing advice to investment companies since 1976.
Nuveen Fund Advisors has selected its affiliate, Nuveen Asset Management, LLC (“Nuveen Asset Management”), located at 333 West Wacker Drive, Chicago, Illinois 60606, to serve as sub-adviser to each fund. Nuveen Asset Management manages the investment of the funds’ assets on a discretionary basis, subject to the supervision of Nuveen Fund Advisors. Nuveen Fund Advisors and Nuveen Asset Management retain the right to reallocate investment advisory responsibilities and fees between themselves in the future.
The portfolio manager for Nuveen California High Yield Municipal Bond Fund is John V. Miller. The portfolio manager for Nuveen California Municipal Bond Fund, Nuveen California Municipal Bond Fund 2, Nuveen New York Municipal Bond Fund and Nuveen New York Municipal Bond Fund 2 is Scott R. Romans. The portfolio manager for Nuveen Connecticut Municipal Bond Fund, Nuveen Massachusetts Municipal Bond Fund and Nuveen Massachusetts Municipal Bond Fund 2 is Michael S. Hamilton. The portfolio manager for Nuveen New Jersey Municipal Bond Fund is Paul L. Brennan.
| • | John V. Miller, CFA, joined Nuveen as a credit analyst in 1996, with three prior years of experience in the municipal market with a private account management firm. Mr. Miller has been the Chief Investment Officer and a Managing Director of Nuveen since 2007. He manages nine Nuveen-sponsored investment companies, with a total of approximately $6.9 billion under management. |
| • | Scott R. Romans, PhD, joined Nuveen in 2000 as a senior analyst covering higher education, charter schools and private secondary schools and assumed certain portfolio management responsibilities in 2003. He manages 33 Nuveen-sponsored investment companies, with a total of approximately $7.9 billion under management. |
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| • | Michael S. Hamilton entered the financial services industry with FAF Advisors, Inc. (“FAF”) in 1989, and joined Nuveen Asset Management on January 1, 2011 in connection with the firm’s acquisition of a portion of FAF’s asset management business. He manages 17 Nuveen-sponsored investment companies, with a total of approximately $16 billion under management. |
| • | Paul L. Brennan, CFA, CPA, became a portfolio manager at Flagship Financial Inc. (“Flagship”) in 1994, and subsequently became a portfolio manager at Nuveen upon the acquisition of Flagship by Nuveen Investments in 1997. He manages investments for 24 Nuveen-sponsored investment companies with a total of approximately $15.7 billion under management. |
Additional information about the portfolio managers’ compensation, other accounts managed by the portfolio managers and the portfolio managers’ ownership of securities in the funds is provided in the statement of additional information.
Management Fee
The management fee schedule for each fund consists of two components: a fund-level fee, based only on the amount of assets within a fund, and a complex-level fee, based on the aggregate amount of all eligible fund assets managed by Nuveen Fund Advisors.
The annual fund-level fee, payable monthly, is based upon the average daily net assets of each fund as follows:
| Average Daily Net Assets | Nuveen California High Yield Municipal Bond Fund | Nuveen California Municipal Bond Fund | Nuveen California Municipal Bond Fund 2 | Nuveen Connecticut Municipal Bond Fund | Nuveen Massachusetts Municipal Bond Fund | |||||||||||||||
| For the first $125 million | 0.4000 | % | 0.3500 | % | 0.3500 | % | 0.3500 | % | 0.3500 | % | ||||||||||
| For the next $125 million | 0.3875 | % | 0.3375 | % | 0.3375 | % | 0.3375 | % | 0.3375 | % | ||||||||||
| For the next $250 million | 0.3750 | % | 0.3250 | % | 0.3250 | % | 0.3250 | % | 0.3250 | % | ||||||||||
| For the next $500 million | 0.3625 | % | 0.3125 | % | 0.3125 | % | 0.3125 | % | 0.3125 | % | ||||||||||
| For the next $1 billion | 0.3500 | % | 0.3000 | % | 0.3000 | % | 0.3000 | % | 0.3000 | % | ||||||||||
| For net assets over $2 billion | 0.3250 | % | 0.2750 | % | 0.2750 | % | 0.2750 | % | 0.2750 | % | ||||||||||
| For net assets over $5 billion | — | 0.2500 | % | 0.2500 | % | 0.2500 | % | 0.2500 | % | |||||||||||
| Average Daily Net Assets | Nuveen Massachusetts Municipal Bond Fund 2 | Nuveen New Jersey Municipal Bond Fund | Nuveen New York Municipal Bond Fund | Nuveen New York Municipal Bond Fund 2 | ||||||||||||
| For the first $125 million | 0.3500 | % | 0.3500 | % | 0.3500 | % | 0.3500 | % | ||||||||
| For the next $125 million | 0.3375 | % | 0.3375 | % | 0.3375 | % | 0.3375 | % | ||||||||
| For the next $250 million | 0.3250 | % | 0.3250 | % | 0.3250 | % | 0.3250 | % | ||||||||
| For the next $500 million | 0.3125 | % | 0.3125 | % | 0.3125 | % | 0.3125 | % | ||||||||
| For the next $1 billion | 0.3000 | % | 0.3000 | % | 0.3000 | % | 0.3000 | % | ||||||||
| For net assets over $2 billion | 0.2750 | % | 0.2750 | % | 0.2750 | % | 0.2750 | % | ||||||||
| For net assets over $5 billion | 0.2500 | % | 0.2500 | % | 0.2500 | % | 0.2500 | % | ||||||||
The complex-level fee is the same for each fund. It begins at a maximum rate of 0.2000% of each fund’s average daily net assets, based upon complex-level assets of $55 billion, with breakpoints for eligible assets above that level. Therefore, the maximum management fee rate for each fund is the fund-level fee plus 0.2000%. As of March 31, 2011, the effective complex-level fee for each fund was 0.1799% of the fund’s average daily net assets.
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39
For the most recent fiscal year, each fund paid Nuveen Fund Advisors the following management fees (net of fee waivers and expense reimbursements, where applicable) as a percentage of average daily net assets:
| Nuveen California High Yield Municipal Bond Fund | 0.58% | |||
| Nuveen California Municipal Bond Fund | 0.52% | |||
| Nuveen California Municipal Bond Fund 2 | 0.53% | |||
| Nuveen Connecticut Municipal Bond Fund | 0.52% | |||
| Nuveen Massachusetts Municipal Bond Fund | 0.53% | |||
| Nuveen Massachusetts Municipal Bond Fund 2 | 0.53% | |||
| Nuveen New Jersey Municipal Bond Fund | 0.53% | |||
| Nuveen New York Municipal Bond Fund | 0.52% | |||
| Nuveen New York Municipal Bond Fund 2 | 0.52% |
Nuveen Fund Advisors has agreed to waive fees and/or reimburse expenses so that total annual fund operating expenses (excluding 12b-1 distribution and service fees, interest expenses, taxes, fees incurred in acquiring and disposing of portfolio securities and extraordinary expenses) for the Nuveen California High Yield Municipal Bond Fund does not exceed 0.70% through July 31, 2012, and 1.00% thereafter, of the average daily net assets of any class of fund shares. The expense limitation expiring July 31, 2012, may be terminated or modified prior to that date only with the approval of the Board of Trustees of the fund. The expense limitation in effect thereafter may be terminated or modified only with the approval of shareholders of the fund.
In addition, Nuveen Fund Advisors has agreed to waive fees and/or reimburse expenses so that total annual fund operating expenses (excluding 12b-1 distribution and service fees, interest expenses, taxes, fees incurred in acquiring and disposing of portfolio securities and extraordinary expenses) for each fund set forth below do not exceed the following percentage of the average daily net assets of any class of fund shares:
| Nuveen California Municipal Bond Fund | 0.750% | |||
| Nuveen California Municipal Bond Fund 2 | 0.975% | |||
| Nuveen Massachusetts Municipal Bond Fund | 0.750% | |||
| Nuveen Massachusetts Municipal Bond Fund 2 | 0.975% | |||
| Nuveen New York Municipal Bond Fund | 0.750% | |||
| Nuveen New York Municipal Bond Fund 2 | 0.975% |
These expense limitations may be terminated or modified only with the approval of shareholders of the funds.
Information regarding the Board of Trustees’ approval of investment management agreements is currently available in the funds’ annual report for the fiscal year ended February 28, 2011.
Each fund’s investment objective may not be changed without shareholder approval. The funds’ investment policies may be changed by the Board of
Trustees without shareholder approval unless otherwise noted in this prospectus or the statement of additional information.
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Section 2 How We Manage Your Money
Municipal Obligations
States, local governments and municipalities and other issuing authorities issue municipal bonds to raise money for various public purposes such as building public facilities, refinancing outstanding obligations and financing general operating expenses. These bonds include general obligation bonds, which are backed by the full faith and credit of the issuer and may be repaid from any revenue source, and revenue bonds, which may be repaid only from the revenue of a specific facility or source.
The funds may purchase municipal bonds that represent lease obligations. These carry special risks because the issuer of the bonds may not be obligated to appropriate money annually to make payments under the lease. In order to reduce this risk, the funds will, in making purchase decisions, take into consideration the issuer’s incentive to continue making appropriations until maturity.
In evaluating municipal bonds of different credit qualities or maturities, Nuveen Asset Management takes into account the size of yield spreads. Yield spread is the additional return the funds may earn by taking on additional credit risk or interest rate risk. For example, yields on low quality bonds are higher than yields on high quality bonds because investors must be compensated for incurring the higher credit risk associated with low quality bonds. If yield spreads do not provide adequate compensation for the additional risk associated with low quality bonds, the funds may buy bonds of relatively higher quality. Similarly, in evaluating bonds of different maturities, Nuveen Asset Management evaluates the comparative yield available on these bonds. If yield spreads on long-term bonds do not compensate the funds adequately for the additional interest rate risk the funds must assume, the funds may buy bonds of relatively shorter maturity. In addition, municipal bonds in a particular industry may provide higher yields relative to their risk compared to bonds in other industries. If that occurs, the funds may buy more bonds from issuers in that industry.
If suitable municipal bonds from a specific state are not available at attractive prices and yields, a fund may invest in municipal bonds of U.S. territories (such as Puerto Rico and Guam), which are exempt from regular federal, state and local income taxes. For diversification purposes or when after-tax yields merit, the funds may invest up to 20% of their net assets in municipal securities that are not exempt from state and local personal income tax. Income received from the funds’ bonds may be subject to the federal and state alternative minimum tax.
Credit Quality
The funds have investment strategies requiring them to invest in municipal bonds that have received a particular rating from a rating service, such as Moody’s or Standard & Poor’s. Municipal bonds that are rated below investment grade (BB/Ba or lower) are commonly referred to as “high yield” or “junk” bonds. High yield bonds typically offer higher yields than investment grade bonds with similar maturities but involve greater risks, including the possibility of default or bankruptcy, and increased market price volatility.
Nuveen California High Yield Municipal Bond Fund may invest in higher quality municipal bonds (those rated AAA/Aaa to A or, if unrated, judged by Nuveen Asset Management to be of comparable quality) or in short-term, high-quality investments as a temporary defensive measure, in response to
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41
unusual market conditions, when there is a lack of acceptable lower rated bonds or at times when yield spreads do not justify the increased risks of investing in lower rated bonds. If Nuveen California High Yield Municipal Bond Fund invests in higher quality municipal bonds, it may not be able to achieve as high a level of current income.
Portfolio Maturity
Maturity measures the time until a bond makes its final payment. Each fund buys municipal bonds with different maturities in pursuit of its investment objective, but will generally maintain, under normal market conditions, an investment portfolio with an overall weighted average maturity of approximately 15 to 30 years.
Inverse Floating Rate Securities
Each fund may invest up to 15% of its net assets in municipal securities whose coupons vary inversely with changes in short-term tax-exempt interest rates. Because these securities create leveraged exposure to underlying municipal bonds, a fund’s exposure to the income and returns of the bonds underlying such securities is greater than the amount of money that the fund has invested in them. These securities present special risks for two reasons: (i) if short-term interest rates rise (fall), the income a fund earns on the inverse floating rate security will fall (rise); and (ii) if long-term interest rates rise (fall), the value of the inverse floating rate security will fall (rise) more than the value of the underlying bond because of the leveraged nature of the investment. The funds will seek to buy these securities at attractive values and yields that more than compensate for their higher income and price volatility and reduced liquidity.
Other Investment Companies
Nuveen California High Yield Municipal Bond Fund may invest up to 10% of its total assets in securities of other open- or closed-end investment companies that invest primarily in municipal securities of the types in which the fund may invest directly. In addition, the fund may invest a portion of its assets in pooled investment vehicles (other than investment companies) that invest primarily in municipal securities of the types in which the fund may invest directly. As a stockholder in an investment company, the fund will bear its ratable share of that investment company’s expenses, and would remain subject to payment of the fund’s advisory and administrative fees with respect to assets so invested. Shareholders would therefore be subject to duplicative expenses to the extent the fund invests in other investment companies. In addition, the securities of other investment companies may also be leveraged and will therefore be subject to leverage risks. If the fund invests in leveraged investment companies, the net asset value and market value of leveraged shares will tend to be more volatile and the yield to shareholders will tend to fluctuate more than the yield generated by unleveraged shares.
Short-Term Investments
Under normal market conditions, each fund may invest up to 20% of its net assets in short-term investments, such as short-term, high quality municipal bonds or tax-exempt money market funds. The funds may invest in short-term, high quality taxable securities or shares of taxable money market funds if suitable short-term municipal bonds or shares of tax-exempt money market funds are not available at reasonable prices and yields. If the funds invest in taxable securities, they may not be able to achieve their investment objectives.
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Each fund may invest up to 100% in cash equivalents and short-term investments as a temporary defensive measure in response to adverse market conditions or to keep cash on hand fully invested. During these periods, the weighted average maturity of a fund’s investment portfolio may fall below the defined range described under “What Securities We Invest In—Portfolio Maturity” (above) and the fund may not achieve its objective. The funds do not expect to invest substantial amounts in short-term investments as a defensive measure except under extraordinary circumstances.
For more information on eligible short-term investments, see the statement of additional information.
Derivatives and Other Investment Strategies
In addition to their principal investment strategies, the funds may also use various investment strategies designed to limit the risk of bond price fluctuations and to preserve capital. These strategies include using financial futures contracts, swap contracts, options on financial futures, options on swap contracts or other derivative securities whose prices, in Nuveen Asset Management’s opinion, correlate with the prices of the funds’ investments. The funds may also use these strategies to shorten or lengthen the effective duration, and therefore the interest rate risk, of the funds’ portfolio, and to adjust other aspects of the portfolio’s risk/return profile. The funds may use these strategies if they deem it more efficient from a transaction cost, total return or income standpoint than selling and/or investing in cash securities.
When-Issued, Delayed-Delivery and Forward Commitment Transactions
Each fund may enter into contracts to purchase securities for a specified price at a future date later than the normal settlement date. These transactions involve an additional element of risk because, although the fund will not have made any cash outlay prior to the settlement date, the value of the security to be purchased may decline before that settlement date.
Municipal “forwards” pay higher interest rates after settlement than standard bonds to compensate the buyer for bearing market risk but deferring income during the settlement period, and can often be bought at attractive prices and yields. For instance, if a fund knows that a portfolio bond will, or is likely to, be called or mature on a specific future date, the fund may buy a forward settling on or about that date to replace the called or maturing bond and “lock in” a currently attractive interest rate.
Portfolio Holdings
A description of the funds’ policies and procedures with respect to the disclosure of the funds’ portfolio holdings is available in the funds’ statement of additional information. Certain portfolio holdings information is available on the funds’ website—www.nuveen.com—by clicking the “Our Products—Mutual Funds” section on the home page and following the applicable link for your fund in the “Search Mutual Fund Family” section. By following these links, you can obtain a list of your fund’s top ten holdings and a complete list of holdings of your fund as of the end of the most recent month. The holdings information on the funds’ website is generally made available approximately five business days following the end of each most recent month. This information will remain available on the website until the funds file with the Securities and Exchange Commission their annual, semi-annual or quarterly holdings report for the fiscal period that includes the date(s) as of which the website information is current.
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Investment Philosophy
Nuveen Asset Management believes that the tax treatment of municipal securities and the structural characteristics in the municipal securities market create opportunities to enhance the after-tax total return and diversification of the investment portfolios of taxable investors.
Investment Process
Nuveen Asset Management believes that a value-oriented investment strategy that seeks to identify underrated and undervalued securities and sectors is positioned to capture the opportunities inherent in the municipal securities market and potentially outperform the general municipal securities market over time. The primary elements of Nuveen Asset Management’s, investment process are:
| • | Credit Analysis and Surveillance |
| • | Sector Analysis |
| • | Limited Industry Concentration |
| • | Trading Strategies |
| • | Sell Discipline |
| • | Yield Curve and Structural Analysis |
Risk is inherent in all investing. Investing in a mutual fund—even the most conservative—involves risk, including the risk that you may receive little or no return on your investment or even that you may lose part or all of your investment. Therefore, before investing you should consider carefully the following risks that you assume when you invest in these funds. Because of these and other risks, you should consider an investment in any of these funds to be a long-term investment.
Market risk: Market risk is the risk that the market values of municipal bonds owned by the funds will decline, at times sharply and unpredictably. Market values of municipal bonds are affected by a number of different factors, including changes in interest rates, the credit quality of bond issuers, and general economic and market conditions. Lower-quality municipal bonds may suffer larger price declines and more volatility than higher-quality bonds in response to negative issuer-specific developments or general economic news. During times of low demand or decreased liquidity in the municipal bond market, prices of bonds, particularly lower-quality bonds, may decline sharply, without regard to changes in interest rates or issuer-specific credit-related events. Such periods of decreased liquidity may occur when dealers that make a market in municipal bonds are unable or unwilling to do so, particularly during periods of economic or financial distress.
Credit risk: Credit risk is the risk that an issuer of a municipal bond may be unable or unwilling to meet its obligation to make interest and principal payments when due and the related risk that the value of a bond may decline because of concerns about the issuer’s ability or willingness to make such payments. Credit risk is heightened for investments in below investment grade municipal bonds. Below investment grade bonds, while generally
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Section 2 How We Manage Your Money
offering higher yields than investment grade bonds with similar maturities, involve greater risks, including the possibility of default or bankruptcy, and are regarded as predominantly speculative with respect to the issuer’s capacity to pay interest and repay principal. In addition, the funds may purchase municipal bonds that represent lease obligations that involve special risks because the issuer may not be obligated to appropriate money annually to make payments under the lease.
Interest rate risk: Interest rate risk is the risk that the value of a fund’s portfolio will decline because of rising interest rates. Interest rate risk is generally lower for shorter-term investments and higher for longer-term investments. Interest rate risk may be increased by a fund’s investment in inverse floating rate securities and forward commitments because of the leveraged nature of these investments.
State concentration risk: Because the funds primarily purchase municipal bonds from a specific state, each fund is subject to the risk that economic, political or regulatory changes could adversely affect municipal bond issuers in that state and therefore the value of the fund’s investment portfolio. For more information, see the statement of additional information.
Income risk: The income from a fund’s portfolio may decline because of falling market interest rates. This can result when the fund invests the proceeds from new share sales, or from matured or called bonds, at market interest rates that are below the portfolio’s current earnings rate. Also, if a fund invests in inverse floating rate securities, whose income payments vary inversely with changes in short-term market rates, the fund’s income may decrease if short-term interest rates rise.
Inflation risk: The value of assets or income from investments may be less in the future as inflation decreases the value of money. As inflation increases, the value of a fund’s assets can decline, as can the value of a fund’s distributions.
Borrowing and leverage risks: Each fund may borrow for temporary or emergency purposes, including to meet redemption requests, pay dividends, repurchase its shares, or clear portfolio transactions. Borrowing may exaggerate changes in the net asset value of a fund’s shares and may affect a fund’s net income. When a fund borrows money, it must pay interest and other fees, which will reduce the fund’s returns if such costs exceed the returns on the portfolio securities purchased or retained with such borrowings. Any such borrowings are intended to be temporary. However, under certain market conditions, including periods of low demand or decreased liquidity in the municipal bond market, such borrowings might be outstanding for longer periods of time. In addition, when a fund invests in certain derivative securities, including, but not limited to, inverse floating rate securities, when-issued securities, forward commitments, futures contracts and interest rate swaps, it is effectively leveraging its investments. Certain investments or trading strategies that involve leverage can exaggerate changes in the net asset value of a fund’s shares and can result in losses that exceed the amount originally invested.
Leveraged securities risk: Each fund may invest in inverse floating rate securities which create effective leverage. Because these securities create leveraged exposure to underlying municipal bonds, the amount a fund invests in such securities exposes it to risks and potential returns to a greater extent than the amount actually invested. The interest payments a fund receives on such securities vary inversely with the short-term financing rates paid by the securities’ issuers, and those interest payments will decrease if
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short-term interest rates increase. In addition, the value of these securities will vary by more than the value of the underlying bonds due to the leveraged nature of the investments. Also, the holder of the floating rate securities that has provided the leverage associated with a fund’s inverse floating rate securities may cause the fund to purchase or otherwise retire those floating rate securities (i.e., to effectively cause the fund to repay the leverage provided by such holder), which may require the fund to raise cash through the sale of portfolio securities at times and at prices that are not desirable for the fund.
Tax risk: Income from municipal bonds held by the funds could be declared taxable because of unfavorable changes in tax laws, adverse interpretations by the Internal Revenue Service or state tax authorities, or noncompliant conduct of a bond issuer. In addition, a portion of the fund’s otherwise exempt-interest dividends may be taxable to those shareholders subject to the federal alternative minimum tax.
Non-diversification risk: The Nuveen Massachusetts Municipal Bond Fund 2 is non-diversified. A non-diversified fund may invest a larger portion of its assets in a fewer number of issuers than a diversified fund. Because a relatively high percentage of the fund’s assets may be invested in the securities of a limited number of issuers, the fund’s portfolio may be more susceptible to any single economic, political or regulatory occurrence than the portfolio of a diversified fund.
Reliance on investment adviser: Each fund is dependent upon services and resources provided by Nuveen Fund Advisors, and therefore its parent, Nuveen Investments. Nuveen Investments has a substantial amount of indebtedness. Nuveen Investments, through its own business or the financial support of its affiliates, may not be able to generate sufficient cash flow from operations or ensure that future borrowings will be available in an amount sufficient to enable it to pay its indebtedness with scheduled maturities beginning in 2014 or to fund its other liquidity needs. Nuveen Investments’ failure to satisfy the terms of its indebtedness, including covenants therein, may generally have an adverse effect on the financial condition of Nuveen Investments and on the ability of Nuveen Fund Advisors to provide services and resources to the funds.
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Section 2 How We Manage Your Money
Section 3 How You Can Buy and Sell Shares
The funds offer multiple classes of shares, each with a different combination of sales charges, fees, eligibility requirements and other features. Your financial advisor can help you determine which class is best for you. For further details, please see the statement of additional information.
Class A Shares
You can purchase Class A shares at the offering price, which is the net asset value per share plus an up-front sales charge. You may qualify for a reduced sales charge, or the sales charge may be waived, as described in “How to Reduce Your Sales Charge.” Class A shares are also subject to an annual service fee of 0.20% of your fund’s average daily net assets, which compensates your financial advisor or other financial intermediary for providing ongoing service to you. Nuveen Securities, LLC (the “Distributor”), a subsidiary of Nuveen Investments and the distributor of the funds, retains the up-front sales charge and the service fee on accounts with no financial intermediary of record. The up-front Class A sales charges for the funds are as follows:
| Amount of Purchase | Sales Charge as % of Public Offering Price | Sales Charge as % of Net Amount Invested | Maximum Financial Intermediary Commission as % of Public Offering Price | |||||||||
| Less than $50,000 | 4.20 | % | 4.38 | % | 3.70 | % | ||||||
| $50,000 but less than $100,000 | 4.00 | 4.18 | 3.50 | |||||||||
| $100,000 but less than $250,000 | 3.50 | 3.63 | 3.00 | |||||||||
| $250,000 but less than $500,000 | 2.50 | 2.56 | 2.00 | |||||||||
| $500,000 but less than $1,000,000 | 2.00 | 2.04 | 1.50 | |||||||||
| $1,000,000 and over* | — | — | 1.00 | |||||||||
| * | You can purchase $1 million or more of Class A shares at net asset value without an up-front sales charge. The Distributor pays financial intermediaries of record a commission equal to 1% of the first $2.5 million, plus 0.75% of the next $2.5 million, plus 0.50% of the amount over $5 million. Unless you are eligible for a waiver, you may be assessed a contingent deferred sales charge (“CDSC”) of 1% if you redeem any of your shares within 6 months of purchase, 0.75% if you redeem any of your shares within 12 months of purchase and 0.50% if you redeem any of your shares within 18 months of purchase. See “How to Sell Shares—Contingent Deferred Sales Charge” below for more information. |
Class B Shares
Class B shares are not available for new accounts or for additional investment into existing accounts. However, the funds will issue Class B shares upon the exchange of Class B shares from another Nuveen Mutual Fund for which Boston Financial Data Services serves as transfer agent or for purposes of dividend reinvestment. Nuveen California High Yield Municipal Bond Fund does not offer Class B shares.
Class B shares are subject to annual distribution and service fees of 0.95% of your fund’s average daily net assets. The annual 0.20% service fee compensates your financial advisor or other financial intermediary for providing ongoing service to you. The annual 0.75% distribution fee compensates the Distributor for paying your financial advisor or other financial intermediary a 4% up-front sales commission, which includes an advance of the first year’s service fee. The Distributor retains the service and distribution fees on accounts with no financial intermediary of record. If you
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redeem your shares within six years of purchase, you will normally pay a CDSC as shown in the schedule below. The CDSC is based on your purchase price or redemption proceeds, whichever is lower. You do not pay a CDSC on any Class B shares you purchase by reinvesting dividends.
| Years Since Purchase | 0-1 | 1-2 | 2-3 | 3-4 | 4-5 | 5-6 | Over 6 | |||||||||||||||||||||
| CDSC | 5 | % | 4 | % | 4 | % | 3 | % | 2 | % | 1 | % | None | |||||||||||||||
Class B shares automatically convert to Class A shares eight years after you buy them so that the distribution fees you pay over the life of your investment are limited. You will continue to pay an annual service fee on any converted Class B shares.
Class C Shares
You can purchase Class C shares at the offering price, which is the net asset value per share without any up-front sales charge. Class C shares are subject to annual distribution and service fees of 0.75% of your fund’s average daily net assets. The annual 0.20% service fee compensates your financial advisor or other financial intermediary for providing ongoing service to you. The annual 0.55% distribution fee compensates the Distributor for paying your financial advisor or other financial intermediary an ongoing sales commission as well as an advance of the first year’s service and distribution fees. The Distributor retains the service and distribution fees on accounts with no financial intermediary of record. If you redeem your shares within 12 months of purchase, you will normally pay a 1% CDSC, which is calculated on the lower of your purchase price or redemption proceeds. You do not pay a CDSC on any Class C shares you purchase by reinvesting dividends. Class C shares do not convert.
The funds have established a limit to the amount of Class C shares that may be purchased by an individual investor. See the statement of additional information for more information.
Class I Shares
You can purchase Class I shares at the offering price, which is the net asset value per share without any up-front sales charge. As Class I shares are not subject to sales charges or ongoing service or distribution fees, they have lower ongoing expenses than the other classes.
Class I shares are available for purchase by clients of financial intermediaries who charge such clients an ongoing fee for advisory, investment, consulting or related services. Such clients may include individuals, corporations, endowments and foundations. The minimum initial investment for such clients is $100,000, but this minimum will be lowered to $250 for clients of financial intermediaries that have accounts holding Class I shares with an aggregate value of at least $100,000. The Distributor may also lower the minimum to $250 for clients of financial intermediaries anticipated to reach this Class I share holdings level.
Class I shares are also available for purchase by family offices and their clients. A family office is a company that provides certain financial and other services to a high net worth family or families. The minimum initial investment for family offices and their clients is $100,000, but this minimum will be lowered to $250 for clients of family offices that have accounts holding Class I shares with an aggregate value of at least $100,000. The Distributor may also lower the minimum to $250 for clients of family offices anticipated to reach this Class I share holdings level.
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Section 3 How You Can Buy and Sell Shares
Class I shares are also available for purchase, with no minimum initial investment, by the following categories of investors:
| • | Certain employer-sponsored retirement plans. |
| • | Certain bank or broker-affiliated trust departments. |
| • | Advisory accounts of Nuveen Fund Advisors and its affiliates. |
| • | Trustees/directors and former trustees/directors of any Nuveen Fund, and their immediate family members (as defined in the statement of additional information). |
| • | Officers, directors and former directors of Nuveen Investments and its affiliates, and their immediate family members. |
| • | Full-time and retired employees of Nuveen Investments and its affiliates, and their immediate family members. |
| • | Certain financial intermediary personnel, and their immediate family members. |
Please refer to the statement of additional information for more information about Class A, Class B, Class C and Class I shares, including more detailed program descriptions and eligibility requirements. Additional information is also available from your financial advisor, who can also help you prepare any necessary application forms.
The funds offer a number of ways to reduce or eliminate the up-front sales charge on Class A shares. See “What Share Classes We Offer” (above) for a discussion of eligibility requirements for purchasing Class I shares.
Class A Sales Charge Reductions
| • | Rights of Accumulation. In calculating the appropriate sales charge on a purchase of Class A shares of a fund, you may be able to add the amount of your purchase to the value that day of all of your prior purchases of any Nuveen Mutual Fund. |
| • | Letter of Intent. Subject to certain requirements, you may purchase Class A shares of a fund at the sales charge rate applicable to the total amount of the purchases you intend to make over a 13-month period. |
For purposes of calculating the appropriate sales charge as described under Rights of Accumulation and Letter of Intent above, you may include purchases by (i) you, (ii) your spouse or domestic partner and dependent children, and (iii) a corporation, partnership or sole proprietorship that is 100% owned by any of the persons in (i) or (ii). In addition, a trustee or other fiduciary can count all shares purchased for a single trust, estate or other single fiduciary account that has multiple accounts (including one or more employee benefit plans of the same employer).
Class A Sales Charge Waivers
Class A shares of a fund may be purchased at net asset value without a sales charge as follows:
| • | Purchases of $1,000,000 or more. |
| • | Monies representing reinvestment of Nuveen Defined Portfolio and Nuveen Mutual Fund distributions. |
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| • | Employees of Nuveen Investments and its affiliates. Purchases by full-time and retired employees of Nuveen Investments and its affiliates and such employees’ immediate family members (as defined in the statement of additional information). |
| • | Trustees/directors and former trustees/directors of the Nuveen Funds. |
| • | Financial intermediary personnel. Purchases by any person who, for at least the last 90 days, has been an officer, director, or bona fide employee of any financial intermediary or any such person’s immediate family member. |
| • | Certain trust departments. Purchases by bank or broker-affiliated trust departments investing funds over which they exercise exclusive discretionary investment authority and that are held in a fiduciary, agency, advisory, custodial or similar capacity. |
| • | Additional categories of investors. Purchases made by: (i) investors purchasing on a periodic fee, asset-based fee or no transaction fee basis through a broker-dealer sponsored mutual fund purchase program; and (ii) clients of investment advisers, financial planners or other financial intermediaries that charge periodic or asset-based fees for their services. |
In order to obtain a sales charge reduction or waiver, it may be necessary at the time of purchase for you to inform the funds or your financial advisor of the existence of other accounts in which there are holdings eligible to be aggregated for such purposes. You may need to provide the funds or your financial advisor information or records, such as account statements, in order to verify your eligibility for a sales charge reduction or waiver. This may include account statements of family members and information regarding Nuveen Mutual Fund shares held in accounts with other financial advisors. You or your financial advisor must notify the Distributor at the time of each purchase if you are eligible for any of these programs. The funds may modify or discontinue these programs at any time.
Fund shares may be purchased on any business day, which is any day the New York Stock Exchange (the “NYSE”) is open for business. Generally, the NYSE is closed on weekends and national holidays. The share price you pay depends on when the Distributor receives your order. Orders received before the close of trading on a business day (normally, 4:00 p.m. New York time) will receive that day’s closing share price; otherwise, you will receive the next business day’s price.
You may purchase fund shares (1) through a financial advisor or (2) directly from the funds.
Through a Financial Advisor
You may buy shares through your financial advisor, who can handle all the details for you, including opening a new account. Financial advisors can also help you review your financial needs and formulate long-term investment goals and objectives. In addition, financial advisors generally can help you develop a customized financial plan, select investments and monitor and review your portfolio on an ongoing basis to help assure your investments continue to meet your needs as circumstances change. Financial advisors (including brokers or agents) are paid for providing ongoing investment advice and services, either from fund sales charges and fees or by charging you a separate fee in lieu of a sales charge.
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Section 3 How You Can Buy and Sell Shares
Financial advisors or other dealer firms may charge their customers a processing or service fee in connection with the purchase or redemption of fund shares. The amount and applicability of such a fee is determined and disclosed to customers by each individual dealer. Processing or service fees typically are fixed, nominal dollar amounts and are in addition to the sales and other charges described in this prospectus and the statement of additional information. Your dealer will provide you with specific information about any processing or service fees you will be charged. Shares you purchase through your financial advisor or other intermediary will normally be held with that firm. For more information, please contact your financial advisor.
Directly from the Funds
| • | By wire. You can purchase shares by making a wire transfer from your bank. Before making an initial investment by wire, you must submit a new account form to a fund. After receiving your form, a service representative will contact you with your account number and wiring instructions. Your order will be priced at the next closing share price based on the share class of your fund, calculated after the fund’s custodian receives your payment by wire. Wired funds must be received prior to 4:00 p.m. New York time to be eligible for same day pricing. Neither your fund nor the transfer agent are responsible for the consequences of delays resulting from the banking or Federal Reserve wire system, or from incomplete wiring instructions. Before making any additional purchases by wire, you should call Nuveen Investor Services at (800) 257-8787. You cannot purchase shares by wire on days when federally chartered banks are closed. |
| • | By mail. You may open an account directly with the funds and buy shares by completing an application and mailing it along with your check to: Nuveen Investor Services, P.O. Box 8530, Boston, Massachusetts 02266-8530. Applications may be obtained at www.nuveen.com or by calling (800) 257-8787. No third party checks will be accepted. |
The funds do not consider the U.S. Postal Service or other independent delivery services to be their agents. Therefore, deposit in the mail or with such services, or receipt at Boston Financial Data Services, Inc.’s post office box, of purchase orders or redemption requests does not constitute receipt by the transfer agent of the funds.
| • | On-line. Existing shareholders with direct accounts may process certain account transactions on-line. You may purchase additional shares or exchange shares between existing, identically registered direct accounts. You can also look up your account balance, history and dividend information, as well as order duplicate account statements and tax forms from the fund’s website. To access your account, follow the links under “Our Products” on www.nuveen.com to “Mutual Funds” and choose “Account Access” under the “Shareholder Resources” tab. The system will walk you through the log-in process. To purchase shares on-line, you must have established Fund Direct privileges on your account prior to the requested transaction. See “Special Services—Fund Direct” below. |
| • | By telephone. Existing shareholders with direct accounts may also process account transactions via the funds’ automated information line. Simply call (800) 257-8787, press 1 for mutual funds and the voice menu will walk you through the process. To purchase shares by telephone, you must have established Fund Direct privileges on your account prior to the requested transaction. See “Special Services—Fund Direct” below. |
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To help make your investing with us easy and efficient, we offer you the following services at no extra cost. Your financial advisor can help you complete the forms for these services, or you can call Nuveen Investor Services at (800) 257-8787 for copies of the necessary forms.
Systematic Investing
Once you have opened an account satisfying the applicable investment minimum, systematic investing allows you to make regular additional investments through automatic deductions from your bank account, directly from your paycheck or from exchanging shares from another mutual fund account. The minimum automatic deduction is $100 per month. There is no charge to participate in each fund’s systematic investment plan. You can stop the deductions at any time by notifying the fund in writing.
| • | From your bank account. You can make systematic investments of $100 or more per month by authorizing your fund to draw pre-authorized checks on your bank account. |
| • | From your paycheck. With your employer’s consent, you can make systematic investments each pay period (collectively meeting the monthly minimum of $100) by authorizing your employer to deduct monies from your paycheck. |
| • | Systematic exchanging. You can make systematic investments by authorizing the Distributor to exchange shares from one Nuveen Mutual Fund account into another identically registered Nuveen Mutual Fund account of the same share class. |
Systematic Withdrawal
If the value of your fund account is at least $10,000, you may request to have $50 or more withdrawn automatically from your account. You may elect to receive payments monthly, quarterly, semi-annually or annually, and may choose to receive a check, have the monies transferred directly into your bank account (see “Fund Direct” below), paid to a third party or sent payable to you at an address other than your address of record. You must complete the appropriate section of the account application or Account Update Form to participate in each fund’s systematic withdrawal plan.
You should not establish systematic withdrawals if you intend to make concurrent purchases of Class A or Class C shares because you may unnecessarily pay a sales charge or CDSC on these purchases.
Exchanging Shares
You may exchange fund shares into an identically registered account for the same class of another Nuveen Mutual Fund available in your state. Your exchange must meet the minimum purchase requirements of the fund into which you are exchanging, and, if your shares are held with a financial intermediary, the financial intermediary must have the operational capability to support exchanges. You may also, under certain limited circumstances, exchange between certain classes of shares of the same fund, subject to the payment of any applicable CDSC. Please consult the statement of additional information for details.
The funds may change or cancel their exchange policy at any time upon 60 days’ notice. Each fund reserves the right to revise or suspend the exchange privilege, limit the amount or number of exchanges or reject any exchange.
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Section 3 How You Can Buy and Sell Shares
Because an exchange between funds is treated for tax purposes as a purchase and sale, any gain may be subject to tax. An exchange between classes of shares of the same fund may not be considered a taxable event. You should consult your tax advisor about the tax consequences of exchanging your shares.
Fund DirectSM
The Fund Direct Program allows you to link your fund account to your bank account, transfer money electronically between these accounts and perform a variety of account transactions, including purchasing shares by telephone and investing through a systematic investment plan. You may also have dividends, distributions, redemption payments or systematic withdrawal plan payments sent directly to your bank account.
Reinstatement Privilege
If you redeem fund shares, you may reinvest all or part of your redemption proceeds up to one year later without incurring any additional charges. You may only reinvest into the same share class you redeemed. If you paid a CDSC, your fund will refund your CDSC and reinstate your holding period for purposes of calculating the CDSC. You may use this reinstatement privilege only once for any redemption. The reinstatement privilege is not available for Class B shares.
You may sell (redeem) your shares on any business day. You will receive the share price next determined after your fund has received your properly completed redemption request. Your redemption request must be received before the close of trading on the NYSE (normally, 4:00 p.m. New York time) for you to receive that day’s price. The fund will normally mail your check the next business day after a redemption request is received, but in no event
more than seven days after your request is received. If you are selling shares purchased recently with a check, your redemption proceeds will not be mailed until your check has cleared, which may take up to ten days from your purchase date.
You may sell your shares (1) through a financial advisor or (2) directly to the funds.
Through a Financial Advisor
You may sell your shares through your financial advisor, who can prepare the necessary documentation. Your financial advisor may charge for this service.
Directly to the Funds
| • | By mail. You can sell your shares at any time by sending a written request to the appropriate fund, c/o Nuveen Investor Services, P.O. Box 8530, Boston, Massachusetts 02266-8530. Your request must include the following information: |
| • | The fund’s name; |
| • | Your name and account number; |
| • | The dollar or share amount you wish to redeem; |
| • | The signature of each owner exactly as it appears on the account; |
| • | The name of the person to whom you want your redemption proceeds paid (if other than to the shareholder of record); |
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An Important Note About Telephone Transactions
Although Nuveen Investor Services has certain safeguards and procedures to confirm the identity of callers, it will not be liable for losses resulting from following telephone instructions it reasonably believes to be genuine. Also, you should verify your trade confirmations immediately upon receipt.
| • | The address where you want your redemption proceeds sent (if other than the address of record); |
| • | Any certificates you have for the shares; and |
| • | Any required signature guarantees. |
After you have established your account, signatures on a written request must be guaranteed if:
| • | You would like redemption proceeds payable or sent to any person, address, or bank account other than that on record; |
| • | You have changed the address on your fund’s records within the last 30 days; |
| • | Your redemption request is in excess of $50,000; or |
| • | You are requesting a change in ownership on your account. |
Non-financial transactions, including establishing or modifying certain services such as changing bank information on an account, will require a signature guarantee or signature verification from a Medallion Guarantee Program member or other acceptable form of authentication from a financial institution source. In addition to the situations described above, the funds reserve the right to require a signature guarantee, or another acceptable form of signature verification, in other instances based on the circumstances of a particular situation.
A signature guarantee assures that a signature is genuine and protects shareholders from unauthorized account transfers. Banks, savings and loan associations, trust companies, credit unions, broker-dealers and member firms of a national securities exchange may guarantee signatures. Call your financial intermediary to determine if it has this capability. A notary public is not an acceptable signature guarantor. Proceeds from a written redemption request will be sent to you by check unless another form of payment is requested.
| • | On-line. You may redeem shares or exchange shares between existing, identically registered accounts on-line. To access your account, follow the links under “Our Products” on www.nuveen.com to “Mutual Funds” and choose “Account Access” under the “Shareholder Resources” tab. The system will walk you through the log-in process. On-line redemptions are not available for shares owned in certificate form and, with respect to redemptions where the proceeds are payable by check, may not exceed $50,000. Checks will only be issued to you as shareholder of record and mailed to your address of record. If you have established Fund Direct privileges, you may have redemption proceeds transferred electronically to your bank account. |
| • | By telephone. If your account is held with your fund and not in your brokerage account, and you have authorized telephone redemption privileges, call (800) 257-8787 to redeem your shares, press 1 for mutual funds and the voice menu will walk you through the process. Telephone redemptions are not available for shares owned in certificate form and, with respect to redemptions where the proceeds are payable by check, may not exceed $50,000. Checks will only be issued to you as the shareholder of record and mailed to your address of record, normally the next business day after the redemption request is received. If you have established Fund Direct privileges, you may have redemption proceeds transferred electronically to your bank account. In this case, the redemption proceeds will be transferred to your bank on the next |
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Section 3 How You Can Buy and Sell Shares
business day after the redemption request is received. You should contact your bank for further information concerning the timing of the credit of the redemption proceeds in your bank account. |
Contingent Deferred Sales Charge
If you redeem Class A, Class B or Class C shares that are subject to a CDSC, you may be assessed a CDSC upon redemption. When you redeem Class A, Class B or Class C shares subject to a CDSC, your fund will first redeem any shares that are not subject to a CDSC, and then redeem the shares you have owned for the longest period of time, unless you ask the fund to redeem your shares in a different order. No CDSC is imposed on shares you buy through the reinvestment of dividends and capital gains. The CDSC holding period is calculated on a monthly basis and begins on the first day of the month in which the purchase was made. When you redeem shares subject to a CDSC, the CDSC is calculated on the lower of your purchase price or redemption proceeds, deducted from your redemption proceeds, and paid to the Distributor. The CDSC may be waived under certain special circumstances as described in the statement of additional information.
Accounts with Low Balances
The funds reserve the right to liquidate or assess a low balance fee on any account held directly with the funds that has a balance that has fallen below the account balance minimum of $1,000 for any reason, including market fluctuations.
If a fund elects to exercise this right, then annually the fund will assess a $15 low balance account fee on certain accounts with balances under the account balance minimum that are accounts established pursuant to the UTMA or UGMA. At the same time, other accounts with balances under the account balance minimum will be liquidated, with proceeds being mailed to the address of record. Prior to the assessment of any low balance fee or liquidation of low balance accounts, affected shareholders will receive a communication notifying them of the pending action, thereby providing time to ensure that balances are at or above the account balance minimum prior to any fee assessment or account liquidation. You will not be assessed a CDSC if your account is liquidated.
Redemptions In-Kind
The funds generally pay redemption proceeds in cash. Under unusual conditions that make cash payment unwise and for the protection of existing shareholders, the funds may pay all or a portion of your redemption proceeds in securities or other fund assets. Although it is unlikely that your shares would be redeemed in-kind, you would probably have to pay brokerage costs to sell the securities distributed to you, as well as taxes on any capital gains from that sale.
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To help you understand the tax implications of investing in the funds, this section includes important details about how the funds make distributions to shareholders. We discuss some other fund policies as well.
The funds declare dividends daily and pay such dividends monthly, usually on the first business day of the month. Your account will begin to accrue dividends on the business day after the day when the monies used to purchase your shares are collected by the transfer agent. Each fund seeks to pay monthly tax-exempt dividends at a level rate that reflects the past and projected net income of the fund. To help maintain more stable monthly distributions, the distribution paid by a fund for any particular monthly period may be more or less than the amount of net income actually earned by the fund during such period, and any such under- (or over-) distribution of income is reflected in the fund’s net asset value. This policy is designed to result in the distribution of substantially all of a fund’s net income over time. The funds declare and pay any taxable capital gains or other taxable distributions once a year at year end.
Payment and Reinvestment Options
The funds automatically reinvest your dividends in additional fund shares unless you request otherwise. You may request to have your dividends paid to you by check, deposited directly into your bank account, paid to a third party, sent to an address other than your address of record or reinvested in shares of another Nuveen Mutual Fund. For further information, contact your financial advisor or call Nuveen Investor Services at (800) 257-8787. If you request that your distributions be paid by check but those distributions cannot be delivered because of an incorrect mailing address, or if a distribution check remains uncashed for six months, the undelivered or uncashed distributions and all future distributions will be reinvested in fund shares at the current net asset value.
Taxes and Tax Reporting
Because the funds invest primarily in municipal bonds from a particular state, the regular monthly dividends you, as a taxpayer in that state, receive will generally be exempt from regular federal, state and (for the New York Funds) local income tax. All or a portion of these dividends, however, may be subject to the federal alternative minimum tax.
Generally the funds do not seek to realize taxable income or capital gains. However, the funds may realize and distribute taxable income or capital gains from time to time as a result of each fund’s normal investment activities. The funds’ distributions of these amounts are taxed as ordinary income or capital gains and are taxable whether received in cash or reinvested in additional shares. Dividends from the funds’ long-term capital gains are taxable as capital gains, while dividends from short-term capital gains and net investment income are generally taxable as ordinary income. The funds’ taxable dividends are not expected to qualify for a dividends received deduction if you are a corporate shareholder or for the lower tax rates on qualified dividend income.
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Section 4 General Information
Early in each year, you will receive a statement detailing the amount and nature of all dividends and capital gains that you were paid during the prior year. If you hold your investment at the firm where you purchased your fund shares, you will receive the statement from that firm. If you hold your shares directly with the fund, the Distributor will send you the statement. The tax status of your dividends is the same whether you reinvest your dividends or elect to receive them in cash.
If you receive social security or railroad retirement benefits, you should consult your tax advisor about how an investment in the funds may affect the taxation of your benefits.
Each sale or exchange of fund shares may be a taxable event. When you exchange shares of one Nuveen Mutual Fund for shares of a different Nuveen Mutual Fund, the exchange is treated the same as a sale for tax purposes. A sale may result in capital gain or loss to you. The gain or loss generally will be treated as short-term if you held the shares for 12 months or less and long-term if you held the shares for more than 12 months at the time of disposition.
Please note that if you do not furnish the funds with your correct social security number or employer identification number, you fail to provide certain certifications to the funds, you fail to certify whether you are a U.S. citizen or a U.S. resident alien, or the Internal Revenue Service notifies the funds to withhold, federal law requires the funds to withhold federal income tax from your distributions and redemption proceeds at the applicable withholding rate.
Please consult the statement of additional information and your tax advisor for more information about taxes.
Buying or Selling Shares Close to a Record Date
Buying fund shares shortly before the record date for a taxable income or capital gain distribution is commonly known as “buying the dividend.” The entire distribution may be taxable to you even though a portion of the distribution effectively represents a return of your purchase price.
Taxable Equivalent Yields
The taxable equivalent yield is the current yield you would need to earn on a taxable investment in order to equal a stated federal tax-free yield on a municipal investment. To assist you in comparing municipal investments like the funds with fully taxable alternative investments, the table below presents the taxable equivalent yields for a range of hypothetical federal tax-free yields and tax rates:
| Taxable Equivalents of Tax-Free Yields | To Equal a Tax-Free Yield of: | |||||||||||||||
| 2.00 | % | 3.00 | % | 4.00 | % | 5.00 | % | |||||||||
| Tax Bracket: | A Taxable Investment Would Need to Yield: | |||||||||||||||
| 25% | 2.67 | % | 4.00 | % | 5.33 | % | 6.67 | % | ||||||||
| 28% | 2.78 | % | 4.17 | % | 5.56 | % | 6.94 | % | ||||||||
| 33% | 2.99 | % | 4.48 | % | 5.97 | % | 7.46 | % | ||||||||
| 35% | 3.08 | % | 4.62 | % | 6.15 | % | 7.69 | % | ||||||||
The yields and tax rates shown above are hypothetical and do not predict your actual returns or effective tax rate. For more detailed information, see the statement of additional information or consult your tax advisor.
State Taxes on Distributions
The funds intend to comply with certain state tax requirements so that the dividends they pay that are attributable to interest on certain municipal securities will be excluded from the taxable income of individuals, trusts and
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57
estates. To meet these requirements, each fund must meet certain obligations with respect to the fund’s assets that are exempt from a state’s personal income tax. More information about tax considerations that may affect each fund and its shareholders appears in the funds’ statement of additional information.
The Distributor serves as the selling agent and distributor of the funds’ shares. In this capacity, the Distributor manages the offering of the funds’ shares and is responsible for all sales and promotional activities. In order to reimburse the Distributor for its costs in connection with these activities, including compensation paid to financial intermediaries, each fund has adopted a distribution and service plan under Rule 12b-1 under the 1940 Act. See “How You Can Buy and Sell Shares—What Share Classes We Offer” for a description of the distribution and service fees paid under this plan.
Under the plan, the Distributor receives a distribution fee for Class B and Class C shares primarily for providing compensation to financial intermediaries, including the Distributor, in connection with the distribution of shares. The Distributor receives a service fee for Class A, Class B and Class C shares to compensate financial intermediaries, including the Distributor, for providing ongoing account services to shareholders. These services may include establishing and maintaining shareholder accounts, answering shareholder inquiries and providing other personal services to shareholders. These fees also compensate the Distributor for other expenses, including printing and distributing prospectuses to persons other than shareholders, and preparing, printing, and distributing advertising, sales literature and reports to shareholders used in connection with the sale of shares. Because these fees are paid out of the fund’s assets on an ongoing basis, over time these fees will increase the cost of your investment and may cost you more than paying other types of sales charges. Long-term holders of Class C shares may pay more in distribution and service fees and CDSCs than the economic equivalent of the maximum front-end sales charge permitted under the Financial Industry Regulatory Authority Conduct Rules.
Other Payments to Financial Intermediaries
In addition to the sales commissions and certain payments from distribution and service fees to financial intermediaries as previously described, the Distributor may from time to time make additional payments, out of its own resources, to certain financial intermediaries that sell shares of Nuveen Mutual Funds in order to promote the sales and retention of fund shares by those firms and their customers. The amounts of these payments vary by financial intermediary and, with respect to a given firm, are typically calculated by reference to the amount of the firm’s recent gross sales of Nuveen Mutual Fund shares and/or total assets of Nuveen Mutual Funds held by the firm’s customers. The level of payments that the Distributor is willing to provide to a particular financial intermediary may be affected by, among other factors, the firm’s total assets held in and recent net investments into Nuveen Mutual Funds, the firm’s level of participation in Nuveen Mutual Fund sales and marketing programs, the firm’s compensation program for its registered representatives who sell fund shares and provide services to fund shareholders, and the asset class of the Nuveen Mutual Funds for which these payments are provided. For 2010, these payments in the aggregate were approximately 0.035% to 0.040% of the assets in the Nuveen Mutual Funds, although payments to particular financial intermediaries can be significantly higher. The statement of additional
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Section 4 General Information
information contains additional information about these payments, including the names of the firms to which payments are made. The Distributor may also make payments to financial intermediaries in connection with sales meetings, due diligence meetings, prospecting seminars and other meetings at which the Distributor promotes its products and services.
In connection with the availability of Nuveen Mutual Funds within selected mutual fund no-transaction fee institutional platforms and fee-based wrap programs (together, “Platform Programs”) at certain financial intermediaries, the Distributor also makes payments out of its own assets to those firms as compensation for certain recordkeeping, shareholder communications and other account administration services provided to Nuveen Mutual Fund shareholders who own their fund shares in these Platform Programs. These payments are in addition to the service fee and any applicable omnibus sub-accounting fees paid to these firms with respect to these services by the Nuveen Mutual Funds out of fund assets.
The amounts of payments to a financial intermediary could be significant, and may create an incentive for the intermediary or its representatives to recommend or offer shares of the funds to you. The intermediary may elevate the prominence or profile of the funds within the intermediary’s organization by, for example, placing the funds on a list of preferred or recommended funds and/or granting the Distributor and/or its affiliates preferential or enhanced opportunities to promote the funds in various ways within the intermediary’s organization.
The price you pay for your shares is based on the fund’s net asset value per share, which is determined as of the close of trading (normally 4:00 p.m. New York time) on each day the NYSE is open for business. Net asset value is calculated for each class of the fund by taking the value of the class’ total assets, including interest or dividends accrued but not yet collected, less all liabilities, and dividing by the total number of shares outstanding. The result, rounded to the nearest cent, is the net asset value per share. All valuations are subject to review by the fund’s Board of Trustees or its designee.
In determining net asset value, portfolio instruments generally are valued using prices provided by independent pricing services or obtained from other sources, such as broker-dealer quotations, all as approved by the Board of Trustees. Independent pricing services typically value non-equity portfolio instruments utilizing a range of market-based inputs and assumptions, including readily available market quotations obtained from broker-dealers making markets in such instruments, cash flows, and transactions for comparable instruments. In pricing certain securities, particularly less liquid and lower quality securities, the pricing services may consider information about a security, its issuer, or market activity provided by the fund’s investment adviser or sub-adviser.
If a price cannot be obtained from a pricing service or other pre-approved source, or if Nuveen Fund Advisors deems such price to be unreliable, a portfolio instrument may be valued by the fund at its fair value as determined in good faith by the Board of Trustees or its designee. As a general principle, the fair value of a portfolio instrument is the amount that an owner might reasonably expect to receive upon the instrument’s current sale. A range of factors and analysis may be considered when determining fair value, including relevant market data, interest rates, credit considerations
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and/or issuer-specific news. The fund may rely on an independent fair valuation service in making any such fair value determinations.
The funds are intended for long-term investment and should not be used for excessive trading. Excessive trading in the funds’ shares can disrupt portfolio management, lead to higher operating costs, and cause other operating inefficiencies for the funds. However, the funds are also mindful that shareholders may have valid reasons for periodically purchasing and redeeming fund shares.
Accordingly, the funds have adopted a Frequent Trading Policy that seeks to balance the funds’ need to prevent excessive trading in fund shares while offering investors the flexibility in managing their financial affairs to make periodic purchases and redemptions of fund shares.
The funds’ Frequent Trading Policy generally limits an investor to four “round trip” trades in a 12-month period. A “round trip” is the purchase and subsequent redemption of fund shares, including by exchange. Each side of a round trip may be comprised of either a single transaction or a series of closely-spaced transactions. The funds may also suspend the trading privileges of any investor who makes a round trip within a 30-day period if the purchase and redemption are of substantially similar dollar amounts and represent at least 25% of the value of the investor’s account.
The funds primarily receive share purchase and redemption orders through third-party financial intermediaries, some of whom rely on the use of omnibus accounts. An omnibus account typically includes multiple investors and provides the funds only with a net purchase or redemption amount on any given day where multiple purchases, redemptions and exchanges of shares occur in the account. The identity of individual purchasers, redeemers and exchangers whose orders are aggregated in omnibus accounts, and the size of their orders, will generally not be known by the funds. Despite the funds’ efforts to detect and prevent frequent trading, the funds may be unable to identify frequent trading because the netting effect in omnibus accounts often makes it more difficult to identify frequent traders. The Distributor has entered into agreements with financial intermediaries that maintain omnibus accounts with the funds’ transfer agent. Under the terms of these agreements, the financial intermediaries undertake to cooperate with the Distributor in monitoring purchase, exchange and redemption orders by their customers in order to detect and prevent frequent trading in the funds through such accounts. Technical limitations in operational systems at such intermediaries or at the Distributor may also limit the funds’ ability to detect and prevent frequent trading. In addition, the funds may permit certain financial intermediaries, including broker-dealer and retirement plan administrators, among others, to enforce their own internal policies and procedures concerning frequent trading. Such policies may differ from the funds’ Frequent Trading Policy and may be approved for use in instances where the funds reasonably believe that the intermediary’s policies and procedures effectively discourage inappropriate trading activity. Shareholders holding their accounts with such intermediaries may wish to contact the intermediary for information regarding its frequent trading policy. Although the funds do not knowingly permit frequent trading, they cannot guarantee that they will be able to identify and restrict all frequent trading activity.
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Section 4 General Information
The funds reserve the right in their sole discretion to waive unintentional or minor violations (including transactions below certain dollar thresholds) if they determine that doing so would not harm the interests of fund shareholders. In addition, certain categories of redemptions may be excluded from the application of the Frequent Trading Policy, as described in more detail in the statement of additional information. These include, among others, redemptions pursuant to systematic withdrawal plans, redemptions in connection with the total disability or death of the investor, involuntary redemptions by operation of law, redemptions in payment of account or plan fees, and certain redemptions by retirement plans, including redemptions in connection with qualifying loans or hardship withdrawals, termination of plan participation, return of excess contributions, and required minimum distributions. The funds may also modify or suspend the Frequent Trading Policy without notice during periods of market stress or other unusual circumstances.
The funds reserve the right to impose restrictions on purchases or exchanges that are more restrictive than those stated above if they determine, in their sole discretion, that a transaction or a series of transactions involves market timing or excessive trading that may be detrimental to fund shareholders. The funds also reserve the right to reject any purchase order, including exchange purchases, for any reason. For example, a fund may refuse purchase orders if the fund would be unable to invest the proceeds from the purchase order in accordance with the fund’s investment policies and/or objectives, or if the fund would be adversely affected by the size of the transaction, the frequency of trading in the account or various other factors. For more information about the funds’ Frequent Trading Policy and its enforcement, see “Purchase and Redemption of Fund Shares—Frequent Trading Policy” in the statement of additional information.
The custodian of the assets of the funds is State Street Bank & Trust Company, P.O. Box 5043, Boston, Massachusetts 02206-5043. The custodian also provides certain accounting services to the funds. The funds’ transfer, shareholder services and dividend paying agent, Boston Financial Data Services, Inc., P.O. Box 8530, Boston, Massachusetts 02266-8530, performs bookkeeping, data processing and administrative services for the maintenance of shareholder accounts.
Section 4 General Information
61
Section 5 Financial Highlights
The financial highlights table is intended to help you understand a fund’s financial performance for the past five fiscal years or the life of the fund, if shorter. Certain information reflects financial results for a single fund share. The total returns in the table represent the rate that an investor would have earned (or lost) on an investment in a fund (assuming reinvestment of all dividends and distributions). The information for each of the last five fiscal years or the life of the fund, if shorter, has been audited by PricewaterhouseCoopers LLP, whose report for the most recent fiscal year, along with the funds’ financial statements, are included in the annual report, which is available upon request.
Nuveen California High Yield Municipal Bond Fund
| Class (Commencement Date) | Investment Operations | Less Distributions | Ratios/Supplemental Data | |||||||||||||||||||||||||||||||||||||||||||||||||
| Year Ended February 28/29, | Beginning Net Asset Value | Net Investment Income(a) | Net Realized/ Unrealized Gain (Loss) | Total | Net Investment Income | Capital Gains(b) | Total | Ending Net Asset Value | Total Return(c) | Ending Net Assets (000) | Ratio of Expenses to Average Net Assets(d)(e)(f) | Ratio of Net Investment Income to Average Net Assets(d)(e) | Portfolio Turnover Rate | |||||||||||||||||||||||||||||||||||||||
| Class A (3/06) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2011 | $ | 7.87 | $ | .52 | $ | (.54 | ) | $ | (.02 | ) | $ | (.49 | ) | $ | — | $ | (.49 | ) | $ | 7.36 | (.56 | )% | $ | 60,178 | .90 | % | 6.53 | % | 17 | % | ||||||||||||||||||||||
| 2010 | 6.51 | .51 | 1.34 | 1.85 | (.49 | ) | — | (.49 | ) | 7.87 | 29.23 | 40,864 | .94 | 6.91 | 23 | |||||||||||||||||||||||||||||||||||||
| 2009 | 8.24 | .48 | (1.76 | ) | (1.28 | ) | (.45 | ) | — | (.45 | ) | 6.51 | (16.06 | ) | 32,290 | 1.01 | 6.13 | 55 | ||||||||||||||||||||||||||||||||||
| 2008 | 10.43 | .45 | (2.19 | ) | (1.74 | ) | (.45 | ) | — | ** | (.45 | ) | 8.24 | (17.19 | ) | 42,252 | 1.37 | 4.64 | 25 | |||||||||||||||||||||||||||||||||
| 2007(g) | 10.00 | .39 | .42 | .81 | (.38 | ) | — | (.38 | ) | 10.43 | 8.19 | 14,539 | 1.52 | * | 3.96 | * | 3 | |||||||||||||||||||||||||||||||||||
| Class C (3/06) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2011 | 7.87 | .48 | (.54 | ) | (.06 | ) | (.45 | ) | — | (.45 | ) | 7.36 | (1.07 | ) | 19,035 | 1.45 | 6.00 | 17 | ||||||||||||||||||||||||||||||||||
| 2010 | 6.51 | .47 | 1.34 | 1.81 | (.45 | ) | — | (.45 | ) | 7.87 | 28.56 | 15,971 | 1.49 | 6.25 | 23 | |||||||||||||||||||||||||||||||||||||
| 2009 | 8.24 | .44 | (1.76 | ) | (1.32 | ) | (.41 | ) | — | (.41 | ) | 6.51 | (16.55 | ) | 6,718 | 1.56 | 5.69 | 55 | ||||||||||||||||||||||||||||||||||
| 2008 | 10.42 | .40 | (2.19 | ) | (1.79 | ) | (.39 | ) | — | ** | (.39 | ) | 8.24 | (17.61 | ) | 6,382 | 1.92 | 4.08 | 25 | |||||||||||||||||||||||||||||||||
| 2007(g) | 10.00 | .33 | .42 | .75 | (.33 | ) | — | (.33 | ) | 10.42 | 7.56 | 3,061 | 2.07 | * | 3.36 | * | 3 | |||||||||||||||||||||||||||||||||||
| Class I (3/06)(h) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2011 | 7.86 | .53 | (.53 | ) | — | (.51 | ) | — | (.51 | ) | 7.35 | (.34 | ) | 37,004 | .70 | 6.74 | 17 | |||||||||||||||||||||||||||||||||||
| 2010 | 6.50 | .52 | 1.34 | 1.86 | (.50 | ) | — | (.50 | ) | 7.86 | 29.54 | 32,212 | .74 | 7.09 | 23 | |||||||||||||||||||||||||||||||||||||
| 2009 | 8.24 | .50 | (1.77 | ) | (1.27 | ) | (.47 | ) | — | (.47 | ) | 6.50 | (16.01 | ) | 16,146 | .81 | 6.80 | 55 | ||||||||||||||||||||||||||||||||||
| 2008 | 10.43 | .47 | (2.19 | ) | (1.72 | ) | (.47 | ) | — | ** | (.47 | ) | 8.24 | (17.04 | ) | 4,889 | 1.17 | 4.92 | 25 | |||||||||||||||||||||||||||||||||
| 2007(g) | 10.00 | .45 | .37 | .82 | (.39 | ) | — | (.39 | ) | 10.43 | 8.35 | 106 | 1.31 | * | 4.58 | * | 3 | |||||||||||||||||||||||||||||||||||
| * | Annualized. |
| ** | Rounds to less than $.01 per share. |
| (a) | Per share Net Investment Income is calculated using the average daily shares method. |
| (b) | Distributions from Capital Gains include short-term capital gains, if any. |
| (c) | Total Return is the combination of changes in net asset value without any sales charge, reinvested dividend income at net asset value and reinvested capital gains distributions at net asset value, if any. Total Return is not annualized. |
| (d) | Ratios do not reflect the effect of custodian fee credits earned on the Fund’s net cash on deposit with the custodian bank, where applicable. |
| (e) | After expense reimbursement from the investment adviser, when applicable. |
| (f) | The Ratios of Expenses to Average Net Assets reflect, among other things, the interest expense deemed to have been paid by the Fund on the floating rate certificates issued by the special purpose trusts for the self-deposited inverse floaters held by the Fund, as described in Footnote 1 – General Information and Significant Accounting Policies, Inverse Floating Rate Securities in the most recent shareholder report, as follows: |
| Interest Expense on Inverse Floaters | ||||
2011 | — | % | ||
2010 | — | |||
2009 | 0.09 | |||
2008 | 0.44 | |||
2007(g) | 0.58 | * | ||
| (g) | For the period March 28, 2006 (commencement of operations) through February 28, 2007. |
| (h) | Effective May 1, 2008, Class R Shares were renamed Class I Shares. |
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Section 5 Financial Highlights
Nuveen California Municipal Bond Fund
Class (Commencement Date) | Investment Operations | Less Distributions | Ratios/Supplemental Data | |||||||||||||||||||||||||||||||||||||||||||||||||
| Year Ended February 28/29, | Beginning Net Asset Value | Net Investment Income(a) | Net Realized/ Unrealized Gain (Loss) | Total | Net Investment Income | Capital Gains(b) | Total | Ending Net Asset Value | Total Return(c) | Ending Net Assets (000) | Ratio of Expenses to Average Net Assets(d)(e) | Ratio of Net Investment Income to Average Net Assets(d) | Portfolio Turnover Rate | |||||||||||||||||||||||||||||||||||||||
| Class A (9/94) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2011 | $ | 9.80 | $ | .47 | $ | (.36 | ) | $ | .11 | $ | (.45 | ) | $ | — | $ | (.45 | ) | $ | 9.46 | 1.05 | % | $ | 136,513 | .81 | % | 4.77 | % | 18 | % | |||||||||||||||||||||||
| 2010 | 8.96 | .46 | .82 | 1.28 | (.44 | ) | — | (.44 | ) | 9.80 | 14.56 | 128,672 | .86 | 4.86 | 14 | |||||||||||||||||||||||||||||||||||||
| 2009 | 9.50 | .44 | (.55 | ) | (.11 | ) | (.43 | ) | — | (.43 | ) | 8.96 | (1.25 | ) | 106,117 | .90 | 4.66 | 40 | ||||||||||||||||||||||||||||||||||
| 2008 | 10.50 | .43 | (1.00 | ) | (.57 | ) | (.43 | ) | — | (.43 | ) | 9.50 | (5.65 | ) | 107,241 | .97 | 4.23 | 50 | ||||||||||||||||||||||||||||||||||
| 2007 | 10.43 | .43 | .07 | .50 | (.43 | ) | — | (.43 | ) | 10.50 | 4.88 | 91,465 | 1.09 | 4.13 | 20 | |||||||||||||||||||||||||||||||||||||
| Class B (3/97) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2011 | 9.80 | .39 | (.36 | ) | .03 | (.38 | ) | — | (.38 | ) | 9.45 | .19 | 1,960 | 1.56 | 4.00 | 18 | ||||||||||||||||||||||||||||||||||||
| 2010 | 8.96 | .39 | .82 | 1.21 | (.37 | ) | — | (.37 | ) | 9.80 | 13.75 | 3,276 | 1.61 | 4.13 | 14 | |||||||||||||||||||||||||||||||||||||
| 2009 | 9.50 | .37 | (.55 | ) | (.18 | ) | (.36 | ) | — | (.36 | ) | 8.96 | (1.99 | ) | 4,337 | 1.65 | 3.87 | 40 | ||||||||||||||||||||||||||||||||||
| 2008 | 10.49 | .36 | (1.00 | ) | (.64 | ) | (.35 | ) | — | (.35 | ) | 9.50 | (6.28 | ) | 7,175 | 1.72 | 3.46 | 50 | ||||||||||||||||||||||||||||||||||
| 2007 | 10.42 | .35 | .07 | .42 | (.35 | ) | — | (.35 | ) | 10.49 | 4.10 | 10,076 | 1.85 | 3.38 | 20 | |||||||||||||||||||||||||||||||||||||
| Class C (9/94) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2011 | 9.78 | .41 | (.36 | ) | .05 | (.40 | ) | — | (.40 | ) | 9.43 | .39 | 26,338 | 1.36 | 4.21 | 18 | ||||||||||||||||||||||||||||||||||||
| 2010 | 8.94 | .41 | .82 | 1.23 | (.39 | ) | — | (.39 | ) | 9.78 | 14.00 | 25,552 | 1.41 | 4.31 | 14 | |||||||||||||||||||||||||||||||||||||
| 2009 | 9.48 | .39 | �� | (.55 | ) | (.16 | ) | (.38 | ) | — | (.38 | ) | 8.94 | (1.80 | ) | 20,484 | 1.45 | 4.10 | 40 | |||||||||||||||||||||||||||||||||
| 2008 | 10.47 | .38 | (1.00 | ) | (.62 | ) | (.37 | ) | — | (.37 | ) | 9.48 | (6.07 | ) | 25,306 | 1.52 | 3.68 | 50 | ||||||||||||||||||||||||||||||||||
| 2007 | 10.41 | .37 | .06 | .43 | (.37 | ) | — | (.37 | ) | 10.47 | 4.25 | 23,067 | 1.64 | 3.58 | 20 | |||||||||||||||||||||||||||||||||||||
| Class I (7/86)(f) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2011 | 9.79 | .49 | (.36 | ) | .13 | (.47 | ) | — | (.47 | ) | 9.45 | 1.23 | 132,344 | .61 | 4.96 | 18 | ||||||||||||||||||||||||||||||||||||
| 2010 | 8.95 | .48 | .82 | 1.30 | (.46 | ) | — | (.46 | ) | 9.79 | 14.80 | 144,962 | .66 | 5.07 | 14 | |||||||||||||||||||||||||||||||||||||
| 2009 | 9.49 | .46 | (.55 | ) | (.09 | ) | (.45 | ) | — | (.45 | ) | 8.95 | (1.02 | ) | 151,650 | .70 | 4.87 | 40 | ||||||||||||||||||||||||||||||||||
| 2008 | 10.49 | .45 | (1.00 | ) | (.55 | ) | (.45 | ) | — | (.45 | ) | 9.49 | (5.43 | ) | 164,365 | .77 | 4.43 | 50 | ||||||||||||||||||||||||||||||||||
| 2007 | 10.43 | .45 | .06 | .51 | (.45 | ) | — | (.45 | ) | 10.49 | 5.03 | 167,300 | .89 | 4.33 | 20 | |||||||||||||||||||||||||||||||||||||
| (a) | Per share Net Investment Income is calculated using the average daily shares method. |
| (b) | Distributions from Capital Gains include short-term capital gains if any. |
| (c) | Total Return is the combination of changes in net asset value without any sales charge, reinvested dividend income at net asset value and reinvested capital gains distributions at net asset value, if any. Total Return is not annualized. |
| (d) | Ratios do not reflect the effect of custodian fee credits earned on the Fund’s net cash on deposit with the custodian bank, where applicable. |
| (e) | The Ratios of Expenses to Average Net Assets reflect, among other things, the interest expense deemed to have been paid by the Fund on the floating rate certificates issued by the special purpose trusts for the self-deposited inverse floaters held by the Fund, where applicable, as described in Footnote 1 – General Information and Significant Accounting Policies, Inverse Floating Rate Securities in the most recent shareholder report, as follows: |
| Interest Expense on Inverse Floaters | ||||
2011 | — | % | ||
2010 | 0.01 | |||
2009 | 0.05 | |||
2008 | 0.15 | |||
2007 | 0.26 | |||
| (f) | Effective May 1, 2008, Class R Shares were renamed Class I Shares. |
Section 5 Financial Highlights
63
Nuveen California Municipal Bond Fund 2
Class (Commencement Date) | Investment Operations | Less Distributions | Ratios/Supplemental Data | |||||||||||||||||||||||||||||||||||||||||||||||||
| Year Ended February 28/29, | Beginning Net Asset Value | Net Investment Income(a) | Net Realized/ Unrealized Gain (Loss) | Total | Net Investment Income | Capital Gains(b) | Total | Ending Net Asset Value | Total Return(c) | Ending Net Assets (000) | Ratio of Expenses to Average Net Assets(d)(e) | Ratio of Investment Income to | Portfolio Turnover Rate | |||||||||||||||||||||||||||||||||||||||
| Class A (9/94) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2011 | $ | 9.99 | $ | .43 | $ | (.51 | ) | $ | (.08 | ) | $ | (.42 | ) | $ | — | $ | (.42 | ) | $ | 9.49 | (.96 | )% | $ | 57,581 | .83 | % | 4.34 | % | 3 | % | ||||||||||||||||||||||
| 2010 | 9.40 | .43 | .57 | 1.00 | (.41 | ) | — | (.41 | ) | 9.99 | 10.87 | 78,338 | .86 | 4.39 | 1 | |||||||||||||||||||||||||||||||||||||
| 2009 | 9.83 | .43 | (.44 | ) | (.01 | ) | (.41 | ) | (.01 | ) | (.42 | ) | 9.40 | (.06 | ) | 77,517 | .85 | 4.38 | 9 | |||||||||||||||||||||||||||||||||
| 2008 | 10.84 | .43 | (.95 | ) | (.52 | ) | (.43 | ) | (.06 | ) | (.49 | ) | 9.83 | (5.04 | ) | 80,867 | .91 | 4.03 | 21 | |||||||||||||||||||||||||||||||||
| 2007 | 10.87 | .43 | .03 | .46 | (.44 | ) | (.05 | ) | (.49 | ) | 10.84 | 4.33 | 89,343 | .86 | 4.02 | 16 | ||||||||||||||||||||||||||||||||||||
| Class B (3/97) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2011 | 10.02 | .36 | (.53 | ) | (.17 | ) | (.34 | ) | — | (.34 | ) | 9.51 | (1.77 | ) | 1,691 | 1.58 | 3.58 | 3 | ||||||||||||||||||||||||||||||||||
| 2010 | 9.43 | .36 | .57 | .93 | (.34 | ) | — | (.34 | ) | 10.02 | 10.03 | 2,851 | 1.61 | 3.66 | 1 | |||||||||||||||||||||||||||||||||||||
| 2009 | 9.85 | .36 | (.43 | ) | (.07 | ) | (.34 | ) | (.01 | ) | (.35 | ) | 9.43 | (.73 | ) | 4,867 | 1.60 | 3.60 | 9 | |||||||||||||||||||||||||||||||||
| 2008 | 10.86 | .35 | (.96 | ) | (.61 | ) | (.34 | ) | (.06 | ) | (.40 | ) | 9.85 | (5.77 | ) | 7,890 | 1.66 | 3.28 | 21 | |||||||||||||||||||||||||||||||||
| 2007 | 10.89 | .35 | .02 | .37 | (.35 | ) | (.05 | ) | (.40 | ) | 10.86 | 3.52 | 12,845 | 1.61 | 3.27 | 16 | ||||||||||||||||||||||||||||||||||||
| Class C (9/94) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2011 | 9.95 | .38 | (.53 | ) | (.15 | ) | (.36 | ) | — | (.36 | ) | 9.44 | (1.60 | ) | 12,624 | 1.38 | 3.80 | 3 | ||||||||||||||||||||||||||||||||||
| 2010 | 9.36 | .37 | .58 | .95 | (.36 | ) | — | (.36 | ) | 9.95 | 10.31 | 12,599 | 1.41 | 3.84 | 1 | |||||||||||||||||||||||||||||||||||||
| 2009 | 9.78 | .37 | (.42 | ) | (.05 | ) | (.36 | ) | (.01 | ) | (.37 | ) | 9.36 | (.55 | ) | 11,668 | 1.40 | 3.83 | 9 | |||||||||||||||||||||||||||||||||
| 2008 | 10.79 | .37 | (.96 | ) | (.59 | ) | (.36 | ) | (.06 | ) | (.42 | ) | 9.78 | (5.62 | ) | 12,455 | 1.46 | 3.48 | 21 | |||||||||||||||||||||||||||||||||
| 2007 | 10.81 | .37 | .03 | .40 | (.37 | ) | (.05 | ) | (.42 | ) | 10.79 | 3.81 | 13,500 | 1.41 | 3.47 | 16 | ||||||||||||||||||||||||||||||||||||
| Class I (7/86)(f) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2011 | 10.01 | .45 | (.51 | ) | (.06 | ) | (.44 | ) | — | (.44 | ) | 9.51 | (.75 | ) | 85,354 | .63 | 4.54 | 3 | ||||||||||||||||||||||||||||||||||
| 2010 | 9.42 | .45 | .57 | 1.02 | (.43 | ) | — | (.43 | ) | 10.01 | 11.05 | 98,657 | .66 | 4.59 | 1 | |||||||||||||||||||||||||||||||||||||
| 2009 | 9.84 | .45 | (.43 | ) | .02 | (.43 | ) | (.01 | ) | (.44 | ) | 9.42 | .23 | 95,255 | .65 | 4.57 | 9 | |||||||||||||||||||||||||||||||||||
| 2008 | 10.85 | .45 | (.96 | ) | (.51 | ) | (.44 | ) | (.06 | ) | (.50 | ) | 9.84 | (4.87 | ) | 112,282 | .71 | 4.23 | 21 | |||||||||||||||||||||||||||||||||
| 2007 | 10.87 | .45 | .04 | .49 | (.46 | ) | (.05 | ) | (.51 | ) | 10.85 | 4.60 | 129,276 | .66 | 4.22 | 16 | ||||||||||||||||||||||||||||||||||||
| (a) | Per share Net Investment Income is calculated using the average daily shares method. |
| (b) | Distributions from Capital Gains include short-term capital gains, if any. |
| (c) | Total Return is the combination of changes in net asset value without any sales charge, reinvested dividend income at net asset value and reinvested capital gains distributions at net asset value, if any. Total Return is not annualized. |
| (d) | Ratios do not reflect the effect of custodian fee credits earned on the Fund’s net cash on deposit with the custodian bank, where applicable. |
| (e) | The Ratios of Expenses to Average Net Assets reflect, among other things, the interest expense deemed to have been paid by the Fund on the floating rate certificates issued by the special purpose trusts for the self-deposited inverse floaters held by the Fund, where applicable, as described in Footnote 1 – General Information and Significant Accounting Policies, Inverse Floating Rate Securities in the most recent shareholder report, as follows: |
| Interest Expense on Inverse Floaters | ||||
2011 | — | % | ||
2010 | — | |||
2009 | — | |||
2008 | 0.08 | |||
2007 | 0.03 | |||
| (f) | Effective May 1, 2008, Class R Shares were renamed Class I Shares. |
64
Section 5 Financial Highlights
Nuveen Connecticut Municipal Bond Fund
Class (Commencement Date) | Investment Operations | Less Distributions | Ratios/Supplemental Data | |||||||||||||||||||||||||||||||||||||||||||||||||
| Year Ended February 28/29, | Beginning Net Asset Value | Net Investment Income(a) | Net Realized/ Unrealized Gain (Loss) | Total | Net Investment Income | Capital Gains(f) | Total | Ending Net Asset Value | Total Return(b) | Ending Net Assets (000) | Ratio of Expenses to Average Net Assets(c)(d) | Ratio of Net Investment Income to Average Net Assets(c) | Portfolio Turnover Rate | |||||||||||||||||||||||||||||||||||||||
| Class A (7/87) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2011 | $ | 10.49 | $ | .42 | $ | (.30 | ) | $ | .12 | $ | (.42 | ) | $ | — | * | $ | (.42 | ) | $ | 10.19 | 1.13 | % | $ | 255,092 | .81 | % | 4.01 | % | 10 | % | ||||||||||||||||||||||
| 2010 | 9.77 | .43 | .71 | 1.14 | (.42 | ) | — | (.42 | ) | 10.49 | 11.86 | 257,989 | .85 | 4.20 | 4 | |||||||||||||||||||||||||||||||||||||
| 2009 | 10.01 | .42 | (.21 | ) | .21 | (.42 | ) | (.03 | ) | (.45 | ) | 9.77 | 2.20 | 241,958 | .93 | 4.22 | 14 | |||||||||||||||||||||||||||||||||||
| 2008 | 10.67 | .42 | (.65 | ) | (.23 | ) | (.42 | ) | (.01 | ) | (.43 | ) | 10.01 | (2.24 | ) | 247,654 | 1.07 | 3.96 | 16 | |||||||||||||||||||||||||||||||||
| 2007 | 10.65 | .42 | .05 | .47 | (.42 | ) | (.03 | ) | (.45 | ) | 10.67 | 4.54 | 228,582 | 1.12 | 4.00 | 14 | ||||||||||||||||||||||||||||||||||||
| Class B (2/97) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2011 | 10.48 | .34 | (.29 | ) | .05 | (.34 | ) | — | * | (.34 | ) | 10.19 | .48 | 2,537 | 1.56 | 3.28 | 10 | |||||||||||||||||||||||||||||||||||
| 2010 | 9.77 | .35 | .71 | 1.06 | (.35 | ) | — | (.35 | ) | 10.48 | 10.97 | 5,784 | 1.60 | 3.45 | 4 | |||||||||||||||||||||||||||||||||||||
| 2009 | 10.00 | .35 | (.21 | ) | .14 | (.34 | ) | (.03 | ) | (.37 | ) | 9.77 | 1.53 | 9,341 | 1.68 | 3.46 | 14 | |||||||||||||||||||||||||||||||||||
| 2008 | 10.66 | .34 | (.65 | ) | (.31 | ) | (.34 | ) | (.01 | ) | (.35 | ) | 10.00 | (2.97 | ) | 13,256 | 1.82 | 3.21 | 16 | |||||||||||||||||||||||||||||||||
| 2007 | 10.65 | .34 | .04 | .38 | (.34 | ) | (.03 | ) | (.37 | ) | 10.66 | 3.67 | 19,462 | 1.87 | 3.25 | 14 | ||||||||||||||||||||||||||||||||||||
| Class C (10/93) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2011 | 10.48 | .36 | (.28 | ) | .08 | (.37 | ) | — | * | (.37 | ) | 10.19 | .71 | 53,317 | 1.36 | 3.48 | 10 | |||||||||||||||||||||||||||||||||||
| 2010 | 9.77 | .37 | .71 | 1.08 | (.37 | ) | — | (.37 | ) | 10.48 | 11.17 | 54,948 | 1.40 | 3.65 | 4 | |||||||||||||||||||||||||||||||||||||
| 2009 | 10.00 | .37 | (.21 | ) | .16 | (.36 | ) | (.03 | ) | (.39 | ) | 9.77 | 1.73 | 45,761 | 1.48 | 3.68 | 14 | |||||||||||||||||||||||||||||||||||
| 2008 | 10.66 | .36 | (.65 | ) | (.29 | ) | (.36 | ) | (.01 | ) | (.37 | ) | 10.00 | (2.80 | ) | 39,561 | 1.62 | 3.41 | 16 | |||||||||||||||||||||||||||||||||
| 2007 | 10.64 | .37 | .04 | .41 | (.36 | ) | (.03 | ) | (.39 | ) | 10.66 | 3.96 | 39,949 | 1.67 | 3.45 | 14 | ||||||||||||||||||||||||||||||||||||
| Class I (2/97)(e) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2011 | 10.53 | .45 | (.31 | ) | .14 | (.44 | ) | — | * | (.44 | ) | 10.23 | 1.36 | 31,761 | .61 | 4.22 | 10 | |||||||||||||||||||||||||||||||||||
| 2010 | 9.81 | .45 | .71 | 1.16 | (.44 | ) | — | (.44 | ) | 10.53 | 12.07 | 25,590 | .65 | 4.40 | 4 | |||||||||||||||||||||||||||||||||||||
| 2009 | 10.05 | .44 | (.21 | ) | .23 | (.44 | ) | (.03 | ) | (.47 | ) | 9.81 | 2.44 | 17,875 | .73 | 4.43 | 14 | |||||||||||||||||||||||||||||||||||
| 2008 | 10.71 | .44 | (.65 | ) | (.21 | ) | (.44 | ) | (.01 | ) | (.45 | ) | 10.05 | (2.01 | ) | 17,518 | .87 | 4.17 | 16 | |||||||||||||||||||||||||||||||||
| 2007 | 10.70 | .45 | .04 | .49 | (.45 | ) | (.03 | ) | (.48 | ) | 10.71 | 4.66 | 12,497 | .92 | 4.19 | 14 | ||||||||||||||||||||||||||||||||||||
| * | Rounds to less than $.01 per share. |
| (a) | Per share Net Investment Income is calculated using the average daily shares method. |
| (b) | Total Return is the combination of changes in net asset value without any sales charge, reinvested dividend income at net asset value and reinvested capital gains distributions at net asset value, if any. Total Return is not annualized. |
| (c) | Ratios do not reflect the effect of custodian fee credits earned on the Fund’s net cash on deposit with the custodian bank, where applicable. |
| (d) | The Ratios of Expenses to Average Net Assets reflect, among other things, the interest expense deemed to have been paid by the Fund on the floating rate certificates issued by the special purpose trusts for the self-deposited inverse floaters held by the Fund, as described in Footnote 1–General Information and Significant Accounting Policies, Inverse Floating Rate Securities in the most recent shareholder report, as follows: |
| Interest Expense on Inverse Floaters | ||||
2011 | 0.01 | % | ||
2010 | 0.02 | |||
2009 | 0.10 | |||
2008 | 0.26 | |||
2007 | 0.29 | |||
| (e) | Effective May 1, 2008, Class R Shares were renamed Class I Shares. |
| (f) | Distributions from Capital Gains include short-term capital gains, if any. |
Section 5 Financial Highlights
65
Nuveen Massachusetts Municipal Bond Fund
| Class (Commencement Date) | Investment Operations | Less Distributions | Ratios/Supplemental Data | |||||||||||||||||||||||||||||||||||||||||||||||||
| Year Ended February 28/29, | Beginning Net Asset Value | Net Investment Income(a) | Net Realized/ Unrealized Gain (Loss) | Total | Net Investment Income | Capital Gains(e) | Total | Ending Net Asset Value | Total Return(b) | Ending Net Assets (000) | Ratio of Expenses to Average Net Assets(c) | Ratio of Net Investment Income to Average Net Assets(c) | Portfolio Turnover Rate | |||||||||||||||||||||||||||||||||||||||
| Class A (9/94) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2011 | $ | 9.75 | $ | .44 | $ | (.27 | ) | $ | .17 | $ | (.45 | ) | $ | — | $ | (.45 | ) | $ | 9.47 | 1.69 | % | $ | 61,883 | .85 | % | 4.54 | % | 7 | % | |||||||||||||||||||||||
| 2010 | 8.81 | .45 | .94 | 1.39 | (.45 | ) | — | (.45 | ) | 9.75 | 16.03 | 61,382 | .91 | 4.77 | 5 | |||||||||||||||||||||||||||||||||||||
| 2009 | 9.34 | .41 | (.51 | ) | (.10 | ) | (.39 | ) | (.04 | ) | (.43 | ) | 8.81 | (1.05 | ) | 45,433 | .91 | 4.47 | 20 | |||||||||||||||||||||||||||||||||
| 2008 | 10.11 | .39 | (.74 | ) | (.35 | ) | (.38 | ) | (.04 | ) | (.42 | ) | 9.34 | (3.61 | ) | 67,297 | .88 | 3.90 | 12 | |||||||||||||||||||||||||||||||||
| 2007 | 10.03 | .38 | .07 | .45 | (.37 | ) | — | (.37 | ) | 10.11 | 4.62 | 102,045 | .87 | 3.82 | 4 | |||||||||||||||||||||||||||||||||||||
| Class B (3/97) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2011 | 9.76 | .37 | (.27 | ) | .10 | (.38 | ) | — | (.38 | ) | 9.48 | .94 | 741 | 1.60 | 3.80 | 7 | ||||||||||||||||||||||||||||||||||||
| 2010 | 8.83 | .38 | .93 | 1.31 | (.38 | ) | — | (.38 | ) | 9.76 | 15.04 | 1,402 | 1.65 | 4.03 | 5 | |||||||||||||||||||||||||||||||||||||
| 2009 | 9.35 | .34 | (.50 | ) | (.16 | ) | (.32 | ) | (.04 | ) | (.36 | ) | 8.83 | (1.69 | ) | 2,741 | 1.67 | 3.71 | 20 | |||||||||||||||||||||||||||||||||
| 2008 | 10.13 | .31 | (.74 | ) | (.43 | ) | (.31 | ) | (.04 | ) | (.35 | ) | 9.35 | (4.41 | ) | 3,519 | 1.63 | 3.15 | 12 | |||||||||||||||||||||||||||||||||
| 2007 | 10.04 | .31 | .08 | .39 | (.30 | ) | — | (.30 | ) | 10.13 | 3.96 | 4,582 | 1.62 | 3.07 | 4 | |||||||||||||||||||||||||||||||||||||
| Class C (10/94) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2011 | 9.67 | .39 | (.27 | ) | .12 | (.40 | ) | — | (.40 | ) | 9.39 | 1.14 | 14,872 | 1.40 | 3.98 | 7 | ||||||||||||||||||||||||||||||||||||
| 2010 | 8.74 | .39 | .93 | 1.32 | (.39 | ) | — | (.39 | ) | 9.67 | 15.37 | 12,550 | 1.46 | 4.23 | 5 | |||||||||||||||||||||||||||||||||||||
| 2009 | 9.26 | .36 | (.50 | ) | (.14 | ) | (.34 | ) | (.04 | ) | (.38 | ) | 8.74 | (1.53 | ) | 10,944 | 1.47 | 3.91 | 20 | |||||||||||||||||||||||||||||||||
| 2008 | 10.04 | .33 | (.75 | ) | (.42 | ) | (.32 | ) | (.04 | ) | (.36 | ) | 9.26 | (4.27 | ) | 11,661 | 1.44 | 3.35 | 12 | |||||||||||||||||||||||||||||||||
| 2007 | 9.95 | .33 | .08 | .41 | (.32 | ) | — | (.32 | ) | 10.04 | 4.19 | 11,853 | 1.42 | 3.27 | 4 | |||||||||||||||||||||||||||||||||||||
| Class I (12/86)(d) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2011 | 9.73 | .46 | (.27 | ) | .19 | (.47 | ) | — | (.47 | ) | 9.45 | 1.91 | 52,930 | .65 | 4.74 | 7 | ||||||||||||||||||||||||||||||||||||
| 2010 | 8.80 | .47 | .92 | 1.39 | (.46 | ) | — | (.46 | ) | 9.73 | 16.15 | 53,698 | .71 | 4.98 | 5 | |||||||||||||||||||||||||||||||||||||
| 2009 | 9.32 | .43 | (.50 | ) | (.07 | ) | (.41 | ) | (.04 | ) | (.45 | ) | 8.80 | (.74 | ) | 47,238 | .72 | 4.67 | 20 | |||||||||||||||||||||||||||||||||
| 2008 | 10.09 | .41 | (.74 | ) | (.33 | ) | (.40 | ) | (.04 | ) | (.44 | ) | 9.32 | (3.45 | ) | 52,832 | .69 | 4.10 | 12 | |||||||||||||||||||||||||||||||||
| 2007 | 10.01 | .40 | .07 | .47 | (.39 | ) | — | (.39 | ) | 10.09 | 4.81 | 60,022 | .67 | 4.02 | 4 | |||||||||||||||||||||||||||||||||||||
| (a) | Per share Net Investment Income is calculated using the average daily shares method. |
| (b) | Total Return is the combination of changes in net asset value without any sales charge, reinvested dividend income at net asset value and reinvested capital gains distributions at net asset value, if any. Total Return is not annualized. |
| (c) | Ratios do not reflect the effect of custodian fee credits earned on the Fund’s net cash on deposit with the custodian bank, where applicable. The Fund did not receive as expense reimbursement from the Adviser during the fiscal years ended 2007 through 2011. |
| (d) | Effective May 1, 2008, Class R Shares were renamed Class I Shares. |
| (e) | Distributions from Capital Gains include short-term gains, if any. |
66
Section 5 Financial Highlights
Nuveen Massachusetts Municipal Bond Fund 2
| Class (Commencement Date) | Investment Operations | Less Distributions | Ratios/Supplemental Data | |||||||||||||||||||||||||||||||||||||||||||||||||
| Year Ended February 28/29, | Beginning Net Asset Value | Net Investment Income(a) | Net Realized/ Unrealized Gain (Loss) | Total | Net Investment Income | Capital Gains(f) | Total | Ending Net Asset Value | Total Return(b) | Ending Net Assets (000) | Ratio of Expenses to Average Net Assets(c)(d) | Ratio of Net Investment Income to Average Net Assets(c) | Portfolio Turnover Rate | |||||||||||||||||||||||||||||||||||||||
| Class A (9/94) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2011 | $ | 10.15 | $ | .38 | $ | (.24 | ) | $ | .14 | $ | (.39 | ) | $ | (.06 | ) | $ | (.45 | ) | $ | 9.84 | 1.33 | % | $ | 25,735 | .86 | % | 3.75 | % | 5 | % | ||||||||||||||||||||||
| 2010 | 9.64 | .37 | .63 | 1.00 | (.40 | ) | (.09 | ) | (.49 | ) | 10.15 | 10.51 | 31,556 | .91 | 3.72 | 9 | ||||||||||||||||||||||||||||||||||||
| 2009 | 9.80 | .40 | (.12 | ) | .28 | (.39 | ) | (.05 | ) | (.44 | ) | 9.64 | 2.94 | 26,123 | .98 | 4.05 | 20 | |||||||||||||||||||||||||||||||||||
| 2008 | 10.37 | .39 | (.53 | ) | (.14 | ) | (.38 | ) | (.05 | ) | (.43 | ) | 9.80 | (1.42 | ) | 22,561 | 1.08 | 3.79 | 18 | |||||||||||||||||||||||||||||||||
| 2007 | 10.37 | .39 | .02 | .41 | (.38 | ) | (.03 | ) | (.41 | ) | 10.37 | 4.12 | 20,958 | 1.06 | 3.75 | 6 | ||||||||||||||||||||||||||||||||||||
| Class B (3/97) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2011 | 10.16 | .30 | (.23 | ) | .07 | (.31 | ) | (.06 | ) | (.37 | ) | 9.86 | .66 | 1,311 | 1.61 | 2.99 | 5 | |||||||||||||||||||||||||||||||||||
| 2010 | 9.65 | .30 | .62 | .92 | (.32 | ) | (.09 | ) | (.41 | ) | 10.16 | 9.70 | 2,919 | 1.66 | 3.01 | 9 | ||||||||||||||||||||||||||||||||||||
| 2009 | 9.82 | .32 | (.12 | ) | .20 | (.32 | ) | (.05 | ) | (.37 | ) | 9.65 | 2.04 | 3,944 | 1.73 | 3.28 | 20 | |||||||||||||||||||||||||||||||||||
| 2008 | 10.38 | .31 | (.51 | ) | (.20 | ) | (.31 | ) | (.05 | ) | (.36 | ) | 9.82 | (2.07 | ) | 5,068 | 1.83 | 3.04 | 18 | |||||||||||||||||||||||||||||||||
| 2007 | 10.38 | .31 | .03 | .34 | (.31 | ) | (.03 | ) | (.34 | ) | 10.38 | 3.33 | 5,635 | 1.81 | 3.00 | 6 | ||||||||||||||||||||||||||||||||||||
| Class C (9/94) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2011 | 10.15 | .33 | (.24 | ) | .09 | (.33 | ) | (.06 | ) | (.39 | ) | 9.85 | .86 | 13,435 | 1.41 | 3.20 | 5 | |||||||||||||||||||||||||||||||||||
| 2010 | 9.64 | .32 | .62 | .94 | (.34 | ) | (.09 | ) | (.43 | ) | 10.15 | 9.92 | 14,630 | 1.47 | 3.18 | 9 | ||||||||||||||||||||||||||||||||||||
| 2009 | 9.81 | .34 | (.12 | ) | .22 | (.34 | ) | (.05 | ) | (.39 | ) | 9.64 | 2.26 | 10,949 | 1.53 | 3.49 | 20 | |||||||||||||||||||||||||||||||||||
| 2008 | 10.37 | .33 | (.52 | ) | (.19 | ) | (.32 | ) | (.05 | ) | (.37 | ) | 9.81 | (1.90 | ) | 10,608 | 1.63 | 3.24 | 18 | |||||||||||||||||||||||||||||||||
| 2007 | 10.36 | .33 | .03 | .36 | (.32 | ) | (.03 | ) | (.35 | ) | 10.37 | 3.62 | 8,700 | 1.61 | 3.21 | 6 | ||||||||||||||||||||||||||||||||||||
| Class I (12/86)(e) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2011 | 10.19 | .40 | (.24 | ) | .16 | (.40 | ) | (.06 | ) | (.46 | ) | 9.89 | 1.60 | 38,924 | .66 | 3.95 | 5 | |||||||||||||||||||||||||||||||||||
| 2010 | 9.68 | .40 | .61 | 1.01 | (.41 | ) | (.09 | ) | (.50 | ) | 10.19 | 10.66 | 40,373 | .71 | 3.95 | 9 | ||||||||||||||||||||||||||||||||||||
| 2009 | 9.84 | .42 | (.12 | ) | .30 | (.41 | ) | (.05 | ) | (.46 | ) | 9.68 | 3.12 | 37,858 | .78 | 4.24 | 20 | |||||||||||||||||||||||||||||||||||
| 2008 | 10.41 | .41 | (.53 | ) | (.12 | ) | (.40 | ) | (.05 | ) | (.45 | ) | 9.84 | (1.24 | ) | 40,474 | .88 | 3.99 | 18 | |||||||||||||||||||||||||||||||||
| 2007 | 10.40 | .41 | .03 | .44 | (.40 | ) | (.03 | ) | (.43 | ) | 10.41 | 4.39 | 45,501 | .86 | 3.96 | 6 | ||||||||||||||||||||||||||||||||||||
| (a) | Per share Net Investment Income is calculated using the average daily shares method. |
| (b) | Total Return is the combination of changes in net asset value without any sales charge, reinvested dividend income at net asset value and reinvested capital gains distributions at net asset value, if any. Total Return is not annualized. |
| (c) | Ratios do not reflect the effect of custodian fee credits earned on the Fund’s net cash on deposit with the custodian bank, where applicable. The Fund did not receive an expense reimbursement from the Adviser during the fiscal years ended 2007 through 2011. |
| (d) | The Ratios of Expenses to Average Net Assets reflect, among other things, the interest expense deemed to have been paid by the Fund on the floating rate certificates issued by the special purpose trusts for the self-deposited inverse floaters held by the Fund, as described in Footnote 1 – General Information and Significant Accounting Policies, Inverse Floating Rate Securities in the most recent shareholder report, as follows: |
| Interest Expense on Inverse Floaters | ||||
2011 | — | % | ||
2010 | — | |||
2009 | 0.09 | |||
2008 | 0.18 | |||
2007 | 0.17 | |||
| (e) | Effective May 1, 2008, Class R Shares were renamed Class I Shares. |
| (f) | Distributions from Capital Gains include short-term gains, if any. |
Section 5 Financial Highlights
67
Nuveen New Jersey Municipal Bond Fund
Class (Commencement Date) | Investment Operations | Less Distributions | Ratios/Supplemental Data | |||||||||||||||||||||||||||||||||||||||||||||||||
| Year Ended February 28/29, | Beginning Net Asset Value | Net Investment Income(a) | Net Realized/ Unrealized Gain (Loss) | Total | Net Investment Income | Capital Gains(f) | Total | Ending Net Asset Value | Total Return(b) | Ending Net Assets (000) | Ratio of Expenses to Average Net Assets(c)(d) | Ratio of Net Investment Income to Average Net Assets(c) | Portfolio Turnover Rate | |||||||||||||||||||||||||||||||||||||||
| Class A (9/94) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2011 | $ | 10.64 | $ | .46 | $ | (.44 | ) | $ | .02 | $ | (.44 | ) | $ | — | $ | (.44 | ) | $ | 10.22 | .14 | % | $ | 125,945 | .82 | % | 4.29 | % | 7 | % | |||||||||||||||||||||||
| 2010 | 9.81 | .45 | .81 | 1.26 | (.43 | ) | — | * | (.43 | ) | 10.64 | 13.14 | 121,371 | .85 | 4.36 | 8 | ||||||||||||||||||||||||||||||||||||
| 2009 | 10.09 | .43 | (.26 | ) | .17 | (.42 | ) | (.03 | ) | (.45 | ) | 9.81 | 1.66 | 91,348 | .87 | 4.31 | 21 | |||||||||||||||||||||||||||||||||||
| 2008 | 10.82 | .42 | (.72 | ) | (.30 | ) | (.41 | ) | (.02 | ) | (.43 | ) | 10.09 | (2.82 | ) | 83,210 | .96 | 3.91 | 11 | |||||||||||||||||||||||||||||||||
| 2007 | 10.78 | .42 | .04 | .46 | (.41 | ) | (.01 | ) | (.42 | ) | 10.82 | 4.44 | 84,421 | 1.00 | 3.88 | 7 | ||||||||||||||||||||||||||||||||||||
| Class B (2/97) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2011 | 10.65 | .38 | (.43 | ) | (.05 | ) | (.37 | ) | — | (.37 | ) | 10.23 | (.59 | ) | 4,275 | 1.57 | 3.53 | 7 | ||||||||||||||||||||||||||||||||||
| 2010 | 9.83 | .37 | .81 | 1.18 | (.36 | ) | — | * | (.36 | ) | 10.65 | 12.21 | 8,442 | 1.60 | 3.64 | 8 | ||||||||||||||||||||||||||||||||||||
| 2009 | 10.10 | .36 | (.26 | ) | .10 | (.34 | ) | (.03 | ) | (.37 | ) | 9.83 | .98 | 11,881 | 1.62 | 3.52 | 21 | |||||||||||||||||||||||||||||||||||
| 2008 | 10.83 | .34 | (.72 | ) | (.38 | ) | (.33 | ) | (.02 | ) | (.35 | ) | 10.10 | (3.58 | ) | 14,539 | 1.71 | 3.16 | 11 | |||||||||||||||||||||||||||||||||
| 2007 | 10.78 | .34 | .05 | .39 | (.33 | ) | (.01 | ) | (.34 | ) | 10.83 | 3.72 | 17,960 | 1.75 | 3.13 | 7 | ||||||||||||||||||||||||||||||||||||
| Class C (9/94) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2011 | 10.61 | .40 | (.43 | ) | (.03 | ) | (.39 | ) | — | (.39 | ) | 10.19 | (.41 | ) | 37,511 | 1.37 | 3.74 | 7 | ||||||||||||||||||||||||||||||||||
| 2010 | 9.79 | .39 | .81 | 1.20 | (.38 | ) | — | * | (.38 | ) | 10.61 | 12.48 | 37,482 | 1.40 | 3.81 | 8 | ||||||||||||||||||||||||||||||||||||
| 2009 | 10.05 | .38 | (.25 | ) | .13 | (.36 | ) | (.03 | ) | (.39 | ) | 9.79 | 1.28 | 29,143 | 1.42 | 3.75 | 21 | |||||||||||||||||||||||||||||||||||
| 2008 | 10.79 | .36 | (.73 | ) | (.37 | ) | (.35 | ) | (.02 | ) | (.37 | ) | 10.05 | (3.47 | ) | 28,363 | 1.51 | 3.37 | 11 | |||||||||||||||||||||||||||||||||
| 2007 | 10.75 | .36 | .04 | .40 | (.35 | ) | (.01 | ) | (.36 | ) | 10.79 | 3.87 | 29,028 | 1.55 | 3.33 | 7 | ||||||||||||||||||||||||||||||||||||
| Class I (2/92)(e) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2011 | 10.68 | .48 | (.43 | ) | .05 | (.47 | ) | — | (.47 | ) | 10.26 | .36 | 70,068 | .62 | 4.49 | 7 | ||||||||||||||||||||||||||||||||||||
| 2010 | 9.85 | .47 | .81 | 1.28 | (.45 | ) | — | * | (.45 | ) | 10.68 | 13.32 | 77,172 | .65 | 4.57 | 8 | ||||||||||||||||||||||||||||||||||||
| 2009 | 10.11 | .45 | (.25 | ) | .20 | (.43 | ) | (.03 | ) | (.46 | ) | 9.85 | 2.05 | 66,899 | .67 | 4.48 | 21 | |||||||||||||||||||||||||||||||||||
| 2008 | 10.85 | .44 | (.73 | ) | (.29 | ) | (.43 | ) | (.02 | ) | (.45 | ) | 10.11 | (2.74 | ) | 68,499 | .76 | 4.11 | 11 | |||||||||||||||||||||||||||||||||
| 2007 | 10.80 | .44 | .05 | .49 | (.43 | ) | (.01 | ) | (.44 | ) | 10.85 | 4.70 | 63,816 | .80 | 4.08 | 7 | ||||||||||||||||||||||||||||||||||||
| * | Rounds to less than $.01 per share. |
| (a) | Per share Net Investment Income is calculated using the average daily shares method. |
| (b) | Total Return is the combination of changes in net asset value without any sales charge, reinvested dividend income at net asset value and reinvested capital gains distributions at net asset value, if any. Total Return is not annualized. |
| (c) | Ratios do not reflect the effect of custodian fee credits earned on the Fund’s net cash on deposit with the custodian bank, where applicable. |
| (d) | The Ratios of Expenses to Average Net Assets reflect, among other things, the interest expense deemed to have been paid by the Fund on the floating rate certificates issued by the special purpose trusts for the self-deposited inverse floaters held by the Fund, where applicable, as described in Footnote 1–General Information and Significant Accounting Policies, Inverse Floating Rate Securities in the most recent shareholder report, as follows: |
| Interest Expense on Inverse Floaters | ||||
2011 | — | % | ||
2010 | — | |||
2009 | 0.02 | |||
2008 | 0.12 | |||
2007 | 0.14 | |||
| (e) | Effective May 1, 2008, Class R Shares were renamed Class I Shares. |
| (f) | Distributions from Capital Gains include short-term gains, if any. |
68
Section 5 Financial Highlights
Nuveen New York Municipal Bond Fund
Class (Commencement Date) | Investment Operations | Less Distributions | Ratios/Supplemental Data | |||||||||||||||||||||||||||||||||||||||||||||||||
| Year Ended February 28/29, | Beginning Net Asset Value | Net Investment Income(a) | Net Realized/ Unrealized Gain (Loss) | Total | Net Investment Income | Capital Gains(f) | Total | Ending Net Asset Value | Total Return(b) | Ending Net Assets (000) | Ratio of Expenses to Average Net Assets(c)(d) | Ratio of Net Investment Income to Average Net Assets(c) | Portfolio Turnover Rate | |||||||||||||||||||||||||||||||||||||||
| Class A (9/94) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2011 | $ | 10.72 | $ | .47 | $ | (.34 | ) | $ | .13 | $ | (.46 | ) | $ | — | $ | (.46 | ) | $ | 10.39 | 1.12 | % | $ | 209,283 | .83 | % | 4.38 | % | 7 | % | |||||||||||||||||||||||
| 2010 | 9.84 | .46 | .88 | 1.34 | (.46 | ) | — | * | (.46 | ) | 10.72 | 13.87 | 226,162 | .87 | 4.46 | 3 | ||||||||||||||||||||||||||||||||||||
| 2009 | 10.15 | .45 | (.28 | ) | .17 | (.44 | ) | (.04 | ) | (.48 | ) | 9.84 | 1.67 | 181,049 | .97 | 4.49 | 30 | |||||||||||||||||||||||||||||||||||
| 2008 | 10.86 | .44 | (.70 | ) | (.26 | ) | (.44 | ) | (.01 | ) | (.45 | ) | 10.15 | (2.53 | ) | 190,598 | 1.12 | 4.13 | 17 | |||||||||||||||||||||||||||||||||
| 2007 | 10.84 | .45 | .02 | .47 | (.44 | ) | (.01 | ) | (.45 | ) | 10.86 | 4.44 | 181,313 | 1.14 | 4.15 | 9 | ||||||||||||||||||||||||||||||||||||
| Class B (2/97) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2011 | 10.71 | .39 | (.34 | ) | .05 | (.38 | ) | — | (.38 | ) | 10.38 | .39 | 5,114 | 1.58 | 3.62 | 7 | ||||||||||||||||||||||||||||||||||||
| 2010 | 9.84 | .38 | .87 | 1.25 | (.38 | ) | — | *�� | (.38 | ) | 10.71 | 12.96 | 8,898 | 1.62 | 3.73 | 3 | ||||||||||||||||||||||||||||||||||||
| 2009 | 10.14 | .38 | (.28 | ) | .10 | (.36 | ) | (.04 | ) | (.40 | ) | 9.84 | 1.00 | 12,094 | 1.72 | 3.71 | 30 | |||||||||||||||||||||||||||||||||||
| 2008 | 10.86 | .36 | (.71 | ) | (.35 | ) | (.36 | ) | (.01 | ) | (.37 | ) | 10.14 | (3.34 | ) | 19,133 | 1.87 | 3.38 | 17 | |||||||||||||||||||||||||||||||||
| 2007 | 10.84 | .37 | .02 | .39 | (.36 | ) | (.01 | ) | (.37 | ) | 10.86 | 3.69 | 25,898 | 1.89 | 3.41 | 9 | ||||||||||||||||||||||||||||||||||||
| Class C (9/94) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2011 | 10.72 | .41 | (.34 | ) | .07 | (.40 | ) | — | (.40 | ) | 10.39 | .58 | 61,439 | 1.38 | 3.82 | 7 | ||||||||||||||||||||||||||||||||||||
| 2010 | 9.84 | .41 | .87 | 1.28 | (.40 | ) | — | * | (.40 | ) | 10.72 | 13.28 | 60,840 | 1.42 | 3.91 | 3 | ||||||||||||||||||||||||||||||||||||
| 2009 | 10.15 | .40 | (.28 | ) | .12 | (.39 | ) | (.04 | ) | (.43 | ) | 9.84 | 1.12 | 51,978 | 1.52 | 3.95 | 30 | |||||||||||||||||||||||||||||||||||
| 2008 | 10.87 | .39 | (.71 | ) | (.32 | ) | (.39 | ) | (.01 | ) | (.40 | ) | 10.15 | (3.12 | ) | 49,910 | 1.67 | 3.58 | 17 | |||||||||||||||||||||||||||||||||
| 2007 | 10.85 | .39 | .02 | .41 | (.38 | ) | (.01 | ) | (.39 | ) | 10.87 | 3.92 | 48,525 | 1.69 | 3.60 | 9 | ||||||||||||||||||||||||||||||||||||
| Class I (12/86)(e) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2011 | 10.73 | .49 | (.33 | ) | .16 | (.48 | ) | — | (.48 | ) | 10.41 | 1.44 | 141,171 | .63 | 4.58 | 7 | ||||||||||||||||||||||||||||||||||||
| 2010 | 9.86 | .48 | .87 | 1.35 | (.48 | ) | — | * | (.48 | ) | 10.73 | 14.00 | 150,977 | .67 | 4.66 | 3 | ||||||||||||||||||||||||||||||||||||
| 2009 | 10.17 | .48 | (.29 | ) | .19 | (.46 | ) | (.04 | ) | (.50 | ) | 9.86 | 1.91 | 132,815 | .77 | 4.69 | 30 | |||||||||||||||||||||||||||||||||||
| 2008 | 10.88 | .47 | (.71 | ) | (.24 | ) | (.46 | ) | (.01 | ) | (.47 | ) | 10.17 | (2.31 | ) | 137,731 | .92 | 4.33 | 17 | |||||||||||||||||||||||||||||||||
| 2007 | 10.86 | .47 | .02 | .49 | (.46 | ) | (.01 | ) | (.47 | ) | 10.88 | 4.66 | 141,556 | .94 | 4.35 | 9 | ||||||||||||||||||||||||||||||||||||
| * | Rounds to less than $.01 per share. |
| (a) | Per share Net Investment Income is calculated using the average daily shares method. |
| (b) | Total Return is the combination of changes in net asset value without any sales charge, reinvested dividend income at net asset value and reinvested capital gains distributions at net asset value, if any. Total Return is not annualized. |
| (c) | Ratios do not reflect the effect of custodian fee credits earned on the Fund’s net cash on deposit with the custodian bank, where applicable. The Fund did not receive an expense reimbursement from the Adviser during the fiscal years ended 2007 through 2011. |
| (d) | The Ratios of Expenses to Average Net Assets reflect, among other things, the interest expense deemed to have been paid by the Fund on the floating rate certificates issued by the special purpose trusts for the self-deposited inverse floaters held by the Fund, where applicable, as described in Footnote 1–General Information and Significant Accounting Policies, Inverse Floating Rate Securities in the most recent shareholder report, as follows: |
| Interest Expense on Inverse Floaters | ||||
2011 | 0.02 | |||
2010 | 0.03 | |||
2009 | 0.13 | |||
2008 | 0.29 | |||
2007 | 0.30 | |||
| (e) | Effective May 1, 2008, Class R Shares were renamed Class I Shares. |
| (f) | Distributions from Capital Gains include short-term capital gains, if any. |
Section 5 Financial Highlights
69
Nuveen New York Municipal Bond Fund 2
Class (Commencement Date) | Investment Operations | Less Distributions | Ratios/Supplemental Data | |||||||||||||||||||||||||||||||||||||||||||||||||
| Year Ended February 28/29, | Beginning Net Asset Value | Net Investment Income(a) | Net Realized/ Unrealized Gain (Loss) | Total | Net Investment Income | Capital Gains(f) | Total | Ending Net Asset Value | Total Return(b) | Ending Net Assets (000) | Ratio of Expenses to Average Net Assets(c)(d) | Ratio of Net Investment Income to Average Net Assets(c) | Portfolio Turnover Rate | |||||||||||||||||||||||||||||||||||||||
| Class A (9/94) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2011 | $ | 10.15 | $ | .39 | $ | (.27 | ) | $ | .12 | $ | (.39 | ) | $ | — | $ | (.39 | ) | $ | 9.88 | 1.16 | % | $ | 87,314 | .83 | % | 3.89 | % | 6 | % | |||||||||||||||||||||||
| 2010 | 9.61 | .40 | .53 | .93 | (.39 | ) | — | (.39 | ) | 10.15 | 9.84 | 98,131 | .86 | 4.03 | 4 | |||||||||||||||||||||||||||||||||||||
| 2009 | 9.63 | .40 | — | * | .40 | (.39 | ) | (.03 | ) | (.42 | ) | 9.61 | 4.24 | 87,154 | .96 | 4.12 | 11 | |||||||||||||||||||||||||||||||||||
| 2008 | 10.37 | .40 | (.71 | ) | (.31 | ) | (.40 | ) | (.03 | ) | (.43 | ) | 9.63 | (3.07 | ) | 79,593 | 1.08 | 3.89 | 13 | |||||||||||||||||||||||||||||||||
| 2007 | 10.41 | .40 | — | .40 | (.40 | ) | (.04 | ) | (.44 | ) | 10.37 | 4.02 | 90,400 | 1.03 | 3.89 | 9 | ||||||||||||||||||||||||||||||||||||
| Class B (2/97) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2011 | 10.18 | .32 | (.28 | ) | .04 | (.32 | ) | — | (.32 | ) | 9.90 | .34 | 2,620 | 1.58 | 3.13 | 6 | ||||||||||||||||||||||||||||||||||||
| 2010 | 9.64 | .33 | .53 | .86 | (.32 | ) | — | (.32 | ) | 10.18 | 9.02 | 5,023 | 1.60 | 3.30 | 4 | |||||||||||||||||||||||||||||||||||||
| 2009 | 9.66 | .33 | — | * | .33 | (.32 | ) | (.03 | ) | (.35 | ) | 9.64 | 3.45 | 7,288 | 1.70 | 3.35 | 11 | |||||||||||||||||||||||||||||||||||
| 2008 | 10.40 | .32 | (.71 | ) | (.39 | ) | (.32 | ) | (.03 | ) | (.35 | ) | 9.66 | (3.79 | ) | 9,290 | 1.83 | 3.14 | 13 | |||||||||||||||||||||||||||||||||
| 2007 | 10.44 | .33 | (.01 | ) | .32 | (.32 | ) | (.04 | ) | (.36 | ) | 10.40 | 3.23 | 13,447 | 1.78 | 3.14 | 9 | |||||||||||||||||||||||||||||||||||
| Class C (9/94) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2011 | 10.16 | .34 | (.27 | ) | .07 | (.34 | ) | — | (.34 | ) | 9.89 | .62 | 20,100 | 1.38 | 3.33 | 6 | ||||||||||||||||||||||||||||||||||||
| 2010 | 9.62 | .35 | .53 | .88 | (.34 | ) | — | (.34 | ) | 10.16 | 9.24 | 18,437 | 1.40 | 3.48 | 4 | |||||||||||||||||||||||||||||||||||||
| 2009 | 9.64 | .35 | — | * | .35 | (.34 | ) | (.03 | ) | (.37 | ) | 9.62 | 3.65 | 15,374 | 1.51 | 3.57 | 11 | |||||||||||||||||||||||||||||||||||
| 2008 | 10.37 | .34 | (.70 | ) | (.36 | ) | (.34 | ) | (.03 | ) | (.37 | ) | 9.64 | (3.54 | ) | 13,870 | 1.63 | 3.34 | 13 | |||||||||||||||||||||||||||||||||
| 2007 | 10.42 | .35 | (.02 | ) | .33 | (.34 | ) | (.04 | ) | (.38 | ) | 10.37 | 3.31 | 14,426 | 1.58 | 3.34 | 9 | |||||||||||||||||||||||||||||||||||
| Class I (12/86)(e) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2011 | 10.19 | .42 | (.28 | ) | .14 | (.41 | ) | — | (.41 | ) | 9.92 | 1.39 | 165,529 | .63 | 4.09 | 6 | ||||||||||||||||||||||||||||||||||||
| 2010 | 9.65 | .42 | .53 | .95 | (.41 | ) | — | (.41 | ) | 10.19 | 10.00 | 175,847 | .66 | 4.23 | 4 | |||||||||||||||||||||||||||||||||||||
| 2009 | 9.67 | .42 | — | * | .42 | (.41 | ) | (.03 | ) | (.44 | ) | 9.65 | 4.42 | 172,000 | .76 | 4.31 | 11 | |||||||||||||||||||||||||||||||||||
| 2008 | 10.40 | .42 | (.70 | ) | (.28 | ) | (.42 | ) | (.03 | ) | (.45 | ) | 9.67 | �� | (2.79 | ) | 184,670 | .88 | 4.09 | 13 | ||||||||||||||||||||||||||||||||
| 2007 | 10.45 | .42 | (.01 | ) | .41 | (.42 | ) | (.04 | ) | (.46 | ) | 10.40 | 4.08 | 207,492 | .83 | 4.09 | 9 | |||||||||||||||||||||||||||||||||||
| * | Rounds to less than $.01 per share. |
| (a) | Per share Net Investment Income is calculated using the average daily shares method. |
| (b) | Total Return is the combination of changes in net asset value without any sales charge, reinvested dividend income at net asset value and reinvested capital gains distributions at net asset value, if any. Total Return is not annualized. |
| (c) | Ratios do not reflect the effect of custodian fee credits earned on the Fund’s net cash on deposit with the custodian bank, where applicable. The Fund did not receive an expense reimbursement from the Adviser during the fiscal years ended 2007 through 2011. |
| (d) | The Ratios of Expenses to Average Net Assets reflect, among other things, the interest expense deemed to have been paid by the Fund on the floating rate certificates issued by the special purpose trusts for the self-deposited inverse floaters held by the Fund, as described in Footnote 1–General Information and Significant Accounting Policies, Inverse Floating Rate Securities in the most recent shareholder report, as follows: |
| Interest Expense on Inverse Floaters | ||||
2011 | 0.01 | % | ||
2010 | 0.01 | |||
2009 | 0.11 | |||
2008 | 0.24 | |||
2007 | 0.18 | |||
| (e) | Effective May 1, 2008, Class R Shares were renamed Class I Shares. |
| (f) | Distributions from Capital Gains include short-term capital gains, if any. |
70
Section 5 Financial Highlights
Section 6 Glossary of Investment Terms
| • | Derivatives: Financial instruments whose performance is derived from the performance of an underlying asset, security or index. Derivatives involve the trading of rights or obligations based on the underlying product. They are used to hedge risk, to exchange a floating rate of return for fixed rate of return or to gain investment exposure. Derivatives include futures, options and swaps, among other instruments. |
| • | Futures: A derivative contract obligating the buyer to purchase an asset or the seller to sell an asset at a predetermined future date and price. Futures contracts detail the quality and quantity of the underlying asset; they are standardized to facilitate trading on a futures exchange. |
| • | Lipper California Municipal Debt Funds Average: The Lipper California Municipal Debt Funds Average represents the average annualized total return for all reporting funds in the Lipper California Municipal Debt Fund category. |
| • | Lipper Connecticut Municipal Debt Funds Average: The Lipper Connecticut Municipal Debt Funds Average represents the average annualized total return for all reporting funds in the Lipper Connecticut Municipal Debt Fund category. |
| • | Lipper Massachusetts Municipal Debt Funds Average: The Lipper Massachusetts Municipal Debt Funds Average represents the average annualized total return for all reporting funds in the Lipper Massachusetts Municipal Debt Fund category. |
| • | Lipper New Jersey Municipal Debt Funds Average: The Lipper New Jersey Municipal Debt Funds Average represents the average annualized total return for all reporting funds in the Lipper New Jersey Municipal Debt Fund category. |
| • | Lipper New York Municipal Debt Funds Average: The Lipper New York Municipal Debt Funds Average represents the average annualized total return for all reporting funds in the Lipper New York Municipal Debt Fund category. |
| • | Options: A derivative investment that gives the buyer the right to buy or to sell shares of a specified stock at a specified price on or before a given date. There are also options on currencies and other financial assets. |
| • | Standard & Poor’s California Municipal Bond Index: The Standard & Poor’s California Municipal Bond Index is an unleveraged market value weighted index designed to measure the performance of the investment grade tax-exempt California municipal bond market. |
| • | Standard & Poor’s Connecticut Municipal Bond Index: The Standard & Poor’s Connecticut Municipal Bond Index is an unleveraged market value weighted index designed to measure the performance of the investment grade tax-exempt Connecticut municipal bond market. |
| • | Standard & Poor’s High Yield Municipal Bond Index: The Standard & Poor’s High Yield Municipal Bond Index is an unleveraged market value weighted index designed to measure the performance of the investment grade tax-exempt U.S. high yield municipal bond market. The since inception data for the index represents returns for the period 3/31/2006 - 12/31/10, as returns for the index are calculated on a calendar month basis. |
| • | Standard & Poor’s Massachusetts Municipal Bond Index: The Standard & Poor’s Massachusetts Municipal Bond Index is an unleveraged market value weighted index designed to measure the performance of the investment grade tax-exempt Massachusetts municipal bond market. |
Section 6 Glossary of Investment Terms
71
| • | Standard & Poor’s National Municipal Bond Index: The Standard & Poor’s National Municipal Bond Index is an unleveraged market value weighted index designed to measure the performance of the investment grade tax-exempt U.S. municipal bond market. The since inception data for the index represents returns for the period 3/31/2006 - 12/31/10, as returns for the index are calculated on a calendar month basis. |
| • | Standard & Poor’s New Jersey Municipal Bond Index: The Standard & Poor’s New Jersey Municipal Bond Index is an unleveraged market value weighted index designed to measure the performance of the investment grade tax-exempt New Jersey municipal bond market. |
| • | Standard & Poor’s New York Municipal Bond Index: The Standard & Poor’s New York Municipal Bond Index is an unleveraged market value weighted index designed to measure the performance of the investment grade tax-exempt New York municipal bond market. |
| • | Swaps: A derivative contract in which two parties agree to exchange one stream of cash flows for another stream. The swap agreement defines the dates when the cash flows will be paid and how the cash flows are calculated. |
72
Section 6 Glossary of Investment Terms
Nuveen Mutual Funds
Nuveen offers a variety of mutual funds designed to help you reach your financial goals. The funds below are grouped by category.
Municipal-National
All-American Municipal Bond
High Yield Municipal Bond
Inflation Protected Municipal Bond
Intermediate Duration Municipal Bond
Intermediate Tax Free*
Limited Term Municipal Bond
Municipal Bond
Municipal Bond 2
Short Tax Free*
Tax Free*
Municipal-State
Arizona Municipal Bond
California High Yield Municipal Bond
California Municipal Bond
California Municipal Bond 2
California Tax Free*
Colorado Municipal Bond
Colorado Tax Free*
Connecticut Municipal Bond
Georgia Municipal Bond
Kansas Municipal Bond
Kentucky Municipal Bond
Louisiana Municipal Bond
Maryland Municipal Bond
Massachusetts Municipal Bond
Massachusetts Municipal Bond 2
Michigan Municipal Bond
Minnesota Intermediate Municipal Bond*
Municipal-State (continued)
Minnesota Municipal Bond*
Missouri Municipal Bond
Missouri Tax Free*
Nebraska Municipal Bond*
New Jersey Municipal Bond
New Mexico Municipal Bond
New York Municipal Bond
New York Municipal Bond 2
North Carolina Municipal Bond
Ohio Municipal Bond
Ohio Tax Free*
Oregon Intermediate Municipal Bond*
Pennsylvania Municipal Bond
Tennessee Municipal Bond
Virginia Municipal Bond
Wisconsin Municipal Bond
Taxable Fixed Income
Core Bond*
High Income Bond*
High Yield Bond
Inflation Protected Securities*
Intermediate Government Bond*
Intermediate Term Bond*
Multi-Strategy Core Bond
Preferred Securities
Short Duration Bond
Short Term Bond*
Symphony Credit Opportunities
Symphony Floating Rate Income
Total Return Bond*
Global/International
International*
International Select*
Santa Barbara International Equity
Symphony International Equity
Tradewinds Emerging Markets
Tradewinds Global All-Cap
Tradewinds Global All-Cap Plus
Tradewinds Global Flexible Allocation
Tradewinds Global Resources
Tradewinds International Value
Tradewinds Japan
Value
Equity Income*
Large Cap Value*
Mid Cap Value*
Multi-Manager Large-Cap Value
NWQ Large-Cap Value
NWQ Multi-Cap Value
NWQ Small-Cap Value
NWQ Small-Mid Cap Value
Small Cap Value*
Symphony Large-Cap Value
Tradewinds Value Opportunities
Growth
Large Cap Growth Opportunities*
Mid Cap Growth Opportunities*
Santa Barbara Growth
Small Cap Growth Opportunities*
Symphony Large-Cap Growth
Winslow Large-Cap Growth
Core
Large Cap Select*
Mid Cap Select*
Santa Barbara Dividend Growth
Small Cap Select*
Symphony Mid-Cap Core
Symphony Optimized Alpha
Symphony Small-Mid Cap Core
Real Assets
Global Infrastructure*
Real Estate Securities*
Asset Allocation
Conservative Allocation
Growth Allocation
Moderate Allocation
Strategy Aggressive Growth Allocation*
Strategy Balanced Allocation*
Strategy Conservative Allocation*
Strategy Growth Allocation*
Tactical Market Opportunities*
Quantitative/Enhanced
Quantitative Enhanced Core Equity*
Index
Equity Index*
Mid Cap Index*
Small Cap Index*
*Former First American Fund.
Several additional sources of information are available to you, including the codes of ethics adopted by the funds, Nuveen Investments, Nuveen Fund Advisors and Nuveen Asset Management. The statement of additional information, incorporated by reference into this prospectus, contains detailed information on the policies and operation of the funds included in this prospectus. Additional information about the funds’ investments is available in the annual and semi-annual reports to shareholders. In the funds’ annual report, you will find a discussion of the market conditions and investment strategies that significantly affected the funds’ performance during their last fiscal year. The funds’ most recent statement of additional information, annual and semi-annual reports and certain other information are available free of charge by calling Nuveen Investor Services at (800) 257-8787, on the funds’ website at www.nuveen.com or through your financial advisor. Shareholders may call the toll free number above with any inquiries.
You may also obtain this and other fund information directly from the Securities and Exchange Commission (“SEC”). The SEC may charge a copying fee for this information. Reports and other information about the funds are also available on the EDGAR Database on the SEC’s Internet site at http://www.sec.gov or in person at the SEC’s Public Reference Room in Washington, D.C. Call the SEC at (202) 551-8090 for room hours and operation. You may also request fund information by sending an e-mail request to publicinfo@sec.gov or by writing to the SEC’s Public Reference Section at 100 F Street, NE, Washington, D.C. 20549-1520.
The funds are series of Nuveen Multistate Trust II, whose Investment Company Act file number is 811-07755.
Distributed by Nuveen Securities, LLC 333 West Wacker Drive Chicago, Illinois 60606 (800) 257-8787 www.nuveen.com |
MPR-MS2-0611P
SUPPLEMENT DATED SEPTEMBER 26, 2011
NUVEEN CALIFORNIA TAX FREE FUND
To the Prospectus dated June 30, 2011
NUVEEN SHORT TERM BOND FUND
To the Prospectus dated July 12, 2011
| 1. | Effective December 1, 2011, the first two paragraphs of the section “How You Can Buy and Sell Shares—Special Services—Exchanging Shares” will be deleted in their entirety and replaced with the following two paragraphs: |
Nuveen Mutual Funds currently utilize two transfer agents. You may exchange fund shares into an identically registered account for the same class of another Nuveen Mutual Fund available in your state provided that the funds have the same transfer agent. Exchanges between funds with different transfer agents are not allowed. Your exchange must meet the minimum purchase requirements of the fund into which you are exchanging. You may also, under certain limited circumstances, exchange between certain classes of shares of the same fund, subject to the payment of any applicable CDSC. Please consult the statement of additional information for details.
The fund reserves the right to revise or suspend the exchange privilege, limit the amount or number of exchanges, or reject any exchange. Shareholders will be provided with at least 60 days’ notice of any material revision to or termination of the exchange privilege.
| 2. | Effective October 1, 2011, the following sentence is hereby added after the first sentence of the section “How You Can Buy and Sell Shares—How to Reduce Your Sales Charge”: |
Nuveen Mutual Funds currently utilize two transfer agents and the ability to use the methods described below to reduce your sales charge is limited to aggregating values or purchases of funds that have the same transfer agent.
| 3. | Effective October 1, 2011, the following two sentences are hereby added to the end of the paragraph in the section “How You Can Buy and Sell Shares—Special Services—Reinstatement Privilege”: |
Nuveen Mutual Funds currently utilize two transfer agents. The reinstatement privilege is limited to reinvestment in a fund which has the same transfer agent as the fund from which you redeemed.
| 4. | The first sentence of the third paragraph of the section “How You Can Buy and Sell Shares—How to Reduce Your Sales Charge—Class A Sales Charge Reductions” is hereby deleted in its entirety and replaced with the following sentence: |
For purposes of calculating the appropriate sales charge as described under Rights of Accumulation and Letter of Intent above, you may include purchases by (i) you, (ii) your spouse or domestic partner and children under the age of 21 years, and (iii) a corporation, partnership or sole proprietorship that is 100% owned by any of the persons in (i) or (ii).
PLEASE KEEP THIS WITH YOUR
FUND’S PROSPECTUS
FOR FUTURE REFERENCE
MGN-CASTBP-0911P
NUVEEN CALIFORNIA TAX FREE FUND
SUPPLEMENT DATED NOVEMBER 18, 2011
TO THE PROSPECTUS DATED JUNE 30, 2011
Proposed Reorganization of
Nuveen California Tax Free Fund and Nuveen California Municipal Bond Fund 2
into Nuveen California Municipal Bond Fund
The Board of Trustees/Directors of Nuveen Multistate Trust II (“NMT II”) and Nuveen Investment Funds, Inc. (“NIF”) has approved the reorganization of Nuveen California Tax Free Fund (“California Tax Free Fund”), a series of NIF, and Nuveen California Municipal Bond Fund 2 (“California Municipal Bond Fund 2”), a series of NMT II, into Nuveen California Municipal Bond Fund (the “Acquiring Fund”), a series of NMT II. California Tax Free Fund and California Municipal Bond Fund 2 are referred to together as the “Acquired Funds.” In order for the reorganization to occur for California Tax Free Fund, it must be approved by the shareholders of that fund. There is no requirement that shareholders of both California Tax Free Fund and California Municipal Bond Fund 2 approve the reorganization. Therefore, it is possible that the reorganization could occur between the Acquiring Fund and only one of the Acquired Funds.
If California Tax Free Fund’s shareholders approve the reorganization, California Tax Free Fund will transfer all of its assets and liabilities to the Acquiring Fund in exchange for Acquiring Fund shares of equal value. These Acquiring Fund shares will then be distributed to California Tax Free Fund shareholders and California Tax Free Fund will be terminated. As a result of these transactions, California Tax Free Fund shareholders will become shareholders of the Acquiring Fund and will cease to be shareholders of California Tax Free Fund. Each California Tax Free Fund shareholder will receive Acquiring Fund shares with a total value equal to the total value of that shareholder’s California Tax Free Fund shares immediately prior to the closing of the reorganization.
A special meeting of California Tax Free Fund’s shareholders for the purpose of voting on the reorganization is expected to be held in mid-to-late March 2012. If the required approval is obtained, it is anticipated that the reorganization will be consummated shortly after the special shareholder meeting. Further information regarding the proposed reorganization will be contained in proxy materials that are expected to be sent to shareholders of California Tax Free Fund in mid-February 2012.
California Tax Free Fund will continue sales and redemptions of its shares as described in the prospectus until shortly before its reorganization. However, holders of shares purchased after the record date set for California Tax Free Fund’s special meeting of shareholders will not be entitled to vote those shares at the special meeting.
PLEASE KEEP THIS WITH YOUR PROSPECTUS
FOR FUTURE REFERENCE
MGN-FCAP-1111P
Mutual Funds
Prospectus
June 30, 2011
Nuveen Municipal Bond Funds
Dependable, tax-free income because it’s not what you earn, it’s what you keep.®
| Class / Ticker Symbol | ||||||
| Fund Name | Class A | Class C1 | Class I | |||
Nuveen California Tax Free Fund | FCAAX | FCCAX | FCAYX | |||
The Securities and Exchange Commission has not approved or disapproved these securities or passed upon the adequacy of this prospectus. Any representation to the contrary is a criminal offense.
| Section 1 Fund Summary | ||||
| Nuveen California Tax Free Fund | 2 | |||
| Section 2 How We Manage Your Money | ||||
| Who Manages the Fund | 7 | |||
| More About Our Investment Strategies | 8 | |||
| What the Risks Are | 10 | |||
| Section 3 How You Can Buy and Sell Shares | ||||
| What Share Classes We Offer | 13 | |||
| How to Reduce Your Sales Charge | 14 | |||
| How to Buy Shares | 16 | |||
| Special Services | 17 | |||
| How to Sell Shares | 18 | |||
| Section 4 General Information | ||||
| Dividends, Distributions and Taxes | 21 | |||
| Distribution and Service Plan | 22 | |||
| Net Asset Value | 24 | |||
| Frequent Trading | 24 | |||
| Fund Service Providers | 26 | |||
| Section 5 Financial Highlights | 27 | |||
| Section 6 Glossary of Investment Terms | 29 | |||
NOT FDIC OR GOVERNMENT INSURED MAY LOSE VALUE NO BANK GUARANTEE
Nuveen California Tax Free Fund
Investment Objective
The investment objective of the fund is to provide maximum current income that is exempt from both federal income tax and California state income tax to the extent consistent with prudent investment risk.
Fees and Expenses of the Fund
This table describes the fees and expenses that you may pay if you buy and hold shares of the fund. You may qualify for sales charge discounts if you and your family invest, or agree to invest in the future, at least $50,000 in the fund or in other Nuveen Mutual Funds. More information about these and other discounts, as well as eligibility requirements for each share class, is available from your financial advisor and in “What Share Classes We Offer” on page 13 of the fund’s prospectus, “How to Reduce Your Sales Charge” on page 14 of the prospectus and “Purchase and Redemption of Fund Shares” on page 56 of the fund’s statement of additional information.
Shareholder Fees
(fees paid directly from your investment)
| Class A | Class C1 | Class I | ||||||||||
| Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) | 4.20% | None | None | |||||||||
| Maximum Deferred Sales Charge (Load) (as a percentage of the lesser of purchase price or redemption proceeds) | None | 1.00% | None | |||||||||
| Maximum Sales Charge (Load) Imposed on Reinvested Dividends | None | None | None | |||||||||
| Exchange Fee | None | None | None | |||||||||
| Annual Low Balance Account Fee (for accounts under $1,000)1 | $15 | $15 | $15 | |||||||||
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)
| Class A | Class C1 | Class I | ||||||||||
| Management Fees | 0.65% | 0.65% | 0.65% | |||||||||
| Distribution and Service (12b-1) Fees | 0.20% | 0.65% | 0.00% | |||||||||
| Other Expenses | 0.14% | 0.14% | 0.14% | |||||||||
| Acquired Fund Fees and Expenses | 0.01% | 0.01% | 0.01% | |||||||||
| Total Annual Fund Operating Expenses2 | 1.00% | 1.45% | 0.80% | |||||||||
| Fee Waivers and/or Expense Reimbursements | (0.14)% | (0.09)% | (0.09)% | |||||||||
| Total Annual Fund Operating Expenses After Fee Waivers and/or Expense Reimbursements3 | 0.86% | 1.36% | 0.71% | |||||||||
| 1 | Fee applies to the following types of accounts held directly with the fund: accounts established pursuant to the Uniform Transfers to Minors Act (UTMA) or Uniform Gifts to Minors Act (UGMA). |
| 2 | Expenses have been restated to reflect current contractual fees and estimated other expenses. |
| 3 | The fund’s investment adviser has contractually agreed to waive fees and reimburse other fund expenses through June 30, 2012 so that annual fund operating expenses, after fee waivers and/or expense reimbursements and excluding Acquired Fund Fees and Expenses, do not exceed 0.85%, 1.35% and 0.70% for Class A, Class C1 and Class I shares, respectively. Fee waivers and expense reimbursements will not be terminated prior to that time without the approval of the fund’s board of directors. |
Example
The following example is intended to help you compare the cost of investing in the fund with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the fund for the time periods indicated and then either redeem or do not redeem your shares at the end of a period. The example also assumes that your investment has a 5% return each year, the fund’s operating expenses remain the same, and the contractual fee waivers currently in place are not renewed beyond the first year of each period indicated. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
| Redemption | No Redemption | |||||||||||||||||||||||||||
| A | C1 | I | A | C1 | I | |||||||||||||||||||||||
| 1 Year | $ | 504 | $ | 138 | $ | 73 | $ | 504 | $ | 138 | $ | 73 | ||||||||||||||||
| 3 Years | $ | 712 | $ | 450 | $ | 246 | $ | 712 | $ | 450 | $ | 246 | ||||||||||||||||
| 5 Years | $ | 936 | $ | 784 | $ | 435 | $ | 936 | $ | 784 | $ | 435 | ||||||||||||||||
| 10 Years | $ | 1,581 | $ | 1,728 | $ | 981 | $ | 1,581 | $ | 1,728 | $ | 981 | ||||||||||||||||
2
Section 1 Fund Summary
Portfolio Turnover
The fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the example, affect the fund’s performance. For the fiscal period July 1, 2010 through February 28, 2011, the fund’s portfolio turnover rate was 8% of the average value of its portfolio.
Principal Investment Strategies
Under normal market conditions, as a fundamental policy, the fund invests at least 80% of its net assets (plus the amount of any borrowings for investment purposes) in municipal securities that pay interest that is exempt from federal and California income tax, including the federal and state alternative minimum tax.
The fund normally may invest up to 20% of its net assets in taxable obligations, including obligations the interest on which is subject to the federal and state alternative minimum tax.
The fund may invest in:
| • | “general obligation” bonds; |
| • | “revenue” bonds; |
| • | participation interests in municipal leases; and |
| • | zero coupon municipal securities. |
The fund invests mainly in securities that, at the time of purchase, are either rated investment grade or are unrated and determined to be of comparable quality by the fund’s sub-adviser. However, the fund may invest up to 20% of its total assets in securities that, at the time of purchase, are rated lower than investment grade or are unrated and of comparable quality (securities commonly referred to as “high-yield” securities or “junk bonds”). If the rating of a security is reduced or discontinued after purchase, the fund is not required to sell the security, but may consider doing so.
In selecting securities for the fund, the fund’s sub-adviser first determines its economic outlook and the direction in which inflation and interest rates are expected to move. In selecting individual securities consistent with this outlook, the sub-adviser evaluates factors such as credit quality, yield, maturity, liquidity, and portfolio diversification. The sub-adviser conducts research on potential and current holdings in the fund to determine whether the fund should purchase or retain a security. This is a continuing process, the focus of which changes according to market conditions, the availability of various permitted investments, and cash flows into and out of the fund.
The fund will attempt to maintain the weighted average maturity of its portfolio securities at ten to twenty-five years under normal market conditions.
The fund may utilize futures contracts and options on futures contracts in an attempt to manage market risk, credit risk and yield curve risk, and to manage the effective maturity or duration of securities in the fund’s portfolio. The fund may not use such instruments to gain exposure to a security or type of security that it would be prohibited by its investment restrictions from purchasing directly.
Principal Risks
The price and yield of this fund will change daily due to changes in interest rates and other factors, which means you could lose money. An investment in the fund is not a deposit of a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other governmental agency. The principal risks of investing in this fund are described below:
Active Management Risk—Because the fund is actively managed, the fund could underperform its benchmark or other mutual funds with similar investment objectives.
Call Risk—If an issuer calls higher-yielding bonds held by the fund, performance could be adversely impacted.
Credit Risk—The issuer of a debt security could suffer adverse changes in financial condition that result in a payment default or a downgrade of the security. Parties to contracts with the fund could default on their obligations.
Section 1 Fund Summary
3
Futures Contract Risk—The use of futures contracts involves additional risks and transaction costs which could leave the fund in a worse position than if it had not used these instruments. Futures contracts may entail investment exposures that are greater than their cost would suggest. As a result, a small investment in futures contracts could have a large impact on performance.
High-Yield Securities Risk—High-yield securities generally are less liquid, have more volatile prices, and have greater credit risk than investment grade securities.
Income Risk—The fund’s income could decline during periods of falling interest rates.
Interest Rate Risk—Interest rate increases can cause the value of debt securities to decrease.
Liquidity Risk—Trading opportunities are more limited for debt securities that have received ratings below investment grade.
Municipal Lease Obligations Risk—Participation interests in municipal leases pose special risks, including non-appropriation risk which may result in the fund not recovering the full principal amount of the obligation.
Non-Diversification Risk—As a non-diversified fund, the fund may invest a larger portion of its assets in the securities of a limited number of issuers and may be more sensitive to any single economic, political or regulatory occurrence than a diversified fund.
State Concentration Risk—Because the fund primarily purchases municipal bonds from California, the fund is more susceptible to adverse economic, political or regulatory changes affecting municipal bond issuers in that state. California’s credit rating is among the worst of any state in the country.
Fund Performance
The following bar chart and table provide some indication of the potential risks of investing in the fund. The fund’s past performance (before and after taxes) is not necessarily an indication of how the fund will perform in the future. Updated performance information is available at www.nuveen.com/MF/products/performancesummary.aspx or by calling (800) 257-8787.
The bar chart below shows the variability of the fund’s performance from year to year for Class A shares. The performance of the other share classes will differ due to their different expense structures. The bar chart and highest/lowest quarterly returns that follow do not reflect sales charges, and if these charges were reflected, the returns would be less than those shown.
Class A Annual Total Return*
| * | Class A year-to-date total return as of March 31, 2011 was -0.14%. |
During the ten-year period ended December 31, 2010, the fund’s highest and lowest quarterly returns were 8.83% and -5.11%, respectively, for the quarters ended September 30, 2009 and December 31, 2010.
The table below shows the variability of the fund’s average annual returns and how they compare over the time periods indicated with those of a broad measure of market performance and an index of funds with similar investment
4
Section 1 Fund Summary
objectives. All after-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. After-tax returns are shown for Class A shares only; after-tax returns for other share classes will vary. Your own actual after-tax returns will depend on your specific tax situation and may differ from what is shown here.
Both the bar chart and the table assume that all distributions have been reinvested. Performance reflects fee waivers, if any, in effect during the periods presented. If any such waivers were not in place, performance would be reduced.
| Average Annual Total Returns for the Periods Ended December 31, 2010 | ||||||||||||
| 1 Year | 5 Years | 10 Years | ||||||||||
| Class Returns Before Taxes: | ||||||||||||
Class A | (1.55 | )% | 2.38 | % | 3.80 | % | ||||||
Class C1 | 2.26 | % | 2.77 | % | 3.79 | % | ||||||
Class I | 2.93 | % | 3.43 | % | 4.47 | % | ||||||
| Class A Returns After Taxes: | ||||||||||||
On Distributions | (1.58 | )% | 2.33 | % | 3.70 | % | ||||||
On Distributions and Sale of Shares | 0.54 | % | 2.62 | % | 3.82 | % | ||||||
| Barclays Capital Municipal Bond Index (reflects no deduction for fees, expenses or taxes) | 2.38 | % | 4.09 | % | 4.83 | % | ||||||
| Lipper California Municipal Debt Funds Average (reflects no deduction for taxes or certain expenses) | 1.82 | % | 2.34 | % | 3.57 | % | ||||||
Management
Investment Adviser
Nuveen Fund Advisors, Inc.
Sub-Adviser
Nuveen Asset Management, LLC
Portfolio Manager
Name | Title | Portfolio Manager of Fund Since | ||
| Scott R. Romans, PhD | Senior Vice President | January 2011 |
Section 1 Fund Summary
5
Purchase and Sale of Fund Shares
You may purchase, redeem or exchange shares of the fund on any business day, which is any day the New York Stock Exchange is open for business. You may purchase, redeem or exchange shares of the fund through a financial advisor or other financial intermediary or directly from the fund. Class C1 shares are available only through dividend reinvestments by current Class C1 shareholders. The fund’s initial and subsequent investment minimums generally are as follows, although the fund may reduce or waive the minimums in some cases:
| Class A | Class I | |||
| Eligibility and Minimum Initial Investment | $3,000 | Available only through fee-based programs and to other limited categories of investors as described in the prospectus.
$100,000 for all accounts except:
•$250 for clients of financial intermediaries and family offices that have accounts holding Class I shares with an aggregate value of at least $100,000 (or that are expected to reach this level).
•No minimum for certain other categories of eligible investors as described in the prospectus. | ||
| Minimum Additional Investment | $100 | No minimum. |
Tax Information
The fund intends to make distributions that are exempt from regular federal and California state income tax. All or a portion of these distributions, however, may be subject to the federal and state alternative minimum tax.
Payments to Broker-Dealers and Other Financial Intermediaries
If you purchase shares of the fund through a broker-dealer or other financial intermediary (such as a bank or financial advisor), the fund, its distributor or its investment adviser may pay the intermediary for the sale of fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other financial intermediary and your salesperson to recommend the fund over another investment. Ask your financial advisor or visit your financial intermediary’s website for more information.
6
Section 1 Fund Summary
Section 2 How We Manage Your Money
To help you better understand the fund, this section includes a detailed discussion of the fund’s investment and risk management strategies. For a more complete discussion of these matters, please see the statement of additional information, which is available by calling (800) 257-8787 or by visiting Nuveen’s website at www.nuveen.com.
Nuveen Fund Advisors, Inc. (“Nuveen Fund Advisors”), the fund’s investment adviser, offers advisory and investment management services to a broad range of mutual fund clients. Nuveen Fund Advisors has overall responsibility for management of the fund, oversees the management of the fund’s portfolio, manages the fund’s business affairs and provides certain clerical, bookkeeping and other administrative services. Nuveen Fund Advisors is located at 333 West Wacker Drive, Chicago, Illinois 60606. Nuveen Fund Advisors is a subsidiary of Nuveen Investments, Inc. (“Nuveen Investments”). On November 13, 2007, Nuveen Investments was acquired by investors led by Madison Dearborn Partners, LLC, which is a private equity investment firm based in Chicago, Illinois. The Nuveen family of advisers has been providing advice to investment companies since 1976.
Nuveen Fund Advisors has selected its affiliate, Nuveen Asset Management, LLC (“Nuveen Asset Management”), located at 333 West Wacker Drive, Chicago, Illinois 60606, to serve as sub-adviser to the fund. Nuveen Asset Management manages the investment of the fund’s assets on a discretionary basis, subject to the supervision of Nuveen Fund Advisors.
The fund was formerly advised by FAF Advisors, Inc. (“FAF”), a wholly-owned subsidiary of U.S. Bank National Association (“U.S. Bank”). On December 31, 2010, pursuant to an agreement among U.S. Bank, FAF, Nuveen Investments, and certain Nuveen affiliates, Nuveen Fund Advisors acquired a portion of the asset management business of FAF (the “Transaction”).
Scott R. Romans, PhD, is the portfolio manager of the fund. Mr. Romans joined Nuveen in 2000 as a senior analyst covering higher education, charter schools and private secondary schools and assumed certain portfolio management responsibilities in 2003. He manages 33 Nuveen-sponsored investment companies, with a total of approximately $7.9 billion under management.
Additional information about the portfolio manager’s compensation, other accounts managed by the portfolio manager and the portfolio manager’s ownership of securities in the fund is provided in the statement of additional information.
Management Fee
The management fee schedule for the fund consists of two components: a fund-level fee, based only on the amount of assets within the fund, and a complex-level fee, based on the aggregate amount of all eligible fund assets managed by Nuveen Fund Advisors.
Section 2 How We Manage Your Money
7
The annual fund-level fee, payable monthly, is based upon the average daily net assets of the fund as follows:
| Average Daily Net Assets | Fund-Level Fee | |||
| For the first $125 million | 0.4500 | % | ||
| For the next $125 million | 0.4375 | % | ||
| For the next $250 million | 0.4250 | % | ||
| For the next $500 million | 0.4125 | % | ||
| For the next $1 billion | 0.4000 | % | ||
| For net assets over $2 billion | 0.3750 | % | ||
The fund’s complex-level fee rate is determined by taking the current overall complex-level fee rate, which is based on the aggregate amount of the “eligible assets” of all Nuveen funds, and making, as appropriate, an upward adjustment to that rate based upon the percentage of the fund’s assets that are not “eligible assets.” The maximum overall complex-level fee rate is 0.2000% of the fund’s average daily net assets, which is based upon complex-level eligible assets of $55 billion, with the complex-level fee rate decreasing incrementally for eligible assets above that level. Fund-specific complex-level fee rates will not exceed the maximum overall complex-level fee rate of 0.2000%. As of March 31, 2011, the fund’s complex-level fee rate was 0.1982%.
See the “Adviser and Sub-Adviser” section of the statement of additional information for the current fee waivers and expense reimbursements for the fund.
The table below reflects management fees paid to FAF (prior to January 1, 2011) and to Nuveen Asset Management (starting on January 1, 2011), after taking into account any fee waivers, for the fund’s most recently completed fiscal period. FAF provided advisory services pursuant to a different management agreement with a different fee schedule. FAF did not provide any administrative services under that agreement.
| Management Fee as a % of Average Daily Net Assets | ||||
| Nuveen California Tax Free Fund | 0.05 | % | ||
Nuveen Fund Advisors has agreed to waive fees and/or reimburse expenses so that total annual fund operating expenses (excluding acquired fund fees and expenses) for the fund do not exceed 0.85%, 1.35% and 0.70% for Class A, Class C1 and Class I shares, respectively, through June 30, 2012 of the average daily net assets of any class of fund shares. The expense limitation expiring June 30, 2012, may be terminated or modified prior to that date only with the approval of the Board of Trustees of the fund.
Information regarding the Board of Directors’ approval of the investment management agreement is currently available in the fund’s annual report for the fiscal period ended February 28, 2011.
The fund’s investment objective, which is described in the “Fund Summary” section, may be changed without shareholder approval. If the fund’s investment objective changes, you will be notified at least 60 days in advance. The fund’s investment policies may be changed by the Board of
8
Section 2 How We Manage Your Money
Directors without shareholder approval unless otherwise noted in this prospectus or the statement of additional information.
The fund’s principal investment strategies are discussed in the “Fund Summary” section. These are the strategies that the fund’s investment adviser and sub-adviser believe are most likely to be important in trying to achieve the fund’s investment objective. This section provides information about some additional strategies that the fund’s sub-adviser uses, or may use, to achieve the fund’s objectives. You should be aware that the fund may also use strategies and invest in securities that are not described in this prospectus, but that are described in the statement of additional information. For a copy of the statement of additional information, call Nuveen Investor Services at (800) 257-8787.
Municipal Securities
Municipal securities are issued to finance public infrastructure projects such as streets and highways, schools, water and sewer systems, hospitals, and airports. They also may be issued to refinance outstanding obligations as well as to obtain funds for general operating expenses and for loans to other public institutions and facilities. The fund may invest in municipal securities such as “general obligation” bonds, “revenue” bonds, and participation interests in municipal leases. General obligation bonds are backed by the full faith, credit, and taxing power of the issuer. Revenue bonds are payable only from the revenues generated by a specific project or from another specific revenue source. Participation interests in municipal leases are undivided interests in a lease, installment purchase contract, or conditional sale contract entered into by a state or local government unit to acquire equipment or facilities.
The municipal securities in which the fund invests may include refunded bonds and zero coupon bonds. Refunded bonds may have originally been issued as general obligation or revenue bonds, but become “refunded” when they are secured by an escrow fund, usually consisting entirely of direct U.S. government obligations and/or U.S. government agency obligations. Zero coupon bonds are issued at substantial discounts from their value at maturity and pay no cash income to their holders until they mature. When held to maturity, their entire return comes from the difference between their purchase price and their maturity value.
The debt obligations in which the fund invests may have variable, floating, or fixed interest rates.
Ratings
The fund has investment strategies requiring it to invest in municipal securities that have received a particular rating from a rating service such as Moody’s or Standard & Poor’s. Any reference in this prospectus to a specific rating encompasses all gradations of that rating. For example, if the prospectus says that the fund may invest in securities rated as low as B, the fund may invest in securities rated B – .
Temporary Investments
In an attempt to respond to adverse market, economic, political, or other conditions, the fund may temporarily invest without limit in cash and in U.S. dollar-denominated high-quality money market instruments and other short-term securities, including securities which pay income that is subject to federal and state income tax. Because these investments may be taxable, and may result in a lower yield than would be available from investments
Section 2 How We Manage Your Money
9
with a lower quality or longer term, they may prevent the fund from achieving its investment objective.
Portfolio Holdings
A description of the fund’s policies and procedures with respect to the disclosure of the fund’s portfolio holdings is available in the fund’s statement of additional information. Certain portfolio holdings information is available on the fund’s website—www.nuveen.com—by clicking the “Our Products—Mutual Funds” section on the home page and following the applicable link for your fund in the “Search Mutual Fund Family” section. By following these links, you can obtain a list of your fund’s top ten holdings and a complete list of holdings of your fund as of the end of the most recent month. The holdings information is generally made available on the fund’s website approximately five business days following the end of each most recent month. This information will remain available on the website until the fund files with the Securities and Exchange Commission its annual, semi-annual or quarterly holdings report for the fiscal period that includes the date(s) as of which the website information is current.
Risk is inherent in all investing. Investing in a mutual fund—even the most conservative—involves risk, including the risk that you may receive little or no return on your investment or even that you may lose part or all of your investment. Therefore, before investing you should consider carefully the following risks that you assume when you invest in the fund. Because of these and other risks, you should consider an investment in the fund to be a long-term investment.
Active management risk. The fund is actively managed and its performance therefore will reflect in part the sub-adviser ability to make investment decisions which are suited to achieving the fund’s investment objective. Due to its active management, the fund could underperform other mutual funds with similar investment objectives.
Call risk. Many municipal bonds may be redeemed at the option of the issuer, or “called,” before their stated maturity date. In general, an issuer will call its bonds if they can be refinanced by issuing new bonds which bear a lower interest rate. The fund is subject to the possibility that during periods of falling interest rates, a municipal bond issuer will call its high-yielding bonds. The fund would then be forced to invest the unanticipated proceeds at lower interest rates, resulting in a decline in the fund’s income.
Credit risk. The fund is subject to the risk that the issuers of debt securities held by the fund will not make payments on the securities. There is also the risk that an issuer could suffer adverse changes in financial condition that could lower the credit quality of a security. This could lead to greater volatility in the price of the security and in shares of the fund. Also, a change in the credit quality rating of a bond could affect the bond’s liquidity and make it more difficult for the fund to sell. When the fund purchases unrated securities, it will depend on the sub-adviser’s analysis of credit risk without the assessment of an independent rating organization, such as Moody’s or Standard & Poor’s.
Futures contract risk. The use of futures contracts exposes the fund to additional risks and transaction costs. Additional risks include the risk that
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Section 2 How We Manage Your Money
securities prices, index prices, or interest rates will not move in the direction that the sub-adviser anticipates; an imperfect correlation between the price of the futures contract and movements in the prices of the securities being hedged; the possible absence of a liquid secondary market for any particular instrument and possible exchange imposed price fluctuation limits, either of which may make it difficult or impossible to close out a position when desired; leverage risk, which is the risk that adverse price movements in a futures contract can result in a loss substantially greater than the fund’s initial investment in that futures contract; and the risk that the counterparty will fail to perform its obligations, which could leave the fund worse off than if it had not entered into the position. If the fund uses futures contracts and the sub-adviser’s judgment proves incorrect, the fund’s performance could be worse than if it had not used these instruments.
High-yield securities risk. The fund may invest in high-yield securities. Although these securities usually offer higher yields than investment grade securities, they also involve more risk. High-yield securities may be more susceptible to real or perceived adverse economic conditions than investment grade securities. In addition, the secondary trading market may be less liquid. High-yield securities generally have more volatile prices and carry more risk to principal than investment grade securities.
Income risk. The fund’s income could decline due to falling market interest rates. This is because, in a falling interest rate environment, the fund generally will have to invest the proceeds from sales of fund shares, as well as the proceeds from maturing portfolio securities (or portfolio securities that have been called, see “Call Risk” above), in lower-yielding securities.
Interest rate risk. Debt securities in the fund will fluctuate in value with changes in interest rates. In general, debt securities will increase in value when interest rates fall and decrease in value when interest rates rise. Longer-term debt securities are generally more sensitive to interest rate changes. The fund may invest in zero coupon securities, which do not pay interest on a current basis and which may be highly volatile as interest rates rise or fall.
Liquidity risk. The fund is exposed to liquidity risk because of its investment in high-yield securities. Trading opportunities are more limited for debt securities that have received ratings below investment grade. These features may make it more difficult to sell or buy a security at a favorable price or time. Consequently, the fund may have to accept a lower price to sell a security, sell other securities to raise cash, or give up an investment opportunity, any of which could have a negative effect on the fund’s performance. Infrequent trading may also lead to greater price volatility.
Municipal lease obligations risk. The fund may purchase participation interests in municipal leases. These are undivided interests in a lease, installment purchase contract, or conditional sale contract entered into by a state or local government unit to acquire equipment or facilities. Participation interests in municipal leases pose special risks because many leases and contracts contain “non-appropriation” clauses that provide that the governmental issuer has no obligation to make future payments under the lease or contract unless money is appropriated for this purpose by the appropriate legislative body. Although these kinds of obligations are secured by the leased equipment or facilities, it might be difficult and time consuming to dispose of the equipment or facilities in the event of non-appropriation, and the fund might not recover the full principal amount of the obligation.
Non-diversification risk. The fund is non-diversified. A non-diversified fund may invest a larger portion of its assets in a fewer number of issuers than a
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diversified fund. Because a relatively high percentage of the fund’s assets may be invested in the securities of a limited number of issuers, the fund’s portfolio may be more susceptible to any single economic, political or regulatory occurrence than the portfolio of a diversified fund.
Political and economic risks. The values of municipal securities may be adversely affected by local political and economic conditions and developments. Adverse conditions in an industry significant to a local economy could have a correspondingly adverse effect on the financial condition of local issuers. Other factors that could affect municipal securities include a change in the local, state, or national economy, demographic factors, ecological or environmental concerns, statutory limitations on the issuer’s ability to increase taxes, and other developments generally affecting the revenue of issuers (for example, legislation or court decisions reducing state aid to local governments or mandating additional services). The value of municipal securities also may be adversely affected by future changes in federal or state income tax laws, including rate reductions, the imposition of a flat tax, or the loss of a current state income tax exemption.
Since the fund invests in the securities of issuers located in the state of California, it will be disproportionately affected by political and economic conditions and developments in that state. The state of California is currently facing a severe financial crisis, which heightens the credit risk associated with investing in California municipal obligations. This heightened risk could result in a reduction in the market value of the bonds held by the fund and in a decrease in the fund’s net asset value and/or its distributions.
Reliance on investment adviser. The fund is dependent upon services and resources provided by Nuveen Fund Advisors, and therefore Nuveen Fund Advisor’s parent, Nuveen Investments. Nuveen Investments has a substantial amount of indebtedness. Nuveen Investments, through its own business or the financial support of its affiliates, may not be able to generate sufficient cash flow from operations or ensure that future borrowings will be available in an amount sufficient to enable it to pay its indebtedness with scheduled maturities beginning in 2014 or to fund its other liquidity needs. Nuveen Investments’ failure to satisfy the terms of its indebtedness, including covenants therein may generally have an adverse effect on the financial condition of Nuveen Investments and on the ability of Nuveen Fund Advisors to provide services and resources to the fund.
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Section 2 How We Manage Your Money
Section 3 How You Can Buy and Sell Shares
The fund offers multiple classes of shares, each with a different combination of sales charges, fees, eligibility requirements and other features. Your financial advisor can help you determine which class is best for you. For further details, please see the statement of additional information.
Class A Shares
You can purchase Class A shares at the offering price, which is the net asset value per share plus an up-front sales charge. You may qualify for a reduced sales charge, or the sales charge may be waived, as described in “How to Reduce Your Sales Charge.” Class A shares are also subject to an annual service fee of 0.20% of the fund’s average daily net assets, which compensates your financial advisor or other financial intermediary for providing ongoing service to you. Nuveen Securities, LLC (the “Distributor”), a subsidiary of Nuveen Investments and the distributor of the fund, retains the up-front sales charge and the service fee on accounts with no financial intermediary of record. The up-front Class A sales charges for the fund are as follows:
| Amount of Purchase | Sales Charge as % of Public Offering Price | Sales Charge as % of Net Amount Invested | Maximum Financial Intermediary Commission as % of Public Offering Price | |||||||||
| Less than $50,000 | 4.20 | % | 4.38 | % | 3.70 | % | ||||||
| $50,000 but less than $100,000 | 4.00 | 4.18 | 3.50 | |||||||||
| $100,000 but less than $250,000 | 3.50 | 3.63 | 3.00 | |||||||||
| $250,000 but less than $500,000 | 2.50 | 2.56 | 2.00 | |||||||||
| $500,000 but less than $1,000,000 | 2.00 | 2.04 | 1.50 | |||||||||
| $1,000,000 and over* | — | — | 1.00 | |||||||||
| * | You can purchase $1 million or more of Class A shares at net asset value without an up-front sales charge. The Distributor pays financial intermediaries of record a commission equal to 1% of the first $2.5 million, plus 0.75% of the next $2.5 million, plus 0.50% of the amount over $5 million. Unless you are eligible for a waiver, you may be assessed a contingent deferred sales charge (“CDSC”) of 1% if you redeem any of your shares within 6 months of purchase, 0.75% if you redeem any of your shares within 12 months of purchase and 0.50% if you redeem any of your shares within 18 months of purchase. See “How to Sell Shares—Contingent Deferred Sales Charge” below for more information. |
Class C1 Shares
Class C1 shares are not available for new accounts or for additional investment into existing accounts, but Class C1 shares can be issued for purposes of dividend reinvestment. Class C1 shares are subject to annual distribution and service fees of 0.65% of the fund’s average daily net assets. The annual 0.25% service fee compensates your financial advisor or other financial intermediary for providing ongoing service to you. The annual 0.40% distribution fee compensates the Distributor for paying your financial advisor or other financial intermediary an ongoing sales commission as well as an advance of the first year’s service and distribution fees. The Distributor retains the service and distribution fees on accounts with no financial intermediary of record. If you redeem your shares within 12 months of purchase, you will normally pay a 1% CDSC, which is calculated on the lower of your purchase price or your redemption proceeds.
You do not pay a CDSC on any Class C1 shares you purchase by reinvesting dividends.
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Class I Shares
You can purchase Class I shares at the offering price, which is the net asset value per share without any up-front sales charge. Class I shares are not subject to sales charges or ongoing service or distribution fees. Class I shares have lower ongoing expenses than the other classes.
Class I shares are available for purchase by clients of financial intermediaries who charge such clients an ongoing fee for advisory, investment, consulting or related services. Such clients may include individuals, corporations, endowments and foundations. The minimum initial investment for such clients is $100,000, but this minimum will be lowered to $250 for clients of financial intermediaries that have accounts holding Class I shares with an aggregate value of at least $100,000. The Distributor may also lower the minimum to $250 for clients of financial intermediaries anticipated to reach this Class I share holdings level.
Class I shares are also available for purchase by family offices and their clients. A family office is a company that provides certain financial and other services to a high net worth family or families. The minimum initial investment for family offices and their clients is $100,000, but this minimum will be lowered to $250 for clients of family offices that have accounts holding Class I shares with an aggregate value of at least $100,000. The Distributor may also lower the minimum to $250 for clients of family offices anticipated to reach this Class I share holdings level.
Class I shares are also available for purchase, with no minimum initial investment, by the following categories of investors:
| • | Certain employer-sponsored retirement plans. |
| • | Certain bank or broker-affiliated trust departments. |
| • | Advisory accounts of Nuveen Fund Advisors and its affiliates. |
| • | Trustees/directors and former trustees/directors of any Nuveen Fund, and their immediate family members (as defined in the statement of additional information). |
| • | Officers, directors and former directors of Nuveen Investments and its affiliates, and their immediate family members. |
| • | Full-time and retired employees of Nuveen Investments and its affiliates, and their immediate family members. |
| • | Certain financial intermediary personnel, and their immediate family members. |
Please refer to the statement of additional information for more information about Class A, Class C1 and Class I shares, including more detailed program descriptions and eligibility requirements. Additional information is also available from your financial advisor, who can also help you prepare any necessary application forms.
The fund offers a number of ways to reduce or eliminate the up-front sales charge on Class A shares. See “What Share Classes We Offer” (above) for a discussion of eligibility requirements for purchasing Class I shares.
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Section 3 How You Can Buy and Sell Shares
Class A Sales Charge Reductions
| • | Rights of Accumulation. In calculating the appropriate sales charge on a purchase of Class A shares of the fund, you may be able to add the amount of your purchase to the value that day of all of your prior purchases of any Nuveen Mutual Fund. |
| • | Letter of Intent. Subject to certain requirements, you may purchase Class A shares of the fund at the sales charge rate applicable to the total amount of the purchases you intend to make over a 13-month period. |
For purposes of calculating the appropriate sales charge as described under Rights of Accumulation and Letter of Intent above, you may include purchases by (i) you, (ii) your spouse or domestic partner and dependent children, and (iii) a corporation, partnership or sole proprietorship that is 100% owned by any of the persons in (i) or (ii). In addition, a trustee or other fiduciary can count all shares purchased for a single trust, estate or other single fiduciary account that has multiple accounts (including one or more employee benefit plans of the same employer).
Class A Sales Charge Waivers
Class A shares of the fund may be purchased at net asset value without a sales charge as follows:
| • | Purchases of $1,000,000 or more. |
| • | Monies representing reinvestment of Nuveen Mutual Fund distributions. |
| • | Employees of Nuveen Investments and its affiliates. Purchases by full-time and retired employees of Nuveen Investments and its affiliates and such employees’ immediate family members (as defined in the statement of additional information). |
| • | Trustees/directors and former trustees/directors of the Nuveen Funds. |
| • | Financial intermediary personnel. Purchases by any person who, for at least the last 90 days, has been an officer, director, or bona fide employee of any financial intermediary or any such person’s immediate family member. |
| • | Certain trust departments. Purchases by bank or broker-affiliated trust departments investing funds over which they exercise exclusive discretionary investment authority and that are held in a fiduciary, agency, advisory, custodial or similar capacity. |
| • | Additional categories of investors. Purchases made by: (i) investors purchasing on a periodic fee, asset-based fee or no transaction fee basis through a broker-dealer sponsored mutual fund purchase program; (ii) clients of investment advisers, financial planners or other financial intermediaries that charge periodic or asset-based fees for their services and (iii) through December 31, 2011, shareholders of funds not currently sub-advised by Nuveen Asset Management that were sub-advised by FAF prior to the closing of its Transaction with Nuveen Investments. |
In order to obtain a sales charge reduction or waiver, it may be necessary at the time of purchase for you to inform the fund or your financial advisor of the existence of other accounts in which there are holdings eligible to be aggregated for such purposes. You may need to provide the fund or your financial advisor information or records, such as account statements, in order to verify your eligibility for a sales charge reduction or waiver. This may include account statements of family members and information regarding Nuveen Mutual Fund shares held in accounts with other financial advisors. You or your financial advisor must notify the Distributor at the time of each purchase if you are eligible for any of these programs. The fund may modify or discontinue these programs at any time.
Section 3 How You Can Buy and Sell Shares
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Fund shares may be purchased on any business day, which is any day the New York Stock Exchange (the “NYSE”) is open for business. Generally, the NYSE is closed on weekends and national holidays. The share price you pay depends on when the Distributor receives your order. Orders received before the close of trading on a business day (normally, 4:00 p.m. New York time) will receive that day’s closing share price; otherwise, you will receive the next business day’s price.
You may purchase fund shares (1) through a financial advisor or (2) directly from the fund.
Through a Financial Advisor
You may buy shares through your financial advisor, who can handle all the details for you, including opening a new account. Financial advisors can also help you review your financial needs and formulate long-term investment goals and objectives. In addition, financial advisors generally can help you develop a customized financial plan, select investments and monitor and review your portfolio on an ongoing basis to help assure your investments continue to meet your needs as circumstances change. Financial advisors (including brokers or agents) are paid for providing ongoing investment advice and services, either from fund sales charges and fees or by charging you a separate fee in lieu of a sales charge.
Financial advisors or other dealer firms may charge their customers a processing or service fee in connection with the purchase or redemption of fund shares. The amount and applicability of such a fee is determined and disclosed to customers by each individual dealer. Processing or service fees typically are fixed, nominal dollar amounts and are in addition to the sales and other charges described in this prospectus and the statement of additional information. Your dealer will provide you with specific information about any processing or service fees you will be charged. Shares you purchase through your financial advisor or other intermediary will normally be held with that firm. For more information, please contact your financial advisor.
Directly from the Fund
Eligible investors may purchase shares directly from the fund.
By Wire. You can purchase shares by making a wire transfer from your bank. Before making an initial investment by wire, you must submit a new account form to the fund. After receiving your form, a service representative will contact you with your account number and wiring instructions. Your order will be priced at the next NAV, or public offering price as applicable based on your share class, calculated after the fund’s custodian receives your payment by wire. Wired funds must be received prior to 4:00 p.m. New York time to be eligible for same day pricing. Neither the fund nor the transfer agent are responsible for the consequences of delays resulting from the banking or Federal Reserve wire system, or from incomplete wiring instructions. Before making any additional purchases by wire, you should call Nuveen Investor Services at (800) 257-8787. You cannot purchase shares by wire on days when federally chartered banks are closed.
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Section 3 How You Can Buy and Sell Shares
By Mail. To purchase shares by mail, simply complete and sign a new account form, enclose a check made payable to the fund, and mail both to:
| Regular U.S. Mail: | Overnight Express Mail: | |||
| Nuveen Mutual Funds | Nuveen Mutual Funds | |||
| P.O. Box 701 | 615 East Michigan Street | |||
| Milwaukee, WI 53201-0701 | Milwaukee, WI 53202 |
The fund does not consider the U.S. Postal Service or other independent delivery services to be its agents. Therefore, deposit in the mail or with such services, or receipt at U.S. Bancorp Fund Services, LLC’s post office box, of purchase orders or redemption requests does not constitute receipt by the transfer agent of the fund.
After you have established an account, you may continue to purchase shares by mailing your check to Nuveen Mutual Funds at the same address.
Please note the following:
| • | All purchases must be drawn on a bank located within the United States and payable in U.S. dollars to Nuveen Mutual Funds. |
| • | Cash, money orders, cashier’s checks in amounts less than $10,000, third-party checks, Treasury checks, credit card checks, traveler’s checks, starter checks, and credit cards will not be accepted. We are unable to accept post dated checks, post dated on-line bill pay checks, or any conditional order of payment. |
| • | If a check or ACH transaction does not clear your bank, the fund reserves the right to cancel the purchase, and you may be charged a fee of $25 per check or transaction. You could be liable for any losses or fees incurred by the fund as a result of your check or ACH transaction failing to clear. |
To help make your investing with us easy and efficient, we offer you the following services at no extra cost. Your financial advisor can help you complete the forms for these services, or you can call Nuveen Investor Services at (800) 257-8787 for copies of the necessary forms.
Systematic Investing
Once you have opened an account satisfying the applicable investment minimum, systematic investing allows you to make regular additional investments through automatic deductions from your bank account, directly from your paycheck or from exchanging shares from another mutual fund account. The minimum automatic deduction is $100 per month. There is no charge to participate in the fund’s systematic investment plan. You can stop the deductions at any time by notifying the fund in writing.
| • | From your bank account. You can make systematic investments of $100 or more per month by authorizing the fund to draw pre-authorized checks on your bank account. |
| • | From your paycheck. With your employer’s consent, you can make systematic investments each pay period (collectively meeting the monthly minimum of $100) by authorizing your employer to deduct monies from your paycheck. |
| • | Systematic exchanging. You can make systematic investments by authorizing the Distributor to exchange shares from one Nuveen Mutual |
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Fund account into another identically registered Nuveen Mutual Fund account of the same share class. |
Systematic Withdrawal
If the value of your fund account is at least $10,000, you may request to have $50 or more withdrawn automatically from your account. You may elect to receive payments monthly, quarterly, semi-annually or annually, and may choose to receive a check, have the monies transferred directly into your bank account, paid to a third party or sent payable to you at an address other than your address of record. You must complete the appropriate section of the account application or Account Update Form to participate in the fund’s systematic withdrawal plan.
You should not establish systematic withdrawals if you intend to make concurrent purchases of Class A or Class C1 shares because you may unnecessarily pay a sales charge or CDSC on these purchases.
Exchanging Shares
You may exchange fund shares into an identically registered account for the same class of another Nuveen Mutual Fund available in your state. Your exchange must meet the minimum purchase requirements of the fund into which you are exchanging, and, if your shares are held with a financial intermediary, the financial intermediary must have the operational capability to support exchanges. You may also, under certain limited circumstances, exchange between certain classes of shares of the same fund, subject to the payment of any applicable CDSC. Please consult the statement of additional information for details.
The fund may change or cancel its exchange policy at any time upon 60 days’ notice. The fund reserves the right to revise or suspend the exchange privilege, limit the amount or number of exchanges or reject any exchange.
Because an exchange between funds is treated for tax purposes as a purchase and sale, any gain may be subject to tax. An exchange between classes of shares of the same fund may not be considered a taxable event. You should consult your tax advisor about the tax consequences of exchanging your shares.
Reinstatement Privilege
If you redeem fund shares, you may reinvest all or part of your redemption proceeds up to one year later without incurring any additional charges. You may only reinvest into the same share class you redeemed. If you paid a CDSC, the fund will refund your CDSC and reinstate your holding period for purposes of calculating the CDSC. You may use this reinstatement privilege only once for any redemption.
You may sell (redeem) your shares on any business day. You will receive the share price next determined after the fund has received your properly completed redemption request. Your redemption request must be received before the close of trading on the NYSE (normally, 4:00 p.m. New York time) for you to receive that day’s price. The fund will normally mail your check the next business day after a redemption request is received, but in no event more than seven days after your request is received. If you are selling shares purchased recently with a check, your redemption proceeds will not be mailed until your check has cleared, which may take up to ten days from your purchase date.
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Section 3 How You Can Buy and Sell Shares
You may sell your shares (1) through a financial advisor or (2) directly to the fund.
Through a Financial Advisor
You may sell your shares through your financial advisor, who can prepare the necessary documentation. Your financial advisor may charge for this service.
Directly to the Fund
By telephone. If you did not purchase shares through a financial advisor, you may redeem your shares by calling Nuveen Investor Services at (800) 257-8787. Proceeds can be wired to your bank account (if you have previously supplied your bank account information to the fund) or sent to you by check. The fund charges a $15 fee for wire redemptions, but has the right to waive this fee for shares redeemed through certain financial intermediaries and by certain accounts. Proceeds also can be sent directly to your bank or brokerage account via electronic funds transfer if your bank or brokerage firm is a member of the ACH network. Credit is usually available within two to three business days. The fund reserves the right to limit telephone redemptions to $50,000 per account per day.
If you recently purchased your shares by check or through the ACH network, proceeds from the sale of those shares may not be available until your check or ACH payment has cleared, which may take up to ten business days from the date of purchase.
By mail. To redeem shares by mail, send a written request to your financial intermediary, or to the fund at the following address:
| Regular U.S. Mail: | Overnight Express Mail: | |||
| Nuveen Mutual Funds | Nuveen Mutual Funds | |||
| P.O. Box 701 | 615 East Michigan Street | |||
| Milwaukee, WI 53201-0701 | Milwaukee, WI 53202 |
Your request should include the following information:
| • | name of the fund; |
| • | account number; |
| • | dollar amount or number of shares redeemed; |
| • | name on the account; |
| • | signatures of all registered account owners; and |
| • | any certificate you have for the shares. |
After you have established your account, signatures on a written request must be guaranteed if:
| • | you would like redemption proceeds payable or sent to any person, address or bank account other than that on record; |
| • | you have changed the address on the fund’s records within the last 30 days; |
| • | your redemption request is in excess of $50,000; or |
| • | you are requesting a change in ownership on your account. |
Non-financial transactions, including establishing or modifying certain services such as changing bank information on an account, will require a signature guarantee or signature verification from a Medallion Signature Guarantee member or other acceptable form of authentication from a financial institution source.
In addition to the situations described above, the fund reserves the right to require a signature guarantee, or another acceptable form of signature verification, in other instances based on the circumstances of a particular situation.
Section 3 How You Can Buy and Sell Shares
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A signature guarantee assures that a signature is genuine and protects shareholders from unauthorized account transfers. Banks, savings and loan associations, trust companies, credit unions, broker-dealers, and member firms of a national securities exchange may guarantee signatures. Call your financial intermediary to determine if it has this capability. A notary public is not an acceptable signature guarantor. Proceeds from a written redemption request will be sent to you by check unless another form of payment is requested.
By wire. You can call or write to have redemption proceeds sent to a bank account. See the policies for redeeming shares by phone or by mail. Before requesting to have redemption proceeds sent to a bank account, please make sure the fund has your bank account information on file. If the fund does not have this information, you will need to send written instructions with your bank’s name and a voided check or pre-printed savings account deposit slip. You must provide written instructions signed by all fund and bank account owners, and each individual must have their signature guaranteed.
Contingent Deferred Sales Charge
If you redeem Class A or Class C1 shares that are subject to a CDSC, you may be assessed a CDSC upon redemption. When you redeem Class A or Class C1 shares subject to a CDSC, the fund will first redeem any shares that are not subject to a CDSC, and then redeem the shares you have owned for the longest period of time, unless you ask the fund to redeem your shares in a different order. No CDSC is imposed on shares you buy through the reinvestment of dividends and capital gains. The CDSC holding period is calculated on a monthly basis and begins on the first day of the month in which the purchase was made. When you redeem shares subject to a CDSC, the CDSC is calculated on the lower of your purchase price or redemption proceeds, deducted from your redemption proceeds, and paid to the Distributor. The CDSC may be waived under certain special circumstances as described in the statement of additional information.
Accounts with Low Balances
The fund reserves the right to liquidate or assess a low balance fee on any account held directly with the fund that has a balance that has fallen below the account balance minimum of $1,000 for any reason, including market fluctuations.
If the fund elects to exercise this right, then annually the fund will assess a $15 low balance account fee on certain accounts with balances under the account balance minimum that are accounts established pursuant to the UTMA or UGMA. At the same time, other accounts with balances under the account balance minimum will be liquidated, with proceeds being mailed to the address of record. Prior to the assessment of any low balance fee or liquidation of low balance accounts, affected shareholders will receive a communication notifying them of the pending action, thereby providing time to ensure that balances are at or above the account balance minimum prior to any fee assessment or account liquidation. You will not be assessed a CDSC if your account is liquidated.
