UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-7492 --------------------- Nuveen Insured California Premium Income Municipal Fund 2, Inc. ------------------------------------------------------------------------------ (Exact name of registrant as specified in charter) Nuveen Investments 333 West Wacker Drive Chicago, IL 60606 - ------------------------------------------------------------------------------ (Address of principal executive offices) (Zip code) Jessica R. Droeger Nuveen Investments 333 West Wacker Drive Chicago, IL 60606 - ------------------------------------------------------------------------------ (Name and address of agent for service) Registrant's telephone number, including area code: (312) 917-7700 ------------------- Date of fiscal year end: 8/31/03 ------------------ Date of reporting period: 8/31/03 ----------------- Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles. A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. ss. 3507. ITEM 1. REPORTS TO STOCKHOLDERS. Nuveen Investments Municipal Closed-End Exchange-Traded Funds ANNUAL REPORT August 31, 2003 CALIFORNIA NPC NCL NCU NAC NVX NZH NKL NKX Photo of: 2 men and child walking through the woods. Photo of: 2 women and 2 children looking at seashells. Dependable, tax-free income because it's not what you earn, it's what you keep.(R) Logo: NUVEEN Investments FASTER INFORMATION RECEIVE YOUR NUVEEN FUND REPORT ELECTRONICALLY By registering for electronic delivery, you will receive an e-mail as soon as your Nuveen Fund information is available. Click on the link and you will be taken directly to the report. Your Fund report can be viewed and saved on your computer. Your report will arrive faster via e-mail than by traditional mail. Registering is easy and only takes a few minutes (see instructions at right). - -------------------------------------------------------------------------------- SOME COMMON CONCERNS: WILL MY E-MAIL ADDRESS BE DISTRIBUTED TO OTHER COMPANIES? No, your e-mail address is strictly confidential and will not be used for anything other than notification of shareholder information. WHAT IF I CHANGE MY MIND AND WANT TO RECEIVE INVESTOR MATERIALS THROUGH REGULAR MAIL DELIVERY AGAIN? If you decide you do not like receiving your reports electronically, it's a simple process to go back to regular mail delivery. - -------------------------------------------------------------------------------- IF YOUR NUVEEN FUND DIVIDENDS AND STATEMENTS COME FROM YOUR FINANCIAL ADVISOR OR BROKERAGE ACCOUNT, FOLLOW THE STEPS OUTLINED BELOW: 1 Go to WWW.INVESTORDELIVERY.COM 2 Refer to the address sheet that accompanied this report. Enter the personal 13-CHARACTER ENROLLMENT NUMBER imprinted near your name. 3 You'll be taken to a page with several options. Select the NEW ENROLLMENT-CREATE screen. Once there, enter your e-mail address (e.g. yourID@providerID.com), and a personal, 4-digit PIN number of your choice. (Pick a number that's easy to remember.) 4 Click Submit. Confirm the information you just entered is correct, then click Submit again. 5 You should get a confirmation e-mail within 24 hours. If you do not, go back through these steps to make sure all the information is correct. 6 Use this same process if you need to change your registration information or cancel internet viewing. IF YOUR NUVEEN FUND DIVIDENDS AND STATEMENTS COME DIRECTLY TO YOU FROM NUVEEN, FOLLOW THE STEPS OUTLINED BELOW: 1 Go to WWW.NUVEEN.COM 2 Select ACCESS YOUR ACCOUNT. Select the E-REPORT ENROLLMENT section. Click on Enrollment Today. 3 You'll be taken to a screen that asks for your Social Security number and e-mail address. Fill in this information, then click Enroll. 4 You should get a confirmation e-mail within 24 hours. If you do not, go back through these steps to make sure all the information is correct. 5 Use this same process if you need to change your registration information or cancel internet viewing. Logo: NUVEEN Investments Photo of: Timothy R. Schwertfeger Chairman of the Board Sidebar text: "WHILE NO ONE KNOWS WHAT THE FUTURE WILL BRING, WE THINK A WELL-BALANCED PORTFOLIO ..... IS AN IMPORTANT COMPONENT IN ACHIEVING YOUR LONG-TERM FINANCIAL GOALS." Dear SHAREHOLDER Once again, I am pleased to report that over the most recent reporting period your California Fund continued to provide you with attractive tax-free monthly income and the opportunity for increased portfolio diversification. For more specific information about the performance of your Fund, please see the Portfolio Managers' Comments and Performance Overview sections of this report. With interest rates at historically low levels, many investors have begun to wonder whether interest rates will rise, and whether that possibility should cause them to adjust their fixed-income holdings. While no one knows what the future will bring, we think a well-balanced portfolio that is structured and carefully monitored with the help of an investment professional is an important component in achieving your long-term financial goals. A well-diversified portfolio may actually help to reduce your overall investment risk. We believe municipal bond investments like your Nuveen Fund can be important building blocks in a portfolio crafted to perform well through a variety of market conditions. I'd also like to direct your attention to the inside front cover of this report, which explains the quick and easy process to begin receiving Fund reports like this via e-mail and the internet. Thousands of Nuveen Fund shareholders already have signed-up, and they are getting their Fund information faster and more conveniently than ever. I urge you to consider joining them. Since 1898, Nuveen Investments has offered financial products and solutions that incorporate careful research, diversification, and the application of conservative risk-management principles. We are grateful that you have chosen us as a partner as you pursue your financial goals. We look forward to continuing to earn your trust in the months and years ahead. Sincerely, /s/ Timothy R. Schwertfeger Timothy R. Schwertfeger Chairman of the Board October 15, 2003 1 Nuveen California Municipal Closed-End Exchange-Traded Funds (NPC, NCL, NCU, NAC, NVX, NZH, NKL, NKX) Portfolio Managers' COMMENTS Portfolio managers Tom O'Shaughnessy, Bill Fitzgerald, and Scott Romans discuss economic and market conditions, key investment strategies, and the annual performance of the Funds. Tom, a 20-year veteran of Nuveen, assumed portfolio management responsibility for NPC and NCL in January 2003. With 15 years of investment experience at Nuveen, Bill has managed NCU since 1998, NAC since 1999, NVX and NZH since 2001, and NKL and NKX since their inceptions in 2002. Scott, who has three years of investment experience at Nuveen, joined Bill in managing these six Funds in January 2003. WHAT FACTORS AFFECTED THE U.S. ECONOMY AND MUNICIPAL MARKET DURING THE TWELVE MONTH PERIOD ENDED AUGUST 31, 2003? As has been the case for some time, we believe the two greatest influences on the general economy and the municipal market continued to be historically low interest rates and the slow pace of economic growth. In June 2003, the Federal Reserve cut the fed funds rate to 1.0%, its lowest level since 1958. Growth during the first half of 2003, as measured by the GDP, registered 2.3%, lagging the 3% pace considered by many to be indicative of recovery. At the same time, inflation remained dormant, with the 12-month advance in the core rate dropping to 1.3% in August. The slow rate of economic recovery, low interest rates, and lack of inflationary pressures created conditions that helped many municipal bonds perform well during the majority of this reporting period. However, during July 2003, stronger-than-expected economic data precipitated a spike in bond yields and a corresponding drop in bond prices that impacted results across all fixed-income markets. During the first eight months of 2003, the states and municipalities followed up the record issuance of 2002 with continued strong supply, issuing $254 billion in new bonds, up 12.5% over the same period in 2002. HOW WERE ECONOMIC AND MARKET CONDITIONS IN CALIFORNIA? Over the 12-months ended August 31, 2003, California continued to struggle with significant budget problems and political uncertainty. On July 29, 2003, nearly a month into its 2004 fiscal year, the state budget was finally approved, closing a $38 billion deficit. Due to the heavy reliance on borrowing and one-time measures to balance the fiscal 2004 budget, California is expected to face an additional $8 billion deficit in fiscal 2005. The governor recall election added further uncertainty to California's outlook during the reporting period. While employment and real estate values remained relatively stable in Southern California, the San Francisco area continued to be the state's weak spot, suffering from lingering effects of the technology downturn. Although some economic data provided a glimmer of hope for the state's tech-related jobs, the consensus was that any meaningful improvement in California's employment market, especially technology, was not expected until 2004. 2 During the first eight months of 2003, municipal new issue supply in the state totaled $42 billion, up 56% over the same period in 2002. However, the delays in budget approval, the size of the deficit, and the uncertainty created by the recall effort also led to several downgrades of California's general obligation debt over the twelve months ended August 31, 2003. In December 2002, Standard & Poor's cut the state's credit rating to A from A+, while Moody's followed suit in February 2003, lowering the rating to A2. In July 2003, Moody's and S&P again downgraded the state, to A3/BBB from A2/A, respectively. HOW DID THE NUVEEN CALIFORNIA FUNDS PERFORM OVER THIS REPORTING PERIOD? Individual results for these Funds, as well as for relevant benchmarks, are presented in the accompanying table. LEHMAN LIPPER TOTAL RETURN CALIFORNIA CALIFORNIA MARKET YIELD ON NAV TOTAL RETURN1 AVERAGE2 - ------------------------------------------------------------------------ 1 YEAR 1 YEAR 1 YEAR TAXABLE- ENDED ENDED ENDED 8/31/03 EQUIVALENT3 8/31/03 8/31/03 8/31/03 - ------------------------------------------------------------------------ NPC 6.05% 9.24% 2.82% 2.65% 1.88% - ------------------------------------------------------------------------ NCL 6.37% 9.73% 2.71% 2.65% 1.88% - ------------------------------------------------------------------------ NCU 6.73% 10.27% 0.69% 2.00% 1.14% - ------------------------------------------------------------------------ NAC 6.71% 10.24% 3.37% 2.00% 1.14% - ------------------------------------------------------------------------ NVX 6.80% 10.38% 2.16% 2.00% 1.14% - ------------------------------------------------------------------------ NZH 6.80% 10.38% 1.68% 2.00% 1.14% - ------------------------------------------------------------------------ NKL 6.51% 9.94% 2.70% 2.65% 1.88% - ------------------------------------------------------------------------ NKX 6.68% 10.20% NA -- -- - ------------------------------------------------------------------------ Past performance is not predictive of future results. For additional information, see the individual Performance Overview for your Fund in this report. For the 12-months ended August 31, 2003, all of the Funds in this report with at least one year of performance history (with the exception of NCU) outperformed their respective Lipper peer group averages. In addition, NPC, NCL, and NKL also outperformed the unleveraged Lehman Brothers California Insured Tax-Exempt Bond Index, and NAC and NVX outperformed the Lehman California index, with NZH lagging the uninsured index by a small margin. In general over this period, the performance of most of the Funds were helped by longer durations.4 During periods of declining interest rates, such as that we experienced over the majority of the past reporting period, investments with longer durations generally would have been expected to outperform those with shorter durations. However, as bond yields jumped higher in late June and July, longer durations worked to hamper the Funds' performances, especially in NZH. Another factor in the performance of these Funds in comparison with the Lehman California indexes over this period was their use of leverage, a strategy that can provide the opportunity for additional income for common shareholders, especially during periods of low short-term interest rates. In addition to duration and leverage, factors such as call exposure, portfolio trading activity, and the price movement of specific sectors and holdings also had an impact on the Funds' performances during this period. For example, all four of the uninsured Funds held bonds backed by the 1998 master tobacco settlement agreement. Over the year ended August 31, 2003, the prices of these bonds weakened. The negative returns affected the NCU, NVX, and NZH in particular. NAC was protected to a degree from these declines by its relatively lower exposure to this sector. In recent months, tobacco bonds have shown some recovery. Our strategy continues to be one of maintaining these holdings while regularly evaluating the situation. 1 The total annual returns on common share net asset value (NAV) for the insured NPC, NCL, and NKL are compared with the total annual return of the Lehman Brothers California Insured Tax-Exempt Bond Index, an unleveraged, unmanaged index comprising a broad range of insured California municipal bonds, while annual returns for the uninsured NCU, NAC, NVX, and NZH are compared with the total annual return of the Lehman California Tax-Exempt Bond Index, an unleveraged, unmanaged index comprising a broad range of investment-grade California municipal bonds. Results for the Lehman indexes do not reflect any expenses. 2 The total returns of the insured California Funds are compared with the average annualized return of the 10 funds in the Lipper California Insured Municipal Debt Funds category, while the total returns of the uninsured California Funds are compared with the return of the 28 funds in the Lipper California Municipal Debt Funds category. Fund and Lipper returns assume reinvestment of dividends. 3 The taxable-equivalent yield represents the yield that must be earned on a taxable investment other than an alternative investment that generates qualified dividend income that is taxable at the maximum rate of 15%, in order to equal the yield of the Nuveen Fund on an after-tax basis. The taxable-equivalent yield is based on the Fund's market yield on the indicated date and a combined federal and state income tax rate of 34.5%. 4 Duration is a measure of a fund's NAV volatility in reaction to interest rate movements. Fund duration, also known as leverage-adjusted duration, takes into account the leveraging process for a fund and therefore is generally longer than the duration of the actual portfolio of individual bonds that make up the fund. References to duration in this commentary are intended to indicate fund duration unless otherwise noted. 3 NCU also held bonds issued for Downey Community Hospital, which declined following a downgrade to BB+ from BBB+ by Standard & Poor's in February 2003 due to poor management of managed care and physician contracts. Although the hospital had been slow to respond to declining operations, the downgrade spurred management to make staff changes and implement operating improvements. We continue to hold these bonds based on our belief that the S&P rating is too low and that the hospital has sufficient balance-sheet liquidity to provide time and resources for a turnaround. NCU's performance over this period was also negatively impacted by the Fund's need to reinvest called bond proceeds at today's relatively lower interest rates. HOW DID THE MARKET ENVIRONMENT AFFECT THE FUNDS' DIVIDENDS AND SHARE PRICES? With short-term interest rates remaining at historically low levels, the dividend-payment capabilities of the Funds benefited from their use of leverage. During the 12-months ended August 31, 2003, the continued low level of short-term rates enabled us to implement two dividend increases in NPC, NCL, and NAC and one each in NCU and NVX. Leverage also helped to support the dividends of NZH and NKL, which, as of August 2003, had paid shareholders dependable, attractive dividends for 22 and 16 consecutive months, respectively. NKX, which was introduced in November 2002, declared its first dividend in January 2003 and continued to pay steady dividends over the course of this reporting period. Although the share prices and net asset values of these Funds generally performed well during much of this 12-month reporting period, increased volatility in the fixed-income markets during the summer of 2003 as well as continued budgetary and political turmoil in California led to an overall weakening of prices. While we began to see some recovery in August as municipal supply thinned somewhat, the Funds' share prices and NAVs finished this reporting period lower than they had been at the beginning. As of August 31, 2003, all of the Funds with at least one year of history continued to trade at discounts to their common share NAVs, while NKX had moved to trading at a slight discount (see charts on individual Performance Overview pages). WHAT KEY STRATEGIES WERE USED TO MANAGE THESE FUNDS DURING THE FISCAL YEAR ENDED AUGUST 31, 2003? Over this 12-month period, we continued to place strong emphasis on diversifying the portfolios, improving call protection, and enhancing dividend-paying capabilities. One of our key strategies focused on managing the Funds' durations in order to enhance our ability to mitigate interest rate risk and produce potentially more consistent returns over time. Interest rate risk is the risk that the value of a Fund's portfolio will decline when market interest rates rise. The longer the duration of a Fund's portfolio, the greater its interest rate risk. Over the course of the reporting period, we concentrated on finding value in the intermediate part of the yield curve. In NKL and NKX, which were introduced in 2002, we expanded our search further out on the yield curve to find additional bonds that would help to support the dividends of the two newest Funds. This has resulted in longer durations for both NKL (15.13) and NKX (16.98). Over the past few months, we have been swapping bonds with the goal of maintaining the yields of these Funds while reducing their durations. 