Redemptions In-Kind
The fund generally pays redemption proceeds in cash. Under unusual conditions that make cash payment unwise and for the protection of existing shareholders, the fund may pay all or a portion of your redemption proceeds in securities or other fund assets. Although it is unlikely that your shares would be redeemed in-kind, you would probably have to pay brokerage costs to sell the securities distributed to you, as well as taxes on any capital gains from that sale.
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Section 3 How You Can Buy and Sell Shares
To help you understand the tax implications of investing in the fund, this section includes important details about how the fund makes distributions to shareholders. We discuss some other fund policies as well.
Dividends from the fund’s net investment income are declared daily and paid monthly. Any capital gains are distributed at least once each year. Generally, you will begin to earn dividends on the next business day after the fund receives your payment and will continue to earn dividends through the business day immediately preceding the day the fund pays your redemption proceeds.
Payment and Reinvestment Options
The fund automatically reinvests your dividends in additional fund shares unless you request otherwise. You may request to have your dividends paid to you by check, sent via electronic funds transfer through the Automated Clearing House (ACH) network, or reinvested in shares of another Nuveen Mutual Fund. For further information, contact your financial advisor or call Nuveen Investor Services at (800) 257-8787. If you request that your distributions be paid by check but those distributions cannot be delivered because of an incorrect mailing address, or if a distribution check remains uncashed for six months, the undelivered or uncashed distributions and all future distributions will be reinvested in fund shares at the current net asset value.
Federal Taxes on Distributions
The fund intends to meet certain federal tax requirements so that distributions of tax-exempt interest income may be treated as “exempt-interest dividends.” These dividends are not subject to regular federal income tax. However, the fund may invest up to 20% of its net assets in municipal securities the interest on which is subject to the federal alternative minimum tax. Any portion of exempt-interest dividends attributable to interest on these securities may increase some shareholders’ alternative minimum tax. The fund expects that its distributions will consist primarily of exempt-interest dividends.
Dividends paid from any interest income that is not tax-exempt and from any net realized capital gains will be taxable whether you reinvest those distributions or take them in cash. Distributions paid from taxable interest income will be taxed as ordinary income and not as “qualifying dividends” that are taxed at the same rate as long-term capital gains. Distributions of the fund’s long-term capital gains are taxable as long-term gains, regardless of how long you have held your shares. The current 15% maximum tax rate applicable to capital gains and the favorable treatment of “qualified dividend” income are scheduled to expire after 2013.
Federal Taxes on Transactions
The sale of fund shares, or the exchange of one fund’s shares for shares of another fund, will be a taxable event and may result in a capital gain or loss. The gain or loss will be considered long-term if you have held your shares for more than one year. A gain or loss on shares held for one year or less is
Section 4 General Information
21
considered short-term and is taxed at the same rates as ordinary income. Unless applicable tax provisions are extended, the current 15% maximum tax rate applicable to capital gains is scheduled to expire after 2013.
If, in redemption of his or her shares, a shareholder receives a distribution of securities instead of cash, the shareholder will be treated as receiving an amount equal to the fair market value of the securities at the time of the distribution for purposes of determining capital gain or loss on the redemption, and will also acquire a basis in the shares for federal income tax purposes equal to their fair market value.
The exchange of one class of shares for another class of shares in the same fund will not be taxable.
Please consult the statement of additional information and your tax advisor for more information about taxes.
Buying or Selling Shares Close to a Record Date
Buying fund shares shortly before the record date for a taxable income or capital gain distribution is commonly known as “buying the dividend.” The entire distribution may be taxable to you even though a portion of the distribution effectively represents a return of your purchase price.
Taxable Equivalent Yields
The taxable equivalent yield is the current yield you would need to earn on a taxable investment in order to equal a stated federal tax-free yield on a municipal investment. To assist you in comparing municipal investments like the fund with fully taxable alternative investments, the table below presents the taxable equivalent yields for a range of hypothetical federal tax-free yields and tax rates:
| Taxable Equivalents of Tax-Free Yields | To Equal a Tax-Free Yield of: | |||||||||||||||
| 2.00 | % | 3.00 | % | 4.00 | % | 5.00 | % | |||||||||
| Tax Bracket: | A Taxable Investment Would Need to Yield: | |||||||||||||||
| 25% | 2.67 | % | 4.00 | % | 5.33 | % | 6.67 | % | ||||||||
| 28% | 2.78 | % | 4.17 | % | 5.56 | % | 6.94 | % | ||||||||
| 33% | 2.99 | % | 4.48 | % | 5.97 | % | 7.46 | % | ||||||||
| 35% | 3.08 | % | 4.62 | % | 6.15 | % | 7.69 | % | ||||||||
The yields and tax rates shown above are hypothetical and do not predict your actual returns or effective tax rate. For more detailed information, see the statement of additional information or consult your tax advisor.
State Taxes on Distributions
The fund intends to comply with certain state tax requirements so that dividends it pays that are attributable to interest on certain municipal securities will be excluded from the taxable income of individuals, trusts and estates. To meet these requirements, the fund must meet certain obligations with respect to the fund’s assets that are exempt from a state’s personal income tax. More information about tax considerations that may affect the fund and its shareholders appears in the fund’s statement of additional information.
The Distributor serves as the selling agent and distributor of the fund’s shares. In this capacity, the Distributor manages the offering of the fund’s
22
Section 4 General Information
shares and is responsible for all sales and promotional activities. In order to reimburse the Distributor for its costs in connection with these activities, including compensation paid to financial intermediaries, the fund has adopted a distribution and service plan under Rule 12b-1 under the 1940 Act. See “How You Can Buy and Sell Shares—What Share Classes We Offer” for a description of the distribution and service fees paid under this plan.
Under the plan, the Distributor receives a distribution fee for Class C1 shares primarily for providing compensation to financial intermediaries, including the Distributor, in connection with the distribution of shares. The Distributor receives a service fee for Class A and Class C1 shares to compensate financial intermediaries, including the Distributor, for providing ongoing account services to shareholders. These services may include establishing and maintaining shareholder accounts, answering shareholder inquiries and providing other personal services to shareholders. These fees also compensate the Distributor for other expenses, including printing and distributing prospectuses to persons other than shareholders, and preparing, printing, and distributing advertising, and sales literature and reports to shareholders used in connection with the sale of shares. Because these fees are paid out of the fund’s assets on an ongoing basis, over time these fees will increase the cost of your investment and may cost you more than paying other types of sales charges. Long-term holders of Class C1 shares may pay more in distribution and service fees and CDSCs than the economic equivalent of the maximum front-end sales charge permitted under the Financial Industry Regulatory Authority Conduct Rules.
Other Payments to Financial Intermediaries
In addition to the sales commissions and certain payments from distribution and service fees to financial intermediaries as previously described, the Distributor may from time to time make additional payments, out of its own resources, to certain financial intermediaries that sell shares of Nuveen Mutual Funds in order to promote the sales and retention of fund shares by those firms and their customers. The amounts of these payments vary by financial intermediary and, with respect to a given firm, are typically calculated by reference to the amount of the firm’s recent gross sales of Nuveen Mutual Fund shares and/or total assets of Nuveen Mutual Funds held by the firm’s customers. The level of payments that the Distributor is willing to provide to a particular financial intermediary may be affected by, among other factors, the firm’s total assets held in and recent net investments into Nuveen Mutual Funds, the firm’s level of participation in Nuveen Mutual Fund sales and marketing programs, the firm’s compensation program for its registered representatives who sell fund shares and provide services to fund shareholders, and the asset class of the Nuveen Mutual Funds for which these payments are provided. The statement of additional information contains additional information about these payments, including the names of the firms to which payments are made. The Distributor may also make payments to financial intermediaries in connection with sales meetings, due diligence meetings, prospecting seminars and other meetings at which the Distributor promotes its products and services.
In connection with the availability of Nuveen Mutual Funds within selected mutual fund no-transaction fee institutional platforms and fee-based wrap programs (together, “Platform Programs”) at certain financial intermediaries, the Distributor also makes payments out of its own assets to those firms as compensation for certain recordkeeping, shareholder communications and other account administration services provided to Nuveen Mutual Fund
Section 4 General Information
23
shareholders who own their fund shares in these Platform Programs. These payments are in addition to the service fee and any applicable omnibus sub-accounting fees paid to these firms with respect to these services by the Nuveen Mutual Funds out of fund assets.
The amounts of payments to a financial intermediary could be significant, and may create an incentive for the intermediary or its representatives to recommend or offer shares of the funds to you. The intermediary may elevate the prominence or profile of the funds within the intermediary’s organization by, for example, placing the funds on a list of preferred or recommended funds and/or granting the Distributor and/or its affiliates preferential or enhanced opportunities to promote the funds in various ways within the intermediary’s organization.
The price you pay for your shares is based on the fund’s net asset value per share, which is determined as of the close of trading (normally 4:00 p.m. New York time) on each day the NYSE is open for business. Net asset value is calculated for each class of the fund by taking the value of the class’ total assets, including interest or dividends accrued but not yet collected, less all liabilities, and dividing by the total number of shares outstanding. The result, rounded to the nearest cent, is the net asset value per share. All valuations are subject to review by the fund’s Board of Directors or its designee.
In determining net asset value, portfolio instruments generally are valued using prices provided by independent pricing services or obtained from other sources, such as broker-dealer quotations, all as approved by the Board of Directors. Independent pricing services typically value non-equity portfolio instruments utilizing a range of market-based inputs and assumptions, including readily available market quotations obtained from broker-dealers making markets in such instruments, cash flows, and transactions for comparable instruments. In pricing certain securities, particularly less liquid and lower quality securities, the pricing services may consider information about a security, its issuer, or market activity provided by the fund’s investment adviser or sub-adviser.
If a price cannot be obtained from a pricing service or other pre-approved source, or if Nuveen Fund Advisors deems such price to be unreliable, a portfolio instrument may be valued by the fund at its fair value as determined in good faith by the Board of Directors or its designee. As a general principle, the fair value of a portfolio instrument is the amount that an owner might reasonably expect to receive upon the instrument’s current sale. A range of factors and analysis may be considered when determining fair value, including relevant market data, interest rates, credit considerations and/or issuer-specific news. The fund may rely on an independent fair valuation service in making any such fair value determinations.
The fund is intended for long-term investment and should not be used for excessive trading. Excessive trading in the fund’s shares can disrupt portfolio management, lead to higher operating costs, and cause other operating inefficiencies for the fund. However, the fund is also mindful that shareholders may have valid reasons for periodically purchasing and redeeming fund shares.
24
Section 4 General Information
Accordingly, the fund has adopted a Frequent Trading Policy that seeks to balance the fund’s need to prevent excessive trading in fund shares while offering investors the flexibility in managing their financial affairs to make periodic purchases and redemptions of fund shares.
The fund’s Frequent Trading Policy generally limits an investor to four “round trip” trades in a 12-month period. A “round trip” is the purchase and subsequent redemption of fund shares, including by exchange. Each side of a round trip may be comprised of either a single transaction or a series of closely-spaced transactions. The fund may also suspend the trading privileges of any investor who makes a round trip within a 30-day period if the purchase and redemption are of substantially similar dollar amounts and represent at least 25% of the value of the investor’s account.
The fund primarily receives share purchase and redemption orders through third-party financial intermediaries, some of whom rely on the use of omnibus accounts. An omnibus account typically includes multiple investors and provides the fund only with a net purchase or redemption amount on any given day where multiple purchases, redemptions and exchanges of shares occur in the account. The identity of individual purchasers, redeemers and exchangers whose orders are aggregated in omnibus accounts, and the size of their orders, will generally not be known by the fund. Despite the fund’s efforts to detect and prevent frequent trading, the fund may be unable to identify frequent trading because the netting effect in omnibus accounts often makes it more difficult to identify frequent traders. The Distributor has entered into agreements with financial intermediaries that maintain omnibus accounts with the fund’s transfer agent. Under the terms of these agreements, the financial intermediaries undertake to cooperate with the Distributor in monitoring purchase, exchange and redemption orders by their customers in order to detect and prevent frequent trading in the fund through such accounts. Technical limitations in operational systems at such intermediaries or at the Distributor may also limit the fund’s ability to detect and prevent frequent trading. In addition, the fund may permit certain financial intermediaries, including broker-dealer and retirement plan administrators, among others, to enforce their own internal policies and procedures concerning frequent trading. Such policies may differ from the fund’s Frequent Trading Policy and may be approved for use in instances where the fund reasonably believes that the intermediary’s policies and procedures effectively discourage inappropriate trading activity. Shareholders holding their accounts with such intermediaries may wish to contact the intermediary for information regarding its frequent trading policy. Although the fund does not knowingly permit frequent trading, it cannot guarantee that it will be able to identify and restrict all frequent trading activity.
The fund reserves the right in its sole discretion to waive unintentional or minor violations (including transactions below certain dollar thresholds) if it determines that doing so would not harm the interests of fund shareholders. In addition, certain categories of redemptions may be excluded from the application of the Frequent Trading Policy, as described in more detail in the statement of additional information. These include, among others, redemptions pursuant to systematic withdrawal plans, redemptions in connection with the total disability or death of the investor, involuntary redemptions by operation of law, redemptions in payment of account or plan fees, and certain redemptions by retirement plans, including redemptions in connection with qualifying loans or hardship withdrawals, termination of plan
Section 4 General Information
25
participation, return of excess contributions, and required minimum distributions. The fund may also modify or suspend the Frequent Trading Policy without notice during periods of market stress or other unusual circumstances.
The fund reserves the right to impose restrictions on purchases or exchanges that are more restrictive than those stated above if it determines, in its sole discretion, that a transaction or a series of transactions involves market timing or excessive trading that may be detrimental to fund shareholders. The fund also reserves the right to reject any purchase order, including exchange purchases, for any reason. For example, the fund may refuse purchase orders if the fund would be unable to invest the proceeds from the purchase order in accordance with the fund’s investment policies and/or objective, or if the fund would be adversely affected by the size of the transaction, the frequency of trading in the account or various other factors. For more information about the fund’s Frequent Trading Policy and its enforcement, see “Purchase and Redemption of Fund Shares—Frequent Trading Policy” in the statement of additional information.
The custodian of the assets of the fund is U.S. Bank National Association, 60 Livingston Avenue, St. Paul, MN 55101. U.S. Bancorp Fund Services, LLC, 615 East Michigan St., Milwaukee, WI 53202, acts as the fund’s transfer agent and as such performs bookkeeping and data processing for the maintenance of shareholder accounts.
26
Section 4 General Information
Section 5 Financial Highlights
The table that follows presents performance information about the share classes of the fund offered during the most recently completed fiscal period. This information is intended to help you understand the fund’s financial performance for the past five years. Some of this information reflects financial results for a single fund share held throughout the period. Total returns in the tables represent the rate that you would have earned or lost on an investment in the fund, assuming you reinvested all of your dividends and distributions.
The information below has been derived from the financial statements audited by Ernst & Young LLP, an independent registered public accounting firm, whose report, along with the fund’s financial statements, is included in the fund’s annual report, which is available upon request.
Section 5 Financial Highlights
27
Nuveen California Tax Free Fund
| Class (Commencement Date) | Ratios/Supplemental Data | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Investment Operations | Less Distributions | |||||||||||||||||||||||||||||||||||||||||||||||||||
Beginning Net Asset | Net Investment Income(a) | Net Realized | Total | Net Investment Income | Capital Gains(b) | Total | Ending Net Asset Value | Total Return(c) | Ending Net Asset | Ratios of Expenses to Average Net Assets(d) | Ratios of Net Investment Income to Average Net Assets(d) | Portfolio Turnover Rate | ||||||||||||||||||||||||||||||||||||||||
| Class A (2/00) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Year Ended February 28, | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2011(e) | $ | 10.88 | $ | 0.31 | $ | (0.38 | ) | $ | (0.07 | ) | $ | (0.31 | ) | $ | (0.02 | ) | $ | (0.33 | ) | $ | 10.48 | (0.68 | )% | $ | 16,453 | 0.65 | %* | 4.31 | %* | 8 | % | |||||||||||||||||||||
| Year Ended June 30, | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2010 | 10.27 | 0.47 | 0.63 | 1.10 | (0.46 | ) | (0.03 | ) | (0.49 | ) | 10.88 | 10.89 | 17,315 | 0.65 | 4.36 | 16 | ||||||||||||||||||||||||||||||||||||
| 2009 | 10.71 | 0.46 | (0.44 | ) | 0.02 | (0.46 | ) | — | (0.46 | ) | 10.27 | 0.29 | 16,417 | 0.65 | 4.51 | 27 | ||||||||||||||||||||||||||||||||||||
| 2008 | 10.98 | 0.46 | (0.23 | ) | 0.23 | (0.46 | ) | (0.04 | ) | (0.50 | ) | 10.71 | 2.11 | 12,076 | 0.67 | 4.19 | 45 | |||||||||||||||||||||||||||||||||||
| 2007 | 10.96 | 0.45 | 0.06 | 0.51 | (0.45 | ) | (0.04 | ) | (0.49 | ) | 10.98 | 4.62 | 11,375 | 0.75 | 4.00 | 36 | ||||||||||||||||||||||||||||||||||||
| 2006(f) | 11.24 | 0.33 | (0.26 | ) | 0.07 | (0.33 | ) | (0.02 | ) | (0.35 | ) | 10.96 | 0.63 | 10,783 | 0.75 | * | 3.99 | * | 24 | |||||||||||||||||||||||||||||||||
| Year Ended September 30, | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2005 | 11.40 | 0.44 | (0.05 | ) | 0.39 | (0.44 | ) | (0.11 | ) | (0.55 | ) | 11.24 | 3.50 | 11,888 | 0.75 | 3.88 | 14 | |||||||||||||||||||||||||||||||||||
| Class C1 (2/00)(g) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Year Ended February 28, | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2011(e) | 10.89 | 0.28 | (0.38 | ) | (0.10 | ) | (0.27 | ) | (0.02 | ) | (0.29 | ) | 10.50 | (0.91 | ) | 5,762 | 1.15 | * | 3.83 | * | 8 | |||||||||||||||||||||||||||||||
| Year Ended June 30, | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2010 | 10.28 | 0.41 | 0.64 | 1.05 | (0.41 | ) | (0.03 | ) | (0.44 | ) | 10.89 | 10.33 | 4,674 | 1.15 | 3.86 | 16 | ||||||||||||||||||||||||||||||||||||
| 2009 | 10.72 | 0.41 | (0.44 | ) | (0.03 | ) | (0.41 | ) | — | (0.41 | ) | 10.28 | (0.21 | ) | 4,064 | 1.15 | 4.01 | 27 | ||||||||||||||||||||||||||||||||||
| 2008 | 10.99 | 0.40 | (0.22 | ) | 0.18 | (0.41 | ) | (0.04 | ) | (0.45 | ) | 10.72 | 1.61 | 2,480 | 1.15 | 3.68 | 45 | |||||||||||||||||||||||||||||||||||
| 2007 | 10.97 | 0.41 | 0.05 | 0.46 | (0.40 | ) | (0.04 | ) | (0.44 | ) | 10.99 | 4.17 | 1,507 | 1.15 | 3.60 | 36 | ||||||||||||||||||||||||||||||||||||
| 2006(f) | 11.25 | 0.30 | (0.26 | ) | 0.04 | (0.30 | ) | (0.02 | ) | (0.32 | ) | 10.97 | 0.33 | 3,592 | 1.15 | * | 3.60 | * | 24 | |||||||||||||||||||||||||||||||||
| Year Ended September 30, | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2005 | 11.41 | 0.40 | (0.05 | ) | 0.35 | (0.40 | ) | (0.11 | ) | (0.51 | ) | 11.25 | 3.11 | 3,068 | 1.15 | 3.47 | 14 | |||||||||||||||||||||||||||||||||||
| Class I (2/00)(g) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Year Ended February 28, | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2011(e) | 10.88 | 0.32 | (0.38 | ) | (0.06 | ) | (0.32 | ) | (0.02 | ) | (0.34 | ) | 10.48 | (0.57 | ) | 75,179 | 0.50 | * | 4.46 | * | 8 | |||||||||||||||||||||||||||||||
| Year Ended June 30, | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2010 | 10.27 | 0.48 | 0.64 | 1.12 | (0.48 | ) | (0.03 | ) | (0.51 | ) | 10.88 | 11.06 | 81,609 | 0.50 | 4.51 | 16 | ||||||||||||||||||||||||||||||||||||
| 2009 | 10.71 | 0.48 | (0.45 | ) | 0.03 | (0.47 | ) | — | (0.47 | ) | 10.27 | 0.44 | 77,616 | 0.50 | 4.62 | 27 | ||||||||||||||||||||||||||||||||||||
| 2008 | 10.98 | 0.48 | (0.23 | ) | 0.25 | (0.48 | ) | (0.04 | ) | (0.52 | ) | 10.71 | 2.28 | 30,485 | 0.50 | 4.36 | 45 | |||||||||||||||||||||||||||||||||||
| 2007 | 10.97 | 0.47 | 0.05 | 0.52 | (0.47 | ) | (0.04 | ) | (0.51 | ) | 10.98 | 4.78 | 24,835 | 0.50 | 4.25 | 36 | ||||||||||||||||||||||||||||||||||||
| 2006(f) | 11.25 | 0.35 | (0.26 | ) | 0.09 | (0.35 | ) | (0.02 | ) | (0.37 | ) | 10.97 | 0.82 | 21,767 | 0.50 | * | 4.24 | * | 24 | |||||||||||||||||||||||||||||||||
| Year Ended September 30, | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2005 | 11.40 | 0.47 | (0.04 | ) | 0.43 | (0.47 | ) | (0.11 | ) | (0.58 | ) | 11.25 | 3.85 | 19,556 | 0.50 | 4.12 | 14 | |||||||||||||||||||||||||||||||||||
| * | Annualized. |
| (a) | Per share Net Investment Income is calculated using the average daily shares method. |
| (b) | Distributions from Capital Gains include short-term capital gains, if any. |
| (c) | Total Return is the combination of changes in net asset value without any sales charge, reinvested dividend income at net asset value and reinvested capital gains distributions at net asset value, if any. Total Return is not annualized. |
| (d) | After expense reimbursement from Nuveen Fund Advisers, where applicable. Ratios do not reflect the effect of custodian fee credits earned on the Fund’s net cash on deposit with the custodian bank, where applicable. |
| (e) | For the period July 1, 2010 to February 28, 2011. |
| (f) | For the period October 1, 2005 to June 30, 2006. |
| (g) | Effective January 18, 2011, Class C Shares were renamed Class C1 Shares and Class Y Shares were renamed Class I Shares. |
28
Section 5 Financial Highlights
Section 6 Glossary of Investment Terms
| • | Barclays Capital Municipal Bond Index: The Barclays Capital Municipal Bond Index is an unmanaged index comprised of fixed-rate, investment-grade tax-exempt bonds with remaining maturities of one year or more. |
| • | Derivatives: Financial instruments whose performance is derived from the performance of an underlying asset, security or index. Derivatives involve the trading of rights or obligations based on the underlying product. They are used to hedge risk, to exchange a floating rate of return for fixed rate of return or to gain investment exposure. Derivatives include futures, options and swaps, among other instruments. |
| • | Futures: A derivative contract obligating the buyer to purchase an asset or the seller to sell an asset at a predetermined future date and price. Futures contracts detail the quality and quantity of the underlying asset; they are standardized to facilitate trading on a futures exchange. |
| • | Lipper California Municipal Debt Funds Average: The Lipper California Municipal Debt Funds Average represents the average annualized total return for all reporting funds in the Lipper California Municipal Debt Fund category. |
| • | Options: A derivative investment that gives the buyer the right to buy or to sell shares of a specified stock at a specified price on or before a given date. There are also options on currencies and other financial assets. |
| • | Swaps: A derivative contract in which two parties agree to exchange one stream of cash flows for another stream. The swap agreement defines the dates when the cash flows will be paid and how the cash flows are calculated. |
Section 6 Glossary of Investment Terms
29
Nuveen Mutual Funds
Nuveen offers a variety of mutual funds designed to help you reach your financial goals. The funds below are grouped by category.
Municipal-National
All-American Municipal Bond
High Yield Municipal Bond
Inflation Protected Municipal Bond
Intermediate Duration Municipal Bond
Intermediate Tax Free*
Limited Term Municipal Bond
Municipal Bond
Municipal Bond 2
Short Tax Free*
Tax Free*
Municipal-State
Arizona Municipal Bond
California High Yield Municipal Bond
California Municipal Bond
California Municipal Bond 2
California Tax Free*
Colorado Municipal Bond
Colorado Tax Free*
Connecticut Municipal Bond
Georgia Municipal Bond
Kansas Municipal Bond
Kentucky Municipal Bond
Louisiana Municipal Bond
Maryland Municipal Bond
Massachusetts Municipal Bond
Massachusetts Municipal Bond 2
Michigan Municipal Bond
Minnesota Intermediate Municipal Bond*
Municipal-State (continued)
Minnesota Municipal Bond*
Missouri Municipal Bond
Missouri Tax Free*
Nebraska Municipal Bond*
New Jersey Municipal Bond
New Mexico Municipal Bond
New York Municipal Bond
New York Municipal Bond 2
North Carolina Municipal Bond
Ohio Municipal Bond
Ohio Tax Free*
Oregon Intermediate Municipal Bond*
Pennsylvania Municipal Bond
Tennessee Municipal Bond
Virginia Municipal Bond
Wisconsin Municipal Bond
Taxable Fixed Income
Core Bond*
High Income Bond*
High Yield Bond
Inflation Protected Securities*
Intermediate Government Bond*
Intermediate Term Bond*
Multi-Strategy Core Bond
Preferred Securities
Short Duration Bond
Short Term Bond*
Symphony Credit Opportunities
Symphony Floating Rate Income
Total Return Bond*
Global/International
International*
International Select*
Santa Barbara International Equity
Symphony International Equity
Tradewinds Emerging Markets
Tradewinds Global All-Cap
Tradewinds Global All-Cap Plus
Tradewinds Global Flexible Allocation
Tradewinds Global Resources
Tradewinds International Value
Tradewinds Japan
Value
Equity Income*
Large Cap Value*
Mid Cap Value*
Multi-Manager Large-Cap Value
NWQ Large-Cap Value
NWQ Multi-Cap Value
NWQ Small-Cap Value
NWQ Small-Mid Cap Value
Small Cap Value*
Symphony Large-Cap Value
Tradewinds Value Opportunities
Growth
Large Cap Growth Opportunities*
Mid Cap Growth Opportunities*
Santa Barbara Growth
Small Cap Growth Opportunities*
Symphony Large-Cap Growth
Winslow Large-Cap Growth
Core
Large Cap Select*
Mid Cap Select*
Santa Barbara Dividend Growth
Small Cap Select*
Symphony Mid-Cap Core
Symphony Optimized Alpha
Symphony Small-Mid Cap Core
Real Assets
Global Infrastructure*
Real Estate Securities*
Asset Allocation
Conservative Allocation
Growth Allocation
Moderate Allocation
Strategy Aggressive Growth Allocation*
Strategy Balanced Allocation*
Strategy Conservative Allocation*
Strategy Growth Allocation*
Tactical Market Opportunities*
Quantitative/Enhanced
Quantitative Enhanced Core Equity*
Index
Equity Index*
Mid Cap Index*
Small Cap Index*
*Former First American Fund.
Several additional sources of information are available to you, including the codes of ethics adopted by the fund, Nuveen Investments, Nuveen Fund Advisors and Nuveen Asset Management. The statement of additional information, incorporated by reference into this prospectus, contains detailed information on the policies and operation of the fund included in this prospectus. Additional information about the fund’s investments is available in the annual and semi-annual reports to shareholders. In the fund’s annual report, you will find a discussion of the market conditions and investment strategies that significantly affected the fund’s performance during its last fiscal year. The fund’s most recent statement of additional information, annual and semi-annual reports and certain other information are available free of charge by calling Nuveen Investor Services at (800) 257-8787, on the fund’s website at www.nuveen.com or through your financial advisor. Shareholders may call the toll free number above with any inquiries.
You may also obtain this and other fund information directly from the Securities and Exchange Commission (“SEC”). The SEC may charge a copying fee for this information. Reports and other information about the fund are also available on the EDGAR Database on the SEC’s Internet site at http://www.sec.gov or in person at the SEC’s Public Reference Room in Washington, D.C. Call the SEC at (202) 551-8090 for room hours and operation. You may also request fund information by sending an e-mail request to publicinfo@sec.gov or by writing to the SEC’s Public Reference Section at 100 F Street, NE, Washington, D.C. 20549-1520.
The fund is a series of Nuveen Investment Funds, Inc., whose Investment Company Act file number is 811-05309.
Distributed by
Nuveen Securities, LLC
333 West Wacker Drive
Chicago, Illinois 60606
(800) 257-8787
www.nuveen.com
MPR-FCA-0611P
STATEMENT OF ADDITIONAL INFORMATION
NUVEEN CALIFORNIA MUNICIPAL BOND FUND
Relating to the Acquisition of the Assets and Liabilities of
NUVEEN CALIFORNIA TAX FREE FUND
and
NUVEEN CALIFORNIA MUNICIPAL BOND FUND 2
333 West Wacker Dr.
Chicago, Illinois 60606
Telephone: (312) 917-7700
This Statement of Additional Information (“SAI”) is not a prospectus but should be read in conjunction with the Joint Proxy Statement/Prospectus dated , 2012 for use in connection with the joint special meeting of shareholders (the “Special Meeting”) of Nuveen California Tax Free Fund (the “Tax Free Fund”), a series of Nuveen Investment Funds, Inc. (the “Corporation”), and Nuveen California Municipal Bond Fund 2 (the “Municipal Bond Fund 2”), a series of Nuveen Multistate Trust II (the “Trust”), to be held on , 2012. The Tax Free Fund and the Municipal Bond Fund 2 are referred to herein as the “Acquired Funds.” At the Special Meeting, shareholders of each Acquired Fund will be asked to approve the reorganization (each, a “Reorganization” and collectively, the “Reorganizations”) of their Acquired Fund into Nuveen California Municipal Bond Fund (the “Acquiring Fund”; the Acquired Funds and the Acquiring Fund are individually referred to as a “Fund” and collectively referred to as the “Funds”) as described in the Joint Proxy Statement/Prospectus. Copies of the Joint Proxy Statement/Prospectus may be obtained at no charge by writing to the Trust at the address shown above or by calling (800) 257-8787.
Further information about the Funds is contained in each Fund’s Statement of Additional Information dated June 30, 2011, as supplemented through the date of this SAI, each of which is incorporated herein by reference only insofar as it relates to an Acquired Fund or the Acquiring Fund, respectively. No other parts are incorporated by reference herein.
The unaudited pro forma financial information, attached hereto as Appendix A, is intended to present the financial condition and related results of operations of the Acquiring Fund as if the Reorganizations had been consummated on August 31, 2011.
The audited financial statements and related independent registered public accounting firm’s report for each Fund are contained in the Fund’s Annual Report for the fiscal year ended February 28, 2011, and the unaudited financial statements for each Fund are contained in the Fund’s Semi-Annual Report for the six-month period ended August 31, 2011, each of which is incorporated herein by reference only insofar as they relate to a Fund. No other parts of the Annual Reports or Semi-Annual Reports are incorporated by reference herein.
The date of this Statement of Additional Information is , 2012.
S-1
Appendix A
Pro Forma Financial Information
The unaudited pro forma financial information set forth below is for informational purposes only and does not purport to be indicative of the financial condition that actually would have resulted if the Reorganizations had been consummated. The closing of each Reorganization is contingent upon the Acquired Fund obtaining the requisite shareholder approval and satisfying its other closing conditions. An unfavorable vote on a Reorganization by the shareholders of one Acquired Fund will not affect the implementation of the Reorganization with respect to the other Acquired Fund, if the other Reorganization is approved by the shareholders of such other Acquired Fund. These pro forma numbers have been estimated in good faith based on information regarding the Acquired Funds and Acquiring Fund as of August 31, 2011. The unaudited pro forma financial information should be read in conjunction with the historical financial statements of the Acquired Funds and Acquiring Fund, which are available in their respective annual and semi-annual shareholder reports.
Narrative Description of the Pro Forma Effects of the Reorganizations
Note 1 — Reorganization
The unaudited pro forma information has been prepared to give effect to the proposed Reorganizations of the Acquired Funds into the Acquiring Fund pursuant to an Agreements and Plans of Reorganization (the “Plans”) as if the Reorganizations occurred on August 31, 2011.
Acquired Funds | Acquiring Fund | |
Nuveen California Tax Free Fund | Nuveen California Municipal Bond Fund | |
Nuveen California Municipal Bond Fund 2 |
Note 2 — Basis of Pro Forma
Each Reorganization will be accounted for as a tax-free reorganization for federal income tax purposes; therefore, no gain or loss will be recognized by an Acquired Fund or its shareholders as a direct result of the Reorganizations. Each Acquired Fund and the Acquiring Fund are registered open-end management investment companies. The Reorganizations would be accomplished by the acquisition of all the assets and the assumption of all the liabilities of each Acquired Fund by the Acquiring Fund in exchange for shares of the Acquiring Fund, followed by the distribution of such shares to Acquired Fund shareholders in complete liquidation of each Acquired Fund. The pro forma financial information has been adjusted to reflect the assumption that the Tax Free Fund distributes its undistributed net investment income of $126,694 and accumulated net realized gains of $98,646 to its shareholders, and the Municipal Bond Fund 2 distributes its undistributed net investment income of $563,830 to its shareholders, prior to its respective Reorganization. The tables below show the class and shares that Acquired Fund shareholders would have received if the Reorganizations were to have taken place on the period ended date in Note 1.
If both Reorganizations had occurred:
Tax Free Fund Share Class | Acquiring Fund Shares Issued | Acquiring Fund Share Class | ||
Class A | 1,897,886 | Class A | ||
Class C1 | 577,522 | Class A | ||
Class I | 7,906,711 | Class I |
A-1
Municipal Bond Fund 2 | Acquiring Fund Shares Issued | Acquiring Fund Share Class | ||
Class A | 5,676,425 | Class A | ||
Class B | 90,756 | Class B | ||
Class C | 1,267,099 | Class C | ||
Class I | 8,491,527 | Class I |
If only the Tax Free Fund Reorganization had occurred:
Tax Free Fund Share Class | Acquiring Fund Shares Issued | Acquiring Fund Share Class | ||
Class A | 1,897,793 | Class A | ||
Class C1 | 577,493 | Class A | ||
Class I | 7,906,324 | Class I |
In accordance with accounting principles generally accepted in the United States of America, each Reorganization will be accounted for as a tax-free reorganization for federal income tax purposes. For financial reporting purposes, the historical cost basis of the investments received from each Acquired Fund will be carried forward to align ongoing reporting of the realized and unrealized gains and losses of the surviving fund (which will be the Acquiring Fund) with amounts distributable to shareholders for tax purposes.
Fund | Net Assets | As-of Date | ||
Nuveen California Tax Free Fund (Tax Free Fund) | $103,503,300 | August 31, 2011 | ||
Nuveen California Municipal Bond Fund 2 (Municipal Bond Fund 2) | $155,051,706 | August 31, 2011 | ||
Nuveen California Municipal Bond Fund (Acquiring Fund) | $306,403,860 | August 31, 2011 | ||
Combined Fund (Tax Free Fund and Municipal Bond Fund 2 into Acquiring Fund) Pro Forma | $564,092,696 | August 31, 2011 | ||
Combined Fund (Tax Free Fund into Acquiring Fund) Pro Forma | $409,657,820 | August 31, 2011 |
Note 3 — Pro Forma Net Expense Adjustments
If both Reorganizations had occurred:
The following assumes shareholders of each Acquired Fund approve the Reorganization of their Fund into the Acquiring Fund. The table below reflects adjustments to annual expenses made to the Pro Forma Combined Fund financial information as if the Reorganizations had taken place on the first day of the period as disclosed in Note 1 using the fees and expenses information shown in the Joint Proxy Statement/Prospectus. The pro forma information has been derived from the books and records used in calculating daily net asset values of the Acquired Funds and Acquiring Fund and has been prepared in accordance with accounting principles generally accepted in the United States of America which require management to make estimates and assumptions that affect this information. Percentages presented below are the increase (decrease) in expenses divided by the Pro Forma Combined Fund net assets presented in Note 2. Actual results could differ from those estimates. No other significant pro forma effects are expected to result from the Reorganization.
A-2
| Increase (Decrease) | ||||||||
Net Expense Category | Dollar Amount | Percentage | ||||||
Expense reimbursement1 | $ | 277,930 | 0.05% | |||||
Management fees2 | $ | (165,024) | (0.03)% | |||||
Shareholders’ reports – printing and mailing expenses3 | $ | (91,273) | (0.02)% | |||||
Custodian’s fees and expenses3 | $ | (31,917) | (0.01)% | |||||
Professional fees3 | $ | (30,569) | (0.01)% | |||||
Federal and state registration fees3 | $ | (2,942) | (0.00)%4 | |||||
|
| |||||||
Total Pro Forma Net Expense Adjustment | $ | (43,795) | (0.01)% | |||||
|
| |||||||
| (1) | Reflects the reduction in expense reimbursement payments the Adviser would have made to the Tax Free Fund if the Reorganization had taken place on the first day of the period as disclosed in Note 1. |
| (2) | Reflects the impact of applying the Acquiring Fund’s fund-level management fee rates following the Reorganizations to the combined fund’s average net assets. |
| (3) | Reflects the anticipated reduction of certain duplicative expenses eliminated as a result of the Reorganizations. |
| (4) | Rounds to less than (0.01%). |
No significant accounting policies will change as a result of the Reorganizations, specifically policies regarding security valuation or compliance with Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). No significant changes to any existing contracts of the Acquiring Fund are expected as a result of the Reorganizations.
If only the Tax Free Fund Reorganization had occurred:
The following assumes shareholders of the Tax Free Fund approve the Reorganization of their Fund into the Acquiring Fund, and shareholders of the Municipal Bond Fund 2 do not approve the Reorganization of their Fund. The table below reflects adjustments to annual expenses made to the Pro Forma Combined Fund financial information as if the Reorganization had taken place on the first day of the period as disclosed in Note 1 using the fees and expenses information shown in the Joint Proxy Statement/Prospectus. The pro forma information has been derived from the books and records used in calculating daily net asset values of the Tax Free Fund and Acquiring Fund and has been prepared in accordance with accounting principles generally accepted in the United States of America which require management to make estimates and assumptions that affect this information. Percentages presented below are the increase (decrease) in expenses divided by the Pro Forma Combined Fund net assets presented in Note 2. Actual results could differ from those estimates. No other significant pro forma effects are expected to result from the Reorganization.
| Increase (Decrease) | ||||||||
Net Expense Category | Dollar Amount | Percentage | ||||||
Expense reimbursement1 | $ | 277,930 | 0.07% | |||||
Management fees2 | $ | (121,382) | (0.03)% | |||||
Shareholders’ reports – printing and mailing expenses3 | $ | (76,251) | (0.02)% | |||||
Custodian’s fees and expenses3 | $ | (24,732) | (0.01)% | |||||
Professional fees3 | $ | (14,592) | (0.00)%4 | |||||
Federal and state registration fees3 | $ | (1,151) | (0.00)%4 | |||||
|
| |||||||
Total Pro Forma Net Expense Adjustment | $ | 39,822 | 0.01% | |||||
|
| |||||||
| (1) | Reflects the reduction in expense reimbursement payments the Adviser would have made to the Tax Free Fund if the Reorganization had taken place on the first day of the period as disclosed in Note 1. |
A-3
| (2) | Reflects the impact of applying the Acquiring Fund’s fund-level management fee rates following the Reorganization to the combined fund’s average net assets. |
| (3) | Reflects the anticipated reduction of certain duplicative expenses eliminated as a result of the Reorganization. |
| (4) | Rounds to less than (0.01%). |
No significant accounting policies will change as a result of the Reorganization, specifically policies regarding security valuation or compliance with Subchapter M of the Code. No significant changes to any existing contracts of the Acquiring Fund are expected as a result of the Reorganization.
Note 4 — Reorganization Costs
If both Reorganizations had occurred:
The following assumes shareholders of each Acquired Fund approve the Reorganization of their Fund into the Acquiring Fund. Nuveen Fund Advisors, Inc. (“Nuveen Fund Advisors”) estimates that expenses for the Reorganizations will be approximately $146,000. The Tax Free Fund is expected to be charged an estimated $69,000 in Reorganization costs, and the Municipal Bond Fund 2 is expected to be charged an estimated $38,000 in Reorganization costs. These costs represent the estimated nonrecurring expenses of the Acquired Funds carrying out their obligations under the Plans and consist of management’s estimate of professional services fees, printing costs and mailing charges related to the proposed Reorganizations to be borne by the Acquired Funds. The Acquiring Fund is expected to be charged approximately $39,000 of expenses in connection with the Reorganizations. To the extent that payment of these costs would cause an Acquired Fund to exceed its expense cap, Nuveen will reimburse the portion of the expenses necessary for the Fund to operate within the cap. Based on current expense levels, it is anticipated that Nuveen will reimburse all expenses charged to the Tax Free Fund and none of the expenses charged to the Municipal Bond Fund 2 or the Acquiring Fund. The pro forma financial information included in Note 2 has been adjusted for any costs related to the Reorganizations to be borne by the Funds. Reorganization costs do not include any commissions that would be incurred due to portfolio realignment. To the extent the Reorganization costs exceed the projected cost savings for the Funds, Nuveen will pay such expenses. Nuveen will bear 100% of the Reorganization costs and expenses with respect to a Reorganization if such Reorganization is not consummated.
If the Reorganizations had occurred as of August 31, 2011, the Acquiring Fund would not have been required to dispose of securities of an Acquired Fund in order to comply with its investment policies and restrictions, and would have not sold any material portion (i.e., more than [5%] of an Acquired Fund’s net assets) of the securities in an Acquired Fund’s portfolio solely as a result of the Reorganizations.
If only the Tax Free Fund Reorganization had occurred:
The following assumes shareholders of the Tax Free Fund approve the Reorganization of their Fund into the Acquiring Fund, and shareholders of the Municipal Bond Fund 2 do not approve the Reorganization of their Fund. Nuveen Fund Advisors estimates that expenses for the Reorganization will be approximately $107,000. The Tax Free Fund is expected to be charged an estimated $81,000 in Reorganization costs. These costs represent the estimated nonrecurring expenses of the Tax Free Fund carrying out its obligations under the Plan and consist of management’s estimate of professional services fees, printing costs and mailing charges related to the Reorganization to be borne by the Tax Free Fund. The Acquiring Fund is expected to be charged approximately $24,000 of expenses in connection with the Reorganization. Nuveen will absorb the remaining Reorganization costs of $2,000
A-4
and any costs in excess of the estimated Reorganization costs. To the extent that payment of these costs would cause the Tax Free Fund to exceed its expense cap, Nuveen will reimburse the portion of the expenses necessary for the Fund to operate within the cap. Based on current expense levels, it is anticipated that Nuveen will reimburse all expenses charged to the Tax Free Fund and none of the expenses charged to the Acquiring Fund. The pro forma financial information included in Note 2 has been adjusted for any costs related to the Reorganizations to be borne by the Funds. Reorganization costs do not include any commissions that would be incurred due to portfolio realignment. Nuveen will bear 100% of the Reorganization costs and expenses if the Reorganization is not consummated.
If the Reorganization had occurred as of August 31, 2011, the Acquiring Fund would not have been required to dispose of securities of the Tax Free Fund in order to comply with its investment policies and restrictions, and would have not sold any material portion (i.e., more than [5%] of the Tax Free Fund’s net assets) of the securities in the Tax Free Fund’s portfolio solely as a result of the Reorganization.
Note 5 — Accounting Survivor
The Acquiring Fund will be the accounting survivor. The surviving fund will have the portfolio management team, portfolio composition, strategies, investment objective, expense structure and policies/restrictions of the Acquiring Fund.
Note 6 — Capital Loss Carryforward
As of August 31, 2011, 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 loss carryforwards will expire as follows:
| Tax Free Fund | Municipal Bond Fund 2 | Acquiring Fund | ||||||||||||||
Expiration Date: | ||||||||||||||||
| 2/28/2013 | $— | $— | $84,061 | |||||||||||||
| 2/28/2017 | $— | $316,570 | $3,965,451 | |||||||||||||
| 2/28/2018 | $— | $825,136 | $4,898,247 | |||||||||||||
| 2/28/2019 | $— | $75,788 | $— | |||||||||||||
| 2/29/2020 | $112,292 | $1,189,105 | $— | |||||||||||||
|
|
| ||||||||||||||
| Total | $112,292 | $2,406,599 | $8,947,759 | |||||||||||||
|
|
| ||||||||||||||
A-5
NUVEEN CALIFORNIA HIGH YIELD MUNICIPAL BOND FUND
NUVEEN CALIFORNIA MUNICIPAL BOND FUND
NUVEEN CALIFORNIA MUNICIPAL BOND FUND 2
NUVEEN CONNECTICUT MUNICIPAL BOND FUND
NUVEEN MASSACHUSETTS MUNICIPAL BOND FUND
NUVEEN MASSACHUSETTS MUNICIPAL BOND FUND 2
NUVEEN NEW JERSEY MUNICIPAL BOND FUND
NUVEEN NEW YORK MUNICIPAL BOND FUND
NUVEEN NEW YORK MUNICIPAL BOND FUND 2
SUPPLEMENT DATED JULY 27, 2011
TO THE STATEMENT OF ADDITIONAL INFORMATION DATED JUNE 30, 2011
The fifth sentence of the second paragraph of the section “Purchase and Redemption of Fund Shares – Class A Shares – Reduction or Elimination of Up-Front Sales Charge on Class A Shares – Letter of Intent” is hereby deleted in its entirety.
PLEASE KEEP THIS WITH YOUR
FUND’S STATEMENT OF ADDITIONAL INFORMATION
FOR FUTURE REFERENCE
MGN-MS2SAI-0711P
NUVEEN CALIFORNIA HIGH YIELD MUNICIPAL BOND FUND
NUVEEN CALIFORNIA MUNICIPAL BOND FUND
NUVEEN CALIFORNIA MUNICIPAL BOND FUND 2
NUVEEN CONNECTICUT MUNICIPAL BOND FUND
NUVEEN MASSACHUSETTS MUNICIPAL BOND FUND
NUVEEN MASSACHUSETTS MUNICIPAL BOND FUND 2
NUVEEN NEW JERSEY MUNICIPAL BOND FUND
NUVEEN NEW YORK MUNICIPAL BOND FUND
NUVEEN NEW YORK MUNICIPAL BOND FUND 2
SUPPLEMENT DATED SEPTEMBER 26, 2011
TO THE STATEMENT OF ADDITIONAL INFORMATION DATED JUNE 30, 2011
| 1. | Effective December 1, 2011, the first paragraph of the section “Purchase and Redemption of Fund Shares—Shareholder Programs—Exchange Privilege” is hereby deleted in its entirety and replaced with the following two paragraphs: |
Nuveen Mutual Funds currently utilize two transfer agents. You may exchange fund shares into an identically registered account for the same class of another Nuveen Mutual Fund available in your state provided that the funds have the same transfer agent. Exchanges between funds with different transfer agents are not allowed. Your exchange must meet the minimum purchase requirements of the fund into which you are exchanging. You may also, under certain limited circumstances, exchange between certain classes of shares of the same Fund. An exchange between classes of shares of the same Fund may not be considered a taxable event; please consult your own tax advisor for further information.
If you hold your shares directly with the Fund, you may exchange your shares by either sending a written request to the applicable Fund, c/o Nuveen Investor Services, P.O. Box 8530, Boston, Massachusetts 02266-8530 or by calling Nuveen Investor Services toll free at (800) 257-8787.
| 2. | Effective December 1, 2011, the third paragraph of the section “Purchase and Redemption of Fund Shares—Shareholder Programs—Exchange Privilege” is hereby deleted in its entirety and replaced with the following paragraph: |
For federal income tax purposes, an exchange between different Nuveen Mutual Funds constitutes a sale and purchase of shares and may result in capital gain or loss. Before making any exchange, you should obtain the Prospectus for the Nuveen Mutual Fund you are purchasing and read it carefully. If the registration of the account for the Fund you are purchasing is not exactly the same as that of the fund account from which the exchange is made, written instructions from all holders of the account from which the exchange is being made must be received, with signatures
guaranteed by a member of an approved Medallion Guarantee Program or in such other manner as may be acceptable to the Fund. You may also exchange shares by telephone if you authorize telephone exchanges by checking the applicable box on the Application Form or by calling Nuveen Investor Services toll-free at (800) 257-8787 to obtain an authorization form. Each Fund reserves the right to revise or suspend the exchange privilege, limit the amount or number of exchanges, or reject any exchange. Shareholders will be provided with at least 60 days’ notice of any material revision to or termination of the exchange privilege.
| 3. | Effective October 1, 2011, the following sentence is hereby inserted after the second sentence of the section “Purchase and Redemption of Fund Shares—Class A Shares”: |
Nuveen Mutual Funds currently utilize two transfer agents and the ability to use the methods described below to reduce your sales charge is limited to aggregating values or purchases of funds that have the same transfer agent.
| 4. | Effective October 1, 2011, the following two sentences are hereby inserted after the second sentence in the section “Purchase and Redemption of Fund Shares—Shareholder Programs—Reinstatement Privilege”: |
Nuveen Mutual Funds currently utilize two transfer agents. The reinstatement privilege is limited to reinvestment in a fund which has the same transfer agent as the fund from which you redeemed.
| 5. | The first sentence of the fifth paragraph of the section “Purchase and Redemption of Fund Shares—Class A Shares—Reduction or Elimination of Up-Front Sales Charge on Class A Shares” is hereby deleted in its entirety and replaced with the following sentence: |
For purposes of determining whether you qualify for a reduced sales charge as described under Rights of Accumulation and Letter of Intent, you may include together with your own purchases those made by your spouse or domestic partner and your children under the age of 21 years, whether these purchases are made through a taxable or non-taxable account.
PLEASE KEEP THIS WITH YOUR
FUND’S STATEMENT OF ADDITIONAL INFORMATION
FOR FUTURE REFERENCE
MGN-MS2SAI-0911P
June 30, 2011
Nuveen California High Yield Municipal Bond Fund
Ticker Symbols: Class A—NCHAX, Class C—NCHCX, Class I—NCHRX
Nuveen California Municipal Bond Fund
Ticker Symbols: Class A—NCAAX, Class B—NCBBX, Class C—NCACX, Class I—NCSPX
Nuveen California Municipal Bond Fund 2
Ticker Symbols: Class A—NCAIX, Class B—NCABX, Class C—NCAKX, Class I—NCIBX
Nuveen Connecticut Municipal Bond Fund
Ticker Symbols: Class A—FCTTX, Class B—FCTBX, Class C—FCTCX, Class I—FCTRX
Nuveen Massachusetts Municipal Bond Fund
Ticker Symbols: Class A—NMAAX, Class B—NMABX, Class C—NMACX, Class I—NBMAX
Nuveen Massachusetts Municipal Bond Fund 2
Ticker Symbols: Class A—NMAIX, Class B—NINSX, Class C—NMAKX, Class I—NIMAX
Nuveen New Jersey Municipal Bond Fund
Ticker Symbols: Class A—NNJAX, Class B—NNJBX, Class C—NNJCX, Class I—NMNJX
Nuveen New York Municipal Bond Fund
Ticker Symbols: Class A—NNYAX, Class B—NNYBX, Class C—NNYCX, Class I—NTNYX
Nuveen New York Municipal Bond Fund 2
Ticker Symbols: Class A—NNYIX, Class B—NNIMX, Class C—NNYKX, Class I—NINYX
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information is not a prospectus. This Statement of Additional Information relates to, and should be read in conjunction with, the Prospectus for Nuveen California High Yield Municipal Bond Fund, Nuveen California Municipal Bond Fund, Nuveen California Municipal Bond Fund 2, Nuveen Connecticut Municipal Bond Fund, Nuveen Massachusetts Municipal Bond Fund, Nuveen Massachusetts Municipal Bond Fund 2, Nuveen New Jersey Municipal Bond Fund, Nuveen New York Municipal Bond Fund and Nuveen New York Municipal Bond Fund 2 (individually, a “Fund,” and collectively, the “Funds”), each a series of Nuveen Multistate Trust II, dated June 30, 2011. A Prospectus may be obtained without charge from certain securities representatives, banks and other financial institutions that have entered into sales agreements with Nuveen Securities, LLC (the “Distributor”), or from a Fund, by written request to the applicable Fund, c/o Nuveen Investor Services, P.O. Box 8530, Boston, Massachusetts 02266-8530, or by calling (800) 257-8787.
The audited financial statements for each Fund’s most recent fiscal year appear in the Fund’s Annual Report dated February 28, 2011; each is incorporated herein by reference and is available without charge by calling (800) 257-8787.
| Page | ||
| S-2 | ||
| S-2 | ||
| S-4 | ||
| S-14 | ||
| S-35 | ||
| S-40 | ||
| S-40 | ||
| S-41 | ||
| S-46 | ||
| S-57 | ||
| S-59 | ||
Independent Registered Public Accounting Firm, Custodian and Transfer Agent | S-60 | |
| S-61 | ||
| S-61 | ||
| A-1 | ||
Appendix B—Description of Derivatives and Hedging Techniques | B-1 |
S-1
The Funds, except the Nuveen Massachusetts Municipal Bond Fund 2, are diversified series of Nuveen Multistate Trust II, formerly the Nuveen Flagship Multistate Trust II, (the “Trust”), an open-end management investment company organized as a Massachusetts business trust on July 1, 1996. The Nuveen Massachusetts Municipal Bond Fund 2 is a non-diversified series of the Trust. Each series of the Trust represents shares of beneficial interest in a separate portfolio of securities and other assets, with its own objective and policies. Currently, ten series of the Trust are authorized and outstanding. The Nuveen New York Municipal Bond Fund was formerly named the Nuveen Flagship New York Municipal Bond Fund and the Nuveen New York Tax-Free Value Fund, a series of the Nuveen Tax-Free Bond Fund, Inc. The Nuveen New York Municipal Bond Fund 2 was formerly named the Nuveen New York Insured Municipal Bond Fund and the Nuveen New York Insured Tax-Free Value Fund, a series of the Nuveen Insured Tax-Free Bond Fund, Inc. The Nuveen New Jersey Municipal Bond Fund was formerly named the Nuveen Flagship New Jersey Municipal Bond Fund and the Nuveen New Jersey Tax-Free Value Fund, a series of the Nuveen Multistate Tax-Free Trust. The Nuveen California Municipal Bond Fund was formerly named the Nuveen California Tax-Free Value Fund, a series of the Nuveen California Tax-Free Fund, Inc. The Nuveen California Municipal Bond Fund 2 was formerly named the Nuveen California Insured Municipal Bond Fund and the Nuveen California Insured Tax-Free Value Fund, a series of the Nuveen California Tax-Free Fund, Inc. The Nuveen Connecticut Municipal Bond Fund was formerly named the Nuveen Flagship Connecticut Municipal Bond Fund and the Flagship Connecticut Double Tax Exempt Fund, a series of the Flagship Tax Exempt Funds Trust. The Nuveen Massachusetts Municipal Bond Fund was formerly named the Nuveen Massachusetts Tax-Free Value Fund, a series of the Nuveen Tax-Free Bond Fund, Inc. The Nuveen Massachusetts Municipal Bond Fund 2 was formerly named the Nuveen Massachusetts Insured Municipal Bond Fund and the Nuveen Massachusetts Insured Tax-Free Value Fund, a series of the Nuveen Insured Tax-Free Bond Fund, Inc. The Nuveen California Intermediate Municipal Bond Fund was formerly named the Nuveen Flagship California Intermediate Municipal Bond Fund and has been organized as a series of the Trust, but has issued no shares to date. The Funds’ investment adviser is Nuveen Fund Advisors, Inc. (“Nuveen Fund Advisors” or the “Adviser”).
Certain matters under the Investment Company Act of 1940, as amended (the “1940 Act”), which must be submitted to a vote of the holders of the outstanding voting securities of a series, shall not be deemed to have been effectively acted upon unless approved by the holders of a majority of the outstanding voting shares of each series affected by such matter.
The investment objective and certain fundamental investment policies of each Fund are described in the Prospectus for that Fund. A Fund, as a fundamental policy, may not, without the approval of the holders of a majority of the Fund’s outstanding voting shares:
(1) Invest in securities other than Municipal Obligations and short-term securities, as described in the Prospectus, except each Fund may invest up to 5% of its assets in tax-exempt or taxable fixed-income or equity securities for the purpose of acquiring control of an issuer whose municipal bonds (a) the Fund already owns and (b) have deteriorated or are expected shortly to deteriorate significantly in credit quality, provided Nuveen Fund Advisors, each Fund’s sub-adviser, determines such investment should enable the Fund to better maximize its existing investment in such issuer. In addition, the California High Yield Municipal Bond Fund may invest up to 10% of its total assets in securities of other open- or closed-end investment companies that invest primarily in municipal securities of the types in which the Fund may invest directly, as well as a portion of its assets in pooled investment vehicles (other than investment companies) that invest primarily in municipal securities of the types in which the Fund may invest directly. Municipal Obligations are municipal bonds that pay interest that is exempt from regular federal, state and, in some cases, local income taxes.
(2) Invest more than 5% of its total assets in securities of any one issuer, except this limitation shall not apply to securities of the U.S. Government, and to the investment of 25% of such Fund’s assets. This limitation shall not apply to the Massachusetts Municipal Bond Fund 2.
(3) Borrow money, except as permitted by the Investment Company Act of 1940 (the “1940 Act”) and exemptive orders granted thereunder.
(4) Pledge, mortgage or hypothecate its assets, except that, to secure borrowings permitted by subparagraph (3) above, it may pledge securities having a market value at the time of pledge not exceeding 10% of the value of the Fund’s total assets.
(5) Issue senior securities as defined in the 1940 Act, except to the extent such issuance might be involved with respect to borrowings described under subparagraph (3) above or with respect to transactions involving futures contracts or the writing of options within the limits described in the Prospectus and this Statement of Additional Information.
S-2
(6) Underwrite any issue of securities, except to the extent that the purchase or sale of Municipal Obligations in accordance with its investment objective, policies and limitations may be deemed to be an underwriting.
(7) Purchase or sell real estate, but this shall not prevent any Fund from investing in Municipal Obligations secured by real estate or interests therein or foreclosing upon and selling such security.
(8) Purchase or sell commodities or commodities contracts or oil, gas or other mineral exploration or development programs, except for transactions involving futures contracts within the limits described in the Prospectus and this Statement of Additional Information.
(9) Make loans, except as permitted by the 1940 Act and exemptive orders granted thereunder.
(10) Make short sales of securities or purchase any securities on margin, except for such short-term credits as are necessary for the clearance of transactions.
(11) Write or purchase put or call options, except to the extent that the purchase of a stand-by commitment may be considered the purchase of a put, and except for transactions involving options within the limits described in the Prospectus and this Statement of Additional Information.
(12) Invest more than 25% of its total assets in securities of issuers in any one industry; provided, however, that such limitations shall not be applicable to Municipal Obligations issued by governments or political subdivisions of governments, and obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities.
(13) Purchase or retain the securities of any issuer other than the securities of the Fund if, to the Fund’s knowledge, those trustees of the Trust, or those officers and directors of the Adviser, who individually own beneficially more than 1/2 of 1% of the outstanding securities of such issuer, together own beneficially more than 5% of such outstanding securities. This limitation shall not apply to the California High Yield Municipal Bond Fund.
For the purpose of applying the limitations set forth in paragraphs (2) and (12) above, an issuer shall be deemed the sole issuer of a security when its assets and revenues are separate from other governmental entities and its securities are backed only by its assets and revenues. Similarly, in the case of a non-governmental user, such as an industrial corporation or a privately owned or operated hospital, if the security is backed only by the assets and revenues of the non-governmental user, then such non-governmental user would be deemed to be the sole issuer. Where a security is also backed by the enforceable obligation of a superior or unrelated governmental entity or other entity (other than a bond insurer), it shall also be included in the computation of securities owned that are issued by such governmental or other entity.
Where a security is guaranteed by a governmental entity or some other facility, such as a bank guarantee or letter of credit, such a guarantee or letter of credit would be considered a separate security and would be treated as an issue of such government, other entity or bank.
Except with respect to paragraph (3) above, the foregoing restrictions and limitations, as well as a Fund’s policies as to ratings of portfolio investments, will apply only at the time of purchase of securities, and the percentage limitations will not be considered violated unless an excess or deficiency occurs or exists immediately after and as a result of an acquisition of securities, unless otherwise indicated.
The foregoing fundamental investment policies, together with the investment objective of each of the Funds and certain other policies specifically identified in the Prospectus, cannot be changed without approval by holders of a “majority of the Fund’s outstanding voting shares.” As defined in the 1940 Act, this means the vote of (i) 67% or more of the Fund’s shares present at a meeting, if the holders of more than 50% of the Fund’s shares are present or represented by proxy, or (ii) more than 50% of the Fund’s shares, whichever is less.
In addition to the foregoing fundamental investment policies, each Fund is also subject to the following non-fundamental restrictions and policies, which may be changed by the Board of Trustees. A Fund may not:
(1) Invest more than 15% of its net assets in “illiquid” securities, including repurchase agreements maturing in more than seven days.
(2) Invest more than 15% of its net assets in inverse floating rate securities.
(3) Purchase securities when borrowings exceed 5% of its total assets. If due to market fluctuations or other reasons, the value of the Fund’s assets falls below 300% of its borrowings, the Fund will reduce its borrowings within 3 business days.
Under normal market conditions, the Nuveen California High Yield Municipal Bond Fund, Nuveen California Municipal Bond Fund and Nuveen California Municipal Bond Fund 2 invest at least 80% of their net assets in municipal bonds that pay interest that is exempt from regular federal and California personal income tax. Under normal market conditions, the Nuveen Connecticut Municipal Bond Fund invests at least 80% of its net assets in municipal bonds that pay interest that is exempt from regular federal and Connecticut personal income tax. Under normal market conditions, the Nuveen Massachusetts Municipal Bond Fund and Nuveen Massachusetts Municipal Bond Fund 2 invests at least
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80% of their net assets in municipal bonds that pay interest that is exempt from regular federal and Massachusetts personal income tax. Under normal market conditions, the Nuveen New Jersey Municipal Bond Fund invests at least 80% of its net assets in municipal bonds that pay interest that is exempt from regular federal and New Jersey personal income tax. Under normal market conditions, the Nuveen New York Municipal Bond Fund and Nuveen New York Municipal Bond Fund 2 invests at least 80% of their net assets in municipal bonds that pay interest that is exempt from regular federal and New York personal income tax. A policy has been adopted by each Fund to provide shareholders with at least 60 days’ notice in the event of a planned change to this investment strategy. Such notice to shareholders will meet the requirements of Rule 35d-1(c) of the 1940 Act.
INVESTMENT POLICIES AND TECHNIQUES
The following information supplements the discussion of the Funds’ investment objectives, policies and techniques that appears in the Prospectus for the Funds.
Portfolio Securities
As described in the Prospectus, under normal market conditions, each Fund invests at least 80% of its net assets in a portfolio of Municipal Obligations free from regular federal, state and, in some cases, local income tax in each Fund’s respective state, which generally will be Municipal Obligations issued within the Fund’s respective state or U.S. territories (such as Puerto Rico and Guam). In general, Municipal Obligations include debt obligations issued by states, cities and local authorities to obtain funds for various public purposes, including construction of a wide range of public facilities such as airports, bridges, highways, hospitals, housing, mass transportation, schools, streets and water and sewer works. Industrial development bonds and pollution control bonds that are issued by or on behalf of public authorities to finance various privately-rated facilities are included within the term Municipal Obligations if the interest paid thereon is exempt from federal income tax. For diversification purposes or when after-tax yields merit, each Fund may invest up to 20% of its net assets in Municipal Obligations that are not exempt from state or local tax.
Under normal market conditions, each Fund, other than the California High Yield Municipal Bond Fund, California Municipal Bond Fund 2, Massachusetts Municipal Bond Fund 2 and New York Municipal Bond Fund 2 (see below), invests at least 80% of its net assets in Municipal Obligations rated BBB/Baa or higher at the time of purchase by Moody’s Investors Service, Inc. (“Moody’s”), Standard and Poor’s Corporation (“S&P”) or Fitch, Inc. (“Fitch”), or, if unrated, judged by Nuveen Asset Management, LLC, the Funds’ Sub-Adviser, to be of comparable quality. Each Fund, other than the California High Yield Municipal Bond Fund, California Municipal Bond Fund 2, Massachusetts Municipal Bond Fund 2 and New York Municipal Bond Fund 2, may invest up to 20% of its net assets in Municipal Obligations rated below BBB/Baa by Moody’s, S&P or Fitch. See Appendix A for more information about ratings by Moody’s, S&P, and Fitch.
Under normal market conditions, the California High Yield Municipal Bond Fund invests at least 65% of its net assets in medium- to low-quality Municipal Obligations rated BBB/Baa or lower by S&P, Moody’s or Fitch or, if unrated, judged by Nuveen Asset Management, LLC to be of comparable quality. As a temporary defensive measure, in response to unusual market conditions, lack of acceptable supply or times when yield spreads do not justify the increased risks of investing in these securities, the Fund may invest in higher quality Municipal Obligations (those rated AAA/Aaa to A or, if unrated, judged by Nuveen Asset Management, LLC to be of comparable quality) or in short-term, high-quality investments. The Fund may invest up to 10% of its net assets in defaulted Municipal Obligations (i.e., bonds on which the issuer has not paid principal or interest on time).
The Municipal Obligations in which California Municipal Bond Fund 2, Massachusetts Municipal Bond Fund 2 and New York Municipal Bond Fund 2 invest are, at the time of purchase, (i) rated BBB/Baa or higher; (ii) unrated, but judged to be of comparable quality by Nuveen Asset Management, LLC, or (iii) backed by an escrow or trust account containing sufficient U.S. Government or U.S. government agency securities to ensure timely payment of principal and interest.
As described in the Prospectus, each Fund may invest in Municipal Obligations that constitute participations in a lease obligation or installment purchase contract obligation (hereafter collectively called “lease obligations”) of a municipal authority or entity. Although lease obligations do not constitute general obligations of the municipality for which the municipality’s taxing power is pledged, a lease obligation is ordinarily backed by the municipality’s covenant to budget for, appropriate and make the payments due under the lease obligation. However, certain lease obligations contain “non-appropriation” clauses, which provide that the municipality has no obligation to make lease or installment purchase payments in future years unless money is appropriated for such purpose on a yearly basis. Although non-appropriation lease obligations are secured by the leased property, disposition of the property in the event of foreclosure might prove difficult. In evaluating securities for purchase, a Fund will take into account the incentive of the issuer to appropriate under the lease, among other factors. Some lease obligations may be illiquid under certain circumstances. Lease obligations normally provide a premium interest rate, which along with regular amortization of the principal may make them attractive for a portion of the assets of the Funds.
Obligations of issuers of Municipal Obligations are subject to the provisions of bankruptcy, insolvency and other laws affecting the rights and remedies of creditors. In addition, the obligations of such issuers may become subject to the laws
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enacted in the future by Congress, state legislatures or referenda extending the time for payment of principal and/or interest, or imposing other constraints upon enforcement of such obligations or upon municipalities to levy taxes. There is also the possibility that, as a result of legislation or other conditions, the power or ability of any issuer to pay, when due, the principal of and interest on its Municipal Obligations may be materially affected.
Investments in Inverse Floating Rate Securities
The Funds may invest in inverse floating rate municipal securities or “inverse floaters,” whose rates vary inversely to interest rates on a specified short-term municipal bond index or on another instrument. Such securities involve special risks as compared to conventional fixed-rate bonds. Should short-term interest rates rise, a fund’s investment in inverse floaters likely would adversely affect the fund’s earnings and distributions to shareholders. Also, because changes in the interest rate on the other index or other instrument inversely affect the rate of interest received on an inverse floater, and because inverse floaters essentially represent a leveraged investment in a long-term bond, the value of an inverse floater is generally more volatile than that of a conventional fixed-rate bond having similar credit quality, redemption provisions and maturity. Although volatile in value, inverse floaters typically offer the potential for yields substantially exceeding the yields available on conventional fixed-rate bonds with comparable credit quality, coupon, call provisions and maturity. The markets for inverse floating rate securities may be less developed and have less liquidity than the markets for conventional securities. The Funds will only invest in inverse floating rate securities whose underlying bonds are rated A or higher.
Portfolio Trading and Turnover
The Funds will make changes in their investment portfolio from time to time in order to take advantage of opportunities in the municipal market and to limit exposure to market risk. The Funds may also engage to a limited extent in short-term trading consistent with their investment objective. Securities may be sold in anticipation of market decline or purchased in anticipation of market rise and later sold. In addition, a security may be sold and another of comparable quality purchased at approximately the same time to take advantage of what Nuveen Asset Management, LLC believes to be a temporary disparity in the normal yield relationship between the two securities. Each Fund may make changes in its investment portfolio in order to limit its exposure to changing market conditions. Changes in a Fund’s investments are known as “portfolio turnover.”
The portfolio turnover rates for the 2010 and 2011 fiscal year-ends of the Funds were:
| Fiscal Year | ||||||||
| 2010 | 2011 | |||||||
Nuveen California High Yield Municipal Bond Fund | 23 | % | 17 | % | ||||
Nuveen California Municipal Bond Fund | 14 | 18 | ||||||
Nuveen California Municipal Bond Fund 2 | 1 | 3 | ||||||
Nuveen Connecticut Municipal Bond Fund | 4 | 10 | ||||||
Nuveen Massachusetts Municipal Bond Fund | 5 | 7 | ||||||
Nuveen Massachusetts Municipal Bond Fund 2 | 9 | 5 | ||||||
Nuveen New Jersey Municipal Bond Fund | 8 | 7 | ||||||
Nuveen New York Municipal Bond Fund | 3 | 7 | ||||||
Nuveen New York Municipal Bond Fund 2 | 4 | 6 | ||||||
When-Issued or Delayed-Delivery Securities
Each Fund may purchase and sell Municipal Obligations on a when-issued or delayed-delivery basis. When-issued and delayed-delivery transactions arise when securities are purchased or sold with payment and delivery beyond the regular settlement date. (When-issued transactions normally settle within 15-45 days.) On such transactions the payment obligation and the interest rate are fixed at the time the buyer enters into the commitment. The commitment to purchase securities on a when-issued or delayed-delivery basis may involve an element of risk because the value of the securities is subject to market fluctuation, no interest accrues to the purchaser prior to settlement of the transaction, and at the time of delivery the market value may be less than cost. At the time a Fund makes the commitment to purchase a Municipal Obligation on a when-issued or delayed-delivery basis, it will record the transaction and reflect the amount due and the value of the security in determining its net asset value. Likewise, at the time a Fund makes the commitment to sell a Municipal Obligation on a delayed-delivery basis, it will record the transaction and include the proceeds to be received in determining its net asset value; accordingly, any fluctuations in the value of the Municipal Obligation sold pursuant to a delayed-delivery commitment are ignored in calculating net asset value so long as the commitment remains in effect. The
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Funds will maintain designated readily marketable assets at least equal in value to commitments to purchase when-issued or delayed-delivery securities, such assets to be designated or segregated by the Custodian specifically for the settlement of such commitments, if necessary. The Funds will only make commitments to purchase Municipal Obligations on a when-issued or delayed-delivery basis with the intention of actually acquiring the securities, but the Funds reserve the right to sell these securities before the settlement date if it is deemed advisable. If a when-issued security is sold before delivery any gain or loss would not be tax-exempt. The Funds commonly engage in when-issued transactions in order to purchase or sell newly-issued Municipal Obligations, and may engage in delayed-delivery transactions in order to manage its operations more effectively.
Each Fund also may buy when-issued and delayed-delivery securities that settle more than 60 days after purchase. These transactions are called “forwards.” Municipal “forwards” pay higher interest after settlement than standard bonds, to compensate the buyer for bearing market risk and deferring income during the settlement period, and can often be bought at attractive prices and yields. If a Fund knows that a portfolio bond will, or is likely to, be called or mature on a specific future date, the Fund may buy forwards settling on or about that date to replace the called or maturing bond and “lock in” a currently attractive interest rate.
Zero Coupon Bonds
The Funds may invest in zero coupon bonds. Zero coupon bonds make no periodic interest payments, but are sold at a deep discount from their face value. The buyer recognizes a rate of return determined by the gradual appreciation of the security, which is redeemed at face value on a specified maturity date. The discount varies depending on the time remaining until maturity, market interest rates, and the issuer’s perceived credit quality. The discount, in the absence of financial difficulties of the issuer, typically decreases as the final maturity date approaches. If the issuer defaults, a Fund may not receive any return on its investment. Because zero coupon securities pay no coupon interest, their value is generally more volatile when interest rates change than the value of bonds of the same maturity that pay coupon interest.
Special Considerations Relating to Municipal Obligations of Designated States
Except as described in the Prospectus, each of the Funds invests at least 80% of its net assets in Municipal Obligations that are exempt from both regular federal and state income taxes, a significant portion of which generally consist of Municipal Obligations issued in its respective state. Each Fund is therefore more susceptible to political, economic or regulatory factors adversely affecting issuers of Municipal Obligations in its state. Set forth below is a summary of information that bears upon the risk of investing in Municipal Obligations issued by public authorities in the states of currently offered Funds. This information was obtained from official statements of issuers located in the respective states, as well as from other publicly available official documents and statements. The Funds have not independently verified any of the information contained in such statements and documents. The information below is intended only as a general summary and is not intended as a discussion of any specific factor that may affect any particular obligation or issuer.
Factors Pertaining to California. The Nuveen California High Yield Municipal Bond Fund, Nuveen California Municipal Bond Fund and Nuveen California Municipal Bond Fund 2 (individually, a “California Fund,” and collectively, the “California Funds”) concentrate their investments in California municipal bonds and, therefore, may be significantly impacted by political, economic, or regulatory developments that affect issuers in California and their ability to pay principal and interest on their obligations. Historically, California’s economy has been more volatile than the nation as a whole due to its steep personal income tax structure, which results in a reliance on a small number of taxpayers for a large share of tax revenues. The State’s economy, however, is relatively diverse with key drivers being international trade, technology production, tourism, finance, defense, and construction. After experiencing a deep recession due to the deterioration in the housing market, California is showing signs of recovery as hiring in technology services has allowed the unemployment rate to fall to 12% as of March 2011. This is down from a recent high of 12.5% as of December 2010 but remains well above the national average of 9.0% for the same period. As with most states, the recession has negatively impacted California’s tax revenues. The newly inaugurated Governor of California, Jerry Brown, responded to the estimated $26.4 billion FY 2012 budget shortfall with expenditure related solutions, net new revenues from an extension of taxes currently due to sunset, and borrowing from special funds. Governor Brown has not been able to gather enough support to enact his proposed budget and therefore revised his FY 2012 budget in May 2011. The revised budget estimates the deficit at $9.6 billion reflecting the assumption that the state, due to the improving economy, is likely to collect more tax revenue than previously estimated back in January and also accounts for the solutions already enacted in March 2011. The May Revision calls for a one year suspension of the income tax surcharge (during FY 2011-2012), but still calls for an extension of the other temporary tax surcharges. The Governor hopes the Legislature will enact the tax increases and then put them on the fall ballot for voters to ratify.
According to Moody’s Investors Service, California has more debt outstanding than any other state, although the State ranks 8th on a per capita basis as of 2010. In addition to its outstanding debt, California also has approximately $37 billion of general obligation bonds authorized but unissued as of May 1, 2011. California’s political landscape has often led to governmental difficulties, including the adoption of the state budget. Additionally, California’s voter initiative process has resulted in several initiatives that have restricted the taxing ability of the State and its political subdivisions, including
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Proposition 13. Other mandates have required the State and its political subdivisions to incur certain expenses, further restricting their financial flexibility. Furthermore, unanticipated initiatives that could impact the financial health of the State or its political subdivisions may be adopted in the future. Declining property values resulting from the bursting of the housing bubble may pressure units of local government, as these entities often rely on property taxes for a significant amount of their revenues. The State and its political subdivisions may also face increasing financial pressure from costs relating to pensions and other post-employment benefits for government employees.
Factors Pertaining to Connecticut. The Nuveen Connecticut Municipal Bond Fund (the “Connecticut Fund”) concentrates its investments in Connecticut municipal bonds and, therefore, may be significantly impacted by political, economic, or regulatory developments that affect issuers in Connecticut and their ability to pay principal and interest on their obligations. The State’s economy is heavily influenced by the high-wage financial services industry, a major reason why Connecticut enjoys the highest per capita income in the nation. On a percentage basis, no other state, including New York, is more dependent on financial services. As a result of the worldwide financial crisis, this important industry has suffered and, according to Moody’s Analytics, has only recently begun to recover. Defense spending also figures prominently in Connecticut’s economy. Despite its relatively small size, Connecticut ranks 8th among the 50 states in defense dollars awarded. Therefore, any cutbacks in defense spending would likely impact Connecticut disproportionately. Job growth in the State has been sluggish, and Connecticut’s unemployment rate is slightly above that of the nation. As with most states, the recession negatively impacted Connecticut’s tax revenues. The State has responded with expenditure reductions, draws on reserves, deficit financing, and tax hikes, including increases in the personal income tax, the corporate income tax, and the cigarette tax. Declining property values resulting from the bursting of the housing bubble may pressure units of local government, as these entities often rely on property taxes for a significant amount of their revenues. The State and its political subdivisions may also face increasing financial pressure from costs relating to pensions and other post-employment benefits for government employees. The State is heavily indebted according to any number of measurements, which may reduce financial flexibility in the future. According to Moody’s Investors Service, in 2010 Connecticut had the highest debt burden in the United States on both a per capita basis and as a percentage of gross state domestic product. Connecticut’s workforce is highly educated and the State is home to a number of prestigious universities, including Yale. However, Connecticut’s high business costs and sluggish population growth are often cited as impediments to higher growth.
Factors Pertaining to Massachusetts. The Nuveen Massachusetts Municipal Bond Fund and Nuveen Massachusetts Municipal Bond Fund 2 (individually, a “Massachusetts Fund,” and collectively, the “Massachusetts Funds”) concentrate their investments in Massachusetts municipal bonds and, therefore, may be significantly impacted by political, economic, or regulatory developments that affect issuers in Massachusetts and their ability to pay principal and interest on their obligations. Massachusetts’ economy is driven by education, healthcare, financial services, and high tech. Massachusetts’ downturn was milder than the nation’s as a whole, and, according to Moody’s Analytics, the Commonwealth’s economy is now in recovery. Recent economic growth in Massachusetts has outpaced the nation as a whole due in large part to increased exports. Unemployment stood at 7.8% in April 2011, below the national average of 9.0%. Education accounts for about 5% of Massachusetts’ employment, twice the national average. The concentration of colleges and universities in Massachusetts adds employment stability and provides a source of well-educated workers for the Commonwealth’s service industries. Despite this, long term growth in Massachusetts is expected to lag the nation because of the Commonwealth’s high business costs. The recession has impacted Massachusetts’ tax revenues, and the Commonwealth has responded with expenditure reductions, draws on reserves, and tax hikes, including increases in sales and cigarette taxes. The Commonwealth’s Budget Stabilization Fund was drawn down substantially, from a balance of $2.1 billion at fiscal year end 2008 to $670 million at the end of fiscal year 2010. In April 2006, Massachusetts passed legislation essentially mandating healthcare insurance for all residents. Those residents unable to secure insurance on their own will have their premiums subsidized by the Commonwealth. Costs incurred by the Commonwealth in connection with this initiative have exceeded initial estimates and may continue to rise in the future. Following the previous recession, the Commonwealth took steps to improve its financial profile on an ongoing basis. Changes in the way school construction and the Massachusetts Bay Transportation Authority are funded have created more budgetary certainty for the Commonwealth. Due in part to costs connected to the Central Artery/Ted Williams Tunnel Project (i.e., the “Big Dig”), the Commonwealth’s debt burden has increased substantially in the past decade and is high by any number of measurements. According to Moody’s Investors Service, in 2010 Massachusetts had the second highest debt burden in the United States on a per capita basis. This may reduce financial flexibility in the future. To ease its own financial pressures, the Commonwealth reduced state aid to its political subdivisions in FY 2010 and FY 2011. The ability of those subdivisions to make up for those lost revenues through higher property taxes is restricted by Proposition 2 1/2 and may be further impaired by declining property values resulting from the bursting of the housing bubble. The Commonwealth and its political subdivisions may also face increasing financial pressure from costs relating to pensions and other post-employment benefits for government employees.
Factors Pertaining to New Jersey. The Nuveen New Jersey Municipal Bond Fund (the “New Jersey Fund”) concentrates its investments in New Jersey municipal bonds and, therefore, may be significantly impacted by political, economic, or regulatory developments that affect issuers in New Jersey and their ability to pay principal and interest on
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their obligations. New Jersey’s economy is closely tied to New York City’s and has benefited from an influx of jobs from the City. New Jersey ranks third in percent of its economy in financial services jobs, behind Connecticut, and New York, and its per capita income is third highest among the 50 states. The Port of Elizabeth/Newark is the East Coast’s largest seaport and handles about one-third of the nation’s ocean-going trade. According to Moody’s Analytics, New Jersey’s economy is in recovery, but unemployment for New Jersey still exceeds the national average (9.3% as of April 2011 versus the national average of 9.0%). Layoffs of government employees due to the State’s persistent budget issues will likely weigh on New Jersey’s economy. The State’s high cost nature and slow population growth are often cited as impediments to higher economic growth. The economic slowdown has caused a falloff in State tax revenues. The State has responded with tax hikes, several rounds of expenditure reductions, expenditure deferrals, and draw-downs of reserves, as well as using federal stimulus money. Additional cuts are proposed by the Governor for the FY 2012 budget, some of which could affect local governments in the State. Declining property values resulting from the bursting of the housing bubble may pressure units of local government, as these entities often rely on property taxes for a significant amount of their revenues. The State and its political subdivisions may also face increasing financial pressure from costs relating to pensions and other post-employment benefits for government employees. New Jersey’s debt burden has increased substantially in the past decade and is high by any number of measurements, which may reduce financial flexibility in the future. On November 4, 2008, New Jersey voters approved an amendment to the State’s constitution that prohibits appropriation-backed debt without voter approval, which may further reduce the State’s future financial flexibility. In 2010 New Jersey enacted a property tax cap that placed a 2 percent limit on annual property-tax increases, which may pressure local governments. Costs associated with debt service are not subject to the property tax cap.
Factors Pertaining to New York. The Nuveen New York Municipal Bond Fund and Nuveen New York Municipal Bond Fund 2 (individually, a “New York Fund,” and collectively, the “New York Funds”) concentrate their investments in New York municipal bonds and, therefore, may be significantly impacted by political, economic, or regulatory developments that affect issuers in New York State and their ability to pay principal and interest on their obligations. Though large and diversified, the State’s economy is heavily influenced by the high-wage financial services industry. While Wall Street represents only 4% of the State’s employment, it is estimated that it accounts for approximately 20% of all wages in the State. Both New York State and New York City benefitted disproportionately from the federal bailout of the financial industry. The State’s April 2011 unemployment rate of 7.9% is well below the national figure of 9.0%. However, upstate New York has continued to struggle because of its dependence on manufacturing. New York State’s tax revenues were impacted by the economic downturn, causing cash flow problems for the State. The State has responded through expenditure reductions, expenditure deferrals, and temporary hikes in the income tax on high income earners. The FY 2012 budget was adopted on time and reduced State expenditures by 2%, the first year over year decline in spending since 1995. Actions taken with the adoption of the FY 2012 budget reduced the projected deficit for FY 2013 from $15 billion to $2 billion, and FY 2014’s projected deficit from $17 billion to $3 billion. New York’s political landscape has often resulted in late adoption of budgets, which, in an extreme case, could result in an interruption of debt service payments. The State is heavily indebted according to any number of measurements, which may reduce financial flexibility in the future. According to Moody’s Investors Service, in 2010 New York State had the second highest amount of tax-supported debt outstanding, although on a per capita basis, it ranks sixth. Declining property values resulting from the bursting of the housing bubble may pressure units of local government, as these entities often rely on property taxes for a significant amount of their revenues. The State and its political subdivisions may also face increasing financial pressure from costs relating to pensions and other post-employment benefits for government employees. Recent lawsuits challenging school funding mechanisms in the State have resulted in increased expenditures on the part of state and local governments in New York, adding to the financial strain. A proposed cap on property taxes, limiting annual increases to 2%, could also pressure local governments if enacted.
Illiquid Securities
Each Fund may invest in illiquid securities (i.e., securities that are not readily marketable). For purposes of this restriction, illiquid securities include, but are not limited to, restricted securities (securities the disposition of which is restricted under the federal securities laws), securities that may only be resold pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”), but that are deemed to be illiquid; and repurchase agreements with maturities in excess of seven days. However, no Fund will acquire illiquid securities if, as a result, such securities would comprise more than 15% of the value of the Fund’s net assets. The Board of Trustees or its delegate has the ultimate authority to determine, to the extent permissible under the federal securities laws, which securities are liquid or illiquid for purposes of this 15% limitation. The Board of Trustees has delegated to the Adviser the day-to-day determination of the illiquidity of any portfolio security, although it has retained oversight over and ultimate responsibility for such determinations. The Adviser works with and to a large extent relies on the expertise and advice of Nuveen Asset Management, LLC in making those liquidity determinations. Although no definitive liquidity criteria are used, the Board of Trustees has directed Nuveen Asset Management, LLC to look to such factors as (i) the nature of the market for a security (including the institutional private resale market; the frequency of trades and quotes for the security; the number of dealers willing to purchase or sell the security; and the amount of time normally needed to dispose of the security, the method of soliciting offers and the mechanics of transfer), (ii) the terms of certain securities or other instruments allowing
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for the disposition to a third party or the issuer thereof (e.g., certain repurchase obligations and demand instruments), and (iii) other permissible relevant facts.
Restricted securities may be sold only in privately negotiated transactions or in a public offering with respect to which a registration statement is in effect under the Securities Act. Where registration is required, a Fund may be obligated to pay all or part of the registration expenses and a considerable period may elapse between the time of the decision to sell and the time the Fund may be permitted to sell a security under an effective registration statement. If, during such a period, adverse market conditions were to develop, the Fund might obtain a less favorable price than that which prevailed when it decided to sell. Illiquid securities will be priced at fair value as determined in good faith by the Board of Trustees or its delegate. If, through the appreciation of illiquid securities or the depreciation of liquid securities, a Fund should be in a position where more than 15% of the value of its net assets are invested in illiquid securities, including restricted securities which are not readily marketable, the Fund will take such steps as is deemed advisable, if any, to protect liquidity.
Derivative Transactions, Hedging and Other Defensive Actions
Each Fund may enter into derivative transactions to reduce, increase or otherwise alter the Fund’s risk profile, including hedging transactions. Hedging is a term used for various methods of seeking to reduce relative risk by offsetting price changes in one investment through making another investment whose price should tend to move in the opposite direction. It may be desirable and possible in various market environments to partially hedge a Fund’s portfolio against fluctuations in market value caused by market interest rate fluctuations, credit events or other market changes by investing in such instruments as financial futures and index futures as well as related put and call options on such instruments, or by entering into interest rate swap, credit default swap, or total return swap transactions or options on such swaps, or other forms of derivatives. The Funds may also use such investments or techniques to alter its portfolio’s investment characteristics (e.g., duration, yield curve positioning and credit quality) to achieve desired positioning. Such investments or techniques may operate to increase absolute levels of risk, as well as to hedge risk.
When a Fund enters into an index or financial futures contract it is required to post an initial deposit of 1% to 5% of the total contract price. Typically, futures or option on futures holders enter into offsetting closing transactions to enable settlement in cash rather than taking delivery of the underlying security in the future. Each Fund will only sell covered futures contracts, which means that the Fund segregates assets equal to the amount of the obligations.
These transactions present certain risks. In particular, the imperfect correlation between price movements in the instrument used in a risk reducing hedge and price movements in the securities being hedged creates the possibility that losses on the hedge by a Fund may be greater than gains in the value of the securities in the Fund’s portfolio being hedged, or that the gain on the hedge may be less than the losses on the Fund’s portfolio securities. Likewise, such imperfect price correlation may mean that the desired non-hedging adjustment to portfolio characteristics (such as lengthening duration) does not lead to the desired risk/return result. In addition, the markets for futures, swaps and options may not be liquid in all circumstances. As a result, in volatile markets a Fund may not be able to close out the hedging transaction without incurring losses substantially greater than the initial deposit. Finally, the potential daily deposit requirements in futures or swap contracts or options sold on futures or swap contracts create an ongoing greater potential financial risk than do purchasing option transactions, where the exposure is limited to the cost of the initial premium. Losses due to certain hedging transactions may reduce yield. Net gains, if any, from hedging and other portfolio transactions will be distributed as taxable ordinary income or capital gains distributions to shareholders.
No Fund will make any hedging investment (whether an initial premium or deposit or a subsequent deposit) other than as necessary to close a prior investment if, immediately after such investment, the sum of the amount of its premiums and deposits with respect to all currently effective hedging investments, would exceed 5% of such series’ net assets. Each Fund will invest in these instruments only in markets believed by Nuveen Asset Management, LLC to be active and sufficiently liquid. For further information regarding these investment strategies and risks presented thereby, see Appendix B to this Statement of Additional Information.
Each Fund reserves the right for liquidity or defensive purposes (such as thinness in the market for municipal securities or an expected substantial decline in value of long-term obligations), to invest temporarily up to 20% of its assets in obligations issued or guaranteed by the U.S. Government and its agencies or instrumentalities. Interest on each instrument is taxable for federal income tax purposes and would reduce the amount of tax-free interest payable to shareholders.
Short-Term Investments
The Prospectus discusses briefly the ability of the Funds to invest a portion of their assets in federally tax-exempt or taxable short-term securities or shares of money market funds (“short-term investments”). Short-term investments will not exceed 20% of a Fund’s assets except when made for defensive purposes. The Funds will invest only in taxable short-term investments that are either U.S. government securities or are rated within the highest grade by Moody’s, S&P, or Fitch and mature within one year from the date of purchase or carry a variable or floating rate of interest. See Appendix A for more information about ratings by Moody’s, S&P, and Fitch.
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The Funds may invest in the following federally tax-exempt short-term investments:
Bond Anticipation Notes (BANs) are usually general obligations of state and local governmental issuers, which are sold to obtain interim financing for projects that will eventually be funded through the sale of long-term debt obligations or bonds. The ability of an issuer to meet its obligations on its BANs is primarily dependent on the issuer’s access to the long-term municipal bond market and the likelihood that the proceeds of such bond sales will be used to pay the principal and interest on the BANs.
Tax Anticipation Notes (TANs) are issued by state and local governments to finance the current operations of such governments. Repayment is generally to be derived from specific future tax revenues. Tax anticipation notes are usually general obligations of the issuer. A weakness in an issuer’s capacity to raise taxes due to, among other things, a decline in its tax base or a rise in delinquencies, could adversely affect the issuer’s ability to meet its obligations on outstanding TANs.
Revenue Anticipation Notes (RANs) are issued by governments or governmental bodies with the expectation that future revenues from a designated source will be used to repay the notes. In general, they also constitute general obligations of the issuer. A decline in the receipt of projected revenues, such as anticipated revenues from another level of government, could adversely affect an issuer’s ability to meet its obligations on outstanding RANs. In addition, the possibility that the revenues would, when received, be used to meet other obligations could affect the ability of the issuer to pay the principal and interest on RANs.
Construction Loan Notes are issued to provide construction financing for specific projects. Frequently, these notes are redeemed with funds obtained from the Federal Housing Administration.
Bank Notes are notes issued by local government bodies and agencies as those described above to commercial banks as evidence of borrowings. The purposes for which the notes are issued are varied, but they are frequently issued to meet short-term working capital or capital-project needs. These notes may have risks similar to the risks associated with TANs and RANs.
Tax-Exempt Commercial Paper (Municipal Paper) represents very short-term unsecured, negotiable promissory notes, issued by states, municipalities and their agencies. Payment of principal and interest on issues of municipal paper may be made from various sources, to the extent the funds are available therefrom. Maturities of municipal paper generally will be shorter than the maturities of TANs, BANs or RANs. There is a limited secondary market for issues of municipal paper.
Certain Municipal Obligations may carry variable or floating rates of interest whereby the rate of interest is not fixed, but varies with changes in specified market rates or indices, such as a bank prime rate or a tax-exempt money market index.
While these various types of notes as a group represent the major portion of the tax-exempt note market, other types of notes are occasionally available in the marketplace and each Fund may invest in such other types of notes to the extent permitted under its investment objective, policies and limitations. Such notes may be issued for different purposes and may be secured differently from those mentioned above.
Municipal Money Market Funds that pay interest income exempt from regular federal and, in some cases, state and local income taxes. The Fund will bear its proportionate share of the money market fund’s fees and expenses.
U.S. Government Direct Obligations are issued by the United States Treasury and include bills, notes and bonds.
| — | Treasury bills are issued with maturities of up to one year. They are issued in bearer form, are sold on a discount basis and are payable at par value at maturity. |
| — | Treasury notes are longer-term interest bearing obligations with original maturities of one to seven years. |
| — | Treasury bonds are longer-term interest-bearing obligations with original maturities from five to thirty years. |
U.S. Government Agencies Securities—Certain federal agencies have been established as instrumentalities of the United States government to supervise and finance certain types of activities. These agencies include, but are not limited to, the Bank for Cooperatives, Federal Land Banks, Federal Intermediate Credit Banks, Federal Home Loan Banks, Federal National Mortgage Association, Government National Mortgage Association, Export-Import Bank of the United States, and Tennessee Valley Authority. Issues of these agencies, while not direct obligations of the United States government, are either backed by the full faith and credit of the United States or are guaranteed by the Treasury or supported by the issuing agencies’ right to borrow from the Treasury. There can be no assurance that the United States government itself will pay interest and principal on securities as to which it is not legally so obligated.
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The Funds may also invest in the following taxable short-term investments:
Certificates of Deposit (CDs)—A certificate of deposit is a negotiable interest bearing instrument with a specific maturity. CDs are issued by banks in exchange for the deposit of funds and normally can be traded in the secondary market, prior to maturity. The Funds will only invest in U.S. dollar denominated CDs issued by U.S. banks with assets of $1 billion or more.
Commercial Paper—Commercial paper is the term used to designate unsecured short-term promissory notes issued by corporations. Maturities on these issues vary from a few days to nine months. Commercial paper may be purchased from U.S. corporations.
Taxable Money Market Funds—These funds pay interest income that is taxable on the federal and state levels. The Funds will bear their proportionate share of the money market fund’s fees and expenses.
Other Corporate Obligations—The Funds may purchase notes, bonds and debentures issued by corporations if at the time of purchase there is less than one year remaining until maturity or if they carry a variable or floating rate of interest.
Repurchase Agreements—A repurchase agreement is a contractual agreement whereby the seller of securities (U.S. government or Municipal Obligations) agrees to repurchase the same security at a specified price on a future date agreed upon by the parties. The agreed upon repurchase price determines the yield during a Fund’s holding period. Repurchase agreements are considered to be loans collateralized by the underlying security that is the subject of the repurchase contract. The Funds will only enter into repurchase agreements with dealers, domestic banks or recognized financial institutions that in the opinion of Nuveen Asset Management, LLC present minimal credit risk. The risk to the Funds is limited to the ability of the issuer to pay the agreed-upon repurchase price on the delivery date; however, although the value of the underlying collateral at the time the transaction is entered into always equals or exceeds the agreed-upon repurchase price, if the value of the collateral subsequently declines there is a risk of loss of both principal and interest. In the event of default, the collateral may be sold but a Fund might incur a loss if the value of the collateral declines, and might incur disposition costs or experience delays in connection with liquidating the collateral. In addition, if bankruptcy proceedings are commenced with respect to the seller of the security, realization upon the collateral by a Fund may be delayed or limited. Nuveen Asset Management, LLC will monitor the value of collateral at the time the transaction is entered into and at all times subsequent during the term of the repurchase agreement in an effort to determine that the value always equals or exceeds the agreed upon price. In the event the value of the collateral declined below the repurchase price, Nuveen Asset Management, LLC will demand additional collateral from the issuer to increase the value of the collateral to at least that of the repurchase price. Each of the Funds will not invest more than 10% of its assets in repurchase agreements maturing in more than seven days.
Making of Loans to Issuers of Bonds Already In the Portfolio
A Fund may make a loan to (as opposed to investing in a bond issued by) an entity whose bonds that Fund already owns in its portfolio, in instances where Nuveen Asset Management, LLC believes that doing so will enhance the value of the Fund’s total investments (both bonds and loans) in obligations of that entity. Typically, such loans will be made to entities suffering severe economic distress, oftentimes in or near bankruptcy. Making a loan to such an entity may enable the entity to remain a “going concern” and enable the entity to both repay the loan as well as be better able to pay interest and principal on the pre-existing bonds, instead of forcing the Fund to liquidate the entity’s assets, which can reduce recovery value. It is generally much more time-consuming and expensive for a troubled entity to issue additional bonds, instead of borrowing, as a means of obtaining liquidity in times of severe financial need.
Other Investment Policies and Techniques of the California High Yield Municipal Bond Fund
Non-Investment Grade Debt Securities (Junk Bonds). Under normal circumstances, at least 65% of the Fund’s net assets will be invested in medium- to low-quality Municipal Obligations. Municipal Obligations rated below investment grade (BB/Ba or lower) are commonly known as “high-yield,” “high risk” or “junk” bonds. Junk bonds, while generally offering higher yields than investment grade securities with similar maturities, involve greater risks, including the possibility of default or bankruptcy. They are regarded as predominantly speculative with respect to the issuer’s capacity to pay interest and repay principal. The special risk considerations in connection with investments in these securities are discussed below. Refer to Appendix A of this Statement of Additional Information for a discussion of securities ratings.
(1) Effect of Interest Rates and Economic Changes. The municipal junk bond market is relatively new and its growth has paralleled a long economic expansion. As a result, it is not clear how this market may withstand a prolonged recession or economic downturn. Such an economic downturn could severely disrupt the market for and adversely affect the value of such securities.
All interest-bearing securities typically experience appreciation when interest rates decline and depreciation when interest rates rise. In addition, the market values of junk bond securities tend to reflect individual corporate developments to a greater extent than do the market values of higher rated securities, which react primarily to fluctuations in the general level of interest rates. Junk bond securities also tend to be more sensitive to economic
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conditions than are higher rated securities. As a result, they generally involve more credit risk than securities in the higher rated categories. During an economic downturn or a sustained period of rising interest rates, highly leveraged issuers of junk bond securities may experience financial stress and may not have sufficient revenues to meet their payment obligations. The risk of loss due to default by an issuer of these securities is significantly greater than by an issuer of higher rated securities because such securities are generally unsecured and are often subordinated to other creditors. Further, if the issuer of a junk bond security defaults, the Fund may incur additional expenses to seek recovery. Periods of economic uncertainty and changes would also generally result in increased volatility in the market prices of these and thus in the Fund’s net asset value.
The value of a junk bond security will generally decrease in a rising interest rate market and, accordingly, so will the Fund’s net asset value. If the Fund experiences unexpected net redemptions in such a market, it may be forced to liquidate a portion of its portfolio securities without regard to their investment merits. Due to the limited liquidity of junk bond securities, the Fund may be forced to liquidate these securities at a substantial discount. Any such liquidation would reduce the Fund’s asset base over which expenses could be allocated and could result in a reduced rate of return for the Fund.
(2) Payment Expectations. Junk bond securities typically contain redemption, call, or prepayment provisions that permit the issuer of securities containing such provisions to redeem the securities at its discretion. During periods of falling interest rates, issuers of these securities are likely to redeem or prepay the securities and refinance them with debt securities with a lower interest rate. To the extent an issuer is able to refinance the securities, or otherwise redeem them, the Fund may have to replace the securities with lower yielding securities, which could result in a lower return for the Fund.
(3) Credit Ratings. Credit ratings are issued by credit rating agencies and are indicative of the rated securities’ safety of principal and interest payments. They do not, however, evaluate the market value risk of junk bond securities and, therefore, may not fully reflect the true risks of such an investment. In addition, credit rating agencies may not make timely changes in a rating to reflect changes in the economy or in the condition of the issuer that affect the value of the security. Consequently, credit ratings are used only as a preliminary indicator of investment quality. Investments in junk bonds will depend more upon credit analysis by Nuveen Asset Management, LLC than investments in investment grade debt securities. Nuveen Asset Management, LLC employs its own credit research and analysis, which includes a study of the issuer’s existing debt, capital structure, ability to service debts and pay dividends, sensitivity to economic conditions, operating history, and current earnings trend. Nuveen Asset Management, LLC continually monitors the Fund’s investments and carefully evaluates whether to dispose of or to retain junk bond securities whose credit ratings or credit quality may have changed.
(4) Liquidity and Valuation. The Fund may have difficulty disposing of certain junk bond securities because there may be a thin trading market for such securities. Not all dealers maintain markets in all junk bond securities. As a result, there is no established retail secondary market for many of these securities. The Fund anticipates that such securities could be sold only to a limited number of dealers or institutional investors. To the extent a secondary trading market does exist, it is generally not as liquid as the secondary market for higher rated securities. The lack of a liquid secondary market may have an adverse impact on the market price of the security. The lack of a liquid secondary market for certain securities may also make it more difficult for the Fund to obtain accurate market quotations for purposes of valuing its securities. Market quotations are generally available on many junk bond issues only from a limited number of dealers and may not necessarily represent firm bids of such dealers or prices for actual sales. During periods of thin trading, the spread between bid and asked prices is likely to increase significantly. In addition, adverse publicity and investor perceptions, whether or not based on fundamental analysis, may decrease the value and liquidity of junk bond securities, especially in a thinly traded market.
The Fund may invest up to 10% of its net assets in defaulted Municipal Obligations. Municipal Obligations in the lowest rating categories may be in default and are generally regarded as having poor prospects of attaining any real investment standing. A default or expected default in a Municipal Obligation owned by the Fund could result in a significant decline in the value of that Municipal Obligation.
Structured Notes. The Fund may invest in structured notes, including “total rate of return swaps” with rates of return determined by reference to the total rate of return on one or more loans references in such notes. The rate of return on a structured note may be determined by applying a multiplier to the rate of total return on the referenced loan or loans. Application of a multiplier is comparable to the use of leverage which magnifies the potential for gain and the risk of loss because a relatively small decline in the value of a referenced note could result in a relatively large loss in the value of the structured note.
Mortgage-Backed Securities. The Fund may invest in fixed-income obligations backed by a pool of mortgages. Mortgage-backed securities are issued both by U.S. government agencies, including the Government National Mortgage Association (GNMA) the Federal National Mortgage Association (FNMA) and the Federal Home Loan Mortgage Corporation (FHLMC) and by private entities. The payment of interest and principal on securities issued by U.S. government agencies is guaranteed by the full faith and credit of the U.S. government (in the case of GNMA securities) or
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the issuer (in the case of FNMA and FHLMC securities). However, the guarantees do not apply to the market prices and yields of these securities, which vary with changes in interest rates. Mortgage-backed securities issued by private entities are structured similarly to mortgage-backed securities issued by GNMA, FNMA and FHLMC. These securities and the underlying mortgages are not guaranteed by government agencies. However, these securities generally are structured with one or more types of credit enhancement by a third party. Mortgage-backed securities permit borrowers to prepay their underlying mortgages. Prepayments by borrowers on underlying obligations can alter the effective maturity of these instruments.
Standby Commitments. The Fund may obtain standby commitments when it purchases Municipal Obligations. A standby commitment gives the holder the right to sell the underlying security to the seller at an agreed-upon price on certain dates or within a specified period. The Fund will acquire standby commitments solely to facilitate portfolio liquidity and not with a view to exercising them at a time when the exercise price may exceed the current value of the underlying securities. If the exercise price of a standby commitment held by the Fund should exceed the current value of the underlying securities, the Fund may refrain from exercising the standby commitment in order to avoid causing the issuer of the standby commitment to sustain a loss and thereby jeopardizing the Fund’s business relationship with the issuer. The Fund will enter into standby commitments only with banks and securities dealers that, in the opinion of Nuveen Asset Management, LLC, present minimal credit risks. However, if a securities dealer or bank is unable to meet its obligation to repurchase the security when the Fund exercises a standby commitment, the Fund might be unable to recover all or a portion of any loss sustained from having to sell the security elsewhere. Standby commitments will be valued at zero in determining the Fund’s net asset value.
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The management of the Trust, including general supervision of the duties performed for the Funds by the Adviser under the Investment Management Agreement, is the responsibility of the Board of Trustees. The number of trustees of the Trust is ten, one of whom is an “interested person” (as the term “interested person” is defined in the 1940 Act) and nine of whom are not interested persons (referred to herein as “independent trustees”). None of the independent trustees has ever been a trustee, director or employee of, or consultant to, the Adviser or its affiliates. The names, business addresses and birthdates of the trustees and officers of the Funds, their principal occupations and other affiliations during the past five years, the number of portfolios each oversees and other directorships they hold are set forth below. The trustees of the Trust are directors or trustees, as the case may be, of 112 Nuveen-sponsored open-end funds (the “Nuveen Mutual Funds”) and 133 Nuveen-sponsored closed-end funds (collectively with the Nuveen Mutual Funds, the “Nuveen Funds”).
Name, Business Address and Birthdate | Position(s) | Term of Office | Principal Occupation(s) | Number of | Other | |||||
Independent Trustees: | ||||||||||
Robert P. Bremner* 333 West Wacker Drive Chicago, IL 60606 (8/22/40) | Chairman of the Board and Trustee | Term—Indefinite** Length of Service— Since 1996 | Private Investor and Management Consultant; Treasurer and Director, Humanities Council of Washington, D.C.; Board Member, Independent Directors Council affiliated with the Investment Company Institute. | 245 | N/A | |||||
Jack B. Evans 333 West Wacker Drive Chicago, IL 60606 | Trustee | Term—Indefinite** Length of Service— Since 2003 | President, The Hall-Perrine Foundation, a private philanthropic corporation (since 1996); President Pro Tem of the Board of Regents for the State of Iowa University System; Director, Source Media Group; Life Trustee of Coe College and the Iowa College Foundation; formerly, Director, Federal Reserve Bank of Chicago; formerly, President and Chief Operating Officer, SCI Financial Group, Inc., a regional financial services firm. | 245 | Director and Chairman, United Fire Group, a publicly held company; formerly, Director, Alliant Energy. | |||||
William C. Hunter 333 West Wacker Drive Chicago, IL 60606 (3/6/48) | Trustee | Term—Indefinite** Length of Service— Since 2004 | Dean, Tippie College of Business, University of Iowa (since 2006); Director (since 2005) of Beta Gamma Sigma International Society; Director of Wellmark, Inc. (since 2009); formerly, Dean and Distinguished Professor of Finance, School of Business at the University of Connecticut (2003-2006); formerly, Director (1997-2007), Credit Research Center at Georgetown University; previously, Senior Vice President and Director of Research at the Federal Reserve Bank of Chicago (1995-2003). | 245 | Director (since 2004) of Xerox Corporation. | |||||
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Name, Business Address and Birthdate | Position(s) | Term of Office | Principal Occupation(s) | Number of | Other | |||||
David J. Kundert* 333 West Wacker Drive Chicago, IL 60606 (10/28/42) | Trustee | Term—Indefinite** Length of Service— Since 2005 | Director, Northwestern Mutual Wealth Management Company; retired (since 2004) as Chairman, JPMorgan Fleming Asset Management, President and CEO, Banc One Investment Advisors Corporation, and President, One Group Mutual Funds; prior thereto, Executive Vice President, Bank One Corporation and Chairman and CEO, Banc One Investment Management Group; member of the Board of Regents, Luther College; Member of the Wisconsin Bar Association; Member of Board of Directors, Friends of Boerner Botanical Gardens; Member Board of Directors and Chair of Investment Committee, Greater Milwaukee Foundation. | 245 | N/A | |||||
William J. Schneider* 333 West Wacker Drive Chicago, IL 60606 (9/24/44) | Trustee | Term—Indefinite** Length of Service— Since 1996 | Chairman of Miller-Valentine Partners Ltd., a real estate investment company; Member, Mid-America Health System Board; formerly, Senior Partner and Chief Operating Officer (retired) of Miller-Valentine Group; Member, University of Dayton Business School Advisory Council; formerly, Member, Dayton Philharmonic Orchestra Association; formerly, Director, Dayton Development Coalition; formerly, Member, Business Advisory Council, Cleveland Federal Reserve Bank. | 245 | N/A | |||||
Judith M. Stockdale 333 West Wacker Drive Chicago, IL 60606 (12/29/47) | Trustee | Term—Indefinite** Length of Service— Since 1996 | Executive Director, Gaylord and Dorothy Donnelley Foundation (since 1994); prior thereto, Executive Director, Great Lakes Protection Fund (1990-1994). | 245 | N/A | |||||
Carole E. Stone* 333 West Wacker Drive Chicago, IL 60606 (6/28/47) | Trustee | Term—Indefinite** Length of Service— | Director, C2 Options Exchange, Incorporated (since 2009); formerly, Commissioner, New York State Commission on Public Authority Reform (2005-2010); formerly, Chair, New York Racing Association Oversight Board (2005-2007). | 245 | Director, Chicago Board Options Exchange (since 2006). | |||||
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Name, Business Address and Birthdate | Position(s) | Term of Office | Principal Occupation(s) | Number of | Other | |||||
Virginia L. Stringer 333 West Wacker Drive Chicago, IL 60606 (8/16/44) | Trustee | Term—Indefinite** Length of Service— Since 2011 | Board Member, Mutual Fund Directors Forum; Member, Governing Board, Investment Company Institute’s Independent Directors Council; governance consultant and non-profit board member; former Owner and President, Strategic Management Resources, Inc., a management consulting firm; previously, held several executive positions in general management, marketing and human resources at IBM and The Pillsbury Company. | 245 | Previously, Independent Director (1987-2010) and Chair (1997-2010), First American Fund Complex. | |||||
Terence J. Toth* 333 West Wacker Drive Chicago, IL 60606 (9/29/59) | Trustee | Term—Indefinite** Length of Service— | Director, Legal & General Investment Management America, Inc. (since 2008); Managing Partner, Promus Capital (since 2008); formerly, CEO and President, Northern Trust Global Investments (2004-2007); Executive Vice President, Quantitative Management & Securities Lending (2000-2004); prior thereto, various positions with Northern Trust Company (since 1994); Member: Goodman Theatre Board (since 2004), and Catalyst Schools of Chicago Board (since 2008); formerly, Member: Northern Trust Mutual Funds Board (2005-2007), Northern Trust Global Investments Board (2004-2007), Northern Trust Japan Board (2004-2007), Northern Trust Securities Inc. Board (2003-2007) and Northern Trust Hong Kong Board (1997-2004). | 245 | N/A | |||||
Interested Trustee: | ||||||||||
John P. Amboian*** 333 West Wacker Drive, Chicago, IL 60606 (6/14/61) | Trustee | Term—Indefinite** Length of Service— | Chief Executive Officer and Chairman (since 2007) and Director (since 1999) of Nuveen Investments, Inc.; formerly, President (1999-2007); Chief Executive Officer (since 2007) of Nuveen Investments Advisers Inc.; Director (since 1998); formerly, Chief Executive Officer (2007-2010) of Nuveen Fund Advisors, Inc. | 245 | N/A | |||||
| * | Also serves as a trustee of the Nuveen Diversified Commodity Fund, an exchange-traded commodity pool managed by Nuveen Commodities Asset Management, LLC, an affiliate of the Adviser. |
| ** | Each trustee serves an indefinite term until his or her successor is elected. |
| *** | Mr. Amboian is an “interested person” of the Trust, as defined in the 1940 Act, by reason of his positions with Nuveen Investments, Inc. (“Nuveen Investments”) and certain of its subsidiaries. |
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Name, Business Address and Birthdate | Position(s) Trust | Term of Length of | Principal Occupation(s) | Number of | ||||
Officers of the Trust: | ||||||||
Gifford R. Zimmerman 333 West Wacker Drive Chicago, IL 60606 (9/9/56) | Chief Administrative Officer | Term—Until August 2011 Length of Service— Since 1996 | Managing Director (since 2002), Assistant Secretary and Associate General Counsel of Nuveen Securities, LLC; Managing Director (since 2002), Assistant Secretary (since 1997) and Co-General Counsel (since 2011) of Nuveen Fund Advisors, Inc.; Managing Director, Assistant Secretary and Associate General Counsel of Nuveen Asset Management, LLC (since 2011); Managing Director (since 2004) and Assistant Secretary (since 1994) of Nuveen Investments, Inc.; Vice President and Assistant Secretary of Nuveen Investments Advisers Inc. (since 2002); Vice President and Assistant Secretary of NWQ Investment Management Company, LLC (since 2002); Managing Director, Associate General Counsel and Assistant Secretary of Symphony Asset Management LLC (since 2003); Vice President and Assistant Secretary of Tradewinds Global Investors, LLC and Santa Barbara Asset Management, LLC (since 2006), Nuveen HydePark Group, LLC and Nuveen Investment Solutions, Inc. (since 2007), and of Winslow Capital Management, Inc. (since 2010); Chief Administrative Officer and Chief Compliance Officer (since 2010) of Nuveen Commodities Asset Management, LLC; Chartered Financial Analyst. | 245 | ||||
Margo L. Cook 333 West Wacker Drive Chicago, IL 60606 (4/11/64) | Vice President | Term—Until August 2011 Length of Service—Since 2009 | Executive Vice President (since 2008) of Nuveen Investments, Inc. and Nuveen Fund Advisors, Inc. (since 2011); previously, Head of Institutional Asset Management (2007-2008) of Bear Stearns Asset Management; Head of Institutional Asset Management (1986-2007) of Bank of NY Mellon; Chartered Financial Analyst. | 245 | ||||
Lorna C. Ferguson 333 West Wacker Drive Chicago, IL 60606 (10/24/45) | Vice President | Term—Until August 2011 Length of Service— Since 1998 | Managing Director (since 2004) of Nuveen Securities, LLC; Managing Director (since 2005) of Nuveen Fund Advisors, Inc. | 245 | ||||
Stephen D. Foy 333 West Wacker Drive Chicago, IL 60606 (5/31/54) | Vice President and Controller | Term—Until August 2011 Length of Service— Since 1997 | Senior Vice President (since 2010), formerly, Vice President (1993-2010) and Funds Controller (since 1998) of Nuveen Securities, LLC; Senior Vice President (since 2010), formerly, Vice President (2005-2010) of Nuveen Fund Advisors, Inc.; Certified Public Accountant. | 245 | ||||
Scott S. Grace 333 West Wacker Drive Chicago, IL 60606 (8/20/70) | Vice President and Treasurer | Term—Until August 2011 Length of Service— Since 2009 | Managing Director, Corporate Finance & Development, Treasurer (since 2009) of Nuveen Securities, LLC; Managing Director and Treasurer (since 2009) of Nuveen Investment Solutions, Inc., Nuveen Investments Advisers Inc., Nuveen Investment Holdings, Inc., Nuveen Fund Advisors, Inc., and (since 2011) Nuveen Asset Management, LLC; Vice President and Treasurer of NWQ Investment Management Company, LLC, Tradewinds Global Investors, LLC, Symphony Asset Management LLC and Winslow Capital Management, Inc.; Vice President of Santa Barbara Asset Management, LLC; formerly, Treasurer (2006-2009), Senior Vice President (2008-2009), previously, Vice President (2006-2008) of Janus Capital Group, Inc.; formerly, Senior Associate in Morgan Stanley’s Global Financial Services Group (2000-2003); Chartered Accountant. | 245 | ||||
Walter M. Kelly 333 West Wacker Drive Chicago, IL 60606 (2/24/70) | Vice President and Chief Compliance Officer | Term—Until August 2011 Length of Service— Since 2004 | Senior Vice President (since 2008), formerly, Vice President of Nuveen Securities, LLC; Senior Vice President (since 2008) and Assistant Secretary (since 2003), formerly, Vice President (2006-2008) of Nuveen Fund Advisors, Inc.; previously, Assistant Vice President and Assistant Secretary of the Nuveen Funds (2003-2006). | 245 | ||||
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Name, Business Address and Birthdate | Position(s) Trust | Term of Length of | Principal Occupation(s) | Number of | ||||
Tina M. Lazar 333 West Wacker Drive Chicago, IL 60606 (8/27/61) | Vice President | Term—Until August 2011 Length of Service— Since 2000 | Senior Vice President (since 2009), formerly, Vice President of Nuveen Securities, LLC (1999-2009); Senior Vice President (since 2010), formerly, Vice President (2005-2010) of Nuveen Fund Advisors, Inc. | 245 | ||||
Larry W. Martin 333 West Wacker Drive Chicago, IL 60606 (7/27/51) | Vice President and Assistant Secretary | Term—Until August 2011 Length of Service— Since 1997 | Senior Vice President (since 2010), formerly, Vice President (1993-2010), Assistant Secretary and Assistant General Counsel of Nuveen Securities, LLC; Senior Vice President (since 2011) of Nuveen Asset Management, LLC; Senior Vice President (since 2010), formerly, Vice President (2005-2010) and Assistant Secretary of Nuveen Investments, Inc.; Senior Vice President (since 2010), formerly, Vice President (2005-2010) and Assistant Secretary (since 1997) of Nuveen Fund Advisors, Inc.; Vice President and Assistant Secretary of Nuveen Investments Advisers Inc. (since 2002), NWQ Investment Management Company, LLC, Symphony Asset Management LLC (since 2003), Tradewinds Global Investors, LLC, Santa Barbara Asset Management, LLC (since 2006), Nuveen HydePark Group, LLC, Nuveen Investment Solutions, Inc. (since 2007) and of Winslow Capital Management, Inc. (since 2010); Vice President and Assistant Secretary of Nuveen Commodities Asset Management, LLC (since 2010). | 245 | ||||
Kevin J. McCarthy 333 West Wacker Drive Chicago, IL 60606 (3/26/66) | Vice President and Secretary | Term—Until August 2011 Length of Service—Since 2007 | Managing Director (since 2008), formerly, Vice President (2007-2008) of Nuveen Securities, LLC; Managing Director (since 2008), Assistant Secretary (since 2007) and Co-General Counsel (since 2011) of Nuveen Fund Advisors, Inc.; Managing Director, Assistant Secretary and Associate General Counsel (since 2011) of Nuveen Asset Management, LLC; Vice President and Assistant Secretary of Nuveen Investments Advisers Inc., NWQ Investment Management Company, LLC, Tradewinds Global Investors, LLC, NWQ Holdings, LLC, Symphony Asset Management LLC, Santa Barbara Asset Management, LLC, Nuveen HydePark Group, LLC, Nuveen Investment Solutions, Inc. and Winslow Capital Management, Inc. (since 2010); Vice President and Secretary (since 2010) of Nuveen Commodities Asset Management, LLC; prior thereto, Partner, Bell, Boyd & Lloyd LLP (1997-2007). | 245 | ||||
Kathleen L. Prudhomme 800 Nicollet Mall Minneapolis, MN 55402 (3/30/53) | Vice President and Assistant Secretary | Term—Until August 2011 Length of Service— Since 2011 | Managing Director and Assistant Secretary of Nuveen Securities, LLC (since 2011); Managing Director, Assistant Secretary and Co-General Counsel (since 2011) of Nuveen Fund Advisors, Inc.; Managing Director, Assistant Secretary and Associate General Counsel (since 2011) of Nuveen Asset Management, LLC; Deputy General Counsel, FAF Advisors, Inc. (2004-2010). | 245 | ||||
Jeffrey M. Wilson 333 West Wacker Drive Chicago, IL 60606 (3/13/56) | Vice President | Term—Until August 2011 Length of Service— Since 2011 | Senior Vice President of Nuveen Securities, LLC (since 2011), formerly, Senior Vice President of FAF Advisors, Inc. (2000-2010). | 112 | ||||
Board Leadership Structure and Risk Oversight
The Board of Directors or the Board of Trustees (as the case may be, each is referred to hereafter as the “Board” or “Board of Trustees” and the directors or trustees of the Nuveen Funds, as applicable, are each referred to herein as “trustees”) oversees the operations and management of the Nuveen Funds, including the duties performed for the Nuveen Funds by the Adviser. The Board has adopted a unitary board structure. A unitary board consists of one group of directors who serve on the board of every fund in the complex. In adopting a unitary board structure, the trustees seek to provide effective governance through establishing a board, the overall composition of which will, as a body, possess the appropriate skills, independence and experience to oversee the Nuveen Funds’ business. With this overall framework in mind, when the Board, through its Nominating and Governance Committee discussed below, seeks nominees for the
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Board, the trustees consider, not only the candidate’s particular background, skills and experience, among other things, but also whether such background, skills and experience enhance the Board’s diversity and at the same time complement the Board given its current composition and the mix of skills and experiences of the incumbent trustees. The Nominating and Governance Committee believes that the Board generally benefits from diversity of background, experience and views among its members, and considers this a factor in evaluating the composition of the Board, but has not adopted any specific policy on diversity or any particular definition of diversity.
The Board believes the unitary board structure enhances good and effective governance, particularly given the nature of the structure of the investment company complex. Funds in the same complex generally are served by the same service providers and personnel and are governed by the same regulatory scheme which raises common issues that must be addressed by the directors across the fund complex (such as compliance, valuation, liquidity, brokerage, trade allocation or risk management). The Board believes it is more efficient to have a single board review and oversee common policies and procedures which increases the Board’s knowledge and expertise with respect to the many aspects of fund operations that are complex-wide in nature. The unitary structure also enhances the Board’s influence and oversight over the investment advisor and other service providers.
In an effort to enhance the independence of the Board, the Board also has a Chairman that is an independent trustee. The Board recognizes that a chairman can perform an important role in setting the agenda for the Board, establishing the boardroom culture, establishing a point person on behalf of the Board for fund management, and reinforcing the Board’s focus on the long-term interests of shareholders. The Board recognizes that a chairman may be able to better perform these functions without any conflicts of interests arising from a position with fund management. Accordingly, the trustees have elected Robert P. Bremner as the independent Chairman of the Board. Specific responsibilities of the Chairman include: (i) presiding at all meetings of the Board and of the shareholders; (ii) seeing that all orders and resolutions of the trustees are carried into effect; and (iii) maintaining records of and, whenever necessary, certifying all proceedings of the trustees and the shareholders.
Although the Board has direct responsibility over various matters (such as advisory contracts, underwriting contracts and fund performance), the Board also exercises certain of its oversight responsibilities through several committees that it has established and which report back to the full Board. The Board believes that a committee structure is an effective means to permit trustees to focus on particular operations or issues affecting the Nuveen Funds, including risk oversight. More specifically, with respect to risk oversight, the Board has delegated matters relating to valuation and compliance to certain committees (as summarized below) as well as certain aspects of investment risk. In addition, the Board believes that the periodic rotation of trustees among the different committees allows the trustees to gain additional and different perspectives of a Nuveen Fund’s operations. The Board has established five standing committees: the Executive Committee, the Dividend Committee, the Audit Committee, the Compliance, Risk Management and Regulatory Oversight Committee and the Nominating and Governance Committee. The Board may also from time to time create ad hoc committees to focus on particular issues as the need arises. The membership and functions of the standing committees are summarized below.
The Executive Committee, which meets between regular meetings of the Board, is authorized to exercise all of the powers of the Board. The members of the Executive Committee are Robert P. Bremner, Chair, Judith M. Stockdale and John P. Amboian. During the fiscal year ended February 28, 2011, the Executive Committee did not meet.
The Audit Committee assists the Board in the oversight and monitoring of the accounting and reporting policies, processes and practices of the Nuveen Funds, and the audits of the financial statements of the Nuveen Funds; the quality and integrity of the financial statements of the Nuveen Funds; the Nuveen Funds’ compliance with legal and regulatory requirements relating to the Nuveen Funds’ financial statements; the independent auditors’ qualifications, performance and independence; and the pricing procedures of the Nuveen Funds and the Adviser’s internal valuation group. It is the responsibility of the Audit Committee to select, evaluate and replace any independent auditors (subject only to Board and, if applicable, shareholder ratification) and to determine their compensation. The Audit Committee is also responsible for, among other things, overseeing the valuation of securities comprising the Nuveen Funds’ portfolios. Subject to the Board’s general supervision of such actions, the Audit Committee addresses any valuation issues, oversees the Nuveen Funds’ pricing procedures and actions taken by the Adviser’s internal valuation group which provides regular reports to the committee, reviews any issues relating to the valuation of the Nuveen Funds’ securities brought to its attention and considers the risks to the Nuveen Funds in assessing the possible resolutions to these matters. The Audit Committee may also consider any financial risk exposures for the Nuveen Funds in conjunction with performing its functions.
To fulfill its oversight duties, the Audit Committee receives annual and semi-annual reports and has regular meetings with the external auditors for the Nuveen Funds and the Adviser’s internal audit group. The Audit Committee also may review in a general manner the processes the Board or other Board committees have in place with respect to risk assessment and risk management as well as compliance with legal and regulatory matters relating to the Nuveen Funds’ financial statements. The committee operates under a written charter adopted and approved by the Board. Members of the Audit Committee shall be independent (as set forth in the charter) and free of any relationship that, in the opinion of the trustees, would interfere with their exercise of independent judgment as an Audit Committee member. The members
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of the Audit Committee are Robert P. Bremner, David J. Kundert, Chair, William J. Schneider, Carole E. Stone and Terence J. Toth, each of whom is an independent trustee of the Nuveen Funds. During the fiscal year ended February 28, 2011, the Audit Committee met four times.
The Nominating and Governance Committee is responsible for seeking, identifying and recommending to the Board qualified candidates for election or appointment to the Board. In addition, the Nominating and Governance Committee oversees matters of corporate governance, including the evaluation of Board performance and processes, the assignment and rotation of committee members, and the establishment of corporate governance guidelines and procedures, to the extent necessary or desirable, and matters related thereto. Although the unitary and committee structure has been developed over the years and the Nominating and Governance Committee believes the structure has provided efficient and effective governance, the committee recognizes that as demands on the Board evolve over time (such as through an increase in the number of funds overseen or an increase in the complexity of the issues raised), the committee must continue to evaluate the Board and committee structures and their processes and modify the foregoing as may be necessary or appropriate to continue to provide effective governance. Accordingly, the Nominating and Governance Committee has a separate meeting each year to, among other things, review the Board and committee structures, their performance and functions, and recommend any modifications thereto or alternative structures or processes that would enhance the Board’s governance of the Nuveen Funds.
In addition, the Nominating and Governance Committee, among other things, makes recommendations concerning the continuing education of trustees; monitors performance of legal counsel and other service providers; establishes and monitors a process by which security holders are able to communicate in writing with members of the Board; and periodically reviews and makes recommendations about any appropriate changes to trustee compensation. In the event of a vacancy on the Board, the Nominating and Governance Committee receives suggestions from various sources, including shareholders, as to suitable candidates. Suggestions should be sent in writing to Lorna Ferguson, Manager of Fund Board Relations, Nuveen Investments, 333 West Wacker Drive, Chicago, IL 60606. The Nominating and Governance Committee sets appropriate standards and requirements for nominations for new trustees and reserves the right to interview any and all candidates and to make the final selection of any new trustees. In considering a candidate’s qualifications, each candidate must meet certain basic requirements, including relevant skills and experience, time availability (including the time requirements for due diligence site visits to sub-advisers and service providers) and, if qualifying as an independent trustee candidate, independence from the Adviser, sub-advisers, the Distributor and other service providers, including any affiliates of these entities. These skill and experience requirements may vary depending on the current composition of the Board, since the goal is to ensure an appropriate range of skills, diversity and experience, in the aggregate. Accordingly, the particular factors considered and weight given to these factors will depend on the composition of the Board and the skills and backgrounds of the incumbent trustees at the time of consideration of the nominees. All candidates, however, must meet high expectations of personal integrity, independence, governance experience and professional competence. All candidates must be willing to be critical within the Board and with management and yet maintain a collegial and collaborative manner toward other Board members. The committee operates under a written charter adopted and approved by the Board. This committee is composed of the independent trustees of the Nuveen Funds. Accordingly, the members of the Nominating and Governance Committee are Robert P. Bremner, Chair, Jack B. Evans, William C. Hunter, David J. Kundert, William J. Schneider, Judith M. Stockdale, Carole E. Stone, Virginia L. Stringer and Terence J. Toth. During the fiscal year ended February 28, 2011, the Nominating and Governance Committee met four times.
The Dividend Committee is authorized to declare distributions on the Nuveen Funds’ shares, including, but not limited to, regular and special dividends, capital gains and ordinary income distributions. The members of the Dividend Committee are Jack B. Evans, Chair, Judith M. Stockdale and Terence J. Toth. During the fiscal year ended February 28, 2011, the Dividend Committee met four times.
The Compliance, Risk Management and Regulatory Oversight Committee (the “Compliance Committee”) is responsible for the oversight of compliance issues, risk management and other regulatory matters affecting the Nuveen Funds that are not otherwise the jurisdiction of the other committees. The Board has adopted and periodically reviews policies and procedures designed to address the Nuveen Funds’ compliance and risk matters. As part of its duties, the Compliance Committee reviews the policies and procedures relating to compliance matters and recommends modifications thereto as necessary or appropriate to the full Board; develops new policies and procedures as new regulatory matters affecting the Nuveen Funds arise from time to time; evaluates or considers any comments or reports from examinations from regulatory authorities and responses thereto; and performs any special reviews, investigations or other oversight responsibilities relating to risk management, compliance and/or regulatory matters as requested by the Board.
In addition, the Compliance Committee is responsible for risk oversight, including, but not limited to, the oversight of risks related to investments and operations. Such risks include, among other things, exposures to particular issuers, market sectors, or types of securities; risks related to product structure elements, such as leverage; and techniques that may be used to address those risks, such as hedging and swaps. In assessing issues brought to the committee’s attention or in reviewing a particular policy, procedure, investment technique or strategy, the Compliance Committee
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evaluates the risks to the Nuveen Funds in adopting a particular approach compared to the anticipated benefits to the Nuveen Funds and their shareholders. In fulfilling its obligations, the Compliance Committee meets on a quarterly basis, and at least once a year in person. The Compliance Committee receives written and oral reports from the Nuveen Funds’ Chief Compliance Officer (“CCO”) and meets privately with the CCO at each of its quarterly meetings. The CCO also provides an annual report to the full Board regarding the operations of the Nuveen Funds’ and other service providers’ compliance programs as well as any recommendations for modifications thereto. The Compliance Committee also receives reports from the Adviser’s investment services group regarding various investment risks. Notwithstanding the foregoing, the full Board also participates in discussions with management regarding certain matters relating to investment risk, such as the use of leverage and hedging. The investment services group therefore also reports to the full Board at its quarterly meetings regarding, among other things, fund performance and the various drivers of such performance. Accordingly, the Board directly and/or in conjunction with the Compliance Committee oversees matters relating to investment risks. Matters not addressed at the committee level are addressed directly by the full Board. The committee operates under a written charter adopted and approved by the Board. The members of the Compliance Committee are Jack B. Evans, William C. Hunter, William J. Schneider, Judith M. Stockdale, Chair, and Virginia L. Stringer. During the fiscal year ended February 28, 2011, the Compliance, Risk Management and Regulatory Oversight Committee met five times.
Board Diversification and Trustee Qualifications
In determining that a particular trustee was qualified to serve on the Board, the Board has considered each trustee’s background, skills, experience and other attributes in light of the composition of the Board with no particular factor controlling. The Board believes that trustees need to have the ability to critically review, evaluate, question and discuss information provided to them, and to interact effectively with Fund management, service providers and counsel, in order to exercise effective business judgment in the performance of their duties, and the Board believes each trustee satisfies this standard. An effective trustee may achieve this ability through his or her educational background; business, professional training or practice; public service or academic positions; experience from service as a board member or executive of investment funds, public companies or significant private or not-for-profit entities or other organizations; and or/other life experiences. Accordingly, set forth below is a summary of the experiences, qualifications, attributes, and skills that led to the conclusion, as of the date of this document, that each trustee should continue to serve in that capacity. References to the experiences, qualifications, attributes and skills of trustees are pursuant to requirements of the Securities and Exchange Commission, do not constitute holding out the Board or any trustee as having any special expertise or experience and shall not impose any greater responsibility or liability on any such person or on the Board by reason thereof.
John P. Amboian
Mr. Amboian, an interested trustee of the Nuveen Funds, joined Nuveen Investments in June 1995 and became Chief Executive Officer in July 2007 and Chairman in November 2007. Prior to this, since 1999, he served as President with responsibility for the firm’s product, marketing, sales, operations and administrative activities. Mr. Amboian initially served Nuveen Investments as Executive Vice President and Chief Financial Officer. Prior to joining Nuveen Investments, Mr. Amboian held key management positions with two consumer product firms affiliated with the Phillip Morris Companies. He served as Senior Vice President of Finance, Strategy and Systems at Miller Brewing Company. Mr. Amboian began his career in corporate and international finance at Kraft Foods, Inc., where he eventually served as Treasurer. He received a Bachelor’s degree in economics and a Masters of Business Administration (“MBA”) from the University of Chicago. Mr. Amboian serves on the Board of Directors of Nuveen Investments and is a Board Member or Trustee of the Investment Company Institute Board of Governors, Boys and Girls Clubs of Chicago, Children’s Memorial Hospital and Foundation, the Council on the Graduate School of Business (University of Chicago), and the North Shore Country Day School Foundation. He is also a member of the Civic Committee of the Commercial Club of Chicago and the Economic Club of Chicago.
Robert P. Bremner
Mr. Bremner, the Nuveen Funds’ Independent Chairman, is a private investor and management consultant in Washington, D.C. His biography of William McChesney Martin, Jr., a former chairman of the Federal Reserve Board, was published by Yale University Press in November 2004. From 1994 to 1997, he was a Senior Vice President at Samuels International Associates, an international consulting firm specializing in governmental policies, where he served in a part-time capacity. Previously, Mr. Bremner was a partner in the LBK Investors Partnership and was chairman and majority stockholder with ITC Investors Inc., both private investment firms. He currently serves on the Board and as Treasurer of the Humanities Council of Washington D.C. and is a Board Member of the Independent Directors Council affiliated with the Investment Company Institute. From 1984 to 1996, Mr. Bremner was an independent Trustee of the Flagship Funds, a group of municipal open-end funds. He began his career at the World Bank in Washington D.C. He graduated with a Bachelor of Science degree from Yale University and received his MBA from Harvard University.
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Jack B. Evans
President of the Hall-Perrine Foundation, a private philanthropic corporation, since 1996, Mr. Evans was formerly President and Chief Operating Officer of the SCI Financial Group, Inc., a regional financial services firm headquartered in Cedar Rapids, Iowa. Formerly, he was a member of the Board of the Federal Reserve Bank of Chicago as well as a Director of Alliant Energy. Mr. Evans is Chairman of the Board of United Fire Group, sits on the Board of the Source Media Group, is President Pro Tem of the Board of Regents for the State of Iowa University System, is a Life Trustee of Coe College and is a member of the Advisory Council of the Department of Finance in the Tippie College of Business, University of Iowa. He has a Bachelor of Arts degree from Coe College and an MBA from the University of Iowa.
William C. Hunter
Mr. Hunter was appointed Dean of the Henry B. Tippie College of Business at the University of Iowa effective July 1, 2006. He had been Dean and Distinguished Professor of Finance at the University of Connecticut School of Business since June 2003. From 1995 to 2003, he was the Senior Vice President and Director of Research at the Federal Reserve Bank of Chicago. While there he served as the Bank’s Chief Economist and was an Associate Economist on the Federal Reserve System’s Federal Open Market Committee (FOMC). In addition to serving as a Vice President in charge of financial markets and basic research at the Federal Reserve Bank in Atlanta, he held faculty positions at Emory University, Atlanta University, the University of Georgia and Northwestern University. A past Director of the Credit Research Center at Georgetown University, SS&C Technologies, Inc. (2005) and past President of the Financial Management Association International, he has consulted with numerous foreign central banks and official agencies in Western Europe, Central and Eastern Europe, Asia, Central America and South America. From 1990 to 1995, he was a U.S. Treasury Advisor to Central and Eastern Europe. He has been a Director of the Xerox Corporation since 2004 and Wellmark, Inc. since 2009. He is President-Elect of Beta Gamma Sigma, Inc., the International Business Honor Society.
David J. Kundert
Mr. Kundert retired in 2004 as Chairman of JPMorgan Fleming Asset Management, and as President and CEO of Banc One Investment Advisors Corporation, and as President of One Group Mutual Funds. Prior to the merger between Bank One Corporation and JPMorgan Chase and Co., he was Executive Vice President, Bank One Corporation and, since 1995, the Chairman and CEO, Banc One Investment Management Group. From 1988 to 1992, he was President and CEO of Bank One Wisconsin Trust Company. Currently, Mr. Kundert is a Director of the Northwestern Mutual Wealth Management Company. He started his career as an attorney for Northwestern Mutual Life Insurance Company. Mr. Kundert has served on the Board of Governors of the Investment Company Institute and he is currently a member of the Wisconsin Bar Association. He is on the Board of the Greater Milwaukee Foundation and chairs its Investment Committee. He received his Bachelor of Arts degree from Luther College, and his Juris Doctor from Valparaiso University.
William J. Schneider
Mr. Schneider is currently Chairman, formerly Senior Partner and Chief Operating Officer (retired, December 2004) of Miller-Valentine Partners Ltd., a real estate investment company. He was formerly a Director and Past Chair of the Dayton Development Coalition. He was formerly a member of the Community Advisory Board of the National City Bank in Dayton as well as a former member of the Business Advisory Council of the Cleveland Federal Reserve Bank. Mr. Schneider is a member of the Business Advisory Council for the University of Dayton College of Business. Mr. Schneider was an independent Trustee of the Flagship Funds, a group of municipal open-end funds. He also served as Chair of the Miami Valley Hospital and as Chair of the Finance Committee of its parent holding company. Mr. Schneider has a Bachelor of Science in Community Planning from the University of Cincinnati and a Masters of Public Administration from the University of Dayton.
Judith M. Stockdale
Ms. Stockdale is currently Executive Director of the Gaylord and Dorothy Donnelley Foundation, a private foundation working in land conservation and artistic vitality in the Chicago region and the Low country of South Carolina. Her previous positions include Executive Director of the Great Lakes Protection Fund, Executive Director of Openlands, and Senior Staff Associate at the Chicago Community Trust. She has served on the Boards of the Land Trust Alliance, the National Zoological Park, the Governor’s Science Advisory Council (Illinois), the Nancy Ryerson Ranney Leadership Grants Program, Friends of Ryerson Woods and the Donors Forum. Ms. Stockdale, a native of the United Kingdom, has a Bachelor of Science degree in geography from the University of Durham (UK) and a Master of Forest Science degree from Yale University.
Carole E. Stone
Ms. Stone retired from the New York State Division of the Budget in 2004, having served as its Director for nearly five years and as Deputy Director from 1995 through 1999. Ms. Stone is currently on the Board of Directors of the Chicago Board Options Exchange, CBOE Holdings, Inc. and C2 Options Exchange, Incorporated. She has also served as the Chair of the New York Racing Association Oversight Board, as Chair of the Public Authorities Control Board, as a Commissioner on the New York State Commission on Public Authority Reform and as a member of the Boards of
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Directors of several New York State public authorities. Ms. Stone has a Bachelor of Arts from Skidmore College in Business Administration.
Virginia L. Stringer
Ms. Stringer served as the independent chair of the Board of the First American Fund Complex from 1997 to 2010, having joined such Board in 1987. Ms. Stringer serves on the Governing Board of the Investment Company Institute’s Independent Directors Council and on the board of the Mutual Fund Directors Forum. She is a recipient of the Outstanding Corporate Director award from Twin Cities Business Monthly and the Minnesota Chapter of the National Association of Corporate Directors. Ms. Stringer is the immediate past board chair of the Oak Leaf Trust, director and immediate past board chair of the Saint Paul Riverfront Corporation and is immediate past President of the Minneapolis Club’s Governing Board. She is a director and former board chair of the Minnesota Opera and a Life Trustee and former board of the Voyageur Outward Bound School. She also served as a trustee of Outward Bound USA. She was appointed by the Governor of Minnesota Board on Judicial Standards and recently served on a Minnesota Supreme Court Judicial Advisory Committee to reform the state’s judicial disciplinary process. She is a member of the International Women’s Forum and attended the London Business School as an International Business Fellow. Ms. Stringer also served as board chair of the Human Resource Planning Society, the Minnesota Women’s Campaign Fund and the Minnesota Women’s Economic Roundtable. Ms. Stringer is the retired founder of Strategic Management Resources, a consulting practice focused on corporate governance, strategy and leadership. She has twenty five years of corporate experience having held executive positions in general management, marketing and human resources with IBM and the Pillsbury Company.
Terence J. Toth
Mr. Toth is a Director, Legal & General Investment Management America, Inc. (since 2008) and a Managing Partner, Promus Capital (since 2008). From 2004 to 2007, he was Chief Executive Officer and President of Northern Trust Global Investments, and Executive Vice President of Quantitative Management & Securities Lending from 2000 to 2004. He also formerly served on the Board of the Northern Trust Mutual Funds. He joined Northern Trust in 1994 after serving as Managing Director and Head of Global Securities Lending at Bankers Trust (1986 to 1994) and Head of Government Trading and Cash Collateral Investment at Northern Trust from 1982 to 1986. He currently serves on the Boards of the Goodman Theatre, and Chicago Fellowship, and is Chairman of the Board of Catalyst Schools of Chicago. Mr. Toth graduated with a Bachelor of Science degree from the University of Illinois, and received his MBA from New York University. In 2005, he graduated from the CEO Perspectives Program at Northwestern University.
Board Compensation
The following table shows, for each independent trustee, (1) the aggregate compensation paid by the Trust for the fiscal year ended February 28, 2011, (2) the amount of total compensation paid by the Trust that has been deferred, and (3) the total compensation paid to each trustee by the Nuveen Funds during the fiscal year ended February 28, 2011.
Name of Trustee | Aggregate Compensation From Trust1 | Amount of Total Compensation that Has Been Deferred2 | Total Compensation from Nuveen Funds Paid to Trustees3 | |||||||||
Robert P. Bremner | $ | 7,275 | $ | 868 | $ | 279,637 | ||||||
Jack B. Evans | 6,380 | 1,291 | 239,928 | |||||||||
William C. Hunter | 5,561 | 4,215 | 211,543 | |||||||||
David J. Kundert | 6,485 | 4,907 | 256,249 | |||||||||
William J. Schneider | 6,675 | 5,051 | 258,987 | |||||||||
Judith M. Stockdale | 5,797 | 2,289 | 217,647 | |||||||||
Carole E. Stone | 4,975 | — | 193,900 | |||||||||
Virginia L. Stringer4 | — | — | — | |||||||||
Terence J. Toth | 6,239 | 1,040 | 235,535 | |||||||||
| 1 | The compensation paid, including deferred amounts, to the independent trustees for the fiscal year ended February 28, 2011 for services to the Trust. |
| 2 | Pursuant to a deferred compensation agreement with the Trust, deferred amounts are treated as though an equivalent dollar amount has been invested in shares of one or more eligible Nuveen Funds. The amounts provided are the total deferred fees (including the return from the assumed investment in the eligible Nuveen Funds) payable from the Trust. |
| 3 | Based on the compensation paid (including any amounts deferred) to the trustees for the one-year period ended February 28, 2011 for services to the Nuveen Funds. |
| 4 | Ms. Stringer was appointed to the Board effective January 1, 2011. |
Prior to January 1, 2011, independent trustees received a $100,000 annual retainer plus (a) a fee of $3,250 per day for attendance in person or by telephone at a regularly scheduled meeting of the Board of Trustees; (b) a fee of $2,500
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per meeting for attendance in person where such in-person attendance was required and $1,500 per meeting for attendance by telephone or in person where in-person attendance was not required at a special, non-regularly scheduled board meeting; (c) a fee of $2,000 per meeting for attendance in person or by telephone at an Audit Committee meeting; (d) a fee of $2,000 per meeting for attendance in person or by telephone at a regularly scheduled Compliance, Risk Management and Regulatory Oversight Committee meeting where in-person attendance was required and $1,000 per meeting for attendance by telephone or in person where in-person attendance was not required; (e) a fee of $1,000 per meeting for attendance in person or by telephone for a meeting of the Dividend Committee; and (f) a fee of $500 per meeting for attendance in person at all other committee meetings ($1,000 for shareholder meetings) on a day on which no regularly scheduled board meeting was held in which in-person attendance was required and $250 per meeting for attendance by telephone or in person at such committee meetings (excluding shareholder meetings) where in-person attendance was not required and $100 per meeting when the Executive Committee acted as pricing committee for IPOs, plus, in each case, expenses incurred in attending such meetings. In addition to the payments described above, the Chairman of the Board of Trustees received $50,000, the chairpersons of the Audit Committee, the Dividend Committee and the Compliance, Risk Management and Regulatory Oversight Committee received $7,500 and the chairperson of the Nominating and Governance Committee received $5,000 as additional retainers. Independent trustees also received a fee of $2,500 per day for site visits to entities that provide services to the Nuveen Funds on days on which no regularly scheduled board meeting was held. When ad hoc committees are organized, the Nominating and Governance Committee at the time of formation determined compensation to be paid to the members of such committee; however, in general, such fees were $1,000 per meeting for attendance in person at any ad hoc committee meeting where in-person attendance was required and $500 per meeting for attendance by telephone or in person at such meetings where in-person attendance was not required. The annual retainer, fees and expenses are allocated among the Nuveen Funds on the basis of relative net asset, although fund management may, in its discretion, establish a minimum amount to be allocated to each fund.
Effective January 1, 2011, independent trustees receive a $120,000 annual retainer plus (a) a fee of $4,500 per day for attendance in person or by telephone at regularly scheduled meetings of the Board; (b) a fee of $3,000 per meeting for attendance in person or by telephone at special, non-regularly scheduled Board meetings where in-person attendance is required and $2,000 per meeting for attendance by telephone or in person at such meetings where in-person attendance is not required; (c) a fee of $2,500 per meeting for attendance in person or by telephone at Audit Committee meetings where in-person attendance is required and $2,000 per meeting for attendance by telephone or in person at such meetings where in-person attendance is not required; (d) a fee of $2,500 per meeting for attendance in person or by telephone at Compliance, Risk Management and Regulatory Oversight Committee meetings where in-person attendance is required and $2,000 per meeting for attendance by telephone or in person at such meetings where in-person attendance is not required; (e) a fee of $1,000 per meeting for attendance in person or by telephone at Dividend Committee meetings; and (f) a fee of $500 per meeting for attendance in person or by telephone at all other committee meetings ($1,000 for shareholder meetings) where in-person attendance is required and $250 per meeting for attendance by telephone or in person at such committee meetings (excluding shareholder meetings) where in-person attendance is not required, and $100 per meeting when the Executive Committee acts as pricing committee for IPOs, plus, in each case, expenses incurred in attending such meetings, provided that no fees are received for meetings held on days on which regularly scheduled Board meetings are held. In addition to the payments described above, the Chairman of the Board receives $75,000, the chairpersons of the Audit Committee, the Dividend Committee and the Compliance, Risk Management and Regulatory Oversight Committee receive $10,000 each and the chairperson of the Nominating and Governance Committee receives $5,000 as additional retainers. Independent trustees also receive a fee of $3,000 per day for site visits to entities that provide services to the Nuveen Funds on days on which no Board meeting is held. When ad hoc committees are organized, the Nominating and Governance Committee will at the time of formation determine compensation to be paid to the members of such committee; however, in general, such fees will be $1,000 per meeting for attendance in person or by telephone at ad hoc committee meetings where in-person attendance is required and $500 per meeting for attendance by telephone or in person at such meetings where in-person attendance is not required. The annual retainer, fees and expenses are allocated among the Nuveen Funds on the basis of relative net assets, although management may, in its discretion, establish a minimum amount to be allocated to each fund.
The Trust does not have a retirement or pension plan. The Trust has a deferred compensation plan (the “Deferred Compensation Plan”) that permits any independent trustee to elect to defer receipt of all or a portion of his or her compensation as an independent trustee. The deferred compensation of a participating trustee is credited to a book reserve account of the Trust when the compensation would otherwise have been paid to the trustee. The value of the trustee’s deferral account at any time is equal to the value that the account would have had if contributions to the account had been invested and reinvested in shares of one or more of the eligible Nuveen Funds. At the time for commencing distributions from a trustee’s deferral account, the independent trustee may elect to receive distributions in a lump sum or over a period of five years. The Trust will not be liable for any other fund’s obligations to make distributions under the Deferred Compensation Plan.
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The Funds have no employees. The officers of the Trust and the trustee of the Trust who is not an independent trustee serve without any compensation from the Funds.
Share Ownership
The following table sets forth the dollar range of equity securities beneficially owned by each trustee as of December 31, 2010:
Name of Trustee | Dollar Range of Equity Securities in the Funds | Aggregate Dollar Range of Equity Securities in All Registered Investment Companies Overseen by Trustee in Family of Investment Companies | ||||||||||||||||||
| California High Yield | California | California 2 | Connec- ticut | Massachu- setts | Massachu- setts 2 | New Jersey | New York | New York 2 | ||||||||||||
John P. Amboian | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | Over $100,000 | ||||||||||
Robert P. Bremner | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | Over $100,000 | ||||||||||
Jack B. Evans | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | Over $100,000 | ||||||||||
William C. Hunter | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | Over $100,000 | ||||||||||
David J. Kundert | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | Over $100,000 | ||||||||||
William J. Schneider | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | Over $100,000 | ||||||||||
Judith M. Stockdale | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | Over $100,000 | ||||||||||
Carole E. Stone | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $10,001- $50,000 | $10,001- $50,000 | Over $100,000 | ||||||||||
Virginia L. Stringer1 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | Over $100,000 | ||||||||||
Terence J. Toth | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | Over $100,000 | ||||||||||
| 1 | Ms. Stringer was appointed to the Board effective January 1, 2011. |
As of June 1, 2011, the officers and trustees of the Trust, in the aggregate, owned less than 1% of the shares of each of the Funds.
The following table sets forth the percentage ownership of each person, who, as of June 1, 2011, owned of record, or is known by the Trust to have owned of record or beneficially 5% or more of any class of a Fund’s shares.
Name of Fund and Class | Name and Address of Owner | Percentage of Ownership | ||||
Nuveen California High Yield Municipal Bond Fund Class A Shares |
MLPF&S For Its Customers Attn Fund Admn 4800 Deer Lake Drive E Floor 3 Jacksonville FL 32246-6484 | 18.97% | ||||
Citigroup Global Markets Inc. House Account Attn: Peter Booth 7th Floor 333 West 34th Street New York NY 1001-2402 | 18.05% | |||||
UBS Wm USA Attn Department Manger 499 Washington Blvd Fl 9 Jersey City NJ 07310-2055 | 12.54% | |||||
First Clearing, LLC Special Custody Acct for the Exclusive Benefit of Customer 2801 Market Street St Louis MO 63103-2523 | 11.35% | |||||
Morgan Stanley Smith Barney Harborside Financial Center Plaza 2 3rd Floor Jersey City NJ 07311 | 9.94% | |||||
American Enterprise Investment Serv PO Box 9446 | 5.01% | |||||
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| Minneapolis MN 55440-9446 | ||||||
Nuveen California High Yield Municipal Bond Fund | MLPF&S For Its Customers Attn Fund Admn 4800 Deer Lake Drive E Floor 3 Jacksonville FL 32246-6484 | 18.66% | ||||
Citigroup Global Markets Inc. House Account Attn: Peter Booth 7th Floor 333 West 34th Street New York NY 10001-2402 | 15.57% | |||||
Morgan Stanley Smith Barney Harborside Financial Center Plaza 2 3rd Floor Jersey City NJ 07311 | 14.81% | |||||
First Clearing, LLC Special Custody Account For The Exclusive Benefit of Customer 2801 Market Street St Louis MO 63103-2523 | 12.44% | |||||
UBS Wm USA Attn Department Manger 499 Washington Blvd Fl 9 Jersey City NJ 07310-2055 | 6.98% | |||||
Nuveen California High Yield Municipal Bond Fund | Morgan Stanley Smith Barney Harborside Financial Center Plaza 2 3rd Floor Jersey City NJ 07311 | 28.53% | ||||
Citigroup Global Markets Inc 333 W 34th St Fl 3 New York NY 10001-2402 | 24.88% | |||||
Laurence S Brody Ttee The Omnibus Trust UA DTD 09/06/2001 2 Georgeff Rd Rolling Hills CA 90274-5270 | 9.56% | |||||
First Clearing, LLC Special Custody Acct for the Exclusive Benefit of Customer 2801 Market Street St Louis MO 63103-2523 | 8.79% | |||||
MLPF&S for the Benefit of its Customers Attn Fund Admin / 4800 Deer Lake Dr E FL 3 Jacksonville FL 32246-6484 | 5.25% | |||||
Nuveen California Municipal Bond Fund | MLPF&S for the Benefit of its Customers Attn Fund Admn/ 4800 Deer Lake Dr E Fl 3 Jacksonville FL 32246-6484 |
| 7.49% |
| ||
First Clearing, LLC Special Custody Account for the | 5.26% | |||||
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Exclusive Benefit of Customer 2801 Market Street St Louis MO 63103-2523 | ||||||
Nuveen California Municipal Bond Fund | First Clearing, LLC Special Custody Account for the Exclusive Benefit of Customer 2801 Market Street St Louis MO 63103-2523 | 27.04% | ||||
Willis S Slusser and Marion B Slusser TRS Willis& Marion Slusser 2002 Family U/A 1/9/02 200 Deer Valley Rd Apt 1D San Rafael CA 94903-5513 | 23.04% | |||||
MLPF&S for the Benefit of its Customers Attn Fund Admin/ 4800 Deer Lake Dr E Fl 3 Jacksonville FL 32246-6484 | 7.81% | |||||
Morgan Stanley Smith Barney Harborside Financial Center Plaza 2 3rd Floor Jersey City NJ 07311 | 5.87% | |||||
Nuveen California Municipal Bond Fund | MLPF&S for the Benefit of its Customers Attn Fund Admin / 4800 Deer Lake Dr E Fl 3 Jacksonville FL 32246-6484 | 41.39% | ||||
UBS Wm USA Attn Department Manger 499 Washington Blvd Fl 9 Jersey City NJ 07310-2055 | 11.70% | |||||
Citigroup Global Markets Inc. House Account Attn: Peter Booth 7th Floor 333 West 34th Street New York NY 10001-2402 | 10.88% | |||||
First Clearing, LLC Special Custody Acct for the Exclusive Benefit of Customer 2801 Market Street St Louis MO 63103-2523 | 10.75% | |||||
Nuveen California Municipal Bond Fund | First Clearing, LLC Special Custody Account for the Exclusive Benefit of Customer 2801 Market Street St Louis MO 63103-2523 | 12.15% | ||||
Wells Fargo Bank, NA FBO Omnibus Account Cash/Cash PO Box 1533 Minneapolis MN 55480-1533 | 6.83% | |||||
Nuveen California Municipal Bond Fund 2 | MLPF&S for the Benefit of its Customers |
| 14.48% |
| ||
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Attn Fund Admn/ 4800 Deer Lake Dr E Fl 3 Jacksonville FL 32246-6484 | ||||||
Morgan Stanley Smith Barney Harborside Financial Center Plaza 2 3rd Floor Jersey City NJ 07311 | 6.63% | |||||
First Clearing, LLC Special Custody Acct for the Exclusive Benefit of Customer 2801 Market Street St Louis MO 63103-2523 | 6.41% | |||||
UBS Wm USA Attn Department Manger 499 Washington Blvd Fl 9 Jersey City NJ 07310-2055 | 5.96% | |||||
Nuveen California Municipal Bond Fund 2 | MLPF&S for the Benefit of its Customers Attn Fund Admn/ 4800 Deer Lake Dr E Fl 3 Jacksonville FL 32246-6484 | 27.10% | ||||
First Clearing, LLC Special Custody Account for the Exclusive Benefit of Customer 2801 Market Street St Louis MO 63103-2523 | 21.70% | |||||
UBS Wm USA Attn Department Manger 499 Washington Blvd Fl 9 Jersey City NJ 07310-2055 | 7.32% | |||||
NFS LLC FEBO Edward & Irene Deblasio Ttee Edward Deblasio & Irene Deblasio Tr, U/A 2/26/90 12661 Sarah St Studio City CA 91604-1116 | 6.96% | |||||
Nuveen California Municipal Bond Fund 2 | MLPF&S for the Benefit of its Customers Attn Fund Admn/ 4800 Deer Lake Dr E Fl 3 Jacksonville FL 32246-6484 | 28.55% | ||||
First Clearing, LLC Special Custody Acct for the Exclusive Benefit of Customer 2801 Market Street St Louis MO 63103-2523 | 16.94% | |||||
Morgan Stanley Smith Barney Harborside Financial Center Plaza 2 3rd Floor Jersey City NJ 07311 | 12.84% | |||||
Citigroup Global Markets Inc. House Account Attn: Peter Booth 7th Floor 333 West 34th Street New York NY 10001-2402 | 9.13% | |||||
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Nuveen California Municipal Bond Fund 2 | First Clearing, LLC Special Custody Acct for the Exclusive Benefit of Customer 2801 Market Street St Louis MO 63103-2523 | 6.16% | ||||
MLPF&S for the Benefit of its Customers Attn Fund Admn/ 4800 Deer Lake Dr E FL 3 Jacksonville FL 32246-6484 | 6.01% | |||||
UBS Wm USA Attn Department Manger 499 Washington Blvd Fl 9 Jersey City NJ 07310-2055 | 5.69% | |||||
Nuveen Connecticut Municipal Bond Fund | MLPF&S for the Sole Benefit & of its Customers Attn Fund Admin Sec 4800 Deer Lake Dr E Fl 3 Jacksonville FL 32246-6484 | 13.27% | ||||
First Clearing, LLC Special Custody Acct for the Exclusive Benefit of Customer 2801 Market Street St Louis MO 63103-2523 | 6.82% | |||||
Nuveen Connecticut Municipal Bond Fund | MLPF&S for the Sole Benefit of its Customers Attn Fund Admin Sec 4800 Deer Lake Dr E Fl 3 Jacksonville FL 32246-6484 | 30.80% | ||||
First Clearing, LLC Special Custody Acct for the Exclusive Benefit of Customer 2801 Market Street St Louis MO 63103-2523 | 17.18% | |||||
UBS Wm USA Attn Department Manger 499 Washington Blvd Fl 9 Jersey City NJ 07310-2055 | 12.30% | |||||
Pershing LLC P.O. Box 2052 Jersey City NJ 07303-2052 | 5.48% | |||||
Morgan Stanley Smith Barney Harborside Financial Center Plaza 2 3rd Floor Jersey City NJ 07311 | 5.39% | |||||
Nuveen Connecticut Municipal Bond Fund | MLPF&S For the Sole Benefit of its Customers Attn Fund Admin Sec 4800 Deer Lake Dr E Fl 3 Jacksonville FL 32246-6484 | 36.81% | ||||
First Clearing, LLC Special Custody Acct for the Exclusive Benefit of Customer | 10.13% | |||||
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2801 Market Street St Louis MO 63103-2523 | ||||||
Citigroup Global Markets Inc. House Account Attn: Peter Booth 7th Floor 333 West 34th Street New York NY 10001-2402 | 9.99% | |||||
Nuveen Connecticut Municipal Bond Fund | Wells Fargo Bank, NA FBO Omnibus Account Cash/Cash PO Box 1533 Minneapolis MN 55480-1533 | 33.64% | ||||
MLPF&S for the Sole Benefit of its Customers Attn Fund Admin Sec 4800 Deer Lake Dr E FL 3 Jacksonville FL 32246-6484 | 22.13% | |||||
Citigroup Global Markets Inc. House Account Attn: Peter Booth 7th Floor 333 West 34th Street New York NY 10001-2402 | 9.84% | |||||
First Clearing, LLC Special Custody Acct for the Exclusive Benefit of Customer 2801 Market Street St Louis MO 63103-2523 | 9.70% | |||||
Nuveen Massachusetts Municipal Bond Fund | UBS Wm USA Attn Department Manger 499 Washington Blvd Fl 9 Jersey City NJ 07310-2055 | 6.36% | ||||
First Clearing, LLC Special Custody Acct for the Exclusive Benefit of Customer 2801 Market Street St Louis MO 63103-2523 | 6.22% | |||||
MLPF&S for the Benefit of its Customers Attn Fund Admn/ 4800 Deer Lake Dr E Fl 3 Jacksonville FL 32246-6484 | 5.96% | |||||
Nuveen Massachusetts Municipal Bond Fund | First Clearing, LLC Special Custody Account for the Exclusive Benefit of Customer 2801 Market Street St Louis MO 63103-2523 | 30.15% | ||||
MLPF&S for the Benefit of its Customers Attn Fund Admn/ 4800 Deer Lake Dr E Fl 3 Jacksonville FL 32246-6484 | 27.31% | |||||
Citigroup Global Markets Inc. House Account Attn: Peter Booth 7th Floor 333 West 34th Street New York NY 10001-2402 | 12.84% | |||||
Sharon M Napolitano 25 Greenfield St Lawrence MA 01843-1705 | 5.87% | |||||
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Laura L Dirko 12D Essex Green Ln Peabody MA 01960-2916 | | 5.57% | | |||
Nuveen Massachusetts Municipal Bond Fund | MLPF&S for the Benefit of its Customers Attn Fund Admn/ 4800 Deer Lake Dr E FL 3 Jacksonville FL 32246-6484 | 37.83% | ||||
Citigroup Global Markets Inc. House Account Attn: Peter Booth 7th Floor 333 West 34th Street New York NY 10001-2402 | 18.15% | |||||
Morgan Stanley Smith Barney Harborside Financial Center Plaza 2 3rd Floor Jersey City NJ 07311 | 7.42% | |||||
First Clearing, LLC Special Custody Acct for the Exclusive Benefit of Customer 2801 Market Street St Louis MO 63103-2523 | 7.13% | |||||
Nuveen Massachusetts Municipal Bond Fund | First Clearing, LLC Special Custody Account for the Exclusive Benefit of Customer 2801 Market Street St Louis MO 63103-2523 | 6.94% | ||||
Citigroup Global Markets Inc. House Account Attn: Peter Booth 7th Floor 333 West 34th Street New York NY 10001-2402 | 6.12% | |||||
Nuveen Massachusetts Municipal Bond Fund 2 | MLPF&S for the Benefit of its Customers Attn Fund Admn/ 4800 Deer Lake Dr E Fl 3 Jacksonville FL 32246-6484 | 12.03% | ||||
First Clearing, LLC Special Custody Acct for the Exclusive Benefit of Customer 2801 Market Street St Louis MO 63103-2523 | 5.98% | |||||
Nuveen Massachusetts Municipal Bond Fund 2 | MLPF&S For The Benefit of Its Customers Attn Fund Admn/ 4800 Deer Lake Dr E Fl 3 Jacksonville FL 32246-6484 |
| 28.31% |
| ||
UBS Wm USA Attn Department Manger 499 Washington Blvd Fl 9 Jersey City NJ 07310-2055 | 25.44% | |||||
NFS LLC FEBO Stanley H Merry Ttee Stanley H Merry Investment Trust U/A 6/26/06 | 8.96% | |||||
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705 Temple Street Duxbury MA 02332-2919 | ||||||
Pershing LLC P.O. Box 2052 Jersey City NJ 07303-2052 | 8.88% | |||||
Robert G Hillis & Mary E Hillis Jtwros 17 Mount Vernon St Arlington MA 02476-6126 | 5.56% | |||||
Citigroup Global Markets Inc. House Account Attn: Peter Booth 7th Floor 333 West 34th Street New York NY 10001-2402 | 5.01% | |||||
Nuveen Massachusetts Municipal Bond Fund 2 | MLPF&S for the Benefit of its Customers Attn Fund Admn/ 4800 Deer Lake Dr E Fl 3 Jacksonville FL 32246-6484 | 26.52% | ||||
First Clearing, LLC Special Custody Acct for the Exclusive Benefit of Customer 2801 Market Street St Louis MO 63103-2523 | 11.10% | |||||
Citigroup Global Markets Inc. House Account Attn: Peter Booth 7th Floor 333 West 34th Street New York NY 10001-2402 | 7.06% | |||||
Kenneth W Gillis Brenda C Gillis Jt Ten 27 Wyman St Burlington MA 01803-4731 | 6.05% | |||||
Morgan Stanley Smith Barney Harborside Financial Center Plaza 2 3rd Floor Jersey City NJ 07311 | | 5.04% | | |||
Nuveen Massachusetts Municipal Bond Fund 2 | First Clearing, LLC Special Custody Account for the Exclusive Benefit of Customer 2801 Market Street St Louis MO 63103-2523 | 11.37% | ||||
Nuveen New Jersey Municipal Bond Fund | First Clearing, LLC Special Custody Account for the Exclusive Benefit of Customer 2801 Market Street St Louis MO 63103-2523 | 6.76% | ||||
MLPF&S for the Benefit of its Customers Attn Fund Admn/ 4800 Deer Lake Dr E Fl 3 Jacksonville FL 32246-6484 | 5.99% | |||||
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Nuveen New Jersey Municipal Bond Fund | First Clearing, LLC Special Custody Account for the Exclusive Benefit of Customer 2801 Market Street St Louis MO 63103-2523 | 24.16 | % | |||
MLPF&S for the Benefit of its Customers Attn Fund Admn/ 4800 Deer Lake Dr E Fl 3 Jacksonville FL 32246-6484 | 13.90 | % | ||||
UBS Wm USA Attn Department Manger 499 Washington Blvd Fl 9 Jersey City NJ 07310-2055 | 6.39 | % | ||||
Nuveen New Jersey Municipal Bond Fund | MLPF&S for the Benefit of its Customers Attn Fund Admn/ 4800 Deer Lake Dr E Fl 3 Jacksonville FL 32246-6484 | 35.25 | % | |||
First Clearing, LLC Special Custody Account for the Exclusive Benefit of Customer 2801 Market Street St Louis MO 63103-2523 | 23.61 | % | ||||
Morgan Stanley Smith Barney Harborside Financial Center Plaza 2 3rd Floor Jersey City NJ 07311 | 6.29 | % | ||||
UBS Wm USA Attn Department Manger 499 Washington Blvd Fl 9 Jersey City NJ 07310-2055 | 5.19 | % | ||||
Nuveen New Jersey Municipal Bond Fund | Wells Fargo Bank, NA FBO Omnibus Account Cash/Cash PO Box 1533 Minneapolis MN 55480-1533 | 38.28 | % | |||
First Clearing, LLC Special Custody Account for the Exclusive Benefit of Customer 2801 Market Street St Louis MO 63103-2523 | 7.74 | % | ||||
MLPF&S for the Benefit of its Customers Attn Fund Admn/ 4800 Deer Lake Dr E Fl 3 Jacksonville FL 32246-6484 | 5.35 | % | ||||
Nuveen New York Municipal Bond Fund | MLPF&S for the Benefit of its Customers Attn Fund Admn/ 4800 Deer Lake Dr E Fl 3 Jacksonville FL 32246-6484 | 7.91 | % | |||
First Clearing, LLC Special Custody Acct for the Exclusive Benefit of Customer 2801 Market Street St Louis MO 63103-2523 | 7.73 | % | ||||
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UBS Wm USA Attn Department Manger 499 Washington Blvd Fl 9 Jersey City NJ 07310-2055 | 6.03% | |||||
Nuveen New York Municipal Bond Fund | First Clearing, LLC Special Custody Acct for the Exclusive Benefit of Customer 2801 Market Street St Louis MO 63103-2523 | 14.04% | ||||
MLPF&S for the Benefit of its Customers Attn Fund Admn/ 4800 Deer Lake Dr E Fl 3 Jacksonville FL 32246-6484 | 11.38% | |||||
Morgan Stanley Smith Barney Harborside Financial Center Plaza 2 3rd Floor Jersey City NJ 07311 | 5.10% | |||||
Nuveen New York Municipal Bond Fund | MLPF&S for the Benefit of its Customers Attn Fund Admn/ 4800 Deer Lake Dr E Fl 3 Jacksonville FL 32246-6484 | 34.58% | ||||
First Clearing, LLC Special Custody Acct for the Exclusive Benefit of Customer 2801 Market Street St Louis MO 63103-2523 | 13.94% | |||||
UBS Wm USA Attn Department Manger 499 Washington Blvd Fl 9 Jersey City NJ 07310-2055 | 11.83% | |||||
Morgan Stanley Smith Barney Harborside Financial Center Plaza 23rd Floor Jersey City NJ 07311 | 7.70% | |||||
Nuveen New York Municipal Bond Fund | First Clearing, LLC Special Custody Account for the Exclusive Benefit of Customer 2801 Market Street St Louis MO 63103-2523 | 10.32% | ||||
| Wells Fargo Bank, NA FBO Omnibus Account Cash/Cash PO Box 1533 Minneapolis MN 55480-1533 | 8.20% | |||||
Nuveen New York Municipal Bond Fund 2 | Margaret A Andretta 100 Burgevin St Kingston NY 12401-5318 |
| 6.79% |
| ||
MLPF&S for the Benefit of its Customers Attn Fund Admn/ 4800 Deer Lake Dr E Fl 3 Jacksonville FL 32246-6484 | 6.74% | |||||
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Nuveen New York Municipal Bond Fund 2 | Raymond James & Assoc Inc FBO Loulou Scharf & Isabel Kurek Ttee U/W Herbert L Scharf 313 Kirby Ave Woodmere NY 11598-2526 |
| 16.37% |
| ||
MLPF&S for the Benefit of its Customers Attn Fund Admn/ 4800 Deer Lake Dr E Fl 3 Jacksonville FL 32246-6484 | | 13.45% | | |||
First Clearing, LLC Special Custody Acct for the Exclusive Benefit of Customer 2801 Market Street St Louis MO 63103-2523 | 11.47% | |||||
UBS Wm USA Attn Department Manger 499 Washington Blvd Fl 9 Jersey City NJ 07310-2055 | 5.32% | |||||
Nuveen New York Municipal Bond Fund 2 | MLPF&S for the Benefit of its Customers Attn Fund Admin/ 4800 Deer Lake Dr E Fl 3 Jacksonville FL 32246-6484 | 30.44% | ||||
First Clearing, LLC Special Custody Acct for the Exclusive Benefit of Customer 2801 Market Street St Louis MO 63103-2523 | 11.53% | |||||
Morgan Stanley Smith Barney Harborside Financial Center Plaza 2 3rd Floor Jersey City NJ 07311 | 10.77% | |||||
UBS Wm USA Attn Department Manger 499 Washington Blvd Fl 9 Jersey City NJ 07310-2055 | 6.81% | |||||
Nuveen New York Municipal Bond Fund 2 | First Clearing, LLC Special Custody Acct for the Exclusive Benefit of Customer 2801 Market Street St Louis MO 63103-2523 | 5.97% | ||||
INVESTMENT ADVISER AND SUB-ADVISER
Investment Adviser
Nuveen Fund Advisors, located at 333 West Wacker Drive, Chicago, Illinois 60606, serves as the investment adviser of each Fund, with responsibility for the overall management of each Fund. The Adviser is also responsible for managing the Funds’ business affairs and providing day-to-day administrative services to the Funds. The Adviser has selected its affiliate, Nuveen Asset Management, LLC, located at 333 West Wacker Drive, Chicago, Illinois 60606, to serve as sub-adviser to manage the investment portfolios of the Funds. For additional information regarding the management services performed by the Adviser and Nuveen Asset Management, LLC, see “Who Manages the Funds” in the Prospectus.
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The Adviser is an affiliate of the Distributor, which is also located at 333 West Wacker Drive, Chicago, Illinois 60606. The Distributor is the principal underwriter for the Nuveen Mutual Funds, and has served as co-managing underwriter for the shares of the Nuveen Closed-End Funds. The Adviser and the Distributor are wholly-owned subsidiaries of Nuveen Investments.
On November 13, 2007, Nuveen Investments was acquired by investors led by Madison Dearborn Partners, LLC, which is a private equity investment firm based in Chicago, Illinois (the “MDP Acquisition”). The investor group led by Madison Dearborn Partners, LLC includes affiliates of Merrill Lynch, Pierce, Fenner & Smith Incorporated (“Merrill Lynch”). Merrill Lynch has since been acquired by Bank of America Corporation. The Adviser has adopted policies and procedures that address arrangements with Bank of America Corporation (including Merrill Lynch) that may give rise to certain conflicts of interest.
Each Fund is dependent upon services and resources provided by the Adviser and therefore the Adviser’s parent, Nuveen Investments. Nuveen Investments increased its level of debt in connection with the MDP Acquisition. Nuveen Investments believes that monies generated from operations and cash on hand will be adequate to fund debt service requirements, capital expenditures and working capital requirements for the foreseeable future; however, Nuveen Investments’ ability to continue to fund these items, to service its debt and to maintain compliance with covenants in its debt agreements may be affected by general economic, financial, competitive, legislative, legal and regulatory factors and by its ability to refinance or repay outstanding indebtedness with scheduled maturities beginning in 2014. In the event that Nuveen Investments breaches certain of the covenants included in its debt agreements, the breach of such covenants may result in the accelerated payment of its outstanding debt, increase the cost of such debt or generally have an adverse effect on the financial condition of Nuveen Investments.
For the management services and facilities furnished by the Adviser, each of the Funds has agreed to pay an annual management fee at rates set forth in the Prospectus under “Who Manages the Funds.” In addition, the Adviser has agreed to waive all or a portion of its management fee or reimburse certain expenses of the Funds. The Prospectus includes current fee waivers and expense reimbursements for the Funds.
Each Fund’s management fee is divided into two components—a complex-level fee based on the aggregate amount of all qualifying Nuveen Fund assets and a specific fund-level fee, based only on the amount of assets within each individual Fund. This pricing structure enables Fund shareholders to benefit from growth in the assets within each individual Fund as well as from growth in the amount of complex-wide assets managed by the Adviser. Under no circumstances will this pricing structure result in a Fund paying management fees at a rate higher than would otherwise have been applicable had the complex-wide management fee structure not been implemented.
Each Fund has agreed to pay an annual fund-level management fee, payable monthly, based upon the average daily net assets of each Fund as set forth in the Prospectus.
The annual complex-level management fee for each Fund, payable monthly, which is additive to the fund-level fee, is based on the aggregate amount of total qualifying assets managed for all Nuveen Funds as stated in the table below:
| Complex-Level Asset Breakpoint Level* | Effective Rate at Breakpoint Level | |||
$55 billion | 0.2000% | |||
$56 billion | 0.1996% | |||
$57 billion | 0.1989% | |||
$60 billion | 0.1961% | |||
$63 billion | 0.1931% | |||
$66 billion | 0.1900% | |||
$71 billion | 0.1851% | |||
$76 billion | 0.1806% | |||
$80 billion | 0.1773% | |||
$91 billion | 0.1691% | |||
$125 billion | 0.1599% | |||
$200 billion | 0.1505% | |||
$250 billion | 0.1469% | |||
$300 billion | 0.1445% | |||
| * | The complex-level fee component of the management fee for the Funds is calculated based upon the aggregate daily managed assets of all Nuveen Funds, with such daily managed assets defined separately for each Fund in its management agreement, but excluding assets attributable to (i) investments by Nuveen Funds in other Nuveen Funds and (ii) the amount, as of January 1, 2011, of managed assets in excess of $2 billion that were added to the Nuveen Funds family on that date in connection with the Adviser’s assumption of the management of the former First American Funds. Managed assets include closed-end fund assets managed by the Adviser that are attributable |
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to financial leverage. For these purposes, financial leverage includes the closed-end funds’ use of preferred stock and borrowings and investments in the residual interest certificates (also called inverse floating rate securities) in tender option bond (TOB) trusts, including the portion of assets held by the TOB trust that has been effectively financed by the trust’s issuance of floating rate securities, subject to an agreement by the Adviser as to certain funds to limit the amount of such assets for determining managed assets in certain circumstances. As of March 31, 2011, the complex-level fee rate was 0.1799%. |
The following tables set forth the management fees (net of fee waivers and expense reimbursements) paid by the Funds and the fees waived and expenses reimbursed by the Adviser for the specified periods.
| Management Fees Net of Expense Reimbursement Paid to the Adviser for the Year Ended | Fee Waivers and Expense Reimbursements from the Adviser for the Year Ended | |||||||||||||||||||||||
| 2/28/09 | 2/28/10 | 2/28/11 | 2/28/09 | 2/28/10 | 2/28/11 | |||||||||||||||||||
Nuveen California High Yield Municipal Bond Fund | $ | 354,879 | $ | 425,345 | $ | 684,453 | $ | — | $ | 1,525 | $ | — | ||||||||||||
Nuveen California Municipal Bond Fund | 1,677,358 | 1,563,113 | 1,581,987 | — | — | — | ||||||||||||||||||
Nuveen California Municipal Bond Fund 2 | 1,108,167 | 1,025,220 | 969,409 | — | — | — | ||||||||||||||||||
Nuveen Connecticut Municipal Bond Fund | 1,726,170 | 1,788,849 | 1,816,844 | — | — | — | ||||||||||||||||||
Nuveen Massachusetts Municipal Bond Fund | 648,196 | 654,547 | 713,398 | — | — | — | ||||||||||||||||||
Nuveen Massachusetts Municipal Bond Fund 2 | 435,661 | 475,887 | 466,260 | — | — | — | ||||||||||||||||||
Nuveen New Jersey Municipal Bond Fund | 1,128,515 | 1,194,228 | 1,317,624 | — | — | — | ||||||||||||||||||
Nuveen New York Municipal Bond Fund | 2,155,955 | 2,199,040 | 2,316,341 | — | — | — | ||||||||||||||||||
Nuveen New York Municipal Bond Fund 2 | 1,535,537 | 1,554,928 | 1,540,272 | — | — | — | ||||||||||||||||||
In addition to the Adviser’s management fee, each Fund also pays a portion of the Trust’s general administrative expenses allocated in proportion to the net assets of each Fund. All fees and expenses are accrued daily and deducted before payment of dividends to investors.
The Funds, the other Nuveen Funds, the Adviser, Nuveen Asset Management, LLC and other related entities have adopted codes of ethics which essentially prohibit all Nuveen Fund management personnel, including the Funds’ portfolio managers, from engaging in personal investments which compete or interfere with, or attempt to take advantage of, a Fund’s anticipated or actual portfolio transactions, and are designed to assure that the interests of shareholders are placed before the interests of Nuveen personnel in connection with personal investment transactions.
Sub-Adviser
Effective January 1, 2011, the Adviser has selected its affiliate, Nuveen Asset Management, LLC, to serve as sub-adviser to manage the investment portfolio of each Fund. The Adviser pays Nuveen Asset Management, LLC a portfolio management fee equal to 58.33% of the advisory fee paid to the Adviser for its services to the California High Yield Municipal Bond Fund and 45.45% of the advisory fee paid to the Adviser for its services to the other Funds (net of any waivers, reimbursement payments, supermarket fees and alliance fees waived, reimbursed or paid by the Adviser in respect of the Funds).
Portfolio Managers
Unless otherwise indicated, the information below is provided as of January 1, 2011.
The following individuals have primary responsibility for the day-to-day implementation of the investment strategies of the Funds:
Name | Fund | |
Paul L. Brennan | New Jersey Municipal Bond Fund | |
Michael S. Hamilton | Connecticut Municipal Bond Fund Massachusetts Municipal Bond Fund Massachusetts Municipal Bond Fund 2 | |
John V. Miller | California High Yield Municipal Bond Fund | |
Scott R. Romans | California Municipal Bond Fund California Municipal Bond Fund 2 |
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New York Municipal Bond Fund New York Municipal Bond Fund 2 |
Compensation
Portfolio manager compensation consists primarily of base pay, an annual cash bonus and long-term incentive payments.
Base pay. Base pay is determined based upon an analysis of the portfolio manager’s general performance, experience, and market levels of base pay for such position.
Annual cash bonus. The Funds’ portfolio managers are eligible for an annual cash bonus determined based upon the particular portfolio manager’s performance, experience and market levels of base pay for such position. The maximum potential annual cash bonus is equal to a multiple of base pay.
A portion of each portfolio manager’s annual cash bonus is based on his or her Fund’s investment performance, generally measured over the past one- and three-year periods unless the portfolio manager’s tenure is shorter. Investment performance for the Funds is determined by evaluating each Fund’s performance relative to its benchmark(s) and/or Lipper industry peer group.