4 Over the six months ended August 31, 2003, another key strategy centered on selling or purchasing California general obligation bonds (GOs) to take advantage of general market moves. In early spring 2003, the yield differential between California GOs and national AAA credits with similar maturities had narrowed to 35-40 basis points. We believed this made California GOs relatively expensive and we largely moved the Funds out of positions in California GOs. By June 2003, as the state's budget process stalled and the recall movement gathered strength, the yield differential had widened, and we began buying California GOs. Following the approval of the fiscal 2004 budget at the end of July 2003, California GOs rallied on a relative basis. As the yield spread with national bonds once again narrowed, we began to sell some of these GO positions at what we believed were attractive prices. WHAT IS YOUR OUTLOOK FOR THE BOND CALLS FOR THESE FUNDS? The five newer Funds will not experience any significant call exposure for several years, with potential call exposure during 2003 and 2004 ranging from zero in NVX to 5% in NKX. During this reporting period, we worked to mitigate the call risk of the three older Funds, especially NCL and NCU, which marked their 10-year anniversaries in 2003, a point in a Fund's life cycle often associated with increased bond calls. As of August 31, 2003, NPC's potential call exposure through 2004 was 12%, while NCL and NCU faced potential calls on 13% and 17% of their portfolios, respectively. The number of actual calls in these Funds will depend largely on market interest rates in coming months. In general, we believe that these Nuveen Funds can continue to serve as attractive sources of tax-free income, while simultaneously offering the potential for considerable portfolio diversification. In our opinion, these Funds represent a quality component of a well-balanced core investment portfolio that can continue to benefit shareholders over time. 5 Nuveen Insured California Premium Income Municipal Fund, Inc. Performance OVERVIEW As of August 31, 2003 NPC Pie Chart: CREDIT QUALITY Insured 79% Insured and U.S. Guaranteed 4% U.S. Guaranteed 17% PORTFOLIO STATISTICS - -------------------------------------------------- Share Price $15.07 - -------------------------------------------------- Common Share Net Asset Value $15.59 - -------------------------------------------------- Market Yield 6.05% - -------------------------------------------------- Taxable-Equivalent Yield (Federal Income Tax Rate)1 8.40% - -------------------------------------------------- Taxable-Equivalent Yield (Federal and State Income Tax Rate)1 9.24% - -------------------------------------------------- Net Assets Applicable to Common Shares ($000) $100,427 - -------------------------------------------------- Average Effective Maturity (Years) 19.77 - -------------------------------------------------- Leverage-Adjusted Duration 10.95 - -------------------------------------------------- AVERAGE ANNUAL TOTAL RETURN (Inception 11/19/92) - -------------------------------------------------- ON SHARE PRICE ON NAV - -------------------------------------------------- 1-Year 1.55% 2.82% - -------------------------------------------------- 5-Year 4.86% 4.98% - -------------------------------------------------- 10-Year 5.74% 6.01% - -------------------------------------------------- TOP FIVE SECTORS (as a % of total investments) - -------------------------------------------------- Tax Obligation/General 21% - -------------------------------------------------- U.S. Guaranteed 21% - -------------------------------------------------- Water and Sewer 20% - -------------------------------------------------- Utilities 12% - -------------------------------------------------- Tax Obligation/Limited 11% - -------------------------------------------------- Bar Chart: 2002-2003 MONTHLY TAX-FREE DIVIDENDS PER SHARE2 Sep 0.0735 Oct 0.0735 Nov 0.0735 Dec 0.0745 Jan 0.0745 Feb 0.0745 Mar 0.076 Apr 0.076 May 0.076 Jun 0.076 Jul 0.076 Aug 0.076 Line Chart: SHARE PRICE PERFORMANCE Weekly Closing Price Past performance is not predictive of future results. 9/1/02 16.09 16.21 16.26 16.45 16.35 16.29 15.49 15 15.3 15.15 15.1 15 15 15.4 15.27 15.46 15.72 15.66 15.35 15.3 15.8 15.86 15.95 15.88 15.71 15.8 15.9 16.25 15.67 15.91 16 15.85 16.1 15.82 16.25 16.39 16.42 16.6 16.75 16.35 16.2 16.27 15.9 15.25 14.55 15.03 14.85 14.81 8/31/03 15.07 1 Taxable-equivalent yield represents the yield on a taxable investment necessary to equal the yield of the Nuveen Fund on an after-tax basis. It is calculated using the current market yield and a federal income tax rate of 28%. The rate shown for federal and state highlights the added value of owning shares that are also exempt from state income taxes. It is based on a combined federal and state income tax rate of 34.5%. 2 The Fund also paid shareholders capital gains and net ordinary income distributions in December 2002 of $0.1419 per share. 6 Nuveen Insured California Premium Income Municipal Fund 2, Inc. Performance OVERVIEW As of August 31, 2003 NCL Pie Chart: CREDIT QUALITY Insured 87% Insured and U.S. Guaranteed 10% U.S. Guaranteed 3% PORTFOLIO STATISTICS - -------------------------------------------------- Share Price $14.32 - -------------------------------------------------- Common Share Net Asset Value $14.60 - -------------------------------------------------- Market Yield 6.37% - -------------------------------------------------- Taxable-Equivalent Yield (Federal Income Tax Rate)1 8.85% - -------------------------------------------------- Taxable-Equivalent Yield (Federal and State Income Tax Rate)1 9.73% - -------------------------------------------------- Net Assets Applicable to Common Shares ($000) $185,181 - -------------------------------------------------- Average Effective Maturity (Years) 17.32 - -------------------------------------------------- Leverage-Adjusted Duration 8.99 - -------------------------------------------------- AVERAGE ANNUAL TOTAL RETURN (Inception 3/18/93) - -------------------------------------------------- ON SHARE PRICE ON NAV - -------------------------------------------------- 1-Year 2.69% 2.71% - -------------------------------------------------- 5-Year 5.16% 5.50% - -------------------------------------------------- 10-Year 5.62% 5.85% - -------------------------------------------------- TOP FIVE SECTORS (as a % of total investments) - -------------------------------------------------- Tax Obligation/Limited 31% - -------------------------------------------------- Tax Obligation/General 15% - -------------------------------------------------- U.S. Guaranteed 13% - -------------------------------------------------- Water and Sewer 12% - -------------------------------------------------- Education and Civic Organizations 8% - -------------------------------------------------- Bar Chart: 2002-2003 MONTHLY TAX-FREE DIVIDENDS PER SHARE Sep 0.0725 Oct 0.0725 Nov 0.0725 Dec 0.0735 Jan 0.0735 Feb 0.0735 Mar 0.076 Apr 0.076 May 0.076 Jun 0.076 Jul 0.076 Aug 0.076 Line Chart: SHARE PRICE PERFORMANCE Weekly Closing Price Past performance is not predictive of future results. 9/1/02 15.05 15.22 15.26 15.74 15.67 15.58 15 14.48 14.43 14.71 14.52 14.55 14.51 14.73 14.55 14.62 14.99 15.21 14.93 14.86 14.91 15.03 14.93 14.9 15.25 15 15.3 15.2 14.99 15.14 15.18 15.2 15.41 15.48 15.43 15.65 15.51 15.77 16.35 15.75 15.5 15.52 15.28 14.71 14.37 14.42 14.36 14.29 8/31/03 14.32 1 Taxable-equivalent yield represents the yield on a taxable investment necessary to equal the yield of the Nuveen Fund on an after-tax basis. It is calculated using the current market yield and a federal income tax rate of 28%. The rate shown for federal and state highlights the added value of owning shares that are also exempt from state income taxes. It is based on a combined federal and state income tax rate of 34.5%. 7 Nuveen California Premium Income Municipal Fund Performance OVERVIEW As of August 31, 2003 NCU Pie Chart: CREDIT QUALITY AAA/U.S. Guaranteed 61% AA 6% A 12% BBB 10% NR 4% BB or lower 7% PORTFOLIO STATISTICS - -------------------------------------------------- Share Price $13.02 - -------------------------------------------------- Common Share Net Asset Value $13.66 - -------------------------------------------------- Market Yield 6.73% - -------------------------------------------------- Taxable-Equivalent Yield (Federal Income Tax Rate)1 9.35% - -------------------------------------------------- Taxable-Equivalent Yield (Federal and State Income Tax Rate)1 10.27% - -------------------------------------------------- Net Assets Applicable to Common Shares ($000) $78,859 - -------------------------------------------------- Average Effective Maturity (Years) 17.29 - -------------------------------------------------- Leverage-Adjusted Duration 11.87 - -------------------------------------------------- AVERAGE ANNUAL TOTAL RETURN (Inception 6/18/93) - -------------------------------------------------- ON SHARE PRICE ON NAV - -------------------------------------------------- 1-Year -0.91% 0.69% - -------------------------------------------------- 5-Year 4.59% 5.09% - -------------------------------------------------- 10-Year 4.85% 5.46% - -------------------------------------------------- TOP FIVE SECTORS (as a % of total investments) - -------------------------------------------------- Tax Obligation/Limited 26% - -------------------------------------------------- Healthcare 15% - -------------------------------------------------- Tax Obligation/General 12% - -------------------------------------------------- Housing/Multifamily 11% - -------------------------------------------------- Water and Sewer 8% - -------------------------------------------------- Bar Chart: 2002-2003 MONTHLY TAX-FREE DIVIDENDS PER SHARE2 Sep 0.0715 Oct 0.0715 Nov 0.0715 Dec 0.0715 Jan 0.0715 Feb 0.0715 Mar 0.073 Apr 0.073 May 0.073 Jun 0.073 Jul 0.073 Aug 0.073 Line Chart: SHARE PRICE PERFORMANCE Weekly Closing Price Past performance is not predictive of future results. 9/1/02 14.17 14.47 14.4 14.54 14.9 14.75 13.8 13.56 13.65 13.82 13.64 13.93 13.72 13.85 13.7 13.59 13.95 14.05 14.05 13.75 13.67 13.31 13.48 13.3 13.4 13.35 13.55 13.48 13.19 13.47 13.47 13.47 13.5 13.51 13.78 13.85 14.09 14.35 14.6 14.47 14.29 14.37 14.24 13.65 13.1 13.08 12.8 12.91 8/31/03 13.02 1 Taxable-equivalent yield represents the yield on a taxable investment necessary to equal the yield of the Nuveen Fund on an after-tax basis. It is calculated using the current market yield and a federal income tax rate of 28%. The rate shown for federal and state highlights the added value of owning shares that are also exempt from state income taxes. It is based on a combined federal and state income tax rate of 34.5%. 2 The Fund also paid shareholders a net ordinary income distribution in December 2002 of $0.0065 per share. 8 Nuveen California Dividend Advantage Municipal Fund Performance OVERVIEW As of August 31, 2003 NAC Pie Chart: CREDIT QUALITY AAA/U.S. Guaranteed 52% AA 6% A 16% BBB 19% NR 7% PORTFOLIO STATISTICS - -------------------------------------------------- Share Price $14.30 - -------------------------------------------------- Common Share Net Asset Value $14.82 - -------------------------------------------------- Market Yield 6.71% - -------------------------------------------------- Taxable-Equivalent Yield (Federal Income Tax Rate)1 9.32% - -------------------------------------------------- Taxable-Equivalent Yield (Federal and State Income Tax Rate)1 10.24% - -------------------------------------------------- Net Assets Applicable to Common Shares ($000) $346,918 - -------------------------------------------------- Average Effective Maturity (Years) 18.97 - -------------------------------------------------- Leverage-Adjusted Duration 11.03 - -------------------------------------------------- AVERAGE ANNUAL TOTAL RETURN (Inception 5/26/99) - -------------------------------------------------- ON SHARE PRICE ON NAV - -------------------------------------------------- 1-Year 4.79% 3.37% - -------------------------------------------------- Since Inception 5.06% 6.94% - -------------------------------------------------- TOP FIVE SECTORS (as a % of total investments) - -------------------------------------------------- Tax Obligation/Limited 24% - -------------------------------------------------- Tax Obligation/General 14% - -------------------------------------------------- Transportation 14% - -------------------------------------------------- Housing/Multifamily 10% - -------------------------------------------------- Healthcare 9% - -------------------------------------------------- Bar Chart: 2002-2003 MONTHLY TAX-FREE DIVIDENDS PER SHARE Sep 0.0755 Oct 0.0755 Nov 0.0755 Dec 0.077 Jan 0.077 Feb 0.077 Mar 0.08 Apr 0.08 May 0.08 Jun 0.08 Jul 0.08 Aug 0.08 Line Chart: SHARE PRICE PERFORMANCE Weekly Closing Price Past performance is not predictive of future results. 9/1/02 14.88 15 14.83 14.95 14.99 14.89 14.4 14.33 14.3 14.35 14.12 13.98 14.16 14.37 14.17 14.41 14.55 14.67 14.3 14.1 14.04 14.11 14.35 14.07 14.09 14.11 14.32 14.29 14.08 14.3 14.34 14.35 14.4 14.62 14.89 15.04 15.35 15.66 15.89 15.69 15.44 15.49 15.2 14.6 14.07 14.36 14.36 14.06 8/31/03 14.3 1 Taxable-equivalent yield represents the yield on a taxable investment necessary to equal the yield of the Nuveen Fund on an after-tax basis. It is calculated using the current market yield and a federal income tax rate of 28%. The rate shown for federal and state highlights the added value of owning shares that are also exempt from state income taxes. It is based on a combined federal and state income tax rate of 34.5%. 9 Nuveen California Dividend Advantage Municipal Fund 2 Performance OVERVIEW As of August 31, 2003 NVX Pie Chart: CREDIT QUALITY AAA/U.S. Guaranteed 72% A 11% BBB 11% NR 6% PORTFOLIO STATISTICS - -------------------------------------------------- Share Price $13.24 - -------------------------------------------------- Common Share Net Asset Value $14.18 - -------------------------------------------------- Market Yield 6.80% - -------------------------------------------------- Taxable-Equivalent Yield (Federal Income Tax Rate)1 9.44% - -------------------------------------------------- Taxable-Equivalent Yield (Federal and State Income Tax Rate)1 10.38% - -------------------------------------------------- Net Assets Applicable to Common Shares ($000) $209,722 - -------------------------------------------------- Average Effective Maturity (Years) 20.34 - -------------------------------------------------- Leverage-Adjusted Duration 12.41 - -------------------------------------------------- AVERAGE ANNUAL TOTAL RETURN (Inception 3/27/01) - -------------------------------------------------- ON SHARE PRICE ON NAV - -------------------------------------------------- 1-Year -0.95% 2.16% - -------------------------------------------------- Since Inception 0.88% 5.61% - -------------------------------------------------- TOP FIVE SECTORS (as a % of total investments) - -------------------------------------------------- Tax Obligation/Limited 29% - -------------------------------------------------- Tax Obligation/General 20% - -------------------------------------------------- Education and Civic Organizations 13% - -------------------------------------------------- Water and Sewer 8% - -------------------------------------------------- Healthcare 8% - -------------------------------------------------- Bar Chart: 2002-2003 MONTHLY TAX-FREE DIVIDENDS PER SHARE2 Sep 0.074 Oct 0.074 Nov 0.074 Dec 0.074 Jan 0.074 Feb 0.074 Mar 0.074 Apr 0.074 May 0.074 Jun 0.075 Jul 0.075 Aug 0.075 Line Chart: SHARE PRICE PERFORMANCE Weekly Closing Price Past performance is not predictive of future results. 9/1/02 14.62 14.64 14.46 14.63 14.87 14.45 13.95 13.74 13.8 14.2 13.68 13.54 13.74 13.75 13.36 13.32 13.73 13.75 13.42 13.44 13.49 13.64 13.47 13.51 13.58 13.59 13.63 13.65 13.4 13.44 13.56 13.55 13.7 13.91 14.06 14.04 14.42 14.72 14.8 14.52 14.52 14.71 14.35 13.97 13.03 13.4 13.19 13.17 8/31/03 13.24 1 Taxable-equivalent yield represents the yield on a taxable investment necessary to equal the yield of the Nuveen Fund on an after-tax basis. It is calculated using the current market yield and a federal income tax rate of 28%. The rate shown for federal and state highlights the added value of owning shares that are also exempt from state income taxes. It is based on a combined federal and state income tax rate of 34.5%. 2 The Fund also paid shareholders capital gains and net ordinary income distributions in December 2002 of $0.0291 per share. 10 Nuveen California Dividend Advantage Municipal Fund 3 Performance OVERVIEW As of August 31, 2003 NZH Pie Chart: CREDIT QUALITY AAA/U.S. Guaranteed 71% AA 1% A 10% BBB 12% NR 6% PORTFOLIO STATISTICS - -------------------------------------------------- Share Price $12.71 - -------------------------------------------------- Common Share Net Asset Value $13.72 - -------------------------------------------------- Market Yield 6.80% - -------------------------------------------------- Taxable-Equivalent Yield (Federal Income Tax Rate)1 9.44% - -------------------------------------------------- Taxable-Equivalent Yield (Federal and State Income Tax Rate)1 10.38% - -------------------------------------------------- Net Assets Applicable to Common Shares ($000) $330,829 - -------------------------------------------------- Average Effective Maturity (Years) 19.88 - -------------------------------------------------- Leverage-Adjusted Duration 14.96 - -------------------------------------------------- AVERAGE ANNUAL TOTAL RETURN (Inception 9/25/01) - -------------------------------------------------- ON SHARE PRICE ON NAV - -------------------------------------------------- 1-Year -3.20% 1.68% - -------------------------------------------------- Since Inception -2.53% 3.61% - -------------------------------------------------- TOP FIVE SECTORS (as a % of total investments) - -------------------------------------------------- Tax Obligation/Limited 30% - -------------------------------------------------- Tax Obligation/General 21% - -------------------------------------------------- Water and Sewer 11% - -------------------------------------------------- Healthcare 8% - -------------------------------------------------- Utilities 8% - -------------------------------------------------- Bar Chart: 2002-2003 MONTHLY TAX-FREE DIVIDENDS PER SHARE Sep 0.072 Oct 0.072 Nov 0.072 Dec 0.072 Jan 0.072 Feb 0.072 Mar 0.072 Apr 0.072 May 0.072 Jun 0.072 Jul 0.072 Aug 0.072 Line Chart: SHARE PRICE PERFORMANCE Weekly Closing Price Past performance is not predictive of future results. 9/1/02 14.13 14.23 14.08 14 14.25 13.94 13.45 13.31 13.7 13.64 13.35 13.26 13.3 13.37 13.02 13.1 13.12 13.5 13.14 13.05 13.07 13.2 13.15 13 13.04 13.14 13.07 13.18 13 13.2 13.21 13.12 13.23 13.3 13.63 13.7 13.97 14.24 14.39 13.92 14.02 14.2 14.15 13.42 12.89 13.16 12.68 12.71 8/31/03 12.71 1 Taxable-equivalent yield represents the yield on a taxable investment necessary to equal the yield of the Nuveen Fund on an after-tax basis. It is calculated using the current market yield and a federal income tax rate of 28%. The rate shown for federal and state highlights the added value of owning shares that are also exempt from state income taxes. It is based on a combined federal and state income tax rate of 34.5%. 11 Nuveen Insured California Dividend Advantage Municipal Fund Performance OVERVIEW As of August 31, 2003 NKL Pie Chart: CREDIT QUALITY Insured 82% AAA (uninsured) 1% AA (uninsured) 4% A (uninsured) 8% BBB (uninsured) 5% PORTFOLIO STATISTICS - -------------------------------------------------- Share Price $14.00 - -------------------------------------------------- Common Share Net Asset Value $14.60 - -------------------------------------------------- Market Yield 6.51% - -------------------------------------------------- Taxable-Equivalent Yield (Federal Income Tax Rate)1 9.04% - -------------------------------------------------- Taxable-Equivalent Yield (Federal and State Income Tax Rate)1 9.94% - -------------------------------------------------- Net Assets Applicable to Common Shares ($000) $222,751 - -------------------------------------------------- Average Effective Maturity (Years) 22.77 - -------------------------------------------------- Leverage-Adjusted Duration 15.13 - -------------------------------------------------- AVERAGE ANNUAL TOTAL RETURN (Inception 3/25/02) - -------------------------------------------------- ON SHARE PRICE ON NAV - -------------------------------------------------- 1-Year -0.35% 2.70% - -------------------------------------------------- Since Inception 1.18% 7.37% - -------------------------------------------------- TOP FIVE SECTORS (as a % of total investments) - -------------------------------------------------- Tax Obligation/Limited 27% - -------------------------------------------------- Tax Obligation/General 25% - -------------------------------------------------- Utilities 15% - -------------------------------------------------- Water and Sewer 12% - -------------------------------------------------- Education and Civic Organizations 7% - -------------------------------------------------- Bar Chart: 2002-2003 MONTHLY TAX-FREE DIVIDENDS PER SHARE2 Sep 0.076 Oct 0.076 Nov 0.076 Dec 0.076 Jan 0.076 Feb 0.076 Mar 0.076 Apr 0.076 May 0.076 Jun 0.076 Jul 0.076 Aug 0.076 Line Chart: SHARE PRICE PERFORMANCE Weekly Closing Price Past performance is not predictive of future results. 9/1/02 15.14 15.25 15.05 15.32 15.25 15.17 14.3 14.2 14.64 14.59 14.6 14.63 14.7 14.8 14.31 14.3 14.3 14.45 14.6 14.24 14.3 14.45 14.59 14.4 14.6 14.68 14.84 14.8 14.55 14.4 14.4 14.71 14.75 14.85 15 15 15.18 15.47 15.37 15.38 15.27 15.25 15.02 14.36 13.8 13.9 13.71 13.91 8/31/03 14 1 Taxable-equivalent yield represents the yield on a taxable investment necessary to equal the yield of the Nuveen Fund on an after-tax basis. It is calculated using the current market yield and a federal income tax rate of 28%. The rate shown for federal and state highlights the added value of owning shares that are also exempt from state income taxes. It is based on a combined federal and state income tax rate of 34.5%. 2 The Fund also paid shareholders a capital gains distribution in December 2002 of $0.0515 per share. 12 Nuveen Insured California Tax-Free Advantage Municipal Fund Performance OVERVIEW As of August 31, 2003 NKX Pie Chart: CREDIT QUALITY Insured 84% A (uninsured) 10% BBB (uninsured) 6% PORTFOLIO STATISTICS - -------------------------------------------------- Share Price $13.56 - -------------------------------------------------- Common Share Net Asset Value $13.79 - -------------------------------------------------- Market Yield 6.68% - -------------------------------------------------- Taxable-Equivalent Yield (Federal Income Tax Rate)1 9.28% - -------------------------------------------------- Taxable-Equivalent Yield (Federal and State Income Tax Rate)1 10.20% - -------------------------------------------------- Net Assets Applicable to Common Shares ($000) $81,141 - -------------------------------------------------- Average Effective Maturity (Years) 22.97 - -------------------------------------------------- Leverage-Adjusted Duration 16.98 - -------------------------------------------------- CUMULATIVE TOTAL RETURN (Inception 11/21/02) - -------------------------------------------------- ON SHARE PRICE ON NAV - -------------------------------------------------- Since Inception -5.79% 0.34% - -------------------------------------------------- TOP FIVE SECTORS (as a % of total investments) - -------------------------------------------------- Tax Obligation/Limited 37% - -------------------------------------------------- Tax Obligation/General 28% - -------------------------------------------------- Transportation 14% - -------------------------------------------------- Healthcare 9% - -------------------------------------------------- Water and Sewer 6% - -------------------------------------------------- Bar Chart: 2002-2003 MONTHLY TAX-FREE DIVIDENDS PER SHARE2 Jan 0.0755 Feb 0.0755 Mar 0.0755 Apr 0.0755 May 0.0755 Jun 0.0755 Jul 0.0755 Aug 0.0755 Line Chart: SHARE PRICE PERFORMANCE Weekly Closing Price Past performance is not predictive of future results. 11/22/02 15.1 15.05 15 15 15 14.94 14.85 14.9 14.9 14.75 14.7 14.2 14.28 14.6 14.8 14.28 14.3 14.3 14.89 14.7 14.76 14.85 14.82 14.78 15.15 15.45 15.95 15.19 15.02 15.5 15.3 15.06 14.2 14.45 14.08 13.85 8/31/03 13.56 1 Taxable-equivalent yield represents the yield on a taxable investment necessary to equal the yield of the Nuveen Fund on an after-tax basis. It is calculated using the current market yield and a federal income tax rate of 28%. The rate shown for federal and state highlights the added value of owning shares that are also exempt from state income taxes. It is based on a combined federal and state income tax rate of 34.5%. 13 Report of INDEPENDENT AUDITORS THE BOARDS OF DIRECTORS, TRUSTEES AND SHAREHOLDERS NUVEEN INSURED CALIFORNIA PREMIUM INCOME MUNICIPAL FUND, INC. NUVEEN INSURED CALIFORNIA PREMIUM INCOME MUNICIPAL FUND 2, INC. NUVEEN CALIFORNIA PREMIUM INCOME MUNICIPAL FUND NUVEEN CALIFORNIA DIVIDEND ADVANTAGE MUNICIPAL FUND NUVEEN CALIFORNIA DIVIDEND ADVANTAGE MUNICIPAL FUND 2 NUVEEN CALIFORNIA DIVIDEND ADVANTAGE MUNICIPAL FUND 3 NUVEEN INSURED CALIFORNIA DIVIDEND ADVANTAGE MUNICIPAL FUND NUVEEN INSURED CALIFORNIA TAX-FREE ADVANTAGE MUNICIPAL FUND We have audited the accompanying statements of assets and liabilities, including the portfolios of investments, of Nuveen Insured California Premium Income Municipal Fund, Inc., Nuveen Insured California Premium Income Municipal Fund 2, Inc., Nuveen California Premium Income Municipal Fund, Nuveen California Dividend Advantage Municipal Fund, Nuveen California Dividend Advantage Municipal Fund 2, Nuveen California Dividend Advantage Municipal Fund 3, Nuveen Insured California Dividend Advantage Municipal Fund and Nuveen Insured California Tax-Free Advantage Municipal Fund as of August 31, 2003, and the related statements of operations, changes in net assets and the financial highlights for the periods indicated therein. These financial statements and financial highlights are the responsibility of the Funds' management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included confirmation of investments owned as of August 31, 2003, by correspondence with the custodian and brokers or other appropriate auditing procedures where replies from brokers were not received. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial positions of Nuveen Insured California Premium Income Municipal Fund, Inc., Nuveen Insured California Premium Income Municipal Fund 2, Inc., Nuveen California Premium Income Municipal Fund, Nuveen California Dividend Advantage Municipal Fund, Nuveen California Dividend Advantage Municipal Fund 2, Nuveen California Dividend Advantage Municipal Fund 3, Nuveen Insured California Dividend Advantage Municipal Fund and Nuveen Insured California Tax-Free Advantage Municipal Fund at August 31, 2003, and the results of their operations, changes in their net assets and financial highlights for the periods indicated therein in conformity with accounting principles generally accepted in the United States. Ernst & Young LLP Chicago, Illinois October 10, 2003 14 Nuveen Insured California Premium Income Municipal Fund, Inc. (NPC) Portfolio of INVESTMENTS August 31, 2003 PRINCIPAL OPTIONAL CALL MARKET AMOUNT (000) DESCRIPTION(1) PROVISIONS* RATINGS** VALUE - ------------------------------------------------------------------------------------------------------------------------------------ EDUCATION AND CIVIC ORGANIZATIONS - 11.5% $ 2,000 California Educational Facilities Authority, Revenue Bonds, 9/06 at 102.00 AAA $ 2,139,420 Santa Clara University, Series 1996, 5.750%, 9/01/26 - MBIA Insured 5,000 California Educational Facilities Authority, Student Loan 3/08 at 102.00 Aaa 5,143,450 Revenue Bonds, California Loan Program, Series 2001A, 5.400%, 3/01/21 (Alternative Minimum Tax) - MBIA Insured 2,000 University of California, Revenue Bonds, Multiple Purpose 9/10 at 101.00 AAA 2,001,420 Projects, Series 2002O, 5.125%, 9/01/31 - FGIC Insured 2,350 University of California, Revenue Bonds, Multiple Purpose 5/13 at 100.00 AAA 2,312,283 Projects, Series 2003A, 5.000%, 5/15/33 (WI, settling 9/09/03) - AMBAC Insured - ------------------------------------------------------------------------------------------------------------------------------------ HEALTHCARE - 4.6% 3,000 California Health Facilities Financing Authority, Insured Revenue 8/08 at 101.00 AAA 3,045,120 Bonds, Sutter Health, Series 1998A, 5.375%, 8/15/30 - MBIA Insured 1,500 California Statewide Communities Development Authority, 8/09 at 101.00 AAA 1,578,510 Certificates of Participation, Members of the Sutter Health Obligated Group, 5.500%, 8/15/19 - FSA Insured - ------------------------------------------------------------------------------------------------------------------------------------ HOUSING/MULTIFAMILY - 4.8% 1,000 ABAG Finance Authority for Nonprofit Corporations, 9/09 at 100.00 AAA 1,032,480 California, Multifamily Housing Revenue Bonds, Civic Center Drive Apartments Project, 1999 Series A, 5.800%, 9/01/20 (Alternative Minimum Tax) - FSA Insured 3,830 Los Angeles, California, FHA-Insured Section 8 Revenue 1/04 at 100.00 AAA 3,833,064 Refunding Mortgage Loan Bonds, Series 1993A, 6.300%, 1/01/25 - MBIA Insured - ------------------------------------------------------------------------------------------------------------------------------------ HOUSING/SINGLE FAMILY - 0.8% 815 California Housing Finance Agency, Single Family Mortgage 2/07 at 102.00 AAA 842,319 Bonds II, Series 1997A-1, 6.000%, 8/01/20 (Alternative Minimum Tax) - MBIA Insured - ------------------------------------------------------------------------------------------------------------------------------------ TAX OBLIGATION/GENERAL - 31.8% State of California, Various Purpose General Obligation Bonds: 7,995 5.750%, 3/01/22 - MBIA Insured 3/10 at 101.00 AAA 8,476,699 2,000 5.750%, 3/01/27 - MBIA Insured 3/10 at 101.00 AAA 2,106,320 2,000 State of California, General Obligation Veterans Welfare Bonds, 6/07 at 101.00 AAA 2,010,220 Series 2001BZ, 5.375%, 12/01/24 (Alternative Minimum Tax) - MBIA Insured 1,225 Fresno Unified School District, Fresno County, California, 2/13 at 103.00 AAA 1,429,355 General Obligation Refunding Bonds, Series 1998A, 6.550%, 8/01/20 - MBIA Insured 2,500 Fresno Unified School District, Fresno County, California, 8/09 at 102.00 AAA 2,537,000 General Obligation Bonds, Election of 2001, Series 2001A, 5.125%, 8/01/26 - FSA Insured 2,000 Los Angeles Unified School District, California, General 7/08 at 102.00 AAA 2,018,320 Obligation Bonds, Series 1997A, 5.000%, 7/01/21 - FGIC Insured 3,000 Pomona Unified School District, California, General Obligation 8/11 at 103.00 AAA 3,453,810 Refunding Bonds, Series 1997A, 6.500%, 8/01/19 - MBIA Insured San Diego Unified School District, San Diego County, California, General Obligation Bonds, Election of 1998, Series 2001C: 1,335 5.000%, 7/01/21 - FSA Insured 7/11 at 102.00 AAA 1,350,953 3,500 5.000%, 7/01/22 - FSA Insured 7/11 at 102.00 AAA 3,520,055 4,895 5.000%, 7/01/23 - FSA Insured 7/11 at 102.00 AAA 4,904,105 15 Nuveen Insured California Premium Income Municipal Fund, Inc. (NPC) (continued) Portfolio of INVESTMENTS August 31, 2003 PRINCIPAL OPTIONAL CALL MARKET AMOUNT (000) DESCRIPTION(1) PROVISIONS* RATINGS** VALUE - ------------------------------------------------------------------------------------------------------------------------------------ TAX OBLIGATION/LIMITED - 16.3% $ 2,000 California State Public Works Board, Lease Revenue Bonds, 11/09 at 101.00 AAA $ 2,107,020 Department of Health Services, Richmond Laboratory Project, Series 1999A, 5.750%, 11/01/24 - MBIA Insured 1,900 Corona-Norco Unified School District, Riverside County, 9/12 at 100.00 AAA 1,905,035 California, Special Tax Bonds, Community Facilities District 98-1, Series 2002, 5.100%, 9/01/25 - AMBAC Insured 5,000 El Monte, California, Senior Lien Certificates of Participation, 1/11 at 100.00 AAA 5,051,200 Department of Public Services Facility - Phase II, Series 2001, 5.250%, 1/01/34 - AMBAC Insured 1,460 Pittsburg Redevelopment Agency, California, Tax Allocation No Opt. Call AAA 1,575,953 Refunding Bonds, Los Medanos Community Development Project, Series 2003A, 5.000%, 8/01/13 - MBIA Insured 3,000 Santa Clara County Financing Authority, California, Lease 11/07 at 102.00 AAA 3,014,070 Revenue Bonds, VMC Facility Replacement Project, Series 1994A, 5.000%, 11/15/22 - AMBAC Insured 2,805 Yucaipa-Calimesa Joint Unified School District, 10/11 at 100.00 AAA 2,748,872 San Bernardino County, California, General Obligation Refunding Bonds, Series 2001A, 5.000%, 10/01/31 - MBIA Insured - ------------------------------------------------------------------------------------------------------------------------------------ U.S. GUARANTEED - 31.6% 6,000 Huntington Park Redevelopment Agency, California, Single No Opt. Call AAA 8,312,460 Family Residential Mortgage Revenue Refunding Bonds, Series 1986A, 8.000%, 12/01/19 5,135 Palmdale Community Redevelopment Agency, California, No Opt. Call AAA 6,871,862 Single Family Restructured Mortgage Revenue Bonds, Series 1986A, 8.000%, 3/01/16 (Alternative Minimum Tax) 6,220 Riverside County, California, Single Family Mortgage Revenue No Opt. Call AAA 9,045,684 Bonds, GNMA Mortgage-Backed Securities Program, Series 1987A, 9.000%, 5/01/21 (Alternative Minimum Tax) 1,485 San Jose, California, Single Family Mortgage Revenue No Opt. Call AAA 2,146,657 Bonds, Series 1985A, 9.500%, 10/01/13 4,800 University of California, Hospital Revenue Bonds, Davis 7/06 at 101.00 AAA 5,368,656 Medical Center, Series 1996, 5.750%, 7/01/24 (Pre-refunded to 7/01/06) - AMBAC Insured - ------------------------------------------------------------------------------------------------------------------------------------ UTILITIES - 18.9% 4,000 California Pollution Control Financing Authority, Pollution 12/03 at 101.00 AAA 4,095,120 Control Revenue Bonds, Southern California Edison Company, Series 1992B, 6.400%, 12/01/24 (Alternative Minimum Tax) - MBIA Insured 4,000 Chula Vista, California, Industrial Development Revenue 12/03 at 101.00 A+ 4,087,360 Bonds, San Diego Gas and Electric Company, Series 1992A, 6.400%, 12/01/27 (Alternative Minimum Tax) 3,600 