Each portfolio manager whose performance is evaluated in part by comparing the manager’s performance to a benchmark is measured against a Fund-specific customized subset (limited to bonds in each Fund’s specific state and with certain maturity parameters) of the S&P/Investortools Municipal Bond Index, an index comprised of bonds held by managed municipal bond fund customers of Standard & Poor’s Securities Pricing, Inc. that are priced daily and whose fund holdings aggregate at least $2 million. As of December 31, 2010, the S&P/Investortools Municipal Bond Index was comprised of 57,308 securities with an aggregate current market value of $1,226 billion.
Bonus amounts can also be influenced by factors other than investment performance. These other factors are more subjective and are based on evaluations by each portfolio manager’s supervisor and reviews submitted by his or her peers. These reviews and evaluations often take into account a number of factors, including the portfolio manager’s effectiveness in communicating investment performance to shareholders and their advisors, his or her contribution to Nuveen Asset Management’s investment process and to the execution of investment strategies consistent with risk guidelines, his or her participation in asset growth, and his or her compliance with Nuveen Asset Management’s policies and procedures.
Investment performance is measured on a pre-tax basis, gross of fees for a Fund’s results and for its Lipper industry peer group.
Long-term incentive compensation. Certain key employees of Nuveen Investments and its affiliates, including certain portfolio managers, have received profits interests in the parent company of Nuveen Investments which entitle their holders to participate in the appreciation in the value of Nuveen Investments. In addition, in July 2009, Nuveen Investments created and funded a trust which purchased shares of certain Nuveen Mutual Funds and awarded such shares, subject to vesting, to certain key employees, including certain portfolio managers. Finally, certain key employees of Nuveen Asset Management, including certain portfolio managers, have received profits interests in Nuveen Asset Management which entitle their holders to participate in the firm’s growth over time.
There are generally no differences between the methods used to determine compensation with respect to the Funds and the Other Accounts shown in the table above.
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Other Accounts Managed
In addition to the Funds, as of February 28, 2011, the portfolio managers are also primarily responsible for the day-to-day portfolio management of the following accounts:
Portfolio Manager | Type of Account Managed | Number of Accounts | Assets | Number of Accounts with Performance Based Fees | Assets of Accounts with Performance Based Fees | |||||
Paul L. Brennan | Registered Investment Company | 23 | $15.43 billion | 0 | 0 | |||||
| Other Pooled Investment Vehicles | 0 | 0 | 0 | 0 | ||||||
| Other Accounts | 2 | 1.45 million | 0 | 0 | ||||||
Michael S. Hamilton | Registered Investment Company | 14 | $1.03 billion | 0 | 0 | |||||
| Other Pooled Investment Vehicles | 0 | 0 | 0 | 0 | ||||||
| Other Accounts | 4 | 199.4 million | 0 | 0 | ||||||
John V. Miller | Registered Investment Company | 8 | $6.81 billion | 0 | 0 | |||||
| Other Pooled Investment Vehicles | 4 | 314 million | 0 | 0 | ||||||
| Other Accounts | 14 | 2.4 million | 0 | 0 | ||||||
Scott R. Romans | Registered Investment Company | 29 | $6.77 billion | 0 | 0 | |||||
| Other Pooled Investment Vehicles | 0 | 0 | 0 | 0 | ||||||
| Other Accounts | 2 | 0.60 million | 0 | 0 |
Conflicts of Interest
Each portfolio manager’s simultaneous management of the Funds and the other accounts noted above may present actual or apparent conflicts of interest with respect to the allocation and aggregation of securities orders placed on behalf of a Fund and the other account. The sub-adviser, however, believes that such potential conflicts are mitigated by the fact that it has adopted several policies that address potential conflicts of interest, including best execution and trade allocation policies that are designed to ensure (1) that portfolio management is seeking the best price for portfolio securities under the circumstances, (2) fair and equitable allocation of investment opportunities among accounts over time and (3) compliance with applicable regulatory requirements. All accounts are to be treated in a non-preferential manner, such that allocations are not based upon account performance, fee structure or preference of the portfolio manager, although the allocation procedures may provide allocation preferences to funds with special characteristics (such as favoring state funds versus national funds for allocations of in-state bonds). In addition, the sub-adviser has adopted a Code of Conduct that sets forth policies regarding conflicts of interest.
Beneficial Ownership of Securities
As of February 28, 2011, each portfolio manager beneficially owned the following dollar range of equity securities issued by the Funds and other Nuveen Funds managed by Nuveen Asset Management, LLC’s municipal investment team:
Name of Portfolio Manager | Fund | Dollar��range of | Dollar range of | |||
Paul L. Brennan | New Jersey Municipal Bond Fund | $0 | $500,001-$1,000,000 | |||
Michael S. Hamilton | Connecticut Municipal Bond Fund | 0 | $0 | |||
| Massachusetts Municipal Bond Fund | 0 | |||||
| Massachusetts Municipal Bond Fund 2 | 0 | |||||
John V. Miller | California High Yield Municipal Bond Fund | 0 | $100,001-$500,000 | |||
Scott R. Romans | California Municipal Bond Fund | 0 | $0 | |||
| California Municipal Bond Fund 2 | 0 | |||||
| New York Municipal Bond Fund | 0 | |||||
| New York Municipal Bond Fund 2 | 0 |
The portfolio managers do not beneficially own any shares issued by the Funds because the Funds are state-specific and provide exemption from both regular federal, state and/or income tax for residents of the state in question, while the portfolio managers, each of whom lives in Illinois, would not benefit from that double or triple tax exemption and are better served investing in a nationally diversified fund.
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Proxy Voting Policies
The Funds invest their assets primarily in municipal bonds and cash management securities. On rare occasions a Fund may acquire, directly or through a special purpose vehicle, equity securities of a municipal bond issuer whose bonds the Fund already owns when such bonds have deteriorated or are expected shortly to deteriorate significantly in credit quality. The purpose of acquiring equity securities generally will be to acquire control of the municipal bond issuer and to seek to prevent the credit deterioration or facilitate the liquidation or other workout of the distressed issuer’s credit problem. In the course of exercising control of a distressed municipal issuer, Nuveen Asset Management, LLC may pursue the Fund’s interests in a variety of ways, which may entail negotiating and executing consents, agreements and other arrangements, and otherwise influencing the management of the issuer. Nuveen Asset Management, LLC does not consider such activities proxy voting for purposes of Rule 206(4)-6 under the 1940 Act, but nevertheless provides reports to the Fund’s Board of Trustees on its control activities on a quarterly basis.
In the rare event that a municipal issuer were to issue a proxy or that the Fund were to receive a proxy issued by a cash management security, Nuveen Asset Management, LLC would either engage an independent third party to determine how the proxy should be voted or vote the proxy with the consent, or based on the instructions, of the Fund’s Board of Trustees or its representative. A member of Nuveen Asset Management, LLC’s legal department would oversee the administration of the voting, and ensure that records were maintained in accordance with Rule 206(4)-6, reports were filed with the Securities and Exchange Commission (“SEC”) on Form N-PX, and the results provided to the Fund’s Board of Trustees and made available to shareholders as required by applicable rules.
Nuveen Asset Management, LLC is responsible for decisions to buy and sell securities for the Funds, the negotiation of the prices to be paid or received for principal trades, and the allocation of transactions among various dealer firms. Portfolio securities will normally be purchased directly from an underwriter in a new issue offering or in the over-the-counter secondary market from the principal dealers in such securities, unless it appears that a better price or execution may be obtained elsewhere. Portfolio securities will not be purchased from Nuveen or its affiliates except in compliance with the 1940 Act.
The Funds expect that substantially all portfolio transactions will be effected on a principal (as opposed to an agency) basis and, accordingly, do not expect to pay significant amounts of brokerage commissions. Brokerage will not be allocated based on the sale of a Fund’s shares. Purchases from underwriters will include a commission or concession paid by the issuer to the underwriter, and purchases from dealers will include the spread between the bid and asked price. It is the policy of Nuveen Asset Management, LLC to seek the best execution under the circumstances of each trade. Nuveen Asset Management, LLC evaluates price as the primary consideration, with the financial condition, reputation and responsiveness of the dealer considered secondarily in determining best execution. Given the best execution obtainable, it may be Nuveen Asset Management, LLC’s practice to select dealers that, in addition, furnish research information (primarily credit analyses of issuers and general economic reports) and statistical and other services to Nuveen Asset Management, LLC. It is not possible to place a dollar value on information and statistical and other services received from dealers. Since it is only supplementary to Nuveen Asset Management, LLC’s own research efforts, the receipt of research information is not expected to reduce significantly Nuveen Asset Management, LLC’s expenses. For certain secondary market transactions where the execution capability of two brokers is judged to be of substantially similar quality, Nuveen Asset Management, LLC may randomly select one of them. While Nuveen Asset Management, LLC will be primarily responsible for the placement of the portfolio transactions of the Funds, the policies and practices of Nuveen Asset Management, LLC in this regard must be consistent with the foregoing and will, at all times, be subject to review by the Board of Trustees.
Nuveen Asset Management, LLC may manage other investment companies and investment accounts for other clients that have investment objectives similar to the Funds. Subject to applicable laws and regulations, Nuveen Asset Management, LLC seeks to allocate portfolio transactions equitably whenever concurrent decisions are made to purchase or sell securities by a Fund and another advisory account. In making such allocations the main factors to be considered will be the respective investment objectives, the relative size of portfolio holdings of the same or comparable securities, the availability of cash for investment or need to raise cash, and the size of investment commitments generally held. While this procedure could have a detrimental effect on the price or amount of the securities (or, in the case of dispositions, the demand for securities) available to the Funds from time to time, it is the opinion of the Board of Trustees that the benefits available from Nuveen Asset Management, LLC organization will outweigh any disadvantage that may arise from exposure to simultaneous transactions.
Each Fund’s net asset value is determined as set forth in its Prospectus under “General Information—Net Asset Value.”
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Federal Income Tax Matters
This section summarizes some of the main U.S. federal income tax consequences of owning shares of a Fund. This section is current as of the date of this Statement of Additional Information. Tax laws and interpretations change frequently, and this summary does not describe all of the tax consequences to all taxpayers. For example, this summary generally does not describe your situation if you are a corporation, a non-U.S. person, a broker-dealer or other investor with special circumstances. In addition, this section does not describe your state, local or non-U.S. tax consequences. This federal income tax summary is based in part on the advice of counsel to the Funds. The Internal Revenue Service could disagree with any conclusions set forth in this section. In addition, Funds’ counsel was not asked to review, and has not reached a conclusion with respect to the federal income tax treatment of the assets to be deposited in the Funds. Consequently, this summary may not be sufficient for you to use for the purpose of avoiding penalties under federal tax law. As with any investment, you should seek advice based on your individual circumstances from your own tax professional.
Fund Status
Each Fund intends to qualify as a “regulated investment company” under the federal tax laws. If a Fund qualifies as a regulated investment company and distributes its income as required by the tax law, the Fund generally will not pay federal income taxes.
Qualification as a Regulated Investment Company
As a regulated investment company, a Fund generally will not be subject to federal income tax on its investment company taxable income (as that term is defined in the Internal Revenue Code (“Code”), but without regard to the deduction for dividends paid) and net capital gain (i.e., the excess of net long-term capital gain over net short-term capital loss), if any, that it distributes to shareholders, provided that it distributes at least 90% of its investment company taxable income and 90% of its net tax-exempt interest income for the year (the “Distribution Requirement”) and satisfies certain other requirements of the Code that are described below. Each Fund also intends to make such distributions as are necessary to avoid the otherwise applicable 4% non-deductible excise tax on certain undistributed earnings.
In addition to satisfying the Distribution Requirement, each Fund must derive at least 90% of its gross income from (1) dividends, interest, certain payments with respect to loans of stock and securities, gains from the sale or disposition of stock, securities or non-U.S. currencies and other income (including but not limited to gains from options, futures or forward contracts) derived with respect to its business of investing in such stock, securities or currencies, and (2) net income derived from an interest in a “qualified publicly traded partnership” (as such term is defined in the Code). Each Fund must also satisfy an asset diversification test in order to qualify as a regulated investment company. Under this test, at the close of each quarter of a Fund’s taxable year, (1) 50% or more of the value of the Fund’s assets must be represented by cash, and cash items (including receivables), United States government securities, securities of other regulated investment companies, and other securities, with such other securities limited, in respect of any one issuer, to an amount not greater than 5% of the value of the Fund’s assets and not greater than 10% of the outstanding voting securities of such issuer and (2) not more than 25% of the value of the Fund’s assets may be invested in securities of (a) any one issuer (other than U.S. government securities or securities of other regulated investment companies), or of two or more issuers which the Fund controls and which are engaged in the same, similar or related trades or businesses or (b) in the securities of one or more “qualified publicly traded partnerships” (as such term is defined in the Code). There are certain exceptions for failure to qualify if the failure is for reasonable cause or is de minimis and certain corrective action is taken and certain tax payments are made by the Fund.
Distributions
After the end of each year, you will receive a tax statement that separates your Fund’s distributions into four categories, exempt-interest dividends, ordinary income distributions, capital gains dividends and returns of capital. Exempt-interest dividends generally are excluded from your gross income for federal income tax purposes. Some or all of the exempt-interest dividends, however, may be taken into account in determining your alternative minimum tax and may have other tax consequences (e.g., they may affect the amount of your social security benefits that are taxed). Ordinary income distributions are generally taxed at your ordinary tax rate. Generally, you will treat all capital gains dividends as long-term capital gains regardless of how long you have owned your shares. To determine your actual tax liability for your capital gains dividends, you must calculate your total net capital gain or loss for the tax year after considering all of your other taxable transactions, as described below. In addition, a Fund may make distributions that represent a return of capital for tax purposes and thus will generally not be taxable to you unless the distribution exceeds your basis in your shares. The tax status of your distributions from your Fund is not affected by whether you reinvest your distributions in additional shares or receive them in cash. The income from your Fund that you must take into account for federal income tax purposes is not reduced by amounts used to pay a deferred sales fee, if any. The tax laws may require you to treat distributions made to you in January as if you had received them on December 31 of the previous year. Under the “Health
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Care and Education Reconciliation Act of 2010,” income from the Fund may also be subject to a new 3.8 percent “medicare tax” imposed for taxable years beginning after 2012. This tax will generally apply to your net investment income if your adjusted gross income exceeds certain threshold amounts, which are $250,000 in the case of married couples filing joint returns and $200,000 in the case of single individuals. Interest that is excluded from gross income and exempt-interest dividends from the Funds are generally not included in your net investment income for purposes of this tax.
Dividends Received Deduction
A corporation that owns shares generally will not be entitled to the dividends received deduction with respect to dividends received from the Funds because the dividends received deduction is generally not available for distributions from regulated investment companies.
If You Sell or Redeem Your Shares
If you sell or redeem your shares, you will generally recognize a taxable gain or loss. To determine the amount of this gain or loss, you must subtract your tax basis in your shares from the amount you receive in the transaction. Your tax basis in your shares is generally equal to the cost of your shares, generally including sales charges. In some cases, however, you may have to adjust your tax basis after you purchase your shares. Further, if you hold your shares for six months or less, any loss incurred by you related to the disposition of such a share will be disallowed to the extent of the exempt-interest dividends you received, except as otherwise described in the next section.
Capital Gains and Losses
If you are an individual, the maximum marginal federal tax rate for net capital gain is generally 15% (generally 0% for certain taxpayers in the 10% and 15% tax brackets). These capital gains rates are generally effective for taxable years beginning before January 1, 2013. For later periods, if you are an individual, the maximum marginal federal tax rate for net capital gain is generally 20% (10% for certain taxpayers in the 10% and 15% tax brackets). The 20% rate is reduced to 18% for net capital gains from most property acquired after December 31, 2000 with a holding period of more than five years, and the 10% rate is reduced to 8% for net capital gains from most property (regardless of when acquired) with a holding period of more than five years.
Net capital gain equals net long-term capital gain minus net short-term capital loss for the taxable year. Capital gain or loss is long-term if the holding period for the asset is more than one year and is short-term if the holding period for the asset is one year or less. You must exclude the date you purchase your shares to determine your holding period. If you hold a share for six months or less, any loss incurred by you related to the disposition of such share will be disallowed to the extent of the exempt-interest dividends you received, except in the case of a regular dividend paid by the Fund if the Fund declares exempt-interest dividends on a daily basis in an amount equal to at least 90 percent of its net tax-exempt interest and distributes such dividends on a monthly or more frequent basis. To the extent, if any, it is not disallowed, it will be recharacterized as long-term capital loss to the extent of the capital gain dividend received. The tax rates for capital gains realized from assets held for one year or less are generally the same as for ordinary income. The Internal Revenue Code treats certain capital gains as ordinary income in special situations.
Exempt-Interest Dividends
A regulated investment company may report any portion of a dividend (other than a capital gain dividend) as an “exempt-interest dividend,” if at least half of the regulated investment company’s assets consist of tax-exempt state and local bonds. In the case of a qualified fund of funds, the regulated investment company may (1) pay exempt-interest dividends without regard to the requirement that at least 50 percent of the value of its total assets consist of tax-exempt state and local bonds and (2) elect to allow its shareholders the foreign tax credit without regard to the requirement that more than 50 percent of the value of its total assets consist of stock or securities in foreign corporations. For this purpose, a qualified fund of funds means a regulated investment company at least 50 percent of the value of the total assets of which (at the close of each quarter of the taxable year) is represented by interests in other regulated investment companies. The shareholder treats an exempt-interest dividend as an item of tax-exempt interest.
Your Fund intends to qualify either under the percentage of assets test or as a qualified fund of funds, as described above. If your Fund qualifies under either test, some or all of a dividend paid by the Fund may be treated as an exempt-interest dividend.
In-Kind Distributions
Under certain circumstances, as described in the Prospectus, you may receive an in-kind distribution of Fund securities when you redeem shares or when your Fund terminates. This distribution will be treated as a sale for federal income tax purposes and you will generally recognize gain or loss, generally based on the value at that time of the securities and the amount of cash received. The Internal Revenue Service could, however, assert that a loss may not be currently deducted.
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Exchanges
If you exchange shares of a Fund for shares of another Nuveen Mutual Fund, the exchange would generally be considered a sale for federal income tax purposes.
Deductibility of Fund Expenses
Expenses incurred and deducted by your Fund will generally not be treated as income taxable to you. In some cases, however, you may be required to treat your portion of these Fund expenses as income. In these cases you may be able to take a deduction for these expenses. However, certain miscellaneous itemized deductions, such as investment expenses, may be deducted by individuals only to the extent that all of these deductions exceed 2% of the individual’s adjusted gross income. Further, because the Funds pay exempt-interest dividends, which are treated as exempt interest for federal income tax purposes, you will not be able to deduct some of your interest expense for debt that you incur or continue to purchase or carry your shares.
Foreign Investors
If you are a foreign investor (i.e., an investor other than a U.S. citizen or resident or a U.S. corporation, partnership, estate or trust), you should be aware that, generally, subject to applicable tax treaties, distributions from the Funds will be characterized as dividends for federal income tax purposes (other than dividends which a Fund properly reports as capital gain dividends) and, other than exempt-interest dividends, will be subject to U.S. income taxes, including withholding taxes, subject to certain exceptions described below. However, distributions received by a foreign investor from a Fund that are properly reported by the Fund as capital gain dividends may not be subject to U.S. federal income taxes, including withholding taxes, provided that the Fund makes certain elections and certain other conditions are met. In the case of dividends with respect to taxable years of a Fund beginning prior to 2012, distributions from the Fund that are properly reported by the Fund as an interest-related dividend attributable to certain interest income received by the Fund or as a short-term capital gain dividend attributable to certain net short-term capital gain income received by the Fund may not be subject to U.S. federal income taxes, including withholding taxes when received by certain foreign investors, provided that the Fund makes certain elections and certain other conditions are met. Distributions and dispositions of shares after December 31, 2012 may be subject to a U.S. withholding tax of 30% in the case of distributions to (i) certain non-U.S. financial institutions that have not entered into an agreement with the U.S. Treasury to collect and disclose certain information and (ii) certain other non-U.S. entities that do not provide certain certifications and information about the entity’s U.S. owners.
State Tax Matters
The treatment of certain dividends from each Fund under particular state taxes is discussed below. It should be noted that this treatment may change if a Fund ever fails to qualify as a RIC for federal income tax purposes. This discussion is based on state laws as enacted and construed on the date of this SAI and in certain cases is based on administrative guidance from state revenue departments. These laws and interpretations can, of course, change at any time. Only certain specific taxes are discussed below and Fund shares and Fund distributions may be subject to other state and local taxes. In addition, the discussions below are generally limited to Fund distributions attributable to certain tax-exempt interest. Generally, other distributions from a Fund are subject to all state income taxes, except that under certain circumstances, many states do provide exemptions for distributions attributable to interest on certain United States government obligations. Additionally, you may be subject to state income tax to the extent you sell or exchange Fund shares and realize a capital gain on the transaction.
Generally, unlike the federal individual income tax, state income taxes do not provide beneficial treatment of long-term capital gains, including capital gains dividends from a Fund. Further, most states restrict deductions for capital losses.
Ownership of shares in a Fund could result in other state and local income tax consequences to certain taxpayers. For example, interest expense incurred or continued to purchase or carry shares of a Fund, if the Fund distributes dividends exempt from a particular state income tax, generally is not deductible for purposes of that income tax.
Prospective investors should consult their tax advisors with respect to all state and local tax issues related to the ownership of shares in a Fund and the receipt of distributions from a Fund.
California Tax Status
The assets of the California Funds will consist of interest bearing obligations issued by or on behalf of the State of California or a local government in California (the “California Bonds”) or by the government of Puerto Rico, Guam or the Virgin Islands (the “Possession Bonds,” and, collectively with the California Bonds, the “Bonds”). The discussion in this section is based on the assumption that: (i) the Bonds were validly issued by the State of California or a local government in California, or by the government of Puerto Rico, Guam or the Virgin Islands, as the case may be, (ii) the interest on the Bonds is excludable from gross income for federal income tax purposes, and (iii) with respect to the Possession Bonds, the Possession Bonds and the interest thereon are exempt from all state and local taxation. This disclosure does not address the taxation of persons other than full-time residents of the State of California.
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If you are an individual, you may exclude from income for purposes of the California Personal Income Tax dividends received from a California Fund that are properly designated by the California Fund in a written notice mailed to you as California exempt-interest dividends. The portion of a California Fund’s dividends designated as California exempt interest dividends may not exceed the amount of interest the California Fund receives during its taxable year on obligations the interest on which, if held by an individual, is exempt from taxation by the State of California, reduced by certain non-deductible expenses. A California Fund may designate California exempt-interest dividends only if the California Fund qualifies as a regulated investment company under the Internal Revenue Code of 1986, and, if at the close of each quarter of its taxable year, at least 50 percent of the value of the total assets consists of obligations the interest on which when held by an individual, is exempt from taxation by the State of California. A “fund of funds” structure which would allow a regulated investment company to distribute exempt-interest dividends for federal income tax purposes, would not be eligible to make exempt-interest dividends for California tax purposes.
Distributions from a California Fund, other than California exempt-interest dividends, will generally be subject to the California Personal Income Tax. Please note that California exempt-interest dividends received by taxpayers subject to the California Corporation Tax Law may be includible in their gross income for purposes of determining its California franchise tax and its California income tax. Interest on indebtedness incurred or continued to purchase or carry shares of a California Fund, if the California Fund distributes California exempt-interest dividends during a year, is not deductible for purposes of the California Personal Income Tax.
Neither the sponsor nor its counsel have independently examined the Bonds or the opinions of bond counsel rendered in connection with the issuance of the Bonds. Ownership of shares in a California Fund may result in other California tax consequences to certain taxpayers, and prospective investors should consult their tax advisors.
Connecticut Tax Status
The assets of the Connecticut Fund will consist of interest bearing obligations issued by or on behalf of the State of Connecticut, any political subdivisions thereof, or public instrumentality, state or local authority, district or similar public entity created under the laws of the State of Connecticut (the “Connecticut Bonds”) or by the government of Puerto Rico, Guam or the Virgin Islands (the “Possession Bonds,” and, collectively with the Connecticut Bonds, the “Bonds”). The discussion in this section is based on the assumption that: (i) the Bonds were validly issued by the State of Connecticut, any political subdivisions thereof, or public instrumentality, state or local authority, district or similar public entity created under the laws of the State of Connecticut, or by the government of Puerto Rico, Guam or the Virgin Islands, as the case may be, (ii) the interest on the Bonds is excludable from gross income for federal income tax purposes, and (iii) with respect to the Possession Bonds, the Possession Bonds and the interest thereon are exempt from all state and local taxation. This disclosure does not address the taxation of persons other than full-time residents of the State of Connecticut.
Exempt-interest dividends distributed by the Connecticut Fund that are excluded from gross income for federal income tax purposes and are attributable to interest on the Bonds will be excluded from taxable income for purposes of the Connecticut State personal income tax imposed by Chapter 229 of Title 12 of the General Statutes of Connecticut, Revision of 1958 (the “Connecticut Personal Income Tax”).
Capital gain dividends distributed by the Connecticut Fund will be excluded from taxable income for purposes of the Connecticut Personal Income Tax to the extent attributable to the sale or exchange of the Connecticut Bonds.
Distributions from the Connecticut Fund, other than exempt-interest dividends attributable to interest on the Bonds and capital gain dividends attributable to the sale or exchange of the Connecticut Bonds, will generally be subject to the Connecticut Personal Income Tax.
You generally will be subject to tax for purposes of the Connecticut Personal Income Tax on the gain recognized on the sale or redemption of a share of the Connecticut Fund.
You should be aware that, generally, interest on indebtedness incurred or continued to purchase or carry shares of the Connecticut Fund is not deductible for purposes of the Connecticut Personal Income Tax.
Distributions, including exempt-interest dividends, distributed by the Connecticut Fund will generally be subject to the Connecticut State corporation business tax imposed by Chapter 208 of Title 12 of the General Statutes of Connecticut, Revision of 1958 (the “Connecticut Corporation Business Tax”).
Neither the sponsor nor its counsel has independently examined the Bonds or the opinions of bond counsel rendered in connection with the issuance of the Bonds. Ownership of shares in the Connecticut Fund may result in other Connecticut consequences to certain taxpayers, and prospective investors should consult their tax advisors.
Massachusetts Tax Status
The assets of the Massachusetts Funds will consist of interest bearing obligations issued by the Commonwealth of Massachusetts, any political subdivision thereof, or any agency or instrumentality of either of the foregoing that are exempt from Massachusetts taxation (the “Massachusetts Bonds”) or by the government of Puerto Rico, Guam or the Virgin Islands (the “Possession Bonds,” and, collectively with the Massachusetts Bonds, the “Bonds”). The discussion in
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this section is based on the assumption that: (i) the Bonds were validly issued by the Commonwealth of Massachusetts, any political subdivision thereof, or any agency or instrumentality of either of the foregoing and are exempt from Massachusetts taxation, or by the government of Puerto Rico, Guam or the Virgin Islands, as the case may be, (ii) the interest on the Bonds is excludable from gross income for federal income tax purposes, and (iii) with respect to the Possession Bonds, the Possession Bonds and the interest thereon are exempt from all state and local taxation. This disclosure does not address the taxation of persons other than full-time residents of the State of Massachusetts.
Distributions from a Massachusetts Fund that constitute exempt-interest dividends for federal income tax purposes and are attributable to interest on the Bonds will be excluded from gross income for purposes of the Massachusetts State personal income tax imposed by Section 4 of Chapter 62 of the General Laws of the Commonwealth of Massachusetts, 1932 (the “Massachusetts Personal Income Tax”), provided such dividends are properly designated as such by a Massachusetts Fund in a written notice mailed to shareholders of the Massachusetts Fund.
Distributions from a Massachusetts Fund that constitute capital gain dividends for federal income tax purposes will be excluded from gross income for purposes of the Massachusetts Personal Income Tax to the extent attributable to the sale or exchange of the Massachusetts Bonds, provided such dividends are properly designated as such by the Massachusetts Fund in a written notice mailed to shareholders of the Massachusetts Fund.
Distributions from a Massachusetts Fund, other than exempt-interest dividends attributable to interest on the Bonds and capital gain dividends attributable to the sale or exchange of the Massachusetts Bonds, will generally be subject to the Massachusetts Personal Income Tax.
You generally will be subject to tax for purposes of the Massachusetts Personal Income Tax on the gain recognized on the sale or redemption of a share of a Massachusetts Fund.
You should be aware that, generally, interest on indebtedness incurred or continued to purchase or carry shares of a Massachusetts Fund is not deductible for purposes of the Massachusetts Personal Income Tax.
Distributions from a Massachusetts Fund, including exempt-interest dividends, will generally be subject to the Massachusetts State corporation business tax imposed by Section 39 of Chapter 63 of the General Laws of the Commonwealth of Massachusetts, 1932 (the “Massachusetts Corporation Business Tax”).
Neither the sponsor nor its counsel has independently examined the Bonds or the opinions of bond counsel rendered in connection with the issuance of the Bonds. Ownership of shares in a Massachusetts Fund may result in other Massachusetts consequences to certain taxpayers, and prospective investors should consult their tax advisors.
New Jersey Tax Status
The assets of the New Jersey Fund will consist of interest bearing obligations issued by or on behalf of the State of New Jersey or any county, municipality, school or other district, agency, authority, commission, instrumentality, public corporation (including one created or existing pursuant to agreement or compact with New Jersey or any other state), body corporate and politic or political subdivision of New Jersey (the “New Jersey Bonds”) or by the government of Puerto Rico, Guam or the Virgin Islands (the “Possession Bonds,” and, collectively with the New Jersey Bonds, the “Bonds”). The discussion in this section is based on the assumption that: (i) the Bonds were validly issued by or on behalf of the State of New Jersey or any county, municipality, school or other district, agency, authority, commission, instrumentality, public corporation (including one created or existing pursuant to agreement or compact with New Jersey or any other state), body corporate and politic or political subdivision of New Jersey, or by the government of Puerto Rico, Guam or the Virgin Islands, as the case may be, (ii) the interest on the Bonds is excludable from gross income for federal income tax purposes, and (iii) with respect to the Possession Bonds, the Possession Bonds and the interest thereon are exempt from all state and local taxation. This disclosure does not address the taxation of persons other than full-time residents of the State of New Jersey.
Assuming the New Jersey Fund qualifies as a “qualified investment fund” for purposes of the New Jersey Gross Income Tax Act, distributions from the New Jersey Fund that are attributable to interest or gain received by the New Jersey Fund from obligations (1) issued by or on behalf of New Jersey or any county, municipality, school or other district, agency, authority, commission, instrumentality, public corporation (including one created or existing pursuant to agreement or compact with New Jersey or any other state), body corporate and politic or political subdivision of New Jersey, or (2) which are statutorily free from state or local taxation under federal or state law, are excluded from gross income for purposes of the New Jersey Gross Income Tax Act. To be a “qualified investment fund,” the New Jersey Fund may have no investments other than interest bearing obligations and certain other financial instruments and at least 80 percent of the aggregate principal amount of its investments must be in obligations described in the previous sentence. Thus, a “fund of funds” structure which would allow a regulated investment company to distribute exempt-interest dividends for federal income tax purposes, would not be eligible to make exempt-interest dividends for purposes of the New Jersey Gross Income Tax.
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Other distributions from the New Jersey Fund will generally be subject to the New Jersey Gross Income Tax Act. Interest on indebtedness incurred or continued to purchase or carry shares of the New Jersey Fund is not deductible for purposes of the New Jersey Gross Income Tax Act.
You generally will not be subject to tax for purposes of the New Jersey Gross Income Tax Act on the gain recognized on the sale or redemption of a share of the New Jersey Fund.
All distributions from the New Jersey Fund will generally be subject to the New Jersey franchise tax imposed on corporations.
Neither the sponsor nor its counsel have independently examined the Bonds or the opinions of bond counsel rendered in connection with the issuance of the Bonds. Ownership of shares in the New Jersey Fund may result in other New Jersey tax consequences to certain taxpayers, and prospective investors should consult their tax advisors.
New York Tax Status
The assets of the New York Funds will consist of interest bearing obligations issued by or on behalf of the State of New York or political subdivisions thereof (the “New York Bonds”) or by the government of Puerto Rico, Guam or the Virgin Islands (the “Possession Bonds,” and, collectively with the New York Bonds, the “Bonds”). The discussion in this section is based on the assumption that: (i) the Bonds were validly issued by the State of New York or a political subdivision thereof, or by the government of Puerto Rico, Guam or the Virgin Islands, as the case may be, (ii) the interest on the Bonds is excludable from gross income for federal income tax purposes, and (iii) with respect to the Possession Bonds, the Possession Bonds and the interest thereon are exempt from all state and local taxation. This disclosure does not address the taxation of persons other than full-time residents of the State of New York and New York City.
Exempt-interest dividends distributed by a New York Fund that are excluded from gross income for federal income tax purposes and are attributable to interest on the Bonds will be excluded from taxable income for purposes of the New York State personal income tax imposed by Article 22 of the New York State Tax Law (the “State Personal Income Tax”) and the personal income tax imposed by the City of New York under Section 11-1701 of the Administrative Code (the “City Personal Income Tax”).
Distributions from a New York Fund other than exempt-interest dividends attributable to interest on the Bonds, will generally be subject to the State Personal Income Tax and the City Personal Income Tax.
Distributions, including exempt-interest dividends, distributed by a New York Fund will generally be subject to the New York State franchise tax imposed on domestic and foreign corporations by Article 9-A of the New York State Tax Law (the “State Corporate Tax”) and the general corporation tax imposed by the City of New York on domestic and foreign corporations under Section 11-603 of the Administrative Code of the City of New York (the “City Corporate Tax”).
You generally will be subject to tax for purposes of the State Personal Income Tax, the City Personal Income Tax, the State Corporate Tax and the City Corporate Tax on the gain recognized on the sale or redemption of a share in a New York Fund.
You should be aware that, generally, interest on indebtedness incurred or continued to purchase or carry shares is not deductible for purposes of the State Personal Income Tax or the City Personal Income Tax.
Neither the sponsor nor its counsel has independently examined the Bonds or the opinions of bond counsel rendered in connection with the issuance of the Bonds. Ownership of shares in a New York Fund may result in other New York State and New York City tax consequences to certain taxpayers, and prospective investors should consult their tax advisors.
PURCHASE AND REDEMPTION OF FUND SHARES
As described in the Prospectus, the Funds provide you with alternative ways of purchasing Fund shares based upon your individual investment needs and preferences. The Funds are generally not a suitable investment for individuals investing through retirement plans.
Each class of shares of a Fund represents an interest in the same portfolio of investments. Each class of shares is identical in all respects except that each class bears its own class expenses, including distribution and administration expenses, and each class has exclusive voting rights with respect to any distribution or service plan applicable to its shares. As a result of the differences in the expenses borne by each class of shares, net income per share, dividends per share and net asset value per share will vary among a Fund’s classes of shares. There are no conversion, preemptive or other subscription rights, except that Class B shares automatically convert into Class A shares as described below.
Shareholders of each class will share expenses proportionately for services that are received equally by all shareholders. A particular class of shares will bear only those expenses that are directly attributable to that class, where the type or amount of services received by a class varies from one class to another. For example, class-specific expenses generally will include distribution and service fees for those classes that pay such fees.
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The expenses to be borne by specific classes of shares may include (i) transfer agency fees attributable to a specific class of shares, (ii) printing and postage expenses related to preparing and distributing materials such as shareholder reports, prospectuses and proxy statements to current shareholders of a specific class of shares, (iii) SEC and state securities registration fees incurred by a specific class of shares, (iv) the expense of administrative personnel and services required to support the shareholders of a specific class of shares, (v) litigation or other legal expenses relating to a specific class of shares, (vi) trustees’ fees or expenses incurred as a result of issues relating to a specific class of shares, (vii) accounting expenses relating to a specific class of shares and (viii) any additional incremental expenses subsequently identified and determined to be properly allocated to one or more classes of shares.
Class A Shares
Class A shares may be purchased at a public offering price equal to the applicable net asset value per share plus an up-front sales charge imposed at the time of purchase as set forth in the Prospectus. Shareholders may qualify for a reduced sales charge, or the sales charge may be waived in its entirety, as described below. Class A shares are also subject to an annual service fee of 0.20%. See “Distribution and Service Plans.” Set forth below is an example of the method of computing the offering price of the Class A shares of a Fund. The example assumes a purchase on February 28, 2011 of Class A shares from the Nuveen Massachusetts Municipal Bond Fund aggregating less than $50,000 subject to the schedule of sales charges set forth in the Prospectus at a price based upon the net asset value of the Class A shares.
Net Asset Value per share | $ | 9.47 | ||
Per Share Sales Charge—4.20% of public offering price (4.44% of net asset value per share) | .42 | |||
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Per Share Offering Price to the Public | $ | 9.89 | ||
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Each Fund receives the entire net asset value of all Class A shares that are sold. The Distributor retains the full applicable sales charge from which it pays the uniform reallowances shown in the Prospectus to financial intermediaries.
Reduction or Elimination of Up-Front Sales Charge on Class A Shares
Rights of Accumulation. You may qualify for a reduced sales charge on a purchase of Class A shares of a Fund if the amount of your purchase, when added to the value that day of all of your shares of any Nuveen Mutual Fund, falls within the amounts stated in the Class A Sales Charges and Commissions table in “How You Can Buy and Sell Shares” in the Prospectus. You or your financial advisor must notify the Distributor or the Fund’s transfer agent of any cumulative discount whenever you plan to purchase Class A shares of a Fund that you wish to qualify for a reduced sales charge.
Letter of Intent. You may qualify for a reduced sales charge on a purchase of Class A shares of a Fund if you plan to purchase Class A shares of Nuveen Mutual Funds over the next 13 months and the total amount of your purchases would, if purchased at one time, qualify you for one of the reduced sales charges shown in the Class A Sales Charges and Commissions table in “How You Can Buy and Sell Shares” in the Prospectus. In order to take advantage of this option, you must complete the applicable section of the Application Form or sign and deliver to your financial advisor or other financial intermediary or to the Fund’s transfer agent a written Letter of Intent in a form acceptable to the Distributor. A Letter of Intent states that you intend, but are not obligated, to purchase over the next 13 months a stated total amount of Class A shares that would qualify you for a reduced sales charge shown above. You may count shares of all Nuveen Mutual Funds that you already own and any Class I and Class C shares of a Nuveen Mutual Fund that you purchase over the next 13 months towards completion of your investment program, but you will receive a reduced sales charge only on new Class A shares you purchase with a sales charge over the 13 months. You cannot count towards completion of your investment program Class A shares that you purchase without a sales charge through investment of distributions from a Nuveen Mutual Fund or a Nuveen Defined Portfolio, or otherwise.
By establishing a Letter of Intent, you agree that your first purchase of Class A shares of a Fund following execution of the Letter of Intent will be at least 5% of the total amount of your intended purchases. You further agree that shares representing 5% of the total amount of your intended purchases will be held in escrow pending completion of these purchases. All dividends and capital gains distributions on Class A shares held in escrow will be credited to your account. If total purchases, less redemptions, prior to the expiration of the 13 month period equal or exceed the amount specified in your Letter of Intent, the Class A shares held in escrow will be transferred to your account. If the total purchases, less redemptions, exceed the amount specified in your Letter of Intent and thereby qualify for a lower sales charge than the sales charge specified in your Letter of Intent, you will receive this lower sales charge retroactively, and the difference between it and the higher sales charge paid will be used to purchase additional Class A shares on your behalf. If the total purchases, less redemptions, are less than the amount specified, you must pay the Distributor an amount equal to the difference between the amounts paid for these purchases and the amounts which would have been paid if the higher sales charge had been applied. If you do not pay the additional amount within 20 days after written request by the Distributor or your financial advisor, the Distributor will redeem an appropriate number of your escrowed Class A shares to meet the required payment. By establishing a Letter of Intent, you irrevocably appoint the Distributor as attorney to give instructions to redeem any or all of your escrowed shares, with full power of substitution in the premises.
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You or your financial advisor must notify the Distributor or the Funds’ transfer agent whenever you make a purchase of Fund shares that you wish to be covered under the Letter of Intent option.
For purposes of determining whether you qualify for a reduced sales charge as described under Rights of Accumulation and Letter of Intent, you may include together with your own purchases those made by your spouse or domestic partner and your dependent children, whether these purchases are made through a taxable or non-taxable account. You may also include purchases made by a corporation, partnership or sole proprietorship which is 100% owned, either alone or in combination, by any of the foregoing. In addition, a trustee or other fiduciary can count all shares purchased for a single trust, estate or other single fiduciary account that has multiple accounts (including one or more employee benefit plans of the same employer).
Reinvestment of Nuveen Defined Portfolio Distributions. You may purchase Class A shares without an up-front sales charge by reinvestment of distributions from any of the various Defined Portfolios sponsored by the Distributor. There is no initial or subsequent minimum investment requirement for such reinvestment purchases. The Distributor is no longer sponsoring new Defined Portfolios.
Also, investors will be able to buy Class A shares at net asset value by using the termination/maturity proceeds from Nuveen Defined Portfolios. You must provide the Distributor appropriate documentation that the Defined Portfolio termination/ maturity occurred not more than 90 days prior to reinvestment.
Elimination of Sales Charge on Class A Shares. Class A shares of a Fund may be purchased at net asset value without a sales charge by the following categories of investors:
| • | investors purchasing $1,000,000 or more; |
| • | officers, trustees and former trustees of the Nuveen Funds; |
| • | bona fide, full-time and retired employees of Nuveen Investments, and subsidiaries thereof, or their immediate family members (immediate family members are defined as their spouses or domestic partners, parents, children, grandparents, grandchildren, parents-in-law, sons- and daughters-in-law, siblings, a sibling’s spouse and a spouse’s siblings); |
| • | any person who, for at least the last 90 days, has been an officer, director or bona fide employee of any financial intermediary, or their immediate family members; |
| • | bank or broker-affiliated trust departments investing funds over which they exercise exclusive discretionary investment authority and that are held in a fiduciary, agency, advisory, custodial or similar capacity; |
| • | investors purchasing on a periodic fee, asset-based fee or no transaction fee basis through a broker-dealer sponsored mutual fund purchase program; and |
| • | clients of investment advisers, financial planners or other financial intermediaries that charge periodic or asset-based fees for their services. |
Any Class A shares purchased pursuant to a special sales charge waiver must be acquired for investment purposes and on the condition that they will not be transferred or resold except through redemption by the Funds. You or your financial advisor must notify the Distributor or your Fund’s transfer agent whenever you make a purchase of Class A shares of any Fund that you wish to be covered under these special sales charge waivers.
Class A shares of any Fund may be issued at net asset value without a sales charge in connection with the acquisition by a Fund of another investment company. All purchases under the special sales charge waivers will be subject to minimum purchase requirements as established by the Funds.
The reduced sales charge programs may be modified or discontinued by the Funds at any time. For more information about the purchase of Class A shares or the reduced sales charge program, or to obtain the required application forms, call Nuveen Investor Services toll-free at (800) 257-8787.
Class B Shares
The Nuveen California High Yield Municipal Bond Fund does not issue Class B shares. The other Funds will only issue Class B shares (i) upon the exchange of Class B shares from another Nuveen Mutual Fund and (ii) for purposes of dividend reinvestment. Class B shares are not available for new accounts or for additional investment into existing accounts.
You may be subject to a Contingent Deferred Sales Charge (“CDSC”) if you redeem your Class B shares prior to the end of the sixth year after purchase. See “Reduction or Elimination of Contingent Deferred Sales Charge” below. The Distributor compensates financial intermediaries for sales of Class B shares at the time of sale at the rate of [4.00]% of the amount of Class B shares purchased, which represents a sales commission of [3.75]% plus an advance on the first year’s annual service fee of 0.20%.
Class B shares acquired through the reinvestment of dividends are not subject to a CDSC. Any CDSC will be imposed on the lower of the redeemed shares’ cost or net asset value at the time of redemption.
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Class B shares will automatically convert to Class A shares eight years after purchase. The purpose of the conversion is to limit the distribution fees you pay over the life of your investment. All conversions will be done at net asset value without the imposition of any sales load, fee, or other charge, so that the value of each shareholder’s account immediately before conversion will be the same as the value of the account immediately after conversion. Class B shares acquired through reinvestment of distributions will convert into Class A shares based on the date of the initial purchase to which such shares relate. For this purpose, Class B shares acquired through reinvestment of distributions will be attributed to particular purchases of Class B shares in accordance with such procedures as the Board of Trustees may determine from time to time. Class B shares that are converted to Class A shares will remain subject to an annual service fee that is identical in amount for both Class B shares and Class A shares. Since net asset value per share of the Class B shares and the Class A shares may differ at the time of conversion, a shareholder may receive more or fewer Class A shares than the number of Class B shares converted. Any conversion of Class B shares into Class A shares will be subject to the continuing availability of an opinion of counsel or a private letter ruling from the Internal Revenue Service to the effect that the conversion of shares would not constitute a taxable event under federal income tax law. Conversion of Class B shares into Class A shares might be suspended if such an opinion or ruling were no longer available.
Class C Shares
You may purchase Class C shares at a public offering price equal to the applicable net asset value per share without any up-front sales charge. Class C shares are subject to an annual distribution fee of 0.55% to compensate the Distributor for paying your financial advisor or other financial intermediary an ongoing sales commission. Class C shares are also subject to an annual service fee of 0.20% to compensate financial intermediaries for providing you with ongoing financial advice and other account services. The Distributor compensates financial intermediaries for sales of Class C shares at the time of the sale at a rate of 0.75% of the amount of Class C shares purchased, which represents an advance of the first year’s distribution fee of 0.55% plus an advance on the first year’s annual service fee of 0.20%. See “Distribution and Service Plans.”
Class C share purchase orders equaling or exceeding $1,000,000 will not be accepted. In addition, purchase orders for a single purchaser that, when added to the value that day of all of such purchaser’s shares of any class of any Nuveen Mutual Fund, cause the purchaser’s cumulative total of shares in Nuveen Mutual Funds to equal or exceed the aforementioned limit will not be accepted. Purchase orders for a single purchaser equal to or exceeding the foregoing limit should be placed only for Class A shares, unless such purchase has been reviewed and approved as suitable for the client by the appropriate compliance personnel of the financial intermediary, and the Fund receives written confirmation of such approval. Class C shares do not convert.
Redemption of Class C shares within 12 months of purchase may be subject to a CDSC of 1% of the lower of the purchase price or redemption proceeds. Because Class C shares do not convert to Class A shares and continue to pay an annual distribution fee indefinitely, Class C shares should normally not be purchased by an investor who expects to hold shares for significantly longer than eight years.
Reduction or Elimination of Contingent Deferred Sales Charge
Class A shares are normally redeemed at net asset value, without any Contingent Deferred Sales Charge (“CDSC”). However, in the case of Class A shares purchased at net asset value without a sales charge because the purchase amount exceeded $1 million, where the financial intermediary did not waive the sales commission, a CDSC of 1% is imposed on any redemption within 6 months of purchase, 0.75% on any redemption within 12 months of purchase and 0.50% on any redemption within 18 months of purchase. In the case of Class B shares redeemed within six years of purchase, a CDSC is imposed, beginning at 5% for redemptions within the first year, declining to 4% for redemptions within years two and three, and declining by 1% each year thereafter until disappearing after the sixth year. Class C shares are redeemed at net asset value, without any CDSC, except that a CDSC of 1% is imposed upon any redemption within 12 months of purchase (except in cases where the shareholder’s financial advisor agreed to waive the right to receive an advance of the first year’s distribution and service fee).
In determining whether a CDSC is payable, each Fund will first redeem shares not subject to any charge and then will redeem shares held for the longest period, unless the shareholder specifies another order. No CDSC is charged on shares purchased as a result of automatic reinvestment of dividends or capital gains paid. In addition, no CDSC will be charged on exchanges of shares into another Nuveen Mutual Fund. The holding period is calculated on a monthly basis and begins on the first day of the month in which the purchase was made. The CDSC is assessed on an amount equal to the lower of the then current market value or the cost of the shares being redeemed. Accordingly, no sales charge is imposed on increases of net asset value above the initial purchase price. The Distributor receives the amount of any CDSC shareholders pay.
The CDSC may be waived or reduced under the following circumstances: (i) in the event of total disability (as evidenced by a determination by the federal Social Security Administration) of the shareholder (including a registered joint owner) occurring after the purchase of the shares being redeemed; (ii) in the event of the death of the shareholder (including a registered joint owner); (iii) for redemptions made pursuant to a systematic withdrawal plan, up to 1% monthly, 3% quarterly, 6% semiannually or 12% annually of an account���s net asset value depending on the frequency of
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the plan as designated by the shareholder; (iv) involuntary redemptions caused by operation of law; (v) redemptions in connection with a payment of account or plan fees; (vi) redemptions in connection with the exercise of a reinstatement privilege whereby the proceeds of a redemption of the Fund’s shares subject to a sales charge are reinvested in shares of certain Funds within a specified number of days; (vii) redemptions in connection with the exercise of the Fund’s right to redeem all shares in an account that does not maintain a certain minimum balance or that the Board of Trustees has determined may have material adverse consequences to the shareholders of the Fund; (viii) in whole or in part for redemptions of shares by shareholders with accounts in excess of specified breakpoints that correspond to the breakpoints under which the up-front sales charge on Class A shares is reduced pursuant to Rule 22d-1 under the Act; (ix) redemptions of shares purchased under circumstances or by a category of investors for which Class A shares could be purchased at net asset value without a sales charge; (x) redemptions of Class A, Class B or Class C shares if the proceeds are transferred to an account managed by the Adviser and the Adviser refunds the advanced service and distribution fees to the Distributor; (xi) redemptions of Class C shares in cases where (a) you purchase shares after committing to hold the shares for less than one year and (b) your advisor consents up front to receiving the appropriate service and distribution fee on the Class C shares on an ongoing basis instead of having the first year’s fees advanced by the Distributor; and (xii) redemptions of Class A shares where the Distributor did not pay a sales commission when such shares were purchased. If the Fund waives or reduces the CDSC, such waiver or reduction would be uniformly applied to all Fund shares in the particular category. In waiving or reducing a CDSC, the Fund will comply with the requirements of Rule 22d-1 under the 1940 Act.
Class I Shares
Class I shares are available for purchase by clients of financial intermediaries who charge such clients an ongoing fee for advisory, investment, consulting or related services. Such clients may include individuals, corporations, endowments and foundations. The minimum initial investment for such clients is $100,000, but this minimum will be lowered to $250 for clients of financial intermediaries that have accounts holding Class I shares with an aggregate value of at least $100,000. The Distributor may also lower the minimum to $250 for clients of financial intermediaries anticipated to reach this Class I share holdings level.
Class I shares are also available for purchase by family offices and their clients. A family office is a company that provides certain financial and other services to a high net worth family or families. The minimum initial investment for family offices and their clients is $100,000, but this minimum will be lowered to $250 for clients of family offices that have accounts holding Class I shares with an aggregate value of at least $100,000. The Distributor may also lower the minimum to $250 for clients of family offices anticipated to reach this Class I share holdings level.
Class I shares also are available for purchase, with no minimum initial investment, by the following categories of investors:
| • | employer-sponsored retirement plans, except SEPs, SAR-SEPs, SIMPLE IRAs and KEOGH plans; |
| • | bank or broker-affiliated trust departments investing funds over which they exercise exclusive discretionary investment authority and that are held in a fiduciary, agency, advisory, custodial or similar capacity; |
| • | Advisory accounts of Nuveen Fund Advisors and its affiliates, including other Nuveen Mutual Funds whose investment policies permit investments in other investment companies. |
| • | trustees/directors and former trustees/directors of any Nuveen Fund, and their immediate family members (“immediate family members” are defined as spouses, parents, children, grandparents, grandchildren, parents-in-law, sons- and daughters-in-law, siblings, a sibling’s spouse and a spouse’s siblings); |
| • | officers, directors and former directors of Nuveen Investments and its affiliates, and their immediate family members; |
| • | full-time and retired employees of Nuveen Investments and its affiliates, and their immediate family members; |
| • | any person who, for at least the last 90 days, has been an officer, director or employee of any financial intermediary, and their immediate family members; |
(Any shares purchased by investors falling within any of the last four categories listed above must be acquired for investment purposes and on the condition that they will not be transferred or resold except through redemption by a Fund).
Holders of Class I shares may purchase additional Class I shares using dividends and capital gains distributions on their shares. In addition, shareholders of Nuveen Defined Portfolios may reinvest their distributions in Class I shares, if, before September 6, 1994 (or before June 13, 1995 in the case of Nuveen Intermediate Duration Municipal Bond Fund), such shareholders had elected to reinvest distributions in Nuveen Mutual Fund shares.
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If you are eligible to purchase either Class I shares or Class A shares without a sales charge at net asset value, you should be aware of the differences between these two classes of shares. Class A shares are subject to an annual service fee to compensate financial intermediaries for providing you with ongoing account services. Class I shares are not subject to a distribution or service fee and, consequently, holders of Class I shares may not receive the same types or levels of services from financial intermediaries. In choosing between Class A shares and Class I shares, you should weigh the benefits of the services to be provided by financial intermediaries against the annual service fee imposed upon the Class A shares.
Shareholder Programs
Exchange Privilege
You may exchange shares of a class of a Fund for shares of the same class of any other Nuveen Mutual Fund with reciprocal exchange privileges, at net asset value without a sales charge, by either sending a written request to the applicable Fund, c/o Nuveen Investor Services, P.O. Box 8530, Boston, Massachusetts 02266-8530 or by calling Nuveen Investor Services toll free at (800) 257-8787. You may also, under certain limited circumstances, exchange between certain classes of shares of the same Fund. An exchange between classes of shares of the same Fund may not be considered a taxable event; please consult your own tax advisor for further information. An exchange between classes of shares of the same Fund may be done in writing to the address stated above.
If you exchange shares between different Nuveen Mutual Funds and your shares are subject to a CDSC, no CDSC will be charged at the time of the exchange. However, if you subsequently redeem the shares acquired through the exchange, the redemption may be subject to a CDSC, depending on when you purchased your original shares and the CDSC schedule of the fund from which you exchanged your shares. If you exchange between classes of shares of the same Fund and your original shares are subject to a CDSC, the CDSC will be assessed at the time of the exchange.
The shares to be purchased through an exchange must be offered in your state of residence. The total value of exchanged shares must at least equal the minimum investment requirement of the Nuveen Mutual Fund being purchased. If your shares are held with a financial intermediary, the financial intermediary must have the operational capability to support exchanges. For federal income tax purposes, an exchange between different Nuveen Mutual Funds constitutes a sale and purchase of shares and may result in capital gain or loss. Before making any exchange, you should obtain the Prospectus for the Nuveen Mutual Fund you are purchasing and read it carefully. If the registration of the account for the Fund you are purchasing is not exactly the same as that of the fund account from which the exchange is made, written instructions from all holders of the account from which the exchange is being made must be received, with signatures guaranteed by a member of an approved Medallion Guarantee Program or in such other manner as may be acceptable to the Fund. You may also exchange shares by telephone if you authorize telephone exchanges by checking the applicable box on the Application Form or by calling Nuveen Investor Services toll-free at (800) 257-8787 to obtain an authorization form. The exchange privilege may be modified or discontinued by a Fund at any time.
The exchange privilege is not intended to permit a Fund to be used as a vehicle for short-term trading. Excessive exchange activity may interfere with portfolio management, raise expenses and otherwise have an adverse effect on all shareholders. In order to limit excessive exchange activity and in other circumstances where Fund management believes doing so would be in the best interest of the Fund, each Fund reserves the right to revise or terminate the exchange privilege, or limit the amount or number of exchanges or reject any exchange. Shareholders would be notified of any such action to the extent required by law. See “Frequent Trading Policy” below.
Reinstatement Privilege
If you redeemed Class A or Class C shares of a Fund or any other Nuveen Mutual Fund that were subject to a sales charge or a CDSC, you have up to one year to reinvest all or part of the full amount of the redemption in the same class of shares of the Fund at net asset value. The reinstatement privilege for Class B shares is no longer available. This reinstatement privilege can be exercised only once for any redemption, and reinvestment will be made at the net asset value next calculated after reinstatement of the appropriate class of Fund shares. If you reinstate shares that were subject to a CDSC, your holding period as of the redemption date also will be reinstated for purposes of calculating a CDSC and the CDSC paid at redemption will be refunded. The federal income tax consequences of any capital gain realized on a redemption will not be affected by reinstatement, but a capital loss may be disallowed in whole or in part depending on the timing, the amount of the reinvestment and the fund from which the redemption occurred.
Suspension of Right of Redemption
Each Fund may suspend the right of redemption of Fund shares or delay payment more than seven days (a) during any period when the New York Stock Exchange is closed (other than customary weekend and holiday closings), (b) when trading in the markets the Fund normally utilizes is restricted or an emergency exists as determined by the SEC so that trading of the Fund’s investments or determination of its net asset value is not reasonably practicable, or (c) for any other periods that the SEC by order may permit for protection of Fund shareholders.
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Redemption In-Kind
The Funds have reserved the right to redeem in-kind (that is, to pay redemption requests in cash and portfolio securities, or wholly in portfolio securities) although the Funds have no present intention to redeem in-kind. The Funds voluntarily have committed to pay in cash all requests for redemption by any shareholder, limited as to each shareholder during any 90-day period to the lesser of $250,000 or 1% of the net asset value of a Fund at the beginning of the 90-day period.
Frequent Trading Policy
The Funds’ Frequent Trading Policy is as follows:
Nuveen Mutual Funds are intended as long-term investments and not as short-term trading vehicles. At the same time, the Funds recognize the need of investors to periodically make purchases and redemptions of Fund shares when rebalancing their portfolios and as their financial needs or circumstances change. Nuveen Mutual Funds have adopted the following Frequent Trading Policy that seeks to balance these needs against the potential for higher operating costs, portfolio management disruption and other inefficiencies that can be caused by excessive trading of Fund shares.
1. Definition of Round Trip
A Round Trip trade is the purchase and subsequent redemption of Fund shares, including by exchange. Each side of a Round Trip trade may be comprised of either a single transaction or a series of closely-spaced transactions.
2. Round Trip Trade Limitations
Nuveen Mutual Funds limit the frequency of Round Trip trades that may be placed in a Fund. Subject to certain exceptions noted below, the Funds limit an investor to four Round Trips per trailing 12-month period and may also restrict the trading privileges of an investor who makes a Round Trip within a 30-day period if the purchase and redemption are of substantially similar dollar amounts and represent at least 25% of the value of the investor’s account.
3. Enforcement
Trades placed in violation of the foregoing policies are subject to rejection or cancellation by Nuveen Mutual Funds. Nuveen Mutual Funds may also bar an investor (and/or the investor’s financial advisor) who has violated these policies from opening new accounts with the Funds and may restrict the investor’s existing account(s) to redemptions only. Nuveen Mutual Funds reserve the right, in their sole discretion, to (a) interpret the terms and application of these policies, (b) waive unintentional or minor violations (including transactions below certain dollar thresholds) if Nuveen Mutual Funds determine that doing so does not harm the interests of Fund shareholders, and (c) exclude certain classes of redemptions from the application of the trading restrictions set forth above.
Nuveen Mutual Funds reserve the right to impose restrictions on purchases or exchanges that are more restrictive than those stated above if they determine, in their sole discretion, that a proposed transaction or series of transactions involve market timing or excessive trading that is likely to be detrimental to the Funds. The Funds may also modify or suspend the Frequent Trading Policy without notice during periods of market stress or other unusual circumstances.
The ability of Nuveen Mutual Funds to implement the Frequent Trading Policy for omnibus accounts at certain financial intermediaries may be dependent on receiving from those intermediaries sufficient shareholder information to permit monitoring of trade activity and enforcement of the Funds’ Frequent Trading Policy. In addition, the Funds may rely on a financial intermediary’s policy to restrict market timing and excessive trading if the Funds believe that the policy is reasonably designed to prevent market timing that is detrimental to the Funds. Such policy may be more or less restrictive than the Funds’ Policy. The Funds cannot ensure that these financial intermediaries will in all cases apply the Funds’ policy or their own policies, as the case may be, to accounts under their control.
Exclusions from the Frequent Trading Policy
As stated above, certain redemptions are eligible for exclusion from the Frequent Trading Policy, including: (i) redemptions or exchanges by shareholders investing through the fee-based platforms of certain financial intermediaries (where the intermediary charges an asset-based or comprehensive “wrap” fee for its services) that are effected by the financial intermediaries in connection with systematic portfolio rebalancing; (ii) when there is a verified trade error correction, which occurs when a dealer firm sends a trade to correct an earlier trade made in error and then the firm sends an explanation to the Nuveen Mutual Funds confirming that the trade is actually an error correction; (iii) in the event of total disability (as evidenced by a determination by the federal Social Security Administration) of the shareholder (including a registered joint owner) occurring after the purchase of the shares being redeemed; (iv) in the event of the death of the shareholder (including a registered joint owner); (v) redemptions made pursuant to a systematic withdrawal plan, up to 1% monthly, 3% quarterly, 6% semiannually or 12% annually of an account’s net asset value depending on the frequency of the plan as designated by the shareholder; (vi) redemptions of shares that were purchased through a systematic investment program; (vii) involuntary redemptions caused by operation of law; (viii) redemptions in connection with a payment of account or plan fees; (ix) redemptions or exchanges by any “fund of funds” advised by the Adviser; and (x) redemptions in connection with the exercise of a Fund’s right to redeem all shares in an account that does not maintain
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a certain minimum balance or that the applicable board has determined may have material adverse consequences to the shareholders of a Fund.
In addition, the following redemptions of shares by an employer-sponsored qualified defined contribution retirement plan are excluded from the Frequent Trading Policy: (i) partial or complete redemptions in connection with a distribution without penalty under Section 72(t) of the Code from a retirement plan: (a) upon attaining age 59 1/2; (b) as part of a series of substantially equal periodic payments, or (c) upon separation from service and attaining age 55; (ii) partial or complete redemptions in connection with a qualifying loan or hardship withdrawal; (iii) complete redemptions in connection with termination of employment, plan termination, transfer to another employer’s plan or IRA or changes in a plan’s recordkeeper; and (iv) redemptions resulting from the return of an excess contribution. Also, the following redemptions of shares held in an IRA account are excluded from the application of the Frequent Trading Policy: (i) redemptions made pursuant to an IRA systematic withdrawal based on the shareholder’s life expectancy including, but not limited to, substantially equal periodic payments described in Code Section 72(t)(A)(iv) prior to age 59 1/2; and (ii) redemptions to satisfy required minimum distributions after age 70 1/2 from an IRA account.
General Matters
The Funds have authorized one or more brokers to accept on their behalf purchase and redemption orders. Such brokers are authorized to designate other intermediaries to accept purchase and redemption orders on the Funds’ behalf. The Funds will be deemed to have received a purchase or redemption order when an authorized broker or, if applicable, a broker’s authorized designee accepts the order. Customer orders received by such broker (or their designee) will be priced at the Funds’ net asset value next computed after they are accepted by an authorized broker (or their designee). Orders accepted by an authorized broker (or their designee) before the close of regular trading on the NYSE will receive that day’s share price; orders accepted after the close of trading will receive the next business day’s share price.
If you choose to invest in a Fund, an account will be opened and maintained for you by Boston Financial Data Services (“BFDS”), the Funds’ shareholder services agent. Shares will be registered in the name of the investor or the investor’s financial advisor. A change in registration or transfer of shares held in the name of a financial advisor may only be made by an order in good standing form from the financial advisor acting on the investor’s behalf. Each Fund reserves the right to reject any purchase order and to waive or increase minimum investment requirements.
The Funds do not issue share certificates. For certificated shares previously issued, a fee of 1% of the current market value will be charged if the certificate is lost, stolen or destroyed. The fee is paid to Seaboard Surety Company for insurance of the lost, stolen or destroyed certificate.
Distribution Arrangements
The Distributor serves as the principal underwriter of the shares of the Funds pursuant to a “best efforts” arrangement as provided by a distribution agreement with the Trust (the “Distribution Agreement”). Pursuant to the Distribution Agreement, the Trust appointed the Distributor to be its agent for the distribution of the Funds’ shares on a continuous offering basis. The Distributor sells shares to or through brokers, dealers, banks or other qualified financial intermediaries (collectively referred to as “Dealers”), or others, in a manner consistent with the then effective registration statement of the Trust. Pursuant to the Distribution Agreement, the Distributor, at its own expense, finances certain activities incident to the sale and distribution of the Funds’ shares, including printing and distributing of prospectuses and statements of additional information to other than existing shareholders, the printing and distributing of sales literature, advertising and payment of compensation and giving of concessions to Dealers.
The Distributor receives for its services the excess, if any, of the sales price of a Fund’s shares less the net asset value of those shares, and reallows a majority or all of such amounts to the Dealers who sold the shares, the Distributor itself may also act as a Dealer. The Distributor also receives distribution fees pursuant to a distribution plan adopted by the Trust pursuant to Rule 12b-1 and described herein under “Distribution and Service Plans.” The Distributor also receives any CDSCs imposed on redemptions of shares, but any amounts as to which a reinstatement privilege is not exercised are set off against and reduce amounts otherwise payable to the Distributor pursuant to the distribution plan.
The following table sets forth the aggregate amounts of underwriting commissions with respect to the sale of Fund shares and the amount thereof retained by the Distributor for each of the Funds for the specified periods. All figures are to the nearest thousand.
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| Year Ended February 28, 2009 | Year Ended February 28, 2010 | |||||||||||||||||||||||
Fund | Amount of Underwriting Commissions | Amount Retained By the Distributor | Amount of Compensation on Redemptions and Repurchases | Amount of Underwriting Commissions | Amount Retained By the Distributor | Amount of Compensation on Redemptions and Repurchases | ||||||||||||||||||
Nuveen California High Yield Municipal Bond Fund | $ | 211 | $ | 21 | $ | 44 | $ | 286 | $ | 22 | $ | 10 | ||||||||||||
Nuveen California Municipal Bond Fund | 136 | 13 | 31 | 99 | 12 | 6 | ||||||||||||||||||
Nuveen California Municipal Bond Fund 2 | 104 | 12 | 12 | 150 | 16 | 4 | ||||||||||||||||||
Nuveen Connecticut Municipal Bond Fund | 391 | 46 | 19 | 366 | 51 | 5 | ||||||||||||||||||
Nuveen Massachusetts Municipal Bond Fund | 47 | 6 | 5 | 105 | 17 | 10 | ||||||||||||||||||
Nuveen Massachusetts Municipal Bond Fund 2 | 66 | 7 | 15 | 88 | 10 | 10 | ||||||||||||||||||
Nuveen New Jersey Municipal Bond Fund | 114 | 14 | 31 | 121 | 17 | 16 | ||||||||||||||||||
Nuveen New York Municipal Bond Fund | 305 | 35 | 39 | 260 | 35 | 29 | ||||||||||||||||||
Nuveen New York Municipal Bond Fund 2 | 132 | 11 | 14 | 164 | 24 | 6 | ||||||||||||||||||
| Year Ended February 28, 2011 | ||||||||||||
Fund | Amount of Underwriting Commissions | Amount Retained By the Distributor | Amount of Compensation on Redemptions and Repurchases | |||||||||
Nuveen California High Yield Municipal Bond Fund | $ | 323 | $ | 33 | $ | 14 | ||||||
Nuveen California Municipal Bond Fund | 223 | 28 | 27 | |||||||||
Nuveen California Municipal Bond Fund 2 | 77 | 12 | 3 | |||||||||
Nuveen Connecticut Municipal Bond Fund | 346 | 41 | 9 | |||||||||
Nuveen Massachusetts Municipal Bond Fund | 152 | 23 | 2 | |||||||||
Nuveen Massachusetts Municipal Bond Fund 2 | 51 | 7 | 3 | |||||||||
Nuveen New Jersey Municipal Bond Fund | 129 | 17 | 22 | |||||||||
Nuveen New York Municipal Bond Fund | 296 | 41 | 18 | |||||||||
Nuveen New York Municipal Bond Fund 2 | 126 | 19 | 9 | |||||||||
Additional Payments to Financial Intermediaries
In addition to the sales charge payments and the distribution, service and transfer agency fees described in the Prospectus and elsewhere in this Statement of Additional Information, the Adviser and/or the Distributor may make additional payments out of its own assets to selected intermediaries that sell shares of the Nuveen Mutual Funds (such as brokers, dealers, banks, registered investment advisors, retirement plan administrators and other intermediaries; hereinafter, individually, “Intermediary,” and collectively, “Intermediaries”) under the categories described below for the purposes of promoting the sale of Fund shares, maintaining share balances and/or for sub-accounting, administrative or shareholder processing services.
The amounts of these payments could be significant and may create an incentive for an Intermediary or its representatives to recommend or offer shares of the Nuveen Mutual Funds to its customers. The Intermediary may elevate the prominence or profile of the Funds within the Intermediary’s organization by, for example, placing the Funds on a list of preferred or recommended funds and/or granting the Adviser and/or the Distributor preferential or enhanced opportunities to promote the Funds in various ways within the Intermediary’s organization.
These payments are made pursuant to negotiated agreements with Intermediaries. The payments do not change the price paid by investors for the purchase of a share or the amount a Fund will receive as proceeds from such sales. Furthermore, these payments are not reflected in the fees and expenses listed in the fee table section of the Funds’ Prospectuses and described above because they are not paid by the Funds.
The categories of payments described below are not mutually exclusive, and a single Intermediary may receive payments under all categories.
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Marketing Support Payments and Program Servicing Payments
The Adviser and/or the Distributor may make payments for marketing support and/or program servicing to selected Intermediaries that are registered as holders or dealers of record for accounts invested in one or more of the Nuveen Mutual Funds or that make Nuveen Mutual Fund shares available through employee benefit plans or fee-based advisory programs to compensate them for the variety of services they provide.
Marketing Support Payments. Services for which an Intermediary receives marketing support payments may include business planning assistance, advertising, educating the Intermediary’s personnel about the Nuveen Mutual Funds in connection with shareholder financial planning needs, placement on the Intermediary’s preferred or recommended fund company list, and access to sales meetings, sales representatives and management representatives of the Intermediary. In addition, Intermediaries may be compensated for enabling Nuveen representatives to participate in and/or present at conferences or seminars, sales or training programs for invited registered representatives and other employees, client and investor events and other events sponsored by the Intermediary.
The Adviser and/or the Distributor compensate Intermediaries differently depending upon, among other factors, the number or value of Nuveen Mutual Funds shares that the Intermediary sells or may sell, the value of the assets invested in the Nuveen Mutual Funds by the Intermediary’s customers, redemption rates, ability to attract and retain assets, reputation in the industry and the level and/or type of marketing assistance and educational activities provided by the Intermediary. Such payments are generally asset-based but also may include the payment of a lump sum.
Program Servicing Payments. Services for which an Intermediary receives program servicing payments typically include recordkeeping, reporting, or transaction processing, but may also include services rendered in connection with fund/investment selection and monitoring, employee enrollment and education, plan balance rollover or separation, or other similar services. An Intermediary may perform program services itself or may arrange with a third party to perform program services.
Program servicing payments typically apply to employee benefit plans, such as retirement plans, or fee-based advisory programs but may apply to retail sales and assets in certain situations. The payments are based on such factors as the type and nature of services or support furnished by the Intermediary and are generally asset-based.
Marketing Support and Program Servicing Payment Guidelines. In the case of any one Intermediary, marketing support and program servicing payments are not expected, with certain limited exceptions, to exceed, in the aggregate, 0.35% of the average net assets of Fund shares attributable to that Intermediary on an annual basis. In connection with the sale of a business by U.S. Bank, N.A. (which was the parent company of a firm a portion of whose business has since been acquired by the Adviser) to Great-West Life & Annuity Insurance Company (“Great-West”), the Adviser has a services agreement with GWFS Equities, Inc., an affiliate of Great-West, which provides for payments of up to 0.60% of the average net assets of Fund shares attributable to GWFS Equities, Inc. on an annual basis.
Other Payments
From time to time, the Adviser and/or the Distributor, at their expense, may provide other compensation to Intermediaries that sell or arrange for the sale of shares of the Funds, which may be in addition to marketing support and program servicing payments described above. For example, the Adviser and/or the Distributor may: (i) compensate Intermediaries for National Securities Clearing Corporation networking system services (e.g., shareholder communication, account statements, trade confirmations, and tax reporting) on an asset-based or per account basis; (ii) compensate Intermediaries for providing Fund shareholder trading information; (iii) make one-time or periodic payments to reimburse selected Intermediaries for items such as ticket charges (i.e., fees that an Intermediary charges its representatives for effecting transactions in Fund shares) of up to $25 per purchase or exchange order, operational charges (e.g., fees that an Intermediary charges for establishing a Fund on its trading system), and literature printing and/or distribution costs; and (iv) at the direction of a retirement plan’s sponsor, reimburse or pay direct expenses of an employee benefit plan that would otherwise be payable by the plan.
When not provided for in a marketing support or program servicing agreement, the Adviser and/or the Distributor may pay Intermediaries for enabling the Adviser and/or the Distributor to participate in and/or present at conferences or seminars, sales or training programs for invited registered representatives and other Intermediary employees, client and investor events and other Intermediary-sponsored events, and for travel expenses, including lodging incurred by registered representatives and other employees in connection with prospecting, asset retention and due diligence trips. These payments may vary depending upon the nature of the event. The Adviser and/or the Distributor make payments for such events as they deem appropriate, subject to their internal guidelines and applicable law. Wholesale representatives of the Distributor may receive additional compensation if they meet certain targets for sales of one or more Nuveen Mutual Funds.
The Adviser and/or the Distributor occasionally sponsors due diligence meetings for registered representatives during which they receive updates on various Nuveen Mutual Funds and are afforded the opportunity to speak with portfolio managers. Although invitations to these meetings are not conditioned on selling a specific number of shares,
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those who have shown an interest in Nuveen Mutual Funds are more likely to be considered. To the extent permitted by their firm’s policies and procedures, all or a portion of registered representatives’ expenses in attending these meetings may be covered by the Adviser and/or the Distributor.
Certain third parties, affiliates of the Adviser, and employees of the Adviser or its affiliates may receive cash compensation from the Adviser and/or the Distributor in connection with establishing new client relationships with the Nuveen Mutual Funds. Such compensation may vary by product and by Intermediary. Total compensation of employees of the Adviser and its affiliates with marketing and/or sales responsibilities is based in part on their generation of new client relationships, including new client relationships with the Nuveen Mutual Funds, and such employees may receive additional compensation if they meet certain targets for sales of one or more Nuveen Mutual Funds.
Other compensation may be offered to the extent not prohibited by state laws or any self-regulatory agency, such as FINRA. Investors can ask their Intermediary for information about any payments it receives from the Adviser and/or the Distributor and the services it provides for those payments.
Investors may wish to take Intermediary payment arrangements into account when considering and evaluating any recommendations relating to Fund shares.
Intermediaries Receiving Additional Payments
The following is a list of Intermediaries receiving one or more of the types of payments discussed above as of June 17, 2011:
ADP Broker-Dealer, Inc.
American Enterprise Investment Services, Inc.
American United Life Insurance Company
Ameriprise Financial Services, Inc.
Ascensus (formerly BISYS Retirement Services, Inc.)
Banc of America Investment Services, Inc.
Benefit Plans Administrative Services, Inc.
Benefit Trust Company
Charles Schwab & Co., Inc.
Citigroup Global Markets Inc./Morgan Stanley Smith Barney LLC
Commonwealth Equity Services, LLP, DBA Commonwealth Financial Network
Country Trust Bank
CPI Qualified Plan Consultants, Inc.
Digital Retirement Solutions, Inc.
Dyatech, LLC
ExpertPlan, Inc.
Fidelity Brokerage Services LLC/National Financial Services LLC
Fidelity Investments Institutional Operations Company, Inc.
Genesis Employee Benefits, Inc. DBA America’s VEBA Solution
GWFS Equities, Inc.
Hartford Life Insurance Company
Hartford Securities Distribution Company, Inc.
Hewitt Associates LLC
ICMA Retirement Corporation
ING Institutional Plan Services, LLC/ING Investment Advisors, LLC (formerly CitiStreet LLC/CitiStreet Advisors LLC)
ING Life Insurance and Annuity Company/ING Institutional Plan Services LLC
J.P. Morgan Retirement Plan Services, LLC
Janney Montgomery Scott LLC
Leggette Actuaries, Inc.
Lincoln Retirement Services Company LLC/AMG Service Corp.
Linsco/Private Ledger Corp.
Marshall & Ilsley Trust Company, N.A.
Massachusetts Mutual Life Insurance Company
Mercer HR Outsourcing LLC
Merrill Lynch, Pierce, Fenner & Smith Inc.
MetLife Securities, Inc.
Mid Atlantic Capital Corporation
Morgan Stanley & Co., Incorporated/Morgan Stanley Smith Barney LLC
MSCS Financial Services, LLC
Nationwide Financial Services, Inc.
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Newport Retirement Services, Inc.
NYLife Distributors LLC
Pershing LLC
Princeton Retirement Group/GPC Securities, Inc.
Principal Life Insurance Company
Prudential Insurance Company of America (The)
Prudential Investment Management Services, LLC / Prudential Investments LLC
Raymond James & Associates / Raymond James Financial Services, Inc.
RBC Dain Rauscher, Inc.
Reliance Trust Company
Retirement Plan Company, LLC (The)
Robert W. Baird & Co., Inc.
Stifel, Nicolaus & Co., Inc.
T. Rowe Price Investment Services, Inc./T. Rowe Price Retirement Plan Services, Inc.
TD Ameritrade, Inc.
TD Ameritrade Trust Company (formerly Fiserv Trust Company/International Clearing Trust Company)
TIAA-CREF Individual & Institutional Services, LLC
U.S. Bancorp Investments, Inc.
U.S. Bank, N.A.
UBS Financial Services, Inc.
Unified Trust Company, N.A.
VALIC Retirement Services Company (formerly AIG Retirement Services Company)
Vanguard Group, Inc.
Wachovia Bank, N.A.
Wachovia Securities, LLC
Wells Fargo Advisors, LLC
Wells Fargo Bank, N.A.
Wilmington Trust Company
Wilmington Trust Retirement and Institutional Services Company (formerly AST Capital Trust Company)
Any additions, modifications or deletions to the list of Intermediaries identified above that have occurred since June 17, 2011 are not reflected in the list.
DISCLOSURE OF PORTFOLIO HOLDINGS
The Nuveen Mutual Funds have adopted a portfolio holdings disclosure policy which governs the dissemination of the Fund’s portfolio holdings. In accordance with this policy, the Fund may provide portfolio holdings information to third parties no earlier than the time a report is filed with the SEC that is required to contain such information or one day after the information is posted on the Fund’s publicly accessible website, www.nuveen.com. The portfolio holdings information is posted monthly approximately five business days after the end of the month as of which the information is current. Additionally, the Fund publishes on the website a list of its top ten holdings as of the end of each month, approximately two to five business days after the end of the month for which the information is current. This information will remain available on the website at least until the Fund files with the SEC its Form N-CSR or Form N-Q for the period that includes the date as of which the website information is current.
Additionally, the Fund may disclose portfolio holdings information that has not been included in a filing with the SEC or posted on the Fund’s website (i.e., non-public portfolio holdings information) only if there is a legitimate business purpose for doing so and if the recipient is required, either by explicit agreement or by virtue of the recipient’s duties to the Fund as an agent or service provider, to maintain the confidentiality of the information and to not use the information in an improper manner (e.g., personal trading). In this connection, the Fund may disclose on an ongoing basis non-public portfolio holdings information in the normal course of its investment and administrative operations to various service providers, including the Adviser and/or sub-adviser, independent registered public accounting firm, custodian, financial printer (R.R. Donnelley Financial and Financial Graphic Services), proxy voting service(s) (including RMG, ADP Investor Communication Services, and Glass, Lewis & Co.), and to the legal counsel for the Fund’s independent directors (Chapman and Cutler LLP). Also, the Adviser may transmit to Vestek Systems, Inc. daily non-public portfolio holdings information on a next-day basis to enable the investment adviser to perform portfolio attribution analysis using Vestek’s systems and software programs. Vestek is also provided with non-public portfolio holdings information on a monthly basis approximately 2-3 business days after the end of each month so that Vestek may calculate and provide certain statistical information (but not the non-public holdings information itself) to its clients (including retirement plan sponsors or their consultants). The Fund’s investment adviser and/or sub-adviser may also provide certain portfolio holdings information to broker-dealers from time to time in connection with the purchase or sale of securities or requests for price quotations or
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bids on one or more securities. In providing this information, reasonable precautions are taken in an effort to avoid potential misuse of the disclosed information, including limitations on the scope of the portfolio holdings information disclosed, when appropriate.
Non-public portfolio holdings information may be provided to other persons if approved by the Fund’s Chief Administrative Officer or Secretary upon a determination that there is a legitimate business purpose for doing so, the disclosure is consistent with the interests of the Fund, and the recipient is obligated to maintain the confidentiality of the information and not misuse it.
Compliance officers of the Fund and the Adviser and sub-adviser periodically monitor overall compliance with the policy to ascertain whether portfolio holdings information is disclosed in a manner that is consistent with the Fund’s policy. Reports are made to the Fund’s Board of Directors on an annual basis.
There is no assurance that the Fund’s policies on portfolio holdings information will protect the Fund from the potential misuse of portfolio holdings information by individuals or firms in possession of such information.
The following parties currently receive Undisclosed Holdings Information regarding one or more of the Nuveen Mutual Funds on an ongoing basis pursuant to the various arrangements described above:
ADP Investor Communications Services
Altrinsic Global Advisors, Inc.
Barclays Capital, Inc.
Barra
Bloomberg
BNP Paribas Prime Brokerage, Inc.
BNP Paribas Securities Corp.
Broadridge Systems
Cantor Fitzgerald & Co.
Chapman and Cutler LLP
Commerz Markets LLC
Credit Agricole Securities (USA) Inc.
Credit Suisse Securities (USA), LLC
Deutsche Bank Securities, Inc.
Ernst & Young LLP
FactSet Research Systems
Financial Graphic Services
First Clearing, LLC
Forbes
Glass, Lewis & Co.
Goldman Sachs & Co.
Hansberger Global Investors, LLC
HSBC Securities (USA), Inc.
ING Financial Markets, LLC
The Investment Company Institute
Jefferies & Company, Inc.
J.P. Morgan Clearing Corp.
J.P. Morgan Securities, Inc.
Lazard Asset Management, Inc.
Lipper Inc.
Merrill Lynch, Pierce, Fenner & Smith
Moody’s
Morgan Stanley & Co., Inc.
Morningstar, Inc.
MS Securities Services, Inc.
Newedge USA, LLC
Nuveen Asset Management, LLC
Nuveen Fund Advisors, Inc.
Pershing, LLC
PricewaterhouseCoopers
Raymond James & Associates, Inc.
RBC Capital Markets Corporation
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RBS Securities, Inc.
RMG
R.R. Donnelley Financial
Scotia Capital (USA), Inc.
SG Ameritas Securities, LLC
Societe Generale, New York Branch
Standard & Poor’s
State Street Bank & Trust Co.
Strategic Insight
TD Ameritrade Clearing, Inc.
ThomsonReuters LLC
UBS Securities, LLC
U.S. Bancorp Fund Services, LLC
U.S. Bank, N.A.
Value Line
Vestek Systems, Inc.
Vickers
Wells Fargo Securities, LLC
DISTRIBUTION AND SERVICE PLANS
The Funds have adopted a plan (the “Plan”) pursuant to Rule 12b-1 under the 1940 Act, pursuant to which Class B and Class C shares are subject to an annual distribution fee and Class A, Class B and Class C shares are subject to an annual service fee. Each Fund may spend up to 0.20% per year of the average daily net assets of Class A shares as a service fee under the Plan as applicable to Class A shares. Each Fund may spend up to 0.75% per year of the average daily net assets of the Class B shares and 0.55% per year of the average daily net assets of Class C shares as a distribution fee and up to 0.20% per year of the average daily net assets of each of the Class B and Class C shares as a service fee under the Plan as applicable to such classes. Class I shares are not subject to either distribution or service fees. Distribution and service fees collectively are referred to herein as “12b-1 fees.”
The distribution fee applicable to Class B and Class C shares under each Fund’s Plan compensates the Distributor for expenses incurred in connection with the distribution of Class B and Class C shares, respectively. These expenses include payments to financial intermediaries, including the Distributor, who are brokers of record with respect to the Class B and Class C shares, as well as, without limitation, expenses of printing and distributing Prospectuses to persons other than shareholders of each Fund, expenses of preparing, printing and distributing advertising and sales literature and reports to shareholders used in connection with the sale of Class B and Class C shares, certain other expenses associated with the distribution of Class B and Class C shares, and any other distribution-related expenses that may be authorized from time to time by the Board of Trustees.
The service fee applicable to Class A, Class B and Class C shares under each Fund’s Plan is used to compensate financial intermediaries in connection with the provision of ongoing account services to shareholders. These services may include establishing and maintaining shareholder accounts, answering shareholder inquiries and providing other personal services to shareholders.
During the fiscal year ended February 28, 2011, the Funds incurred 12b-1 fees pursuant to their respective Plan in the amounts set forth in the table below. For this period, substantially all of the 12b-1 service fees on Class A shares were paid out as compensation to financial intermediaries for providing services to shareholders relating to their investments. To compensate for commissions advanced to financial intermediaries, all 12b-1 service fees collected on Class B shares during the first year following a purchase, all 12b-1 distribution fees on Class B shares, and all 12b-1 fees on Class C shares during the first year following a purchase are retained by the Distributor. After the first year following a purchase, 12b-1 service fees on Class B shares and 12b-1 fees on Class C shares are paid to financial intermediaries.
| 12b-1 Fees Incurred by Each Fund for the Fiscal Year Ended February 28, 2011 | ||||
Nuveen California High Yield Municipal Bond Fund: | ||||
Class A | $ | 123,693 | ||
Class B | 486 | |||
Class C | 138,715 | |||
Nuveen California Municipal Bond Fund: | ||||
Class A | $ | 259,724 | ||
Class B | 24,582 | |||
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| 12b-1 Fees Incurred by Each Fund for the Fiscal Year Ended February 28, 2011 | ||||
Class C | 206,236 | |||
Nuveen California Municipal Bond Fund 2: | ||||
Class A | $ | 144,750 | ||
Class B | 20,602 | |||
Class C | 98,840 | |||
Nuveen Connecticut Municipal Bond Fund: | ||||
Class A | $ | 513,495 | ||
Class B | 37,912 | |||
Class C | 428,561 | |||
Nuveen Massachusetts Municipal Bond Fund: | ||||
Class A | $ | 127,848 | ||
Class B | 9,741 | |||
Class C | 104,908 | |||
Nuveen Massachusetts Municipal Bond Fund 2: | ||||
Class A | $ | 59,241 | ||
Class B | 18,659 | |||
Class C | 110,682 | |||
Nuveen New Jersey Municipal Bond Fund: | ||||
Class A | $ | 251,301 | ||
Class B | 60,987 | |||
Class C | 301,514 | |||
Nuveen New York Municipal Bond Fund: | ||||
Class A | $ | 446,624 | ||
Class B | 67,196 | |||
Class C | 481,964 | |||
Nuveen New York Municipal Bond Fund 2: | ||||
Class A | $ | 191,334 | ||
Class B | 37,851 | |||
Class C | 150,560 | |||
Under each Fund’s Plan, the Fund will report quarterly to the Board of Trustees for its review all amounts expended per class of shares under the Plan. The Plan may be terminated at any time with respect to any class of shares, without the payment of any penalty, by a vote of a majority of the independent trustees who have no direct or indirect financial interest in the Plan or by vote of a majority of the outstanding voting securities of such class. The Plan may be renewed from year to year if approved by a vote of the Board of Trustees and a vote of the independent trustees who have no direct or indirect financial interest in the Plan cast in person at a meeting called for the purpose of voting on the Plan. The Plan may be continued only if the trustees who vote to approve such continuance conclude, in the exercise of reasonable business judgment and in light of their fiduciary duties under applicable law, that there is a reasonable likelihood that the Plan will benefit the Fund and its shareholders. The Plan may not be amended to increase materially the cost which a class of shares may bear under the Plan without the approval of the shareholders of the affected class, and any other material amendments of the Plan must be approved by the independent trustees by a vote cast in person at a meeting called for the purpose of considering such amendments. During the continuance of the Plan, the selection and nomination of the independent trustees of the Trust will be committed to the discretion of the independent trustees then in office.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM, CUSTODIAN AND TRANSFER AGENT
PricewaterhouseCoopers LLP (“PwC”), One North Wacker Drive, Chicago, Illinois 60606, independent registered public accounting firm, has been selected as auditors for the Trust. In addition to audit services, PwC provides assistance on accounting, internal control, tax and related matters.
The custodian of the assets of the Funds is State Street Bank & Trust Company, P.O. Box 5043, Boston, Massachusetts 02206-5043. The custodian performs custodial, fund accounting and portfolio accounting services.
The Funds’ transfer, shareholder services, and dividend paying agent is Boston Financial Data Services, P.O. Box 8530, Boston, Massachusetts 02266-8530.
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The audited financial statements for each Fund’s most recent fiscal year appear in each Fund’s Annual Report, dated February 28, 2011. Each Fund’s Annual Report is incorporated by reference into this Statement of Additional Information and is available without charge by calling (800) 257-8787.
Each Fund is a series of the Trust. The Trust is an open-end management investment company under the 1940 Act. The Trust was organized as a Massachusetts business trust on July 1, 1996. The Board of Trustees of the Trust is authorized to issue an unlimited number of shares in one or more series, which may be divided into classes of shares. Currently, there are ten series authorized and outstanding, each of which may be generally divided into different classes of shares designated as Class A shares, Class B shares, Class C shares and Class I shares. Each class of shares represents an interest in the same portfolio of investments of a Fund. Each class of shares has equal rights as to voting, redemption, dividends and liquidation, except that each bears different class expenses, including different distribution and service fees, and each has exclusive voting rights with respect to any distribution or service plan applicable to its shares. There are no conversion, preemptive or other subscription rights, except that Class B shares (available in only certain series) automatically convert into Class A shares. The Board of Trustees of the Trust has the right to establish additional series and classes of shares in the future, to change those series or classes and to determine the preferences, voting powers, rights and privileges thereof.
The Trust is not required and does not intend to hold annual meetings of shareholders. Shareholders owning more than 10% of the outstanding shares of a Fund have the right to call a special meeting to remove trustees or for any other purpose.
Under Massachusetts law applicable to Massachusetts business trusts, shareholders of such a trust may, under certain circumstances, be held personally liable as partners for its obligations. However, the Declaration of Trust of the Trust contains an express disclaimer of shareholder liability for acts or obligations of the Trust and requires that notice of this disclaimer be given in each agreement, obligation or instrument entered into or executed by the Trust or the trustees. The Trust’s Declaration of Trust further provides for indemnification out of the assets and property of the Trust for all losses and expenses of any shareholder held personally liable for the obligations of the Trust. Thus, the risk of a shareholder incurring financial loss on account of shareholder liability is limited to circumstances in which both inadequate insurance existed and the Trust or a Fund itself was unable to meet its obligations. The Trust believes the likelihood of the occurrence of these circumstances is remote.
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RATING OF INVESTMENTS
Standard & Poor’s Ratings Group—A brief description of the applicable Standard & Poor’s (“S&P”) rating symbols and their meanings (as published by S&P) follows:
Issue Credit Ratings
A S&P issue credit rating is a forward looking opinion about the creditworthiness of an obligor with respect to a specific financial obligation, a specific class of financial obligations, or a specific financial program (including ratings on medium-term note programs and commercial paper programs). It takes into consideration the creditworthiness of guarantors, insurers, or other forms of credit enhancement on the obligation and takes into account the currency in which the obligation is denominated.
The opinion reflects S&P’s view of the obligor’s capacity and willingness to meet its financial commitments as they come due, and may assess terms, such as collateral security and subordination, which could affect ultimate payment in the event of default.
Issue credit ratings can be either long-term or short-term. Short-term ratings are generally assigned to those obligations considered short-term in the relevant market. In the U.S., for example, that means obligations with an original maturity of no more than 365 days-including commercial paper. Short-term ratings are also used to indicate the creditworthiness of an obligor with respect to put features on long-term obligations. The result is a dual rating, in which the short-term rating addresses the put feature, in addition to the usual long-term rating. Medium-term notes are assigned long-term ratings.
Long-Term Issue Credit Ratings
Issue credit ratings are based, in varying degrees, on the following considerations:
1. Likelihood of payment—capacity and willingness of the obligor to meet its financial commitment on an obligation in accordance with the terms of the obligation;
2. Nature of and provisions of the obligation;
3. Protection afforded by, and relative position of, the obligation in the event of bankruptcy, reorganization, or other arrangement under the laws of bankruptcy and other laws affecting creditors’ rights.
Issue rating are an assessment of default risk, but may incorporate an assessment of relative seniority or ultimate recovery in the event of default. Junior obligations are typically rated lower than senior obligations, to reflect the lower priority in bankruptcy, as noted above. (Such differentiation may apply when an entity has both senior and subordinated obligations, secured and unsecured obligations, or operating company and holding company obligations.)
A-1
| AAA | An obligation rated ‘AAA’ has the highest rating assigned by S&P. The obligor’s capacity to meet its financial commitment on the obligation is extremely strong. | |
| AA | An obligation rated ‘AA’ differs from the highest rated obligations only to a small degree. The obligor’s capacity to meet its financial commitment on the obligation is very strong. | |
| A | An obligation rated ‘A’ is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher-rated categories. However, the obligor’s capacity to meet its financial commitment on the obligation is still strong. | |
| BBB | An obligation rated ‘BBB’ exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation. | |
Obligations rated ‘BB’, ‘B��, ‘CCC’, ‘CC’ and ‘C’ are regarded as having significant speculative characteristics. ‘BB’ indicates the least degree of speculation and ‘C’ the highest. While such obligations will likely have some quality and protective characteristics, these may be outweighed by large uncertainties or major exposures to adverse conditions.
| BB | An obligation rated ‘BB’ is less vulnerable to nonpayment than other speculative issues. However, it faces major ongoing uncertainties or exposure to adverse business, financial, or economic conditions which could lead to the obligor’s inadequate capacity to meet its financial commitment on the obligation. | |
| B | An obligation rated ‘B’ is more vulnerable to nonpayment than obligations rated ‘BB’, but the obligor currently has the capacity to meet its financial commitment on the obligation. Adverse business, financial, or economic conditions will likely impair the obligor’s capacity or willingness to meet its financial commitment on the obligation. | |
| CCC | An obligation rated ‘CCC’ is currently vulnerable to nonpayment, and is dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation. In the event of adverse business, financial, or economic conditions, the obligor is not likely to have the capacity to meet its financial commitment on the obligation. | |
| CC | An obligation rated ‘CC’ is currently highly vulnerable to nonpayment. | |
| C | A ‘C’ rating is assigned to obligations that are currently highly vulnerable to nonpayment, obligations that have payment arrearages allowed by the terms of the documents, or obligations of an issuer that is the subject of a bankruptcy petition or similar action which have not experienced a payment default. Among others, the ‘C’ rating may be assigned to subordinated debt, preferred stock or other obligations on which cash payments have been suspended in accordance with the instrument’s terms or when preferred stock is the subject of a distressed exchange offer, whereby some or all of the issue is either repurchased for an amount of cash or replaced by other instruments having a total value that is less than par. | |
A-2
| D | An obligation rated ‘D’ is in payment default. The ‘D’ rating category is used when payments on an obligation, including a regulatory capital instrument, are not made on the date due even if the applicable grace period has not expired, unless S&P believes that such payments will be made during such grace period. The ‘D’ rating also will be used upon the filing of a bankruptcy petition or the taking of a similar action if payments on an obligation are jeopardized. An obligation’s rating is lowered to ‘D’ upon completion of a distressed exchange offer, whereby some or all of the issue is either repurchased for an amount of cash or replaced by other instruments having a total value that is less than par. | |
Plus (+) or Minus (–): The ratings from ‘AA’ to ‘CCC’ may be modified by the addition of a plus or minus sign to show relative standing within the major rating categories.
| NR | This indicates that no rating has been requested, that there is insufficient information on which to base a rating, or that S&P does not rate a particular obligation as a matter of policy. | |
| Municipal Short-Term Note Ratings | ||
A Standard & Poor’s U.S. municipal note rating reflects Standard & Poor’s opinion about the liquidity factors and market access risks unique to the notes. Notes due in three years or less will likely receive a note rating. Notes with an original maturity of more than three years will most likely receive a long-term debt rating. In determining which type of rating, if any, to assign, Standard & Poor’s analysis will review the following considerations: | ||
• Amortization schedule–the larger the final maturity relative to other maturities, the more likely it will be treated as a note; and | ||
• Source of payment–the more dependent the issue is on the market for its refinancing, the more likely it will be treated as a note. | ||
Note rating symbols are as follows:
| SP-1 | Strong capacity to pay principal and interest. An issue determined to possess a very strong capacity to pay debt service is given a plus (+) designation. | |
| SP-2 | Satisfactory capacity to pay principal and interest, with some vulnerability to adverse financial and economic changes over the term of the notes. | |
| SP-3 | Speculative capacity to pay principal and interest. | |
Moody’s Investor Service, Inc.—A brief description of the applicable Moody’s Investor Service, Inc. (“Moodys”) rating symbols and their meanings (as published by Moodys) follows:
Long-Term Obligation Ratings
| Aaa | Obligations rated Aaa are judged to be of the highest quality, with minimal credit risk. | |
A-3
| Aa | Obligations rated Aa are judged to be of high quality and are subject to very low credit risk. | |
| A | Obligations rated A are considered upper-medium grade and are subject to low credit risk. | |
| Baa | Obligations rated Baa are subject to moderate credit risk. They are considered medium grade and as such may possess certain speculative characteristics. | |
| Ba | Obligations rated Ba are judged to have speculative elements and are subject to substantial credit risk. | |
| B | Obligations rated B are considered speculative and are subject to high credit risk. | |
| Caa | Obligations rated Caa are judged to be of poor standing and are subject to very high credit risk. | |
| Ca | Obligations rated Ca are highly speculative and are likely in, or very near, default, with some prospect of recovery of principal and interest. | |
| C | Obligations rated C are the lowest rated class and are typically in default, with little prospect for recovery of principal or interest. | |
Note: Moody’s appends numerical modifiers 1, 2, and 3 to each generic rating classification from Aa through Caa. The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of that generic rating category.
Medium-Term Note Program Ratings
Moody’s assigns ratings to medium-term note (MTN) programs and to individual debt securities issued from them (referred to as drawdowns or notes). These ratings may be expressed on Moody’s general long-term or short-term rating scale, depending upon the intended tenor of the notes to be issued under the program. MTN program ratings are intended to reflect the ratings likely to be assigned to drawdowns issued from the program with the specified priority of claim (e.g. senior or subordinated). However, the rating assigned to a drawdown from a rated MTN program may differ from the program rating if the draw-down is exposed to additional credit risks besides the issuer’s default, such as links to the defaults of other issuers, or has other structural features that warrant a different rating. In some circumstances, no rating may be assigned to a drawdown.
Market participants must determine whether any particular note is rated, and if so, at what rating level. Moody’s encourages market participants to contact Moody’s Ratings Desks or visit www.moodys.com directly if they have questions regarding ratings for specific notes issued under a medium-term note program. Unrated notes issued under an MTN program may be assigned an NR (not rated) symbol.
U.S. Municipal Short-Term Debt and Demand Obligation Ratings
A-4
Short-Term Obligation Ratings
In municipal debt issuance, there are three rating categories for short-term municipal obligations that are considered investment grade. These ratings are designated as Municipal Investment Grade (MIG) and are divided into three levels—MIG 1 through MIG 3.
In addition, those short-term obligations that are of speculative quality are designated SG, or speculative grade. MIG ratings expire at the maturity of the obligation.
| MIG 1 | This designation denotes superior credit quality. Excellent protection is afforded by established cash flows, highly reliable liquidity support, or demonstrated broad-based access to the market for refinancing. | |
| MIG 2 | This designation denotes strong credit quality. Margins of protection are ample, although not as large as in the preceding group. | |
| MIG 3 | This designation denotes acceptable credit quality. Liquidity and cash-flow protection may be narrow, and market access for refinancing is likely to be less well-established. | |
| SG | This designation denotes speculative-grade credit quality. Debt instruments in this category may lack sufficient margins of protection. | |
Demand Obligation Ratings
In the case of variable rate demand obligations (VRDOs), a two-component rating is assigned; a long or short-term debt rating and a demand obligation rating. The first element represents Moody’s evaluation of the degree of risk associated with scheduled principal and interest payments. The second element represents Moody’s evaluation of the degree of risk associated with the ability to receive purchase price upon demand (“demand feature”), using a variation of the MIG rating scale, the Variable Municipal Investment Grade or VMIG rating.
When either the long- or short-term aspect of a VRDO is not rated, that piece is designated NR, e.g., Aaa/NR or NR/VMIG 1.
VMIG rating expirations are a function of each issue’s specific structural or credit features.
| VMIG 1 | This designation denotes superior credit quality. Excellent protection is afforded by the superior short-term credit strength of the liquidity provider and structural and legal protections that ensure the timely payment of purchase price upon demand. | |
| VMIG 2 | This designation denotes strong credit quality. Good protection is afforded by the strong short-term credit strength of the liquidity provider and structural and legal protections that ensure the timely payment of purchase price upon demand. | |
A-5
| VMIG 3 | This designation denotes acceptable credit quality. Adequate protection is afforded by the satisfactory short-term credit strength of the liquidity provider and structural and legal protections that ensure the timely payment of purchase price upon demand. | |
| SG | This designation denotes speculative-grade credit quality. Demand features rated in this category may be supported by a liquidity provider that does not have an investment grade short-term rating or may lack the structural and/or legal protections necessary to ensure the timely payment of purchase price upon demand. | |
Fitch Ratings—A brief description of the applicable Fitch Ratings (“Fitch”) ratings symbols and meanings (as published by Fitch) follows:
Structured, Project & Public Finance Obligations–Long-Term Rating Scales
Ratings of structured finance, project finance and public finance obligations on the long-term scale, including the financial obligations of sovereigns, consider the obligations’ relative vulnerability to default. These ratings are typically assigned to an individual security or tranche in a transaction and not to an issuer.
| AAA | Highest credit quality. ‘AAA’ ratings denote the lowest expectation of default risk. They are assigned only in cases of exceptionally strong capacity for payment of financial commitments. This capacity is highly unlikely to be adversely affected by foreseeable events. | |
| AA | Very high credit quality. ‘AA’ ratings denote expectations of very low default risk. They indicate very strong capacity for payment of financial commitments. This capacity is not significantly vulnerable to foreseeable events. | |
| A | High credit quality. ‘A’ ratings denote expectations of low default risk. The capacity for payment of financial commitments is considered strong. This capacity may, nevertheless, be more vulnerable to adverse business or economic conditions than is the case for higher ratings. | |
| BBB | Good credit quality. ‘BBB’ ratings indicate that expectations of default risk are currently low. The capacity for payment of financial commitments is considered adequate but adverse business or economic conditions are more likely to impair this capacity. | |
| BB | Speculative. ‘BB’ ratings indicate an elevated vulnerability to default risk, particularly in the event of adverse changes in business or economic conditions over time. | |
| B | Highly speculative. ‘B’ ratings indicate that material default risk is present, but a limited margin of safety remains. Financial commitments are currently being met; however, capacity for continued payment is vulnerable to deterioration in the business and economic environment. | |
| CCC | Substantial credit risk. Default is a real possibility. | |
A-6
| CC | Very high levels of credit risk. Default of some kind appears probable. | |
| C | Exceptionally high levels of credit risk. Default appears imminent or inevitable. | |
| D | Default. Indicates a default. Default generally is defined as one of the following:
• failure to make payment of principal and/or interest under the contractual terms of the rated obligation;
• the bankruptcy filings, administration, receivership, liquidation or other winding-up or cessation of the business of an issuer/obligor; or
• the coercive exchange of an obligation, where creditors were offered securities with diminished structural or
• economic terms compared with the existing obligation. | |
Notes: In the case of structured and project finance, while the ratings do not address the loss severity given default of the rated liability, loss severity assumptions on the underlying assets are nonetheless typically included as part of the analysis. Loss severity assumptions are used to derive pool cash flows available to service the rated liability.
The suffix “sf” denotes an issue that is a structured finance transaction. For an explanation of how Fitch determines structured finance ratings, please see our criteria available at www.Fitchratings.com.
In the case of public finance, the ratings do not address the loss given default of the rated liability, focusing instead on the vulnerability to default of the rated liability.
The modifiers “+” or “-” may be appended to a rating to denote relative status within major rating categories. Such suffixes are not added to the ‘AAA’ Long-Term Rating category, or categories below ‘B’.
Limitations of the Structured, Project and Public Finance Obligation Rating Scale
Specific limitations relevant to the structured, project and public finance obligation rating scale include:
• The ratings do not predict a specific percentage of default likelihood over any given time period. | ||
• The ratings do not opine on the market value of any issuer’s securities or stock, or the likelihood that this value may change. | ||
• The ratings do not opine on the liquidity of the issuer’s securities or stock. | ||
A-7
• The ratings do not opine on the possible loss severity on an obligation should an obligation default. | ||
• The ratings do not opine on any quality related to a transaction’s profile other than the agency’s opinion on the relative vulnerability to default of each rated tranche or security. | ||
Short-Term Ratings Assigned to Issuers or Obligations in Corporate, Public and Structured Finance
A short-term issuer or obligation rating is based in all cases on the short-term vulnerability to default of the rated entity or security stream and relates to the capacity to meet financial obligations in accordance with the documentation governing the relevant obligation. Short-Term Ratings are assigned to obligations whose initial maturity is viewed as “short term” based on market convention. Typically, this means up to 13 months for corporate, sovereign, and structured obligations, and up to 36 months for obligations in U.S. public finance markets.
| F1 | Highest short-term credit quality. Indicates the strongest intrinsic capacity for timely payment of financial commitments; may have an added “+” to denote any exceptionally strong credit feature. | |
| F2 | Good short-term credit quality. Good intrinsic capacity for timely payment of financial commitments. | |
| F3 | Fair short-term credit quality. The intrinsic capacity for timely payment of financial commitments is adequate. | |
| B | Speculative short-term credit quality. Minimal capacity for timely payment of financial commitments, plus heightened vulnerability to near term adverse changes in financial and economic conditions. | |
| C | High short-term default risk. Default is a real possibility. | |
| RD | Restricted default. Indicates an entity that has defaulted on one or more of its financial commitments, although it continues to meet other financial obligations. Applicable to entity ratings only. | |
| D | Default. Indicates a broad-based default event for an entity, or the default of a short-term obligation. | |
Limitations of the Short-Term Ratings Scale
Specific limitations relevant to the Short-Term Ratings scale include:
• The ratings do not predict a specific percentage of default likelihood over any given time period. | ||
A-8
• The ratings do not opine on the market value of any issuer’s securities or stock, or the likelihood that this value may change.
• The ratings do not opine on the liquidity of the issuer’s securities or stock.
• The ratings do not opine on the possible loss severity on an obligation should an obligation default.
• The ratings do not opine on any quality related to an issuer or transaction’s profile other than the agency’s opinion on the relative vulnerability to default of the rated issuer or obligation. |
Ratings assigned by Fitch Ratings articulate an opinion on discrete and specific areas of risk. The above list is not exhaustive, and is provided for the reader’s convenience.
A-9
DESCRIPTION OF DERIVATIVES AND HEDGING TECHNIQUES
Set forth below is additional information regarding the Funds’ use of derivatives and hedging techniques, and use of repurchase agreements.
Futures and Index Transactions
Financial Futures. A financial future is an agreement between two parties to buy and sell a security for a set price on a future date. They have been designed by boards of trade that have been designated “contracts markets” by the Commodity Futures Trading Commission (“CFTC”).
The purchase of financial futures is for the purpose of hedging a Fund’s existing or anticipated holdings of long-term debt securities or for otherwise adjusting the investment characteristics of a Fund’s portfolio. When a Fund purchases a financial future, it deposits in cash or securities an “initial margin” of between 1% and 5% of the contract amount. Thereafter, the Fund’s account is either credited or debited on a daily basis in correlation with the fluctuation in price of the underlying future or other requirements imposed by the exchange in order to maintain an orderly market. The Fund must make additional payments to cover debits to its account and has the right to withdraw credits in excess of the liquidity, the Fund may close out its position at any time prior to expiration of the financial future by taking an opposite position. At closing a final determination of debits and credits is made, additional cash is paid by or to the Fund to settle the final determination and the Fund realizes a loss or gain depending on whether on a net basis it made or received such payments.
The sale of financial futures is for the purpose of hedging a Fund’s existing or anticipated holdings of long-term debt securities or for otherwise adjusting the investment characteristics of a Fund’s portfolio. For example, if a Fund owns long-term bonds and interest rates were expected to increase, it might sell financial futures. If interest rates did increase, the value of long-term bonds in the Fund’s portfolio would decline, but the value of the Fund’s financial futures would be expected to increase at approximately the same rate thereby keeping the net asset value of the Fund from declining as much as it otherwise would have.
Among the risks associated with the use of financial futures by the Funds as a hedging device, perhaps the most significant, is the imperfect correlation between movements in the price of the financial futures and movements in the price of the debt securities that are the subject of the hedge. Thus, if the price of the financial future moves less or more than the price of the securities that are the subject of the hedge, the hedge will not be fully effective. To compensate for this imperfect correlation, the Fund may enter into financial futures in a greater dollar amount than the dollar amount of the securities being hedged if the historical volatility of the prices of such securities has been greater than the historical volatility of the financial futures. Conversely, the Fund may enter into fewer financial futures if the historical volatility of the price of the securities being hedged is less than the historical volatility of the financial futures.
The market prices of financial futures may also be affected by factors other than interest rates. One of these factors is the possibility that rapid changes in the volume of closing transactions, whether due to volatile markets or movements by speculators, would temporarily distort the normal relationship between the markets in the financial future and the chosen debt securities. In these circumstances as well as in periods of rapid and large price movements. The Fund might find it difficult or impossible to close out a particular transaction.
Options on Financial Futures. The Funds may also purchase or sell put or call options on financial futures that are traded on a U.S. Exchange or board of trade and enter into closing transactions with respect to such options to terminate an existing position. Currently, options can be purchased with respect to financial futures on U.S. Treasury Bonds, U.S. Treasury Notes, and/or Eurodollar futures contracts on The Chicago Board of Trade or the Chicago Mercantile Exchange. The purchase of put options on financial futures is analogous to the purchase or sale of put options by a Fund on its portfolio securities to hedge against the risk of rising or declining interest rates. As with options on debt securities, the holder of an option may terminate his position by buying or selling an option of the same type. There is no guarantee that such closing transactions can be effected.
Index Contracts
Index Futures. A tax-exempt bond index, which assigns relative values to the tax-exempt bonds included in the index, is traded on the Chicago Board of Trade. The index fluctuates with changes in the market values of all tax-exempt bonds included rather than a single bond. An index future is a bilateral agreement pursuant to which two parties agree to take or make delivery of an amount of cash—rather than any security—equal to specified dollar amount times the difference between the index value at the close of the last trading day of the contract and the price at which the index future was originally written. Thus, an index future is similar to traditional financial futures except that settlement is made in cash.
B-1
Index Options. The Funds may also purchase or sell put or call options on U.S. government or tax-exempt bond index futures and enter into closing transactions with respect to such options to terminate an existing position. Options on index futures are similar to options on debt instruments except that an option on an index future gives the purchaser the right, in return for the premium paid, to assume a position in an index contract rather than an underlying security at a specified exercise price at any time during the period of the option. Upon exercise of the option, the delivery of the futures position by the writer of the option to the holder of the option will be accompanied by delivery of the accumulated balance of the writer’s futures margin account which represents the amount by which the market price of the index futures contract, at exercise, is less than the exercise price of the option on the index future.
Bond index futures and options transactions would be subject to risks similar to transactions in financial futures and options thereon as described above. No series will enter into transactions in index or financial futures or related options unless and until, in Nuveen Asset Management LLC’s opinion, the market for such instruments has developed sufficiently.
Repurchase Agreements
A Fund may invest temporarily up to 5% of its assets in repurchase agreements, which are agreements pursuant to which securities are acquired by the Fund from a third party with the understanding that they will be repurchased by the seller at a fixed price on an agreed date. These agreements may be made with respect to any of the portfolio securities in which the Fund is authorized to invest. Repurchase agreements may be characterized as loans secured by the underlying securities. The Fund may enter into repurchase agreements with (i) member banks of the Federal Reserve System having total assets in excess of $500 million and (ii) securities dealers, provided that such banks or dealers meet the creditworthiness standards established by the Fund’s board of trustees (“Qualified Institutions”). Nuveen Asset Management, LLC will monitor the continued creditworthiness of Qualified Institutions, subject to the oversight of the Fund’s board of trustees.
The use of repurchase agreements involves certain risks. For example, if the seller of securities under a repurchase agreement defaults on its obligation to repurchase the underlying securities, as a result of its bankruptcy or otherwise, the Fund will seek to dispose of such securities, which action could involve costs or delays. If the seller becomes insolvent and subject to liquidation or reorganization under applicable bankruptcy or other laws, the Fund’s ability to dispose of the underlying securities may be restricted. Finally, it is possible that the Fund may not be able to substantiate its interest in the underlying securities. To minimize this risk, the securities underlying the repurchase agreement will be held by the custodian at all times in an amount at least equal to the repurchase price, including accrued interest. If the seller fails to repurchase the securities, the Fund may suffer a loss to the extent proceeds from the sale of the underlying securities are less than the repurchase price.
The resale price reflects the purchase price plus an agreed upon market rate of interest that is unrelated to the coupon rate or date of maturity of the purchased security. The collateral is marked to market daily. Such agreements permit the Fund to keep all its assets earning interest while retaining “overnight” flexibility in pursuit of investments of a longer-term nature.
Swap Agreements
Swap agreements are two-party contracts entered into primarily by institutional investors for periods ranging from a few weeks to several years. In a standard swap transaction, two parties agree to exchange the returns (or differentials in rates of return) earned or realized on particular predetermined investments or instruments. The gross returns to be exchanged or swapped between the parties are calculated with respect to a notional amount (the amount or value of the underlying asset used in computing the particular interest rate, return, or other amount to be exchanged) in a particular foreign currency, or in a basket of securities representing a particular index. Swap agreements may include (i) interest rate caps, under which, in return for a premium, one party agrees to make payments to the other to the extent that interest rates exceed a specified rate or cap; (ii) interest rate floors, under which, in return for a premium, one party agrees to make payments to the other to the extent that interest rates fall below a specified level or floor; and (iii) interest rate collars, under which a party sells a cap and purchases a floor, or vice versa, in an attempt to protect itself against interest rate movements exceeding given minimum or maximum levels or collar amounts.
A Fund may enter into interest rate, credit default, securities index, commodity, or security and currency exchange rate swap agreements for any purpose consistent with the Fund’s investment objective, such as for the purpose of attempting to obtain, enhance, or preserve a particular desired return or spread at a lower cost to the Fund than if the Fund had invested directly in an instrument that yielded that desired return or spread. The Fund also may enter into swaps in order to protect against an increase in the price of, or the currency exchange rate applicable to, securities that the Fund anticipates purchasing at a later date.
B-2
Whether a Fund’s use of swap agreements will be successful in furthering its investment objective will depend, in part, on the ability to predict correctly whether certain types of investments are likely to produce greater returns than other investments and the changes in the future values, indices, or rates covered by the swap agreement. Swap agreements may be considered to be illiquid. Moreover, the Fund bears the risk of loss of the amount expected to be received under a swap agreement in the event of the default or bankruptcy of a swap agreement counterparty. The Fund will enter swap agreements only with counterparties that the Adviser reasonably believes are capable of performing under the swap agreements. If there is a default by the other party to such a transaction, the Fund will have to rely on its contractual remedies (which may be limited by bankruptcy, insolvency or similar laws) pursuant to the agreements related to the transaction. Certain restrictions imposed on the Fund by the Internal Revenue Code of 1986 may limit the Fund’s ability to use swap agreements. The swap market is largely unregulated.
B-3
MAI-MS2-0611P
NUVEEN CALIFORNIA TAX FREE FUND
SUPPLEMENT DATED JULY 27, 2011
TO THE STATEMENT OF ADDITIONAL INFORMATION DATED JUNE 30, 2011
The fifth sentence of the second paragraph of the section “Purchase and Redemption of Fund Shares – Reduction or Elimination of Up-Front Sales Charge on Class A Shares – Letter of Intent” is hereby deleted in its entirety.
PLEASE KEEP THIS WITH YOUR
FUND’S STATEMENT OF ADDITIONAL INFORMATION
FOR FUTURE REFERENCE
MGN-FCASAI-0711P
NUVEEN CALIFORNIA TAX FREE FUND
SUPPLEMENT DATED SEPTEMBER 26, 2011
TO THE STATEMENT OF ADDITIONAL INFORMATION DATED JUNE 30, 2011
| 1. | Effective December 1, 2011, the first paragraph of the section “Purchase and Redemption of Fund Shares—Shareholder Programs—Exchange Privilege” is hereby deleted in its entirety and replaced with the following two paragraphs: |
Nuveen Mutual Funds currently utilize two transfer agents. You may exchange fund shares into an identically registered account for the same class of another Nuveen Mutual Fund available in your state provided that the funds have the same transfer agent. Exchanges between funds with different transfer agents are not allowed. Your exchange must meet the minimum purchase requirements of the fund into which you are exchanging. You may also, under certain limited circumstances, exchange between certain classes of shares of the same Fund. An exchange between classes of shares of the same Fund may not be considered a taxable event; please consult your own tax advisor for further information.
If you hold your shares directly with the Fund, you may exchange your shares by either sending a written request to the applicable Fund, c/o Nuveen Investor Services, P.O. Box 701, Milwaukee, Wisconsin 53201-0701 or by calling Nuveen Investor Services toll free at (800) 257-8787.
| 2. | Effective December 1, 2011, the third paragraph of the section “Purchase and Redemption of Fund Shares—Shareholder Programs—Exchange Privilege” is hereby deleted in its entirety and replaced with the following paragraph: |
For federal income tax purposes, an exchange between different Nuveen Mutual Funds constitutes a sale and purchase of shares and may result in capital gain or loss. Before making any exchange, you should obtain the Prospectus for the Nuveen Mutual Fund you are purchasing and read it carefully. If the registration of the account for the Fund you are purchasing is not exactly the same as that of the fund account from which the exchange is made, written instructions from all holders of the account from which the exchange is being made must be received, with signatures guaranteed by a member of an approved Medallion Guarantee Program or in such other manner as may be acceptable to the Fund. You may also exchange shares by telephone if you authorize telephone exchanges by checking the applicable box on the Application Form or by calling Nuveen Investor Services toll-free at (800) 257-8787 to obtain an authorization form. Each Fund reserves the right to revise or suspend the exchange privilege, limit the amount or number of exchanges, or reject any
exchange. Shareholders will be provided with at least 60 days’ notice of any material revision to or termination of the exchange privilege.
| 3. | Effective October 1, 2011, the following sentence is hereby inserted after the second sentence of the section “Purchase and Redemption of Fund Shares—Class A Shares”: |
Nuveen Mutual Funds currently utilize two transfer agents and the ability to use the methods described below to reduce your sales charge is limited to aggregating values or purchases of funds that have the same transfer agent.
| 4. | Effective October 1, 2011, the following two sentences are hereby inserted after the second sentence in the section “Purchase and Redemption of Fund Shares—Shareholder Programs—Reinstatement Privilege”: |
Nuveen Mutual Funds currently utilize two transfer agents. The reinstatement privilege is limited to reinvestment in a fund which has the same transfer agent as the fund from which you redeemed.
| 5. | The first sentence of the fifth paragraph of the section “Purchase and Redemption of Fund Shares—Reduction or Elimination of Up-Front Sales Charge on Class A Shares” is hereby deleted in its entirety and replaced with the following sentence: |
For purposes of determining whether you qualify for a reduced sales charge as described under Rights of Accumulation and Letter of Intent, you may include together with your own purchases those made by your spouse or domestic partner and your children under the age of 21 years, whether these purchases are made through a taxable or non-taxable account.
PLEASE KEEP THIS WITH YOUR
FUND’S STATEMENT OF ADDITIONAL INFORMATION
FOR FUTURE REFERENCE
MGN-CTFSAI-0911P
NUVEEN INVESTMENT FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION
June 30, 2011
| Share Classes/Ticker Symbols | ||||||||||||
| Class A | Class C1 | Class I | ||||||||||
Nuveen California Tax Free Fund | FCAAX | FCCAX | FCAYX | |||||||||
This Statement of Additional Information relates to the Class A, Class C1 and Class I shares of Nuveen California Tax Free Fund (the “Fund”), which is a series of Nuveen Investment Funds, Inc. (“NIF”). This Statement of Additional Information is not a prospectus, but should be read in conjunction with the current Prospectus dated June 30, 2011. The financial statements included as part of the Fund’s Annual Report to shareholders for the fiscal period ended February 28, 2011 and the financial statements included as part of the Fund’s Semi-Annual Report to shareholders for the fiscal period ended December 31, 2010 for the Fund are incorporated by reference into this Statement of Additional Information. This Statement of Additional Information is incorporated into the Fund’s Prospectus by reference. To obtain copies of the Prospectus or the Fund’s Annual Report or Semi-Annual Report at no charge, write the Fund, c/o Nuveen Investor Services, P.O. Box 8530, Boston, Massachusetts 02266-8530 or call (800) 257-8787. You can also find the Fund’s Prospectus, Statement of Additional Information, and Annual Report online at www.nuveen.com. Please retain this Statement of Additional Information for future reference.
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Nuveen Investment Funds, Inc. (“NIF”) was incorporated in the State of Maryland on August 20, 1987 under the name “SECURAL Mutual Funds, Inc.” The Board of Directors and shareholders, at meetings held January 10, 1991, and April 2, 1991, respectively, approved amendments to the Articles of Incorporation providing that the name “SECURAL Mutual Funds, Inc.” be changed to “First American Investment Funds, Inc.” At a meeting held February 27, 2011, the Board of Directors approved the name “First American Investment Funds, Inc.” be changed to “Nuveen Investment Funds, Inc.”
NIF is organized as a series fund and currently issues its shares in 37 series. Each series of shares represents a separate investment portfolio with its own investment objective and policies (in essence, a separate mutual fund). The series of NIF to which this Statement of Additional Information (“SAI”) relates is Nuveen California Tax Free Fund. Also, when the Fund is discussed herein, the word “Nuveen” is dropped from the beginning of its name. This series is referred to in this SAI as the “Fund.”
The Fund is a non-diversified open-end management investment company. The Fund was formerly advised by FAF Advisors, Inc. (“FAF”), a wholly-owned subsidiary of U.S. Bank National Association (“U.S. Bank”). On December 31, 2010, pursuant to an agreement among U.S. Bank, FAF, Nuveen Investments, Inc. (“Nuveen Investments”) and certain Nuveen affiliates, Nuveen Fund Advisors, Inc., (the “Adviser” or “Nuveen Fund Advisors”) acquired a portion of the asset management business of FAF and was selected as the investment adviser of the Fund (the “Transaction”).
Shareholders may purchase shares of the Fund through three separate classes, Class A, Class C1, and Class I, which provide for variations in distribution costs, shareholder servicing fees, voting rights and dividends. The Class C1 shares are not available for new accounts or for additional investment into existing accounts, but can be issued for purposes of dividend reinvestment. To the extent permitted by the Investment Company Act of 1940, as amended (“1940 Act”), the Fund may also provide for variations in other costs among the classes. In addition, a sales load may be imposed on the sale of Class A and Class C1 shares of the Fund. Except for the foregoing differences among the classes pertaining to costs and fees, each share of the Fund represents an equal proportionate interest in the Fund.
The Articles of Incorporation and Bylaws of NIF provide that meetings of shareholders be held as determined by the Board of Directors and as required by the 1940 Act. Maryland corporation law requires a meeting of shareholders to be held upon the written request of shareholders holding 10% or more of the voting shares of NIF, with the cost of preparing and mailing the notice of such meeting payable by the requesting shareholders. The 1940 Act requires a shareholder vote for, among other things, all amendments to fundamental investment policies and restrictions, for approval of investment advisory contracts and amendments thereto, and for amendments to Rule 12b-1 distribution plans.
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Additional Information Concerning Fund Investments
The principal investment strategies of the Fund are set forth in the Fund’s Prospectus. Additional information concerning principal investment strategies of the Fund, and other investment strategies that may be used by the Fund, is set forth below. The Fund has attempted to identify investment strategies that will be employed in pursuing the Fund’s investment objective. Additional information concerning the Fund’s investment restrictions is set forth below under “Investment Restrictions.”
If a percentage limitation on investments by the Fund stated in this SAI or the Prospectus is adhered to at the time of an investment, a later increase or decrease in percentage resulting from changes in asset value will not be deemed to violate the limitation except in the case of the limitations on borrowing. The Fund, which is limited to investing in securities with specified ratings or of a certain credit quality, is not required to sell a security if its rating is reduced or its credit quality declines after purchase, but may consider doing so. Descriptions of the rating categories of Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc. (“Standard & Poor’s”), Fitch, Inc. (“Fitch”) and Moody’s Investors Service, Inc. (“Moody’s”) are contained in Appendix A.
References in this section to the Adviser also apply, to the extent applicable, to the sub-adviser of the Fund.
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To the extent required by Securities and Exchange Commission (“SEC”) guidelines, the Fund will only engage in transactions that expose it to an obligation to another party if it owns either (a) an offsetting position for the same type of financial asset, or (b) cash or liquid securities, designated on the Fund’s books or held in a segregated account, with a value sufficient at all times to cover its potential obligations not covered as provided in (a). Examples of transactions governed by these asset coverage requirements include, for example, options written by the Fund, futures contracts and options on futures contracts, forward currency contracts, swaps, dollar rolls, and when-issued and delayed delivery transactions. Assets used as offsetting positions, designated on the Fund’s books, or held in a segregated account cannot be sold while the positions requiring cover are open unless replaced with other appropriate assets. As a result, the commitment of a large portion of assets to be used as offsetting positions or to be designated or segregated in such a manner could impede portfolio management or the ability to meet redemption requests or other current obligations.
The Fund may invest in corporate debt securities only to the extent described below under “—Temporary Taxable Investments.” Corporate debt securities are fully taxable debt obligations issued by corporations. These securities fund capital improvements, expansions, debt refinancing or acquisitions that require more capital than would ordinarily be available from a single lender. Investors in corporate debt securities lend money to the issuing corporation in exchange for interest payments and repayment of the principal at a set maturity date. Rates on corporate debt securities are set according to prevailing interest rates at the time of the issue, the credit rating of the issuer, the length of the maturity and other terms of the security, such as a call feature. Corporate debt securities are subject to the risk of an issuer's inability to meet principal and interest payments on the obligations and may also be subject to price volatility due to such factors as market interest rates, market perception of the creditworthiness of the issuer and general market liquidity. In addition, corporate restructurings, such as mergers, leveraged buyouts, takeovers or similar corporate transactions are often financed by an increase in a corporate issuer's debt securities. As a result of the added debt burden, the credit quality and market value of an issuer's existing debt securities may decline significantly.
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Debt Obligations Rated Less Than Investment Grade
The Fund may invest in both investment grade and non-investment grade debt obligations as principal investment strategies. Debt obligations rated less than “investment grade” are sometimes referred to as “high yield securities” or “junk bonds.” To be consistent with the ratings methodology used by Barclays, the provider of the benchmarks of the Fund, a debt obligation is considered to be rated “investment grade” if two of Moody’s, Standard & Poor’s and Fitch rate the security investment-grade (i.e. at least Baa, BBB and BBB, respectively). If ratings are provided by only two of those rating agencies, the more conservative rating is used to determine whether the security is investment-grade. If only one of those rating agencies provides a rating, that rating is used. The Fund may invest in non-investment grade debt obligations rated at least B by two of Standard & Poor’s, Moody’s and Fitch, unless only one of those rating agencies rates the security, in which case that rating must be at least B, or in unrated securities determined to be of comparable quality by the Adviser.
Yields on non-investment grade debt obligations will fluctuate over time. The prices of such obligations have been found to be less sensitive to interest rate changes than higher rated obligations, but more sensitive to adverse economic changes or individual corporate developments. Also, during an economic downturn or period of rising interest rates, highly leveraged issuers may experience financial stress which could adversely affect their ability to service principal and interest payment obligations, to meet projected business goals, and to obtain additional financing. In addition, periods of economic uncertainty and changes can be expected to result in increased volatility of market prices of non-investment grade debt obligations. If the issuer of a security held by the Fund defaulted, the Fund might incur additional expenses to seek recovery.
In addition, the secondary trading market for non-investment grade debt obligations may be less developed than the market for investment grade obligations. This may make it more difficult for the Fund to value and dispose of such obligations. Adverse publicity and investor perceptions, whether or not based on fundamental analysis, may decrease the values and liquidity of non-investment grade obligations, especially in a thin secondary trading market.
Certain risks also are associated with the use of credit ratings as a method for evaluating non-investment grade debt obligations. For example, credit ratings evaluate the safety of principal and interest payments, not the market value risk of such obligations. In addition, credit rating agencies may not timely change credit ratings to reflect current events. Thus, the success of the Fund’s use of non-investment grade debt obligations may be more dependent on the Adviser’s own credit analysis than is the case with investment grade obligations.
The Fund may use derivative instruments as a principal investment strategy, as described below. Generally, a derivative is a financial contract the value of which depends upon, or is derived from, the value of an underlying asset, reference rate or index. Derivatives generally take the form of contracts under which the parties agree to payments between them based upon the performance of a wide variety of underlying references, such as stocks, bonds, loans, commodities, interest rates, currency exchange rates, and various domestic and foreign indices. Derivative instruments that the Fund may use include options contracts, futures contracts, options on futures contracts, forward currency contracts and swap transactions, all of which are described in more detail below.
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The Fund may use derivatives for a variety of reasons, including as a substitute for investing directly in securities and currencies, as an alternative to selling a security short, as part of a hedging strategy (that is, for the purpose of reducing risk to the Fund), to manage the effective duration of the Fund’s portfolio, or for other purposes related to the management of the Fund. Derivatives permit the Fund to increase or decrease the level of risk, or change the character of the risk, to which its portfolio is exposed in much the same way as the Fund can increase or decrease the level of risk, or change the character of the risk, of its portfolio by making investments in specific securities. However, derivatives may entail investment exposures that are greater than their cost would suggest. As a result, a small investment in derivatives could have a large impact on the Fund’s performance.
Derivatives can be volatile and involve various types and degrees of risk, depending upon the characteristics of the particular derivative and the portfolio as a whole. If the Fund invests in derivatives at inopportune times or judges market conditions incorrectly, such investments may lower the Fund’s return or result in a loss. The Fund also could experience losses or limit its gains if the performance of its derivatives is poorly correlated with the underlying instruments or the Fund’s other investments, or if the Fund is unable to liquidate its position because of an illiquid secondary market. The market for derivatives is, or suddenly can become, illiquid. Changes in liquidity may result in significant, rapid and unpredictable changes in the prices for derivatives.
While transactions in some derivatives may be effected on established exchanges, many other derivatives are privately negotiated and entered into in the over-the-counter market with a single counterparty. When exchange-traded derivatives are purchased and sold, a clearing agency associated with the exchange stands between each buyer and seller and effectively guarantees performance of each contract, either on a limited basis through a guaranty fund or to the full extent of the clearing agency’s balance sheet. Transactions in over-the-counter derivatives have no such protection. Each party to an over-the-counter derivative bears the risk that its direct counterparty will default. In addition, over-the-counter derivatives may be less liquid than exchange-traded derivatives since the other party to the transaction may be the only investor with sufficient understanding of the derivative to be interested in bidding for it.
Derivatives generally involve leverage in the sense that the investment exposure created by the derivative is significantly greater than the Fund’s initial investment in the derivative. As discussed above under “—Asset Coverage Requirements,” the Fund may be required to segregate permissible liquid assets, or engage in other permitted measures, to “cover” the Fund’s obligations relating to its transactions in derivatives. For example, in the case of futures contracts or forward contracts that are not contractually required to cash settle, the Fund must set aside liquid assets equal to such contracts’ full notional value (generally, the total numerical value of the asset underlying a future or forward contract at the time of valuation) while the positions are open. With respect to futures contracts or forward contracts that are contractually required to cash settle, however, the Fund is permitted to set aside liquid assets in an amount equal to the Fund’s daily mark-to-market net obligation (i.e., the Fund’s daily net liability) under the contracts, if any, rather than such contracts’ full notional value. By setting aside assets equal to only its net obligations under cash-settled futures and forward contracts, the Fund may employ leverage to a greater extent than if the Fund were required to segregate assets equal to the full notional value of such contracts.
Derivatives also may involve other types of leverage. For example, an instrument linked to the value of a securities index may return income calculated as a multiple of the price movement of the underlying index. This leverage will increase the volatility of these derivatives since they may increase or decrease in value more quickly than the underlying instruments.
The particular derivative instruments the Fund can use are described below. The Fund’s portfolio manager may decide not to employ some or all of these instruments, and there is no assurance that any derivatives strategy used by the Fund will succeed. The Fund may employ new derivative instruments and strategies when they are developed, if those investment methods are consistent with the Fund’s investment objective and are permissible under applicable regulations governing the Fund.
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Futures and Options on Futures
The Fund may engage in futures transactions as a principal investment strategy. The Fund may buy and sell futures contracts that relate to: (1) interest rates, (2) debt securities, (3) bond indices, (4) stock indices, and (5) individual stocks. The Fund also may buy and write options on the futures contracts in which it may invest (“futures options”) and may write straddles, which consist of a call and a put option on the same futures contract. The Fund will only write options and straddles which are “covered.” This means that, when writing a call option, the Fund must either segregate liquid assets with a value equal to the fluctuating market value of the optioned futures contract, or the Fund must own an option to purchase the same futures contract having an exercise price that is (i) equal to or less than the exercise price of the call written, or (ii) greater than the exercise price of the call written, provided the difference is maintained by the Fund in segregated liquid assets. When writing a put option, the Fund must segregate liquid assets in an amount not less than the exercise price, or own a put option on the same futures contract where the exercise price of the put held is (i) equal to or greater than the exercise price of the put written, or (ii) less than the exercise price of the put written, provided the difference is maintained by the Fund in segregated liquid assets. A straddle will be covered when sufficient assets are deposited to meet the Fund’s immediate obligations. The Fund may use the same liquid assets to cover both the call and put options in a straddle where the exercise price of the call and put are the same, or the exercise price of the call is higher than that of the put. In such cases, the Fund will also segregate liquid assets equivalent to the amount, if any, by which the put is “in the money.” The Fund may only enter into futures contracts and futures options which are standardized and traded on a U.S. or foreign exchange, board of trade or similar entity, or quoted on an automated quotation system.
A futures contract is an agreement between two parties to buy and sell a security, index, interest rate, currency or commodity (each a “financial instrument”) for a set price on a future date. Certain futures contracts, such as futures contracts relating to individual securities, call for making or taking delivery of the underlying financial instrument. However, these contracts generally are closed out before delivery by entering into an offsetting purchase or sale of a matching futures contract (same exchange, underlying financial instrument, and delivery month). Other futures contracts, such as futures contracts on interest rates and indices, do not call for making or taking delivery of the underlying financial instrument, but rather are agreements pursuant to which two parties agree to take or make delivery of an amount of cash equal to the difference between the value of the financial instrument at the close of the last trading day of the contract and the price at which the contract was originally written. These contracts also may be settled by entering into an offsetting futures contract.
Unlike when the Fund purchases or sells a security, no price is paid or received by the Fund upon the purchase or sale of a futures contract. Initially, the Fund will be required to deposit with the futures broker, known as a futures commission merchant (“FCM”), an amount of cash or securities equal to a varying specified percentage of the contract amount. This amount is known as initial margin. The margin deposit is intended to ensure completion of the contract. Minimum initial margin requirements are established by the futures exchanges and may be revised. In addition, FCMs may establish margin deposit requirements that are higher than the exchange minimums. Cash held in the margin account generally is not income producing. However, coupon-bearing securities, such as Treasury securities, held in margin accounts generally will earn income. Subsequent payments to and from the FCM, called variation margin, will be made on a daily basis as the price of the underlying financial instrument fluctuates, making the futures contract more or less valuable, a process known as marking the contract to market. Changes in variation margin are recorded by the Fund as unrealized gains or losses. At any time prior to expiration of the futures contract, the Fund may elect to close the position by taking an opposite position that will operate to terminate its position in the futures contract. A final determination of variation margin is then made, additional cash is required to be paid by or released to the Fund, and the Fund realizes a gain or loss. In the event of the bankruptcy or insolvency of an FCM that holds margin on behalf of the Fund, the Fund may be entitled to the return of margin owed to it only in proportion to the amount received by the FCM’s other customers, potentially resulting in losses to the Fund. Futures transactions also involve brokerage costs and the Fund may have to segregate additional liquid assets in accordance with applicable SEC requirements. See “—Asset Coverage Requirements” above.
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A futures option gives the purchaser of such option the right, in return for the premium paid, to assume a long position (call) or short position (put) in a futures contract at a specified exercise price at any time during the period of the option. Upon exercise of a call option, the purchaser acquires a long position in the futures contract and the writer is assigned the opposite short position. Upon the exercise of a put option, the opposite is true. Futures options possess many of the same characteristics as options on securities, currencies and indices (discussed below under “—Options Transactions”).
Limitations on the Use of Futures and Futures Options. The Commodities Futures Trading Commission has eliminated limitations on futures trading by certain regulated entities including registered investment companies. Consequently, registered investment companies may engage in unlimited futures transactions and options thereon provided they have claimed an exclusion from regulation as a commodity pool operator. NIF, on behalf of each of its series, has claimed such an exclusion. Thus, the Fund may use futures contracts and options thereon to the extent consistent with its investment objective. The requirements for qualification as a regulated investment company may limit the extent to which the Fund may enter into futures transactions. See “Taxation.”
Risks Associated with Futures and Futures Options. There are risks associated with the use of futures contracts and futures options. A purchase or sale of a futures contract may result in a loss in excess of the amount invested in the futures contract.
If futures are used for hedging purposes, there can be no guarantee that there will be a correlation between price movements in the futures contract and in the underlying financial instruments that are being hedged. This could result from differences between the financial instruments being hedged and the financial instruments underlying the standard contracts available for trading (e.g., differences in interest rate levels, maturities and the creditworthiness of issuers). In addition, price movements of futures contracts may not correlate perfectly with price movements of the financial instruments underlying the futures contracts due to certain market distortions.
Successful use of futures by the Fund also is subject to the Adviser’s ability to predict correctly movements in the direction of the relevant market. For example, if the Fund uses futures to hedge against the possibility of a decline in the market value of securities held in its portfolio and the prices of such securities increase instead, the Fund will lose part or all of the benefit of the increased value of the securities which it has hedged because it will have offsetting losses in its futures positions. Furthermore, if in such circumstances the Fund has insufficient cash, it may have to sell securities to meet daily variation margin requirements. The Fund may have to sell such securities at a time when it may be disadvantageous to do so.
There can be no assurance that a liquid market will exist at a time when the Fund seeks to close out a futures or a futures option position, and the Fund would remain obligated to meet margin requirements until the position is closed. Futures exchanges may limit the amount of fluctuation permitted in certain futures contract prices during a single trading day. The daily limit establishes the maximum amount that the price of a futures contract may vary either up or down from the previous day’s settlement price at the end of the current trading session. Once the daily limit has been reached in a futures contract subject to the limit, no more trades may be made on that day at a price beyond that limit. The daily limit governs only price movements during a particular trading day and therefore does not limit potential losses because the limit may work to prevent the liquidation of unfavorable positions. For example, futures prices have occasionally moved to the daily limit for several consecutive trading days with little or no trading, thereby preventing prompt liquidation of positions and subjecting some holders of futures contracts to substantial losses.
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Additional Risks Associated with Commodity Futures Contracts. There are several additional risks associated with transactions in commodity futures contracts.
Storage. Unlike the financial futures markets, in the commodity futures markets there are costs of physical storage associated with purchasing the underlying commodity. The price of the commodity futures contract will reflect the storage costs of purchasing the physical commodity, including the time value of money invested in the physical commodity. To the extent that the storage costs for an underlying commodity change while the Fund is invested in futures contracts on that commodity, the value of the futures contract may change proportionately.
Reinvestment. In the commodity futures markets, producers of the underlying commodity may decide to hedge the price risk of selling the commodity by selling futures contracts today to lock in the price of the commodity at the time of delivery. In order to induce speculators to purchase the other side of the same futures contract, the commodity producer generally must sell the futures contract at a lower price than the expected future spot price. Conversely, if most hedgers in the futures market are purchasing futures contracts to hedge against a rise in prices, then speculators will only sell the other side of the futures contract at a higher futures price than the expected future spot price of the commodity. The changing nature of the hedgers and speculators in the commodity markets will influence whether futures prices are above or below the expected future spot price. If the nature of hedgers and speculators in futures markets has shifted when it is time for the Fund to reinvest the proceeds of a maturing contract in a new futures contract, the Fund might reinvest at higher or lower futures prices, or choose to pursue other investments.
Other Economic Factors. The commodities which underlie commodity futures contracts may be subject to additional economic and non-economic variables, such as drought, floods, weather, livestock disease, embargoes, tariffs, and international economic, political and regulatory developments. These factors may have a larger impact on commodity prices and commodity-linked instruments, including futures contracts, than on traditional securities. Certain commodities are also subject to limited pricing flexibility because of supply and demand factors. Others are subject to broad price fluctuations as a result of the volatility of the prices for certain raw materials and the instability of supplies of other materials.
Options Transactions
To the extent set forth below, the Fund may purchase put and call options on interest rates, stock indices, bond indices, and commodity indices. Options on futures contracts are discussed above under “— Futures and Options on Futures.”
Options on Interest Rates and Indices. As a non-principal investment strategy, the Fund may purchase put and call options on interest rates and on stock and bond indices. An option on interest rates or on an index gives the holder the right to receive, upon exercise of the option, an amount of cash if the closing value of the underlying interest rate or index is greater than, in the case of a call, or less than, in the case of a put, the exercise price of the option. This amount of cash is equal to the difference between the exercise-settlement value of the interest rate option or the closing price of the index and the exercise price of the option expressed in dollars times a specified multiple (the “multiplier”). The writer of the option is obligated, for the premium received, to make delivery of this amount. Settlements for interest rate and index options are always in cash.
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Expiration or Exercise of Options. If an option written by the Fund expires unexercised, the Fund realizes a capital gain equal to the premium received at the time the option was written. If an option purchased by the Fund expires unexercised, the Fund realizes a capital loss equal to the premium paid. Prior to the earlier of exercise or expiration, an exchange traded option may be closed out by an offsetting purchase or sale of an option of the same series (type, exchange, underlying security, currency or index, exercise price, and expiration). There can be no assurance, however, that a closing purchase or sale transaction can be effected when the Fund desires.
The Fund may sell put or call options it has previously purchased, which could result in a net gain or loss depending on whether the amount realized on the sale is more or less than the premium and other transaction costs paid on the put or call option which is sold. Prior to exercise or expiration, an option may be closed out by an offsetting purchase or sale of an option of the same series. The Fund will realize a capital gain from a closing purchase transaction if the cost of the closing option is less than the premium received from writing the option, or, if it is more, the Fund will realize a capital loss. If the premium received from a closing sale transaction is more than the premium paid to purchase the option, the Fund will realize a capital gain or, if it is less, the Fund will realize a capital loss. The principal factors affecting the market value of a put or a call option include supply and demand, interest rates, the current market price of the underlying security, currency or index in relation to the exercise price of the option, the volatility of the underlying security, currency or index, and the time remaining until the expiration date.
Risks Associated with Options Transactions. There are several risks associated with options transactions. For example, there are significant differences between the securities and options markets that could result in an imperfect correlation between these markets, causing a given transaction not to achieve its objectives. A decision as to whether, when and how to use options involves the exercise of skill and judgment, and even a well-conceived transaction may be unsuccessful to some degree because of market behavior or unexpected events.
When the Fund purchases a put or call option, it risks a total loss of the premium paid for the option, plus any transaction costs, if the price of the underlying security does not increase or decrease sufficiently to justify the exercise of such option. Also, where a put or call option on a particular security is purchased to hedge against price movements in a related security, the price of the put or call option may move more or less than the price of the related security.
There can be no assurance that a liquid market will exist when the Fund seeks to close out an option position. If the Fund were unable to close out an option that it had purchased on a security, it would have to exercise the option in order to realize any profit or the option may expire worthless.
There is also a risk that, if restrictions on exercise were imposed, the Fund might be unable to exercise an option it had purchased.
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Interest Rate Caps, Floors and Collars
The Fund may enter into interest rate caps, floors and collars as a non-principal investment strategy.
The purchase of an interest rate floor entitles the purchaser, to the extent that a specified index falls below a predetermined interest rate, to receive payments of interest on a notional principal amount from the party selling such interest rate floor. The purchase of an interest rate cap entitles the purchaser, to the extent that a specified index rises above a predetermined interest rate, to receive payments of interest on a notional principal amount from the party selling such interest rate cap. Interest rate collars involve selling a cap and purchasing a floor or vice versa to protect the Fund against interest rate movements exceeding given minimum or maximum levels.
Risks Associated with Interest Rate Caps, Floors and Collars Transactions. The use of interest rate caps, floors and collars transactions is a highly specialized activity which involves strategies and risks different from those associated with ordinary portfolio security transactions. If the Adviser is incorrect in its forecasts of default risks, market spreads or other applicable factors the investment performance of the Fund would diminish compared with what it would have been if these techniques were not used. The Fund may only close out a cap, floor, or collar with its particular counterparty, and may only transfer a position with the consent of that counterparty. In addition, the price at which the Fund may close out such a two party contract may not correlate with the price change in the underlying reference asset. If the counterparty defaults, the Fund will have contractual remedies, but there can be no assurance that the counterparty will be able to meet its contractual obligations or that the Fund will succeed in enforcing its rights. It also is possible that developments in the derivatives market, including potential government regulation, could adversely affect the Fund’s ability to terminate existing swap or other agreements or to realize amounts to be received under such agreements.
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Inflation Protected Securities
The Fund may invest in inflation protected securities as a non-principal investment strategy. Inflation protected securities are fixed income securities designed to provide protection against the negative effects of inflation. Two structures are common. The U.S. Treasury and some other issuers use a structure that accrues inflation into the principal value of the bond. Most other issuers pay out the inflation accruals as part of a semiannual coupon.
Inflation protected securities issued by the U.S. Treasury have maturities of five, ten, twenty or thirty years, although it is possible that securities with other maturities will be issued in the future. The U.S. Treasury securities pay interest on a semi-annual basis, equal to a fixed percentage of the inflation-adjusted principal amount. For example, if the Fund purchased an inflation protected bond with a par value of $1,000 and a 3% real rate of return coupon (payable 1.5% semi-annually), and inflation over the first six months were 1%, the mid-year par value of the bond would be $1,010 and the first semi-annual interest payment would be $15.15 ($1,010 times 1.5%). If inflation during the second half of the year resulted in the whole years’ inflation equaling 3%, the end-of-year par value of the bond would be $1,030 and the second semi-annual interest payment would be $15.45 ($1,030 times 1.5%).
If the periodic adjustment rate measuring inflation falls, the principal value of U.S. Treasury inflation protected securities will be adjusted downward, and consequently the interest payable on these securities (calculated with respect to a smaller principal amount) will be reduced. Repayment of the original bond principal upon maturity (as adjusted for inflation) is guaranteed in the case of U.S. Treasury inflation protected bonds, even during a period of deflation. However, the current market value of the bonds is not guaranteed, and will fluctuate. Other inflation-protected securities that accrue inflation into their principal value may or may not provide a similar guarantee. If a guarantee of principal is not provided, the adjusted principal value of the bond repaid at maturity may be less than the original principal.
The value of inflation-protected securities is expected to change in response to changes in real interest rates. Real interest rates in turn are tied to the relationship between nominal interest rates and the rate of inflation. Therefore, if inflation was to rise at a faster rate than nominal interest rates, real interest rates might decline, leading to an increase in value of inflation protected securities. In contrast, if nominal interest rates increased at a faster rate than inflation, real interest rates might rise, leading to a decrease in value of inflation-protected securities.
The periodic adjustment of U.S. inflation protected bonds is tied to the Consumer Price Index for Urban Consumers (“CPI-U”), which is calculated monthly by the U.S. Bureau of Labor Statistics. The CPI-U is a measurement of changes in the cost of living, made up of components such as housing, food, transportation and energy. Inflation protected securities issued by a foreign government are generally adjusted to reflect a comparable inflation index, calculated by that government. There can be no assurance that the CPI-U or any foreign inflation index will accurately measure the real rate of inflation in the prices of goods and services. Moreover, there can be no assurance that the rate of inflation in a foreign country will be correlated to the rate of inflation in the United States. If the market perceives that the adjustment mechanism of an inflation-protected security does not accurately adjust for inflation, the value of the security could be adversely affected.
While inflation protected securities are expected to be protected from long-term inflationary trends, short-term increases in inflation may lead to a decline in value. The calculation of the inflation index ratio for inflation protected securities issued by the U.S. Treasury incorporates an approximate three-month lag, which may have an effect on the trading price of the securities, particularly during periods of significant, rapid changes in the inflation index. To the extent that inflation has increased during the three months prior to an interest payment, that interest payment will not be protected from the inflation increase. Further, to the extent that inflation has increased during the final three months of a security’s maturity, the final value of the security will not be protected against that increase, which will negatively impact the value of the security. If interest rates rise due to reasons other than inflation (for example, due to changes in currency exchange rates), investors in inflation-protected securities may not be protected to the extent that the increase is not reflected in the bond’s inflation measure.
Any increase in the principal amount of an inflation-protected security will be considered taxable income to the Fund, even though the Fund does not receive its principal until maturity.
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Municipal Bonds and Other Municipal Obligations
The Fund invests principally in municipal bonds and other municipal obligations. These bonds and other obligations are issued by the states and by their local and special-purpose political subdivisions. The term “municipal bond” includes short-term municipal notes issued by the states and their political subdivisions, including, but not limited to, tax anticipation notes (“TANs”), bond anticipation notes (“BANs”), revenue anticipation notes (“RANs”), construction loan notes, tax free commercial paper, and tax free participation certificates.
Municipal Bonds
The two general classifications of municipal bonds are “general obligation” bonds and “revenue” bonds. General obligation bonds are secured by the governmental issuer’s pledge of its faith, credit and taxing power for the payment of principal and interest upon a default by the issuer of its principal and interest payment obligations. They are usually paid from general revenues of the issuing governmental entity. Revenue bonds, on the other hand, are usually payable only out of a specific revenue source rather than from general revenues. Revenue bonds ordinarily are not backed by the faith, credit or general taxing power of the issuing governmental entity. The principal and interest on revenue bonds for private facilities are typically paid out of rents or other specified payments made to the issuing governmental entity by a private company which uses or operates the facilities. Examples of these types of obligations are industrial revenue bond and pollution control revenue bonds. Industrial revenue bonds are issued by governmental entities to provide financing aid to community facilities such as hospitals, hotels, business or residential complexes, convention halls and sport complexes. Pollution control revenue bonds are issued to finance air, water and solids pollution control systems for privately operated industrial or commercial facilities.
Revenue bonds for private facilities usually do not represent a pledge of the credit, general revenues or taxing powers of issuing governmental entity. Instead, the private company operating the facility is the sole source of payment of the obligation. Sometimes, the funds for payment of revenue bonds come solely from revenue generated by operation of the facility. Revenue bonds which are not backed by the credit of the issuing governmental entity frequently provide a higher rate of return than other municipal obligations, but they entail greater risk than obligations which are guaranteed by a governmental unit with taxing power. Federal income tax laws place substantial limitations on industrial revenue bonds, and particularly certain specified private activity bonds issued after August 7, 1986. In the future, legislation could be introduced in Congress which could further restrict or eliminate the income tax exemption for interest on debt obligations in which the Fund may invest.
Refunded Bonds
The Fund may invest in refunded bonds. Refunded bonds may have originally been issued as general obligation or revenue bonds, but become refunded when they are secured by an escrow fund, usually consisting entirely of direct U.S. government obligations and/or U.S. government agency obligations sufficient for paying the bondholders. There are two types of refunded bonds: pre-refunded bonds and escrowed-to-maturity (“ETM”) bonds. The escrow fund for a pre-refunded municipal bond may be structured so that the refunded bonds are to be called at the first possible date or a subsequent call date established in the original bond debenture. The call price usually includes a premium from 1% to 3% above par. This type of structure usually is used for those refundings that either reduce the issuer’s interest payment expenses or change the debt maturity schedule. In escrow funds for ETM refunded municipal bonds, the maturity schedules of the securities in the escrow funds match the regular debt-service requirements on the bonds as originally stated in the bond indentures.
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Municipal Leases and Certificates of Participation
The Fund also may purchase municipal lease obligations, primarily through certificates of participation. Certificates of participation in municipal leases are undivided interests in a lease, installment purchase contract or conditional sale contract entered into by a state or local governmental unit to acquire equipment or facilities. Municipal leases frequently have special risks which generally are not associated with general obligation bonds or revenue bonds.
Municipal leases and installment purchase or conditional sales contracts (which usually provide for title to the leased asset to pass to the governmental issuer upon payment of all amounts due under the contract) have evolved as a means for governmental issuers to acquire property and equipment without meeting the constitutional and statutory requirements for the issuance of municipal debt. The debt issuance limitations are deemed to be inapplicable because of the inclusion in many leases and contracts of “non-appropriation” clauses that provide that the governmental issuer has no obligation to make future payments under the lease or contract unless money is appropriated for this purpose by the appropriate legislative body on a yearly or other periodic basis. Although these kinds of obligations are secured by the leased equipment or facilities, the disposition of the pledged property in the event of non-appropriation or foreclosure might, in some cases, prove difficult and time-consuming. In addition, disposition upon non-appropriation or foreclosure might not result in recovery by the Fund of the full principal amount represented by an obligation.
In light of these concerns, the Fund has adopted and follows procedures for determining whether municipal lease obligations purchased by the Fund are liquid and for monitoring the liquidity of municipal lease securities held in the Fund’s portfolio. These procedures require that a number of factors be used in evaluating the liquidity of a municipal lease security, including the frequency of trades and quotes for the security, the number of dealers willing to purchase or sell the security and the number of other potential purchasers, the willingness of dealers to undertake to make a market in security, the nature of the marketplace in which the security trades, and other factors which the Adviser may deem relevant. As set forth in “Investment Restrictions” below, the Fund is subject to limitations on the percentage of illiquid securities it can hold.
Derivative Municipal Securities
The Fund may also acquire derivative municipal securities, which are custodial receipts of certificates underwritten by securities dealers or banks that evidence ownership of future interest payments, principal payments or both on certain municipal securities. The underwriter of these certificates or receipts typically purchases municipal securities and deposits them in an irrevocable trust or custodial account with a custodian bank, which then issues receipts or certificates that evidence ownership of the periodic unmatured coupon payments and the final principal payment on the obligation.
The principal and interest payments on the municipal securities underlying custodial receipts may be allocated in a number of ways. For example, payments may be allocated such that certain custodial receipts may have variable or floating interest rates and others may be stripped securities which pay only the principal or interest due on the underlying municipal securities. The Fund may invest in custodial receipts which have inverse floating interest rates and other inverse floating rate municipal obligations, as described below under “—Inverse Floating Rate Municipal Obligations.”
Tender Option Bonds (“TOBs”)
TOBs are created by municipal bond dealers who purchase long-term tax-exempt bonds in the secondary market, place the certificates in trusts, and sell interests in the trusts with puts or other liquidity guarantees attached. The credit quality of the resulting synthetic short-term instrument is based on the put provider’s short-term rating and the underlying bond’s long-term rating. There is some risk that a remarketing agent will renege on a tender option agreement if the underlying bond is downgraded or defaults. Because of this the Adviser will consider on an ongoing basis the creditworthiness of the issuer of the underlying municipal securities, of any custodian, and of the third-party provider of the tender option. In certain instances and for certain TOBs, the option may be terminable in the event of a default in payment of principal or interest on the underlying municipal securities and for other reasons.
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Variable Rate Demand Notes (“VRDNs”)
VRDNs are long-term municipal obligations that have variable or floating interest rates and provide the Fund with the right to tender the security for repurchase at its stated principal amount plus accrued interest. Such securities typically bear interest at a rate that is intended to cause the securities to trade at par. The interest rate may float or be adjusted at regular intervals (ranging from daily to annually), and is normally based on an applicable interest index or another published interest rate or interest rate index. Most VRDNs allow the Fund to demand the repurchase of the security on not more than seven days prior notice. Other notes only permit the Fund to tender the security at the time of each interest rate adjustment or at other fixed intervals. Variable interest rates generally reduce changes in the market value of municipal obligations from their original purchase prices. Accordingly, as interest rates decrease, the potential for capital appreciation is less for variable rate municipal obligations than for fixed income obligations.
Inverse Floating Rate Municipal Obligations
The Fund may invest in inverse floating rate municipal obligations. An inverse floating rate obligation entitles the holder to receive interest at a rate which changes in the opposite direction from, and in the same magnitude as, or in a multiple of, changes in a specified index rate. Although an inverse floating rate municipal obligation would tend to increase portfolio income during a period of generally decreasing market interest rates, its value would tend to decline during a period of generally increasing market interest rates. In addition, its decline in value may be greater than for a fixed-rate municipal obligation, particularly if the interest rate borne by the floating rate municipal obligation is adjusted by a multiple of changes in the specified index rate. For these reasons, inverse floating rate municipal obligations have more risk than more conventional fixed-rate and floating rate municipal obligations.
The Fund may invest in other investment companies, such as mutual funds, closed-end funds, and exchange-traded funds (“ETFs”). Under the 1940 Act, the Fund’s investment in such securities, subject to certain exceptions, currently is limited to 3% of the total voting stock of any one investment company; 5% of the Fund’s total assets with respect to any one investment company; and 10% of the Fund’s total assets in the aggregate. The Fund will only invest in other investment companies that invest in Fund-eligible investments. The Fund’s investments in other investment companies may include money market mutual funds. Investments in money market funds are not subject to the percentage limitations set forth above.
If the Fund invests in other investment companies, Fund shareholders will bear not only their proportionate share of the Fund’s expenses, but also, indirectly, the similar expenses of the underlying investment companies. Shareholders would also be exposed to the risks associated not only to the Fund, but also to the portfolio investments of the underlying investment companies. Shares of certain closed-end funds may at times be acquired only at market prices representing premiums to their net asset values. Shares acquired at a premium to their net asset value may be more likely to subsequently decline in price, resulting in a loss to the Fund and its shareholders. The underlying securities in an ETF may not follow the price movements of the industry or sector the ETF is designed to track. Trading in an ETF may be halted if the trading in one or more of the ETF’s underlying securities is halted, which could result in the ETF being more volatile.
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Payment-In-Kind Debentures and Delayed Interest Securities
The Fund, as a non-principal investment strategy, may invest in debentures the interest on which may be paid in other securities rather than cash (“PIKs”) or may be delayed (“delayed interest securities”). Typically, during a specified term prior to the debenture’s maturity, the issuer of a PIK may provide for the option or the obligation to make interest payments in debentures, common stock or other instruments (i.e., “in kind” rather than in cash). The type of instrument in which interest may or will be paid would be known by the Fund at the time of investment. While PIKs generate income for purposes of generally accepted accounting standards, they do not generate cash flow and thus could cause the Fund to be forced to liquidate securities at an inopportune time in order to distribute cash, as required by the Code.
Unlike PIKs, delayed interest securities do not pay interest for a specified period. Because values of securities of this type are subject to greater fluctuations than are the values of securities that distribute income regularly, they may be more speculative than such securities.
The Fund may invest in repurchase agreements as a non-principal investment strategy. Ordinarily, the Fund does not expect its investment in repurchase agreements to exceed 10% of its total assets. However, because the Fund may invest without limit in cash and short-term securities for temporary defensive purposes, there is no limit on the Fund’s ability to invest in repurchase agreements. A repurchase agreement involves the purchase by the Fund of securities with the agreement that after a stated period of time, the original seller will buy back the same securities (“collateral”) at a predetermined price or yield. Repurchase agreements involve certain risks not associated with direct investments in securities. If the original seller defaults on its obligation to repurchase as a result of its bankruptcy or otherwise, the purchasing Fund will seek to sell the collateral, which could involve costs or delays. Although collateral (which may consist of any fixed income security which is an eligible investment for the Fund entering into the repurchase agreement) will at all times be maintained in an amount equal to the repurchase price under the agreement (including accrued interest), the Fund would suffer a loss if the proceeds from the sale of the collateral were less than the agreed-upon repurchase price. The Adviser will monitor the creditworthiness of the firms with which the Fund enters into repurchase agreements.
The Fund’s custodian will hold the securities underlying any repurchase agreement, or the securities will be part of the Federal Reserve/Treasury Book Entry System. The market value of the collateral underlying the repurchase agreement will be determined on each business day. If at any time the market value of the collateral falls below the repurchase price under the repurchase agreement (including any accrued interest), the Fund will promptly receive additional collateral (so the total collateral is an amount at least equal to the repurchase price plus accrued interest).
Short-Term Temporary Investments
In an attempt to respond to adverse market, economic, political or other conditions, the Fund may temporarily invest without limit in a variety of short-term instruments such as commercial paper and variable amount master demand notes; U.S. dollar-denominated time and savings deposits (including certificates of deposit); bankers’ acceptances; obligations of the U.S. government or its agencies or instrumentalities; repurchase agreements collateralized by eligible investments of the Fund; securities of other mutual funds that invest primarily in debt obligations with remaining maturities of 13 months or less (which investments also are subject to an advisory fee); and other similar high-quality short-term U.S. dollar-denominated obligations.
The Fund may also invest in Eurodollar certificates of deposit issued by foreign branches of U.S. or foreign banks; Eurodollar time deposits, which are U.S. dollar-denominated deposits in foreign branches of U.S. or foreign banks; and Yankee certificates of deposit, which are U.S. dollar-denominated certificates of deposit issued by U.S. branches of foreign banks and held in the United States. In each instance, the Fund may only invest in bank instruments issued by an institution which has capital, surplus and undivided profits of more than $100 million or the deposits of which are insured by the Bank Insurance Fund or the Savings Association Insurance Fund.
Short-term investments and repurchase agreements may be entered into on a joint basis by the Fund and other funds advised by the Adviser to the extent permitted by an exemptive order issued by the SEC with respect to the Fund. A brief description of certain kinds of short-term instruments follows:
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Commercial Paper
Commercial paper consists of unsecured promissory notes issued by corporations. Issues of commercial paper normally have maturities of less than nine months and fixed rates of return. Subject to the limitations described in the Prospectus, the Fund may purchase commercial paper consisting of issues rated at the time of purchase within the two highest rating categories by Standard & Poor’s, Fitch or Moody’s, or which have been assigned an equivalent rating by another nationally recognized statistical rating organization. The Fund also may invest in commercial paper that is not rated but that is determined by the Adviser to be of comparable quality to instruments that are so rated. For a description of the rating categories of Standard & Poor’s, Fitch and Moody’s, see Appendix A.
Bankers’ Acceptances
Bankers’ acceptances are credit instruments evidencing the obligation of a bank to pay a draft drawn on it by a customer. These instruments reflect the obligation both of the bank and of the drawer to pay the full amount of the instrument upon maturity.
Variable Amount Master Demand Notes
Variable amount master demand notes are unsecured demand notes that permit the indebtedness thereunder to vary and provide for periodic adjustments in the interest rate according to the terms of the instrument. Because master demand notes are direct lending arrangements between the Fund and the issuer, they are not normally traded. Although there is no secondary market in the notes, the Fund may demand payment of principal and accrued interest at any time. While the notes are not typically rated by credit rating agencies, issuers of variable amount master demand notes (which are normally manufacturing, retail, financial, and other business concerns) must satisfy the same criteria as set forth above for commercial paper. The Adviser will consider the earning power, cash flow and other liquidity ratios of the issuers of such notes and will continuously monitor their financial status and ability to meet payment on demand.
Variable Rate Demand Obligations
Variable rate demand obligations (“VRDOs”) are securities in which the interest rate is adjusted at pre-designated periodic intervals. VRDOs may include a demand feature which is a put that entitles the holder to receive the principal amount of the underlying security or securities and which may be exercised either at any time on no more than 30 days’ notice or at specified intervals not exceeding 397 calendar days on no more than 30 days’ notice.
The Fund may make temporary taxable investments. Temporary taxable investments will include only the following types of obligations maturing within 13 months from the date of purchase: (i) obligations of the U.S. government, its agencies and instrumentalities (including zero coupon securities); (ii) commercial paper rated not less than A-1 by Standard & Poor’s, F1 by Fitch or P-1 by Moody’s or which has been assigned an equivalent rating by another nationally recognized statistical rating organization; (iii) other short-term debt securities issued or guaranteed by corporations having outstanding debt rated not less than BBB- by Standard & Poor’s or Fitch or Baa3 by Moody’s or which have been assigned an equivalent rating by another nationally recognized statistical rating organization; (iv) certificates of deposit of domestic commercial banks subject to regulation by the U.S. government or any of its agencies or instrumentalities, with assets of $500 million or more based on the most recent published reports; and (v) repurchase agreements with domestic banks or securities dealers involving any of the securities which the Fund is permitted to hold.
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Variable, Floating, and Fixed Rate Debt Obligations
The debt obligations in which the Fund invests as either a principal or non-principal investment strategy may have variable, floating, or fixed interest rates. Variable rate securities provide for periodic adjustments in the interest rate. Floating rate securities are generally offered at an initial interest rate which is at or above prevailing market rates. The interest rate paid on floating rate securities is then reset periodically (commonly every 90 days) to an increment over some predetermined interest rate index. Commonly utilized indices include the three-month Treasury bill rate, the 180-day Treasury bill rate, the one-month or three-month London Interbank Offered Rate (LIBOR), the prime rate of a bank, the commercial paper rates, or the longer-term rates on U.S. Treasury securities. Variable and floating rate securities are relatively long-term instruments that often carry demand features permitting the holder to demand payment of principal at any time or at specified intervals prior to maturity. In order to most effectively use these securities, the Adviser must correctly assess probable movements in interest rates. If the Adviser incorrectly forecasts such movements, the Fund could be adversely affected by use of variable and floating rate securities.
Fixed rate securities pay a fixed rate of interest and tend to exhibit more price volatility during times of rising or falling interest rates than securities with variable or floating rates of interest. The value of fixed rate securities will tend to fall when interest rates rise and rise when interest rates fall. The value of variable or floating rate securities, on the other hand, fluctuates much less in response to market interest rate movements than the value of fixed rate securities. This is because variable and floating rate securities behave like short-term instruments in that the rate of interest they pay is subject to periodic adjustments according to a specified formula, usually with reference to some interest rate index or market interest rate. Fixed rate securities with short-term characteristics are not subject to the same price volatility as fixed rate securities without such characteristics. Therefore, they behave more like variable or floating rate securities with respect to price volatility.
When-Issued and Delayed Delivery Transactions
The Fund may purchase securities on a when-issued or delayed delivery basis as a non-principal investment strategy. When such a transaction is negotiated, the purchase price is fixed at the time the purchase commitment is entered, but delivery of and payment for the securities take place at a later date. The Fund will not accrue income with respect to securities purchased on a when-issued or delayed delivery basis prior to their stated delivery date.
The purchase of securities on a when-issued or delayed delivery basis exposes the Fund to risk because the securities may decrease in value prior to delivery. In addition, the Fund’s purchase of securities on a when-issued or delayed delivery basis while remaining substantially fully invested could increase the amount of the Fund’s total assets that are subject to market risk, resulting in increased sensitivity of net asset value to changes in market prices. A seller’s failure to deliver securities to the Fund could prevent the Fund from realizing a price or yield considered to be advantageous.
When the Fund agrees to purchase securities on a when-issued or delayed delivery basis, the Fund will segregate cash or liquid securities in an amount sufficient to meet the Fund’s purchase commitments. It may be expected that the Fund’s net assets will fluctuate to a greater degree when it sets aside securities to cover such purchase commitments than when it sets aside cash. In addition, because the Fund will set aside cash or liquid securities to satisfy its purchase commitments, its liquidity and the ability of the Adviser to manage it might be affected in the event its commitments to purchase when-issued or delayed delivery securities ever became significant. Under normal market conditions, however, the Fund’s commitments to purchase when-issued or delayed delivery securities will not exceed 25% of the value of its total assets.
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Zero Coupon and Step Coupon Securities
The Fund may invest in zero coupon and step coupon securities as a principal investment strategy. Zero coupon securities pay no cash income to their holders until they mature. When held to maturity, their entire return comes from the difference between their purchase price and their maturity value. Step coupon securities are debt securities that may not pay interest for a specified period of time and then, after the initial period, may pay interest at a series of different rates. Both zero coupon and step coupon securities are issued at substantial discounts from their value at maturity. Because interest on these securities is not paid on a current basis, the values of securities of this type are subject to greater fluctuations than are the value of securities that distribute income regularly and may be more speculative than such securities. Accordingly, the values of these securities may be highly volatile as interest rates rise or fall. In addition, while such securities generate income for purposes of generally accepted accounting standards, they do not generate cash flow and thus could cause the Fund to be forced to liquidate securities at an inopportune time in order to distribute cash, as required by the Code.
Special Considerations Relating to Municipal Obligations of the State of California
Under normal market conditions, the Fund invests at least 80% of its net assets in Municipal Obligations that are exempt from both regular federal and California state income taxes, a significant portion of which generally consist of Municipal Obligations issued in the state of California. The Fund is therefore more susceptible to political, economic or regulatory factors adversely affecting issuers of Municipal Obligations in the state of California. Set forth below is a summary of information that bears upon the risk of investing in Municipal Obligations issued by public authorities in the state of California. This information was obtained from official statements of issuers located in California, as well as from other publicly available official documents and statements. The Fund has not independently verified any of the information contained in such statements and documents. The information below is intended only as a general summary and is not intended as a discussion of any specific factor that may affect any particular obligation or issuer.
Factors Pertaining to California. The Fund concentrates its investments in California municipal bonds and, therefore, may be significantly impacted by political, economic, or regulatory developments that affect issuers in California and their ability to pay principal and interest on their obligations. Historically, California’s economy has been more volatile than the nation as a whole due to its steep personal income tax structure, which results in a reliance on a small number of taxpayers for a large share of tax revenues. The State’s economy, however, is relatively diverse with key drivers being international trade, technology production, tourism, finance, defense, and construction. After experiencing a deep recession due to the deterioration in the housing market, California is showing signs of recovery as hiring in technology services has allowed the unemployment rate to fall to 12% as of March 2011. This is down from a recent high of 12.5% as of December 2010 but remains well above the national average of 9.0% for the same period. As with most states, the recession has negatively impacted California’s tax revenues. The newly inaugurated Governor of California, Jerry Brown, responded to the estimated $26.4 billion FY 2012 budget shortfall with expenditure related solutions, net new revenues from an extension of taxes currently due to sunset, and borrowing from special funds. Governor Brown has not been able to gather enough support to enact his proposed budget and therefore revised his FY 2012 budget in May 2011. The revised budget estimates the deficit at $9.6 billion reflecting the assumption that the state, due to the improving economy, is likely to collect more tax revenue than previously estimated back in January and also accounts for the solutions already enacted in March 2011. The May Revision calls for a one year suspension of the income tax surcharge (during FY 2011-2012), but still calls for an extension of the other temporary tax surcharges. The Governor hopes the Legislature will enact the tax increases and then put them on the fall ballot for voters to ratify.
According to Moody’s Investors Service, California has more debt outstanding than any other state, although the State ranks 8th on a per capita basis as of 2010. In addition to its outstanding debt, California also has approximately $37 billion of general obligation bonds authorized but unissued as of May 1, 2011. California’s political landscape has often led to governmental difficulties, including the adoption of the state budget. Additionally, California’s voter initiative process has resulted in several initiatives that have restricted the taxing ability of the State and its political subdivisions, including Proposition 13. Other mandates have required the State and its political subdivisions to incur certain expenses, further restricting their financial flexibility. Furthermore, unanticipated initiatives that could impact the financial health of the State or its political subdivisions may be adopted in the future. Declining property values resulting from the bursting of the housing bubble may pressure units of local government, as these entities often rely on property taxes for a significant amount of their revenues. The State and its political subdivisions may also face increasing financial pressure from costs relating to pensions and other post-employment benefits for government employees.
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In addition to the investment objectives and policies set forth in the Prospectus and under the caption “Additional Information Concerning Fund Investments” above, the Fund is subject to the investment restrictions set forth below. The investment restrictions set forth in paragraphs 1 through 7 below are fundamental and cannot be changed with respect to the Fund without approval by the holders of a majority of the outstanding shares of the Fund as defined in the 1940 Act, i.e., by the lesser of the vote of (a) 67% of the shares of the Fund present at a meeting where more than 50% of the outstanding shares are present in person or by proxy, or (b) more than 50% of the outstanding shares of the Fund.
The Fund will not:
| 1. | Concentrate its investments in a particular industry, except that if the Fund has one or more industry concentrations implied by its name, it shall, in normal market conditions, concentrate in securities of issues within that industry or industries. For purposes of this limitation, the U.S. Government, and state or municipal governments and their political subdivisions are not considered members of any industry. Whether the Fund is concentrating in an industry shall be determined in accordance with the 1940 Act, as interpreted or modified from time to time by any regulatory authority having jurisdiction. |
| 2. | Borrow money or issue senior securities, except as permitted under the 1940 Act, as interpreted or modified from time to time by any regulatory authority having jurisdiction. |
| 3. | Invest in companies for the purpose of control or management. |
| 4. | Purchase physical commodities or contracts relating to physical commodities. |
| 5. | Purchase or sell real estate unless as a result of ownership of securities or other instruments, but this shall not prevent the Fund from investing in securities or other instruments backed by real estate or interests therein or in securities of companies that deal in real estate or mortgages. |
| 6. | Act as an underwriter of securities of other issuers, except to the extent that, in connection with the disposition of portfolio securities, it may be deemed an underwriter under applicable laws. |
| 7. | Make loans except as permitted under the 1940 Act, as interpreted or modified from time to time by any regulatory authority having jurisdiction. |
For purposes of applying the limitation set forth in number 1 above, according to the current interpretation by the SEC, the Fund would be concentrated in an industry if 25% or more of its total assets, based on current market value at the time of purchase, were invested in that industry. The Fund will use industry classifications provided by Bloomberg, Barclays, or other similar sources to determine its compliance with this limitation.
For purposes of applying the limitation set forth in number 2 above, under the 1940 Act as currently in effect, the Fund is not permitted to issue senior securities, except that the Fund may borrow from any bank if immediately after such borrowing the value of the Fund's total assets is at least 300% of the principal amount of all of the Fund's borrowings (i.e., the principal amount of the borrowings may not exceed 33 1/3% of the Fund's total assets). In the event that such asset coverage shall at any time fall below 300%, the Fund shall, within three days thereafter (not including Sundays and holidays), reduce the amount of its borrowings to an extent that the asset coverage of such borrowing shall be at least 300%.
For purposes of applying the limitation set forth in number 7 above, there are no limitations with respect to unsecured loans made by the Fund to an unaffiliated party.
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Because the Fund refers to tax-free investments in its name, it has a fundamental investment policy that it will normally invest at least 80% of its assets in investments that pay interest exempt from federal and California income tax, including the federal alternative minimum tax and the state alternative minimum tax.
The following restrictions are non-fundamental and may be changed by NIF’s Board of Directors without a shareholder vote:
The Fund will not:
| 1. | Invest more than 15% of its net assets in all forms of illiquid investments. |
| 2. | Borrow money in an amount exceeding 10% of the borrowing Fund’s total assets and pledge up to 15% of its total assets to secure such borrowings. The Fund will not borrow money for leverage purposes. For the purpose of this investment restriction, the use of options and futures transactions and the purchase of securities on a when-issued or delayed delivery basis shall not be deemed the borrowing of money. The Fund will not make additional investments while its borrowings exceed 5% of total assets. |
| 3. | Make short sales of securities. |
| 4. | Lend portfolio securities representing in excess of one-third of the value of its total assets. |
| 5. | Pledge any assets, except in connection with any permitted borrowing and then in amounts not in excess of one-third of the Fund’s total assets, provided that for the purposes of this restriction, margin deposits, security interests, liens and collateral arrangements with respect to options, futures contracts, options on futures contracts, and other permitted investments and techniques are not deemed to be a pledge of assets for purposes of this limitation. |
| 6. | Acquire any securities of registered open-end investment companies or registered unit investment trusts in reliance on subparagraph (F) or subparagraph (G) of Section 12(d)(1) of the 1940 Act. |
With respect to the non-fundamental restriction set forth in number 1 above, the Fund will monitor portfolio liquidity on an ongoing basis and, in the event more than 15% of the Fund’s net assets are invested in illiquid investments, the Fund will reduce its holdings of illiquid securities in an orderly fashion in order to maintain adequate liquidity.
The Board of Directors has adopted guidelines and procedures under which the Fund’s investment adviser is to determine whether the following types of securities which may be held by the Fund are “liquid” and to report to the Board concerning its determinations: (i) securities eligible for resale pursuant to Rule 144A under the Securities Act of 1933; (ii) commercial paper issued in reliance on the “private placement” exemption from registration under Section 4(2) of the Securities Act of 1933, whether or not it is eligible for resale pursuant to Rule 144A; (iii) interest-only and principal-only, inverse floating and inverse interest-only securities issued or guaranteed by the U.S. Government or its agencies or instrumentalities; and (iv) municipal leases and securities that represent interests in municipal leases.
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The Fund has adopted an investment strategy pursuant to Rule 35d-1 of the 1940 Act, whereby at least 80% of the Fund’s net assets (plus the amount of any borrowings for investment purposes) must be invested in a strategy suggested by the Fund’s name. Accordingly, a policy has been adopted by the Fund to provide shareholders with at least 60 days notice in the event of a planned change to the investment strategy. Such notice to shareholders will meet the requirements of Rule 35d-1(c).
The Fund will make changes in its investment portfolio from time to time in order to take advantage of opportunities in the municipal market and to limit exposure to market risk. The Fund may also engage to a limited extent in short-term trading consistent with its investment objective. Securities may be sold in anticipation of market decline or purchased in anticipation of market rise and later sold. In addition, a security may be sold and another of comparable quality purchased at approximately the same time to take advantage of what Nuveen Asset Management, LLC (the “Sub-Adviser” or “Nuveen Asset Management”) believes to be a temporary disparity in the normal yield relationship between the two securities. The Fund may make changes in its investment portfolio in order to limit its exposure to changing market conditions. Changes in the Fund’s investments are known as “portfolio turnover.”
DISCLOSUREOF PORTFOLIO HOLDINGS
The Nuveen Mutual Funds have adopted a portfolio holdings disclosure policy which governs the dissemination of the Fund’s portfolio holdings. In accordance with this policy, the Fund may provide portfolio holdings information to third parties no earlier than the time a report is filed with the SEC that is required to contain such information or one day after the information is posted on the Fund’s publicly accessible website, www.nuveen.com. The portfolio holdings information is posted monthly approximately five business days after the end of the month as of which the information is current. Additionally, the Fund publishes on the website a list of its top ten holdings as of the end of each month, approximately two to five business days after the end of the month for which the information is current. This information will remain available on the website at least until the Fund files with the SEC its Form N-CSR or Form N-Q for the period that includes the date as of which the website information is current.
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Additionally, the Fund may disclose portfolio holdings information that has not been included in a filing with the SEC or posted on the Fund’s website (i.e., non-public portfolio holdings information) only if there is a legitimate business purpose for doing so and if the recipient is required, either by explicit agreement or by virtue of the recipient’s duties to the Fund as an agent or service provider, to maintain the confidentiality of the information and to not use the information in an improper manner (e.g., personal trading). In this connection, the Fund may disclose on an ongoing basis non-public portfolio holdings information in the normal course of its investment and administrative operations to various service providers, including the Adviser and/or sub-adviser, independent registered public accounting firm, custodian, financial printer (R.R. Donnelley Financial and Financial Graphic Services), proxy voting service(s) (including RMG, ADP Investor Communication Services, and Glass, Lewis & Co.), and to the legal counsel for the Fund’s independent directors (Chapman and Cutler LLP). Also, the Adviser may transmit to Vestek Systems, Inc. daily non-public portfolio holdings information on a next-day basis to enable the Adviser to perform portfolio attribution analysis using Vestek’s systems and software programs. Vestek is also provided with non-public portfolio holdings information on a monthly basis approximately 2-3 business days after the end of each month so that Vestek may calculate and provide certain statistical information (but not the non-public holdings information itself) to its clients (including retirement plan sponsors or their consultants). The Adviser and/or sub-adviser may also provide certain portfolio holdings information to broker-dealers from time to time in connection with the purchase or sale of securities or requests for price quotations or bids on one or more securities. In providing this information, reasonable precautions are taken in an effort to avoid potential misuse of the disclosed information, including limitations on the scope of the portfolio holdings information disclosed, when appropriate.