Sacramento Municipal Utility District, California, Electric No Opt. Call AAA 3,891,636 Revenue Refunding Bonds, Series 2003S, 5.000%, 11/15/13 - MBIA Insured 7,000 Turlock Irrigation District, California, Certificates of 1/13 at 100.00 AAA 6,888,350 Participation, Series 2003A, 5.000%, 1/01/33 - MBIA Insured - ------------------------------------------------------------------------------------------------------------------------------------ WATER AND SEWER - 30.7% 6,415 Coachella Water Authority, California, Water Revenue Bonds, 3/13 at 102.00 AAA 6,312,873 Series 2003, 5.000%, 3/01/33 - FSA Insured 6,000 Los Angeles, California, Wastewater System Revenue Bonds, 11/03 at 102.00 AAA 5,996,280 Series 1993D, 4.700%, 11/01/19 - FGIC Insured 7,500 Orange County Sanitation District, California, Certificates 8/13 at 100.00 AAA 7,346,850 of Participation, Series 2003, 5.000%, 2/01/33 (DD, settling 9/02/03) - FGIC Insured 3,400 San Diego Public Facilities Financing Authority, California, 5/07 at 101.00 AAA 3,472,318 Sewer Revenue Bonds, Series 1997A, 5.250%, 5/15/22 - FGIC Insured 2,150 Santa Clara Valley Water District, California, Water Utility 6/10 at 100.00 AAA 2,151,032 System Revenue Bonds, Series 2000A, 5.125%, 6/01/31 - FGIC Insured 5,000 Wheeler Ridge-Maricopa Water Storage District, Kern County, 11/06 at 102.00 AAA 5,567,149 California, Water Revenue Refunding Bonds, Series 1996, 5.700%, 11/01/15 - AMBAC Insured - ------------------------------------------------------------------------------------------------------------------------------------ $ 140,815 Total Long-Term Investments (cost $142,252,848) - 151.0% 151,691,340 =============----------------------------------------------------------------------------------------------------------------------- 16 PRINCIPAL MARKET AMOUNT (000) DESCRIPTION(1) RATINGS** VALUE - ------------------------------------------------------------------------------------------------------------------------------------ SHORT-TERM INVESTMENTS - 1.1% $ 1,100 California Infrastructure and Economic Development Bank, A-1+ $ 1,100,000 Insured Revenue Bonds, Rand Corporation, Variable Rate Demand Obligations, Series 2002B, 0.800%, 4/01/42 - AMBAC Insured+ - ------------------------------------------------------------------------------------------------------------------------------------ $ 1,100 Total Short-Term Investments (cost $1,100,000) 1,100,000 =============----------------------------------------------------------------------------------------------------------------------- Total Investments (cost $143,352,848) - 152.1% 152,791,340 -------------------------------------------------------------------------------------------------------------------- Other Assets Less Liabilities - (7.3)% (7,364,357) -------------------------------------------------------------------------------------------------------------------- Preferred Shares, at Liquidation Value - (44.8)% (45,000,000) -------------------------------------------------------------------------------------------------------------------- Net Assets Applicable to Common Shares - 100% $100,426,983 ==================================================================================================================== All of the bonds in the portfolio, excluding temporary investments in short-term municipal securities, are either covered by Original Issue Insurance, Secondary Market Insurance or Portfolio Insurance, or are backed by an escrow or trust containing sufficient U.S. Government or U.S. Government agency securities, any of which ensure the timely payment of principal and interest. (1) All percentages shown in the Portfolio of Investments are based on net assets applicable to Common shares. * Optional Call Provisions (not covered by the report of independent auditors): Dates (month and year) and prices of the earliest optional call or redemption. There may be other call provisions at varying prices at later dates. ** Ratings (not covered by the report of independent auditors): Using the higher of Standard & Poor's or Moody's rating. (DD) Security purchased on a delayed delivery basis. (WI) Security purchased on a when-issued basis. + Security has a maturity of more than one year, but has variable rate and demand features which qualify it as a short-term security. The rate disclosed is that currently in effect. This rate changes periodically based on market conditions or a specified market index. See accompanying notes to financial statements. 17 Nuveen Insured California Premium Income Municipal Fund 2, Inc. (NCL) Portfolio of INVESTMENTS August 31, 2003 PRINCIPAL OPTIONAL CALL MARKET AMOUNT (000) DESCRIPTION(1) PROVISIONS* RATINGS** VALUE - ------------------------------------------------------------------------------------------------------------------------------------ EDUCATION AND CIVIC ORGANIZATIONS - 12.7% California Educational Facilities Authority, Revenue Bonds, Santa Clara University, Series 1996: $ 2,400 5.750%, 9/01/21 - MBIA Insured 9/06 at 102.00 AAA $ 2,613,480 3,000 5.750%, 9/01/26 - MBIA Insured 9/06 at 102.00 AAA 3,209,130 2,000 California Educational Facilities Authority, Revenue Bonds, 11/10 at 100.00 Aaa 2,204,960 University of the Pacific, Series 2000, 5.875%, 11/01/20 - MBIA Insured 6,615 California Educational Facilities Authority, Revenue Refunding No Opt. Call Aaa 1,178,925 Bonds, Loyola Marymount University, Series 2001A, 0.000%, 10/01/33 - MBIA Insured 5,000 California Educational Facilities Authority, Student Loan 3/08 at 102.00 Aaa 5,143,450 Revenue Bonds, California Loan Program, Series 2001A, 5.400%, 3/01/21 (Alternative Minimum Tax) - MBIA Insured California Infrastructure and Economic Development Bank, Revenue Bonds, Asian Art Museum of San Francisco Project, Series 2000: 1,295 5.500%, 6/01/19 - MBIA Insured 6/10 at 101.00 AAA 1,391,426 1,000 5.500%, 6/01/20 - MBIA Insured 6/10 at 101.00 AAA 1,066,770 1,900 University of California, Housing System Revenue Bonds, 11/03 at 102.00 AAA 1,952,763 Series 1993A, 5.500%, 11/01/18 (Pre-refunded to 11/01/03) - MBIA Insured 4,750 University of California, Revenue Bonds, Multiple Purpose 5/13 at 100.00 AAA 4,673,763 Projects, Series 2003A, 5.000%, 5/15/33 (WI, settling 9/09/03) - AMBAC Insured - ------------------------------------------------------------------------------------------------------------------------------------ HEALTHCARE - 5.3% 1,450 California Health Facilities Financing Authority, Insured 7/06 at 102.00 AAA 1,603,019 Health Facility Revenue Refunding Bonds, Mark Twain St. Joseph's Healthcare Corporation, Series 1996A, 6.000%, 7/01/19 - MBIA Insured 5,000 California Health Facilities Financing Authority, Insured Health 7/06 at 102.00 AAA 5,377,750 Facility Revenue Refunding Bonds, Catholic Healthcare West, Series 1996A, 6.000%, 7/01/25 - MBIA Insured 2,500 Oakland, California, Insured Revenue Bonds, 1800 Harrison 1/10 at 100.00 AAA 2,756,325 Foundation - Kaiser Permanente, Series 1999A, 6.000%, 1/01/29 - AMBAC Insured - ------------------------------------------------------------------------------------------------------------------------------------ HOUSING/MULTIFAMILY - 9.1% ABAG Finance Authority for Nonprofit Corporations, California, Multifamily Housing Revenue Bonds, Civic Center Drive Apartments Project, 1999 Series A: 4,000 5.800%, 9/01/20 (Alternative Minimum Tax) - FSA Insured 9/09 at 100.00 AAA 4,129,920 1,370 5.875%, 3/01/32 (Alternative Minimum Tax) - FSA Insured 9/09 at 100.00 AAA 1,407,935 3,460 Los Angeles Community Redevelopment Agency, California, 6/05 at 105.00 AAA 3,706,456 FNMA Collateralized Multifamily Housing Revenue Refunding Bonds, Angelus Plaza Section 8 Project, Series 1995A, 7.400%, 6/15/10 7,400 Santa Cruz County Housing Authority, California, GNMA 11/03 at 102.00 Aaa 7,522,396 Collateralized Multifamily Housing Revenue Refunding Bonds, Meadowview Apartments, Series 1993A, 6.125%, 5/20/28 - ------------------------------------------------------------------------------------------------------------------------------------ HOUSING/SINGLE FAMILY - 1.2% 2,105 California Housing Finance Agency, Single Family Mortgage 8/07 at 101.50 AAA 2,162,951 Bonds II, Series 1997C-2, 5.625%, 8/01/20 (Alternative Minimum Tax) - MBIA Insured - ------------------------------------------------------------------------------------------------------------------------------------ TAX OBLIGATION/GENERAL - 23.3% 1,460 ABC Unified School District, Los Angeles County, California, 8/10 at 101.00 AAA 1,625,520 General Obligation Bonds, Election of 1997, Series 2000B, 5.750%, 8/01/16 - FGIC Insured 485 State of California, General Obligation Veterans Welfare 12/03 at 102.00 AAA 490,020 Bonds, Series 1997BH, 5.500%, 12/01/24 (Alternative Minimum Tax) - FSA Insured State of California, Various Purpose General Obligation Bonds: 7,995 5.750%, 3/01/22 - MBIA Insured 3/10 at 101.00 AAA 8,476,699 2,500 5.500%, 9/01/24 - FSA Insured 9/09 at 101.00 AAA 2,584,300 2,000 5.750%, 3/01/27 - MBIA Insured 3/10 at 101.00 AAA 2,106,320 18 PRINCIPAL OPTIONAL CALL MARKET AMOUNT (000) DESCRIPTION(1) PROVISIONS* RATINGS** VALUE - ------------------------------------------------------------------------------------------------------------------------------------ TAX OBLIGATION/GENERAL (continued) $ 3,000 State of California, General Obligation Veterans Welfare 6/07 at 101.00 AAA $ 3,015,330 Bonds, Series 2001BZ, 5.375%, 12/01/24 (Alternative Minimum Tax) - MBIA Insured 5,000 State of California, General Obligation Bonds, Series 2003, 8/13 at 100.00 AAA 4,897,900 5.000%, 2/01/33 - AMBAC Insured 2,575 Calipatria Unified School District, Imperial County, California, 8/06 at 102.00 AAA 2,848,233 General Obligation Bonds, Series 1996A, 5.625%, 8/01/13 - AMBAC Insured Campbell Union High School District, Santa Clara County, California, General Obligation Bonds, Series 2003: 3,520 5.000%, 8/01/27 - FGIC Insured 8/11 at 102.00 Aaa 3,482,547 4,000 5.000%, 8/01/32 - FGIC Insured 8/11 at 102.00 Aaa 3,936,720 Fresno Unified School District, Fresno County, California, General Obligation Bonds, Election of 1995, Series 2001F: 1,065 5.125%, 8/01/21 - FSA Insured 8/09 at 102.00 AAA 1,083,989 1,160 5.125%, 8/01/22 - FSA Insured 8/09 at 102.00 AAA 1,181,309 1,220 5.125%, 8/01/23 - FSA Insured 8/09 at 102.00 AAA 1,239,947 1,500 Hacienda La Puente Unified School District, Los Angeles 8/10 at 101.00 AAA 1,523,235 County, California, General Obligation Bonds, Election of 2000, Series 2000A, 5.250%, 8/01/25 - MBIA Insured 1,750 Lake Tahoe Unified School District, El Dorado County, 8/09 at 100.00 AAA 1,770,335 California, General Obligation Bonds, Election of 1999, Series A, 5.250%, 8/01/24 - FGIC Insured 1,125 San Diego Unified School District, California, General No Opt. Call AAA 425,520 Obligation Bonds, Election of 1998, Series 1999A, 0.000%, 7/01/21 - FGIC Insured 2,500 San Francisco Community College District, California, 6/10 at 102.00 Aaa 2,477,975 General Obligation Bonds, Series 2002A, 5.000%, 6/15/26 - FGIC Insured - ------------------------------------------------------------------------------------------------------------------------------------ TAX OBLIGATION/LIMITED - 47.6% Anaheim Public Financing Authority, California, Subordinate Lease Revenue Bonds, Anaheim Public Improvements Project, Series 1997C: 5,130 0.000%, 9/01/18 - FSA Insured No Opt. Call AAA 2,352,054 8,000 0.000%, 9/01/21 - FSA Insured No Opt. Call AAA 2,977,600 5,250 California State Public Works Board, Lease Revenue Bonds, 1/06 at 100.00 AAA 5,390,700 Department of Corrections, California Substance Abuse Treatment Facility and State Prison - Corcoran II, Series 1996A, 5.250%, 1/01/21 - AMBAC Insured 3,450 California State Public Works Board, Lease Revenue Bonds, 11/09 at 101.00 AAA 3,634,610 Department of Health Services, Richmond Laboratory Project, Series 1999A, 5.750%, 11/01/24 - MBIA Insured 5,000 Compton Community Redevelopment Agency, California, 8/05 at 102.00 AAA 5,511,300 Tax Allocation Refunding Bonds, Merged Area Redevelopment Projects, Series 1995A, 6.500%, 8/01/13 - FSA Insured 4,000 Contra Costa County, California, Refunding Certificates 11/07 at 102.00 AAA 4,153,400 of Participation, Merrithew Memorial Hospital Replacement Project, Series 1997, 5.500%, 11/01/22 - MBIA Insured 1,835 Corona-Norco Unified School District, Riverside County, 9/12 at 100.00 AAA 1,831,403 California, Special Tax Bonds, Community Facilities District 98-1, Series 2002, 5.100%, 9/01/32 - AMBAC Insured 6,000 El Monte, California, Senior Lien Certificates of 1/11 at 100.00 AAA 6,056,460 Participation, Department of Public Services Facility - Phase II, Series 2001, 5.000%, 1/01/21 - AMBAC Insured 3,000 Galt Schools Joint Powers Authority, Sacramento County, 11/07 at 102.00 AAA 3,272,370 California, Revenue Refunding Bonds, High School and Elementary School Facilities, Series 1997A, 5.875%, 11/01/24 - MBIA Insured 5,000 Kern County Board of Education, California, Refunding 5/08 at 102.00 AAA 5,029,000 Certificates of Participation, Series 1998A, 5.200%, 5/01/28 - MBIA Insured 5,000 La Quinta Redevelopment Agency, California, Tax Allocation 9/07 at 102.00 AAA 5,026,850 Refunding Bonds, Project Area 1, Series 1998, 5.200%, 9/01/28 - AMBAC Insured 3,865 Los Angeles County Metropolitan Transportation Authority, 7/10 at 101.00 AAA 3,909,254 California, Proposition C Sales Tax Revenue Bonds, Second Senior Lien, Series 2000A, 5.250%, 7/01/30 - FGIC Insured 1,935 Menifee Union School District, Riverside County, California, 9/06 at 102.00 AAA 2,160,679 Certificates of Participation, School Project, Series 1996, 6.125%, 9/01/24 - FSA Insured 2,690 Norwalk Community Facilities Financing Authority, Los Angeles 9/05 at 102.00 AAA 2,942,645 County, California, Tax Allocation Revenue Refunding Bonds, Series 1995A, 6.000%, 9/01/15 - FSA Insured 19 Nuveen Insured California Premium Income Municipal Fund 2, Inc. (NCL) (continued) Portfolio of INVESTMENTS August 31, 2003 PRINCIPAL OPTIONAL CALL MARKET AMOUNT (000) DESCRIPTION(1) PROVISIONS* RATINGS** VALUE - ------------------------------------------------------------------------------------------------------------------------------------ TAX OBLIGATION/LIMITED (continued) $ 2,780 Pittsburg Redevelopment Agency, California, Tax Allocation No Opt. Call AAA $ 3,010,434 Refunding Bonds, Los Medanos Community Development Project, Series 2003A, 5.000%, 8/01/12 - MBIA Insured 2,000 Poway Redevelopment Agency, California, Tax Allocation 12/10 at 102.00 AAA 2,155,880 Refunding Bonds, Series 2000, 5.750%, 6/15/33 - MBIA Insured 5,000 San Bernardino Joint Powers Financing Authority, City of 9/09 at 102.00 AAA 5,332,300 San Bernardino, California, Refunding Certificates of Participation, Police Station Project, 5.500%, 9/01/20 - MBIA Insured 3,500 San Francisco Bay Area Rapid Transit District, California, 7/09 at 101.00 AAA 3,634,120 Sales Tax Revenue Bonds, Series 1999, 5.500%, 7/01/34 - FGIC Insured 1,930 Santa Margarita/Dana Point Authority, Orange County, No Opt. Call AAA 2,141,875 California, Revenue Bonds Refinancing, Improvement Districts 1, 2, 2A and 8, Series 1994A, 7.250%, 8/01/05 - MBIA Insured South Orange County Public Financing Authority, California, Special Tax Revenue Bonds, Foothill Area, Series 1994C: 3,000 8.000%, 8/15/08 - FGIC Insured No Opt. Call AAA 3,713,940 6,830 8.000%, 8/15/09 - FGIC Insured No Opt. Call AAA 8,594,530 5,450 Visalia, California, Refunding Certificates of Participation, 12/06 at 102.00 AAA 5,567,720 Motor Vehicle License Fee Enhancement, Series 1996A, 5.375%, 12/01/26 - MBIA Insured - ------------------------------------------------------------------------------------------------------------------------------------ TRANSPORTATION - 4.8% 6,500 Foothill-Eastern Transportation Corridor Agency, California, 1/10 at 65.32 AAA 2,976,285 Toll Road Refunding Revenue Bonds, Series 1999, 0.000%, 1/15/18 - MBIA Insured 1,000 Foothill-Eastern Transportation Corridor Agency, California, 1/10 at 100.00 AAA 977,790 Toll Road Revenue Bonds, Series 1995A, 5.000%, 1/01/35 - MBIA Insured 5,000 San Francisco City and County Airports Commission, 5/11 at 100.00 AAA 5,007,450 California, Revenue Refunding Bonds, San Francisco International Airport, Second Series , Issue 27A, 5.250%, 5/01/31 (Alternative Minimum Tax) - MBIA Insured - ------------------------------------------------------------------------------------------------------------------------------------ U.S. GUARANTEED - 20.5% 3,425 Alameda County, California, Certificates of Participation, 9/06 at 102.00 AAA 3,906,521 Alameda County Public Facilities Corporation, Series 1991, 6.000%, 9/01/21 (Pre-refunded to 9/01/06) - MBIA Insured 4,485 Alameda County, California, Certificates of Participation 12/03 at 102.00 AAA 4,628,699 Refunding, Santa Rita Jail Project, Series 1993, 5.700%, 12/01/14 (Pre-refunded to 12/01/03) - MBIA Insured 3,000 Central Unified School District, Fresno County, California, 9/03 at 102.00 AAA 3,071,430 General Obligation Bonds, Election of 1992, Series 1993, 5.625%, 3/01/18 - AMBAC Insured 3,000 Escondido Union High School District, San Diego County, 11/06 at 102.00 AAA 3,256,950 California, General Obligation Bonds, Election of 1996, Series 1996, 5.700%, 11/01/10 - MBIA Insured 4,320 Riverside County, California, Single Family Mortgage Revenue No Opt. Call AAA 5,968,210 Bonds, GNMA Mortgage-Backed Securities Program, Series 1987B, 8.625%, 5/01/16 (Alternative Minimum Tax) 1,850 Sacramento City Unified School District, Sacramento County, 7/09 at 102.00 Aaa 2,156,527 California, General Obligation Bonds, Series 2000A, 5.750%, 7/01/18 (Pre-refunded to 7/01/09) - FGIC Insured 3,500 Sacramento Municipal Utility District, California, Electric 8/06 at 102.00 AAA 3,946,565 Revenue Bonds, Series 1996J, 5.600%, 8/15/24 (Pre-refunded to 8/15/06) - AMBAC Insured 9,000 San Francisco City and County Airports Commission, 5/04 at 101.00 AAA 9,399,600 California, Revenue Bonds, San Francisco International Airport, Second Series, Issue 8B, 6.100%, 5/01/20 (Pre-refunded to 5/01/04) - FGIC Insured 1,450 Torrance, California, Hospital Revenue Bonds, Little Company 12/05 at 100.00 AAA 1,604,860 of Mary Hospital, Series 1985A, 7.100%, 12/01/15 (Pre-refunded to 12/01/05) - ------------------------------------------------------------------------------------------------------------------------------------ UTILITIES - 9.8% 3,740 California Pollution Control Financing Authority, Pollution 9/09 at 101.00 AAA 3,773,772 Control Revenue Refunding Bonds, Southern California Edison Company, Series 1999B, 5.450%, 9/01/29 - MBIA Insured 3,215 Modesto Irrigation District, California, Revenue Refunding 10/06 at 102.00 AAA 3,606,973 Bonds, Series 1996A, 6.000%, 10/01/15 - MBIA Insured 3,000 Puerto Rico Electric Power Authority, Power Revenue Bonds, 7/12 at 101.00 AAA 3,051,300 Series 2002II, 5.125%, 7/01/26 - FSA Insured 20 PRINCIPAL OPTIONAL CALL MARKET AMOUNT (000) DESCRIPTION(1) PROVISIONS* RATINGS** VALUE - ------------------------------------------------------------------------------------------------------------------------------------ UTILITIES (continued) $ 1,790 Sacramento City Financing Authority, California, Capital 12/09 at 102.00 AAA $ 1,985,951 Improvement Revenue Bonds, Solid Waste and Redevelopment Projects, Series 1999, 5.800%, 12/01/19 - AMBAC Insured 3,500 Sacramento Municipal Utility District, California, Electric No Opt. Call AAA 3,778,915 Revenue Bonds, Series 2003R, 5.000%, 8/15/13 - MBIA Insured 1,950 Salinas Valley Solid Waste Authority, California, Revenue 8/12 at 100.00 AAA 1,957,079 Bonds, Series 2002, 5.250%, 8/01/27 (Alternative Minimum Tax) - AMBAC Insured - ------------------------------------------------------------------------------------------------------------------------------------ WATER AND SEWER - 18.9% 3,530 Castaic Lake Water Agency, California, Revenue Refunding No Opt. Call AAA 3,753,449 Certificates of Participation, Water System Improvement Projects, Series 1994A, 8.000%, 8/01/04 - MBIA Insured 2,975 Chino Basin Regional Financing Authority, California, Revenue 8/04 at 102.00 AAA 3,145,825 Bonds, Chino Basin Municipal Water District Sewer System Project, Series 1994, 6.000%, 8/01/16 - AMBAC Insured 12,000 Orange County Sanitation District, California, Certificates 8/13 at 100.00 AAA 11,754,960 of Participation, Series 2003, 5.000%, 2/01/33 (DD, settling 9/02/03) - FGIC Insured 2,775 Pomona Public Financing Authority, California, Revenue Bonds, 5/09 at 101.00 AAA 2,878,730 Water Facilities Project, Series 1999AC, 5.500%, 5/01/29 - FGIC Insured 1,000 Sacramento County Sanitation Districts Financing Authority, 12/10 at 101.00 AAA 1,068,250 California, Revenue Bonds, Series 2000A, Sacramento Regional County Sanitation District, 5.500%, 12/01/20 - AMBAC Insured 2,000 South San Joaquin Irrigation District, San Joaquin County, 1/04 at 102.00 AAA 2,045,800 California, Revenue Refunding Certificates of Participation, Series 1993, 5.500%, 1/01/15 - AMBAC Insured 5,410 Tulare, California, Sewer Revenue Bonds, Series 1996, 11/06 at 102.00 AAA 5,894,411 5.750%, 11/15/21 - MBIA Insured Yorba Linda Water District, California, Certificates of Participation, Highland Reservoir Renovation, Series 2003: 2,010 5.000%, 10/01/28 (WI, settling 9/10/03) - FGIC Insured 10/13 at 100.00 AAA 1,985,839 2,530 5.000%, 10/01/33 (WI, settling 9/10/03) - FGIC Insured 10/13 at 100.00 AAA 2,489,266 - ------------------------------------------------------------------------------------------------------------------------------------ $ 286,700 Total Long-Term Investments (cost $267,897,010) - 153.2% 283,737,849 =============----------------------------------------------------------------------------------------------------------------------- Other Assets Less Liabilities - (1.9)% (3,557,189) -------------------------------------------------------------------------------------------------------------------- Preferred Shares, at Liquidation Value - (51.3)% (95,000,000) -------------------------------------------------------------------------------------------------------------------- Net Assets Applicable to Common Shares - 100% $185,180,660 ==================================================================================================================== All of the bonds in the portfolio are either covered by Original Issue Insurance, Secondary Market Insurance or Portfolio Insurance, or are backed by an escrow or trust containing sufficient U.S. Government or U.S. Government agency securities, any of which ensure the timely payment of principal and interest. (1) All percentages shown in the Portfolio of Investments are based on net assets applicable to Common shares. * Optional Call Provisions (not covered by the report of independent auditors): Dates (month and year) and prices of the earliest optional call or redemption. There may be other call provisions at varying prices at later dates. ** Ratings (not covered by the report of independent auditors): Using the higher of Standard & Poor's or Moody's rating. (DD) Security purchased on a delayed delivery basis. (WI) Security purchased on a when-issued basis. See accompanying notes to financial statements. 21 Nuveen California Premium Income Municipal Fund (NCU) Portfolio of INVESTMENTS August 31, 2003 PRINCIPAL OPTIONAL CALL MARKET AMOUNT (000) DESCRIPTION(1) PROVISIONS* RATINGS** VALUE - ------------------------------------------------------------------------------------------------------------------------------------ CONSUMER STAPLES - 5.3% $ 1,500 California County Tobacco Securitization Agency, Tobacco 6/12 at 100.00 Baa2 $ 1,142,415 Settlement Asset-Backed Bonds, Alameda County Tobacco Asset Securitization Corporation, Series 2002, 5.750%, 6/01/29 3,910 California Statewide Financing Authority, Tobacco Settlement 5/12 at 100.00 Baa2 3,048,588 Asset-Backed Bonds, Pooled Tobacco Securitization Program, Series 2002A, 5.625%, 5/01/29 - ------------------------------------------------------------------------------------------------------------------------------------ EDUCATION AND CIVIC ORGANIZATIONS - 2.0% 1,500 University of California, Revenue Bonds, Multiple Purpose 5/13 at 100.00 AAA 1,578,420 Projects, Series 2003A, 5.125%, 5/15/17 (WI, settling 9/09/03) - AMBAC Insured - ------------------------------------------------------------------------------------------------------------------------------------ HEALTHCARE - 23.8% 1,500 California Health Facilities Financing Authority, Revenue 12/09 at 101.00 A3 1,578,660 Bonds, Cedars-Sinai Medical Center, Series 1999A, 6.125%, 12/01/30 5,150 California Health Facilities Financing Authority, Hospital 11/03 at 102.00 BB+ 4,484,054 Revenue Bonds, Downey Community Hospital, Series 1993, 5.750%, 5/15/15 1,500 California Infrastructure and Economic Development Bank, 8/11 at 102.00 A 1,485,420 Revenue Bonds, Kaiser Hospital Assistance I-LLC, Series 2001A, 5.550%, 8/01/31 1,185 California Statewide Community Development Authority, 2/04 at 101.00 A3 1,200,962 Hospital Revenue Certificates of Participation, Cedars- Sinai Medical Center, Series 1992, 6.500%, 8/01/15 8,100 California Statewide Community Development Authority, No Opt. Call AAA 8,036,091 Revenue Refunding Bonds, Sherman Oaks Project, Series 1998A, 5.000%, 8/01/22 - AMBAC Insured 2,000 Loma Linda, California, Hospital Revenue Bonds, Loma 12/03 at 102.00 BB 1,963,400 Linda University Medical Center Project, Series 1993A, 6.000%, 12/01/06 - ------------------------------------------------------------------------------------------------------------------------------------ HOUSING/MULTIFAMILY - 16.2% 2,000 California Statewide Community Development Authority, 7/08 at 101.00 BBB 2,059,440 Revenue Refunding Bonds, Irvine Apartment Communities Development, Series 1998A, 5.250%, 5/15/25 (Mandatory put 5/15/13) 6,205 Los Angeles Community Redevelopment Agency, California, 6/05 at 105.00 AAA 6,646,982 Multifamily Housing Revenue Refunding Bonds, Angelus Plaza Project, Series 1995A, 7.400%, 6/15/10 3,815 Stanton, California, Multifamily Housing Revenue Bonds, 8/07 at 102.00 AAA 4,039,627 Continental Gardens Apartments, Series 1997, 5.625%, 8/01/29 (Alternative Minimum Tax) (Mandatory put 8/01/09) - ------------------------------------------------------------------------------------------------------------------------------------ HOUSING/SINGLE FAMILY - 5.8% 1,520 California Housing Finance Agency, Single Family Mortgage 2/07 at 102.00 AAA 1,570,950 Bonds II, Series 1997A-1, 6.000%, 8/01/20 (Alternative Minimum Tax) - MBIA Insured 350 California Housing Finance Agency, Home Mortgage Revenue 8/04 at 102.00 Aa2 360,752 Bonds, Series 1994A, 6.550%, 8/01/26 1,000 California Housing Finance Agency, Home Mortgage Revenue 8/05 at 102.00 AAA 1,013,480 Bonds, Series 1994F-3, 6.100%, 8/01/15 (Alternative Minimum Tax) - MBIA Insured 1,085 California Housing Finance Agency, Home Mortgage Revenue 2/07 at 102.00 AAA 1,124,982 Bonds, Series 1997B, 6.000%, 8/01/16 (Alternative Minimum Tax) - MBIA Insured 435 California Rural Home Mortgage Finance Authority, Single No Opt. Call AAA 473,698 Family Mortgage Revenue Bonds, Mortgage-Backed Securities Program, Series 1996C, 7.500%, 8/01/27 (Alternative Minimum Tax) - ------------------------------------------------------------------------------------------------------------------------------------ TAX OBLIGATION/GENERAL - 18.1% 4,000 State of California, General Obligation Veterans Welfare 6/04 at 101.00 A 3,926,800 Bonds, Series 1999BR, 5.300%, 12/01/29 (Alternative Minimum Tax) 1,750 State of California, General Obligation Refunding Bonds, 4/12 at 100.00 A3 1,705,673 Series 2002, 5.250%, 4/01/32 State of California, General Obligation Bonds, Series 2003: 1,055 5.250%, 2/01/21 8/13 at 100.00 A3 1,066,753 2,000 5.000%, 2/01/33 8/13 at 100.00 A3 1,872,880 22 PRINCIPAL OPTIONAL CALL MARKET AMOUNT (000) DESCRIPTION(1) PROVISIONS* RATINGS** VALUE - ------------------------------------------------------------------------------------------------------------------------------------ TAX OBLIGATION/GENERAL (continued) $ 2,250 Los Angeles Unified School District, Los Angeles County, 7/13 at 100.00 AAA $ 2,262,892 California, General Obligation Bonds, Series 2003A, 5.000%, 7/01/22 - FSA Insured 3,000 Pomona Unified School District, California, General Obligation 8/11 at 103.00 AAA 3,430,560 Refunding Bonds, Series 1997A, 6.150%, 8/01/15 - MBIA Insured - ------------------------------------------------------------------------------------------------------------------------------------ TAX OBLIGATION/LIMITED - 40.3% 985 Beverly Hills Public Financing Authority, California, Lease 6/13 at 100.00 Aaa 1,064,972 Revenue Refunding Bonds, Series 2003A, 5.250%, 6/01/15 - MBIA Insured 5,920 State Public Works Board of the State of California, Lease 11/09 at 101.00 AAA 6,276,325 Revenue Bonds, Department of Veterans Affairs of the State of California, Southern California Veterans Home - Chula Vista Facility, 1999 Series A, 5.600%, 11/01/19 - AMBAC Insured 2,345 Carlsbad, California, Limited Obligation Improvement Bonds, 9/03 at 101.00 N/R 2,227,539 Assessment District 96-1, Series 1998, 5.500%, 9/02/28 3,500 Livermore Redevelopment Agency, California, Tax Allocation 8/11 at 100.00 AAA 3,455,200 Revenue Bonds, Livermore Redevelopment Project Area, Series 2001A, 5.000%, 8/01/26 - MBIA Insured 2,030 Los Angeles Community Redevelopment Agency, California, 12/03 at 102.00 BB 1,984,508 Tax Allocation Multifamily Housing Bonds, Grand Central Square Project, Series 1993A, 5.750%, 12/01/13 (Alternative Minimum Tax) 2,000 Oakland Redevelopment Agency, California, Subordinate Lien 3/13 at 100.00 AAA 2,202,860 Tax Allocation Bonds, Central District Redevelopment Project, Series 2003, 5.500%, 9/01/15 - FGIC Insured 1,000 Poway Community Facilities District 88-1, California, Special 8/08 at 102.00 N/R 1,115,670 Tax Refunding Bonds, Parkway Business Centre, Series 1998, 6.500%, 8/15/09 6,570 Sacramento City Finance Authority, California, Lease Revenue No Opt. Call AA- 7,010,387 Refunding Bonds, Series 1993B, 5.400%, 11/01/20 San Marcos Public Facilities Authority, California, Revenue Refunding Bonds, Series 1998: 1,500 5.800%, 9/01/18 9/08 at 101.00 Baa3 1,553,565 1,000 5.800%, 9/01/27 9/08 at 101.00 Baa3 1,020,440 2,050 Santa Barbara County, California, Certificates of Participation, 12/11 at 102.00 AAA 2,148,421 Series 2001, 5.250%, 12/01/19 - AMBAC Insured 2,000 Vista, California, Mobile Home Park Revenue Bonds, Vista 3/09 at 102.00 N/R 1,830,420 Manor Mobile Home Park Project, Series 1999A, 5.750%, 3/15/29 - ------------------------------------------------------------------------------------------------------------------------------------ TRANSPORTATION - 12.4% 3,000 California Infrastructure and Economic Development Bank, 7/13 at 100.00 AAA 3,017,190 Revenue Bonds, Bay Area Toll Bridges, First Lien, Series 2003A, 5.000%, 7/01/22 - FSA Insured 2,000 Foothill-Eastern Transportation Corridor Agency, California, 1/10 at 100.00 BBB- 1,779,160 Toll Road Revenue Bonds, Series 1995A, 5.000%, 1/01/35 2,750 San Francisco City and County Airports Commission, 5/04 at 102.00 AAA 2,887,363 California, Revenue Bonds, San Francisco International Airport, Second Series, Issue 5, 6.500%, 5/01/24 (Alternative Minimum Tax) - FGIC Insured 2,000 San Francisco City and County Airports Commission, 5/06 at 102.00 AAA 2,064,600 California, Revenue Bonds, San Francisco International Airport, Second Series, Issue 10A, 5.700%, 5/01/26 (Alternative Minimum Tax) - MBIA Insured - ------------------------------------------------------------------------------------------------------------------------------------ U.S. GUARANTEED - 5.1% 3,500 Puerto Rico Commonwealth, Public Improvement General 7/10 at 100.00 AAA 3,996,790 Obligation Bonds, Series 2000, 5.750%, 7/01/21 (Pre-refunded to 7/01/10) - MBIA Insured - ------------------------------------------------------------------------------------------------------------------------------------ UTILITIES - 12.2% 1,000 California Pollution Control Financing Authority, Pollution 12/03 at 101.00 AAA 1,023,780 Control Revenue Bonds, Southern California Edison Company, Series 1992B, 6.400%, 12/01/24 (Alternative Minimum Tax) - FGIC Insured 2,250 California Department of Water Resources, Power Supply 5/12 at 101.00 A3 2,272,050 Revenue Bonds, Series 2002A, 5.125%, 5/01/18 23 Nuveen California Premium Income Municipal Fund (NCU) (continued) Portfolio of INVESTMENTS August 31, 2003 PRINCIPAL OPTIONAL CALL MARKET AMOUNT (000) DESCRIPTION(1) PROVISIONS* RATINGS** VALUE - ------------------------------------------------------------------------------------------------------------------------------------ UTILITIES (continued) $ 1,500 Merced Irrigation District, California, Revenue Refunding 9/05 at 102.00 Baa3 $ 1,561,260 Bonds, Electric System Project, Series 2001, 6.500%, 9/01/22 4,580 Sacramento Municipal Utility District, California, Electric 8/12 at 100.00 AAA 4,760,727 Revenue Refunding Bonds, Series 2002Q, 5.250%, 8/15/20 - FSA Insured - ------------------------------------------------------------------------------------------------------------------------------------ WATER AND SEWER - 12.6% 5,000 Culver City, California, Wastewater Facilities Revenue Refunding 9/09 at 102.00 AAA 5,331,400 Bonds, Series 1999A, 5.700%, 9/01/29 - FGIC Insured 3,495 Orange County Sanitation District, California, Certificates 8/13 at 100.00 AAA 3,608,098 of Participation, Series 2003, 5.250%, 2/01/21 - FGIC Insured 1,000 Sacramento County Water Financing Authority, California, 6/13 at 100.00 AAA 1,005,678 Revenue Bonds, Agency Zones 40-41 System Projects, Series 2003, 5.000%, 6/01/22 - AMBAC Insured - ------------------------------------------------------------------------------------------------------------------------------------ $ 119,785 Total Long-Term Investments (cost $120,449,908) - 153.8% 121,271,882 =============----------------------------------------------------------------------------------------------------------------------- Other Assets Less Liabilities - 0.7% 587,400 -------------------------------------------------------------------------------------------------------------------- Preferred Shares, at Liquidation Value - (54.5)% (43,000,000) -------------------------------------------------------------------------------------------------------------------- Net Assets Applicable to Common Shares - 100% $ 78,859,282 ==================================================================================================================== (1) All percentages shown in the Portfolio of Investments are based on net assets applicable to common shares. * Optional Call Provisions (not covered by the report of independent auditors): Dates (month and year) and prices of the earliest optional call or redemption. There may be other call provisions at varying prices at later dates. ** Ratings (not covered by the report of independent auditors): Using the higher of Standard & Poor's or Moody's rating. N/R Investment is not rated. (WI) Security purchased on a when-issued basis. See accompanying notes to financial statements. 