Non-public portfolio holdings information may be provided to other persons if approved by the Fund’s Chief Administrative Officer or Secretary upon a determination that there is a legitimate business purpose for doing so, the disclosure is consistent with the interests of the Fund, and the recipient is obligated to maintain the confidentiality of the information and not misuse it.
Compliance officers of the Fund and the Adviser and sub-adviser periodically monitor overall compliance with the policy to ascertain whether portfolio holdings information is disclosed in a manner that is consistent with the Fund’s policy. Reports are made to the Fund’s Board of Directors on an annual basis.
There is no assurance that the Fund’s policies on portfolio holdings information will protect the Fund from the potential misuse of portfolio holdings information by individuals or firms in possession of such information.
The following parties currently receive Undisclosed Holdings Information regarding one or more of the Nuveen Mutual Funds on an ongoing basis pursuant to the various arrangements described above:
ADP Investor Communications Services
Altrinsic Global Advisors, Inc.
Barclays Capital, Inc.
Barra
Bloomberg
BNP Paribas Prime Brokerage, Inc.
BNP Paribas Securities Corp.
Broadridge Systems
Cantor Fitzgerald & Co.
Chapman and Cutler LLP
Commerz Markets LLC
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Credit Agricole Securities (USA) Inc.
Credit Suisse Securities (USA), LLC
Deutsche Bank Securities, Inc.
Ernst & Young LLP
FactSet Research Systems
Financial Graphic Services
First Clearing, LLC
Forbes
Glass, Lewis & Co.
Goldman Sachs & Co.
Hansberger Global Investors, LLC
HSBC Securities (USA), Inc.
ING Financial Markets, LLC
The Investment Company Institute
Jefferies & Company, Inc.
J.P. Morgan Clearing Corp.
J.P. Morgan Securities, Inc.
Lazard Asset Management, Inc.
Lipper Inc.
Merrill Lynch, Pierce, Fenner & Smith
Moody’s
Morgan Stanley & Co., Inc.
Morningstar, Inc.
MS Securities Services, Inc.
Newedge USA, LLC
Nuveen Asset Management, LLC
Nuveen Fund Advisors, Inc.
Pershing, LLC
PricewaterhouseCoopers
Raymond James & Associates, Inc.
RBC Capital Markets Corporation
RBS Securities, Inc.
RMG
R.R. Donnelley Financial
Scotia Capital (USA), Inc.
SG Ameritas Securities, LLC
Societe Generale, New York Branch
Standard & Poor’s
State Street Bank & Trust Co.
Strategic Insight
TD Ameritrade Clearing, Inc.
ThomsonReuters LLC
UBS Securities, LLC
U.S. Bancorp Fund Services, LLC
U.S. Bank, N.A.
Value Line
Vestek Systems, Inc.
Vickers
Wells Fargo Securities, LLC
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The management of NIF, including general supervision of the duties performed for the Fund by the Adviser under the Management Agreement, is the responsibility of the Board of Directors. The number of directors of NIF is ten, one of whom is an “interested person” (as the term “interested person” is defined in the 1940 Act) and nine of whom are not interested persons (referred to herein as “independent directors”). None of the independent directors has ever been a trustee, director or employee of, or consultant to, the Adviser or its affiliates. The names, business addresses and birthdates of the directors and officers of the Fund, their principal occupations and other affiliations during the past five years, the number of portfolios each oversees and other directorships they hold are set forth below. The directors of NIF are directors or trustees, as the case may be, of 112 Nuveen-sponsored open-end funds (the “Nuveen Mutual Funds”) and 133 Nuveen-sponsored closed-end funds (collectively with the Nuveen Mutual Funds, the “Nuveen Funds”).
NAME, BUSINESS ADDRESS AND BIRTHDATE | POSITION(S) | TERM OF OFFICE AND SERVED WITH NIF | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS | NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEENBY DIRECTOR | OTHER DIRECTORSHIPS HELDBY DIRECTOR DURING PAST FIVE YEARS | |||||
INDEPENDENT DIRECTORS: | ||||||||||
Robert P. Bremner* 333 West Wacker Drive Chicago, IL 60606 (8/22/40) | Chairman of the Board and Director | Term—Indefinite** Length of Service—Since 2011 | Private Investor and Management Consultant; Treasurer and Director, Humanities Council of Washington, D.C.; Board Member, Independent Directors Council affiliated with the Investment Company Institute. | 245 | N/A | |||||
Jack B. Evans 333 West Wacker Drive Chicago, IL 60606 (10/22/48) | Director | Term—Indefinite** Length of Service—Since 2011 | President, The Hall-Perrine Foundation, a private philanthropic corporation (since 1996); President Pro Tem of the Board of Regents for the State of Iowa University System; Director, Source Media Group; Life Trustee of Coe College and the Iowa College Foundation; formerly, Director, Federal Reserve Bank of Chicago; formerly, President and Chief Operating Officer, SCI Financial Group, Inc., a regional financial services firm. | 245 | Director and Chairman, United Fire Group, a publicly held company; formerly, Director, Alliant Energy. | |||||
William C. Hunter 333 West Wacker Drive Chicago, IL 60606 (3/6/48) | Director | Term—Indefinite** Length of Service— Since 2011 | Dean, Tippie College of Business, University of Iowa (since 2006); Director (since 2005) of Beta Gamma Sigma International Society; Director of Wellmark, Inc. (since 2009); formerly, Dean and Distinguished Professor of Finance, School of Business at the University of Connecticut (2003-2006); formerly, Director (1997-2007), Credit Research Center at Georgetown University; previously, Senior Vice President and Director of Research at the Federal Reserve Bank of Chicago (1995-2003). | 245 | Director (since 2004) of Xerox Corporation. | |||||
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NAME, BUSINESS ADDRESS AND BIRTHDATE | POSITION(S) | TERM OF OFFICE AND SERVED WITH NIF | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS | NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEENBY DIRECTOR | OTHER DIRECTORSHIPS HELDBY DIRECTOR DURING PAST FIVE YEARS | |||||
David J. Kundert* 333 West Wacker Drive Chicago, IL 60606 (10/28/42) | Director | Term—Indefinite** Length of Service—Since 2011 | Director, Northwestern Mutual Wealth Management Company; retired (since 2004) as Chairman, JPMorgan Fleming Asset Management, President and CEO, Banc One Investment Advisors Corporation, and President, One Group Mutual Funds; prior thereto, Executive Vice President, Bank One Corporation and Chairman and CEO, Banc One Investment Management Group; member of the Board of Regents, Luther College; member of the Wisconsin Bar Association; member of Board of Directors, Friends of Boerner Botanical Gardens; member Board of Directors and Chair of Investment Committee, Greater Milwaukee Foundation. | 245 | N/A | |||||
William J. Schneider* 333 West Wacker Drive Chicago, IL 60606 (9/24/44) | Director | Term—Indefinite** Length of Service—Since 2011 | Chairman of Miller-Valentine Partners Ltd., a real estate investment company; Member, Mid-America Health System Board; formerly, Senior Partner and Chief Operating Officer (retired) of Miller-Valentine Group; Member, University of Dayton Business School Advisory Council; formerly, Member, Dayton Philharmonic Orchestra Association; formerly, Director, Dayton Development Coalition; formerly, Member, Business Advisory Council, Cleveland Federal Reserve Bank. | 245 | N/A | |||||
Judith M. Stockdale 333 West Wacker Drive Chicago, IL 60606 (12/29/47) | Director | Term—Indefinite** Length of Service—Since 2011 | Executive Director, Gaylord and Dorothy Donnelley Foundation (since 1994); prior thereto, Executive Director, Great Lakes Protection Fund (from 1990 to 1994). | 245 | N/A | |||||
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NAME, BUSINESS ADDRESS AND BIRTHDATE | POSITION(S) | TERM OF OFFICE AND SERVED WITH NIF | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS | NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEENBY DIRECTOR | OTHER DIRECTORSHIPS HELDBY DIRECTOR DURING PAST FIVE YEARS | |||||
Carole E. Stone* 333 West Wacker Drive Chicago, IL 60606 (6/28/47) | Director | Term—Indefinite** Length of Service—Since 2011 | Director, C2 Options Exchange, Incorporated (since 2009); formerly, Commissioner, New York State Commission on Public Authority Reform (2005-2010); formerly, Chair, New York Racing Association Oversight Board (2005-2007). | 245 | Director, Chicago Board Options Exchange (since 2006). | |||||
Virginia L. Stringer 333 West Wacker Drive Chicago, IL 60606 (8/16/44) | Director | Term- Indefinite** Length of Service- Since 1987 | Board Member, Mutual Fund Directors Forum; Member, Governing Board, Investment Company Institute's Independent Directors Council; Governance consultant and non-profit board member; former Owner and President, Strategic Management Resources, Inc., a management consulting firm; previously, held several executive positions in general management, marketing and human resources at IBM and The Pillsbury Company. | 245 | Previously, Independent Director (1987-2010) and Chair (1997-2010), First American Fund Complex | |||||
Terence J. Toth* 333 West Wacker Drive Chicago, IL 60606 (9/29/59) | Director | Term—Indefinite** Length of Service—Since 2011 | Director, Legal & General Investment Management America, Inc. (since 2008); Managing Partner, Promus Capital (since 2008); formerly, CEO and President, Northern Trust Global Investments (2004-2007); Executive Vice President, Quantitative Management & Securities Lending (2000-2004); prior thereto, various positions with Northern Trust Company (since 1994); member: Goodman Theatre Board (since 2004), Chicago Fellowship Board (since 2005), and Catalyst Schools of Chicago Board (since 2008); formerly, member: Northern Trust Mutual Funds Board (2005-2007), Northern Trust Global Investments Board (2004-2007), Northern Trust Japan Board (2004-2007), Northern Trust Securities Inc. Board (2003-2007) and Northern Trust Hong Kong Board (1997-2004). | 245 | N/A | |||||
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NAME, BUSINESS ADDRESS AND BIRTHDATE | POSITION(S) | TERM OF OFFICE AND SERVED WITH NIF | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS | NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEENBY DIRECTOR | OTHER DIRECTORSHIPS HELDBY DIRECTOR DURING PAST FIVE YEARS | |||||
INTERESTED DIRECTOR: | ||||||||||
John P. Amboian*** 333 West Wacker Drive Chicago, IL 60606 (6/14/61) | Director | Term—Indefinite** Length of Service—Since 2011 | Chief Executive Officer and Chairman (since 2007) and Director (since 1999) of Nuveen Investments, Inc.; formerly, President (1999-2007); Chief Executive Officer (since 2007) of Nuveen Investments Advisors Inc.; Director (since 1998), formerly Chief Executive Officer (2007-2010) of Nuveen Fund Advisors, Inc. | 245 | N/A |
| * | Also serves as a trustee of the Nuveen Diversified Commodity Fund, an exchange-traded commodity pool managed by Nuveen Commodities Asset Management LLC, an affiliate of the Adviser. |
| ** | Each director serves an indefinite term until his or her successor is elected. |
| *** | Mr. Amboian is an “interested person” of NIF, as defined in the 1940 Act, by reason of his positions with Nuveen Investments, Inc. (“Nuveen Investments”) and certain of its subsidiaries. |
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NAME, BUSINESS ADDRESS AND BIRTHDATE | POSITION(S) HELD WITH NIF | TERM OF OFFICE AND LENGTH OF TIME SERVED WITH NIF | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS | NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEENBY OFFICER | ||||
OFFICERS OF THE FUND: | ||||||||
Gifford R. Zimmerman 333 West Wacker Drive Chicago, IL 60606 (9/9/56) | Chief Administrative Officer | Term—Until August 2011 Length of Service—Since 2011 | Managing Director (since 2002), Assistant Secretary and Associate General Counsel of Nuveen Securities, LLC; Managing Director (since 2002), Assistant Secretary (since 1997) and Co-General Counsel (since 2011) of Nuveen Fund Advisors, Inc.; Managing Director, Assistant Secretary and Associate General Counsel of Nuveen Asset Management, LLC (since 2011); Managing Director (since 2004) and Assistant Secretary (since 1994) of Nuveen Investments, Inc.; Vice President and Assistant Secretary of Nuveen Investments Advisers Inc. (since 2002); Vice President and Assistant Secretary of NWQ Investment Management Company, LLC (since 2002); Managing Director, Associate General Counsel and Assistant Secretary of Symphony Asset Management LLC (since 2003); Vice President and Assistant Secretary of Tradewinds Global Investors, LLC and Santa Barbara Asset Management, LLC (since 2006), Nuveen HydePark Group, LLC and Nuveen Investment Solutions, Inc. (since 2007), and of Winslow Capital Management, Inc. (since 2010); Chief Administrative Officer and Chief Compliance Officer (since 2010) of Nuveen Commodities Asset Management, LLC; Chartered Financial Analyst. | 245 |
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NAME, BUSINESS ADDRESS AND BIRTHDATE | POSITION(S) HELD WITH NIF | TERM OF OFFICE AND LENGTH OF TIME SERVED WITH NIF | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS | NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEENBY OFFICER | ||||
Margo L. Cook 333 West Wacker Drive Chicago, IL 60606 (4/11/64) | Vice President | Term—Until August 2011 Length of Service—Since 2011 | Executive Vice President (since 2008) of Nuveen Investments, Inc. and of Nuveen Fund Advisors, Inc. (since 2011); previously, Head of Institutional Asset Management (2007-2008) of Bear Stearns Asset Management; Head of Institutional Asset Management (1986-2007) of Bank of NY Mellon; Chartered Financial Analyst. | 245 | ||||
Lorna C. Ferguson 333 West Wacker Drive Chicago, IL 60606 (10/24/45) | Vice President | Term—Until August 2011 Length of Service—Since 2011 | Managing Director (since 2004) of Nuveen Securities, LLC; Managing Director (since 2005) of Nuveen Fund Advisors, Inc. | 245 | ||||
Stephen D. Foy 333 West Wacker Drive Chicago, IL 60606 (5/31/54) | Vice President and Controller | Term—Until August 2011 Length of Service—Since 2011 | Senior Vice President (since 2010), formerly, Vice President (1993-2010) and Funds Controller (since 1998) of Nuveen Securities, LLC; Senior Vice President (since 2010), formerly, Vice President (2005-2010) of Nuveen Fund Advisors, Inc.; Certified Public Accountant. | 245 | ||||
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NAME, BUSINESS ADDRESS AND BIRTHDATE | POSITION(S) HELD WITH NIF | TERM OF OFFICE AND LENGTH OF TIME SERVED WITH NIF | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS | NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEENBY OFFICER | ||||
Scott S. Grace 333 West Wacker Drive Chicago, IL 60606 (8/20/70) | Vice President and Treasurer | Term—Until August 2011 Length of Service—Since 2011 | Managing Director, Corporate Finance & Development, Treasurer (since September 2009) of Nuveen Securities, LLC; Managing Director and Treasurer (since 2009) of Nuveen Investment Solutions, Inc., Nuveen Investment Advisers Inc., Nuveen Investment Holdings, Inc., Nuveen Fund Advisors, Inc., and (since 2011) Nuveen Asset Management, LLC; Vice President and Treasurer of NWQ Investment Management Company, LLC, Tradewinds Global Investors, LLC, Symphony Asset Management LLC and Winslow Capital Management, Inc.; Vice President of Santa Barbara Asset Management, LLC; formerly, Treasurer (2006-2009), Senior Vice President (2008-2009), previously, Vice President (2006-2008) of Janus Capital Group, Inc.; formerly, Senior Associate in Morgan Stanley’s Global Financial Services Group (2000-2003); Chartered Accountant. | 245 | ||||
Walter M. Kelly 333 West Wacker Drive Chicago, IL 60606 (2/24/70) | Vice President and Chief Compliance Officer | Term—Until August 2011 Length of Service—Since 2011 | Senior Vice President (since 2008), formerly, Vice President of Nuveen Securities, LLC; Senior Vice President (since 2008) and Assistant Secretary (since 2003), formerly, Vice President (2006-2008) of Nuveen Fund Advisors, Inc.; previously, Assistant Vice President and Assistant Secretary of the Nuveen Funds (2003-2006). | 245 | ||||
Tina M. Lazar 333 West Wacker Drive Chicago, IL 60606 (8/27/61) | Vice President | Term—Until August 2011 Length of Service—Since 2011 | Senior Vice President (since 2009), formerly, Vice President of Nuveen Securities, LLC (1999-2009); Senior Vice President (since 2010), formerly, Vice President (2005-2010) of Nuveen Fund Advisors, Inc. | 245 | ||||
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NAME, BUSINESS ADDRESS AND BIRTHDATE | POSITION(S) HELD WITH NIF | TERM OF OFFICE AND LENGTH OF TIME SERVED WITH NIF | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS | NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEENBY OFFICER | ||||
Larry W. Martin 333 West Wacker Drive Chicago, IL 60606 (7/27/51) | Vice President and Assistant Secretary | Term—Until August 2011 Length of Service—Since 2011 | Senior Vice President (since 2010), formerly, Vice President (1993-2010), Assistant Secretary and Assistant General Counsel of Nuveen Securities, LLC; Senior Vice President (since 2011) of Nuveen Asset Management, LLC; Senior Vice President (since 2010), formerly, Vice President (2005-2010), and Assistant Secretary of Nuveen Investments, Inc.; Senior Vice President (since 2010), formerly, Vice President (2005-2010) and Assistant Secretary (since 1997) of Nuveen Fund Advisors, Inc.; Vice President and Assistant Secretary of Nuveen Investments Advisers Inc. (since 2002), NWQ Investment Management Company, LLC, Symphony Asset Management LLC (since 2003), Tradewinds Global Investors, LLC, Santa Barbara Asset Management LLC (since 2006), Nuveen HydePark Group, LLC, Nuveen Investment Solutions, Inc. (since 2007) and of Winslow Capital Management, Inc. (since 2010); Vice President and Assistant Secretary of Nuveen Commodities Asset Management, LLC (since 2010). | 245 | ||||
Kevin J. McCarthy 333 West Wacker Drive Chicago, IL 60606 (3/26/66) | Vice President and Secretary | Term—Until August 2011 Length of Service—Since 2011 | Managing Director (since 2008), formerly, Vice President (2007-2008) of Nuveen Securities, LLC; Managing Director (since 2008), Assistant Secretary (since 2007) and Co-General Counsel (since 2011) of Nuveen Fund Advisors, Inc.; Managing Director, Assistant Secretary and Associate General Counsel (since 2011) of Nuveen Asset Management, LLC; Vice President and Assistant Secretary of Nuveen Investments Advisers Inc., NWQ Investment Management Company, LLC, Tradewinds Global Investors, LLC, NWQ Holdings, LLC, Symphony Asset Management LLC, Santa Barbara Asset Management, LLC, Nuveen HydePark Group, LLC, Nuveen Investment Solutions, Inc. and Winslow Capital Management, Inc. (since 2010); Vice President and Secretary (since 2010) of Nuveen Commodities Asset Management, LLC; prior thereto, Partner, Bell, Boyd & Lloyd LLP (1997-2007). | 245 | ||||
Kathleen L. Prudhomme 800 Nicollet Mall Minneapolis, MN 55402 (3/30/53) | Vice President and Assistant Secretary | Term—Until August 2011 Length of Service—Since 2011 | Managing Director and Assistant Secretary of Nuveen Securities, LLC (since 2011); Managing Director, Assistant Secretary and Co-General Counsel (since 2011) of Nuveen Fund Advisors, Inc.; Managing Director, Assistant Secretary and Associate General Counsel (since 2011) of Nuveen | 245 | ||||
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NAME, BUSINESS ADDRESS AND BIRTHDATE | POSITION(S) HELD WITH NIF | TERM OF OFFICE AND LENGTH OF TIME SERVED WITH NIF | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS | NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEENBY OFFICER | ||||
| Asset Management, LLC; Deputy General Counsel, FAF Advisors, Inc. (2004-2010). | ||||||||
Jeffrey M. Wilson 333 West Wacker Drive Chicago, IL 60606 (3/13/56) | Vice President | Term—Until August 2011 Length of Service—Since 2011 | Senior Vice President of Nuveen Investments, LLC (since 2011); formerly, Senior Vice President of FAF Advisors, Inc. (2000-2010). | 112 | ||||
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Board Leadership Structure and Risk Oversight
In connection with the Transaction, the committees of the Fund and the members of the Board of Directors, referred to hereafter as the “Board” or “Board of Directors,” were changed. Each of the Committees were newly formed and constituted in connection with the Transaction. The Board of Directors oversees the operations and management of the Fund, including the duties performed for the Fund by the Adviser. The Board has adopted a unitary board structure. A unitary board consists of one group of directors who serve on the board of every fund in the Nuveen Fund complex. In adopting a unitary board structure, the directors seek to provide effective governance through establishing a board, the overall composition of which will, as a body, possess the appropriate skills, independence and experience to oversee the Nuveen Funds’ business. With this overall framework in mind, when the Board, through its Nominating and Governance Committee discussed below, seeks nominees for the Board, the directors consider, not only the candidate’s particular background, skills and experience, among other things, but also whether such background, skills and experience enhance the Board’s diversity and at the same time complement the Board given its current composition and the mix of skills and experiences of the incumbent directors. The Nominating and Governance Committee believes that the Board generally benefits from diversity of background, experience and views among its members, and considers this a factor in evaluating the composition of the Board, but has not adopted any specific policy on diversity or any particular definition of diversity.
The Board believes the unitary board structure enhances good and effective governance, particularly given the nature of the structure of the investment company complex. Funds in the same complex generally are served by the same service providers and personnel and are governed by the same regulatory scheme which raises common issues that must be addressed by the directors across the fund complex (such as compliance, valuation, liquidity, brokerage, trade allocation or risk management). The Board believes it is more efficient to have a single board review and oversee common policies and procedures which increases the Board’s knowledge and expertise with respect to the many aspects of fund operations that are complex-wide in nature. The unitary structure also enhances the Board’s influence and oversight over the investment adviser and other service providers.
In an effort to enhance the independence of the Board, the Board also has a Chairman that is an independent director. The Board recognizes that a chairman can perform an important role in setting the agenda for the Board, establishing the boardroom culture, establishing a point person on behalf of the Board for fund management, and reinforcing the Board’s focus on the long-term interests of shareholders. The Board recognizes that a chairman may be able to better perform these functions without any conflicts of interests arising from a position with fund management. Accordingly, the directors have elected Robert P. Bremner as the independent Chairman of the Board. Specific responsibilities of the Chairman include: (i) presiding at all meetings of the Board and of the shareholders; (ii) seeing that all orders and resolutions of the directors are carried into effect; and (iii) maintaining records of and, whenever necessary, certifying all proceedings of the directors and the shareholders.
Although the Board has direct responsibility over various matters (such as advisory contracts, underwriting contracts and fund performance), the Board also exercises certain of its oversight responsibilities through several committees that it has established and which report back to the full Board. The Board believes that a committee structure is an effective means to permit directors to focus on particular operations or issues affecting the Nuveen Funds, including risk oversight. More specifically, with respect to risk oversight, the Board has delegated matters relating to valuation and compliance to certain committees (as summarized below) as well as certain aspects of investment risk. In addition, the Board believes that the periodic rotation of directors among the different committees allows the directors to gain additional and different perspectives of a Nuveen Fund’s operations. The Board has established five standing committees: the Executive Committee, the Dividend Committee, the Audit Committee, the Compliance, Risk Management and Regulatory Oversight Committee and the Nominating and Governance Committee. The Board may also from time to time create ad hoc committees to focus on particular issues as the need arises. The membership and functions of the standing committees are summarized below.
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The Executive Committee, which meets between regular meetings of the Board, is authorized to exercise all of the powers of the Board. The members of the Executive Committee are Robert P. Bremner, Chair, Judith M. Stockdale and John P. Amboian. During the fiscal period ended February 28, 2011, the Executive Committee did not meet.
The Audit Committee assists the Board in the oversight and monitoring of the accounting and reporting policies, processes and practices of the Nuveen Funds, and the audits of the financial statements of the Nuveen Funds; the quality and integrity of the financial statements of the Nuveen Funds; the Nuveen Funds’ compliance with legal and regulatory requirements relating to the Nuveen Funds’ financial statements; the independent auditors’ qualifications, performance and independence; and the pricing procedures of the Nuveen Funds and the Adviser’s internal valuation group. It is the responsibility of the Audit Committee to select, evaluate and replace any independent auditors (subject only to Board and, if applicable, shareholder ratification) and to determine their compensation. The Audit Committee is also responsible for, among other things, overseeing the valuation of securities comprising the Nuveen Funds’ portfolios. Subject to the Board’s general supervision of such actions, the Audit Committee addresses any valuation issues, oversees the Nuveen Funds’ pricing procedures and actions taken by the Adviser’s internal valuation group which provides regular reports to the committee, reviews any issues relating to the valuation of the Nuveen Funds’ securities brought to its attention and considers the risks to the Nuveen Funds in assessing the possible resolutions to these matters. The Audit Committee may also consider any financial risk exposures for the Nuveen Funds in conjunction with performing its functions.
To fulfill its oversight duties, the Audit Committee receives annual and semi-annual reports and has regular meetings with the external auditors for the Nuveen Funds and the Adviser’s internal audit group. The Audit Committee also may review in a general manner the processes the Board or other Board committees have in place with respect to risk assessment and risk management as well as compliance with legal and regulatory matters relating to the Nuveen Funds’ financial statements. The committee operates under a written charter adopted and approved by the Board. Members of the Audit Committee shall be independent (as set forth in the charter) and free of any relationship that, in the opinion of the directors, would interfere with their exercise of independent judgment as an Audit Committee member. The members of the Audit Committee are Robert P. Bremner, David J. Kundert, Chair, William J. Schneider, Carole E. Stone and Terence J. Toth, each of whom is an independent director of the Nuveen Funds. During the fiscal period ended February 28, 2011, the Audit Committee met one time.
The Nominating and Governance Committee is responsible for seeking, identifying and recommending to the Board qualified candidates for election or appointment to the Board. In addition, the Nominating and Governance Committee oversees matters of corporate governance, including the evaluation of Board performance and processes, the assignment and rotation of committee members, and the establishment of corporate governance guidelines and procedures, to the extent necessary or desirable, and matters related thereto. Although the unitary and committee structure has been developed over the years and the Nominating and Governance Committee believes the structure has provided efficient and effective governance, the committee recognizes that as demands on the Board evolve over time (such as through an increase in the number of funds overseen or an increase in the complexity of the issues raised), the committee must continue to evaluate the Board and committee structures and their processes and modify the foregoing as may be necessary or appropriate to continue to provide effective governance. Accordingly, the Nominating and Governance Committee has a separate meeting each year to, among other things, review the Board and committee structures, their performance and functions, and recommend any modifications thereto or alternative structures or processes that would enhance the Board’s governance of the Nuveen Funds.
In addition, the Nominating and Governance Committee, among other things, makes recommendations concerning the continuing education of directors; monitors performance of legal counsel and other service providers; establishes and monitors a process by which security holders are able to communicate in writing with members of the Board; and periodically reviews and makes recommendations about any appropriate changes to director compensation. In the event of a vacancy on the Board, the Nominating and Governance Committee receives suggestions from various sources, including shareholders, as to suitable candidates. Suggestions should be sent in writing to Lorna Ferguson, Manager of Fund Board Relations, Nuveen Investments, 333 West Wacker Drive, Chicago, IL 60606. The Nominating and Governance Committee sets appropriate standards and requirements for
35
nominations for new directors and reserves the right to interview any and all candidates and to make the final selection of any new directors. In considering a candidate’s qualifications, each candidate must meet certain basic requirements, including relevant skills and experience, time availability (including the time requirements for due diligence site visits to sub-advisers and service providers) and, if qualifying as an independent director candidate, independence from the Adviser, sub-advisers, the Distributor and other service providers, including any affiliates of these entities. These skill and experience requirements may vary depending on the current composition of the Board, since the goal is to ensure an appropriate range of skills, diversity and experience, in the aggregate. Accordingly, the particular factors considered and weight given to these factors will depend on the composition of the Board and the skills and backgrounds of the incumbent directors at the time of consideration of the nominees. All candidates, however, must meet high expectations of personal integrity, independence, governance experience and professional competence. All candidates must be willing to be critical within the Board and with management and yet maintain a collegial and collaborative manner toward other Board members. The committee operates under a written charter adopted and approved by the Board. This committee is composed of the independent directors of the Nuveen Funds. Accordingly, the members of the Nominating and Governance Committee are Robert P. Bremner, Chair, Jack B. Evans, William C. Hunter, David J. Kundert, William J. Schneider, Judith M. Stockdale, Carole E. Stone, Virginia L. Stringer and Terence J. Toth. During the fiscal period ended February 28, 2011, the Nominating and Governance Committee met one time.
The Dividend Committee is authorized to declare distributions on the Nuveen Funds’ shares, including, but not limited to, regular and special dividends, capital gains and ordinary income distributions. The members of the Dividend Committee are Jack B. Evans, Chair, Judith M. Stockdale and Terence J. Toth. During the fiscal period ended February 28, 2011, the Dividend Committee met one time.
The Compliance, Risk Management and Regulatory Oversight Committee (the “Compliance Committee”) is responsible for the oversight of compliance issues, risk management and other regulatory matters affecting the Nuveen Funds that are not otherwise the jurisdiction of the other committees. The Board has adopted and periodically reviews policies and procedures designed to address the Nuveen Funds’ compliance and risk matters. As part of its duties, the Compliance Committee reviews the policies and procedures relating to compliance matters and recommends modifications thereto as necessary or appropriate to the full Board; develops new policies and procedures as new regulatory matters affecting the Nuveen Funds arise from time to time; evaluates or considers any comments or reports from examinations from regulatory authorities and responses thereto; and performs any special reviews, investigations or other oversight responsibilities relating to risk management, compliance and/or regulatory matters as requested by the Board.
In addition, the Compliance Committee is responsible for risk oversight, including, but not limited to, the oversight of risks related to investments and operations. Such risks include, among other things, exposures to particular issuers, market sectors, or types of securities; risks related to product structure elements, such as leverage; and techniques that may be used to address those risks, such as hedging and swaps. In assessing issues brought to the committee’s attention or in reviewing a particular policy, procedure, investment technique or strategy, the Compliance Committee evaluates the risks to the Nuveen Funds in adopting a particular approach compared to the anticipated benefits to the Nuveen Funds and their shareholders. In fulfilling its obligations, the Compliance Committee meets on a quarterly basis, and at least once a year in person. The Compliance Committee receives written and oral reports from the Nuveen Funds’ Chief Compliance Officer (“CCO”) and meets privately with the CCO at each of its quarterly meetings. The CCO also provides an annual report to the full Board regarding the operations of the Nuveen Funds’ and other service providers’ compliance programs as well as any recommendations for modifications thereto. The Compliance Committee also receives reports from the Adviser’s investment services group regarding various investment risks. Notwithstanding the foregoing, the full Board also participates in discussions with management regarding certain matters relating to investment risk, such as the use of leverage and hedging. The investment services group therefore also reports to the full Board at its quarterly meetings regarding, among other things, fund performance and the various drivers of such performance. Accordingly, the Board directly and/or in conjunction with the Compliance Committee oversees matters relating to investment risks. Matters not addressed at the committee level are addressed directly by the full Board. The committee operates under a written charter adopted and approved by the Board. The members of the Compliance Committee are Jack B. Evans, William C. Hunter, William J. Schneider, Judith M. Stockdale, Chair, and Virginia L. Stringer. During the fiscal period ended February 28, 2011, the Compliance Committee met one time.
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Prior to the Transaction, the Fund had an Audit Committee, a Pricing Committee and a Governance Committee. The following table presents the number of times each Committee met during the period from July 1, 2010 through December 31, 2010.
Committee | Number of Committee Meetings Held During NIF’s Period from July 1, 2010 through December 31, 2010 | |||
Audit Committee | 3 | |||
Pricing Committee | 2 | |||
Governance Committee | 1 | |||
Board Diversification and Director Qualifications
In determining that a particular director was qualified to serve on the Board, the Board has considered each director’s background, skills, experience and other attributes in light of the composition of the Board with no particular factor controlling. The Board believes that directors need to have the ability to critically review, evaluate, question and discuss information provided to them, and to interact effectively with Fund management, service providers and counsel, in order to exercise effective business judgment in the performance of their duties, and the Board believes each director satisfies this standard. An effective director may achieve this ability through his or her educational background; business, professional training or practice; public service or academic positions; experience from service as a board member or executive of investment funds, public companies or significant private or not-for-profit entities or other organizations; and or/other life experiences. Accordingly, set forth below is a summary of the experiences, qualifications, attributes, and skills that led to the conclusion, as of the date of this document, that each director should continue to serve in that capacity. References to the experiences, qualifications, attributes and skills of directors are pursuant to requirements of the Securities and Exchange Commission, do not constitute holding out the Board or any director as having any special expertise or experience and shall not impose any greater responsibility or liability on any such person or on the Board by reason thereof.
John P. Amboian
Mr. Amboian, an interested director of the Nuveen Funds, joined Nuveen Investments in June 1995 and became Chief Executive Officer in July 2007 and Chairman in November 2007. Prior to this, since 1999, he served as President with responsibility for the firm’s product, marketing, sales, operations and administrative activities. Mr. Amboian initially served Nuveen Investments as Executive Vice President and Chief Financial Officer. Prior to joining Nuveen Investments, Mr. Amboian held key management positions with two consumer product firms affiliated with the Phillip Morris Companies. He served as Senior Vice President of Finance, Strategy and Systems at Miller Brewing Company. Mr. Amboian began his career in corporate and international finance at Kraft Foods, Inc., where he eventually served as Treasurer. He received a Bachelor’s degree in economics and a Masters of Business Administration (“MBA”) from the University of Chicago. Mr. Amboian serves on the Board of Directors of Nuveen Investments and is a Board Member or Trustee of the Investment Company Institute Board of Governors, Boys and Girls Clubs of Chicago, Children’s Memorial Hospital and Foundation, the Council on the Graduate School of Business (University of Chicago), and the North Shore Country Day School Foundation. He is also a member of the Civic Committee of the Commercial Club of Chicago and the Economic Club of Chicago.
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Robert P. Bremner
Mr. Bremner, the Nuveen Funds’ Independent Chairman, is a private investor and management consultant in Washington, D.C. His biography of William McChesney Martin, Jr., a former chairman of the Federal Reserve Board, was published by Yale University Press in November 2004. From 1994 to 1997, he was a Senior Vice President at Samuels International Associates, an international consulting firm specializing in governmental policies, where he served in a part-time capacity. Previously, Mr. Bremner was a partner in the LBK Investors Partnership and was chairman and majority stockholder with ITC Investors Inc., both private investment firms. He currently serves on the Board and as Treasurer of the Humanities Council of Washington D.C. and is a Board Member of the Independent Directors Council affiliated with the Investment Company Institute. From 1984 to 1996, Mr. Bremner was an independent Trustee of the Flagship Funds, a group of municipal open-end funds. He began his career at the World Bank in Washington D.C. He graduated with a Bachelor of Science degree from Yale University and received his MBA from Harvard University.
Jack B. Evans
President of the Hall-Perrine Foundation, a private philanthropic corporation, since 1996, Mr. Evans was formerly President and Chief Operating Officer of the SCI Financial Group, Inc., a regional financial services firm headquartered in Cedar Rapids, Iowa. Formerly, he was a member of the Board of the Federal Reserve Bank of Chicago as well as a Director of Alliant Energy. Mr. Evans is Chairman of the Board of United Fire Group, sits on the Board of the Source Media Group, is President Pro Tem of the Board of Regents for the State of Iowa University System, is a Life Trustee of Coe College and is a member of the Advisory Council of the Department of Finance in the Tippie College of Business, University of Iowa. He has a Bachelor of Arts degree from Coe College and an MBA from the University of Iowa.
William C. Hunter
Mr. Hunter was appointed Dean of the Henry B. Tippie College of Business at the University of Iowa effective July 1, 2006. He had been Dean and Distinguished Professor of Finance at the University of Connecticut School of Business since June 2003. From 1995 to 2003, he was the Senior Vice President and Director of Research at the Federal Reserve Bank of Chicago. While there he served as the Bank’s Chief Economist and was an Associate Economist on the Federal Reserve System’s Federal Open Market Committee (FOMC). In addition to serving as a Vice President in charge of financial markets and basic research at the Federal Reserve Bank in Atlanta, he held faculty positions at Emory University, Atlanta University, the University of Georgia and Northwestern University. A past Director of the Credit Research Center at Georgetown University, SS&C Technologies, Inc. (2005) and past President of the Financial Management Association International, he has consulted with numerous foreign central banks and official agencies in Western Europe, Central and Eastern Europe, Asia, Central America and South America. From 1990 to 1995, he was a U.S. Treasury Advisor to Central and Eastern Europe. He has been a Director of the Xerox Corporation since 2004 and Wellmark, Inc. since 2009. He is President-Elect of Beta Gamma Sigma, Inc., the International Business Honor Society.
David J. Kundert
Mr. Kundert retired in 2004 as Chairman of JPMorgan Fleming Asset Management, and as President and CEO of Banc One Investment Advisors Corporation, and as President of One Group Mutual Funds. Prior to the merger between Bank One Corporation and JPMorgan Chase and Co., he was Executive Vice President, Bank One Corporation and, since 1995, the Chairman and CEO, Banc One Investment Management Group. From 1988 to 1992, he was President and CEO of Bank One Wisconsin Trust Company. Currently, Mr. Kundert is a Director of the Northwestern Mutual Wealth Management Company. He started his career as an attorney for Northwestern Mutual Life Insurance Company. Mr. Kundert has served on the Board of Governors of the Investment Company Institute and he is currently a member of the Wisconsin Bar Association. He is on the Board of the Greater
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Milwaukee Foundation and chairs its Investment Committee. He received his Bachelor of Arts degree from Luther College, and his Juris Doctor from Valparaiso University.
William J. Schneider
Mr. Schneider is currently Chairman, formerly Senior Partner and Chief Operating Officer (retired, December 2004) of Miller-Valentine Partners Ltd., a real estate investment company. He was formerly a Director and Past Chair of the Dayton Development Coalition. He was formerly a member of the Community Advisory Board of the National City Bank in Dayton as well as a former member of the Business Advisory Council of the Cleveland Federal Reserve Bank. Mr. Schneider is a member of the Business Advisory Council for the University of Dayton College of Business. Mr. Schneider was an independent Trustee of the Flagship Funds, a group of municipal open-end funds. He also served as Chair of the Miami Valley Hospital and as Chair of the Finance Committee of its parent holding company. Mr. Schneider has a Bachelor of Science in Community Planning from the University of Cincinnati and a Masters of Public Administration from the University of Dayton.
Judith M. Stockdale
Ms. Stockdale is currently Executive Director of the Gaylord and Dorothy Donnelley Foundation, a private foundation working in land conservation and artistic vitality in the Chicago region and the Low country of South Carolina. Her previous positions include Executive Director of the Great Lakes Protection Fund, Executive Director of Openlands, and Senior Staff Associate at the Chicago Community Trust. She has served on the Boards of the Land Trust Alliance, the National Zoological Park, the Governor’s Science Advisory Council (Illinois), the Nancy Ryerson Ranney Leadership Grants Program, Friends of Ryerson Woods and the Donors Forum. Ms. Stockdale, a native of the United Kingdom, has a Bachelor of Science degree in geography from the University of Durham (UK) and a Master of Forest Science degree from Yale University.
Carole E. Stone
Ms. Stone retired from the New York State Division of the Budget in 2004, having served as its Director for nearly five years and as Deputy Director from 1995 through 1999. Ms. Stone is currently on the Board of Directors of the Chicago Board Options Exchange, CBOE Holdings, Inc. and C2 Options Exchange, Incorporated. She has also served as the Chair of the New York Racing Association Oversight Board, as Chair of the Public Authorities Control Board, as a Commissioner on the New York State Commission on Public Authority Reform and as a member of the Boards of Directors of several New York State public authorities. Ms. Stone has a Bachelor of Arts from Skidmore College in Business Administration.
Virginia L. Stringer
Ms. Stringer served as the independent chair of the Board of the First American Fund Complex from 1997 to 2010, having joined such Board in 1987. Ms. Stringer serves on the Governing Board of the Investment Company Institute’s Independent Directors Council and on the board of the Mutual Fund Directors Forum. She is a recipient of the Outstanding Corporate Director award from Twin Cities Business Monthly and the Minnesota Chapter of the National Association of Corporate Directors. Ms. Stringer is the immediate past board chair of the Oak Leaf Trust, director and immediate past board chair of the Saint Paul Riverfront Corporation and is immediate past President of the Minneapolis Club’s Governing Board. She is a director and former board chair of the Minnesota Opera and a Life Trustee and former board of the Voyageur Outward Bound School. She also served as a trustee of Outward Bound USA. She was appointed by the Governor of Minnesota Board on Judicial Standards and recently served on a Minnesota Supreme Court Judicial Advisory Committee to reform the state’s judicial disciplinary process. She is a member of the International Women’s Forum and attended the London Business School as an International Business Fellow. Ms. Stringer also served as board chair of the Human Resource Planning Society, the Minnesota Women’s Campaign Fund and the Minnesota Women’s Economic Roundtable. Ms. Stringer is the retired founder of Strategic Management Resources, a consulting practice focused on corporate
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governance, strategy and leadership. She has twenty five years of corporate experience having held executive positions in general management, marketing and human resources with IBM and the Pillsbury Company.
Terence J. Toth
Mr. Toth is a Director, Legal & General Investment Management America, Inc. (since 2008) and a Managing Partner, Promus Capital (since 2008). From 2004 to 2007, he was Chief Executive Officer and President of Northern Trust Global Investments, and Executive Vice President of Quantitative Management & Securities Lending from 2000 to 2004. He also formerly served on the Board of the Northern Trust Mutual Funds. He joined Northern Trust in 1994 after serving as Managing Director and Head of Global Securities Lending at Bankers Trust (1986 to 1994) and Head of Government Trading and Cash Collateral Investment at Northern Trust from 1982 to 1986. He currently serves on the Boards of the Goodman Theatre and Chicago Fellowship, and is Chairman of the Board of Catalyst Schools of Chicago. Mr. Toth graduated with a Bachelor of Science degree from the University of Illinois, and received his MBA from New York University. In 2005, he graduated from the CEO Perspectives Program at Northwestern University.
Fund Shares Owned by the Directors
The information in the table below discloses the dollar ranges of (i) each Director’s beneficial ownership in the Fund, and (ii) each Director’s aggregate beneficial ownership in all funds within the Nuveen Funds complex, including in each case the value of fund shares elected by Directors in the directors’ deferred compensation plan, based on the value of fund shares as of February 28, 2011.
| Directors | ||||||||||||||||||||
| Bremner1 | Evans1 | Hunter1 | Kundert1 | Schneider1 | Stockdale1 | Stone1 | Stringer | Toth1 | Amboian1 | |||||||||||
| Aggregate Holdings – Fund Complex | Over $100,000 | Over $100,000 | Over $100,000 | Over $100,000 | Over $100,000 | Over $100,000 | Over $100,000 | Over $100,000 | Over $100,000 | Over $100,000 | ||||||||||
| California Tax Free Fund | — | — | — | — | — | — | — | — | — | — | ||||||||||
| 1 | All directors, except for Ms. Stringer, were appointed to the Board of Directors effective January 1, 2011. |
As of June 2, 2011, none of the Independent Directors or their immediate family members owned, beneficially, or of record, any securities in (i) an investment adviser or principal underwriter of the Fund or (ii) a person (other than a registered investment company) directly or indirectly controlling, controlled by, or under common control with an investment adviser or principal underwriter of the Fund.
The following table shows, for each independent director, (1) the aggregate compensation paid by the Fund for the fiscal period ended February 28, 2011, (2) the amount of total compensation paid by the Fund that has been deferred, and (3) the total compensation paid to each director by the Nuveen Funds during the fiscal period ended February 28, 2011.
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Name of Director | Aggregate Compensation From Fund | Amount of Total Compensation that Has Been Deferred | Total Compensation From Nuveen Funds Paid to Directors2 | |||||||||
Robert P. Bremner1 | — | — | $ | 279,637 | ||||||||
Jack B. Evans1 | — | — | 239,928 | |||||||||
William C. Hunter1 | — | — | 211,543 | |||||||||
David J. Kundert1 | — | — | 256,249 | |||||||||
William J. Schneider1 | — | — | 258,987 | |||||||||
Judith M. Stockdale1 | — | — | 217,647 | |||||||||
Carole E. Stone1 | — | — | 193,900 | |||||||||
Virginia L. Stringer | $ | 2,664 | — | — | ||||||||
Terence J. Toth1 | — | — | 235,535 | |||||||||
| 1 | All directors, except for Ms. Stringer, were appointed to the Board of Directors effective January 1, 2011. As the directors are paid quarterly, and the information in this table is presented on a cash (rather than accrual) basis, none of the directors received any compensation from the Fund for the period of January 1, 2011 to February 28, 2011. |
| 2 | Does not include compensation paid for the period of July 1, 2010 to December 31, 2010 from funds that are now Nuveen Funds, but were advised by FAF prior to the closing of the Transaction. |
Independent directors receive a $120,000 annual retainer plus (a) a fee of $4,500 per day for attendance in person or by telephone at regularly scheduled meetings of the Board; (b) a fee of $3,000 per meeting for attendance in person or by telephone at special, non-regularly scheduled Board meetings where in-person attendance is required and $2,000 per meeting for attendance by telephone or in person at such meetings where in-person attendance is not required; (c) a fee of $2,500 per meeting for attendance in person or by telephone at Audit Committee meetings where in-person attendance is required and $2,000 per meeting for attendance by telephone or in person at such meetings where in-person attendance is not required; (d) a fee of $2,500 per meeting for attendance in person or by telephone at Compliance, Risk Management and Regulatory Oversight Committee meetings where in-person attendance is required and $2,000 per meeting for attendance by telephone or in person at such meetings where in-person attendance is not required; (e) a fee of $1,000 per meeting for attendance in person or by telephone at Dividend Committee meetings; and (f) a fee of $500 per meeting for attendance in person or by telephone at all other committee meetings ($1,000 for shareholder meetings) where in-person attendance is required and $250 per meeting for attendance by telephone or in person at such committee meetings (excluding shareholder meetings) where in-person attendance is not required, and $100 per meeting when the Executive Committee acts as pricing committee for IPOs, plus, in each case, expenses incurred in attending such meetings, provided that no fees are received for meetings held on days on which regularly scheduled Board meetings are held. In addition to the payments described above, the Chairman of the Board receives $75,000, the chairpersons of the Audit Committee, the Dividend Committee and the Compliance, Risk Management and Regulatory Oversight Committee receive $10,000 each and the chairperson of the Nominating and Governance Committee receives $5,000 as additional retainers. Independent directors also receive a fee of $3,000 per day for site visits to entities that provide services to the Nuveen Funds on days on which no Board meeting is held. When ad hoc committees are organized, the Nominating and Governance Committee will at the time of formation determine compensation to be paid to the members of such committee; however, in general, such fees will be $1,000 per meeting for attendance in person or by telephone at ad hoc committee meetings where in-person attendance is required and $500 per meeting for attendance by telephone or in person at such meetings where in-person attendance is not required. The annual retainer, fees and expenses are allocated among the Nuveen Funds on the basis of relative net assets, although management may, in its discretion, establish a minimum amount to be allocated to each fund.
NIF does not have a retirement or pension plan. NIF has a deferred compensation plan (the “Deferred Compensation Plan”) that permits any independent director to elect to defer receipt of all or a portion of his or her compensation as an independent director. The deferred compensation of a participating director is credited to a book reserve account of NIF when the compensation would otherwise have been paid to the director. The value of the director’s deferral account at any time is equal to the value that the account would have had if contributions to the account had been invested and reinvested in shares of one or more of the eligible Nuveen Funds. At the time for commencing distributions from a director’s deferral account, the independent director may elect to receive distributions in a lump sum or over a period of five years. NIF will not be liable for any other fund’s obligations to make distributions under the Deferred Compensation Plan.
The Fund has no employees. The officers of NIF and the director of NIF who is not an independent director serve without any compensation from the Fund.
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Directors of the Fund and certain other Fund affiliates may purchase the Fund’s Class I shares. See the Fund’s Prospectus for details.
The Fund, the other Nuveen Funds, the Adviser, Nuveen Asset Management, and other related entities have adopted codes of ethics which essentially prohibit all Nuveen Fund management personnel, including the Fund’s portfolio manager, from engaging in personal investments which compete or interfere with, or attempt to take advantage of, the Fund’s anticipated or actual portfolio transactions, and are designed to assure that the interests of the shareholders are placed before the interests of Nuveen personnel in connection with personal investment transactions. Each of these codes of ethics permits personnel to invest in securities for their own accounts, including securities that may be purchased or held by the Fund. These codes of ethics are on public file with, and are available from, the SEC.
The Fund invests its assets primarily in municipal bonds and cash management securities. On rare occasions the Fund may acquire, directly or through a special purpose vehicle, equity securities of a municipal bond issuer whose bonds the Fund already owns when such bonds have deteriorated or are expected shortly to deteriorate significantly in credit quality. The purpose of acquiring equity securities generally will be to acquire control of the municipal bond issuer and to seek to prevent the credit deterioration or facilitate the liquidation or other workout of the distressed issuer’s credit problem. In the course of exercising control of a distressed municipal issuer, Nuveen Asset Management may pursue the Fund’s interests in a variety of ways, which may entail negotiating and executing consents, agreements and other arrangements, and otherwise influencing the management of the issuer. Nuveen Asset Management does not consider such activities proxy voting for purposes of Rule 206(4)-6 under the 1940 Act, but nevertheless provides reports to the Fund’s Board of Directors on its control activities on a quarterly basis.
In the rare event that a municipal issuer were to issue a proxy or that the Fund were to receive a proxy issued by a cash management security, Nuveen Asset Management would either engage an independent third party to determine how the proxy should be voted or vote the proxy with the consent, or based on the instructions, of the Fund’s Board of Directors or its representative. A member of Nuveen Asset Management’s legal department would oversee the administration of the voting, and ensure that records were maintained in accordance with Rule 206(4)-6, reports were filed with the Securities and Exchange Commission (“SEC”) on Form N-PX, and the results provided to the Fund’s Board of Trustees and made available to shareholders as required by applicable rules.
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The investment adviser of the fund is Nuveen Fund Advisors, Inc. The Adviser, located at 333 West Wacker Drive, Chicago, Illinois 60606, serves as the manager of the Fund, with responsibility for the overall management of the Fund. The Adviser is also responsible for managing the Fund’s business affairs and providing day-to-day administrative services to the Fund.
The Adviser is an affiliate of the Distributor, which is also located at 333 West Wacker Drive, Chicago, Illinois 60606. The Distributor is the principal underwriter for the Nuveen Mutual Funds, and has served as co-managing underwriter for the shares of the Nuveen Closed-End Funds. The Adviser and the Distributor are subsidiaries of Nuveen Investments.
On November 13, 2007, Nuveen Investments was acquired by investors led by Madison Dearborn Partners, LLC, which is a private equity investment firm based in Chicago, Illinois.
Each Fund is dependent upon services and resources provided by the Adviser and therefore the Adviser’s parent, Nuveen Investments. Nuveen Investments increased its level of debt in connection with the MDP Acquisition. Nuveen Investments believes that monies generated from operations and cash on hand will be adequate to fund debt service requirements, capital expenditures and working capital requirements for the foreseeable future; however, Nuveen Investments’ ability to continue to fund these items, to service its debt and to maintain compliance with covenants in its debt agreements may be affected by general economic, financial, competitive, legislative, legal and regulatory factors and by its ability to refinance or repay outstanding indebtedness with scheduled maturities beginning in 2014. In the event that Nuveen Investments breaches certain of the covenants included in its debt agreements, the breach of such covenants may result in the accelerated payment of its outstanding debt, increase the cost of such debt or generally have an adverse effect on the financial condition of Nuveen Investments.
For the management services and facilities furnished by the Adviser, the Fund has agreed to pay an annual management fee at a rate set forth in the Prospectus under “Who Manages the Fund.” In addition, the Adviser has agreed to waive all or a portion of its management fee or reimburse certain expenses of the Fund.
The Fund’s management fee is divided into two components—a complex-level fee based on the aggregate amount of all eligible Fund assets managed by the Adviser and its affiliates, and a specific fund-level fee based only on the amount of assets within each individual Fund. This pricing structure enables Fund shareholders to benefit from growth in the assets within the Fund as well as from growth in the amount of complex-wide assets managed by the Adviser. Under no circumstances will this pricing structure result in the Fund paying management fees at a rate higher than would otherwise have been applicable had the complex-wide management fee structure not been implemented.
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The Fund has agreed to pay an annual fund-level management fee, payable monthly, based upon the average daily net assets of the Fund as set forth in the Prospectus.
The Fund’s complex-level fee is payable monthly and is additive to the fund-level fee. It is determined by taking the current overall complex-level fee rate, which is based on the aggregate amount of the “eligible assets” of all Nuveen Funds, and making, as appropriate, an upward adjustment to that rate based upon the percentage of the Fund’s assets that are not “eligible assets.” The current overall complex-level fee schedule is as follows:
Complex-Level Asset Breakpoint Level* | Effective Rate at Breakpoint Level | |||
$55 billion | 0.2000 | % | ||
$56 billion | 0.1996 | % | ||
$57 billion | 0.1989 | % | ||
$60 billion | 0.1961 | % | ||
$63 billion | 0.1931 | % | ||
$66 billion | 0.1900 | % | ||
$71 billion | 0.1851 | % | ||
$76 billion | 0.1806 | % | ||
$80 billion | 0.1773 | % | ||
$91 billion | 0.1691 | % | ||
$125 billion | 0.1599 | % | ||
$200 billion | 0.1505 | % | ||
$250 billion | 0.1469 | % | ||
$300 billion | 0.1445 | % | ||
| * | The complex-level fee component of the management fee for the Fund is calculated based upon the aggregate daily “eligible assets” of all Nuveen Funds. Eligible assets exclude assets attributable to investments in other Nuveen Funds and assets in excess of $2 billion added to the Nuveen Fund complex in connection with the Adviser’s assumption of the management of the former First American Funds effective January 1, 2011. Eligible assets include closed-end fund assets managed by the Adviser that are attributable to financial leverage. For these purposes, financial leverage includes the closed-end funds’ use of preferred stock and borrowings and investments in the residual interest certificates (also called inverse floating rate securities) in tender option bond (TOB) trusts, including the portion of assets held by the TOB trust that has been effectively financed by the trust’s issuance of floating rate securities, subject to an agreement by the Adviser as to certain funds to limit the amount of such assets for determining managed assets in certain circumstances. |
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The Fund’s complex-level fee rate will not exceed the maximum overall complex-level fee rate of 0.2000%. As of March 31, 2011, the Fund’s complex-level fee was 0.1982%.
The following table sets forth total advisory fees paid to the Adviser (for the period of January 1, 2011 through February 28, 2011) before waivers and after waivers:
| January 1, 2011 through February 28, 2011 | ||||||||
Fund | Advisory Fee Before Waivers | Advisory Fee After Waivers(1) | ||||||
California Tax Free Fund | $ | 101,127 | $ | 3,045 | ||||
| 1 | Advisory and certain other fees for the period were waived by the Adviser to comply with total operating expense limitations that were agreed upon by the Fund and the Adviser. |
As noted, FAF served as the Fund’s investment adviser prior to the consummation of the Transaction. The following table sets forth total advisory fees paid to FAF before waivers and after waivers for the Fund for the fiscal years ended June 30, 2009 and June 30, 2010 and the period from July 1, 2010 through December 31, 2010:
| Fiscal Year Ended June 30, 2009 | Fiscal Year Ended June 30, 2010 | July 1, 2010 through December 31, 2010 | ||||||||||||||||||||||
Fund | Advisory Fee Before Waivers | Advisory Fee After Waivers(1) | Advisory Fee Before Waivers | Advisory Fee After Waivers(1) | Advisory Fee Before Waivers | Advisory Fee After Waivers(1) | ||||||||||||||||||
California Tax Free Fund | 336,498 | – | 499,392 | 67,001 | 269,730 | 33,508 | ||||||||||||||||||
| 1 | Advisory and certain other fees for the period were waived by FAF to comply with total operating expense limitations that were agreed upon by the Fund and FAF. |
In addition to the Adviser’s management fee, the Fund also pays a portion of the Trust’s general expenses allocated in proportion to the net assets of the Fund. All fees and expenses are accrued daily and deducted before payment of dividends to investors.
The Adviser has selected its affiliate, Nuveen Asset Management, LLC, located at 333 West Wacker Drive, Chicago, Illinois 60606, to serve as sub-adviser to manage the investment portfolio of the Fund. The Adviser pays Nuveen Asset Management a portfolio management fee equal to 38.4615% of the advisory fee paid to the Adviser for its services to the Fund (net of any waivers, reimbursement payments, supermarket fees and alliance fees waived, reimbursed or paid by the Adviser in respect of the Fund).
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Additional Payments to Financial Intermediaries
In addition to the sales charge payments and the distribution, service and transfer agency fees described in the Prospectus and elsewhere in this SAI, the Adviser and/or the Distributor may make additional payments out of its own assets to selected intermediaries that sell shares of the Nuveen Mutual Funds (such as brokers, dealers, banks, registered investment advisers, retirement plan administrators and other intermediaries; hereinafter, individually, “Intermediary,” and collectively, “Intermediaries”) under the categories described below for the purposes of promoting the sale of Fund shares, maintaining share balances and/or for sub-accounting, administrative or shareholder processing services.
The amounts of these payments could be significant and may create an incentive for an Intermediary or its representatives to recommend or offer shares of the Nuveen Mutual Funds to its customers. The Intermediary may elevate the prominence or profile of the Fund within the Intermediary’s organization by, for example, placing the Fund on a list of preferred or recommended funds and/or granting the Adviser and/or the Distributor preferential or enhanced opportunities to promote the Fund in various ways within the Intermediary’s organization.
These payments are made pursuant to negotiated agreements with Intermediaries. The payments do not change the price paid by investors for the purchase of a share or the amount the Fund will receive as proceeds from such sales. Furthermore, these payments are not reflected in the fees and expenses listed in the fee table section of the Fund’s Prospectus and described above because they are not paid by the Fund.
The categories of payments described below are not mutually exclusive, and a single Intermediary may receive payments under all categories.
Marketing Support Payments and Program Servicing Payments
The Adviser and/or the Distributor may make payments for marketing support and/or program servicing to selected Intermediaries that are registered as holders or dealers of record for accounts invested in one or more of the Nuveen Mutual Funds or that make Nuveen Mutual Fund shares available through employee benefit plans or fee-based advisory programs to compensate them for the variety of services they provide.
Marketing Support Payments. Services for which an Intermediary receives marketing support payments may include business planning assistance, advertising, educating the Intermediary’s personnel about the Nuveen Mutual Funds in connection with shareholder financial planning needs, placement on the Intermediary’s preferred or recommended fund company list, and access to sales meetings, sales representatives and management representatives of the Intermediary. In addition, Intermediaries may be compensated for enabling Nuveen representatives to participate in and/or present at conferences or seminars, sales or training programs for invited registered representatives and other employees, client and investor events and other events sponsored by the Intermediary.
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The Adviser and/or the Distributor compensate Intermediaries differently depending upon, among other factors, the number or value of Nuveen Mutual Funds shares that the Intermediary sells or may sell, the value of the assets invested in the Nuveen Mutual Funds by the Intermediary’s customers, redemption rates, ability to attract and retain assets, reputation in the industry and the level and/or type of marketing assistance and educational activities provided by the Intermediary. Such payments are generally asset-based but also may include the payment of a lump sum.
Program Servicing Payments. Services for which an Intermediary receives program servicing payments typically include recordkeeping, reporting, or transaction processing, but may also include services rendered in connection with fund/investment selection and monitoring, employee enrollment and education, plan balance rollover or separation, or other similar services. An Intermediary may perform program services itself or may arrange with a third party to perform program services.
Program servicing payments typically apply to employee benefit plans, such as retirement plans, or fee-based advisory programs but may apply to retail sales and assets in certain situations. The payments are based on such factors as the type and nature of services or support furnished by the Intermediary and are generally asset-based.
Marketing Support and Program Servicing Payment Guidelines. In the case of any one Intermediary, marketing support and program servicing payments are not expected, with certain limited exceptions, to exceed, in the aggregate, 0.35% of the average net assets of Fund shares attributable to that Intermediary on an annual basis. In connection with the sale of a business by U.S. Bank N.A. (which was the parent company of a firm a portion of whose business has since been acquired by the Adviser) to Great-West Life & Annuity Insurance Company (“Great-West”), the Adviser has a services agreement with GWFS Equities, Inc., an affiliate of Great-West, which provides for payments of up to 0.60% of the average net assets of Fund shares attributable to GWFS Equities, Inc. on an annual basis.
Other Payments
From time to time, the Adviser and/or the Distributor, at their expense, may provide other compensation to Intermediaries that sell or arrange for the sale of shares of the Fund, which may be in addition to marketing support and program servicing payments described above. For example, the Adviser and/or the Distributor may: (i) compensate Intermediaries for National Securities Clearing Corporation networking system services (e.g., shareholder communication, account statements, trade confirmations, and tax reporting) on an asset-based or per account basis; (ii) compensate Intermediaries for providing Fund shareholder trading information; (iii) make one-time or periodic payments to reimburse selected Intermediaries for items such as ticket charges (i.e., fees that an Intermediary charges its representatives for effecting transactions in Fund shares) of up to $25 per purchase or exchange order, operational charges (e.g., fees that an Intermediary charges for establishing the Fund on its trading system), and literature printing and/or distribution costs; and (iv) at the direction of a retirement plan's sponsor, reimburse or pay direct expenses of an employee benefit plan that would otherwise be payable by the plan.
When not provided for in a marketing support or program servicing agreement, the Adviser and/or the Distributor may pay Intermediaries for enabling the Adviser and/or the Distributor to participate in and/or present at conferences or seminars, sales or training programs for invited registered representatives and other Intermediary employees, client and investor events and other Intermediary-sponsored events, and for travel expenses, including lodging incurred by registered representatives and other employees in connection with prospecting, asset retention and due diligence trips. These payments may vary depending upon the nature of the event. The Adviser and/or the Distributor make payments for such events as they deem appropriate, subject to their internal guidelines and applicable law. Wholesale representatives of the Distributor may receive additional compensation if they meet certain targets for sales of one or more Nuveen Mutual Funds.
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The Adviser and/or the Distributor occasionally sponsors due diligence meetings for registered representatives during which they receive updates on various Nuveen Mutual Funds and are afforded the opportunity to speak with portfolio managers. Although invitations to these meetings are not conditioned on selling a specific number of shares, those who have shown an interest in Nuveen Mutual Funds are more likely to be considered. To the extent permitted by their firm’s policies and procedures, all or a portion of registered representatives’ expenses in attending these meetings may be covered by the Adviser and/or the Distributor.
Certain third parties, affiliates of the Adviser and employees of the Adviser or its affiliates may receive cash compensation from the Adviser and/or the Distributor in connection with establishing new client relationships with the Nuveen Mutual Funds. Such compensation may vary by product and by Intermediary. Total compensation of employees of the Adviser and its affiliates with marketing and/or sales responsibilities is based in part on their generation of new client relationships, including new client relationships with the Nuveen Mutual Funds, and such employees may receive additional compensation if they meet certain targets for sales of one or more Nuveen Mutual Funds.
Other compensation may be offered to the extent not prohibited by state laws or any self-regulatory agency, such as FINRA. Investors can ask their Intermediary for information about any payments it receives from the Adviser and/or the Distributor and the services it provides for those payments.
Investors may wish to take Intermediary payment arrangements into account when considering and evaluating any recommendations relating to Fund shares.
Intermediaries Receiving Additional Payments
The following is a list of Intermediaries receiving one or more of the types of payments discussed above as of June 17, 2011:
ADP Broker-Dealer, Inc. American Enterprise Investment Services, Inc. American United Life Insurance Company Ameriprise Financial Services, Inc. Ascensus (formerly BISYS Retirement Services, Inc.) Banc of America Investment Services, Inc. Benefit Plans Administrative Services, Inc. Benefit Trust Company Charles Schwab & Co., Inc. Citigroup Global Markets Inc. / Morgan Stanley Smith Barney LLC Commonwealth Equity Services, LLP, DBA Commonwealth Financial Network Country Trust Bank CPI Qualified Plan Consultants, Inc. Digital Retirement Solutions, Inc. Dyatech, LLC ExpertPlan, Inc. Fidelity Brokerage Services LLC / National Financial Services LLC Fidelity Investments Institutional Operations Company, Inc. Genesis Employee Benefits, Inc. DBA America’s VEBA Solution GWFS Equities, Inc. Hartford Life Insurance Company |
48
Hartford Securities Distribution Company, Inc. Hewitt Associates LLC ICMA Retirement Corporation ING Institutional Plan Services, LLC / ING Investment Advisors, LLC (formerly CitiStreet LLC / CitiStreet Advisors LLC) ING Life Insurance and Annuity Company / ING Institutional Plan Services LLC J.P. Morgan Retirement Plan Services, LLC Janney Montgomery Scott LLC Leggette Actuaries, Inc. Lincoln Retirement Services Company LLC / AMG Service Corp. Linsco/Private Ledger Corp. Marshall & Ilsley Trust Company, N.A. Massachusetts Mutual Life Insurance Company Mercer HR Outsourcing LLC Merrill Lynch, Pierce, Fenner & Smith Inc. MetLife Securities, Inc. Mid Atlantic Capital Corporation Morgan Stanley & Co., Incorporated / Morgan Stanley Smith Barney LLC MSCS Financial Services, LLC Nationwide Financial Services, Inc. Newport Retirement Services, Inc. NYLife Distributors LLC Pershing LLC Princeton Retirement Group / GPC Securities, Inc. Principal Life Insurance Company Prudential Insurance Company of America (The) Prudential Investment Management Services, LLC / Prudential Investments LLC Raymond James & Associates / Raymond James Financial Services, Inc. RBC Dain Rauscher, Inc. Reliance Trust Company Retirement Plan Company, LLC (The) Robert W. Baird & Co., Inc. Stifel, Nicolaus & Co., Inc. T. Rowe Price Investment Services, Inc. / T. Rowe Price Retirement Plan Services, Inc. TD Ameritrade, Inc. TD Ameritrade Trust Company (formerly Fiserv Trust Company / International Clearing Trust Company) TIAA-CREF Individual & Institutional Services, LLC U.S. Bancorp Investments, Inc. U.S. Bank, N.A. UBS Financial Services, Inc. |
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Unified Trust Company, N.A. VALIC Retirement Services Company (formerly AIG Retirement Services Company) Vanguard Group, Inc. Wachovia Bank, N.A. Wachovia Securities, LLC Wells Fargo Advisors, LLC Wells Fargo Bank, N.A. Wilmington Trust Company Wilmington Trust Retirement and Institutional Services Company (formerly AST Capital Trust Company) |
Any additions, modifications or deletions to the list of Intermediaries identified above that have occurred since June 17, 2011 are not reflected in the list.
50
Prior to the Transaction, FAF served as Administrator pursuant to an Administration Agreement between the FAF and NIF, dated July 1, 2006 and U.S. Bancorp Fund Services, LLC (“USBFS”), 615 East Michigan Street, Milwaukee, WI 53202, served as sub-administrator pursuant to a Sub-Administration Agreement between the FAF and USBFS dated July 1, 2005. USBFS is a subsidiary of U.S. Bancorp. As of December 31, 2010, the Fund no longer has an administrator or sub-administrator. The following table sets forth total administrative fees, after waivers, paid by the Fund listed below to FAF and USBFS for the fiscal years ended June 30, 2009 and June 30, 2010 and the fiscal period from July 1, 2010 through December 31, 2010:
Fund | Fiscal Year Ended June 30, 2009 | Fiscal Year Ended June 30, 2010 | July 1, 2010 through December 31, 2010 | |||||||||
California Tax Free Fund | 147,684 | 220,343 | 121,362 | |||||||||
USBFS (the “Transfer Agent”) serves as the Fund’s transfer agent pursuant to a Transfer Agent and Shareholder Servicing Agreement (the “Transfer Agent Agreement”) between the Transfer Agent and NIF dated September 19, 2006. As transfer agent, the Transfer Agent maintains records of shareholder accounts, processes purchases and redemptions of the Fund’s shares, acts as dividend and capital gain distribution disbursing agent, and performs other related transfer agent functions. The Fund pays transfer agent fees on a per shareholder account basis, at annual rates paid monthly, subject to a minimum annual fee per share class. These fees will be charged to the Fund based on the number of accounts within the Fund. The Fund will continue to reimburse the Transfer Agent for out-of-pocket expenses incurred in providing transfer agent services.
The following table sets forth transfer agent fees paid, excluding out-of-pocket expenses, by the Fund to the Transfer Agent for the fiscal years ended June 30, 2009 and June 30, 2010 and the fiscal period ended February 28, 2011:
Fund | Fiscal Year Ended June 30, 2009 | Fiscal Year Ended June 30, 2010 | Fiscal Period Ended February 28, 2011 | |||||||||
California Tax Free Fund | 72,000 | 72,000 | 36,999 | |||||||||
Nuveen Securities, LLC, 333 West Wacker Drive, Chicago, Illinois 60606, serves as the distributor for the Fund’s shares pursuant to a “best efforts” arrangement as provided by a Distribution Agreement dated January 1, 2011 (the “Distribution Agreement”). Pursuant to the Distribution Agreement, the Fund appointed the Distributor to be its agent for the distribution of the Fund’s shares on a continuous offering basis.
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The following tables set forth the amount of underwriting commissions paid by the Fund, the amount of such commissions retained by the Distributor, and the amount of compensation on redemptions and repurchases for the period from January 1, 2011 through February 28, 2011:
| Total Underwriting Commissions | ||||
Fund | January 1, 2011 through February 28, 2011 | |||
California Tax Free Fund | $ | 2,996 | ||
| Underwriting Commissions Retained by Distributor | ||||
Fund | January 1, 2011 through February 28, 2011 | |||
California Tax Free Fund | $ | 363 | ||
| Compensation on Redemptions and Repurchases | ||||
Fund | January 1, 2011 through February 28, 2011 | |||
California Tax Free Fund | $ | 1,242 | ||
| 1 | Fees paid by the Fund under NIF’s Rule 12b-1 Distribution and Service Plan are provided below. |
Prior to the Transaction, Quasar Distributors, LLC (“Quasar”) 615 East Michigan Street, Milwaukee, WI 53202, served as the distributor for the Fund’s shares pursuant to a Distribution Agreement dated July 1, 2007 (the “Quasar Distribution Agreement”). Quasar is a wholly owned subsidiary of U.S. Bancorp. Fund shares and other securities distributed by Quasar are not deposits or obligations of, or endorsed or guaranteed by, any bank, and are not insured by the Bank Insurance Fund, which is administered by the Federal Deposit Insurance Corporation.
The following tables set forth the amount of underwriting commissions paid by the Fund and the amount of such commissions retained by Quasar during the fiscal years ended June 30, 2009 and June 30, 2010 and the period July 1, 2010 through December 31, 2010:
| Total Underwriting Commissions | ||||||||||||
Fund | Fiscal Year Ended June 30, 2009 | Fiscal Year Ended June 30, 2010 | July 1, 2010 through December 31, 2010 | |||||||||
California Tax Free Fund | 104,957 | 82,897 | 77,851 | |||||||||
| Underwriting Commissions Retained by Quasar | ||||||||||||
Fund | Fiscal Year Ended June 30, 2009 | Fiscal Year Ended June 30, 2010 | July 1, 2010 through December 31, 2010 | |||||||||
California Tax Free Fund | 5,547 | 4,754 | 4,337 | |||||||||
| Compensation on Redemptions and Repurchases | ||||||||||||
Fund | Fiscal Year Ended June 30, 2009 | Fiscal Year Ended June 30, 2010 | July 1, 2010 through December 31, 2010 | |||||||||
California Tax Free Fund | 5,211 | 1,284 | 626 | |||||||||
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Distribution and Service Plan
NIF has adopted a Distribution and Service Plan with respect to the Class A and Class C1 shares of the Fund pursuant to Rule 12b-1 under the 1940 Act (the “Plan”). Rule 12b-1 provides in substance that a mutual fund may not engage directly or indirectly in financing any activity which is primarily intended to result in the sale of shares, except pursuant to a plan adopted under the Rule. The Plan authorizes the Fund to pay the Distributor distribution and/or shareholder servicing fees on the Fund’s Class A and Class C1 shares as described below. The distribution fees under the Plan are used for primary purpose of compensating participating intermediaries for their sales of the Fund. The shareholder servicing fees are used primarily for the purpose of providing compensation for the ongoing servicing and/or maintenance of shareholder accounts.
The Class A shares pay to the Distributor a shareholder servicing fee at an annual rate of 0.20% of the average daily net assets of the Class A shares. The fee may be used by the Distributor to provide compensation for shareholder servicing activities with respect to the Class A shares. The shareholder servicing fee is intended to compensate the Distributor for ongoing servicing and/or maintenance of shareholder accounts and may be used by the Distributor to provide compensation to participating intermediaries through whom shareholders hold their shares for ongoing servicing and/or maintenance of shareholder accounts. This fee is calculated and paid each month based on average daily net assets of Class A shares of the Fund for that month.
The Class C1 shares pay to the Distributor a shareholder servicing fee at the annual rate of 0.25% of the average daily net assets of the Class C1 shares. The fee may be used by the Distributor to provide compensation for shareholder servicing activities with respect to the Class C1 shares. This fee is calculated and paid each month based on average daily net assets of the Class C1 shares. The Class C1 shares pay to the Distributor a distribution fee at the annual rate of 0.40% of the average daily net assets of the Class C1 shares. The Distributor may use the distribution fee to provide compensation to participating intermediaries through which shareholders hold their shares beginning one year after purchase.
The Distributor receives no compensation for distribution of the Class I shares.
The Plan is a “compensation-type” plan under which the Distributor is entitled to receive the distribution and shareholder servicing fees regardless of whether its actual distribution and shareholder servicing expenses are more or less than the amount of the fees. It is therefore possible that the Distributor may realize a profit in a particular year as a result of these payments. The Plan recognizes that the Distributor and the Adviser, in their discretion, may from time to time use their own assets to pay for certain additional costs of distributing Class A and Class C1 shares. Any such arrangements to pay such additional costs may be commenced or discontinued by the Distributor or the Adviser at any time. With the exception of the Distributor and its affiliates, no “interested person” of NIF, as that term is defined in the 1940 Act, and no Director of NIF has a direct or indirect financial interest in the operation of the Plan or any related agreement.
Under the Plan, the Fund’s Treasurer reports the amounts expended under the Plan and the purposes for which such expenditures were made to the Board of Directors for their review on a quarterly basis. The Plan provides that it will continue in effect for a period of more than one year from the date of its execution only so long as such continuance is specifically approved at least annually by the vote of a majority of the Board members of NIF and by the vote of the majority of those Board members of NIF who are not “interested persons” of NIF (as that term is defined in the 1940 Act) and who have no direct or indirect financial interest in the operation of the Plan or in any agreement related to such plan. The Fund paid the following 12b-1 fees to Quasar for the period from July 1, 2010 through December 31, 2010 with respect to the Class A shares and Class C1 shares of the Fund. The table also describes the activities for which such payments were used. As noted above, no 12b-1 fees are paid with respect to Class I shares.
Fund | Total 12b-1 Fees Paid to Quasar | Amount Retained by Quasar1 | Compensation Paid to Participating Intermediaries | |||||||||
California Tax Free Fund | ||||||||||||
Class A | 22,771 | 9,356 | 13,415 | |||||||||
Class C1 | 18,608 | 9,116 | 9,492 | |||||||||
| 1 | The amounts retained by the Distributor were used to pay for various distribution and shareholder servicing expenses, including advertising, marketing, wholesaler support, and printing prospectuses. |
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The Fund paid the following 12b-1 fees to the Distributor for the period from January 1, 2011 through February 28, 2011 with respect to the Class A shares and Class C1 shares of the Fund. The table also describes the activities for which such payments were used. As noted above, no 12b-1 fees are paid with respect to Class I shares.
Fund | Total 12b-1 Fees Paid to Nuveen | Amount Retained by Nuveen1 | Compensation Paid to Participating Intermediaries | |||||||||
California Tax Free Fund | ||||||||||||
Class A | 5,409 | 5,409 | — | |||||||||
Class C1 | 6,089 | 6,089 | — | |||||||||
| 1 | The amounts retained by the Distributor were used to pay for various distribution and shareholder servicing expenses, including advertising, marketing, wholesaler support, and printing prospectuses. |
If the Fund closes to new investors, it may continue to make payments under the Plan. Such payments would be made for the various services provided to existing shareholders by the Participating Intermediaries receiving such payments.
Custodian and Independent Registered Public Accounting Firm
Custodian
U.S. Bank, 60 Livingston Avenue, St. Paul, MN 55101, acts as the custodian for the Fund (the “Custodian”). U.S. Bank is a subsidiary of U.S. Bancorp. The Custodian takes no part in determining the investment policies of the Fund or in deciding which securities are purchased or sold by the Fund. All of the instruments representing the investments of the Fund and all cash are held by the Custodian. The Custodian delivers securities against payment upon sale and pays for securities against delivery upon purchase. The Custodian also remits Fund assets in payment of Fund expenses, pursuant to instructions of NIF's officers or resolutions of the Board of Directors.
As compensation for its services as custodian to the Fund, the Custodian is paid a monthly fee calculated on an annual basis equal to 0.005% of the Fund’s average daily net assets. In addition, the Custodian is reimbursed for its out-of-pocket expenses incurred while providing services to the Fund. The Custodian continues to serve so long as its appointment is approved at least annually by the Board of Directors including a majority of the directors who are not “interested persons” of NIF, as that term is defined in the 1940 Act.
Independent Registered Public Accounting Firm
Ernst & Young LLP, 220 South Sixth Street, Suite 1400, Minneapolis, Minnesota 55402, serves as the Fund’s independent registered public accounting firm, providing audit services, including audits of the annual financial statements.
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The following table sets forth the number and total assets of the mutual funds and accounts managed by the Fund’s portfolio managers as of February 28, 2011.
Portfolio Manager | Type of Account Managed | Number of Accounts | Assets | Amount Subject to Performance-Based Fee | ||||||||||
Scott R. Romans | Registered Investment Company | 32 | $ | 7.82 billion | 0 | |||||||||
| Other Pooled Investment Vehicles | 0 | 0 | 0 | |||||||||||
| Other Accounts | 2 | $ | 0.60 million | 0 | ||||||||||
Actual or apparent conflicts of interest may arise when a portfolio manager has day-to-day management responsibilities with respect to more than one account. More specifically, portfolio managers who manage multiple accounts are presented a number of potential conflicts, including, among others those discussed below.
The management of multiple accounts may result in a portfolio manager devoting unequal time and attention to the management of each account. Nuveen Asset Management seeks to manage such competing interests for the time and attention of portfolio managers by having portfolio managers focus on a particular investment discipline. Most accounts managed by a portfolio manager in a particular investment strategy are managed using the same investment models.
If a portfolio manager identifies a limited investment opportunity which may be suitable for more than one account, an account may not be able to take full advantage of that opportunity due to an allocation of filled purchase or sale orders across all eligible accounts. To deal with these situations, Nuveen Asset Management has adopted procedures for allocating limited opportunities across multiple accounts.
With respect to many of its clients’ accounts, Nuveen Asset Management determines which broker to use to execute transaction orders, consistent with its duty to seek best execution of the transaction. However, with respect to certain other accounts, Nuveen Asset Management may be limited by the client with respect to the selection of brokers or may be instructed to direct trades through a particular broker. In these cases, Nuveen Asset Management may place separate, non-simultaneous, transactions for the Fund and other accounts which may temporarily affect the market price of the security or the execution of the transaction, or both, to the detriment of the Fund or the other accounts.
Some clients are subject to different regulations. As a consequence of this difference in regulatory requirements, some clients may not be permitted to engage in all the investment techniques or transactions or to engage in these transactions to the same extent as the other accounts managed by the portfolio manager. Finally, the appearance of a conflict of interest may arise where Nuveen Asset Management has an incentive, such as a performance-based management fee, which relates to the management of some accounts, with respect to which a portfolio manager has day-to-day management responsibilities.
Nuveen Asset Management has adopted certain compliance procedures which are designed to address these types of conflicts common among investment managers. However, there is no guarantee that such procedures will detect each and every situation in which a conflict arises.
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Portfolio Manager Compensation
Portfolio manager compensation consists primarily of base pay, an annual cash bonus and long-term incentive payments.
Base pay. Base pay is determined based upon an analysis of the portfolio manager’s general performance, experience, and market levels of base pay for such position.
Annual cash bonus. The Fund’s portfolio manager is eligible for an annual cash bonus determined based upon the portfolio manager’s performance, experience and market levels of base pay for such position. The maximum potential annual cash bonus is equal to a multiple of base pay.
A portion of the portfolio manager’s annual cash bonus is based on the Fund’s investment performance, generally measured over the past one- and three-year periods unless the portfolio manager’s tenure is shorter. Investment performance for the Fund is determined by evaluating the Fund’s performance relative to its benchmarks.
The portfolio manager’s performance is evaluated in part by comparing the manager’s performance to a Fund-specific customized subset (limited to bonds in the Fund’s specific state and with certain maturity parameters) of the S&P/Investortools Municipal Bond Index, an index comprised of bonds held by managed municipal bond fund customers of Standard & Poor’s Securities Pricing, Inc. that are priced daily and whose fund holdings aggregate at least $2 million. As of December 31, 2010, the S&P/Investortools Municipal Bond Index was comprised of 57,308 securities with an aggregate current market value of $1,226 billion.
Bonus amounts can also be influenced by factors other than investment performance. These other factors are more subjective and are based on evaluations by each portfolio manager’s supervisor and reviews submitted by his or her peers. These reviews and evaluations often take into account a number of factors, including the portfolio manager’s effectiveness in communicating investment performance to shareholders and their advisors, his or her contribution to Nuveen Asset Management’s investment process and to the execution of investment strategies consistent with risk guidelines, his or her participation in asset growth, and his or her compliance with Nuveen Asset Management’s policies and procedures.
Investment performance is measured on a pre-tax basis, gross of fees for the Fund’s results and for its Lipper industry peer group.
Long-term incentive compensation. Certain key employees of Nuveen Investments and its affiliates, including certain portfolio managers, have received profits interests in the parent company of Nuveen Investments which entitle their holders to participate in the appreciation in the value of Nuveen Investments. In addition, in July 2009, Nuveen Investments created and funded a trust which purchased shares of certain Nuveen Mutual Funds and awarded such shares, subject to vesting, to certain key employees, including certain portfolio managers. Finally, certain key employees of Nuveen Asset Management, including certain portfolio managers, have received profits interests in Nuveen Asset Management which entitle their holders to participate in the firm’s growth over time.
There are generally no differences between the methods used to determine compensation with respect to the Fund and the Other Accounts shown in the table above.
56
The following table indicates as of February 28, 2011 the value, within the indicated range, of shares beneficially owned by the portfolio manager in the Fund he manages and in the remainder of Nuveen funds managed by Nuveen Asset Management’s municipal investment team. For purposes of this table, the following letters indicate the range listed next to each letter:
A - $0
B - $1 - $10,000
C - $10,001 - $50,000
D - $50,001 - $100,000
E - $100,001 - $500,000
F - $500,001 - $1,000,000
G - More than $1 million
Portfolio Manager | Fund | Dollar range of equity securities beneficially owned in Fund | Dollar range of equity securities beneficially owned in the remainder of Nuveen Funds managed by Nuveen Asset Management’s municipal investment team | |||
Scott R. Romans | California Tax Free Fund | A | A |
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Decisions with respect to which securities are to be bought or sold, the total amount of securities to be bought or sold, the broker-dealer with or through which the securities transactions are to be effected and the commission rates applicable to the trades are made by Nuveen Asset Management.
In selecting a broker-dealer to execute securities transactions, Nuveen Asset Management considers a variety of factors, including the execution capability, financial responsibility and responsiveness of the broker-dealer in seeking best price and execution. Subject to the satisfaction of its obligation to seek best execution, other factors Nuveen Asset Management may consider include a broker-dealer’s access to initial public offerings and the nature and quality of any brokerage and research products and services the broker-dealer provides. However, Nuveen Asset Management may cause the Fund to pay a broker-dealer a commission in excess of that which another broker-dealer might have charged for effecting the same transaction (a practice commonly referred to as “paying up”). However, Nuveen Asset Management may cause the Fund to pay up in recognition of the value of brokerage and research products and services provided to Nuveen Asset Management by the broker-dealer. The broker-dealer may directly provide such products or services to the Adviser or purchase them form a third party and provide them to the Adviser. In such cases, the Fund is in effect paying for the brokerage and research products and services in so-called “soft-dollars”. However, Nuveen Asset Management will authorize the Fund to pay an amount of commission for effecting a securities transaction in excess of the amount of commission another broker or dealer would have charged only if Nuveen Asset Management determined in good faith that the amount of such commission was reasonable in relation to the value of the brokerage and research products and services provided by such broker or dealer, viewed in terms of either that particular transaction or the overall responsibilities of the Adviser with respect to the managing its accounts.
The types of research products and services Nuveen Asset Management receives include economic analysis and forecasts, financial market analysis and forecasts, industry and company specific analysis, interest rate forecasts, and other services that assist in the investment decision making process. Research products and services are received primarily in the form of written reports, computer-generated services, telephone contacts and personal meetings with security analysts. Research services may also be provided in the form of meetings arranged with corporate and industry spokespersons or may be generated by third parties but are provided to Nuveen Asset Management by, or through, broker-dealers.
The research products and services Nuveen Asset Management receives from broker-dealers are supplemental to, and do not necessarily reduce, the Adviser’s own normal research activities. As a practical matter, however, it would be impossible for Nuveen Asset Management to generate all of the information presently provided by broker-dealers. The expenses of Nuveen Asset Management would be materially increased if they attempted to generate such additional information through their own staffs. To the extent that Nuveen Asset Management could use cash to purchase many of the brokerage and research products and services received for allocating securities transactions to broker-dealers, Nuveen Asset Management are relieved of expenses that they might otherwise bear when such services are provided by broker-dealers.
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As a general matter, the brokerage and research products and services Nuveen Asset Management receive from broker-dealers are used to service all of their respective accounts. However, any particular brokerage and research product or service may not be used to service each and every client account, and may not benefit the particular accounts that generated the brokerage commissions. For example, equity commissions may pay for brokerage and research products and services utilized in managing fixed income accounts.
In some cases, Nuveen Asset Management may receive brokerage or research products or services that are used for both brokerage or research purposes and other purposes, such as accounting, record keeping, administration or marketing. In such cases, Nuveen Asset Management will make a good faith effort to decide the relative proportion of the cost of such products or services used for non-brokerage or research purposes and will pay for such portion from its own funds. In such circumstance, Nuveen Asset Management has a conflict of interest in making such decisions.
Many of the Fund’s portfolio transactions involve payment of a brokerage commission by the Fund. In some cases, transactions are with dealers or issuers who act as principal for their own accounts and not as brokers. Transactions effected on a principal basis, other than certain transactions effected on a so-called riskless principal basis, are made without the payment of brokerage commissions but at net prices which usually include a spread or markup. In effecting transactions in over-the-counter securities, the Fund typically deals with market makers unless it appears that better price and execution are available elsewhere.
Foreign equity securities may be held in the form of American Depositary Receipts, or ADRs, European Depositary Receipts, or EDRs, or securities convertible into foreign equity securities. ADRs and EDRs may be listed on stock exchanges or traded in the over-the-counter markets in the United States or overseas. The foreign and domestic debt securities and money market instruments in which the Fund may invest are generally traded in the over-the-counter markets.
The Fund does not effect any brokerage transactions in its portfolio securities with any broker or dealer affiliated directly or indirectly with Nuveen Asset Management or Distributor unless such transactions, including the frequency thereof, the receipt of commission payable in connection therewith, and the selection of the affiliated broker or dealer effecting such transactions are not unfair or unreasonable to the shareholders of the Fund, as determined by the Board of Directors. Any transactions with an affiliated broker or dealer must be on terms that are both at least as favorable to the Fund as the Fund can obtain elsewhere and at least as favorable as such affiliated broker or dealer normally gives to others.
When two or more clients of Nuveen Asset Management are simultaneously engaged in the purchase or sale of the same security, the prices and amounts are allocated in a manner considered by Nuveen Asset Management to be equitable to each client. In some cases, this system could have a detrimental effect on the price or volume of the security as far as each client is concerned. In other cases, however, the ability of the clients to participate in volume transactions may produce better executions for each client.
The following table sets forth the aggregate brokerage commissions paid by the Fund during the fiscal years ended June 30, 2009 and June 30, 2010 and the fiscal period ended February 28, 2011:
| Aggregate Brokerage Commissions Paid by the Fund | ||||||||||||
Fund | Fiscal Year Ended June 30, 2009 | Fiscal Year Ended June 30, 2010 | Fiscal Period Ended February 28, 2011 | |||||||||
California Tax Free Fund | — | — | — | |||||||||
| — | No commissions paid. |
At February 28, 2011, the Fund did not hold securities of its “regular brokers or dealers.”
59
Each share of the Fund's $.0001 par value common stock is fully paid, nonassessable, and transferable. Shares may be issued as either full or fractional shares. Fractional shares have pro rata the same rights and privileges as full shares. Shares of the Fund have no preemptive or conversion rights.
Each share of the Fund has one vote. On some issues, such as the election of directors, all shares of all NIF funds vote together as one series. The shares do not have cumulative voting rights. On issues affecting only a particular Fund, the shares of that Fund will vote as a separate series. Examples of such issues would be proposals to alter a fundamental investment restriction pertaining to the Fund or to approve, disapprove or alter a distribution plan.
The Bylaws of NIF provide that annual shareholders meetings are not required and that meetings of shareholders need only be held with such frequency as required under Maryland law and the 1940 Act.
As of June 2, 2011, the directors and officers of NIF as a group owned less than 1% of the Fund’s outstanding shares and the Fund was aware that the following persons owned of record 5% or more of the outstanding shares of each class of stock of the Fund:
| Percentage of Outstanding Shares | ||||||||||||
Fund | Class A | Class C1 | Class I | |||||||||
California Tax Free Fund | ||||||||||||
U.S. BANCORP INVESTMENTS INC. 60 LIVINGSTON AVE SAINT PAUL MN 55107-2292 | 6.93 | % | ||||||||||
U.S. BANCORP INVESTMENTS INC. 60 LIVINGSTON AVE SAINT PAUL MN 55107-2292 | 5.68 | % | ||||||||||
MERRILL LYNCH PIERCE FENNER & SMITH ATTN PHYSICAL TEAM 4800 DEER LAKE DR E JACKSONVILLE FL 32246-6484 | 23.31 | % | ||||||||||
U.S. BANCORP INVESTMENTS INC. 60 LIVINGSTON AVE SAINT PAUL MN 55107-2292 | 8.62 | % | ||||||||||
U.S. BANCORP INVESTMENTS INC. 60 LIVINGSTON AVE SAINT PAUL MN 55107-2292 | 6.26 | % | ||||||||||
U.S. BANCORP INVESTMENTS INC. 60 LIVINGSTON AVE SAINT PAUL MN 55107-2292 | 5.76 | % | ||||||||||
BAND & CO C/O US BANK PO BOX 1787 MILWAUKEE WI 53201-1787 | 85.27 | % | ||||||||||
WASHINGTON & CO C/O US BANK PO BOX 1787 MILWAUKEE WI 53201-1787 | 10.90 | % | ||||||||||
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The Fund’s net asset value is determined as set forth in its Prospectus under “General Information – Net Asset Value.”
On February 28, 2011, the net asset values per share for each class of shares were calculated as follows.
Fund | Net Assets | Shares Outstanding | Net Asset Value Per Share | |||||||||
California Tax Free Fund | ||||||||||||
Class A | $ | 16,452,962 | 1,570,112 | $ | 10.48 | |||||||
Class C | 5,762,161 | 549,001 | 10.50 | |||||||||
Class I | 75,178,388 | 7,174,971 | 10.48 | |||||||||
The public offering price of the shares of the Fund generally equals the Fund’s net asset value plus any applicable sales charge. A summary of any applicable sales charge assessed on Fund share purchases is set forth in the Fund’s Prospectus. The public offering price of the Class A Shares of the Fund as of February 28, 2011 was as set forth below. Please note that the public offering prices of Class C1and Class I Shares are the same as net asset value since no sales charges are imposed on the purchase of such shares.
Fund | Public Offering Price Class A | |||
California Tax Free Fund | $ | 10.94 | ||
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Federal Income Tax Matters
This section summarizes some of the main U.S. federal income tax consequences of owning shares of the Fund. This section is current as of the date of this Statement of Additional Information. Tax laws and interpretations change frequently, and this summary does not describe all of the tax consequences to all taxpayers. For example, this summary generally does not describe your situation if you are a corporation, a non-U.S. person, a broker-dealer or other investor with special circumstances. In addition, this section does not describe your state, local or non-U.S. tax consequences. This federal income tax summary is based in part on the advice of counsel to the Fund. The Internal Revenue Service could disagree with any conclusions set forth in this section. In addition, Funds’ counsel was not asked to review, and has not reached a conclusion with respect to the federal income tax treatment of the assets to be deposited in the Fund. Consequently, this summary may not be sufficient for you to use for the purpose of avoiding penalties under federal tax law. As with any investment, you should seek advice based on your individual circumstances from your own tax professional.
Fund Status
The Fund intends to qualify as a “regulated investment company” under the federal tax laws. If the Fund qualifies as a regulated investment company and distributes its income as required by the tax law, the Fund generally will not pay federal income taxes.
Qualification as a Regulated Investment Company
As a regulated investment company, the Fund will not be subject to federal income tax on the portion of its investment company taxable income, as that term is defined in the Code, without regard to the deduction for dividends paid and net capital gain (i.e., the excess of net long-term capital gain over net short-term capital loss) that it distributes to shareholders, provided that it distributes at least 90% of its investment company taxable income and 90% of its net tax-exempt interest income for the year (the “Distribution Requirement”) and satisfies certain other requirements of the Code that are described below. The Fund also intends to make such distributions as are necessary to avoid the otherwise applicable 4% non-deductible excise tax on certain undistributed earnings.
In addition to satisfying the Distribution Requirement, the Fund must derive at least 90% of its gross income from (1) dividends, interest, certain payments with respect to loans of stock and securities, gains from the sale or disposition of stock, securities or non-U.S. currencies and other income (including but not limited to gains from options, futures or forward contracts) derived with respect to its business of investing in such stock, securities or currencies, and (2) net income derived from an interest in “qualified publicly traded partnerships” (as such term is defined in the Code). The Fund must also satisfy an asset diversification test in order to qualify as a regulated investment company. Under this test, at the close of each quarter of the Fund’s taxable year, (1) 50% or more of the value of the Fund’s assets must be represented by cash, United States government securities, securities of other regulated investment companies, and other securities, with such other securities limited, in respect of any one issuer, to an amount not greater than 5% of the value of the Fund’s assets and 10% of the outstanding voting securities of such issuer and (2) not more than 25% of the value of the Fund’s assets may be invested in securities of (a) any one issuer (other than U.S. government securities or securities of other regulated investment companies), or of two or more issuers which the Fund controls and which are engaged in the same, similar or related trades or businesses or (b) in the securities of one or more “qualified publicly traded partnerships” (as such term is defined in the Code). There are certain exceptions for failure to qualify if the failure is for reasonable cause or is de minimus, and certain corrective action is taken and certain tax payments are made by the Fund.
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Distributions
After the end of each year, you will receive a tax statement that separates the Fund’s distributions into three categories, exempt-interest dividends, ordinary income distributions and capital gains dividends. Exempt-interest dividends generally are excluded from your gross income for federal income tax purposes. Some or all of the exempt-interest dividends, however, may be taken into account in determining your alternative minimum tax and may have other tax consequences (e.g., they may affect the amount of your social security benefits that are taxed). Ordinary income distributions are generally taxed at your ordinary tax rate. Generally, you will treat all capital gains dividends as long-term capital gains regardless of how long you have owned your shares. To determine your actual tax liability for your capital gains dividends, you must calculate your total net capital gain or loss for the tax year after considering all of your other taxable transactions, as described below. In addition, the Fund may make distributions that represent a return of capital for tax purposes and thus will generally not be taxable to you. The tax status of your distributions from the Fund is not affected by whether you reinvest your distributions in additional shares or receive them in cash. The income from the Fund that you must take into account for federal income tax purposes is not reduced by amounts used to pay a deferred sales fee, if any. The tax laws may require you to treat distributions made to you in January as if you had received them on December 31 of the previous year. Under the "Health Care and Education Reconciliation Act of 2010," income from the Fund may also be subject to a new 3.8 percent "medicare tax" imposed for taxable years beginning after 2012. This tax will generally apply to your net investment income if your adjusted gross income exceeds certain threshold amounts, which are $250,000 in the case of married couples filing joint returns and $200,000 in the case of single individuals. Interest that is excluded from gross income and exempt-interest dividends from the Fund are generally not included in your net investment income for purposes of this tax.
Dividends Received Deduction
A corporation that owns shares generally will not be entitled to the dividends received deduction with respect to dividends received from the Fund because the dividends received deduction is generally not available for distributions from regulated investment companies.
If You Sell or Redeem Your Shares
If you sell or redeem your shares, you will generally recognize a taxable gain or loss. To determine the amount of this gain or loss, you must subtract your tax basis in your shares from the amount you receive in the transaction. Your tax basis in your shares is generally equal to the cost of your shares, generally including sales charges. In some cases, however, you may have to adjust your tax basis after you purchase your shares. Further, if you hold your shares for six months or less, any loss incurred by you related to the disposition of such a share will be disallowed to the extent of the exempt-interest dividends you received, except as otherwise described in the next section.
Capital Gains and Losses
If you are an individual, the maximum marginal federal tax rate for net capital gain is generally 15% (generally 0% for certain taxpayers in the 10% and 15% tax brackets). These capital gains rates are generally effective for taxable years beginning before January 1, 2013. For later periods, if you are an individual, the maximum marginal federal tax rate for net capital gain is generally 20% (10% for certain taxpayers in the 10% and 15% tax brackets). The 20% rate is reduced to 18% for net capital gains from most property acquired after December 31, 2000 with a holding period of more than five years, and the 10% rate is reduced to 8% for net capital gains from most property (regardless of when acquired) with a holding period of more than five years.
Net capital gain equals net long-term capital gain minus net short-term capital loss for the taxable year. Capital gain or loss is long-term if the holding period for the asset is more than one year and is short-term if the holding period for the asset is one year or less. You must exclude the date you purchase your shares to determine your holding period. If you hold a share for six months or less, any loss incurred by you related to the disposition of such share will be disallowed to the extent of the exempt-interest dividends you received, except in the case of a regular dividend paid by the Fund if the Fund declares exempt-interest dividends on a daily basis in an amount equal to at least 90 percent of its net tax-exempt interest and distributes such dividends on a monthly or more frequent basis. To the extent, if any, it is not disallowed, it will be recharacterized as long-term capital loss to the extent of any capital gain dividend received. The tax rates for capital gains realized from assets held for one year or less are generally the same as for ordinary income. The Internal Revenue Code treats certain capital gains as ordinary income in special situations.
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In-Kind Distributions
Under certain circumstances, as described in the Prospectus, you may receive an in-kind distribution of Fund securities when you redeem shares or when the Fund terminates. This distribution will be treated as a sale for federal income tax purposes and you will generally recognize gain or loss, generally based on the value at that time of the securities and the amount of cash received. The Internal Revenue Service could, however, assert that a loss may not be currently deducted.
Exchanges
If you exchange shares of the Fund for shares of another Nuveen Mutual Fund, the exchange would generally be considered a sale for federal income tax purposes.
Deductibility of Fund Expenses
Expenses incurred and deducted by the Fund will generally not be treated as income taxable to you. In some cases, however, you may be required to treat your portion of these Fund expenses as income. In these cases you may be able to take a deduction for these expenses. However, certain miscellaneous itemized deductions, such as investment expenses, may be deducted by individuals only to the extent that all of these deductions exceed 2% of the individual’s adjusted gross income. Further, because the Fund pays exempt-interest dividends, which are treated as exempt interest for federal income tax purposes, you will not be able to deduct some of your interest expense for debt that you incur or continue to purchase or carry your shares.
Foreign Investors
If you are a foreign investor (i.e., an investor other than a U.S. citizen or resident or a U.S. corporation, partnership, estate or trust), you should be aware that, generally, subject to applicable tax treaties, distributions from the Fund will be characterized as dividends for federal income tax purposes (other than dividends which the Fund properly reports as capital gain dividends) and, other than exempt-interest dividends, will be subject to U.S. income taxes, including withholding taxes, subject to certain exceptions described below. However, distributions received by a foreign investor from the Fund that are properly reported by the Fund as capital gain dividends may not be subject to U.S. federal income taxes, including withholding taxes, provided that the Fund makes certain elections and certain other conditions are met. In the case of dividends with respect to taxable years of the Fund beginning prior to 2012, distributions from the Fund that are properly reported by the Fund as an interest-related dividend attributable to certain interest income received by the Fund or as a short-term capital gain dividend attributable to certain net short-term capital gain income received by the Fund may not be subject to U.S. federal income taxes, including withholding taxes when received by certain foreign investors, provided that the Fund makes certain elections and certain other conditions are met. Distributions after December 31, 2012 may be subject to a U.S. withholding tax of 30% in the case of distributions to (i) certain non-U.S. financial institutions that have not entered into an agreement with the U.S. Treasury to collect and disclose certain information and (ii) certain other non-U.S. entities that do not provide certain certifications and information about the entity’s U.S. owners.
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State Tax Matters
California Tax Status
The assets of the Fund will consist of interest bearing obligations issued by or on behalf of the State of California or a local government in California (the “California Bonds”) or by the government of Puerto Rico, Guam or the Virgin Islands (the “Possession Bonds,” and, collectively with the California Bonds, the “Bonds”). The discussion in this section is based on the assumption that: (i) the Bonds were validly issued by the State of California or a local government in California, or by the government of Puerto Rico, Guam or the Virgin Islands, as the case may be, (ii) the interest on the Bonds is excludable from gross income for federal income tax purposes, and (iii) with respect to the Possession Bonds, the Possession Bonds and the interest thereon are exempt from all state and local taxation. This disclosure does not address the taxation of persons other than full-time residents of the State of California.
If you are an individual, you may exclude from income for purposes of the California Personal Income Tax dividends received from the Fund that are properly designated by the Fund in a written notice mailed to you as California exempt-interest dividends. The portion of the Fund’s dividends designated as California exempt interest dividends may not exceed the amount of interest the Fund receives during its taxable year on obligations the interest on which, if held by an individual, is exempt from taxation by the State of California, reduced by certain non-deductible expenses. The Fund may designate California exempt-interest dividends only if the Fund qualifies as a regulated investment company under the Internal Revenue Code of 1986, and, if at the close of each quarter of its taxable year, at least 50 percent of the value of the total assets consists of obligations the interest on which when held by an individual, is exempt from taxation by the State of California. A “fund of funds” structure which would allow a regulated investment company to distribute exempt-interest dividends for federal income tax purposes, would not be eligible to make exempt-interest dividends for California tax purposes.
Distributions from the Fund, other than California exempt-interest dividends, will generally be subject to the California Personal Income Tax. Please note that California exempt-interest dividends received by taxpayers subject to the California Corporation Tax Law may be includible in their gross income for purposes of determining its California franchise tax and its California income tax. Interest on indebtedness incurred or continued to purchase or carry shares of the Fund, if the Fund distributes California exempt-interest dividends during a year, is not deductible for purposes of the California Personal Income Tax.
Neither the sponsor nor its counsel have independently examined the Bonds or the opinions of bond counsel rendered in connection with the issuance of the Bonds. Ownership of shares in the Fund may result in other California tax consequences to certain taxpayers, and prospective investors should consult their tax advisors.
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PURCHASEAND REDEMPTIONOF FUND SHARES
As described in the Prospectus, the Fund provides you with alternative ways of purchasing Fund shares based upon your individual investment needs and preferences. The Fund is generally not a suitable investment for individuals investing through retirement plans.
Each class of shares of the Fund represents an interest in the same portfolio of investments. Each class of shares is identical in all respects except that each class bears its own class expenses, including distribution and administration expenses, and each class has exclusive voting rights with respect to any distribution or service plan applicable to its shares. As a result of the differences in the expenses borne by each class of shares, net income per share, dividends per share and net asset value per share will vary among the Fund’s classes of shares. There are no conversion, preemptive or other subscription rights.
Shareholders of each class will share expenses proportionately for services that are received equally by all shareholders. A particular class of shares will bear only those expenses that are directly attributable to that class, where the type or amount of services received by a class varies from one class to another. For example, class-specific expenses generally will include distribution and service fees for those classes that pay such fees.
The expenses to be borne by specific classes of shares may include (i) transfer agency fees attributable to a specific class of shares, (ii) printing and postage expenses related to preparing and distributing materials such as shareholder reports, prospectuses and proxy statements to current shareholders of a specific class of shares, (iii) SEC and state securities registration fees incurred by a specific class of shares, (iv) the expense of administrative personnel and services required to support the shareholders of a specific class of shares, (v) litigation or other legal expenses relating to a specific class of shares, (vi) directors’ fees or expenses incurred as a result of issues relating to a specific class of shares, (vii) accounting expenses relating to a specific class of shares and (viii) any additional incremental expenses subsequently identified and determined to be properly allocated to one or more classes of shares.
Class A shares may be purchased at a public offering price equal to the applicable net asset value per share plus an up-front sales charge imposed at the time of purchase as set forth in the Prospectus. Shareholders may qualify for a reduced sales charge, or the sales charge may be waived in its entirety, as described below. Class A shares are also subject to an annual service fee of 0.20%. See “Distribution and Service Plan.”
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Reduction or Elimination of Up-Front Sales Charge on Class A Shares
Rights of Accumulation
You may qualify for a reduced sales charge on a purchase of Class A shares of the Fund if the amount of your purchase, when added to the value that day of all of your shares of any Nuveen Mutual Fund, falls within the amounts stated in the Class A Sales Charges and Commissions table in “How You Can Buy and Sell Shares” in the Prospectus. You or your financial advisor must notify the Distributor or the Fund’s transfer agent of any cumulative discount whenever you plan to purchase Class A shares of the Fund that you wish to qualify for a reduced sales charge.
Letter of Intent
You may qualify for a reduced sales charge on a purchase of Class A shares of the Fund if you plan to purchase Class A shares of Nuveen Mutual Funds over the next 13 months and the total amount of your purchases would, if purchased at one time, qualify you for one of the reduced sales charges shown in the Class A Sales Charges and Commissions table in “How You Can Buy and Sell Shares” in the Prospectus. In order to take advantage of this option, you must complete the applicable section of the Application Form or sign and deliver to your financial advisor or other financial intermediary or to the Fund’s transfer agent a written Letter of Intent in a form acceptable to the Distributor. A Letter of Intent states that you intend, but are not obligated, to purchase over the next 13 months a stated total amount of Class A shares that would qualify you for a reduced sales charge shown above. You may count shares of all Nuveen Mutual Funds that you already own and any Class I and Class C shares of a Nuveen Mutual Fund that you purchase over the next 13 months towards completion of your investment program, but you will receive a reduced sales charge only on new Class A shares you purchase with a sales charge over the 13 months. You cannot count towards completion of your investment program Class A shares that you purchase without a sales charge through investment of distributions from a Nuveen Mutual Fund or a Nuveen Defined Portfolio, or otherwise.
By establishing a Letter of Intent, you agree that your first purchase of Class A shares of the Fund following execution of the Letter of Intent will be at least 5% of the total amount of your intended purchases. You further agree that shares representing 5% of the total amount of your intended purchases will be held in escrow pending completion of these purchases. All dividends and capital gains distributions on Class A shares held in escrow will be credited to your account. If total purchases, less redemptions, prior to the expiration of the 13 month period equal or exceed the amount specified in your Letter of Intent, the Class A shares held in escrow will be transferred to your account. If the total purchases, less redemptions, exceed the amount specified in your Letter of Intent and thereby qualify for a lower sales charge than the sales charge specified in your Letter of Intent, you will receive this lower sales charge retroactively, and the difference between it and the higher sales charge paid will be used to purchase additional Class A shares on your behalf. If the total purchases, less redemptions, are less than the amount specified, you must pay the Distributor an amount equal to the difference between the amounts paid for these purchases and the amounts which would have been paid if the higher sales charge had been applied. If you do not pay the additional amount within 20 days after written request by the Distributor or your financial advisor, the Distributor will redeem an appropriate number of your escrowed Class A shares to meet the required payment. By establishing a Letter of Intent, you irrevocably appoint the Distributor as attorney to give instructions to redeem any or all of your escrowed shares, with full power of substitution in the premises.
You or your financial advisor must notify the Distributor or the Fund’s transfer agent whenever you make a purchase of Fund shares that you wish to be covered under the Letter of Intent option.
For purposes of determining whether you qualify for a reduced sales charge as described under Rights of Accumulation and Letter of Intent, you may include together with your own purchases those made by your spouse or domestic partner and your dependent children, whether these purchases are made through a taxable or non-taxable account. You may also include purchases made by a corporation, partnership or sole proprietorship which is 100% owned, either alone or in combination, by any of the foregoing. In addition, a trustee or other fiduciary can count all shares purchased for a single trust, estate or other single fiduciary account that has multiple accounts (including one or more employee benefit plans of the same employer).
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Elimination of Sales Charge on Class A Shares
Class A shares of the Fund may be purchased at net asset value without a sales charge by the following categories of investors:
| • | investors purchasing $1,000,000 or more; |
| • | officers, trustees and former trustees of the Nuveen Funds; |
| • | bona fide, full-time and retired employees of Nuveen Investments, and subsidiaries thereof, or their immediate family members (immediate family members are defined as their spouses or domestic partners, parents, children, grandparents, grandchildren, parents-in-law, sons-and daughters-in-law, siblings, a sibling’s spouse and a spouse’s siblings); |
| • | any person who, for at least the last 90 days, has been an officer, director or bona fide employee of any financial intermediary, or their immediate family members; |
| • | bank or broker-affiliated trust departments investing funds over which they exercise exclusive discretionary investment authority and that are held in a fiduciary, agency, advisory, custodial or similar capacity; |
| • | investors purchasing on a periodic fee, asset-based fee or no transaction fee basis through a broker-dealer sponsored mutual fund purchase program; and |
| • | clients of investment advisers, financial planners or other financial intermediaries that charge periodic or asset-based fees for their services. |
Any Class A shares purchased pursuant to a special sales charge waiver must be acquired for investment purposes and on the condition that they will not be transferred or resold except through redemption by the Fund. You or your financial advisor must notify the Distributor or the Fund’s transfer agent whenever you make a purchase of Class A shares of the Fund that you wish to be covered under these special sales charge waivers.
Class A shares of the Fund may be issued at net asset value without a sales charge in connection with the acquisition by the Fund of another investment company. All purchases under the special sales charge waivers will be subject to minimum purchase requirements as established by the Fund.
The reduced sales charge programs may be modified or discontinued by the Fund at any time. For more information about the purchase of Class A shares or the reduced sales charge program, or to obtain the required application forms, call Nuveen Investor Services toll-free at (800) 257-8787.
Class C1 shares are not available for new accounts or for additional investment into existing accounts, but Class C1 shares can be issued for purposed of dividend reinvestment. Class C1 shares are also subject to an annual service fee of 0.25% to compensate financial intermediaries for providing you with ongoing financial advice and other account services. The Distributor compensates financial intermediaries for sales of Class C1 shares at the time of the sale at a rate of 0.65% of the amount of Class C1 shares purchased, which represents an advance of the first year’s distribution fee of 0.40% plus an advance on the first year’s annual service fee of 0.25%. See “Distribution and Service Plan.”
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Class C1 share purchase orders equaling or exceeding $1,000,000 will not be accepted. In addition, purchase orders for a single purchaser that, when added to the value that day of all of such purchaser’s shares of any class of any Nuveen Mutual Fund, cause the purchaser’s cumulative total of shares in Nuveen Mutual Funds to equal or exceed the aforementioned limit will not be accepted. Purchase orders for a single purchaser equal to or exceeding the foregoing limit should be placed only for Class A shares, unless such purchase has been reviewed and approved as suitable for the client by the appropriate compliance personnel of the financial intermediary, and the Fund receives written confirmation of such approval.
Redemption of Class C1 shares within 12 months of purchase may be subject to a CDSC of 1% of the lower of the purchase price or redemption proceeds. Because Class C1 shares do not convert to Class A shares and continue to pay an annual distribution fee indefinitely, Class C1 shares should normally not be purchased by an investor who expects to hold shares for significantly longer than eight years.
Reduction or Elimination of Contingent Deferred Sales Charge
Class A shares are normally redeemed at net asset value, without any CDSC. However, in the case of Class A shares purchased at net asset value without a sales charge because the purchase amount exceeded $1 million, where the financial intermediary did not waive the sales commission, a CDSC is imposed on any redemption within 12 months of purchase. Class C1 shares are redeemed at net asset value, without any CDSC, except that a CDSC of 1% is imposed upon any redemption within 12 months of purchase (except in cases where the shareholder’s financial advisor agreed to waive the right to receive an advance of the first year’s distribution and service fee).
In determining whether a CDSC is payable, the Fund will first redeem shares not subject to any charge and then will redeem shares held for the longest period, unless the shareholder specifies another order. No CDSC is charged on shares purchased as a result of automatic reinvestment of dividends or capital gains paid. In addition, no CDSC will be charged on exchanges of shares into another Nuveen Mutual Fund. The holding period is calculated on a monthly basis and begins on the first day of the month in which the purchase was made. The CDSC is assessed on an amount equal to the lower of the then current market value or the cost of the shares being redeemed. Accordingly, no sales charge is imposed on increases of net asset value above the initial purchase price. The Distributor receives the amount of any CDSC shareholders pay.
The CDSC may be waived or reduced under the following circumstances: (i) in the event of total disability (as evidenced by a determination by the federal Social Security Administration) of the shareholder (including a registered joint owner) occurring after the purchase of the shares being redeemed; (ii) in the event of the death of the shareholder (including a registered joint owner); (iii) for redemptions made pursuant to a systematic withdrawal plan, up to 1% monthly, 3% quarterly, 6% semiannually or 12% annually of an account’s net asset value depending on the frequency of the plan as designated by the shareholder; (iv) involuntary redemptions caused by operation of law; (v) redemptions in connection with a payment of account or plan fees; (vi) redemptions in connection with the exercise of a reinstatement privilege whereby the proceeds of a redemption of the Fund’s shares subject to a sales charge are reinvested in shares of certain Funds within a specified number of days; (vii) redemptions in connection with the exercise of the Fund’s right to redeem all shares in an account that does not maintain a certain minimum balance or that the Board of Trustees has determined may have material adverse consequences to the shareholders of the Fund; (viii) in whole or in part for redemptions of shares by shareholders with accounts in excess of specified breakpoints that correspond to the breakpoints under which the up-front sales charge on Class A shares is reduced pursuant to Rule 22d-1 under the Act; (ix) redemptions of shares purchased under circumstances or by a category of investors for which Class A shares could be purchased at net asset value without a sales charge; (x) redemptions of Class A or Class C1 shares if the proceeds are transferred to an account managed by the Adviser and the Adviser refunds the advanced service and distribution fees to the Distributor; (xi) redemptions of Class C1 shares in cases where (a) you purchase shares after committing to hold the shares for less than one year and (b) your advisor consents up front to receiving the appropriate service and distribution fee on the Class C1 shares on an ongoing basis instead of having the first year’s fees advanced by the Distributor; and (xii) redemptions of Class A shares where the Distributor did not pay a sales commission when such shares were purchased. If the Fund waives or reduces the CDSC, such waiver or reduction would be uniformly applied to all Fund shares in the particular category. In waiving or reducing a CDSC, the Fund will comply with the requirements of Rule 22d-1 under the 1940 Act.
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Class I shares are available for purchase by clients of financial intermediaries who charge such clients an ongoing fee for advisory, investment, consulting or related services. Such clients may include individuals, corporations, endowments and foundations. The minimum initial investment for such clients is $100,000, but this minimum will be lowered to $250 for clients of financial intermediaries that have accounts holding Class I shares with an aggregate value of at least $100,000. The Distributor may also lower the minimum to $250 for clients of financial intermediaries anticipated to reach this Class I share holdings level.
Class I shares are also available for purchase by family offices and their clients. A family office is a company that provides certain financial and other services to a high net worth family or families. The minimum initial investment for family offices and their clients is $100,000, but this minimum will be lowered to $250 for clients of family offices that have accounts holding Class I shares with an aggregate value of at least $100,000. The Distributor may also lower the minimum to $250 for clients of family offices anticipated to reach this Class I share holdings level.
Class I shares also are available for purchase, with no minimum initial investment, by the following categories of investors:
| • | employer-sponsored retirement plans, except SEPs, SAR-SEPs, SIMPLE IRAs and KEOGH plans; |
| • | bank or broker-affiliated trust departments investing funds over which they exercise exclusive discretionary investment authority and that are held in a fiduciary, agency, advisory, custodial or similar capacity; |
| • | Advisory accounts of Nuveen Fund Advisors and its affiliates, including other Nuveen Mutual Funds whose investment policies permit investments in other investment companies. |
| • | trustees/directors and former trustees/directors of any Nuveen Fund, and their immediate family members (“immediate family members” are defined as spouses, parents, children, grandparents, grandchildren, parents-in-law, sons- and daughters-in-law, siblings, a sibling’s spouse and a spouse’s siblings); |
| • | officers, directors and former directors of Nuveen Investments and its affiliates, and their immediate family members; |
| • | full-time and retired employees of Nuveen Investments and its affiliates, and their immediate family members; |
| • | any person who, for at least the last 90 days, has been an officer, director or employee of any financial intermediary, and their immediate family members; |
(Any shares purchased by investors falling within any of the last four categories listed above must be acquired for investment purposes and on the condition that they will not be transferred or resold except through redemption by a Fund).
Holders of Class I shares may purchase additional Class I shares using dividends and capital gains distributions on their shares. In addition, shareholders of Nuveen Defined Portfolios may reinvest their distributions in Class I shares, if, before September 6, 1994 (or before June 13, 1995 in the case of Nuveen Intermediate Duration Municipal Bond Fund), such shareholders had elected to reinvest distributions in Nuveen Mutual Fund shares.
If you are eligible to purchase either Class I shares or Class A shares without a sales charge at net asset value, you should be aware of the differences between these two classes of shares. Class A shares are subject to an annual service fee to compensate financial intermediaries for providing you with ongoing account services. Class I shares are not subject to a distribution or service fee and, consequently, holders of Class I shares may not receive the same types or levels of services from financial intermediaries. In choosing between Class A shares and Class I shares, you should weigh the benefits of the services to be provided by financial intermediaries against the annual service fee imposed upon the Class A shares.
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Exchange Privilege
You may exchange shares of a class of the Fund for shares of the same class of any other Nuveen Mutual Fund with reciprocal exchange privileges, at net asset value without a sales charge, by either sending a written request to the Fund, c/o Nuveen Investor Services, P.O. Box 8530, Boston, Massachusetts 02266-8530 or by calling Nuveen Investor Services toll free at (800) 257-8787. You may also, under certain limited circumstances, exchange between certain classes of shares of the same Fund. An exchange between classes of shares of the same Fund may not be considered a taxable event; please consult your own tax advisor for further information. An exchange between classes of shares of the same Fund may be done in writing to the address stated above.
If you exchange shares between different Nuveen Mutual Funds and your shares are subject to a CDSC, no CDSC will be charged at the time of the exchange. However, if you subsequently redeem the shares acquired through the exchange, the redemption may be subject to a CDSC, depending on when you purchased your original shares and the CDSC schedule of the fund from which you exchanged your shares. If you exchange between classes of shares of the same Fund and your original shares are subject to a CDSC, the CDSC will be assessed at the time of the exchange.
The shares to be purchased through an exchange must be offered in your state of residence. The total value of exchanged shares must at least equal the minimum investment requirement of the Nuveen Mutual Fund being purchased. If your shares are held with a financial intermediary, the financial intermediary must have the operational capability to support exchanges. For federal income tax purposes, an exchange between different Nuveen Mutual Funds constitutes a sale and purchase of shares and may result in capital gain or loss. Before making any exchange, you should obtain the Prospectus for the Nuveen Mutual Fund you are purchasing and read it carefully. If the registration of the account for the Fund you are purchasing is not exactly the same as that of the fund account from which the exchange is made, written instructions from all holders of the account from which the exchange is being made must be received, with signatures guaranteed by a member of an approved Medallion Guarantee Program or in such other manner as may be acceptable to the Fund. You may also exchange shares by telephone if you authorize telephone exchanges by checking the applicable box on the Application Form or by calling Nuveen Investor Services toll-free at (800) 257-8787 to obtain an authorization form. The exchange privilege may be modified or discontinued by the Fund at any time.
The exchange privilege is not intended to permit the Fund to be used as a vehicle for short-term trading. Excessive exchange activity may interfere with portfolio management, raise expenses and otherwise have an adverse effect on all shareholders. In order to limit excessive exchange activity and in other circumstances where Fund management believes doing so would be in the best interest of the Fund, the Fund reserves the right to revise or terminate the exchange privilege, or limit the amount or number of exchanges or reject any exchange. Shareholders would be notified of any such action to the extent required by law. See “Frequent Trading Policy” below.
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Reinstatement Privilege
If you redeemed Class A or Class C1 shares of the Fund or any other Nuveen Mutual Fund that were subject to a sales charge or a CDSC, you have up to one year to reinvest all or part of the full amount of the redemption in the same class of shares of the Fund at net asset value. This reinstatement privilege can be exercised only once for any redemption, and reinvestment will be made at the net asset value next calculated after reinstatement of the appropriate class of Fund shares. If you reinstate shares that were subject to a CDSC, your holding period as of the redemption date also will be reinstated for purposes of calculating a CDSC and the CDSC paid at redemption will be refunded. The federal income tax consequences of any capital gain realized on a redemption will not be affected by reinstatement, but a capital loss may be disallowed in whole or in part depending on the timing, the amount of the reinvestment and the fund from which the redemption occurred.
Suspension of Right of Redemption
The Fund may suspend the right of redemption of Fund shares or delay payment more than seven days (a) during any period when the NYSE is closed (other than customary weekend and holiday closings), (b) when trading in the markets the Fund normally utilizes is restricted or an emergency exists as determined by the SEC so that trading of the Fund’s investments or determination of its net asset value is not reasonably practicable, or (c) for any other periods that the SEC by order may permit for protection of Fund shareholders.
Redemption In-Kind
The Fund has reserved the right to redeem in-kind (that is, to pay redemption requests in cash and portfolio securities, or wholly in portfolio securities), although the Fund has no present intention to redeem in-kind. The Fund voluntarily has committed to pay in cash all requests for redemption by any shareholder, limited as to each shareholder during any 90-day period to the lesser of $250,000 or 1% of the net asset value of the Fund at the beginning of the 90-day period.
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The Fund’s Frequent Trading Policy is as follows:
Nuveen Mutual Funds are intended as long-term investments and not as short-term trading vehicles. At the same time, the Fund recognizes the need of investors to periodically make purchases and redemptions of Fund shares when rebalancing their portfolios and as their financial needs or circumstances change. Nuveen Mutual Funds have adopted the following Frequent Trading Policy that seeks to balance these needs against the potential for higher operating costs, portfolio management disruption and other inefficiencies that can be caused by excessive trading of Fund shares.
| 1. | Definition of Round Trip |
A Round Trip trade is the purchase and subsequent redemption of Fund shares, including by exchange. Each side of a Round Trip trade may be comprised of either a single transaction or a series of closely-spaced transactions.
| 2. | Round Trip Trade Limitations |
Nuveen Mutual Funds limit the frequency of Round Trip trades that may be placed in the Fund. Subject to certain exceptions noted below, the Fund limits an investor to four Round Trips per trailing 12-month period and may also restrict the trading privileges of an investor who makes a Round Trip within a 30-day period if the purchase and redemption are of substantially similar dollar amounts and represent at least 25% of the value of the investor’s account.
| 3. | Enforcement |
Trades placed in violation of the foregoing policies are subject to rejection or cancellation by Nuveen Mutual Funds. Nuveen Mutual Funds may also bar an investor (and/or the investor’s financial advisor) who has violated these policies from opening new accounts with the Fund and may restrict the investor’s existing account(s) to redemptions only. Nuveen Mutual Funds reserve the right, in their sole discretion, to (a) interpret the terms and application of these policies, (b) waive unintentional or minor violations (including transactions below certain dollar thresholds) if Nuveen Mutual Funds determine that doing so does not harm the interests of Fund shareholders, and (c) exclude certain classes of redemptions from the application of the trading restrictions set forth above.
Nuveen Mutual Funds reserve the right to impose restrictions on purchases or exchanges that are more restrictive than those stated above if they determine, in their sole discretion, that a proposed transaction or series of transactions involve market timing or excessive trading that is likely to be detrimental to the Fund. The Fund may also modify or suspend the Frequent Trading Policy without notice during periods of market stress or other unusual circumstances.
The ability of Nuveen Mutual Funds to implement the Frequent Trading Policy for omnibus accounts at certain financial intermediaries may be dependent on receiving from those intermediaries sufficient shareholder information to permit monitoring of trade activity and enforcement of the Fund’s Frequent Trading Policy. In addition, the Fund may rely on a financial intermediary’s policy to restrict market timing and excessive trading if the Fund believes that the policy is reasonably designed to prevent market timing that is detrimental to the Fund. Such policy may be more or less restrictive than the Fund’s Policy. The Fund cannot ensure that these financial intermediaries will in all cases apply the Fund’s policy or their own policies, as the case may be, to accounts under their control.
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Exclusions from the Frequent Trading Policy
As stated above, certain redemptions are eligible for exclusion from the Frequent Trading Policy, including: (i) redemptions or exchanges by shareholders investing through the fee-based platforms of certain financial intermediaries (where the intermediary charges an asset-based or comprehensive “wrap” fee for its services) that are effected by the financial intermediaries in connection with systematic portfolio rebalancing; (ii) when there is a verified trade error correction, which occurs when a dealer firm sends a trade to correct an earlier trade made in error and then the firm sends an explanation to the Nuveen Mutual Funds confirming that the trade is actually an error correction; (iii) in the event of total disability (as evidenced by a determination by the federal Social Security Administration) of the shareholder (including a registered joint owner) occurring after the purchase of the shares being redeemed; (iv) in the event of the death of the shareholder (including a registered joint owner); (v) redemptions made pursuant to a systematic withdrawal plan, up to 1% monthly, 3% quarterly, 6% semiannually or 12% annually of an account’s net asset value depending on the frequency of the plan as designated by the shareholder; (vi) redemptions of shares that were purchased through a systematic investment program; (vii) involuntary redemptions caused by operation of law; (viii) redemptions in connection with a payment of account or plan fees; (ix) redemptions or exchanges by any “fund of funds” advised by the Adviser; and (x) redemptions in connection with the exercise of the Fund’s right to redeem all shares in an account that does not maintain a certain minimum balance or that the board has determined may have material adverse consequences to the shareholders of the Fund.
In addition, the following redemptions of shares by an employer-sponsored qualified defined contribution retirement plan are excluded from the Frequent Trading Policy: (i) partial or complete redemptions in connection with a distribution without penalty under Section 72(t) of the Code from a retirement plan: (a) upon attaining age 59 1/2; (b) as part of a series of substantially equal periodic payments; or (c) upon separation from service and attaining age 55; (ii) partial or complete redemptions in connection with a qualifying loan or hardship withdrawal; (iii) complete redemptions in connection with termination of employment, plan termination, transfer to another employer’s plan or IRA or changes in a plan’s recordkeeper; and (iv) redemptions resulting from the return of an excess contribution. Also, the following redemptions of shares held in an IRA account are excluded from the application of the Frequent Trading Policy: (i) redemptions made pursuant to an IRA systematic withdrawal based on the shareholder’s life expectancy including, but not limited to, substantially equal periodic payments described in Code Section 72(t)(A)(iv) prior to age 59 1/2; and (ii) redemptions to satisfy required minimum distributions after age 70 1/2 from an IRA account.
The financial statements of NIF included in its Annual Report to shareholders for the fiscal period ended February 28, 2011 and the financial statements included in its Semi-Annual Report to shareholders for the fiscal period ended December 31, 2010 are incorporated herein by reference.
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APPENDIX A
RATING OF INVESTMENTS
Standard & Poor’s Ratings Group—A brief description of the applicable Standard & Poor’s (“S&P”) rating symbols and their meanings (as published by S&P) follows:
Issue Credit Ratings
A S&P issue credit rating is a forward looking opinion about the creditworthiness of an obligor with respect to a specific financial obligation, a specific class of financial obligations, or a specific financial program (including ratings on medium-term note programs and commercial paper programs). It takes into consideration the creditworthiness of guarantors, insurers, or other forms of credit enhancement on the obligation and takes into account the currency in which the obligation is denominated.
The opinion reflects S&P’s view of the obligor’s capacity and willingness to meet its financial commitments as they come due, and may assess terms, such as collateral security and subordination, which could affect ultimate payment in the event of default.
Issue credit ratings can be either long-term or short-term. Short-term ratings are generally assigned to those obligations considered short-term in the relevant market. In the U.S., for example, that means obligations with an original maturity of no more than 365 days-including commercial paper. Short-term ratings are also used to indicate the creditworthiness of an obligor with respect to put features on long-term obligations. The result is a dual rating, in which the short-term rating addresses the put feature, in addition to the usual long-term rating. Medium-term notes are assigned long-term ratings.
Long-Term Issue Credit Ratings
Issue credit ratings are based, in varying degrees, on the following considerations:
1. Likelihood of payment—capacity and willingness of the obligor to meet its financial commitment on an obligation in accordance with the terms of the obligation;
2. Nature of and provisions of the obligation;
3. Protection afforded by, and relative position of, the obligation in the event of bankruptcy, reorganization, or other arrangement under the laws of bankruptcy and other laws affecting creditors’ rights.
Issue rating are an assessment of default risk, but may incorporate an assessment of relative seniority or ultimate recovery in the event of default. Junior obligations are typically rated lower than senior obligations, to reflect the lower priority in bankruptcy, as noted above. (Such differentiation may apply when an entity has both senior and subordinated obligations, secured and unsecured obligations, or operating company and holding company obligations.)
| AAA | An obligation rated ‘AAA’ has the highest rating assigned by S&P. The obligor’s capacity to meet its financial commitment on the obligation is extremely strong. |
| AA | An obligation rated ‘AA’ differs from the highest rated obligations only to a small degree. The obligor’s capacity to meet its financial commitment on the obligation is very strong. |
| A | An obligation rated ‘A’ is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher-rated categories. However, the obligor’s capacity to meet its financial commitment on the obligation is still strong. |
| BBB | An obligation rated ‘BBB’ exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation. |
Obligations rated ‘BB’, ‘B’, ‘CCC’, ‘CC’ and ‘C’ are regarded as having significant speculative characteristics. ‘BB’ indicates the least degree of speculation and ‘C’ the highest. While such obligations will likely have some quality and protective characteristics, these may be outweighed by large uncertainties or major exposures to adverse conditions.
| BB | An obligation rated ‘BB’ is less vulnerable to nonpayment than other speculative issues. However, it faces major ongoing uncertainties or exposure to adverse business, financial, or economic conditions which could lead to the obligor’s inadequate capacity to meet its financial commitment on the obligation. |
| B | An obligation rated ‘B’ is more vulnerable to nonpayment than obligations rated ‘BB’, but the obligor currently has the capacity to meet its financial commitment on the obligation. Adverse business, financial, or economic conditions will likely impair the obligor’s capacity or willingness to meet its financial commitment on the obligation. |
| CCC | An obligation rated ‘CCC’ is currently vulnerable to nonpayment, and is dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation. In the event of adverse business, financial, or economic conditions, the obligor is not likely to have the capacity to meet its financial commitment on the obligation. |
| CC | An obligation rated ‘CC’ is currently highly vulnerable to nonpayment. |
| C | A ‘C’ rating is assigned to obligations that are currently highly vulnerable to nonpayment, obligations that have payment arrearages allowed by the terms of the documents, or obligations of an issuer that is the subject of a bankruptcy petition or similar action which have not experienced a payment default. Among others, the ‘C’ rating may be assigned to subordinated debt, preferred stock or other obligations on which cash payments have been suspended in accordance with the instrument’s terms or when preferred stock is the subject of a distressed exchange offer, whereby some or all of the issue is either repurchased for an amount of cash or replaced by other instruments having a total value that is less than par. |
| D | An obligation rated ‘D’ is in payment default. The ‘D’ rating category is used when payments on an obligation, including a regulatory capital instrument, are not made on the date due even if the applicable grace period has not expired, unless S&P believes that such payments will be made during such grace period. The ‘D’ rating also will be used upon the filing of a bankruptcy petition or the taking of a similar action if payments on an obligation are jeopardized. An obligation’s rating is lowered to ‘D’ upon completion of a distressed exchange offer, whereby some or all of the issue is either repurchased for an amount of cash or replaced by other instruments having a total value that is less than par. |
Plus (+) or Minus (–): The ratings from ‘AA’ to ‘CCC’ may be modified by the addition of a plus or minus sign to show relative standing within the major rating categories.
| NR | This indicates that no rating has been requested, that there is insufficient information on which to base a rating, or that S&P does not rate a particular obligation as a matter of policy. |
Municipal Short-Term Note Ratings
A Standard & Poor’s U.S. municipal note rating reflects Standard & Poor’s opinion about the liquidity factors and market access risks unique to the notes. Notes due in three years or less will likely receive a note rating. Notes with an original maturity of more than three years will most likely receive a long-term debt rating. In determining which type of rating, if any, to assign, Standard & Poor’s analysis will review the following considerations:
| • | Amortization schedule–the larger the final maturity relative to other maturities, the more likely it will be treated as a note; and |
| • | Source of payment–the more dependent the issue is on the market for its refinancing, the more likely it will be treated as a note. |
Note rating symbols are as follows:
| SP-1 | Strong capacity to pay principal and interest. An issue determined to possess a very strong capacity to pay debt service is given a plus (+) designation. |
| SP-2 | Satisfactory capacity to pay principal and interest, with some vulnerability to adverse financial and economic changes over the term of the notes. |
| SP-3 | Speculative capacity to pay principal and interest. |
Moody’s Investor Service, Inc.—A brief description of the applicable Moody’s Investor Service, Inc. (“Moodys”) rating symbols and their meanings (as published by Moodys) follows:
Long-Term Obligation Ratings
| Aaa | Obligations rated Aaa are judged to be of the highest quality, with minimal credit risk. |
| Aa | Obligations rated Aa are judged to be of high quality and are subject to very low credit risk. |
| A | Obligations rated A are considered upper-medium grade and are subject to low credit risk. |
| Baa | Obligations rated Baa are subject to moderate credit risk. They are considered medium grade and as such may possess certain speculative characteristics. |
| Ba | Obligations rated Ba are judged to have speculative elements and are subject to substantial credit risk. |
| B | Obligations rated B are considered speculative and are subject to high credit risk. |
| Caa | Obligations rated Caa are judged to be of poor standing and are subject to very high credit risk. |
| Ca | Obligations rated Ca are highly speculative and are likely in, or very near, default, with some prospect of recovery of principal and interest. |
| C | Obligations rated C are the lowest rated class and are typically in default, with little prospect for recovery of principal or interest. |
Note: Moody’s appends numerical modifiers 1, 2, and 3 to each generic rating classification from Aa through Caa. The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of that generic rating category.
Medium-Term Note Program Ratings
Moody’s assigns ratings to medium-term note (MTN) programs and to individual debt securities issued from them (referred to as drawdowns or notes). These ratings may be expressed on Moody’s general long-term or short-term rating scale, depending upon the intended tenor of the notes to be issued under the program. MTN program ratings are intended to reflect the ratings likely to be assigned to drawdowns issued from the program with the specified priority of claim (e.g. senior or subordinated). However, the rating assigned to a drawdown from a rated MTN program may differ from the program rating if the draw-down is exposed to additional credit risks besides the issuer’s default, such as links to the defaults of other issuers, or has other structural features that warrant a different rating. In some circumstances, no rating may be assigned to a drawdown.
Market participants must determine whether any particular note is rated, and if so, at what rating level. Moody’s encourages market participants to contact Moody’s Ratings Desks or visit www.moodys.com directly if they have questions regarding ratings for specific notes issued under a medium-term note program. Unrated notes issued under an MTN program may be assigned an NR (not rated) symbol.
U.S. Municipal Short-Term Debt and Demand Obligation Ratings
Short-Term Obligation Ratings
In municipal debt issuance, there are three rating categories for short-term municipal obligations that are considered investment grade. These ratings are designated as Municipal Investment Grade (MIG) and are divided into three levels—MIG 1 through MIG 3.
In addition, those short-term obligations that are of speculative quality are designated SG, or speculative grade. MIG ratings expire at the maturity of the obligation.
| MIG 1 | This designation denotes superior credit quality. Excellent protection is afforded by established cash flows, highly reliable liquidity support, or demonstrated broad-based access to the market for refinancing. |
| MIG 2 | This designation denotes strong credit quality. Margins of protection are ample, although not as large as in the preceding group. |
| MIG 3 | This designation denotes acceptable credit quality. Liquidity and cash-flow protection may be narrow, and market access for refinancing is likely to be less well-established. |
| SG | This designation denotes speculative-grade credit quality. Debt instruments in this category may lack sufficient margins of protection. |
Demand Obligation Ratings
In the case of variable rate demand obligations (VRDOs), a two-component rating is assigned; a long or short-term debt rating and a demand obligation rating. The first element represents Moody’s evaluation of the degree of risk associated with scheduled principal and interest payments. The second element represents Moody’s evaluation of the degree of risk associated with the ability to receive purchase price upon demand (“demand feature”), using a variation of the MIG rating scale, the Variable Municipal Investment Grade or VMIG rating.
When either the long- or short-term aspect of a VRDO is not rated, that piece is designated NR, e.g., Aaa/NR or NR/VMIG 1.
VMIG rating expirations are a function of each issue’s specific structural or credit features.
| VMIG 1 | This designation denotes superior credit quality. Excellent protection is afforded by the superior short-term credit strength of the liquidity provider and structural and legal protections that ensure the timely payment of purchase price upon demand. |
| VMIG 2 | This designation denotes strong credit quality. Good protection is afforded by the strong short-term credit strength of the liquidity provider and structural and legal protections that ensure the timely payment of purchase price upon demand. |
| VMIG 3 | This designation denotes acceptable credit quality. Adequate protection is afforded by the satisfactory short-term credit strength of the liquidity provider and structural and legal protections that ensure the timely payment of purchase price upon demand. |
| SG | This designation denotes speculative-grade credit quality. Demand features rated in this category may be supported by a liquidity provider that does not have an investment grade short-term rating or may lack the structural and/or legal protections necessary to ensure the timely payment of purchase price upon demand. |
Fitch Ratings—A brief description of the applicable Fitch Ratings (“Fitch”) ratings symbols and meanings (as published by Fitch) follows:
Structured, Project & Public Finance Obligations–Long-Term Rating Scales
Ratings of structured finance, project finance and public finance obligations on the long-term scale, including the financial obligations of sovereigns, consider the obligations’ relative vulnerability to default. These ratings are typically assigned to an individual security or tranche in a transaction and not to an issuer.
| AAA | Highest credit quality. ‘AAA’ ratings denote the lowest expectation of default risk. They are assigned only in cases of exceptionally strong capacity for payment of financial commitments. This capacity is highly unlikely to be adversely affected by foreseeable events. |
| AA | Very high credit quality. ‘AA’ ratings denote expectations of very low default risk. They indicate very strong capacity for payment of financial commitments. This capacity is not significantly vulnerable to foreseeable events. |
| A | High credit quality. ‘A’ ratings denote expectations of low default risk. The capacity for payment of financial commitments is considered strong. This capacity may, nevertheless, be more vulnerable to adverse business or economic conditions than is the case for higher ratings. |
| BBB | Good credit quality. ‘BBB’ ratings indicate that expectations of default risk are currently low. The capacity for payment of financial commitments is considered adequate but adverse business or economic conditions are more likely to impair this capacity. |
| BB | Speculative. ‘BB’ ratings indicate an elevated vulnerability to default risk, particularly in the event of adverse changes in business or economic conditions over time. |
| B | Highly speculative. ‘B’ ratings indicate that material default risk is present, but a limited margin of safety remains. Financial commitments are currently being met; however, capacity for continued payment is vulnerable to deterioration in the business and economic environment. |
| CCC | Substantial credit risk. Default is a real possibility. |
| CC | Very high levels of credit risk. Default of some kind appears probable. |
| C | Exceptionally high levels of credit risk. Default appears imminent or inevitable. |
| D | Default. Indicates a default. Default generally is defined as one of the following: |
| • | failure to make payment of principal and/or interest under the contractual terms of the rated obligation; |
| • | the bankruptcy filings, administration, receivership, liquidation or other winding-up or cessation of the business of an issuer/obligor; or |
| • | the coercive exchange of an obligation, where creditors were offered securities with diminished structural or |
| • | economic terms compared with the existing obligation. |
Notes: In the case of structured and project finance, while the ratings do not address the loss severity given default of the rated liability, loss severity assumptions on the underlying assets are nonetheless typically included as part of the analysis. Loss severity assumptions are used to derive pool cash flows available to service the rated liability.
The suffix “sf’’ denotes an issue that is a structured finance transaction. For an explanation of how Fitch determines structured finance ratings, please see our criteria available at www.Fitchratings.com.
In the case of public finance, the ratings do not address the loss given default of the rated liability, focusing instead on the vulnerability to default of the rated liability.
The modifiers “+” or “-” may be appended to a rating to denote relative status within major rating categories. Such suffixes are not added to the ‘AAA’ Long-Term Rating category, or categories below ‘B’.
Limitations of the Structured, Project and Public Finance Obligation Rating Scale
Specific limitations relevant to the structured, project and public finance obligation rating scale include:
| • | The ratings do not predict a specific percentage of default likelihood over any given time period. |
| • | The ratings do not opine on the market value of any issuer’s securities or stock, or the likelihood that this value may change. |
| • | The ratings do not opine on the liquidity of the issuer’s securities or stock. |
| • | The ratings do not opine on the possible loss severity on an obligation should an obligation default. |
| • | The ratings do not opine on any quality related to a transaction’s profile other than the agency’s opinion on the relative vulnerability to default of each rated tranche or security. |
Short-Term Ratings Assigned to Issuers or Obligations in Corporate, Public and Structured Finance
A short-term issuer or obligation rating is based in all cases on the short-term vulnerability to default of the rated entity or security stream and relates to the capacity to meet financial obligations in accordance with the documentation governing the relevant obligation. Short-Term Ratings are assigned to obligations whose initial
maturity is viewed as “short term” based on market convention. Typically, this means up to 13 months for corporate, sovereign, and structured obligations, and up to 36 months for obligations in U.S. public finance markets.
| F1 | Highest short-term credit quality. Indicates the strongest intrinsic capacity for timely payment of financial commitments; may have an added “+” to denote any exceptionally strong credit feature. |
| F2 | Good short-term credit quality. Good intrinsic capacity for timely payment of financial commitments. |
| F3 | Fair short-term credit quality. The intrinsic capacity for timely payment of financial commitments is adequate. |
| B | Speculative short-term credit quality. Minimal capacity for timely payment of financial commitments, plus heightened vulnerability to near term adverse changes in financial and economic conditions. |
| C | High short-term default risk. Default is a real possibility. |
| RD | Restricted default. Indicates an entity that has defaulted on one or more of its financial commitments, although it continues to meet other financial obligations. Applicable to entity ratings only. |
| D | Default. Indicates a broad-based default event for an entity, or the default of a short-term obligation. |
Limitations of the Short-Term Ratings Scale
Specific limitations relevant to the Short-Term Ratings scale include:
| • | The ratings do not predict a specific percentage of default likelihood over any given time period. |
| • | The ratings do not opine on the market value of any issuer’s securities or stock, or the likelihood that this value may change. |
| • | The ratings do not opine on the liquidity of the issuer’s securities or stock. |
| • | The ratings do not opine on the possible loss severity on an obligation should an obligation default. |
| • | The ratings do not opine on any quality related to an issuer or transaction’s profile other than the agency’s opinion on the relative vulnerability to default of the rated issuer or obligation. |
Ratings assigned by Fitch Ratings articulate an opinion on discrete and specific areas of risk. The above list is not exhaustive, and is provided for the reader’s convenience.
MAI-FCA-0611D
1
Mutual Funds
Nuveen Municipal Bond Funds
Dependable, tax-free income because it’s not what you earn, it’s what you keep.®
Annual Report
February 28, 2011
| Share Class / Ticker Symbol | ||||||||
| Fund Name | Class A | Class B | Class C | Class I | ||||
Nuveen California High Yield Municipal Bond Fund | NCHAX | — | NCHCX | NCHRX | ||||
Nuveen California Municipal Bond Fund | NCAAX | NCBBX | NCACX | NCSPX | ||||
Nuveen California Insured Municipal Bond Fund | NCAIX | NCABX | NCAKX | NCIBX | ||||
INVESTMENT ADVISER NAME CHANGE
Effective January 1, 2011, Nuveen Asset Management, the Funds’ investment adviser, changed its name to Nuveen Fund Advisors, Inc. (“Nuveen Fund Advisors”). Concurrently, Nuveen Fund Advisors formed a wholly-owned subsidiary, Nuveen Asset Management, LLC, to house its portfolio management capabilities.
NUVEEN INVESTMENTS COMPLETES STRATEGIC COMBINATION WITH FAF ADVISORS
On December 31, 2010, Nuveen Investments completed the strategic combination between Nuveen Asset Management, LLC, the largest investment affiliate of Nuveen Investments, and FAF Advisors. As part of this transaction, U.S. Bancorp – the parent of FAF Advisors – received cash consideration and a 9.5% stake in Nuveen Investments in exchange for the long term investment business of FAF Advisors, including investment-management responsibilities for the non-money market mutual funds of the First American Funds family.
The approximately $27 billion of mutual fund and institutional assets managed by FAF Advisors, along with the investment professionals managing these assets and other key personnel, have become part of Nuveen Asset Management, LLC. With these additions to Nuveen Asset Management, LLC, this affiliate now manages more than $100 billion of assets across a broad range of strategies from municipal and taxable fixed income to traditional and specialized equity investments.
This combination does not affect the investment objectives or strategies of the Funds in this report. Over time, Nuveen Investments expects that the combination will provide even more ways to meet the needs of investors who work with financial advisors and consultants by enhancing the multi-boutique model of Nuveen Investments, which also includes highly respected investment teams at HydePark, NWQ Investment Management, Santa Barbara Asset Management, Symphony Asset Management, Tradewinds Global Investors and Winslow Capital. Nuveen Investments managed approximately $197 billion of assets as of December 31, 2010.
| Must be preceded by or accompanied by a prospectus. | NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE |
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Letter to Shareholders
Dear Shareholders,
In 2010, the global economy recorded another year of recovery from the financial and economic crises of 2008, but many of the factors that caused the downturn still weigh on the prospects for continued improvement. In the U.S., ongoing weakness in housing values has put pressure on homeowners and mortgage lenders. Similarly, the strong earnings recovery for corporations and banks is only slowly being translated into increased hiring or more active lending. Globally, deleveraging by private and public borrowers has inhibited economic growth and that process is far from complete.
Encouragingly, constructive actions are being taken by governments around the world to deal with economic issues. In the U.S., the recent passage of a stimulatory tax bill relieved some of the pressure on the Federal Reserve to promote economic expansion through quantitative easing and offers the promise of sustained economic growth. A number of European governments are undertaking programs that could significantly reduce their budget deficits. Governments across the emerging markets are implementing various steps to deal with global capital flows without undermining international trade and investment.
The success of these government actions could determine on whether 2011 brings further economic recovery and financial market progress. One risk associated with the extraordinary efforts to strengthen U.S. economic growth is that the debt of the U.S. government will continue to grow to unprecedented levels. Another risk is that over time there could be inflationary pressures on asset values in the U.S. and abroad, because what happens in the U.S. impacts the rest of the world economy. Also, these various actions are being taken in a setting of heightened global economic uncertainty, primarily about the supplies of energy and other critical commodities. In this challenging environment, your Nuveen investment team continues to seek sustainable investment opportunities and to remain alert to potential risks in a recovery still facing many headwinds. On your behalf, we monitor their activities to assure they maintain their investment disciplines.
As you will note elsewhere in this report, on December 31, 2010, Nuveen Investments completed a strategic combination with FAF Advisors, Inc., the manager of the First American Funds. The combination adds highly respected and distinct investment teams to meet the needs of investors and their advisors and is designed to benefit all fund shareholders by creating a fund organization with the potential for further economies of scale and the ability to draw from even greater talent and expertise to meet those investor needs.
As always, I encourage you to contact your financial consultant if you have any questions about your investment in a Nuveen Fund. On behalf of the other members of your Fund Board, we look forward to continuing to earn your trust in the months and years ahead.
Sincerely,
Robert P. Bremner
Chairman of the Board
April 26, 2011
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Certain statements in this report are forward-looking statements. Discussions of specific investments are for illustration only and are not intended as recommendations of individual investments. The forward-looking statements and other views expressed herein are those of the portfolio managers as of the date of this report. Actual future results or occurrences may differ significantly from those anticipated in any forward-looking statements, and the views expressed herein are subject to change at any time, due to numerous market and other factors. The Funds disclaim any obligation to update publicly or revise any forward-looking statements or views expressed herein.
Any reference to credit ratings for portfolio holdings denotes the highest rating assigned by a Nationally Recognized Statistical Rating Organization (NRSRO) such as Standard & Poor’s (S&P), Moody’s, or Fitch. AAA, AA, A and BBB ratings are investment grade; BB, B, CCC, CC, C and D ratings are below investment grade. Holdings and ratings may change over time.
Portfolio managers John Miller and Scott Romans examine economic and municipal market conditions at both the national and state levels, key investment strategies and the Funds’ performance during the twelve months ending February 28, 2011. John Miller, who has 18 years of investment experience, has managed the Nuveen California High Yield Municipal Bond Fund since its inception in 2006, while Scott Romans, who has 11 years of investment experience, has managed the Nuveen California Municipal Bond Fund since 2003 and the Nuveen California Insured Municipal Bond Fund since 2005.
What factors affected the U.S. economy, the national municipal bond market and the California municipal bond market during the twelve-month reporting period ending February 28, 2011?
During this period, the U.S. economy demonstrated some signs of improvement, supported by the efforts of both the Federal Reserve (Fed) and the federal government. For its part, the Fed continued to hold the benchmark fed funds rate in a target range of zero to 0.25% since cutting it to this record low level in December 2008. At its March 2011 meeting (after the end of this reporting period), the central bank renewed its commitment to keeping the fed funds rate at “exceptionally low levels” for an “extended period.” The Fed also left unchanged its second round of quantitative easing, which calls for purchasing $600 billion in U.S. Treasury bonds by June 30, 2011. The goal of this plan is to lower long-term interest rates and thereby stimulate economic activity and create jobs. The federal government continued to focus on implementing the economic stimulus package passed in early 2009 and aimed at providing job creation, tax relief, fiscal assistance to state and local governments and expansion of unemployment benefits and other federal social welfare programs.
In the fourth quarter of 2010, the U.S. economy, as measured by the U.S. gross domestic product (GDP), grew at an annualized rate of 3.1%, marking the first time the economy put together six consecutive quarters of positive growth since 2006-2007. In February 2011, national unemployment dropped below 9% for the first time in 21 months, standing at 8.9%, down from 9.7% a year earlier. At the same time, inflation posted its largest gain since April 2009, as the Consumer Price Index (CPI) rose 2.1% year-over-year as of February 2011, driven mainly by increased prices for energy, particularly fuel oil and gasoline and food. The core CPI (which excludes food and energy) increased 1.1% over this period. The housing market continued to be the weak spot in the economy. For the twelve months ended January 2011 (most recent data available at the time this report was produced), the average home price in the Standard & Poor’s (S&P)/Case-Shiller index of 20 major metropolitan areas lost 3.1%, with 11 of the 20 metropolitan areas hitting their lowest levels since housing prices peaked in 2006.
| Nuveen Investments | 5 |
Municipal bond prices generally rose during the first eight months of this period, as the combination of strong demand and tight supply of new tax-exempt issuance created favorable market conditions. One reason for the decrease in new tax-exempt supply was the heavy issuance of taxable municipal debt under the Build America Bond (BAB) program, which was created as part of the American Recovery and Reinvestment Act of February 2009 and which expired December 31, 2010. Build America Bonds offered municipal issuers a federal subsidy equal to 35% of a bond’s interest payments, providing issuers with an alternative to traditional tax-exempt debt that often was lower in cost. For the period March 1, 2010, through December 31, 2010, taxable Build America Bonds issuance totaled $117.3 billion, accounting for 24% of new bonds issued in the municipal market. In mid-November 2010, after rallying strongly over most of the period, the municipal market suffered a reversal, due largely to investor concerns about inflation, the federal deficit, and the impact on demand for U.S. Treasuries. Adding to this situation was the popular media’s coverage of the strained finances of many state and local governments, which failed to differentiate between gaps in operating budgets and those entities’ ability to pay their municipal debt. As a result, money began to flow out of high-yield funds, yields rose and valuations fell. Toward the end of this period, we saw the environment in the municipal market improve, as crossover buyers — including hedge funds and life insurance companies — were attracted by municipal bond prices and tax-exempt yields, resulting in decreased outflows, declining yields and rising valuations.
Over the twelve months ended February 28, 2011, municipal bond issuance nationwide — both tax-exempt and taxable — totaled $423.4 billion. Demand for municipal bonds was exceptionally strong during the majority of this period, especially from individual investors. In recent months, crossover buyers have provided support for the market.
California’s economy is the largest in the United States and the eighth largest in the world on a stand-alone basis, according to the International Monetary Fund. The state continued to be burdened by serious budget problems, with persistent deficits and high spending outweighing its ability to generate revenues. That said, the state’s revenue picture has begun to improve modestly. As of October 2010, California’s General Fund revenues were above estimated levels by close to 1%, with the improvement driven by three main sources — higher corporate-tax, personal-income-tax and sales-tax collections. In October 2010 alone, tax receipts surpassed budget estimates by almost 5%. Toward year-end, after a long political stalemate, the state’s government finally enacted a $125 billion budget for the 2011 fiscal year, closing a gap of more than $19 billion. This budget includes no new taxes, a variety of spending reductions, and the use of various one-time receipts, loans, and other solutions to rectify the budget shortfall. The state’s unemployment rate was 12.2% in February 2011 — second-highest in the nation and well above the national average of 8.9% for the same month. At the end of the reporting period, California maintained credit ratings of A1, A- and A- from rating agencies Moody’s Investor Services, Standard & Poor’s (S&P) and Fitch, respectively. The supply of new tax-exempt bond issuance in California totaled more than $58 billion during the twelve-month period ending February 28, 2010, a 21% year-over-year drop, compared to roughly flat issuance levels nationwide during the same time frame.
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How did the Funds perform?
The tables in the Fund Performance section of this report provide total return performance information for the one-, five- and ten-year periods ending February 28, 2011. Each Fund’s Class A Share total returns are compared with the performance of the California specific and national Standard & Poor’s (S&P) indexes and the corresponding Lipper peer fund average. All three Funds underperformed both S&P indexes, while the Nuveen California High Yield Municipal Bond Fund and the Nuveen California Insured Municipal Bond Fund also lagged their respective Lipper peer fund averages. The Nuveen California Municipal Bond Fund outpaced the Lipper California Municipal Debt Funds Average.
Nuveen California High Yield Municipal Bond Fund
The Fund’s Class A Shares at net asset value (NAV) lagged the national high yield municipal bond market. The Fund did relatively well during the market’s upswing in the first eight months of the reporting period. Performance suffered, however, from the challenging environment for high yield tax-exempt bonds during the last four months of the reporting period. We believe the difficult conditions resulted from an unfavorable balance between the supply and demand of bonds. Weak investor sentiment stemming from negative news about state and local issuers of tax-exempt debt also played a prominent role — though we ultimately believe this news will prove to have been overstated.
A longer-than-average duration was the primary factor hampering performance. The Fund’s relatively longer duration meant it was more sensitive to changes in interest rates, and this caused the portfolio to struggle when long-term rates rose toward period end. In addition, as investors became more risk-averse in the period’s final months, the market saw a significant sell-off and the substantial underperformance of tax-exempt securities, especially lower-rated bonds — a category to which the Fund has significant exposure.
On the positive side, we did experience favorable results from a number of individual positions. For the most part, the Fund’s best-performing holdings were securities that did not necessarily see significant price appreciation, but managed to retain their value during the market’s sell-off. For example, we benefited from a position in California appropriation bonds for the state’s public works program. We owned bonds paying a 5.75% coupon rate and maturing in 2030. Because these securities offered a better-than-average yield for their quality, were relatively liquid and provided long-intermediate maturities, they were able to hold their value well, particularly as the state continued to see a recovery in its financial position.
Certain California redevelopment district bonds actually saw price appreciation amidst the difficult conditions. These included special taxing district bonds for the City of Fiddyment Ranch and Azusa redevelopment district bonds. Both of these issues were for community development districts that continued to stabilize their financial positions and, having survived the downturn in the real estate market, appeared to have improving prospects going forward.
We also had good results in the health care sector on a selective basis. This sector didn’t perform well overall because of heavy issuance — which served to depress prices — and
| Nuveen Investments | 7 |
perceived unfavorable legislation affecting the industry. However, the Fund’s position in Loma Linda University Medical Center revenue bonds managed to retain its price, and the bonds’ yield in excess of 8.25% enabled them to provide a solid total return in a difficult municipal market. Another modest contributor to positive comparative performance was the Fund’s limited allocation to tobacco securitization bonds compared with the national high yield market. These issues did not perform well, and having less exposure to them helped relative performance.
Nuveen California Municipal Bond Fund
The Fund’s Class A Shares at net asset value (NAV) lagged the S&P California Municipal Bond Index during the period ending February 28, 2011, with sector allocation being the primary detractor from comparative results.
In particular, we were underweighted in California general obligation (GO) bonds, which performed extremely well compared with the overall California tax-exempt market, outperforming by almost 370 basis points (3.70%). These types of securities had struggled in previous years, but toward the end of 2010 they benefited from a variety of factors — for example, they offered higher interest rates and provided good liquidity to investors during a time of anxiety about the municipal market performance. GO bonds make up almost one quarter of the California municipal market and while we had sizeable exposure to this strong-performing sector, we did not match the level of investment as found in the benchmark.
Several other factors also influenced results. For example, the portfolio maintained a slight overweighting in local GO bonds — mostly involving primary and secondary school districts and community college districts. Unlike state-level GO bonds, local GOs generally underperformed the market, and being overweighted hampered comparative performance. Another disappointment was our investment in “other revenue” bonds, a broad category that includes redevelopment district securities. As part of a budget package, Governor Jerry Brown proposed eliminating redevelopment districts in the state, which caused spreads on these issues to widen significantly. As such, the Fund’s overweighting in this sector hurt results.
On the positive side, an overweighting in corporate-backed municipal bonds was helpful. The reasons for the outperformance were primarily technical — investors noted a mismatch between the valuations of tax-exempt bonds backed by corporate issuers and similar corporate-backed securities in the taxable market, so they took advantage of an opportunity to capture better values on the tax-exempt side.
Credit-quality and duration positioning were modestly negative factors for performance. An overweighting in BBB bonds relative to the S&P California Municipal Bond Index ultimately hurt returns when prices fell sharply on these lower investment-grade rated issues. However, the Fund benefited from its exposure to non-rated bonds, many of which offered higher underlying credit quality and did not experience the same degree of selling pressure as BBB-rated issues. Meanwhile, the Fund’s duration was slightly longer than its benchmark, which hampered performance when long-term interest rates rose late in the period.
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Nuveen California Insured Municipal Bond Fund
The Fund’s Class A Shares at net asset value (NAV) lagged the S&P Insured National Municipal Bond Index during the twelve-month reporting period. Much of the Fund’s underperformance can be attributed to sector positioning, with our holdings in tax-supported bonds especially hampering comparative results. Specifically, we owned a smaller relative weighting in outperforming California GO debt. However, the Fund saw a positive impact from dedicated sales tax bonds, which partially offset the GO-related underperformance. Also on a sector basis, the Fund’s overweighting in “other revenue” bonds, consisting largely of redevelopment district bonds, was unfavorable in relative terms because of the underperformance of these securities.
On balance, the Fund’s credit-quality allocation hampered performance to a modest degree. Although the portfolio consists predominantly of insured bonds, it does also include an allocation to bonds with lower investment-grade credit ratings. As such, the Fund’s overweighting in BBB-rated debt held back results, as risk-averse investors looked increasingly toward higher-quality opportunities in a challenging market. However, the Fund’s overweighting in A-rated bonds, which did well during the period, counterbalanced some of the negative effect of the BBB-rated securities.
The Fund benefited slightly from its yield curve positioning. We had a particular concentration in bonds with about four to ten years of duration. As this was the best-performing segment of the yield curve, this positioning compensated for the portfolio’s relatively longer duration overall.
What strategies were used to manage the Funds during the twelve-month period?
Nuveen California High Yield Municipal Bond Fund
Investors engaged in significant selling of high yield tax-exempt bonds during the market’s late-2010 and early-2011 downturn. Fortunately, this Fund did not experience significant outflows. As a result, we were active buyers during a time of tremendous market volatility and negative performance — two trends we believed were shaped by unjustified investor pessimism and would likely prove temporary. Against this backdrop, we identified multiple securities we thought were priced too low relative to their long-term value, and continued to follow our usual bottom-up bond selection strategy. In other words, we chose investments one at a time based on diligent credit research and risk-adjusted reward potential.
For instance, we found what we believed was very good value among redevelopment district bonds. Redevelopment bonds have recently come under a fair amount of scrutiny. The state’s new governor, Jerry Brown, has proposed that these districts be abolished because of their adverse effect on the state’s budget. In response, many issuers rushed to market with new bonds, leading to a substantial increase in supply that pushed down prices — even on securities we believed were sound and offered excellent investment potential. As one example, we added March Air Force Base redevelopment district bonds, which were rated BBB+ by S&P and offered a generous yield.
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In other sectors, the market’s recent turmoil provided an opportunity to take advantage of unusually low prices for securities our analysts have long followed. For example, we established a new position in California Drew School bonds. We believed these private-school bonds were financially solid and also selling at a fairly significant discount to our assessment of their fair value.
At the same time, given the market’s tremendous volatility, we felt it was prudent to increase the portfolio’s allocation to relatively liquid bonds. We believed this would better enable us to sell positions quickly in case of further market disruptions. We bought some higher-quality issues, and we also invested in relatively widely known bonds, which tend to be more marketable to a wide range of buyers.
During the period, we also entered into forward interest rate swap transactions to broadly reduce the sensitivity of the Fund to movements in the U.S. interest rates.
Nuveen California Municipal Bond Fund
Because the timing of municipal bond issuance was very uneven, our purchases for the portfolio were primarily opportunistic in nature. Given the state of the municipal bond market during the period, it wasn’t possible to accomplish broad structural goals such as shifting the portfolio’s duration, sector or credit-quality characteristics to desired levels. In fact, the majority of our trading activity took place in the past few months, when we found significant opportunities to add new bonds at what we believed were attractive prices.
Early on, we added to our position in California GO debt, thereby reducing the Fund’s substantial underweighting in this category. At the time, these bonds were offering generous credit spreads due to a glut of issuance by the state. As the period progressed and the supply was absorbed by the market, these bonds became more attractive to investors, causing the spreads to gradually tighten and helping the Fund’s results.
Another management theme was to invest in health care bonds of various credit quality. Because health care bond issuers were among the few to be ineligible to participate in the Build America Bond program, this sector enjoyed plentiful supply and relatively low prices. We invested in both GO and revenue bonds issued by individual health care providers and health care districts.
We also took advantage of selected opportunities among redevelopment district bonds, adding a handful of positions paying generous yields and offering good total return potential. As mentioned earlier, toward period end there were questions about whether redevelopment districts would continue to exist in California. As a result, many of these districts quickly issued bonds, creating significant supply that lowered prices in the sector.
Our selling activity was relatively limited, although in some cases we saw good opportunities to exchange the portfolio’s existing bonds with lower coupons and shorter call dates with newer issues paying higher interest rates and offering longer call dates. We felt bonds with larger coupons and better call protection would perform more favorably, regardless of the direction of the municipal bond market.
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Nuveen California Insured Municipal Bond Fund
Trading activity was quite limited in this Fund because of extremely low issuance of California insured municipal bonds, coupled with investment outflows during the period. As a result, we made only three new purchases for this portfolio. All three of these additions made use of the Fund’s ability to invest in uninsured securities. Two of the new bond issues were higher-rated credits, while the third was lower rated.
All three of the purchases took place within the health care sector and consisted of individual hospital or GO hospital district bonds. With these purchases, we sought to replace existing health care bonds with new ones offering better yields and improved call protection. To fund these purchases, we generally used the proceeds from called bonds, and to a lesser extent we sold certain high-quality, intermediate-maturity issues and very short dated pre-refunded debt.
Recent Changes to the Investment Policies of Nuveen Insured Funds
Effective as of the close of business on April 27, 2011, the Nuveen California Insured Municipal Bond Fund will close to new investors. Investors in the Fund as of that date may continue to invest in the Fund, including through the reinvestment of dividends and capital gains distributions.
In addition, effective May 31, 2011:
| • | The Fund will no longer be required to invest at least 80% of its net assets in municipal securities that are covered by insurance guaranteeing the timely payment of principal and interest thereon. The Fund will continue to be subject to the requirement that it invest at least 80% of its net assets in municipal bonds that pay interest that is exempt from regular federal and California personal income tax. |
| • | The Fund’s name will be changed to Nuveen California Municipal Bond Fund 2. |
Risk Considerations
Mutual fund investing involves risk; principal loss is possible. Debt or fixed income securities are subject to credit risk and interest rate risk. Market interest rate changes will cause the value of debt securities (and the value of shares of funds that invest in them) to fluctuate and may also impact income over time. Credit risk refers to an issuer’s ability to make interest and principal payments when due. High yield or lower rated bonds carry heightened credit risk and potential for default.
Dividend Information
During the reporting period, all share classes of the Nuveen California High Yield Municipal Bond Fund and Class A, Class B and Class C Shares of the Nuveen California Insured Municipal Bond Fund experienced a dividend increase in February 2011, while the Class I Shares of the Nuveen California Insured Municipal Bond Fund saw a dividend increase in August 2010 and again in February 2011. The Class B Shares of the Nuveen California Municipal Bond Fund experienced a dividend decrease in November 2010 and increase in February 2011, there were no other dividend changes to any of the Fund’s share classes during the twelve-month period ending February 28, 2011.
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Each Fund seeks to pay dividends at a rate that reflects the past and projected performance of the Fund. To permit a Fund to maintain a more stable monthly dividend, the Fund may pay dividends at a rate that may be more or less than the amount of net investment income actually earned by the Fund during the period. If the Fund has cumulatively earned more than it has paid in dividends, it will hold the excess in reserve as undistributed net investment income (UNII) as part of the Fund’s net asset value. Conversely, if the Fund has cumulatively paid in dividends more than it has earned, the excess will constitute a negative UNII that will likewise be reflected in the Fund’s net asset value. Each Fund will, over time, pay all its net investment income as dividends to shareholders. As of February 28, 2011, all three Funds had positive UNII balances for both tax purposes and financial reporting purposes.
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Returns quoted represent past performance, which is no guarantee of future results. Current performance may be higher or lower than the performance shown. Investment returns and principal value will fluctuate so that when shares are redeemed, they may be worth more or less than their original cost. Returns without sales charges would be lower if the sales charge were included. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
Returns may reflect a contractual agreement between certain Funds and the investment adviser to waive certain fees and expenses; see Notes to Financial Statements, Footnote 7 — Management Fees and Other Transactions with Affiliates for more information. In addition, returns may reflect a voluntary expense limitation by the Funds’ investment adviser that may be modified or discontinued at any time without notice. For the most recent month-end performance visit www.nuveen.com or call (800) 257-8787.
Returns reflect differences in sales charges and expenses, which are primarily differences in distribution and service fees. Fund returns assume reinvestment of dividends and capital gains.
Comparative index and benchmark return information is provided for the Funds’ Class A Shares at net asset value (NAV) only.
Nuveen California High Yield Municipal Bond Fund
| Average Annual Total Returns as of February 28, 2011 |
| Average Annual | ||||||||||
| 1-Year | 5-Year | 10-Year | Since Inception* | |||||||
Class A Shares at NAV | -0.56% | N/A | N/A | -0.69 | % | |||||
Class A Shares at Offer | -4.79% | N/A | N/A | -1.56 | % | |||||
Standard & Poor’s (S&P) California Municipal Bond Index** | 2.08% | N/A | N/A | 3.58 | % | |||||
Standard & Poor’s (S&P) High Yield Municipal Bond Index** | 3.60% | N/A | N/A | 1.68 | % | |||||
Lipper California Municipal Debt Funds Average** | 0.17% | N/A | N/A | 2.17 | % | |||||
Class C Shares | -1.07% | N/A | N/A | -1.24 | % | |||||
Class I Shares | -0.34% | N/A | N/A | -0.52 | % | |||||
| Latest Calendar Quarter – Average Annual Total Returns as of March 31, 2011 | ||||||||||||
| Average Annual | ||||||||||||
| 1-Year | 5-Year | Since Inception* | ||||||||||
Class A Shares at NAV | -2.23% | -0.87% | -0.87% | |||||||||
Class A Shares at Offer | -6.39% | -1.72% | -1.71% | |||||||||
Class C Shares | -2.74% | -1.41% | -1.41% | |||||||||
Class I Shares | -2.14% | -0.70% | -0.69% | |||||||||
Class A Shares have a maximum 4.20% sales charge. Class A Share purchases of $1 million or more are sold at net asset value without an up-front sales charge but may be subject to a contingent deferred sales charge (CDSC), also known as a back-end sales charge, if redeemed within twelve months of purchase. Class B Shares have a CDSC that begins at 5% for redemptions during the first year and declines periodically until after six years when the charge becomes 0%. Class B Shares automatically convert to Class A Shares eight years after purchase. Class C Shares have a 1% CDSC for redemptions within less than one year, which is not reflected in the one-year total return. Class I Shares have no sales charge and may be purchased under limited circumstances or by specified classes of investors.
| Growth of an Assumed $10,000 Investment as of February 28, 2011 – Class A Shares |
The graphs do not reflect the deduction of taxes, such as state and local income taxes or capital gains taxes that a shareholder may pay on Fund distributions or the redemption of Fund shares.
| * | Since inception returns are from 3/28/2006. |
| ** | Refer to the Glossary of Terms Used in this Report for definitions. |
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Fund Performance (Unaudited) (continued)
Nuveen California Municipal Bond Fund
| Average Annual Total Returns as of February 28, 2011 | ||||||||||||
| Average Annual | ||||||||||||
| 1-Year | 5-Year | 10-Year | ||||||||||
Class A Shares at NAV | 1.05% | 2.50% | 3.72% | |||||||||
Class A Shares at Offer | -3.20% | 1.61% | 3.28% | |||||||||
Standard & Poor’s (S&P) California Municipal Bond Index* | 2.08% | 3.39% | 4.57% | |||||||||
Standard & Poor’s (S&P) National Municipal Bond Index* | 1.63% | 3.74% | 4.75% | |||||||||
Lipper California Municipal Debt Funds Average* | 0.17% | 2.12% | 3.49% | |||||||||
Class B Shares w/o CDSC | 0.19% | 1.74% | 3.11% | |||||||||
Class B Shares w/CDSC | -3.66% | 1.57% | 3.11% | |||||||||
Class C Shares | 0.39% | 1.93% | 3.15% | |||||||||
Class I Shares | 1.23% | 2.70% | 3.94% | |||||||||
| Latest Calendar Quarter – Average Annual Total Returns as of March 31, 2011 | ||||||||||||
| Average Annual | ||||||||||||
| 1-Year | 5-Year | 10-Year | ||||||||||
Class A Shares at NAV | 0.10% | 2.51% | 3.78% | |||||||||
Class A Shares at Offer | -4.11% | 1.64% | 3.33% | |||||||||
Class B Shares w/o CDSC | -0.65% | 1.75% | 3.16% | |||||||||
Class B Shares w/CDSC | -4.47% | 1.58% | 3.16% | |||||||||
Class C Shares | -0.45% | 1.94% | 3.21% | |||||||||
Class I Shares | 0.39% | 2.73% | 3.99% | |||||||||
Class A Shares have a maximum 4.20% sales charge. Class A Share purchases of $1 million or more are sold at net asset value without an up-front sales charge but may be subject to a contingent deferred sales charge (CDSC), also known as a back-end sales charge, if redeemed within twelve months of purchase. Class B Shares have a CDSC that begins at 5% for redemptions during the first year and declines periodically until after six years when the charge becomes 0%. Class B Shares automatically convert to Class A Shares eight years after purchase. Class C Shares have a 1% CDSC for redemptions within less than one year, which is not reflected in the one-year total return. Class I Shares have no sales charge and may be purchased under limited circumstances or by specified classes of investors.
Growth of an Assumed $10,000 Investment as of February 28, 2011 – Class A Shares
|
The graphs do not reflect the deduction of taxes, such as state and local income taxes or capital gains taxes that a shareholder may pay on Fund distributions or the redemption of Fund shares.
| * | Refer to the Glossary of Terms Used in this Report for definitions. |
| 14 | Nuveen Investments |
Nuveen California Insured Municipal Bond Fund
| Average Annual Total Returns as of February 28, 2011 | ||||||||||||
| Average Annual | ||||||||||||
| 1-Year | 5-Year | 10-Year | ||||||||||
Class A Shares at NAV | -0.96% | 1.69% | 3.28% | |||||||||
Class A Shares at Offer | -5.14% | 0.81% | 2.83% | |||||||||
Standard & Poor’s (S&P) California Municipal Bond Index* | 2.08% | 3.39% | 4.57% | |||||||||
Standard & Poor’s (S&P) Insured National Municipal Bond Index* | 1.24% | 3.60% | 4.75% | |||||||||
Lipper Single-States Insured Municipal Debt Funds Average* | 0.26% | 2.78% | 3.61% | |||||||||
Class B Shares w/o CDSC | -1.77% | 0.91% | 2.66% | |||||||||
Class B Shares w/CDSC | -5.57% | 0.74% | 2.66% | |||||||||
Class C Shares | -1.60% | 1.12% | 2.71% | |||||||||
Class I Shares | -0.75% | 1.91% | 3.49% | |||||||||
| Latest Calendar Quarter – Average Annual Total Returns as of March 31, 2011 | ||||||||||||
| Average Annual | ||||||||||||
| 1-Year | 5-Year | 10-Year | ||||||||||
Class A Shares at NAV | -2.10% | 1.60% | 3.07% | |||||||||
Class A Shares at Offer | -6.24% | 0.73% | 2.62% | |||||||||
Class B Shares w/o CDSC | -2.70% | 0.85% | 2.44% | |||||||||
Class B Shares w/CDSC | -6.46% | 0.68% | 2.44% | |||||||||
Class C Shares | -2.54% | 1.06% | 2.50% | |||||||||
Class I Shares | -1.79% | 1.80% | 3.27% | |||||||||
Class A Shares have a maximum 4.20% sales charge. Class A Share purchases of $1 million or more are sold at net asset value without an up-front sales charge but may be subject to a contingent deferred sales charge (CDSC), also known as a back-end sales charge, if redeemed within twelve months of purchase. Class B Shares have a CDSC that begins at 5% for redemptions during the first year and declines periodically until after six years when the charge becomes 0%. Class B Shares automatically convert to Class A Shares eight years after purchase. Class C Shares have a 1% CDSC for redemptions within less than one year, which is not reflected in the one-year total return. Class I Shares have no sales charge and may be purchased under limited circumstances or by specified classes of investors.
| Growth of an Assumed $10,000 Investment as of February 28, 2011 – Class A Shares |
The graphs do not reflect the deduction of taxes, such as state and local income taxes or capital gains taxes that a shareholder may pay on Fund distributions or the redemption of Fund shares.
| * | Refer to the Glossary of Terms Used in this Report for definitions. |
| Nuveen Investments | 15 |
Yields (Unaudited) as of February 28, 2011
Dividend Yield is the most recent dividend per share (annualized) divided by the offering price per share.
The SEC 30-Day Yield is a standardized measure of a Fund’s yield that accounts for the future amortization of premiums or discounts of bonds held in the Fund’s portfolio. The SEC 30-Day Yield is computed under an SEC standardized formula and is based on the maximum offer price per share. The 30-Day Yield is computed under the same formula but is based on the net asset value (NAV) per share. Dividend Yield may differ from the SEC 30-Day Yield because the Fund may be paying out more or less than it is earning and it may not include the effect of amortization of bond premium.
The Taxable-Equivalent Yield represents the yield that must be earned on a fully taxable investment in order to equal the yield of the Fund on an after-tax basis at a specified tax rate. With respect to investments that generate qualified dividend income that is taxable at a maximum rate of 15%, the Taxable-Equivalent Yield is lower.
The SEC 30-Day Yield and Taxable-Equivalent Yield on A Shares at NAV applies only to A Shares purchased at no-load pursuant to the Fund’s policy permitting waiver of the A Share load in certain specified circumstances.
Nuveen California High Yield Municipal Bond Fund
| Dividend Yield | 30-Day Yield | SEC 30-Day Yield | Taxable- Equivalent Yield1 | |||||||||||||
Class A Shares at NAV | 6.77% | 7.22% | — | 11.06% | ||||||||||||
Class A Shares at Offer | 6.48% | — | 6.91% | 10.58% | ||||||||||||
Class C Shares | 6.28% | 6.68% | — | 10.23% | ||||||||||||
Class I Shares | 7.02% | 7.42% | — | 11.36% | ||||||||||||
Nuveen California Municipal Bond Fund
| Dividend Yield | 30-Day Yield | SEC 30-Day Yield | Taxable- Equivalent Yield1 | |||||||||||||
Class A Shares at NAV | 4.76% | 4.88% | — | 7.47% | ||||||||||||
Class A Shares at Offer | 4.56% | — | 4.67% | 7.15% | ||||||||||||
Class B Shares | 4.00% | 4.13% | — | 6.32% | ||||||||||||
Class C Shares | 4.20% | 4.33% | — | 6.63% | ||||||||||||
Class I Shares | 4.95% | 5.07% | — | 7.76% | ||||||||||||
Nuveen California Insured Municipal Bond Fund
| Dividend Yield | 30-Day Yield | SEC 30-Day Yield | Taxable- Equivalent Yield1 | |||||||||||||
Class A Shares at NAV | 4.55% | 4.71% | — | 7.21% | ||||||||||||
Class A Shares at Offer | 4.36% | — | 4.51% | 6.91% | ||||||||||||
Class B Shares | 3.79% | 3.97% | — | 6.08% | ||||||||||||
Class C Shares | 4.00% | 4.18% | — | 6.40% | ||||||||||||
Class I Shares | 4.73% | 4.91% | — | 7.52% | ||||||||||||
| 1 | The Taxable-Equivalent Yield is based on the Fund’s 30-Day Yield on the indicated date and a combined federal and state income tax rate of 34.7%. |
| 16 | Nuveen Investments |
Holding Summaries (Unaudited) as of February 28, 2011
This data relates to the securities held in each Fund’s portfolio of investments. It should not be construed as a measure of performance for the Fund itself.
Ratings shown are the highest of Standard & Poor’s Group, Moody’s Investor Service, Inc. or Fitch, Inc. AAA includes bonds with an implied AAA rating since they are backed by U.S. Government or agency securities. AAA, AA, A and BBB ratings are investment grade; BB, B, CCC, CC, C and D ratings are below-investment grade. Holdings designated N/R are not rated by any of these national rating agencies.