24 Nuveen California Dividend Advantage Municipal Fund (NAC) Portfolio of INVESTMENTS August 31, 2003 PRINCIPAL OPTIONAL CALL MARKET AMOUNT (000) DESCRIPTION(1) PROVISIONS* RATINGS** VALUE - ------------------------------------------------------------------------------------------------------------------------------------ CONSUMER STAPLES - 5.2% $ 5,000 California Statewide Community Development Authority, 11/09 at 102.00 N/R $ 5,140,200 Certificates of Participation, Pride Industries and Pride One, Inc., Series 1999, 7.250%, 11/01/29 5,200 Golden State Tobacco Securitization Corporation, California, 6/13 at 100.00 BBB 4,203,992 Tobacco Settlement Asset-Backed Bonds, Series 2003A-1, 6.250%, 6/01/33 Northern California Tobacco Securitization Authority, Tobacco Settlement Asset-Backed Bonds, Series 2001A: 2,500 5.250%, 6/01/31 6/11 at 100.00 BBB 1,805,250 4,500 5.375%, 6/01/41 6/11 at 100.00 BBB 3,047,850 4,090 Southern California Tobacco Securitization Authority, 6/12 at 100.00 BBB 3,774,293 Tobacco Settlement Asset-Backed Bonds, Senior Series 2001A, 5.250%, 6/01/27 - ------------------------------------------------------------------------------------------------------------------------------------ EDUCATION AND CIVIC ORGANIZATIONS - 10.7% 615 California Statewide Community Development Authority, 10/13 at 100.00 N/R 601,808 Revenue Bonds, Notre Dame de Namur University, Series 2003, 6.500%, 10/01/23 3,000 Long Beach Bond Financing Authority, California, Lease 11/11 at 100.00 AAA 3,253,620 Revenue Refunding Bonds, Long Beach Aquarium of the South Pacific, Series 2001, 5.500%, 11/01/17 - AMBAC Insured 700 University of California, Certificates of Participation, 1/10 at 101.00 Aa2 712,005 San Diego and Sacramento Campus Projects, Series 2002A, 5.250%, 1/01/22 6,000 University of California, Revenue Bonds, Multiple Purpose 9/08 at 101.00 Aa2 6,349,200 Projects, Series 2000K, 5.000%, 9/01/12 University of California, Revenue Bonds, Multiple Purpose Projects, Series 2002O: 10,770 5.000%, 9/01/20 - FGIC Insured 9/10 at 101.00 AAA 10,961,491 11,305 5.000%, 9/01/21 - FGIC Insured 9/10 at 101.00 AAA 11,431,616 3,500 University of California, Revenue Bonds, Multiple Purpose 5/13 at 100.00 AAA 3,682,980 Projects, Series 2003A, 5.125%, 5/15/17 (WI, settling 9/09/03) - AMBAC Insured - ------------------------------------------------------------------------------------------------------------------------------------ HEALTHCARE - 14.0% 8,400 California Health Facilities Financing Authority, Revenue 10/08 at 101.00 A 8,657,544 Bonds, Kaiser Permanente, Series 1998B, 5.250%, 10/01/14 (Optional put 10/01/08) 15,000 California Health Facilities Financing Authority, Revenue 12/09 at 101.00 A3 15,786,600 Bonds, Cedars-Sinai Medical Center, Series 1999A, 6.125%, 12/01/30 8,000 Central California Joint Powers Health Financing 2/10 at 101.00 BBB 8,091,680 Authority, Certificates of Participation, Community Hospitals of Central California Obligated Group Project, Series 2000, 6.000%, 2/01/30 10,500 Duarte, California, Certificates of Participation, City of Hope 4/09 at 101.00 BBB 9,853,200 National Medical Center, Series 1999A, 5.250%, 4/01/31 3,415 Upland, California, Certificates of Participation, San Antonio 1/04 at 102.00 A 3,502,595 Community Hospital, Series 1993, 5.250%, 1/01/08 2,500 Whittier, California, Health Facility Revenue Bonds, 6/12 at 101.00 A- 2,512,000 Presbyterian Intercommunity Hospital, Series 2002, 5.600%, 6/01/22 - ------------------------------------------------------------------------------------------------------------------------------------ HOUSING/MULTIFAMILY - 15.3% 15,000 California Statewide Community Development Authority, 7/08 at 101.00 BBB 15,889,350 Revenue Refunding Bonds, Irvine Apartment Communities Development, Series 1998A, 4.900%, 5/15/25 (Mandatory put 5/15/08) 10,000 California Statewide Community Development Authority, No Opt. Call BBB+ 10,583,900 Multifamily Housing Refunding Bonds, Archstone Pelican Point Apartments, Archstone Communities Trust, Series 1999H, 5.300%, 6/01/29 (Mandatory put 6/01/08) 5,250 California Statewide Community Development Authority, 8/12 at 105.00 Aaa 5,831,175 GNMA Collateralized Housing Revenue Refunding Bonds, Crowne Pointe Project, Series 2002F, 6.750%, 8/20/37 25 Nuveen California Dividend Advantage Municipal Fund (NAC) (continued) Portfolio of INVESTMENTS August 31, 2003 PRINCIPAL OPTIONAL CALL MARKET AMOUNT (000) DESCRIPTION(1) PROVISIONS* RATINGS** VALUE - ------------------------------------------------------------------------------------------------------------------------------------ HOUSING/MULTIFAMILY (continued) $ 5,000 Contra Costa County, California, Multifamily Housing Revenue 6/09 at 102.00 N/R $ 4,824,550 Bonds, Delta View Apartments Project, Series 1999C, 6.750%, 12/01/30 (Alternative Minimum Tax) 15,000 Housing Authority of the County of San Bernardino, No Opt. Call BBB+ 15,799,650 California, Multifamily Housing Revenue Refunding Bonds, Equity Residential/Redlands Lawn and Tennis Apartments, Issue 1999A, 5.200%, 6/15/29 (Mandatory put 6/15/09) - ------------------------------------------------------------------------------------------------------------------------------------ HOUSING/SINGLE FAMILY - 0.2% 3,985 California Housing Finance Agency, Single Family Mortgage 2/09 at 31.14 AAA 862,872 Bonds II, Series 1999D2, 0.000%, 2/01/29 (Alternative Minimum Tax) - ------------------------------------------------------------------------------------------------------------------------------------ LONG-TERM CARE - 2.4% 8,500 Riverside County Public Financing Authority, California, 5/09 at 101.00 BBB- 8,296,255 Certificates of Participation, Air-Force Village West, Series 1999, 5.800%, 5/15/29 - ------------------------------------------------------------------------------------------------------------------------------------ TAX OBLIGATION/GENERAL - 21.1% State of California, General Obligation Refunding Bonds, Series 2002: 8,000 5.000%, 2/01/12 No Opt. Call A3 8,371,200 6,435 6.000%, 4/01/16 - AMBAC Insured No Opt. Call AAA 7,391,498 State of California, General Obligation Bonds, Series 2003: 2,595 5.250%, 2/01/15 8/13 at 100.00 A3 2,714,370 5,200 5.250%, 2/01/20 8/13 at 100.00 A3 5,282,212 2,300 5.000%, 2/01/22 8/13 at 100.00 A3 2,252,482 3,000 Contra Costa County Community College District, California, 8/12 at 100.00 AAA 3,022,530 General Obligation Bonds, Series 2002, 4.900%, 8/01/20 - FGIC Insured 1,000 Los Angeles Community College District, Los Angeles County, 8/11 at 100.00 AAA 991,200 California, General Obligation Bonds, Election of 2001, Series 2001A, 5.000%, 6/01/26 - MBIA Insured 18,500 Los Angeles Unified School District, California, General 7/09 at 101.00 AAA 18,742,350 Obligation Bonds, Election of 1997, Series 1999C, 5.250%, 7/01/24 - MBIA Insured 10,845 Los Angeles Unified School District, California, General 7/12 at 100.00 AAA 11,105,063 Obligation Bonds, Election of 1997, Series 2002E, 5.000%, 7/01/19 - MBIA Insured 1,750 Oakland Unified School District, Alameda County, California, 8/08 at 101.00 AAA 1,766,818 General Obligation Bonds, Series 2001, 5.125%, 8/01/21 - FSA Insured 5,000 San Diego Unified School District, San Diego County, 7/13 at 101.00 AAA 5,229,000 California, General Obligation Bonds, Series 2003E, 5.250%, 7/01/20 - FSA Insured 2,700 Ventura County Community College District, California, 8/12 at 101.00 AAA 2,863,593 General Obligation Bonds, Series 2002A, 5.000%, 8/01/15 - MBIA Insured 3,605 West Contra Costa Unified School District, Contra Costa 8/11 at 101.00 AAA 3,644,943 County, California, General Obligation Bonds, Series 2003B, 5.000%, 8/01/21 - FSA Insured - ------------------------------------------------------------------------------------------------------------------------------------ TAX OBLIGATION/LIMITED - 35.8% Brentwood Infrastructure Financing Authority, Contra Costa County, California, Capital Improvement Revenue Bonds, Series 2001: 1,110 5.375%, 11/01/18 - FSA Insured 11/11 at 100.00 AAA 1,187,156 1,165 5.375%, 11/01/19 - FSA Insured 11/11 at 100.00 AAA 1,239,968 1,990 Brentwood Infrastructure Financing Authority, California, 9/12 at 100.00 AAA 2,004,268 Infrastructure Revenue Refunding Bonds, Series 2002A, 5.125%, 9/02/24 - FSA Insured 3,515 Dinuba Redevelopment Agency, California, Tax Allocation 9/11 at 102.00 AAA 3,506,634 Refunding Bonds, Redevelopment Project 2, Series 2001, 4.875%, 9/01/21 - MBIA Insured 3,490 Fontana, California, Senior Special Tax Refunding Bonds, 9/08 at 102.00 AAA 3,696,922 Heritage Village Community Facilities District 2 Project, Series 1998A, 5.250%, 9/01/17 - MBIA Insured 3,980 Garden Grove, California, Certificates of Participation, 3/12 at 101.00 AAA 4,200,691 Financing Project, Series 2002A, 5.500%, 3/01/22 - AMBAC Insured 2,000 Lee Lake Water District, Riverside County, California, Special 9/13 at 102.00 N/R 2,047,720 Tax Bonds, Community Facilities District 1 of Sycamore Creek, Series 2003, 6.500%, 9/01/24 26 PRINCIPAL OPTIONAL CALL MARKET AMOUNT (000) DESCRIPTION(1) PROVISIONS* RATINGS** VALUE - ------------------------------------------------------------------------------------------------------------------------------------ TAX OBLIGATION/LIMITED (continued) $ 2,200 Lincoln Community Facilities District No. 2003-1, California, 9/13 at 102.00 N/R $ 2,271,280 Special Tax Bonds, Series A, Lincoln Crossing Project, 6.500%, 9/01/25 5,500 Los Angeles County, California, Refunding Certificates of 9/08 at 101.00 AAA 5,286,875 Participation, Disney Parking Project, Series 1998, 4.750%, 3/01/23 - AMBAC Insured 5,000 Los Angeles County Metropolitan Transportation Authority, 7/08 at 101.00 AAA 4,953,100 California, Proposition C Sales Tax Revenue Refunding Bonds, Second Senior Lien, Series 1998A, 5.000%, 7/01/23 - AMBAC Insured 10,000 Los Angeles County Public Works Financing Authority, 10/07 at 101.00 AA 10,307,900 California, Revenue Bonds, Los Angeles County Regional Park and Open Space District, Series 1997A, 5.000%, 10/01/16 9,200 Norco Redevelopment Agency, California, Tax Allocation 3/11 at 102.00 AAA 9,406,080 Refunding Bonds, Project Area 1, Series 2001, 5.000%, 3/01/19 - MBIA Insured 4,670 Oakland Joint Power Financing Authority, California, No Opt. Call AAA 5,223,395 Lease Revenue Refunding Bonds, Oakland Convention Centers, Series 2001, 5.500%, 10/01/14 - AMBAC Insured 3,290 Oakland Redevelopment Agency, California, Subordinate 3/13 at 100.00 AAA 3,602,122 Lien Tax Allocation Bonds, Central District Redevelopment Project, Series 2003, 5.500%, 9/01/16 - FGIC Insured 4,000 Orange County Local Transportation Authority, California, No Opt. Call AAA 4,512,760 Limited Sales Tax Revenue Refunding Bonds, Measure M, Second Senior Series 1997A, 5.700%, 2/15/08 - AMBAC Insured 5,600 Palm Springs Financing Authority, California, Lease Revenue 11/11 at 101.00 AAA 5,632,928 Refunding Bonds, Convention Center Project, Series 2001A, 5.000%, 11/01/22 - MBIA Insured 8,100 Poway Redevelopment Agency, California, Tax Allocation 12/10 at 102.00 AAA 8,731,314 Refunding Bonds, Series 2000, 5.750%, 6/15/33 - MBIA Insured 1,055 Poway Redevelopment Agency, California, Tax Allocation 12/11 at 101.00 AAA 1,137,301 Refunding Bonds, Paguay Redevelopment Project, Series 2001, 5.375%, 12/15/16 - AMBAC Insured 2,000 Puerto Rico Public Finance Corporation, Commonwealth 8/11 at 100.00 AAA 2,171,360 Appropriation Bonds, Series 2001A, 5.500%, 8/01/19 - MBIA Insured 1,860 Riverside Redevelopment Agency, California, Tax Allocation 8/13 at 100.00 AAA 1,909,867 Refunding Bonds, Merged Project Areas, Series 2003, 5.250%, 8/01/22 - MBIA Insured 7,800 Riverside County Public Financing Authority, California, No Opt. Call N/R 8,279,622 Reassessment Revenue Bonds, Rancho Village Project/AD No. 159, Junior Lien, 1999 Series B, 6.000%, 9/02/07 1,725 Rohnert Park Finance Authority, California, Rancho Feliz Mobile 9/13 at 100.00 BBB 1,667,006 Home Park Revenue Bonds, Senior Lien, Series 2003A, 5.750%, 9/15/38 (WI, settling 9/11/03) 1,120 Rohnert Park Finance Authority, California, Rancho Feliz 9/13 at 100.00 N/R 1,094,912 Mobile Home Park Revenue Bonds, Subordinate Lien, Series 2003B, 6.625%, 9/15/38 (WI, settling 9/11/03) 2,500 Sacramento City Financing Authority, California, Lease No Opt. Call AAA 2,706,025 Revenue Refunding Bonds, Series 1993A, 5.400%, 11/01/20 - AMBAC Insured 1,205 San Francisco City and County, California, Certificates 9/09 at 101.00 AAA 1,199,445 of Participation, 30 Van Ness Avenue Property, Series 2001A, 4.600%, 9/01/18 - MBIA Insured 24,060 San Jose Redevelopment Agency, California, Tax Allocation 8/08 at 102.00 A 23,640,875 Bonds, Merged Area Redevelopment Project, Series 1998, 5.250%, 8/01/29 2,810 West Patterson Financing Authority, California, Community 9/13 at 103.00 N/R 2,810,000 Facilities District 01-1 Special Tax Bonds, Series 2003B, 7.000%, 9/01/38 (WI, settling 9/16/03) - ------------------------------------------------------------------------------------------------------------------------------------ TRANSPORTATION - 20.3% 8,150 Foothill-Eastern Transportation Corridor Agency, California, 1/10 at 101.00 BBB- 8,200,530 Toll Road Refunding Revenue Bonds, Series 1999, 5.750%, 1/15/40 8,515 Los Angeles Harbors Department, California, Revenue Refunding 8/11 at 100.00 AAA 8,900,730 Bonds, Series 2001B, 5.500%, 8/01/18 (Alternative Minimum Tax) - AMBAC Insured 23,000 Port of Oakland, California, Revenue Bonds, Series 2000K, 5/10 at 100.00 AAA 23,894,010 5.750%, 11/01/29 (Alternative Minimum Tax) - FGIC Insured 27 Nuveen California Dividend Advantage Municipal Fund (NAC) (continued) Portfolio of INVESTMENTS August 31, 2003 PRINCIPAL OPTIONAL CALL MARKET AMOUNT (000) DESCRIPTION(1) PROVISIONS* RATINGS** VALUE - ------------------------------------------------------------------------------------------------------------------------------------ TRANSPORTATION (continued) $ 5,000 San Francisco City and County Airports Commission, 5/06 at 101.00 AAA $ 5,158,900 California, Revenue Bonds, San Francisco International Airport, Second Series, Issue 13B, 5.625%, 5/01/21 (Alternative Minimum Tax) - MBIA Insured 23,275 San Francisco City and County Airports Commission, 5/10 at 101.00 AAA 24,252,550 California, Revenue Bonds, San Francisco International Airport, Second Series, Issue 24A, 5.750%, 5/01/30 (Alternative Minimum Tax) - FSA Insured - ------------------------------------------------------------------------------------------------------------------------------------ U.S. GUARANTEED - 2.8% 3,600 Los Angeles Unified School District, California, General 7/10 at 100.00 AAA 4,095,504 Obligation Bonds, Election of 1997, Series 2000D, 5.625%, 7/01/14 (Pre-refunded to 7/01/10) 5,000 Puerto Rico Commonwealth, Public Improvement General 7/10 at 100.00 AAA 5,709,700 Obligation Bonds, Series 2000, 5.750%, 7/01/16 (Pre-refunded to 7/01/10) - MBIA Insured - ------------------------------------------------------------------------------------------------------------------------------------ UTILITIES - 11.2% 9,750 California Department of Water Resources, Power Supply 5/12 at 101.00 A3 9,845,550 Revenue Bonds, Series 2002A, 5.125%, 5/01/18 7,000 Los Angeles Department of Water and Power, California, 7/11 at 100.00 AAA 7,222,250 Power System Revenue Bonds, Series 2001A-1, 5.250%, 7/01/21 - FSA Insured 8,370 Los Angeles Department of Water and Power, California, 7/11 at 100.00 AAA 8,900,993 Power System Revenue Refunding Bonds, Series 2001A-2, 5.375%, 7/01/19 - MBIA Insured 7,000 Merced Irrigation District, California, Revenue Refunding 9/05 at 102.00 Baa3 7,322,910 Bonds, Electric System Project, Series 2001, 6.750%, 9/01/31 5,630 Southern California Public Power Authority, Subordinate 7/12 at 100.00 AAA 5,647,791 Revenue Refunding Bonds, Transmission Project, Series 2002A, 4.750%, 7/01/19 - FSA Insured - ------------------------------------------------------------------------------------------------------------------------------------ WATER AND SEWER - 11.3% 11,000 California Department of Water Resources, Water System 12/11 at 100.00 AAA 11,282,810 Revenue Bonds, Central Valley Project, Series 2001W, 5.250%, 12/01/22 - FSA Insured 14,000 Orange County Water District, California, Revenue Certificates 8/09 at 101.00 AA+ 14,262,360 of Participation, Series 1999A, 5.375%, 8/15/29 8,250 Pico Rivera Water Authority, California, Revenue Bonds, 12/11 at 102.00 N/R 8,220,464 Series 2001A, 6.250%, 12/01/32 5,115 San Francisco City and County Public Utilities Commission, 11/12 at 100.00 AAA 5,279,907 California, Water Revenue Bonds, Series 2002A, 5.000%, 11/01/18 - MBIA Insured - ------------------------------------------------------------------------------------------------------------------------------------ $ 512,260 Total Long-Term Investments (cost $509,460,322) - 150.3% 521,457,420 =============----------------------------------------------------------------------------------------------------------------------- Other Assets Less Liabilities - 0.1% 461,079 -------------------------------------------------------------------------------------------------------------------- Preferred Shares, at Liquidation Value - (50.4)% (175,000,000) -------------------------------------------------------------------------------------------------------------------- Net Assets Applicable to Common Shares - 100% $346,918,499 ==================================================================================================================== (1) All percentages shown in the Portfolio of Investments are based on net assets applicable to Common shares. * Optional Call Provisions (not covered by the report of independent auditors): Dates (month and year) and prices of the earliest optional call or redemption. There may be other call provisions at varying prices at later dates. ** Ratings (not covered by the report of independent auditors): Using the higher of Standard & Poor's or Moody's rating. N/R Investment is not rated. (WI) Security purchased on a when-issued basis. See accompanying notes to financial statements. 28 Nuveen California Dividend Advantage Municipal Fund 2 (NVX) Portfolio of INVESTMENTS August 31, 2003 PRINCIPAL OPTIONAL CALL MARKET AMOUNT (000) DESCRIPTION(1) PROVISIONS* RATINGS** VALUE - ------------------------------------------------------------------------------------------------------------------------------------ CONSUMER STAPLES - 4.7% $ 4,625 California County Tobacco Securitization Agency, Tobacco 6/12 at 100.00 Baa2 $ 3,325,098 Settlement Asset-Backed Bonds, Stanislaus County Tobacco Funding Corporation, Series 2002A, 5.500%, 6/01/33 3,200 Golden State Tobacco Securitization Corporation, California, 6/13 at 100.00 BBB 2,587,072 Tobacco Settlement Asset-Backed Bonds, Series 2003A-1, 6.250%, 6/01/33 3,000 Northern California Tobacco Securitization Authority, Tobacco 6/11 at 100.00 BBB 2,031,900 Settlement Asset-Backed Bonds, Series 2001A, 5.375%, 6/01/41 2,800 Southern California Tobacco Securitization Authority, Tobacco 6/12 at 100.00 BBB 1,995,280 Settlement Asset-Backed Bonds, Senior Series 2001A, 5.500%, 6/01/36 - ------------------------------------------------------------------------------------------------------------------------------------ EDUCATION AND CIVIC ORGANIZATIONS - 19.9% 2,000 California Educational Facilities Authority, Revenue Bonds, 6/11 at 101.00 AAA 2,031,540 Stanford University, Series 2001Q, 5.250%, 12/01/32 15,000 California Educational Facilities Authority, Student Loan 3/08 at 102.00 Aaa 15,430,350 Revenue Bonds, California Loan Program, Series 2001A, 5.400%, 3/01/21 (Alternative Minimum Tax) - MBIA Insured California State Public Works Board, Lease Revenue Bonds, University of California System, Series 2002A: 8,880 5.375%, 10/01/16 - FSA Insured 10/12 at 100.00 AAA 9,525,931 10,570 5.375%, 10/01/18 - FSA Insured 10/12 at 100.00 AAA 11,192,573 620 California Statewide Community Development Authority, 10/13 at 100.00 N/R 606,701 Revenue Bonds, Notre Dame de Namur University, Series 2003, 6.500%, 10/01/23 3,000 Long Beach Bond Financing Authority, California, Lease 11/11 at 101.00 AAA 3,024,750 Revenue Refunding Bonds, Long Beach Aquarium of the South Pacific, Series 2001, 5.250%, 11/01/30 - AMBAC Insured - ------------------------------------------------------------------------------------------------------------------------------------ HEALTHCARE - 11.2% 2,000 California Health Facilities Financing Authority, Revenue 4/12 at 100.00 BBB+ 2,033,800 Bonds, Casa Colina, Inc., Series 2001, 6.000%, 4/01/22 500 California Infrastructure and Economic Development Bank, 8/11 at 102.00 A 495,140 Revenue Bonds, Kaiser Hospital Assistance I-LLC, Series 2001A, 5.550%, 8/01/31 6,000 California Statewide Community Development Authority, No Opt. Call AAA 5,952,660 Revenue Refunding Bonds, Sherman Oaks Project, Series 1998A, 5.000%, 8/01/22 - AMBAC Insured 5,355 California Statewide Community Development Authority, No Opt. Call A 5,605,025 Revenue Bonds, Kaiser Permanente System, Series 2002E, 4.700%, 11/01/36 (Mandatory put 6/01/09) 2,185 California Statewide Community Development Authority, No Opt. Call A- 2,417,855 Health Facility Revenue Refunding Bonds, Memorial Health Services, Series 2003A, 6.000%, 10/01/11 3,000 Central California Joint Powers Health Financing Authority, 2/10 at 101.00 BBB 3,034,380 Certificates of Participation, Community Hospitals of Central California Obligated Group Project, Series 2000, 6.000%, 2/01/30 2,500 Torrance, California, Revenue Bonds, Torrance Memorial 6/11 at 101.00 A+ 2,490,950 Medical Center, Series 2001A, 5.500%, 6/01/31 1,500 Whittier, California, Health Facility Revenue Bonds, 6/12 at 101.00 A- 1,507,200 Presbyterian Intercommunity Hospital, Series 2002, 5.600%, 6/01/22 - ------------------------------------------------------------------------------------------------------------------------------------ HOUSING/MULTIFAMILY - 7.1% 5,962 California Statewide Community Development Authority, 6/11 at 102.00 AAA 6,200,659 Multifamily Housing Revenue Refunding Bonds, Claremont Village Apartments, Series 2001D, 5.500%, 6/01/31 (Alternative Minimum Tax) (Mandatory put 6/01/16) 3,500 California Statewide Community Development Authority, 8/12 at 105.00 Aaa 3,887,450 GNMA Collateralized Housing Revenue Refunding Bonds, Crowne Pointe Project, Series 2002F, 6.750%, 8/20/37 29 Nuveen California Dividend Advantage Municipal Fund 2 (NVX) (continued) Portfolio of INVESTMENTS August 31, 2003 PRINCIPAL OPTIONAL CALL MARKET AMOUNT (000) DESCRIPTION(1) PROVISIONS* RATINGS** VALUE - ------------------------------------------------------------------------------------------------------------------------------------ HOUSING/MULTIFAMILY (continued) $ 4,650 San Francisco Redevelopment Agency, California, GNMA 10/11 at 100.00 Aaa $ 4,729,143 Collateralized Multifamily Housing Revenue Bonds, Kokoro Assisted Living Facility, Series 2001A, 5.675%, 4/20/43 - ------------------------------------------------------------------------------------------------------------------------------------ HOUSING/SINGLE FAMILY - 2.5% 5,260 California Rural Home Mortgage Finance Authority, Single 6/11 at 102.00 AAA 5,317,650 Family Mortgage Revenue Bonds, Mortgage-Backed Securities Program, Series 2001A, 5.650%, 12/01/31 (Alternative Minimum Tax) - ------------------------------------------------------------------------------------------------------------------------------------ LONG-TERM CARE - 0.7% 1,550 California Health Facilities Financing Authority, Revenue 1/13 at 100.00 BBB 1,524,565 Bonds, Northern California Retired Officers Community Corporation - Paradise Valley Estates, Series 2002, 5.125%, 1/01/22 - ------------------------------------------------------------------------------------------------------------------------------------ TAX OBLIGATION/GENERAL - 29.9% 5,000 State of California, General Obligation Refunding Bonds, No Opt. Call A3 5,232,000 Series 2002, 5.000%, 2/01/12 7,225 State of California, General Obligation Veterans Welfare 6/06 at 101.00 AAA 7,307,076 Bonds, Series 2001BV, 5.600%, 12/01/32 - FSA Insured State of California, General Obligation Bonds, Series 2003: 3,000 5.250%, 2/01/20 8/13 at 100.00 A3 3,047,430 1,400 5.250%, 2/01/21 8/13 at 100.00 A3 1,415,596 1,400 5.000%, 2/01/21 8/13 at 100.00 A3 1,381,520 3,615 Colton Joint Unified School District, San Bernardino County, 8/12 at 102.00 AAA 3,842,239 California, General Obligation Bonds, Series 2002A, 5.500%, 8/01/22 - FGIC Insured Contra Costa County Community College District, California, General Obligation Bonds, Series 2002: 3,005 5.000%, 8/01/21 - FGIC Insured 8/12 at 100.00 AAA 3,038,295 3,300 5.000%, 8/01/22 - FGIC Insured 8/12 at 100.00 AAA 3,317,556 8,330 Los Angeles Unified School District, California, General 7/10 at 100.00 AAA 8,583,315 Obligation Bonds, Election of 1997, Series 2000D, 5.375%, 7/01/25 - FGIC Insured 10,840 Los Angeles Unified School District, California, General 7/12 at 100.00 AAA 11,099,943 Obligation Bonds, Election of 1997, Series 2002E, 5.000%, 7/01/19 - MBIA Insured 1,250 Los Angeles Unified School District, Los Angeles County, 7/13 at 100.00 AAA 1,303,075 California, General Obligation Bonds, Series 2003A, 5.250%, 7/01/20 - FSA Insured 4,050 Santa Rosa High School District, Sonoma County, 5/11 at 101.00 AAA 4,132,944 California, General Obligation Bonds, Series 2001, 5.300%, 5/01/26 - FGIC Insured 1,160 Saugus Union School District, Los Angeles County, California, 8/12 at 100.00 AAA 1,172,853 General Obligation Bonds, Series 2002A, 5.000%, 8/01/21 - FGIC Insured 7,600 Southwestern Community College District, San Diego County, 8/11 at 101.00 AAA 7,822,072 California, General Obligation Bonds, Series 2001, 5.375%, 8/01/25 - AMBAC Insured - ------------------------------------------------------------------------------------------------------------------------------------ TAX OBLIGATION/LIMITED - 42.7% 9,000 Anitoch Area Public Facilities Financing Agency, California, 8/11 at 100.00 AAA 9,139,410 Special Tax Bonds, Community Facilities District 1989-1, Series 2001, 5.250%, 8/01/25 - MBIA Insured 4,000 Daly City Housing Development Financing Agency, California, 12/13 at 102.00 A- 4,036,960 Mobile Home Park Revenue Bonds, Franciscan Mobile Home Park Project, Series 2002A, 5.850%, 12/15/32 4,845 Encinitas Public Financing Authority, California, Lease Revenue 4/08 at 102.00 AAA 4,885,020 Bonds, Acquisition Project, Series 2001A, 5.250%, 4/01/31 - MBIA Insured 5,000 Industry Urban Development Agency, California, Tax Allocation 5/07 at 101.50 AAA 5,368,450 Refunding Bonds, Civic, Recreational and Industrial Redevelopment Project 1, Series 2002, 5.500%, 5/01/19 - MBIA Insured 2,000 Lake Elsinore Public Financing Authority, California, Local 10/13 at 102.00 N/R 1,936,600 Agency Revenue Refunding Bonds, Series 2003H, 6.000%, 10/01/20 1,265 Lee Lake Water District, Riverside County, California, 9/13 at 102.00 N/R 1,295,183 Special Tax Bonds, Community Facilities District 1 of Sycamore Creek, Series 2003, 6.500%, 9/01/24 1,320 Lincoln Community Facilities District No. 2003-1, California, 9/13 at 102.00 N/R 1,362,768 Special Tax Bonds, Series A, Lincoln Crossing Project, 6.500%, 9/01/25 8,000 Los Angeles County Metropolitan Transportation Authority, 7/08 at 101.00 AAA 7,924,960 California, Proposition C Sales Tax Revenue Refunding Bonds, Second Senior Lien, Series 1998A, 5.000%, 7/01/23 - AMBAC Insured 30 PRINCIPAL OPTIONAL CALL MARKET AMOUNT (000) DESCRIPTION(1) PROVISIONS* RATINGS** VALUE - ------------------------------------------------------------------------------------------------------------------------------------ TAX OBLIGATION/LIMITED (continued) $ 5,000 Los Angeles County Metropolitan Transportation Authority, No Opt. Call AAA $ 5,495,450 California, Proposition C Sales Tax Revenue Refunding Bonds, Second Senior Lien, Series 2003A, 5.250%, 7/01/13 - MBIA Insured 3,295 Oakland Redevelopment Agency, California, Subordinate Lien 3/13 at 100.00 AAA 3,607,597 Tax Allocation Bonds, Central District Redevelopment Project, Series 2003, 5.500%, 9/01/16 - FGIC Insured 2,000 Orange County, California, Special Tax Bonds, Community 8/11 at 101.00 N/R 1,901,800 Facilities District 02-1 of Ladera Ranch, Series 2003A, 5.550%, 8/15/33 4,400 Puerto Rico Public Finance Corporation, Commonwealth No Opt. Call BBB+ 4,852,320 Appropriation Bonds, Series 2002E, 6.000%, 8/01/26 6,000 Riverside County Redevelopment Agency, California, Tax 10/11 at 102.00 AAA 6,061,500 Allocation Bonds, Jurupa Valley Project Area, Series 2001, 5.250%, 10/01/35 - AMBAC Insured 1,055 Rohnert Park Finance Authority, California, Rancho Feliz 9/13 at 100.00 BBB 1,019,531 Mobile Home Park Revenue Bonds, Senior Lien, Series 2003A, 5.750%, 9/15/38 (WI, settling 9/11/03) 700 Rohnert Park Finance Authority, California, Rancho Feliz 9/13 at 100.00 N/R 684,320 Mobile Home Park Revenue Bonds, Subordinate Lien, Series 2003B, 6.625%, 9/15/38 (WI, settling 9/11/03) Santa Clara Valley Transportation Authority, California, Sales Tax Revenue Bonds, Series 2001A: 16,090 5.000%, 6/01/25 - MBIA Insured 6/11 at 100.00 AAA 15,972,704 4,000 5.000%, 6/01/26 - MBIA Insured 6/11 at 100.00 AAA 3,964,800 1,930 West Patterson Financing Authority, California, Community 9/13 at 103.00 N/R 1,930,000 Facilities District 01-1 Special Tax Bonds, Series 2003B, 6.750%, 9/01/30 (WI, settling 9/16/03) 3,045 Yucaipa Redevelopment Agency, California, Mobile Home 5/11 at 102.00 N/R 3,064,610 Park Revenue Bonds, Rancho del Sol and Grandview, Series 2001A, 6.750%, 5/15/36 5,100 Yucaipa, California, Special Tax Bonds, Chapman Heights 9/09 at 102.00 N/R 4,899,315 Community Facilities District 98-1, Series 1998, 6.000%, 9/01/28 - ------------------------------------------------------------------------------------------------------------------------------------ TRANSPORTATION - 10.8% 7,000 Foothill-Eastern Transportation Corridor Agency, California, 1/14 at 101.00 BBB- 4,833,990 Toll Road Refunding Revenue Bonds, Series 1999, 0.000%, 1/15/27 5,585 Port of Oakland, California, Revenue Bonds, Series 2002N, 11/12 at 100.00 AAA 5,722,950 5.000%, 11/01/16 (Alternative Minimum Tax) - MBIA Insured 3,840 Sacramento-Yolo Port District, Sacramento and Yolo Counties, 7/08 at 101.00 Baa2 3,888,000 California, Port Facilities Improvement and Revenue Refunding Bonds, Series 2001, 5.125%, 7/01/14 2,000 San Francisco City and County Airports Commission, California, 5/12 at 100.00 AAA 2,050,960 Revenue Refunding Bonds, San Francisco International Airport, Second Series, Issue 28A, 5.250%, 5/01/17 (Alternative Minimum Tax) - MBIA Insured San Francisco City and County Airports Commission, California, Revenue Bonds, San Francisco International Airport, Second Series, Issue 29A: 2,430 5.250%, 5/01/18 (Alternative Minimum Tax) - FGIC Insured 5/13 at 100.00 AAA 2,478,770 2,555 5.250%, 5/01/19 (Alternative Minimum Tax) - FGIC Insured 5/13 at 100.00 AAA 2,582,824 1,000 San Francisco City and County Airports Commission, 5/13 at 100.00 AAA 1,052,120 California, Revenue Bonds, San Francisco International Airport, Second Series, Issue 29B, 5.125%, 5/01/17 - FGIC Insured - ------------------------------------------------------------------------------------------------------------------------------------ UTILITIES - 6.9% 3,000 California Pollution Control Financing Authority, Pollution 4/11 at 102.00 AAA 3,161,550 Control Revenue Refunding Bonds, Pacific Gas and Electric Company, Series 1996A Remarketed, 5.350%, 12/01/16 (Alternative Minimum Tax) - MBIA Insured 6,000 California Department of Water Resources, Power Supply 5/12 at 101.00 A3 6,058,800 Revenue Bonds, Series 2002A, 5.125%, 5/01/18 1,000 Los Angeles Department of Water and Power, California, 7/13 at 100.00 AAA 1,001,860 Power System Revenue Bonds, Series 2003A-2, 5.000%, 7/01/23 - MBIA Insured 3,000 Merced Irrigation District, California, Revenue Refunding 9/05 at 102.00 Baa3 3,143,790 Bonds, Electric System Project, Series 2001, 6.850%, 9/01/36 1,000 Merced Irrigation District, California, Revenue Certificates 9/05 at 103.00 Baa3 1,054,330 of Participation, Electric System Project, Series 2002, 6.500%, 9/01/34 31 Nuveen California Dividend Advantage Municipal Fund 2 (NVX) (continued) Portfolio of INVESTMENTS August 31, 2003 PRINCIPAL OPTIONAL CALL MARKET AMOUNT (000) DESCRIPTION(1) PROVISIONS* RATINGS** VALUE - ------------------------------------------------------------------------------------------------------------------------------------ WATER AND SEWER - 12.0% $ 2,740 California Department of Water Resources, Water System 12/12 at 100.00 AAA $ 2,828,968 Revenue Bonds, Central Valley Project, Series 2002Z, 5.000%, 12/01/18 - FGIC Insured 4,900 East Bay Municipal Utility District, Alameda and Contra 6/11 at 100.00 AAA 4,856,880 Costa Counties, California, Water System Subordinated Revenue Bonds, Series 2001, 5.000%, 6/01/26 - MBIA Insured 6,885 San Diego Public Facilities Financing Authority, California, 8/12 at 100.00 AAA 6,961,285 Subordinate Lien Water Revenue Bonds, Series 2002, 5.000%, 8/01/21 - MBIA Insured 10,000 San Francisco City and County Public Utilities Commission, 4/13 at 100.00 AAA 10,416,299 California, Clean Water Revenue Refunding Bonds, Series 2003A, 5.250%, 10/01/20 - MBIA Insured - ------------------------------------------------------------------------------------------------------------------------------------ $ 309,812 Total Long-Term Investments (cost $311,202,914) - 148.4% 311,140,260 =============----------------------------------------------------------------------------------------------------------------------- Other Assets Less Liabilities - 4.1% 8,582,097 -------------------------------------------------------------------------------------------------------------------- Preferred Shares, at Liquidation Value - (52.5)% (110,000,000) -------------------------------------------------------------------------------------------------------------------- Net Assets Applicable to Common Shares - 100% $209,722,357 ==================================================================================================================== (1) All percentages shown in the Portfolio of Investments are based on net assets applicable to Common shares. * Optional Call Provisions (not covered by the report of independent auditors): Dates (month and year) and prices of the earliest optional call or redemption. There may be other call provisions at varying prices at later dates. ** Ratings (not covered by the report of independent auditors): Using the higher of Standard & Poor's or Moody's rating. N/R Investment is not rated. (WI) Security purchased on a when-issued basis. See accompanying notes to financial statements. 