Nuveen California High Yield Municipal Bond Fund
Bond Credit Quality1
Nuveen California Municipal Bond Fund
Bond Credit Quality1
Nuveen California Insured Municipal Bond Fund
Bond Credit Quality1
| Portfolio Composition1 | ||||
Tax Obligation/Limited | 43.9% | |||
Health Care | 13.3% | |||
Education and Civic Organizations | 11.5% | |||
Transportation | 8.1% | |||
Housing/Multifamily | 4.3% | |||
Long-Term Care | 4.2% | |||
Other | 14.7% | |||
| Portfolio Composition1 | ||||
Tax Obligation/Limited | 27.6% | |||
Health Care | 22.0% | |||
Tax Obligation/General | 12.9% | |||
U.S. Guaranteed | 7.4% | |||
Utilities | 5.4% | |||
Transportation | 4.6% | |||
Consumer Staples | 4.4% | |||
Water and Sewer | 4.4% | |||
Other | 11.3% | |||
| Portfolio Composition1 | ||||
Tax Obligation/Limited | 27.2% | |||
Tax Obligation/General | 27.1% | |||
Transportation | 11.2% | |||
Health Care | 10.9% | |||
Utilities | 6.1% | |||
Education and Civic Organizations | 6.0% | |||
Housing/Multifamily | 5.8% | |||
Other | 5.7% | |||
| Insurers 2,3 | ||||
NPFG4 | 38.0% | |||
AMBAC | 25.9% | |||
AGM | 18.4% | |||
FGIC | 13.2% | |||
SYNCORA GTY | 4.5% | |||
| 1 | As a percentage of total investments (excluding investments in derivatives) as of February 28, 2011. Holdings are subject to change. |
| 2 | As a percentage of total Insured investments as of February 28, 2011. Holdings are subject to change. |
| 3 | During the fiscal year ended February 28, 2011, the Fund invested at least 80% of its net assets in municipal securities that were covered by insurance guaranteeing the timely payment of principal and interest. See Notes to Financial Statements, Footnote 1 – General Information and Significant Accounting Policies, Insurance for more information. At the end of the reporting period, 90% of the Fund’s total investments are invested in Insured securities. |
| 4 | MBIA’s public finance subsidiary. |
| Nuveen Investments | 17 |
These expense ratios are those shown in the Fund’s most recent prospectus. The expense ratios shown factor in Total Annual Fund Operating Expenses including management fees and other fees and expenses but exclude interest expense on self-deposited inverse floaters held by the Fund, if any.
| Nuveen California High Yield Municipal Bond Fund | Nuveen California Municipal Bond Fund | |||||||||||
| Share Class | Gross Expense Ratios | Share Class | Gross Expense Ratios | |||||||||
| Class A | 0.94% | Class A | 0.85% | |||||||||
| Class C | 1.49% | Class B | 1.60% | |||||||||
| Class I | 0.74% | Class C | 1.40% | |||||||||
| Class I | 0.65% | |||||||||||
| Nuveen California Insured Municipal Bond Fund | ||||||||||||
| Share Class | Gross Expense Ratios | |||||||||||
| Class A | 0.86% | |||||||||||
| Class B | 1.61% | |||||||||||
| Class C | 1.41% | |||||||||||
| Class I | 0.66% | |||||||||||
| 18 | Nuveen Investments |
As a shareholder of one or more of the Funds, you incur two types of costs: (1) transaction costs, including up-front and back-end sales charges (loads) or redemption fees, where applicable; and (2) ongoing costs, including management fees; distribution and service (12b-1) fees, where applicable; and other Fund expenses. The Examples below are intended to help you understand your ongoing costs (in dollars) of investing in the Funds and to compare these costs with the ongoing costs of investing in other mutual funds.
The Examples below are based on an investment of $1,000 invested at the beginning of the period and held for the period.
The information under “Actual Performance,” together with the amount you invested, allows you to estimate actual expenses incurred over the reporting period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.60) and multiply the result by the cost shown for your share class, in the row entitled “Expenses Incurred During Period” to estimate the expenses incurred on your account during this period.
The information under “Hypothetical Performance,” provides information about hypothetical account values and hypothetical expenses based on the respective Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expense you incurred for the period. You may use this information to compare the ongoing costs of investing in the Fund and other Funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the hypothetical information is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds or share classes. In addition, if these transaction costs were included, your costs would have been higher.
| Nuveen California High Yield Municipal Bond Fund | ||||||||
| Hypothetical Performance | ||||||||||||||||||||||||||
| Actual Performance | (5% annualized return before expenses) | |||||||||||||||||||||||||
| A Shares | C Shares | I Shares | A Shares | C Shares | I Shares | |||||||||||||||||||||
| Beginning Account Value (9/01/10) | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | ||||||||||||||
| Ending Account Value (2/28/11) | $ | 907.40 | $ | 905.00 | $ | 908.30 | $ | 1,020.28 | $ | 1,017.55 | $ | 1,021.27 | ||||||||||||||
| Expenses Incurred During Period | $ | 4.30 | $ | 6.90 | $ | 3.36 | $ | 4.56 | $ | 7.30 | $ | 3.56 | ||||||||||||||
For each class of the Fund, expenses are equal to the Fund’s annualized net expense ratio of .91%, 1.46% and .71% for Classes A, C and I, respectively, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period).
| Nuveen California Municipal Bond Fund | ||||||||
| Hypothetical Performance | ||||||||||||||||||||||||||||||||||
| Actual Performance | (5% annualized return before expenses) | |||||||||||||||||||||||||||||||||
| A Shares | B Shares | C Shares | I Shares | A Shares | B Shares | C Shares | I Shares | |||||||||||||||||||||||||||
| Beginning Account Value (9/01/10) | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | ||||||||||||||||||
| Ending Account Value (2/28/11) | $ | 951.90 | $ | 948.20 | $ | 949.10 | $ | 953.70 | $ | 1,020.83 | $ | 1,017.11 | $ | 1,018.10 | $ | 1,021.82 | ||||||||||||||||||
| Expenses Incurred During Period | $ | 3.87 | $ | 7.49 | $ | 6.52 | $ | 2.91 | $ | 4.01 | $ | 7.75 | $ | 6.76 | $ | 3.01 | ||||||||||||||||||
For each class of the Fund, expenses are equal to the Fund’s annualized net expense ratio of .80%, 1.55%, 1.35% and .60% for Classes A, B, C and I, respectively, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period).
| Nuveen Investments | 19 |
Expense Examples (Unaudited) (continued)
| Nuveen California Insured Municipal Bond Fund | ||||||||
| Hypothetical Performance | ||||||||||||||||||||||||||||||||||
| Actual Performance | (5% annualized return before expenses) | |||||||||||||||||||||||||||||||||
| A Shares | B Shares | C Shares | I Shares | A Shares | B Shares | C Shares | I Shares | |||||||||||||||||||||||||||
| Beginning Account Value (9/01/10) | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | ||||||||||||||||||
| Ending Account Value (2/28/11) | $ | 934.80 | $ | 930.60 | $ | 931.90 | $ | 936.00 | $ | 1,020.78 | $ | 1,017.06 | $ | 1,018.05 | $ | 1,021.77 | ||||||||||||||||||
| Expenses Incurred During Period | $ | 3.89 | $ | 7.47 | $ | 6.51 | $ | 2.93 | $ | 4.06 | $ | 7.80 | $ | 6.80 | $ | 3.06 | ||||||||||||||||||
For each class of the Fund, expenses are equal to the Fund’s annualized net expense ratio of .81%, 1.56%, 1.36% and .61% for Classes A, B, C and I, respectively, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period).
| 20 | Nuveen Investments |
Independent Registered Public Accounting Firm
To the Board of Trustees and Shareholders of
Nuveen Multistate Trust II:
In our opinion, the accompanying statements of assets and liabilities, including the portfolios of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Nuveen California High Yield Municipal Bond Fund, Nuveen California Municipal Bond Fund and Nuveen California Insured Municipal Bond Fund (each a series of the Nuveen Multistate Trust II, hereafter referred to as the “Funds”) at February 28, 2011, the results of each of their operations for the year then ended, the changes in each of their net assets for each of the two years in the period then ended and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Funds’ management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at February 28, 2011 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PRICEWATERHOUSECOOPERS LLP
Chicago, Illinois
April 27, 2011
| Nuveen Investments | 21 |
Nuveen California High Yield Municipal Bond Fund
February 28, 2011
| Principal Amount (000) | Description (1) | Optional Call Provisions (2) | Ratings (3) | Value | ||||||||||||||
Consumer Discretionary – 2.0% | ||||||||||||||||||
| $ | 280 | Austin Convention Enterprises Inc., Texas, Convention Center Hotel Revenue Bonds, Third Tier Series 2001C, 9.750%, 1/01/26 | 7/11 at 100.00 | N/R | $ | 278,888 | ||||||||||||
| 1,000 | Lombard Public Facilities Corporation, Illinois, First Tier Conference Center and Hotel Revenue Bonds, Series 2005A-2, 5.500%, 1/01/36 – ACA Insured | 1/16 at 100.00 | B– | 604,670 | ||||||||||||||
| 1,000 | Louisiana Local Government Environmental Facilities and Community Development Authority, Revenue Bonds, Southgate Suites Hotel LLC Project, Series 2007A, 6.750%, 12/15/37 | 12/17 at 100.00 | N/R | 653,050 | ||||||||||||||
| 500 | Morongo Band of Mission Indians, California, Enterprise Revenue Bonds, Series 2008B, 6.500%, 3/01/28 | 3/18 at 100.00 | N/R | 468,070 | ||||||||||||||
| 345 | Norfolk Economic Development Authority, Virginia, Empowerment Zone Facility Revenue Bonds, BBL Old Dominion University LLC Project Revenue Bonds, Series 2006B, 5.625%, 11/01/15 (Alternative Minimum Tax) | No Opt. Call | N/R | 294,596 | ||||||||||||||
| 3,125 | Total Consumer Discretionary | 2,299,274 | ||||||||||||||||
Consumer Staples – 3.4% | ||||||||||||||||||
| 1,000 | California County Tobacco Securitization Agency, Tobacco Settlement Asset-Backed Bonds, Golden Gate Tobacco Funding Corporation, Turbo, Series 2007A, 5.000%, 6/01/47 | 6/17 at 100.00 | N/R | 593,280 | ||||||||||||||
Golden State Tobacco Securitization Corporation, California, Tobacco Settlement Asset-Backed Bonds, Series 2007A-1: | ||||||||||||||||||
| 1,750 | 5.000%, 6/01/33 | 6/17 at 100.00 | Baa3 | 1,140,895 | ||||||||||||||
| 1,600 | 5.750%, 6/01/47 | 6/17 at 100.00 | Baa3 | 1,068,416 | ||||||||||||||
| 1,000 | 5.125%, 6/01/47 | 6/17 at 100.00 | Baa3 | 599,950 | ||||||||||||||
Tobacco Securitization Authority of Southern California, Tobacco Settlement Asset-Backed Bonds, San Diego County Tobacco Asset Securitization Corporation, Senior Series 2001A: | ||||||||||||||||||
| 50 | 5.000%, 6/01/37 | 6/14 at 100.00 | BBB | 32,616 | ||||||||||||||
| 750 | 5.125%, 6/01/46 | 6/14 at 100.00 | BBB | 459,158 | ||||||||||||||
| 6,150 | Total Consumer Staples | 3,894,315 | ||||||||||||||||
Education and Civic Organizations – 11.2% | ||||||||||||||||||
| 1,325 | California Educational Facilities Authority, Revenue Bonds, California Lutheran University, Refunding Series 2008, 5.750%, 10/01/38 | 10/18 at 100.00 | Baa1 | 1,238,319 | ||||||||||||||
| 1,065 | California Educational Facilities Authority, Revenue Bonds, Dominican University, Series 2006, 5.000%, 12/01/36 | 12/16 at 100.00 | Baa3 | 823,778 | ||||||||||||||
| 75 | California Educational Facilities Authority, Revenue Bonds, University of Redlands, Series 2005A, 5.000%, 10/01/35 | 10/15 at 100.00 | A3 | 63,174 | ||||||||||||||
| 1,250 | California Educational Facilities Authority, Revenue Bonds, University of Southern California, Tender Option Bond Trust 3144, 58.513%, 10/01/16 (IF) | No Opt. Call | AA+ | 1,163,850 | ||||||||||||||
| 100 | California Educational Facilities Authority, Revenue Bonds, University of the Pacific, Series 2006, 5.000%, 11/01/36 | 11/15 at 100.00 | A2 | 89,560 | ||||||||||||||
California Educational Facilities Authority, Revenue Bonds, Woodbury University, Series 2006: | ||||||||||||||||||
| 1,165 | 5.000%, 1/01/30 | 1/15 at 100.00 | BBB– | 954,694 | ||||||||||||||
| 500 | 5.000%, 1/01/36 | 1/15 at 100.00 | BBB– | 388,290 | ||||||||||||||
| 1,000 | California Municipal Finance Authority, Education Revenue Bonds, American Heritage Education Foundation Project, Series 2006A, 5.250%, 6/01/36 | 6/16 at 100.00 | BBB– | 751,120 | ||||||||||||||
| 1,335 | California Municipal Finance Authority, Educational Facilities Revenue Bonds, OCEAA Project, Series 2008A, 7.000%, 10/01/39 | No Opt. Call | N/R | 1,213,301 | ||||||||||||||
| 2,000 | California Municipal Finance Authority, Revenue Refunding Bonds, Biola University, Series 2008A, 5.875%, 10/01/34 | 4/18 at 100.00 | Baa1 | 1,910,319 | ||||||||||||||
| 500 | California Statewide Community Development Authority, Revenue Bonds, California Baptist University, Series 2007A, 5.500%, 11/01/38 | No Opt. Call | N/R | 410,330 | ||||||||||||||
| 2,135 | California Statewide Community Development Authority, Revenue Bonds, Drew School, Series 2007, 5.300%, 10/01/37 | 10/15 at 102.00 | N/R | 1,595,016 | ||||||||||||||
| 22 | Nuveen Investments |
| Principal Amount (000) | Description (1) | Optional Call Provisions (2) | Ratings (3) | Value | ||||||||||||||
Education and Civic Organizations (continued) | ||||||||||||||||||
| $ | 200 | California Statewide Community Development Authority, Revenue Bonds, International School of the Peninsula, Palo Alto, California, Series 2006, 5.000%, 11/01/29 | 11/16 at 100.00 | N/R | $ | 154,666 | ||||||||||||
| 400 | California Statewide Community Development Authority, Revenue Bonds, Montessori in Redlands School, Series 2007A, 5.125%, 12/01/36 | 12/16 at 100.00 | N/R | 278,540 | ||||||||||||||
| 100 | California Statewide Community Development Authority, Revenue Bonds, Viewpoint School, Series 2004, 5.000%, 10/01/28 – ACA Insured | 10/14 at 100.00 | BBB | 87,737 | ||||||||||||||
| 200 | Hawaii State Department of Budget and Finance, Private School Revenue Bonds, Montessori of Maui, Series 2007, 5.500%, 1/01/37 | 2/17 at 100.00 | N/R | 157,434 | ||||||||||||||
| 600 | La Vernia Education Financing Corporation, Texas, Charter School Revenue Bonds, Riverwalk Education Foundation, Series 2007A, 5.450%, 8/15/36 | 8/11 at 100.00 | N/R | 448,128 | ||||||||||||||
| 100 | Pima County Industrial Development Authority, Arizona, Choice Education and Development Charter School Revenue Bonds, Series 2006, 6.375%, 6/01/36 | 6/16 at 100.00 | N/R | 78,164 | ||||||||||||||
| 65 | Pima County Industrial Development Authority, Arizona, Educational Revenue Bonds, Paradise Education Center Charter School, Series 2006, 6.000%, 6/01/36 | 6/16 at 100.00 | BBB– | 52,769 | ||||||||||||||
| 395 | Pingree Grove Village, Illinois, Charter School Revenue Bonds, Cambridge Lakes Learning Center, Series 2007, 6.000%, 6/01/36 | 6/16 at 102.00 | N/R | 303,909 | ||||||||||||||
| 1,060 | San Diego County, California, Certificates of Participation, Burnham Institute, Series 2006, 5.000%, 9/01/34 | 9/15 at 102.00 | Baa3 | 816,221 | ||||||||||||||
| 15,570 | Total Education and Civic Organizations | 12,979,319 | ||||||||||||||||
Health Care – 13.0% | ||||||||||||||||||
| 50 | California Health Facilities Financing Authority, Health Facility Revenue Bonds, Adventist Health System/West, Series 2003A, 5.000%, 3/01/33 | 3/13 at 100.00 | A | 44,438 | ||||||||||||||
| 1,040 | California Health Facilities Financing Authority, Hospital Revenue Bonds, Downey Community Hospital, Series 1993, 5.750%, 5/15/15 (4) | 5/11 at 100.00 | N/R | 831,688 | ||||||||||||||
| 1,625 | California Health Facilities Financing Authority, Revenue Bonds, Childrens Hospital Los Angeles, Series 2010A, 5.250%, 7/01/38 – AGC Insured (5) | 7/20 at 100.00 | AA+ | 1,485,429 | ||||||||||||||
| 2,000 | California Municipal Finance Authority, Certificates of Participation, Community Hospitals of Central California Obligated Group, Series 2009, 5.500%, 2/01/39 | 2/19 at 100.00 | Baa2 | 1,698,540 | ||||||||||||||
| 1,000 | California Municipal Financing Authority, Certificates of Participation, Community Hospitals of Central California, Series 2007, 5.250%, 2/01/27 | 2/17 at 100.00 | Baa2 | 890,730 | ||||||||||||||
| 1,000 | California Statewide Communities Development Authority, Revenue Bonds, ValleyCare Health System, Series 2007A, 5.125%, 7/15/31 | 7/17 at 100.00 | N/R | 817,590 | ||||||||||||||
| 2,000 | California Statewide Community Development Authority, Revenue Bonds, Childrens Hospital of Los Angeles, Series 2007, 5.000%, 8/15/47 | 8/17 at 100.00 | BBB+ | 1,518,040 | ||||||||||||||
California Statewide Community Development Authority, Revenue Bonds, Daughters of Charity Health System, Series 2005A: | ||||||||||||||||||
| 750 | 5.250%, 7/01/30 | 7/15 at 100.00 | BBB | 649,785 | ||||||||||||||
| 515 | 5.250%, 7/01/35 | 7/15 at 100.00 | BBB | 427,512 | ||||||||||||||
| 495 | 5.000%, 7/01/39 | 7/15 at 100.00 | BBB | 385,664 | ||||||||||||||
| 715 | California Statewide Community Development Authority, Revenue Bonds, Sutter Health, Tender Option Bond Trust 3048, 18.276%, 11/15/32 (IF) | 5/18 at 100.00 | AA– | 347,376 | ||||||||||||||
California Statewide Community Development Authority, Revenue Bonds, Sutter Health, Tender Option Bond Trust 3102: | ||||||||||||||||||
| 375 | 18.481%, 11/15/46 (IF) | 11/16 at 100.00 | AA– | 163,054 | ||||||||||||||
| 1,285 | 18.486%, 11/15/48 (IF) | 5/18 at 100.00 | AA– | 624,304 | ||||||||||||||
| 1,000 | California Statewide Communities Development Authority, Revenue Bonds, Saint Joseph Health System, Trust 2554, 18.488%, 7/01/47 – AGM Insured (IF) | 7/18 at 100.00 | AA+ | 735,280 | ||||||||||||||
| 1,490 | Loma Linda, California, Hospital Revenue Bonds, Loma Linda University Medical Center, Series 2008A, 8.250%, 12/01/38 | 12/17 at 100.00 | BBB | 1,606,101 | ||||||||||||||
| Nuveen Investments | 23 |
Portfolio of Investments
Nuveen California High Yield Municipal Bond Fund (continued)
February 28, 2011
| Principal Amount (000) | Description (1) | Optional Call Provisions (2) | Ratings (3) | Value | ||||||||||||||
Health Care (continued) | ||||||||||||||||||
| $ | 1,060 | Oak Valley Hospital District, Stanislaus County, California, Revenue Bonds, Series 2010A, 7.000%, 11/01/35 | 11/20 at 100.00 | BBB– | $ | 1,023,716 | ||||||||||||
| 100 | Sierra Kings Health Care District, Fresno County, California, Revenue Bonds, Series 2006A, 5.750%, 12/01/36 | 12/16 at 100.00 | N/R | 58,960 | ||||||||||||||
| 2,000 | Tulare Local Health Care District, California, Revenue Bonds, Series 2007, 5.200%, 11/01/32 | 11/17 at 100.00 | N/R | 1,693,640 | ||||||||||||||
| 60 | Weatherford Hospital Authority, Oklahoma, Sales Tax Revenue Bonds, Series 2006, 6.000%, 5/01/31 | 5/16 at 103.00 | N/R | 48,277 | ||||||||||||||
| 18,560 | Total Health Care | 15,050,124 | ||||||||||||||||
Housing/Multifamily – 4.2% | ||||||||||||||||||
| 1,400 | California Municipal Finance Authority, Mobile Home Park Revenue Bonds, Caritas Projects Series 2010B, 7.250%, 8/15/45 | 8/20 at 100.00 | N/R | 1,298,136 | ||||||||||||||
| 400 | California Municipal Finance Authority, Revenue Bonds, University Students Coop Association, Series 2007, 4.750%, 4/01/27 | 4/17 at 100.00 | BBB– | 333,564 | ||||||||||||||
| 1,000 | California Statewide Community Development Authority, Lancer Educational Student Housing Revenue Bonds, California Baptist University, Series 2007, 5.625%, 6/01/33 | 6/17 at 102.00 | N/R | 829,320 | ||||||||||||||
| 375 | California Statewide Community Development Authority, Multifamily Housing Revenue Bonds, Magnolia City Lights, Series 1999X, 6.650%, 7/01/39 | 7/11 at 100.00 | N/R | 329,550 | ||||||||||||||
| 120 | Multifamily Housing Revenue Bond Pass-Through Certificates, California, Series 2001-17, Stanford Arms Seniors Apartments 01-P2, 5.750%, 11/01/34 (Mandatory put 11/01/16) (Alternative Minimum Tax) | 12/11 at 100.00 | N/R | 119,188 | ||||||||||||||
| 1,250 | Richmond, California, Joint Powers Financing Agency Multifamily Housing Revenue Bonds, Westridge Hilltop Apartments, Series 2007, 5.000%, 12/15/33 | 12/12 at 100.00 | Baa1 | 970,675 | ||||||||||||||
| 736 | Ventura County Area Housing Authority, California, Mira Vista Senior Apartments Project, Junior Subordinate Series 2006C, 6.500%, 12/01/39 (Mandatory put 7/01/16) (Alternative Minimum Tax) | No Opt. Call | N/R | 660,531 | ||||||||||||||
| 485 | Wilson County Health and Educational Facilities Board, Tennessee, Senior Living Revenue Bonds, Rutland Place, Series 2007A, 6.300%, 7/01/37 (4) | 7/17 at 100.00 | N/R | 306,651 | ||||||||||||||
| 5,766 | Total Housing/Multifamily | 4,847,615 | ||||||||||||||||
Housing/Single Family – 0.7% | ||||||||||||||||||
| 500 | California Housing Finance Agency, California, Home Mortgage Revenue Bonds, Series 2007E, 4.800%, 8/01/37 (Alternative Minimum Tax) | 2/17 at 100.00 | A | 393,855 | ||||||||||||||
| 600 | California Housing Finance Agency, Home Mortgage Revenue Bonds, Tender Option Bond Trust 3206, 8.151%, 2/01/24 (Alternative Minimum Tax) (IF) | 2/16 at 100.00 | A | 403,158 | ||||||||||||||
| 1,100 | Total Housing/Single Family | 797,013 | ||||||||||||||||
Industrials – 0.6% | ||||||||||||||||||
| 65 | California Pollution Control Financing Authority, Solid Waste Disposal Revenue Bonds, Waste Management Inc., Series 2002A, 5.000%, 1/01/22 (Alternative Minimum Tax) | 1/16 at 102.00 | BBB | 65,298 | ||||||||||||||
| 1,000 | California Statewide Communities Development Authority, Revenue Bonds, EnerTech Regional Biosolids Project, Series 2007A, 5.500%, 12/01/33 (Alternative Minimum Tax) (6) | No Opt. Call | CCC+ | 223,560 | ||||||||||||||
| 250 | California Statewide Communities Development Authority, Sewer and Solid Waste Disposal Facilities Revenue Bonds, Anheuser Busch Project, Series 2007, 4.800%, 9/01/46 (Alternative Minimum Tax) | 3/12 at 100.00 | BBB+ | 212,523 | ||||||||||||||
| 250 | Kootenai County Industrial Development Corporation, Idaho, Industrial Development Revenue Bonds, Coer d’Alene Fiber Fuels, Inc., Series 2006, 6.750%, 12/01/26 (4), (6), (8) | 12/16 at 100.00 | N/R | 57,500 | ||||||||||||||
| 100 | Louisiana Local Government Environmental Facilities and Community Development Authority, Carter Plantation Hotel Project Revenue Bonds, Series 2006A, 6.000%, 9/01/36 (4), (6) | 9/16 at 100.00 | N/R | 19,000 | ||||||||||||||
| 24 | Nuveen Investments |
| Principal Amount (000) | Description (1) | Optional Call Provisions (2) | Ratings (3) | Value | ||||||||||||||
Industrials (continued) | ||||||||||||||||||
| $ | 750 | Western Reserve Port Authority, Ohio, Solid Waste Facility Revenue Bonds, Central Waste Inc., Series 2007A, 6.350%, 7/01/27 (Alternative Minimum Tax) (4), (6) | 7/17 at 102.00 | N/R | $ | 136,875 | ||||||||||||
| 2,415 | Total Industrials | 714,756 | ||||||||||||||||
Long-Term Care – 4.0% | ||||||||||||||||||
| 1,040 | California Municipal Finance Authority, Revenue Bonds, Harbor Regional Center Project, Series 2009, 8.500%, 11/01/39 | 11/19 at 100.00 | Baa1 | 1,122,462 | ||||||||||||||
| 1,500 | California Statewide Communities Development Authority, Revenue Bonds, Inland Regional Center Project, Series 2007, 5.375%, 12/01/37 | 12/17 at 100.00 | Baa1 | 1,288,785 | ||||||||||||||
| 1,000 | California Statewide Community Development Authority, Revenue Bonds, Hollenbeck Palms, Magnolia Assisted Living, Series 2007A, 4.600%, 2/01/37 – RAAI Insured (Alternative Minimum Tax) | 2/17 at 100.00 | N/R | 713,770 | ||||||||||||||
| 1,000 | Fulton County Residential Care Facilities Authority, Georgia, Revenue Bonds, Elderly Care, Lenbrook Square Project, Series 2006A, 5.125%, 7/01/37 | 7/17 at 100.00 | N/R | 610,660 | ||||||||||||||
| 50 | Louisiana Local Government Environmental Facilities and Community Development Authority, Revenue Bonds, CDF Healthcare of Louisiana LLC, Series 2006A, 7.000%, 6/01/36 | 6/16 at 101.00 | N/R | 41,271 | ||||||||||||||
| 1,000 | San Diego County, California, Certificates of Participation, San Diego-Imperial Counties Developmental Services Foundation Project, Series 2002, 5.500%, 9/01/27 | 9/12 at 100.00 | Baa1 | 920,540 | ||||||||||||||
| 5,590 | Total Long-Term Care | 4,697,488 | ||||||||||||||||
Tax Obligation/General – 2.8% | ||||||||||||||||||
| 390 | Bessemer, Alabama, General Obligation Warrants, Series 2007, 6.500%, 2/01/37 | 2/17 at 102.00 | N/R | 266,483 | ||||||||||||||
| 725 | Guam Government, General Obligation Bonds, 2009 Series A, 7.000%, 11/15/39 | No Opt. Call | B+ | 757,553 | ||||||||||||||
| 500 | Guam, General Obligation Bonds, Series 2007A, 5.250%, 11/15/37 | 11/17 at 100.00 | B+ | 420,600 | ||||||||||||||
| 250 | Palomar Pomerado Health, California, General Obligation Bonds, Tender Option Bond Trust 4683, 16.722%, 8/01/37 – NPFG Insured (IF) (5) | 8/17 at 100.00 | A+ | 147,470 | ||||||||||||||
| 1,500 | Tahoe Forest Hospital District, Placer and Nevada Counties, California, General Obligation Bonds, Tender Option Bond Trust 11863, 17.553%, 8/01/34 (IF) | 8/18 at 100.00 | Aa3 | 911,760 | ||||||||||||||
| 2,295 | William S. Hart Union High School District, Los Angeles County, California, General Obligation Bonds, Election 2001 Series 2005B, 0.000%, 9/01/27 – AGM Insured | No Opt. Call | AA+ | 768,045 | ||||||||||||||
| 5,660 | Total Tax Obligation/General | 3,271,911 | ||||||||||||||||
Tax Obligation/Limited – 42.7% | ||||||||||||||||||
| 1,000 | Azusa Redevelopment Agency, California, Tax Allocation Refunding Bonds, Merged West End Development, Series 2007B, 5.300%, 8/01/36 | No Opt. Call | N/R | 712,020 | ||||||||||||||
| 745 | Azusa, California, Special Tax Bonds, Community Facilities District 2005-1 Rosedale Improvement Area 1, Series 2007, 5.000%, 9/01/27 | 9/11 at 103.00 | N/R | 601,126 | ||||||||||||||
| 1,000 | Beaumont Financing Authority, California, Local Agency Revenue Bonds, Improvement Area 8C, Series 2007E, 6.250%, 9/01/38 | No Opt. Call | N/R | 885,820 | ||||||||||||||
Beaumont Financing Authority, California, Local Agency Revenue Bonds, Improvement Area 8D & 17B, Series 2009B: | ||||||||||||||||||
| 225 | 8.875%, 9/01/34 | 9/12 at 103.00 | N/R | 230,625 | ||||||||||||||
| 450 | 8.625%, 9/01/39 | 9/12 at 103.00 | N/R | 455,400 | ||||||||||||||
| 100 | Beaumont Financing Authority, California, Local Agency Revenue Bonds, Series 2005A, 5.600%, 9/01/25 | 9/15 at 102.00 | N/R | 92,138 | ||||||||||||||
| 300 | Beaumont Financing Authority, California, Local Agency Revenue Bonds, Series 2006B, 5.050%, 9/01/37 | 9/11 at 101.50 | N/R | 215,916 | ||||||||||||||
| 1,000 | Borrego Water District, California, Community Facilities District 2007-1 Montesoro, Special Tax Bonds, Series 2007, 5.750%, 8/01/32 (4), (6) | 8/17 at 102.00 | N/R | 590,920 | ||||||||||||||
| Nuveen Investments | 25 |
Portfolio of Investments
Nuveen California High Yield Municipal Bond Fund (continued)
February 28, 2011
| Principal Amount (000) | Description (1) | Optional Call Provisions (2) | Ratings (3) | Value | ||||||||||||||
Tax Obligation/Limited (continued) | ||||||||||||||||||
| $ | 620 | California State Public Works Board, Lease Revenue Bonds, Various Capital Projects, Series 2009I-1, 6.375%, 11/01/34 | 11/19 at 100.00 | A2 | $ | 636,746 | ||||||||||||
California State Public Works Board, Lease Revenue Bonds, Various Capital Projects, Series 2010A-1: | ||||||||||||||||||
| 2,000 | 5.750%, 3/01/30 | 3/20 at 100.00 | A2 | 1,976,099 | ||||||||||||||
| 1,250 | 6.000%, 3/01/35 | 3/20 at 100.00 | A2 | 1,249,200 | ||||||||||||||
| 1,000 | California Statewide Communities Development Authority, Recovery Zone Facility Bonds, SunEdison Huntington Beach Solar Projects, Series 2010, 7.500%, 1/01/31 | 1/21 at 100.00 | N/R | 983,860 | ||||||||||||||
| 1,415 | California Statewide Communities Development Authority, Recovery Zone Facility Bonds, SunEdison Irvine Unified School District Solar Projects, Series 2010, 7.500%, 7/01/30 | 1/20 at 100.00 | N/R | 1,392,275 | ||||||||||||||
| 250 | California Statewide Community Development Authority, Revenue Bonds, Epidaurus Project, Series 2004A, 7.750%, 3/01/34 | 3/14 at 102.00 | N/R | 243,983 | ||||||||||||||
| 800 | Chino, California, Community Facilities District 2009-1, Watson Commerce Center, Special Tax Bonds, Series 2010, 6.750%, 9/01/40 | 9/20 at 100.00 | N/R | 745,160 | ||||||||||||||
| 500 | Dinuba Financing Authority, California, Measure R Road Improvement Lease Revenue Bonds, Series 2007, 5.375%, 9/01/38 | 9/17 at 100.00 | N/R | 361,745 | ||||||||||||||
| 100 | Eastern Municipal Water District, California, Community Facility District No 2005-38 Improvement Area A, Special Tax Bonds, Series 2006, 5.200%, 9/01/36 | 3/11 at 102.00 | N/R | 78,534 | ||||||||||||||
| 200 | El Dorado County, California, Special Tax Bonds, Blackstone Community Facilities District 2005-1, Series 2005, 5.250%, 9/01/35 | 9/14 at 102.00 | N/R | 142,456 | ||||||||||||||
| 250 | El Dorado County, California, Special Tax Bonds, Community Facilities District 2005-2, Series 2006, 5.100%, 9/01/36 | 9/14 at 102.00 | N/R | 188,380 | ||||||||||||||
Elk Grove Community Facilities District 2005-1, California, Special Tax Bonds, Series 2007: | ||||||||||||||||||
| 80 | 5.000%, 9/01/18 | 9/17 at 100.00 | N/R | 69,465 | ||||||||||||||
| 10 | 5.000%, 9/01/20 | 9/17 at 100.00 | N/R | 8,127 | ||||||||||||||
| 50 | 5.125%, 9/01/22 | No Opt. Call | N/R | 38,717 | ||||||||||||||
| 1,000 | 5.200%, 9/01/27 | 9/15 at 102.00 | N/R | 701,740 | ||||||||||||||
| 1,225 | 5.250%, 9/01/37 | 9/15 at 102.00 | N/R | 765,735 | ||||||||||||||
| 500 | Fairfield, California, Community Facilities District 2007-1 Special Tax Bonds, Fairfield Commons Project, Series 2008, 6.875%, 9/01/38 | 9/18 at 100.00 | N/R | 443,325 | ||||||||||||||
| 500 | Folsom Public Financing Authority, California, Subordinate Special Tax Revenue Bonds, Series 2007B, 5.200%, 9/01/32 | 9/17 at 100.00 | N/R | 411,735 | ||||||||||||||
| 1,000 | Fontana, California, Special Tax Bonds, Community Facilities District 31 Citrus Heights North Special Tax Bonds, Series 2006, 5.000%, 9/01/36 | 9/14 at 102.00 | N/R | 710,640 | ||||||||||||||
| 1,000 | Hemet Unified School District Community Facilities District 2005-3, Riverside County, California, Special Tax Bonds, Series 2007, 5.750%, 9/01/39 | 9/11 at 101.50 | N/R | 778,950 | ||||||||||||||
| 200 | Hemet Unified School District, California, Community Facilities District 2005-1 Special Tax Bonds, Series 2006, 5.125%, 9/01/36 | 9/13 at 100.00 | N/R | 156,476 | ||||||||||||||
Hercules Redevelopment Agency, California, Tax Allocation Bonds, Merged Project Area, Series 2005: | ||||||||||||||||||
| 1,000 | 5.000%, 8/01/25 – AMBAC Insured | 8/15 at 100.00 | BB | 709,480 | ||||||||||||||
| 500 | 4.750%, 8/01/35 – AMBAC Insured | No Opt. Call | BB | 292,490 | ||||||||||||||
| 295 | Hesperia Unified School District, San Bernardino County, California, Community Facilities District 2006-5 Special Tax Bonds, Series 2007, 5.000%, 9/01/37 | 9/17 at 100.00 | N/R | 224,893 | ||||||||||||||
| 340 | Hesperia, California, Improvement Act of 1915, Assessment District, 91-1, Joshua West Main Street, Series 1992, 8.500%, 9/02/24 | 9/11 at 100.00 | N/R | 347,120 | ||||||||||||||
| 150 | Indio, California, Special Tax Bonds, Community Facilities District 2006-1 Sonora Wells, Series 2006, 5.050%, 9/01/26 | 9/16 at 100.00 | N/R | 121,854 | ||||||||||||||
| 120 | Irvine, California, Unified School District, Community Facilities District Special Tax Bonds, Series 2006A, 5.125%, 9/01/36 | 9/16 at 100.00 | N/R | 98,808 | ||||||||||||||
| 26 | Nuveen Investments |
| Principal Amount (000) | Description (1) | Optional Call Provisions (2) | Ratings (3) | Value | ||||||||||||||
Tax Obligation/Limited (continued) | ||||||||||||||||||
| $ | 1,115 | Jurupa Community Services District, California, Community Facilities District 25 Earstvale Area Special Tax Bonds, Series 2008A, 8.375%, 9/01/28 | 9/18 at 100.00 | N/R | $ | 1,149,955 | ||||||||||||
| 500 | Jurupa Community Services District, California, Special Tax Bonds, Community Facilities District 34 Eastvale Area , Series 2010A, 6.500%, 9/01/40 | 3/11 at 103.00 | N/R | 471,340 | ||||||||||||||
| 500 | Jurupa Community Services District, California, Special Tax Bonds, Community Facilities District 38 Eastvale Improvement Area 2, Series 2010A, 6.375%, 9/01/40 | 9/11 at 103.00 | N/R | 457,170 | ||||||||||||||
| 750 | Lake Elsinore Public Financing Authority, California, Local Agency Revenue Bonds, Canyon Hills Improvement Area C, Series 2010A, 6.250%, 9/01/40 | 9/12 at 103.00 | N/R | 653,505 | ||||||||||||||
| 1,000 | Lake Elsinore Public Financing Authority, California, Local Agency Revenue Bonds, Villages at Wasson Canyon, Series 2009B, 6.875%, 9/01/38 | 9/13 at 100.00 | N/R | 960,150 | ||||||||||||||
| 1,000 | Lake Elsinore, California, Special Tax Bonds, Community Facilities District | 9/12 at 102.00 | N/R | 810,400 | ||||||||||||||
| 335 | Lancaster Redevelopment Agency, California, Combined Project Areas Housing Programs, Tax Allocation Bonds, Series 2009, 6.875%, 8/01/39 | 8/19 at 100.00 | BBB+ | 344,886 | ||||||||||||||
| 1,000 | March Joint Powers Redevelopment Agency, California, March Air Force Base Redevelopment Project Series 2011A, 7.500%, 8/01/41 | 8/21 at 100.00 | BBB+ | 984,620 | ||||||||||||||
| 130 | Merced, California, Community Facilities District 2005-1, Special Tax Bonds, Bellevue Ranch West, Series 2006, 5.300%, 9/01/36 | 9/11 at 103.00 | N/R | 78,126 | ||||||||||||||
| 65 | Moreno Valley Unified School District, Riverside County, California, Special Tax Bonds, Community Facilities District, Series 2006, 5.200%, 9/01/36 | 3/16 at 100.00 | N/R | 52,751 | ||||||||||||||
| 1,000 | Moreno Valley, California, Community Facilities District 5, Special Tax Bonds, Series 2007, 5.000%, 9/01/37 | 9/17 at 100.00 | N/R | 684,090 | ||||||||||||||
| 125 | Murrieta Valley Unified School District, Riverside County, California, Special Tax Bonds, Community Facilities District 2002-4, Series 2006B, 5.450%, 9/01/38 | 9/16 at 100.00 | N/R | 92,105 | ||||||||||||||
| 1,000 | Murrieta, California, Special Tax Bonds, Community Facilities District 2003-3, Creekside Village Improvement Area 1, Series 2005, 5.100%, 9/01/26 | 9/12 at 100.00 | N/R | 837,770 | ||||||||||||||
| 1,000 | Palm Desert, California, Community Facilities District 2005-1, University Park Special Tax Bonds, Series 2005, 5.500%, 9/01/36 | 9/16 at 100.00 | N/R | 730,590 | ||||||||||||||
| 1,600 | Palm Drive Health Care District, Sonoma County, California, Certificates of Participation, Parcel Tax Secured Financing Program, Series 2010, 7.500%, 4/01/35 | No Opt. Call | BB | 1,494,016 | ||||||||||||||
| 1,000 | Palm Drive Health Care District, Sonoma County, California, Parcel Tax Revenue Bonds, Series 2005, 5.250%, 4/01/30 | 4/13 at 102.00 | BB | 708,760 | ||||||||||||||
| 620 | Palmdale, California, Special Tax Bonds, Community Facilities District 2003-1, Anaverde Project, Series 2005A, 5.100%, 9/01/21 | 9/15 at 101.00 | N/R | 552,036 | ||||||||||||||
| 1,100 | Perris Public Finance Authority, California, Local Agency Revenue Bonds, Perris Vally Vistas IA3, Series 2008B, 6.625%, 9/01/38 | 9/16 at 100.00 | N/R | 1,005,180 | ||||||||||||||
| 495 | Perris Public Financing Authority, California, Local Agency Revenue Bonds, Series 2007D, 5.800%, 9/01/38 | 9/14 at 100.00 | N/R | 409,449 | ||||||||||||||
| 575 | Perris, California, Community Facilities District 2001-1 Improvement Area 5-A Special Tax Bonds, Series 2006, 5.000%, 9/01/37 | 9/11 at 101.50 | N/R | 418,284 | ||||||||||||||
| 1,000 | Rancho Cardova, California, Special Tax Bonds, Sunridge Park Area Community Facilities District 2004-1, Series, 6.125%, 9/01/37 | 9/17 at 100.00 | N/R | 872,520 | ||||||||||||||
| 2,000 | Riverside County Community Facilities District 05-8 Scott Road, California, Special Tax Bonds, Series 2008, 7.250%, 9/01/38 | 9/17 at 100.00 | N/R | 1,846,580 | ||||||||||||||
| 500 | Riverside County Redevelopment Agency, California, Interstate 215 Corridor Redevelopment Project Area Tax Allocation Bonds, Series 2010E, 6.500%, 10/01/40 | 10/20 at 100.00 | A– | 478,805 | ||||||||||||||
| 125 | Riverside Unified School District, California, Community Facilities District 24 Special Tax Bonds, Series 2006, 5.100%, 9/01/36 | 9/14 at 102.00 | N/R | 96,693 | ||||||||||||||
| 1,000 | Riverside, California, Improvement Bond Act of 1915, Special Assessment Bonds, Hunter Park Assessment District, Series 2006, 5.200%, 9/02/36 | 9/16 at 101.00 | N/R | 737,510 | ||||||||||||||
| Nuveen Investments | 27 |
Portfolio of Investments
Nuveen California High Yield Municipal Bond Fund (continued)
February 28, 2011
| Principal Amount (000) | Description (1) | Optional Call Provisions (2) | Ratings (3) | Value | ||||||||||||||
Tax Obligation/Limited (continued) | ||||||||||||||||||
| $ | 1,000 | Roseville Financing Authority, California, Special Tax Revenue Bonds, Refunding Series 2007B, 5.000%, 9/01/33 | 9/17 at 100.00 | N/R | $ | 767,570 | ||||||||||||
Roseville, California, Special Tax Bonds, Community Facilities District 1 – Westpark, Series 2005: | ||||||||||||||||||
| 425 | 5.250%, 9/01/25 | 9/15 at 100.00 | N/R | 369,801 | ||||||||||||||
| 1,700 | 5.200%, 9/01/36 | 9/15 at 100.00 | N/R | 1,325,099 | ||||||||||||||
| 125 | Roseville, California, Special Tax Bonds, Community Facilities District 1 Westpark, Series 2006, 5.250%, 9/01/37 | 9/16 at 100.00 | N/R | 97,553 | ||||||||||||||
| 1,800 | Roseville, California, Special Tax Bonds, Community Facilities District 1, Fiddyment Ranch, Series 2006, 5.125%, 9/01/26 | 9/16 at 100.00 | N/R | 1,527,588 | ||||||||||||||
| 1,500 | Sacramento, California, Community Facilities District 05-1, College Square Special Tax Bonds, Series 2007, 5.900%, 9/01/37 | 9/17 at 100.00 | N/R | 1,202,325 | ||||||||||||||
| 461 | Saint Louis, Missouri, Tax Increment Financing Revenue Bonds, Grace Lofts Redevelopment Projects, Series 2007A, 6.000%, 3/27/26 | 6/11 at 100.00 | N/R | 364,010 | ||||||||||||||
| 1,710 | San Bernardino County Financing Authority, California, Revenue Bonds, Courthouse Facilities Project, Series 2007, 5.500%, 6/01/37 - NPFG Insured | No Opt. Call | Baa1 | 1,539,308 | ||||||||||||||
| 1,000 | San Diego Redevelopment Agency, California, Crossroads Redevelopment Project Tax Allocation Bonds, 2010A, 6.000%, 9/01/40 | 9/20 at 100.00 | BBB+ | 831,940 | ||||||||||||||
| 100 | San Jacinto Unified School District, Riverside County, California, Community Facilities District 2006-1 Special Tax Bonds, Infrastructure Projects, Series 2006, 5.200%, 9/01/36 | 9/16 at 100.00 | N/R | 78,534 | ||||||||||||||
| 2,500 | Stockton, California, Special Tax Bonds, Arch Road Community Facilities District 99-02, Refunding Series 2007, 5.875%, 9/01/37 | 9/17 at 102.00 | N/R | 2,057,348 | ||||||||||||||
| 530 | Turlock Public Financing Authority, California, Tax Allocation Revenue Bonds, Series 2011, 7.250%, 9/01/29 | 3/21 at 100.00 | BBB+ | 534,865 | ||||||||||||||
| 500 | Val Verde Unified School District Financing Authority, California, Special Tax Revenue, Junior Lien Refunding Series 2003, 6.250%, 10/01/28 | 10/13 at 102.00 | N/R | 462,835 | ||||||||||||||
| 500 | Victor Elementary School District, Los Angeles County, California, Community Facilities District 2005-1 Special Tax Bonds, Series 2007A, 5.500%, 9/01/37 | 9/15 at 102.00 | N/R | 370,635 | ||||||||||||||
| 595 | West Patterson Financing Authority, California, Special Tax Bonds, Community Facilities District 01-1, Refunding Series 2009B, 10.000%, 9/01/32 | 9/14 at 105.00 | N/R | 637,953 | ||||||||||||||
| 1,000 | West Sacramento Financing Authority, California, Special Tax Revenue Bonds, Refunding Series 1999F, 6.100%, 9/01/29 | 9/11 at 100.00 | N/R | 922,960 | ||||||||||||||
| 1,000 | Western Placer Unified School District, Placer County, California, Certificates of Participation, Refunding Series 2009, 5.250%, 8/01/35 – AGM Insured | 8/19 at 100.00 | AA+ | 899,140 | ||||||||||||||
Westside Union School District, California, Community Facilities District 2005-3 Special Tax Bonds, Series 2006: | ||||||||||||||||||
| 700 | 5.000%, 9/01/26 | 9/14 at 102.00 | N/R | 579,803 | ||||||||||||||
| 295 | 5.000%, 9/01/36 | 9/14 at 102.00 | N/R | 220,244 | ||||||||||||||
| 290 | Yorkville United City Business District, Illinois, Storm Water and Water Improvement Project Revenue Bonds, Series 2007, 6.000%, 1/01/27 | 1/17 at 102.00 | N/R | 163,563 | ||||||||||||||
| 135 | Yuba County, California, Special Tax Bonds, Community Facilities District 2004-1, Edgewater, Series 2005, 5.125%, 9/01/35 | 3/15 at 100.00 | N/R | 89,676 | ||||||||||||||
| 58,576 | Total Tax Obligation/Limited | 49,631,999 | ||||||||||||||||
Transportation – 7.8% | ||||||||||||||||||
| 500 | Bay Area Governments Association, California, BART SFO Extension, Airport Premium Fare Revenue Bonds, Series 2002A, 5.000%, 8/01/32 – AMBAC Insured | 8/12 at 100.00 | N/R | 400,645 | ||||||||||||||
| 1,125 | Bay Area Toll Authority, California, Revenue Bonds, San Francisco Bay Area Toll Bridge, Tender Option Bond Trust 2985, 17.325%, 4/01/17 (IF) | No Opt. Call | AA | 1,031,569 | ||||||||||||||
| 8,275 | Foothill/Eastern Transportation Corridor Agency, California, Toll Road Revenue Bonds, Refunding Series 1999, 0.000%, 1/15/30 | 4/11 at 33.12 | BBB– | 1,863,115 | ||||||||||||||
| 28 | Nuveen Investments |
| Principal Amount (000) | Description (1) | Optional Call Provisions (2) | Ratings (3) | Value | ||||||||||||||
Transportation (continued) | ||||||||||||||||||
| $ | 1,125 | Los Angeles Department of Airports, California, Revenue Bonds, Los Angeles International Airport, Tender Option Bond Trust 10-27B, 17.832%, 5/15/40 (IF) | 5/20 at 100.00 | AA | $ | 849,015 | ||||||||||||
Palm Springs Financing Authority, California, Palm Springs International Airport Revenue Bonds, Series 2006: | ||||||||||||||||||
| 35 | 5.450%, 7/01/20 (Alternative Minimum Tax) | 7/14 at 102.00 | N/R | 31,245 | ||||||||||||||
| 45 | 5.550%, 7/01/28 (Alternative Minimum Tax) | 7/14 at 102.00 | N/R | 37,978 | ||||||||||||||
Palm Springs, California, Airport Passenger Facility Charge Subordinate Refunding Revenue Bonds, Palm Springs International Airport, Series 2008: | ||||||||||||||||||
| 250 | 6.400%, 7/01/23 (Alternative Minimum Tax) | 7/14 at 102.00 | N/R | 227,053 | ||||||||||||||
| 265 | 6.500%, 7/01/27 (Alternative Minimum Tax) | 7/14 at 102.00 | N/R | 237,832 | ||||||||||||||
| 140 | Puerto Rico Industrial, Tourist, Educational, Medical and Environmental Control Facilities Financing Authority, Revenue Bonds, American Airlines Inc., Series 1985A, 6.450%, 12/01/25 | 4/11 at 100.00 | CCC+ | 120,942 | ||||||||||||||
| 35 | Puerto Rico Ports Authority, Special Facilities Revenue Bonds, American Airlines Inc., Series 1993A, 6.300%, 6/01/23 (Alternative Minimum Tax) | 6/11 at 100.00 | CCC+ | 29,697 | ||||||||||||||
| 2,320 | Puerto Rico Ports Authority, Special Facilities Revenue Bonds, American Airlines Inc., Series 1996A, 6.250%, 6/01/26 (Alternative Minimum Tax) | 6/11 at 100.00 | CCC+ | 1,914,045 | ||||||||||||||
San Joaquin Hills Transportation Corridor Agency, Orange County, California, Toll Road Revenue Refunding Bonds, Series 1997A: | ||||||||||||||||||
| 2,000 | 0.000%, 1/15/25 – NPFG Insured | No Opt. Call | Baa1 | 599,580 | ||||||||||||||
| 6,500 | 0.000%, 1/15/26 – NPFG Insured | No Opt. Call | Baa1 | 1,773,915 | ||||||||||||||
| 22,615 | Total Transportation | 9,116,631 | ||||||||||||||||
U.S. Guaranteed – 0.0% (7) | ||||||||||||||||||
| 10 | Golden State Tobacco Securitization Corporation, California, Tobacco Settlement Asset-Backed Bonds, Series 2003A-1, 6.250%, 6/01/33 (Pre-refunded 6/01/13) | 6/13 at 100.00 | AAA | 10,872 | ||||||||||||||
Utilities – 3.9% | ||||||||||||||||||
Long Beach Bond Finance Authority, California, Natural Gas Purchase Revenue Bonds, Series 2007A: | ||||||||||||||||||
| 25 | 5.500%, 11/15/30 | No Opt. Call | A | 23,291 | ||||||||||||||
| 1,000 | 5.500%, 11/15/37 | No Opt. Call | A | 901,170 | ||||||||||||||
| 7,890 | Merced Irrigation District, California, Certificates of Participation, Water and Hydroelectric Series 2008B, 0.000%, 9/01/33 | 9/16 at 32.62 | A | 1,574,528 | ||||||||||||||
| 1,400 | M-S-R Energy Authority, California, Gas Revenue Bonds, Citigroup Prepay Contracts, Series 2009A, 6.500%, 11/01/39 | No Opt. Call | A | 1,455,818 | ||||||||||||||
| 600 | M-S-R Energy Authority, California, Gas Revenue Bonds, Citigroup Prepay Contracts, Series 2009C, 6.500%, 11/01/39 | No Opt. Call | A | 623,922 | ||||||||||||||
| 10,915 | Total Utilities | 4,578,729 | ||||||||||||||||
Water and Sewer – 1.1% | ||||||||||||||||||
| 500 | Dinuba Financing Authority, California, Wastewater System Revenue Bonds, Series 2007, 5.375%, 9/01/38 | 9/17 at 100.00 | N/R | 361,745 | ||||||||||||||
| 1,000 | Guam Government Waterworks Authority, Water and Wastewater System Revenue Bonds, Series 2010, 5.500%, 7/01/30 | No Opt. Call | Ba2 | 903,940 | ||||||||||||||
| 1,500 | Total Water and Sewer | 1,265,685 | ||||||||||||||||
| $ | 157,552 | Total Investments (cost $126,610,930) – 97.4% | 113,155,731 | |||||||||||||||
Other Assets Less Liabilities – 2.6% (9) | 3,060,847 | |||||||||||||||||
Net Assets – 100% | $ | 116,216,578 | ||||||||||||||||
| Nuveen Investments | 29 |
Portfolio of Investments
Nuveen California High Yield Municipal Bond Fund (continued)
February 28, 2011
Investments in Derivatives
Forward Swaps outstanding at February 28, 2011:
| Counterparty | Notional Amount | Fund Pay/Receive Floating Rate | Floating Rate Index | Fixed Rate (Annualized) | Fixed Rate Payment Frequency | Effective Date (10) | Termination Date | Unrealized Appreciation (Depreciation) | ||||||||||||||||||||||||
Barclays Bank PLC | $ | 1,000,000 | Receive | 3-Month USD-LIBOR | 4.720 | % | Semi-Annually | 5/25/11 | 5/25/40 | $ (67,634 | ) | |||||||||||||||||||||
| (1) | All percentages shown in the Portfolio of Investments are based on net assets. |
| (2) | Optional Call Provisions (not covered by the report of independent registered public accounting firm): 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. Certain mortgage-backed securities may be subject to periodic principal paydowns. |
| (3) | Ratings (not covered by the report of independent registered public accounting firm): Using the highest of Standard & Poor’s Group (“Standard & Poor’s”), Moody’s Investor Service, Inc. (“Moody’s”) or Fitch, Inc. (“Fitch”) rating. Ratings below BBB by Standard & Poor’s, Baa by Moody’s or BBB by Fitch are considered to be below investment grade. Holdings designated N/R are not rated by any of these national rating agencies. |
| (4) | For fair value measurement disclosure purposes, investment categorized as Level 3. See Notes to Financial Statements, Footnote 1 – General Information and Significant Accounting Policies, Investment Valuation for more information. |
| (5) | Investment, or portion of investment, has been pledged to collateralize the net payment obligations for investments in derivatives and/or inverse floating rate transactions. |
| (6) | The Fund’s Adviser has concluded this issue is not likely to meet its future interest payment obligations and has directed the Fund’s custodian to cease accruing additional income on the Fund’s records. |
| (7) | Backed by an escrow or trust containing sufficient U.S. Government or U.S. Government agency securities, which ensure the timely payment of principal and interest. |
| (8) | Investment valued at fair value using methods determined in good faith by, or at the discretion of, the Board of Trustees. |
| (9) | Other Assets Less Liabilities includes Value and/or Unrealized Appreciation (Depreciation) of derivative instruments as noted in Investments in Derivatives. |
| (10) | Effective date represents the date on which both the Fund and Counterparty commence interest payment accruals on each forward swap contract. |
| N/R | Not rated. |
| (IF) | Inverse floating rate investment. |
| USD-LIBOR | United States Dollar-London Inter-Bank Offered Rate. |
See accompanying notes to financial statements.
| 30 | Nuveen Investments |
Portfolio of Investments
Nuveen California Municipal Bond Fund
February 28, 2011
| Principal Amount (000) | Description (1) | Optional Call Provisions (2) | Ratings (3) | Value | ||||||||||||||
Consumer Staples – 4.3% | ||||||||||||||||||
| $ | 3,500 | California County Tobacco Securitization Agency, Tobacco Settlement Asset-Backed Bonds, Alameda County Tobacco Asset Securitization Corporation, Series 2002, 5.750%, 6/01/29 | 6/12 at 100.00 | Baa3 | $ | 3,183,110 | ||||||||||||
| 445 | California County Tobacco Securitization Agency, Tobacco Settlement Asset-Backed Bonds, Sonoma County Tobacco Securitization Corporation, Series 2005, 4.250%, 6/01/21 | 6/15 at 100.00 | BBB | 409,222 | ||||||||||||||
| 3,500 | Golden State Tobacco Securitization Corporation, California, Tobacco Settlement Asset-Backed Bonds, Series 2007A-1, 5.750%, 6/01/47 | 6/17 at 100.00 | Baa3 | 2,337,160 | ||||||||||||||
| 12,135 | Golden State Tobacco Securitization Corporation, California, Tobacco Settlement Asset-Backed Bonds, Series 2007A-2, 0.000%, 6/01/37 | 6/22 at 100.00 | Baa3 | 6,953,961 | ||||||||||||||
| 19,580 | Total Consumer Staples | 12,883,453 | ||||||||||||||||
Education and Civic Organizations – 3.8% | ||||||||||||||||||
| 105 | California Educational Facilities Authority, Revenue Bonds, University of the Pacific, Series 2006, 5.000%, 11/01/21 | 11/15 at 100.00 | A2 | 108,954 | ||||||||||||||
| 2,960 | California Educational Facilities Authority, Revenue Bonds, Woodbury University, Series 2006, 5.000%, 1/01/36 | 1/15 at 100.00 | BBB– | 2,298,677 | ||||||||||||||
California Municipal Finance Authority, Educational Facilities Revenue Bonds, OCEAA Project, Series 2008A: | ||||||||||||||||||
| 1,000 | 6.750%, 10/01/28 | No Opt. Call | N/R | 929,590 | ||||||||||||||
| 1,500 | 7.000%, 10/01/39 | No Opt. Call | N/R | 1,363,260 | ||||||||||||||
| 1,500 | California Municipal Finance Authority, Revenue Bonds, University of La Verne, Series 2010A, 6.125%, 6/01/30 | 6/20 at 100.00 | Baa2 | 1,469,130 | ||||||||||||||
| 1,000 | California State Public Works Board, Lease Revenue Bonds, University of California Department of Education Riverside Campus Project, Series 2009B, 5.750%, 4/01/23 | 4/19 at 100.00 | A2 | 1,043,280 | ||||||||||||||
| 1,000 | California State Public Works Board, Lease Revenue Bonds, University of California, Institute Projects, Series 2005C, 5.000%, 4/01/30 – AMBAC Insured | 4/15 at 100.00 | Aa2 | 981,860 | ||||||||||||||
| 1,500 | California Statewide Community Development Authority, Certificates of Participation, San Diego Space and Science Foundation, Series 1996, 7.500%, 12/01/26 | 6/11 at 101.00 | N/R | 1,419,255 | ||||||||||||||
| 2,000 | San Diego County, California, Certificates of Participation, Burnham Institute, Series 2006, 5.000%, 9/01/34 | �� | 9/15 at 102.00 | Baa3 | 1,540,040 | |||||||||||||
| 12,565 | Total Education and Civic Organizations | 11,154,046 | ||||||||||||||||
Health Care – 21.5% | ||||||||||||||||||
| 2,250 | California Health Facilities Financing Authority, Hospital Revenue Bonds, Downey Community Hospital, Series 1993, 5.750%, 5/15/15 (4) | 5/11 at 100.00 | N/R | 1,799,325 | ||||||||||||||
| 5,000 | California Health Facilities Financing Authority, Insured Revenue Bonds, Catholic Healthcare West, Series 1994-5, 5.000%, 7/01/14 – NPFG Insured | 5/11 at 100.00 | A2 | 5,010,200 | ||||||||||||||
| 3,000 | California Health Facilities Financing Authority, Revenue Bonds, Catholic Healthcare West, Series 2009F, 5.625%, 7/01/25 | 7/19 at 100.00 | A | 3,062,790 | ||||||||||||||
| 1,000 | California Health Facilities Financing Authority, Revenue Bonds, Childrens Hospital of Orange County, Series 2009A, 6.500%, 11/01/38 | 11/19 at 100.00 | A | 1,020,460 | ||||||||||||||
| 1,360 | California Health Facilities Financing Authority, Revenue Bonds, Kaiser Permanante System, Series 2006, 5.000%, 4/01/37 | 4/16 at 100.00 | A+ | 1,147,119 | ||||||||||||||
| 2,000 | California Health Facilities Financing Authority, Revenue Bonds, Sutter Health, Series 2011B, 6.000%, 8/15/42 | 8/20 at 100.00 | AA– | 1,994,320 | ||||||||||||||
| 2,000 | California Municipal Finance Authority, Certificates of Participation, Community Hospitals of Central California Obligated Group, Series 2009, 5.500%, 2/01/39 | 2/19 at 100.00 | Baa2 | 1,698,540 | ||||||||||||||
| 1,000 | California Statewide Communities Development Authority, Revenue Bonds, Adventist Health System West, Series 2005A, 5.000%, 3/01/35 | 3/15 at 100.00 | A | 878,250 | ||||||||||||||
| Nuveen Investments | 31 |
Portfolio of Investments
Nuveen California Municipal Bond Fund (continued)
February 28, 2011
| Principal Amount (000) | Description (1) | Optional Call Provisions (2) | Ratings (3) | Value | ||||||||||||||
Health Care (continued) | ||||||||||||||||||
California Statewide Communities Development Authority, Revenue Bonds, ValleyCare Health System, Series 2007A: | ||||||||||||||||||
| $ | 2,100 | 4.800%, 7/15/17 | No Opt. Call | N/R | $ | 2,079,441 | ||||||||||||
| 1,000 | 5.000%, 7/15/22 | 7/17 at 100.00 | N/R | 902,990 | ||||||||||||||
| 7,740 | California Statewide Community Development Authority, Health Facility Revenue Refunding Bonds, Memorial Health Services, Series 2003A, 6.000%, 10/01/23 | 4/13 at 100.00 | AA– | 8,019,026 | ||||||||||||||
| 5,540 | California Statewide Community Development Authority, Insured Health Facility Revenue Bonds, Catholic Healthcare West, Series 2008K, 5.500%, 7/01/41 – AGC Insured | 7/17 at 100.00 | AA+ | 5,423,494 | ||||||||||||||
California Statewide Community Development Authority, Revenue Bonds, Daughters of Charity Health System, Series 2005A: | ||||||||||||||||||
| 1,000 | 5.250%, 7/01/30 | 7/15 at 100.00 | BBB | 866,380 | ||||||||||||||
| 2,000 | 5.000%, 7/01/39 | 7/15 at 100.00 | BBB | 1,558,240 | ||||||||||||||
| 3,670 | California Statewide Community Development Authority, Revenue Bonds, Daughters of Charity Health System, Series 2005G, 5.000%, 7/01/22 | 7/15 at 100.00 | BBB | 3,454,351 | ||||||||||||||
| 1,615 | California Statewide Community Development Authority, Revenue Bonds, Kaiser Permanente System, Series 2001C, 5.250%, 8/01/31 | 8/16 at 100.00 | A+ | 1,462,819 | ||||||||||||||
| 3,000 | California Statewide Community Development Authority, Revenue Bonds, Kaiser Permanente System, Series 2007B, 0.974%, 4/01/36 | 4/17 at 100.00 | A+ | 1,702,680 | ||||||||||||||
| 2,250 | California Statewide Community Development Authority, Revenue Bonds, Methodist Hospital Project, Series 2009, 6.750%, 2/01/38 | 8/19 at 100.00 | Aa2 | 2,446,965 | ||||||||||||||
| 4,540 | California Statewide Community Development Authority, Revenue Bonds, St. Joseph Health System, Series 2007A, 5.750%, 7/01/47 – FGIC Insured | 7/18 at 100.00 | AA– | 4,274,455 | ||||||||||||||
| 2,065 | Loma Linda, California, Hospital Revenue Bonds, Loma Linda University Medical Center, Series 2008A, 8.250%, 12/01/38 | 12/17 at 100.00 | BBB | 2,225,905 | ||||||||||||||
| 1,580 | Oak Valley Hospital District, Stanislaus County, California, Revenue Bonds, Series 2010A, 7.000%, 11/01/35 | 11/20 at 100.00 | BBB– | 1,525,917 | ||||||||||||||
| 3,625 | Palomar Pomerado Health Care District, California, Certificates of Participation, Series 2010, 6.000%, 11/01/41 | 11/20 at 100.00 | Baa3 | 3,223,350 | ||||||||||||||
| 4,500 | Santa Clara County Financing Authority, California, Insured Revenue Bonds, El Camino Hospital, Series 2007A, 5.750%, 2/01/41 – AMBAC Insured | 8/17 at 100.00 | A+ | 4,293,225 | ||||||||||||||
| 1,000 | Sierra View Local Health Care District, California, Revenue Bonds, Series 2007, 5.250%, 7/01/37 | 9/17 at 100.00 | N/R | 875,030 | ||||||||||||||
| 3,000 | Upland, California, Certificates of Participation, San Antonio Community Hospital, Series 2011, 6.500%, 1/01/41 | 1/21 at 100.00 | A | 2,976,210 | ||||||||||||||
| 67,835 | Total Health Care | 63,921,482 | ||||||||||||||||
Housing/Multifamily – 1.0% | ||||||||||||||||||
| 1,300 | California Municipal Finance Authority, Mobile Home Park Revenue Bonds, Caritas Projects Series 2010A, 6.400%, 8/15/45 | 8/20 at 100.00 | BBB– | 1,184,586 | ||||||||||||||
| 1,880 | San Dimas Housing Authority, California, Mobile Home Park Revenue Bonds, Charter Oak Mobile Home Estates Acquisition Project, Series 1998A, 5.700%, 7/01/28 | 7/11 at 100.00 | N/R | 1,688,691 | ||||||||||||||
| 3,180 | Total Housing/Multifamily | 2,873,277 | ||||||||||||||||
Housing/Single Family – 0.9% | ||||||||||||||||||
| 215 | California Housing Finance Agency, Home Mortgage Revenue Bonds, Series 2006H, 5.750%, 8/01/30 – FGIC Insured (Alternative Minimum Tax) | 2/16 at 100.00 | A | 218,391 | ||||||||||||||
| 3,000 | California State Department of Veteran Affairs, Home Purchase Revenue Bonds, Series 2007, 5.000%, 12/01/42 (Alternative Minimum Tax) | 12/16 at 100.00 | AA | 2,451,240 | ||||||||||||||
| 3,215 | Total Housing/Single Family | 2,669,631 | ||||||||||||||||
Industrials – 1.2% | ||||||||||||||||||
| 610 | California Pollution Control Financing Authority, Solid Waste Disposal Revenue Bonds, Republic Services Inc., Series 2002C, 5.250%, 6/01/23 (Mandatory put 12/01/17) (Alternative Minimum Tax) | No Opt. Call | BBB | 616,448 | ||||||||||||||
| 32 | Nuveen Investments |
| Principal Amount (000) | Description (1) | Optional Call Provisions (2) | Ratings (3) | Value | ||||||||||||||
Industrials (continued) | ||||||||||||||||||
| $ | 3,000 | California Pollution Control Financing Authority, Solid Waste Disposal Revenue Bonds, Waste Management Inc., Series 2002A, 5.000%, 1/01/22 (Alternative Minimum Tax) | 1/16 at 102.00 | BBB | $ | 3,013,770 | ||||||||||||
| 3,610 | Total Industrials | 3,630,218 | ||||||||||||||||
Long-Term Care – 4.1% | ||||||||||||||||||
ABAG Finance Authority for Non-Profit Corporations, California, Cal-Mortgage Revenue Bonds, Elder Care Alliance of Union City, Series 2004: | ||||||||||||||||||
| 1,850 | 5.400%, 8/15/24 | 8/14 at 100.00 | A– | 1,803,362 | ||||||||||||||
| 2,130 | 5.600%, 8/15/34 | 8/14 at 100.00 | A– | 1,963,136 | ||||||||||||||
| 3,000 | ABAG Finance Authority for Non-Profit Corporations, California, Health Facility Revenue Bonds, The Insitute on Aging, Series 2008A, 5.650%, 8/15/38 | 8/18 at 100.00 | A– | 2,743,080 | ||||||||||||||
| 1,000 | California Municipal Finance Authority, Revenue Bonds, Harbor Regional Center Project, Series 2009, 8.000%, 11/01/29 | 11/19 at 100.00 | Baa1 | 1,067,400 | ||||||||||||||
| 2,000 | California Municipal Finance Authority, Senior Living Revenue Bonds, Pilgrim Place at Claremont, Series 2009A, 6.125%, 5/15/39 | 5/19 at 100.00 | A– | 1,973,340 | ||||||||||||||
| 2,750 | San Diego County, California, Certificates of Participation, San Diego-Imperial Counties Developmental Services Foundation Project, Series 2002, 5.500%, 9/01/27 | 9/12 at 100.00 | Baa1 | 2,531,485 | ||||||||||||||
| 12,730 | Total Long-Term Care | 12,081,803 | ||||||||||||||||
Tax Obligation/General – 12.6% | ||||||||||||||||||
| 1,425 | Bassett Unified School District, Los Angeles County, California, General Obligation Bonds, Series 2006B, 5.250%, 8/01/30 – FGIC Insured | 8/16 at 100.00 | A– | 1,429,603 | ||||||||||||||
California State, General Obligation Bonds, Various Purpose Series 2009: | ||||||||||||||||||
| 5,000 | 5.500%, 11/01/34 | 11/19 at 100.00 | A1 | 5,014,950 | ||||||||||||||
| 4,060 | 6.000%, 11/01/39 | 11/19 at 100.00 | A1 | 4,199,623 | ||||||||||||||
| 10,000 | California State, General Obligation Bonds, Various Purpose Series 2010, 5.500%, 3/01/40 | 3/20 at 100.00 | A1 | 9,935,398 | ||||||||||||||
Central Unified School District, Fresno County, California, General Obligation Bonds, Series 2004A: | ||||||||||||||||||
| 1,000 | 5.500%, 7/01/22 – FGIC Insured | 7/14 at 100.00 | A | 1,116,520 | ||||||||||||||
| 1,500 | 5.500%, 7/01/24 – FGIC Insured | 7/14 at 100.00 | A | 1,674,780 | ||||||||||||||
| 2,435 | East Side Union High School District, Santa Clara County, California, General Obligation Bonds, 2008 Election Series 2010B, 5.000%, 8/01/25 – AGC Insured | 8/19 at 100.00 | AA+ | 2,449,707 | ||||||||||||||
| 2,000 | Murrieta Valley Unified School District, Riverside County, California, General Obligation Bonds, Series 2003A, 5.000%, 9/01/26 – FGIC Insured | 9/13 at 100.00 | Aa2 | 2,003,720 | ||||||||||||||
| 1,685 | Peralta Community College District, Alameda County, California, General Obligation Bonds, Refunding Series 2010, 5.250%, 8/01/26 | 8/20 at 100.00 | AA- | 1,756,158 | ||||||||||||||
| 275 | Roseville Joint Union High School District, Placer County, California, General Obligation Bonds, Series 2006B, 5.000%, 8/01/27 – FGIC Insured | 8/15 at 100.00 | AA– | 276,452 | ||||||||||||||
| 1,355 | San Jose-Evergreen Community College District, Santa Clara County, California, General Obligation Bonds, Series 2005A, 5.000%, 9/01/25 – NPFG Insured | 9/15 at 100.00 | Aa1 | 1,374,526 | ||||||||||||||
| 5,500 | Tahoe Forest Hospital District, Placer and Nevada Counties, California, General Obligation Bonds, Series 2010B, 5.500%, 8/01/35 | 8/18 at 100.00 | Aa3 | 5,519,690 | ||||||||||||||
| 3,500 | Yosemite Community College District, California, General Obligation Bonds, Capital Appreciation, Election 2004, Series 2010D, 0.000%, 8/01/42 | No Opt. Call | Aa2 | 766,430 | ||||||||||||||
| 39,735 | Total Tax Obligation/General | 37,517,557 | ||||||||||||||||
Tax Obligation/Limited – 27.0% | ||||||||||||||||||
| 3,000 | Alameda County Redevelopment Agency, California, Eden Area Redevelopment Project, Tax Allocation Bonds, Series 2006A, 5.000%, 8/01/36 – NPFG Insured | 8/16 at 100.00 | A2 | 2,349,270 | ||||||||||||||
| Nuveen Investments | 33 |
Portfolio of Investments
Nuveen California Municipal Bond Fund (continued)
February 28, 2011
| Principal Amount (000) | Description (1) | Optional Call Provisions (2) | Ratings (3) | Value | ||||||||||||||
Tax Obligation/Limited (continued) | ||||||||||||||||||
Brea Public Finance Authority, California, Revenue Bonds, Series 2008A: | ||||||||||||||||||
| $ | 2,105 | 7.000%, 9/01/23 | 9/16 at 102.00 | BBB+ | $ | 2,150,468 | ||||||||||||
| 2,000 | 7.125%, 9/01/26 | 9/16 at 102.00 | BBB+ | 2,015,540 | ||||||||||||||
| 1,000 | California State Public Works Board, Lease Revenue Bonds, Various Capital Projects, Series 2009G-1, 5.750%, 10/01/30 | 10/19 at 100.00 | A2 | 987,790 | ||||||||||||||
| 2,000 | California State Public Works Board, Lease Revenue Bonds, Various Capital Projects, Series 2009I-1, 6.375%, 11/01/34 | 11/19 at 100.00 | A2 | 2,054,020 | ||||||||||||||
| 3,000 | California State Public Works Board, Lease Revenue Bonds, Various Capital Projects, Series 2010A-1, 6.000%, 3/01/35 | 3/20 at 100.00 | A2 | 2,998,080 | ||||||||||||||
| 350 | Capistrano Unified School District, Orange County, California, Special Tax Bonds, Community Facilities District, Series 2005, 5.000%, 9/01/24 – FGIC Insured | 9/15 at 100.00 | BBB | 321,500 | ||||||||||||||
| 2,075 | Hesperia Community Redevelopment Agency, California, Tax Allocation Bonds, Series 2005A, 5.000%, 9/01/35 – SYNCORA GTY Insured | 9/15 at 100.00 | BBB– | 1,546,290 | ||||||||||||||
| 1,445 | Irvine, California, Unified School District, Community Facilities District 06-1 Special Tax Bonds, Series 2010, 6.700%, 9/01/35 | 9/20 at 100.00 | N/R | 1,471,400 | ||||||||||||||
Irvine, California, Unified School District, Community Facilities District Special Tax Bonds, Series 2006A: | ||||||||||||||||||
| 170 | 5.000%, 9/01/26 | 9/16 at 100.00 | N/R | 150,015 | ||||||||||||||
| 395 | 5.125%, 9/01/36 | 9/16 at 100.00 | N/R | 325,243 | ||||||||||||||
Jurupa Community Services District, California, Community Facilities District 25 Earstvale Area Special Tax Bonds, Series 2008A: | ||||||||||||||||||
| 1,000 | 8.375%, 9/01/28 | 9/18 at 100.00 | N/R | 1,031,350 | ||||||||||||||
| 3,205 | 8.875%, 9/01/38 | 9/18 at 100.00 | N/R | 3,335,379 | ||||||||||||||
| 1,300 | Lake Elsinore Public Financing Authority, California, Local Agency Revenue Bonds, Canyon Hills Improvement Area C, Series 2010A, 6.250%, 9/01/40 | 9/12 at 103.00 | N/R | 1,132,742 | ||||||||||||||
| 2,500 | Lancaster Redevelopment Agency, California, Subordinate Lien Tax Allocation Bonds, Combined Redevelopment Project Areas, Series 2003B, 5.000%, 8/01/34 – FGIC Insured | 8/13 at 100.00 | BBB+ | 1,984,875 | ||||||||||||||
| 1,870 | Lancaster Redevelopment Agency, California, Tax Allocation Refunding Bonds, Combined Area Sheriff’s Facilities Projects, Series 2004, 5.000%, 12/01/23 – SYNCORA GTY Insured | 12/14 at 100.00 | A | 1,747,627 | ||||||||||||||
| 1,120 | Lancaster Redevelopment Agency, California, Tax Allocation Refunding Bonds, Combined Fire Protection Facilities Project, Series 2004, 5.000%, 12/01/23 – SYNCORA GTY Insured | 12/14 at 100.00 | A | 1,046,707 | ||||||||||||||
| 630 | Los Angeles Community Redevelopment Agency, California, Lease Revenue Bonds, Manchester Social Services Project, Series 2005, 5.000%, 9/01/37 – AMBAC Insured | 9/15 at 100.00 | A1 | 508,927 | ||||||||||||||
| 2,500 | Los Angeles County Schools, California, Certificates of Participation, Pooled Financing Program, Regionalized Business Services Corporation, Series 2003A, 5.000%, 9/01/22 – AGM Insured | 9/13 at 100.00 | AA+ | 2,538,500 | ||||||||||||||
| 985 | Milpitas, California, Local Improvement District 20 Limited Obligation Bonds, Series 1998A, 5.700%, 9/02/18 | 3/11 at 103.00 | N/R | 975,879 | ||||||||||||||
Moreno Valley Unified School District, Riverside County, California, Special Tax Bonds, Community Facilities District, Series 2004: | ||||||||||||||||||
| 805 | 5.550%, 9/01/29 | 9/14 at 100.00 | N/R | 725,273 | ||||||||||||||
| 1,250 | 5.650%, 9/01/34 | 9/14 at 100.00 | N/R | 1,105,375 | ||||||||||||||
| 7,100 | Murrieta Redevelopment Agency, California, Tax Allocation Bonds, Series 2007A, 5.000%, 8/01/37 – NPFG Insured | 8/17 at 100.00 | A– | 5,530,544 | ||||||||||||||
| 170 | Ontario, California, Assessment District 100C Limited Obligation Improvement Bonds, California Commerce Center Phase III, Series 1991, 8.000%, 9/02/11 | 3/11 at 103.00 | N/R | 174,085 | ||||||||||||||
| 2,500 | Palm Drive Health Care District, Sonoma County, California, Certificates of Participation, Parcel Tax Secured Financing Program, Series 2010, 7.500%, 4/01/35 | No Opt. Call | BB | 2,334,400 | ||||||||||||||
| 34 | Nuveen Investments |
| Principal Amount (000) | Description (1) | Optional Call Provisions (2) | Ratings (3) | Value | ||||||||||||||
Tax Obligation/Limited (continued) | ||||||||||||||||||
| $ | 1,600 | Pomona Public Financing Authority, California, Merged Projects Revenue Bonds, Series 2007AS, 5.000%, 2/01/31 – AMBAC Insured | 2/17 at 100.00 | A | $ | 1,412,832 | ||||||||||||
| 1,150 | Poway Redevelopment Agency, California, Tax Allocation Bonds, Paugay Redevelopment Project, Series 2007, 5.000%, 6/15/30 – NPFG Insured | 6/17 at 100.00 | A | 984,860 | ||||||||||||||
| 1,645 | Rancho Cucamonga, California, Limited Obligation Improvement Bonds, Masi Plaza Assessment District 93-1, Series 1997, 6.250%, 9/02/22 | 3/11 at 100.00 | N/R | 1,646,612 | ||||||||||||||
| 305 | Rialto Redevelopment Agency, California, Tax Allocation Bonds, Merged Project Area, Series 2005A, 5.000%, 9/01/35 – SYNCORA GTY Insured | 9/15 at 100.00 | A– | 241,005 | ||||||||||||||
| 2,345 | Richmond Redevelopment Agency, California, Harbour Project Tax Allocation Bonds, Series 1998A Refunding, 5.500%, 7/01/18 – NPFG Insured | 5/11 at 100.00 | AA– | 2,352,973 | ||||||||||||||
| 2,950 | Riverside County Redevelopment Agency, California, Interstate 215 Corridor Redevelopment Project Area Tax Allocation Bonds, Series 2010E, 6.250%, 10/01/30 | 10/20 at 100.00 | A– | 2,934,955 | ||||||||||||||
| 380 | Roseville, California, Certificates of Participation, Public Facilities, Series 2003A, 5.000%, 8/01/25 – AMBAC Insured | 8/13 at 100.00 | AA– | 366,548 | ||||||||||||||
| 1,000 | Sacramento City Financing Authority, California, Lease Revenue Refunding Bonds, Series 1993A, 5.400%, 11/01/20 – AMBAC Insured | No Opt. Call | A1 | 1,033,030 | ||||||||||||||
| 500 | Sacramento City Financing Authority, California, Lease Revenue Refunding Bonds, Series 1993B, 5.400%, 11/01/20 | No Opt. Call | A1 | 516,515 | ||||||||||||||
| 2,880 | San Francisco Redevelopment Agency, California, Lease Revenue Bonds, Moscone Convention Center, Series 2004, 5.250%, 7/01/24 – AMBAC Insured | 7/11 at 102.00 | AA– | 2,970,288 | ||||||||||||||
| 6,475 | San Marcos Redevelopment Agency, California, Tax Allocation Bonds, Affordable Housing Project, Series 1997A, 6.000%, 10/01/27 (Alternative Minimum Tax) | 4/11 at 100.00 | AA– | 6,476,942 | ||||||||||||||
| 1,505 | San Mateo Union High School District, San Mateo County, California, Certificates of Participation, Phase 1, Series 2007A, 5.000%, 12/15/30 – AMBAC Insured | 12/17 at 100.00 | AA– | 1,355,207 | ||||||||||||||
| 2,140 | Santa Ana Community Redevelopment Agency, California, Tax Allocation Bonds, Merged Project Area, Series 2011A, 6.750%, 9/01/28 | 3/21 at 100.00 | A | 2,205,869 | ||||||||||||||
| 4,000 | Shafter Joint Powers Financing Authority, California, Lease Revenue Bonds, Community Correctional Facility Acquisition Project, Series 1997A, 6.050%, 1/01/17 | 7/11 at 100.00 | A2 | 4,007,440 | ||||||||||||||
| 6,700 | Travis Unified School District, Solano County, California, Certificates of Participation, Series 2006, 5.000%, 9/01/31 – FGIC Insured | 9/16 at 100.00 | N/R | 5,228,278 | ||||||||||||||
| 2,500 | Tulare Public Financing Authority, California, Lease Revenue Bonds, Series 2008, 5.250%, 4/01/27 – AGC Insured | 4/18 at 100.00 | AA+ | 2,566,075 | ||||||||||||||
| 1,225 | Turlock Public Financing Authority, California, Tax Allocation Revenue Bonds, Series 2011, 7.000%, 9/01/25 | 3/21 at 100.00 | BBB+ | 1,234,616 | ||||||||||||||
| 2,000 | Tustin, California, Community Facilities District 2007-1, Legacy-Retail Center Special Tax Bonds, 6.000%, 9/01/37 | 9/17 at 100.00 | N/R | 1,806,920 | ||||||||||||||
| 230 | Vallejo Public Financing Authority, California, Limited Obligation Revenue Refinancing Bonds, Fairground Drive Assessment District 65, Series 1998, 5.700%, 9/02/11 | No Opt. Call | N/R | 233,388 | ||||||||||||||
| 86,005 | Total Tax Obligation/Limited | 80,115,632 | ||||||||||||||||
Transportation – 4.5% | ||||||||||||||||||
| 2,750 | Foothill/Eastern Transportation Corridor Agency, California, Toll Road Revenue Refunding Bonds, Series 1999, 5.875%, 1/15/28 | 1/14 at 101.00 | BBB- | 2,444,888 | ||||||||||||||
Palm Springs Financing Authority, California, Palm Springs International Airport Revenue Bonds, Series 2006: | ||||||||||||||||||
| 285 | 5.450%, 7/01/20 (Alternative Minimum Tax) | 7/14 at 102.00 | N/R | 254,420 | ||||||||||||||
| 215 | 5.550%, 7/01/28 (Alternative Minimum Tax) | 7/14 at 102.00 | N/R | 181,451 | ||||||||||||||
| 3,970 | Port of Oakland, California, Revenue Bonds, Series 2000K, 5.750%, 11/01/29 – FGIC Insured | 5/11 at 100.00 | A | 3,784,125 | ||||||||||||||
| Nuveen Investments | 35 |
Portfolio of Investments
Nuveen California Municipal Bond Fund (continued)
February 28, 2011
| Principal Amount (000) | Description (1) | Optional Call Provisions (2) | Ratings (3) | Value | ||||||||||||||
Transportation (continued) | ||||||||||||||||||
| $ | 550 | San Francisco Airports Commission, California, Revenue Bonds, San Francisco International Airport, Second Series 1999, Issue 23A, 5.000%, 5/01/30 – FGIC Insured (Alternative Minimum Tax) | 5/11 at 100.00 | A1 | $ | 493,279 | ||||||||||||
| 4,000 | San Francisco Airports Commission, California, Revenue Bonds, San Francisco International Airport, Second Series 2002, Issue 32G, 5.000%, 5/01/24 – FGIC Insured | 5/16 at 100.00 | A1 | 4,042,760 | ||||||||||||||
| 2,000 | San Francisco Airports Commission, California, Revenue Bonds, San Francisco International Airport, Second Series A of 2008, 6.500%, 5/01/19 (Mandatory put 5/01/12) (Alternative Minimum Tax) | No Opt. Call | A1 | 2,123,240 | ||||||||||||||
| 13,770 | Total Transportation | 13,324,163 | ||||||||||||||||
U.S. Guaranteed – 7.2% (5) | ||||||||||||||||||
| 2,500 | Daly City Housing Development Finance Agency, California, Mobile Home Park Revenue Bonds, Franciscan Mobile Home Park Project, Series 2002A, 5.800%, 12/15/25 (Pre-refunded 12/15/13) | 12/13 at 102.00 | N/R | (5) | 2,880,450 | |||||||||||||
| 1,035 | Escondido Union School District, San Diego County, California, General Obligation Bonds, Series 2002A, 5.250%, 8/01/23 (Pre-refunded 8/01/12) – AGM Insured | 8/12 at 100.00 | AA+ | (5) | 1,105,142 | |||||||||||||
| 3,695 | Golden State Tobacco Securitization Corporation, California, Tobacco Settlement Asset-Backed Bonds, Series 2003A-1, 6.250%, 6/01/33 (Pre-refunded 6/01/13) | 6/13 at 100.00 | AAA | 4,017,241 | ||||||||||||||
Grossmont-Cuyamaca Community College District, California, General Obligation Bonds, Series 2005B: | ||||||||||||||||||
| 4,080 | 5.000%, 8/01/21 (Pre-refunded 8/01/15) – FGIC Insured | 8/15 at 100.00 | AA | (5) | 4,686,859 | |||||||||||||
| 2,350 | 5.000%, 8/01/26 (Pre-refunded 8/01/15) – FGIC Insured | 8/15 at 100.00 | AA | (5) | 2,699,539 | |||||||||||||
| 1,655 | Los Angeles Harbors Department, California, Revenue Bonds, Series 1988, 7.600%, 10/01/18 (ETM) | No Opt. Call | AAA | 1,988,118 | ||||||||||||||
| 1,400 | Port of Oakland, California, Revenue Bonds, Series 2002M, 5.250%, 11/01/19 (Pre-refunded 11/01/12) – FGIC Insured | 11/12 at 100.00 | A | (5) | 1,510,404 | |||||||||||||
| 2,475 | San Francisco Airports Commission, California, Revenue Refunding Bonds, San Francisco International Airport, Second Series 2002, Issue 28B, 5.250%, 5/01/22 (Pre-refunded 5/01/12) – NPFG Insured | 5/12 at 100.00 | A1 | (5) | 2,615,704 | |||||||||||||
| 19,190 | Total U.S. Guaranteed | 21,503,457 | ||||||||||||||||
Utilities – 5.3% | ||||||||||||||||||
| 2,445 | California Statewide Community Development Authority, Certificates of Participation Refunding, Rio Bravo Fresno Project, Series 1999A, 6.500%, 12/01/18 (6) | 6/11 at 100.00 | N/R | 2,161,625 | ||||||||||||||
| 500 | Los Angeles Department of Water and Power, California, Power System Revenue Bonds, Series 2003A-2, 5.000%, 7/01/21 – NPFG Insured | 7/13 at 100.00 | AA– | 528,650 | ||||||||||||||
Merced Irrigation District, California, Certificates of Participation, Water and Hydroelectric Series 2008B: | ||||||||||||||||||
| 4,535 | 0.000%, 9/01/23 | 9/16 at 64.56 | A | 2,000,797 | ||||||||||||||
| 27,110 | 0.000%, 9/01/33 | 9/16 at 32.62 | A | 5,410,072 | ||||||||||||||
| 12,000 | 0.000%, 9/01/38 | 9/16 at 23.21 | A | 1,634,520 | ||||||||||||||
| 615 | Merced Irrigation District, California, Electric System Revenue Bonds, Series 2005, 5.125%, 9/01/31 – SYNCORA GTY Insured | 9/15 at 100.00 | N/R | 512,633 | ||||||||||||||
| 3,470 | Puerto Rico Industrial, Tourist, Educational, Medical and Environmental Control Facilities Financing Authority, Co-Generation Facility Revenue Bonds, Series 2000A, 6.625%, 6/01/26 (Alternative Minimum Tax) | 6/11 at 100.00 | Baa3 | 3,476,697 | ||||||||||||||
| 50,675 | Total Utilities | 15,724,994 | ||||||||||||||||
Water and Sewer – 4.3% | ||||||||||||||||||
| 2,000 | Brentwood Infrastructure Financing Authority, California, Water Revenue Bonds, Series 2008, 5.750%, 7/01/38 | 7/18 at 100.00 | AA | 2,039,980 | ||||||||||||||
| 2,000 | California Statewide Community Development Authority, Water and Wastewater Revenue Bonds, Pooled Financing Program, Series 2003A, 5.250%, 10/01/23 – AGM Insured | 10/13 at 100.00 | AA+ | 2,020,860 | ||||||||||||||
| 36 | Nuveen Investments |
| Principal Amount (000) | Description (1) | Optional Call Provisions (2) | Ratings (3) | Value | ||||||||||||||
Water and Sewer (continued) | ||||||||||||||||||
| $ | 1,680 | Castaic Lake Water Agency, California, Certificates of Participation, Series 2004A, 5.000%, 8/01/20 – AMBAC Insured | 8/14 at 100.00 | AA | $ | 1,748,074 | ||||||||||||
| 1,250 | Cucamonga Valley Water District, California, Certificates of Participation, Series 2006, 5.000%, 9/01/36 – NPFG Insured | 9/16 at 100.00 | AA– | 1,167,263 | ||||||||||||||
| 3,745 | Los Angeles, California, Wastewater System Revenue Bonds, Refunding Series 2009A, 5.750%, 6/01/26 | 6/19 at 100.00 | AA | 4,076,770 | ||||||||||||||
| 1,770 | Pomona Public Finance Authority, California, Revenue Bonds, Water Facilities Project, Series 2007AY, 5.000%, 5/01/27 – AMBAC Insured | 5/17 at 100.00 | A+ | 1,732,423 | ||||||||||||||
| 12,445 | Total Water and Sewer | 12,785,370 | ||||||||||||||||
| $ | 344,535 | Total Investments (cost $303,981,418) – 97.7% | 290,185,083 | |||||||||||||||
Other Assets Less Liabilities – 2.3% | 6,969,474 | |||||||||||||||||
Net Assets – 100% | $ | 297,154,557 | ||||||||||||||||
| (1) | All percentages shown in the Portfolio of Investments are based on net assets. |
| (2) | Optional Call Provisions (not covered by the report of independent registered public accounting firm): 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. Certain mortgage-backed securities may be subject to periodic principal paydowns. |
| (3) | Ratings (not covered by the report of independent registered public accounting firm): Using the highest of Standard & Poor’s Group (“Standard & Poor’s”), Moody’s Investor Service, Inc. (“Moody’s”) or Fitch, Inc. (“Fitch”) rating. Ratings below BBB by Standard & Poor’s, Baa by Moody’s or BBB by Fitch are considered to be below investment grade. Holdings designated N/R are not rated by any of these national rating agencies. |
| (4) | For fair value measurement disclosure purposes, investment categorized as Level 3. See Notes to Financial Statements, Footnote 1 – General Information and Significant Accounting Policies, Investment Valuation for more information. |
| (5) | Backed by an escrow or trust containing sufficient U.S. Government or U.S. Government agency securities, which ensure the timely payment of principal and interest. Such investments are normally considered to be equivalent to AAA rated securities. |
| (6) | This debt has been restructured to accommodate capital maintenance at the facility. Major highlights of the debt restructuring include the following: (1) the principal balance outstanding on and after December 1, 2007, shall accrue interest at a rate of 6.500% per annum commencing December 1, 2007; (2) the interest shall accrue but not be payable on June 1, 2008 or December 1, 2008, but shall instead be deferred and paid by the end of calendar year 2011; (3) no principal component shall be pre-payable from the Minimum Sinking Fund Account during calendar years 2008 and 2009 but such pre-payments shall recommence beginning in calendar year 2010 according to a revised schedule. Management believes that the restructuring is in the best interest of Fund shareholders and that it is more-likely-than-not that the borrower will fulfill its obligation. Consequently, the Fund continues to accrue interest on this obligation. |
| N/R | Not rated. |
| (ETM) | Escrowed to maturity. |
See accompanying notes to financial statements.
| Nuveen Investments | 37 |
Portfolio of Investments
Nuveen California Insured Municipal Bond Fund
February 28, 2011
| Principal Amount (000) | Description (1) | Optional Call Provisions (2) | Ratings (3) | Value | ||||||||||||||
Education and Civic Organizations – 5.6% | ||||||||||||||||||
| $ | 750 | California Educational Facilities Authority, Student Loan Revenue Bonds, Cal Loan Program, Series 2001A, 5.400%, 3/01/21 – NPFG Insured (Alternative Minimum Tax) | 3/11 at 100.00 | Baa1 | $ | 749,963 | ||||||||||||
| 1,500 | California State Public Works Board, Lease Revenue Bonds, University of California, Institute Projects, Series 2005C, 5.000%, 4/01/30 – AMBAC Insured | 4/15 at 100.00 | Aa2 | 1,472,790 | ||||||||||||||
| 2,250 | California State University, Systemwide Revenue Bonds, Series 2005A, 5.000%, 11/01/25 – AMBAC Insured | 5/15 at 100.00 | Aa2 | 2,254,050 | ||||||||||||||
| 5,000 | Long Beach Bond Financing Authority, California, Lease Revenue Refunding Bonds, Long Beach Aquarium of the South Pacific, Series 2001, 5.250%, 11/01/30 – AMBAC Insured | 11/11 at 101.00 | BBB | 4,414,700 | ||||||||||||||
| 9,500 | Total Education and Civic Organizations | 8,891,503 | ||||||||||||||||
Health Care – 10.3% | ||||||||||||||||||
| 2,000 | Antelope Valley Healthcare District, California, Insured Revenue Refunding Bonds, Series 1997A, 5.200%, 1/01/27 – AGM Insured | 7/11 at 100.00 | AA+ | 1,850,220 | ||||||||||||||
| 2,000 | California Health Facilities Financing Authority, Refunding Revenue Bonds, Stanford Hospital and Clinics, Refunding Series 2010B, 5.750%, 11/15/31 | 11/20 at 100.00 | Aa3 | 2,061,340 | ||||||||||||||
| 2,500 | California Health Facilities Financing Authority, Revenue Bonds, Kaiser Permanante System, Series 2006, 5.250%, 3/01/45 | 3/16 at 100.00 | A+ | 2,143,100 | ||||||||||||||
| 4,000 | California Statewide Community Development Authority, Certificates of Participation, Sutter Health Obligated Group, Series 1999, 5.500%, | 8/11 at 100.00 | AA+ | 3,937,200 | ||||||||||||||
| 1,000 | California Statewide Community Development Authority, Revenue Bonds, Daughters of Charity Health System, Series 2005A, 5.250%, 7/01/30 | 7/15 at 100.00 | BBB | 866,380 | ||||||||||||||
| 5,685 | California Statewide Community Development Authority, Revenue Bonds, St. Joseph Health System, Series 2007A, 5.750%, 7/01/47 – FGIC Insured | 7/18 at 100.00 | AA- | 5,352,484 | ||||||||||||||
| 17,185 | Total Health Care | 16,210,724 | ||||||||||||||||
Housing/Multifamily – 5.5% | ||||||||||||||||||
| 4,180 | California Statewide Community Development Authority, Multifamily Housing Revenue Senior Bonds, Westgate Courtyards Apartments, Series 2001X-1, 5.420%, 12/01/34 – AMBAC Insured (Alternative Minimum Tax) | 12/11 at 100.00 | N/R | 3,504,428 | ||||||||||||||
| 3,865 | Los Angeles, California, GNMA Mortgage-Backed Securities Program Multifamily Housing Revenue Bonds, Park Plaza West Senior Apartments, Series 2001B, 5.400%, 1/20/31 (Alternative Minimum Tax) | 7/11 at 102.00 | AAA | 3,864,768 | ||||||||||||||
| 1,285 | Santa Cruz County Housing Authority, California, GNMA Collateralized Multifamily Housing Revenue Bonds, Northgate Apartments, Series 1999A, 5.500%, 7/20/40 (Alternative Minimum Tax) | 7/11 at 100.00 | AAA | 1,264,671 | ||||||||||||||
| 9,330 | Total Housing/Multifamily | 8,633,867 | ||||||||||||||||
Housing/Single Family – 1.9% | ||||||||||||||||||
| 1,735 | California Department of Veterans Affairs, Home Purchase Revenue Bonds, Series 2002A, 5.300%, 12/01/21 – AMBAC Insured | 6/12 at 101.00 | AA | 1,774,992 | ||||||||||||||
| 190 | California Housing Finance Agency, Home Mortgage Revenue Bonds, Series 2006H, 5.750%, 8/01/30 – FGIC Insured (Alternative Minimum Tax) | 2/16 at 100.00 | A | 192,996 | ||||||||||||||
| 1,025 | California Rural Home Mortgage Finance Authority, FNMA Mortgage-Backed Securities Program Single Family Mortgage Revenue Bonds, Series 2002D, 5.250%, 6/01/34 (Alternative Minimum Tax) | 6/12 at 101.00 | Aaa | 1,043,891 | ||||||||||||||
| 2,950 | Total Housing/Single Family | 3,011,879 | ||||||||||||||||
Tax Obligation/General – 25.7% | ||||||||||||||||||
| 1,000 | Bonita Unified School District, San Diego County, California, General Obligation Bonds, Series 2004A, 5.250%, 8/01/20 – NPFG Insured | 8/14 at 100.00 | AA– | 1,067,550 | ||||||||||||||
| 6,900 | Central Unified School District, Fresno County, California, General Obligation Bonds, Series 2006B, 5.000%, 8/01/31 – AGM Insured | 8/16 at 100.00 | AA+ | 6,532,161 | ||||||||||||||
| 38 | Nuveen Investments |
| Principal Amount (000) | Description (1) | Optional Call Provisions (2) | Ratings (3) | Value | ||||||||||||||
Tax Obligation/General (continued) | ||||||||||||||||||
| $ | 2,040 | Chaffey Joint Union High School District, San Bernardino County, California, General Obligation Bonds, Series 2005, 5.000%, 8/01/23 – FGIC Insured | 8/15 at 100.00 | AA– | $ | 2,098,160 | ||||||||||||
| 1,365 | El Segundo Unified School District, Los Angeles County, California, General Obligation Bonds, Series 2004, 5.250%, 9/01/20 – FGIC Insured | 9/14 at 100.00 | AA– | 1,474,487 | ||||||||||||||
| 2,285 | Folsom Cordova Unified School District, Sacramento County, California, General Obligation Bonds, School Facilities Improvement District 1, Series 2004B, 5.000%, 10/01/21 – NPFG Insured | 10/14 at 100.00 | Aa3 | 2,355,424 | ||||||||||||||
| 1,185 | Folsom Cordova Unified School District, Sacramento County, California, General Obligation Bonds, School Facilities Improvement District 2, Series 2004B, 5.000%, 10/01/27 – AGM Insured | 10/14 at 100.00 | AA+ | 1,187,643 | ||||||||||||||
Glendora Unified School District, Los Angeles County, California, General Obligation Bonds, Series 2006A: | ||||||||||||||||||
| 1,900 | 5.250%, 8/01/24 – NPFG Insured | 8/16 at 100.00 | Aa2 | 1,986,165 | ||||||||||||||
| 1,000 | 5.250%, 8/01/25 – NPFG Insured | 8/16 at 100.00 | Aa2 | 1,037,660 | ||||||||||||||
| 5,000 | Grossmont Healthcare District, California, General Obligation Bonds, Series 2007A, 5.000%, 7/15/37 – AMBAC Insured | 7/17 at 100.00 | Aa2 | 4,531,350 | ||||||||||||||
| 1,330 | Imperial Community College District, Imperial County, California, General Obligation Bonds, Series 2005, 5.000%, 8/01/23 – FGIC Insured | 8/14 at 100.00 | Aa3 | 1,363,609 | ||||||||||||||
| 1,460 | Jurupa Unified School District, Riverside County, California, General Obligation Bonds, Series 2004, 5.000%, 8/01/24 – FGIC Insured | 8/13 at 100.00 | A+ | 1,471,111 | ||||||||||||||
| 2,405 | Oak Valley Hospital District, Stanislaus County, California, General Obligation Bonds, Series 2005, 5.000%, 7/01/31 – FGIC Insured | 7/14 at 101.00 | A1 | 2,171,450 | ||||||||||||||
| 270 | Roseville Joint Union High School District, Placer County, California, General Obligation Bonds, Series 2006B, 5.000%, 8/01/27 – FGIC Insured | 8/15 at 100.00 | AA– | 271,426 | ||||||||||||||
| 1,590 | Sacramento City Unified School District, Sacramento County, California, General Obligation Bonds, Series 2005, 5.000%, 7/01/27 – NPFG Insured | 7/15 at 100.00 | Aa2 | 1,593,896 | ||||||||||||||
| 4,070 | San Benito Health Care District, California, General Obligation Bonds, Series 2005, 5.000%, 7/01/31 – SYNCORA GTY Insured | 7/14 at 101.00 | BBB+ | 3,621,405 | ||||||||||||||
| 1,000 | San Ramon Valley Unified School District, Contra Costa County, California, General Obligation Bonds, Series 2004, 5.000%, 8/01/24 – AGM Insured | 8/14 at 100.00 | AA+ | 1,029,550 | ||||||||||||||
| 3,040 | Sulphur Springs Union School District, Los Angeles County, California, General Obligation Bonds, Series 1991A, 0.000%, 9/01/15 – NPFG Insured | No Opt. Call | Baa1 | 2,574,941 | ||||||||||||||
| 3,000 | Tahoe Forest Hospital District, Placer and Nevada Counties, California, General Obligation Bonds, Series 2010B, 5.500%, 8/01/35 | 8/18 at 100.00 | Aa3 | 3,010,740 | ||||||||||||||
| 1,000 | Washington Unified School District, Yolo County, California, General Obligation Bonds, Series 2004A, 5.000%, 8/01/22 – FGIC Insured | 8/13 at 100.00 | A+ | 1,039,520 | ||||||||||||||
| 41,840 | Total Tax Obligation/General | 40,418,248 | ||||||||||||||||
Tax Obligation/Limited – 25.8% | ||||||||||||||||||
| 1,915 | Alameda County Redevelopment Agency, California, Eden Area Redevelopment Project, Tax Allocation Bonds, Series 2006A, 5.000%, 8/01/36 – NPFG Insured | 8/16 at 100.00 | A2 | 1,499,617 | ||||||||||||||
Anaheim Public Finance Authority, California, Subordinate Lease Revenue Bonds, Public Improvement Project, Series 1997C: | ||||||||||||||||||
| 15,000 | 0.000%, 9/01/34 – AGM Insured | No Opt. Call | AA+ | 2,902,650 | ||||||||||||||
| 10,000 | 0.000%, 9/01/36 – AGM Insured | No Opt. Call | AA+ | 1,666,300 | ||||||||||||||
| 195 | Barstow Redevelopment Agency, California, Tax Allocation Bonds, Central Redevelopment Project, Series 1994A, 7.000%, 9/01/14 – NPFG Insured | No Opt. Call | Baa1 | 213,244 | ||||||||||||||
| 1,655 | Bell Community Housing Authority, California, Lease Revenue Bonds, Series 2005, 5.000%, 10/01/36 – AMBAC Insured | 10/15 at 100.00 | N/R | 1,140,494 | ||||||||||||||
| 2,250 | Brea and Olinda Unified School District, Orange County, California, Certificates of Participation Refunding, Series 2002A, 5.125%, 8/01/26 – AGM Insured | 8/11 at 101.00 | AA+ | 2,254,028 | ||||||||||||||
| 1,960 | California Infrastructure Economic Development Bank, Revenue Bonds, North County Center for Self-Sufficiency Corporation, Series 2004, 5.000%, 12/01/25 – AMBAC Insured | 12/13 at 100.00 | AA | 1,976,915 | ||||||||||||||
| Nuveen Investments | 39 |
Portfolio of Investments
Nuveen California Insured Municipal Bond Fund (continued)
February 28, 2011
| Principal Amount (000) | Description (1) | Optional Call Provisions (2) | Ratings (3) | Value | ||||||||||||||
Tax Obligation/Limited (continued) | ||||||||||||||||||
| $ | 335 | Capistrano Unified School District, Orange County, California, Special Tax Bonds, Community Facilities District, Series 2005, 5.000%, 9/01/24 – FGIC Insured | 9/15 at 100.00 | BBB | $ | 307,721 | ||||||||||||
| 1,400 | Chula Vista Public Financing Authority, California, Pooled Community Facility District Assessment Revenue Bonds, Series 2005A, 5.000%, 9/01/29 – NPFG Insured | 9/15 at 100.00 | Baa1 | 1,183,126 | ||||||||||||||
| 2,480 | Golden State Tobacco Securitization Corporation, California, Enhanced Tobacco Settlement Asset-Backed Revenue Bonds, Series 2005A, 5.000%, 6/01/45 – AMBAC Insured | 6/15 at 100.00 | A2 | 1,988,166 | ||||||||||||||
| 1,840 | Hawthorne Community Redevelopment Agency, California, Project Area 2 Tax Allocation Bonds, Series 2006, 5.000%, 9/01/26 – SYNCORA GTY Insured | 9/16 at 100.00 | A– | 1,634,619 | ||||||||||||||
| 4,555 | Long Beach Bond Finance Authority, California, Multiple Project Tax Allocation Bonds, Housing and Gas Utility Financing Project Areas, Series 2005A-1, 5.000%, 8/01/35 – AMBAC Insured | 8/15 at 100.00 | BBB+ | 3,600,363 | ||||||||||||||
| 1,830 | Los Angeles Community Redevelopment Agency, California, Lease Revenue Bonds, Manchester Social Services Project, Series 2005, 5.000%, 9/01/37 – AMBAC Insured | 9/15 at 100.00 | A1 | 1,478,311 | ||||||||||||||
| 1,000 | Los Angeles Community Redevelopment Agency, California, Tax Allocation Bonds, Bunker Hill Project, Series 2004A, 5.000%, 12/01/20 – AGM Insured | 12/14 at 100.00 | AA+ | 1,042,310 | ||||||||||||||
| 14,050 | Paramount Redevelopment Agency, California, Tax Allocation Refunding Bonds, Redevelopment Project Area 1, Series 1998, 0.000%, 8/01/26 – NPFG Insured | No Opt. Call | A– | 4,993,651 | ||||||||||||||
| 1,150 | Poway Redevelopment Agency, California, Tax Allocation Bonds, Paugay Redevelopment Project, Series 2007, 5.000%, 6/15/30 – NPFG Insured | 6/17 at 100.00 | A | 984,860 | ||||||||||||||
| 290 | Rialto Redevelopment Agency, California, Tax Allocation Bonds, Merged Project Area, Series 2005A, 5.000%, 9/01/35 – SYNCORA GTY Insured | 9/15 at 100.00 | A– | 229,152 | ||||||||||||||
| 8,000 | Riverside County, California, Asset Leasing Corporate Leasehold Revenue Bonds, Riverside County Hospital Project, Series 1997B, 5.000%, 6/01/19 – NPFG Insured | 6/12 at 101.00 | Baa1 | 8,030,158 | ||||||||||||||
| 360 | Roseville, California, Certificates of Participation, Public Facilities, Series 2003A, 5.000%, 8/01/25 – AMBAC Insured | 8/13 at 100.00 | AA– | 347,256 | ||||||||||||||
| 3,560 | Roseville, California, Special Tax Bonds, Community Facilities District 1 – Woodcreek West, Series 2005, 5.000%, 9/01/30 – AMBAC Insured | 9/15 at 100.00 | A– | 3,107,631 | ||||||||||||||
| 73,825 | Total Tax Obligation/Limited | 40,580,572 | ||||||||||||||||
Transportation – 10.7% | ||||||||||||||||||
| 6,500 | Foothill/Eastern Transportation Corridor Agency, California, Toll Road Revenue Bonds, Series 1995A, 5.000%, 1/01/35 – NPFG Insured | 7/11 at 100.00 | Baa1 | 4,962,425 | ||||||||||||||
| 3,255 | Foothill/Eastern Transportation Corridor Agency, California, Toll Road Revenue Refunding Bonds, Series 1999, 5.750%, 1/15/40 – NPFG Insured | 7/11 at 100.50 | Baa1 | 2,723,491 | ||||||||||||||
| 1,985 | Port of Oakland, California, Revenue Bonds, Series 2000K, 5.750%, 11/01/29 – FGIC Insured | 5/11 at 100.00 | A | 1,892,062 | ||||||||||||||
| 5,000 | San Francisco Airports Commission, California, Revenue Refunding Bonds, San Francisco International Airport, Second Series 2001, Issue 27A, 5.250%, 5/01/31 – NPFG Insured (Alternative Minimum Tax) | 5/11 at 100.00 | A1 | 4,583,300 | ||||||||||||||
| 1,290 | San Francisco Airports Commission, California, Special Facilities Lease Revenue Bonds, San Francisco International Airport, SFO Fuel Company LLC, Series 1997A, 5.250%, 1/01/22 – AMBAC Insured (Alternative Minimum Tax) | 7/11 at 100.00 | A3 | 1,290,116 | ||||||||||||||
| 1,320 | San Francisco Airports Commission, California, Special Facilities Lease Revenue Bonds, San Francisco International Airport, SFO Fuel Company LLC, Series 2000A, 6.100%, 1/01/20 – AGM Insured (Alternative Minimum Tax) | 7/11 at 100.00 | AA+ | 1,322,284 | ||||||||||||||
| 19,350 | Total Transportation | 16,773,678 | ||||||||||||||||
| 40 | Nuveen Investments |
| Principal Amount (000) | Description (1) | Optional Call Provisions (2) | Ratings (3) | Value | ||||||||||||||
U.S. Guaranteed – 1.6% (4) | ||||||||||||||||||
| $ | 390 | Barstow Redevelopment Agency, California, Tax Allocation Bonds, Central Redevelopment Project, Series 1994A, 7.000%, 9/01/14 – NPFG Insured (ETM) | No Opt. Call | BBB | (4) | $ | 435,299 | |||||||||||
| 2,000 | Los Angeles Unified School District, California, General Obligation Bonds, Series 2002E, 5.125%, 1/01/27 (Pre-refunded 7/01/12) – NPFG Insured | 7/12 at 100.00 | AA– | (4) | 2,124,780 | |||||||||||||
| 2,390 | Total U.S. Guaranteed | 2,560,079 | ||||||||||||||||
Utilities – 5.8% | ||||||||||||||||||
| 4,000 | California Pollution Control Financing Authority, Remarketed Revenue Bonds, Pacific Gas and Electric Company, Series 1996A, 5.350%, 12/01/16 – NPFG Insured (Alternative Minimum Tax) | 4/11 at 102.00 | A3 | 4,089,640 | ||||||||||||||
| 595 | Merced Irrigation District, California, Electric System Revenue Bonds, Series 2005, 5.125%, 9/01/31 – SYNCORA GTY Insured | 9/15 at 100.00 | N/R | 495,962 | ||||||||||||||
| 1,950 | Salinas Valley Solid Waste Authority, California, Revenue Bonds, Series 2002, 5.250%, 8/01/27 – AMBAC Insured (Alternative Minimum Tax) | 8/12 at 100.00 | A+ | 1,763,502 | ||||||||||||||
| 2,700 | Santa Clara, California, Subordinate Electric Revenue Bonds, Series 2003A, 5.000%, 7/01/23 – NPFG Insured | 7/13 at 100.00 | A1 | 2,766,312 | ||||||||||||||
| 9,245 | Total Utilities | 9,115,416 | ||||||||||||||||
Water and Sewer – 1.9% | ||||||||||||||||||
| 1,000 | Brentwood Infrastructure Financing Authority, California, Water Revenue Bonds, Series 2008, 5.750%, 7/01/38 | 7/18 at 100.00 | AA | 1,019,990 | ||||||||||||||
| 1,000 | Fortuna Public Financing Authority, California, Wastewater Revenue Bonds, Series 2006, 5.000%, 10/01/36 – AGM Insured | 10/16 at 100.00 | AA+ | 864,730 | ||||||||||||||
| 1,000 | Orange County Water District, California, Revenue Certificates of Participation, Series 2005B, 5.000%, 8/15/24 – NPFG Insured | 2/15 at 100.00 | AAA | 1,043,980 | ||||||||||||||
| 3,000 | Total Water and Sewer | 2,928,700 | ||||||||||||||||
| $ | 188,615 | Total Investments (cost $161,148,427) – 94.8% | 149,124,666 | |||||||||||||||
Other Assets Less Liabilities – 5.2% | 8,125,644 | |||||||||||||||||
Net Assets – 100% | $ | 157,250,310 | ||||||||||||||||
| The Fund intends to invest at least 80% of its net assets in municipal securities that are covered by insurance guaranteeing the timely payment of principal and interest. See Notes to Financial Statements, Footnote 1 – General Information and Significant Accounting Policies, Insurance for more information. |
| (1) | All percentages shown in the Portfolio of Investments are based on net assets. |
| (2) | Optional Call Provisions (not covered by the report of independent registered public accounting firm): 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. Certain mortgage-backed securities may be subject to periodic principal paydowns. |
| (3) | Ratings (not covered by the report of independent registered public accounting firm): Using the highest of Standard & Poor’s Group (“Standard & Poor’s”), Moody’s Investor Service, Inc. (“Moody’s”) or Fitch, Inc. (“Fitch”) rating. Ratings below BBB by Standard & Poor’s, Baa by Moody’s or BBB by Fitch are considered to be below investment grade. Holdings designated N/R are not rated by any of these national rating agencies. |
| (4) | Backed by an escrow or trust containing sufficient U.S. Government or U.S. Government agency securities, which ensure the timely payment of principal and interest. Such investments are normally considered to be equivalent to AAA rated securities. |
| N/R | Not rated. |
| (ETM) | Escrowed to maturity. |
See accompanying notes to financial statements.
| Nuveen Investments | 41 |
Statement of Assets and Liabilities
February 28, 2011
| California High Yield | California | California Insured | ||||||||||
Assets | ||||||||||||
Investments, at value (cost $126,610,930, $303,981,418 and | $ | 113,155,731 | $ | 290,185,083 | $ | 149,124,666 | ||||||
Cash | 615,228 | 1,577,187 | 861,154 | |||||||||
Receivables: | ||||||||||||
Interest | 2,845,306 | 4,671,110 | 1,670,931 | |||||||||
Investments sold | 57,650 | 1,950,000 | 6,855,261 | |||||||||
Shares sold | 583,276 | 335,934 | 44,059 | |||||||||
Other assets | 65 | 22,307 | 19,825 | |||||||||
Total assets | 117,257,256 | 298,741,621 | 158,575,896 | |||||||||
Liabilities | ||||||||||||
Unrealized depreciation on forward swaps | 67,634 | — | — | |||||||||
Payables: | ||||||||||||
Dividends | 200,631 | 588,133 | 205,488 | |||||||||
Shares redeemed | 647,127 | 719,047 | 951,057 | |||||||||
Accrued expenses: | ||||||||||||
Management fees | 58,650 | 118,543 | 63,506 | |||||||||
12b-1 distribution and service fees | 19,641 | 37,628 | 17,271 | |||||||||
Other | 46,995 | 123,713 | 88,264 | |||||||||
Total liabilities | 1,040,678 | 1,587,064 | 1,325,586 | |||||||||
Net assets | $ | 116,216,578 | $ | 297,154,557 | $ | 157,250,310 | ||||||
Class A Shares | ||||||||||||
Net assets | $ | 60,177,907 | $ | 136,513,168 | $ | 57,581,029 | ||||||
Shares outstanding | 8,176,904 | 14,430,767 | 6,068,163 | |||||||||
Net asset value per share | $ | 7.36 | $ | 9.46 | $ | 9.49 | ||||||
Offering price per share (net asset value per share plus | $ | 7.68 | $ | 9.87 | $ | 9.91 | ||||||
Class B Shares | ||||||||||||
Net assets | N/A | $ | 1,960,141 | $ | 1,691,188 | |||||||
Shares outstanding | N/A | 207,410 | 177,762 | |||||||||
Net asset value and offering price per share | N/A | $ | 9.45 | $ | 9.51 | |||||||
Class C Shares | ||||||||||||
Net assets | $ | 19,034,754 | $ | 26,337,740 | $ | 12,623,788 | ||||||
Shares outstanding | 2,586,917 | 2,792,947 | 1,336,574 | |||||||||
Net asset value and offering price per share | $ | 7.36 | $ | 9.43 | $ | 9.44 | ||||||
Class I Shares | ||||||||||||
Net assets | $ | 37,003,917 | $ | 132,343,508 | $ | 85,354,305 | ||||||
Shares outstanding | 5,032,144 | 14,009,552 | 8,979,475 | |||||||||
Net asset value and offering price per share | $ | 7.35 | $ | 9.45 | $ | 9.51 | ||||||
Net Assets Consist of: | ||||||||||||
Capital paid-in | $ | 136,320,658 | $ | 323,609,836 | $ | 170,703,172 | ||||||
Undistributed (Over-distribution of) net investment income | 742,209 | 1,308,491 | 873,574 | |||||||||
Accumulated net realized gain (loss) | (7,323,456 | ) | (13,967,435 | ) | (2,302,675 | ) | ||||||
Net unrealized appreciation (depreciation) | (13,522,833 | ) | (13,796,335 | ) | (12,023,761 | ) | ||||||
Net assets | $ | 116,216,578 | $ | 297,154,557 | $ | 157,250,310 | ||||||
Authorized shares | Unlimited | Unlimited | Unlimited | |||||||||
Par value per share | $ | 0.01 | $ | 0.01 | $ | 0.01 | ||||||
N/A – Effective April 28, 2010, Class B Shares of California High Yield are no longer available through an exchange of another Nuveen fund and converted to Class A Shares after the close of business on June 30, 2010.
See accompanying notes to financial statements.
| 42 | Nuveen Investments |
Year Ended February 28, 2011
| California High Yield | California | California Insured | ||||||||||
Investment Income | $ | 8,720,785 | $ | 16,836,108 | $ | 9,450,175 | ||||||
Expenses | ||||||||||||
Management fees | 684,453 | 1,581,987 | 969,409 | |||||||||
12b-1 service fees – Class A | 123,693 | 259,724 | 144,750 | |||||||||
12b-1 distribution and service fees – Class B | 486 | 24,582 | 20,602 | |||||||||
12b-1 distribution and service fees – Class C | 138,715 | 206,236 | 98,840 | |||||||||
Shareholders’ servicing agent fees and expenses | 26,221 | 141,064 | 79,737 | |||||||||
Custodian’s fees and expenses | 37,847 | 64,372 | 39,886 | |||||||||
Trustees’ fees and expenses | 2,721 | 6,943 | 4,230 | |||||||||
Professional fees | 35,870 | 24,919 | 20,897 | |||||||||
Shareholders’ reports – printing and mailing expenses | 8,205 | 22,024 | 15,239 | |||||||||
Federal and state registration fees | 15,496 | 7,989 | 6,719 | |||||||||
Other expenses | 4,697 | 10,032 | 6,475 | |||||||||
Total expenses before custodian fee credit | 1,078,404 | 2,349,872 | 1,406,784 | |||||||||
Custodian fee credit | (2,369 | ) | (983 | ) | (344 | ) | ||||||
Net expenses | 1,076,035 | 2,348,889 | 1,406,440 | |||||||||
Net investment income | 7,644,750 | 14,487,219 | 8,043,735 | |||||||||
Realized and Unrealized Gain (Loss) | ||||||||||||
Net realized gain (loss) from: | ||||||||||||
Investments | 69,782 | 673,815 | (1,164,351 | ) | ||||||||
Forward swaps | (248,571 | ) | — | — | ||||||||
Change in net unrealized appreciation (depreciation) of: | ||||||||||||
Investments | (9,054,186 | ) | (11,914,496 | ) | (8,126,684 | ) | ||||||
Forward swaps | (124,834 | ) | — | — | ||||||||
Net realized and unrealized gain (loss) | (9,357,809 | ) | (11,240,681 | ) | (9,291,035 | ) | ||||||
Net increase (decrease) in net assets from operations | $ | (1,713,059 | ) | $ | 3,246,538 | $ | (1,247,300 | ) | ||||
See accompanying notes to financial statements.
| Nuveen Investments | 43 |
Statement of Changes in Net Assets
| California High Yield | California | California Insured | ||||||||||||||||||||||
| Year Ended 2/28/11 | Year Ended 2/28/10 | Year Ended 2/28/11 | Year Ended 2/28/10 | Year Ended 2/28/11 | Year Ended 2/28/10 | |||||||||||||||||||
Operations | ||||||||||||||||||||||||
Net investment income | $ | 7,644,750 | $ | 4,946,199 | $ | 14,487,219 | $ | 14,375,587 | $ | 8,043,735 | $ | 8,442,199 | ||||||||||||
Net realized gain (loss) from: | ||||||||||||||||||||||||
Investments | 69,782 | 160,122 | 673,815 | (2,272,659 | ) | (1,164,351 | ) | (79,983 | ) | |||||||||||||||
Forward swaps | (248,571 | ) | 395,000 | — | — | — | — | |||||||||||||||||
Change in net unrealized appreciation (depreciation) of: | ||||||||||||||||||||||||
Investments | (9,054,186 | ) | 11,819,202 | (11,914,496 | ) | 27,719,069 | (8,126,684 | ) | 11,319,221 | |||||||||||||||
Forward swaps | (124,834 | ) | (33,220 | ) | — | — | — | — | ||||||||||||||||
Net increase (decrease) in net assets from operations | (1,713,059 | ) | 17,287,303 | 3,246,538 | 39,821,997 | (1,247,300 | ) | 19,681,437 | ||||||||||||||||
Distributions to Shareholders | ||||||||||||||||||||||||
From net investment income: | ||||||||||||||||||||||||
Class A | (3,786,851 | ) | (2,295,875 | ) | (5,943,619 | ) | (5,389,861 | ) | (3,010,759 | ) | (3,252,179 | ) | ||||||||||||
Class B | N/A | (8,363 | ) | (98,949 | ) | (148,704 | ) | (74,298 | ) | (127,426 | ) | |||||||||||||
Class C | (1,037,625 | ) | (716,683 | ) | (1,111,252 | ) | (954,192 | ) | (480,390 | ) | (443,423 | ) | ||||||||||||
Class I | (2,351,189 | ) | (1,808,433 | ) | (6,760,241 | ) | (7,231,824 | ) | (4,159,824 | ) | (4,295,411 | ) | ||||||||||||
Decrease in net assets from distributions to shareholders | (7,175,665 | ) | (4,829,354 | ) | (13,914,061 | ) | (13,724,581 | ) | (7,725,271 | ) | (8,118,439 | ) | ||||||||||||
Fund Share Transactions | ||||||||||||||||||||||||
Proceeds from sale of shares | 70,666,004 | 48,601,886 | 75,312,274 | 54,441,468 | 9,322,551 | 20,055,510 | ||||||||||||||||||
Proceeds from shares issued to shareholders due to reinvestment of distributions | 4,491,282 | 2,866,258 | 7,310,079 | 7,593,192 | 4,671,188 | 4,891,054 | ||||||||||||||||||
| 75,157,286 | 51,468,144 | 82,622,353 | 62,034,660 | 13,993,739 | 24,946,564 | |||||||||||||||||||
Cost of shares redeemed | (39,251,927 | ) | (30,003,720 | ) | (77,261,765 | ) | (68,258,900 | ) | (40,215,641 | ) | (33,372,195 | ) | ||||||||||||
Net increase (decrease) in net assets from Fund share transactions | 35,905,359 | 21,464,424 | 5,360,588 | (6,224,240 | ) | (26,221,902 | ) | (8,425,631 | ) | |||||||||||||||
Net increase (decrease) in net assets | 27,016,635 | 33,922,373 | (5,306,935 | ) | 19,873,176 | (35,194,473 | ) | 3,137,367 | ||||||||||||||||
Net assets at the beginning of year | 89,199,943 | 55,277,570 | 302,461,492 | 282,588,316 | 192,444,783 | 189,307,416 | ||||||||||||||||||
Net assets at the end of year | $ | 116,216,578 | $ | 89,199,943 | $ | 297,154,557 | $ | 302,461,492 | $ | 157,250,310 | $ | 192,444,783 | ||||||||||||
Undistributed (Over-distribution of) net investment income at the end of year | $ | 742,209 | $ | 292,361 | $ | 1,308,491 | $ | 740,333 | $ | 873,574 | $ | 559,781 | ||||||||||||
N/A – Effective April 28, 2010, Class B Shares of California High Yield are no longer available through an exchange of another Nuveen fund and converted to Class A Shares after the close of business on June 30, 2010.
See accompanying notes to financial statements.
| 44 | Nuveen Investments |
Financial Highlights
| Nuveen Investments | 45 |
| Selected data for a share outstanding throughout each period: | ||||||||||||||||||||||||||||||||||||
| Class (Commencement Date) | ||||||||||||||||||||||||||||||||||||
| Investment Operations | Less Distributions | |||||||||||||||||||||||||||||||||||
| CALIFORNIA HIGH YIELD | ||||||||||||||||||||||||||||||||||||
| Year Ended February 28/29, | Beginning Net Asset Value | Net Invest- ment Income(a) | Net Realized/ Unrealized Gain (Loss) | Total | Net Invest- ment Income | Capital Gains(b) | Total | Ending Net Asset Value | Total Return(c) | |||||||||||||||||||||||||||
Class A (3/06) |
| |||||||||||||||||||||||||||||||||||
2011 | $ | 7.87 | $ | .52 | $ | (.54 | ) | $ | (.02 | ) | $ | (.49 | ) | $ | — | $ | (.49 | ) | $ | 7.36 | (.56 | )% | ||||||||||||||
2010 | 6.51 | .51 | 1.34 | 1.85 | (.49 | ) | — | (.49 | ) | 7.87 | 29.23 | |||||||||||||||||||||||||
2009 | 8.24 | .48 | (1.76 | ) | (1.28 | ) | (.45 | ) | — | (.45 | ) | 6.51 | (16.06 | ) | ||||||||||||||||||||||
2008 | 10.43 | .45 | (2.19 | ) | (1.74 | ) | (.45 | ) | — | ** | (.45 | ) | 8.24 | (17.19 | ) | |||||||||||||||||||||
2007(g) | 10.00 | .39 | .42 | .81 | (.38 | ) | — | (.38 | ) | 10.43 | 8.19 | |||||||||||||||||||||||||
Class C (3/06) |
| |||||||||||||||||||||||||||||||||||
2011 | 7.87 | .48 | (.54 | ) | (.06 | ) | (.45 | ) | — | (.45 | ) | 7.36 | (1.07 | ) | ||||||||||||||||||||||
2010 | 6.51 | .47 | 1.34 | 1.81 | (.45 | ) | — | (.45 | ) | 7.87 | 28.56 | |||||||||||||||||||||||||
2009 | 8.24 | .44 | (1.76 | ) | (1.32 | ) | (.41 | ) | — | (.41 | ) | 6.51 | (16.55 | ) | ||||||||||||||||||||||
2008 | 10.42 | .40 | (2.19 | ) | (1.79 | ) | (.39 | ) | — | ** | (.39 | ) | 8.24 | (17.61 | ) | |||||||||||||||||||||
2007(g) | 10.00 | .33 | .42 | .75 | (.33 | ) | — | (.33 | ) | 10.42 | 7.56 | |||||||||||||||||||||||||
Class I (3/06)(h) |
| |||||||||||||||||||||||||||||||||||
2011 | 7.86 | .53 | (.53 | ) | — | (.51 | ) | — | (.51 | ) | 7.35 | (.34 | ) | |||||||||||||||||||||||
2010 | 6.50 | .52 | 1.34 | 1.86 | (.50 | ) | — | (.50 | ) | 7.86 | 29.54 | |||||||||||||||||||||||||
2009 | 8.24 | .50 | (1.77 | ) | (1.27 | ) | (.47 | ) | — | (.47 | ) | 6.50 | (16.01 | ) | ||||||||||||||||||||||
2008 | 10.43 | .47 | (2.19 | ) | (1.72 | ) | (.47 | ) | — | ** | (.47 | ) | 8.24 | (17.04 | ) | |||||||||||||||||||||
2007(g) | 10.00 | .45 | .37 | .82 | (.39 | ) | — | (.39 | ) | 10.43 | 8.35 | |||||||||||||||||||||||||
| 46 | Nuveen Investments |
| Ratios/Supplemental Data | ||||||||||||||||||||||||||||||
| Ratios to Average Net Assets Before Reimbursement(d) | Ratios to Average Net Assets After Reimbursement(d)(e) | |||||||||||||||||||||||||||||
| Ending Net Assets (000) | Expenses Including Interest(f) | Expenses Excluding Interest | Net Invest- ment Income | Expenses Including Interest(f) | Expenses Excluding Interest | Net Invest- ment Income | Portfolio Turnover Rate | |||||||||||||||||||||||
| $ | 60,178 | .90 | % | .90 | % | 6.53 | % | .90 | % | .90 | % | 6.53 | % | 17 | % | |||||||||||||||
| 40,864 | .94 | .94 | 6.91 | .94 | .94 | 6.91 | 23 | |||||||||||||||||||||||
| 32,290 | 1.01 | .92 | 6.13 | 1.01 | .92 | 6.13 | 55 | |||||||||||||||||||||||
| 42,252 | 1.43 | .99 | 4.58 | 1.37 | .93 | 4.64 | 25 | |||||||||||||||||||||||
| 14,539 | 1.84 | * | 1.26 | * | 3.63 | * | 1.52 | * | .94 | * | 3.96 | * | 3 | |||||||||||||||||
| 19,035 | 1.45 | 1.45 | 6.00 | 1.45 | 1.45 | 6.00 | 17 | |||||||||||||||||||||||
| 15,971 | 1.49 | 1.49 | 6.25 | 1.49 | 1.49 | 6.25 | 23 | |||||||||||||||||||||||
| 6,718 | 1.56 | 1.47 | 5.69 | 1.56 | 1.47 | 5.69 | 55 | |||||||||||||||||||||||
| 6,382 | 1.97 | 1.53 | 4.02 | 1.92 | 1.48 | 4.08 | 25 | |||||||||||||||||||||||
| 3,061 | 2.44 | * | 1.86 | * | 2.99 | * | 2.07 | * | 1.49 | * | 3.36 | * | 3 | |||||||||||||||||
| 37,004 | .70 | .70 | 6.74 | .70 | .70 | 6.74 | 17 | |||||||||||||||||||||||
| 32,212 | .74 | .74 | 7.09 | .74 | .74 | 7.09 | 23 | |||||||||||||||||||||||
| 16,146 | .81 | .72 | 6.80 | .81 | .72 | 6.80 | 55 | |||||||||||||||||||||||
| 4,889 | 1.21 | .77 | 4.89 | 1.17 | .73 | 4.92 | 25 | |||||||||||||||||||||||
| 106 | 1.58 | * | 1.00 | * | 4.32 | * | 1.31 | * | .73 | * | 4.58 | * | 3 | |||||||||||||||||
| (a) | Per share Net Investment Income is calculated using the average daily shares method. |
| (b) | Distributions from Capital Gains include short-term capital gains, if any. |
| (c) | Total return is the combination of changes in net asset value without any sales charge, reinvested dividend income at net asset value and reinvested capital gains distributions at net asset value, if any. Total returns are not annualized. |
| (d) | Ratios do not reflect the effect of custodian fee credits earned on the Fund’s net cash on deposit with the custodian bank, where applicable. |
| (e) | After expense reimbursement from the Adviser, where applicable. |
| (f) | The expense ratios reflect, among other things, the interest expense deemed to have been paid by the Fund on the floating rate certificates issued by the special purpose trusts for the self-deposited inverse floaters held by the Fund, where applicable, as described in Footnote 1 – General Information and Significant Accounting Policies, Inverse Floating Rate Securities. |
| (g) | For the period March 28, 2006 (commencement of operations) through February 28, 2007. |
| (h) | Effective May 1, 2008, Class R Shares were renamed Class I Shares. |
| * | Annualized. |
| ** | Rounds to less than $.01 per share. |
See accompanying notes to financial statements.
| Nuveen Investments | 47 |
Financial Highlights (continued)
| Selected data for a share outstanding throughout each period: | ||||||||||||||||||||||||||||||||||||
| Class (Commencement Date) | ||||||||||||||||||||||||||||||||||||
| Investment Operations | Less Distributions | |||||||||||||||||||||||||||||||||||
| CALIFORNIA | ||||||||||||||||||||||||||||||||||||
| Year Ended February 28/29, | Beginning Net Asset Value | Net Invest- ment Income(a) | Net Realized/ Unrealized Gain (Loss) | Total | Net Invest- ment Income | Capital Gains(b) | Total | Ending Net Asset Value | Total Return(c) | |||||||||||||||||||||||||||
Class A (9/94) |
| |||||||||||||||||||||||||||||||||||
2011 | $ | 9.80 | $ | .47 | $ | (.36 | ) | $ | .11 | $ | (.45 | ) | $ | — | $ | (.45 | ) | $ | 9.46 | 1.05 | % | |||||||||||||||
2010 | 8.96 | .46 | .82 | 1.28 | (.44 | ) | — | (.44 | ) | 9.80 | 14.56 | |||||||||||||||||||||||||
2009 | 9.50 | .44 | (.55 | ) | (.11 | ) | (.43 | ) | — | (.43 | ) | 8.96 | (1.25 | ) | ||||||||||||||||||||||
2008 | 10.50 | .43 | (1.00 | ) | (.57 | ) | (.43 | ) | — | (.43 | ) | 9.50 | (5.65 | ) | ||||||||||||||||||||||
2007 | 10.43 | .43 | .07 | .50 | (.43 | ) | — | (.43 | ) | 10.50 | 4.88 | |||||||||||||||||||||||||
Class B (3/97) |
| |||||||||||||||||||||||||||||||||||
2011 | 9.80 | .39 | (.36 | ) | .03 | (.38 | ) | — | (.38 | ) | 9.45 | .19 | ||||||||||||||||||||||||
2010 | 8.96 | .39 | .82 | 1.21 | (.37 | ) | — | (.37 | ) | 9.80 | 13.75 | |||||||||||||||||||||||||
2009 | 9.50 | .37 | (.55 | ) | (.18 | ) | (.36 | ) | — | (.36 | ) | 8.96 | (1.99 | ) | ||||||||||||||||||||||
2008 | 10.49 | .36 | (1.00 | ) | (.64 | ) | (.35 | ) | — | (.35 | ) | 9.50 | (6.28 | ) | ||||||||||||||||||||||
2007 | 10.42 | .35 | .07 | .42 | (.35 | ) | — | (.35 | ) | 10.49 | 4.10 | |||||||||||||||||||||||||
Class C (9/94) |
| |||||||||||||||||||||||||||||||||||
2011 | 9.78 | .41 | (.36 | ) | .05 | (.40 | ) | — | (.40 | ) | 9.43 | .39 | ||||||||||||||||||||||||
2010 | 8.94 | .41 | .82 | 1.23 | (.39 | ) | — | (.39 | ) | 9.78 | 14.00 | |||||||||||||||||||||||||
2009 | 9.48 | .39 | (.55 | ) | (.16 | ) | (.38 | ) | — | (.38 | ) | 8.94 | (1.80 | ) | ||||||||||||||||||||||
2008 | 10.47 | .38 | (1.00 | ) | (.62 | ) | (.37 | ) | — | (.37 | ) | 9.48 | (6.07 | ) | ||||||||||||||||||||||
2007 | 10.41 | .37 | .06 | .43 | (.37 | ) | — | (.37 | ) | 10.47 | 4.25 | |||||||||||||||||||||||||
Class I (7/86)(f) |
| |||||||||||||||||||||||||||||||||||
2011 | 9.79 | .49 | (.36 | ) | .13 | (.47 | ) | — | (.47 | ) | 9.45 | 1.23 | ||||||||||||||||||||||||
2010 | 8.95 | .48 | .82 | 1.30 | (.46 | ) | — | (.46 | ) | 9.79 | 14.80 | |||||||||||||||||||||||||
2009 | 9.49 | .46 | (.55 | ) | (.09 | ) | (.45 | ) | — | (.45 | ) | 8.95 | (1.02 | ) | ||||||||||||||||||||||
2008 | 10.49 | .45 | (1.00 | ) | (.55 | ) | (.45 | ) | — | (.45 | ) | 9.49 | (5.43 | ) | ||||||||||||||||||||||
2007 | 10.43 | .45 | .06 | .51 | (.45 | ) | — | (.45 | ) | 10.49 | 5.03 | |||||||||||||||||||||||||
| 48 | Nuveen Investments |
| Ratios/Supplemental Data | ||||||||||||||||||
| Ratios to Average Net Assets(d) | ||||||||||||||||||
| Ending Net Assets (000) | Expenses Including Interest(e) | Expenses Excluding Interest | Net Invest- ment Income | Portfolio Turnover Rate | ||||||||||||||
| $ | 136,513 | .81 | % | .81 | % | 4.77 | % | 18 | % | |||||||||
| 128,672 | .86 | .85 | 4.86 | 14 | ||||||||||||||
| 106,117 | .90 | .85 | 4.66 | 40 | ||||||||||||||
| 107,241 | .97 | .82 | 4.23 | 50 | ||||||||||||||
| 91,465 | 1.09 | .83 | 4.13 | 20 | ||||||||||||||
| 1,960 | 1.56 | 1.56 | 4.00 | 18 | ||||||||||||||
| 3,276 | 1.61 | 1.60 | 4.13 | 14 | ||||||||||||||
| 4,337 | 1.65 | 1.60 | 3.87 | 40 | ||||||||||||||
| 7,175 | 1.72 | 1.57 | 3.46 | 50 | ||||||||||||||
| 10,076 | 1.85 | 1.59 | 3.38 | 20 | ||||||||||||||
| 26,338 | 1.36 | 1.36 | 4.21 | 18 | ||||||||||||||
| 25,552 | 1.41 | 1.40 | 4.31 | 14 | ||||||||||||||
| 20,484 | 1.45 | 1.40 | 4.10 | 40 | ||||||||||||||
| 25,306 | 1.52 | 1.37 | 3.68 | 50 | ||||||||||||||
| 23,067 | 1.64 | 1.38 | 3.58 | 20 | ||||||||||||||
| 132,344 | .61 | .61 | 4.96 | 18 | ||||||||||||||
| 144,962 | .66 | .65 | 5.07 | 14 | ||||||||||||||
| 151,650 | .70 | .65 | 4.87 | 40 | ||||||||||||||
| 164,365 | .77 | .62 | 4.43 | 50 | ||||||||||||||
| 167,300 | .89 | .63 | 4.33 | 20 | ||||||||||||||
| (a) | Per share Net Investment Income is calculated using the average daily shares method. |
| (b) | Distributions from Capital Gains include short-term capital gains, if any. |
| (c) | Total return is the combination of changes in net asset value without any sales charge, reinvested dividend income at net asset value and reinvested capital gains distributions at net asset value, if any. Total returns are not annualized. |
| (d) | Ratios do not reflect the effect of custodian fee credits earned on the Fund’s net cash on deposit with the custodian bank, where applicable. |
| (e) | The expense ratios reflect, among other things, the interest expense deemed to have been paid by the Fund on the floating rate certificates issued by the special purpose trusts for the self-deposited inverse floaters held by the Fund, where applicable, as described in Footnote 1 – General Information and Significant Accounting Policies, Inverse Floating Rate Securities. |
| (f) | Effective May 1, 2008, Class R Shares were renamed Class I Shares. |
See accompanying notes to financial statements.
| Nuveen Investments | 49 |
Financial Highlights (continued)
| Selected data for a share outstanding throughout each period: | ||||||||||||||||||||||||||||||||||||
| Class (Commencement Date) | ||||||||||||||||||||||||||||||||||||
| Investment Operations | Less Distributions | |||||||||||||||||||||||||||||||||||
| CALIFORNIA INSURED | ||||||||||||||||||||||||||||||||||||
| Year Ended February 28/29, | Beginning Net Asset Value | Net Invest- ment Income(a) | Net Realized/ Unrealized Gain (Loss) | Total | Net Invest- ment Income | Capital Gains(b) | Total | Ending Net Asset Value | Total Return(c) | |||||||||||||||||||||||||||
Class A (9/94) | ||||||||||||||||||||||||||||||||||||
2011 | $ | 9.99 | $ | .43 | $ | (.51 | ) | $ | (.08 | ) | $ | (.42 | ) | $ | — | $ | (.42 | ) | $ | 9.49 | (.96 | )% | ||||||||||||||
2010 | 9.40 | .43 | .57 | 1.00 | (.41 | ) | — | (.41 | ) | 9.99 | 10.87 | |||||||||||||||||||||||||
2009 | 9.83 | .43 | (.44 | ) | (.01 | ) | (.41 | ) | (.01 | ) | (.42 | ) | 9.40 | (.06 | ) | |||||||||||||||||||||
2008 | 10.84 | .43 | (.95 | ) | (.52 | ) | (.43 | ) | (.06 | ) | (.49 | ) | 9.83 | (5.04 | ) | |||||||||||||||||||||
2007 | 10.87 | .43 | .03 | .46 | (.44 | ) | (.05 | ) | (.49 | ) | 10.84 | 4.33 | ||||||||||||||||||||||||
Class B (3/97) | ||||||||||||||||||||||||||||||||||||
2011 | 10.02 | .36 | (.53 | ) | (.17 | ) | (.34 | ) | — | (.34 | ) | 9.51 | (1.77 | ) | ||||||||||||||||||||||
2010 | 9.43 | .36 | .57 | .93 | (.34 | ) | — | (.34 | ) | 10.02 | 10.03 | |||||||||||||||||||||||||
2009 | 9.85 | .36 | (.43 | ) | (.07 | ) | (.34 | ) | (.01 | ) | (.35 | ) | 9.43 | (.73 | ) | |||||||||||||||||||||
2008 | 10.86 | .35 | (.96 | ) | (.61 | ) | (.34 | ) | (.06 | ) | (.40 | ) | 9.85 | (5.77 | ) | |||||||||||||||||||||
2007 | 10.89 | .35 | .02 | .37 | (.35 | ) | (.05 | ) | (.40 | ) | 10.86 | 3.52 | ||||||||||||||||||||||||
Class C (9/94) | ||||||||||||||||||||||||||||||||||||
2011 | 9.95 | .38 | (.53 | ) | (.15 | ) | (.36 | ) | — | (.36 | ) | 9.44 | (1.60 | ) | ||||||||||||||||||||||
2010 | 9.36 | .37 | .58 | .95 | (.36 | ) | — | (.36 | ) | 9.95 | 10.31 | |||||||||||||||||||||||||
2009 | 9.78 | .37 | (.42 | ) | (.05 | ) | (.36 | ) | (.01 | ) | (.37 | ) | 9.36 | (.55 | ) | |||||||||||||||||||||
2008 | 10.79 | .37 | (.96 | ) | (.59 | ) | (.36 | ) | (.06 | ) | (.42 | ) | 9.78 | (5.62 | ) | |||||||||||||||||||||
2007 | 10.81 | .37 | .03 | .40 | (.37 | ) | (.05 | ) | (.42 | ) | 10.79 | 3.81 | ||||||||||||||||||||||||
Class I (7/86)(f) |
| |||||||||||||||||||||||||||||||||||
2011 | 10.01 | .45 | (.51 | ) | (.06 | ) | (.44 | ) | — | (.44 | ) | 9.51 | (.75 | ) | ||||||||||||||||||||||
2010 | 9.42 | .45 | .57 | 1.02 | (.43 | ) | — | (.43 | ) | 10.01 | 11.05 | |||||||||||||||||||||||||
2009 | 9.84 | .45 | (.43 | ) | .02 | (.43 | ) | (.01 | ) | (.44 | ) | 9.42 | .23 | |||||||||||||||||||||||
2008 | 10.85 | .45 | (.96 | ) | (.51 | ) | (.44 | ) | (.06 | ) | (.50 | ) | 9.84 | (4.87 | ) | |||||||||||||||||||||
2007 | 10.87 | .45 | .04 | .49 | (.46 | ) | (.05 | ) | (.51 | ) | 10.85 | 4.60 | ||||||||||||||||||||||||
| 50 | Nuveen Investments |
| Ratios/Supplemental Data | ||||||||||||||||||
| Ratios to Average Net Assets(d) | ||||||||||||||||||
| Ending Net Assets (0d00) | Expenses Including Interest(e) | Expenses Excluding Interest | Net Invest- ment Income | Portfolio Turnover Rate | ||||||||||||||
| $ | 57,581 | .83 | % | .83 | % | 4.34 | % | 3 | % | |||||||||
| 78,338 | .86 | .86 | 4.39 | 1 | ||||||||||||||
| 77,517 | .85 | .85 | 4.38 | 9 | ||||||||||||||
| 80,867 | .91 | .83 | 4.03 | 21 | ||||||||||||||
| 89,343 | .86 | .83 | 4.02 | 16 | ||||||||||||||
| 1,691 | 1.58 | 1.58 | 3.58 | 3 | ||||||||||||||
| 2,851 | 1.61 | 1.61 | 3.66 | 1 | ||||||||||||||
| 4,867 | 1.60 | 1.60 | 3.60 | 9 | ||||||||||||||
| 7,890 | 1.66 | 1.58 | 3.28 | 21 | ||||||||||||||
| 12,845 | 1.61 | 1.58 | 3.27 | 16 | ||||||||||||||
| 12,624 | 1.38 | 1.38 | 3.80 | 3 | ||||||||||||||
| 12,599 | 1.41 | 1.41 | 3.84 | 1 | ||||||||||||||
| 11,668 | 1.40 | 1.40 | 3.83 | 9 | ||||||||||||||
| 12,455 | 1.46 | 1.38 | 3.48 | 21 | ||||||||||||||
| 13,500 | 1.41 | 1.38 | 3.47 | 16 | ||||||||||||||
| 85,354 | .63 | .63 | 4.54 | 3 | ||||||||||||||
| 98,657 | .66 | .66 | 4.59 | 1 | ||||||||||||||
| 95,255 | .65 | .65 | 4.57 | 9 | ||||||||||||||
| 112,282 | .71 | .63 | 4.23 | 21 | ||||||||||||||
| 129,276 | .66 | .63 | 4.22 | 16 | ||||||||||||||
| (a) | Per share Net Investment Income is calculated using the average daily shares method. |
| (b) | Distributions from Capital Gains include short-term capital gains, if any. |
| (c) | Total return is the combination of changes in net asset value without any sales charge, reinvested dividend income at net asset value and reinvested capital gains distributions at net asset value, if any. Total returns are not annualized. |
| (d) | Ratios do not reflect the effect of custodian fee credits earned on the Fund’s net cash on deposit with the custodian bank, where applicable. |
| (e) | The expense ratios reflect, among other things, the interest expense deemed to have been paid by the Fund on the floating rate certificates issued by the special purpose trusts for the self-deposited inverse floaters held by the Fund, where applicable, as described in Footnote 1 – General Information and Significant Accounting Policies, Inverse Floating Rate Securities. |
| (f) | Effective May 1, 2008, Class R Shares were renamed Class I Shares. |
See accompanying notes to financial statements.
| Nuveen Investments | 51 |
1. General Information and Significant Accounting Policies
General Information
The Nuveen Multistate Trust II (the “Trust”) is an open-end investment company registered under the Investment Company Act of 1940, as amended. The Trust is comprised of Nuveen California High Yield Municipal Bond Fund (“California High Yield”), Nuveen California Municipal Bond Fund (“California”) and Nuveen California Insured Municipal Bond Fund (“California Insured”) (collectively, the “Funds”), among others. The Trust was organized as a Massachusetts business trust on July 1, 1996. California and California Insured were each organized as a series of predecessor trusts or corporations prior to that date.
Effective January 1, 2011, the Funds’ adviser, Nuveen Asset Management, a wholly-owned subsidiary of Nuveen Investments, Inc. (“Nuveen”), changed its name to Nuveen Fund Advisors, Inc. (the “Adviser”). Concurrently, the Adviser formed a wholly-owned subsidiary, Nuveen Asset Management, LLC (the “Sub-Adviser”), to house its portfolio management capabilities and to serve as the Funds’ sub-adviser, and the Funds’ portfolio managers became employees of the Sub-Adviser. This allocation of responsibilities between the Adviser and the Sub-Adviser affects each of the Funds. The Adviser will compensate the Sub-Adviser for the portfolio management services it provides to the Funds from each Fund’s management fee.
California High Yield’s investment objective is to provide high current income exempt from regular federal, state and, in some cases, local income taxes. Total return is a secondary objective when consistent with the Fund’s primary objective. Under normal market conditions, the Fund invests at least 80% of its net assets in municipal bonds that pay interest that is exempt from regular federal and California personal income tax. The Fund invests at least 65% of its net assets in medium- to low-quality bonds rated BBB/Baa or lower and may invest up to 10% of its net assets in defaulted municipal bonds. The Fund may invest up to 15% of its net assets in municipal securities whose interest payments vary inversely with changes in short-term tax-exempt interest rates (i.e., inverse floating rate securities).
California’s investment objective is to provide as high a level of current interest income exempt from regular federal, state and, in some cases, local income taxes as is consistent with preservation of capital. Under normal market conditions, the Fund invests at least 80% of its net assets in municipal bonds that pay interest that is exempt from regular federal and California personal income tax. The Fund invests at least 80% of its net assets in investment grade municipal bonds rated BBB-/Baa or higher at the time of purchase by at least one independent rating agency, or, if unrated, judged by the Sub-Adviser to be of comparable quality. The Fund may invest up to 20% of its net assets in below investment grade municipal bonds, commonly referred to as “high yield” or “junk” bonds. The Fund may invest up to 15% of its net assets in municipal securities whose interest payments vary inversely with changes in short-term tax-exempt interest rates (i.e., inverse floating rate securities).
California Insured’s investment objective is to provide as high a level of current interest income exempt from regular federal, state and, in some cases, local income taxes as is consistent with preservation of capital. Under normal market conditions and during the fiscal year ended February 28, 2011, the Fund invested at least 80% of its net assets in municipal bonds that pay interest that is exempt from regular federal and California personal income tax. The Fund invested at least 80% of its net assets in municipal securities that are covered by insurance guaranteeing the timely payment of principal and interest. In addition, the municipal securities in which the Fund invests were, at the time of purchase, (i) rated BBB/Baa or higher or covered by insurance from insurers with a claims-paying ability rated BBB/Baa or higher; (ii) unrated, but judged to be of comparable quality by the Sub-Adviser; or (iii) backed by an escrow or trust account containing sufficient U.S. Government or U.S. government agency securities to ensure timely payment of principle and interest. The Fund may invest up to 15% of its net assets in municipal securities whose interest payments vary inversely with changes in short-term tax-exempt interest rates (i.e., inverse floating rate securities).
The Funds’ most recent prospectus provides further descriptions of each Fund’s investment objective, principal investment strategies and principal risks.
After the close of business on June 30, 2010, all outstanding Class B Shares of California High Yield were converted to Class A Shares, and Class B Shares are no longer issued by the Fund.
Significant Accounting Policies
The following is a summary of significant accounting policies followed by the Funds in the preparation of their financial statements in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”).
Investment Valuation
Prices of municipal bonds and forward swaps are provided by a pricing service approved by the Funds’ Board of Trustees. These securities are generally classified as Level 2 for fair value measurement purposes. When price quotes are not readily available (which is usually the case for municipal bonds) the pricing service establishes a security’s fair value using methods that may include consideration of the following: yields or prices of investments of comparable quality, type of issue, coupon, maturity and rating, market quotes or indications of value from security dealers, evaluations of anticipated cash flows or collateral, general market conditions and other information and analysis, including the obligor’s credit characteristics considered relevant. In pricing certain securities, particularly less liquid and lower quality securities, the pricing service may consider information about a security, its issuer, or market activity, provided by the Adviser. These securities are generally classified as Level 2 or Level 3 depending on the priority of the significant inputs.
| 52 | Nuveen Investments |
Temporary investments in securities that have variable rate and demand features qualifying them as short-term investments are valued at amortized cost, which approximates market value. These securities are generally classified as Level 2.
Certain securities may not be able to be priced by the pre-established pricing methods as described above. Such securities may be valued by the Funds’ Board of Trustees or its designee at fair value. These securities generally include, but are not limited to, restricted securities (securities which may not be publicly sold without registration under the Securities Act of 1933, as amended) for which a pricing service is unable to provide a market price; securities whose trading has been formally suspended; debt securities that have gone into default and for which there is no current market quotation; a security whose market price is not available from a pre-established pricing source; a security with respect to which an event has occurred that is likely to materially affect the value of the security after the market has closed but before the calculation of a Fund’s net asset value (as may be the case in non-U.S. markets on which the security is primarily traded) or make it difficult or impossible to obtain a reliable market quotation; and a security whose price, as provided by the pricing service, is not deemed to reflect the security’s fair value. As a general principle, the fair value of an issue of securities would appear to be the amount that the owner might reasonably expect to receive for it in a current sale. A variety of factors may be considered in determining the fair value of such securities, which may include consideration of the following: yields or prices of investments of comparable quality, type of issue, coupon, maturity and rating, market quotes or indications of value from security dealers, evaluations of anticipated cash flows or collateral, general market conditions and other information and analysis, including the obligor’s credit characteristics considered relevant. These securities are generally classified as Level 2 or Level 3 depending on the priority of the significant inputs. Regardless of the method employed to value a particular security, all valuations are subject to review by the Funds’ Board of Trustees or its designee.
Refer to Footnote 2 – Fair Value Measurements for further details on the leveling of securities held by the Funds as of the end of the reporting period.
Investment Transactions
Investment transactions are recorded on a trade date basis. Realized gains and losses from transactions are determined on the specific identification method, which is the same basis used for federal income tax purposes. Investments purchased on a when-issued/delayed delivery basis may have extended settlement periods. Any investments so purchased are subject to market fluctuation during this period. The Funds have instructed the custodian to segregate assets with a current value at least equal to the amount of the when-issued/delayed delivery purchase commitments. At February 28, 2011, the Funds had no such outstanding purchase commitments.
Investment Income
Investment income, which reflects the amortization of premiums and accretion of discounts for financial reporting purposes, is recorded on an accrual basis. Investment income also includes paydown gains and losses, if any.
Income Taxes
Each Fund is a separate taxpayer for federal income tax purposes. Each Fund intends to distribute substantially all of its net investment income and net capital gains to shareholders and to otherwise comply with the requirements of Subchapter M of the Internal Revenue Code applicable to regulated investment companies. Therefore, no federal income tax provision is required. Furthermore, each Fund intends to satisfy conditions that 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. Net realized capital gains and ordinary income distributions paid by the Funds are subject to federal taxation.
For all open tax years and all major taxing jurisdictions, management of the Funds has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements. Open tax years are those that are open for examination by taxing authorities (i.e., generally the last four tax year ends and the interim tax period since then). Furthermore, management of the Funds is also not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
Dividends and Distributions to Shareholders
During the period March 1, 2010 through March 31, 2010, dividends from net investment income were declared and paid to shareholders monthly. Effective April 1, 2010, the Funds declare dividends from their net investment income daily and pay shareholders monthly. Fund shares begin to accrue dividends on the business day after the day when the monies used to purchase Fund shares are collected by the Funds’ transfer agent.
Net realized capital gains and/or market discount from investment transactions, if any, are declared and distributed to shareholders at least annually. Furthermore, capital gains are distributed only to the extent they exceed available capital loss carryforwards.
Distributions to shareholders of 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 U.S. GAAP.
Insurance
Under normal market conditions and during the fiscal year ended February 28, 2011, California Insured invested at least 80% of its net assets in municipal securities that were covered by insurance guaranteeing the timely payment of principal and interest thereon.
| Nuveen Investments | 53 |
Notes to Financial Statements (continued)
Inverse floating rate securities whose underlying bonds are covered by insurance were included for purposes of the 80%. Insured municipal bonds are either covered by individual, permanent insurance policies (obtained either at the time of issuance or subsequently), or covered “while in fund” under a master portfolio insurance policy purchased by the Fund. Insurance guarantees only the timely payment of interest and principal on the bonds; it does not guarantee the value of either individual bonds or Fund shares. The Adviser may obtain master policies from insurers that specialize in insuring municipal bonds.
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 Fund’s 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 Fund ultimately disposes 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, in contrast, is effective only while the municipal securities are held by the Fund, and is reflected as an expense over the term of the policy, when applicable. Accordingly, neither the prices used in determining the market value of the underlying municipal securities nor the net asset value of the Fund’s shares include value, if any, attributable to the Portfolio Insurance. Each policy of the Portfolio Insurance does, however, give the Fund the right to obtain permanent insurance with respect to the municipal security covered by the Portfolio Insurance policy at the time of its sale.
Flexible Sales Charge Program
Class A Shares are generally sold with an up-front sales charge and incur a .20% annual 12b-1 service fee. Class A Share purchases of $1 million or more are sold at net asset value without an up-front sales charge but may be subject to a contingent deferred sales charge (“CDSC”) if redeemed within twelve months of purchase. Class B Shares were sold without an up-front sales charge but incur a .75% annual 12b-1 distribution fee and a .20% annual 12b-1 service fee. Class B Shares are subject to a CDSC of up to 5% depending upon the length of time the shares are held by the investor (CDSC is reduced to 0% at the end of six years). Class B Shares convert to Class A Shares eight years after purchase. Class C Shares are sold without an up-front sales charge but incur a .55% annual 12b-1 distribution fee and a .20% annual 12b-1 service fee. Class C Shares are subject to a CDSC of 1% if redeemed within one year of purchase. Class I Shares are not subject to any sales charge or 12b-1 distribution or service fees.
Inverse Floating Rate Securities
Each Fund is authorized to invest in inverse floating rate securities. An inverse floating rate security is created by depositing a municipal bond, typically with a fixed interest rate, into a special purpose trust created by a broker-dealer. In turn, this trust (a) issues floating rate certificates, in face amounts equal to some fraction of the deposited bond’s par amount or market value, that typically pay short-term tax-exempt interest rates to third parties, and (b) issues to a long-term investor (such as one of the Funds) an inverse floating rate certificate (sometimes referred to as an “inverse floater”) that represents all remaining or residual interest in the trust. The income received by the inverse floater holder varies inversely with the short-term rate paid to the floating rate certificates’ holders, and in most circumstances the inverse floater holder bears substantially all of the underlying bond’s downside investment risk and also benefits disproportionately from any potential appreciation of the underlying bond’s value. The price of an inverse floating rate security will be more volatile than that of the underlying bond because the interest rate is dependent on not only the fixed coupon rate of the underlying bond but also on the short-term interest paid on the floating rate certificates, and because the inverse floating rate security essentially bears the risk of loss of the greater face value of the underlying bond.
A Fund may purchase an inverse floating rate security in a secondary market transaction without first owning the underlying bond (referred to as an “externally-deposited inverse floater”), or instead by first selling a fixed-rate bond to a broker-dealer for deposit into the special purpose trust and receiving in turn the residual interest in the trust (referred to as a “self-deposited inverse floater”). The inverse floater held by a Fund gives the Fund the right (a) to cause the holders of the floating rate certificates to tender their notes at par, and (b) to have the broker transfer the fixed-rate bond held by the trust to the Fund, thereby collapsing the trust. An investment in an externally-deposited inverse floater is identified in the Portfolio of Investments as “(IF) – Inverse floating rate investment.” An investment in a self-deposited inverse floater is accounted for as a financing transaction. In such instances, a fixed-rate bond deposited into a special purpose trust is identified in the Portfolio of Investments as “(UB) – Underlying bond of an inverse floating rate trust reflected as a financing transaction,” with the Fund accounting for the short-term floating rate certificates issued by the trust as “Floating rate obligations” on the Statement of Assets and Liabilities. In addition, the Fund reflects in “Investment Income” the entire earnings of the underlying bond and recognizes the related interest paid to the holders of the short-term floating rate certificates as a component of “Interest expense on floating rate obligations” on the Statement of Operations.
During the fiscal year ended February 28, 2011, California High Yield and California invested in externally-deposited inverse floaters and/or self-deposited inverse floaters.
Each Fund may also enter into shortfall and forbearance agreements (sometimes referred to as a “recourse trust” or “credit recovery swap”) (such agreements referred to herein as “Recourse Trusts”) with a broker-dealer by which a Fund agrees to reimburse the broker-dealer, in certain circumstances, for the difference between the liquidation value of the fixed-rate bond held by the trust and the liquidation value of the floating rate certificates issued by the trust plus any shortfalls in interest cash flows. Under these agreements, a Fund’s potential exposure to losses related to or on inverse floaters may increase beyond the value of a Fund’s inverse floater investments as a Fund may potentially be liable to fulfill all amounts owed to holders of the floating rate certificates. At period end, any such shortfall is recognized as “Unrealized depreciation on Recourse Trusts” on the Statement of Assets and Liabilities.
| 54 | Nuveen Investments |
At February 28, 2011, each Fund’s maximum exposure to externally-deposited Recourse Trusts was as follows:
| California High Yield | California | California Insured | ||||||||||
Maximum exposure to Recourse Trusts | $ | 23,760,000 | $ | — | $ | — | ||||||
Forward Swap Contracts
Each Fund is authorized to enter into forward interest rate swap contracts consistent with their investment objectives and policies to reduce, increase or otherwise alter its risk profile or to alter its portfolio characteristics (i.e. duration, yield curve positioning and credit quality).
Each Fund is subject to interest rate risk in the normal course of pursuing its investment objectives. Each Fund’s use of forward interest rate swap transactions is intended to help the Fund manage its overall interest rate sensitivity, either shorter or longer, generally to more closely align the Fund’s interest rate sensitivity with that of the broader market. Forward interest rate swap transactions involve each Fund’s agreement with a counterparty to pay, in the future, a fixed or variable rate payment in exchange for the counterparty paying the Fund a variable or fixed rate payment, the accruals for which would begin at a specified date in the future (the “effective date”). The amount of the payment obligation is based on the notional amount of the swap contract and the termination date of the swap (which is akin to a bond’s maturity). The value of the Fund’s swap commitment would increase or decrease based primarily on the extent to which long-term interest rates for bonds having a maturity of the swap’s termination date increases or decreases. Forward interest rate swap contracts are valued daily. The net amount recorded on these transactions for each counterparty is recognized on the Statement of Assets and Liabilities as a component of “Unrealized appreciation or depreciation on forward swaps” with the change during the fiscal period recognized on the Statement of Operations as a component of “Change in net unrealized appreciation (depreciation) of forward swaps.”
Each Fund may terminate a swap contract prior to the effective date, at which point a realized gain or loss is recognized. When a forward swap is terminated, it ordinarily does not involve the delivery of securities or other underlying assets or principal, but rather is settled in cash on a net basis. Net realized gains and losses during the fiscal period are recognized on the Statement of Operations as a component of “Net realized gain (loss) from forward swaps.” Each Fund intends, but is not obligated, to terminate its forward swaps before the effective date. Accordingly, the risk of loss with respect to the swap counterparty on such transactions is limited to the credit risk associated with a counterparty failing to honor its commitment to pay any realized gain to the Fund upon termination.
During the fiscal year ended February 28, 2011, California High Yield entered into forward interest rate swap transactions to broadly reduce the sensitivity of the Fund to movements in the U.S. interest rates.
The average notional amount of forward interest rate swap contracts outstanding during the fiscal year ended February 28, 2011, was as follows:
| California High Yield | ||||
Average notional amount of forward interest rate swap contracts outstanding* | $ | 5,000,000 | ||
| * | The average notional amount is calculated based on the outstanding notional amount at the beginning of the fiscal year and at the end of each fiscal quarter within the current fiscal year. |
Refer to Footnote 3 – Derivative Instruments and Hedging Activities for further details on forward swap contract activity.
Market and Counterparty Credit Risk
In the normal course of business each Fund may invest in financial instruments and enter into financial transactions where risk of potential loss exists due to changes in the market (market risk) or failure of the other party to the transaction to perform (counterparty credit risk). The potential loss could exceed the value of the financial assets recorded on the financial statements. Financial assets, which potentially expose each Fund to counterparty credit risk, consist principally of cash due from counterparties on forward, option and swap transactions, when applicable. The extent of each Fund’s exposure to counterparty credit risk in respect to these financial assets approximates their carrying value as recorded on the Statement of Assets and Liabilities. Futures contracts, when applicable, expose a Fund to minimal counterparty credit risk as they are exchange traded and the exchange’s clearing house, which is counterparty to all exchange traded futures, guarantees the futures contracts against default.
Each Fund helps manage counterparty credit risk by entering into agreements only with counterparties the Adviser believes have the financial resources to honor their obligations and by having the Adviser monitor the financial stability of the counterparties. Additionally, counterparties may be required to pledge collateral daily (based on the daily valuation of the financial asset) on behalf of each Fund with a value approximately equal to the amount of any unrealized gain above a pre-determined threshold. Reciprocally, when each Fund has an unrealized loss, the Funds have instructed the custodian to pledge assets of the Funds as collateral with a value approximately equal to the amount of the unrealized loss above a pre-determined threshold. Collateral pledges are monitored and subsequently adjusted if and when the valuations fluctuate, either up or down, by at least the pre-determined threshold amount.
| Nuveen Investments | 55 |
Notes to Financial Statements (continued)
Zero Coupon Securities
Each Fund is authorized to invest in zero coupon securities. A zero coupon security does not pay a regular interest coupon to its holders during the life of the security. Tax-exempt income to the holder of the security comes from accretion of the difference between the original purchase price of the security at issuance and the par value of the security at maturity and is effectively paid at maturity. The market prices of zero coupon securities generally are more volatile than the market prices of securities that pay interest periodically.
Multiclass Operations and Allocations
During the period March 1, 2010 through March 31, 2010, income and expenses of the Funds that were not directly attributable to a specific class of shares were prorated among the classes based on the relative net assets of each class. Effective April 1, 2010, income and expenses of the Funds that are not directly attributable to a specific class of shares are prorated among the classes based on the relative settled shares of each class. Expenses directly attributable to a class of shares, which presently only include 12b-1 distribution and service fees, are recorded to the specific class.
Realized and unrealized capital gains and losses of the Funds are prorated among the classes based on the relative net assets of each class.
Custodian Fee Credit
Each Fund has an arrangement with the custodian bank whereby certain custodian fees and expenses are reduced by net credits earned on each Fund’s cash on deposit with the bank. Such deposit arrangements are an alternative to overnight investments. Credits for cash balances may be offset by charges for any days on which a Fund overdraws its account at the custodian bank.
Indemnifications
Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust. In addition, in the normal course of business, the Trust enters into contracts that provide general indemnifications to other parties. The Trust’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Trust that have not yet occurred. However, the Trust has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results may differ from those estimates.
2. Fair Value Measurements
Fair value is defined as the price that the Funds would receive upon selling an investment or transferring a liability in an orderly transaction to an independent buyer in the principal or most advantageous market of the investment. A three-tier hierarchy is used to maximize the use of observable market data and minimize the use of unobservable inputs and to establish classification of fair value measurements for disclosure purposes. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability. Observable inputs are based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability. Unobservable inputs are based on the best information available in the circumstances. The three-tier hierarchy of inputs is summarized in the three broad levels listed below:
| Level 1 – | Quoted prices in active markets for identical securities. | |
| Level 2 – | Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.). | |
| Level 3 – | Significant unobservable inputs (including management’s assumptions in determining the fair value of investments). |
The inputs or methodologies used for valuing securities are not an indication of the risk associated with investing in those securities. The following is a summary of each Fund’s fair value measurements as of February 28, 2011:
| California High Yield | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Investments: | ||||||||||||||||
Municipal Bonds | $ | — | $ | 111,213,097 | $ | 1,942,634 | $ | 113,155,731 | ||||||||
Derivatives: | ||||||||||||||||
Forward Swaps* | — | (67,634 | ) | — | (67,634 | ) | ||||||||||
Total | $ | — | $ | 111,145,463 | $ | 1,942,634 | $ | 113,088,097 | ||||||||
| California | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Investments: | ||||||||||||||||
Municipal Bonds | $ | — | $ | 288,385,758 | $ | 1,799,325 | $ | 290,185,083 | ||||||||
| * | Represents net unrealized appreciation (depreciation). |
| 56 | Nuveen Investments |
| California Insured | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Investments: | ||||||||||||||||
Municipal Bonds | $ | — | $ | 149,124,666 | $ | — | $ | 149,124,666 | ||||||||
The following is a reconciliation of each Fund’s Level 3 investments held at the beginning and end of the measurement period:
| California High Yield Level 3 Municipal Bonds | California Level 3 Municipal Bonds | |||||||
Balance at the beginning of year | $ | — | $ | — | ||||
Gains (losses): | ||||||||
Net realized gains (losses) | — | — | ||||||
Net change in unrealized appreciation (depreciation) | — | — | ||||||
Purchases at cost | — | — | ||||||
Sales at proceeds | — | — | ||||||
Net discounts (premiums) | — | — | ||||||
Transfers into | 1,942,634 | 1,799,325 | ||||||
Transfers out of | — | — | ||||||
Balance at the end of year | $ | 1,942,634 | $ | 1,799,325 | ||||
Net change in unrealized appreciation (depreciation) during the year of Level 3 securities held as of February 28, 2011 | $ | (337,775 | ) | $ | 452,337 | |||
During the fiscal year ended February 28, 2011, the Funds recognized no significant transfers to/from Level 1 or Level 2. Transfers in and/or out of Level 3 are shown using end of period values.
3. Derivative Instruments and Hedging Activities
The Funds record derivative instruments at fair value, with changes in fair value recognized on the Statement of Operations, when applicable. Even though the Funds’ investments in derivatives may represent economic hedges, they are not considered to be hedge transactions for financial reporting purposes. For additional information on the derivative instruments in which each Fund was invested during and at the end of the reporting period, refer to the Portfolios of Investments, Financial Statements and Footnote 1 – General Information and Significant Accounting Policies.
The following table presents the fair value of all derivative instruments held by the Funds as of February 28, 2011, the location of these instruments on the Statement of Assets and Liabilities, and the primary underlying risk exposure. California High Yield invested in derivative instruments during the fiscal year ended February 28, 2011.
| California High Yield | ||||||||||||||
Location on the Statement of Assets and Liabilities | ||||||||||||||
Underlying Risk Exposure | Derivative Instrument | Asset Derivatives | Liability Derivatives | |||||||||||
| Location | Value | Location | Value | |||||||||||
Interest Rate | Forward Swaps | Unrealized appreciation on forward swaps* | $ | — | Unrealized depreciation on forward swaps* | $ | 67,634 | |||||||
| * | Represents cumulative unrealized appreciation (depreciation) of swap contracts as reported on the Portfolio of Investments. |
The following tables present the amount of net realized gain (loss) and change in net unrealized appreciation (depreciation) recognized for the fiscal year ended February 28, 2011, on derivative instruments, as well as the primary risk exposure associated with each.
| Net Realized Gain (Loss) from Forward Swaps | California High Yield | |||
| Risk Exposure | ||||
Interest Rate | $ | (248,571 | ) | |
| Change in Net Unrealized Appreciation (Depreciation) of Forward Swaps | California High Yield | |||
| Risk Exposure | ||||
Interest Rate | $ | (124,834 | ) | |
| Nuveen Investments | 57 |
Notes to Financial Statements (continued)
4. Fund Shares
Transactions in Fund shares were as follows:
| California High Yield | ||||||||||||||||
| Year Ended 2/28/11 | Year Ended 2/28/10 | |||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||
Shares sold: | ||||||||||||||||
Class A | 5,763,877 | $ | 45,707,390 | 3,703,341 | $ | 27,817,051 | ||||||||||
Class A – automatic conversion of Class B Shares | 18,156 | 145,432 | — | — | ||||||||||||
Class B | — | — | — | — | ||||||||||||
Class C | 1,166,998 | 9,301,894 | 1,333,787 | 10,061,329 | ||||||||||||
Class I | 1,947,423 | 15,511,288 | 1,540,267 | 10,723,506 | ||||||||||||
Shares issued to shareholders due to reinvestment of distributions: | ||||||||||||||||
Class A | 301,015 | 2,378,965 | 169,845 | 1,249,046 | ||||||||||||
Class B | 257 | 2,056 | 1,107 | 8,102 | ||||||||||||
Class C | 87,194 | 688,899 | 63,042 | 472,184 | ||||||||||||
Class I | 180,447 | 1,421,362 | 154,861 | 1,136,926 | ||||||||||||
| 9,465,367 | 75,157,286 | 6,966,250 | 51,468,144 | |||||||||||||
Shares redeemed: | ||||||||||||||||
Class A | (3,099,382 | ) | (24,204,633 | ) | (3,642,073 | ) | (26,322,357 | ) | ||||||||
Class B | (1,627 | ) | (13,020 | ) | (506 | ) | (3,555 | ) | ||||||||
Class B – automatic conversion to Class A Shares | (18,179 | ) | (145,432 | ) | — | — | ||||||||||
Class C | (696,801 | ) | (5,430,680 | ) | (399,343 | ) | (3,040,733 | ) | ||||||||
Class I | (1,191,548 | ) | (9,458,162 | ) | (81,577 | ) | (637,075 | ) | ||||||||
| (5,007,537 | ) | (39,251,927 | ) | (4,123,499 | ) | (30,003,720 | ) | |||||||||
Net increase (decrease) | 4,457,830 | $ | 35,905,359 | 2,842,751 | $ | 21,464,424 | ||||||||||
| California | ||||||||||||||||
| Year Ended 2/28/11 | Year Ended 2/28/10 | |||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||
Shares sold: | ||||||||||||||||
Class A | 5,970,886 | $ | 57,108,652 | 3,886,182 | $ | 36,949,578 | ||||||||||
Class A – automatic conversion of Class B Shares | 49,193 | 488,102 | 87,982 | 823,830 | ||||||||||||
Class B | 4,155 | 40,974 | 1,331 | 12,219 | ||||||||||||
Class C | 738,009 | 7,306,756 | 511,292 | 4,822,926 | ||||||||||||
Class I | 1,055,240 | 10,367,790 | 1,261,360 | 11,832,915 | ||||||||||||
Shares issued to shareholders due to reinvestment | ||||||||||||||||
Class A | 207,829 | 2,042,441 | 221,379 | 2,093,004 | ||||||||||||
Class B | 6,005 | 59,110 | 9,617 | 90,884 | ||||||||||||
Class C | 55,508 | 543,392 | 48,479 | 458,184 | ||||||||||||
Class I | 475,489 | 4,665,136 | 524,837 | 4,951,120 | ||||||||||||
| 8,562,314 | 82,622,353 | 6,552,459 | 62,034,660 | |||||||||||||
Shares redeemed: | ||||||||||||||||
Class A | (4,920,663 | ) | (47,269,994 | ) | (2,909,736 | ) | (27,457,177 | ) | ||||||||
Class B | (87,922 | ) | (874,096 | ) | (72,570 | ) | (683,662 | ) | ||||||||
Class B – automatic conversion to Class A Shares | (49,242 | ) | (488,102 | ) | (88,061 | ) | (823,830 | ) | ||||||||
Class C | (614,502 | ) | (5,961,491 | ) | (237,005 | ) | (2,232,350 | ) | ||||||||
Class I | (2,328,425 | ) | (22,668,082 | ) | (3,922,122 | ) | (37,061,881 | ) | ||||||||
| (8,000,754 | ) | (77,261,765 | ) | (7,229,494 | ) | (68,258,900 | ) | |||||||||
Net increase (decrease) | 561,560 | $ | 5,360,588 | (677,035 | ) | $ | (6,224,240 | ) | ||||||||
| 58 | Nuveen Investments |
| California Insured | ||||||||||||||||
| Year Ended 2/28/11 | Year Ended 2/28/10 | |||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||
Shares sold: | ||||||||||||||||
Class A | 383,367 | $ | 3,836,017 | 1,237,373 | $ | 12,221,354 | ||||||||||
Class A – automatic conversion of Class B Shares | 33,973 | 342,022 | 122,722 | 1,174,822 | ||||||||||||
Class B | 1,057 | 10,514 | 2,653 | 26,270 | ||||||||||||
Class C | 189,066 | 1,878,664 | 235,236 | 2,321,158 | ||||||||||||
Class I | 328,171 | 3,255,334 | 440,920 | 4,311,906 | ||||||||||||
Shares issued to shareholders due to reinvestment | ||||||||||||||||
Class A | 156,968 | 1,564,026 | 176,146 | 1,721,015 | ||||||||||||
Class B | 2,924 | 29,210 | 4,422 | 43,184 | ||||||||||||
Class C | 29,683 | 293,878 | 26,845 | 261,196 | ||||||||||||
Class I | 279,292 | 2,784,074 | 292,884 | 2,865,659 | ||||||||||||
| 1,404,501 | 13,993,739 | 2,539,201 | 24,946,564 | |||||||||||||
Shares redeemed: | ||||||||||||||||
Class A | (2,345,545 | ) | (23,023,556 | ) | (1,939,828 | ) | (18,962,488 | ) | ||||||||
Class B | (76,857 | ) | (776,421 | ) | (116,256 | ) | (1,140,574 | ) | ||||||||
Class B – automatic conversion to Class A Shares | (33,874 | ) | (342,022 | ) | (122,339 | ) | (1,174,822 | ) | ||||||||
Class C | (148,578 | ) | (1,445,051 | ) | (241,762 | ) | (2,374,720 | ) | ||||||||
Class I | (1,483,481 | ) | (14,628,591 | ) | (991,874 | ) | (9,719,591 | ) | ||||||||
| (4,088,335 | ) | (40,215,641 | ) | (3,412,059 | ) | (33,372,195 | ) | |||||||||
Net increase (decrease) | (2,683,834 | ) | $ | (26,221,902 | ) | (872,858 | ) | $ | (8,425,631 | ) | ||||||
5. Investment Transactions
Purchases and sales (including maturities but excluding short-term investments and derivative transactions) during the fiscal year ended February 28, 2011, were as follows:
| California High Yield | California | California Insured | ||||||||||
Purchases | $ | 54,282,484 | $ | 52,426,211 | $ | 6,187,640 | ||||||
Sales and maturities | 18,928,093 | 53,713,038 | 36,770,126 | |||||||||
6. Income Tax Information
The following information is presented on an income tax basis. Differences between amounts for financial statement and federal income tax purposes are primarily due to timing differences in recognizing taxable market discount, timing differences in recognizing certain gains and losses on investment transactions and the treatment of investments in inverse floating rate securities reflected as financing transactions, if any. To the extent that differences arise that are permanent in nature, such amounts are reclassified within the capital accounts as detailed below. Temporary differences do not require reclassification. Temporary and permanent differences do not impact the net asset values of the Funds.
At February 28, 2011, the cost and unrealized appreciation (depreciation) of investments (excluding investments in derivatives), as determined on a federal income tax basis, were as follows:
| California High Yield | California | California Insured | ||||||||||
Cost of investments | $ | 126,385,800 | $ | 303,636,032 | $ | 160,836,461 | ||||||
Gross unrealized: | ||||||||||||
Appreciation | $ | 2,487,097 | $ | 6,838,757 | $ | 1,351,959 | ||||||
Depreciation | (15,717,166 | ) | (20,289,706 | ) | (13,063,754 | ) | ||||||
Net unrealized appreciation (depreciation) of investments | $ | (13,230,069 | ) | $ | (13,450,949 | ) | $ | (11,711,795 | ) | |||
Permanent differences, primarily due to federal taxes paid, taxable market discount and distribution character reclassifications, resulted in reclassifications among the Funds’ components of net assets at February 28, 2011, the Funds’ tax year end, as follows:
| California High Yield | California | California Insured | ||||||||||
Capital paid-in | $ | 6,539 | $ | 2,697 | $ | 1,287 | ||||||
Undistributed (Over-distribution of) net investment income | (19,237 | ) | (5,000 | ) | (4,671 | ) | ||||||
Accumulated net realized gain (loss) | 12,698 | 2,303 | 3,384 | |||||||||
| Nuveen Investments | 59 |
Notes to Financial Statements (continued)
The tax components of undistributed net tax-exempt income, net ordinary income and net long-term capital gains at February 28, 2011, the Funds’ tax year end, were as follows:
| California High Yield | California | California Insured | ||||||||||
Undistributed net tax-exempt income* | $ | 987,063 | $ | 2,112,247 | $ | 1,166,334 | ||||||
Undistributed net ordinary income** | 29,407 | 19,056 | — | |||||||||
Undistributed net long-term capital gains | — | — | — | |||||||||
| * | Undistributed net tax-exempt income (on a tax basis) has not been reduced for the dividends declared during the period February 1, 2011, through February 28, 2011, and paid on March 1, 2011. |
| ** | Net ordinary income consists of taxable market discount income and net short-term capital gains, if any. |
The tax character of distributions paid during the Funds’ tax years ended February 28, 2011 and February 28, 2010, was designated for purposes of the dividends paid deduction as follows:
| 2011 | California High Yield | California | California Insured | |||||||||
Distributions from net tax-exempt income*** | $ | 6,981,434 | $ | 13,898,835 | $ | 7,790,512 | ||||||
Distributions from net ordinary income ** | — | — | — | |||||||||
Distributions from net long-term capital gains | — | — | — | |||||||||
| 2010 | California High Yield | California | California Insured | |||||||||
Distributions from net tax-exempt income | $4,681,304 | $13,725,783 | $8,148,535 | |||||||||
Distributions from net ordinary income** | 32,916 | — | — | |||||||||
Distributions from net long-term capital gains | — | — | — | |||||||||
| ** | Net ordinary income consists of taxable market discount income and net short-term capital gains, if any. |
| *** | The Funds hereby designate these amounts paid during the fiscal year ended February 28, 2011, as Exempt Interest Dividends. |
At February 28, 2011, the Funds’ tax year end, 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:
| California High Yield | California | California Insured | ||||||||||
Expiration: | ||||||||||||
February 29, 2012 | $ | — | $ | 5,007,429 | $ | — | ||||||
February 28, 2013 | — | 84,061 | — | |||||||||
February 29, 2016 | 320,899 | — | — | |||||||||
February 28, 2017 | 3,792,828 | 3,965,451 | 316,570 | |||||||||
February 28, 2018 | 2,097,482 | 4,898,247 | 825,136 | |||||||||
February 28, 2019 | — | — | 75,788 | |||||||||
Total | $ | 6,211,209 | $ | 13,955,188 | $ | 1,217,494 | ||||||
During the tax year ended February 28, 2011, California High Yield and California utilized $488,749 and $676,118 of their capital loss carryforwards, respectively.
The following Funds have elected to defer net realized losses from investments incurred from November 1, 2010 through February 28, 2011, the Funds’ tax year end, (“post-October losses”) in accordance with federal income tax regulations. Post-October losses are treated as having arisen on the first day of the following fiscal year:
| California High Yield | California Insured | |||||||
Post-October capital losses | $ | 960,847 | $ | 1,085,179 | ||||
7. Management Fees and Other Transactions with Affiliates
Each Fund’s management fee consists of two components – a fund-level fee, based only on the amount of assets within the Fund, and a complex-level fee, based on the aggregate amount of all eligible fund assets managed by the Adviser. This pricing structure enables Fund shareholders to benefit from growth in the assets within their Fund as well as from growth in the amount of complex-wide assets managed by the Adviser.
| 60 | Nuveen Investments |
The annual fund-level fee for each Fund, payable monthly, is calculated according to the following schedule:
| Average Daily Net Assets | California High Yield Fund-Level Fee Rate | |||
For the first $125 million | .4000 | % | ||
For the next $125 million | .3875 | |||
For the next $250 million | .3750 | |||
For the next $500 million | .3625 | |||
For the next $1 billion | .3500 | |||
For net assets over $2 billion | .3250 | |||
| Average Daily Net Assets | California California Insured Fund-Level Fee Rate | |||
For the first $125 million | .3500 | % | ||
For the next $125 million | .3375 | |||
For the next $250 million | .3250 | |||
For the next $500 million | .3125 | |||
For the next $1 billion | .3000 | |||
For the next $3 billion | .2750 | |||
For net assets over $5 billion | .2500 | |||
The annual complex-level fee for each Fund, payable monthly, is calculated according to the following schedule:
| Complex-Level Asset Breakpoint Level* | Effective Rate at Breakpoint Level | |||
$55 billion | .2000 | % | ||
$56 billion | .1996 | |||
$57 billion | .1989 | |||
$60 billion | .1961 | |||
$63 billion | .1931 | |||
$66 billion | .1900 | |||
$71 billion | .1851 | |||
$76 billion | .1806 | |||
$80 billion | .1773 | |||
$91 billion | .1691 | |||
$125 billion | .1599 | |||
$200 billion | .1505 | |||
$250 billion | .1469 | |||
$300 billion | .1445 | |||
| * | The complex-level fee is calculated based upon the aggregate daily “eligible assets” of all Nuveen Funds. Eligible assets do not include assets attributable to investments in other Nuveen Funds or assets in excess of $2 billion added to the Nuveen Fund complex in connection with the Adviser’s assumption of the management of the former First American Funds effective January 1, 2011. Eligible assets include closed-end fund assets managed by the Adviser that are attributable to financial leverage. For these purposes, financial leverage includes the closed-end funds’ use of preferred stock and borrowings and certain investments in the residual interest certificates (also called inverse floating rate securities) in tender option bond (TOB) trusts, including the portion of assets held by a TOB trust that has been effectively financed by the trust’s issuance of floating rate securities, subject to an agreement by the Adviser as to certain funds to limit the amount of such assets for determining eligible assets in certain circumstances. As of February 28, 2011, the complex-level fee rate for the Funds was .1799%. |
The management fee compensates the Adviser for overall investment advisory and administrative services and general office facilities it provides for the Funds. The Adviser has entered into Sub-Advisory Agreements with the Sub-Adviser under which the Sub-Adviser manages the investment portfolios of the Funds. The Sub-Adviser is compensated for its services to the Funds from the management fees paid to the Adviser.
The Trust pays no compensation directly to those of its trustees who are affiliated with the Adviser or to its officers, all of whom receive remuneration for their services to the Trust from the Adviser or its affiliates. The Board of Trustees has adopted a deferred compensation plan for independent trustees that enables trustees to elect to defer receipt of all or a portion of the annual compensation they are entitled to receive from certain Nuveen-advised funds. Under the plan, deferred amounts are treated as though equal dollar amounts had been invested in shares of select Nuveen-advised funds.
The Adviser has agreed to waive fees and reimburse expenses (“Expense Cap”) of the Funds so that total annual fund operating expenses (excluding 12b-1 distribution and service fees, interest expenses, taxes, fees incurred in acquiring and disposing of portfolio securities and extraordinary expenses) do not exceed the average daily net assets of any class of Fund shares in the amounts and for the time periods stated in the following table.
| Fund | Temporary Expense Cap | Temporary Expiration Date | Permanent Expense Cap | |||||||||
California High Yield | 0.750 | % | July 31, 2010 | 1.000 | % | |||||||
California | N/A | N/A | 0.750 | |||||||||
California Insured | N/A | N/A | 0.975 | |||||||||
| Nuveen Investments | 61 |
Notes to Financial Statements (continued)
The Adviser may also voluntarily reimburse expenses from time to time in any of the Funds. Voluntary reimbursements may be terminated at any time at the Adviser’s discretion.
During the fiscal year ended February 28, 2011, Nuveen Investments, LLC (the “Distributor”), a wholly-owned subsidiary of Nuveen, collected sales charges on purchases of Class A Shares, the majority of which were paid out as concessions to financial intermediaries as follows:
California High Yield | California | California Insured | ||||||||||
Sales charges collected (Unaudited) | $ | 323,299 | $ | 222,949 | $ | 76,728 | ||||||
Paid to financial intermediaries (Unaudited) | 290,371 | 194,762 | 64,796 | |||||||||
The Distributor also received 12b-1 service fees on Class A Shares, substantially all of which were paid to compensate financial intermediaries for providing services to shareholders relating to their investments.
During the fiscal year ended February 28, 2011, the Distributor compensated financial intermediaries directly with commission advances at the time of purchase as follows:
California High Yield | California | California Insured | ||||||||||
Commission advances (Unaudited) | $ | 201,505 | $ | 67,131 | $ | 1,000 | ||||||
To compensate for commissions advanced to financial intermediaries, all 12b-1 service fees collected on Class B Shares during the first year following a purchase, all 12b-1 distribution fees collected on Class B Shares, and all 12b-1 service and distribution fees collected on Class C Shares during the first year following a purchase are retained by the Distributor. During the fiscal year ended February 28, 2011, the Distributor retained such 12b-1 fees as follows:
California High Yield | California | California Insured | ||||||||||
12b-1 fees retained (Unaudited) | $ | 60,288 | $ | 59,633 | $ | 32,321 | ||||||
The remaining 12b-1 fees charged to the Funds were paid to compensate financial intermediaries for providing services to shareholders relating to their investments.
The Distributor also collected and retained CDSC on share redemptions during the fiscal year ended February 28, 2011, as follows:
California High Yield | California | California Insured | ||||||||||
CDSC retained (Unaudited) | $ | 14,028 | $ | 26,926 | $ | 3,468 | ||||||
8. Subsequent Events
On April 30, 2011, the Distributor will change its name from Nuveen Investments, LLC to Nuveen Securities, LLC.
Effective April 27, 2011, California Insured will be closed to new investors. Investors in the Fund as of April 27, 2011, may continue to invest in the Fund, including through the reinvestment of dividends and capital gains distributions.
Effective May 31, 2011, California Insured will no longer be required to invest at least 80% of its net assets in municipal securities that are covered by insurance guaranteeing the timely payment of principal and interest thereon. The Fund will continue to be subject to the requirement that it invest at least 80% of its net assets in municipal bonds that pay interest that is exempt from regular federal and California personal income tax. Also on May 31, 2011, the Fund’s name will be changed to Nuveen California Municipal Bond Fund 2.
| 62 | Nuveen Investments |
Trustees and Officers (Unaudited)
The management of the Funds, including general supervision of the duties performed for the Funds by the Adviser, is the responsibility of the Board of Trustees of the Funds. The number of trustees of the Funds is currently set at ten. None of the trustees who are not “interested” persons of the Funds (referred to herein as “independent trustees”) has ever been a director or employee of, or consultant to, Nuveen or its affiliates. The names and business addresses of the trustees and officers of the Funds, their principal occupations and other affiliations during the past five years, the number of portfolios each oversees and other directorships they hold are set forth below.
The Funds’ Statement of Additional Information (“SAI”) includes more information about the trustees. To request a free copy, call Nuveen Investments at (800) 257-8787 or visit the Funds’ website at www.nuveen.com.
Name, Birthdate and Address | Position(s) Held with the Funds | Year First Elected or Appointed (1) | Principal Occupation(s) Including other Directorships During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Trustee | ||||
| Independent Trustees: | ||||||||
Robert P. Bremner (2) 8/22/40 333 W. Wacker Drive Chicago, IL 60606 | Chairman of the Board and Trustee | 1996 | Private Investor and Management Consultant; Treasurer and Director, Humanities Council of Washington, D.C.; Board Member, Independent Directors Council affiliated with the Investment Company Institute. | 246 | ||||
Jack B. Evans 10/22/48 333 W. Wacker Drive Chicago, IL 60606 | Trustee | 1999 | President, The Hall-Perrine Foundation, a private philanthropic corporation (since 1996); Director and Chairman, United Fire Group, a publicly held company; President Pro Tem of the Board of Regents for the State of Iowa University System; Director, Source Media Group; Life Trustee of Coe College and the Iowa College Foundation; formerly, Director, Alliant Energy; formerly, Director, Federal Reserve Bank of Chicago; formerly, President and Chief Operating Officer, SCI Financial Group, Inc., a regional financial services firm. | 246 | ||||
William C. Hunter 3/6/48 333 W. Wacker Drive Chicago, IL 60606 | Trustee | 2004 | Dean, Tippie College of Business, University of Iowa (since 2006); Director (since 2004) of Xerox Corporation; Director (since 2005), Beta Gamma Sigma International Honor Society; Director of Wellmark, Inc. (since 2009); formerly, Dean and Distinguished Professor of Finance, School of Business at the University of Connecticut (2003-2006); previously, Senior Vice President and Director of Research at the Federal Reserve Bank of Chicago (1995-2003); formerly, Director (1997-2007), Credit Research Center at George Washington University. | 246 | ||||
David J. Kundert (2) 10/28/42 333 W. Wacker Drive Chicago, IL 60606 | Trustee | 2005 | Director, Northwestern Mutual Wealth Management Company; retired (since 2004) as Chairman, JPMorgan Fleming Asset Management, President and CEO, Banc One Investment Advisors Corporation, and President, One Group Mutual Funds; prior thereto, Executive Vice President, Banc One Corporation and Chairman and CEO, Banc One Investment Management Group; Member, Board of Regents, Luther College; member of the Wisconsin Bar Association; member of Board of Directors, Friends of Boerner Botanical Gardens; member of Board of Directors and Chair of Investment Committee, Greater Milwaukee Foundation. | 246 | ||||
William J. Schneider (2) 9/24/44 333 W. Wacker Drive Chicago, IL 60606 | Trustee | 1997 | Chairman of Miller-Valentine Partners Ltd., a real estate investment company; formerly, Senior Partner and Chief Operating Officer (retired 2004) of Miller-Valentine Group; member, University of Dayton Business School Advisory Council; member, Mid-America Health System Board; formerly, member and chair, Dayton Philharmonic Orchestra Association; formerly, member, Business Advisory Council, Cleveland Federal Reserve Bank. | 246 | ||||
Judith M. Stockdale 12/29/47 333 W. Wacker Drive Chicago, IL 60606 | Trustee | 1997 | Executive Director, Gaylord and Dorothy Donnelley Foundation (since 1994); prior thereto, Executive Director, Great Lakes Protection Fund (1990-1994). | 246 | ||||
Carole E. Stone (2) 6/28/47 333 W. Wacker Drive Chicago, IL 60606 | Trustee | 2007 | Director, Chicago Board Options Exchange (since 2006); Director, C2 Options Exchange, Incorporated (since 2009); formerly, Commissioner, New York State Commission on Public Authority Reform (2005-2010); formerly, Chair, New York Racing Association Oversight Board (2005-2007). | 246 | ||||
| Nuveen Investments | 63 |
Trustees and Officers (Unaudited) (continued)
Name, Birthdate and Address | Position(s) Held with the Funds | Year First Elected or Appointed | Principal Occupation(s) During Past Five Years | Number of Portfolios in Fund Complex Overseen by Officer | ||||
Virginia L. Stringer 8/16/44 333 West Wacker Drive Chicago, IL 60606 | Trustee | 2011 | Board Member, Mutual Fund Directors Forum; Member, Governing Board, Investment Company Institute’s Independent Directors Council; governance consultant and non-profit board member; former Owner and President, Strategic Management Resources, Inc. a management consulting firm; previously, held several executive positions in general management, marketing and human resources at IBM and The Pillsbury Company; Independent Director, First American Fund Complex (1987-2010) and Chair (1997-2010). | 246 | ||||
Name, Birthdate and Address | Position(s) Held with the Funds | Year First Elected or Appointed (1) | Principal Occupation(s) Including other Directorships During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Trustee | ||||
Terence J. Toth (2) 9/29/59 333 W. Wacker Drive Chicago, IL 60606 | Trustee | 2008 | Director, Legal & General Investment Management America, Inc. (since 2008); Managing Partner, Promus Capital (since 2008); formerly, CEO and President, Northern Trust Global Investments (2004-2007); Executive Vice President, Quantitative Management & Securities Lending (2000-2004); prior thereto, various positions with Northern Trust Company (since 1994); member: Goodman Theatre Board (since 2004); Chicago Fellowship Board (since 2005), and Catalyst Schools of Chicago Board (since 2008); formerly, member: Northern Trust Mutual Funds Board (2005-2007), Northern Trust Global Investments Board (2004-2007), Northern Trust Japan Board (2004-2007), Northern Trust Securities Inc. Board (2003-2007) and Northern Trust Hong Kong Board (1997-2004). | 246 | ||||
| Interested Trustee: | ||||||||
John P. Amboian (3) 6/14/61 333 W. Wacker Drive Chicago, IL 60606 | Trustee | 2008 | Chief Executive Officer and Chairman (since 2007), and Director (since 1999) of Nuveen Investments, Inc., formerly, President (1999-2007); Chief Executive Officer (since 2007) of Nuveen Investments Advisors, Inc.; Director (since 1998) formerly, Chief Executive Officer (2007-2010) of Nuveen Fund Advisors, Inc. | 246 | ||||
Name, Birthdate and Address | Position(s) Held with the Funds | Year First Elected or Appointed (4) | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Officer | ||||
| Officers of the Funds: | ||||||||
Gifford R. Zimmerman 9/9/56 333 W. Wacker Drive Chicago, IL 60606 | Chief Administrative Officer | 1988 | Managing Director (since 2002), Assistant Secretary and Associate General Counsel of Nuveen Investments LLC; Managing Director (since 2004) and Assistant Secretary (since 1994) of Nuveen Investments, Inc.; Managing Director (since 2002), Assistant Secretary (since 1997) and Co-General Counsel (since 2011) of Nuveen Fund Advisors, Inc.; Managing Director, Assistant Secretary and Associate General Counsel of Nuveen Asset Management, LLC (since 2011); Managing Director, Associate General Counsel and Assistant Secretary of Symphony Asset Management LLC (since 2003); Vice President and Assistant Secretary of NWQ Investment Management Company, LLC (since 2002), Nuveen Investments Advisers Inc. (since 2002), Tradewinds Global Investors LLC, and Santa Barbara Asset Management, LLC (since 2006), Nuveen HydePark Group LLC and Nuveen Investment Solutions, Inc. (since 2007) and of Winslow Capital Management Inc. (since 2010); Chief Administrative Officer and Chief Compliance Officer (since 2010) of Nuveen Commodities Asset Management, LLC; Chartered Financial Analyst. | 246 | ||||
| 64 | Nuveen Investments |
Name, Birthdate and Address | Position(s) Held with the Funds | Year First Elected or Appointed (4) | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Officer | ||||
Margo L. Cook 4/11/64 333 W. Wacker Drive Chicago, IL 60606 | Vice President | 2009 | Executive Vice President (since 2008) of Nuveen Investments, Inc. and of Nuveen Fund Advisors, Inc. (since 2011); previously, Head of Institutional Asset Management (2007-2008) of Bear Stearns Asset Management; Head of Institutional Asset Management (1986-2007) of Bank of NY Mellon; Chartered Financial Analyst. | 246 | ||||
Lorna C. Ferguson 10/24/45 333 W. Wacker Drive Chicago, IL 60606 | Vice President | 1998 | Managing Director (since 2004) of Nuveen Investments, LLC and Managing Director (since 2005) of Nuveen Fund Advisors, Inc. | 246 | ||||
Name, Birthdate and Address | Position(s) Held with the Funds | Year First Elected or Appointed (1) | Principal Occupation(s) Including other Directorships During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Trustee | ||||
Stephen D. Foy 5/31/54 333 W. Wacker Drive Chicago, IL 60606 | Vice President and Controller | 1998 | Senior Vice President (since 2010), formerly, Vice President (1993-2010) and Funds Controller (since 1998) of Nuveen Investments, LLC; Senior Vice President (since 2010), formerly, Vice President (2005-2010) of Nuveen Fund Advisors, Inc.; Certified Public Accountant. | 246 | ||||
Scott S. Grace 8/20/70 333 W. Wacker Drive Chicago, IL 60606 | Vice President and Treasurer | 2009 | Managing Director, Corporate Finance & Development, Treasurer (since 2009) of Nuveen Investments, LLC; Managing Director and Treasurer (since 2009) of Nuveen Fund Advisors, Inc., Nuveen Investment Solutions, Inc., Nuveen Investments Advisers, Inc., Nuveen Investments Holdings Inc. and (since (2011) Nuveen Asset Management, LLC; Vice President and Treasurer of NWQ Investment Management Company, LLC, Tradewinds Global Investors, LLC, Symphony Asset Management LLC and Winslow Capital Management, Inc.; Vice President of Santa Barbara Asset Management, LLC; formerly, Treasurer (2006-2009), Senior Vice President (2008-2009), previously, Vice President (2006-2008) of Janus Capital Group, Inc.; formerly, Senior Associate in Morgan Stanley’s Global Financial Services Group (2000-2003); Chartered Accountant Designation. | 246 | ||||
Walter M. Kelly 2/24/70 333 W. Wacker Drive Chicago, IL 60606 | Chief Compliance Officer and Vice President | 2003 | Senior Vice President (since 2008), Vice President (2006-2008) of Nuveen Investments, LLC; Senior Vice President (since 2008) and Assistant Secretary (since 2008) of Nuveen Fund Advisors, Inc. | 246 | ||||
Tina M. Lazar 8/27/61 333 W. Wacker Drive Chicago, IL 60606 | Vice President | 2002 | Senior Vice President (since 2009), formerly, Vice President of Nuveen Investments, LLC (1999-2009); Senior Vice President (since 2010), formerly, Vice President (2005-2010) of Nuveen Fund Advisors, Inc. | 246 | ||||
Larry W. Martin 7/27/51 333 West Wacker Drive Chicago, IL 60606 | Vice President and Assistant Secretary | 1997 | Senior Vice President (since 2010), formerly, Vice President (1993-2010), Assistant Secretary and Assistant General Counsel of Nuveen Investments, LLC; Senior Vice President (since 2011) of Nuveen Asset Management, LLC: Senior Vice President (since 2010), formerly, Vice President (2005-2010), and Assistant Secretary of Nuveen Investments, Inc.; Senior Vice President (since 2010), formerly Vice President (2005-2010), and Assistant Secretary (since 1997) of Nuveen Fund Advisors, Vice President and Assistant Secretary of Nuveen Investments Advisers Inc. (since 2002), NWQ Investment Management Company, LLC, Symphony Asset Management, LLC (since 2003), Tradewinds Global Investors, LLC, Santa Barbara Asset Management, LLC (since 2006), Nuveen HydePark Group, LLC and Nuveen Investment Solutions, Inc. (since 2007); Vice President and Assistant Secretary of Nuveen Commodities Asset Management LLC (since 2010). | 246 |
| Nuveen Investments | 65 |
Trustees and Officers (Unaudited) (continued)
Name, Birthdate and Address | Position(s) Held with the Funds | Year First Elected or Appointed (1) | Principal Occupation(s) Including other Directorships During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Trustee | ||||
Kevin J. McCarthy 3/26/66 333 W. Wacker Drive Chicago, IL 60606 | Vice President and Secretary | 2007 | Managing Director (since 2008), formerly, Vice President (2007-2008), Nuveen Investments, LLC; Managing Director (since 2008), Assistant Secretary (since 2007) and Co-General Counsel (since 2011) of Nuveen Fund Advisors, Inc.; Managing Director, Assistant Secretary and Associate General Counsel (since 2011) of Nuveen Asset Management, LLC; Managing Director (since 2008), and Assistant Secretary, Nuveen Investment Holdings, Inc.; Vice President (since 2007) and Assistant Secretary, Nuveen Investment Advisers Inc., NWQ Investment Management Company, LLC, Tradewinds Global Investors LLC, NWQ Holdings, LLC, Symphony Asset Management LLC, Santa Barbara Asset Management, LLC, Nuveen HydePark Group, LLC and Nuveen Investment Solutions, Inc. (since 2007) and of Winslow Capital Management, Inc. (since 2010); Vice President and Secretary (since 2010) of Nuveen Commodities Asset Management, LLC; prior thereto, Partner, Bell, Boyd & Lloyd LLP (1997-2007). | 246 | ||||
Kathleen L. Prudhomme 3/30/53 800 Nicollet Mall Minneapolis, MN 55402 | Vice President and Assistant Secretary | 2011 | Managing Director, Assistant Secretary and Co-General Counsel (since 2011) of Nuveen Fund Advisors; Managing Director, Assistant Secretary and Associate General Counsel (since 2011) of Nuveen Asset Management, LLC; Managing Director and Assistant Secretary (since 2011) of Nuveen Investments, LLC; formerly, Secretary of FASF (2004-2010); Deputy General Counsel, FAF Advisors, Inc. (2004-2010). | 246 | ||||
Jeffrey M. Wilson 3/13/56 333 West Wacker Drive Chicago, IL 60606 | Vice President | 2011 | Senior Vice President of Nuveen Investments, LLC (since 2011), formerly, Senior Vice President of FAF Advisors, Inc. (2000-2010). | 114 |
| (1) | Trustees serve an indefinite term until his/her successor is elected or appointed. The year first elected or appointed represents the year in which the trustee was first elected or appointed to any fund in the Nuveen Fund Complex. |
| (2) | Also serves as a trustee of the Nuveen Diversified Commodity Fund, an exchange-traded commodity pool managed by Nuveen Commodities Asset Management, LLC, an affiliate of the Adviser. |
| (3) | Mr. Amboian is an interested trustee because of his position with Nuveen Investments, Inc. and certain of its subsidiaries, which are affiliates of the Nuveen Funds. |
| (4) | Officers serve one year terms through August of each year. The year first elected or appointed represents the year in which the officer was first elected or appointed to any fund in the Nuveen Fund Complex. |
| 66 | Nuveen Investments |
Annual Investment Management Agreement Approval Process
(Unaudited)
The Investment Company Act of 1940, as amended (the “1940 Act”), provides, in substance, that each investment advisory agreement between a fund and its investment adviser will continue in effect from year to year only if its continuance is approved at least annually by the fund’s board members, including by a vote of a majority of the board members who are not parties to the advisory agreement or “interested persons” of any parties (the “Independent Board Members”), cast in person at a meeting called for the purpose of considering such approval. In connection with such approvals, the fund’s board members must request and evaluate, and the investment adviser is required to furnish, such information as may be reasonably necessary to evaluate the terms of the advisory agreement. Accordingly, at a meeting held on May 25-26, 2010 (the “May Meeting”), the Boards of Trustees (each a “Board” and each Trustee, a “Board Member”) of the Funds, including a majority of the Independent Board Members, considered and approved the continuation of the advisory agreements (each an “Advisory Agreement”) between each Fund and Nuveen Asset Management (the “Adviser”) for an additional one-year period. In preparation for their considerations at the May Meeting, the Board also held a separate meeting on April 21-22, 2010 (the “April Meeting”). Accordingly, the factors considered and determinations made regarding the renewals by the Independent Board Members include those made at the April Meeting.
In addition, in evaluating the Advisory Agreements, the Independent Board Members reviewed a broad range of information relating to the Funds and the Adviser, including absolute and comparative performance, fee and expense information for the Funds (as described in more detail below), the profitability of Nuveen for its advisory activities (which includes its wholly owned subsidiaries), and other information regarding the organization, personnel, and services provided by the Adviser. The Independent Board Members also met quarterly as well as at other times as the need arose during the year and took into account the information provided at such meetings and the knowledge gained therefrom. Prior to approving the renewal of the Advisory Agreements, the Independent Board Members reviewed the foregoing information with their independent legal counsel and with management, reviewed materials from independent legal counsel describing applicable law and their duties in reviewing advisory contracts, and met with independent legal counsel in private sessions without management present. The Independent Board Members considered the legal advice provided by independent legal counsel and relied upon their knowledge of the Adviser, its services and the Funds resulting from their meetings and other interactions throughout the year and their own business judgment in determining the factors to be considered in evaluating the Advisory Agreements. Each Board Member may have accorded different weight to the various factors in reaching his or her conclusions with respect to a Fund’s Advisory Agreement. The Independent Board Members did not identify any single factor as all-important or controlling. The Independent Board Members’ considerations were instead based on a comprehensive consideration of all the information presented. The principal factors considered by the Board and its conclusions are described below.
A. Nature, Extent and Quality of Services
In considering renewal of the Advisory Agreements, the Independent Board Members considered the nature, extent and quality of the Adviser’s services, including advisory services and administrative services. The Independent Board Members reviewed materials outlining, among other things, the Adviser’s organization and business; the types of services that the Adviser or its affiliates provide and are expected to provide to the Funds; the performance record of the applicable Fund (as described in further detail below); and any initiatives Nuveen had taken for the applicable fund product line, including the development of new practices and coordination among business units with respect to large shareholder transactions, streamlining the classes offered, and adding funds to various distribution platforms.
As part of their review, the Independent Board Members also evaluated the background, experience and track record of the Adviser’s investment personnel. In this regard, the Independent Board Members considered any changes in the personnel, and the impact on the level of services provided to the Funds, if any. The Independent Board Members also reviewed information regarding portfolio manager compensation arrangements to evaluate the Adviser’s ability to attract and retain high quality investment personnel, preserve stability, and reward performance but not provide an incentive for taking undue risks.
In addition to advisory services, the Independent Board Members considered the quality of administrative services provided by the Adviser and its affiliates including product management, fund administration, oversight of service providers, shareholder services, administration of Board relations, regulatory and portfolio compliance and legal support. Given the importance of compliance, the Independent Board Members also considered the Adviser’s compliance program, including the report of the chief compliance officer regarding the Funds’ compliance policies and procedures.
Based on their review, the Independent Board Members found that, overall, the nature, extent and quality of services provided (and expected to be provided) to the respective Funds under the Advisory Agreements were satisfactory.
B. The Investment Performance of the Funds and the Adviser
The Board considered the performance results of each Fund over various time periods. The Board reviewed, among other things, each Fund’s historic investment performance as well as information comparing the Fund’s performance information with that of other funds (the “Performance Peer Group”) based on data provided by an independent provider of mutual fund data and with recognized and/or customized benchmarks. In this regard, the Board reviewed each Fund’s total return information compared to its Performance Peer Group for the quarter, one-, three- and five-year periods ending December 31, 2009 and for the same periods ending March 31, 2010. In addition, the Board reviewed each Fund’s total return information compared to recognized and/or customized benchmarks for the quarter, one- and three-year periods ending December 31, 2009 and for the same periods ending March 31, 2010. The Board also reviewed the peer ranking of the Nuveen municipal funds advised by the Adviser in the aggregate. This information supplemented the Fund performance information provided to the Board at each of its quarterly meetings.
| Nuveen Investments | 67 |
Annual Investment Management Agreement Approval Process
(Unaudited) (continued)
In reviewing peer comparison information, the Independent Board Members recognized that the Performance Peer Group of certain funds may not adequately represent the objectives and strategies of the funds, thereby limiting the usefulness of comparing a fund’s performance with that of its Performance Peer Group. In this regard, the Independent Board Members considered that the Performance Peer Groups of certain funds (including the Nuveen California High Yield Municipal Bond Fund and Nuveen California Insured Municipal Bond Fund) were classified as having significant differences from such funds based on considerations such as special fund objectives, potential investable universe and the composition of the peer set (e.g., the number and size of competing funds and number of competing managers).
Based on their review, the Independent Board Members determined that each Fund’s investment performance over time had been satisfactory. The Independent Board Members noted that although the Nuveen California High Yield Municipal Bond Fund and the Nuveen California Insured Municipal Bond Fund underperformed their respective benchmark in the three-year period, they outperformed their benchmark in the one-year period. In addition, although the Nuveen California Municipal Bond Fund lagged its peers somewhat in the longer periods, the performance had improved in the one-year period performing in the first quartile.
C. Fees, Expenses and Profitability
1. Fees and Expenses
The Board evaluated the management fees and expenses of each Fund reviewing, among other things, such Fund’s gross management fees, net management fees and net expense ratios in absolute terms as well as compared to the fee and expenses of a comparable universe of funds based on data provided by an independent fund data provider (the “Peer Universe”) and in certain cases, to a more focused subset of funds in the Peer Universe (the “Peer Group”) and any expense limitations.
The Independent Board Members further reviewed the methodology regarding the construction of the applicable Peer Universe and/or Peer Group. In reviewing the comparisons of fee and expense information, the Independent Board Members took into account that in certain instances various factors such as: the asset level of a fund relative to peers; the limited size and particular composition of the Peer Universe or Peer Group; the investment objectives of the peers; expense anomalies; changes in the funds comprising the Peer Universe or Peer Group from year to year; levels of reimbursement; the timing of information used; and differences in the states reflected in the Peer Universe or Peer Group may impact the comparative data, thereby limiting the ability to make a meaningful comparison with peers.
In reviewing the fee schedule for a Fund, the Independent Board Members also considered the fund-level and complex-wide breakpoint schedules (described in further detail below) and any fee waivers and reimbursements provided by Nuveen. It was noted that the Funds had net advisory fees above the peer average of its Peer Group (or Peer Universe as applicable) but net expense ratios below, at or near (within 5 basis points or less) the peer expense ratio average. In addition, the Independent Board Members noted that the temporary expense cap for the Nuveen California High Yield Municipal Bond Fund will expire as such Fund operates under its expense cap.
Based on their review of the fee and expense information provided, the Independent Board Members determined that each Fund’s management fees were reasonable in light of the nature, extent and quality of services provided to the Fund.
2. Comparisons with the Fees of Other Clients
The Independent Board Members further reviewed information regarding the nature of services and fee rates offered by the Adviser to other clients, including municipal separately managed accounts and passively managed municipal bond exchange traded funds (ETFs) that are sub-advised by the Adviser. In evaluating the comparisons of fees, the Independent Board Members noted that the fee rates charged to the Funds and other clients vary, among other things, because of the different services involved and the additional regulatory and compliance requirements associated with registered investment companies, such as the Funds. Accordingly, the Independent Board Members considered the differences in the product types, including, but not limited to, the services provided, the structure and operations, product distribution and costs thereof, portfolio investment policies, investor profiles, account sizes and regulatory requirements. The Independent Board Members noted, in particular, that the range of services provided to the Funds (as discussed above) is much more extensive than that provided to separately managed accounts. Given the inherent differences in the products, particularly the extensive services provided to the Funds, the Independent Board Members believe such facts justify the different levels of fees.
3. Profitability of Nuveen
In conjunction with its review of fees, the Independent Board Members also considered the profitability of Nuveen for its advisory activities (which incorporated Nuveen’s wholly-owned affiliated sub-advisers) and its financial condition. The Independent Board Members reviewed the revenues and expenses of Nuveen’s advisory activities for the last two years, the allocation methodology used in preparing the profitability data and an analysis of the key drivers behind the changes in revenues and expenses that impacted profitability in 2009. The Independent Board Members noted this information supplemented the profitability information requested and received during the year to help keep them apprised of developments affecting profitability (such as changes in fee waivers and expense reimbursement commitments). In this regard, the Independent Board Members noted that they had also appointed an Independent Board Member as a point person to review and keep them apprised of changes to the profitability analysis and/or methodologies during the year. The Independent Board Members also considered Nuveen’s revenues for advisory
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activities, expenses, and profit margin compared to that of various unaffiliated management firms with similar amounts of assets under management and relatively comparable asset composition prepared by Nuveen.
In reviewing profitability, the Independent Board Members recognized the subjective nature of determining profitability which may be affected by numerous factors including the allocation of expenses. Further, the Independent Board Members recognized the difficulties in making comparisons as the profitability of other advisers generally is not publicly available and the profitability information that is available for certain advisers or management firms may not be representative of the industry and may be affected by, among other things, the adviser’s particular business mix, capital costs, types of funds managed and expense allocations. Notwithstanding the foregoing, the Independent Board Members reviewed Nuveen’s methodology and assumptions for allocating expenses across product lines to determine profitability. In reviewing profitability, the Independent Board Members recognized Nuveen’s investment in its fund business. Based on their review, the Independent Board Members concluded that Nuveen’s level of profitability for its advisory activities was reasonable in light of the services provided.
In evaluating the reasonableness of the compensation, the Independent Board Members also considered other amounts paid to the Adviser by the Funds as well as any indirect benefits (such as soft dollar arrangements, if any) the Adviser and its affiliates receive, or are expected to receive, that are directly attributable to the management of the Funds, if any. See Section E below for additional information on indirect benefits the Adviser may receive as a result of its relationship with the Funds. Based on their review of the overall fee arrangements of each Fund, the Independent Board Members determined that the advisory fees and expenses of the respective Fund were reasonable.
D. Economies of Scale and Whether Fee Levels Reflect These Economies of Scale
With respect to economies of scale, the Independent Board Members have recognized the potential benefits resulting from the costs of a fund being spread over a larger asset base, although economies of scale are difficult to measure and predict with precision, particularly on a fund-by-fund basis. One method to help ensure the shareholders share in these benefits is to include breakpoints in the advisory fee schedule. Generally, management fees for funds in the Nuveen complex are comprised of a fund-level component and a complex-level component, subject to certain exceptions. Accordingly, the Independent Board Members reviewed and considered the applicable fund-level breakpoints in the advisory fee schedules that reduce advisory fees as asset levels increase.
In addition to fund-level advisory fee breakpoints, the Board also considered the Funds’ complex-wide fee arrangement. Pursuant to the complex-wide fee arrangement, the fees of the funds in the Nuveen complex are generally reduced as the assets in the fund complex reach certain levels. The complex-wide fee arrangement seeks to provide the benefits of economies of scale to fund shareholders when total fund complex assets increase, even if assets of a particular fund are unchanged or have decreased. The approach reflects the notion that some of Nuveen’s costs are attributable to services provided to all its funds in the complex and therefore all funds benefit if these costs are spread over a larger asset base.
Based on their review, the Independent Board Members concluded that the breakpoint schedules and complex-wide fee arrangement were acceptable and reflect economies of scale to be shared with shareholders when assets under management increase.
E. Indirect Benefits
In evaluating fees, the Independent Board Members received and considered information regarding potential “fall out” or ancillary benefits the Adviser or its affiliates may receive as a result of its relationship with each Fund. In this regard, the Independent Board Members considered, among other things, any sales charges, distribution fees and shareholder services fees received and retained by the Funds’ principal underwriter, an affiliate of the Adviser, which includes fees received pursuant to any 12b-1 plan. The Independent Board Members, therefore, considered the 12b-1 fees retained by Nuveen during the last calendar year.
In addition to the above, the Independent Board Members considered whether the Adviser received any benefits from soft dollar arrangements whereby a portion of the commissions paid by a Fund for brokerage may be used to acquire research that may be useful to the Adviser in managing the assets of the Funds and other clients. The Independent Board Members noted that the Adviser does not currently have any soft dollar arrangements; however, to the extent certain bona fide agency transactions that occur on markets that traditionally trade on a principal basis and riskless principal transactions are considered as generating “commissions,” the Adviser intends to comply with the applicable safe harbor provisions.
Based on their review, the Independent Board Members concluded that any indirect benefits received by the Adviser as a result of its relationship with the Funds were reasonable and within acceptable parameters.
F. Other Considerations
The Independent Board Members did not identify any single factor discussed previously as all-important or controlling. The Board Members, including the Independent Board Members, unanimously concluded that the terms of the Advisory Agreements are fair and reasonable, that the Adviser’s fees are reasonable in light of the services provided to each Fund and that the Advisory Agreements be renewed.
| Nuveen Investments | 69 |
Board Approval of Sub-Advisory Arrangements (Unaudited)
Since the May Meeting, Nuveen has engaged in an internal restructuring (the “Restructuring”) pursuant to which the portfolio management services provided by NAM to the Funds were transferred to Nuveen Asset Management, LLC (“NAM LLC”), a newly-organized wholly-owned subsidiary of the Adviser and the Adviser changed its name to Nuveen Fund Advisors, Inc. (“NFA”). The Adviser, under its new name NFA, continues to serve as investment adviser to the Funds and, in that capacity, will continue to provide various oversight, administrative, compliance and other services. To effectuate the foregoing, NFA entered into sub-advisory agreements with NAM LLC on behalf of the Funds (each a “Sub-Advisory Agreement”). Under each Sub-Advisory Agreement, NAM LLC, subject to the oversight of NFA and the Board, will furnish an investment program, make investment decisions for, and place all orders for the purchase and sale of securities for the portion of the respective Fund’s investment portfolio allocated to it by NFA. There have been no changes to the advisory fees paid by the Funds; rather, NFA will pay a portion of the investment advisory fee it receives to NAM LLC for its sub-advisory services. The Independent Board Members reviewed the allocation of fees between NFA and NAM LLC. NFA and NAM LLC do not anticipate any reduction in the nature or level of services provided to the Funds following the Restructuring. The personnel of NFA who engaged in portfolio management activities prior to the spinoff of NAM LLC are not expected to materially change as a result of the spinoff. In light of the foregoing, at a meeting held on November 16-18, 2010, the Board Members, including a majority of the Independent Board Members, approved the Sub-Advisory Agreements on behalf of the Funds. Given that the Restructuring was not expected to reduce the level or nature of services provided and the advisory fees paid by the Funds were the same, the factors considered and determinations made at the May Meeting in approving the Advisory Agreements were equally applicable to the approval of the Sub-Advisory Agreements.
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Notes
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Notes
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Notes
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Glossary of Terms Used in this Report
Auction Rate Bond: An auction rate bond is a security whose interest payments are adjusted periodically through an auction process, which process typically also serves as a means for buying and selling the bond. Auctions that fail to attract enough buyers for all the shares offered for sale are deemed to have “failed,” with current holders receiving a formula-based interest rate until the next scheduled auction.
Pre-refundings: Pre-refundings, also known as advance refundings or refinancings, occur when an issuer sells new bonds and uses the proceeds to fund principal and interest payments of older existing bonds. This process often results in lower borrowing costs for bond issuers.
Average Annual Total Return: This is a commonly used method to express an investment’s performance over a particular, usually multi-year time period. It expresses the return that would have been necessary each year to equal the investment’s actual cumulative performance (including change in NAV or offer price and reinvested dividends and capital gains distributions, if any) over the time period being considered.
Average Effective Maturity: The market-value-weighted average of the effective maturity dates of the individual securities including cash. In the case of a bond that has been advance-refunded to a call date, the effective maturity is the date on which the bond is scheduled to be redeemed using the proceeds of an escrow account. In most other cases the effective maturity is the stated maturity date of the security.
Average Duration: Duration is a measure of the expected period over which a bond’s principal and interest will be paid, and consequently is a measure of the sensitivity of a bond’s (or bond fund’s) value to changes when market interest rates change. Generally, the longer a bond or Fund’s duration, the more the price of the bond or Fund will change as interest rates change.
Inverse Floaters: Inverse floating rate securities are created by depositing a municipal bond, typically with a fixed interest rate, into a special purpose trust created by a broker-dealer. This trust, in turn, (a) issues floating rate certificates typically paying short-term tax-exempt interest rates to third parties in amounts equal to some fraction of the deposited bond’s par amount or market value, and (b) issues an inverse floating rate certificate (sometimes referred to as an “inverse floater”) to an investor (such as a Fund) interested in gaining investment exposure to a long-term municipal bond. The income received by the holder of the inverse floater varies inversely with the short-term rate paid to the floating rate certificates’ holders, and in most circumstances the holder of the inverse floater bears substantially all of the underlying bond’s downside investment risk. The holder of the inverse floater typically also benefits disproportionately from any potential appreciation of the underlying bond’s value. Hence, an inverse floater essentially represents an investment in the underlying bond on a leveraged basis.
Lipper California Municipal Debt Funds Average: Represents the average annualized total return for all reporting funds in the Lipper California Municipal Debt Fund category. The Lipper California Municipal Debt Funds Average contained 122, 99 and 83 funds for the 1-year, 5-year and 10-years period, respectively, ended February 28, 2011.
Lipper Single-State Insured Municipal Debt Funds Average: Represents the average annualized total return for all reporting funds in the Lipper Single-State Insured Municipal Debt Fund category. The Lipper Single-State Insured Municipal Debt Funds Average contained 60, 56 and 55 funds for the 1-year, 5-year and 10-years period, respectively, ended February 28, 2011.
Net Asset Value (NAV): A Fund’s NAV is the dollar value of one share in the Fund. It is calculated by subtracting the liabilities of the Fund from its total assets and then dividing the remainder by the number of shares outstanding. Fund NAVs are calculated at the end of each business day.
Standard & Poor’s (S&P) California Municipal Bond Index: An unleveraged, market value-weighted index designed to measure the performance of the tax-exempt, investment grade California municipal bond market.
Standard & Poor’s (S&P) High Yield Municipal Bond Index: An unleveraged, market-value-weighted index designed to measure the performance of the tax-exempt, investment grade U.S. high yield municipal bond market.
Standard & Poor’s (S&P) Insured National Municipal Bond Index: An unleveraged, market value-weighted index designed to measure the performance of the insured segment of the U.S. municipal bond market.
Standard & Poor’s (S&P) National Municipal Bond Index: An unleveraged, market value-weighted index designed to measure the performance of the tax-exempt, investment grade U.S. municipal bond market.
Zero Coupon Bond: A zero coupon bond does not pay a regular interest coupon to its holders during the life of the bond. Tax-exempt income to the holder of the bond comes from accretion of the difference between the original purchase price of the bond at issuance and the par value of the bond at maturity and is effectively paid at maturity. The market prices of zero coupon bonds generally are more volatile than the market prices of bonds that pay interest periodically.
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Fund Manager
Nuveen Fund Advisors, Inc.
333 West Wacker Drive
Chicago, IL 60606
Sub-Adviser
Nuveen Asset Management, LLC
333 West Wacker Drive
Chicago, IL 60606
Legal Counsel
Chapman and Cutler LLP
Chicago, IL
Independent Registered
Public Accounting Firm
PricewaterhouseCoopers LLP
Chicago, IL
Custodian
State Street Bank & Trust Company
Boston, MA
Transfer Agent and Shareholder Services
Boston Financial
Data Services, Inc.
Nuveen Investor Services
P.O. Box 8530
Boston, MA 02266-8530
(800) 257-8787
Quarterly Portfolio of Investments and Proxy Voting Information: You may obtain (i) each Fund’s quarterly portfolio of investments, (ii) information regarding how each Fund voted proxies relating to portfolio securities held during the most recent twelve-month period ended June 30, and (iii) a description of the policies and procedures that each Fund used to determine how to vote proxies relating to portfolio securities without charge, upon request, by calling Nuveen Investments at (800) 257-8787 or on Nuveen’s website at www.nuveen.com.
You may also obtain this and other Fund information directly from the Securities and Exchange Commission (SEC). The SEC may charge a copying fee for this information. Visit the SEC on-line at http://www.sec.gov or in person at the SEC’s Public Reference Room in Washington, D.C. Call the SEC at (202) 942-8090 for room hours and operation. You may also request Fund information by sending an e-mail request to publicinfo@sec.gov or by writing to the SEC’s Public Reference Section at 100 F Street NE, Washington, D.C. 20549.
The Financial Industry Regulatory Authority (FINRA) provides a Public Disclosure Program which supplies certain information regarding the disciplinary history of FINRA members and their associated persons in response to either telephone inquiries at (800) 289-9999 or written inquiries at www.finra.org. FINRA also provides an investor brochure that includes information describing the Public Disclosure Program.
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Nuveen Investments:
Serving Investors for Generations
Since 1898, financial advisors and their clients have relied on Nuveen Investments to provide dependable investment solutions through continued adherence to proven, long-term investing principles. Today, we offer a range of high quality equity and fixed-income solutions designed to be integral components of a well-diversified core portfolio.
Focused on meeting investor needs.
Nuveen Investments is a global investment management firm that seeks to help secure the long-term goals of institutions and high net worth investors as well as the consultants and financial advisors who serve them. We market our growing range of specialized investment solutions under the high-quality brands of HydePark, NWQ, Nuveen Asset Management, Santa Barbara, Symphony, Tradewinds and Winslow Capital. In total, Nuveen Investments managed approximately $197 billion of assets as of December 31, 2010.
Find out how we can help you.
To learn more about how the products and services of Nuveen Investments may be able to help you meet your financial goals, talk to your financial advisor, or call us at (800) 257-8787. Please read the information provided carefully before you invest. Investors should consider the investment objective and policies, risk considerations, charges and expenses of any investment carefully. Where applicable, be sure to obtain a prospectus, which contains this and other relevant information. To obtain a prospectus, please contact your securities representative or Nuveen Investments, 333 W. Wacker Dr., Chicago, IL 60606. Please read the prospectus carefully before you invest or send money.
Learn more about Nuveen Funds at: www.nuveen.com/mf
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Distributed by Nuveen Investments, LLC 333 West Wacker Drive Chicago, IL 60606 www.nuveen.com |
MAN-CA-0211P
Mutual Funds
Nuveen Municipal Bond Funds
(formerly First American California Tax Free Fund)
Dependable, tax-free income because it’s not what you earn, it’s what you keep.®
Annual Report
February 28, 2011
| Share Class / Ticker Symbol | ||||||
| Class A | Class C1 | Class I | ||||
Nuveen California Tax Free Fund | FCAAX | FCCAX | FCAYX | |||
INVESTMENT ADVISER NAME CHANGE
Effective January 1, 2011, Nuveen Asset Management, the Fund’s investment adviser, changed its name to Nuveen Fund Advisors, Inc. (“Nuveen Fund Advisors”). Concurrently, Nuveen Fund Advisors formed a wholly-owned subsidiary, Nuveen Asset Management, LLC, to house its portfolio management capabilities.
NUVEEN INVESTMENTS COMPLETES STRATEGIC COMBINATION WITH FAF ADVISORS
On December 31, 2010, Nuveen Investments completed the strategic combination between Nuveen Asset Management, LLC, the largest investment affiliate of Nuveen Investments, and FAF Advisors. As part of this transaction, U.S. Bancorp – the parent of FAF Advisors – received cash consideration and a 9.5% stake in Nuveen Investments in exchange for the long term investment business of FAF Advisors, including investment-management responsibilities for the non-money market mutual funds of the First American Funds family.
The approximately $27 billion of mutual fund and institutional assets managed by FAF Advisors, along with the investment professionals managing these assets and other key personnel, have become part of Nuveen Asset Management, LLC. With these additions to Nuveen Asset Management, LLC, this affiliate now manages more than $100 billion of assets across a broad range of strategies from municipal and taxable fixed income to traditional and specialized equity investments.
This combination does not affect the investment objectives or strategies of this Fund. Over time, Nuveen Investments expects that the combination will provide even more ways to meet the needs of investors who work with financial advisors and consultants by enhancing the multi-boutique model of Nuveen Investments, which also includes highly respected investment teams at HydePark, NWQ Investment Management, Santa Barbara Asset Management, Symphony Asset Management, Tradewinds Global Investors and Winslow Capital. Nuveen Investments managed approximately $197 billion of assets as of December 31, 2010.
| Must be preceded by or accompanied by a prospectus. | NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE |
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Letter to Shareholders
Dear Shareholders,
In 2010, the global economy recorded another year of recovery from the financial and economic crises of 2008, but many of the factors that caused the downturn still weigh on the prospects for continued improvement. In the U.S., ongoing weakness in housing values has put pressure on homeowners and mortgage lenders. Similarly, the strong earnings recovery for corporations and banks is only slowly being translated into increased hiring or more active lending. Globally, deleveraging by private and public borrowers has inhibited economic growth and that process is far from complete.
Encouragingly, constructive actions are being taken by governments around the world to deal with economic issues. In the U.S., the recent passage of a stimulatory tax bill relieved some of the pressure on the Federal Reserve to promote economic expansion through quantitative easing and offers the promise of sustained economic growth. A number of European governments are undertaking programs that could significantly reduce their budget deficits. Governments across the emerging markets are implementing various steps to deal with global capital flows without undermining international trade and investment.
The success of these government actions could determine whether 2011 brings further economic recovery and financial market progress. One risk associated with the extraordinary efforts to strengthen U.S. economic growth is that the debt of the U.S. government will continue to grow to unprecedented levels. Another risk is that over time there could be inflationary pressures on asset values in the U.S. and abroad, because what happens in the U.S. impacts the rest of the world economy. Also, these various actions are being taken in a setting of heightened global economic uncertainty, primarily about the supplies of energy and other critical commodities. In this challenging environment, your Nuveen investment team continues to seek sustainable investment opportunities and to remain alert to potential risks in a recovery still facing many headwinds. On your behalf, we monitor their activities to assure they maintain their investment disciplines.
As you will note elsewhere in this report, on December 31, 2010, Nuveen Investments completed a strategic combination with FAF Advisors, Inc., the manager of the First American Funds. The combination adds highly respected and distinct investment teams to meet the needs of investors and their advisors and is designed to benefit all fund shareholders by creating a fund organization with the potential for further economies of scale and the ability to draw from even greater talent and expertise to meet those investor needs.
As always, I encourage you to contact your financial consultant if you have any questions about your investment in a Nuveen Fund. On behalf of the other members of your Fund Board, we look forward to continuing to earn your trust in the months and years ahead.
Sincerely,
Robert P. Bremner
Chairman of the Board
April 26, 2011
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Certain statements in this report are forward-looking statements. Discussions of specific investments are for illustration only and are not intended as recommendations of individual investments. The forward-looking statements and other views expressed herein are those of the portfolio manager as of the date of this report. Actual future results or occurrences may differ significantly from those anticipated in any forward-looking statements and the views expressed herein are subject to change at any time, due to numerous market and other factors. The Fund disclaims any obligation to update publicly or revise any forward-looking statements or views expressed herein.
Any reference to credit ratings for portfolio holdings denotes the highest rating assigned by a Nationally Recognized Statistical Rating Organization (NRSRO) such as Standard & Poor’s (S&P), Moody’s, or Fitch. AAA, AA, A and BBB ratings are investment grade; BB, B, CCC, CC, C and D ratings are below investment grade. Holdings and ratings may change over time.
Nuveen California Tax Free Fund
(formerly known as First American California Tax Free Fund)
Recently, the Nuveen California Tax Free Fund changed its fiscal year end to February 28/29 from June 30. As a result, this annual report covers an eight-month period. Portfolio manager Scott Romans, PhD, reviews market conditions at the national and state levels, key investment strategies and the Fund’s performance during this period. Scott, who has twelve years of investment experience, assumed portfolio management responsibilities for the Fund in January 2011. The previous portfolio managers for the Fund, Christopher Drahn and Michael Hamilton, managed it from 2005 and 2002, respectively, until December 2010.
What factors affected the U.S. economy and the national and state municipal bond markets during the eight-month reporting period ended February 28, 2011?
The main drivers of municipal bond performance during the period were significant supply and demand issues in the marketplace. During the first half of this reporting period, fixed-income assets across the board continued to rally as investors migrated out of money market funds and into mutual funds. The market’s bullish nature was driven by the perception that short rates would stay low for an extended period as well as the possibility that quantitative easing would drive down long rates. The municipal market also participated in the rally with prices moving higher and yields continuing to grind lower until they reached historically low levels in August 2010. Throughout this period, municipal bond funds experienced strong inflows as investors felt more confident moving out on the yield curve and taking on additional credit and interest rate risk. At the same time, the supply of municipal bonds was scarce as a great deal of issuance continued to be taken out of the tax-exempt arena and offered through the Build America Bond (BAB) program. While tax-exempt fund managers had difficulty finding longer maturity bonds for their portfolios, the steepness of the yield curve caused detrimental income consequences if they purchased shorter maturity bonds.
The environment reversed very quickly in the final half of the period as valuations suffered due to several factors. First, rates began to climb across fixed-income markets as concerns about Federal stimulus programs and potential inflation drove Treasury rates higher. Valuations in the municipal market declined along with the Treasury market. Second, municipal bond funds, particularly high yield funds, began to experience a large volume of outflows starting in mid-November 2010 and the market became relatively illiquid. As high yield bond funds offered to sell bonds to meet redemptions, buyers were very cautious about what they would bid for these bonds. Consequently, trades that took
| Nuveen Investments | 5 |
place at lower levels impacted valuations across the market. Investors watched their fund values decrease, which in turn caused more outflows. The final element that played into the market downturn were the negative stories in the media about the fiscal struggles of states and municipalities. The fear of potential defaults caused more investors to exit the municipal marketplace. These events in the final months of the period disrupted the earlier positive performance of municipal bonds. Over the eight months ended February 2011, municipal bond issuance nationwide totaled $260.5 billion.
Supply and demand issues instead of credit factors drove performance at the state level as well. While California finally established a budget in October 2010 after an extended stalemate, the state remained in a fiscal predicament. Unemployment within the state lingered at 12.4% as of February 2011, which was the second highest rate in the country. Also, the state’s general obligation (GO) debt carried an A1 rating by Moody’s, the only state besides Illinois to have that rating. Despite ongoing fiscal concerns, state GO bonds rallied strongly during the period, outperforming the California market in general. The outperformance was not a result of improved credit quality for the state, but rather from a significant drop in the amount of municipal bonds California brought to market, especially compared to the record issuance in the fourth quarter of 2009. At the same time, investors became more comfortable owning California GOs, particularly with the attractive structures of the bonds issued in late 2009. This caused credit spreads – meaning the extra income investors demanded for investing in lower-rated securities – to narrow during the period and stay that way. Even when the overall market traded off and funds started to see redemptions, California GO bonds held up well.
Despite the fact that the BAB program was discontinued at the end of 2010, municipal bond issuance was extremely low early in 2011. Many issuers raced to get their 2011 deals done as BAB bonds in the fourth quarter of 2010 when it became clear that the program would not be re-established. Projections for issuance across the nation and in California for the remainder of 2011 are also very low as it does not appear that the expiration of the program will bring significant tax-exempt issuance back in the near term.
How did the Fund perform during the eight-month reporting period ended February 28, 2011?
The table within the Fund Performance section of this report provides total returns for the eight-month, one-year, five-year and ten-year reporting periods ending February 28, 2011. The Fund’s Class A Share total returns are compared with the performance of a corresponding index and an appropriate Lipper peer fund average. During the eight-month period, the Fund’s Class A Shares at net asset value (NAV) outpaced its peer group, the Lipper California Municipal Debt Funds Average, but lagged the Barclays Capital Municipal Bond Index.
Sector selection was the primary driver of the Fund’s underperformance relative to the index during the reporting period. First, the Fund’s results were hindered by its underweight position in California GO bonds. While the Fund had approximately a 4% weighting in these bonds, they constituted more than 25% of the index and dramatically outperformed the market in general as discussed earlier. We are not able to match a market-level position in California GOs due to the Fund’s diversification requirements as
| 6 | Nuveen Investments |
well as the ability to gain access to the bonds. To a lesser extent, the Fund’s performance was hurt by an overweight position in local GO bonds (unified school districts and community colleges) as concerns about state and local municipalities caused that sector to underperform. The Fund had approximately 29% in local GOs versus 11% for the index at period end. However, our strong security selection within the local GO sector partially offset the negative effects of the weighting. The same scenario took place in health care, where spreads remained wide because that sector was not eligible to participate in the BAB program. While the Fund’s overweight to health care proved detrimental as the sector underperformed the market, our positive security selection partially cancelled out the impact. Additionally, the Fund benefited from a lack of exposure to tobacco bonds, which performed extremely poorly near the end of the period as high yield funds unloaded them to meet redemptions.
Credit quality was a secondary, but much smaller, factor in the Fund’s performance. As has historically been the case, the Fund was positioned with an overweight to mid-grade and non-rated bonds. The BBB-rated sector in California performed poorly compared to the overall market during the period. As the high yield market traded off, spreads on lower rated bonds widened. However, we again benefited from security selection as the BBB-rated bonds we held tended to outperform the sector, helping to offset most of the negative effects of the overweight. At period end, BBB-rated bonds made up around 17% of the portfolio versus approximately 6% of the index.
What strategies did you use to manage the Fund?
The Fund continued to employ the same fundamental investment strategies and tactics used in previous years. Our focus remains on bottom-up security selection, evaluating potential opportunities one at a time based on thorough credit research. Now more than ever, the in-depth credit research performed by our team is important. In part, this is because relatively few new issues carrying municipal bond insurance. This is a change from several years ago when as much as 50% of new issuance was insured. In addition to bottom-up security selection, our long-term strategy in the Fund has been to emphasize mid grade and non-rated bonds due to the favorable returns these credits have historically generated. We have also tended to overweight select sectors – such as health care – where our research team has in-depth expertise. We continued to favor these areas in the Fund during the period. In addition, we made slight adjustments to the Fund’s yield curve positioning; however, we don’t believe these moves add as much value as security selection.
Going into the reporting period, we were comfortable with the Fund’s positioning and were only able to make modest adjustments to its weightings due to the scarcity of bonds. We did actively search for opportunities in health care because of the wider spreads and stronger structures (higher coupons with longer call protections) available in that sector. We added one holding to the portfolio, Sutter Health, which is an AA–rated hospital system bond. For the purchase, we used cash on the Fund’s balance sheet and did not need to sell any positions. The Fund also owned several bonds that were called during the period.
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Risk Considerations
Mutual fund investing involves risk; principal loss is possible. Debt or fixed income securities are subject to credit risk and interest rate risk. Market interest rate changes will cause the value of debt securities (and the value of shares of funds that invest in them) to fluctuate, and may also impact income over time. Credit risk refers to an issuer’s ability to make interest and principal payments when due.
Dividend Information
During the reporting period, all share classes of the Nuveen California Tax Free Fund remained stable.
Each Fund seeks to pay dividends at a rate that reflects the past and projected performance of the Fund. To permit a Fund to maintain a more stable monthly dividend, the Fund may pay dividends at a rate that may be more or less than the amount of net investment income actually earned by the Fund during the period. If the Fund has cumulatively earned more than it has paid in dividends, it will hold the excess in reserve as undistributed net investment income (UNII) as part of the Fund’s net asset value. Conversely, if the Fund has cumulatively paid in dividends more than it has earned, the excess will constitute a negative UNII that will likewise be reflected in the Fund’s net asset value. Each Fund will, over time, pay all its net investment income as dividends to shareholders. As of February 28, 2011, the Fund had a positive UNII balance for tax purposes and positive UNII balances for financial reporting purposes.
| 8 | Nuveen Investments |
Returns quoted represent past performance, which is no guarantee of future results. Current performance may be higher or lower than the performance shown. Investment returns and principal value will fluctuate so that when shares are redeemed, they may be worth more or less than their original cost. Returns without sales charges would be lower if the sales charge were included. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
Returns may reflect a contractual agreement between the Fund and the investment adviser to waive certain fees and expenses; see Notes to Financial Statements, Footnote 7 — Management Fees and Other Transactions with Affiliates for more information. In addition, returns may reflect a voluntary expense limitation by the Fund’s investment adviser that may be modified or discontinued at any time without notice. For the most recent month-end performance visit www.nuveen.com or call (800) 257-8787.
Returns reflect differences in sales charges and expenses, which are primarily differences in distribution and service fees. Fund returns assume reinvestment of dividends and capital gains.
Comparative index and benchmark return information is provided for the Fund’s Class A Shares at net asset value (NAV) only.
Class A Shares – Average Annual Total Returns as of February 28, 2011*
| Cumulative | Average Annual | |||||||||||||||
| 8-Month | 1-Year | 5-Year | 10-Year | |||||||||||||
Nuveen California Tax Free Fund | ||||||||||||||||
A Shares at NAV | -0.68% | 1.44% | 3.13% | 4.21% | ||||||||||||
A Shares at Offer | -4.87% | -2.79% | 2.25% | 3.77% | ||||||||||||
Barclays Capital Municipal Bond Index** | 0.07% | 1.72% | 4.06% | 4.79% | ||||||||||||
Lipper California Municipal Debt Funds Average** | -1.86% | 0.17% | 2.12% | 3.49% | ||||||||||||
Class C1 Shares | -0.91% | 0.94% | 2.66% | 3.77% | ||||||||||||
Class I Shares | -0.57% | 1.60% | 3.30% | 4.43% | ||||||||||||
| Latest Calendar Quarter – Average Annual Total Returns as of March 31, 2011 | ||||||||||||
| Average Annual | ||||||||||||
| 1-Year | 5-Year | 10-Year | ||||||||||
Class A Shares at NAV | 1.41% | 3.22% | 4.08% | |||||||||
Class A Shares at Offer | -2.85% | 2.33% | 3.64% | |||||||||
Class C1 Shares | 0.91% | 2.75% | 3.65% | |||||||||
Class I Shares | 1.57% | 3.39% | 4.31% | |||||||||
Class A Shares have a maximum 4.20% sales charge. Class A Share purchases of $1 million or more are sold at net asset value without an up-front sales charge but may be subject to a contingent deferred sales charge (CDSC), also known as a back-end sales charge, if redeemed within twelve months of purchase. Class C1 Shares have a 1% CDSC for redemptions within less than one year, which is not reflected in the one-year total return. Class I Shares have no sales charge and may be purchased under limited circumstances or by specified classes of investors.
| Growth of an Assumed $10,000 Investment as of February 28, 2011 – Class A Shares |
The graphs do not reflect the deduction of taxes, such as state and local income taxes or capital gains taxes that a shareholder may pay on Fund distributions or the redemption of Fund shares.
| * | Eight-month returns are cumulative; all other returns are annualized. |
| ** | Refer to the Glossary of Terms Used in this Report for definitions. |
| Nuveen Investments | 9 |
Yields as of February 28, 2011 (Unaudited)
Dividend Yield is the most recent dividend per share (annualized) divided by the offering price per share.
The SEC 30-Day Yield is a standardized measure of a Fund’s yield that accounts for the future amortization of premiums or discounts of bonds held in the Fund’s portfolio. The SEC 30-Day Yield is computed under an SEC standardized formula and is based on the maximum offer price per share. The 30-Day Yield is computed under the same formula but is based on the net asset value (NAV) per share. Dividend Yield may differ from the SEC 30-Day Yield because the Fund may be paying out more or less than it is earning and it may not include the effect of amortization of bond premium.
The Taxable-Equivalent Yield represents the yield that must be earned on a fully taxable investment in order to equal the yield of the Fund on an after-tax basis at a specified tax rate. With respect to investments that generate qualified dividend income that is taxable at a maximum rate of 15%, the Taxable-Equivalent Yield is lower.
The SEC 30-Day Yield and Taxable-Equivalent Yield on A Shares at NAV applies only to A Shares purchased at no-load pursuant to the Fund’s policy permitting waiver of the A Share load in certain specified circumstances.
| Dividend Yield | 30-Day Yield | SEC 30-Day Yield | Taxable- Equivalent Yield1 | |||||||||||||
Class A Shares at NAV | 4.35% | 4.48% | — | 6.86% | ||||||||||||
Class A Shares at Offer | 4.17% | — | 4.29% | 6.57% | ||||||||||||
Class C1 Shares | 3.94% | 3.98% | — | 6.09% | ||||||||||||
Class I Shares | 4.58% | 4.62% | — | 7.08% | ||||||||||||
| 1 | The Taxable-Equivalent Yield is based on the Fund’s 30-Day Yield on the indicated date and a combined federal and state income tax rate of 34.7%. |
| 10 | Nuveen Investments |
Holding Summaries as of February 28, 2011 (Unaudited)
This data relates to the securities held in the Fund’s portfolio of investments. It should not be construed as a measure of performance for the Fund itself.
Ratings shown are the highest of Standard & Poor’s Group, Moody’s Investor Service, Inc. or Fitch, Inc. AAA includes bonds with an implied AAA rating since they are backed by U.S. Government or agency securities. AAA, AA, A and BBB ratings are investment grade; BB, B, CCC, CC, C and D ratings are below-investment grade. Holdings designated N/R are not rated by any of these national rating agencies.
Bond Credit Quality1
| Portfolio Composition1 | ||||
General Obligation | 29.5% | |||
Health Care | 19.8% | |||
Lease Revenue | 12.4% | |||
Education | 11.8% | |||
Tax Revenue | 8.5% | |||
Utilities | 6.5% | |||
Certificates of Participation | 5.5% | |||
Other | 6.0% | |||
| 1 | As a percentage of total municipal bonds as of February 28, 2011. Holdings are subject to change. |
| Nuveen Investments | 11 |
The expense ratios below reflect the Fund’s total operating expenses as shown in the Fund’s most recent prospectus. The expense ratios include management fees and other fees and expenses but exclude interest expense on self-deposited inverse floaters held by the Fund, if any.
| Share Class | Gross Expense Ratios | Net Expense Ratios | ||||||
| Class A | 1.01% | 0.85% | ||||||
| Class C1 | 1.46% | 1.35% | ||||||
| Class I | 0.81% | 0.70% | ||||||
The Fund’s investment adviser has contractually agreed to waive fees and reimburse other Fund expenses through June 30, 2011 so that total annual fund operating expenses, after fee waivers and/or expense reimbursements and excluding Acquired Fund Fees and Expenses, do not exceed 0.65%, 1.15%, and 0.50% for Class A, Class C1, and Class I Shares, respectively, and waive fees and reimburse other Fund expenses through March 31, 2012 so that annual fund operating expenses, after fee waivers and/or expense reimbursements and excluding Acquired Fund Fees and Expenses, do not exceed 0.85%, 1.35%, and 0.70% for Class A, Class C1, and Class I Shares, respectively. Fee waivers and expense reimbursements will not be terminated prior to that time without the approval of the Fund’s board of directors.
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including up-front and back-end sales charges (loads) or redemption fees, where applicable; and (2) ongoing costs, including management fees; distribution and service (12b-1) fees, where applicable; and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example below is based on an investment of $1,000 invested at the beginning of the period and held for the period.
The information under “Actual Performance,” together with the amount you invested, allows you to estimate actual expenses incurred over the reporting period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.60) and multiply the result by the cost shown for your share class, in the row entitled “Expenses Incurred During Period” to estimate the expenses incurred on your account during this period.
The information under “Hypothetical Performance,” provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expense you incurred for the period. You may use this information to compare the ongoing costs of investing in the Fund and other Funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as up-front and back-end sales charges (loads) or redemption fees, where applicable. Therefore, the hypothetical information is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds or share classes. In addition, if these transaction costs were included, your costs would have been higher.
| Hypothetical Performance | ||||||||||||||||||||||||
| Actual Performance | (5% annualized return before expenses) | |||||||||||||||||||||||
| A Shares | C1 Shares | I Shares | A Shares | C1 Shares | I Shares | |||||||||||||||||||
| Beginning Account Value (9/01/10) | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | ||||||||||||
| Ending Account Value (2/28/11) | $ | 952.20 | $ | 949.90 | $ | 952.90 | $ | 1,021.57 | $ | 1,019.09 | $ | 1,022.32 | ||||||||||||
| Expenses Incurred During Period | $ | 3.15 | $ | 5.56 | $ | 2.42 | $ | 3.26 | $ | 5.76 | $ | 2.51 | ||||||||||||
For each class of the Fund, expenses are equal to the Fund’s annualized net expense ratio of .65%, 1.15% and .50% for Classes A, C1 and I, respectively, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the six month period).
| 12 | Nuveen Investments |
Shareholder Meeting Report (Unaudited)
A special meeting of shareholders was held in the offices of FAF Advisors, Inc. on December 17, 2010; at this meeting the shareholders were asked to vote on the election of Board Members, the approval of an Investment Advisory Agreement and the approval of an Investment Sub-Advisory Agreement.
| Nuveen California Tax Free Fund | ||||
To approve an investment advisory agreement with Nuveen Fund Advisors (formerly Nuveen Asset Management) and an investment sub-advisory agreement between Nuveen Fund Advisors and Nuveen Asset Management, LLC. | ||||
For | 7,628,557 | |||
Against | 21,138 | |||
Abstain | 2,990 | |||
Broker Non-Votes | 1,953,316 | |||
Total | 9,606,001 | |||
Approval of the Board Members was reached as follows: | ||||
John P. Amboian | ||||
For | 9,584,863 | |||
Withhold | 21,138 | |||
Total | 9,606,001 | |||
Robert P. Bremner | ||||
For | 9,584,863 | |||
Withhold | 21,138 | |||
Total | 9,606,001 | |||
Jack B. Evans | ||||
For | 9,584,863 | |||
Withhold | 21,138 | |||
Total | 9,606,001 | |||
William C. Hunter | ||||
For | 9,584,863 | |||
Withhold | 21,138 | |||
Total | 9,606,001 | |||
David J. Kundert | ||||
For | 9,584,863 | |||
Withhold | 21,138 | |||
Total | 9,606,001 | |||
William J. Schneider | ||||
For | 9,584,863 | |||
Withhold | 21,138 | |||
Total | 9,606,001 | |||
Judith M. Stockdale | ||||
For | 9,584,863 | |||
Withhold | 21,138 | |||
Total | 9,606,001 | |||
Carole E. Stone | ||||
For | 9,584,863 | |||
Withhold | 21,138 | |||
Total | 9,606,001 | |||
Virginia L. Stringer | ||||
For | 9,584,863 | |||
Withhold | 21,138 | |||
Total | 9,606,001 | |||
Terence J. Toth | ||||
For | 9,584,863 | |||
Withhold | 21,138 | |||
Total | 9,606,001 | |||
| Nuveen Investments | 13 |
Independent Registered Public Accounting Firm
The Board of Directors and Shareholders
Nuveen California Tax Free Fund (formerly First American California Tax Free Fund)
We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of Nuveen California Tax Free Fund (formerly First American California Tax Free Fund) (the “Fund”) as of February 28, 2011, and the related statements of operations, changes in net assets, and the financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Fund’s 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of February 28, 2011, by correspondence with the custodian. 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 position of Nuveen California Tax Free Fund (formerly First American California Tax Free Fund) at February 28, 2011, and the results of its operations, the changes in its net assets, and the financial highlights for each of the periods indicated therein in conformity with U.S. generally accepted accounting principles.
Chicago, Illinois
April 27, 2011
| 14 | Nuveen Investments |
Nuveen California Tax Free Fund
(formerly known as First American California Tax Free Fund)
February 28, 2011
| Principal Amount (000) | Description p | Value | ||||||
Municipal Bonds – 98.5% | ||||||||
Certificates of Participation – 5.4% | ||||||||
Eden Township Healthcare District | ||||||||
| $ | 1,000 | 6.000%, 06/01/2030 | $ | 943,310 | ||||
Escondido, Series A (FGIC) (NATL) | ||||||||
| 140 | 5.625%, 09/01/2020 | 141,919 | ||||||
Los Angeles, Sonnenblick del Rio, West Los Angeles (AMBAC) | ||||||||
| 330 | 6.000%, 11/01/2019 | 333,844 | ||||||
Oakdale Irrigation District, Water Facilities Project | ||||||||
| 805 | 5.500%, 08/01/2034 | 808,196 | ||||||
Pasadena, Series C | ||||||||
| 50 | 4.500%, 02/01/2026 | 47,899 | ||||||
Poway (AMBAC) | ||||||||
| 585 | 4.500%, 08/01/2016 | 619,380 | ||||||
Ramona Unified School District (FGIC) (NATL) (Convertible CAB) | ||||||||
| 500 | 0.000% through 05/01/2012, thereafter 5.000%, 05/01/2032 g | 407,695 | ||||||
Rowland Water District, Recycled Water Project | ||||||||
| 565 | 5.750%, 12/01/2024 | 607,064 | ||||||
| 480 | 5.750%, 12/01/2025 | 512,410 | ||||||
| 500 | 6.250%, 12/01/2039 | 520,810 | ||||||
Travis Unified School District, (FGIC) (NATL) | ||||||||
| 300 | 4.500%, 09/01/2016 | 294,693 | ||||||
| 5,255 | Total Certificates of Participation | 5,237,220 | ||||||
Continuing Care Retirement Communities – 0.9% | ||||||||
Association of Bay Area Governments Financial Authority, Lincoln Glen Manor Senior Citizens (CMI) | ||||||||
| 240 | 6.100%, 02/15/2025 | 240,086 | ||||||
Illinois Finance Authority, Franciscan Communities, Series A | ||||||||
| 300 | 5.500%, 05/15/2027 | 241,800 | ||||||
La Verne, Brethren Hillcrest Homes, Series B (ACA) | ||||||||
| 500 | 5.600%, 02/15/2033 | 395,935 | ||||||
| 1,040 | Total Continuing Care Retirement Communities | 877,821 | ||||||
Education – 11.6% | ||||||||
California Educational Facilities Authority, Claremont Graduate University, Series A | ||||||||
| 655 | 4.750%, 03/01/2020 | 665,336 | ||||||
| 240 | 5.000%, 03/01/2020 | 246,446 | ||||||
| 865 | 5.000%, 03/01/2023 | 864,222 | ||||||
| 500 | 5.125%, 03/01/2028 | 468,950 | ||||||
California Educational Facilities Authority, Fresno Pacific University, Series A | ||||||||
| 380 | 6.750%, 03/01/2019 | 380,798 | ||||||
California Educational Facilities Authority, Golden Gate University | ||||||||
| 430 | 5.000%, 10/01/2020 | 403,435 | ||||||
California Educational Facilities Authority, Lutheran University, Series C | ||||||||
| 675 | 4.750%, 10/01/2015 | 703,917 | ||||||
California Educational Facilities Authority, Pitzer College | ||||||||
| 1,000 | 5.375%, 04/01/2034 | 916,540 | ||||||
California Educational Facilities Authority, University of Redlands, Series A | ||||||||
| 1,000 | 5.000%, 08/01/2028 | 923,270 | ||||||
California Educational Facilities Authority, University of the Pacific | ||||||||
| 1,000 | 5.000%, 11/01/2030 | 961,180 | ||||||
California Educational Facilities Authority, Woodbury University | ||||||||
| 450 | 4.400%, 01/01/2015 | 444,969 | ||||||
| 470 | 4.500%, 01/01/2016 | 460,769 | ||||||
| Nuveen Investments | 15 |
Portfolio of Investments
Nuveen California Tax Free Fund (continued)
February 28, 2011
| Principal Amount (000) | Description p | Value | ||||||
Education (continued) | ||||||||
California Municipal Finance Authority, American Heritage Education Foundation Project, Series A | ||||||||
| $ | 400 | 5.250%, 06/01/2026 | $ | 329,080 | ||||
California Municipal Finance Authority, Biola University | ||||||||
| 1,000 | 5.000%, 10/01/2018 | 1,032,460 | ||||||
| 500 | 5.625%, 10/01/2023 | 500,115 | ||||||
California Municipal Finance Authority, Loma Linda University | ||||||||
| 300 | 4.250%, 04/01/2018 | 304,902 | ||||||
| 300 | 4.375%, 04/01/2019 | 303,267 | ||||||
California State University, Series C (NATL) | ||||||||
| 1,000 | 5.000%, 11/01/2025 | 1,000,760 | ||||||
California Statewide Communities Development Authority, Viewpoint School (ACA) | ||||||||
| 405 | 4.125%, 10/01/2014 | 414,011 | ||||||
| 11,570 | Total Education | 11,324,427 | ||||||
General Obligations – 29.0% | ||||||||
Acalanes Unified High School District, Election 2008, Series A | ||||||||
| 1,000 | 0.000%, 08/01/2026 | 394,020 | ||||||
Baldwin Park Unified School District, Election of 2002 (AMBAC) | ||||||||
| 1,000 | 0.000%, 08/01/2020 | 582,440 | ||||||
California | ||||||||
| 600 | 5.625%, 04/01/2026 | 631,608 | ||||||
| 1,000 | 5.500%, 11/01/2039 | 989,950 | ||||||
Central Unified School District, Election of 2008, Series A (AGC) | ||||||||
| 500 | 5.625%, 08/01/2033 | 504,815 | ||||||
College of the Sequoias, Visalia Area Improvement District #2, Election of 2008, Series A (AGC) | ||||||||
| 1,000 | 5.250%, 08/01/2029 | 994,120 | ||||||
Corona-Norco Unified School District, Election of 2006 (Convertible CAB) | ||||||||
| 500 | 0.000% through 08/01/2017, thereafter 6.800%, 08/01/2039 g | 332,310 | ||||||
Corona-Norco Unified School District, Election of 2006, Series B (AGC) | ||||||||
| 500 | 5.375%, 02/01/2034 | 494,455 | ||||||
Cupertino Unified School District, Election of 2001, Series D | ||||||||
| 1,705 | 0.000%, 08/01/2030 | 479,361 | ||||||
Desert Sands Unified School District, Election of 2001 | ||||||||
| 350 | 5.250%, 08/01/2023 | 365,613 | ||||||
Grossmont Union High School District, Election of 2008, Series A | ||||||||
| 950 | 5.500%, 08/01/2031 | 973,104 | ||||||
Hemet Unified School District, Election of 2006, Series B (AGC) | ||||||||
| 600 | 5.000%, 08/01/2030 | 599,238 | ||||||
Jefferson Union High School District, San Mateo County, Series A (NATL) | ||||||||
| 300 | 6.250%, 02/01/2014 | 328,821 | ||||||
| 460 | 6.250%, 08/01/2020 | 519,078 | ||||||
Long Beach Unified School District, Election of 2008, Series A | ||||||||
| 500 | 5.500%, 08/01/2029 | 515,610 | ||||||
Los Angeles Community College District, Election of 2008, Series C | ||||||||
| 3,000 | 5.250%, 08/01/2039 | 2,956,290 | ||||||
Los Angeles Unified School District, Series D | ||||||||
| 100 | 5.000%, 01/01/2034 | 95,410 | ||||||
Los Angeles Unified School District, Election of 2002 Series B (AMBAC) | ||||||||
| 240 | 4.500%, 07/01/2025 | 227,453 | ||||||
Lucia Mar Unified School District (FGIC) (NATL) | ||||||||
| 100 | 5.250%, 08/01/2022 | 107,612 | ||||||
Oakland, Series A (NATL) | ||||||||
| 435 | 5.000%, 01/15/2026 | 435,361 | ||||||
| 16 | Nuveen Investments |
| Principal Amount (000) | Description p | Value | ||||||
General Obligations (continued) | ||||||||
Pittsburg Unified School District, Election of 2006, Series B (AGM) | ||||||||
| $ | 1,155 | 5.500%, 08/01/2034 | $ | 1,181,057 | ||||
Pomona Unified School District, Series A (NATL) | ||||||||
| 855 | 5.950%, 02/01/2017 | 952,162 | ||||||
Poway Unified School District, Election of 2008, District 2007-1-A | ||||||||
| 5,000 | 0.000%, 08/01/2029 | 1,458,450 | ||||||
Puerto Rico Commonwealth, Series B (AGM) | ||||||||
| 1,000 | 6.500%, 07/01/2015 | 1,120,710 | ||||||
Puerto Rico Commonwealth, Government Development, Series B | ||||||||
| 50 | 5.000%, 12/01/2014 | 52,946 | ||||||
San Bernardino Community College District, Election of 2002, Series A | ||||||||
| 1,265 | 6.500%, 08/01/2027 | 1,416,370 | ||||||
San Diego Unified School District, Election of 2008, Series A (Convertible CAB) | ||||||||
| 2,000 | 0.000% through 07/01/2019, thereafter 6.000%, 07/01/2033 g | 1,143,160 | ||||||
Santa Ana Union School District, Election of 2008, Series A | ||||||||
| 1,000 | 5.250%, 08/01/2028 | 1,000,570 | ||||||
Santa Barbara Community College District, Election of 2008, Series A | ||||||||
| 1,000 | 5.250%, 08/01/2027 | 1,037,270 | ||||||
Tulare Local Health Care District, Election 2005, Series B | ||||||||
| 500 | 6.375%, 08/01/2025 | 540,280 | ||||||
| 1,005 | 6.500%, 08/01/2026 | 1,083,500 | ||||||
Victor Valley Community College District, Election of 2008, Series A (AGC) | ||||||||
| 1,530 | 5.000%, 08/01/2031 | 1,476,787 | ||||||
Victor Valley Joint Union High School District, Election of 2008, Series A (AGC) (Convertible CAB) | ||||||||
| 2,000 | 0.000% through 08/01/2019, thereafter 5.750%, 08/01/2031 g | 1,116,660 | ||||||
West Contra Costa Unified School District, Election of 2005, Series B | ||||||||
| 1,100 | 6.000%, 08/01/2024 | 1,178,386 | ||||||
West Covina Unified School District, Series A (NATL) | ||||||||
| 770 | 5.350%, 02/01/2020 | 818,633 | ||||||
Whittier Unified High School District | ||||||||
| 1,000 | 0.000%, 08/01/2034 | 197,750 | ||||||
| 36,070 | Total General Obligations | 28,301,360 | ||||||
Health Care – 19.5% | ||||||||
Association of Bay Area Governments Financial Authority, Children’s Hospital & Research, Series A | ||||||||
| 425 | 4.500%, 12/01/2019 | 426,696 | ||||||
| 350 | 4.750%, 12/01/2022 | 345,695 | ||||||
California Health Facilities Financing Authority, Adventist Health System West, Series C | ||||||||
| 500 | 5.250%, 03/01/2021 | 512,140 | ||||||
California Health Facilities Financing Authority, Casa Colina | ||||||||
| 350 | 5.500%, 04/01/2013 | 358,085 | ||||||
California Health Facilities Financing Authority, Catholic Healthcare West, Series G | ||||||||
| 1,000 | 5.500%, 07/01/2025 | 1,004,710 | ||||||
California Health Facilities Financing Authority, Marshall Medical Center, Series A (CMI) | ||||||||
| 1,760 | 4.750%, 11/01/2019 | 1,763,467 | ||||||
California Health Facilities Financing Authority, Scripps Health, Series A | ||||||||
| 200 | 5.000%, 10/01/2022 | 203,722 | ||||||
California Health Facilities Financing Authority, Stanford Hospital, Series A | ||||||||
| 1,000 | 5.000%, 11/15/2025 | 1,001,680 | ||||||
California Health Facilities Financing Authority, Sutter Health, Series A | ||||||||
| 250 | 5.000%, 08/15/2038 | 212,102 | ||||||
California Health Facilities Financing Authority, Sutter Health, Series B | ||||||||
| 1,000 | 6.000%, 08/15/2042 | 990,200 | ||||||
| Nuveen Investments | 17 |
Portfolio of Investments
Nuveen California Tax Free Fund (continued)
February 28, 2011
| Principal Amount (000) | Description p | Value | ||||||
Health Care (continued) | ||||||||
California Statewide Communities Development Authority, Adventist Health, Series A | ||||||||
| $ | 300 | 5.000%, 03/01/2030 | $ | 272,577 | ||||
California Statewide Communities Development Authority, Catholic Healthcare West, Series C | ||||||||
| 1,000 | 5.625%, 07/01/2035 | 958,400 | ||||||
California Statewide Communities Development Authority, Daughters of Charity Health, Series A | ||||||||
| 100 | 5.250%, 07/01/2030 | 86,144 | ||||||
California Statewide Communities Development Authority, Daughters of Charity Health, Series G | ||||||||
| 400 | 5.250%, 07/01/2013 | 414,312 | ||||||
California Statewide Communities Development Authority, Elder Care Alliance, Series A (ETM) | ||||||||
| 140 | 7.250%, 11/15/2011 | 146,755 | ||||||
California Statewide Communities Development Authority, Enloe Medical Center, Series A (CMI) | ||||||||
| 125 | 5.250%, 08/15/2019 | 129,858 | ||||||
| 500 | 5.500%, 08/15/2023 | 503,910 | ||||||
California Statewide Communities Development Authority, Henry Mayo Newhall Memorial Hospital Series A (CMI) | ||||||||
| 500 | 5.000%, 10/01/2020 | 499,975 | ||||||
| 400 | 5.000%, 10/01/2027 | 359,476 | ||||||
California Statewide Communities Development Authority, Henry Mayo Newhall Memorial Hospital Series B (AMBAC) (CMI) | ||||||||
| 500 | 5.200%, 10/01/2037 | 431,165 | ||||||
California Statewide Communities Development Authority, Jewish Home (CMI) | ||||||||
| 560 | 4.500%, 11/15/2019 | 549,679 | ||||||
| 500 | 5.000%, 11/15/2037 | 418,140 | ||||||
California Statewide Communities Development Authority, Redlands Community Hospital, Series A (RAAI) | ||||||||
| 500 | 5.000%, 04/01/2015 | 518,395 | ||||||
California Statewide Communities Development Authority, St. Joseph, Series B (FGIC) | ||||||||
| 1,100 | 5.500%, 07/01/2027 | 1,071,015 | ||||||
California Statewide Communities Development Authority, St. Joseph, Series C (FGIC) | ||||||||
| 500 | 5.500%, 07/01/2027 | 486,825 | ||||||
Loma Linda University Medical Center, Series A | ||||||||
| 1,000 | 5.000%, 12/01/2015 | 974,750 | ||||||
| 1,000 | 8.250%, 12/01/2038 | 1,075,120 | ||||||
Northern Inyo County Hospital District | ||||||||
| 500 | 6.375%, 12/01/2025 | 487,590 | ||||||
Sierra View Health Care District | ||||||||
| 1,000 | 5.250%, 07/01/2024 | 959,170 | ||||||
| 1,000 | 5.300%, 07/01/2026 | 933,680 | ||||||
Turlock Health Facilities Revenue, Emanuel Medical Center | ||||||||
| 1,000 | 5.000%, 10/15/2024 | 869,910 | ||||||
| 19,460 | Total Health Care | 18,965,343 | ||||||
Housing – 1.2% | ||||||||
California Statewide Communities Development Authority, UCI East Campus | ||||||||
| 410 | 5.500%, 05/15/2026 | 392,448 | ||||||
Ventura County Area Housing Authority, Mira Vista Senior Apartments Series A (AMBAC) (AMT) | ||||||||
| 1,000 | 5.150%, 12/01/2031 | 756,210 | ||||||
| 1,410 | Total Housing | 1,148,658 | ||||||
Lease Revenue – 12.2% | ||||||||
Apple Valley Public Financing Authority, Town Hall Annex Project Series A (AMBAC) | ||||||||
| 485 | 4.500%, 09/01/2017 | 519,716 | ||||||
| 500 | 5.000%, 09/01/2027 | 500,270 | ||||||
California Public Works Board, California Community Colleges, Series A | ||||||||
| 200 | 4.875%, 12/01/2018 | 200,938 | ||||||
California Public Works Board, California Community Colleges, Series B | ||||||||
| 1,035 | 5.500%, 06/01/2019 | 1,081,627 | ||||||
| 18 | Nuveen Investments |
| Principal Amount (000) | Description p | Value | ||||||
Lease Revenue (continued) | ||||||||
California Public Works Board, California State University, Series B-1 | ||||||||
| $ | 500 | 5.400%, 03/01/2026 | $ | 493,425 | ||||
California Public Works Board, California State University, Series J | ||||||||
| 695 | 5.500%, 11/01/2026 | 692,776 | ||||||
California Public Works Board, Department of Corrections & Rehabilitation, Series F (FGIC) (NATL) | ||||||||
| 1,500 | 5.000%, 11/01/2016 | 1,605,495 | ||||||
California Public Works Board, Department of Mental Health Coalinga, Series A | ||||||||
| 540 | 5.500%, 06/01/2016 | 566,752 | ||||||
California Public Works Board, Regents University of California, Series E | ||||||||
| 1,250 | 5.000%, 04/01/2034 | 1,157,988 | ||||||
California Public Works Board, Various Capital Projects, Series G-1 | ||||||||
| 1,500 | 5.750%, 10/01/2030 | 1,477,395 | ||||||
Golden State Tobacco Securitization Corporation, California Tobacco Settlement, Series A (AGM) | ||||||||
| 1,650 | 4.550%, 06/01/2022 | 1,520,904 | ||||||
Los Angeles Community Redevelopment Agency, Manchester Social Services Project (AMBAC) | ||||||||
| 1,200 | 5.000%, 09/01/2016 | 1,260,156 | ||||||
Lynwood Public Financing Authority, Lease Revenue, Civic Center Improvement Project, Series A | ||||||||
| 500 | 5.375%, 09/01/2030 | 441,320 | ||||||
| 150 | 5.500%, 09/01/2040 | 123,676 | ||||||
Yuba Levee Financing Authority Project, Series A (AGC) | ||||||||
| 250 | 5.000%, 09/01/2038 | 229,730 | ||||||
| 11,955 | Total Lease Revenue | 11,872,168 | ||||||
Miscellaneous – 2.8% | ||||||||
Golden West Schools Financing Authority, Series A (NATL) | ||||||||
| 440 | 0.000%, 02/01/2012 | 430,553 | ||||||
| 670 | 5.700%, 02/01/2013 | 720,612 | ||||||
| 770 | 5.750%, 02/01/2014 | 847,886 | ||||||
| 320 | 5.800%, 08/01/2022 | 364,234 | ||||||
| 345 | 5.800%, 08/01/2023 | 390,236 | ||||||
| 2,545 | Total Miscellaneous | 2,753,521 | ||||||
Recreational Facility Authority – 0.1% | ||||||||
California Infrastructure & Economic Development, Performing Arts Center | ||||||||
| 100 | 4.000%, 12/01/2015 | 103,600 | ||||||
Tax Revenue – 8.4% | ||||||||
Antioch Area Public Facilities Financing Agency, Special Tax, Community Facilities District #1989-1 (AMBAC) | ||||||||
| 1,000 | 4.000%, 08/01/2018 | 949,410 | ||||||
Los Angeles County Community Facilities District #3, Special Tax, Improvement Area B, Series A (AMBAC) | ||||||||
| 715 | 5.250%, 09/01/2018 | 708,880 | ||||||
Murrieta Community Facilities, Special Tax, District #2, The Oaks Improvement Area, Series A | ||||||||
| 350 | 5.750%, 09/01/2020 | 345,968 | ||||||
Norco, Special Tax, Community Facilities District #97-1 (AGC) | ||||||||
| 300 | 4.875%, 10/01/2030 | 267,426 | ||||||
Palm Desert Financing Authority, Tax Allocation, Project Area #4, Series A (NATL) | ||||||||
| 1,000 | 5.000%, 10/01/2029 | 863,640 | ||||||
Poway Unified School District, Special Tax, Community Facilities District #6 4S Ranch | ||||||||
| 650 | 5.000%, 09/01/2023 | 607,100 | ||||||
Puerto Rico Sales Tax Financing Corporation, Series C | ||||||||
| 1,000 | 5.250%, 08/01/2041 | 900,780 | ||||||
Rancho Cucamonga Redevelopment Agency, Tax Allocation, Series A (NATL) | ||||||||
| 310 | 4.125%, 09/01/2018 | 299,649 | ||||||
| 500 | 5.000%, 09/01/2034 | 399,080 | ||||||
San Bernardino Redevelopment Agency, Tax Allocation, San Sevaine Redevelopment Project, Series A (RAAI) | ||||||||
| 850 | 5.000%, 09/01/2016 | 845,554 | ||||||
| Nuveen Investments | 19 |
Portfolio of Investments
Nuveen California Tax Free Fund (continued)
February 28, 2011
| Principal Amount (000) | Description p | Value | ||||||
Tax Revenue (continued) | ||||||||
San Francisco City & County Redevelopment Financing Authority, Tax Allocation, Mission Bay North Redevelopment Project, Series B (RAAI) | ||||||||
| $ | 325 | 4.100%, 08/01/2014 | $ | 327,889 | ||||
| 250 | 4.250%, 08/01/2016 | 249,285 | ||||||
| 380 | 4.375%, 08/01/2018 | 369,584 | ||||||
Sand City Redevelopment Agency, Tax Allocation, Series A (AGC) | ||||||||
| 315 | 4.000%, 11/01/2019 | 292,421 | ||||||
Soledad Redevelopment Agency, Tax Allocation, Series A (SGI) | ||||||||
| 205 | 4.500%, 12/01/2016 | 211,236 | ||||||
South Tahoe Redevelopment Agency, Special Tax, Community Facilities District #2001-1 | ||||||||
| 120 | 4.400%, 10/01/2015 | 121,019 | ||||||
| 125 | 4.500%, 10/01/2016 | 124,873 | ||||||
| 280 | 4.600%, 10/01/2018 | 269,287 | ||||||
| 8,675 | Total Tax Revenue | 8,153,081 | ||||||
Transportation – 1.0% | ||||||||
Alameda Corridor Transportation Authority (AMBC) | ||||||||
| 1,000 | 0.000%, 10/01/2014 | 841,590 | ||||||
Puerto Rico Commonwealth, Highway & Transportation Authority, Series X (IBC) (NATL) | ||||||||
| 100 | 5.500%, 07/01/2015 | 106,168 | ||||||
| 1,100 | Total Transportation | 947,758 | ||||||
Utilities – 6.4% | ||||||||
Banning Utility Authority, Water Enterprise, Refunding and Improvement Projects, (FGIC) (NATL) | ||||||||
| 1,025 | 5.000%, 11/01/2020 | 1,069,905 | ||||||
| 1,040 | 5.000%, 11/01/2023 | 1,058,949 | ||||||
California Pollution Control Financing Authority, Solid Waste Disposal, Waste Management Incorporated Project, Series A-2 (AMT) (GTY) | ||||||||
| 500 | 5.400%, 04/01/2025 | 500,195 | ||||||
California Pollution Control Financing Authority, Solid Waste Disposal, Waste Management Incorporated Project, Series B (AMT) (GTY) | ||||||||
| 500 | 5.000%, 07/01/2027 | 473,030 | ||||||
Compton Sewer (IBC) (NATL) | ||||||||
| 1,150 | 5.375%, 09/01/2023 | 1,150,138 | ||||||
Imperial, Wastewater Treatment Facility (FGIC) (NATL) | ||||||||
| 1,000 | 5.000%, 10/15/2020 | 1,007,700 | ||||||
Norco, Financing Authority, Enterprise Revenue (AGM) | ||||||||
| 1,000 | 5.625%, 10/01/2034 | 1,004,330 | ||||||
| 6,215 | Total Utilities | 6,264,247 | ||||||
| $ | 105,395 | Total Municipal Bonds (cost $97,692,948) | 95,949,204 | |||||
| Shares | Description p | Value | ||||||
Short-Term Investments – 1.2% | ||||||||
Money Market Fund – 1.2% | ||||||||
| 1,128,903 | First American Tax Free Obligations Fund, 0.000% W | $ | 1,128,903 | |||||
Total Short-Term Investment (cost $1,128,903) | 1,128,903 | |||||||
Total Investments (cost $98,821,851) – 99.7% | 97,078,107 | |||||||
Other Assets Less Liabilities – 0.3% | 315,404 | |||||||
Net Assets – 100.0% | $ | 97,393,511 | ||||||
| 20 | Nuveen Investments |
| p | All percentages shown in the Portfolio of Investments are based on net assets. |
| g | Convertible Capital Appreciation Bonds (Convertible CABs) – These bonds initially pay no interest but accrete in value from the date of issuance through the conversion date, at which time the bonds start to accrue and pay interest on a semiannual basis until final maturity. |
| W | The rate shown is the annualized seven-day effective yield as of February 28, 2011. |
| (ETM) | Escrowed to maturity. |
| Nuveen Investments | 21 |
Statement of Assets and Liabilities
February 28, 2011 (all dollars and shares are rounded to thousands (000), except for per share data)
Assets | ||||
Investments, at value (cost $98,822) | $ | 97,078 | ||
Receivables: | ||||
Interest | 1,193 | |||
From Adviser | 2 | |||
Shares sold | 32 | |||
Other assets | 7 | |||
Total assets | 98,312 | |||
Liabilities | ||||
Payables: | ||||
Dividends | 307 | |||
Shares redeemed | 514 | |||
Accrued expenses: | ||||
12b-1 distribution and service fees | 5 | |||
Other | 91 | |||
Total liabilities | 918 | |||
Net assets | $ | 97,394 | ||
Class A Shares | ||||
Net assets | $ | 16,453 | ||
Shares outstanding | 1,570 | |||
Net asset value per share | $ | 10.48 | ||
Offering price per share (net asset value per share plus | $ | 10.95 | ||
Class C1 Shares | ||||
Net assets | $ | 5,762 | ||
Shares outstanding | 549 | |||
Net asset value and offering price per share | $ | 10.50 | ||
Class I Shares | ||||
Net assets | $ | 75,179 | ||
Shares outstanding | 7,175 | |||
Net asset value and offering price per share | $ | 10.48 | ||
Net Assets Consist of: | ||||
Capital paid-in | $ | 98,995 | ||
Undistributed (Over-distribution of) net investment income | 44 | |||
Accumulated net realized gain (loss) | 99 | |||
Net unrealized appreciation (depreciation) | (1,744 | ) | ||
Net assets | $ | 97,394 | ||
Authorized shares | $ | 2 billion | ||
Par value per share | $ | 0.0001 |
See accompanying notes to financial statements.
| 22 | Nuveen Investments |
Statement of Operations (all dollars are rounded to thousands (000))
| Eight Months Ended 2/28/11 | Year Ended 6/30/10 | |||||||
Dividend and Interest Income | $ | 3,449 | $ | 5,002 | ||||
Expenses | ||||||||
Management fees | 371 | 499 | ||||||
12b-1 service fees – Class A | 28 | 42 | ||||||
12b-1 distribution and service fees – Class C1 | 25 | 26 | ||||||
Administration fees | 129 | 231 | ||||||
Shareholders’ servicing agent fees and expenses | 44 | 80 | ||||||
Custodian’s fees and expenses | 4 | 5 | ||||||
Directors’ fees and expenses | 17 | 31 | ||||||
Professional fees | 26 | 51 | ||||||
Shareholders’ reports – printing and mailing expenses | 63 | 7 | ||||||
Federal and state registration fees | 5 | 7 | ||||||
Other expenses | 10 | 20 | ||||||
Total expenses before expense reimbursement | 722 | 999 | ||||||
Expense reimbursement | (334) | (449) | ||||||
Net expenses | 388 | 550 | ||||||
Net investment income | $ | 3,061 | $ | 4,452 | ||||
Realized and Unrealized Gain (Loss) | ||||||||
Net realized gain (loss) from investments | 130 | 499 | ||||||
Change in net unrealized appreciation (depreciation) of investments | (3,828) | 5,413 | ||||||
Net realized and unrealized gain (loss) | (3,698) | 5,912 | ||||||
Net increase (decrease) in net assets from operations | $ | (637) | $ | 10,364 | ||||
See accompanying notes to financial statements.
| Nuveen Investments | 23 |
Statement of Changes in Net Assets (all dollars are rounded to thousands (000))
| Eight Months Ended 2/28/11 | Year Ended 6/30/10 | Year Ended 6/30/09 | ||||||||||
Operations | ||||||||||||
Net investment income | $ | 3,061 | $ | 4,452 | $ | 3,079 | ||||||
Net realized gain (loss) from investments | 130 | 499 | 82 | |||||||||
Change in net unrealized appreciation (depreciation) of investments | (3,828 | ) | 5,413 | (3,078 | ) | |||||||
Net increase (decrease) in net assets from operations | (637 | ) | 10,364 | 83 | ||||||||
Distributions to Shareholders | ||||||||||||
From net investment income: | ||||||||||||
Class A | (505 | ) | (722 | ) | (622 | ) | ||||||
Class C1 | (143 | ) | (153 | ) | (115 | ) | ||||||
Class I | (2,396 | ) | (3,542 | ) | (2,343 | ) | ||||||
From accumulated net realized gains: | ||||||||||||
Class A | (38 | ) | (44 | ) | — | |||||||
Class C1 | (12 | ) | (11 | ) | — | |||||||
Class I | (166 | ) | (211 | ) | — | |||||||
Decrease in net assets from distributions to shareholders | (3,260 | ) | (4,683 | ) | (3,080 | ) | ||||||
Fund Share Transactions | ||||||||||||
Proceeds from Fund merger | — | — | 59,132 | |||||||||
Proceeds from sale of shares | 17,541 | 20,363 | 18,191 | |||||||||
Proceeds from shares issued to shareholders due to reinvestment of distributions | 532 | 674 | 544 | |||||||||
| 18,073 | 21,037 | 77,867 | ||||||||||
Cost of shares redeemed | (20,380 | ) | (21,217 | ) | (21,814 | ) | ||||||
Net increase (decrease) in net assets from Fund share transactions | (2,307 | ) | (180 | ) | 56,053 | |||||||
Net increase (decrease) in net assets | (6,204 | ) | 5,501 | 53,056 | ||||||||
Net assets at the beginning of period | 103,598 | 98,097 | 45,041 | |||||||||
Net assets at the end of period | $ | 97,394 | $ | 103,598 | $ | 98,097 | ||||||
Undistributed (Over-distribution of) net investment income at the end of period | $ | 44 | $ | 28 | $ | (7 | ) | |||||
See accompanying notes to financial statements.
| 24 | Nuveen Investments |
Financial Highlights
| Nuveen Investments | 25 |
| Selected data for a share outstanding throughout each period: | ||||||||||||||||||||||||||||||||
| Class (Commencement Date) | ||||||||||||||||||||||||||||||||
| Investment Operations | Less Distributions | |||||||||||||||||||||||||||||||
| Beginning Net Asset Value | Net Invest- ment Income(a) | Net (Loss) | Total | Net Invest- ment Income | Capital Gains(b) | Total | Ending Net Asset Value | |||||||||||||||||||||||||
Class A (2/00) |
| |||||||||||||||||||||||||||||||
Year Ended 2/28: |
| |||||||||||||||||||||||||||||||
2011(e) | $ | 10.88 | $ | .31 | $ | (.38 | ) | $ | (.07 | ) | $ | (.31 | ) | $ | (.02 | ) | $ | (.33 | ) | $ | 10.48 | |||||||||||
Year Ended 6/30: |
| |||||||||||||||||||||||||||||||
2010 | 10.27 | .47 | .63 | 1.10 | (.46 | ) | (.03 | ) | (.49 | ) | 10.88 | |||||||||||||||||||||
2009 | 10.71 | .46 | (.44 | ) | .02 | (.46 | ) | — | (.46 | ) | 10.27 | |||||||||||||||||||||
2008 | 10.98 | .46 | (.23 | ) | .23 | (.46 | ) | (.04 | ) | (.50 | ) | 10.71 | ||||||||||||||||||||
2007 | 10.96 | .45 | .06 | .51 | (.45 | ) | (.04 | ) | (.49 | ) | 10.98 | |||||||||||||||||||||
2006(f) | 11.24 | .33 | (.26 | ) | .07 | (.33 | ) | (.02 | ) | (.35 | ) | 10.96 | ||||||||||||||||||||
Class C1 (2/00)(g) |
| |||||||||||||||||||||||||||||||
Year Ended 2/28: |
| |||||||||||||||||||||||||||||||
2011(e) | 10.89 | .28 | (.38 | ) | (.10 | ) | (.27 | ) | (.02 | ) | (.29 | ) | 10.50 | |||||||||||||||||||
Year Ended 6/30: |
| |||||||||||||||||||||||||||||||
2010 | 10.28 | .41 | .64 | 1.05 | (.41 | ) | (.03 | ) | (.44 | ) | 10.89 | |||||||||||||||||||||
2009 | 10.72 | .41 | (.44 | ) | (.03 | ) | (.41 | ) | — | (.41 | ) | 10.28 | ||||||||||||||||||||
2008 | 10.99 | .40 | (.22 | ) | .18 | (.41 | ) | (.04 | ) | (.45 | ) | 10.72 | ||||||||||||||||||||
2007 | 10.97 | .41 | .05 | .46 | (.40 | ) | (.04 | ) | (.44 | ) | 10.99 | |||||||||||||||||||||
2006(f) | 11.25 | .30 | (.26 | ) | .04 | (.30 | ) | (.02 | ) | (.32 | ) | 10.97 | ||||||||||||||||||||
Class I (2/00)(g) |
| |||||||||||||||||||||||||||||||
Year Ended 2/28: |
| |||||||||||||||||||||||||||||||
2011(e) | 10.88 | .32 | (.38 | ) | (.06 | ) | (.32 | ) | (.02 | ) | (.34 | ) | 10.48 | |||||||||||||||||||
Year Ended 6/30: |
| |||||||||||||||||||||||||||||||
2010 | 10.27 | .48 | .64 | 1.12 | (.48 | ) | (.03 | ) | (.51 | ) | 10.88 | |||||||||||||||||||||
2009 | 10.71 | .48 | (.45 | ) | .03 | (.47 | ) | — | (.47 | ) | 10.27 | |||||||||||||||||||||
2008 | 10.98 | .48 | (.23 | ) | .25 | (.48 | ) | (.04 | ) | (.52 | ) | 10.71 | ||||||||||||||||||||
2007 | 10.97 | .47 | .05 | .52 | (.47 | ) | (.04 | ) | (.51 | ) | 10.98 | |||||||||||||||||||||
2006(f) | 11.25 | .35 | (.26 | ) | .09 | (.35 | ) | (.02 | ) | (.37 | ) | 10.97 | ||||||||||||||||||||
| 26 | Nuveen Investments |
| Ratios/Supplemental Data | ||||||||||||||||||||||||||
| Ratios to Average Net Assets Before Reimbursement | Ratios to Average Net Assets After Reimbursement(d) | |||||||||||||||||||||||||
| Total Return(c) | Ending Net Assets (000) | Expenses | Net Invest- ment Income | Expenses | Net Invest- ment Income | Portfolio Turnover Rate | ||||||||||||||||||||
| (.68 | )% | $ | 16,453 | 1.20 | %* | 3.76 | %* | .65 | %* | 4.31 | %* | 8 | % | |||||||||||||
| 10.89 | 17,315 | 1.18 | 3.83 | .65 | 4.36 | 16 | ||||||||||||||||||||
| .29 | 16,417 | 1.28 | 3.88 | .65 | 4.51 | 27 | ||||||||||||||||||||
| 2.11 | 12,076 | 1.46 | 3.40 | .67 | 4.19 | 45 | ||||||||||||||||||||
| 4.62 | 11,375 | 1.46 | 3.29 | .75 | 4.00 | 36 | ||||||||||||||||||||
| .63 | 10,783 | 1.34 | * | 3.40 | * | .75 | * | 3.99 | * | 24 | ||||||||||||||||
| (.91 | ) | 5,762 | 1.62 | * | 3.36 | * | 1.15 | * | 3.83 | * | 8 | |||||||||||||||
| 10.33 | 4,674 | 1.58 | 3.43 | 1.15 | 3.86 | 16 | ||||||||||||||||||||
| (.21 | ) | 4,064 | 1.68 | 3.48 | 1.15 | 4.01 | 27 | |||||||||||||||||||
| 1.61 | 2,480 | 1.85 | 2.98 | 1.15 | 3.68 | 45 | ||||||||||||||||||||
| 4.17 | 1,507 | 1.98 | 2.77 | 1.15 | 3.60 | 36 | ||||||||||||||||||||
| .33 | 3,592 | 2.09 | * | 2.66 | * | 1.15 | * | 3.60 | * | 24 | ||||||||||||||||
| (.57 | ) | 75,179 | .96 | * | 4.00 | * | .50 | * | 4.46 | * | 8 | |||||||||||||||
| 11.06 | 81,609 | .93 | 4.08 | .50 | 4.51 | 16 | ||||||||||||||||||||
| .44 | 77,616 | 1.03 | 4.09 | .50 | 4.62 | 27 | ||||||||||||||||||||
| 2.28 | 30,485 | 1.20 | 3.66 | .50 | 4.36 | 45 | ||||||||||||||||||||
| 4.78 | 24,835 | 1.21 | 3.54 | .50 | 4.25 | 36 | ||||||||||||||||||||
| .82 | 21,767 | 1.09 | * | 3.65 | * | .50 | * | 4.24 | * | 24 | ||||||||||||||||
| * | Annualized. |
| (a) | Per share Net Investment Income is calculated using the average daily shares method. |
| (b) | Distributions from Capital Gains include short-term capital gains, if any. |
| (c) | Total return is the combination of changes in net asset value without any sales charge, reinvested dividend income at net asset value and reinvested capital gains distributions at net asset value, if any. Total returns are not annualized. |
| (d) | After expense reimbursement from the Adviser, where applicable. Ratios do not reflect the effect of custodian fee credits earned on the Fund’s net cash on deposit with the custodian bank, where applicable. |
| (e) | For the period July 1, 2010 to February 28, 2011. |
| (f) | For the period October 1, 2005 to June 30, 2006. |
| (g) | Effective January 18, 2011, Class C Shares were renamed Class C1 Shares and Class Y Shares were renamed Class I Shares. |
See accompanying notes to financial statements.
| Nuveen Investments | 27 |
Notes to Financial Statements (all dollars and shares are rounded to thousands (000))
1. General Information and Significant Accounting Policies
General Information
On July 28, 2010, U.S. Bancorp, the indirect parent company of FAF Advisors, Inc. (“FAF Advisors”), entered into an agreement to sell a portion of FAF Advisors’ asset management business to Nuveen Investments, Inc. (“Nuveen”). Included in the sale was the part of FAF Advisors’ asset management business that advises the fund included in this report. The sale closed on December 31, 2010.
In connection with the transaction, the fund’s Board of Directors was asked to consider and approve new investment advisory agreements for the fund with Nuveen Asset Management, a wholly-owned subsidiary of Nuveen. The new investment advisory agreements for the fund was submitted to the fund’s shareholders for approval and took effect on January 1, 2011. The fund’s Board of Directors also approved new distribution agreements with Nuveen Investments, LLC. There was no change in the fund’s investment objectives or policies as a result of the transaction. The transition did result in a change to the fund’s name effective January 1, 2011.
Effective January 1, 2011, the fund’s adviser, Nuveen Asset Management, changed its name to Nuveen Fund Advisors, Inc. (“Nuveen Fund Advisors” or the “Adviser”). Concurrently, the Adviser formed a wholly-owned subsidiary, Nuveen Asset Management, LLC (the “Sub-Adviser”), to house its portfolio management capabilities and to serve as the fund’s sub-adviser pursuant to a sub-advisory agreement that had been approved by shareholders. The fund’s portfolio manager has become an employee of the Sub-Adviser. The Adviser will compensate the Sub-Adviser for the portfolio management services it provides to the fund from the fund’s management fee.
First American Investment Funds, Inc., known as Nuveen Investment Funds, Inc. effective April 4, 2011 (the “Trust” or “FAIF”), is an open-end investment company registered under the Investment Company Act of 1940, as amended. The Trust is comprised the Nuveen California Tax Free Fund (the “Fund”), formerly known as First American California Tax Free Fund, among others. After the close of business on January 16, 2009, the Fund acquired all the net assets of the First American California Intermediate Tax Free Fund (“California Intermediate Tax Free”). California Intermediate Tax Free’s net assets of $59,132 at that date included $86 of net unrealized appreciation which was combined with that of the Fund. The combined net assets of the Fund after the merger were $97,848. For accounting and performance reporting purposes, the Fund is the survivor.
The investment objective of the Fund is to provide maximum current income that is exempt from both federal income tax and California state income tax to the extent consistent with prudent investment risk.
Under normal market conditions, as a fundamental policy, the Fund invests at least 80% of its net assets (plus the amount of any borrowings for investment purposes) in municipal securities that pay interest that is exempt from federal and California income tax, including the federal and state alternative minimum tax. The Fund normally may invest up to 20% of its net assets in taxable obligations, including obligations the interest on which is subject to the federal and state alternative minimum tax. The Fund may invest up to 20% of its total assets in securities that, at the time of purchase, are rated lower than investment grade or are unrated and of comparable quality (securities commonly referred to as “high-yield” securities or “junk bonds”). The Fund’s most recent prospectus provides further descriptions of the Fund’s investment objective, principal investment strategies, and principal risks.
During the current fiscal period, the Fund’s Board of Directors approved a change in the Fund’s fiscal and tax year end from June 30 to February 28/29.
Effective January 18, 2011, Class C Shares were renamed Class C1 Shares and Class Y Shares were renamed Class I Shares.
Significant Accounting Policies
The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”).
Investment Valuation
Security valuations for the Fund’s investments are furnished by an independent pricing service that has been approved by the Fund’s Board of Directors. These securities are generally classified as Level 2. Debt obligations exceeding 60 days to maturity are valued by an independent pricing service. The pricing service may employ methodologies that utilize actual market transactions, broker-dealer supplied valuations, or other formula-driven valuation techniques. These techniques generally consider such factors as yields or prices of bonds of comparable quality, type of issue, coupon, maturity, ratings, and general market conditions. Securities for which prices are not available from an independent pricing service, but where an active market exists, are valued using market quotations obtained from one or more dealers that make markets in the securities or from a widely-used quotation system. These securities are generally classified as Level 2 or Level 3 depending on the priority of significant inputs. Investment grade debt obligations with 60 days or less remaining until maturity will be valued at their amortized cost, which approximates fair value. These securities are generally classified as Level 2. Investments in open-end funds are valued at their respective net asset values on the valuation date. These investment vehicles are generally classified as Level 1. The following investment vehicles, when held by a Fund, are priced as follows: Exchange listed futures and options on futures are priced at their last sale price on the exchange on which they are principally traded, as determined by the Adviser, on the day the valuation is made. These investment vehicles are generally classified as Level 1. If there were no sales on that day, futures and options on futures will be valued at the last reported bid price. Options on securities, indices, and currencies traded on NASDAQ National Market (“NASDAQ”) or listed on a domestic stock exchange are valued at the last sale
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price on NASDAQ or on any exchange on the day the valuation is made. If there were no sales on that day, the options will be valued at the last sale price on the previous valuation date. Last sale prices are obtained from an independent pricing service. Forward contracts, swaps, and over-the-counter options on securities and indices are valued at the quotations received from an independent pricing service, if available. These investment vehicles are generally classified as Level 2.
When market quotations are not readily available, securities are internally valued at fair value as determined in good faith by procedures established and approved by the Fund’s Board of Directors. Some of the factors which may be considered in determining fair value are fundamental analytical data relating to the investment; the nature and duration of any restrictions on disposition; trading in similar securities of the same issuer or comparable companies; information from broker-dealers; and an evaluation of the forces that influence the market in which the securities are purchased and sold. If events occur that materially affect the value of securities between the close of trading in those securities and the close of regular trading on the New York Stock Exchange, the securities will be valued at fair value. The use of fair value pricing by a Fund may cause the net asset value of its shares to differ significantly from the net asset value that would be calculated without fair value pricing. These securities are generally classified as Level 2 or Level 3 depending on the priority of significant inputs.
Refer to Footnote 2 – Fair Value Measurements for further details on the leveling of securities held by the Fund as of the end of the reporting period.
Investment Transactions
Investment transactions are recorded on a trade date basis. Realized gains and losses from transactions are determined on the specific identification method, which is the same basis used for federal income tax purposes. Investments purchased on a when-issued/delayed delivery basis may have extended settlement periods. Any investments so purchased are subject to market fluctuation during this period. The Fund has instructed the custodian to segregate assets with a current value at least equal to the amount of the when-issued/delayed delivery purchase commitments. At February 28, 2011, the Fund had no such outstanding purchase commitments.
Investment Income
Interest income, which reflects the amortization of premiums and includes accretion of discounts for financial reporting purposes, is recorded on an accrual basis. Dividend income is recorded on the ex-dividend date. Investment income also reflects paydown gains and losses, if any.
Income Taxes
The Fund is a separate taxpayer for federal income tax purposes. The Fund intends to distribute substantially all of its net investment income and net capital gains to shareholders and to otherwise comply with the requirements of Subchapter M of the Internal Revenue Code applicable to regulated investment companies. Therefore, no federal income tax provision is required. Furthermore, the Fund intends to satisfy conditions that will enable interest from municipal securities, which is exempt from regular federal and designated state income taxes, to retain such tax-exempt status when distributed to shareholders of the Fund. Net realized capital gains and ordinary income distributions paid by the Fund are subject to federal taxation.
For all open tax years and all major taxing jurisdictions, management of the Fund has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements. Open tax years are those that are open for examination by taxing authorities (i.e., generally the last four tax year ends and the interim tax period since then). Furthermore, management of the Fund is also not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
Dividends and Distributions to Shareholders
The Fund declares dividends from its net investment income daily and pays shareholders monthly. Fund shares begin to accrue dividends on the business day after the day when the monies used to purchase Fund shares are collected by the Fund’s transfer agent.
Net realized capital gains and/or market discount from investment transactions, if any, are declared and distributed to shareholders at least annually. Furthermore, capital gains are distributed only to the extent they exceed available capital loss carryforwards.
Distributions to shareholders of 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 U.S. GAAP.
Inverse Floating Rate Securities
The Fund is authorized to invest in inverse floating rate securities. An inverse floating rate security is created by depositing a municipal bond, typically with a fixed interest rate, into a special purpose trust created by a broker-dealer. In turn, this trust (a) issues floating rate certificates, in face amounts equal to some fraction of the deposited bond’s par amount or market value, that typically pay short-term tax-exempt interest rates to third parties, and (b) issues to a long-term investor (such as the Fund) an inverse floating rate certificate (sometimes referred to as an “inverse floater”) that represents all remaining or residual interest in the trust. The income received by the inverse floater holder varies inversely with the short-term rate paid to the floating rate certificates’ holders, and in most circumstances the inverse floater holder bears substantially all of the underlying bond’s downside investment risk and also benefits disproportionately from any potential appreciation of the underlying bond’s value. The price of an inverse floating rate
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Notes to Financial Statements (continued) (all dollars and shares are rounded to thousands (000))
security will be more volatile than that of the underlying bond because the interest rate is dependent on not only the fixed coupon rate of the underlying bond but also on the short-term interest paid on the floating rate certificates, and because the inverse floating rate security essentially bears the risk of loss of the greater face value of the underlying bond.
The Fund may purchase an inverse floating rate security in a secondary market transaction without first owning the underlying bond (referred to as an “externally-deposited inverse floater”), or instead by first selling a fixed-rate bond to a broker-dealer for deposit into the special purpose trust and receiving in turn the residual interest in the trust (referred to as a “self-deposited inverse floater”). The inverse floater held by the Fund gives the Fund the right (a) to cause the holders of the floating rate certificates to tender their notes at par, and (b) to have the broker transfer the fixed-rate bond held by the trust to the Fund, thereby collapsing the trust. An investment in an externally-deposited inverse floater is identified in the Portfolio of Investments as “(IF) – Inverse floating rate investment.” An investment in a self-deposited inverse floater is accounted for as a financing transaction. In such instances, a fixed-rate bond deposited into a special purpose trust is identified in the Portfolio of Investments as “(UB) – Underlying bond of an inverse floating rate trust reflected as a financing transaction,” with the Fund accounting for the short-term floating rate certificates issued by the trust as “Floating rate obligations” on the Statement of Assets and Liabilities. In addition, the Fund reflects in “Interest from unaffiliated investments” the entire earnings of the underlying bond and recognizes the related interest paid to the holders of the short-term floating rate certificates as “Interest expense on floating rate obligations” on the Statement of Operations.
During the eight months ended February 28, 2011, the Fund did not invest in externally-deposited inverse floaters and/or self-deposited inverse floaters.
Derivative Financial Instruments
The Fund is authorized to invest in certain derivative instruments, including futures, options, and swap contracts. Although the Fund is authorized to invest in such derivative instruments, and may do so in the future, it did not make any such investments during the eight months ended February 28, 2011.
Market and Counterparty Credit Risk
In the normal course of business the Fund may invest in financial instruments and enter into financial transactions where risk of potential loss exists due to changes in the market (market risk) or failure of the other party to the transaction to perform (counterparty credit risk). The potential loss could exceed the value of the financial assets recorded on the financial statements. Financial assets, which potentially expose the Fund to counterparty credit risk, consist principally of cash due from counterparties on forward, option and swap transactions, when applicable. The extent of the Fund’s exposure to counterparty credit risk in respect to these financial assets approximates their carrying value as recorded on the Statement of Assets and Liabilities. Futures contracts, when applicable, expose a Fund to minimal counterparty credit risk as they are exchange traded and the exchange’s clearinghouse, which is counterparty to all exchange traded futures, guarantees the futures contracts against default.
The Fund helps manage counterparty credit risk by entering into agreements only with counterparties the Adviser believes have the financial resources to honor their obligations and by having the Adviser monitor the financial stability of the counterparties. Additionally, counterparties may be required to pledge collateral daily (based on the daily valuation of the financial asset) on behalf of the Fund with a value approximately equal to the amount of any unrealized gain above a predetermined threshold. Reciprocally, when the Fund has an unrealized loss, the Fund has instructed the custodian to pledge assets of the Fund as collateral with a value approximately equal to the amount of the unrealized loss above a predetermined threshold. Collateral pledges are monitored and subsequently adjusted if and when the valuations fluctuate, either up or down, by at least the pre-determined threshold amount.
Zero Coupon Securities
The Fund is authorized to invest in zero coupon securities. A zero coupon security does not pay a regular interest coupon to its holders during the life of the security. Tax-exempt income to the holder of the security comes from accretion of the difference between the original purchase price of the security at issuance and the par value of the security at maturity and is effectively paid at maturity. The market prices of zero coupon securities generally are more volatile than the market prices of securities that pay interest periodically.
Multiclass Operations and Allocations
Income and expenses of the Fund that are not directly attributable to a specific class of shares are prorated among the classes based on the relative net assets of each class. Expenses directly attributable to a class of shares, which presently only include 12b-1 distribution and shareholder service fees, are recorded to the specific class.
Income, realized and unrealized capital gains and losses of the Fund are prorated among the classes based on the relative net assets of each class.
Interfund Lending Program
During the period July 1, 2010 through December 31, 2010, pursuant to an exemptive order issued by the Securities and Exchange Commission, the Fund, along with other registered investment companies in the First American Funds family, were allowed to participate in an interfund lending program. This program provided an alternative credit facility allowing the Fund to borrow from, or lend money to, other participating funds. The Fund did not have any interfund lending transactions during the period July 1, 2010 through December 31, 2010. The exemptive order terminated with respect to the Fund on December 31, 2010, in connection with the closing of the sale.
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Indemnifications
Under the Trust’s organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the Trust. In addition, in the normal course of business, the Trust enters into contracts that provide general indemnifications to other parties. The Trust’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Trust that have not yet occurred. However, the Trust has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results may differ from those estimates.
2. Fair Value Measurements
Fair value is defined as the price that the Fund would receive upon selling an investment or transferring a liability in an orderly transaction to an independent buyer in the principal or most advantageous market of the investment. A three-tier hierarchy is used to maximize the use of observable market data and minimize the use of unobservable inputs and to establish classification of fair value measurements for disclosure purposes. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability. Observable inputs are based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability. Unobservable inputs are based on the best information available in the circumstances. The three-tier hierarchy of inputs is summarized in the three broad levels listed below:
| Level 1 – | Quoted prices in active markets for identical securities. | |
| Level 2 – | Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.). | |
| Level 3 – | Significant unobservable inputs (including management’s assumptions in determining the fair value of investments). |
The inputs or methodologies used for valuing securities are not an indication of the risk associated with investing in those securities. The following is a summary of the Fund’s fair value measurements as of February 28, 2011:
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Investments: | ||||||||||||||||
Municipal Bonds | $ | — | $ | 95,949 | $ | — | $ | 95,949 | ||||||||
Short-Term Investments | 1,129 | — | — | 1,129 | ||||||||||||
Total | $ | 1,129 | $ | 95,949 | $ | — | $ | 97,078 | ||||||||
During the eight months ended February 28, 2011, the Fund recognized no significant transfers to/from Level 1, Level 2, or Level 3.
3. Derivative Instruments and Hedging Activities
The Fund records derivative instruments at fair value, with changes in fair value recognized on the Statement of Operations, when applicable. Even though the Fund’s investments in derivatives may represent economic hedges, they are not considered to be hedge transactions for financial reporting purposes. The Fund did not invest in derivative instruments during the eight months ended February 28, 2011.
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Notes to Financial Statements (continued) (all dollars and shares are rounded to thousands (000))
4. Fund Shares
Transactions in Fund shares were as follows:
| Eight Months Ended 2/28/11 | Year Ended 6/30/10 | Year Ended 6/30/09 | ||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||
Shares issued in the Merger: | ||||||||||||||||||||||||
Class A | — | $ | — | — | $ | — | 459 | $ | 4,782 | |||||||||||||||
Class C1(1) | — | — | — | — | — | — | ||||||||||||||||||
Class I(1) | — | — | — | — | 5,217 | 54,350 | ||||||||||||||||||
Shares sold: | ||||||||||||||||||||||||
Class A | 282 | 3,121 | 269 | 2,905 | 417 | 4,306 | ||||||||||||||||||
Class C1(1) | 764 | 2,201 | 148 | 1,599 | 189 | 1,946 | ||||||||||||||||||
Class I(1) | 1,133 | 12,220 | 1,473 | 15,859 | 1,184 | 11,939 | ||||||||||||||||||
Shares issued to shareholders due to reinvestment of distributions: | ||||||||||||||||||||||||
Class A | 34 | 373 | 44 | 466 | 39 | 398 | ||||||||||||||||||
Class C1(1) | 7 | 76 | 11 | 112 | 8 | 81 | ||||||||||||||||||
Class I(1) | 8 | 83 | 9 | 96 | 6 | 65 | ||||||||||||||||||
| 2,228 | 18,074 | 1,954 | 21,037 | 7,519 | 77,867 | |||||||||||||||||||
Shares redeemed: | ||||||||||||||||||||||||
Class A | (338 | ) | (3,662 | ) | (320 | ) | (3,438 | ) | (444 | ) | (4,585 | ) | ||||||||||||
Class C1(1) | (651 | ) | (947 | ) | (125 | ) | (1,329 | ) | (33 | ) | (327 | ) | ||||||||||||
Class I(1) | (1,468 | ) | (15,772 | ) | (1,541 | ) | (16,450 | ) | (1,693 | ) | (16,902 | ) | ||||||||||||
| (2,457 | ) | (20,381 | ) | (1,986 | ) | (21,217 | ) | (2,170 | ) | (21,814 | ) | |||||||||||||
Net increase (decrease) | (229 | ) | $ | (2,307 | ) | (32 | ) | $ | (180 | ) | 5,349 | $ | 56,053 | |||||||||||
| (1) | Effective January 18, 2011, Class C Shares are renamed Class C1 Shares and Class Y Shares are renamed Class I Shares. |
5. Investment Transactions
Purchases and sales (including maturities but excluding short-term investments) during the eight months ended February 28, 2011, aggregated $8,191 and $8,444, respectively.
6. Income Tax Information
The following information is presented on an income tax basis. Differences between amounts for financial statement and federal income tax purposes are primarily due to timing differences in recognizing certain gains and losses on investment transactions and the treatment of investments in inverse floating rate securities reflected as financing transactions, if any. To the extent that differences arise that are permanent in nature, such amounts are reclassified within the capital accounts as detailed below. Temporary differences do not require reclassification. Temporary and permanent differences do not impact the net asset value of the Fund.
At February 28, 2011, the cost and unrealized appreciation (depreciation) of investments, as determined on a federal income tax basis, were as follows:
Cost of investments | $ | 98,822 | ||
Gross unrealized: | ||||
Appreciation | $ | 1,438 | ||
Depreciation | (3,182 | ) | ||
Net unrealized appreciation (depreciation) of investments | $ | (1,744 | ) |
Permanent differences, primarily due to equalization, resulted in reclassifications among the Fund’s components of net assets at February 28, 2011, the Fund’s tax year-end, as follows:
Capital paid-in | $ | 31 | ||
Undistributed (Over-distribution of) net investment income | — | |||
Accumulated net realized gain (loss) | (31 | ) |
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The tax components of undistributed net tax-exempt income, net ordinary income and net long-term capital gains at February 28, 2011, the Fund’s tax year end, were as follows:
Undistributed net tax-exempt income* | $ | 428 | ||
Undistributed net ordinary income** | — | |||
Undistributed net long-term capital gains | 99 |
| * | Undistributed net tax exempt income (on a tax basis) has not been reduced for the dividend declared during the period February 1, 2011 through February 28, 2011 and paid on March 1, 2011. |
| ** | Net ordinary income consists of taxable market discount income and net short-term capital gains, if any. |
The tax character of distributions paid during the eight months ended February 28, 2011, and during the tax years ended June 30, 2010 and June 30, 2009, was designated for purposes of the dividends paid deduction as follows:
| Eight months ended February 28, 2011 | ||||
Distributions from net tax-exempt income*** | $ | 3,004 | ||
Distributions from net ordinary income** | 23 | |||
Distributions from net long-term capital gains**** | 224 | |||
| 2010 | ||||
Distributions from net tax-exempt income | $ | 4,311 | ||
Distributions from net ordinary income ** | 88 | |||
Distributions from net long-term gains | 266 | |||
| 2009 | ||||
Distributions from net tax-exempt income | $ | 2,894 | ||
Distributions from net ordinary income ** | — | |||
Distributions from net long-term gains | — | |||
| ** | Net ordinary income consists of taxable market discount income and net short-term capital gains, if any. |
| *** | The Fund hereby designates this amount paid during the eight months ended February 28, 2011, as Exempt Interest Dividends. |
| **** | The Fund designated as long-term capital gain dividend, pursuant to the Internal Revenue Code Section 852 (b)(3), the amount necessary to reduce earnings and profits of the Fund related to net capital gain to zero for the eight months ended February 28, 2011. |
7. Management Fees and Other Transactions with Affiliates
Investment Advisory Fees
During the period July 1, 2010 through December 31, 2010, pursuant to an investment advisory agreement (the “Agreement”), FAF Advisors managed the Fund’s assets and furnished related office facilities, equipment, research, and personnel. The Agreement required the Fund to pay FAF Advisors a monthly fee equal, on an annual basis, to 0.50% of the Fund’s average daily net assets. FAF Advisors also agreed to waive fees and reimburse other Fund expenses at least through October 31, 2010, so that total fund operating expenses, as a percentage of average daily net assets, did not exceed 0.65% for Class A Shares, 1.15% for Class C Shares (renamed Class C1 Shares) and 0.50% for Class Y Shares (renamed Class I Shares).
During the period July 1, 2010 through December 31, 2010, the Fund may have invested in related money market funds that are series of First American Funds, Inc., subject to certain limitations. In order to avoid the payment of duplicative investment advisory fees to FAF Advisors, which acted as the investment advisor to both the investing Fund and the related money market funds, FAF Advisors reimbursed the investing Fund an amount equal to that portion of FAF Advisors’ investment advisory fee received from the related money market funds that was attributable to the assets of the investing Fund. This reimbursement, if any, is recognized as a component of “Expense Reimbursement” on the Statement of Operations, and terminated with respect to the Fund on December 31, 2010, in connection with the closing of the sale.
Effective January 1, 2011, pursuant to a new investment advisory agreement (the “New Agreement”), the Fund’s new investment adviser is Nuveen Fund Advisors. Under the New Agreement, the Fund’s management fee consists of two components – a fund-level fee, based only on the amount of assets within the Fund, and a complex-level fee, based on the aggregate amount of all eligible fund assets managed by the Nuveen Fund Advisors. This pricing structure enables the Fund’s shareholders to benefit from growth in the assets within its Fund as well as from growth in the amount of complex-wide assets managed by the Nuveen Fund Advisors.
The annual fund-level fee, payable monthly, is calculated according to the following schedule:
| Average Daily Net Assets | Fund-Level Fee Rate | |||
For the first $125 million | 0.4500 | % | ||
For the next $125 million | 0.4375 | |||
For the next $250 million | 0.4250 | |||
For the next $500 million | 0.4125 | |||
For the next $1 billion | 0.4000 | |||
For net assets over $2 billion | 0.3750 | |||
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Notes to Financial Statements (continued) (all dollars and shares are rounded to thousands (000))
The annual complex-level fee for the Fund, payable monthly, is determined by taking the complex-level fee rate, which is based on the aggregate amount of “eligible assets” of all Nuveen funds as set forth in the schedule below, and making, as appropriate, an upward adjustment to that rate based upon the percentage of the particular fund’s assets that are not “eligible assets.” The complex-level fee schedule is as follows:
| Complex-Level Asset Breakpoint Level* | Effective Rate at Breakpoint Level | |||
$55 billion | 0.2000 | % | ||
$56 billion | 0.1996 | |||
$57 billion | 0.1989 | |||
$60 billion | 0.1961 | |||
$63 billion | 0.1931 | |||
$66 billion | 0.1900 | |||
$71 billion | 0.1851 | |||
$76 billion | 0.1806 | |||
$80 billion | 0.1773 | |||
$91 billion | 0.1691 | |||
$125 billion | 0.1599 | |||
$200 billion | 0.1505 | |||
$250 billion | 0.1469 | |||
$300 billion | 0.1445 | |||
| * | The complex-level fee is calculated based upon the aggregate daily “eligible assets” of all Nuveen funds. Eligible assets do not include assets attributable to investments in other Nuveen funds or assets in excess of $2 billion added to the Nuveen fund complex in connection with Nuveen Fund Advisors’ assumption of the management of the former First American Funds effective January 1, 2011. Eligible assets include closed-end fund assets managed by Nuveen Fund Advisors that are attributable to financial leverage. For these purposes, financial leverage includes the closed-end funds’ use of preferred stock and borrowings and investments in the residual interest certificates (also called inverse floating rate securities) in tender option bond (TOB) trusts, including the portion of assets held by the TOB trust that has been effectively financed by the trust’s issuance of floating rate securities, subject to an agreement by Nuveen Fund Advisors as to certain funds to limit the amount of such assets for determining eligible assets in certain circumstances. As of February 28, 2011, the Fund’s complex-level fee rate was .1975%. |
The management fee will compensate Nuveen Fund Advisors for the overall investment advisory and administrative services and general office facilities it provides for the Fund. Effective January 1, 2011, Nuveen Fund Advisors has entered into a sub-advisory agreement with the Sub-Adviser. The Sub-Adviser will be compensated for its services to the Fund from the management fee paid to Nuveen Fund Advisors.
Effective January 1, 2011, Nuveen Fund Advisors has contractually agreed to waive fees and reimburse expenses of the Fund so that total annual fund operating expenses, after waivers and excluding Acquired Fund Fees and Expenses, do not exceed the percent of the Fund’s average daily net assets, for each share class and for the time periods stated, as set forth in the following table:
Class A | 0.6500 | % | ||
Class C1(1) | 1.1500 | |||
Class I(1) | 0.5000 | |||
Through first expiration date | June 30, 2011 | |||
After first expiration date: | ||||
Class A | 0.8500 | |||
Class C1(1) | 1.3500 | |||
Class I(1) | 0.7000 | |||
Expiration date | March 31, 2012 |
| (1) | Effective January 18, 2011, Class C Shares are renamed Class C1 Shares and Class Y Shares are renamed Class I Shares. |
During the period July 1, 2010 through December 31, 2010, independent directors of the Fund may have participated and elected to defer receipt of part or all of their annual compensation under a deferred compensation plan (the “Plan”). Deferred amounts were treated as though equivalent dollar amounts had been invested in shares of selected open-end funds as designated by each director. All amounts in the Plan were 100% vested and accounts under the Plan were obligations of the Fund. Deferred amounts remain in the Fund until distributed in accordance with the Plan.
Effective January 1, 2011, independent directors may elect to defer receipt of all or a portion of the annual compensation they are entitled to receive from certain funds advised by Nuveen Fund Advisors. Under the plan, deferred amounts are treated as though equal dollar amounts had been invested in shares of select funds advised by Nuveen Fund Advisors.
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Administration Fees
During the period July 1, 2010 through December 31, 2010, FAF Advisors served as the Fund’s administrator pursuant to an administration agreement between FAF Advisors and the Fund. U.S. Bancorp Fund Services, LLC (“USBFS”) served as sub-administrator pursuant to a sub-administration agreement between USBFS and FAF Advisors. FAF Advisors is a subsidiary of U.S. Bank National Association (“U.S. Bank”). Both U.S. Bank and USBFS are direct subsidiaries of U.S. Bancorp. Under the administration agreement, FAF Advisors was compensated to provide, or compensated other entities to provide, services to the Fund. These services included various legal, oversight, and administrative and accounting services. The Fund paid FAF Advisors administration fees, which were calculated daily and paid monthly, equal to the Fund’s pro rata share of an amount equal, on an annual basis, to 0.25% of the aggregate average daily net assets of all open-end funds in the First American Funds family up to $8 billion, 0.235% on the next $17 billion of the aggregate average daily net assets, 0.22% on the next $25 billion of the aggregate average daily net assets, and 0.20% of the aggregate average daily net assets in excess of $50 billion. All fees paid to the sub-administrator were paid from the administration fee. In addition to these fees, the Fund may have reimbursed FAF Advisors and the sub-administrator for any out-of-pocket expenses incurred in providing administration services. Effective January 1, 2011, FAF Advisors and USBFS no longer serve as the Fund’s administrator and sub-administrator, respectively, and the Fund has not entered into any new administration or sub-administration agreements.
Transfer Agent Fees
USBFS serves as the Fund’s transfer agent pursuant to a transfer agent agreement with FAIF. The Fund was charged transfer agent fees on a per shareholder account basis, subject to a minimum fee per share class. These fees are charged to the Fund based upon the number of accounts within the Fund. In addition to these fees, the Fund may reimburse USBFS for out-of-pocket expenses incurred in providing transfer agent services.
Custodian Fees
U.S. Bank serves as the custodian for the Fund pursuant to a custodian agreement with FAIF. The custodian fee charged for the Fund is equal to an annual rate of 0.005% of average daily net assets. All fees are computed daily and paid monthly. Interest earned on uninvested cash balances was used to reduce a portion of the Fund’s custodian expenses. These credits, if any, are recognized as “Custodian Fee Credit” on the Statements of Operations. Conversely, the custodian charged a fee for any cash overdrafts incurred, which increased the Fund’s custodian expenses.
Distribution and Shareholder Servicing (12b-1) Fees
During the period July 1, 2010 through December 31, 2010, Quasar Distributors, LLC (“Quasar”), a subsidiary of U.S. Bancorp, served as the distributor of the Fund pursuant to a distribution agreement with FAIF. Under the distribution agreement, and pursuant to a plan adopted by the Fund under Rule 12b-1 of the Investment Company Act, the Fund paid Quasar a monthly distribution and/or shareholder servicing fee equal to an annual rate of 0.25% and 0.65% of the Fund’s average daily net assets of Class A and Class C Shares (renamed Class C1 Shares), respectively. No distribution or shareholder servicing fees were paid by Class Y Shares (renamed Class I Shares). These fees may have been used by Quasar to provide compensation for sales support, distribution activities, and/or shareholder servicing activities. During the period July 1, 2010 through December 31, 2010, there were no distribution and shareholder servicing fees waived by Quasar.
Effective January 1, 2011, the Fund has entered into a distribution agreement with Nuveen Investments LLC (the “Distributor”), who now serves as the Fund’s distributor. Under the new agreement, Class A Shares incur a .20% annual 12b-1 service fee. Class C1 Shares continue to incur a .40% annual 12b-1 distribution fee and a .25% annual 12b-1 service fee. Class I Shares will continue to not be subject to any sales charge or 12b-1 distribution or service fees. Annual distribution and service fees are based on average daily net assets.
All 12b-1 service and distribution fees collected on Class C Shares during the first year following a purchase are retained by Quasar and the Distributor to compensate for commissions advanced to financial intermediaries. During the eight months ended February 28, 2011, Quasar and the Distributor retained such 12b-1 fees as follows:
| Amount | ||||
12b-1 fees retained (Unaudited) | $ | 35 | ||
Beginning January 18, 2011, Quasar and the Distributor compensated financial intermediaries directly with commission advances at the time of purchase as follows:
Commission advances | $ | — |
| Nuveen Investments | 35 |
Notes to Financial Statements (continued) (all dollars and shares are rounded to thousands (000))
Other Fees and Expenses
In addition to the investment advisory fees, administration fees, transfer agent fees, custodian fees, and distribution and shareholder servicing fees, the Fund is responsible for paying other operating expenses, including: legal, auditing, registration fees, postage and printing of shareholder reports, fees and expenses of independent directors, insurance, and other miscellaneous expenses. During the period July 1, 2010 through December 31, 2010, legal fees and expenses of $2 were paid to a law firm of which an Assistant Secretary of the Fund was a partner.
Contingent Deferred Sales Charges
During the period July 1, 2010 through January 17, 2011, Class A Shares of the Fund were sold with an up-front sales charge of 4.25%. Class C Shares (renamed Class C1 Shares) were subject to a contingent deferred sales charge (“CDSC”) of 1% for twelve months. Class Y Shares (renamed Class I Shares) had no sales charge and were offered only to qualifying institutional investors and certain other qualifying accounts.
Effective January 18, 2011, Class A Shares of the Fund are sold with an up-front sales charge of 4.20%. Class A Share purchases of the Fund of $1 million or more are sold at net asset value without an sales charge. Class A Share purchases of the Fund may be subject to a CDSC if redeemed within eighteen months of purchase. Class C1 Shares are subject to a CDSC of 1% if redeemed within one year of purchase.
Quasar and the Distributor collected and retained CDSC on share redemptions during the eight months ended February 28, 2011, as follows:
| Amount | ||||
CDSC retained (Unaudited) | $ | 77 | ||
8. Subsequent Events
Name Changes
On April 30, 2011, the Distributor will change its name from Nuveen Investments, LLC to Nuveen Securities, LLC.
| 36 | Nuveen Investments |
Trustees and Officers (Unaudited)
The management of the Funds, including general supervision of the duties performed for the Funds by the Adviser, is the responsibility of the Board of Trustees of the Funds. The number of trustees of the Funds is currently set at ten. None of the trustees who are not “interested” persons of the Funds (referred to herein as “independent trustees”) has ever been a director or employee of, or consultant to, Nuveen or its affiliates. The names and business addresses of the trustees and officers of the Funds, their principal occupations and other affiliations during the past five years, the number of portfolios each oversees and other directorships they hold are set forth below.
The Funds’ Statement of Additional Information (“SAI”) includes more information about the trustees. To request a free copy, call Nuveen Investments at (800) 257-8787 or visit the Funds’ website at www.nuveen.com.
Name, Birthdate and Address | Position(s) Held with the Funds | Year First Elected or Appointed (1) | Principal Occupation(s) Including other Directorships During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Trustee | ||||
| Independent Trustees: | ||||||||
Robert P. Bremner (2) 8/22/40 333 W. Wacker Drive Chicago, IL 60606 | Chairman of the Board and Trustee | 1996 | Private Investor and Management Consultant; Treasurer and Director, Humanities Council of Washington, D.C.; Board Member, Independent Directors Council affiliated with the Investment Company Institute. | 246 | ||||
Jack B. Evans 10/22/48 333 W. Wacker Drive Chicago, IL 60606 | Trustee | 1999 | President, The Hall-Perrine Foundation, a private philanthropic corporation (since 1996); Director and Chairman, United Fire Group, a publicly held company; President Pro Tem of the Board of Regents for the State of Iowa University System; Director, Source Media Group; Life Trustee of Coe College and the Iowa College Foundation; formerly, Director, Alliant Energy; formerly, Director, Federal Reserve Bank of Chicago; formerly, President and Chief Operating Officer, SCI Financial Group, Inc., a regional financial services firm. | 246 | ||||
William C. Hunter 3/6/48 333 W. Wacker Drive Chicago, IL 60606 | Trustee | 2004 | Dean, Tippie College of Business, University of Iowa (since 2006); Director (since 2004) of Xerox Corporation; Director (since 2005), Beta Gamma Sigma International Honor Society; Director of Wellmark, Inc. (since 2009); formerly, Dean and Distinguished Professor of Finance, School of Business at the University of Connecticut (2003-2006); previously, Senior Vice President and Director of Research at the Federal Reserve Bank of Chicago (1995-2003); formerly, Director (1997-2007), Credit Research Center at George Washington University. | 246 | ||||
David J. Kundert (2) 10/28/42 333 W. Wacker Drive Chicago, IL 60606 | Trustee | 2005 | Director, Northwestern Mutual Wealth Management Company; retired (since 2004) as Chairman, JPMorgan Fleming Asset Management, President and CEO, Banc One Investment Advisors Corporation, and President, One Group Mutual Funds; prior thereto, Executive Vice President, Banc One Corporation and Chairman and CEO, Banc One Investment Management Group; Member, Board of Regents, Luther College; member of the Wisconsin Bar Association; member of Board of Directors, Friends of Boerner Botanical Gardens; member of Board of Directors and Chair of Investment Committee, Greater Milwaukee Foundation. | 246 | ||||
William J. Schneider (2) 9/24/44 333 W. Wacker Drive Chicago, IL 60606 | Trustee | 1997 | Chairman of Miller-Valentine Partners Ltd., a real estate investment company; formerly, Senior Partner and Chief Operating Officer (retired 2004) of Miller-Valentine Group; member, University of Dayton Business School Advisory Council; member, Mid-America Health System Board; formerly, member and chair, Dayton Philharmonic Orchestra Association; formerly, member, Business Advisory Council, Cleveland Federal Reserve Bank. | 246 | ||||
Judith M. Stockdale 12/29/47 333 W. Wacker Drive Chicago, IL 60606 | Trustee | 1997 | Executive Director, Gaylord and Dorothy Donnelley Foundation (since 1994); prior thereto, Executive Director, Great Lakes Protection Fund (1990-1994). | 246 | ||||
Carole E. Stone (2) 6/28/47 333 W. Wacker Drive Chicago, IL 60606 | Trustee | 2007 | Director, Chicago Board Options Exchange (since 2006); Director, C2 Options Exchange, Incorporated (since 2009); formerly, Commissioner, New York State Commission on Public Authority Reform (2005-2010); formerly, Chair, New York Racing Association Oversight Board (2005-2007). | 246 | ||||
| Nuveen Investments | 37 |
Trustees and Officers (Unaudited) (continued)
Name, Birthdate and Address | Position(s) Held with the Funds | Year First Elected or Appointed | Principal Occupation(s) During Past Five Years | Number of Portfolios in Fund Complex Overseen by Officer | ||||
Virginia L. Stringer 8/16/44 333 West Wacker Drive Chicago, IL 60606 | Trustee | 2011 | Board Member, Mutual Fund Directors Forum; Member, Governing Board, Investment Company Institute’s Independent Directors Council; governance consultant and non-profit board member; former Owner and President, Strategic Management Resources, Inc. a management consulting firm; previously, held several executive positions in general management, marketing and human resources at IBM and The Pillsbury Company; Independent Director, First American Fund Complex (1987-2010) and Chair (1997-2010). | 246 | ||||
Name, Birthdate and Address | Position(s) Held with the Funds | Year First Elected or Appointed (1) | Principal Occupation(s) Including other Directorships During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Trustee | ||||
Terence J. Toth (2) 9/29/59 333 W. Wacker Drive Chicago, IL 60606 | Trustee | 2008 | Director, Legal & General Investment Management America, Inc. (since 2008); Managing Partner, Promus Capital (since 2008); formerly, CEO and President, Northern Trust Global Investments (2004-2007); Executive Vice President, Quantitative Management & Securities Lending (2000-2004); prior thereto, various positions with Northern Trust Company (since 1994); member: Goodman Theatre Board (since 2004); Chicago Fellowship Board (since 2005), and Catalyst Schools of Chicago Board (since 2008); formerly, member: Northern Trust Mutual Funds Board (2005-2007), Northern Trust Global Investments Board (2004-2007), Northern Trust Japan Board (2004-2007), Northern Trust Securities Inc. Board (2003-2007) and Northern Trust Hong Kong Board (1997-2004). | 246 | ||||
| Interested Trustee: | ||||||||
John P. Amboian (3) 6/14/61 333 W. Wacker Drive Chicago, IL 60606 | Trustee | 2008 | Chief Executive Officer and Chairman (since 2007), and Director (since 1999) of Nuveen Investments, Inc., formerly, President (1999-2007); Chief Executive Officer (since 2007) of Nuveen Investments Advisors, Inc.; Director (since 1998) formerly, Chief Executive Officer (2007-2010) of Nuveen Fund Advisors, Inc. | 246 | ||||
Name, Birthdate and Address | Position(s) Held with the Funds | Year First Elected or Appointed (4) | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Officer | ||||
| Officers of the Funds: | ||||||||
Gifford R. Zimmerman 9/9/56 333 W. Wacker Drive Chicago, IL 60606 | Chief Administrative Officer | 1988 | Managing Director (since 2002), Assistant Secretary and Associate General Counsel of Nuveen Investments LLC; Managing Director (since 2004) and Assistant Secretary (since 1994) of Nuveen Investments, Inc.; Managing Director (since 2002), Assistant Secretary (since 1997) and Co-General Counsel (since 2011) of Nuveen Fund Advisors, Inc.; Managing Director, Assistant Secretary and Associate General Counsel of Nuveen Asset Management, LLC (since 2011); Managing Director, Associate General Counsel and Assistant Secretary of Symphony Asset Management LLC (since 2003); Vice President and Assistant Secretary of NWQ Investment Management Company, LLC (since 2002), Nuveen Investments Advisers Inc. (since 2002), Tradewinds Global Investors LLC, and Santa Barbara Asset Management, LLC (since 2006), Nuveen HydePark Group LLC and Nuveen Investment Solutions, Inc. (since 2007) and of Winslow Capital Management Inc. (since 2010); Chief Administrative Officer and Chief Compliance Officer (since 2010) of Nuveen Commodities Asset Management, LLC; Chartered Financial Analyst. | 246 | ||||
| 38 | Nuveen Investments |
Name, Birthdate and Address | Position(s) Held with the Funds | Year First Elected or Appointed (4) | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Officer | ||||
Margo L. Cook 4/11/64 333 W. Wacker Drive Chicago, IL 60606 | Vice President | 2009 | Executive Vice President (since 2008) of Nuveen Investments, Inc. and of Nuveen Fund Advisors, Inc. (since 2011); previously, Head of Institutional Asset Management (2007-2008) of Bear Stearns Asset Management; Head of Institutional Asset Management (1986-2007) of Bank of NY Mellon; Chartered Financial Analyst. | 246 | ||||
Lorna C. Ferguson 10/24/45 333 W. Wacker Drive Chicago, IL 60606 | Vice President | 1998 | Managing Director (since 2004) of Nuveen Investments, LLC and Managing Director (since 2005) of Nuveen Fund Advisors, Inc. | 246 | ||||
Name, Birthdate and Address | Position(s) Held with the Funds | Year First Elected or Appointed (1) | Principal Occupation(s) Including other Directorships During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Trustee | ||||
Stephen D. Foy 5/31/54 333 W. Wacker Drive Chicago, IL 60606 | Vice President and Controller | 1998 | Senior Vice President (since 2010), formerly, Vice President (1993-2010) and Funds Controller (since 1998) of Nuveen Investments, LLC; Senior Vice President (since 2010), formerly, Vice President (2005-2010) of Nuveen Fund Advisors, Inc.; Certified Public Accountant. | 246 | ||||
Scott S. Grace 8/20/70 333 W. Wacker Drive Chicago, IL 60606 | Vice President and Treasurer | 2009 | Managing Director, Corporate Finance & Development, Treasurer (since 2009) of Nuveen Investments, LLC; Managing Director and Treasurer (since 2009) of Nuveen Fund Advisors, Inc., Nuveen Investment Solutions, Inc., Nuveen Investments Advisers, Inc., Nuveen Investments Holdings Inc. and (since (2011) Nuveen Asset Management, LLC; Vice President and Treasurer of NWQ Investment Management Company, LLC, Tradewinds Global Investors, LLC, Symphony Asset Management LLC and Winslow Capital Management, Inc.; Vice President of Santa Barbara Asset Management, LLC; formerly, Treasurer (2006-2009), Senior Vice President (2008-2009), previously, Vice President (2006-2008) of Janus Capital Group, Inc.; formerly, Senior Associate in Morgan Stanley’s Global Financial Services Group (2000-2003); Chartered Accountant Designation. | 246 | ||||
Walter M. Kelly 2/24/70 333 W. Wacker Drive Chicago, IL 60606 | Chief Compliance Officer and Vice President | 2003 | Senior Vice President (since 2008), Vice President (2006-2008) of Nuveen Investments, LLC; Senior Vice President (since 2008) and Assistant Secretary (since 2008) of Nuveen Fund Advisors, Inc. | 246 | ||||
Tina M. Lazar 8/27/61 333 W. Wacker Drive Chicago, IL 60606 | Vice President | 2002 | Senior Vice President (since 2009), formerly, Vice President of Nuveen Investments, LLC (1999-2009); Senior Vice President (since 2010), formerly, Vice President (2005-2010) of Nuveen Fund Advisors, Inc. | 246 | ||||
Larry W. Martin 7/27/51 333 West Wacker Drive Chicago, IL 60606 | Vice President and Assistant Secretary | 1997 | Senior Vice President (since 2010), formerly, Vice President (1993-2010), Assistant Secretary and Assistant General Counsel of Nuveen Investments, LLC; Senior Vice President (since 2011) of Nuveen Asset Management, LLC: Senior Vice President (since 2010), formerly, Vice President (2005-2010), and Assistant Secretary of Nuveen Investments, Inc.; Senior Vice President (since 2010), formerly Vice President (2005-2010), and Assistant Secretary (since 1997) of Nuveen Fund Advisors, Vice President and Assistant Secretary of Nuveen Investments Advisers Inc. (since 2002), NWQ Investment Management Company, LLC, Symphony Asset Management, LLC (since 2003), Tradewinds Global Investors, LLC, Santa Barbara Asset Management, LLC (since 2006), Nuveen HydePark Group, LLC and Nuveen Investment Solutions, Inc. (since 2007); Vice President and Assistant Secretary of Nuveen Commodities Asset Management LLC (since 2010). | 246 |
| Nuveen Investments | 39 |
Trustees and Officers (Unaudited) (continued)
Name, Birthdate and Address | Position(s) Held with the Funds | Year First Elected or Appointed (1) | Principal Occupation(s) Including other Directorships During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Trustee | ||||
Kevin J. McCarthy 3/26/66 333 W. Wacker Drive Chicago, IL 60606 | Vice President and Secretary | 2007 | Managing Director (since 2008), formerly, Vice President (2007-2008), Nuveen Investments, LLC; Managing Director (since 2008), Assistant Secretary (since 2007) and Co-General Counsel (since 2011) of Nuveen Fund Advisors, Inc.; Managing Director, Assistant Secretary and Associate General Counsel (since 2011) of Nuveen Asset Management, LLC; Managing Director (since 2008), and Assistant Secretary, Nuveen Investment Holdings, Inc.; Vice President (since 2007) and Assistant Secretary, Nuveen Investment Advisers Inc., NWQ Investment Management Company, LLC, Tradewinds Global Investors LLC, NWQ Holdings, LLC, Symphony Asset Management LLC, Santa Barbara Asset Management, LLC, Nuveen HydePark Group, LLC and Nuveen Investment Solutions, Inc. (since 2007) and of Winslow Capital Management, Inc. (since 2010); Vice President and Secretary (since 2010) of Nuveen Commodities Asset Management, LLC; prior thereto, Partner, Bell, Boyd & Lloyd LLP (1997-2007). | 246 | ||||
Kathleen L. Prudhomme 3/30/53 800 Nicollet Mall Minneapolis, MN 55402 | Vice President and Assistant Secretary | 2011 | Managing Director, Assistant Secretary and Co-General Counsel (since 2011) of Nuveen Fund Advisors; Managing Director, Assistant Secretary and Associate General Counsel (since 2011) of Nuveen Asset Management, LLC; Managing Director and Assistant Secretary (since 2011) of Nuveen Investments, LLC; formerly, Secretary of FASF (2004-2010); Deputy General Counsel, FAF Advisors, Inc. (2004-2010). | 246 | ||||
Jeffrey M. Wilson 3/13/56 333 West Wacker Drive Chicago, IL 60606 | Vice President | 2011 | Senior Vice President of Nuveen Investments, LLC (since 2011), formerly, Senior Vice President of FAF Advisors, Inc. (2000-2010). | 114 |
| (1) | Trustees serve an indefinite term until his/her successor is elected or appointed. The year first elected or appointed represents the year in which the trustee was first elected or appointed to any fund in the Nuveen Fund Complex. |
| (2) | Also serves as a trustee of the Nuveen Diversified Commodity Fund, an exchange-traded commodity pool managed by Nuveen Commodities Asset Management, LLC, an affiliate of the Adviser. |
| (3) | Mr. Amboian is an interested trustee because of his position with Nuveen Investments, Inc. and certain of its subsidiaries, which are affiliates of the Nuveen Funds. |
| (4) | Officers serve one year terms through August of each year. The year first elected or appointed represents the year in which the officer was first elected or appointed to any fund in the Nuveen Fund Complex. |
| 40 | Nuveen Investments |
Annual Investment Management Agreement Approval Process
(Unaudited)
A. Background
Prior to January 1, 2011, FAF Advisors, Inc. (“FAF”), a wholly-owned subsidiary of U.S. Bank National Association (“U.S. Bank”), served as investment adviser to the Fund pursuant to an investment advisory agreement between First American Investment Funds, Inc. (the “Company”) and FAF (the “Prior Advisory Agreement”), and as administrator to the Fund pursuant to an administrative agreement between the Company and FAF (the “Prior Administrative Agreement”). On July 29, 2010, U.S. Bank and FAF entered into a definitive agreement with Nuveen Investments, Inc. (“Nuveen”), Nuveen Asset Management (“NAM”) and certain Nuveen affiliates, whereby NAM would acquire a portion of the asset management business of FAF (the “Transaction”). The acquired business included the assets of FAF used in providing investment advisory services, research, sales and distribution in connection with equity, fixed income, real estate, global infrastructure and asset allocation investment products (other than the money market business and closed-end funds advised by FAF), including the Fund. In connection with the Transaction, the Board of Directors (the “Prior Board”) serving the Fund as directors at that time (each a “Prior Director” and, collectively, the “Prior Directors”) considered a number of proposals designed to integrate the Company’s funds (including the Fund) into the Nuveen family of funds, including the appointment of NAM as investment adviser and Nuveen Investments, LLC as distributor to the Fund. The Prior Board also considered a proposal in connection with an internal restructuring of NAM (the “Restructuring”), for Nuveen Asset Management, LLC (“NAM LLC”), a wholly-owned subsidiary of NAM formed in anticipation of the Restructuring, to serve as sub-advisor for the Fund.
The Prior Board approved a new investment advisory agreement (the “New Advisory Agreement”) for the Fund with NAM and an investment sub-advisory agreement between NAM and NAM LLC (the “NAM Sub-Advisory Agreement”). At a meeting of the Fund’s stockholders held on December 17, 2010, stockholders of the Fund approved the New Advisory Agreement and the NAM Sub-Advisory Agreement. In addition, stockholders of the Company’s funds (including the Fund) elected ten directors, including one Prior Director, to the board of directors of the Company (the “New Board”).
On December 31, 2010, the Transaction closed and the New Board (which replaced the Prior Board) took effect. On January 1, 2011, the New Advisory Agreement and the NAM Sub-Advisory Agreement became effective. In addition, in connection with the Restructuring, NAM has changed its name to Nuveen Fund Advisors, Inc. (“NFA”). The following is a summary of the considerations of the Prior Board, which were set forth in a proxy statement dated November 10, 2010 (the “Proxy Statement”), in approving the New Advisory Agreement and the NAM Sub-Advisory Agreement for the Fund.
B. Prior Board Considerations
The New Advisory Agreement for the Fund was approved by the Prior Board after consideration of all factors determined to be relevant to its deliberations, including those discussed below. The Prior Board authorized the submission of the New Advisory Agreement for consideration by the Fund’s stockholders.
At meetings held in May and June of 2010, the Prior Board was apprised of the general terms of the Transaction and, as a result, began the process of considering the transition of services from FAF to NFA. In preparation for its September 21-23, 2010 meeting, the Prior Board received, in response to a written due diligence request prepared by the Prior Board and its independent legal counsel and provided to NFA and FAF, a significant amount of information covering a range of issues in advance of the meeting. To assist the Prior Board in its consideration of the New Advisory Agreement for the Fund, NFA provided materials and information about, among other things: (1) NFA and its affiliates, including their history and organizational structure, product lines, experience in providing investment advisory, administrative and other services, and financial condition, (2) the nature, extent and quality of services to be provided under the New Advisory Agreement, (3) proposed Fund fees and expenses and comparative information relating thereto, and (4) NFA’s compliance and risk management capabilities and processes. In addition, the Prior Board was provided with a memorandum from independent legal counsel outlining the legal duties of the Prior Board under the Investment Company Act of 1940, as amended (the “1940 Act”). In response to further requests from the Prior Board and its independent legal counsel, NFA and FAF provided additional information to the Prior Board following its September 21-23 meeting.
An additional in-person meeting of the Prior Board to consider the New Advisory Agreement was held on October 7, 2010, at which the members of the Prior Board in attendance, all of whom were not considered to be “interested persons” of the Company as defined in the 1940 Act (the “Independent Prior Directors”), approved the New Advisory Agreement with NFA for the Fund.
In considering the New Advisory Agreement for the Fund, the Prior Board, advised by independent legal counsel, reviewed and analyzed the factors it deemed relevant, including: (1) the nature, quality, and extent of services to be rendered to the Fund by NFA, (2) the cost of services to be provided, including Fund expense information, and (3) whether economies of scale may be realized as the Fund grows and whether fee levels are adjusted to enable Fund investors to share in these potential economies of scale.
In considering the New Advisory Agreement, the Prior Board did not identify any particular information that was all-important or controlling, and each Prior Director may have attributed different weights to the various factors discussed below. Where appropriate, the Prior Directors evaluated all information available to them regarding the Company’s funds on a fund-by-fund basis, and their determinations were made separately with respect to each such fund (including the Fund). The Prior Directors, all of whom were Independent Prior Directors, concluded that the terms of the New Advisory Agreement and the fee rates to be paid in light of the services to be provided to the Fund are in the best interests of the Fund, and that the New Advisory Agreement should be approved
| Nuveen Investments | 41 |
Annual Investment Management Agreement Approval Process
(Unaudited) (continued)
and recommended to stockholders for approval. In voting to approve the New Advisory Agreement with respect to the Fund, the Prior Board considered in particular the following factors:
Nature, Extent and Quality of Services. In considering approval of the New Advisory Agreement, the Prior Board considered the nature, extent and quality of services to be provided by NFA, including advisory services and administrative services. The Prior Board reviewed materials outlining, among other things, NFA’s organizational structure and business; the types of services that NFA or its affiliates are expected to provide to the Fund; the performance record of the Fund (as described in further detail below); and fund product lines offered by NFA. The Prior Board considered that affiliation with a larger fund complex and well-recognized sponsor may result in a broader distribution network, potential economies of scale with respect to other services or fees and broader shareholder services including exchange options.
With respect to personnel, the Prior Board considered information regarding retention plans for current FAF employees who would be offered employment by NFA, and the background and experience of NFA employees who would become portfolio managers as of the closing of the Transaction. The Prior Board also reviewed information regarding portfolio manager compensation arrangements to evaluate NFA’s ability to attract and retain high quality investment personnel.
In evaluating the services of NFA, the Prior Board also considered NFA’s ability to supervise the Fund’s other service providers and, given the importance of compliance, NFA’s compliance program. Among other things, the Prior Board considered the report of NFA’s chief compliance officer regarding NFA’s compliance policies and procedures.
In addition to advisory services, the Prior Board considered the quality of administrative services expected to be provided by NFA and its affiliates including product management, fund administration, oversight of service providers, shareholder services, administration of Board relations, regulatory and portfolio compliance and legal support.
The Prior Board considered that, based on representations from FAF and NFA, the Transaction would allow stockholders to continue their investment in each of the Company’s funds with the same investment objective and principal strategies. The Prior Board considered the historical investment performance of each of the Company’s funds (including the Fund) previously provided during the annual contract renewal process.
Cost of Services Provided by NFA. In evaluating the costs of the services to be provided by NFA under the New Advisory Agreement, the Prior Board received a comparison of the Fund’s annual operating expenses as of June 30, 2010 under the Prior Advisory Agreement and under the New Advisory Agreement, in each case adjusted to reflect a decrease in net assets for certain of the Company’s funds from redemptions by the U.S. Bank 401(k) Plan expected to occur prior to the closing of the Transaction. The Prior Board considered, among other things, that the advisory fee rates and other expenses would change as a result of NFA serving as investment adviser to the Fund. The Prior Board noted that the services provided by NFA under the New Advisory Agreement would include certain administrative services, which services (along with other services) were provided pursuant to the Prior Administrative Agreement and were charged separately from the advisory fee. Accordingly, the Prior Board considered that the fee rates paid under the New Advisory Agreement include bundled investment advisory and administrative fees and thus are higher than the fee rates paid under the Prior Advisory Agreement for most of the Company’s funds, but lower than the combined fee rates paid under the Prior Advisory Agreement and the Prior Administrative Agreement. The Prior Board also noted that certain administrative services provided under the Prior Administrative Agreement will not be provided under the New Advisory Agreement and will be delegated to other service providers. Similarly, certain fees paid by FAF under the Prior Administrative Agreement will not be paid by NFA under the New Advisory Agreement and will be paid directly by the Fund. However, immediately following the closing of the Transaction, the net expense ratio of each of the Company’s funds was expected to be the same or lower than the fund’s net expense ratio as of June 30, 2010, adjusted (where applicable) to reflect a decrease in net assets resulting from redemptions by the U.S. Bank 401(k) Plan expected to occur prior to the closing of the Transaction, assuming the fund’s net assets at the time of the closing of the Transaction were no lower than their adjusted June 30 level. In addition, the Prior Board noted that NFA has committed to certain undertakings to maintain current fee caps and/or to waive fees or reimburse expenses to maintain net management fees at certain levels and Nuveen has represented to the Prior Board that Nuveen and its affiliates will not take any action that imposes an “unfair burden” on the Fund as a result of the Transaction. The Board also considered that fees payable under the New Advisory Agreement include both a fund-level fee and a complex-level fee, and that schedules for the fund-level and complex-level fees contain breakpoints that are based, respectively, on fund assets and Nuveen complex-wide assets. The Board considered that breakpoints in the fund-level fee allow for the possibility that this portion of the advisory fee could decline in the future if Fund assets were to increase or increase in the future if Fund assets were to decline. The Prior Board also considered that breakpoints in the complex-level fee allow for the possibility that this portion of the advisory fee could decline in the future if complex-wide assets were to increase or increase in the future if complex-wide assets were to decline, regardless, in each case, of whether assets of a particular fund of the Company had increased or decreased.
In considering the compensation to be paid to NFA, the Prior Board also reviewed fee information regarding NFA-sponsored funds, to the extent such funds had similar investment objectives and strategies to the Company’s funds. The Prior Board reviewed information provided by NFA regarding similar funds managed by NFA and noted that the fee rates payable by these funds were generally comparable to the fee rates proposed for the Company’s funds. The Prior Board also compared proposed fee and expense information to the median fees and expenses of comparable funds, using information provided by an independent data service.
| 42 | Nuveen Investments |
In evaluating the compensation, the Prior Board also considered other amounts expected to be paid to NFA by the Fund as well as any indirect benefits (such as soft dollar arrangements, if any) NFA and its affiliates are expected to receive, that are directly attributable to the management of the Fund.
The Prior Board also considered that the Fund would not bear any of the costs relating to the Transaction, including the costs of preparing, printing and mailing the Proxy Statement.
Economies of Scale. The Prior Board reviewed information regarding potential economies of scale or other efficiencies that might result from the Fund’s potential association with Nuveen. The Prior Board noted that the New Advisory Agreement provides for breakpoints in the Fund’s fund-level and complex-level management fee rates as the assets of the Fund and the assets held by the various registered investment companies sponsored by Nuveen increase, respectively. The Prior Board concluded that the structure of the investment management fee rates, with the breakpoints for the Fund under the New Advisory Agreement, reflected sharing of potential economies of scale with the Fund’s stockholders.
Conclusion. After deliberating in executive session, the members of the Prior Board in attendance, all of whom were Independent Prior Directors, approved the New Advisory Agreement with respect to the Fund, concluding that the New Advisory Agreement was in the best interests of the Fund.
NAM Sub-Advisory Agreement. The Prior Board also approved the NAM Sub-Advisory Agreement between NFA and NAM LLC as a result of the Restructuring expected to occur with NFA. The Prior Board considered that the services to be provided by NAM LLC under the NAM Sub-Advisory Agreement would not result in any material change in the nature or level of investment advisory services or administrative services provided to the Fund. In addition, the portfolio managers will continue to manage the Fund in their capacity as employees of NAM LLC. The Prior Board considered that NFA will pay a portion of the advisory fee it receives from the Fund to NAM LLC for its services as sub-advisor. The Prior Board concluded, based upon the conclusions that the Prior Board reached in connection with the approval of the New Advisory Agreement and after determining that it need not reconsider all of the factors that it had considered in connection with the approval of the New Advisory Agreement, to approve the NAM Sub-Advisory Agreement.
| Nuveen Investments | 43 |
Notes
| 44 | Nuveen Investments |
Notes
| Nuveen Investments | 45 |
Glossary of Terms Used in this Report
Average Annual Total Return: This is a commonly used method to express an investment’s performance over a particular, usually multi-year time period. It expresses the return that would have been necessary each year to equal the investment’s actual cumulative performance (including change in NAV or offer price and reinvested dividends and capital gains distributions, if any) over the time period being considered.
The Barclays Capital Municipal Bond Index: An unmanaged index composed of a broad range of investment grade municipal bonds.
The Lipper California Municipal Debt Funds Average: Represents the average annualized total return for all reporting funds in the Lipper California Municipal Debt Fund Category. The Lipper California Municipal Debt Funds Average contained 122, 99 and 83 funds for the 1-year, 5-year and 10-years period, respectively, ended February 28, 2011.
Net Asset Value (NAV): A Fund’s NAV is the dollar value of one share in the Fund. It is calculated by subtracting the liabilities of the Fund from its total assets and then dividing the remainder by the number of shares outstanding. Fund NAVs are calculated at the end of each business day.
Pre-refundings: Pre-refundings, also known as advance refundings or refinancings, occur when an issuer sells new bonds and uses the proceeds to fund principal and interest payments of older existing bonds. This process often results in lower borrowing costs for bond issuers.
| 46 | Nuveen Investments |
Fund Manager
Nuveen Fund Advisors, Inc.
333 West Wacker Drive
Chicago, IL 60606
Sub-Adviser
Nuveen Asset Management, LLC
333 West Wacker Drive
Chicago, IL 60606
Legal Counsel
Chapman and Cutler LLP
Chicago, IL
Independent Registered
Public Accounting Firm
Ernst & Young LLP
Chicago, IL
Custodian
U.S. Bank National Association
St. Paul, MN
Transfer Agent and
Shareholder Services
U.S. Bancorp Fund Services, LLC
615 East Michigan Street
Milwaukee, WI 53202
Quarterly Portfolio of Investments and Proxy Voting Information: You may obtain (i) the Fund’s quarterly portfolio of investments, (ii) information regarding how the Fund voted proxies relating to portfolio securities held during the most recent twelve-month period ended June 30, and (iii) a description of the policies and procedures that the Fund used to determine how to vote proxies relating to portfolio securities without charge, upon request, by calling Nuveen Investments at (800) 257-8787 or on Nuveen’s website at www.nuveen.com.
You may also obtain this and other Fund information directly from the Securities and Exchange Commission (SEC). The SEC may charge a copying fee for this information. Visit the SEC on-line at http://www.sec.gov or in person at the SEC’s Public Reference Room in Washington, D.C. Call the SEC at (202) 942-8090 for room hours and operation. You may also request Fund information by sending an e-mail request to publicinfo@sec.gov or by writing to the SEC’s Public Reference Section at 100 F Street NE, Washington, D.C. 20549.
The Financial Industry Regulatory Authority (FINRA) provides a Public Disclosure Program which supplies certain information regarding the disciplinary history of FINRA members and their associated persons in response to either telephone inquiries at (800) 289-9999 or written inquiries at www.finra.org. FINRA also provides an investor brochure that includes information describing the Public Disclosure Program.
| Nuveen Investments | 47 |
Nuveen Investments:
Serving Investors For Generations
Since 1898, financial advisors and their clients have relied on Nuveen Investments to provide dependable investment solutions through continued adherence to proven, longterm investing principles. Today, we offer a range of high quality equity and fixed-income solutions designed to be integral components of a well-diversified core portfolio.
Focused on meeting investor needs.
Nuveen Investments is a global investment management firm that seeks to help secure the long-term goals of institutions and high net worth investors as well as the consultants and financial advisors who serve them. We market our growing range of specialized investment solutions under the high-quality brands of HydePark, NWQ, Nuveen Asset Management, Santa Barbara, Symphony, Tradewinds and Winslow Capital. In total, Nuveen Investments managed approximately $197 billion of assets as of December 31, 2010.
Find out how we can help you.
To learn more about how the products and services of Nuveen Investments may be able to help you meet your financial goals, talk to your financial advisor, or call us at (800) 257-8787. Please read the information provided carefully before you invest. Investors should consider the investment objective and policies, risk considerations, charges and expenses of any investment carefully. Where applicable, be sure to obtain a prospectus, which contains this and other relevant information. To obtain a prospectus, please contact your securities representative or Nuveen Investments, 333 W. Wacker Dr., Chicago, IL 60606. Please read the prospectus carefully before you invest or send money.
Learn more about Nuveen Funds at: www.nuveen.com/mf
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Distributed by Nuveen Investments, LLC 333 West Wacker Drive Chicago, IL 60606 www.nuveen.com |
MAN-FCA-0211P
Mutual Funds
Nuveen Municipal Bond Funds
Dependable, tax-free income because it’s not what you earn, it’s what you keep.®
Semi-Annual Report
August 31, 2011
| Share Class / Ticker Symbol | ||||||||
| Fund Name | Class A | Class B | Class C | Class I | ||||
Nuveen California High Yield Municipal Bond Fund | NCHAX | — | NCHCX | NCHRX | ||||
Nuveen California Municipal Bond Fund | NCAAX | NCBBX | NCACX | NCSPX | ||||
Nuveen California Municipal Bond Fund 2 (formerly Nuveen California Insured Municipal Bond Fund) | NCAIX | NCABX | NCAKX | NCIBX | ||||
LIFE IS COMPLEX.
Nuveen makes things e-simple.
It only takes a minute to sign up for e-Reports. Once enrolled, you’ll receive an e-mail as soon as your Nuveen Fund information is ready. No more waiting for delivery by regular mail. Just click on the link within the e-mail to see the report and save it on your computer if you wish.
Free e-Reports right to your e-mail!
www.investordelivery.com
If you receive your Nuveen Fund dividends and statements from your financial advisor or brokerage account.
OR
www.nuveen.com/accountaccess
If you receive your Nuveen Fund dividends and statements directly from Nuveen.
| Must be preceded by or accompanied by a prospectus. | NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE |
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Letter to Shareholders
Dear Shareholders,
The global economy continues to be weighed down by an unusual combination of pressures facing the larger developed economies. Japanese leaders continue to work through the economic aftereffects of the March 2011 earthquake and tsunami. Political leaders in Europe and the U.S. have resolved some of the near term fiscal problems, but the financial markets are not convinced that these leaders are able to address more complex longer term fiscal issues. Despite improved earnings and capital increases, the largest banks in these countries continue to be vulnerable to deteriorating mortgage portfolios and sovereign credit exposure, adding another source of uncertainty to the global financial system.
In the U.S., recent economic statistics indicate that the economic recovery may be losing momentum. Consumption, which represents about 70% of the gross domestic product, faces an array of challenges from seemingly intractable declines in housing values, increased energy costs and limited growth in the job market. The failure of Congress and the administration to agree on the debt ceiling increase on a timely basis and the deep divisions between the political parties over fashioning a balanced program to address growing fiscal imbalances that led to the recent S&P ratings downgrade add considerable uncertainty to the domestic economic picture.
On a more positive note, corporate earnings continue to hold up well and the municipal bond market is recovering from recent weakness as states and municipalities implement various programs to reduce their budgetary deficits. In addition, the Federal Reserve System has made it clear that it stands ready to take additional steps should the economic recovery falter. However, there are concerns that the Fed is approaching the limits of its resources to intervene in the economy.
These perplexing times highlight the importance of professional investment management. Your Nuveen investment team is working hard to develop an appropriate response to increased risk, and they continue to seek out opportunities created by stressful markets using proven investment disciplines designed to help your Fund achieve its investment objectives. On your behalf, we monitor their activities to assure that they maintain their investment disciplines.
As always, I encourage you to contact your financial consultant if you have any questions about your investment in a Nuveen Fund. On behalf of the other members of your Fund Board, we look forward to continuing to earn your trust in the months and years ahead.
Sincerely,
Robert P. Bremner
Chairman of the Board
October 21, 2011
| 4 | Nuveen Investments |
Certain statements in this report are forward-looking statements. Discussions of specific investments are for illustration only and are not intended as recommendations of individual investments. The forward-looking statements and other views expressed herein are those of the portfolio managers as of the date of this report. Actual future results or occurrences may differ significantly from those anticipated in any forward-looking statements, and the views expressed herein are subject to change at any time, due to numerous market and other factors. The Funds disclaim any obligation to update publicly or revise any forward-looking statements or views expressed herein.
Ratings shown are the highest rating given by one of the following national rating agencies: Standard & Poor’s Group, Moody’s Investor Services, Inc. or Fitch, Inc. Credit ratings are subject to change. AAA, AA, A, and BBB are investment grade ratings; BB, B, CCC, CC, C and D are below-investment grade ratings. Bonds backed by U.S. Government or agency securities are given an implied rating equal to the rating of such securities. Holdings designated N/R are not rated by a national rating agency.
Portfolio managers John Miller and Scott Romans examine key investment strategies and the Funds’ performance during the six months ending August 31, 2011. John has 18 years of investment experience and has managed the Nuveen California High Yield Municipal Bond Fund since its inception in 2006. Scott has eleven years of investment experience and has managed the Nuveen California Municipal Bond Fund since 2003 and the Nuveen California Municipal Bond Fund 2 (formerly the Nuveen California Insured Municipal Bond Fund) since 2005.
How did the Funds perform during the six-month reporting period ending August 31, 2011?
The tables in the Fund Performance and Expense Ratios section of this report provide total return performance information for the six-month, one-year, five-year, ten-year and since inception periods ending August 31, 2011. Each Fund’s Class A Share total returns at net asset value (NAV) are compared with the performance of the California-specific and National Standard & Poor’s (S&P) Municipal Bond Indexes and the corresponding Lipper peer fund average. Over the six-month period, all three Funds outpaced the National S&P Index by varying degrees. Meanwhile, the Nuveen California High Yield Municipal Bond Fund also beat the S&P California Municipal Bond Index, the S&P High Yield Municipal Bond Index and its Lipper average by very wide margins. The Nuveen California Municipal Bond Fund surpassed the S&P California Municipal Bond Index and its Lipper peer group average, while the Nuveen California Municipal Bond Fund 2 trailed both of these measures.
During this reporting period, tax-exempt bonds benefited from a favorable investment environment, as this time span began just a few weeks after the municipal market bottomed after a deep downturn in late 2010 and early 2011. In addition, the Funds were helped by their emphasis on California-based securities — the state outperformed the national municipal market as a whole, thanks to an improved fiscal picture and significantly constrained supply that pushed bond prices upward. During the six months ending August 31, 2011, municipal bond issuance totaled roughly $135 billion nationwide, a 34% year-over-year decline. In comparison, new supply of California tax-exempt debt was about $19 billion during the same time span, reflecting a 37% year-over-year drop.
Nuveen California High Yield Municipal Bond Fund
As noted above, the Fund’s Class A Shares at NAV outpaced the national high-yield municipal bond market by a very wide margin. One notably helpful influence was the portfolio’s longer-than-average duration, meaning that it was more sensitive to changes in interest rates than the national index. The decline in rates fueled the tax-exempt bond market’s strong rally. As rates fall, bond prices generally rise, so the Fund’s performance
| Nuveen Investments | 5 |
was aided to a great extent by its relatively high sensitivity to interest rate movement. Similarly, as a high-yield portfolio, we were able to offer our shareholders a relatively high level of income, which can be especially valuable to investors seeking additional yield in such a low-interest-rate environment. Both of these factors contributed nicely to the Fund’s positive performance.
In addition, a number of the best-performing positions were higher-rated bonds that enjoyed healthy price growth during the period as municipal bond investors’ sentiment seemingly improved. Some of these higher-rated securities had been among the Fund’s biggest underperformers prior to the period. For example, we owned AA-rated hospital bonds issued by Sutter Health, a dominant health care provider in Northern California. These bonds had seen sizeable price depreciation during the market’s downturn in December 2010 and January 2011, but they made a nice recovery that boosted the Fund’s return. Other high-quality bonds that enjoyed similar price increases included securities issued for the Los Angeles International Airport, the University of Southern California and Bay Area Rapid Transit.
The Fund was also supported by relative price improvement among lower-rated, higher-yielding securities, including BBB-rated Children’s Hospital of Los Angeles bonds, whose financial position we believed was sound given the institution’s large endowment, fundraising capabilities and essential-service function. The portfolio also saw strong performance from bonds issued by the Drew School. Although these securities were unrated by major rating agencies, we conducted our own research and concluded the issuer was fundamentally solid and offered a very favorable risk/reward tradeoff. In fact, as market conditions improved, these bonds enjoyed very good price appreciation.
Nuveen California Municipal Bond Fund and Nuveen California Municipal Bond Fund 2
As noted, the Class A Shares at NAV of the Nuveen California Municipal Bond Fund outpaced the comparative indexes during the six-month reporting period ending August 31, 2011, while the Class A Shares at NAV of the Nuveen California Municipal Bond Fund 2 beat the national index and lagged the state index and Lipper peer group average.
The strongest positive contribution to the Funds’ results came from their interest-rate positioning. Due to the portfolios’ longer durations than the national index, the Funds’ performance was rewarded when municipal bond prices rose in response to falling interest rates. Yield curve positioning further added to results in relative terms. The California Municipal Bond Fund had less exposure to bonds with relatively short maturities, which proved helpful given the outperformance of longer-dated securities. While the Fund had good representation among longer-duration bonds, its slight underweighting in the longest bonds on the yield curve partially offset what was otherwise a very good performance story. Duration was a universally positive performance factor for the California Municipal Bond Fund 2, as the portfolio was both substantially underweighted in very-short-maturity bonds and overweighted on the long end of the yield curve.
To a lesser extent, sector positioning also proved helpful. An overweighting in the health care sector was a plus for both Funds, as California health care securities performed well
| 6 | Nuveen Investments |
compared to the rest of the tax-exempt bond market. Both Funds benefited from underweighting pre-refunded bonds, given that these very-short-duration, very-high-quality securities did not fare as well as bonds with longer maturities and lower credit ratings in an environment of decreased investor risk aversion. A modest overweighting in outperforming California tobacco-securitization bonds was helpful for the California Municipal Bond Fund’s performance, but the California Municipal Bond Fund 2 was underweighted in tobacco bonds for most of the period, which hampered this portfolio’s relative performance. On the other hand, a modest drawback for the California Municipal Bond Fund was the portfolio’s relative underweighting in local general obligation (GO) bonds. In California, local GOs are primarily school district bonds, and recently they have been zero-coupon bonds, which are very sensitive to interest-rate changes. As prices rallied during the period, this category disproportionately outperformed the municipal bond market as a whole. Being underweighted here was a disappointment for the California Municipal Bond Fund’s performance, while the California Municipal Bond Fund 2 was at an advantage by being overweighted in this category.
What strategies were used to manage the Funds during the six-month period?
Nuveen California High Yield Municipal Bond Fund
The Fund’s investment objective is to provide high current income exempt from regular federal, California state and, in some cases, California local income taxes. The Fund seeks to purchase below investment grade or medium to lower rated, high-yielding municipal bonds that offer attractive value in terms of current yields, prices, credit quality, liquidity or future prospects.
The Fund was fortunate to receive a moderate level of investment inflows during the period. This situation worked to the portfolio’s benefit because it enabled us to add new securities at a time when we saw some good investment opportunities at attractive prices in the tax-exempt municipal marketplace. With these inflows, we were able to buy bonds we believed could provide significant long-term value.
We invested a large portion of the Fund’s incoming assets into newly issued redevelopment district bonds, which raise tax-exempt money for community development projects. As we discussed in our last report to shareholders six months ago, redevelopment bonds were commonplace in California until recently, when their continued existence was put into question by an early proposal for a state budget resolution that called for their elimination. Although there was great confusion in the marketplace about the potential impact on bonds issued by these agencies, we viewed the development as a credit positive. As new issues were brought to market, we took advantage of their wider spreads and attractive structures. In all, we bought about a dozen redevelopment district bond issues for the portfolio — both new issues and from the secondary municipal bond market — and believed they provided the potential to help the Fund’s shareholders over the long term.
The rest of our new additions to the portfolio focused on “essential service” bonds, which we often favor because we believe these securities benefit from their vital nature to the communities they serve. Recent purchases included a variety of non-rated issues in health
| Nuveen Investments | 7 |
care, charter schools and community facilities districts that we believed represented good value at a reasonable amount of risk. The Fund also utilized derivatives (forward interest rate swaps) to reduce price volatility risk to movement in U.S. interest rates relative to the Fund’s benchmarks. During this period, the derivatives functioned as intended, and we continued to use these derivatives at the end of the period.
Nuveen California Municipal Bond Fund and Nuveen California Municipal Bond Fund 2
Effective as of the close of business on April 27, 2011, the Nuveen California Municipal Bond Fund 2 closed to new investors. Investors in the Fund as of that date may continue to invest in the Fund, including through the reinvestment of dividends and capital gains distributions.
In addition, effective May 31, 2011:
| • | The Fund is no longer required to invest at least 80% of its net assets in municipal securities that are covered by insurance guaranteeing the timely payment of principal and interest thereon. The Fund continues to be subject to the requirement that it invest at least 80% of its net assets in municipal bonds that pay interest that is exempt from regular federal and California personal income tax. |
| • | The Fund’s name changed from Nuveen California Insured Municipal Bond Fund. |
The Funds invest primarily in investment-grade municipal bonds in an effort to provide interest income exempt from regular federal, California state and, in some cases, California local income taxes.
New purchases for the Nuveen California Municipal Bond Fund and the Nuveen California Municipal Bond Fund 2 were relatively few during the period, reflecting both the limited supply in the municipal bond market and the low-interest-rate environment. These factors made it unattractive to try to restructure the portfolio, given that the bonds available for purchase were generally less desirable than the bonds we already owned in the portfolios. For the most part, our recent purchases were opportunistic in nature, occurring when we believed we had uncovered individual bond issues that gave the portfolio an unusual degree of value relative to the securities’ underlying risk. In the California Municipal Bond Fund, for example, we added to the portfolio’s exposure to health care and charter school bonds that we felt were favorable, as well as a non-rated charter school bond issue and a special-taxing-district bond issue we thought offered good value. Meanwhile, in the portfolio of the California Municipal Bond Fund 2, we took advantage of the Fund’s broadened ability to invest in non-insured municipal debt to add a position in California tobacco-securitization bonds that we were unable to own previously. We also bought a special-taxing district bond issue and a highly rated community college district local GO bond.
One unique opportunity that surfaced during the period was among redevelopment district bonds, in which we invested to the extent possible in both Funds. As mentioned earlier, in the Nuveen High Yield California Municipal Bond Fund, unusual circumstances led to a significant number of tax-exempt bond deals from redevelopment districts, which had previously been a popular source of issuance in California but whose future was put in doubt by a budget proposal that called for the elimination of redevelopment agencies. Because of this uncertainty, new issue supply came with wider spreads (and more
| 8 | Nuveen Investments |
attractive prices) relative to comparable AAA-rated tax-exempt bonds. Our ability to purchase these bonds was somewhat constrained by the fact that most of these deals were relatively small. Since we viewed the changes in this sector as broadly positive for redevelopment district bonds, we did find a lot of value in these types of bonds, given their high level of income, attractive structures (with ten years of call protection) and, we believe, substantial upside potential.
To fund our purchases for the California Municipal Bond Fund portfolio, we relied primarily on the proceeds of called bonds, as well as the sale of some very-short-maturity bonds that had strong demand in the marketplace and would have soon been leaving the portfolio anyway. Another approach was to realize profits on some of the bonds we bought at extremely low prices during the municipal bond market’s downturn in 2008 and 2009, as they now had achieved what we believed was their fair value and therefore had modest prospects for further appreciation.
Selling activity was somewhat more robust in the California Municipal Bond Fund 2 portfolio. In addition to utilizing the proceeds of called bonds and sales of short-maturity issues , we sold insured AA-rated and A-rated bonds whose outlook we saw as more limited than other opportunities available in the marketplace.
Risk Considerations
Mutual fund investing involves risk; principal loss is possible. Debt or fixed income securities are subject to credit risk and interest rate risk. The value of, and income generated by debt securities will decrease or increase based on changes in market interest rates. As interest rates rise, bond prices fall. Credit risk refers to an issuer’s ability to make interest and principal payments when due. Below investment grade bonds carry heightened credit risk and potential for default.
Dividend Information
All of the share classes of Nuveen California High Yield Municipal Bond Fund and Nuveen California Municipal Bond Fund 2 saw an increase in their monthly dividend in March 2011. Nuveen California Municipal Bond Fund had a dividend increase in Class B Shares in March 2011 and had an additional increase in all share classes in June 2011. There were no other dividend changes to any of the Funds’ share classes during the six-month period ending August 31, 2011.
Each Fund seeks to pay dividends at a rate that reflects the past and projected performance of the Fund. To permit a Fund to maintain a more stable monthly dividend, the Fund may pay dividends at a rate that may be more or less than the amount of net investment income actually earned by the Fund during the period. If the Fund has cumulatively earned more than it has paid in dividends, it will hold the excess in reserve as undistributed net investment income (UNII) as part of the Fund’s net asset value. Conversely, if the Fund has cumulatively paid in dividends more than it has earned, the excess will constitute a negative UNII that will likewise be reflected in the Fund’s net asset value. Each Fund will, over time, pay all its net investment income as dividends to shareholders. As of August 31, 2011, all three Funds had a positive UNII balances, based upon our best estimate, for tax purposes and a positive UNII balance for financial reporting purposes.
| Nuveen Investments | 9 |
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| 10 | Nuveen Investments |
Fund Performance and Expense Ratios (Unaudited)
The Fund Performance and Expense Ratios for each Fund are shown on the following three pages.
Returns quoted represent past performance, which is no guarantee of future results. Current performance may be higher or lower than the performance shown. Investment returns and principal value will fluctuate so that when shares are redeemed, they may be worth more or less than their original cost. Returns without sales charges would be lower if the sales charge were included. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Income is generally exempt from regular federal income taxes. Some income may be subject to state and local income taxes and to the federal alternative minimum tax. Capital gains, if any, are subject to tax.
Returns may reflect a contractual agreement between certain Funds and the investment adviser to waive certain fees and expenses; see Notes to Financial Statements, Footnote 7 — Management Fees and Other Transactions with Affiliates for more information. In addition, returns may reflect a voluntary expense limitation by the Funds’ investment adviser that may be modified or discontinued at any time without notice. For the most recent month-end performance visit www.nuveen.com or call (800) 257-8787.
Returns reflect differences in sales charges and expenses, which are primarily differences in distribution and service fees. Fund returns assume reinvestment of dividends and capital gains.
Comparative index and Lipper return information is provided for the Funds’ Class A Shares at net asset value (NAV) only.
The expense ratios shown reflect the Funds’ total operating expenses (before fee waivers or expense reimbursements, if any) as shown in the Funds’ most recent prospectus. The expense ratios include management fees and other fees and expenses.
| Nuveen Investments | 11 |
Fund Performance and Expense Ratios (Unaudited) (continued)
Nuveen California High Yield Municipal Bond Fund
Refer to the first page of this Fund Performance and Expense Ratios section for further explanation of the information included within this page.
Fund Performance
Average Annual Total Returns as of August 31, 2011*
| Cumulative | Average Annual | |||||||||||||||
| 6-Month | 1-Year | 5-Year | Since Inception* | |||||||||||||
Class A Shares at NAV | 11.06% | 0.77% | 0.64% | 1.31% | ||||||||||||
Class A Shares at maximum Offering Price | 6.43% | -3.49% | -0.22% | 0.51% | ||||||||||||
Standard & Poor’s (S&P) California Municipal Bond Index** | 7.33% | 2.68% | 4.39% | 4.60% | ||||||||||||
Standard & Poor’s (S&P) High Yield Municipal Bond Index** | 7.15% | 3.03% | 2.24% | 2.84% | ||||||||||||
Standard & Poor’s (S&P) National Municipal Bond Index** | 6.56% | 2.62% | 4.60% | 4.93% | ||||||||||||
Lipper California Municipal Debt Classification Average** | 7.44% | 1.30% | 3.09% | 3.27% | ||||||||||||
Class C Shares | 10.79% | 0.27% | 0.11% | 0.76% | ||||||||||||
Class I Shares | 11.20% | 1.01% | 0.83% | 1.49% | ||||||||||||
Latest Calendar Quarter – Average Annual Total Returns as of September 30, 2011*
| Cumulative | Average Annual | |||||||||||||||
| 6-Month | 1-Year | 5-Year | Since Inception* | |||||||||||||
Class A Shares at NAV | 15.12% | 3.23% | 1.03% | 1.78% | ||||||||||||
Class A Shares at maximum Offering Price | 10.25% | -1.15% | 0.17% | 0.99% | ||||||||||||
Class C Shares | 14.84% | 2.71% | 0.49% | 1.23% | ||||||||||||
Class I Shares | 15.27% | 3.35% | 1.22% | 1.97% | ||||||||||||
Class A Shares have a maximum 4.20% sales charge (Offering Price). Class A Share purchases of $1 million or more are sold at net asset value without an up-front sales charge but may be subject to a contingent deferred sales charge (CDSC), also known as a back-end sales charge, if redeemed within eighteen months of purchase. Class C Shares have a 1% CDSC for redemptions within less than twelve months, which is not reflected in the one-year total return. Class I Shares have no sales charge and may be purchased under limited circumstances or by specified classes of investors.
Expense Ratios as of Most Recent Prospectus
| Expense Ratios | ||
Class A Shares | 0.90% | |
Class C Shares | 1.45% | |
Class I Shares | 0.70% | |
| * | Six-month returns are cumulative; all other returns are annualized. Since inception returns are from 3/28/06. |
| ** | Refer to the Glossary of Terms Used in this Report for definitions. |
| 12 | Nuveen Investments |
Nuveen California Municipal Bond Fund
Refer to the first page of this Fund Performance and Expense Ratios section for further explanation of the information included within this page.
Fund Performance
Average Annual Total Returns as of August 31, 2011*
| Cumulative | Average Annual | |||||||||||||||
| 6-Month | 1-Year | 5-Year | 10-Year | |||||||||||||
Class A Shares at NAV | 7.82% | 2.64% | 3.68% | 4.20% | ||||||||||||
Class A Shares at maximum Offering Price | 3.34% | -1.71% | 2.79% | 3.75% | ||||||||||||
Standard & Poor’s (S&P) California Municipal Bond Index** | 7.33% | 2.68% | 4.39% | 4.81% | ||||||||||||
Standard & Poor’s (S&P) National Municipal Bond Index** | 6.56% | 2.62% | 4.60% | 4.93% | ||||||||||||
Lipper California Municipal Debt Classification Average** | 7.44% | 1.30% | 3.09% | 3.78% | ||||||||||||
Class B Shares w/o CDSC | 7.43% | 1.87% | 2.92% | 3.57% | ||||||||||||
Class B Shares w/CDSC | 2.43% | -2.05% | 2.74% | 3.57% | ||||||||||||
Class C Shares | 7.55% | 2.08% | 3.11% | 3.63% | ||||||||||||
Class I Shares | 7.93% | 2.93% | 3.90% | 4.41% | ||||||||||||
Latest Calendar Quarter – Average Annual Total Returns as of September 30, 2011*
| Cumulative | Average Annual | |||||||||||||||
| 6-Month | 1-Year | 5-Year | 10-Year | |||||||||||||
Class A Shares at NAV | 10.60% | 4.41% | 3.94% | 4.41% | ||||||||||||
Class A Shares at maximum Offering Price | 5.96% | 0.07% | 3.05% | 3.96% | ||||||||||||
Class B Shares w/o CDSC | 10.21% | 3.62% | 3.17% | 3.79% | ||||||||||||
Class B Shares w/CDSC | 5.21% | -0.36% | 3.00% | 3.79% | ||||||||||||
Class C Shares | 10.33% | 3.84% | 3.37% | 3.85% | ||||||||||||
Class I Shares | 10.60% | 4.50% | 4.14% | 4.62% | ||||||||||||
Class A Shares have a maximum 4.20% sales charge (Offering Price). Class A Share purchases of $1 million or more are sold at net asset value without an up-front sales charge but may be subject to a contingent deferred sales charge (CDSC), also known as a back-end sales charge, if redeemed within eighteen months of purchase. Class B Shares have a CDSC that begins at 5% for redemptions during the first year and declines periodically until after six years when the charge becomes 0%. Class B Shares automatically convert to Class A Shares eight years after purchase. Class C Shares have a 1% CDSC for redemptions within less than twelve months, which is not reflected in the one-year total return. Class I Shares have no sales charge and may be purchased under limited circumstances or by specified classes of investors.
Expense Ratios as of Most Recent Prospectus
| Expense Ratios | ||||
Class A Shares | 0.81% | |||
Class B Shares | 1.56% | |||
Class C Shares | 1.36% | |||
Class I Shares | 0.61% | |||
| * | Six-month returns are cumulative; all other returns are annualized. |
| ** | Refer to the Glossary of Terms Used in this Report for definitions. |
| Nuveen Investments | 13 |
Fund Performance and Expense Ratios (Unaudited) (continued)
Nuveen California Municipal Bond Fund 2
Refer to the first page of this Fund Performance and Expense Ratios section for further explanation of the information included within this page.
Fund Performance
Average Annual Total Returns as of August 31, 2011*
| Cumulative | Average Annual | |||||||||||||||
| 6-Month | 1-Year | 5-Year | 10-Year | |||||||||||||
Class A Shares at NAV | 7.21% | 0.22% | 2.81% | 3.53% | ||||||||||||
Class A Shares at maximum Offering Price | 2.67% | -3.95% | 1.94% | 3.09% | ||||||||||||
Standard & Poor’s (S&P) California Municipal Bond Index** | 7.33% | 2.68% | 4.39% | 4.81% | ||||||||||||
Standard & Poor’s (S&P) National Municipal Bond Index** | 6.56% | 2.62% | 4.60% | 4.93% | ||||||||||||
Lipper California Municipal Debt Classification Average** | 7.44% | 1.30% | 3.09% | 3.78% | ||||||||||||
Class B Shares w/o CDSC | 6.91% | -0.51% | 2.05% | 2.91% | ||||||||||||
Class B Shares w/CDSC | 1.91% | -4.35% | 1.88% | 2.91% | ||||||||||||
Class C Shares | 6.95% | -0.34% | 2.23% | 2.96% | ||||||||||||
Class I Shares | 7.30% | 0.43% | 3.01% | 3.74% | ||||||||||||
Latest Calendar Quarter – Average Annual Total Returns as of September 30, 2011*
| Cumulative | Average Annual | |||||||||||||||
| 6-Month | 1-Year | 5-Year | 10-Year | |||||||||||||
Class A Shares at NAV | 10.44% | 2.05% | 3.02% | 3.75% | ||||||||||||
Class A Shares at maximum Offering Price | 5.79% | -2.21% | 2.13% | 3.31% | ||||||||||||
Class B Shares w/o CDSC | 10.00% | 1.29% | 2.26% | 3.12% | ||||||||||||
Class B Shares w/CDSC | 5.00% | -2.61% | 2.09% | 3.12% | ||||||||||||
Class C Shares | 10.07% | 1.49% | 2.45% | 3.18% | ||||||||||||
Class I Shares | 10.52% | 2.25% | 3.23% | 3.96% | ||||||||||||
Class A Shares have a maximum 4.20% sales charge (Offering Price). Class A Share purchases of $1 million or more are sold at net asset value without an up-front sales charge but may be subject to a contingent deferred sales charge (CDSC), also known as a back-end sales charge, if redeemed within eighteen months of purchase. Class B Shares have a CDSC that begins at 5% for redemptions during the first year and declines periodically until after six years when the charge becomes 0%. Class B Shares automatically convert to Class A Shares eight years after purchase. Class C Shares have a 1% CDSC for redemptions within less than twelve months, which is not reflected in the one-year total return. Class I Shares have no sales charge and may be purchased under limited circumstances or by specified classes of investors.
Expense Ratios as of Most Recent Prospectus
| Expense Ratios | ||||
Class A Shares | 0.83% | |||
Class B Shares | 1.58% | |||
Class C Shares | 1.38% | |||
Class I Shares | 0.63% | |||
| * | Six-month returns are cumulative; all other returns are annualized. |
| ** | Refer to the Glossary of Terms Used in this Report for definitions. |
| 14 | Nuveen Investments |
Yields (Unaudited) as of August 31, 2011
Dividend Yield is the most recent dividend per share (annualized) divided by the offering price per share.
The SEC 30-Day Yield is a standardized measure of a Fund’s yield that accounts for the future amortization of premiums or discounts of bonds held in the Fund’s portfolio. The SEC 30-Day Yield is computed under an SEC standardized formula and is based on the maximum offer price per share. Dividend Yield may differ from the SEC 30-Day Yield because the Fund may be paying out more or less than it is earning and it may not include the effect of amortization of bond premium.
The Taxable-Equivalent Yield represents the yield that must be earned on a fully taxable investment in order to equal the yield of the Fund on an after-tax basis at a specified tax rate. With respect to investments that generate qualified dividend income that is taxable at a maximum rate of 15%, the Taxable-Equivalent Yield is lower.
Nuveen California High Yield Municipal Bond Fund
| Dividend Yield | SEC 30-Day Yield | Taxable- Equivalent Yield1 | ||||||||||
Class A Shares2 | 6.25% | 6.52% | 9.98% | |||||||||
Class C Shares | 5.99% | 6.27% | 9.60% | |||||||||
Class I Shares | 6.76% | 7.01% | 10.74% | |||||||||
Nuveen California Municipal Bond Fund
| Dividend Yield | SEC 30-Day Yield | Taxable- Equivalent Yield1 | ||||||||||
Class A Shares2 | 4.50% | 4.20% | 6.43% | |||||||||
Class B Shares | 3.98% | 3.62% | 5.54% | |||||||||
Class C Shares | 4.17% | 3.86% | 5.91% | |||||||||
Class I Shares | 4.88% | 4.59% | 7.03% | |||||||||
Nuveen California Municipal Bond Fund 2
| Dividend Yield | SEC 30-Day Yield | Taxable- Equivalent Yield1 | ||||||||||
Class A Shares2 | 4.16% | 3.92% | 6.00% | |||||||||
Class B Shares | 3.61% | 3.33% | 5.10% | |||||||||
Class C Shares | 3.82% | 3.54% | 5.42% | |||||||||
Class I Shares | 4.51% | 4.29% | 6.57% | |||||||||
| 1 | The Taxable-Equivalent Yield is based on the Fund’s SEC 30-Day Yield on the indicated date and a combined federal and state income tax rate of 34.7%. |
| 2 | The SEC Yield for Class A shares quoted in the table reflects the maximum sales load. Investors paying a reduced load because of volume discounts, investors paying no load because they qualify for one of the several exclusions from the load, and existing shareholders who previously paid a load but would like to know the SEC Yield applicable to their shares on a going-forward basis, should understand that the SEC Yield effectively applicable to them would be higher than the figure quoted in the table. |
| Nuveen Investments | 15 |
Holding Summaries (Unaudited) as of August 31, 2011
This data relates to the securities held in each Fund’s portfolio of investments. It should not be construed as a measure of performance for the Fund itself.
Ratings shown are the highest rating given by one of the following national rating agencies: Standard & Poor’s Group, Moody’s Investor Services, Inc. or Fitch, Inc. Credit ratings are subject to change. AAA, AA, A, and BBB are investment grade ratings; BB, B, CCC, CC, C and D are below-investment grade ratings. Bonds backed by U.S. Government or agency securities are given an implied rating equal to the rating of such securities. Holdings designated N/R are not rated by a national rating agency.
Nuveen California High Yield Municipal Bond Fund
Bond Credit Quality1
Nuveen California Municipal Bond Fund
Bond Credit Quality3
Nuveen California Municipal Bond Fund 2
Bond Credit Quality3
| Portfolio Composition1 | ||||
| Tax Obligation/Limited | 44.0% | |||
| Health Care | 13.3% | |||
| Education and Civic Organizations | 12.6% | |||
| Transportation | 8.9% | |||
| Long-Term Care | 4.6% | |||
| Consumer Staples | 4.5% | |||
| Other | 12.1% | |||
| Portfolio Composition3 | ||||
| Tax Obligation/Limited | 33.5% | |||
| Health Care | 20.0% | |||
| Tax Obligation/General | 13.3% | |||
| Utilities | 5.8% | |||
| Consumer Staples | 4.6% | |||
| Education and Civic Organizations | 4.5% | |||
| Water and Sewer | 4.5% | |||
| Other | 13.8% | |||
| Portfolio Composition3 | ||||
| Tax Obligation/Limited | 33.3% | |||
| Tax Obligation/General | 26.8% | |||
| Transportation | 8.6% | |||
| Health Care | 8.4% | |||
| Education and Civic Organizations | 6.3% | |||
| Utilities | 6.2% | |||
| Housing/Multifamily | 5.9% | |||
| Other | 4.5% | |||
| 1 | As a percentage of total investments (excluding investments in derivatives) as of August 31, 2011. Holdings are subject to change. |
| 2 | Rounds to less than 0.1%. |
| 3 | As a percentage of total investments as of August 31, 2011. Holdings are subject to change. |
| 16 | Nuveen Investments |
As a shareholder of one or more of the Funds, you incur two types of costs: (1) transaction costs, including up-front and back-end sales charges (loads) or redemption fees, where applicable; and (2) ongoing costs, including management fees; distribution and service (12b-1) fees, where applicable; and other Fund expenses. The Examples below are intended to help you understand your ongoing costs (in dollars) of investing in the Funds and to compare these costs with the ongoing costs of investing in other mutual funds.
The Examples below are based on an investment of $1,000 invested at the beginning of the period and held for the period.
The information under “Actual Performance,” together with the amount you invested, allows you to estimate actual expenses incurred over the reporting period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.60) and multiply the result by the cost shown for your share class, in the row entitled “Expenses Incurred During Period” to estimate the expenses incurred on your account during this period.
The information under “Hypothetical Performance,” provides information about hypothetical account values and hypothetical expenses based on the respective Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expense you incurred for the period. You may use this information to compare the ongoing costs of investing in the Fund and other Funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the hypothetical information is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds or share classes. In addition, if these transaction costs were included, your costs would have been higher.
Nuveen California High Yield Municipal Bond Fund
| Hypothetical Performance | ||||||||||||||||||||||||||
| Actual Performance | (5% annualized return before expenses) | |||||||||||||||||||||||||
| A Shares | C Shares | I Shares | A Shares | C Shares | I Shares | |||||||||||||||||||||
| Beginning Account Value (3/01/11) | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | ||||||||||||||
| Ending Account Value (8/31/11) | $ | 1,110.60 | $ | 1,107.90 | $ | 1,112.00 | $ | 1,020.66 | $ | 1,017.90 | $ | 1,021.67 | ||||||||||||||
| Expenses Incurred During Period | $ | 4.72 | $ | 7.63 | $ | 3.66 | $ | 4.52 | $ | 7.30 | $ | 3.51 | ||||||||||||||
For each class of the Fund, expenses are equal to the Fund’s annualized net expense ratio of .89%, 1.44% and .69% for Classes A, C and I, respectively, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period).
Nuveen California Municipal Bond Fund
| Hypothetical Performance | ||||||||||||||||||||||||||||||||||
| Actual Performance | (5% annualized return before expenses) | |||||||||||||||||||||||||||||||||
| A Shares | B Shares | C Shares | I Shares | A Shares | B Shares | C Shares | I Shares | |||||||||||||||||||||||||||
| Beginning Account Value (3/01/11) | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | ||||||||||||||||||
| Ending Account Value (8/31/11) | $ | 1,078.20 | $ | 1,074.30 | $ | 1,075.50 | $ | 1,079.30 | $ | 1,021.01 | $ | 1,017.24 | $ | 1,018.25 | $ | 1,022.02 | ||||||||||||||||||
| Expenses Incurred During Period | $ | 4.28 | $ | 8.19 | $ | 7.15 | $ | 3.24 | $ | 4.17 | $ | 7.96 | $ | 6.95 | $ | 3.15 | ||||||||||||||||||
For each class of the Fund, expenses are equal to the Fund’s annualized net expense ratio of .82%, 1.57%, 1.37% and .62% for Classes A, B, C and I, respectively, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period).
| Nuveen Investments | 17 |
Expense Examples (Unaudited) (continued)
Nuveen California Municipal Bond Fund 2
| Hypothetical Performance | ||||||||||||||||||||||||||||||||||
| Actual Performance | (5% annualized return before expenses) | |||||||||||||||||||||||||||||||||
| A Shares | B Shares | C Shares | I Shares | A Shares | B Shares | C Shares | I Shares | |||||||||||||||||||||||||||
| Beginning Account Value (3/01/11) | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | ||||||||||||||||||
| Ending Account Value (8/31/11) | $ | 1,072.10 | $ | 1,069.10 | $ | 1,069.50 | $ | 1,073.00 | $ | 1,020.91 | $ | 1,017.14 | $ | 1,018.15 | $ | 1,021.92 | ||||||||||||||||||
| Expenses Incurred During Period | $ | 4.38 | $ | 8.27 | $ | 7.23 | $ | 3.33 | $ | 4.27 | $ | 8.06 | $ | 7.05 | $ | 3.25 | ||||||||||||||||||
For each class of the Fund, expenses are equal to the Fund’s annualized net expense ratio of .84%, 1.59%, 1.39% and .64% for Classes A, B, C and I, respectively, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period).
| 18 | Nuveen Investments |
Portfolio of Investments (Unaudited)
Nuveen California High Yield Municipal Bond Fund
August 31, 2011
| Principal Amount (000) | Description (1) | Optional Call Provisions (2) | Ratings (3) | Value | ||||||||||||||
Consumer Discretionary – 1.9% | ||||||||||||||||||
| $ | 280 | Austin Convention Enterprises Inc., Texas, Convention Center Hotel Revenue Bonds, Third Tier Series 2001C, 9.750%, 1/01/26 | 1/12 at 100.00 | N/R | $ | 283,377 | ||||||||||||
| 1,000 | Lombard Public Facilities Corporation, Illinois, First Tier Conference Center and Hotel Revenue Bonds, Series 2005A-2, 5.500%, 1/01/36 – ACA Insured | 1/16 at 100.00 | B– | 696,190 | ||||||||||||||
| 1,000 | Louisiana Local Government Environmental Facilities and Community Development Authority, Revenue Bonds, Southgate Suites Hotel LLC Project, Series 2007A, 6.750%, 12/15/37 (5), (6) | 12/17 at 100.00 | N/R | 505,320 | ||||||||||||||
| 500 | Morongo Band of Mission Indians, California, Enterprise Revenue Bonds, Series 2008B, 6.500%, 3/01/28 | 3/18 at 100.00 | N/R | 470,415 | ||||||||||||||
| 345 | Norfolk Economic Development Authority, Virginia, Empowerment Zone Facility Revenue Bonds, BBL Old Dominion University LLC Project Revenue Bonds, Series 2006B, 5.625%, 11/01/15 (Alternative Minimum Tax) | No Opt. Call | N/R | 302,617 | ||||||||||||||
| 3,125 | Total Consumer Discretionary | 2,257,919 | ||||||||||||||||
Consumer Staples – 4.5% | ||||||||||||||||||
| 1,000 | California County Tobacco Securitization Agency, Tobacco Settlement Asset-Backed Bonds, Golden Gate Tobacco Funding Corporation, Turbo, Series 2007A, 5.000%, 6/01/47 | 6/17 at 100.00 | N/R | 599,760 | ||||||||||||||
Golden State Tobacco Securitization Corporation, California, Tobacco Settlement Asset-Backed Bonds, Series 2007A-1: | ||||||||||||||||||
| 2,750 | 5.000%, 6/01/33 | 6/17 at 100.00 | Baa3 | 1,925,165 | ||||||||||||||
| 1,000 | 5.125%, 6/01/47 | 6/17 at 100.00 | Baa3 | 645,280 | ||||||||||||||
| 1,600 | 5.750%, 6/01/47 | 6/17 at 100.00 | Baa3 | 1,133,696 | ||||||||||||||
| 1,000 | Golden State Tobacco Securitization Corporation, California, Tobacco Settlement Asset-Backed Bonds, Series 2007A-2, 0.000%, 6/01/37 | 6/22 at 100.00 | BB+ | 620,020 | ||||||||||||||
Tobacco Securitization Authority of Southern California, Tobacco Settlement Asset-Backed Bonds, San Diego County Tobacco Asset Securitization Corporation, Senior Series 2001A: | ||||||||||||||||||
| 50 | 5.000%, 6/01/37 | 6/14 at 100.00 | BBB | 33,893 | ||||||||||||||
| 750 | 5.125%, 6/01/46 | 6/14 at 100.00 | BBB | 477,113 | ||||||||||||||
| 8,150 | Total Consumer Staples | 5,434,927 | ||||||||||||||||
Education and Civic Organizations – 12.6% | ||||||||||||||||||
| 1,065 | California Educational Facilities Authority, Revenue Bonds, Dominican University, Series 2006, 5.000%, 12/01/36 | 12/16 at 100.00 | Baa3 | 910,106 | ||||||||||||||
| 75 | California Educational Facilities Authority, Revenue Bonds, University of Redlands, Series 2005A, 5.000%, 10/01/35 | 10/15 at 100.00 | A3 | 70,500 | ||||||||||||||
| 1,250 | California Educational Facilities Authority, Revenue Bonds, University of Southern California, Tender Option Bond Trust 3144, | No Opt. Call | Aa1 | 1,535,050 | ||||||||||||||
| 100 | California Educational Facilities Authority, Revenue Bonds, University of the Pacific, Series 2006, 5.000%, 11/01/36 | 11/15 at 100.00 | A2 | 99,709 | ||||||||||||||
California Educational Facilities Authority, Revenue Bonds, Woodbury University, Series 2006: | ||||||||||||||||||
| 1,165 | 5.000%, 1/01/30 | 1/15 at 100.00 | Baa3 | 1,003,881 | ||||||||||||||
| 500 | 5.000%, 1/01/36 | 1/15 at 100.00 | Baa3 | 412,065 | ||||||||||||||
| 1,000 | California Municipal Finance Authority, Education Revenue Bonds, American Heritage Education Foundation Project, Series 2006A, 5.250%, 6/01/36 | 6/16 at 100.00 | BBB– | 811,430 | ||||||||||||||
| 1,335 | California Municipal Finance Authority, Educational Facilities Revenue Bonds, OCEAA Project, Series 2008A, 7.000%, 10/01/39 | No Opt. Call | N/R | 1,279,691 | ||||||||||||||
| 1,500 | California Municipal Finance Authority, Revenue Refunding Bonds, Biola University, Series 2008A, 5.875%, 10/01/34 | 4/18 at 100.00 | Baa1 | 1,506,810 | ||||||||||||||
| 1,000 | California Statewide Communitities Development Authority, Charter School Revenue Bonds, Rocketship 4 - Mosaic Elementary Charter School, | 12/21 at 100.00 | N/R | 1,005,200 | ||||||||||||||
| Nuveen Investments | 19 |
Portfolio of Investments (Unaudited)
Nuveen California High Yield Municipal Bond Fund (continued)
August 31, 2011
| Principal Amount (000) | Description (1) | Optional Call Provisions (2) | Ratings (3) | Value | ||||||||||||||
Education and Civic Organizations (continued) | ||||||||||||||||||
| $ | 750 | California Statewide Communitities Development Authority, School Facility Revenue Bonds, Alliance College-Ready Public Schools, Series 2011A, 7.000%, 7/01/46 | 7/21 at 100.00 | N/R | $ | 728,048 | ||||||||||||
| 815 | California Statewide Community Development Authority, Charter School Revenue Bonds, Rocklin Academy Charter, Series 2011A, 8.250%, 6/01/41 | 6/21 at 100.00 | BB+ | 820,787 | ||||||||||||||
| 500 | California Statewide Community Development Authority, Revenue Bonds, California Baptist University, Series 2007A, 5.500%, 11/01/38 | No Opt. Call | N/R | 424,245 | ||||||||||||||
| 2,135 | California Statewide Community Development Authority, Revenue Bonds, Drew School, Series 2007, 5.300%, 10/01/37 | 10/15 at 102.00 | N/R | 2,000,431 | ||||||||||||||
| 200 | California Statewide Community Development Authority, Revenue Bonds, International School of the Peninsula, Palo Alto, California, Series 2006, 5.000%, 11/01/29 | 11/16 at 100.00 | N/R | 162,214 | ||||||||||||||
| 400 | California Statewide Community Development Authority, Revenue Bonds, Montessori in Redlands School, Series 2007A, 5.125%, 12/01/36 | 12/16 at 100.00 | N/R | 294,808 | ||||||||||||||
| 100 | California Statewide Community Development Authority, Revenue Bonds, Viewpoint School, Series 2004, 5.000%, 10/01/28 – ACA Insured | 10/14 at 100.00 | BBB | 92,725 | ||||||||||||||
| 200 | Hawaii State Department of Budget and Finance, Private School Revenue Bonds, Montessori of Maui, Series 2007, 5.500%, 1/01/37 | 2/17 at 100.00 | N/R | 166,676 | ||||||||||||||
| 600 | La Vernia Education Financing Corporation, Texas, Charter School Revenue Bonds, Riverwalk Education Foundation, Series 2007A, 5.450%, 8/15/36 | 2/12 at 100.00 | N/R | 473,898 | ||||||||||||||
| 100 | Pima County Industrial Development Authority, Arizona, Choice Education and Development Charter School Revenue Bonds, Series 2006, 6.375%, 6/01/36 | 6/16 at 100.00 | N/R | 81,356 | ||||||||||||||
| 65 | Pima County Industrial Development Authority, Arizona, Educational Revenue Bonds, Paradise Education Center Charter School, Series 2006, 6.000%, 6/01/36 | 6/16 at 100.00 | BBB– | 56,375 | ||||||||||||||
| 390 | Pingree Grove Village, Illinois, Charter School Revenue Bonds, Cambridge Lakes Learning Center, Series 2007, 6.000%, 6/01/36 | 6/16 at 102.00 | N/R | 300,632 | ||||||||||||||
| 1,060 | San Diego County, California, Certificates of Participation, Burnham Institute, Series 2006, 5.000%, 9/01/34 | 9/15 at 102.00 | Baa3 | 900,618 | ||||||||||||||
| 16,305 | Total Education and Civic Organizations | 15,137,255 | ||||||||||||||||
Health Care – 13.4% | ||||||||||||||||||
| 50 | California Health Facilities Financing Authority, Health Facility Revenue Bonds, Adventist Health System/West, Series 2003A, 5.000%, 3/01/33 | 3/13 at 100.00 | A | 48,526 | ||||||||||||||
| 830 | California Health Facilities Financing Authority, Hospital Revenue Bonds, Downey Community Hospital, Series 1993, 5.750%, 5/15/15 (4) | 11/11 at 100.00 | N/R | 676,334 | ||||||||||||||
| 1,000 | California Municipal Financing Authority, Certificates of Participation, Community Hospitals of Central California, Series 2007, 5.250%, 2/01/27 | 2/17 at 100.00 | Baa2 | 941,480 | ||||||||||||||
| 1,000 | California Statewide Communities Development Authority, Revenue Bonds, ValleyCare Health System, Series 2007A, 5.125%, 7/15/31 | 7/17 at 100.00 | N/R | 858,680 | ||||||||||||||
| 495 | California Statewide Community Development Authority, Health Facility Revenue Bonds, Catholic Healthcare West, Series 2008A, 5.500%, 7/01/30 | 7/17 at 100.00 | A | 509,117 | ||||||||||||||
| 2,000 | California Statewide Community Development Authority, Revenue Bonds, Childrens Hospital of Los Angeles, Series 2007, 5.000%, 8/15/47 | 8/17 at 100.00 | BBB+ | 1,627,280 | ||||||||||||||
California Statewide Community Development Authority, Revenue Bonds, Daughters of Charity Health System, Series 2005A: | ||||||||||||||||||
| 750 | 5.250%, 7/01/30 | 7/15 at 100.00 | BBB | 636,668 | ||||||||||||||
| 515 | 5.250%, 7/01/35 | 7/15 at 100.00 | BBB | 421,929 | ||||||||||||||
| 495 | 5.000%, 7/01/39 | 7/15 at 100.00 | BBB | 382,531 | ||||||||||||||
| 715 | California Statewide Community Development Authority, Revenue Bonds, Sutter Health, Tender Option Bond Trust 3048, 18.112%, 11/15/32 (IF) | 5/18 at 100.00 | AA– | 670,155 | ||||||||||||||
California Statewide Community Development Authority, Revenue Bonds, Sutter Health, Tender Option Bond Trust 3102: | ||||||||||||||||||
| 375 | 18.317%, 11/15/46 (IF) | 11/16 at 100.00 | AA– | 353,089 | ||||||||||||||
| 1,285 | 18.322%, 11/15/48 (IF) | 5/18 at 100.00 | AA– | 1,204,405 | ||||||||||||||
| 20 | Nuveen Investments |
| Principal Amount (000) | Description (1) | Optional Call Provisions (2) | Ratings (3) | Value | ||||||||||||||
Health Care (continued) | ||||||||||||||||||
| $ | 1,000 | California Statewide Communities Development Authority, Revenue Bonds, Saint Joseph Health System, Trust 2554, 18.324%, 7/01/47 – AGM Insured (IF) | 7/18 at 100.00 | AA+ | $ | 1,022,040 | ||||||||||||
| 1,490 | Loma Linda, California, Hospital Revenue Bonds, Loma Linda University Medical Center, Series 2008A, 8.250%, 12/01/38 | 12/17 at 100.00 | BBB | 1,642,814 | ||||||||||||||
| 1,060 | Oak Valley Hospital District, Stanislaus County, California, Revenue Bonds, Series 2010A, 7.000%, 11/01/35 | 11/20 at 100.00 | BBB– | 1,078,486 | ||||||||||||||
| 500 | Palomar Pomerado Health Care District, California, Certificates of Participation, Series 2009, 6.750%, 11/01/39 | 11/19 at 100.00 | Baa3 | 510,045 | ||||||||||||||
| 500 | Palomar Pomerado Health Care District, California, Certificates of Participation, Series 2010, 6.000%, 11/01/41 | 11/20 at 100.00 | Baa3 | 468,945 | ||||||||||||||
| 1,000 | San Buenaventura, California, Revenue Bonds, Community Memorial Health System, Series 2011, 8.000%, 12/01/26 | 12/21 at 100.00 | BB | 1,065,330 | ||||||||||||||
| 100 | Sierra Kings Health Care District, Fresno County, California, Revenue Bonds, Series 2006A, 5.750%, 12/01/36 | 12/16 at 100.00 | N/R | 59,835 | ||||||||||||||
| 2,000 | Tulare Local Health Care District, California, Revenue Bonds, Series 2007, 5.200%, 11/01/32 | 11/17 at 100.00 | N/R | 1,811,680 | ||||||||||||||
| 60 | Weatherford Hospital Authority, Oklahoma, Sales Tax Revenue Bonds, Series 2006, 6.000%, 5/01/31 | 5/16 at 103.00 | N/R | 50,061 | ||||||||||||||
| 17,220 | Total Health Care | 16,039,430 | ||||||||||||||||
Housing/Multifamily – 4.2% | ||||||||||||||||||
| 1,400 | California Municipal Finance Authority, Mobile Home Park Revenue Bonds, Caritas Projects Series 2010B, 7.250%, 8/15/45 | 8/20 at 100.00 | N/R | 1,397,298 | ||||||||||||||
| 400 | California Municipal Finance Authority, Revenue Bonds, University Students Coop Association, Series 2007, 4.750%, 4/01/27 | 4/17 at 100.00 | BBB– | 367,284 | ||||||||||||||
| 1,000 | California Statewide Community Development Authority, Lancer Educational Student Housing Revenue Bonds, California Baptist University, Series 2007, 5.625%, 6/01/33 | 6/17 at 102.00 | N/R | 858,350 | ||||||||||||||
| 375 | California Statewide Community Development Authority, Multifamily Housing Revenue Bonds, Magnolia City Lights, Series 1999X, 6.650%, 7/01/39 | 11/11 at 100.00 | N/R | 335,651 | ||||||||||||||
| 120 | Multifamily Housing Revenue Bond Pass-Through Certificates, California, Series 2001-17, Stanford Arms Seniors Apartments 01-P2, 5.750%, 11/01/34 (Mandatory put 11/01/16) (Alternative Minimum Tax) | 12/11 at 100.00 | N/R | 120,068 | ||||||||||||||
| 1,250 | Richmond, California, Joint Powers Financing Agency Multifamily Housing Revenue Bonds, Westridge Hilltop Apartments, Series 2007, 5.000%, 12/15/33 | 12/12 at 100.00 | Baa1 | 1,026,938 | ||||||||||||||
| 734 | Ventura County Area Housing Authority, California, Mira Vista Senior Apartments Project, Junior Subordinate Series 2006C, 6.500%, 12/01/39 (Mandatory put 7/01/16) (Alternative Minimum Tax) | No Opt. Call | N/R | 675,148 | ||||||||||||||
| 485 | Wilson County Health and Educational Facilities Board, Tennessee, Senior Living Revenue Bonds, Rutland Place, Series 2007A, 6.300%, 7/01/37 (4) | 7/17 at 100.00 | N/R | 293,289 | ||||||||||||||
| 5,764 | Total Housing/Multifamily | 5,074,026 | ||||||||||||||||
Housing/Single Family – 0.7% | ||||||||||||||||||
| 500 | California Housing Finance Agency, California, Home Mortgage Revenue Bonds, Series 2007E, 4.800%, 8/01/37 (Alternative Minimum Tax) | 2/17 at 100.00 | Baa1 | 426,530 | ||||||||||||||
| 600 | California Housing Finance Agency, Home Mortgage Revenue Bonds, Tender Option Bond Trust 3206, 8.115%, 2/01/24 (Alternative Minimum Tax) (IF) | 2/16 at 100.00 | BBB | 393,816 | ||||||||||||||
| 1,100 | Total Housing/Single Family | 820,346 | ||||||||||||||||
Industrials – 0.4% | ||||||||||||||||||
| 65 | California Pollution Control Financing Authority, Solid Waste Disposal Revenue Bonds, Waste Management Inc., Series 2002A, 5.000%, 1/01/22 (Alternative Minimum Tax) | 1/16 at 102.00 | BBB | 66,146 | ||||||||||||||
| Nuveen Investments | 21 |
Portfolio of Investments (Unaudited)
Nuveen California High Yield Municipal Bond Fund (continued)
August 31, 2011
| Principal Amount (000) | Description (1) | Optional Call Provisions (2) | Ratings (3) | Value | ||||||||||||||
Industrials (continued) | ||||||||||||||||||
| $ | 1,000 | California Statewide Communities Development Authority, Revenue Bonds, EnerTech Regional Biosolids Project, Series 2007A, 5.500%, 12/01/33 (Alternative Minimum Tax) (5) | No Opt. Call | CCC+ | $ | 220,340 | ||||||||||||
| 250 | Kootenai County Industrial Development Corporation, Idaho, Industrial Development Revenue Bonds, Coer d’Alene Fiber Fuels, Inc., Series 2006, 6.750%, 12/01/26 (4), (5) | 12/16 at 100.00 | N/R | 62,125 | ||||||||||||||
| 100 | Louisiana Local Government Environmental Facilities and Community Development Authority, Carter Plantation Hotel Project Revenue Bonds, Series 2006A, 6.000%, 9/01/36 (4), (5) | 9/16 at 100.00 | N/R | 18,800 | ||||||||||||||
| 750 | Western Reserve Port Authority, Ohio, Solid Waste Facility Revenue Bonds, Central Waste Inc., Series 2007A, 6.350%, 7/01/27 (Alternative Minimum Tax) (4), (5) | 7/17 at 102.00 | N/R | 135,225 | ||||||||||||||
| 2,165 | Total Industrials | 502,636 | ||||||||||||||||
Long-Term Care – 4.6% | ||||||||||||||||||
California Municipal Finance Authority, Revenue Bonds, Harbor Regional Center Project, Series 2009: | ||||||||||||||||||
| 500 | 8.000%, 11/01/29 | 11/19 at 100.00 | Baa1 | 543,580 | ||||||||||||||
| 1,040 | 8.500%, 11/01/39 | 11/19 at 100.00 | Baa1 | 1,143,095 | ||||||||||||||
| 1,500 | California Statewide Communities Development Authority, Revenue Bonds, Inland Regional Center Project, Series 2007, 5.375%, 12/01/37 | 12/17 at 100.00 | Baa1 | 1,391,625 | ||||||||||||||
| 1,000 | California Statewide Community Development Authority, Revenue Bonds, Hollenbeck Palms, Magnolia Assisted Living, Series 2007A, 4.600%, 2/01/37 – RAAI Insured (Alternative Minimum Tax) | 2/17 at 100.00 | N/R | 736,500 | ||||||||||||||
| 1,000 | Fulton County Residential Care Facilities Authority, Georgia, Revenue Bonds, Elderly Care, Lenbrook Square Project, Series 2006A, 5.125%, 7/01/37 | 7/17 at 100.00 | N/R | 678,790 | ||||||||||||||
| 50 | Louisiana Local Government Environmental Facilities and Community Development Authority, Revenue Bonds, CDF Healthcare of Louisiana LLC, Series 2006A, 7.000%, 6/01/36 | 6/16 at 101.00 | N/R | 41,452 | ||||||||||||||
| 1,000 | San Diego County, California, Certificates of Participation, San Diego-Imperial Counties Developmental Services Foundation Project, Series 2002, 5.500%, 9/01/27 | 9/12 at 100.00 | Baa1 | 984,340 | ||||||||||||||
| 6,090 | Total Long-Term Care | 5,519,382 | ||||||||||||||||
Tax Obligation/General – 2.1% | ||||||||||||||||||
| 390 | Bessemer, Alabama, General Obligation Warrants, Series 2007, 6.500%, 2/01/37 | 2/17 at 102.00 | N/R | 276,530 | ||||||||||||||
| 725 | Guam Government, General Obligation Bonds, 2009 Series A, 7.000%, 11/15/39 | No Opt. Call | B+ | 748,563 | ||||||||||||||
| 500 | Guam, General Obligation Bonds, Series 2007A, 5.250%, 11/15/37 | 11/17 at 100.00 | B+ | 427,910 | ||||||||||||||
| 250 | Palomar Pomerado Health, California, General Obligation Bonds, Tender Option Bond Trust 4683, 16.768%, 8/01/37 – NPFG Insured (IF) (7) | 8/17 at 100.00 | AA | 247,820 | ||||||||||||||
| 2,295 | William S. Hart Union High School District, Los Angeles County, California, General Obligation Bonds, Election 2001 Series 2005B, 0.000%, 9/01/27 – AGM Insured (7) | No Opt. Call | AA+ | 854,910 | ||||||||||||||
| 4,160 | Total Tax Obligation/General | 2,555,733 | ||||||||||||||||
Tax Obligation/Limited – 44.1% | ||||||||||||||||||
| 1,000 | Azusa Redevelopment Agency, California, Tax Allocation Refunding Bonds, Merged West End Development, Series 2007B, 5.300%, 8/01/36 | No Opt. Call | N/R | 762,010 | ||||||||||||||
| 740 | Azusa, California, Special Tax Bonds, Community Facilities District 2005-1 Rosedale Improvement Area 1, Series 2007, 5.000%, 9/01/27 | 9/17 at 100.00 | N/R | 615,739 | ||||||||||||||
| 1,000 | Beaumont Financing Authority, California, Local Agency Revenue Bonds, Improvement Area 8C, Series 2007E, 6.250%, 9/01/38 | No Opt. Call | N/R | 954,950 | ||||||||||||||
Beaumont Financing Authority, California, Local Agency Revenue Bonds, Improvement Area 8D & 17B, Series 2009B: | ||||||||||||||||||
| 225 | 8.875%, 9/01/34 | 9/12 at 103.00 | N/R | 236,158 | ||||||||||||||
| 450 | 8.625%, 9/01/39 | 9/12 at 103.00 | N/R | 470,885 | ||||||||||||||
| 300 | Beaumont Financing Authority, California, Local Agency Revenue Bonds, Series 2006B, 5.050%, 9/01/37 | 9/12 at 101.00 | N/R | 239,745 | ||||||||||||||
| 22 | Nuveen Investments |
| Principal Amount (000) | Description (1) | Optional Call Provisions (2) | Ratings (3) | Value | ||||||||||||||
Tax Obligation/Limited (continued) | ||||||||||||||||||
| $ | 1,000 | Borrego Water District, California, Community Facilities District 2007-1 Montesoro, Special Tax Bonds, Series 2007, 5.750%, 8/01/32 (4), (5) | 8/17 at 102.00 | N/R | $ | 370,000 | ||||||||||||
| 1,000 | California Statewide Communities Development Authority, Recovery Zone Facility Bonds, SunEdison Huntington Beach Solar Projects, Series 2010, 7.500%, 1/01/31 | 1/21 at 100.00 | N/R | 1,013,350 | ||||||||||||||
| 1,415 | California Statewide Communities Development Authority, Recovery Zone Facility Bonds, SunEdison Irvine Unified School District Solar Projects, Series 2010, 7.500%, 7/01/30 | 1/20 at 100.00 | N/R | 1,432,320 | ||||||||||||||
| 250 | California Statewide Community Development Authority, Revenue Bonds, Epidaurus Project, Series 2004A, 7.750%, 3/01/34 | 3/14 at 102.00 | N/R | 251,408 | ||||||||||||||
| 800 | Chino, California, Community Facilities District 2009-1, Watson Commerce Center, Special Tax Bonds, Series 2010, 6.750%, 9/01/40 | 9/20 at 100.00 | N/R | 809,128 | ||||||||||||||
| 490 | Davis Redevelopment Agency, California, Tax Allocation Bonds, Davis Redevelopment Project, Subordinate Series 2011A, 7.000%, 12/01/36 | 12/21 at 100.00 | A+ | 530,170 | ||||||||||||||
| 100 | Eastern Municipal Water District, California, Community Facility District No 2005-38 Improvement Area A, Special Tax Bonds, Series 2006, 5.200%, 9/01/36 | 3/12 at 102.00 | N/R | 88,414 | ||||||||||||||
| 200 | El Dorado County, California, Special Tax Bonds, Blackstone Community Facilities District 2005-1, Series 2005, 5.250%, 9/01/35 | 9/14 at 102.00 | N/R | 152,052 | ||||||||||||||
| 250 | El Dorado County, California, Special Tax Bonds, Community Facilities District 2005-2, Series 2006, 5.100%, 9/01/36 | 9/14 at 102.00 | N/R | 202,308 | ||||||||||||||
Elk Grove Community Facilities District 2005-1, California, Special Tax Bonds, Series 2007: | ||||||||||||||||||
| 80 | 5.000%, 9/01/18 | 9/17 at 100.00 | N/R | 71,837 | ||||||||||||||
| 10 | 5.000%, 9/01/20 | 9/17 at 100.00 | N/R | 8,449 | ||||||||||||||
| 50 | 5.125%, 9/01/22 | No Opt. Call | N/R | 40,466 | ||||||||||||||
| 1,000 | 5.200%, 9/01/27 | 9/15 at 102.00 | N/R | 728,880 | ||||||||||||||
| 1,225 | 5.250%, 9/01/37 | 9/15 at 102.00 | N/R | 794,964 | ||||||||||||||
| 500 | Fairfield, California, Community Facilities District 2007-1 Special Tax Bonds, Fairfield Commons Project, Series 2008, 6.875%, 9/01/38 | 9/18 at 100.00 | N/R | 483,075 | ||||||||||||||
| 500 | Folsom Public Financing Authority, California, Subordinate Special Tax Revenue Bonds, Series 2007B, 5.200%, 9/01/32 | 9/17 at 100.00 | N/R | 436,955 | ||||||||||||||
| 1,000 | Fontana, California, Special Tax Bonds, Community Facilities District 31 Citrus Heights North Special Tax Bonds, Series 2006, 5.000%, 9/01/36 | 9/14 at 102.00 | N/R | 762,570 | ||||||||||||||
| 750 | Golden State Tobacco Securitization Corporation, California, Enhanced Tobacco Settlement Asset-Backed Revenue Bonds, Tender Option Bond Trust 1011, 17.391%, 6/01/45 (WI/DD, Settling 9/08/11) (IF) | 6/15 at 100.00 | A2 | 400,020 | ||||||||||||||
| 1,000 | Hawthorne, California, Special Tax Bonds, Community Facilities District 2006-1, Three Sixty Degrees @ South Bay, Series 2006, 5.000%, 9/01/36 | 9/16 at 102.00 | N/R | 687,450 | ||||||||||||||
| 1,000 | Hemet Unified School District Community Facilities District 2005-3, Riverside County, California, Special Tax Bonds, Series 2007, 5.750%, 9/01/39 | 9/12 at 101.00 | N/R | 834,720 | ||||||||||||||
| 200 | Hemet Unified School District, California, Community Facilities District 2005-1 Special Tax Bonds, Series 2006, 5.125%, 9/01/36 | 9/13 at 100.00 | N/R | 168,186 | ||||||||||||||
Hercules Redevelopment Agency, California, Tax Allocation Bonds, Merged Project Area, Series 2005: | ||||||||||||||||||
| 1,000 | 5.000%, 8/01/25 – AMBAC Insured | 8/15 at 100.00 | CCC | 676,350 | ||||||||||||||
| 500 | 4.750%, 8/01/35 – AMBAC Insured | No Opt. Call | CCC | 281,325 | ||||||||||||||
| 295 | Hesperia Unified School District, San Bernardino County, California, Community Facilities District 2006-5 Special Tax Bonds, Series 2007, 5.000%, 9/01/37 | 9/17 at 100.00 | N/R | 237,012 | ||||||||||||||
| 325 | Hesperia, California, Improvement Act of 1915, Assessment District, 91-1, Joshua West Main Street, Series 1992, 8.500%, 9/02/24 | 3/12 at 100.00 | N/R | 335,855 | ||||||||||||||
| 150 | Indio, California, Special Tax Bonds, Community Facilities District 2006-1 Sonora Wells, Series 2006, 5.050%, 9/01/26 | 9/16 at 100.00 | N/R | 129,746 | ||||||||||||||
| 120 | Irvine, California, Unified School District, Community Facilities District Special Tax Bonds, Series 2006A, 5.125%, 9/01/36 | 9/16 at 100.00 | N/R | 107,777 | ||||||||||||||
| Nuveen Investments | 23 |
Portfolio of Investments (Unaudited)
Nuveen California High Yield Municipal Bond Fund (continued)
August 31, 2011
| Principal Amount (000) | Description (1) | Optional Call Provisions (2) | Ratings (3) | Value | ||||||||||||||
Tax Obligation/Limited (continued) | ||||||||||||||||||
| $ | 1,115 | Jurupa Community Services District, California, Community Facilities District 25 Earstvale Area Special Tax Bonds, Series 2008A, 8.375%, 9/01/28 | 9/18 at 100.00 | N/R | $ | 1,230,101 | ||||||||||||
| 500 | Jurupa Community Services District, California, Special Tax Bonds, Community Facilities District 34 Eastvale Area , Series 2010A, 6.500%, 9/01/40 | 9/20 at 100.00 | N/R | 502,705 | ||||||||||||||
| 500 | Jurupa Community Services District, California, Special Tax Bonds, Community Facilities District 38 Eastvale Improvement Area 2, Series 2010A, 6.375%, 9/01/40 | 3/12 at 100.00 | N/R | 503,910 | ||||||||||||||
| 750 | Lake Elsinore Public Financing Authority, California, Local Agency Revenue Bonds, Canyon Hills Improvement Area C, Series 2010A, 6.250%, 9/01/40 | 9/12 at 103.00 | N/R | 699,848 | ||||||||||||||
| 1,000 | Lake Elsinore Public Financing Authority, California, Local Agency Revenue Bonds, Villages at Wasson Canyon, Series 2009B, 6.875%, 9/01/38 | 9/13 at 100.00 | N/R | 1,005,760 | ||||||||||||||
| 1,000 | Lake Elsinore, California, Special Tax Bonds, Community Facilities District 2005-2 Improvement Area A, Series 2005A, 5.450%, 9/01/36 | 9/12 at 102.00 | N/R | 869,550 | ||||||||||||||
| 335 | Lancaster Redevelopment Agency, California, Combined Project Areas Housing Programs, Tax Allocation Bonds, Series 2009, 6.875%, 8/01/39 | 8/19 at 100.00 | BBB+ | 339,844 | ||||||||||||||
| 1,275 | Lynwood Redevelopment Agency, California, Project A Revenue Bonds, Subordinate Lien Series 2011A, 7.250%, 9/01/38 | 9/21 at 100.00 | A– | 1,337,832 | ||||||||||||||
March Joint Powers Redevelopment Agency, California, March Air Force Base Redevelopment Project Series 2011A: | ||||||||||||||||||
| 300 | 7.250%, 8/01/31 | No Opt. Call | BBB+ | 320,988 | ||||||||||||||
| 1,000 | 7.500%, 8/01/41 | 8/21 at 100.00 | BBB+ | 1,069,920 | ||||||||||||||
| 130 | Merced, California, Community Facilities District 2005-1, Special Tax Bonds, Bellevue Ranch West, Series 2006, 5.300%, 9/01/36 | 9/12 at 103.00 | N/R | 79,238 | ||||||||||||||
| 65 | Moreno Valley Unified School District, Riverside County, California, Special Tax Bonds, Community Facilities District, Series 2006, 5.200%, 9/01/36 | 3/16 at 100.00 | N/R | 56,720 | ||||||||||||||
| 1,000 | Moreno Valley, California, Community Facilities District 5, Special Tax Bonds, Series 2007, 5.000%, 9/01/37 | 9/17 at 100.00 | N/R | 734,690 | ||||||||||||||
| 125 | Murrieta Valley Unified School District, Riverside County, California, Special Tax Bonds, Community Facilities District 2002-4, Series 2006B, 5.450%, 9/01/38 | 9/16 at 100.00 | N/R | 98,699 | ||||||||||||||
| 330 | Novato Redevelopment Agency, California, Tax Allocation Bonds, Hamilton Field Redevelopment Project, Series 2011, 6.750%, 9/01/40 | 9/21 at 100.00 | A– | 344,378 | ||||||||||||||
| 1,500 | Palm Desert, California, Community Facilities District 2005-1, University Park Special Tax Bonds, Series 2006, 5.500%, 9/01/36 | 9/16 at 100.00 | N/R | 1,148,385 | ||||||||||||||
| 1,600 | Palm Drive Health Care District, Sonoma County, California, Certificates of Participation, Parcel Tax Secured Financing Program, Series 2010, 7.500%, 4/01/35 | No Opt. Call | BB | 1,556,816 | ||||||||||||||
| 1,000 | Palm Drive Health Care District, Sonoma County, California, Parcel Tax Revenue Bonds, Series 2005, 5.250%, 4/01/30 | 4/13 at 102.00 | BB | 742,800 | ||||||||||||||
| 1,100 | Perris Public Finance Authority, California, Local Agency Revenue Bonds, Perris Vally Vistas IA3, Series 2008B, 6.625%, 9/01/38 | 9/16 at 100.00 | N/R | 1,105,324 | ||||||||||||||
| 495 | Perris Public Financing Authority, California, Local Agency Revenue Bonds, Series 2007D, 5.800%, 9/01/38 | 9/14 at 100.00 | N/R | 439,169 | ||||||||||||||
| 575 | Perris, California, Community Facilities District 2001-1 Improvement Area 5-A Special Tax Bonds, Series 2006, 5.000%, 9/01/37 | 9/12 at 101.00 | N/R | 450,127 | ||||||||||||||
| 500 | Rancho Cardova, California, Special Tax Bonds, Sunridge Anatolia Area Community Facilities District 2003-1, Series 2005, 5.500%, 9/01/37 | 9/13 at 102.00 | N/R | 430,965 | ||||||||||||||
| 1,000 | Rancho Cardova, California, Special Tax Bonds, Sunridge Park Area Community Facilities District 2004-1, Series, 6.125%, 9/01/37 | 9/17 at 100.00 | N/R | 935,460 | ||||||||||||||
| 500 | Redwood City, California, Special Tax Bonds, Community Facilities District 2010-1 One Marina, Series 2011, 7.500%, 9/01/31 | 9/16 at 103.00 | N/R | 521,010 | ||||||||||||||
| 2,000 | Riverside County Community Facilities District 05-8 Scott Road, California, Special Tax Bonds, Series 2008, 7.250%, 9/01/38 | 9/17 at 100.00 | N/R | 1,967,460 | ||||||||||||||
| 24 | Nuveen Investments |
| Principal Amount (000) | Description (1) | Optional Call Provisions (2) | Ratings (3) | Value | ||||||||||||||
Tax Obligation/Limited (continued) | ||||||||||||||||||
| $ | 710 | Riverside County Public Financing Authority, California, Tax Allocation Bonds, Multiple Projects, Series 2004, 5.000%, 10/01/35 – SYNCORA GTY Insured | 10/14 at 100.00 | BBB | $ | 590,230 | ||||||||||||
| 500 | Riverside County Redevelopment Agency, California, Interstate 215 Corridor Redevelopment Project Area Tax Allocation Bonds, Series 2010E, 6.500%, 10/01/40 | 10/20 at 100.00 | A– | 516,570 | ||||||||||||||
| 205 | Riverside County Redevelopment Agency, California, Tax Allocation Housing Bonds, Series 2011A, 7.125%, 10/01/42 | No Opt. Call | A– | 220,318 | ||||||||||||||
| 125 | Riverside Unified School District, California, Community Facilities District 24 Special Tax Bonds, Series 2006, 5.100%, 9/01/36 | 9/14 at 102.00 | N/R | 105,413 | ||||||||||||||
| 1,000 | Riverside, California, Improvement Bond Act of 1915, Special Assessment Bonds, Hunter Park Assessment District, Series 2006, 5.200%, 9/02/36 | 9/16 at 101.00 | N/R | 790,860 | ||||||||||||||
| 1,000 | Roseville Financing Authority, California, Special Tax Revenue Bonds, Refunding Series 2007B, 5.000%, 9/01/33 | 9/17 at 100.00 | N/R | 820,680 | ||||||||||||||
| 1,700 | Roseville, California, Special Tax Bonds, Community Facilities District 1 – Westpark, Series 2005, 5.200%, 9/01/36 | 9/15 at 100.00 | N/R | 1,423,206 | ||||||||||||||
| 125 | Roseville, California, Special Tax Bonds, Community Facilities District 1 Westpark, Series 2006, 5.250%, 9/01/37 | 9/16 at 100.00 | N/R | 104,971 | ||||||||||||||
| 1,800 | Roseville, California, Special Tax Bonds, Community Facilities District 1, Fiddyment Ranch, Series 2006, 5.125%, 9/01/26 | 9/16 at 100.00 | N/R | 1,625,832 | ||||||||||||||
| 1,510 | Sacramento City Financing Authority California, Lease Revenue Bonds, Master Lease Program Facilities Projects, Tender Option Bond Trust 4698, | No Opt. Call | Aa3 | 1,470,317 | ||||||||||||||
| 1,495 | Sacramento, California, Community Facilities District 05-1, College Square Special Tax Bonds, Series 2007, 5.900%, 9/01/37 | 9/17 at 100.00 | N/R | 1,283,517 | ||||||||||||||
| 461 | Saint Louis, Missouri, Tax Increment Financing Revenue Bonds, Grace Lofts Redevelopment Projects, Series 2007A, 6.000%, 3/27/26 | 12/11 at 100.00 | N/R | 378,343 | ||||||||||||||
| 100 | San Jacinto Unified School District, Riverside County, California, Community Facilities District 2006-1 Special Tax Bonds, Infrastructure Projects, Series 2006, 5.200%, 9/01/36 | 9/16 at 100.00 | N/R | 84,366 | ||||||||||||||
| 2,500 | Stockton, California, Special Tax Bonds, Arch Road Community Facilities District 99-02, Refunding Series 2007, 5.875%, 9/01/37 | 9/17 at 102.00 | N/R | 2,205,925 | ||||||||||||||
| 1,000 | Temecula Redevelopment Agency, California, Tax Allocation Revenue Bonds, Redevelopment Project 1, Series 2002, 5.250%, 8/01/36 – NPFG Insured | 11/11 at 100.00 | A– | 898,850 | ||||||||||||||
| 530 | Turlock Public Financing Authority, California, Tax Allocation Revenue Bonds, Series 2011, 7.250%, 9/01/29 | 3/21 at 100.00 | BBB+ | 556,701 | ||||||||||||||
| 650 | Twentynine Palms Redevelopment Agency, California, Tax Allocation Bonds, Four Corners Project Area, Series 2011A, 7.650%, 9/01/42 | 9/21 at 100.00 | BBB+ | 690,586 | ||||||||||||||
| 500 | Union City Community Redevelopment Agency, California, Tax Allocation Revenue Bonds, Redevelopment Project, Subordinate Lien Series 2011, 6.875%, 12/01/33 | 12/21 at 100.00 | A | 533,865 | ||||||||||||||
| 500 | Val Verde Unified School District Financing Authority, California, Special Tax Revenue, Junior Lien Refunding Series 2003, 6.250%, 10/01/28 | 10/13 at 102.00 | N/R | 490,210 | ||||||||||||||
| 500 | Victor Elementary School District, Los Angeles County, California, Community Facilities District 2005-1 Special Tax Bonds, Series 2007A, 5.500%, 9/01/37 | 9/15 at 102.00 | N/R | 409,745 | ||||||||||||||
| 600 | West Hollywood Community Development Commission, California, East Side Redevelopment Project Series 2011 Tax Allocation Bonds Series 2011A, 7.500%, 9/01/42 | 9/21 at 100.00 | BBB | 639,984 | ||||||||||||||
| 595 | West Patterson Financing Authority, California, Special Tax Bonds, Community Facilities District 01-1, Refunding Series 2009B, 10.000%, 9/01/32 | 9/14 at 105.00 | N/R | 645,028 | ||||||||||||||
| 965 | West Sacramento Financing Authority, California, Special Tax Revenue Bonds, Refunding Series 1999F, 6.100%, 9/01/29 | 3/12 at 100.00 | N/R | 947,447 | ||||||||||||||
| 500 | Westminster Redevelopment Agency, California, Tax Allocation Bonds, Commercial Redevelopment Project 1, Subordinate Lien Series 2011A, 5.875%, 11/01/41 | 11/21 at 100.00 | A | 506,715 | ||||||||||||||
| Nuveen Investments | 25 |
Portfolio of Investments (Unaudited)
Nuveen California High Yield Municipal Bond Fund (continued)
August 31, 2011
| Principal Amount (000) | Description (1) | Optional Call Provisions (2) | Ratings (3) | Value | ||||||||||||||
Tax Obligation/Limited (continued) | ||||||||||||||||||
Westside Union School District, California, Community Facilities District 2005-3 Special Tax Bonds, Series 2006: | �� | |||||||||||||||||
| $ | 700 | 5.000%, 9/01/26 | 9/14 at 102.00 | N/R | $ | 602,154 | ||||||||||||
| 295 | 5.000%, 9/01/36 | 9/14 at 102.00 | N/R | 229,247 | ||||||||||||||
| 290 | Yorkville United City Business District, Illinois, Storm Water and Water Improvement Project Revenue Bonds, Series 2007, 6.000%, 1/01/27 | 1/17 at 102.00 | N/R | 178,333 | ||||||||||||||
| 135 | Yuba County, California, Special Tax Bonds, Community Facilities District 2004-1, Edgewater, Series 2005, 5.125%, 9/01/35 | 3/15 at 100.00 | N/R | 95,633 | ||||||||||||||
| 59,611 | Total Tax Obligation/Limited | 52,851,019 | ||||||||||||||||
Transportation – 8.9% | ||||||||||||||||||
| 500 | Bay Area Governments Association, California, BART SFO Extension, Airport Premium Fare Revenue Bonds, Series 2002A, 5.000%, 8/01/32 – AMBAC Insured | 8/12 at 100.00 | N/R | 428,095 | ||||||||||||||
| 1,125 | Bay Area Toll Authority, California, Revenue Bonds, San Francisco Bay Area Toll Bridge, Tender Option Bond Trust 2985, 17.375%, 4/01/17 (IF) | No Opt. Call | AA | 1,321,751 | ||||||||||||||
| 8,275 | Foothill/Eastern Transportation Corridor Agency, California, Toll Road Revenue Bonds, Refunding Series 1999, 0.000%, 1/15/30 | 1/11 at 34.18 | BBB– | 2,443,856 | ||||||||||||||
| 1,125 | Los Angeles Department of Airports, California, Revenue Bonds, Los Angeles International Airport, Tender Option Bond Trust 10-27B, 17.680%, 5/15/40 (IF) (7) | 5/20 at 100.00 | AA | 1,257,525 | ||||||||||||||
Palm Springs Financing Authority, California, Palm Springs International Airport Revenue Bonds, Series 2006: | ||||||||||||||||||
| 35 | 5.450%, 7/01/20 (Alternative Minimum Tax) | 7/14 at 102.00 | N/R | 31,509 | ||||||||||||||
| 45 | 5.550%, 7/01/28 (Alternative Minimum Tax) | 7/14 at 102.00 | N/R | 38,285 | ||||||||||||||
Palm Springs, California, Airport Passenger Facility Charge Subordinate Refunding Revenue Bonds, Palm Springs International Airport, Series 2008: | ||||||||||||||||||
| 250 | 6.400%, 7/01/23 (Alternative Minimum Tax) | 7/14 at 102.00 | N/R | 231,688 | ||||||||||||||
| 265 | 6.500%, 7/01/27 (Alternative Minimum Tax) | 7/14 at 102.00 | N/R | 243,281 | ||||||||||||||
| 140 | Puerto Rico Industrial, Tourist, Educational, Medical and Environmental Control Facilities Financing Authority, Revenue Bonds, American Airlines Inc., | 11/11 at 100.00 | CCC+ | 122,725 | ||||||||||||||
| 35 | Puerto Rico Ports Authority, Special Facilities Revenue Bonds, American Airlines Inc., Series 1993A, 6.300%, 6/01/23 (Alternative Minimum Tax) | 12/11 at 100.00 | CCC+ | 29,804 | ||||||||||||||
| 2,320 | Puerto Rico Ports Authority, Special Facilities Revenue Bonds, American Airlines Inc., Series 1996A, 6.250%, 6/01/26 (Alternative Minimum Tax) | 12/11 at 100.00 | CCC+ | 1,911,586 | ||||||||||||||
San Joaquin Hills Transportation Corridor Agency, Orange County, California, Toll Road Revenue Refunding Bonds, Series 1997A: | ||||||||||||||||||
| 2,000 | 0.000%, 1/15/25 – NPFG Insured | No Opt. Call | Baa1 | 662,119 | ||||||||||||||
| 6,500 | 0.000%, 1/15/26 – NPFG Insured | No Opt. Call | Baa1 | 1,954,029 | ||||||||||||||
| 22,615 | Total Transportation | 10,676,253 | ||||||||||||||||
U.S. Guaranteed – 0.0% (8) | ||||||||||||||||||
| 10 | Golden State Tobacco Securitization Corporation, California, Tobacco Settlement Asset-Backed Bonds, Series 2003A-1, 6.250%, 6/01/33 (Pre-refunded 6/01/13) | 6/13 at 100.00 | Aaa | 10,830 | ||||||||||||||
Utilities – 1.7% | ||||||||||||||||||
Long Beach Bond Finance Authority, California, Natural Gas Purchase Revenue Bonds, Series 2007A: | ||||||||||||||||||
| 25 | 5.500%, 11/15/30 | No Opt. Call | A | 23,757 | ||||||||||||||
| 250 | 5.500%, 11/15/37 | No Opt. Call | A | 230,852 | ||||||||||||||
| 7,890 | Merced Irrigation District, California, Certificates of Participation, Water and Hydroelectric Series 2008B, 0.000%, 9/01/33 | 9/16 at 32.62 | A | 1,808,229 | ||||||||||||||
| 8,165 | Total Utilities | 2,062,838 | ||||||||||||||||
| 26 | Nuveen Investments |
| Principal Amount (000) | Description (1) | Optional Call Provisions (2) | Ratings (3) | Value | ||||||||||||||
Water and Sewer – 1.2% | ||||||||||||||||||
| $ | 500 | Dinuba Financing Authority, California, Wastewater System Revenue Bonds, Series 2007, 5.375%, 9/01/38 | 9/17 at 100.00 | N/R | $ | 405,119 | ||||||||||||
| 1,000 | Guam Government Waterworks Authority, Water and Wastewater System Revenue Bonds, Series 2010, 5.500%, 7/01/30 | No Opt. Call | Ba2 | 961,379 | ||||||||||||||
| 1,500 | Total Water and Sewer | 1,366,498 | ||||||||||||||||
| $ | 155,980 | Total Investments (cost $124,065,372) – 100.3% | 120,309,092 | |||||||||||||||
Other Assets Less Liabilities – (0.3)% (9) | (417,688) | |||||||||||||||||
Net Assets – 100% | $ | 119,891,404 | ||||||||||||||||
Investment in Derivatives
Forward Swaps outstanding:
| Counterparty | Notional Amount | Fund Pay/Receive Floating Rate | Floating Rate Index | Fixed Rate (Annualized) | Fixed Rate Payment Frequency | Effective Date (10) | Termination Date | Unrealized Appreciation (Depreciation) | ||||||||||||||||||||||||
Barclays Bank PLC | $ | 3,600,000 | Receive | 3-Month USD-LIBOR | 4.259 | % | Semi-Annually | 6/28/12 | 6/28/41 | $ | (601,019 | ) | ||||||||||||||||||||
Morgan Stanley | 2,000,000 | Receive | 3-Month USD-LIBOR | 4.228 | Semi-Annually | 7/09/12 | 7/09/41 | (319,853 | ) | |||||||||||||||||||||||
| $ | (920,872 | ) | ||||||||||||||||||||||||||||||
| (1) | All percentages shown in the Portfolio of Investments are based on net assets. |
| (2) | Optional Call Provisions: 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. Certain mortgage-backed securities may be subject to periodic principal paydowns. |
| (3) | Ratings: Using the highest of Standard & Poor’s Group (“Standard & Poor’s”), Moody’s Investor Service, Inc. (“Moody’s”) or Fitch, Inc. (“Fitch”) rating. Ratings below BBB by Standard & Poor’s, Baa by Moody’s or BBB by Fitch are considered to be below investment grade. Holdings designated N/R are not rated by any of these national rating agencies. |
| (4) | For fair value measurement disclosure purposes, investment categorized as Level 3. See Notes to Financial Statements, Footnote 1 – General Information and Significant Accounting Policies, Investment Valuation for more information. |
| (5) | At or subsequent to the end of the reporting period, this security is non-income producing. Non-income producing security, in the case of a bond, generally denotes that the issuer has (1) defaulted on the payment of principal or interest, (2) is under the protection of the Federal Bankruptcy Court or (3) the Fund’s Adviser has concluded that the issue is not likely to meet its future interest payment obligations and has directed the Fund’s custodian to cease accruing additional income on the Fund’s records. |
| (6) | Investment valued at fair value using methods determined in good faith by, or at the discretion of, the Board of Trustees. |
| (7) | Investment, or portion of investment, has been pledged to collateralize the net payment obligations for investments in derivatives and/or inverse floating rate transactions. |
| (8) | Backed by an escrow or trust containing sufficient U.S. Government or U.S. Government agency securities, which ensure the timely payment of principal and interest. |
| (9) | Other Assets Less Liabilities includes Value and/or Net Unrealized Appreciation (Depreciation) of derivative instruments as noted within Investments in Derivatives. |
| (10) | Effective date represents the date on which both the Fund and Counterparty commence interest payment accruals on each forward swap contract. |
| N/R | Not rated. |
| WI/DD | Purchased on a when-issued or delayed delivery basis. |
| (IF) | Inverse floating rate investment. |
| USD-LIBOR | United States Dollar-London Inter-Bank Offered Rate. |
See accompanying notes to financial statements.
| Nuveen Investments | 27 |
Portfolio of Investments (Unaudited)
Nuveen California Municipal Bond Fund
August 31, 2011
| Principal Amount (000) | Description (1) | Optional Call Provisions (2) | Ratings (3) | Value | ||||||||||||||
Consumer Staples – 4.4% | ||||||||||||||||||
| $ | 3,500 | California County Tobacco Securitization Agency, Tobacco Settlement Asset-Backed Bonds, Alameda County Tobacco Asset Securitization Corporation, Series 2002, 5.750%, 6/01/29 | 6/12 at 100.00 | Baa3 | $ | 3,235,890 | ||||||||||||
| 425 | California County Tobacco Securitization Agency, Tobacco Settlement Asset-Backed Bonds, Sonoma County Tobacco Securitization Corporation, Series 2005, 4.250%, 6/01/21 | 6/15 at 100.00 | BBB | 395,815 | ||||||||||||||
| 3,500 | Golden State Tobacco Securitization Corporation, California, Tobacco Settlement Asset-Backed Bonds, Series 2007A-1, 5.750%, 6/01/47 | 6/17 at 100.00 | Baa3 | 2,479,960 | ||||||||||||||
| 12,135 | Golden State Tobacco Securitization Corporation, California, Tobacco Settlement Asset-Backed Bonds, Series 2007A-2, 0.000%, 6/01/37 | 6/22 at 100.00 | BB+ | 7,523,943 | ||||||||||||||
| 19,560 | Total Consumer Staples | 13,635,608 | ||||||||||||||||
Education and Civic Organizations – 4.3% | ||||||||||||||||||
| 105 | California Educational Facilities Authority, Revenue Bonds, University of the Pacific, Series 2006, 5.000%, 11/01/21 | 11/15 at 100.00 | A2 | 111,379 | ||||||||||||||
| 2,960 | California Educational Facilities Authority, Revenue Bonds, Woodbury University, Series 2006, 5.000%, 1/01/36 | 1/15 at 100.00 | Baa3 | 2,439,425 | ||||||||||||||
California Municipal Finance Authority, Educational Facilities Revenue Bonds, OCEAA Project, Series 2008A: | ||||||||||||||||||
| 1,000 | 6.750%, 10/01/28 | No Opt. Call | N/R | 967,030 | ||||||||||||||
| 1,500 | 7.000%, 10/01/39 | No Opt. Call | N/R | 1,437,855 | ||||||||||||||
| 1,500 | California Municipal Finance Authority, Revenue Bonds, University of La Verne, Series 2010A, 6.125%, 6/01/30 | 6/20 at 100.00 | Baa2 | 1,542,240 | ||||||||||||||
| 1,000 | California State Public Works Board, Lease Revenue Bonds, University of California Department of Education Riverside Campus Project, Series 2009B, 5.750%, 4/01/23 | 4/19 at 100.00 | A2 | 1,102,800 | ||||||||||||||
| 1,000 | California State Public Works Board, Lease Revenue Bonds, University of California, Institute Projects, Series 2005C, 5.000%, 4/01/30 – AMBAC Insured | 4/15 at 100.00 | Aa2 | 1,016,170 | ||||||||||||||
| 1,600 | California Statewide Communitities Development Authority, School Facility Revenue Bonds, Alliance College-Ready Public Schools, Series 2011A, 7.000%, 7/01/46 | 7/21 at 100.00 | N/R | 1,553,168 | ||||||||||||||
| 1,500 | California Statewide Community Development Authority, Certificates of Participation, San Diego Space and Science Foundation, Series 1996, 7.500%, 12/01/26 | 12/11 at 100.00 | N/R | 1,465,350 | ||||||||||||||
| 2,000 | San Diego County, California, Certificates of Participation, Burnham Institute, Series 2006, 5.000%, 9/01/34 | 9/15 at 102.00 | Baa3 | 1,699,280 | ||||||||||||||
| 14,165 | Total Education and Civic Organizations | 13,334,697 | ||||||||||||||||
Health Care – 19.4% | ||||||||||||||||||
| 1,800 | California Health Facilities Financing Authority, Hospital Revenue Bonds, Downey Community Hospital, Series 1993, 5.750%, 5/15/15 (4) | 11/11 at 100.00 | N/R | 1,466,748 | ||||||||||||||
| 3,000 | California Health Facilities Financing Authority, Revenue Bonds, Catholic Healthcare West, Series 2009F, 5.625%, 7/01/25 | 7/19 at 100.00 | A | 3,200,130 | ||||||||||||||
| 1,000 | California Health Facilities Financing Authority, Revenue Bonds, Childrens Hospital of Orange County, Series 2009A, 6.500%, 11/01/38 | 11/19 at 100.00 | A | 1,072,460 | ||||||||||||||
| 1,360 | California Health Facilities Financing Authority, Revenue Bonds, Kaiser Permanante System, Series 2006, 5.000%, 4/01/37 | 4/16 at 100.00 | A+ | 1,303,152 | ||||||||||||||
| 2,000 | California Health Facilities Financing Authority, Revenue Bonds, Sutter Health, Series 2011B, 6.000%, 8/15/42 | 8/20 at 100.00 | AA– | 2,159,400 | ||||||||||||||
| 2,000 | California Municipal Finance Authority, Certificates of Participation, Community Hospitals of Central California Obligated Group, Series 2009, 5.500%, 2/01/39 | 2/19 at 100.00 | Baa2 | 1,804,040 | ||||||||||||||
| 1,500 | California Statewide Communities Development Authority, Health Facility Revenue Bonds, Community Hospital of the Monterey Peninsula, Series 2011A, 6.000%, 6/01/33 | 6/21 at 100.00 | A+ | 1,566,225 | ||||||||||||||
| 28 | Nuveen Investments |
| Principal Amount (000) | Description (1) | Optional Call Provisions (2) | Ratings (3) | Value | ||||||||||||||
| �� | ||||||||||||||||||
Health Care (continued) | ||||||||||||||||||
| $ | 1,000 | California Statewide Communities Development Authority, Revenue Bonds, Adventist Health System West, Series 2005A, 5.000%, 3/01/35 | 3/15 at 100.00 | A | $ | 952,210 | ||||||||||||
| 1,000 | California Statewide Communities Development Authority, Revenue Bonds, ValleyCare Health System, Series 2007A, 5.000%, 7/15/22 | 7/17 at 100.00 | N/R | 940,690 | ||||||||||||||
| 7,740 | California Statewide Community Development Authority, Health Facility Revenue Refunding Bonds, Memorial Health Services, Series 2003A, 6.000%, 10/01/23 | 4/13 at 100.00 | AA– | 8,043,718 | ||||||||||||||
| 5,540 | California Statewide Community Development Authority, Insured Health Facility Revenue Bonds, Catholic Healthcare West, Series 2008K, 5.500%, 7/01/41 – AGC Insured | 7/17 at 100.00 | AA+ | 5,634,789 | ||||||||||||||
| 1,000 | California Statewide Community Development Authority, Revenue Bonds, Daughters of Charity Health System, Series 2005A, 5.250%, 7/01/30 | 7/15 at 100.00 | BBB | 848,890 | ||||||||||||||
| 3,670 | California Statewide Community Development Authority, Revenue Bonds, Daughters of Charity Health System, Series 2005G, 5.000%, 7/01/22 | 7/15 at 100.00 | BBB | 3,452,883 | ||||||||||||||
| 1,615 | California Statewide Community Development Authority, Revenue Bonds, Kaiser Permanente System, Series 2001C, 5.250%, 8/01/31 | 8/16 at 100.00 | A+ | 1,635,850 | ||||||||||||||
| 3,000 | California Statewide Community Development Authority, Revenue Bonds, Kaiser Permanente System, Series 2007B, 0.974%, 4/01/36 | 4/17 at 100.00 | A+ | 2,190,000 | ||||||||||||||
| 2,250 | California Statewide Community Development Authority, Revenue Bonds, Methodist Hospital Project, Series 2009, 6.750%, 2/01/38 | 8/19 at 100.00 | Aa2 | 2,540,768 | ||||||||||||||
| 4,540 | California Statewide Community Development Authority, Revenue Bonds, St. Joseph Health System, Series 2007A, 5.750%, 7/01/47 – FGIC Insured | 7/18 at 100.00 | AA– | 4,576,819 | ||||||||||||||
| 2,065 | Loma Linda, California, Hospital Revenue Bonds, Loma Linda University Medical Center, Series 2008A, 8.250%, 12/01/38 | 12/17 at 100.00 | BBB | 2,276,786 | ||||||||||||||
| 1,580 | Oak Valley Hospital District, Stanislaus County, California, Revenue Bonds, Series 2010A, 7.000%, 11/01/35 | 11/20 at 100.00 | BBB– | 1,607,555 | ||||||||||||||
| 3,625 | Palomar Pomerado Health Care District, California, Certificates of Participation, Series 2010, 6.000%, 11/01/41 | 11/20 at 100.00 | Baa3 | 3,399,851 | ||||||||||||||
| 4,500 | Santa Clara County Financing Authority, California, Insured Revenue Bonds, El Camino Hospital, Series 2007A, 5.750%, 2/01/41 – AMBAC Insured | 8/17 at 100.00 | A+ | 4,580,910 | ||||||||||||||
| 1,000 | Sierra View Local Health Care District, California, Revenue Bonds, Series 2007, 5.250%, 7/01/37 | 9/17 at 100.00 | N/R | 934,340 | ||||||||||||||
| 3,000 | Upland, California, Certificates of Participation, San Antonio Community Hospital, Series 2011, 6.500%, 1/01/41 | 1/21 at 100.00 | A | 3,180,480 | ||||||||||||||
| 59,785 | Total Health Care | 59,368,694 | ||||||||||||||||
Housing/Multifamily – 1.0% | ||||||||||||||||||
| 1,295 | California Municipal Finance Authority, Mobile Home Park Revenue Bonds, Caritas Projects Series 2010A, 6.400%, 8/15/45 | 8/20 at 100.00 | BBB– | 1,269,994 | ||||||||||||||
| 1,815 | San Dimas Housing Authority, California, Mobile Home Park Revenue Bonds, Charter Oak Mobile Home Estates Acquisition Project, Series 1998A, 5.700%, 7/01/28 | 1/12 at 100.00 | N/R | 1,746,484 | ||||||||||||||
| 3,110 | Total Housing/Multifamily | 3,016,478 | ||||||||||||||||
Housing/Single Family – 1.0% | ||||||||||||||||||
| 215 | California Housing Finance Agency, Home Mortgage Revenue Bonds, Series 2006H, 5.750%, 8/01/30 – FGIC Insured (Alternative Minimum Tax) | 2/16 at 100.00 | Baa1 | 215,138 | ||||||||||||||
| 3,000 | California State Department of Veteran Affairs, Home Purchase Revenue Bonds, Series 2007, 5.000%, 12/01/42 (Alternative Minimum Tax) | 12/16 at 100.00 | AA | 2,791,830 | ||||||||||||||
| 3,215 | Total Housing/Single Family | 3,006,968 | ||||||||||||||||
Industrials – 0.2% | ||||||||||||||||||
| 610 | California Pollution Control Financing Authority, Solid Waste Disposal Revenue Bonds, Republic Services Inc., Series 2002C, 5.250%, 6/01/23 (Mandatory put 12/01/17) (Alternative Minimum Tax) | No Opt. Call | BBB | 654,725 | ||||||||||||||
| Nuveen Investments | 29 |
Portfolio of Investments (Unaudited)
Nuveen California Municipal Bond Fund (continued)
August 31, 2011
| Principal Amount (000) | Description (1) | Optional Call Provisions (2) | Ratings (3) | Value | ||||||||||||||
Long-Term Care – 4.2% | ||||||||||||||||||
ABAG Finance Authority for Non-Profit Corporations, California, Cal-Mortgage Revenue Bonds, Elder Care Alliance of Union City, Series 2004: | ||||||||||||||||||
| $ | 1,850 | 5.400%, 8/15/24 | 8/14 at 100.00 | A– | $ | 1,873,347 | ||||||||||||
| 2,130 | 5.600%, 8/15/34 | 8/14 at 100.00 | A– | 2,116,325 | ||||||||||||||
| 3,000 | ABAG Finance Authority for Non-Profit Corporations, California, Health Facility Revenue Bonds, The Insitute on Aging, Series 2008A, 5.650%, 8/15/38 | 8/18 at 100.00 | A– | 2,959,050 | ||||||||||||||
| 1,000 | California Municipal Finance Authority, Revenue Bonds, Harbor Regional Center Project, Series 2009, 8.000%, 11/01/29 | 11/19 at 100.00 | Baa1 | 1,087,160 | ||||||||||||||
| 2,000 | California Municipal Finance Authority, Senior Living Revenue Bonds, Pilgrim Place at Claremont, Series 2009A, 6.125%, 5/15/39 | 5/19 at 100.00 | A– | 2,116,700 | ||||||||||||||
| 2,750 | San Diego County, California, Certificates of Participation, San Diego-Imperial Counties Developmental Services Foundation Project, Series 2002, 5.500%, 9/01/27 | 9/12 at 100.00 | Baa1 | 2,706,935 | ||||||||||||||
| 12,730 | Total Long-Term Care | 12,859,517 | ||||||||||||||||
Tax Obligation/General – 12.8% | ||||||||||||||||||
| 1,425 | Bassett Unified School District, Los Angeles County, California, General Obligation Bonds, Series 2006B, 5.250%, 8/01/30 – FGIC Insured | 8/16 at 100.00 | A– | 1,465,598 | ||||||||||||||
California State, General Obligation Bonds, Various Purpose Series 2009: | ||||||||||||||||||
| 5,000 | 5.500%, 11/01/34 | 11/19 at 100.00 | A1 | 5,256,250 | ||||||||||||||
| 4,060 | 6.000%, 11/01/39 | 11/19 at 100.00 | A1 | 4,447,365 | ||||||||||||||
| 10,000 | California State, General Obligation Bonds, Various Purpose Series 2010, 5.500%, 3/01/40 | 3/20 at 100.00 | A1 | 10,416,600 | ||||||||||||||
Central Unified School District, Fresno County, California, General Obligation Bonds, Series 2004A: | ||||||||||||||||||
| 1,000 | 5.500%, 7/01/22 – FGIC Insured | 7/14 at 100.00 | A | 1,115,410 | ||||||||||||||
| 1,500 | 5.500%, 7/01/24 – FGIC Insured | 7/14 at 100.00 | A | 1,673,115 | ||||||||||||||
| 2,435 | East Side Union High School District, Santa Clara County, California, General Obligation Bonds, 2008 Election Series 2010B, 5.000%, 8/01/25 – AGC Insured | 8/19 at 100.00 | AA+ | 2,615,507 | ||||||||||||||
| 2,000 | Murrieta Valley Unified School District, Riverside County, California, General Obligation Bonds, Series 2003A, 5.000%, 9/01/26 – FGIC Insured | 9/13 at 100.00 | A+ | 2,091,160 | ||||||||||||||
| 1,685 | Peralta Community College District, Alameda County, California, General Obligation Bonds, Refunding Series 2010, 5.250%, 8/01/26 | 8/20 at 100.00 | AA– | 1,851,545 | ||||||||||||||
| 275 | Roseville Joint Union High School District, Placer County, California, General Obligation Bonds, Series 2006B, 5.000%, 8/01/27 – FGIC Insured | 8/15 at 100.00 | AA– | 284,719 | ||||||||||||||
| 1,355 | San Jose-Evergreen Community College District, Santa Clara County, California, General Obligation Bonds, Series 2005A, 5.000%, 9/01/25 – NPFG Insured | 9/15 at 100.00 | Aa1 | 1,416,097 | ||||||||||||||
| 5,500 | Tahoe Forest Hospital District, Placer and Nevada Counties, California, General Obligation Bonds, Series 2010B, 5.500%, 8/01/35 | 8/18 at 100.00 | Aa3 | 5,758,665 | ||||||||||||||
| 3,500 | Yosemite Community College District, California, General Obligation Bonds, Capital Appreciation, Election 2004, Series 2010D, 0.000%, 8/01/42 | No Opt. Call | Aa2 | 999,075 | ||||||||||||||
| 39,735 | Total Tax Obligation/General | 39,391,106 | ||||||||||||||||
Tax Obligation/Limited – 32.6% | ||||||||||||||||||
| 3,000 | Alameda County Redevelopment Agency, California, Eden Area Redevelopment Project, Tax Allocation Bonds, Series 2006A, 5.000%, 8/01/36 – NPFG Insured | 8/16 at 100.00 | A2 | 2,628,480 | ||||||||||||||
Brea Public Finance Authority, California, Revenue Bonds, Series 2008A: | ||||||||||||||||||
| 2,105 | 7.000%, 9/01/23 | 9/16 at 102.00 | BBB+ | 2,222,670 | ||||||||||||||
| 2,000 | 7.125%, 9/01/26 | 9/16 at 102.00 | BBB+ | 2,091,100 | ||||||||||||||
| 1,000 | California State Public Works Board, Lease Revenue Bonds, Various Capital Projects, Series 2009G-1, 5.750%, 10/01/30 | 10/19 at 100.00 | A2 | 1,050,340 | ||||||||||||||
| 30 | Nuveen Investments |
| Principal Amount (000) | Description (1) | Optional Call Provisions (2) | Ratings (3) | Value | ||||||||||||||
Tax Obligation/Limited (continued) | ||||||||||||||||||
| $ | 2,000 | California State Public Works Board, Lease Revenue Bonds, Various Capital Projects, Series 2009I-1, 6.375%, 11/01/34 | 11/19 at 100.00 | A2 | $ | 2,174,680 | ||||||||||||
| 3,000 | California State Public Works Board, Lease Revenue Bonds, Various Capital Projects, Series 2010A-1, 6.000%, 3/01/35 | 3/20 at 100.00 | A2 | 3,179,040 | ||||||||||||||
| 350 | Capistrano Unified School District, Orange County, California, Special Tax Bonds, Community Facilities District, Series 2005, 5.000%, 9/01/24 – FGIC Insured | 9/15 at 100.00 | BBB | 346,374 | ||||||||||||||
Community Development Commission Of City of National City, California, National City Redevelopment Project 2011, Tax Allocation Bonds: | ||||||||||||||||||
| 470 | 6.500%, 8/01/24 | 8/21 at 100.00 | A– | 490,196 | ||||||||||||||
| 1,705 | 7.000%, 8/01/32 | 8/21 at 100.00 | A– | 1,786,789 | ||||||||||||||
| 2,075 | Hesperia Community Redevelopment Agency, California, Tax Allocation Bonds, Series 2005A, 5.000%, 9/01/35 – SYNCORA GTY Insured | 9/15 at 100.00 | BBB– | 1,679,962 | ||||||||||||||
| 1,660 | Highland, California, Special Tax Bonds, Communitiy Facilities District 01-1, Refunding, Series 2011, 5.500%, 9/01/28 | 9/21 at 100.00 | BBB | 1,650,040 | ||||||||||||||
| 1,445 | Irvine, California, Unified School District, Community Facilities District 06-1 Special Tax Bonds, Series 2010, 6.700%, 9/01/35 | 9/20 at 100.00 | N/R | 1,534,157 | ||||||||||||||
Irvine, California, Unified School District, Community Facilities District Special Tax Bonds, Series 2006A: | ||||||||||||||||||
| 170 | 5.000%, 9/01/26 | 9/16 at 100.00 | N/R | 161,395 | ||||||||||||||
| 395 | 5.125%, 9/01/36 | 9/16 at 100.00 | N/R | 354,765 | ||||||||||||||
Jurupa Community Services District, California, Community Facilities District 25 Earstvale Area Special Tax Bonds, Series 2008A: | ||||||||||||||||||
| 1,000 | 8.375%, 9/01/28 | 9/18 at 100.00 | N/R | 1,103,230 | ||||||||||||||
| 3,205 | 8.875%, 9/01/38 | 9/18 at 100.00 | N/R | 3,563,031 | ||||||||||||||
| 1,300 | Lake Elsinore Public Financing Authority, California, Local Agency Revenue Bonds, Canyon Hills Improvement Area C, Series 2010A, 6.250%, 9/01/40 | 9/12 at 103.00 | N/R | 1,213,069 | ||||||||||||||
| 2,500 | Lancaster Redevelopment Agency, California, Subordinate Lien Tax Allocation Bonds, Combined Redevelopment Project Areas, Series 2003B, 5.000%, 8/01/34 – FGIC Insured | 8/13 at 100.00 | BBB+ | 2,040,800 | ||||||||||||||
| 1,870 | Lancaster Redevelopment Agency, California, Tax Allocation Refunding Bonds, Combined Area Sheriff’s Facilities Projects, Series 2004, 5.000%, 12/01/23 – SYNCORA GTY Insured | 12/14 at 100.00 | A | 1,874,582 | ||||||||||||||
| 1,120 | Lancaster Redevelopment Agency, California, Tax Allocation Refunding Bonds, Combined Fire Protection Facilities Project, Series 2004, 5.000%, 12/01/23 – SYNCORA GTY Insured | 12/14 at 100.00 | A | 1,122,744 | ||||||||||||||
| 630 | Los Angeles Community Redevelopment Agency, California, Lease Revenue Bonds, Manchester Social Services Project, Series 2005, 5.000%, 9/01/37 – AMBAC Insured | 9/15 at 100.00 | A1 | 568,216 | ||||||||||||||
| 2,500 | Los Angeles County Schools, California, Certificates of Participation, Pooled Financing Program, Regionalized Business Services Corporation, Series 2003A, 5.000%, 9/01/22 – AGM Insured | 9/13 at 100.00 | AA+ | 2,578,775 | ||||||||||||||
| 985 | Milpitas, California, Local Improvement District 20 Limited Obligation Bonds, Series 1998A, 5.700%, 9/02/18 | 3/12 at 103.00 | N/R | 1,012,206 | ||||||||||||||
Moreno Valley Unified School District, Riverside County, California, Special Tax Bonds, Community Facilities District, Series 2004: | ||||||||||||||||||
| 805 | 5.550%, 9/01/29 | 9/14 at 100.00 | N/R | 773,492 | ||||||||||||||
| 1,250 | 5.650%, 9/01/34 | 9/14 at 100.00 | N/R | 1,181,238 | ||||||||||||||
| 7,100 | Murrieta Redevelopment Agency, California, Tax Allocation Bonds, Series 2007A, 5.000%, 8/01/37 – NPFG Insured | 8/17 at 100.00 | A– | 6,180,408 | ||||||||||||||
| 170 | Novato Redevelopment Agency, California, Tax Allocation Bonds, Hamilton Field Redevelopment Project, Series 2011, 6.750%, 9/01/40 | 9/21 at 100.00 | A– | 177,407 | ||||||||||||||
| 170 | Ontario, California, Assessment District 100C Limited Obligation Improvement Bonds, California Commerce Center Phase III, Series 1991, 8.000%, 9/02/11 | No Opt. Call | N/R | 170,024 | ||||||||||||||
| 2,500 | Palm Drive Health Care District, Sonoma County, California, Certificates of Participation, Parcel Tax Secured Financing Program, Series 2010, 7.500%, 4/01/35 | No Opt. Call | BB | 2,432,525 | ||||||||||||||
| Nuveen Investments | 31 |
Portfolio of Investments (Unaudited)
Nuveen California Municipal Bond Fund (continued)
August 31, 2011
| Principal Amount (000) | Description (1) | Optional Call Provisions (2) | Ratings (3) | Value | ||||||||||||||
Tax Obligation/Limited (continued) | ||||||||||||||||||
| $ | 1,600 | Pomona Public Financing Authority, California, Merged Projects Revenue Bonds, Series 2007AS, 5.000%, 2/01/31 – AMBAC Insured | 2/17 at 100.00 | A | $ | 1,481,808 | ||||||||||||
| 1,150 | Poway Redevelopment Agency, California, Tax Allocation Bonds, Paugay Redevelopment Project, Series 2007, 5.000%, 6/15/30 – NPFG Insured | 6/17 at 100.00 | A | 1,056,551 | ||||||||||||||
| 1,645 | Rancho Cucamonga, California, Limited Obligation Improvement Bonds, Masi Plaza Assessment District 93-1, Series 1997, 6.250%, 9/02/22 | 3/12 at 100.00 | N/R | 1,651,925 | ||||||||||||||
| 560 | Rancho Santa Fe CSD Financing Authority, California, Revenue Bonds, Superior Lien Series 2011A, 5.750%, 9/01/30 | 9/21 at 100.00 | BBB+ | 568,081 | ||||||||||||||
| 305 | Rialto Redevelopment Agency, California, Tax Allocation Bonds, Merged Project Area, Series 2005A, 5.000%, 9/01/35 – SYNCORA GTY Insured | 9/15 at 100.00 | A– | 267,522 | ||||||||||||||
| 2,345 | Richmond Redevelopment Agency, California, Harbour Project Tax Allocation Bonds, Series 1998A Refunding, 5.500%, 7/01/18 – NPFG Insured | 11/11 at 100.00 | AA– | 2,353,043 | ||||||||||||||
| 100 | Riverside County Redevelopment Agency, California, Jurupa Valley Project Area 2011 Tax Allocation Bonds Series B, 6.500%, 10/01/25 | 10/21 at 100.00 | A– | 103,735 | ||||||||||||||
| 2,950 | Riverside County Redevelopment Agency, California, Interstate 215 Corridor Redevelopment Project Area Tax Allocation Bonds, Series 2010E, 6.250%, 10/01/30 | 10/20 at 100.00 | A– | 3,061,510 | ||||||||||||||
| 380 | Roseville, California, Certificates of Participation, Public Facilities, Series 2003A, 5.000%, 8/01/25 – AMBAC Insured | 8/13 at 100.00 | AA– | 383,367 | ||||||||||||||
| 1,000 | Sacramento City Financing Authority, California, Lease Revenue Refunding Bonds, Series 1993A, 5.400%, 11/01/20 – AMBAC Insured | No Opt. Call | A1 | 1,087,680 | ||||||||||||||
| 500 | Sacramento City Financing Authority, California, Lease Revenue Refunding Bonds, Series 1993B, 5.400%, 11/01/20 | No Opt. Call | A1 | 543,840 | ||||||||||||||
| 2,880 | San Francisco Redevelopment Agency, California, Lease Revenue Bonds, Moscone Convention Center, Series 2004, 5.250%, 7/01/24 – AMBAC Insured | 7/13 at 100.00 | AA– | 2,947,190 | ||||||||||||||
| 85 | San Francisco Redevelopment Finance Authority, California, Tax Allocation Revenue Bonds, Mission Bay North Redevelopment Project, Series 2011C, 6.750%, 8/01/41 | 2/21 at 100.00 | A– | 90,120 | ||||||||||||||
San Francisco Redevelopment Financing Authority, California, Tax Allocation Revenue Bonds, Mission Bay South Redevelopment Project, Series 2011D: | ||||||||||||||||||
| 80 | 7.000%, 8/01/33 | 2/21 at 100.00 | BBB | 84,217 | ||||||||||||||
| 105 | 7.000%, 8/01/41 | 2/21 at 100.00 | BBB | 110,153 | ||||||||||||||
| 6,475 | San Marcos Redevelopment Agency, California, Tax Allocation Bonds, Affordable Housing Project, Series 1997A, 6.000%, 10/01/27 (Alternative Minimum Tax) | 10/11 at 100.00 | AA– | 6,480,828 | ||||||||||||||
| 2,140 | Santa Ana Community Redevelopment Agency, California, Tax Allocation Bonds, Merged Project Area, Series 2011A, 6.750%, 9/01/28 | 3/21 at 100.00 | A | 2,316,957 | ||||||||||||||
| 1,500 | Santee Community Development Commission, California, Santee Redevelopment Project Tax Allocation Bonds, Series 2011A, 6.500%, 8/01/26 | 2/21 at 100.00 | A | 1,605,600 | ||||||||||||||
| 4,000 | Shafter Joint Powers Financing Authority, California, Lease Revenue Bonds, Community Correctional Facility Acquisition Project, Series 1997A, 6.050%, 1/01/17 | 1/12 at 100.00 | A2 | 4,010,400 | ||||||||||||||
| 135 | Signal Hill Redevelopment Agency, California, Project 1 Tax Allocation Bonds, Series 2011, 7.000%, 10/01/26 | 4/21 at 100.00 | N/R | 135,830 | ||||||||||||||
| 500 | Temecula Redevelopment Agency, California, Redevelopment Project 1 Tax Allocation Housing Bonds Series 2011A, 6.750%, 8/01/31 | 8/21 at 100.00 | A | 528,455 | ||||||||||||||
| 6,700 | Travis Unified School District, Solano County, California, Certificates of Participation, Series 2006, 5.000%, 9/01/31 – FGIC Insured | 9/16 at 100.00 | N/R | 5,758,181 | ||||||||||||||
| 2,500 | Tulare Public Financing Authority, California, Lease Revenue Bonds, Series 2008, 5.250%, 4/01/27 – AGC Insured | 4/18 at 100.00 | AA+ | 2,676,225 | ||||||||||||||
| 1,225 | Turlock Public Financing Authority, California, Tax Allocation Revenue Bonds, Series 2011, 7.000%, 9/01/25 | 3/21 at 100.00 | BBB+ | 1,294,568 | ||||||||||||||
| 32 | Nuveen Investments |
| Principal Amount (000) | Description (1) | Optional Call Provisions (2) | Ratings (3) | Value | ||||||||||||||
Tax Obligation/Limited (continued) | ||||||||||||||||||
| $ | 2,000 | Tustin, California, Community Facilities District 2007-1, Legacy-Retail Center Special Tax Bonds, 6.000%, 9/01/37 | 9/17 at 100.00 | N/R | $ | 1,941,140 | ||||||||||||
| 1,045 | Ukiah Redevelopment Agency, California, Tax Allocation Bonds, Ukiah Redevelopment Project, Series 2011A, 6.500%, 12/01/28 | 6/21 at 100.00 | A | 1,069,087 | ||||||||||||||
Vista Community Development Commission Taxable Non-Housing Tax Allocation Revenue Bonds, California, Vista Redevelopment Project, Series 2011: | ||||||||||||||||||
| 4,045 | 6.000%, 9/01/33 | 9/21 at 100.00 | A– | 4,127,275 | ||||||||||||||
| 4,210 | 6.125%, 9/01/37 | 9/21 at 100.00 | A– | 4,277,613 | ||||||||||||||
| 230 | Vallejo Public Financing Authority, California, Limited Obligation Revenue Refinancing Bonds, Fairground Drive Assessment District 65, Series 1998, 5.700%, 9/02/11 | No Opt. Call | N/R | 230,021 | ||||||||||||||
| 240 | Yorba Linda Redevelopment Agency, Orange County, California, Tax Allocation Revenue Bonds, Yorba Linda Redevelopment Project, Subordinate Lien Series 2011A, 6.500%, 9/01/32 | 9/21 at 100.00 | A– | 250,210 | ||||||||||||||
| 101,110 | Total Tax Obligation/Limited | 99,834,867 | ||||||||||||||||
Transportation – 3.3% | ||||||||||||||||||
| 2,750 | Foothill/Eastern Transportation Corridor Agency, California, Toll Road Revenue Refunding Bonds, Series 1999, 5.875%, 1/15/28 | 1/14 at 101.00 | BBB– | 2,714,250 | ||||||||||||||
Palm Springs Financing Authority, California, Palm Springs International Airport Revenue Bonds, Series 2006: | ||||||||||||||||||
| 285 | 5.450%, 7/01/20 (Alternative Minimum Tax) | 7/14 at 102.00 | N/R | 256,577 | ||||||||||||||
| 215 | 5.550%, 7/01/28 (Alternative Minimum Tax) | 7/14 at 102.00 | N/R | 182,918 | ||||||||||||||
| 550 | San Francisco Airports Commission, California, Revenue Bonds, San Francisco International Airport, Second Series 1999, Issue 23A, 5.000%, 5/01/30 – FGIC Insured (Alternative Minimum Tax) | 11/11 at 100.00 | A+ | 544,698 | ||||||||||||||
| 4,000 | San Francisco Airports Commission, California, Revenue Bonds, San Francisco International Airport, Second Series 2002, Issue 32G, 5.000%, 5/01/24 – FGIC Insured | 5/16 at 100.00 | A+ | 4,207,680 | ||||||||||||||
| 2,000 | San Francisco Airports Commission, California, Revenue Bonds, San Francisco International Airport, Second Series A of 2008, 6.500%, 5/01/19 (Mandatory put 5/01/12) (Alternative Minimum Tax) | No Opt. Call | A+ | 2,079,400 | ||||||||||||||
| 9,800 | Total Transportation | 9,985,523 | ||||||||||||||||
U.S. Guaranteed – 3.8% (5) | ||||||||||||||||||
| 2,500 | Daly City Housing Development Finance Agency, California, Mobile Home Park Revenue Bonds, Franciscan Mobile Home Park Project, Series 2002A, 5.800%, 12/15/25 (Pre-refunded 12/15/13) | 12/13 at 102.00 | N/R | (5) | 2,847,600 | |||||||||||||
| 3,130 | Golden State Tobacco Securitization Corporation, California, Tobacco Settlement Asset-Backed Bonds, Series 2003A-1, 6.250%, 6/01/33 (Pre-refunded 6/01/13) | 6/13 at 100.00 | Aaa | 3,389,665 | ||||||||||||||
| 1,655 | Los Angeles Harbors Department, California, Revenue Bonds, Series 1988, 7.600%, 10/01/18 (ETM) | No Opt. Call | AA+ | (5) | 1,998,628 | |||||||||||||
| 1,400 | Port of Oakland, California, Revenue Bonds, Series 2002M, 5.250%, 11/01/19 (Pre-refunded 11/01/12) – FGIC Insured | 11/12 at 100.00 | A | (5) | 1,482,376 | |||||||||||||
| 1,505 | San Mateo Union High School District, San Mateo County, California, Certificates of Participation, Phase 1, Series 2007A, 5.000%, 12/15/30 (Pre-refunded 12/15/17) – AMBAC Insured | 12/17 at 100.00 | AA– | (5) | 1,859,548 | |||||||||||||
| 10,190 | Total U.S. Guaranteed | 11,577,817 | ||||||||||||||||
Utilities – 5.6% | ||||||||||||||||||
| 2,445 | California Statewide Community Development Authority, Certificates of Participation Refunding, Rio Bravo Fresno Project, Series 1999A, 6.500%, 12/01/18 (6) | 12/11 at 100.00 | N/R | 2,221,014 | ||||||||||||||
| 500 | Los Angeles Department of Water and Power, California, Power System Revenue Bonds, Series 2003A-2, 5.000%, 7/01/21 – NPFG Insured | 7/13 at 100.00 | AA– | 530,490 | ||||||||||||||
| Nuveen Investments | 33 |
Portfolio of Investments (Unaudited)
Nuveen California Municipal Bond Fund (continued)
August 31, 2011
| Principal Amount (000) | Description (1) | Optional Call Provisions (2) | Ratings (3) | Value | ||||||||||||||
Utilities (continued) | ||||||||||||||||||
Merced Irrigation District, California, Certificates of Participation, Water and Hydroelectric Series 2008B: | ||||||||||||||||||
| $ | 4,535 | 0.000%, 9/01/23 | 9/16 at 64.56 | A | $ | 2,173,263 | ||||||||||||
| 27,110 | 0.000%, 9/01/33 | 9/16 at 32.62 | A | 6,213,070 | ||||||||||||||
| 12,000 | 0.000%, 9/01/38 | 9/16 at 23.21 | A | 1,942,079 | ||||||||||||||
| 615 | Merced Irrigation District, California, Electric System Revenue Bonds, Series 2005, 5.125%, 9/01/31 – SYNCORA GTY Insured | 9/15 at 100.00 | N/R | 555,455 | ||||||||||||||
| 3,470 | Puerto Rico Industrial, Tourist, Educational, Medical and Environmental Control Facilities Financing Authority, Co-Generation Facility Revenue Bonds, Series 2000A, 6.625%, 6/01/26 (Alternative Minimum Tax) | 12/11 at 100.00 | Baa3 | 3,497,759 | ||||||||||||||
| 50,675 | Total Utilities | 17,133,130 | ||||||||||||||||
Water and Sewer – 4.4% | ||||||||||||||||||
| 2,000 | Brentwood Infrastructure Financing Authority, California, Water Revenue Bonds, Series 2008, 5.750%, 7/01/38 | 7/18 at 100.00 | AA | 2,134,019 | ||||||||||||||
| 2,000 | California Statewide Community Development Authority, Water and Wastewater Revenue Bonds, Pooled Financing Program, Series 2003A, 5.250%, 10/01/23 – AGM Insured | 10/13 at 100.00 | AA+ | 2,062,279 | ||||||||||||||
| 1,680 | Castaic Lake Water Agency, California, Certificates of Participation, Series 2004A, 5.000%, 8/01/20 – AMBAC Insured | 8/14 at 100.00 | AA | 1,847,680 | ||||||||||||||
| 1,250 | Cucamonga Valley Water District, California, Certificates of Participation, Series 2006, 5.000%, 9/01/36 – NPFG Insured | 9/16 at 100.00 | AA– | 1,266,537 | ||||||||||||||
| 3,745 | Los Angeles, California, Wastewater System Revenue Bonds, Refunding Series 2009A, 5.750%, 6/01/26 | 6/19 at 100.00 | AA | 4,286,451 | ||||||||||||||
| 1,770 | Pomona Public Finance Authority, California, Revenue Bonds, Water Facilities Project, Series 2007AY, 5.000%, 5/01/27 – AMBAC Insured | 5/17 at 100.00 | A+ | 1,842,905 | ||||||||||||||
| 12,445 | Total Water and Sewer | �� | 13,439,871 | |||||||||||||||
| $ | 337,130 | Total Investments (cost $298,139,291) – 97.0% | 297,239,001 | |||||||||||||||
Other Assets Less Liabilities – 3.0% | 9,164,859 | |||||||||||||||||
Net Assets – 100% | $ | 306,403,860 | ||||||||||||||||
| (1) | All percentages shown in the Portfolio of Investments are based on net assets. |
| (2) | Optional Call Provisions: 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. Certain mortgage-backed securities may be subject to periodic principal paydowns. |
| (3) | Ratings: Using the highest of Standard & Poor’s Group (“Standard & Poor’s”), Moody’s Investor Service, Inc. (“Moody’s”) or Fitch, Inc. (“Fitch”) rating. Ratings below BBB by Standard & Poor’s, Baa by Moody’s or BBB by Fitch are considered to be below investment grade. Holdings designated N/R are not rated by any of these national rating agencies. |
| (4) | For fair value measurement disclosure purposes, investment categorized as Level 3. See Notes to Financial Statements, Footnote 1 – General Information and Significant Accounting Policies, Investment Valuation for more information. |
| (5) | Backed by an escrow or trust containing sufficient U.S. Government or U.S. Government agency securities, which ensure the timely payment of principal and interest. Bonds backed by U.S. Government or agency securities are given an implied rating equal to the rating of such securities. |
| (6) | This debt has been restructured to accommodate capital maintenance at the facility. Major highlights of the debt restructuring include the following: (1) the principal balance outstanding on and after December 1, 2007, shall accrue interest at a rate of 6.500% per annum commencing December 1, 2007; (2) the interest shall accrue but not be payable on June 1, 2008 or December 1, 2008, but shall instead be deferred and paid by the end of calendar year 2011; (3) no principal component shall be pre-payable from the Minimum Sinking Fund Account during calendar years 2008 and 2009 but such pre-payments shall recommence beginning in calendar year 2010 according to a revised schedule. Management believes that the restructuring is in the best interest of Fund shareholders and that it is more-likely-than-not that the borrower will fulfill its obligation. Consequently, the Fund continues to accrue interest on this obligation. |
| N/R | Not rated. |
| (ETM) | Escrowed to maturity. |
See accompanying notes to financial statements.
| 34 | Nuveen Investments |
Portfolio of Investments (Unaudited)
Nuveen California Municipal Bond Fund 2
(formerly Nuveen California Insured Municipal Bond Fund)
August 31, 2011
| Principal Amount (000) | Description (1) | Optional Call Provisions (2) | Ratings (3) | Value | ||||||||||||||
Consumer Staples – 2.1% | ||||||||||||||||||
| $ | 5,000 | Golden State Tobacco Securitization Corporation, California, Tobacco Settlement Asset-Backed Bonds, Series 2007A-1, 5.125%, 6/01/47 | 6/17 at 100.00 | Baa3 | $ | 3,226,400 | ||||||||||||
Education and Civic Organizations – 6.1% | ||||||||||||||||||
| 750 | California Educational Facilities Authority, Student Loan Revenue Bonds, Cal Loan Program, Series 2001A, 5.400%, 3/01/21 – NPFG Insured (Alternative Minimum Tax) | 3/12 at 100.00 | Baa1 | 750,488 | ||||||||||||||
| 1,500 | California State Public Works Board, Lease Revenue Bonds, University of California, Institute Projects, Series 2005C, 5.000%, 4/01/30 – AMBAC Insured | 4/15 at 100.00 | Aa2 | 1,524,255 | ||||||||||||||
| 2,250 | California State University, Systemwide Revenue Bonds, Series 2005A, 5.000%, 11/01/25 – AMBAC Insured | 5/15 at 100.00 | Aa2 | 2,355,210 | ||||||||||||||
| 5,000 | Long Beach Bond Financing Authority, California, Lease Revenue Refunding Bonds, Long Beach Aquarium of the South Pacific, Series 2001, 5.250%, 11/01/30 – AMBAC Insured | 11/11 at 101.00 | BBB | 4,841,150 | ||||||||||||||
| 9,500 | Total Education and Civic Organizations | 9,471,103 | ||||||||||||||||
Health Care – 8.2% | ||||||||||||||||||
| 2,000 | Antelope Valley Healthcare District, California, Insured Revenue Refunding Bonds, Series 1997A, 5.200%, 1/01/27 – AGM Insured | 1/12 at 100.00 | AA+ | 1,999,960 | ||||||||||||||
| 2,000 | California Health Facilities Financing Authority, Refunding Revenue Bonds, Stanford Hospital and Clinics, Series 2010B, 5.750%, 11/15/31 | 11/20 at 100.00 | Aa3 | 2,166,200 | ||||||||||||||
| 4,000 | California Statewide Community Development Authority, Certificates of Participation, Sutter Health Obligated Group, Series 1999, 5.500%, 8/15/31 – AGM Insured | 2/12 at 100.00 | AA+ | 4,001,480 | ||||||||||||||
| 1,000 | California Statewide Community Development Authority, Revenue Bonds, Daughters of Charity Health System, Series 2005A, 5.250%, 7/01/30 | 7/15 at 100.00 | BBB | 848,890 | ||||||||||||||
| 3,685 | California Statewide Community Development Authority, Revenue Bonds, St. Joseph Health System, Series 2007A, 5.750%, 7/01/47 – FGIC Insured | 7/18 at 100.00 | AA– | 3,714,885 | ||||||||||||||
| 12,685 | Total Health Care | 12,731,415 | ||||||||||||||||
Housing/Multifamily – 5.8% | ||||||||||||||||||
| 4,180 | California Statewide Community Development Authority, Multifamily Housing Revenue Senior Bonds, Westgate Courtyards Apartments, Series 2001X-1, 5.420%, 12/01/34 – AMBAC Insured (Alternative Minimum Tax) | 12/11 at 100.00 | N/R | 3,715,100 | ||||||||||||||
| 3,865 | Los Angeles, California, GNMA Mortgage-Backed Securities Program Multifamily Housing Revenue Bonds, Park Plaza West Senior Apartments, Series 2001B, 5.400%, 1/20/31 (Alternative Minimum Tax) | 1/12 at 102.00 | AA+ | 3,901,486 | ||||||||||||||
| 1,285 | Santa Cruz County Housing Authority, California, GNMA Collateralized Multifamily Housing Revenue Bonds, Northgate Apartments, Series 1999A, 5.500%, 7/20/40 (Alternative Minimum Tax) | 1/12 at 100.00 | Aaa | 1,285,334 | ||||||||||||||
| 9,330 | Total Housing/Multifamily | 8,901,920 | ||||||||||||||||
Housing/Single Family – 0.8% | ||||||||||||||||||
| 190 | California Housing Finance Agency, Home Mortgage Revenue Bonds, Series 2006H, 5.750%, 8/01/30 – FGIC Insured (Alternative Minimum Tax) | 2/16 at 100.00 | Baa1 | 190,122 | ||||||||||||||
| 1,005 | California Rural Home Mortgage Finance Authority, FNMA Mortgage-Backed Securities Program Single Family Mortgage Revenue Bonds, Series 2002D, 5.250%, 6/01/34 (Alternative Minimum Tax) | 6/12 at 101.00 | Aaa | 1,038,798 | ||||||||||||||
| 1,195 | Total Housing/Single Family | 1,228,920 | ||||||||||||||||
Tax Obligation/General – 26.2% | ||||||||||||||||||
| 1,000 | Bonita Unified School District, San Diego County, California, General Obligation Bonds, Series 2004A, 5.250%, 8/01/20 – NPFG Insured | 8/14 at 100.00 | AA– | 1,091,620 | ||||||||||||||
| 6,900 | Central Unified School District, Fresno County, California, General Obligation Bonds, Series 2006B, 5.000%, 8/01/31 – AGM Insured | 8/16 at 100.00 | AA+ | 7,061,115 | ||||||||||||||
| Nuveen Investments | 35 |
Portfolio of Investments (Unaudited)
Nuveen California Municipal Bond Fund 2 (continued)
August 31, 2011
| Principal Amount (000) | Description (1) | Optional Call Provisions (2) | Ratings (3) | Value | ||||||||||||||
Tax Obligation/General (continued) | ||||||||||||||||||
| $ | 1,365 | El Segundo Unified School District, Los Angeles County, California, General Obligation Bonds, Series 2004, 5.250%, 9/01/20 – FGIC Insured | 9/14 at 100.00 | AA– | $ | 1,499,835 | ||||||||||||
| 2,285 | Folsom Cordova Unified School District, Sacramento County, California, General Obligation Bonds, School Facilities Improvement District 1, Series 2004B, 5.000%, 10/01/21 – NPFG Insured | 10/14 at 100.00 | Aa3 | 2,483,087 | ||||||||||||||
| 1,185 | Folsom Cordova Unified School District, Sacramento County, California, General Obligation Bonds, School Facilities Improvement District 2, Series 2004B, 5.000%, 10/01/27 – AGM Insured | 10/14 at 100.00 | AA+ | 1,257,072 | ||||||||||||||
Glendora Unified School District, Los Angeles County, California, General Obligation Bonds, Series 2006A: | ||||||||||||||||||
| 1,900 | 5.250%, 8/01/24 – NPFG Insured | 8/16 at 100.00 | Aa2 | 2,050,708 | ||||||||||||||
| 1,000 | 5.250%, 8/01/25 – NPFG Insured | 8/16 at 100.00 | Aa2 | 1,041,370 | ||||||||||||||
| 1,330 | Imperial Community College District, Imperial County, California, General Obligation Bonds, Series 2005, 5.000%, 8/01/23 – FGIC Insured | 8/15 at 100.00 | Aa3 | 1,399,306 | ||||||||||||||
| 1,460 | Jurupa Unified School District, Riverside County, California, General Obligation Bonds, Series 2004, 5.000%, 8/01/24 – FGIC Insured | 8/13 at 100.00 | A+ | 1,492,310 | ||||||||||||||
| 2,405 | Oak Valley Hospital District, Stanislaus County, California, General Obligation Bonds, Series 2005, 5.000%, 7/01/31 – FGIC Insured | 7/14 at 101.00 | A1 | 2,351,561 | ||||||||||||||
| 270 | Roseville Joint Union High School District, Placer County, California, General Obligation Bonds, Series 2006B, 5.000%, 8/01/27 – FGIC Insured | 8/15 at 100.00 | AA– | 279,542 | ||||||||||||||
| 1,590 | Sacramento City Unified School District, Sacramento County, California, General Obligation Bonds, Series 2005, 5.000%, 7/01/27 – NPFG Insured | 7/15 at 100.00 | Aa3 | 1,645,046 | ||||||||||||||
| 4,070 | San Benito Health Care District, California, General Obligation Bonds, Series 2005, 5.000%, 7/01/31 – SYNCORA GTY Insured | 7/14 at 101.00 | BBB+ | 3,733,818 | ||||||||||||||
| 1,000 | San Ramon Valley Unified School District, Contra Costa County, California, General Obligation Bonds, Series 2004, 5.000%, 8/01/24 – AGM Insured | 8/14 at 100.00 | AA+ | 1,074,670 | ||||||||||||||
| 5,000 | Southwestern Community College District, San Diego County, California, General Obligation Bonds, Election of 2008, Series 2011C, 5.250%, 8/01/36 | 8/21 at 100.00 | Aa2 | 5,229,900 | ||||||||||||||
| 3,040 | Sulphur Springs Union School District, Los Angeles County, California, General Obligation Bonds, Series 1991A, 0.000%, 9/01/15 – NPFG Insured | No Opt. Call | Baa1 | 2,717,122 | ||||||||||||||
| 3,000 | Tahoe Forest Hospital District, Placer and Nevada Counties, California, General Obligation Bonds, Series 2010B, 5.500%, 8/01/35 | 8/18 at 100.00 | Aa3 | 3,141,090 | ||||||||||||||
| 1,000 | Washington Unified School District, Yolo County, California, General Obligation Bonds, Series 2004A, 5.000%, 8/01/22 – FGIC Insured | 8/13 at 100.00 | A+ | 1,059,910 | ||||||||||||||
| 39,800 | Total Tax Obligation/General | 40,609,082 | ||||||||||||||||
Tax Obligation/Limited – 32.4% | ||||||||||||||||||
| 1,915 | Alameda County Redevelopment Agency, California, Eden Area Redevelopment Project, Tax Allocation Bonds, Series 2006A, 5.000%, 8/01/36 – NPFG Insured | 8/16 at 100.00 | A2 | 1,677,846 | ||||||||||||||
Anaheim Public Finance Authority, California, Subordinate Lease Revenue Bonds, Public Improvement Project, Series 1997C: | ||||||||||||||||||
| 15,000 | 0.000%, 9/01/34 – AGM Insured | No Opt. Call | AA+ | 3,014,250 | ||||||||||||||
| 10,000 | 0.000%, 9/01/36 – AGM Insured | No Opt. Call | AA+ | 1,743,600 | ||||||||||||||
| 150 | Barstow Redevelopment Agency, California, Tax Allocation Bonds, Central Redevelopment Project, Series 1994A, 7.000%, 9/01/14 – NPFG Insured | No Opt. Call | Baa1 | 161,024 | ||||||||||||||
| 1,655 | Bell Community Housing Authority, California, Lease Revenue Bonds, Series 2005, 5.000%, 10/01/36 – AMBAC Insured | 10/15 at 100.00 | N/R | 1,222,797 | ||||||||||||||
| 2,250 | Brea and Olinda Unified School District, Orange County, California, Certificates of Participation Refunding, Series 2002A, 5.125%, 8/01/26 – AGM Insured | 8/12 at 100.00 | AA+ | 2,278,215 | ||||||||||||||
| 1,960 | California Infrastructure Economic Development Bank, Revenue Bonds, North County Center for Self-Sufficiency Corporation, Series 2004, 5.000%, 12/01/25 – AMBAC Insured | 12/13 at 100.00 | AA | 2,075,954 | ||||||||||||||
| 335 | Capistrano Unified School District, Orange County, California, Special Tax Bonds, Community Facilities District, Series 2005, 5.000%, 9/01/24 – FGIC Insured | 9/15 at 100.00 | BBB | 331,529 | ||||||||||||||
| 36 | Nuveen Investments |
| Principal Amount (000) | Description (1) | Optional Call Provisions (2) | Ratings (3) | Value | ||||||||||||||
Tax Obligation/Limited (continued) | ||||||||||||||||||
| $ | 1,400 | Chula Vista Public Financing Authority, California, Pooled Community Facility District Assessment Revenue Bonds, Series 2005A, 5.000%, 9/01/29 – NPFG Insured | 9/15 at 100.00 | Baa1 | $ | 1,270,080 | ||||||||||||
| 2,480 | Golden State Tobacco Securitization Corporation, California, Enhanced Tobacco Settlement Asset-Backed Revenue Bonds, Series 2005A, 5.000%, 6/01/45 – AMBAC Insured | 6/15 at 100.00 | A2 | 2,190,683 | ||||||||||||||
| 1,840 | Hawthorne Community Redevelopment Agency, California, Project Area 2 Tax Allocation Bonds, Series 2006, 5.000%, 9/01/26 – SYNCORA GTY Insured | 9/16 at 100.00 | A– | 1,721,854 | ||||||||||||||
| 4,555 | Long Beach Bond Finance Authority, California, Multiple Project Tax Allocation Bonds, Housing and Gas Utility Financing Project Areas, Series 2005A-1, 5.000%, 8/01/35 – AMBAC Insured | 8/15 at 100.00 | BBB+ | 3,712,325 | ||||||||||||||
| 1,830 | Los Angeles Community Redevelopment Agency, California, Lease Revenue Bonds, Manchester Social Services Project, Series 2005, 5.000%, 9/01/37 – AMBAC Insured | 9/15 at 100.00 | A1 | 1,650,532 | ||||||||||||||
| 1,000 | Los Angeles Community Redevelopment Agency, California, Tax Allocation Bonds, Bunker Hill Project, Series 2004A, 5.000%, 12/01/20 – AGM Insured | 12/14 at 100.00 | AA+ | 1,092,590 | ||||||||||||||
| 14,050 | Paramount Redevelopment Agency, California, Tax Allocation Refunding Bonds, Redevelopment Project Area 1, Series 1998, 0.000%, 8/01/26 – NPFG Insured | No Opt. Call | A– | 5,103,944 | ||||||||||||||
| 1,150 | Poway Redevelopment Agency, California, Tax Allocation Bonds, Paugay Redevelopment Project, Series 2007, 5.000%, 6/15/30 – NPFG Insured | 6/17 at 100.00 | A | 1,056,551 | ||||||||||||||
| 295 | Rancho Santa Fe CSD Financing Authority, California, Revenue Bonds, Superior Lien Series 2011A, 5.750%, 9/01/30 | 9/21 at 100.00 | BBB+ | 299,257 | ||||||||||||||
| 290 | Rialto Redevelopment Agency, California, Tax Allocation Bonds, Merged Project Area, Series 2005A, 5.000%, 9/01/35 – SYNCORA GTY Insured | 9/15 at 100.00 | A– | 254,365 | ||||||||||||||
| 8,000 | Riverside County, California, Asset Leasing Corporate Leasehold Revenue Bonds, Riverside County Hospital Project, Series 1997B, 5.000%, 6/01/19 – NPFG Insured | 6/12 at 101.00 | Baa1 | 8,198,640 | ||||||||||||||
| 360 | Roseville, California, Certificates of Participation, Public Facilities, Series 2003A, 5.000%, 8/01/25 – AMBAC Insured | 8/13 at 100.00 | AA– | 363,190 | ||||||||||||||
| 3,560 | Roseville, California, Special Tax Bonds, Community Facilities District 1 – Woodcreek West, Series 2005, 5.000%, 9/01/30 – AMBAC Insured | 9/15 at 100.00 | A– | 3,412,509 | ||||||||||||||
| 1,955 | San Francisco City and County Redevelopment Agency, California, Hotel Occupancy Tax Revenue Bonds, Refunding Series 2011, 5.000%, 6/01/25 – AGM Insured | 6/21 at 100.00 | AA+ | 2,056,562 | ||||||||||||||
| 1,000 | Temecula Redevelopment Agency, California, Tax Allocation Revenue Bonds, Redevelopment Project 1, Series 2002, 5.250%, 8/01/36 – NPFG Insured | 11/11 at 100.00 | A– | 898,850 | ||||||||||||||
Vista Community Development Commission Taxable Non-Housing Tax Allocation Revenue Bonds, California, Vista Redevelopment Project, Series 2011: | ||||||||||||||||||
| 2,165 | 6.000%, 9/01/33 | 9/21 at 100.00 | A– | 2,209,036 | ||||||||||||||
| 2,260 | 6.125%, 9/01/37 | 9/21 at 100.00 | A– | 2,296,296 | ||||||||||||||
| 81,455 | Total Tax Obligation/Limited | 50,292,479 | ||||||||||||||||
Transportation – 8.4% | ||||||||||||||||||
| 6,500 | Foothill/Eastern Transportation Corridor Agency, California, Toll Road Revenue Bonds, Series 1995A, 5.000%, 1/01/35 – NPFG Insured | 1/12 at 100.00 | Baa1 | 5,316,480 | ||||||||||||||
| 3,255 | Foothill/Eastern Transportation Corridor Agency, California, Toll Road Revenue Refunding Bonds, Series 1999, 5.750%, 1/15/40 – NPFG Insured | 1/12 at 100.00 | Baa1 | 2,909,547 | ||||||||||||||
| 2,150 | San Francisco Airports Commission, California, Revenue Refunding Bonds, San Francisco International Airport, Second Series 2001, Issue 27A, 5.250%, 5/01/31 – NPFG Insured (Alternative Minimum Tax) | 11/11 at 100.00 | A+ | 2,149,979 | ||||||||||||||
| 1,290 | San Francisco Airports Commission, California, Special Facilities Lease Revenue Bonds, San Francisco International Airport, SFO Fuel Company LLC, Series 1997A, 5.250%, 1/01/22 – AMBAC Insured (Alternative Minimum Tax) | 1/12 at 100.00 | A3 | 1,290,942 | ||||||||||||||
| Nuveen Investments | 37 |
Portfolio of Investments (Unaudited)
Nuveen California Municipal Bond Fund 2 (continued)
August 31, 2011
| Principal Amount (000) | Description (1) | Optional Call Provisions (2) | Ratings (3) | Value | ||||||||||||||
Transportation (continued) | ||||||||||||||||||
| $ | 1,320 | San Francisco Airports Commission, California, Special Facilities Lease Revenue Bonds, San Francisco International Airport, SFO Fuel Company LLC, Series 2000A, 6.100%, 1/01/20 – AGM Insured (Alternative Minimum Tax) | 1/12 at 100.00 | AA+ | $ | 1,322,851 | ||||||||||||
| 14,515 | Total Transportation | 12,989,799 | ||||||||||||||||
U.S. Guaranteed – 0.2% (4) | ||||||||||||||||||
| 305 | Barstow Redevelopment Agency, California, Tax Allocation Bonds, Central Redevelopment Project, Series 1994, 7.000%, 9/01/14 – NPFG Insured (ETM) | No Opt. Call | BBB | (4) | 334,649 | |||||||||||||
Utilities – 6.0% | ||||||||||||||||||
| 4,000 | California Pollution Control Financing Authority, Remarketed Revenue Bonds, Pacific Gas and Electric Company, Series 1996A, 5.350%, 12/01/16 – NPFG Insured (Alternative Minimum Tax) | No Opt. Call | A3 | 4,086,240 | ||||||||||||||
| 595 | Merced Irrigation District, California, Electric System Revenue Bonds, Series 2005, 5.125%, 9/01/31 – SYNCORA GTY Insured | 9/15 at 100.00 | N/R | 537,391 | ||||||||||||||
| 1,950 | Salinas Valley Solid Waste Authority, California, Revenue Bonds, Series 2002, 5.250%, 8/01/27 – AMBAC Insured (Alternative Minimum Tax) | 8/12 at 100.00 | A+ | 1,927,126 | ||||||||||||||
| 2,700 | Santa Clara, California, Subordinate Electric Revenue Bonds, Series 2003A, 5.000%, 7/01/23 – NPFG Insured | 7/13 at 100.00 | A1 | 2,781,134 | ||||||||||||||
| 9,245 | Total Utilities | 9,331,891 | ||||||||||||||||
Water and Sewer – 1.4% | ||||||||||||||||||
| 1,000 | Brentwood Infrastructure Financing Authority, California, Water Revenue Bonds, Series 2008, 5.750%, 7/01/38 | 7/18 at 100.00 | AA | 1,067,009 | ||||||||||||||
| 1,000 | Orange County Water District, California, Revenue Certificates of Participation, Series 2005B, 5.000%, 8/15/24 – NPFG Insured | 2/15 at 100.00 | AAA | 1,089,569 | ||||||||||||||
| 2,000 | Total Water and Sewer | 2,156,578 | ||||||||||||||||
| $ | 185,030 | Total Investments (cost $155,801,980) – 97.6% | 151,274,236 | |||||||||||||||
Other Assets Less Liabilities – 2.4% | 3,777,470 | |||||||||||||||||
Net Assets – 100% | $ | 155,051,706 | ||||||||||||||||
| (1) | All percentages shown in the Portfolio of Investments are based on net assets. |
| (2) | Optional Call Provisions: 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. Certain mortgage-backed securities may be subject to periodic principal paydowns. |
| (3) | Ratings: Using the highest of Standard & Poor’s Group (“Standard & Poor’s”), Moody’s Investor Service, Inc. (“Moody’s”) or Fitch, Inc. (“Fitch”) rating. Ratings below BBB by Standard & Poor’s, Baa by Moody’s or BBB by Fitch are considered to be below investment grade. Holdings designated N/R are not rated by any of these national rating agencies. |
| (4) | Backed by an escrow or trust containing sufficient U.S. Government or U.S. Government agency securities, which ensure the timely payment of principal and interest. Bonds backed by U.S. Government or agency securities are given an implied rating equal to the rating of such securities. |
| N/R | Not rated. |
| (ETM) | Escrowed to maturity. |
See accompanying notes to financial statements.
| 38 | Nuveen Investments |
Statement of Assets and Liabilities (Unaudited)
August 31, 2011
| California High Yield | California | California 2 | ||||||||||
Assets | ||||||||||||
Investments, at value (cost $124,065,372, $298,139,291 and $155,801,980, respectively) | $ | 120,309,092 | $ | 297,239,001 | $ | 151,274,236 | ||||||
Cash | — | 5,075,080 | — | |||||||||
Receivables: | ||||||||||||
Interest | 2,882,531 | 4,725,644 | 1,579,786 | |||||||||
Investments sold | 464,840 | — | 3,039,019 | |||||||||
Shares sold | 377,221 | 526,046 | 42,416 | |||||||||
Other assets | — | 25,477 | 22,428 | |||||||||
Total assets | 124,033,684 | 307,591,248 | 155,957,885 | |||||||||
Liabilities | ||||||||||||
Cash overdraft | 1,265,696 | — | 442,521 | |||||||||
Unrealized depreciation on forward swaps | 920,872 | — | — | |||||||||
Payables: | ||||||||||||
Dividends | 229,581 | 590,701 | 182,187 | |||||||||
Investments purchased | 1,437,624 | — | — | |||||||||
Shares redeemed | 163,307 | 281,013 | 106,073 | |||||||||
Accrued expense: | ||||||||||||
Management fees | 58,942 | 139,142 | 71,051 | |||||||||
12b-1 distribution and service fees | 24,113 | 43,916 | 18,475 | |||||||||
Other | 42,145 | 132,616 | 85,872 | |||||||||
Total liabilities | 4,142,280 | 1,187,388 | 906,179 | |||||||||
Net assets | $ | 119,891,404 | $ | 306,403,860 | $ | 155,051,706 | ||||||
Class A Shares | ||||||||||||
Net assets | $ | 53,656,807 | $ | 132,374,269 | $ | 56,746,148 | ||||||
Shares outstanding | 6,780,909 | 13,291,556 | 5,702,825 | |||||||||
Net asset value per share | $ | 7.91 | $ | 9.96 | $ | 9.95 | ||||||
Offering price per share (net asset value per share plus | $ | 8.26 | $ | 10.40 | $ | 10.39 | ||||||
Class B Shares | ||||||||||||
Net assets | N/A | $ | 1,308,780 | $ | 906,248 | |||||||
Shares outstanding | N/A | 131,561 | 90,779 | |||||||||
Net asset value and offering price per share | N/A | $ | 9.95 | $ | 9.98 | |||||||
Class C Shares | ||||||||||||
Net assets | $ | 23,778,593 | $ | 32,627,594 | $ | 12,626,760 | ||||||
Shares outstanding | 3,006,721 | 3,286,528 | 1,274,943 | |||||||||
Net asset value and offering price per share | $ | 7.91 | $ | 9.93 | $ | 9.90 | ||||||
Class I Shares | ||||||||||||
Net assets | $ | 42,456,004 | $ | 140,093,217 | $ | 84,772,550 | ||||||
Shares outstanding | 5,370,813 | 14,085,795 | 8,503,536 | |||||||||
Net asset value and offering price per share | $ | 7.90 | $ | 9.95 | $ | 9.97 | ||||||
Net Assets Consist of: | ||||||||||||
Capital paid-in | $ | 131,520,095 | $ | 317,564,969 | $ | 161,092,852 | ||||||
Undistributed (Over-distribution of ) net investment income | 1,032,302 | 1,578,025 | 894,301 | |||||||||
Accumulated net realized gain (loss) | (7,983,841 | ) | (11,838,844 | ) | (2,407,703 | ) | ||||||
Net unrealized appreciation (depreciation) | (4,677,152 | ) | (900,290 | ) | (4,527,744 | ) | ||||||
Net assets | $ | 119,891,404 | $ | 306,403,860 | $ | 155,051,706 | ||||||
Authorized shares | Unlimited | Unlimited | Unlimited | |||||||||
Par value per share | $ | 0.01 | $ | 0.01 | $ | 0.01 | ||||||
N/A – California High Yield does not issue Class B Shares.
See accompanying notes to financial statements.
| Nuveen Investments | 39 |
Statement of Operations (Unaudited)
Six Months Ended August 31, 2011
| California High Yield | California | California 2 | ||||||||||
Investment Income | $ | 4,676,802 | $ | 8,593,250 | $ | 4,156,254 | ||||||
Expenses | ||||||||||||
Management fees | 339,839 | 776,252 | 412,381 | |||||||||
12b-1 service fees – Class A | 56,186 | 132,243 | 56,950 | |||||||||
12b-1 distribution and service fees – Class B | N/A | 7,544 | 6,178 | |||||||||
12b-1 distribution and service fees – Class C | 78,670 | 107,852 | 46,762 | |||||||||
Shareholders’ servicing agent fees and expenses | 18,895 | 74,023 | 38,978 | |||||||||
Custodian’s fees and expenses | 15,952 | 31,085 | 13,519 | |||||||||
Trustees’ fee and expenses | 1,422 | 3,678 | 1,870 | |||||||||
Professional fees | 12,414 | 8,856 | 7,871 | |||||||||
Shareholders’ reports – printing and mailing expenses | 12,439 | 32,084 | 22,415 | |||||||||
Federal and state registration fees | 4,796 | 1,615 | 1,812 | |||||||||
Other expenses | 1,159 | 2,616 | 1,168 | |||||||||
Total expenses before custodian fee credit | 541,772 | 1,177,848 | 609,904 | |||||||||
Custodian fee credit | (131 | ) | (294 | ) | (1,114 | ) | ||||||
Net expenses | 541,641 | 1,177,554 | 608,790 | |||||||||
Net investment income (loss) | 4,135,161 | 7,415,696 | 3,547,464 | |||||||||
Realized and Unrealized Gain (Loss) | ||||||||||||
Net realized gain (loss) from: | ||||||||||||
Investments | (540,112 | ) | 2,125,733 | (105,028 | ) | |||||||
Forward swaps | (125,800 | ) | — | — | ||||||||
Change in net unrealized appreciation (depreciation) of: | ||||||||||||
Investments | 9,698,919 | 12,896,045 | 7,496,017 | |||||||||
Forward swaps | (853,238 | ) | — | — | ||||||||
Net realized and unrealized gain (loss) | 8,179,769 | 15,021,778 | 7,390,989 | |||||||||
Net increase (decrease) in net assets from operations | $ | 12,314,930 | $ | 22,437,474 | $ | 10,938,453 | ||||||
N/A – California High Yield does not issue Class B Shares.
See accompanying notes to financial statements.
| 40 | Nuveen Investments |
Statement of Changes in Net Assets (Unaudited)
| California High Yield | California | California 2 | ||||||||||||||||||||||
| Six Months Ended 8/31/11 | Year Ended 2/28/11 | Six Months Ended 8/31/11 | Year Ended 2/28/11 | Six Months Ended 8/31/11 | Year Ended 2/28/11 | |||||||||||||||||||
Operations | ||||||||||||||||||||||||
Net investment income (loss) | $ | 4,135,161 | $ | 7,644,750 | $ | 7,415,696 | $ | 14,487,219 | $ | 3,547,464 | $ | 8,043,735 | ||||||||||||
Net realized gain (loss) from: | ||||||||||||||||||||||||
Investments | (540,112 | ) | 69,782 | 2,125,733 | 673,815 | (105,028 | ) | (1,164,351 | ) | |||||||||||||||
Forward swaps | (125,800 | ) | (248,571 | ) | — | — | — | — | ||||||||||||||||
Change in net unrealized appreciation (depreciation) of: | ||||||||||||||||||||||||
Investments | 9,698,919 | (9,054,186 | ) | 12,896,045 | (11,914,496 | ) | 7,496,017 | (8,126,684 | ) | |||||||||||||||
Forward swaps | (853,238 | ) | (124,834 | ) | — | — | — | — | ||||||||||||||||
Net increase (decrease) in net assets from operations | 12,314,930 | (1,713,059 | ) | 22,437,474 | 3,246,538 | 10,938,453 | (1,247,300 | ) | ||||||||||||||||
Distributions to Shareholders | ||||||||||||||||||||||||
From net investment income: | ||||||||||||||||||||||||
Class A | (1,842,684 | ) | (3,786,851 | ) | (3,142,610 | ) | (5,943,619 | ) | (1,268,786 | ) | (3,010,759 | ) | ||||||||||||
Class B | N/A | N/A | (31,819 | ) | (98,949 | ) | (24,120 | ) | (74,298 | ) | ||||||||||||||
Class C | (634,906 | ) | (1,037,625 | ) | (604,155 | ) | (1,111,252 | ) | (244,041 | ) | (480,390 | ) | ||||||||||||
Class I | (1,367,478 | ) | (2,351,189 | ) | (3,367,578 | ) | (6,760,241 | ) | (1,989,790 | ) | (4,159,824 | ) | ||||||||||||
Decrease in net assets from distributions to shareholders | (3,845,068 | ) | (7,175,665 | ) | (7,146,162 | ) | (13,914,061 | ) | (3,526,737 | ) | (7,725,271 | ) | ||||||||||||
Fund Share Transactions | ||||||||||||||||||||||||
Proceeds from sale of shares | 21,532,238 | 70,666,004 | 19,531,891 | 75,312,274 | 2,624,255 | 9,322,551 | ||||||||||||||||||
Proceeds from shares issued to shareholders due to reinvestment of distributions | 2,570,813 | 4,491,282 | 3,574,722 | 7,310,079 | 2,328,099 | 4,671,188 | ||||||||||||||||||
| 24,103,051 | 75,157,286 | 23,106,613 | 82,622,353 | 4,952,354 | 13,993,739 | |||||||||||||||||||
Cost of shares redeemed | (28,898,087 | ) | (39,251,927 | ) | (29,148,622 | ) | (77,261,765 | ) | (14,562,674 | ) | (40,215,641 | ) | ||||||||||||
Net increase (decrease) in net assets from Fund share transactions | (4,795,036 | ) | 35,905,359 | (6,042,009 | ) | 5,360,588 | (9,610,320 | ) | (26,221,902 | ) | ||||||||||||||
Net increase (decrease) in net assets | 3,674,826 | 27,016,635 | 9,249,303 | (5,306,935 | ) | (2,198,604 | ) | (35,194,473 | ) | |||||||||||||||
Net assets at the beginning of period | 116,216,578 | 89,199,943 | 297,154,557 | 302,461,492 | 157,250,310 | 192,444,783 | ||||||||||||||||||
Net assets at the end of period | $ | 119,891,404 | $ | 116,216,578 | $ | 306,403,860 | $ | 297,154,557 | $ | 155,051,706 | $ | 157,250,310 | ||||||||||||
Undistributed (Over-distribution of) net investment income at the end of period | $ | 1,032,302 | $ | 742,209 | $ | 1,578,025 | $ | 1,308,491 | $ | 894,301 | $ | 873,574 | ||||||||||||
N/A – California High Yield does not issue Class B Shares.
See accompanying notes to financial statements.
| Nuveen Investments | 41 |
Financial Highlights (Unaudited)
| Selected data for a share outstanding throughout each period: | ||||||||||||||||||||||||||||||||||||
| Class (Commencement Date) | ||||||||||||||||||||||||||||||||||||
| Investment Operations | Less Distributions | |||||||||||||||||||||||||||||||||||
| CALIFORNIA HIGH YIELD | ||||||||||||||||||||||||||||||||||||
| Year Ended February 28/29, | Beginning Net Asset Value | Net Invest- ment Income (Loss)(a) | Net Realized/ Unrealized Gain (Loss) | Total | Net Invest- ment Income | Capital Gains(b) | Total | Ending Net Asset Value | Total Return(c) | |||||||||||||||||||||||||||
Class A (3/06) |
| |||||||||||||||||||||||||||||||||||
2012(i) | $ | 7.36 | $ | .28 | $ | .52 | $ | .80 | $ | (.25 | ) | $ | — | $ | (.25 | ) | $ | 7.91 | 11.06 | % | ||||||||||||||||
2011 | 7.87 | .52 | (.54 | ) | (.02 | ) | (.49 | ) | — | (.49 | ) | 7.36 | (.56 | ) | ||||||||||||||||||||||
2010 | 6.51 | .51 | 1.34 | 1.85 | (.49 | ) | — | (.49 | ) | 7.87 | 29.23 | |||||||||||||||||||||||||
2009 | 8.24 | .48 | (1.76 | ) | (1.28 | ) | (.45 | ) | — | (.45 | ) | 6.51 | (16.06 | ) | ||||||||||||||||||||||
2008 | 10.43 | .45 | (2.19 | ) | (1.74 | ) | (.45 | ) | — | ** | (.45 | ) | 8.24 | (17.19 | ) | |||||||||||||||||||||
2007(g) | 10.00 | .39 | .42 | .81 | (.38 | ) | — | (.38 | ) | 10.43 | 8.19 | |||||||||||||||||||||||||
Class C (3/06) |
| |||||||||||||||||||||||||||||||||||
2012(i) | 7.36 | .25 | .53 | .78 | (.23 | ) | — | (.23 | ) | 7.91 | 10.79 | |||||||||||||||||||||||||
2011 | 7.87 | .48 | (.54 | ) | (.06 | ) | (.45 | ) | — | (.45 | ) | 7.36 | (1.07 | ) | ||||||||||||||||||||||
2010 | 6.51 | .47 | 1.34 | 1.81 | (.45 | ) | — | (.45 | ) | 7.87 | 28.56 | |||||||||||||||||||||||||
2009 | 8.24 | .44 | (1.76 | ) | (1.32 | ) | (.41 | ) | — | (.41 | ) | 6.51 | (16.55 | ) | ||||||||||||||||||||||
2008 | 10.42 | .40 | (2.19 | ) | (1.79 | ) | (.39 | ) | — | ** | (.39 | ) | 8.24 | (17.61 | ) | |||||||||||||||||||||
2007(g) | 10.00 | .33 | .42 | .75 | (.33 | ) | — | (.33 | ) | 10.42 | 7.56 | |||||||||||||||||||||||||
Class I (3/06)(h) |
| |||||||||||||||||||||||||||||||||||
2012(i) | 7.35 | .28 | .53 | .81 | (.26 | ) | — | (.26 | ) | 7.90 | 11.20 | |||||||||||||||||||||||||
2011 | 7.86 | .53 | (.53 | ) | — | (.51 | ) | — | (.51 | ) | 7.35 | (.34 | ) | |||||||||||||||||||||||
2010 | 6.50 | .52 | 1.34 | 1.86 | (.50 | ) | — | (.50 | ) | 7.86 | 29.54 | |||||||||||||||||||||||||
2009 | 8.24 | .50 | (1.77 | ) | (1.27 | ) | (.47 | ) | — | (.47 | ) | 6.50 | (16.01 | ) | ||||||||||||||||||||||
2008 | 10.43 | .47 | (2.19 | ) | (1.72 | ) | (.47 | ) | — | ** | (.47 | ) | 8.24 | (17.04 | ) | |||||||||||||||||||||
2007(g) | 10.00 | .45 | .37 | .82 | (.39 | ) | — | (.39 | ) | 10.43 | 8.35 | |||||||||||||||||||||||||
| 42 | Nuveen Investments |
| Ratios/Supplemental Data | ||||||||||||||||||||||||||||||
| Ratios to Average Net Assets Before Reimbursement(d) | Ratios to Average Net Assets After Reimbursement(d)(e) | |||||||||||||||||||||||||||||
| Ending Net Assets (000) | Expenses Including Interest(f) | Expenses Excluding Interest | Net Invest- ment Income (Loss) | Expenses Including Interest(f) | Expenses Excluding Interest | Net (Loss) | Portfolio Turnover Rate | |||||||||||||||||||||||
| $ | 53,657 | .89 | %* | .89 | %* | 7.08 | %* | .89 | %* | .89 | %* | 7.08 | %* | 16 | % | |||||||||||||||
| 60,178 | .90 | .90 | 6.53 | .90 | .90 | 6.53 | 17 | |||||||||||||||||||||||
| 40,864 | .94 | .94 | 6.91 | .94 | .94 | 6.91 | 23 | |||||||||||||||||||||||
| 32,290 | 1.01 | .92 | 6.13 | 1.01 | .92 | 6.13 | 55 | |||||||||||||||||||||||
| 42,252 | 1.43 | .99 | 4.58 | 1.37 | .93 | 4.64 | 25 | |||||||||||||||||||||||
| 14,539 | 1.84 | * | 1.26 | * | 3.63 | * | 1.52 | * | .94 | * | 3.96 | * | 3 | |||||||||||||||||
| 23,779 | 1.44 | * | 1.44 | * | 6.51 | * | 1.44 | %* | 1.44 | %* | 6.51 | %* | 16 | |||||||||||||||||
| 19,035 | 1.45 | 1.45 | 6.00 | 1.45 | 1.45 | 6.00 | 17 | |||||||||||||||||||||||
| 15,971 | 1.49 | 1.49 | 6.25 | 1.49 | 1.49 | 6.25 | 23 | |||||||||||||||||||||||
| 6,718 | 1.56 | 1.47 | 5.69 | 1.56 | 1.47 | 5.69 | 55 | |||||||||||||||||||||||
| 6,382 | 1.97 | 1.53 | 4.02 | 1.92 | 1.48 | 4.08 | 25 | |||||||||||||||||||||||
| 3,061 | 2.44 | * | 1.86 | * | 2.99 | * | 2.07 | * | 1.49 | * | 3.36 | * | 3 | |||||||||||||||||
| 42,456 | .69 | * | .69 | * | 7.28 | * | .69 | %* | .69 | %* | 7.28 | %* | 16 | |||||||||||||||||
| 37,004 | .70 | .70 | 6.74 | .70 | .70 | 6.74 | 17 | |||||||||||||||||||||||
| 32,212 | .74 | .74 | 7.09 | .74 | .74 | 7.09 | 23 | |||||||||||||||||||||||
| 16,146 | .81 | .72 | 6.80 | .81 | .72 | 6.80 | 55 | |||||||||||||||||||||||
| 4,889 | 1.21 | .77 | 4.89 | 1.17 | .73 | 4.92 | 25 | |||||||||||||||||||||||
| 106 | 1.58 | * | 1.00 | * | 4.32 | * | 1.31 | * | .73 | * | 4.58 | * | 3 | |||||||||||||||||
| (a) | Per share Net Investment Income (Loss) is calculated using the average daily shares method. |
| (b) | Distributions from Capital Gains include short-term capital gains, if any. |
| (c) | Total return is the combination of changes in net asset value without any sales charge, reinvested dividend income at net asset value and reinvested capital gains distributions at net asset value, if any. Total returns are not annualized. |
| (d) | Ratios do not reflect the effect of custodian fee credits earned on the Fund’s net cash on deposit with the custodian bank, where applicable. |
| (e) | After expense reimbursement from the Adviser, where applicable. |
| (f) | The expense ratios reflect, among other things, the interest expense deemed to have been paid by the Fund on the floating rate certificates issued by the special purpose trusts for the self-deposited inverse floaters held by the Fund, where applicable, as described in Footnote 1 – General Information and Significant Accounting Policies, Inverse Floating Rate Securities. |
| (g) | For the period March 28, 2006 (commencement of operations) through February 28, 2007. |
| (h) | Effective May 1, 2008, Class R Shares were renamed Class I Shares. |
| (i) | For the six months ended August 31, 2011. |
| * | Annualized. |
| ** | Rounds to less than $.01 per share. |
See accompanying notes to financial statements.
| Nuveen Investments | 43 |
Financial Highlights (Unaudited) (continued)
| Selected data for a share outstanding throughout each period: | ||||||||||||||||||||||||||||||||||||
| Class (Commencement Date) | ||||||||||||||||||||||||||||||||||||
| Investment Operations | Less Distributions | |||||||||||||||||||||||||||||||||||
| CALIFORNIA | ||||||||||||||||||||||||||||||||||||
| Year Ended February 28/29, | Beginning Net Asset Value | Net Income | Net Realized/ Unrealized Gain (Loss) | Total | Net Invest- ment Income | Capital Gains(b) | Total | Ending Net Asset Value | Total Return(c) | |||||||||||||||||||||||||||
Class A (9/94) |
| |||||||||||||||||||||||||||||||||||
2012(g) | $ | 9.46 | $ | .24 | $ | .49 | $ | .73 | $ | (.23 | ) | $ | — | $ | (.23 | ) | $ | 9.96 | 7.82 | % | ||||||||||||||||
2011 | 9.80 | .47 | (.36 | ) | .11 | (.45 | ) | — | (.45 | ) | 9.46 | 1.05 | ||||||||||||||||||||||||
2010 | 8.96 | .46 | .82 | 1.28 | (.44 | ) | — | (.44 | ) | 9.80 | 14.56 | |||||||||||||||||||||||||
2009 | 9.50 | .44 | (.55 | ) | (.11 | ) | (.43 | ) | — | (.43 | ) | 8.96 | (1.25 | ) | ||||||||||||||||||||||
2008 | 10.50 | .43 | (1.00 | ) | (.57 | ) | (.43 | ) | — | (.43 | ) | 9.50 | (5.65 | ) | ||||||||||||||||||||||
2007 | 10.43 | .43 | .07 | .50 | (.43 | ) | — | (.43 | ) | 10.50 | 4.88 | |||||||||||||||||||||||||
Class B (3/97) |
| |||||||||||||||||||||||||||||||||||
2012(g) | 9.45 | .21 | .49 | .70 | (.20 | ) | — | (.20 | ) | 9.95 | 7.43 | |||||||||||||||||||||||||
2011 | 9.80 | .39 | (.36 | ) | .03 | (.38 | ) | — | (.38 | ) | 9.45 | .19 | ||||||||||||||||||||||||
2010 | 8.96 | .39 | .82 | 1.21 | (.37 | ) | — | (.37 | ) | 9.80 | 13.75 | |||||||||||||||||||||||||
2009 | 9.50 | .37 | (.55 | ) | (.18 | ) | (.36 | ) | — | (.36 | ) | 8.96 | (1.99 | ) | ||||||||||||||||||||||
2008 | 10.49 | .36 | (1.00 | ) | (.64 | ) | (.35 | ) | — | (.35 | ) | 9.50 | (6.28 | ) | ||||||||||||||||||||||
2007 | 10.42 | .35 | .07 | .42 | (.35 | ) | — | (.35 | ) | 10.49 | 4.10 | |||||||||||||||||||||||||
Class C (9/94) |
| |||||||||||||||||||||||||||||||||||
2012(g) | 9.43 | .21 | .49 | .70 | (.20 | ) | — | (.20 | ) | 9.93 | 7.55 | |||||||||||||||||||||||||
2011 | 9.78 | .41 | (.36 | ) | .05 | (.40 | ) | — | (.40 | ) | 9.43 | .39 | ||||||||||||||||||||||||
2010 | 8.94 | .41 | .82 | 1.23 | (.39 | ) | — | (.39 | ) | 9.78 | 14.00 | |||||||||||||||||||||||||
2009 | 9.48 | .39 | (.55 | ) | (.16 | ) | (.38 | ) | — | (.38 | ) | 8.94 | (1.80 | ) | ||||||||||||||||||||||
2008 | 10.47 | .38 | (1.00 | ) | (.62 | ) | (.37 | ) | — | (.37 | ) | 9.48 | (6.07 | ) | ||||||||||||||||||||||
2007 | 10.41 | .37 | .06 | .43 | (.37 | ) | — | (.37 | ) | 10.47 | 4.25 | |||||||||||||||||||||||||
Class I (7/86)(f) |
| |||||||||||||||||||||||||||||||||||
2012(g) | 9.45 | .25 | .49 | .74 | (.24 | ) | — | (.24 | ) | 9.95 | 7.93 | |||||||||||||||||||||||||
2011 | 9.79 | .49 | (.36 | ) | .13 | (.47 | ) | — | (.47 | ) | 9.45 | 1.23 | ||||||||||||||||||||||||
2010 | 8.95 | .48 | .82 | 1.30 | (.46 | ) | — | (.46 | ) | 9.79 | 14.80 | |||||||||||||||||||||||||
2009 | 9.49 | .46 | (.55 | ) | (.09 | ) | (.45 | ) | — | (.45 | ) | 8.95 | (1.02 | ) | ||||||||||||||||||||||
2008 | 10.49 | .45 | (1.00 | ) | (.55 | ) | (.45 | ) | — | (.45 | ) | 9.49 | (5.43 | ) | ||||||||||||||||||||||
2007 | 10.43 | .45 | .06 | .51 | (.45 | ) | — | (.45 | ) | 10.49 | 5.03 | |||||||||||||||||||||||||
| 44 | Nuveen Investments |
| Ratios/Supplemental Data | ||||||||||||||||||
| Ratios to Average Net Assets(d) | ||||||||||||||||||
| Ending Net Assets (000) | Expenses Including Interest(e) | Expenses Excluding Interest | Net Invest- ment Income (Loss) | Portfolio Turnover Rate | ||||||||||||||
| $ | 132,374 | .82 | %* | .82 | %* | 4.93 | %* | 7 | % | |||||||||
| 136,513 | .81 | .81 | 4.77 | 18 | ||||||||||||||
| 128,672 | .86 | .85 | 4.86 | 14 | ||||||||||||||
| 106,117 | .90 | .85 | 4.66 | 40 | ||||||||||||||
| 107,241 | .97 | .82 | 4.23 | 50 | ||||||||||||||
| 91,465 | 1.09 | .83 | 4.13 | 20 | ||||||||||||||
| 1,309 | 1.57 | * | 1.57 | * | 4.16 | * | 7 | |||||||||||
| 1,960 | 1.56 | 1.56 | 4.00 | 18 | ||||||||||||||
| 3,276 | 1.61 | 1.60 | 4.13 | 14 | ||||||||||||||
| 4,337 | 1.65 | 1.60 | 3.87 | 40 | ||||||||||||||
| 7,175 | 1.72 | 1.57 | 3.46 | 50 | ||||||||||||||
| 10,076 | 1.85 | 1.59 | 3.38 | 20 | ||||||||||||||
| 32,628 | 1.37 | * | 1.37 | * | 4.37 | * | 7 | |||||||||||
| 26,338 | 1.36 | 1.36 | 4.21 | 18 | ||||||||||||||
| 25,552 | 1.41 | 1.40 | 4.31 | 14 | ||||||||||||||
| 20,484 | 1.45 | 1.40 | 4.10 | 40 | ||||||||||||||
| 25,306 | 1.52 | 1.37 | 3.68 | 50 | ||||||||||||||
| 23,067 | 1.64 | 1.38 | 3.58 | 20 | ||||||||||||||
| 140,093 | .62 | * | .62 | * | 5.13 | * | 7 | |||||||||||
| 132,344 | .61 | .61 | 4.96 | 18 | ||||||||||||||
| 144,962 | .66 | .65 | 5.07 | 14 | ||||||||||||||
| 151,650 | .70 | .65 | 4.87 | 40 | ||||||||||||||
| 164,365 | .77 | .62 | 4.43 | 50 | ||||||||||||||
| 167,300 | .89 | .63 | 4.33 | 20 | ||||||||||||||
| (a) | Per share Net Investment Income (Loss) is calculated using the average daily shares method. |
| (b) | Distributions from Capital Gains include short-term capital gains, if any. |
| (c) | Total return is the combination of changes in net asset value without any sales charge, reinvested dividend income at net asset value and reinvested capital gains distributions at net asset value, if any. Total returns are not annualized. |
| (d) | Ratios do not reflect the effect of custodian fee credits earned on the Fund’s net cash on deposit with the custodian bank, where applicable. The Fund did not receive an expense reimbursement from the Adviser during the periods presented herein. |
| (e) | The expense ratios reflect, among other things, the interest expense deemed to have been paid by the Fund on the floating rate certificates issued by the special purpose trusts for the self-deposited inverse floaters held by the Fund, where applicable, as described in Footnote 1 – General Information and Significant Accounting Policies, Inverse Floating Rate Securities. |
| (f) | Effective May 1, 2008, Class R Shares were renamed Class I Shares. |
| (g) | For the six months ended August 31, 2011. |
| * | Annualized. |
See accompanying notes to financial statements.
| Nuveen Investments | 45 |
Financial Highlights (Unaudited) (continued)
| Selected data for a share outstanding throughout each period: | ||||||||||||||||||||||||||||||||||||
| Class (Commencement Date) | ||||||||||||||||||||||||||||||||||||
| Investment Operations | Less Distributions | |||||||||||||||||||||||||||||||||||
| CALIFORNIA 2 | ||||||||||||||||||||||||||||||||||||
| Year Ended February 28/29, | Beginning Net Asset Value | Net Invest- ment Income (Loss)(a) | Net Realized/ Unrealized Gain (Loss) | Total | Net Invest- ment Income | Capital Gains(b) | Total | Ending Net Asset Value | Total Return(c) | |||||||||||||||||||||||||||
Class A (9/94) | ||||||||||||||||||||||||||||||||||||
2012(g) | $ | 9.49 | $ | .22 | $ | .46 | $ | .68 | $ | (.22 | ) | $ | — | $ | (.22 | ) | $ | 9.95 | 7.21 | % | ||||||||||||||||
2011 | 9.99 | .43 | (.51 | ) | (.08 | ) | (.42 | ) | — | (.42 | ) | 9.49 | (.96 | ) | ||||||||||||||||||||||
2010 | 9.40 | .43 | .57 | 1.00 | (.41 | ) | — | (.41 | ) | 9.99 | 10.87 | |||||||||||||||||||||||||
2009 | 9.83 | .43 | (.44 | ) | (.01 | ) | (.41 | ) | (.01 | ) | (.42 | ) | 9.40 | (.06 | ) | |||||||||||||||||||||
2008 | 10.84 | .43 | (.95 | ) | (.52 | ) | (.43 | ) | (.06 | ) | (.49 | ) | 9.83 | (5.04 | ) | |||||||||||||||||||||
2007 | 10.87 | .43 | .03 | .46 | (.44 | ) | (.05 | ) | (.49 | ) | 10.84 | 4.33 | ||||||||||||||||||||||||
Class B (3/97) | ||||||||||||||||||||||||||||||||||||
2012(g) | 9.51 | .19 | .46 | .65 | (.18 | ) | — | (.18 | ) | 9.98 | 6.91 | |||||||||||||||||||||||||
2011 | 10.02 | .36 | (.53 | ) | (.17 | ) | (.34 | ) | — | (.34 | ) | 9.51 | (1.77 | ) | ||||||||||||||||||||||
2010 | 9.43 | .36 | .57 | .93 | (.34 | ) | — | (.34 | ) | 10.02 | 10.03 | |||||||||||||||||||||||||
2009 | 9.85 | .36 | (.43 | ) | (.07 | ) | (.34 | ) | (.01 | ) | (.35 | ) | 9.43 | (.73 | ) | |||||||||||||||||||||
2008 | 10.86 | .35 | (.96 | ) | (.61 | ) | (.34 | ) | (.06 | ) | (.40 | ) | 9.85 | (5.77 | ) | |||||||||||||||||||||
2007 | 10.89 | .35 | .02 | .37 | (.35 | ) | (.05 | ) | (.40 | ) | 10.86 | 3.52 | ||||||||||||||||||||||||
Class C (9/94) | ||||||||||||||||||||||||||||||||||||
2012(g) | 9.44 | .19 | .46 | .65 | (.19 | ) | — | (.19 | ) | 9.90 | 6.95 | |||||||||||||||||||||||||
2011 | 9.95 | .38 | (.53 | ) | (.15 | ) | (.36 | ) | — | (.36 | ) | 9.44 | (1.60 | ) | ||||||||||||||||||||||
2010 | 9.36 | .37 | .58 | .95 | (.36 | ) | — | (.36 | ) | 9.95 | 10.31 | |||||||||||||||||||||||||
2009 | 9.78 | .37 | (.42 | ) | (.05 | ) | (.36 | ) | (.01 | ) | (.37 | ) | 9.36 | (.55 | ) | |||||||||||||||||||||
2008 | 10.79 | .37 | (.96 | ) | (.59 | ) | (.36 | ) | (.06 | ) | (.42 | ) | 9.78 | (5.62 | ) | |||||||||||||||||||||
2007 | 10.81 | .37 | .03 | .40 | (.37 | ) | (.05 | ) | (.42 | ) | 10.79 | 3.81 | ||||||||||||||||||||||||
Class I (7/86)(f) |
| |||||||||||||||||||||||||||||||||||
2012(g) | 9.51 | .23 | .46 | .69 | (.23 | ) | — | (.23 | ) | 9.97 | 7.30 | |||||||||||||||||||||||||
2011 | 10.01 | .45 | (.51 | ) | (.06 | ) | (.44 | ) | — | (.44 | ) | 9.51 | (.75 | ) | ||||||||||||||||||||||
2010 | 9.42 | .45 | .57 | 1.02 | (.43 | ) | — | (.43 | ) | 10.01 | 11.05 | |||||||||||||||||||||||||
2009 | 9.84 | .45 | (.43 | ) | .02 | (.43 | ) | (.01 | ) | (.44 | ) | 9.42 | .23 | |||||||||||||||||||||||
2008 | 10.85 | .45 | (.96 | ) | (.51 | ) | (.44 | ) | (.06 | ) | (.50 | ) | 9.84 | (4.87 | ) | |||||||||||||||||||||
2007 | 10.87 | .45 | .04 | .49 | (.46 | ) | (.05 | ) | (.51 | ) | 10.85 | 4.60 | ||||||||||||||||||||||||
| 46 | Nuveen Investments |
| Ratios/Supplemental Data | ||||||||||||||||||
| Ratios to Average Net Assets(d) | ||||||||||||||||||
| Ending Net Assets (000) | Expenses Including Interest(e) | Expenses Excluding Interest | Net Invest- ment Income (Loss) | Portfolio Turnover Rate | ||||||||||||||
| $ | 56,746 | .84 | %* | .84 | %* | 4.47 | %* | 10 | % | |||||||||
| 57,581 | .83 | .83 | 4.34 | 3 | ||||||||||||||
| 78,338 | .86 | .86 | 4.39 | 1 | ||||||||||||||
| 77,517 | .85 | .85 | 4.38 | 9 | ||||||||||||||
| 80,867 | .91 | .83 | 4.03 | 21 | ||||||||||||||
| 89,343 | .86 | .83 | 4.02 | 16 | ||||||||||||||
| 906 | 1.59 | * | 1.59 | * | 3.70 | * | 10 | |||||||||||
| 1,691 | 1.58 | 1.58 | 3.58 | 3 | ||||||||||||||
| 2,851 | 1.61 | 1.61 | 3.66 | 1 | ||||||||||||||
| 4,867 | 1.60 | 1.60 | 3.60 | 9 | ||||||||||||||
| 7,890 | 1.66 | 1.58 | 3.28 | 21 | ||||||||||||||
| 12,845 | 1.61 | 1.58 | 3.27 | 16 | ||||||||||||||
| 12,627 | 1.39 | * | 1.39 | * | 3.92 | * | 10 | |||||||||||
| 12,624 | 1.38 | 1.38 | 3.80 | 3 | ||||||||||||||
| 12,599 | 1.41 | 1.41 | 3.84 | 1 | ||||||||||||||
| 11,668 | 1.40 | 1.40 | 3.83 | 9 | ||||||||||||||
| 12,455 | 1.46 | 1.38 | 3.48 | 21 | ||||||||||||||
| 13,500 | 1.41 | 1.38 | 3.47 | 16 | ||||||||||||||
| 84,773 | .64 | * | .64 | * | 4.67 | * | 10 | |||||||||||
| 85,354 | .63 | .63 | 4.54 | 3 | ||||||||||||||
| 98,657 | .66 | .66 | 4.59 | 1 | ||||||||||||||
| 95,255 | .65 | .65 | 4.57 | 9 | ||||||||||||||
| 112,282 | .71 | .63 | 4.23 | 21 | ||||||||||||||
| 129,276 | .66 | .63 | 4.22 | 16 | ||||||||||||||
| (a) | Per share Net Investment Income (Loss) is calculated using the average daily shares method. |
| (b) | Distributions from Capital Gains include short-term capital gains, if any. |
| (c) | Total return is the combination of changes in net asset value without any sales charge, reinvested dividend income at net asset value and reinvested capital gains distributions at net asset value, if any. Total returns are not annualized. |
| (d) | Ratios do not reflect the effect of custodian fee credits earned on the Fund’s net cash on deposit with the custodian bank, where applicable. The Fund did not receive an expense reimbursement from the Adviser during the periods presented herein. |
| (e) | The expense ratios reflect, among other things, the interest expense deemed to have been paid by the Fund on the floating rate certificates issued by the special purpose trusts for the self-deposited inverse floaters held by the Fund, where applicable, as described in Footnote 1 – General Information and Significant Accounting Policies, Inverse Floating Rate Securities. |
| (f) | Effective May 1, 2008, Class R Shares were renamed Class I Shares. |
| (g) | For the six months ended August 31, 2011. |
| * | Annualized. |
See accompanying notes to financial statements.
| Nuveen Investments | 47 |
Notes to Financial Statements (Unaudited)
1. General Information and Significant Accounting Policies
General Information
The Nuveen Multistate Trust II (the “Trust”) is an open-end investment company registered under the Investment Company Act of 1940, as amended. The Trust is comprised of Nuveen California High Yield Municipal Bond Fund (“California High Yield”), Nuveen California Municipal Bond Fund (“California”) and Nuveen California Municipal Bond Fund 2 (“California 2”) (formerly, Nuveen California Insured Municipal Bond Fund) (each a “Fund” and collectively, the “Funds”), among others. The Trust was organized as a Massachusetts business trust on July 1, 1996. California and California 2 were each organized as a series of predecessor trusts or corporations prior to that date.
Effective April 27, 2011, California 2 was closed to new investors. Investors in the Fund as of April 27, 2011, are able to continue investing in the Fund, through the reinvestment of dividends and capital gains distributions.
Effective April 30, 2011, Nuveen Investments, LLC, a wholly-owned subsidiary of Nuveen Investments, Inc. (“Nuveen”), changed its name to Nuveen Securities, LLC (the “Distributor”).
California High Yield’s investment objective is to provide high current income exempt from regular federal, California state and, in some cases, California local income taxes. Total return is a secondary objective when consistent with the Fund’s primary objective. Under normal market conditions, the Fund invests at least 80% of its net assets in municipal bonds that pay interest that is exempt from regular federal and California personal income tax. The Fund invests at least 65% of its net assets in medium- to low-quality bonds rated BBB/Baa or lower and may invest up to 10% of its net assets in defaulted municipal bonds (ie., bonds on which the issuer has not paid principal or interest on time). The Fund may invest up to 15% of its net assets in municipal securities whose interest payments vary inversely with changes in short-term tax-exempt interest rates (i.e., inverse floating rate securities).
California’s investment objective is to provide as high a level of current interest income exempt from regular federal, California state and, in some cases, California local income taxes as is consistent with preservation of capital. Under normal market conditions, the Fund invests at least 80% of its net assets in municipal bonds that pay interest that is exempt from regular federal and California personal income tax. The Fund invests at least 80% of its net assets in investment grade municipal bonds rated BBB/Baa or higher at the time of purchase by at least one independent rating agency, or, if unrated, judged by the Nuveen Asset Management, LLC (the “Sub-Adviser”), a wholly-owned subsidiary of Nuveen Fund Advisors, Inc., (the “Adviser”), a wholly-owned subsidiary of Nuveen, to be of comparable quality. The Fund may invest up to 20% of its net assets in below investment grade municipal bonds, commonly referred to as “high yield” or “junk” bonds. The Fund may invest up to 15% of its net assets in municipal securities whose interest payments vary inversely with changes in short-term tax-exempt interest rates (i.e., inverse floating rate securities).
California 2’s investment objective is to provide as high a level of current interest income exempt from regular federal, California state and, in some cases, California local income taxes as is consistent with preservation of capital. Under normal market conditions, the Fund invests at least 80% of its net assets in municipal bonds that pay interest that is exempt from regular federal and California personal income tax. The municipal securities in which the Fund invests are, at the time of purchase, (i) rated BBB/Baa or higher, (ii) unrated, but judged to be of comparable quality by the Sub-Adviser; or (iii) backed by an escrow or trust account containing sufficient U.S. Government or U.S. government agency securities to ensure timely payment of principle and interest. The Fund may invest up to 15% of its net assets in municipal securities whose interest payments vary inversely with changes in short-term tax-exempt interest rates (i.e., inverse floating rate securities).
The Funds’ most recent prospectus provides further descriptions of each Fund’s investment objective, principal investment strategies and principal risks.
After the close of business on June 30, 2010, all outstanding Class B Shares of California High Yield were converted to Class A Shares, and Class B Shares are no longer issued by the Fund.
Significant Accounting Policies
The following is a summary of significant accounting policies followed by the Funds in the preparation of their financial statements in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”).
Investment Valuation
Prices of municipal bonds and forward swaps are provided by a pricing service approved by the Funds’ Board of Trustees. These securities are generally classified as Level 2 for fair value measurement purposes. When price quotes are not readily available (which is usually the case for municipal bonds) the pricing service establishes a security’s fair value using methods that may include consideration of the following: yields or prices of investments of comparable quality, type of issue, coupon, maturity and rating, market quotes or indications of value from security dealers, evaluations of anticipated cash flows or collateral, general market conditions and other information and analysis, including the obligor’s credit characteristics considered relevant. In pricing certain securities, particularly less liquid and lower quality securities, the pricing service may consider information about a security, its issuer, or market activity, provided by the Adviser. These securities are generally classified as Level 2 or Level 3 depending on the priority of the significant inputs.
| 48 | Nuveen Investments |
Certain securities may not be able to be priced by the pre-established pricing methods as described above. Such securities may be valued by the Funds’ Board of Trustees or its designee at fair value. These securities generally include, but are not limited to, restricted securities (securities which may not be publicly sold without registration under the Securities Act of 1933, as amended) for which a pricing service is unable to provide a market price; securities whose trading has been formally suspended; debt securities that have gone into default and for which there is no current market quotation; a security whose market price is not available from a pre-established pricing source; a security with respect to which an event has occurred that is likely to materially affect the value of the security after the market has closed but before the calculation of a Fund’s net asset value (as may be the case in non-U.S. markets on which the security is primarily traded) or make it difficult or impossible to obtain a reliable market quotation; and a security whose price, as provided by the pricing service, is not deemed to reflect the security’s fair value. As a general principle, the fair value of a security would appear to be the amount that the owner might reasonably expect to receive for it in a current sale. A variety of factors may be considered in determining the fair value of such securities, which may include consideration of the following: yields or prices of investments of comparable quality, type of issue, coupon, maturity and rating, market quotes or indications of value from security dealers, evaluations of anticipated cash flows or collateral, general market conditions and other information and analysis, including the obligor’s credit characteristics considered relevant. These securities are generally classified as Level 2 or Level 3 depending on the priority of the significant inputs. Regardless of the method employed to value a particular security, all valuations are subject to review by the Funds’ Board of Trustees or its designee.
Refer to Footnote 2 – Fair Value Measurements for further details on the leveling of securities held by the Funds as of the end of the reporting period.
Investment Transactions
Investment transactions are recorded on a trade date basis. Realized gains and losses from investment transactions are determined on the specific identification method, which is the same basis used for federal income tax purposes. Investments purchased on a when-issued/delayed delivery basis may have extended settlement periods. Any investments so purchased are subject to market fluctuation during this period. The Funds have instructed the custodian to segregate assets with a current value at least equal to the amount of the when-issued/delayed delivery purchase commitments. At August 31, 2011, California High Yield had outstanding when-issued/delayed delivery purchase commitments of $1,437,624. There were no such outstanding purchase commitments in any of the other funds.
Investment Income
Investment income, which reflects the amortization of premiums and accretion of discounts for financial reporting purposes, is recorded on an accrual basis. Investment income also includes paydown gains and losses, if any.
Professional Fees
Professional fees presented on the Statement of Operations consist of legal fees incurred in the normal course of operations, audit fees, tax consulting fees and, in some cases, workout expenditures. Workout expenditures are incurred in an attempt to protect or enhance an investment, or to pursue other claims or legal actions on behalf of Fund shareholders.
Income Taxes
Each Fund is a separate taxpayer for federal income tax purposes. Each Fund intends to distribute substantially all of its net investment income and net capital gains to shareholders and to otherwise comply with the requirements of Subchapter M of the Internal Revenue Code applicable to regulated investment companies. Therefore, no federal income tax provision is required. Furthermore, each Fund intends to satisfy conditions that 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. Net realized capital gains and ordinary income distributions paid by the Funds are subject to federal taxation.
For all open tax years and all major taxing jurisdictions, management of the Funds has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements. Open tax years are those that are open for examination by taxing authorities (i.e., generally the last four tax year ends and the interim tax period since then). Furthermore, management of the Funds is also not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
Dividends and Distributions to Shareholders
The Funds declare dividends from their net investment income daily and pay shareholders monthly. Fund shares begin to accrue dividends on the business day after the day when the monies used to purchase Fund shares are collected by the Funds’ transfer agent.
Net realized capital gains and/or market discount from investment transactions, if any, are declared and distributed to shareholders at least annually. Furthermore, capital gains are distributed only to the extent they exceed available capital loss carryforwards.
Distributions to shareholders of 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 U.S. GAAP.
| Nuveen Investments | 49 |
Notes to Financial Statements (Unaudited) (continued)
Insurance
During the period March 1, 2011 through May 31, 2011, California 2 invested at least 80% of its net assets in municipal securities that were covered by insurance guaranteeing the timely payment of principal and interest thereon. Inverse floating rate securities whose underlying bonds are covered by insurance were included for purposes of the 80%. Insured municipal bonds are either covered by individual, permanent insurance policies (obtained either at the time of issuance or subsequently), or covered “while in fund” under a master portfolio insurance policy purchased by the Fund. Insurance guarantees only the timely payment of interest and principal on the bonds; it does not guarantee the value of either individual bonds or Fund shares. The Adviser may obtain master policies from insurers that specialize in insuring municipal bonds.
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 Fund’s 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 Fund ultimately disposes 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, in contrast, is effective only while the municipal securities are held by the Fund, and is reflected as an expense over the term of the policy, when applicable. Accordingly, neither the prices used in determining the market value of the underlying municipal securities nor the net asset value of the Fund’s shares include value, if any, attributable to the Portfolio Insurance. Each policy of the Portfolio Insurance does, however, give the Fund the right to obtain permanent insurance with respect to the municipal security covered by the Portfolio Insurance policy at the time of its sale.
Flexible Sales Charge Program
Class A Shares are generally sold with an up-front sales charge and incur a .20% annual 12b-1 service fee. Class A Share purchases of $1 million or more are sold at net asset value without an up-front sales charge but may be subject to a contingent deferred sales charge (“CDSC”) if redeemed within eighteen months of purchase. Class B Shares were sold without an up-front sales charge but incur a .75% annual 12b-1 distribution fee and a .20% annual 12b-1 service fee. Class B Shares are subject to a CDSC of up to 5% depending upon the length of time the shares are held by the investor (CDSC is reduced to 0% at the end of six years). Class B Shares convert to Class A Shares eight years after purchase. Class C Shares are sold without an up-front sales charge but incur a .55% annual 12b-1 distribution fee and a .20% annual 12b-1 service fee. Class C Shares are subject to a CDSC of 1% if redeemed within twelve months of purchase. Class I Shares are not subject to any sales charge or 12b-1 distribution or service fees.
Inverse Floating Rate Securities
Each Fund is authorized to invest in inverse floating rate securities. An inverse floating rate security is created by depositing a municipal bond, typically with a fixed interest rate, into a special purpose trust created by a broker-dealer. In turn, this trust (a) issues floating rate certificates, in face amounts equal to some fraction of the deposited bond’s par amount or market value, that typically pay short-term tax-exempt interest rates to third parties, and (b) issues to a long-term investor (such as one of the Funds) an inverse floating rate certificate (sometimes referred to as an “inverse floater”) that represents all remaining or residual interest in the trust. The income received by the inverse floater holder varies inversely with the short-term rate paid to the floating rate certificates’ holders, and in most circumstances the inverse floater holder bears substantially all of the underlying bond’s downside investment risk and also benefits disproportionately from any potential appreciation of the underlying bond’s value. The price of an inverse floating rate security will be more volatile than that of the underlying bond because the interest rate is dependent on not only the fixed coupon rate of the underlying bond but also on the short-term interest paid on the floating rate certificates, and because the inverse floating rate security essentially bears the risk of loss of the greater face value of the underlying bond.
A Fund may purchase an inverse floating rate security in a secondary market transaction without first owning the underlying bond (referred to as an “externally-deposited inverse floater”), or instead by first selling a fixed-rate bond to a broker-dealer for deposit into the special purpose trust and receiving in turn the residual interest in the trust (referred to as a “self-deposited inverse floater”). The inverse floater held by a Fund gives the Fund the right (a) to cause the holders of the floating rate certificates to tender their notes at par, and (b) to have the broker transfer the fixed-rate bond held by the trust to the Fund, thereby collapsing the trust. An investment in an externally-deposited inverse floater is identified in the Portfolio of Investments as “(IF) – Inverse floating rate investment.” An investment in a self-deposited inverse floater is accounted for as a financing transaction. In such instances, a fixed-rate bond deposited into a special purpose trust is identified in the Portfolio of Investments as “(UB) – Underlying bond of an inverse floating rate trust reflected as a financing transaction,” with the Fund accounting for the short-term floating rate certificates issued by the trust as “Floating rate obligations” on the Statement of Assets and Liabilities. In addition, the Fund reflects in “Investment Income” the entire earnings of the underlying bond and recognizes the related interest paid to the holders of the short-term floating rate certificates as a component of “Interest expense on floating rate obligations” on the Statement of Operations.
During the six months ended August 31, 2011, California High Yield invested in externally-deposited inverse floaters and/or self-deposited inverse floaters.
Each Fund may also enter into shortfall and forbearance agreements (sometimes referred to as a “recourse trust” or “credit recovery swap”) (such agreements referred to herein as “Recourse Trusts”) with a broker-dealer by which a Fund agrees to reimburse the broker-dealer, in certain circumstances, for the difference between the liquidation value of the fixed-rate bond held by the trust and the liquidation value of the floating rate certificates issued by the trust plus any shortfalls in interest cash flows. Under these
| 50 | Nuveen Investments |
agreements, a Fund’s potential exposure to losses related to or on inverse floaters may increase beyond the value of a Fund’s inverse floater investments as a Fund may potentially be liable to fulfill all amounts owed to holders of the floating rate certificates. At period end, any such shortfall is recognized as “Unrealized depreciation on Recourse Trusts” on the Statement of Assets and Liabilities.
At August 31, 2011, each Fund’s maximum exposure to externally-deposited Recourse Trusts was as follows:
| California High Yield | California | California 2 | ||||||||||
Maximum exposure to Recourse Trusts | $ | 26,040,000 | $ | — | $ | — | ||||||
Forward Swap Contracts
Each Fund is authorized to enter into forward interest rate swap contracts consistent with their investment objectives and policies to reduce, increase or otherwise alter its risk profile or to alter its portfolio characteristics (i.e. duration, yield curve positioning and credit quality).
Each Fund is subject to interest rate risk in the normal course of pursuing its investment objectives. Each Fund’s use of forward interest rate swap transactions is intended to help the Fund manage its overall interest rate sensitivity, either shorter or longer, generally to more closely align the Fund’s interest rate sensitivity with that of the broader market. Forward interest rate swap transactions involve each Fund’s agreement with a counterparty to pay, in the future, a fixed or variable rate payment in exchange for the counterparty paying the Fund a variable or fixed rate payment, the accruals for which would begin at a specified date in the future (the “effective date”). The amount of the payment obligation is based on the notional amount of the swap contract and the termination date of the swap (which is akin to a bond’s maturity). The value of the Fund’s swap commitment would increase or decrease based primarily on the extent to which long-term interest rates for bonds having a maturity of the swap’s termination date increases or decreases. Forward interest rate swap contracts are valued daily. The net amount recorded on these transactions for each counterparty is recognized on the Statement of Assets and Liabilities as a component of “Unrealized appreciation or depreciation on forward swaps” with the change during the fiscal period recognized on the Statement of Operations as a component of “Change in net unrealized appreciation (depreciation) of forward swaps.”
Each Fund may terminate a swap contract prior to the effective date, at which point a realized gain or loss is recognized. When a forward swap is terminated, it ordinarily does not involve the delivery of securities or other underlying assets or principal, but rather is settled in cash on a net basis. Net realized gains and losses during the fiscal period are recognized on the Statement of Operations as a component of “Net realized gain (loss) from forward swaps.” Each Fund intends, but is not obligated, to terminate its forward swaps before the effective date. Accordingly, the risk of loss with respect to the swap counterparty on such transactions is limited to the credit risk associated with a counterparty failing to honor its commitment to pay any realized gain to the Fund upon termination.
During the six months ended August 31, 2011, California High Yield entered into forward interest rate swap transactions to broadly reduce the sensitivity of the Fund to movements in U.S. interest rates. The average notional amount of forward interest rate swap contracts outstanding during the six months ended August 31, 2011, was as follows:
| California High Yield | ||||
Average notional amount of forward interest rate swap contracts outstanding* | $ | 3,400,000 | ||
| * | The average notional amount is calculated based on the outstanding notional amount at the beginning of the fiscal year and at the end of each fiscal quarter within the current fiscal year. |
Refer to Footnote 3 – Derivative Instruments and Hedging Activities for further details on forward interest rate swap contract activity.
Market and Counterparty Credit Risk
In the normal course of business each Fund may invest in financial instruments and enter into financial transactions where risk of potential loss exists due to changes in the market (market risk) or failure of the other party to the transaction to perform (counterparty credit risk). The potential loss could exceed the value of the financial assets recorded on the financial statements. Financial assets, which potentially expose each Fund to counterparty credit risk, consist principally of cash due from counterparties on forward, option and swap transactions, when applicable. The extent of each Fund’s exposure to counterparty credit risk in respect to these financial assets approximates their carrying value as recorded on the Statement of Assets and Liabilities. Futures contracts, when applicable, expose a Fund to minimal counterparty credit risk as they are exchange traded and the exchange’s clearinghouse, which is counterparty to all exchange traded futures, guarantees the futures contracts against default.
Each Fund helps manage counterparty credit risk by entering into agreements only with counterparties the Adviser believes have the financial resources to honor their obligations and by having the Adviser monitor the financial stability of the counterparties. Additionally, counterparties may be required to pledge collateral daily (based on the daily valuation of the financial asset) on behalf of each Fund with a value approximately equal to the amount of any unrealized gain above a pre-determined threshold. Reciprocally, when each Fund has an unrealized loss, the Funds have instructed the custodian to pledge assets of the Funds as collateral with a value approximately equal to the amount of the unrealized loss above a pre-determined threshold. Collateral pledges are monitored and subsequently adjusted if and when the valuations fluctuate, either up or down, by at least the pre-determined threshold amount.
| Nuveen Investments | 51 |
Notes to Financial Statements (Unaudited) (continued)
Zero Coupon Securities
Each Fund is authorized to invest in zero coupon securities. A zero coupon security does not pay a regular interest coupon to its holders during the life of the security. Tax-exempt income to the holder of the security comes from accretion of the difference between the original purchase price of the security at issuance and the par value of the security at maturity and is effectively paid at maturity. The market prices of zero coupon securities generally are more volatile than the market prices of securities that pay interest periodically.
Multiclass Operations and Allocations
Income and expenses of the Funds that were not directly attributable to a specific class of shares were prorated among the classes based on the relative settled shares of each class. Expenses directly attributable to a class of shares, which presently only include 12b-1 distribution and service fees, are recorded to the specific class.
Realized and unrealized capital gains and losses of the Funds are prorated among the classes based on the relative net assets of each class.
Custodian Fee Credit
Each Fund has an arrangement with the custodian bank whereby certain custodian fees and expenses are reduced by net credits earned on each Fund’s cash on deposit with the bank. Such deposit arrangements are an alternative to overnight investments. Credits for cash balances may be offset by charges for any days on which a Fund overdraws its account at the custodian bank.
Indemnifications
Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust. In addition, in the normal course of business, the Trust enters into contracts that provide general indemnifications to other parties. The Trust’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Trust that have not yet occurred. However, the Trust has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results may differ from those estimates.
2. Fair Value Measurements
Fair value is defined as the price that the Funds would receive upon selling an investment or transferring a liability in an orderly transaction to an independent buyer in the principal or most advantageous market for the investment. A three-tier hierarchy is used to maximize the use of observable market data and minimize the use of unobservable inputs and to establish classification of fair value measurements for disclosure purposes. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability. Observable inputs are based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability. Unobservable inputs are based on the best information available in the circumstances. The three-tier hierarchy of inputs is summarized in the three broad levels listed below:
| Level 1 – | Quoted prices in active markets for identical securities. | |
| Level 2 – | Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.). | |
| Level 3 – | Significant unobservable inputs (including management’s assumptions in determining the fair value of investments). |
The inputs or methodologies used for valuing securities are not an indication of the risk associated with investing in those securities. The following is a summary of each Fund’s fair value measurements as of August 31, 2011:
| California High Yield | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Investments: | ||||||||||||||||
Municipal Bonds | $ | — | $ | 118,247,999 | $ | 2,061,093 | $ | 120,309,092 | ||||||||
Derivatives: | ||||||||||||||||
Forward Swaps* | — | (920,872 | ) | — | (920,872 | ) | ||||||||||
Total | $ | — | $ | 117,327,127 | $ | 2,061,093 | $ | 119,388,220 | ||||||||
| California | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Investments: | ||||||||||||||||
Municipal Bonds | $ | — | $ | 295,772,253 | $1,466,748 | $ | 297,239,001 | |||||||||
| California 2 | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Investments: | ||||||||||||||||
Municipal Bonds | $ | — | $ | 151,274,236 | $ | — | $ | 151,274,236 | ||||||||
| * | Represents net unrealized appreciation (depreciation) as reported in the Fund’s Portfolio of Investments. |
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The following is a reconciliation of each Fund’s Level 3 investments held at the beginning and end of the measurement period:
| California High Yield Level 3 Municipal Bonds | California Level 3 Municipal Bonds | |||||||
Balance at the beginning of period | $ | 1,942,634 | $ | 1,799,325 | ||||
Gains (losses): | ||||||||
Net realized gains (losses) | 122 | 171 | ||||||
Net change in unrealized appreciation (depreciation) | (177,099 | ) | 116,547 | |||||
Purchases at cost | — | — | ||||||
Sales at proceeds | (210,000 | ) | (450,000 | ) | ||||
Net discounts (premiums) | 116 | 705 | ||||||
Transfers in to | 505,320 | — | ||||||
Transfers out of | — | — | ||||||
Balance at the end of period | $ | 2,061,093 | $ | 1,466,748 | ||||
Change in net unrealized appreciation (depreciation) during the period of Level 3 securities held at the end of period | $ | (324,829 | ) | $ | 116,547 | |||
During the six months ended August 31, 2011, the Funds recognized no significant transfers to or from Level 1 or Level 2. Transfers in and/or out of Level 3 are shown using end of period values.
3. Derivative Instruments and Hedging Activities
The Funds record derivative instruments at fair value, with changes in fair value recognized on the Statement of Operations, when applicable. Even though the Funds’ investments in derivatives may represent economic hedges, they are not considered to be hedge transactions for financial reporting purposes. For additional information on the derivative instruments in which each Fund was invested during and at the end of the reporting period, refer to the Portfolios of Investments, Financial Statements and Footnote 1 – General Information and Significant Accounting Policies.
The following table presents the fair value of all derivative instruments held by the Funds as of August 31, 2011, the location of these instruments on the Statement of Assets and Liabilities, and the primary underlying risk exposure. California High Yield invested in derivative instruments during the six months ended August 31, 2011.
| California High Yield | ||||||||||||||
Location on the Statement of Assets and Liabilities | ||||||||||||||
Underlying Risk Exposure | Derivative Instrument | Asset Derivatives | Liability Derivatives | |||||||||||
| Location | Value | Location | Value | |||||||||||
Interest Rate | Forward Swaps | Unrealized appreciation on forward swaps* | $ | — | Unrealized depreciation on forward swaps* | $ | 920,872 | |||||||
| * | Represents cumulative gross unrealized appreciation (depreciation) of forward swap contracts as reported in the Portfolio of Investments. |
The following tables present the amount of net realized gain (loss) and change in net unrealized appreciation (depreciation) recognized for the six months ended August 31, 2011, on derivative instruments, as well as the primary risk exposure associated with each.
| Net Realized Gain (Loss) from Forward Swaps | California High Yield | |||
| Risk Exposure | ||||
Interest Rate | $ | (125,800 | ) | |
| Change in Net Unrealized Appreciation (Depreciation) of Forward Swaps | California High Yield | |||
| Risk Exposure | ||||
Interest Rate | $ | (853,238 | ) | |
| Nuveen Investments | 53 |
Notes to Financial Statements (Unaudited) (continued)
4. Fund Shares
Transactions in Fund shares were as follows:
| California High Yield | ||||||||||||||||
| Six Months Ended 8/31/11 | Year Ended 2/28/11 | |||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||
Shares sold: | ||||||||||||||||
Class A | 1,428,800 | $ | 10,849,754 | 5,763,877 | $ | 45,707,390 | ||||||||||
Class A – automatic conversion of Class B Shares | — | — | 18,156 | 145,432 | ||||||||||||
Class B | — | — | — | — | ||||||||||||
Class C | 645,390 | 4,933,558 | 1,166,998 | 9,301,894 | ||||||||||||
Class I | 759,535 | 5,748,926 | 1,947,423 | 15,511,288 | ||||||||||||
Shares issued to shareholders due to reinvestment | ||||||||||||||||
Class A | 165,912 | 1,257,707 | 301,015 | 2,378,965 | ||||||||||||
Class B | — | — | 257 | 2,056 | ||||||||||||
Class C | 54,331 | 414,062 | 87,194 | 688,899 | ||||||||||||
Class I | 118,034 | 899,044 | 180,447 | 1,421,362 | ||||||||||||
| 3,172,002 | 24,103,051 | 9,465,367 | 75,157,286 | |||||||||||||
Shares redeemed: | ||||||||||||||||
Class A | (2,990,707 | ) | (22,611,663 | ) | (3,099,382 | ) | (24,204,633 | ) | ||||||||
Class B | — | — | (1,627 | ) | (13,020 | ) | ||||||||||
Class B – automatic conversion to Class A Shares | — | — | (18,179 | ) | (145,432 | ) | ||||||||||
Class C | (279,917 | ) | (2,110,586 | ) | (696,801 | ) | (5,430,680 | ) | ||||||||
Class I | (538,900 | ) | (4,175,838 | ) | (1,191,548 | ) | (9,458,162 | ) | ||||||||
| (3,809,524 | ) | (28,898,087 | ) | (5,007,537 | ) | (39,251,927 | ) | |||||||||
Net increase (decrease) | (637,522 | ) | $ | (4,795,036 | ) | 4,457,830 | $ | 35,905,359 | ||||||||
| California | ||||||||||||||||
| Six Months Ended 8/31/11 | Year Ended 2/28/11 | |||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||
Shares sold: | ||||||||||||||||
Class A | 586,283 | $ | 5,701,048 | 5,970,886 | $ | 57,108,652 | ||||||||||
Class A – automatic conversion of Class B Shares | 38,199 | 381,001 | 49,193 | 488,102 | ||||||||||||
Class B | 262 | 2,534 | 4,155 | 40,974 | ||||||||||||
Class C | 627,526 | 6,074,767 | 738,009 | 7,306,756 | ||||||||||||
Class I | 769,334 | 7,372,541 | 1,055,240 | 10,367,790 | ||||||||||||
Shares issued to shareholders due to reinvestment | ||||||||||||||||
Class A | 95,301 | 922,449 | 207,829 | 2,042,441 | ||||||||||||
Class B | 1,738 | 16,778 | 6,005 | 59,110 | ||||||||||||
Class C | 31,183 | 301,328 | 55,508 | 543,392 | ||||||||||||
Class I | 241,292 | 2,334,167 | 475,489 | 4,665,136 | ||||||||||||
| 2,391,118 | 23,106,613 | 8,562,314 | 82,622,353 | |||||||||||||
Shares redeemed: | ||||||||||||||||
Class A | (1,858,994 | ) | (17,820,232 | ) | (4,920,663 | ) | (47,269,994 | ) | ||||||||
Class B | (39,612 | ) | (370,024 | ) | (87,922 | ) | (874,096 | ) | ||||||||
Class B – automatic conversion to Class A Shares | (38,237 | ) | (381,001 | ) | (49,242 | ) | (488,102 | ) | ||||||||
Class C | (165,128 | ) | (1,584,274 | ) | (614,502 | ) | (5,961,491 | ) | ||||||||
Class I | (934,383 | ) | (8,993,091 | ) | (2,328,425 | ) | (22,668,082 | ) | ||||||||
| (3,036,354 | ) | (29,148,622 | ) | (8,000,754 | ) | (77,261,765 | ) | |||||||||
Net increase (decrease) | (645,236 | ) | $ | (6,042,009 | ) | 561,560 | $ | 5,360,588 | ||||||||
| 54 | Nuveen Investments |
| California 2 | ||||||||||||||||
| Six Months Ended 8/31/11 | Year Ended 2/28/11 | |||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||
Shares sold: | ||||||||||||||||
Class A | 107,663 | $ | 1,028,578 | 383,367 | $ | 3,836,017 | ||||||||||
Class A – automatic conversion of Class B Shares | 18,299 | 184,334 | 33,973 | 342,022 | ||||||||||||
Class B | 439 | 4,226 | 1,057 | 10,514 | ||||||||||||
Class C | 47,376 | 448,819 | 189,066 | 1,878,664 | ||||||||||||
Class I | 100,574 | 958,298 | 328,171 | 3,255,334 | ||||||||||||
Shares issued to shareholders due to reinvestment | ||||||||||||||||
Class A | 74,095 | 715,439 | 156,968 | 1,564,026 | ||||||||||||
Class B | 1,065 | 10,264 | 2,924 | 29,210 | ||||||||||||
Class C | 15,829 | 152,151 | 29,683 | 293,878 | ||||||||||||
Class I | 149,885 | 1,450,245 | 279,292 | 2,784,074 | ||||||||||||
| 515,225 | 4,952,354 | 1,404,501 | 13,993,739 | |||||||||||||
Shares redeemed: | ||||||||||||||||
Class A | (565,395 | ) | (5,433,127 | ) | (2,345,545 | ) | (23,023,556 | ) | ||||||||
Class B | (70,236 | ) | (670,571 | ) | (76,857 | ) | (776,421 | ) | ||||||||
Class B – automatic conversion to Class A Shares | (18,251 | ) | (184,334 | ) | (33,874 | ) | (342,022 | ) | ||||||||
Class C | (124,836 | ) | (1,184,105 | ) | (148,578 | ) | (1,445,051 | ) | ||||||||
Class I | (726,398 | ) | (7,090,537 | ) | (1,483,481 | ) | (14,628,591 | ) | ||||||||
| (1,505,116 | ) | (14,562,674 | ) | (4,088,335 | ) | (40,215,641 | ) | |||||||||
Net increase (decrease) | (989,891 | ) | $ | (9,610,320 | ) | (2,683,834 | ) | $ | (26,221,902 | ) | ||||||
5. Investment Transactions
Purchases and sales (including maturities but excluding short-term investments and derivative transactions, where applicable) during the six months ended August 31, 2011, were as follows:
| California High Yield | California | California 2 | ||||||||||
Purchases | $ | 18,541,906 | $ | 19,303,126 | $ | 15,740,904 | ||||||
Sales and maturities | 20,971,855 | 27,770,672 | 21,283,881 | |||||||||
6. Income Tax Information
The following information is presented on an income tax basis. Differences between amounts for financial statement and federal income tax purposes are primarily due to timing differences in recognizing taxable market discount, timing differences in recognizing certain gains and losses on investment transactions and the treatment of investments in inverse floating rate securities reflected as financing transactions, if any. To the extent that differences arise that are permanent in nature, such amounts are reclassified within the capital accounts as detailed below. Temporary differences do not require reclassification. Temporary and permanent differences do not impact the net asset values of the Funds.
At August 31, 2011, the cost and unrealized appreciation (depreciation) of investments (excluding investments in derivatives, where applicable), as determined on a federal income tax basis, were as follows:
| California High Yield | California | California 2 | ||||||||||
Cost of investments | $ | 123,735,698 | $ | 297,897,285 | $ | 155,472,610 | ||||||
Gross unrealized: | ||||||||||||
Appreciation | $ | 5,686,359 | $ | 11,126,322 | $ | 3,025,482 | ||||||
Depreciation | (9,112,965 | ) | (11,784,606 | ) | (7,223,856 | ) | ||||||
Net unrealized appreciation (depreciation) of investments | $ | (3,426,606 | ) | $ | (658,284 | ) | $ | (4,198,374 | ) | |||
Permanent differences, primarily due to federal taxes paid, taxable market discount and distribution character reclassifications, resulted in reclassifications among the Funds’ components of net assets at February 28, 2011, the Funds’ last tax year end, as follows:
| California High Yield | California | California 2 | ||||||||||
Capital paid-in | $ | 6,539 | $ | 2,697 | $ | 1,287 | ||||||
Undistributed (Over-distribution of) net investment income | (19,237 | ) | (5,000 | ) | (4,671 | ) | ||||||
Accumulated net realized gain (loss) | 12,698 | 2,303 | 3,384 | |||||||||
| Nuveen Investments | 55 |
Notes to Financial Statements (Unaudited) (continued)
The tax components of undistributed net tax-exempt income, net ordinary income and net long-term capital gains at February 28, 2011, the Funds’ last tax year end, were as follows:
| California High Yield | California | California 2 | ||||||||||
Undistributed net tax-exempt income* | $ | 987,063 | $ | 2,112,247 | $ | 1,166,334 | ||||||
Undistributed net ordinary income** | 29,407 | 19,056 | — | |||||||||
Undistributed net long-term capital gains | — | — | — | |||||||||
| * | Undistributed net tax-exempt income (on a tax basis) has not been reduced for the dividends declared during the period February 1, 2011, through February 28, 2011, and paid on March 1, 2011. |
| ** | Net ordinary income consists of taxable market discount income and net short-term capital gains, if any. |
The tax character of distributions paid during the Funds’ last tax year ended February 28, 2011, was designated for purposes of the dividends paid deduction as follows:
| California High Yield | California | California 2 | ||||||||||
Distributions from net tax-exempt income | $ | 6,981,434 | $ | 13,898,835 | $ | 7,790,512 | ||||||
Distributions from net ordinary income ** | — | — | — | |||||||||
Distributions from net long-term capital gains | — | — | — | |||||||||
| ** | Net ordinary income consists of taxable market discount income and net short-term capital gains, if any. |
At February 28, 2011, the Funds’ last tax year end, 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:
| California High Yield | California | California 2 | ||||||||||
Expiration: | ||||||||||||
February 29, 2012 | $ | — | $ | 5,007,429 | $ | — | ||||||
February 28, 2013 | — | 84,061 | — | |||||||||
February 29, 2016 | 320,899 | — | — | |||||||||
February 28, 2017 | 3,792,828 | 3,965,451 | 316,570 | |||||||||
February 28, 2018 | 2,097,482 | 4,898,247 | 825,136 | |||||||||
February 28, 2019 | — | — | 75,788 | |||||||||
Total | $ | 6,211,209 | $ | 13,955,188 | $ | 1,217,494 | ||||||
During the last tax year ended February 28, 2011, California High Yield and California utilized $488,749 and $676,118 of their capital loss carryforwards, respectively.
The Funds have elected to defer net realized losses from investments incurred from November 1, 2010 through February 28, 2011, the Funds’ last tax year end, (“post-October losses”) in accordance with federal income tax regulations. Post-October losses are treated as having arisen on the first day of the current fiscal year. The following Funds have elected to defer post-October losses as follows:
| California High Yield | California 2 | |||||||
Post-October capital losses | $ | 960,847 | $ | 1,085,179 | ||||
7. Management Fees and Other Transactions with Affiliates
Each Fund’s management fee consists of two components – a fund-level fee, based only on the amount of assets within the Fund, and a complex-level fee, based on the aggregate amount of all eligible fund assets managed by the Adviser. This pricing structure enables Fund shareholders to benefit from growth in the assets within their Fund as well as from growth in the amount of complex-wide assets managed by the Adviser.
The annual fund-level fee for each Fund, payable monthly, is calculated according to the following schedule:
| Average Daily Net Assets | California High Yield Fund-Level Fee Rate | California California 2 Fund-Level Fee Rate | ||||||
For the first $125 million | .4000 | % | .3500 | % | ||||
For the next $125 million | .3875 | .3375 | ||||||
For the next $250 million | .3750 | .3250 | ||||||
For the next $500 million | .3625 | .3125 | ||||||
For the next $1 billion | .3500 | .3000 | ||||||
For net assets over $2 billion | .3250 | .2750 | ||||||
For net assets over $5 billion | — | .2500 | ||||||
| 56 | Nuveen Investments |
The annual complex-level fee for each Fund, payable monthly, is calculated according to the following schedule:
| Complex-Level Asset Breakpoint Level* | Effective Rate at Breakpoint Level | |||
$55 billion | .2000 | % | ||
$56 billion | .1996 | |||
$57 billion | .1989 | |||
$60 billion | .1961 | |||
$63 billion | .1931 | |||
$66 billion | .1900 | |||
$71 billion | .1851 | |||
$76 billion | .1806 | |||
$80 billion | .1773 | |||
$91 billion | .1691 | |||
$125 billion | .1599 | |||
$200 billion | .1505 | |||
$250 billion | .1469 | |||
$300 billion | .1445 | |||
| * | The complex-level fee is calculated based upon the aggregate daily “eligible assets” of all Nuveen Funds. Eligible assets do not include assets attributable to investments in other Nuveen Funds or assets in excess of $2 billion added to the Nuveen Fund complex in connection with the Adviser’s assumption of the management of the former First American Funds effective January 1, 2011. Eligible assets include closed-end fund assets managed by the Adviser that are attributable to financial leverage. For these purposes, financial leverage includes the closed-end funds’ use of preferred stock and borrowings and certain investments in the residual interest certificates (also called inverse floating rate securities) in tender option bond (TOB) trusts, including the portion of assets held by a TOB trust that has been effectively financed by the trust’s issuance of floating rate securities, subject to an agreement by the Adviser as to certain funds to limit the amount of such assets for determining eligible assets in certain circumstances. As of August 31, 2011, the complex-level fee rate for these Funds was .1781%. |
The management fee compensates the Adviser for overall investment advisory and administrative services and general office facilities it provides for the Funds. The Adviser has entered into sub-advisory agreements with the Sub-Adviser under which the Sub-Adviser manages the investment portfolios of the Funds. The Sub-Adviser is compensated for its services to the Funds from the management fees paid to the Adviser.
The Trust pays no compensation directly to those of its trustees who are affiliated with the Adviser or to its officers, all of whom receive remuneration for their services to the Trust from the Adviser or its affiliates. The Board of Trustees has adopted a deferred compensation plan for independent trustees that enables trustees to elect to defer receipt of all or a portion of the annual compensation they are entitled to receive from certain Nuveen-advised funds. Under the plan, deferred amounts are treated as though equal dollar amounts had been invested in shares of select Nuveen-advised funds.
The Adviser has agreed to waive fees and/or reimburse expenses (“Expense Cap”) of the Funds so that total annual fund operating expenses (excluding 12b-1 distribution and service fees, interest expenses, taxes, fees incurred in acquiring and disposing of portfolio securities and extraordinary expenses) do not exceed the average daily net assets of any class of Fund shares in the amounts and for the time periods stated in the following table.
| Fund | Temporary Expense Cap | Temporary Expiration Date | Permanent Expense Cap | |||||||||
California High Yield | 0.700 | % | July 31, 2012 | 1.000 | % | |||||||
California | N/A | N/A | 0.750 | |||||||||
California 2 | N/A | N/A | 0.975 | |||||||||
The Adviser may also voluntarily reimburse expenses from time to time in any of the Funds. Voluntary reimbursements may be terminated at any time at the Adviser’s discretion.
During the six months ended August 31, 2011, the Distributor collected sales charges on purchases of Class A Shares, the majority of which were paid out as concessions to financial intermediaries as follows:
California High Yield | California | California 2 | ||||||||||
Sales charges collected | $ | 84,029 | $ | 58,294 | $ | 12,267 | ||||||
Paid to financial intermediaries | 76,455 | 51,240 | 10,557 | |||||||||
The Distributor also received 12b-1 service fees on Class A Shares, substantially all of which were paid to compensate financial intermediaries for providing services to shareholders relating to their investments.
During the six months ended August 31, 2011, the Distributor compensated financial intermediaries directly with commission advances at the time of purchase as follows:
California High Yield | California | California 2 | ||||||||||
Commission advances | $ | 76,757 | $ | 50,804 | $ | 4,188 | ||||||
| Nuveen Investments | 57 |
Notes to Financial Statements (Unaudited) (continued)
To compensate for commissions advanced to financial intermediaries, all 12b-1 service fees collected on Class B Shares during the first year following a purchase, all 12b-1 distribution fees collected on Class B Shares, and all 12b-1 service and distribution fees collected on Class C Shares during the first year following a purchase are retained by the Distributor. During the six months ended August 31, 2011, the Distributor retained such 12b-1 fees as follows:
California High Yield | California | California 2 | ||||||||||
12b-1 fees retained | $ | 27,570 | $ | 29,741 | $ | 9,389 | ||||||
The remaining 12b-1 fees charged to the Funds were paid to compensate financial intermediaries for providing services to shareholders relating to their investments.
The Distributor also collected and retained CDSC on share redemptions during the six months ended August 31, 2011, as follows:
California High Yield | California | California 2 | ||||||||||
CDSC retained | $ | 17,616 | $ | 10,741 | $ | 4,423 | ||||||
8. New Accounting Pronouncements
Fair Value Measurements and Disclosures
On May 12, 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No. 2011-04 (“ASU No. 2011-04”) modifying Topic 820, Fair Value Measurements and Disclosures. At the same time, the International Accounting Standards Board (“IASB”) issued International Financial Reporting Standard (“IFRS”) 13, Fair Value Measurement. The objective of the FASB and IASB is convergence of their guidance on fair value measurements and disclosures. Specifically, ASU No. 2011-04 requires reporting entities to disclose i) the amounts of any transfers between Level 1 and Level 2, and the reasons for the transfers, ii) for Level 3 fair value measurements, a) quantitative information about significant unobservable inputs used, b) a description of the valuation processes used by the reporting entity and c) a narrative description of the sensitivity of the fair value measurement to changes in unobservable inputs if a change in those inputs might result in a significantly higher or lower fair value measurement. The effective date of ASU No. 2011-04 is for interim and annual periods beginning after December 15, 2011. At this time, management is evaluating the implications of this guidance and the impact it will have on the financial statement amounts and footnote disclosures, if any.
| 58 | Nuveen Investments |
Annual Investment Management Agreement Approval Process
(Unaudited)
The Board of Trustees (each, a “Board” and each Trustee, a “Board Member”) of the Funds, including the Board Members who are not parties to the Funds’ advisory or sub-advisory agreements or “interested persons” of any such parties (the “Independent Board Members”), are responsible for approving the advisory agreements (each, an “Investment Management Agreement”) between each Fund and Nuveen Fund Advisors, Inc. (the “Advisor”) and the sub-advisory agreements (each a “Sub-Advisory Agreement”) between the Advisor and Nuveen Asset Management, LLC (the “Sub-Advisor”) (the Investment Management Agreements and the Sub-Advisory Agreements are referred to collectively as the “Advisory Agreements”) and their periodic continuation. Pursuant to the Investment Company Act of 1940, as amended (the “1940 Act”), the Board is generally required to consider the continuation of advisory agreements and sub-advisory agreements on an annual basis. Accordingly, at an in-person meeting held on May 23-25, 2011 (the “May Meeting”), the Board, including a majority of the Independent Board Members, considered and approved the continuation of the Advisory Agreements for the Funds for an additional one-year period.
In preparation for their considerations at the May Meeting, the Board requested and received extensive materials prepared in connection with the review of the Advisory Agreements. The materials provided a broad range of information regarding the Funds, the Advisor and the Sub-Advisor (the Advisor and the Sub-Advisor are collectively, the “Fund Advisers” and each, a “Fund Adviser”). As described in more detail below, the information provided included, among other things, a review of Fund performance, including Fund investment performance assessments against peer groups and appropriate benchmarks, a comparison of Fund fees and expenses relative to peers, a description and assessment of shareholder service levels for the Funds, a summary of the performance of certain service providers, a review of product initiatives and shareholder communications and an analysis of the Advisor’s profitability with comparisons to comparable peers in the managed fund business. As part of their annual review, the Board also held a separate meeting on April 19-20, 2011, to review the Funds’ investment performance and consider an analysis provided by the Advisor of the Sub-Advisor which generally evaluated the Sub-Advisor’s investment team, investment mandate, organizational structure and history, investment philosophy and process, performance of the applicable Fund, and significant changes to the foregoing. As a result of their review of the materials and discussions, the Board presented the Advisor with questions and the Advisor responded.
The materials and information prepared in connection with the review of the Advisory Agreements at the May Meeting supplemented the information provided to the Board during the year. In this regard, throughout the year, the Board, acting directly or through its committees, regularly reviews the performance and various services provided by the Advisor and, since the internal restructuring described in Section A below, the Sub-Advisor. The Board meets at least quarterly as well as at other times as the need arises. At its quarterly meetings, the Board reviews reports by the Advisor which include, among other things, Fund performance, a review of the investment teams and compliance reports. The Board also meets with key investment personnel managing the Fund portfolios during the year. In addition, the Board continues its program of seeking to visit each sub-advisor to the Nuveen funds at least once over a multiple year rotation, meeting with key investment and business personnel. The Board also met with State Street Bank & Trust Company, the Funds’ accountant and custodian, in 2010. The Board considers factors and information that are relevant to its consideration of the renewal of the Advisory Agreements at these meetings held throughout the year. Accordingly, the Board considered the information provided and knowledge gained at these meetings when performing its review at the May Meeting of the Advisory Agreements. The Independent Board Members are assisted throughout the process by independent legal counsel who provided materials describing applicable law and the duties of directors or trustees in reviewing advisory contracts and met with the Independent Board Members in executive sessions without management present.
The Board considered all factors it believed relevant with respect to each Fund, including among other factors: (a) the nature, extent and quality of the services provided by the Fund Advisers, (b) the investment performance of the Fund and Fund Advisers, (c) the advisory fees and costs of the services to be provided to the Funds and the profitability of the Fund Advisers, (d) the extent of any economies of scale, (e) any benefits derived by the Fund Advisers from the relationship with the Fund and (f) other factors. Each Board Member may have accorded different weight to the various factors in reaching his or her conclusions with respect to a Fund’s Advisory Agreements. The Independent Board Members did not identify any single factor as all important or controlling. The Independent Board Members’ considerations were instead based on a comprehensive consideration of all the information presented. The principal factors considered by the Board and its conclusions are described below.
A. Nature, Extent and Quality of Services
In considering renewal of the Advisory Agreements, the Independent Board Members considered the nature, extent and quality of the Fund Adviser’s services, including advisory services and the resulting Fund performance and administrative services. The Independent Board Members reviewed materials outlining, among other things, the Fund Adviser’s organization and business; the types of services that the Fund Adviser or its affiliates provide to the Funds; the performance record of the applicable Fund (as described in further detail below); and any initiatives Nuveen had taken for the applicable fund product line.
In considering advisory services, the Board recognized that the Advisor provides various oversight, administrative, compliance and other services for the Funds and the Sub-Advisor provides the portfolio investment management services to the Funds. The Board recognized that Nuveen engaged in an internal restructuring in 2010 pursuant to which portfolio management services the Advisor had provided directly to the Funds were transferred to the Sub-Advisor, a newly-organized, wholly-owned subsidiary of the Advisor consisting of largely the same investment personnel. Accordingly, in reviewing the portfolio management services provided to each Fund, the Board reviewed the materials provided by the Nuveen Investment Services Oversight Team analyzing, among other things, the Sub-Advisor’s investment team and changes thereto, organization and history, assets under management, Fund objectives and
| Nuveen Investments | 59 |
Annual Investment Management Agreement Approval Process
(Unaudited) (continued)
mandate, the investment team’s philosophy and strategies in managing the Fund, developments affecting the Sub-Advisor or Fund and Fund performance. The Independent Board Members also reviewed portfolio manager compensation arrangements to evaluate each Fund Adviser’s ability to attract and retain high quality investment personnel, preserve stability, and reward performance but not provide an incentive to take undue risks. In addition, the Board considered the Advisor’s execution of its oversight responsibilities over the Sub-Advisor. Given the importance of compliance, the Independent Board Members also considered Nuveen’s compliance program, including the report of the chief compliance officer regarding the Funds’ compliance policies and procedures.
In addition to advisory services, the Board considered the quality and extent of administrative and other non-investment advisory services the Advisor and its affiliates provide to the Funds, including product management, investment services (such as oversight of investment policies and procedures, risk management, and pricing), fund administration, oversight of service providers, shareholder services, administration of Board relations, regulatory and portfolio compliance and legal support. In reviewing the services provided, the Board also reviewed materials describing various notable initiatives and projects the Advisor performed in connection with the open-end fund product line. These initiatives included operations necessary to effect the acquisition of FAF Advisors, Inc.’s (“FAF”) long-term asset management business by Nuveen and the subsequent integration of FAF and the funds FAF advised into the Nuveen family of funds; changes in dividend declaration policies; and adding funds to various distribution platforms.
Based on their review, the Independent Board Members found that, overall, the nature, extent and quality of services provided to the respective Funds under each applicable Advisory Agreement were satisfactory.
B. The Investment Performance of the Funds and Fund Advisers
The Board, including the Independent Board Members, reviewed and considered the performance history of each Fund over various time periods. The Board reviewed, among other things, each Fund’s historic investment performance as well as information comparing the Fund’s performance information with that of other funds (the “Performance Peer Group”) based on data provided by an independent provider of mutual fund data and with recognized and/or customized benchmarks.
The Board reviewed reports, including a comprehensive analysis of the Funds’ performance and the applicable investment team. In this regard, the Board reviewed each Fund’s total return information compared to its Performance Peer Group for the quarter, one-, three- and five-year periods ending December 31, 2010 and for the same periods ending March 31, 2011 (or for the periods available for the Nuveen California High Yield Municipal Bond Fund (the “High Yield Fund”), which did not exist for part of the foregoing time frame). In addition, the Board reviewed each Fund’s total return information compared to recognized and/or customized benchmarks for the quarter, one- and three-year periods ending December 31, 2010 and for the same periods ending March 31, 2011.
In reviewing performance comparison information, the Independent Board Members recognized that the usefulness of the comparisons of the performance of certain funds with the performance of their respective Performance Peer Group may be limited because the Performance Peer Group may not adequately represent the objectives and strategies of the applicable funds or may be limited in size or number. In this regard, the Independent Board Members noted that the Performance Peer Groups of the High Yield Fund and the Nuveen California Municipal Bond Fund 2 (the “Municipal Fund 2”) were classified as having significant differences from such Funds based on various considerations such as special fund objectives, potential investable universe and the composition of the peer set (e.g., the number and size of competing funds and number of competing managers). The Independent Board Members also noted that the investment experience of a particular shareholder in the Nuveen funds will vary depending on when such shareholder invests in the applicable fund, the class held (if multiple classes are offered) and the performance of the fund (or respective class) during that shareholder’s investment period.
In considering the results of the comparisons, the Independent Board Members observed, among other things, that the Nuveen California Municipal Bond Fund (the “Municipal Fund”) had demonstrated satisfactory performance in comparison to peers, performing in the second or third quartile over various periods. With respect to the High Yield Fund and the Municipal Fund 2 which, as noted above, had significant differences with their Performance Peer Groups, the Independent Board Members noted that each such Fund underperformed its benchmark in the one- and three-year periods.
With respect to any Nuveen funds that underperformed their peers and/or benchmarks from time to time, the Board monitors such funds closely and considers any steps necessary or appropriate to address such issues.
Based on their review, the Independent Board Members determined that each Fund’s investment performance had been satisfactory.
C. Fees, Expenses and Profitability
1. Fees and Expenses
The Board evaluated the management fees and expenses of each Fund reviewing, among other things, such Fund’s gross management fees, net management fees and net expense ratios in absolute terms as well as compared to the fee and expenses of a comparable universe of funds based on data provided by an independent fund data provider (the “Peer Universe”) and in certain cases, to a more focused subset of funds in the Peer Universe (the “Peer Group”) and any expense limitations.
The Independent Board Members further reviewed the methodology regarding the construction of the applicable Peer Universe and Peer Group (if any). In reviewing the comparisons of fee and expense information, the Independent Board Members took into account that in certain instances various factors such as: the asset level of a fund relative to peers; the limited size and particular composition of the Peer Universe or Peer Group; the investment objectives of the peers; expense anomalies; changes in the funds
| 60 | Nuveen Investments |
comprising the Peer Universe or Peer Group from year to year; levels of reimbursement; the timing of information used; and differences in the states reflected in the Peer Universe or Peer Group may impact the comparative data thereby limiting the ability to make a meaningful comparison with peers.
In reviewing the fee schedule for a Fund, the Independent Board Members also considered the fund-level and complex-wide breakpoint schedules (described in further detail below) and any fee waivers and reimbursements provided by Nuveen. In reviewing fees and expenses, the Board considered the expenses and fees to be higher if they were over 10 basis points higher, slightly higher if they were 6 to 10 basis points higher, in line if they were within 5 basis points higher than the peer average and below if they were below the peer average of the Peer Group (if available) or Peer Universe if there was no separate Peer Group. The Independent Board Members noted that the Municipal Fund and the Municipal Fund 2 each had net management fees slightly higher or higher than the peer average but net expense ratios below or in line with the peer average, while the High Yield Fund had net management fees and a net expense ratio higher than the peer average. In addition, with respect to the High Yield Fund, the Independent Board Members noted that the Advisor was instituting an expense cap for Class A shares of such Fund in seeking to lower expenses and reduce variability in expenses from year to year.
Based on their review of the fee and expense information provided, the Independent Board Members determined that each Fund’s management fees were reasonable in light of the nature, extent and quality of services provided to the Fund.
2. Comparisons with the Fees of Other Clients
The Independent Board Members further reviewed information regarding the nature of services and fee rates offered by the Advisor to other clients, including municipal separately managed accounts and passively managed exchange traded funds (ETFs) sub-advised by the Advisor. In evaluating the comparisons of fees, the Independent Board Members noted that the fee rates charged to the Funds and other clients vary, among other things, because of the different services involved and the additional regulatory and compliance requirements associated with registered investment companies, such as the Funds. Accordingly, the Independent Board Members considered the differences in the product types, including, but not limited to, the services provided, the structure and operations, product distribution and costs thereof, portfolio investment policies, investor profiles, account sizes and regulatory requirements. The Independent Board Members noted, in particular, that the range of services provided to the Funds (as discussed above) is much more extensive than that provided to separately managed accounts. Given the inherent differences in the products, particularly the extensive services provided to the Funds, the Independent Board Members believe such facts justify the different levels of fees.
In considering the fees of the Sub-Advisor, the Independent Board Members also considered the pricing schedule or fees that the Sub-Advisor charges for similar investment management services for other Nuveen funds.
3. Profitability of Fund Advisers
In conjunction with its review of fees, the Independent Board Members also considered the profitability of Nuveen for its advisory activities (which incorporated Nuveen’s wholly-owned affiliated sub-advisers) and its financial condition. The Independent Board Members reviewed the revenues and expenses of Nuveen’s advisory activities for the last two years, the allocation methodology used in preparing the profitability data and an analysis of the key drivers behind the changes in revenues and expenses that impacted profitability in 2010. The Independent Board Members noted this information supplemented the profitability information requested and received during the year to help keep them apprised of developments affecting profitability (such as changes in fee waivers and expense reimbursement commitments). In this regard, the Independent Board Members noted that they have an Independent Board Member serve as a point person to review and keep them apprised of changes to the profitability analysis and/or methodologies during the year. The Independent Board Members also considered Nuveen’s revenues for advisory activities, expenses, and profit margin compared to that of various unaffiliated management firms with similar amounts of assets under management and relatively comparable asset composition prepared by Nuveen.
In reviewing profitability, the Independent Board Members recognized the subjective nature of determining profitability which may be affected by numerous factors including the allocation of expenses. Further, the Independent Board Members recognized the difficulties in making comparisons as the profitability of other advisers generally is not publicly available and the profitability information that is available for certain advisers or management firms may not be representative of the industry and may be affected by, among other things, the adviser’s particular business mix, capital costs, types of funds managed and expense allocations. Notwithstanding the foregoing, the Independent Board Members reviewed Nuveen’s methodology and assumptions for allocating expenses across product lines to determine profitability. In reviewing profitability, the Independent Board Members recognized Nuveen’s investment in its fund business. Based on their review, the Independent Board Members concluded that the Advisor’s level of profitability for its advisory activities was reasonable in light of the services provided.
In evaluating the reasonableness of the compensation, the Independent Board Members also considered other amounts paid to a Fund Adviser by the Funds as well as any indirect benefits (such as soft dollar arrangements, if any) the Fund Adviser and its affiliates receive, or are expected to receive, that are directly attributable to the management of the Funds, if any. See Section E below for additional information on indirect benefits a Fund Adviser may receive as a result of its relationship with the Funds. Based on their review of the overall fee arrangements of each Fund, the Independent Board Members determined that the advisory fees and expenses of the respective Fund were reasonable.
| Nuveen Investments | 61 |
Annual Investment Management Agreement Approval Process
(Unaudited) (continued)
D. Economies of Scale and Whether Fee Levels Reflect These Economies of Scale
With respect to economies of scale, the Independent Board Members have recognized the potential benefits resulting from the costs of a fund being spread over a larger asset base, although economies of scale are difficult to measure and predict with precision, particularly on a fund-by-fund basis. One method to help ensure the shareholders share in these benefits is to include breakpoints in the advisory fee schedule. Generally, management fees for funds in the Nuveen complex are comprised of a fund-level component and a complex-level component, subject to certain exceptions. Accordingly, the Independent Board Members reviewed and considered the applicable fund-level breakpoints in the advisory fee schedules that reduce advisory fees as asset levels increase.
In addition to fund-level advisory fee breakpoints, the Board also considered the Funds’ complex-wide fee arrangement. Pursuant to the complex-wide fee arrangement, the fees of the funds in the Nuveen complex are generally reduced as the assets in the fund complex reach certain levels. The complex-wide fee arrangement seeks to provide the benefits of economies of scale to fund shareholders when total fund complex assets increase, even if assets of a particular fund are unchanged or have decreased. The approach reflects the notion that some of Nuveen’s costs are attributable to services provided to all its funds in the complex and therefore all funds benefit if these costs are spread over a larger asset base. In this regard, the Independent Board Members also noted that a portion of the assets acquired pursuant to the transaction with FAF are included in determining the level of assets for calculating the complex-wide fee, which helps reduce such fee to the benefit of all shareholders.
Based on their review, the Independent Board Members concluded that the breakpoint schedules and complex-wide fee arrangement were acceptable and reflect economies of scale to be shared with shareholders when assets under management increase.
E. Indirect Benefits
In evaluating fees, the Independent Board Members received and considered information regarding potential “fall out” or ancillary benefits the respective Fund Adviser or its affiliates may receive as a result of its relationship with each Fund. In this regard, the Independent Board Members considered, among other things, any sales charges, distribution fees and shareholder services fees received and retained by the Funds’ principal underwriter, an affiliate of the Advisor, which includes fees received pursuant to any 12b-1 plan. The Independent Board Members, therefore, considered the 12b-1 fees retained by Nuveen during the last calendar year.
In addition to the above, the Independent Board Members considered whether the Fund Advisers received any benefits from soft dollar arrangements whereby a portion of the commissions paid by a Fund for brokerage may be used to acquire research that may be useful to the Fund Adviser in managing the assets of the Funds and other clients. The Independent Board Members recognized that each Fund Adviser has the authority to pay a higher commission in return for brokerage and research services if it determines in good faith that the commission paid is reasonable in relation to the value of the brokerage and research services provided. Nevertheless, the Independent Board Members noted that commissions are generally not paid in connection with municipal securities transactions typically executed on a principal basis.
Based on their review, the Independent Board Members concluded that any indirect benefits received by a Fund Adviser as a result of its relationship with the Funds were reasonable and within acceptable parameters.
F. Other Considerations
The Independent Board Members did not identify any single factor discussed previously as all-important or controlling. The Board Members, including the Independent Board Members, unanimously concluded that the terms of each Advisory Agreement are fair and reasonable, that the respective Fund Adviser’s fees are reasonable in light of the services provided to each Fund and that the Advisory Agreements be renewed.
| 62 | Nuveen Investments |
Notes
| Nuveen Investments | 63 |
Notes
| 64 | Nuveen Investments |
Notes
| Nuveen Investments | 65 |
Glossary of Terms Used in this Report
Average Annual Total Return: This is a commonly used method to express an investment’s performance over a particular, usually multi-year time period. It expresses the return that would have been necessary each year to equal the investment’s actual cumulative performance (including change in NAV or offer price and reinvested dividends and capital gains distributions, if any) over the time period being considered.
Average Duration: Duration is a measure of the expected period over which a bond’s principal and interest will be paid, and consequently is a measure of the sensitivity of a bond’s (or bond fund’s) value to changes when market interest rates change. Generally, the longer a bond or Fund’s duration, the more the price of the bond or Fund will change as interest rates change.
Average Effective Maturity: The market-value-weighted average of the effective maturity dates of the individual securities including cash. In the case of a bond that has been advance-refunded to a call date, the effective maturity is the date on which the bond is scheduled to be redeemed using the proceeds of an escrow account. In most other cases the effective maturity is the stated maturity date of the security.
Inverse Floaters: Inverse floating rate securities are created by depositing a municipal bond, typically with a fixed interest rate, into a special purpose trust created by a broker-dealer. This trust, in turn, (a) issues floating rate certificates typically paying short-term tax-exempt interest rates to third parties in amounts equal to some fraction of the deposited bond’s par amount or market value, and (b) issues an inverse floating rate certificate (sometimes referred to as an “inverse floater”) to an investor (such as a Fund) interested in gaining investment exposure to a long-term municipal bond. The income received by the holder of the inverse floater varies inversely with the short-term rate paid to the floating rate certificates’ holders, and in most circumstances the holder of the inverse floater bears substantially all of the underlying bond’s downside investment risk. The holder of the inverse floater typically also benefits disproportionately from any potential appreciation of the underlying bond’s value. Hence, an inverse floater essentially represents an investment in the underlying bond on a leveraged basis.
Lipper California Municipal Debt Classification Average: Represents the average annualized total return for all reporting funds in the Lipper California Municipal Debt category. The Lipper California Municipal Debt Classification Average contained 119, 117, 97, 80 and 98 funds for the 6-month, 1-year, 5-year, 10-year and since inception periods, respectively, ended August 31, 2011. Lipper returns account for the effects of management fees and assume reinvestment of dividends but do not reflect any applicable sales charges. The Lipper average is not available for direct investment.
Net Asset Value (NAV): The net market value of all securities held in a portfolio.
Net Asset Value (NAV) Per Share: The market value of one share of a mutual fund or closed-end fund. For a Fund, the NAV is calculated daily by taking the Fund’s total assets (securities, cash, and accrued earnings), subtracting the Fund’s liabilities, and dividing by the number of shares outstanding.
Pre-Refundings: Pre-Refundings, also known as advance refundings or refinancings, occur when an issuer sells new bonds and uses the proceeds to fund principal and interest payments of older existing bonds. This process often results in lower borrowing costs for bond issuers.
Standard & Poor’s (S&P) California Municipal Bond Index: An unleveraged, market value-weighted index designed to measure the performance of the tax-exempt, investment grade California municipal bond market. The index returns assume reinvestment of dividends but do not reflect any applicable sales charges. You cannot invest directly in an index.
Standard & Poor’s (S&P) High Yield Municipal Bond Index: An unleveraged, market-value-weighted index designed to measure the performance of the tax-exempt, investment grade U.S. high yield municipal bond market. The index returns assume reinvestment of dividends but do not reflect any applicable sales charges. You cannot invest directly in an index.
Standard & Poor’s (S&P) National Municipal Bond Index: An unleveraged, market value-weighted index designed to measure the performance of the tax-exempt, investment grade U.S. municipal bond market. The index returns assume reinvestment of dividends but do not reflect any applicable sales charges. You cannot invest directly in an index.
Zero Coupon Bond: A zero coupon bond does not pay a regular interest coupon to its holders during the life of the bond. Tax-exempt income to the holder of the bond comes from accretion of the difference between the original purchase price of the bond at issuance and the par value of the bond at maturity and is effectively paid at maturity. The market prices of zero coupon bonds generally are more volatile than the market prices of bonds that pay interest periodically.
| 66 | Nuveen Investments |
Fund Manager
Nuveen Fund Advisors, Inc.
333 West Wacker Drive
Chicago, IL 60606
Sub-Adviser
Nuveen Asset Management, LLC
333 West Wacker Drive
Chicago, IL 60606
Legal Counsel
Chapman and Cutler LLP
Chicago, IL
Independent Registered
Public Accounting Firm
PricewaterhouseCoopers LLP
Chicago, IL
Custodian
State Street Bank & Trust Company
Boston, MA
Transfer Agent and Shareholder Services
Boston Financial
Data Services, Inc.
Nuveen Investor Services
P.O. Box 8530
Boston, MA 02266-8530
(800) 257-8787
Quarterly Portfolio of Investments and Proxy Voting Information: You may obtain (i) each Fund’s quarterly portfolio of investments, (ii) information regarding how each Fund voted proxies relating to portfolio securities held during the most recent twelve-month period ended June 30, and (iii) a description of the policies and procedures that each Fund used to determine how to vote proxies relating to portfolio securities without charge, upon request, by calling Nuveen Investments at (800) 257-8787 or on Nuveen’s website at www.nuveen.com.
You may also obtain this and other Fund information directly from the Securities and Exchange Commission (SEC). The SEC may charge a copying fee for this information. Visit the SEC on-line at http://www.sec.gov or in person at the SEC’s Public Reference Room in Washington, D.C. Call the SEC at (202) 942-8090 for room hours and operation. You may also request Fund information by sending an e-mail request to publicinfo@sec.gov or by writing to the SEC’s Public Reference Section at 100 F Street NE, Washington, D.C. 20549.
The Financial Industry Regulatory Authority (FINRA) provides a Public Disclosure Program which supplies certain information regarding the disciplinary history of FINRA members and their associated persons in response to either telephone inquiries at (800) 289-9999 or written inquiries at www.finra.org. FINRA also provides an investor brochure that includes information describing the Public Disclosure Program.
| Nuveen Investments | 67 |
Nuveen Investments:
Serving Investors for Generations
Since 1898, financial advisors and their clients have relied on Nuveen Investments to provide dependable investment solutions through continued adherence to proven, long-term investing principles. Today, we offer a range of high quality equity and fixed-income solutions designed to be integral components of a well-diversified core portfolio.
Focused on meeting investor needs.
Nuveen Investments is a global investment management firm that seeks to help secure the long-term goals of institutions and high net worth investors as well as the consultants and financial advisors who serve them. We market our growing range of specialized investment solutions under the high-quality brands of HydePark, NWQ, Nuveen Asset Management, Santa Barbara, Symphony, Tradewinds and Winslow Capital. In total, Nuveen Investments managed approximately $210 billion of assets as of June 30, 2011.
Find out how we can help you.
To learn more about how the products and services of Nuveen Investments may be able to help you meet your financial goals, talk to your financial advisor, or call us at (800) 257-8787. Please read the information provided carefully before you invest. Investors should consider the investment objective and policies, risk considerations, charges and expenses of any investment carefully. Where applicable, be sure to obtain a prospectus, which contains this and other relevant information. To obtain a prospectus, please contact your securities representative or Nuveen Investments, 333 W. Wacker Dr., Chicago, IL 60606. Please read the prospectus carefully before you invest or send money.
Learn more about Nuveen Funds at: www.nuveen.com/mf
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Distributed by Nuveen Securities, LLC 333 West Wacker Drive Chicago, IL 60606 www.nuveen.com |
MSA-CA-0811P
Mutual Funds
Nuveen Municipal Bond Funds
Dependable, tax-free income because it’s not what you earn, it’s what you keep.®
Semi-Annual Report
August 31, 2011
| Share Class / Ticker Symbol | ||||||
| Class A | Class C1 | Class I | ||||
Nuveen California Tax Free Fund | FCAAX | FCCAX | FCAYX | |||
LIFE IS COMPLEX.
Nuveen makes things e-simple.
It only takes a minute to sign up for e-Reports. Once enrolled, you’ll receive an e-mail as soon as your Nuveen Fund information is ready. No more waiting for delivery by regular mail. Just click on the link within the e-mail to see the report and save it on your computer if you wish.
Free e-Reports right to your e-mail!
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If you receive your Nuveen Fund dividends and statements from your financial advisor or brokerage account.
OR
www.nuveen.com/accountaccess
If you receive your Nuveen Fund dividends and statements directly from Nuveen.
| Must be preceded by or accompanied by a prospectus. | NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE |
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Letter to Shareholders
Dear Shareholders,
The global economy continues to be weighed down by an unusual combination of pressures facing the larger developed economies. Japanese leaders continue to work through the economic aftereffects of the March 2011 earthquake and tsunami. Political leaders in Europe and the U.S. have resolved some of the near term fiscal problems, but the financial markets are not convinced that these leaders are able to address more complex longer term fiscal issues. Despite improved earnings and capital increases, the largest banks in these countries continue to be vulnerable to deteriorating mortgage portfolios and sovereign credit exposure, adding another source of uncertainty to the global financial system.
In the U.S., recent economic statistics indicate that the economic recovery may be losing momentum. Consumption, which represents about 70% of the gross domestic product, faces an array of challenges from seemingly intractable declines in housing values, increased energy costs and limited growth in the job market. The failure of Congress and the administration to agree on the debt ceiling increase on a timely basis and the deep divisions between the political parties over fashioning a balanced program to address growing fiscal imbalances that led to the recent S&P ratings downgrade add considerable uncertainty to the domestic economic picture.
On a more positive note, corporate earnings continue to hold up well and the municipal bond market is recovering from recent weakness as states and municipalities implement various programs to reduce their budgetary deficits. In addition, the Federal Reserve System has made it clear that it stands ready to take additional steps should the economic recovery falter. However, there are concerns that the Fed is approaching the limits of its resources to intervene in the economy.
These perplexing times highlight the importance of professional investment management. Your Nuveen investment team is working hard to develop an appropriate response to increased risk, and they continue to seek out opportunities created by stressful markets using proven investment disciplines designed to help your Fund achieve its investment objectives. On your behalf, we monitor their activities to assure that they maintain their investment disciplines.
As always, I encourage you to contact your financial consultant if you have any questions about your investment in a Nuveen Fund. On behalf of the other members of your Fund Board, we look forward to continuing to earn your trust in the months and years ahead.
Sincerely,
Robert P. Bremner
Chairman of the Board
October 21, 2011
| 4 | Nuveen Investments |
Certain statements in this report are forward-looking statements. Discussions of specific investments are for illustration only and are not intended as recommendations of individual investments. The forward-looking statements and other views expressed herein are those of the portfolio manager as of the date of this report. Actual future results or occurrences may differ significantly from those anticipated in any forward-looking statements and the views expressed herein are subject to change at any time, due to numerous market and other factors. The Fund disclaims any obligation to update publicly or revise any forward-looking statements or views expressed herein.
Ratings shown are the highest rating given by one of the following national rating agencies: Standard & Poor’s Group, Moody’s Investor Services, Inc. or Fitch, Inc. Credit ratings are subject to change. AAA, AA, A, and BBB are investment grade ratings; BB, B, CCC, CC, C and D are below-investment grade ratings. Bonds backed by U.S. Government or agency securities are given an implied rating equal to the rating of such securities. Holdings designated N/R are not rated by a national rating agency.
Portfolio manager Scott Romans, reviews key investment strategies and the Fund’s performance during the six months ending August 31, 2011. Scott, who has twelve years of investment experience, assumed portfolio management responsibilities for the Fund in January 2011.
How did the Fund perform during the six-month reporting period ended August 31, 2011?
The table in the Fund Performance and Expense Ratios section of this report provide total return performance information for the six-month, one-year, five-year and ten-year reporting periods ending August 31, 2011. The Fund’s Class A Share total returns are compared with the performance of a corresponding market index and Lipper peer fund classification average.
Over the six-month period, the Fund’s Class A Shares at net asset value (NAV) outpaced the Barclays Capital Municipal Bond Index and the Lipper California Municipal Debt Classification Average.
What strategies were used to manage the Fund during the six-month reporting period?
The Fund continued to employ the same fundamental investment strategies and tactics used in previous years. We remained focused on bottom-up security selection, evaluating potential opportunities one at a time based on thorough credit research. We continued our long-term strategy of focusing on mid-grade and non-rated bonds due to the favorable returns these credits historically have generated. In addition, we continued to overweight select sectors where we have research expertise, such as health care. Most of the moves we made during the period were opportunistic because the municipal market didn’t have enough trading volume to make larger scale changes. During the six months ending August 31, 2011, municipal bond issuance totaled roughly $135 billion nationwide, a 34% year-over-year decline. In comparison, new supply of California tax-exempt debt was about $19 billion during the same time span, reflecting a 37% year-over-year drop.
The Fund’s duration positioning, or its sensitivity to interest-rate movements, was the most significant driver of its outperformance during the reporting period. With the market generally rallying over the six months, the Fund benefited from a duration stance that was approximately half a year longer than the overall market. In particular, the Fund was rewarded for its dramatic underexposure to bonds with the shortest maturities. The front end of the municipal yield curve was the worst-performing segment during the six-month
| Nuveen Investments | 5 |
period. However, the Fund was also slightly underweighted in the longest maturities on the curve, which offset some of the outperformance gained from the relative underexposure at the front end.
Several of the Fund’s sector exposures, particularly in the tax-supported segment, were also positive contributors to its outperformance during the semi-annual period. The Fund benefited from a significant underweight to California general obligation (GO) bonds, as this segment slightly underperformed. We are unable to take a similar weighting of GOs in the Fund due to the Fund’s diversification requirements as well as the inability to gain access to an adequate supply of attractively priced GO bonds. At the same time, we positioned the Fund with an overweight to local GO bonds (usually unified school districts and community colleges), which also aided performance as this segment of the market outperformed.
Another sector position that proved beneficial was the Fund’s approximately 14% overweight to health care. The health care sector outperformed the overall market by about 2% during the reporting period. In particular, higher rated health care bonds rallied, outpacing their lower rated counterparts. Last year, the health care sector generally lagged similarly rated credits in other risk sectors as investors feared that health care reform would negatively impact issuers. Also, because the health care sector did not have access to the Build American Bond program, investors were getting their fill of these bonds as they continued to be issued. Although spreads remained wider in health care on an overall basis, the sector benefited from an increasing acceptance of its higher quality issuers along with the larger coupons offered on new deals that came to market from lower rated issuers.
One sector that hindered relative performance was tobacco bonds, where the Fund had approximately a 2% underweight. California tobacco bonds rallied very strongly, benefiting from a rumor of a potential settlement among the participants in the master settlement agreement, which could positively impact the credit quality of these bonds.
As was the case in the previous reporting period, we were able to make only modest adjustments to the Fund’s weightings due to the scarcity of bonds. Our purchases were focused on two areas: tobacco bonds and redevelopment authority bonds. In the tobacco sector, we bought approximately $3 million of tobacco settlement asset-backed bonds from the Golden State Tobacco Securitization Corporation for the Fund. In the case of redevelopment authority bonds, the state of California issued a budget resolution that had a dramatic impact on the authorization of these municipal entities. Although the change spooked the market, we viewed it as broadly positive. New issues in this sector came to market favorably priced and attractively structured (large coupons with 10-year calls). We were very active in this sector, adding a total of seven positions in existing or new redevelopment authority bonds to the Fund.
To fund these purchases, we used the proceeds from several bonds that were called during the period. We also sold several high-grade and lower rated positions in the health care sector at favorable prices. Additionally, we sold a few positions in California GO and public works bonds. Spreads had previously been very wide in these two segments, but narrowed over time as the state stayed out of the new issue market. Both California GO
| 6 | Nuveen Investments |
and public works bonds grew more valuable as a result of their relative scarcity. We were also a net seller of Puerto Rico bonds in the Fund as they were trading with very tight spreads. These territorial bonds are double tax-exempt in all states and can be advantageous to use as a placeholder when we have difficulty finding in-state bonds.
Risk Considerations
Mutual fund investing involves risk; principal loss is possible. Debt or fixed income securities are subject to credit risk and interest rate risk. The value of, and income generated by debt securities will decrease or increase based on changes in market interest rates. As interest rates rise, bond prices fall. Credit risk refers to an issuer’s ability to make interest and principal payments when due. Below investment grade bonds carry heightened credit risk and potential for default.
Dividend Information
During the reporting period, Class A and I Shares of the Fund remained stable. Class C1 Shares of the Fund saw a decrease to its monthly dividend in August 2011.
The Fund seeks to pay dividends at a rate that reflects the past and projected performance of the Fund. To permit the Fund to maintain a more stable monthly dividend, the Fund may pay dividends at a rate that may be more or less than the amount of net investment income actually earned by the Fund during the period. If the Fund has cumulatively earned more than it has paid in dividends, it will hold the excess in reserve as undistributed net investment income (UNII) as part of the Fund’s net asset value. Conversely, if the Fund has cumulatively paid in dividends more than it has earned, the excess will constitute a negative UNII that will likewise be reflected in the Fund’s net asset value. The Fund will, over time, pay all its net investment income as dividends to shareholders. As of August 31, 2011, the Fund had a positive UNII balance, based upon our best estimate, for tax purposes and a positive UNII balance for financial reporting purposes.
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Fund Performance and Expense Ratios (Unaudited)
The Fund Performance and Expense Ratios for this Fund are shown on the following page.
Returns quoted represent past performance, which is no guarantee of future results. Current performance may be higher or lower than the performance shown. Investment returns and principal value will fluctuate so that when shares are redeemed, they may be worth more or less than their original cost. Returns without sales charges would be lower if the sales charge were included. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Income is generally exempt from regular federal income taxes. Some income may be subject to state and local income taxes and to the federal alternative minimum tax. Capital gains, if any, are subject to tax.
Returns may reflect a contractual agreement between the Fund and the investment adviser to waive certain fees and expenses; see Notes to Financial Statements, Footnote 7 — Management Fees and Other Transactions with Affiliates for more information. In addition, returns may reflect a voluntary expense limitation by the Fund’s investment adviser that may be modified or discontinued at any time without notice. For the most recent month-end performance visit www.nuveen.com or call (800) 257-8787.
Returns reflect differences in sales charges and expenses, which are primarily differences in distribution and service fees. Fund returns assume reinvestment of dividends and capital gains.
Comparative index and Lipper return information is provided for the Fund’s Class A Shares at net asset value (NAV) only.
The expense ratios shown reflect the Fund’s total operating expenses (before fee waivers or expense reimbursements, if any) as shown in the Fund’s most recent prospectus. The expense ratios include management fees and other fees and expenses.
| Nuveen Investments | 9 |
Fund Performance and Expense Ratios (Unaudited) (continued)
Nuveen California Tax Free Fund
Refer to the first page of this Fund Performance and Expense Ratios section for further explanation of the information included within this page.
Fund Performance
Average Annual Total Returns as of August 31, 2011*
| Cumulative | Average Annual | |||||||||||||||
| 6-Month | 1-Year | 5-Year | 10-Year | |||||||||||||
Class A Shares at NAV | 7.60% | 2.45% | 4.27% | 4.47% | ||||||||||||
Class A Shares at maximum Offering Price | 3.08% | -1.82% | 3.38% | 4.03% | ||||||||||||
Barclays Capital Municipal Bond Index** | 6.39% | 2.66% | 4.54% | 4.95% | ||||||||||||
Lipper California Municipal Debt Classification Average** | 7.44% | 1.30% | 3.09% | 3.78% | ||||||||||||
Class C1 Shares | 7.27% | 1.90% | 3.77% | 4.02% | ||||||||||||
Class I Shares | 7.62% | 2.56% | 4.43% | 4.69% | ||||||||||||
Latest Calendar Quarter – Average Annual Total Returns as of September 30, 2011*
| Cumulative | Average Annual | |||||||||||||||
| 6-Month | 1-Year | 5-Year | 10-Year | |||||||||||||
Class A Shares at NAV | 9.59% | 3.84% | 4.42% | 4.67% | ||||||||||||
Class A Shares at maximum Offering Price | 4.94% | -0.50% | 3.53% | 4.22% | ||||||||||||
Class C1 Shares | 9.25% | 3.38% | 3.91% | 4.21% | ||||||||||||
Class I Shares | 9.71% | 4.05% | 4.59% | 4.89% | ||||||||||||
Class A Shares have a maximum 4.20% sales charge (Offering Price). Class A Share purchases of $1 million or more are sold at net asset value without an up-front sales charge but may be subject to a contingent deferred sales charge (CDSC), also known as a back-end sales charge, if redeemed within eighteen months of purchase. Class C1 Shares have a 1% CDSC for redemptions within less than twelve months, which is not reflected in the one-year total return. Class I Shares have no sales charge and may be purchased under limited circumstances or by specified classes of investors.
Expense Ratios as of Most Recent Prospectus
| Gross Expense Ratios | Net Expense Ratios | |||||||
Class A Shares | 1.00% | 0.86% | ||||||
Class C1 Shares | 1.45% | 1.36% | ||||||
Class I Shares | 0.80% | 0.71% | ||||||
The Fund’s investment adviser has contractually agreed to waive fees and reimburse other Fund expenses through June 30, 2012 so that total annual Fund operating expenses, after fee waivers and/or expense reimbursements and excluding acquired Fund fees and expenses, do not exceed 0.85%, 1.35% and 0.70% for Class A, Class C1 and Class I Shares, respectively. Fee waivers and expense reimbursements will not be terminated prior to that time without the approval of the Fund’s Board of Directors.
| * | Six-month returns are cumulative; all other returns are annualized. |
| ** | Refer to the Glossary of Terms Used in the Report for definitions. |
| 10 | Nuveen Investments |
Yields (Unaudited) as of August 31, 2011
Dividend Yield is the most recent dividend per share (annualized) divided by the offering price per share.
The SEC 30-Day Yield is a standardized measure of a Fund’s yield that accounts for the future amortization of premiums or discounts of bonds held in the Fund’s portfolio. The SEC 30-Day Yield is computed under an SEC standardized formula and is based on the maximum offer price per share. Dividend Yield may differ from the SEC 30-Day Yield because the Fund may be paying out more or less than it is earning and it may not include the effect of amortization of bond premium.
The Taxable-Equivalent Yield represents the yield that must be earned on a fully taxable investment in order to equal the yield of the Fund on an after-tax basis at a specified tax rate. With respect to investments that generate qualified dividend income that is taxable at a maximum rate of 15%, the Taxable-Equivalent Yield is lower.
| Dividend Yield | SEC 30-Day Yield | Taxable- Equivalent Yield1 | ||||||||||
Class A Shares2 | 4.13% | 3.68% | 5.64% | |||||||||
Class C1 Shares | 3.69% | 3.18% | 4.87% | |||||||||
Class I Shares | 4.35% | 3.84% | 5.88% | |||||||||
| 1 | The Taxable-Equivalent Yield is based on the Fund’s SEC 30-Day Yield on the indicated date and a combined federal and state income tax rate of 34.7%. |
| 2 | The SEC Yield for Class A shares quoted in the table reflects the maximum sales load. Investors paying a reduced load because of volume discounts, investors paying no load because they qualify for one of the several exclusions from the load, and existing shareholders who previously paid a load but would like to know the SEC Yield applicable to their shares on a going-forward basis, should understand that the SEC Yield effectively applicable to them would be higher than the figure quoted in the table. |
| Nuveen Investments | 11 |
Holding Summaries (Unaudited) as of August 31, 2011
This data relates to the securities held in the Fund’s portfolio of investments. It should not be construed as a measure of performance for the Fund itself.
Ratings shown are the highest rating given by one of the following national rating agencies: Standard & Poor’s Group, Moody’s Investor Services, Inc. or Fitch, Inc. Credit ratings are subject to change. AAA, AA, A, and BBB are investment grade ratings; BB, B, CCC, CC, C and D are below-investment grade ratings. Bonds backed by U.S. Government or agency securities are given an implied rating equal to the rating of such securities. Holdings designated N/R are not rated by a national rating agency.
Bond Credit Quality1
| Portfolio Composition2 | ||||
| Tax Obligation/General | 32.3% | |||
| Tax Obligation/Limited | 19.8% | |||
| Health Care | 16.4% | |||
| Education and Civic Organizations | 14.4% | |||
| Water and Sewer | 8.0% | |||
| Short-Term Investments | 2.0% | |||
| Other | 7.1% | |||
| 1 | As a percentage of total investments, excluding short-term investments, as of August 31, 2011. Holdings are subject to change. |
| 2 | As a percentage of total investments, as of August 31, 2011. Holdings are subject to change. |
| 12 | Nuveen Investments |
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including up-front and back-end sales charges (loads) or redemption fees, where applicable; and (2) ongoing costs, including management fees; distribution and service (12b-1) fees, where applicable; and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example below is based on an investment of $1,000 invested at the beginning of the period and held for the period.
The information under “Actual Performance,” together with the amount you invested, allows you to estimate actual expenses incurred over the reporting period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.60) and multiply the result by the cost shown for your share class, in the row entitled “Expenses Incurred During Period” to estimate the expenses incurred on your account during this period.
The information under “Hypothetical Performance,” provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expense you incurred for the period. You may use this information to compare the ongoing costs of investing in the Fund and other Funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the hypothetical information is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds or share classes. In addition, if these transaction costs were included, your costs would have been higher.
| Hypothetical Performance | ||||||||||||||||||||||||
| Actual Performance | (5% annualized return before expenses) | |||||||||||||||||||||||
| A Shares | C1 Shares | I Shares | A Shares | C1 Shares | I Shares | |||||||||||||||||||
| Beginning Account Value (3/01/11) | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | ||||||||||||
| Ending Account Value (8/31/11) | $ | 1,076.00 | $ | 1,072.70 | $ | 1,076.20 | $ | 1,021.52 | $ | 1,019.00 | $ | 1,022.27 | ||||||||||||
| Expenses Incurred During Period | $ | 3.76 | $ | 6.36 | $ | 2.97 | $ | 3.66 | $ | 6.19 | $ | 2.90 | ||||||||||||
For each class of the Fund, expenses are equal to the Fund’s annualized net expense ratio of .72%, 1.22% and .57% for Classes A, C1 and I, respectively, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the six month period).
| Nuveen Investments | 13 |
Portfolio of Investments (Unaudited)
Nuveen California Tax Free Fund
August 31, 2011
| Principal Amount (000) | Description (1) | Optional Call Provisions (2) | Ratings (3) | Value | ||||||||||||||
Consumer Staples – 1.8% | ||||||||||||||||||
| $ | 2,945 | Golden State Tobacco Securitization Corporation, California, Tobacco Settlement Asset-Backed Bonds, Series 2007A-1, 5.125%, 6/01/47 | 6/17 at 100.00 | Baa3 | $ | 1,900,350 | ||||||||||||
Education and Civic Organizations – 14.2% | ||||||||||||||||||
| 240 | California Educational Facilities Authority, Revenue Bonds, Claremont Graduate University, Series 2007A, 5.000%, 3/01/20 | 3/17 at 100.00 | A3 | 258,391 | ||||||||||||||
California Educational Facilities Authority, Revenue Bonds, Claremont Graduate University, Series 2008A: | ||||||||||||||||||
| 865 | 5.000%, 3/01/23 | 3/18 at 100.00 | A3 | 909,029 | ||||||||||||||
| 500 | 5.125%, 3/01/28 | 3/18 at 100.00 | A3 | 507,310 | ||||||||||||||
| 430 | California Educational Facilities Authority, Revenue Bonds, Golden Gate University, Series 2005, 5.000%, 10/01/20 | 10/15 at 100.00 | Baa3 | 418,661 | ||||||||||||||
| 675 | California Educational Facilities Authority, Revenue Bonds, Lutheran University, Series 2004C, 4.750%, 10/01/15 | 10/14 at 100.00 | Baa1 | 712,382 | ||||||||||||||
| 1,000 | California Educational Facilities Authority, Revenue Bonds, Pitzer College, Refunding Series 2009, 5.375%, 4/01/34 | 4/20 at 100.00 | A3 | 1,018,180 | ||||||||||||||
| 1,000 | California Educational Facilities Authority, Revenue Bonds, University of Redlands, Series 2008A, 5.000%, 8/01/28 | 8/18 at 100.00 | A3 | 1,008,100 | ||||||||||||||
| 1,000 | California Educational Facilities Authority, Revenue Bonds, University of the Pacific, Series 2006, 5.000%, 11/01/30 | 11/15 at 100.00 | A2 | 1,011,920 | ||||||||||||||
California Educational Facilities Authority, Revenue Bonds, Woodbury University, Series 2006: | ||||||||||||||||||
| 450 | 4.400%, 1/01/15 | No Opt. Call | Baa3 | 451,778 | ||||||||||||||
| 470 | 4.500%, 1/01/16 | 1/15 at 100.00 | Baa3 | 470,550 | ||||||||||||||
| 100 | California Infrastructure Economic Development Bank, Revenue Bonds, Perfroming Arts Center of Los ANgeles County, Series 2007, 4.000%, 12/01/15 | No Opt. Call | A | 108,960 | ||||||||||||||
| 400 | California Municipal Finance Authority, Education Revenue Bonds, American Heritage Education Foundation Project, Series 2006A, 5.250%, 6/01/26 | 6/16 at 100.00 | BBB– | 353,672 | ||||||||||||||
California Municipal Finance Authority, Revenue Bonds, Loma Linda University, Series 2007: | ||||||||||||||||||
| 300 | 4.250%, 4/01/18 | 4/17 at 100.00 | A | 318,111 | ||||||||||||||
| 300 | 4.375%, 4/01/19 | 4/17 at 100.00 | A | 315,690 | ||||||||||||||
California Municipal Finance Authority, Revenue Refunding Bonds, Biola University, Series 2008A: | ||||||||||||||||||
| 1,000 | 5.000%, 10/01/18 | No Opt. Call | Baa1 | 1,062,390 | ||||||||||||||
| 500 | 5.625%, 10/01/23 | 4/18 at 100.00 | Baa1 | 515,910 | ||||||||||||||
| 695 | California State Public Works Board, Lease Revenue Bonds, California State University, J. Paul Leonard & Sutro Library, Series 2009J, 5.500%, 11/01/26 | 11/19 at 100.00 | Aa3 | 732,301 | ||||||||||||||
| 500 | California State Public Works Board, Lease Revenue Bonds, California State University, Various University Projects, Series 2009B-1, 5.400%, 3/01/26 | 3/20 at 100.00 | Aa3 | 525,010 | ||||||||||||||
| 1,250 | California State Public Works Board, Lease Revenue Bonds, University of California Regents, Series 2009E, 5.000%, 4/01/34 | No Opt. Call | Aa2 | 1,278,038 | ||||||||||||||
| 1,035 | California State Public Works Board, Lease Revenue Refunding Bonds, Community College Projects, Series 2004B, 5.500%, 6/01/19 | 6/14 at 100.00 | A2 | 1,095,765 | ||||||||||||||
| 200 | California State Public Works Board, Lease Revenue Refunding Bonds, Community Colleges Projects, Series 1999A, 4.875%, 12/01/18 | 11/11 at 100.50 | A2 | 200,978 | ||||||||||||||
| 1,000 | California State University, Systemwide Revenue Bonds, Series 2005C, 5.000%, 11/01/25 – NPFG Insured | 11/15 at 100.00 | Aa2 | 1,052,680 | ||||||||||||||
| 405 | California Statewide Community Development Authority, Revenue Bonds, Viewpoint School, Series 2004, 4.125%, 10/01/14 – ACA Insured | No Opt. Call | BBB | 418,555 | ||||||||||||||
| 14,315 | Total Education and Civic Organizations | 14,744,361 | ||||||||||||||||
| 14 | Nuveen Investments |
| Principal Amount (000) | Description (1) | Optional Call Provisions (2) | Ratings (3) | Value | ||||||||||||||
Health Care – 16.3% | ||||||||||||||||||
ABAG Finance Authority for Non-Profit Corporations, California, Revenue Bonds, Childrens Hospital & Research Center at Oakland, Refunding Series 2007A: | ||||||||||||||||||
| $ | 425 | 4.500%, 12/01/19 | 12/17 at 100.00 | A– | $ | 450,687 | ||||||||||||
| 350 | 4.750%, 12/01/22 | 12/17 at 100.00 | A– | 364,270 | ||||||||||||||
| 1,000 | California Health Facilities Financing Authority, Refunding Revenue Bonds, Stanford Hospital and Clinics, Series 2010A, 5.000%, 11/15/25 | 11/20 at 100.00 | Aa3 | 1,057,360 | ||||||||||||||
| 500 | California Health Facilities Financing Authority, Revenue Bonds, Adventist Health System/West, Series 2009C, 5.250%, 3/01/21 | 3/19 at 100.00 | A | 547,750 | ||||||||||||||
| 350 | California Health Facilities Financing Authority, Revenue Bonds, Casa Colina Inc., Series 2001, 5.500%, 4/01/13 | 4/12 at 100.00 | BBB+ | 355,821 | ||||||||||||||
| 1,000 | California Health Facilities Financing Authority, Revenue Bonds, Catholic Healthcare West, Series 2008G, 5.500%, 7/01/25 | 7/18 at 100.00 | A | 1,053,990 | ||||||||||||||
| 1,760 | California Health Facilities Financing Authority, Revenue Bonds, Marshall Medical Center, Series 2004A, 4.750%, 11/01/19 | 11/14 at 100.00 | A– | 1,815,458 | ||||||||||||||
| 200 | California Health Facilities Financing Authority, Revenue Bonds, Scripps Health, Refunding Series 2008A, 5.000%, 10/01/22 | 10/18 at 100.00 | AA– | 216,648 | ||||||||||||||
| 250 | California Health Facilities Financing Authority, Revenue Bonds, Sutter Health, Series 2008A, 5.000%, 8/15/38 | 8/18 at 100.00 | AA– | 243,140 | ||||||||||||||
| 500 | California Statewide Communities Development Authority, Health Facility Revenue Bonds, Community Hospital of the Monterey Peninsula, Series 2011A, 6.000%, 6/01/33 | 6/21 at 100.00 | A+ | 522,075 | ||||||||||||||
| 300 | California Statewide Communities Development Authority, Revenue Bonds, Adventist Health System West, Series 2005A, 5.000%, 3/01/30 | 3/15 at 100.00 | A | 300,096 | ||||||||||||||
| 1,000 | California Statewide Community Development Authority, Health Facility Revenue Bonds, Catholic Healthcare West, Series 2008C, 5.625%, 7/01/35 | 7/18 at 100.00 | A | 1,022,950 | ||||||||||||||
California Statewide Community Development Authority, Health Revenue Bonds, Enloe Medical Center, Refunding Series 2008A: | ||||||||||||||||||
| 125 | 5.250%, 8/15/19 | 8/18 at 100.00 | A– | 137,266 | ||||||||||||||
| 500 | 5.500%, 8/15/23 | 8/18 at 100.00 | A– | 531,775 | ||||||||||||||
| 500 | California Statewide Community Development Authority, Hospital Revenue Bonds, Redlands Community Hospital, Series 2005A, 5.000%, 4/01/15 – RAAI Insured | No Opt. Call | BBB | 534,600 | ||||||||||||||
California Statewide Community Development Authority, Insured Health Facility Revenue Bonds, Henry Mayo Newhall Memorial Hospital, Series 2007A: | ||||||||||||||||||
| 500 | 5.000%, 10/01/20 | 10/17 at 100.00 | A– | 531,045 | ||||||||||||||
| 400 | 5.000%, 10/01/27 | 10/17 at 100.00 | A– | 393,476 | ||||||||||||||
| 400 | California Statewide Community Development Authority, Revenue Bonds, Daughters of Charity Health System, Series 2005G, 5.250%, 7/01/13 | No Opt. Call | BBB | 411,088 | ||||||||||||||
| 1,100 | California Statewide Community Development Authority, Revenue Bonds, St. Joseph Health System, Series 2007B, 5.500%, 7/01/27 – FGIC Insured | 7/18 at 100.00 | AA– | 1,138,500 | ||||||||||||||
| 500 | California Statewide Community Development Authority, Revenue Bonds, St. Joseph Health System, Series 2007C, 5.500%, 7/01/27 – FGIC Insured | 7/18 at 100.00 | AA– | 517,500 | ||||||||||||||
| 1,000 | Loma Linda, California, Hospital Revenue Bonds, Loma Linda University Medical Center, Series 2005A, 5.000%, 12/01/15 | No Opt. Call | BBB | 1,047,430 | ||||||||||||||
| 1,000 | Loma Linda, California, Hospital Revenue Bonds, Loma Linda University Medical Center, Series 2008A, 8.250%, 12/01/38 | 12/17 at 100.00 | BBB | 1,102,560 | ||||||||||||||
| 500 | Northern Inyo County Local Hospital District, Inyo County, California, Revenue Bonds, Series 2010, 6.375%, 12/01/25 | 12/20 at 100.00 | BBB– | 506,030 | ||||||||||||||
Sierra View Local Health Care District, California, Revenue Bonds, Series 2007: | ||||||||||||||||||
| 1,000 | 5.250%, 7/01/24 | 7/17 at 100.00 | N/R | 1,009,420 | ||||||||||||||
| 1,000 | 5.300%, 7/01/26 | 7/17 at 100.00 | N/R | 987,800 | ||||||||||||||
| 16,160 | Total Health Care | 16,798,735 | ||||||||||||||||
| Nuveen Investments | 15 |
Portfolio of Investments (Unaudited)
Nuveen California Tax Free Fund (continued)
August 31, 2011
| Principal Amount (000) | Description (1) | Optional Call Provisions (2) | Ratings (3) | Value | ||||||||||||||
Housing/Multifamily – 1.2% | ||||||||||||||||||
| $ | 410 | California Statewide Community Development Authority, Student Housing Revenue Bonds, CHF-Irvine, LLC-UCI East Campus Apartments, Phase II, Series 2008, 5.500%, 5/15/26 | 5/18 at 100.00 | Baa2 | $ | 402,669 | ||||||||||||
| 1,000 | Ventura County Area Housing Authority, California, Multifamily Revenue Bonds, Mira Vista Senior Apartments Project, Series 2006A, 5.150%, 12/01/31 – AMBAC Insured (Alternative Minimum Tax) | 12/16 at 100.00 | N/R | 800,300 | ||||||||||||||
| 1,410 | Total Housing/Multifamily | 1,202,969 | ||||||||||||||||
Industrials – 1.0% | ||||||||||||||||||
| 500 | California Pollution Control Financing Authority, Solid Waste Disposal Revenue Bonds, Waste Management Inc., Series 2002B, 5.000%, 7/01/27 (Alternative Minimum Tax) | 7/15 at 101.00 | BBB | 495,115 | ||||||||||||||
| 500 | California Pollution Control Financing Authority, Solid Waste Disposal Revenue Bonds, Waste Management Inc., Series 2005A-2, 5.400%, 4/01/25 (Alternative Minimum Tax) | 4/15 at 101.00 | BBB | 509,310 | ||||||||||||||
| 1,000 | Total Industrials | 1,004,425 | ||||||||||||||||
Long-Term Care – 2.2% | ||||||||||||||||||
| 560 | California Statewide Community Development Authority, Revenue Bonds, Los Angeles Jewish Home for the Aging, Series 2008, 4.500%, 11/15/19 | 5/18 at 100.00 | A– | 588,946 | ||||||||||||||
| 1,000 | Eden Township Healthcare District, California, Certificates of Participation, Installment Sale Agreement with Eden Hospital Health Services Corporation, Series 2010, 6.000%, 6/01/30 | 6/20 at 100.00 | N/R | 996,550 | ||||||||||||||
| 300 | Illinois Finance Authority, Revenue Bonds, Franciscan Communities Inc., Refunding Series 2007A, 5.500%, 5/15/27 | 5/17 at 100.00 | N/R | 251,460 | ||||||||||||||
| 500 | La Verne, California, Certificates of Participation, Brethren Hillcrest Homes, Series 2003A, 5.600%, 2/15/33 – ACA Insured | 2/13 at 101.00 | BB | 430,450 | ||||||||||||||
| 2,360 | Total Long-Term Care | 2,267,406 | ||||||||||||||||
Tax Obligation/General – 32.0% | ||||||||||||||||||
| 1,000 | Acalanes Union High School District, Contra Costa County, California, General Obligation Bonds, Refunding Series 2010A, 0.000%, 8/01/26 | No Opt. Call | Aa1 | 443,860 | ||||||||||||||
| 1,000 | Baldwin Park Unified School District, Los Angeles County, California, General Obligation Bonds, Election 2002 Series 2006, 0.000%, 8/01/20 – AMBAC Insured | 8/16 at 83.04 | A+ | 647,970 | ||||||||||||||
| 600 | California State, General Obligation Bonds, Various Purpose Series 2009, 5.625%, 4/01/26 | 4/19 at 100.00 | A1 | 665,076 | ||||||||||||||
| 855 | Central Unified School District, Fresno County, California, General Obligation Bonds, Election 2008 Series 2009A, 5.625%, 8/01/33 – AGC Insured | 8/19 at 100.00 | AA+ | 915,791 | ||||||||||||||
| 1,000 | College of the Sequoias Visalia Area Improvement District 2, Tulare County, California, General Obligation Bonds, Sequoias Community College District, Election 2008 Series 2009A, 5.250%, 8/01/29 – AGC Insured | 8/19 at 100.00 | AA+ | 1,052,240 | ||||||||||||||
| 500 | Corona-Norco Unified School District, Riverside County, California, General Obligation Bonds, Capital Appreciation, Election 2006 Refunding Series 2009C, 0.000%, 8/01/39 – AGM Insured | 8/27 at 100.00 | AA+ | 408,150 | ||||||||||||||
| 500 | Corona-Norco Unified School District, Riverside County, California, General Obligation Bonds, Election 2006 Series 2009B, 5.375%, 2/01/34 – AGC Insured | 8/18 at 100.00 | AA+ | 522,865 | ||||||||||||||
| 1,705 | Cupertino Union School District, Santa Clara County, California, General Obligation Bonds, Series 2010D, 0.000%, 8/01/30 | 8/20 at 52.75 | Aa1 | 540,860 | ||||||||||||||
| 350 | Desert Sands Unified School District, Riverside County, California, General Obligation Bonds, Election 2001, Series 2008, 5.250%, 8/01/23 | No Opt. Call | Aa2 | 391,269 | ||||||||||||||
| 440 | Golden West Schools Financing Authority, California, General Obligation Revenue Refunding Bonds, School District Program, Series 1998A, 0.000%, 2/01/12 – NPFG Insured | No Opt. Call | Baa1 | 436,968 | ||||||||||||||
| 16 | Nuveen Investments |
| Principal Amount (000) | Description (1) | Optional Call Provisions (2) | Ratings (3) | Value | ||||||||||||||
Tax Obligation/General (continued) | ||||||||||||||||||
Golden West Schools Financing Authority, California, General Obligation Revenue Refunding Bonds, School District Program, Series 1999A: | ||||||||||||||||||
| $ | 670 | 5.700%, 2/01/13 – NPFG Insured | No Opt. Call | Baa1 | $ | 707,882 | ||||||||||||
| 770 | 5.750%, 2/01/14 – NPFG Insured | No Opt. Call | Baa1 | 840,586 | ||||||||||||||
| 320 | 5.800%, 8/01/22 – NPFG Insured | No Opt. Call | Baa1 | 369,798 | ||||||||||||||
| 345 | 5.800%, 8/01/23 – NPFG Insured | No Opt. Call | Baa1 | 395,732 | ||||||||||||||
| 950 | Grossmont Union High School District, San Diego County, California, General Obligation Bonds, Series 2009A, 5.500%, 8/01/31 | 8/19 at 100.00 | Aa2 | 1,034,085 | ||||||||||||||
| 600 | Hemet Unified School District, Riverside County, California, General Obligation Bonds, Series 2008B, 5.000%, 8/01/30 – AGC Insured | 8/16 at 102.00 | AA+ | 625,062 | ||||||||||||||
Jefferson Union High School District, San Mateo County, California, General Obligation Bonds, Series 2000A: | ||||||||||||||||||
| 300 | 6.250%, 2/01/14 – NPFG Insured | No Opt. Call | A+ | 328,629 | ||||||||||||||
| 460 | 6.250%, 8/01/20 – NPFG Insured | No Opt. Call | A+ | 545,730 | ||||||||||||||
| 500 | Long Beach Unified School District, Los Angeles County, California, General Obligation Bonds, Election of 2008, Series 2009A, 5.500%, 8/01/29 | 8/19 at 100.00 | Aa2 | 553,845 | ||||||||||||||
| 3,000 | Los Angeles Community College District, California, General Obligation Bonds, 2008 Election Series 2010C, 5.250%, 8/01/39 | No Opt. Call | Aa1 | 3,228,690 | ||||||||||||||
| 240 | Los Angeles Unified School District, Los Angeles County, California, General Obligation Bonds, Series 2007B, 4.500%, 7/01/25 – AMBAC Insured | No Opt. Call | Aa2 | 243,679 | ||||||||||||||
| 100 | Los Angeles Unified School District, Los Angeles County, California, General Obligation Bonds, Series 2009D, 5.000%, 1/01/34 | No Opt. Call | Aa2 | 102,765 | ||||||||||||||
| 100 | Lucia Mar Unified School District, San Luis Obispo County, California, General Obligation Bonds, Refunding Series 2005, 5.250%, 8/01/22 – NPFG Insured | No Opt. Call | Aa2 | 121,832 | ||||||||||||||
Lynwood Public Financing Authority, Los Angeles County, California, Lease Revenue Bonds, Civic Center Improvement Project, Series 2010A: | ||||||||||||||||||
| 500 | 5.375%, 9/01/30 | 9/20 at 100.00 | A– | 487,800 | ||||||||||||||
| 150 | 5.500%, 9/01/40 | 9/20 at 100.00 | A– | 139,266 | ||||||||||||||
| 435 | Oakland, California, General Obligation Bonds, Series 2003A, 5.000%, 1/15/26 – NPFG Insured | No Opt. Call | Aa2 | 449,264 | ||||||||||||||
| 1,155 | Pittsburg Unified School District, Contra Costa County, California, General Obligation Bonds, Series 2009B, 5.500%, 8/01/34 – AGM Insured | 8/18 at 100.00 | AA+ | 1,236,762 | ||||||||||||||
| 855 | Pomona Unified School District, Los Angeles County, California, General Obligation Bonds, Series 2001A, 5.950%, 2/01/17 – NPFG Insured | No Opt. Call | A | 975,940 | ||||||||||||||
| 5,000 | Poway Unified School District, San Diego County, California, School Facilities Improvement District 2007-1 General Obligation Bonds, Series 2009A, 0.000%, 8/01/29 | No Opt. Call | Aa2 | 1,674,450 | ||||||||||||||
| 50 | Puerto Rico Government Development Bank, Senior Note Revenue Bonds, Senior Lien, Series 2006B, 5.000%, 12/01/14 | No Opt. Call | Baa1 | 54,106 | ||||||||||||||
| 1,000 | Puerto Rico, General Obligation and Public Improvement Bonds, Series 1996, 6.500%, 7/01/15 – AGM Insured | No Opt. Call | AA+ | 1,156,250 | ||||||||||||||
| 1,265 | San Bernardino Community College District, California, General Obligation Bonds, Series 2008A, 6.500%, 8/01/27 | No Opt. Call | Aa2 | 1,489,069 | ||||||||||||||
| 2,000 | San Diego Unified School District, San Diego County, California, General Obligation Bonds, Series 2009A, 0.000%, 7/01/33 | 7/24 at 100.00 | Aa1 | 1,304,260 | ||||||||||||||
| 1,000 | Santa Ana Unified School District, Orange County, California, General Obligation Bonds, Series 2008A, 5.250%, 8/01/28 | 8/18 at 100.00 | Aa2 | 1,059,660 | ||||||||||||||
| 1,000 | Santa Barbara Community College District, California, General Obligation Bonds, Series 2008A, 5.250%, 8/01/27 | 8/18 at 100.00 | AA+ | 1,089,020 | ||||||||||||||
Tulare Local Health Care District, California, General Obligation Bonds, Series 2009B: | ||||||||||||||||||
| 500 | 6.375%, 8/01/25 | 8/19 at 100.00 | A1 | 564,430 | ||||||||||||||
| 1,005 | 6.500%, 8/01/26 | 8/19 at 100.00 | A1 | 1,129,037 | ||||||||||||||
| Nuveen Investments | 17 |
Portfolio of Investments (Unaudited)
Nuveen California Tax Free Fund (continued)
August 31, 2011
| Principal Amount (000) | Description (1) | Optional Call Provisions (2) | Ratings (3) | Value | ||||||||||||||
Tax Obligation/General (continued) | ||||||||||||||||||
| $ | 1,530 | Victor Valley Community College District, San Bernardino County, California, General Obligation Bonds, Election of 2008 Series 2009A, 5.000%, 8/01/31 | 8/19 at 100.00 | Aa2 | $ | 1,575,793 | ||||||||||||
| 2,000 | Victor Valley Union High School District, San Bernardino County, California, General Obligation Bonds, Series 2009A, 0.000%, 8/01/31 – AGC Insured | 8/26 at 100.00 | AA+ | 1,268,460 | ||||||||||||||
| 1,100 | West Contra Costa Unified School District, Contra Costa County, California, General Obligation Bonds, Series 2008B, 6.000%, 8/01/24 | No Opt. Call | Aa3 | 1,279,289 | ||||||||||||||
| 770 | West Covina Unified School District, Los Angeles County, California, General Obligation Bonds, Series 2002A Refunding, 5.350%, 2/01/20 – NPFG Insured | No Opt. Call | A+ | 860,313 | ||||||||||||||
| 1,000 | Whittier Union High School District, Los Angeles County, California, General Obligation Bonds, Series 2009A, 0.000%, 8/01/34 | 8/19 at 38.81 | AA- | 214,580 | ||||||||||||||
| 38,620 | Total Tax Obligation/General | 33,131,113 | ||||||||||||||||
Tax Obligation/Limited – 19.5% | ||||||||||||||||||
| 1,000 | Anitoch Area Public Facilities Financing Agency, California, Special Tax Bonds, Community Facilities District 1989-1, Refunding Series 2006, 4.000%, 8/01/18 – AMBAC Insured | 8/16 at 100.00 | A1 | 1,009,670 | ||||||||||||||
Apple Valley Public Financing Authority, California, Lease Revenue Bonds, Town Hall Annex Project, Series 2007A: | ||||||||||||||||||
| 485 | 4.500%, 9/01/17 – AMBAC Insured | No Opt. Call | A– | 548,457 | ||||||||||||||
| 500 | 5.000%, 9/01/27 – AMBAC Insured | 9/17 at 100.00 | A– | 521,830 | ||||||||||||||
| 540 | California State Public Works Board, Lease Revenue Bonds, Department of Mental Health, Coalinga State Hospital, Series 2004A, 5.500%, 6/01/16 | 6/14 at 100.00 | A2 | 590,765 | ||||||||||||||
| 1,500 | California State Public Works Board, Lease Revenue Bonds, Various Capital Projects, Series 2009G-1, 5.750%, 10/01/30 | 10/19 at 100.00 | A2 | 1,575,510 | ||||||||||||||
Community Development Commission Of City of National City, California, National City Redevelopment Project 2011 Tax Allocation Bonds: | ||||||||||||||||||
| 155 | 6.500%, 8/01/24 | 8/21 at 100.00 | A– | 161,660 | ||||||||||||||
| 1,000 | 7.000%, 8/01/32 | 8/21 at 100.00 | A– | 1,047,970 | ||||||||||||||
| 140 | Escondido, California, Certificates of Participation, Refunding Series 2000A, 5.625%, 9/01/20 – NPFG Insured | 11/11 at 100.00 | A+ | 140,540 | ||||||||||||||
| 1,650 | Golden State Tobacco Securitization Corporation, California, Enhanced Tobacco Settlement Asset-Backed Revenue Bonds, Series 2005A, 4.550%, 6/01/22 – AGM Insured | 6/18 at 100.00 | AA+ | 1,598,042 | ||||||||||||||
| 1,200 | Los Angeles Community Redevelopment Agency, California, Lease Revenue Bonds, Manchester Social Services Project, Series 2005, 5.000%, 9/01/16 – AMBAC Insured | 9/15 at 100.00 | A1 | 1,312,560 | ||||||||||||||
| 715 | Los Angeles County Community Facilities District 3, California, Special Tax Bonds, Improvement Area B, Series 2000A, 5.250%, 9/01/18 – AMBAC Insured | 3/12 at 100.00 | N/R | 717,867 | ||||||||||||||
| 330 | Los Angeles, California, Certificates of Participation, Department of Public Social Services, Sonnenblick Del Rio West LA, Senior Lien Series 2000, 6.000%, 11/01/19 – AMBAC Insured | 11/12 at 100.00 | A2 | 331,584 | ||||||||||||||
| 350 | Murrieta, California, Special Tax Bonds, Community Facilities District 2000-2, The Oaks Improvement Area A, Series 2004A, 5.750%, 9/01/20 | 9/14 at 100.00 | N/R | 353,546 | ||||||||||||||
| 300 | Norco, California, Community Facilities District 97-1, Norco Hills, Special Tax Refunding Series 2005, 4.875%, 10/01/30 – AGC Insured | 10/15 at 100.00 | AA+ | 294,867 | ||||||||||||||
| 60 | Novato Redevelopment Agency, California, Tax Allocation Bonds, Hamilton Field Redevelopment Project, Series 2011, 6.750%, 9/01/40 | 9/21 at 100.00 | A– | 62,614 | ||||||||||||||
| 1,000 | Palm Desert Finance Authority, California, Tax Allocation Revenue Bonds, Project Area 4, Refunding Series 2006A, 5.000%, 10/01/29 – NPFG Insured | 10/16 at 100.00 | A2 | 920,530 | ||||||||||||||
| 50 | Pasadena, California, Certificates of Participation, Refunding Series 2008C, 4.500%, 2/01/26 | 2/18 at 100.00 | AA+ | 51,587 | ||||||||||||||
| 650 | Poway Unified School District, San Diego County, California, Special Tax Bonds, Community Facilities District 6, Series 2005, 5.000%, 9/01/23 | 3/12 at 103.00 | BBB+ | 631,722 | ||||||||||||||
| 18 | Nuveen Investments |
| Principal Amount (000) | Description (1) | Optional Call Provisions (2) | Ratings (3) | Value | ||||||||||||||
Tax Obligation/Limited (continued) | ||||||||||||||||||
| $ | 585 | Poway, California, Certificates of Participation, Refunding Series 2005, 4.500%, 8/01/16 – AMBAC Insured | 8/15 at 100.00 | Aa3 | $ | 643,582 | ||||||||||||
| 100 | Puerto Rico, Highway Revenue Bonds, Highway and Transportation Authority, Series 1993X, 5.500%, 7/01/15 – NPFG Insured | No Opt. Call | A3 | 109,707 | ||||||||||||||
| 500 | Ramona Unified School District, San Diego County, California, Certificates of Participation, Refunding Series 2007, 0.000%, 5/01/32 – NPFG Insured | 5/17 at 100.00 | A | 461,850 | ||||||||||||||
Rancho Cucamonga Redevelopment Agency, California, Housing Set-Aside Tax Allocation Bonds, Series 2007A: | ||||||||||||||||||
| 310 | 4.125%, 9/01/18 – NPFG Insured | 9/17 at 100.00 | A+ | 302,904 | ||||||||||||||
| 500 | 5.000%, 9/01/34 – NPFG Insured | 9/17 at 100.00 | A+ | 434,695 | ||||||||||||||
| 190 | Rancho Santa Fe CSD Financing Authority, California, Revenue Bonds, Superior Lien Series 2011A, 5.750%, 9/01/30 | 9/21 at 100.00 | BBB+ | 192,742 | ||||||||||||||
| 850 | San Bernardino County Redevelopment Agency, California, Tax Allocation Refunding Bonds, San Sevaine Project, Series 2005A, 5.000%, 9/01/16 – RAAI Insured | 9/15 at 100.00 | BBB | 866,337 | ||||||||||||||
San Francisco Redevelopment Finance Authority, California, Tax Allocation Revenue Bonds, Mission Bay North Redevelopment Project, Series 2006B: | ||||||||||||||||||
| 325 | 4.100%, 8/01/14 – RAAI Insured | No Opt. Call | A– | 331,650 | ||||||||||||||
| 250 | 4.250%, 8/01/16 – RAAI Insured | No Opt. Call | A– | 257,313 | ||||||||||||||
| 380 | 4.375%, 8/01/18 – RAAI Insured | 8/16 at 100.00 | A– | 382,561 | ||||||||||||||
| 315 | Sand City Redevelopment Agency, Monterrey County, California, Tax Allocation Revenue Bonds, Redevelopment Project, Series 2008A, 4.000%, 11/01/19 – AGC Insured | 11/18 at 100.00 | Aa3 | 311,526 | ||||||||||||||
| 45 | Signal Hill Redevelopment Agency, California, Project 1 Tax Allocation Bonds, Series 2011, 7.000%, 10/01/26 | 4/21 at 100.00 | N/R | 45,277 | ||||||||||||||
| 205 | Soledad Redevelopment Agency, California, Tax Allocation Bonds, Soledad Redevelopment Project, Series 2007A, 4.500%, 12/01/16 – SYNCORA GTY Insured | No Opt. Call | BB+ | 220,713 | ||||||||||||||
South Tahoe Redevelopment Agency, California, Community Facilities District 2001-1 , Heavenly Village, Special Tax Refunding Bonds, Series 2007: | ||||||||||||||||||
| 120 | 4.400%, 10/01/15 | No Opt. Call | N/R | 124,240 | ||||||||||||||
| 125 | 4.500%, 10/01/16 | 10/15 at 102.00 | N/R | 129,181 | ||||||||||||||
| 280 | 4.600%, 10/01/18 | 10/15 at 102.00 | N/R | 280,932 | ||||||||||||||
| 300 | Travis Unified School District, Solano County, California, Certificates of Participation, Series 2006, 4.500%, 9/01/16 – NPFG Insured | No Opt. Call | N/R | 306,327 | ||||||||||||||
Vista Community Development Commission Taxable Non-Housing Tax Allocation Revenue Bonds, California, Vista Redevlopment Project, | ||||||||||||||||||
| 1,390 | 6.000%, 9/01/33 | 9/21 at 100.00 | A– | 1,418,273 | ||||||||||||||
| 1,450 | 6.125%, 9/01/37 | 9/21 at 100.00 | A– | 1,473,287 | ||||||||||||||
| 80 | Yorba Linda Redevelopment Agency, Orange County, California, Tax Allocation Revenue Bonds, Yorba Linda Redevelopment Project, Subordinate Lien Series 2011A, 6.500%, 9/01/32 | 9/21 at 100.00 | A– | 83,403 | ||||||||||||||
| 19,925 | Total Tax Obligation/Limited | 20,247,821 | ||||||||||||||||
Transportation – 0.9% | ||||||||||||||||||
| 1,000 | Alameda Corridor Transportation Authority, California, Subordinate Lien Revenue Bonds, Series 2004A, 0.000%, 10/01/14 – AMBAC Insured | No Opt. Call | A– | 896,230 | ||||||||||||||
Water and Sewer – 8.0% | ||||||||||||||||||
Banning Utility Authority, California, Water Revenue Bonds, Series 2005: | ||||||||||||||||||
| 1,025 | 5.000%, 11/01/20 – NPFG Insured | 11/16 at 100.00 | A+ | 1,115,897 | ||||||||||||||
| 1,040 | 5.000%, 11/01/23 – NPFG Insured | 11/16 at 100.00 | A+ | 1,102,899 | ||||||||||||||
| 1,150 | Compton, California, Sewer Revenue Bonds, Series 1998 Refunding, 5.375%, 9/01/23 – NPFG Insured | 11/11 at 100.00 | A2 | 1,151,012 | ||||||||||||||
| 1,000 | Imperial, California, Certificates of Participation, Wastewater Treatment Project, Refunding Series 2001, 5.000%, 10/15/20 – NPFG Insured | 10/11 at 102.00 | BBB | 1,001,140 | ||||||||||||||
| Nuveen Investments | 19 |
Portfolio of Investments (Unaudited)
Nuveen California Tax Free Fund (continued)
August 31, 2011
| Principal Amount (000) | Description (1) | Optional Call Provisions (2) | Ratings (3) | Value | ||||||||||||||
Water and Sewer (continued) | ||||||||||||||||||
| $ | 1,000 | Norco Financing Authority, California, Enterprise Revenue Refunding Bonds, Series 2009, 5.625%, 10/01/34 – AGM Insured | 10/19 at 100.00 | AA+ | $ | 1,056,410 | ||||||||||||
| 805 | Oakdale Irrigation District, California, Certificates of Participation, Water Facilities Project, Series 2009, 5.500%, 8/01/34 | 8/19 at 100.00 | AA | 850,128 | ||||||||||||||
Rowland Water District, California, Certificates of Participation, Recycled Water Project, Series 2008: | ||||||||||||||||||
| 565 | 5.750%, 12/01/24 | 12/18 at 100.00 | AA– | 632,314 | ||||||||||||||
| 480 | 5.750%, 12/01/25 | 12/18 at 100.00 | AA– | 533,179 | ||||||||||||||
| 500 | 6.250%, 12/01/39 | 12/18 at 100.00 | AA– | 543,110 | ||||||||||||||
| 250 | Yuba Levee Financing Authority, California, Revenue Bonds, Yuba County Levee Financing Project, Series 2008A, 5.000%, 9/01/38 – AGC Insured | No Opt. Call | AA+ | 251,515 | ||||||||||||||
| 7,815 | Total Water and Sewer | 8,237,604 | ||||||||||||||||
| $ | 105,550 | Total Municipal Bonds (cost $97,055,078) – 97.1% | 100,431,014 | |||||||||||||||
| Shares | Description (1) | Value | ||||||||||||||||
Short-Term Invesments – 1.9% | ||||||||||||||||||
Money Market Funds – 1.9% | ||||||||||||||||||
| 2,002,715 | First American Tax Free Obligations Fund, Class Z, 0.000% (4) | $ | 2,002,715 | |||||||||||||||
Total Short-Term Investments (cost $2,002,715) | 2,002,715 | |||||||||||||||||
Total Invesments (cost $99,057,793) – 99.0% | 102,433,729 | |||||||||||||||||
Other Assets Less Liabilities – 1.0% | 1,069,571 | |||||||||||||||||
Net Assets – 100% | $ | 103,503,300 | ||||||||||||||||
| (1) | All percentages shown in the Portfolio of Investments are based on net assets. |
| (2) | Optional Call Provisions: 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. Certain mortgage-backed securities may be subject to periodic principal paydowns. |
| (3) | Ratings: Using the highest of Standard & Poor’s Group (“Standard & Poor’s”), Moody’s Investor Service, Inc. (“Moody’s”) or Fitch, Inc. (“Fitch”) rating. Ratings below BBB by Standard & Poor’s, Baa by Moody’s or BBB by Fitch are considered to be below investment grade. Holdings designated N/R are not rated by any of these national rating agencies. |
| (4) | The rate shown is the annualized seven-day effective yield as of August 31, 2011. |
| N/R | Not rated. |
See accompanying notes to financial statements.
| 20 | Nuveen Investments |
Statement of Assets and Liabilities (Unaudited)
August 31, 2011
Assets | ||||
Investments, at value (cost $99,057,793) | $ | 102,433,729 | ||
Receivables: | ||||
Interest | 1,184,993 | |||
Shares sold | 371,269 | |||
Other assets | 5,648 | |||
Total assets | 103,995,639 | |||
Liabilities | ||||
Cash overdraft | 494 | |||
Payables: | ||||
Dividends | 298,787 | |||
Shares redeemed | 52,005 | |||
Accrued expenses: | ||||
Management fees | 49,197 | |||
12b-1 distribution and service fees | 6,333 | |||
Other | 85,523 | |||
Total liabilities | 492,339 | |||
Net assets | $ | 103,503,300 | ||
Class A Shares | ||||
Net assets | $ | 18,940,395 | ||
Shares outstanding | 1,716,093 | |||
Net asset value per share | $ | 11.04 | ||
Offering price per share (net asset value per share plus | $ | 11.52 | ||
Class C1 Shares | ||||
Net assets | $ | 5,763,514 | ||
Shares outstanding | 521,652 | |||
Net asset value and offering price per share | $ | 11.05 | ||
Class I Shares | ||||
Net assets | $ | 78,799,391 | ||
Shares outstanding | 7,143,245 | |||
Net asset value and offering price per share | $ | 11.03 | ||
Net assets consist of: | ||||
Capital paid-in | $ | 100,021,724 | ||
Undistributed (Over-distribution of) net investment income | 119,285 | |||
Accumulated net realized gain (loss) | (13,645 | ) | ||
Net unrealized appreciation (depreciation) | 3,375,936 | |||
Net assets | $ | 103,503,300 | ||
Authorized shares | 2 billion | |||
Par value per share | $ | 0.0001 |
See accompanying notes to financial statements.
| Nuveen Investments | 21 |
Statement of Operations (Unaudited)
Six Months Ended August 31, 2011
Investment Income | $ | 2,561,620 | ||
Expenses | ||||
Management fees | 321,644 | |||
12b-1 service fees – Class A | 17,869 | |||
12b-1 distribution and service fees – Class C1 | 18,652 | |||
Shareholders’ servicing agent fees and expenses | 12,859 | |||
Custodian’s fees and expenses | 20,072 | |||
Directors’ fees and expenses | 256 | |||
Professional fees | 10,758 | |||
Shareholders’ reports – printing and mailing expenses | 4,865 | |||
Federal and state registration fees | 655 | |||
Other expenses | 4,006 | |||
Total expenses before expense reimbursement | 411,636 | |||
Expense reimbursement | (97,485) | |||
Net expenses | 314,151 | |||
Net investment income (loss) | 2,247,469 | |||
Realized and Unrealized Gain (Loss) | ||||
Net realized gain (loss) from investments | (112,291) | |||
Change in net unrealized appreciation (depreciation) of investments | 5,119,680 | |||
Net realized and unrealized gain (loss) | 5,007,389 | |||
Net increase (decrease) in net assets from operations | $ | 7,254,858 |
See accompanying notes to financial statements.
| 22 | Nuveen Investments |
Statement of Changes in Net Assets (Unaudited)
| Six Months Ended 8/31/11 | Eight Months Ended 2/28/11 | Year Ended 6/30/10 | ||||||||||
Operations | ||||||||||||
Net investment income (loss) | $ | 2,247,469 | $ | 3,061,061 | $ | 4,452,095 | ||||||
Net realized gain (loss) from investments | (112,291 | ) | 129,841 | 498,180 | ||||||||
Change in net unrealized appreciation (depreciation) of investments | 5,119,680 | (3,827,713 | ) | 5,413,368 | ||||||||
Net increase (decrease) in net assets from operations | 7,254,858 | (636,811 | ) | 10,363,643 | ||||||||
Distributions to Shareholders | ||||||||||||
From net investment income: | ||||||||||||
Class A | (376,844 | ) | (505,497 | ) | (721,608 | ) | ||||||
Class C1(1) | (109,846 | ) | (143,307 | ) | (152,970 | ) | ||||||
Class I(1) | (1,685,559 | ) | (2,395,670 | ) | (3,542,590 | ) | ||||||
From accumulated net realized gains: | ||||||||||||
Class A | — | (37,671 | ) | (43,933 | ) | |||||||
Class C1(1) | — | (12,546 | ) | (10,928 | ) | |||||||
Class I(1) | — | (165,547 | ) | (211,107 | ) | |||||||
Decrease in net assets from distributions to shareholders | (2,172,249 | ) | (3,260,238 | ) | (4,683,136 | ) | ||||||
Fund Share Transactions | ||||||||||||
Proceeds from sale of shares | 10,083,184 | 17,541,271 | 20,363,921 | |||||||||
Proceeds from shares issued to shareholders due to reinvestment of distributions | 375,675 | 531,955 | 674,222 | |||||||||
| 10,458,859 | 18,073,226 | 21,038,143 | ||||||||||
Cost of shares redeemed | (9,431,679 | ) | (20,380,312 | ) | (21,217,701 | ) | ||||||
Net increase (decrease) in net assets from Fund share transactions | 1,027,180 | (2,307,086 | ) | (179,558 | ) | |||||||
Net increase (decrease) in net assets | 6,109,789 | (6,204,135 | ) | 5,500,949 | ||||||||
Net assets at the beginning of period | 97,393,511 | 103,597,646 | 98,096,697 | |||||||||
Net assets at the end of period | $ | 103,503,300 | $ | 97,393,511 | $ | 103,597,646 | ||||||
Undistributed (Over-distribution of) net investment income | $ | 119,285 | $ | 44,065 | $ | 27,478 | ||||||
| (1) | Effective January 18, 2011, Class C Shares and Class Y Shares were renamed Class C1 Shares and Class I Shares, respectively. |
See accompanying notes to financial statements.
| Nuveen Investments | 23 |
Financial Highlights (Unaudited)
| Selected data for a share outstanding throughout each period: | ||||||||||||||||||||||||||||||||||||
| Class (Commencement Date) | ||||||||||||||||||||||||||||||||||||
| Investment Operations | Less Distributions | |||||||||||||||||||||||||||||||||||
| Beginning Net Asset Value | Net Invest- ment Income (Loss)(a) | Net (Loss) | Total | Net Invest- ment Income | Capital Gains(b) | Total | Ending Net Asset Value | Total Return(c) | ||||||||||||||||||||||||||||
Class A (2/00) |
| |||||||||||||||||||||||||||||||||||
Year Ended 2/28 – 2/29: |
| |||||||||||||||||||||||||||||||||||
2012(e) | $ | 10.48 | $ | .24 | $ | .55 | $ | .79 | $ | (.23 | ) | $ | — | $ | (.23 | ) | $ | 11.04 | 7.60 | % | ||||||||||||||||
2011(f) | 10.88 | .31 | (.38 | ) | (.07 | ) | (.31 | ) | (.02 | ) | (.33 | ) | 10.48 | (.68 | ) | |||||||||||||||||||||
Year Ended 6/30: |
| |||||||||||||||||||||||||||||||||||
2010 | 10.27 | .47 | .63 | 1.10 | (.46 | ) | (.03 | ) | (.49 | ) | 10.88 | 10.89 | ||||||||||||||||||||||||
2009 | 10.71 | .46 | (.44 | ) | .02 | (.46 | ) | — | (.46 | ) | 10.27 | .29 | ||||||||||||||||||||||||
2008 | 10.98 | .46 | (.23 | ) | .23 | (.46 | ) | (.04 | ) | (.50 | ) | 10.71 | 2.11 | |||||||||||||||||||||||
2007 | 10.96 | .45 | .06 | .51 | (.45 | ) | (.04 | ) | (.49 | ) | 10.98 | 4.62 | ||||||||||||||||||||||||
2006(h) | 11.24 | .33 | (.26 | ) | .07 | (.33 | ) | (.02 | ) | (.35 | ) | 10.96 | .63 | |||||||||||||||||||||||
Class C1 (2/00)(g) |
| |||||||||||||||||||||||||||||||||||
Year Ended 2/28 – 2/29: |
| |||||||||||||||||||||||||||||||||||
2012(e) | 10.50 | .21 | .55 | .76 | (.21 | ) | — | (.21 | ) | 11.05 | 7.27 | |||||||||||||||||||||||||
2011(f) | 10.89 | .28 | (.38 | ) | (.10 | ) | (.27 | ) | (.02 | ) | (.29 | ) | 10.50 | (.91 | ) | |||||||||||||||||||||
Year Ended 6/30: |
| |||||||||||||||||||||||||||||||||||
2010 | 10.28 | .41 | .64 | 1.05 | (.41 | ) | (.03 | ) | (.44 | ) | 10.89 | 10.33 | ||||||||||||||||||||||||
2009 | 10.72 | .41 | (.44 | ) | (.03 | ) | (.41 | ) | — | (.41 | ) | 10.28 | (.21 | ) | ||||||||||||||||||||||
2008 | 10.99 | .40 | (.22 | ) | .18 | (.41 | ) | (.04 | ) | (.45 | ) | 10.72 | 1.61 | |||||||||||||||||||||||
2007 | 10.97 | .41 | .05 | .46 | (.40 | ) | (.04 | ) | (.44 | ) | 10.99 | 4.17 | ||||||||||||||||||||||||
2006(h) | 11.25 | .30 | (.26 | ) | .04 | (.30 | ) | (.02 | ) | (.32 | ) | 10.97 | .33 | |||||||||||||||||||||||
Class I (2/00)(g) |
| |||||||||||||||||||||||||||||||||||
Year Ended 2/28 – 2/29: |
| |||||||||||||||||||||||||||||||||||
2012(e) | 10.48 | .25 | .54 | .79 | (.24 | ) | — | (.24 | ) | 11.03 | 7.62 | |||||||||||||||||||||||||
2011(f) | 10.88 | .32 | (.38 | ) | (.06 | ) | (.32 | ) | (.02 | ) | (.34 | ) | 10.48 | (.57 | ) | |||||||||||||||||||||
Year Ended 6/30: |
| |||||||||||||||||||||||||||||||||||
2010 | 10.27 | .48 | .64 | 1.12 | (.48 | ) | (.03 | ) | (.51 | ) | 10.88 | 11.06 | ||||||||||||||||||||||||
2009 | 10.71 | .48 | (.45 | ) | .03 | (.47 | ) | — | (.47 | ) | 10.27 | .44 | ||||||||||||||||||||||||
2008 | 10.98 | .48 | (.23 | ) | .25 | (.48 | ) | (.04 | ) | (.52 | ) | 10.71 | 2.28 | |||||||||||||||||||||||
2007 | 10.97 | .47 | .05 | .52 | (.47 | ) | (.04 | ) | (.51 | ) | 10.98 | 4.78 | ||||||||||||||||||||||||
2006(h) | 11.25 | .35 | (.26 | ) | .09 | (.35 | ) | (.02 | ) | (.37 | ) | 10.97 | .82 | |||||||||||||||||||||||
| 24 | Nuveen Investments |
| Ratios/Supplemental Data | ||||||||||||||||||||||
| Ratios to Average Net Assets Before Reimbursement | Ratios to Average Net Assets After Reimbursement(d) | |||||||||||||||||||||
| Ending Net Assets (000) | Expenses | Net Invest- ment Income (Loss) | Expenses | Net Invest- ment Income (Loss) | Portfolio Turnover Rate | |||||||||||||||||
| $ | 18,940 | .96 | %* | 4.20 | %* | .72 | %* | 4.43 | %* | 7 | % | |||||||||||
| 16,453 | 1.20 | * | 3.76 | * | .65 | * | 4.31 | * | 8 | |||||||||||||
| 17,315 | 1.18 | 3.83 | .65 | 4.36 | 16 | |||||||||||||||||
| 16,417 | 1.28 | 3.88 | .65 | 4.51 | 27 | |||||||||||||||||
| 12,076 | 1.46 | 3.40 | .67 | 4.19 | 45 | |||||||||||||||||
| 11,375 | 1.46 | 3.29 | .75 | 4.00 | 36 | |||||||||||||||||
| 10,783 | 1.34 | * | 3.40 | * | .75 | * | 3.99 | * | 24 | |||||||||||||
| 5,764 | 1.41 | * | 3.75 | * | 1.22 | * | 3.94 | * | 7 | |||||||||||||
| 5,762 | 1.62 | * | 3.36 | * | 1.15 | * | 3.83 | * | 8 | |||||||||||||
| 4,674 | 1.58 | 3.43 | 1.15 | 3.86 | 16 | |||||||||||||||||
| 4,064 | 1.68 | 3.48 | 1.15 | 4.01 | 27 | |||||||||||||||||
| 2,480 | 1.85 | 2.98 | 1.15 | 3.68 | 45 | |||||||||||||||||
| 1,507 | 1.98 | 2.77 | 1.15 | 3.60 | 36 | |||||||||||||||||
| 3,592 | 2.09 | * | 2.66 | * | 1.15 | * | 3.60 | * | 24 | |||||||||||||
| 78,799 | .76 | * | 4.40 | * | .57 | * | 4.59 | * | 7 | |||||||||||||
| 75,179 | .96 | * | 4.00 | * | .50 | * | 4.46 | * | 8 | |||||||||||||
| 81,609 | .93 | 4.08 | .50 | 4.51 | 16 | |||||||||||||||||
| 77,616 | 1.03 | 4.09 | .50 | 4.62 | 27 | |||||||||||||||||
| 30,485 | 1.20 | 3.66 | .50 | 4.36 | 45 | |||||||||||||||||
| 24,835 | 1.21 | 3.54 | .50 | 4.25 | 36 | |||||||||||||||||
| 21,767 | 1.09 | * | 3.65 | * | .50 | * | 4.24 | * | 24 | |||||||||||||
| (a) | Per share Net Investment Income (Loss) is calculated using the average daily shares method. |
| (b) | Distributions from Capital Gains include short-term capital gains, if any. |
| (c) | Total return is the combination of changes in net asset value without any sales charge, reinvested dividend income at net asset value and reinvested capital gains distributions at net asset value, if any. Total returns are not annualized. |
| (d) | After expense reimbursement from the Adviser, where applicable. Ratios do not reflect the effect of custodian fee credits earned on the Fund’s net cash on deposit with the custodian bank, where applicable. |
| (e) | For the six months ended August 31, 2011. |
| (f) | For the eight months ended February 28, 2011. |
| (g) | Effective January 18, 2011, Class C Shares and Class Y Shares were renamed Class C1 Shares and Class I Shares, respectively. |
| (h) | For the nine months ended June 30, 2006. |
| * | Annualized. |
See accompanying notes to financial statements.
| Nuveen Investments | 25 |
Notes to Financial Statements (Unaudited)
1. General Information and Significant Accounting Policies
General Information
First American Investment Funds, Inc., known as Nuveen Investment Funds, Inc. effective April 4, 2011 (the “Trust”), is an open-end investment company registered under the Investment Company Act of 1940, as amended. The Trust is comprised of the Nuveen California Tax Free Fund (the “Fund”), among others.
Effective April 30, 2011, Nuveen Investments, LLC, a wholly-owned subsidiary of Nuveen Investments, Inc. (“Nuveen”), changed its name to Nuveen Securities, LLC (the “Distributor”).
The investment objective of the Fund is to provide maximum current income that is exempt from both federal income tax and California state income tax to the extent consistent with prudent investment risk. Under normal market conditions, as a fundamental policy, the Fund invests at least 80% of its net assets (plus the amount of any borrowings for investment purposes) in municipal securities that pay interest that is exempt from federal and California income tax, including the federal and state alternative minimum tax. The Fund normally may invest up to 20% of its net assets in taxable obligations, including obligations the interest on which is subject to the federal and state alternative minimum tax. The Fund may invest up to 20% of its total assets in securities that, at the time of purchase, are rated lower than investment grade or are unrated and of comparable quality (securities commonly referred to as “high-yield” securities or “junk bonds”).
The Fund’s most recent prospectus provides further descriptions of the Fund’s investment objective, principal investment strategies, and principal risks.
During the fiscal period ended February 28, 2011, the Fund’s Board of Directors approved a change in the Fund’s fiscal and tax year ends from June 30 to February 28/29.
Significant Accounting Policies
The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”).
Investment Valuation
Prices of municipal bonds are provided by a pricing service approved by the Fund’s Board of Directors. These securities are generally classified as Level 2 for fair value measurement purposes. When price quotes are not readily available (which is usually the case for municipal bonds) the pricing service establishes a security’s fair value using methods that may include consideration of the following: yields or prices of investments of comparable quality, type of issue, coupon, maturity and rating, market quotes or indications of value from security dealers, evaluations of anticipated cash flows or collateral, general market conditions and other information and analysis, including the obligor’s credit characteristics considered relevant. In pricing certain securities, particularly less liquid and lower quality securities, the pricing service may consider information about a security, its issuer, or market activity provided by Nuveen Fund Advisors, Inc. (the “Adviser”), a wholly-owned subsidiary of Nuveen. These securities are generally classified as Level 2 or Level 3 depending on the priority of the significant inputs. Investments in open-end funds are valued at their respective net asset values on the valuation date. These investment vehicles are generally classified as Level 1.
Certain securities may not be able to be priced by the pre-established pricing methods as described above. Such securities may be valued by the Fund’s Board of Directors or its designee at fair value. These securities generally include, but are not limited to, restricted securities (securities which may not be publicly sold without registration under the Securities Act of 1933, as amended) for which a pricing service is unable to provide a market price; securities whose trading has been formally suspended; debt securities that have gone into default and for which there is no current market quotation; a security whose market price is not available from a pre-established pricing source; a security with respect to which an event has occurred that is likely to materially affect the value of the security after the market has closed but before the calculation of a Fund’s net asset value (as may be the case in non-U.S. markets on which the security is primarily traded) or make it difficult or impossible to obtain a reliable market quotation; and a security whose price, as provided by the pricing service, is not deemed to reflect the security’s fair value. As a general principle, the fair value of a security would appear to be the amount that the owner might reasonably expect to receive for them in a current sale. A variety of factors may be considered in determining the fair value of such securities, which may include consideration of the following: yields or prices of investments of comparable quality, type of issue, coupon, maturity and rating, market quotes or indications of value from security dealers, evaluations of anticipated cash flows or collateral, general market conditions and other information and analysis, including the obligor’s credit characteristics considered relevant. These securities are classified as Level 2 or as Level 3 depending on the priority of the significant inputs. Regardless of the method employed to value a particular security, all valuations are subject to review by the Fund’s Board of Directors or its designee.
Refer to Footnote 2 – Fair Value Measurements for further details on the leveling of securities held by the Fund as of the end of the reporting period.
Investment Transactions
Investment transactions are recorded on a trade date basis. Realized gains and losses from transactions are determined on the specific identification method, which is the same basis used for federal income tax purposes. Investments purchased on a when-issued/
| 26 | Nuveen Investments |
delayed delivery basis may have extended settlement periods. Any investments so purchased are subject to market fluctuation during this period. The Fund has instructed the custodian to segregate assets with a current value at least equal to the amount of the when-issued/delayed delivery purchase commitments. At August 31, 2011, the Fund had no such outstanding purchase commitments.
Investment Income
Dividend income is recorded on the ex-dividend date. Investment income, which reflects the amortization of premiums and includes accretion of discounts for financial reporting purposes, is recorded on an accrual basis. Investment income also reflects paydown gains and losses, if any.
Income Taxes
The Fund intends to distribute substantially all of its net investment income and net capital gains to shareholders and to otherwise comply with the requirements of Subchapter M of the Internal Revenue Code applicable to regulated investment companies. Therefore, no federal income tax provision is required. Furthermore, the Fund intends to satisfy conditions that will enable interest from municipal securities, which is exempt from regular federal and designated state income taxes, to retain such tax-exempt status when distributed to shareholders of the Fund. Net realized capital gains and ordinary income distributions paid by the Fund are subject to federal taxation.
For all open tax years and all major taxing jurisdictions, management of the Fund has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements. Open tax years are those that are open for examination by taxing authorities (i.e., generally the last four tax year ends and the interim tax period since then). Furthermore, management of the Fund is also not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
Dividends and Distributions to Shareholders
The Fund declares dividends from its net investment income daily and pays shareholders monthly. Fund shares begin to accrue dividends on the business day after the day when the monies used to purchase Fund shares are collected by the Fund’s transfer agent.
Net realized capital gains and/or market discount from investment transactions, if any, are declared and distributed to shareholders at least annually. Furthermore, capital gains are distributed only to the extent they exceed available capital loss carryforwards.
Distributions to shareholders of 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 U.S. GAAP.
Flexible Sales Charge Program
Class A Shares are generally sold with an up-front sales charge and incur a .20% annual 12b-1 service fee. Class A Share purchases of $1 million or more are sold at net asset value without an up-front sales charge but may be subject to a contingent deferred sales charge (“CDSC”) if redeemed within eighteen months of purchase. Class C1 Shares are sold without an up-front sales charge but incur a .40% annual 12b-1 distribution fee and a .25% annual 12b-1 service fee. Class C1 Shares are subject to a CDSC of 1% if redeemed within twelve months of purchase. Class I Shares are not subject to any sales charge or 12b-1 distribution or service fees.
Inverse Floating Rate Securities
The Fund is authorized to invest in inverse floating rate securities. An inverse floating rate security is created by depositing a municipal bond, typically with a fixed interest rate, into a special purpose trust created by a broker-dealer. In turn, this trust (a) issues floating rate certificates, in face amounts equal to some fraction of the deposited bond’s par amount or market value, that typically pay short-term tax-exempt interest rates to third parties, and (b) issues to a long-term investor (such as the Fund) an inverse floating rate certificate (sometimes referred to as an “inverse floater”) that represents all remaining or residual interest in the trust. The income received by the inverse floater holder varies inversely with the short-term rate paid to the floating rate certificates’ holders, and in most circumstances the inverse floater holder bears substantially all of the underlying bond’s downside investment risk and also benefits disproportionately from any potential appreciation of the underlying bond’s value. The price of an inverse floating rate security will be more volatile than that of the underlying bond because the interest rate is dependent on not only the fixed coupon rate of the underlying bond but also on the short-term interest paid on the floating rate certificates, and because the inverse floating rate security essentially bears the risk of loss of the greater face value of the underlying bond.
The Fund may purchase an inverse floating rate security in a secondary market transaction without first owning the underlying bond (referred to as an “externally-deposited inverse floater”), or instead by first selling a fixed-rate bond to a broker-dealer for deposit into the special purpose trust and receiving in turn the residual interest in the trust (referred to as a “self-deposited inverse floater”). The inverse floater held by the Fund gives the Fund the right (a) to cause the holders of the floating rate certificates to tender their notes at par, and (b) to have the broker transfer the fixed-rate bond held by the trust to the Fund, thereby collapsing the trust. An investment in an externally-deposited inverse floater is identified in the Portfolio of Investments as “(IF) – Inverse floating rate investment.” An investment in a self-deposited inverse floater is accounted for as a financing transaction. In such instances, a fixed-rate bond deposited into a special purpose trust is identified in the Portfolio of Investments as “(UB) – Underlying bond of an inverse floating rate trust reflected as a financing transaction,” with the Fund accounting for the short-term floating rate certificates issued by
| Nuveen Investments | 27 |
Notes to Financial Statements (Unaudited) (continued)
the trust as “Floating rate obligations” on the Statement of Assets and Liabilities. In addition, the Fund reflects in “Investment Income” the entire earnings of the underlying bond and recognizes the related interest paid to the holders of the short-term floating rate certificates as “Interest expense on floating rate obligations” on the Statement of Operations.
During the six months ended August 31, 2011, the Fund did not invest in externally-deposited inverse floaters and/or self-deposited inverse floaters.
Derivative Financial Instruments
The Fund is authorized to invest in certain derivative instruments, including foreign currency forwards, futures, options, and swap contracts. Although the Fund is authorized to invest in such financial instruments, and may do so in the future, it did not make any such investments during the six months ended August 31, 2011.
Market and Counterparty Credit Risk
In the normal course of business the Fund may invest in financial instruments and enter into financial transactions where risk of potential loss exists due to changes in the market (market risk) or failure of the other party to the transaction to perform (counterparty credit risk). The potential loss could exceed the value of the financial assets recorded on the financial statements. Financial assets, which potentially expose the Fund to counterparty credit risk, consist principally of cash due from counterparties on forward, option and swap transactions, when applicable. The extent of the Fund’s exposure to counterparty credit risk in respect to these financial assets approximates their carrying value as recorded on the Statement of Assets and Liabilities. Futures contracts, when applicable, expose a Fund to minimal counterparty credit risk as they are exchange traded and the exchange’s clearinghouse, which is counterparty to all exchange traded futures, guarantees the futures contracts against default.
The Fund helps manage counterparty credit risk by entering into agreements only with counterparties the Adviser believes have the financial resources to honor their obligations and by having the Adviser monitor the financial stability of the counterparties. Additionally, counterparties may be required to pledge collateral daily (based on the daily valuation of the financial asset) on behalf of the Fund with a value approximately equal to the amount of any unrealized gain above a pre-determined threshold. Reciprocally, when the Fund has an unrealized loss, the Fund has instructed the custodian to pledge assets of the Fund as collateral with a value approximately equal to the amount of the unrealized loss above a pre-determined threshold. Collateral pledges are monitored and subsequently adjusted if and when the valuations fluctuate, either up or down, by at least the pre-determined threshold amount.
Zero Coupon Securities
The Fund is authorized to invest in zero coupon securities. A zero coupon security does not pay a regular interest coupon to its holders during the life of the security. Tax-exempt income to the holder of the security comes from accretion of the difference between the original purchase price of the security at issuance and the par value of the security at maturity and is effectively paid at maturity. The market prices of zero coupon securities generally are more volatile than the market prices of securities that pay interest periodically.
Multiclass Operations and Allocations
Income and expenses of the Fund that are not directly attributable to a specific class of shares are prorated among the classes based on the relative settled shares of each class. Expenses directly attributable to a class of shares, which presently only include 12b-1 distribution and shareholder service fees, are recorded to the specific class.
Income, realized and unrealized capital gains and losses of the Fund are prorated among the classes based on the relative net assets of each class.
Custodian Fee Credit
The Fund has an arrangement with the custodian bank whereby certain custodian fees and expenses are reduced by net credits earned on the Fund’s cash on deposit with the bank. Such deposit arrangements are an alternative to overnight investments. Credits for cash balances may be offset by charges for any days on which the Fund overdraws its account at the custodian bank.
Indemnifications
Under the Trust’s organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the Trust. In addition, in the normal course of business, the Trust enters into contracts that provide general indemnifications to other parties. The Trust’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Trust that have not yet occurred. However, the Trust has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results may differ from those estimates.
2. Fair Value Measurements
Fair value is defined as the price that the Fund would receive upon selling an investment or transferring a liability in an orderly transaction to an independent buyer in the principal or most advantageous market for the investment. A three-tier hierarchy is used to
| 28 | Nuveen Investments |
maximize the use of observable market data and minimize the use of unobservable inputs and to establish classification of fair value measurements for disclosure purposes. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability. Observable inputs are based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability. Unobservable inputs are based on the best information available in the circumstances. The three-tier hierarchy of inputs is summarized in the three broad levels listed below:
| Level 1 – | Quoted prices in active markets for identical securities. | |
| Level 2 – | Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.). | |
| Level 3 – | Significant unobservable inputs (including management’s assumptions in determining the fair value of investments). |
The inputs or methodologies used for valuing securities are not an indication of the risk associated with investing in those securities. The following is a summary of the Fund’s fair value measurements as of August 31, 2011:
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Investments: | ||||||||||||||||
Municipal Bonds | $ | — | $ | 100,431,014 | $ | — | $ | 100,431,014 | ||||||||
Short-Term Investments | 2,002,715 | — | — | 2,002,715 | ||||||||||||
Total | $ | 2,002,715 | $ | 100,431,014 | $ | — | $ | 102,433,729 | ||||||||
During the six months ended August 31, 2011, the Fund recognized no significant transfers to or from Level 1, Level 2, or Level 3.
3. Derivative Instruments and Hedging Activities
The Fund records derivative instruments at fair value, with changes in fair value recognized on the Statement of Operations, when applicable. Even though the Fund’s investments in derivatives may represent economic hedges, they are not considered to be hedge transactions for financial reporting purposes. The Fund did not invest in derivative instruments during the six months ended August 31, 2011.
4. Fund Shares
Transactions in Fund shares were as follows:
| Six Months Ended 8/31/11 | Eight Months Ended 2/28/11 | Year Ended 6/30/10 | ||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||
Shares sold: | ||||||||||||||||||||||||
Class A | 319,075 | $ | 3,430,935 | 281,659 | $ | 3,120,573 | 269,247 | $ | 2,905,288 | |||||||||||||||
Class C1(1) | 2,212 | 23,788 | 763,722 | 2,201,106 | 148,024 | 1,599,352 | ||||||||||||||||||
Class I(1) | 613,918 | 6,628,461 | 1,132,750 | 12,219,592 | 1,472,632 | 15,859,281 | ||||||||||||||||||
Shares issued to shareholders due to reinvestment of distributions: | ||||||||||||||||||||||||
Class A | 25,889 | 278,322 | 34,525 | 373,248 | 43,375 | 466,322 | ||||||||||||||||||
Class C1(1) | 4,600 | 49,499 | 6,990 | 75,604 | 10,402 | 111,987 | ||||||||||||||||||
Class I(1) | 4,461 | 47,854 | 7,760 | 83,103 | 8,923 | 95,913 | ||||||||||||||||||
| 970,155 | 10,458,859 | 2,227,406 | 18,073,226 | 1,952,603 | 21,038,143 | |||||||||||||||||||
Shares redeemed: | ||||||||||||||||||||||||
Class A | (198,983 | ) | (2,147,583 | ) | (337,747 | ) | (3,661,654 | ) | (320,129 | ) | (3,438,501 | ) | ||||||||||||
Class C1(1) | (34,161 | ) | (364,823 | ) | (650,990 | ) | (946,801 | ) | (124,797 | ) | (1,328,865 | ) | ||||||||||||
Class I(1) | (650,105 | ) | (6,919,273 | ) | (1,467,604 | ) | (15,771,857 | ) | (1,540,449 | ) | (16,450,335 | ) | ||||||||||||
| (883,249 | ) | (9,431,679 | ) | (2,456,341 | ) | (20,380,312 | ) | (1,985,375 | ) | (21,217,701 | ) | |||||||||||||
Net increase (decrease) | 86,906 | $ | 1,027,180 | (228,935 | ) | $ | (2,307,086 | ) | (32,772 | ) | $ | (179,558 | ) | |||||||||||
| (1) | Effective January 18, 2011, Class C Shares and Class Y Shares were renamed Class C1 Shares and Class I Shares, respectively. |
5. Investment Transactions
Purchases and sales (including maturities but excluding short-term investments) during the six months ended August 31, 2011, aggregated $7,138,494 and $7,857,394, respectively.
6. Income Tax Information
The following information is presented on an income tax basis. Differences between amounts for financial statement and federal income tax purposes are primarily due to timing differences in recognizing certain gains and losses on investment transactions and the
| Nuveen Investments | 29 |
Notes to Financial Statements (Unaudited) (continued)
treatment of investments in inverse floating rate securities reflected as financing transactions, if any. To the extent that differences arise that are permanent in nature, such amounts are reclassified within the capital accounts as detailed below. Temporary differences do not require reclassification. Temporary and permanent differences do not impact the net asset value of the Fund.
At August 31, 2011, the cost and unrealized appreciation (depreciation) of investments, as determined on a federal income tax basis, were as follows:
Cost of investments | $ | 99,057,793 | ||
Gross unrealized: | ||||
Appreciation | $ | 4,267,782 | ||
Depreciation | (891,846 | ) | ||
Net unrealized appreciation (depreciation) of investments | $ | 3,375,936 |
Permanent differences, primarily due to equalization, resulted in reclassifications among the Fund’s components of net assets at February 28, 2011, the Fund’s last tax year-end, as follows:
Capital paid-in | $ | 31,152 | ||
Undistributed (Over-distribution of) net investment income | — | |||
Accumulated net realized gain (loss) | (31,152 | ) |
The tax components of undistributed net tax-exempt income, net ordinary income and net long-term capital gains at February 28, 2011, the Fund’s last tax year end, were as follows:
Undistributed net tax-exempt income* | $ | 427,508 | ||
Undistributed net ordinary income** | — | |||
Undistributed net long-term capital gains | 98,646 |
| * | Undistributed net tax exempt income (on a tax basis) has not been reduced for the dividend declared during the period February 1, 2011 through February 28, 2011 and paid on March 1, 2011. |
| ** | Net ordinary income consists of taxable market discount income and net short-term capital gains, if any. |
The tax character of distributions paid during the Fund’s last tax years ended February 28, 2011 and June 30, 2010, was designated for purposes of the dividends paid deduction as follows:
| Eight months ended February 28, 2011 | ||||
Distributions from net tax-exempt income | $ | 3,004,122 | ||
Distributions from net ordinary income** | 23,258 | |||
Distributions from net long-term capital gains | 223,658 | |||
| Year ended June 30, 2010 | ||||
Distributions from net tax-exempt income | $ | 4,311,589 | ||
Distributions from net ordinary income ** | 88,004 | |||
Distributions from net long-term gains | 265,968 | |||
| ** | Net ordinary income consists of taxable market discount income and net short-term capital gains, if any. |
7. Management Fees and Other Transactions with Affiliates
The Fund’s management fee consists of two components – a fund-level fee, based only on the amount of assets within the Fund, and a complex-level fee, based on the aggregate amount of all eligible fund assets managed by the Adviser. This pricing structure enables Fund shareholders to benefit from growth in the assets within their Fund as well as from growth in the amount of complex-wide assets managed by the Adviser.
The annual fund-level fee, payable monthly, is calculated according to the following schedule:
| Average Daily Net Assets | Fund-Level Fee Rate | |||
For the first $125 million | 0.4500 | % | ||
For the next $125 million | 0.4375 | |||
For the next $250 million | 0.4250 | |||
For the next $500 million | 0.4125 | |||
For the next $1 billion | 0.4000 | |||
For net assets over $2 billion | 0.3750 | |||
The annual complex-level fee for the Fund, payable monthly, is determined by taking the complex-level fee rate, which is based on the aggregate amount of “eligible assets” of all Nuveen funds as set forth in the schedule below, and making, as appropriate, an upward adjustment to that rate based upon the percentage of the particular fund’s assets that are not “eligible assets.” The complex-level fee schedule is as follows:
| 30 | Nuveen Investments |
| Complex-Level Asset Breakpoint Level* | Effective Rate at Breakpoint Level | |||
$55 billion | 0.2000 | % | ||
$56 billion | 0.1996 | |||
$57 billion | 0.1989 | |||
$60 billion | 0.1961 | |||
$63 billion | 0.1931 | |||
$66 billion | 0.1900 | |||
$71 billion | 0.1851 | |||
$76 billion | 0.1806 | |||
$80 billion | 0.1773 | |||
$91 billion | 0.1691 | |||
$125 billion | 0.1599 | |||
$200 billion | 0.1505 | |||
$250 billion | 0.1469 | |||
$300 billion | 0.1445 | |||
| * | The complex-level fee is calculated based upon the aggregate daily “eligible assets” of all Nuveen Funds. Eligible assets do not include assets attributable to investments in other Nuveen Funds or assets in excess of $2 billion added to the Nuveen Fund complex in connection with the Adviser’s assumption of the management of the former First American Funds effective January 1, 2011. Eligible assets include closed-end fund assets managed by the Adviser that are attributable to financial leverage. For these purposes, financial leverage includes the closed-end funds’ use of preferred stock and borrowings and investments in the residual interest certificates (also called inverse floating rate securities) in tender option bond (TOB) trusts, including the portion of assets held by the TOB trust that has been effectively financed by the trust’s issuance of floating rate securities, subject to an agreement by the Adviser as to certain funds to limit the amount of such assets for determining eligible assets in certain circumstances. As of August 31, 2011, the Fund’s complex-level fee rate was .1964%. |
The management fee compensates the Adviser for the overall investment advisory and administrative services and general office facilities it provides for the Fund. The Adviser has entered into a sub-advisory agreement with Nuveen Asset Management, LLC (the “Sub-Adviser”), a wholly-owned subsidiary of the Adviser, under which the Sub-Adviser manages the investment portfolio of the Fund. The Sub-Adviser is compensated for its services to the Fund from the management fee paid to the Adviser.
The Adviser has agreed to waive fees and/or reimburse expenses of the Fund so that total annual fund operating expenses (excluding acquired Fund fees and expenses) do not exceed the percent of the Fund’s average daily net assets, for each share class, as set forth in the following table:
Class A Shares | 0.6500 | % | ||
Class C1 Shares | 1.1500 | |||
Class I Shares | 0.5000 | |||
Through first expiration date | June 30, 2011 | |||
After first expiration date: | ||||
Class A Shares | 0.8500 | |||
Class C1 Shares | 1.3500 | |||
Class I Shares | 0.7000 | |||
Expiration date | June 30, 2012 |
The Adviser may also voluntarily reimburse expenses from time to time in the Fund. Voluntary reimbursements may be terminated at any time at the Adviser’s discretion.
The Trust pays no compensation directly to those of its directors who are affiliated with the Adviser or to its officers, all of whom receive remuneration for their services to the Trust from the Adviser or its affiliates. The Board of Directors has adopted a deferred compensation plan for independent directors that enables directors to elect to defer receipt of all or a portion of the annual compensation they are entitled to receive from certain Nuveen-advised funds. Under the plan, deferred amounts are treated as though equal dollar amounts had been invested in shares of select Nuveen-advised funds.
During the six months ended August 31, 2011, the Distributor collected sales charges on purchases of Class A Shares, the majority of which were paid out as concessions to financial intermediaries as follows:
Sales charges collected | $ | 42,270 | ||
Paid to financial intermediaries | 38,069 |
The Distributor also received 12b-1 service fees on Class A Shares, substantially all of which were paid to compensate financial intermediaries for providing services to shareholders relating to their investments.
During the six months ended August 31, 2011, the Distributor compensated financial intermediaries directly with commission advances at the time of purchase as follows:
Commission advances | $ | 13,000 |
| Nuveen Investments | 31 |
Notes to Financial Statements (Unaudited) (continued)
To compensate for commissions advanced to financial intermediaries, all 12b-1 service and distribution fees collected on Class C1 Shares during the first year following a purchase are retained by the Distributor. During the six months ended August 31, 2011, the Distributor retained such 12b-1 fees as follows:
12b-1 fees retained | $ | 5,950 |
The remaining 12b-1 fees charged to the Fund were paid to compensate financial intermediaries for providing services to shareholders relating to their investments.
The Distributor also collected and retained CDSC on share redemptions during the six months ended August 31, 2011, as follows:
CDSC retained | $ | 145 |
8. New Accounting Pronouncements
Fair Value Measurements and Disclosures
On May 12, 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2011-04 (“ASU No. 2011-04”) modifying Topic 820, Fair Value Measurements and Disclosures. At the same time, the International Accounting Standards Board (“IASB”) issued International Financial Reporting Standard (“IFRS”) 13, Fair Value Measurement. The objective of the FASB and IASB is convergence of their guidance on fair value measurements and disclosures. Specifically, ASU No. 2011-04 requires reporting entities to disclose i) the amounts of any transfers between Level 1 and Level 2, and the reasons for the transfers, ii) for Level 3 fair value measurements, a) quantitative information about significant unobservable inputs used, b) a description of the valuation processes used by the reporting entity and c) a narrative description of the sensitivity of the fair value measurement to changes in unobservable inputs if a change in those inputs might result in a significantly higher or lower fair value measurement. The effective date of ASU No. 2011-04 is for interim and annual periods beginning after December 15, 2011. At this time, management is evaluating the implications of this guidance and the impact it will have on the financial statement amounts and footnote disclosures, if any.
| 32 | Nuveen Investments |
Notes
| Nuveen Investments | 33 |
Glossary of Terms Used in this Report
Average Annual Total Return: This is a commonly used method to express an investment’s performance over a particular, usually multi-year time period. It expresses the return that would have been necessary each year to equal the investment’s actual cumulative performance (including change in NAV or offer price and reinvested dividends and capital gains distributions, if any) over the time period being considered.
Average Duration: Duration is a measure of the expected period over which a bond’s principal and interest will be paid, and consequently is a measure of the sensitivity of a bond’s (or bond fund’s) value to changes when market interest rates change. Generally, the longer a bond or Fund’s duration, the more the price of the bond or Fund will change as interest rates change.
Average Effective Maturity: The market-value-weighted average of the effective maturity dates of the individual securities including cash. In the case of a bond that has been advance-refunded to a call date, the effective maturity is the date on which the bond is scheduled to be redeemed using the proceeds of an escrow account. In most other cases the effective maturity is the stated maturity date of the security.
Barclays Capital Municipal Bond Index: An unmanaged index composed of a broad range of investment-grade tax-exempt municipal bonds with remaining maturities of one year or more. The index returns assume reinvestment of dividends but do not reflect any applicable sales charge. You cannot invest directly in an index.
Lipper California Municipal Debt Classification Average: Represents the average annualized total return for all reporting funds in the Lipper California Municipal Debt Category. The Lipper California Municipal Debt Classification Average contained 119, 117, 97 and 80 funds for the 6-month, 1-year, 5-year and 10-year periods, respectively, ended August 31, 2011. Lipper returns account for the effects of management fees and assume reinvestment of dividends but do not reflect any applicable sales charges. The Lipper average is not available for direct investment.
Net Asset Value (NAV): The net market value of all securities held in a portfolio.
Net Asset Value (NAV) Per Share: The market value of one share of a mutual fund or closed-end fund. For a Fund, the NAV is calculated daily by taking the Fund’s total assets (securities, cash, and accrued earnings), subtracting the Fund’s liabilities, and dividing by the number of shares outstanding.
Pre-Refundings: Pre-Refundings, also known as advance refundings or refinancings, occur when an issuer sells new bonds and uses the proceeds to fund principal and interest payments of older existing bonds. This process often results in lower borrowing costs for bond issuers.
Zero Coupon Bond: A zero coupon bond does not pay a regular interest coupon to its holders during the life of the bond. Tax-exempt income to the holder of the bond comes from accretion of the difference between the original purchase price of the bond at issuance and the par value of the bond at maturity and is effectively paid at maturity. The market prices of zero coupon bonds generally are more volatile than the market prices of bonds that pay interest periodically.
| 34 | Nuveen Investments |
Fund Manager
Nuveen Fund Advisors, Inc.
333 West Wacker Drive
Chicago, IL 60606
Sub-Adviser
Nuveen Asset Management, LLC
333 West Wacker Drive
Chicago, IL 60606
Legal Counsel
Chapman and Cutler LLP
Chicago, IL
Independent Registered
Public Accounting Firm
Ernst & Young LLP
Chicago, IL
Custodian
U.S. Bank National Association
St. Paul, MN
Transfer Agent and
Shareholder Services
U.S. Bancorp Fund Services, LLC
615 East Michigan Street
Milwaukee, WI 53202
Quarterly Portfolio of Investments and Proxy Voting Information: You may obtain (i) the Fund’s quarterly portfolio of investments, (ii) information regarding how the Fund voted proxies relating to portfolio securities held during the most recent twelve-month period ended June 30, and (iii) a description of the policies and procedures that the Fund used to determine how to vote proxies relating to portfolio securities without charge, upon request, by calling Nuveen Investments at (800) 257-8787 or on Nuveen’s website at www.nuveen.com.
You may also obtain this and other Fund information directly from the Securities and Exchange Commission (SEC). The SEC may charge a copying fee for this information. Visit the SEC on-line at http://www.sec.gov or in person at the SEC’s Public Reference Room in Washington, D.C. Call the SEC at (202) 942-8090 for room hours and operation. You may also request Fund information by sending an e-mail request to publicinfo@sec.gov or by writing to the SEC’s Public Reference Section at 100 F Street NE, Washington, D.C. 20549.
The Financial Industry Regulatory Authority (FINRA) provides a Public Disclosure Program which supplies certain information regarding the disciplinary history of FINRA members and their associated persons in response to either telephone inquiries at (800) 289-9999 or written inquiries at www.finra.org. FINRA also provides an investor brochure that includes information describing the Public Disclosure Program.
| Nuveen Investments | 35 |
Nuveen Investments:
Serving Investors for Generations
Since 1898, financial advisors and their clients have relied on Nuveen Investments to provide dependable investment solutions through continued adherence to proven, long-term investing principles. Today, we offer a range of high quality equity and fixed-income solutions designed to be integral components of a well-diversified core portfolio.
Focused on meeting investor needs.
Nuveen Investments is a global investment management firm that seeks to help secure the long-term goals of institutions and high net worth investors as well as the consultants and financial advisors who serve them. We market our growing range of specialized investment solutions under the high-quality brands of HydePark, NWQ, Nuveen Asset Management, Santa Barbara, Symphony, Tradewinds and Winslow Capital. In total, Nuveen Investments managed approximately $210 billion of assets as of June 30, 2011.
Find out how we can help you.
To learn more about how the products and services of Nuveen Investments may be able to help you meet your financial goals, talk to your financial advisor, or call us at (800) 257-8787. Please read the information provided carefully before you invest. Investors should consider the investment objective and policies, risk considerations, charges and expenses of any investment carefully. Where applicable, be sure to obtain a prospectus, which contains this and other relevant information. To obtain a prospectus, please contact your securities representative or Nuveen Investments, 333 W. Wacker Dr., Chicago, IL 60606. Please read the prospectus carefully before you invest or send money.
Learn more about Nuveen Funds at: www.nuveen.com/mf
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It only takes a minute to sign up for e-Reports. Once enrolled, you’ll receive an e-mail as soon as your Nuveen Fund information is ready — no more waiting for delivery by regular mail. Just click on the link within the e-mail to see the report and save it on your computer if you wish.
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Distributed by Nuveen Securities, LLC 333 West Wacker Drive Chicago, IL 60606 www.nuveen.com |
MSA-FCA-0811P
PART C
OTHER INFORMATION
Item 15. Indemnification
Section 4 of Article XII of Registrant’s Declaration of Trust, as amended, provides as follows:
Subject to the exceptions and limitations contained in this Section 4, every person who is, or has been, a Trustee, officer, employee or agent of the Trust, including persons who serve at the request of the Trust as directors, trustees, officers, employees or agents of another organization in which the Trust has an interest as a shareholder, creditor or otherwise (hereinafter referred to as a “Covered Person”), shall be indemnified by the Trust to the fullest extent permitted by law against liability and against all expenses reasonably incurred or paid by him in connection with any claim, action, suit or proceeding in which he becomes involved as a party or otherwise by virtue of his being or having been such a Trustee, director, officer, employee or agent and against amounts paid or incurred by him in settlement thereof.
No indemnification shall be provided hereunder to a Covered Person:
(a) against any liability to the Trust or its Shareholders by reason of a final adjudication by the court or other body before which the proceeding was brought that he engaged in willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office;
(b) with respect to any matter as to which he shall have been finally adjudicated not to have acted in good faith in the reasonable belief that his action was in the best interests of the Trust; or
(c) in the event of a settlement or other disposition not involving a final adjudication (as provided in paragraph (a) or (b)) and resulting in a payment by a Covered Person, unless there has been either a determination that such Covered Person did not engage in willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office by the court or other body approving the settlement or other disposition or a reasonable determination, based on a review of readily available facts (as opposed to a full trial-type inquiry), that he did not engage in such conduct:
(i) by a vote of a majority of the Disinterested Trustees acting on the matter (provided that a majority of the Disinterested Trustees then in office act on the matter); or
(ii) by written opinion of independent legal counsel.
The rights of indemnification herein provided may be insured against by policies maintained by the Trust, shall be severable, shall not affect any other rights to which any Covered Person may now or hereafter be entitled, shall continue as to a person who has ceased to be such a Covered Person and shall inure to the benefit of the heirs, executors and administrators of such a person. Nothing contained herein shall affect any rights to indemnification to which Trust personnel other than Covered Persons may be entitled by contract or otherwise under law.
Expenses of preparation and presentation of a defense to any claim, action, suit or proceeding subject to a claim for indemnification under this Section 4 shall be advanced by the Trust prior to final disposition thereof upon receipt of an undertaking by or on behalf of the recipient to repay such amount if it is ultimately determined that he is not entitled to indemnification under this Section 4, provided that either:
(a) such undertaking is secured by a surety bond or some other appropriate security or the Trust shall be insured against losses arising out of any such advances; or
(b) a majority of the Disinterested Trustees acting on the matter (provided that a majority of the Disinterested Trustees then in office act on the matter) or independent legal counsel in a written opinion shall determine, based upon a review of the readily available facts (as opposed to a full trial-type inquiry), that there is reason to believe that the recipient ultimately will be found entitled to indemnification.
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As used in this Section 4, a “Disinterested Trustee” is one (x) who is not an Interested Person of the Trust (including, as such Disinterested Trustee, anyone who has been exempted from being an Interested Person by any rule, regulation or order of the Commission), and (y) against whom none of such actions, suits or other proceedings or another action, suit or other proceeding on the same or similar grounds is then or has been pending.
As used in this Section 4, the words “claim,” “action,” “suit” or “proceeding” shall apply to all claims, actions, suits, proceedings (civil, criminal, administrative or other, including appeals), actual or threatened; and the word “liability” and “expenses” shall include without limitation, attorneys’ fees, costs, judgments, amounts paid in settlement, fines, penalties and other liabilities.
The trustees and officers of the Registrant are covered by Investment Trust Errors and Omission policies in the aggregate amount of $70,000,000 (with a $2,500,000 deductible for operational failures (after the deductible is satisfied, the insurer would cover 80% of any operational failure claims and the Fund would be liable for 20% of any such claims) and $1,000,000 for all other claims) against liability and expenses of claims of wrongful acts arising out of their position with the Registrant, except for matters which involved willful acts, bad faith, gross negligence and willful disregard of duty (i.e., where the insured did not act in good faith for a purpose he or she reasonably believed to be in the best interest of the Registrant or where he or she shall have had reasonable cause to believe this conduct was unlawful).
Insofar as indemnification for liabilities arising under the Securities Act of 1933 (“1933 Act”) may be permitted to the officers, trustees or controlling persons of the Registrant pursuant to the Declaration of Trust of the Registrant or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the 1933 Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by an officer or trustee or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such officer, trustee or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by it is against public policy as expressed in the 1933 Act and will be governed by the final adjudication of such issue.
Item 16. Exhibits.
| (1)(a) | Declaration of Trust of Registrant dated July 1, 1996. (1) | |
| (1)(b) | Certificate of Amendment to Declaration of Trust of Registrant dated June 28, 2000. (4) | |
| (1)(c) | Amended Establishment and Designation of Classes, dated April 23, 2008. (8) | |
| (1)(d) | Amended and Restated Designation of Series, dated May 29, 2011. (10) | |
| (2) | By-Laws of Registrant, amended and restated as of November 18, 2009. (9) | |
| (3) | Not applicable | |
| (4) | Form of Agreement and Plan of Reorganization is filed herewith as Appendix I to Part A of this Registration Statement. | |
| (5) | Not applicable. | |
| (6)(a) | Investment Management Agreement between Registrant and Nuveen Fund Advisors, Inc. (f/k/a Nuveen Asset Management), dated November 13, 2007. (6) | |
| (6)(b) | Amendment of Investment Management Agreement, dated May 26, 2010. (10) | |
C-2
| (6)(c) | Investment Sub-Advisory Agreement between Nuveen Fund Advisors, Inc. and Nuveen Asset Management, LLC, dated January 1, 2011. (10) | |
| (7)(a) | Form of Distribution Agreement between Registrant and John Nuveen & Co. Incorporated. (2) | |
| (7)(b) | Renewal of Distribution Agreement between Registrant and Nuveen Securities, LLC (f/k/a Nuveen Investments, LLC), dated August 2, 2010. (10) | |
| (7)(c) | Form of Dealer Distribution, Shareholder Servicing and Fee-Based Program Agreement. (5) | |
| (8) | Not applicable. | |
| (9)(a) | Amended and Restated Master Custodian Agreement between the Nuveen Funds and State Street Bank and Trust Company, dated February 25, 2005. (5) | |
| (9)(b) | Appendix A to the Custodian Agreement, dated May 2, 2011. (10) | |
| (10)(a) | Plan of Distribution and Service Pursuant to Rule 12b-1, dated January 30, 1997. (3) | |
| (10)(b) | Multiple Class Plan, dated May 1, 2008. (7) | |
| (11) | Opinion and Consent of Vedder Price P.C. is filed herewith. | |
| (12) | Form of Opinion and Consent of Vedder Price P.C. supporting the tax matters and consequences to shareholders discussed in the Proxy Statement/Prospectus is filed herewith. | |
| (13) | Not applicable. | |
| (14)(a) | Consent of Independent Auditor is filed herewith. | |
| (14)(b) | Consent of Independent Auditor is filed herewith. | |
| (15) | Not applicable. | |
| (16) | Powers of Attorney are filed herewith. | |
| (17) | Form of Proxy is filed herein and appears following the Proxy Statement/Prospectus included in this registration statement. | |
| (1) | Incorporated by reference to the initial registration statement filed on Form N-1A for Registrant. |
| (2) | Incorporated by reference to the post-effective amendment no. 3 filed on Form N-1A for Registrant. |
| (3) | Incorporated by reference to the post-effective amendment no. 5 filed on Form N-1A for Registrant. |
| (4) | Incorporated by reference to the post-effective amendment no. 7 filed on Form N-1A for Registrant. |
| (5) | Incorporated by reference to the post-effective amendment no. 13 filed on Form N-1A for Registrant. |
| (6) | Incorporated by reference to the post-effective amendment no. 18 filed on Form N-1A for Registrant. |
| (7) | Incorporated by reference to the post-effective amendment no. 19 filed on Form N-1A for Registrant. |
| (8) | Incorporated by reference to the post-effective amendment no. 20 filed on Form N-1A for Registrant. |
| (9) | Incorporated by reference to the post-effective amendment no. 22 filed on Form N-1A for Registrant. |
| (10) | Incorporated by reference to the post-effective amendment no. 23 filed on Form N-1A for Registrant. |
Item 17. Undertakings.
(1) The undersigned Registrant agrees that prior to any public reoffering of the securities registered through the use of a prospectus which is a part of this registration statement by any person or party who is deemed to be an underwriter within the meaning of Rule 145(c) of the 1933 Act, the reoffering prospectus will contain the information called for by the applicable registration form for reofferings by persons who may be deemed underwriters, in addition to the information called for by the other items of the applicable form.
C-3
(2) The undersigned Registrant agrees that every prospectus that is filed under paragraph (1) above will be filed as a part of an amendment to the registration statement and will not be used until the amendment is effective, and that, in determining any liability under the 1933 Act, each post-effective amendment shall be deemed to be a new registration statement for the securities offered therein, and the offering of the securities at that time shall be deemed to be the initial bona fide offering of them.
C-4
SIGNATURES
As required by the Securities Act of 1933, this registration statement has been signed on behalf of the registrant, in the City of Chicago, the State of Illinois, on the 18th day of January, 2012.
| NUVEEN MULTISTATE TRUST II | ||
| By: | /s/ Kathleen L. Prudhomme | |
| Kathleen L. Prudhomme | ||
| Vice President and Assistant Secretary | ||
As required by the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated:
Signature | Capacity | Date | ||||
/s/ Stephen D. Foy Stephen D. Foy | Vice President and Controller | January 18, 2012 | ||||
/s/ Gifford R. Zimmerman Gifford R. Zimmerman | Chief Administrative Officer | January 18, 2012 | ||||
| Chairman of the Board and Director | ) | ||||
| Robert P. Bremner* | ) | |||||
| ) | ||||||
John P. Amboian* | Director | ) ) | ||||
| ) | ||||||
Jack B. Evans* | Director | ) ) | ||||
| ) | ||||||
William C. Hunter* | Director | ) ) | By: /s/ Kathleen L. Prudhomme Kathleen L. Prudhomme Attorney-in-Fact | |||
| ) | ||||||
David J. Kundert* | Director | ) ) | ||||
| ) | ||||||
William J. Schneider* | Director | ) ) | ||||
| ) | ||||||
Judith M. Stockdale* | Director | ) ) | ||||
| ) | ||||||
Carole E. Stone* | Director | ) ) | ||||
| ) | ||||||
Virginia L. Stringer* | Director | ) ) | ||||
C-5
Signature | Capacity | Date | ||||
| ) | ||||||
Terence J. Toth* | Director | ) ) |
| * | An original power of attorney authorizing, among others, Kevin J. McCarthy, Kathleen L. Prudhomme and Gifford R. Zimmerman, to execute this registration statement, and amendments thereto, for each of the directors of the Registrant on whose behalf this registration statement is filed, has been executed and is filed herewith as exhibit 16. |
C-6
EXHIBIT INDEX
Exhibit No. | Name of Exhibit | |
| 11 | Opinion and Consent of Counsel | |
| 12 | Form of Opinion and Consent of Tax Counsel Supporting Tax Matters | |
| 14(a) | Consent of Independent Auditor | |
| 14(b) | Consent of Independent Auditor | |
| 16 | Powers of Attorney | |
C-7