32 Nuveen California Dividend Advantage Municipal Fund 3 (NZH) Portfolio of INVESTMENTS August 31, 2003 PRINCIPAL OPTIONAL CALL MARKET AMOUNT (000) DESCRIPTION(1) PROVISIONS* RATINGS** VALUE - ------------------------------------------------------------------------------------------------------------------------------------ CONSUMER STAPLES - 4.9% $ 11,240 California County Tobacco Securitization Agency, Tobacco 6/12 at 100.00 Baa2 $ 8,129,780 Settlement Asset-Backed Bonds, Merced County Tobacco Funding Corporation, Series 2002A, 5.500%, 6/01/33 6,100 Golden State Tobacco Securitization Corporation, California, 6/13 at 100.00 BBB 4,931,606 Tobacco Settlement Asset-Backed Bonds, Series 2003A-1, 6.250%, 6/01/33 4,200 Southern California Tobacco Securitization Authority, Tobacco 6/12 at 100.00 BBB 2,992,920 Settlement Asset-Backed Bonds, Senior Series 2001A, 5.500%, 6/01/36 - ------------------------------------------------------------------------------------------------------------------------------------ EDUCATION AND CIVIC ORGANIZATIONS - 9.7% 9,000 California Educational Facilities Authority, Student Loan 3/08 at 102.00 Aaa 9,258,210 Revenue Bonds, California Loan Program, Series 2001A, 5.400%, 3/01/21 (Alternative Minimum Tax) - MBIA Insured 3,600 California State Public Works Board, Lease Revenue Bonds, 10/12 at 100.00 AAA 3,834,108 University of California System, Series 2002A, 5.375%, 10/01/17 - FSA Insured 620 California Statewide Community Development Authority, 10/13 at 100.00 N/R 606,701 Revenue Bonds, Notre Dame de Namur University, Series 2003, 6.500%, 10/01/23 7,595 San Francisco State University Foundation, Inc., California, 9/11 at 100.00 AAA 7,528,316 Auxiliary Organization Revenue Bonds, Student Housing, Series 2001, 5.000%, 9/01/26 - MBIA Insured 2,990 University of California, Revenue Bonds, Multiple Purpose 9/08 at 101.00 Aa2 2,962,014 Projects, Series 2000K, 5.000%, 9/01/23 3,820 University of California, Revenue Bonds, Research Facilities, 9/09 at 101.00 AAA 3,786,460 Series 2001E, 5.000%, 9/01/26 - AMBAC Insured 4,000 University of California, Revenue Bonds, Multiple Purpose 5/13 at 100.00 AAA 4,007,320 Projects, Series 2003A, 5.000%, 5/15/23 (WI, settling 9/09/03) - AMBAC Insured - ------------------------------------------------------------------------------------------------------------------------------------ HEALTHCARE - 12.4% California Health Facilities Financing Authority, Revenue Bonds, Casa Colina, Inc., Series 2001: 4,000 6.000%, 4/01/22 4/12 at 100.00 BBB+ 4,067,600 2,000 6.125%, 4/01/32 4/12 at 100.00 BBB+ 2,021,140 9,000 California Infrastructure and Economic Development Bank, 8/11 at 102.00 A 8,912,520 Revenue Bonds, Kaiser Hospital Assistance I-LLC, Series 2001A, 5.550%, 8/01/31 7,665 California Statewide Community Development Authority, 11/09 at 102.00 BBB 7,765,488 Insured Mortgage Hospital Revenue Bonds, Mission Community Hospital, Series 2001, 5.375%, 11/01/21 6,525 California Statewide Community Development Authority, No Opt. Call A- 7,215,932 Health Facility Revenue Refunding Bonds, Memorial Health Services, Series 2003A, 6.000%, 10/01/12 6,450 California Statewide Community Development Authority, 6/13 at 100.00 AAA 6,737,412 Hospital Revenue Bonds, Monterey Peninsula Hospital, Series 2003B, 5.250%, 6/01/18 - FSA Insured 1,740 Central California Joint Powers Health Financing 2/10 at 101.00 BBB 1,759,940 Authority, Certificates of Participation, Community Hospitals of Central California Obligated Group Project, Series 2000, 6.000%, 2/01/30 2,500 Whittier, California, Health Facility Revenue Bonds, 6/12 at 101.00 A- 2,512,000 Presbyterian Intercommunity Hospital, Series 2002, 5.600%, 6/01/22 - ------------------------------------------------------------------------------------------------------------------------------------ HOUSING/MULTIFAMILY - 4.2% 5,250 California Statewide Community Development Authority, 8/12 at 105.00 Aaa 5,831,175 GNMA Collateralized Housing Revenue Refunding Bonds, Crowne Pointe Project, Series 2002F, 6.750%, 8/20/37 3,610 San Bernardino County Housing Authority, California, 11/11 at 105.00 Aaa 3,894,612 GNMA Collateralized Multifamily Mortgage Revenue Bonds, Pacific Palms Mobile Home Park, Series 2001A, 6.700%, 12/20/41 San Jose, California, Multifamily Housing Revenue Bonds, GNMA Mortgage-Backed Securities Program, Lenzen Housing, Series 2001B: 1,250 5.350%, 2/20/26 (Alternative Minimum Tax) 8/11 at 102.00 AAA 1,254,000 2,880 5.450%, 2/20/43 (Alternative Minimum Tax) 8/11 at 102.00 AAA 2,885,213 33 Nuveen California Dividend Advantage Municipal Fund 3 (NZH) (continued) Portfolio of INVESTMENTS August 31, 2003 PRINCIPAL OPTIONAL CALL MARKET AMOUNT (000) DESCRIPTION(1) PROVISIONS* RATINGS** VALUE - ------------------------------------------------------------------------------------------------------------------------------------ HOUSING/SINGLE FAMILY - 0.9% $ 3,000 California Housing Finance Agency, Home Mortgage Revenue 2/08 at 101.50 AAA $ 3,047,370 Bonds, Series 1998B, 5.150%, 2/01/18 (Alternative Minimum Tax) - AMBAC Insured - ------------------------------------------------------------------------------------------------------------------------------------ INDUSTRIALS - 1.5% 4,715 California Pollution Control Financing Authority, Solid Waste No Opt. Call BBB 4,816,703 Disposal Revenue Bonds, Waste Management Inc. Project, Series 2002B, 4.450%, 7/01/27 (Alternative Minimum Tax) (Mandatory put 7/01/05) - ------------------------------------------------------------------------------------------------------------------------------------ LONG-TERM CARE - 1.6% California Health Facilities Financing Authority, Insured Senior Living Revenue Bonds, Aldersly, Series 2002A: 1,500 5.125%, 3/01/22 3/12 at 101.00 BBB 1,475,355 1,315 5.250%, 3/01/32 3/12 at 101.00 BBB 1,276,234 2,450 California Health Facilities Financing Authority, Revenue 1/13 at 100.00 BBB 2,409,796 Bonds, Northern California Retired Officers Community Corporation - Paradise Valley Estates, Series 2002, 5.125%, 1/01/22 - ------------------------------------------------------------------------------------------------------------------------------------ TAX OBLIGATION/GENERAL - 33.2% 8,500 State of California, General Obligation Veterans Welfare 12/03 at 102.00 A 8,580,750 Bonds, Series 1997BH, 5.500%, 12/01/18 (Alternative Minimum Tax) 10 State of California, General Obligation Veterans Welfare 12/06 at 102.00 A 10,209 Bonds, Series 1997BJ, 5.500%, 12/01/18 (Alternative Minimum Tax) 9,335 State of California, General Obligation Bonds, Series 2002, No Opt. Call AAA 10,708,832 6.000%, 2/01/16 - FSA Insured State of California, General Obligation Refunding Bonds, Series 2002: 8,450 5.000%, 2/01/12 No Opt. Call A3 8,842,080 2,780 6.000%, 4/01/16 - AMBAC Insured No Opt. Call AAA 3,193,219 5,000 5.000%, 4/01/21 - AMBAC Insured 4/12 at 100.00 AAA 5,022,300 1,950 State of California, Various Purpose General Obligation 11/11 at 100.00 AAA 1,911,527 Bonds, Series 2001, 5.000%, 11/01/30 - MBIA Insured 14,300 State of California, General Obligation Veterans Welfare 6/07 at 101.00 AAA 14,406,106 Bonds, Series 2001BZ, 5.350%, 12/01/21 (Alternative Minimum Tax) - MBIA Insured 2,050 Centinela Valley Union High School District, Los Angeles No Opt. Call AAA 2,139,749 County, California, General Obligation Bonds, Series 2002A, 5.250%, 2/01/26 - MBIA Insured 1,840 Compton Unified School District, Los Angeles County, 9/13 at 100.00 AAA 1,947,916 California, General Obligation Bonds, Series 2003A, 5.250%, 9/01/18 - MBIA Insured 3,000 Contra Costa County Community College District, 8/12 at 100.00 AAA 3,005,220 California, General Obligation Bonds, Series 2002, 5.000%, 8/01/23 - FGIC Insured 2,500 Fullerton Joint Union High School District, Orange County, 8/12 at 100.00 Aaa 2,503,950 California, General Obligation Bonds, Series 2002A, 5.000%, 8/01/23 - FSA Insured 2,260 Jurupa Unified School District, Riverside County, California, 8/11 at 101.00 AAA 2,292,228 General Obligation Bonds, Series 2002, 5.125%, 8/01/22 - FGIC Insured Los Angeles Unified School District, Los Angeles County, California, General Obligation Bonds, Series 2003A: 3,750 5.250%, 7/01/20 - FSA Insured 7/13 at 100.00 AAA 3,909,225 7,200 5.000%, 7/01/22 - FSA Insured 7/13 at 100.00 AAA 7,241,256 6,315 Los Angeles Unified School District, Los Angeles County, 7/13 at 100.00 AAA 6,036,824 California, General Obligation Bonds, Series 2003F, 4.750%, 7/01/24 - FGIC Insured 2,710 Pajaro Valley Unified School District, Santa Cruz County, 8/13 at 100.00 AAA 2,725,691 California, General Obligation Bonds, Series 2003, 5.000%, 8/01/22 - FSA Insured 3,000 Puerto Rico Commonwealth, Public Improvement General 7/11 at 100.00 AAA 3,027,900 Obligation Refunding Bonds, Series 2001, 5.000%, 7/01/24 - FSA Insured 5,000 Riverside Unified School District, Riverside County, California, 2/12 at 101.00 AAA 4,954,150 General Obligation Bonds, Series 2002A, 5.000%, 2/01/27 - FGIC Insured 10,810 San Diego Unified School District, San Diego County, 7/11 at 102.00 AAA 10,714,764 California, General Obligation Bonds, Election of 1998, Series 2001C, 5.000%, 7/01/26 - FSA Insured 34 PRINCIPAL OPTIONAL CALL MARKET AMOUNT (000) DESCRIPTION(1) PROVISIONS* RATINGS** VALUE - ------------------------------------------------------------------------------------------------------------------------------------ TAX OBLIGATION/GENERAL (continued) $ 4,000 San Diego Unified School District, San Diego County, 7/12 at 101.00 AAA $ 4,152,200 California, General Obligation Bonds, Election of 1998, Series 2002D, 5.250%, 7/01/21 - FGIC Insured 1,000 Saugus Union School District, Los Angeles County, 8/12 at 100.00 AAA 996,750 California, General Obligation Bonds, Series 2002A, 5.000%, 8/01/24 - FGIC Insured 1,630 West Contra Costa Unified School District, Contra Costa 8/11 at 101.00 AAA 1,638,672 County, California, General Obligation Bonds, Series 2003C, 5.000%, 8/01/22 - FGIC Insured - ------------------------------------------------------------------------------------------------------------------------------------ TAX OBLIGATION/LIMITED - 47.3% 4,000 Beaumont Financing Authority, California, Local Agency 9/12 at 102.00 N/R 4,041,720 Revenue Bonds, Series 2002A, 6.750%, 9/01/25 7,135 Brentwood Infrastructure Financing Authority, Contra Costa 11/11 at 100.00 AAA 7,082,558 County, California, Capital Improvement Revenue Bonds, Series 2001, 5.000%, 11/01/25 - FSA Insured 3,620 Burbank Public Financing Authority, California, Revenue 12/13 at 100.00 AAA 3,778,773 Refunding Bonds, Golden State Redevelopment Project, Series 2003A, 5.250%, 12/01/20 - AMBAC Insured 3,350 California State Public Works Board, Lease Revenue Bonds, 12/12 at 100.00 AAA 3,534,351 Department of General Services, Capital East End, Series 2002A, 5.250%, 12/01/17 - AMBAC Insured 2,630 California State Public Works Board, Lease Revenue No Opt. Call AAA 2,865,885 Refunding Bonds, Department of Corrections, Series 2001B, 5.250%, 1/01/12 - AMBAC Insured 4,510 California State Public Works Board, Lease Revenue Bonds, 12/11 at 102.00 AAA 4,439,554 Department of Mental Health, Hospital Addition, Series 2001A, 5.000%, 12/01/26 - AMBAC Insured 15,000 California State Public Works Board, Lease Revenue Bonds, 3/12 at 100.00 AAA 14,761,500 Department of General Services, Series 2002B, 5.000%, 3/01/27 - AMBAC Insured 1,810 Cerritos Public Financing Authority, California, Tax Allocation No Opt. Call AAA 1,940,465 Revenue Bonds, Los Cerritos Redevelopment Projects, Series 2002A, 5.000%, 11/01/14 - AMBAC Insured 1,270 Coalinga Public Financing Authority, California, Local No Opt. Call AAA 1,474,292 Obligation Senior Lien Revenue Bonds, Series 1998A, 6.000%, 9/15/18 - AMBAC Insured 2,000 Daly City Housing Development Finance Agency, California, 12/13 at 102.00 A- 2,019,960 Mobile Home Park Revenue Bonds, Franciscan Mobile Home Park Project, Series 2002A, 5.800%, 12/15/25 1,000 Fullerton Community Facilities District 1, California, Special 9/12 at 100.00 N/R 1,010,960 Tax Bonds, Amerige Heights, Series 2002, 6.100%, 9/01/22 3,000 Lake Elsinore Public Financing Authority, California, Local 10/13 at 102.00 N/R 2,904,900 Agency Revenue Refunding Bonds, Series 2003H, 6.000%, 10/01/20 5,250 Lammersville School District, San Joaquin County, California, 9/12 at 101.00 N/R 5,267,325 Special Tax Bonds, Community Facilities District of Mountain House, Series 2002, 6.300%, 9/01/24 2,000 Lee Lake Water District, Riverside County, California, 9/13 at 102.00 N/R 2,047,720 Special Tax Bonds, Community Facilities District 1 of Sycamore Creek, Series 2003, 6.500%, 9/01/24 2,200 Lincoln Community Facilities District No. 2003-1, California, 9/13 at 102.00 N/R 2,271,280 Special Tax Bonds, Series A, Lincoln Crossing Project, 6.500%, 9/01/25 5,425 Lodi, California, Certificates of Participation, Public 10/12 at 100.00 AAA 5,355,235 Improvement Financing Project, Series 2002, 5.000%, 10/01/26 - MBIA Insured 6,075 Los Angeles County Metropolitan Transportation Authority, No Opt. Call AAA 6,676,972 California, Proposition C Sales Tax Revenue Refunding Bonds, Second Senior Lien, Series 2003A, 5.250%, 7/01/13 - MBIA Insured 1,000 Monterey County, California, Certificates of Participation, 8/11 at 100.00 Aaa 1,071,920 Master Plan Financing, Series 2001, 5.250%, 8/01/15 - MBIA Insured 1,000 Norco Community Facilities District 01-1, California, 9/12 at 102.00 N/R 985,800 Special Tax Bonds, Series 2002, 6.750%, 9/01/22 3,000 Oakland Redevelopment Agency, California, Subordinate 3/13 at 100.00 AAA 3,221,550 Lien Tax Allocation Bonds, Central District Redevelopment Project, Series 2003, 5.500%, 9/01/19 - FGIC Insured 4,520 Ontario Redevelopment Financing Authority, California, Lease 8/11 at 101.00 AAA 4,505,310 Revenue Bonds, Capital Projects, Series 2001, 5.000%, 8/01/24 - AMBAC Insured 2,000 Orange County, California, Special Tax Bonds, Community 8/11 at 101.00 N/R 1,901,800 Facilities District 02-1 of Ladera Ranch, Series 2003A, 5.550%, 8/15/33 35 Nuveen California Dividend Advantage Municipal Fund 3 (NZH) (continued) Portfolio of INVESTMENTS August 31, 2003 PRINCIPAL OPTIONAL CALL MARKET AMOUNT (000) DESCRIPTION(1) PROVISIONS* RATINGS** VALUE - ------------------------------------------------------------------------------------------------------------------------------------ TAX OBLIGATION/LIMITED (continued) $ 11,165 Palm Desert Financing Authority, California, Tax Allocation 4/12 at 102.00 AAA $ 11,095,330 Revenue Refunding Bonds, Project Area 1, Series 2002, 5.100%, 4/01/30 - MBIA Insured 5,000 Pomona Public Financing Authority, California, Revenue 2/11 at 100.00 AAA 4,954,150 Refunding Bonds, Merged Redevelopment Projects, Series 2001AD, 5.000%, 2/01/27 - MBIA Insured 6,500 Puerto Rico Highway and Transportation Authority, Highway 7/12 at 100.00 A 6,554,990 Revenue Bonds, Series 2002D, 5.375%, 7/01/36 4,400 Puerto Rico Public Finance Corporation, Commonwealth No Opt. Call BBB+ 4,852,320 Appropriation Bonds, Series 2002E, 6.000%, 8/01/26 1,735 Rohnert Park Finance Authority, California, Rancho Feliz 9/13 at 100.00 BBB 1,676,669 Mobile Home Park Revenue Bonds, Senior Lien, Series 2003A, 5.750%, 9/15/38 (WI, settling 9/11/03) 1,125 Rohnert Park Finance Authority, California, Rancho Feliz 9/13 at 100.00 N/R 1,099,800 Mobile Home Park Revenue Bonds, Subordinate Lien, Series 2003B, 6.625%, 9/15/38 (WI, settling 9/11/03) 1,700 Roseville, California, Special Tax Bonds, Community Facilities 9/09 at 103.00 N/R 1,656,786 District 1 - Crocker, Series 2003, 6.000%, 9/01/27 14,505 San Diego Redevelopment Agency, California, Subordinate 9/11 at 101.00 AAA 14,319,481 Tax Allocation Bonds, Centre City Redevelopment Project, Series 2001A, 5.000%, 9/01/26 - FSA Insured 8,725 San Francisco Bay Area Rapid Transit District, California, 7/11 at 100.00 AAA 8,648,133 Sales Tax Revenue Bonds, Series 2001, 5.000%, 7/01/26 - AMBAC Insured 10,000 San Jose Redevelopment Agency, California, Tax Allocation 8/10 at 101.00 AAA 9,852,800 Bonds, Merged Area Redevelopment Project, Series 2002, 5.000%, 8/01/27 - MBIA Insured 2,115 San Marcos Public Facilities Authority, California, Special 9/07 at 102.00 N/R 2,131,455 Tax Revenue Bonds, Series 2002, 6.300%, 9/01/20 1,595 Santa Clara Valley Transportation Authority, California, 6/11 at 100.00 AAA 1,602,512 Sales Tax Revenue Bonds, Series 2001A, 5.000%, 6/01/22 - MBIA Insured 2,810 West Patterson Financing Authority, California, Special 9/13 at 103.00 N/R 2,810,000 Tax Bonds, Community Facilities District 01-1, Series 2003B, 7.000%, 9/01/38 (WI, settling 9/16/03) 2,500 Yucaipa-Calimesa Joint Unified School District, San 10/11 at 100.00 AAA 2,467,850 Bernardino County, California, General Obligation Refunding Bonds, Series 2001A, 5.000%, 10/01/26 - MBIA Insured - ------------------------------------------------------------------------------------------------------------------------------------ TRANSPORTATION - 11.3% 11,750 Foothill-Eastern Transportation Corridor Agency, California, 1/14 at 101.00 BBB- 7,810,460 Toll Road Refunding Revenue Bonds, Series 1999, 0.000%, 1/15/28 1,500 Port of Oakland, California, Revenue Refunding Bonds, 11/07 at 102.00 AAA 1,629,735 Series 1997I, 5.600%, 11/01/19 - MBIA Insured 1,000 Port of Oakland, California, Revenue Bonds, Series 2002M, 11/12 at 100.00 AAA 1,040,150 5.250%, 11/01/20 - FGIC Insured 3,000 San Francisco City and County Airports Commission, 5/10 at 101.00 AAA 2,924,310 California, Revenue Bonds, San Francisco International Airport, Second Series, Issue 26B, 5.000%, 5/01/30 - FGIC Insured 3,000 San Francisco City and County Airports Commission, 5/12 at 100.00 AAA 3,080,730 California, Revenue Refunding Bonds, San Francisco International Airport, Second Series, Issue 28B, 5.250%, 5/01/22 - MBIA Insured San Francisco City and County Airports Commission, California, Revenue Bonds, San Francisco International Airport, Second Series, Issue 29B: 4,110 5.125%, 5/01/17 - FGIC Insured 5/13 at 100.00 AAA 4,324,213 10,625 5.125%, 5/01/18 - FGIC Insured 5/13 at 100.00 AAA 11,093,881 5,140 5.125%, 5/01/19 - FGIC Insured 5/13 at 100.00 AAA 5,322,059 - ------------------------------------------------------------------------------------------------------------------------------------ UTILITIES - 12.1% 15,000 California Pollution Control Financing Authority, Pollution 4/11 at 102.00 AAA 15,807,750 Control Revenue Refunding Bonds, Pacific Gas and Electric Company, Series 1996A Remarketed, 5.350%, 12/01/16 (Alternative Minimum Tax) - MBIA Insured 9,000 California Department of Water Resources, Power Supply 5/12 at 101.00 A3 9,088,200 Revenue Bonds, Series 2002A, 5.125%, 5/01/18 1,600 Merced Irrigation District, California, Revenue Certificates 9/05 at 103.00 Baa3 1,686,928 of Participation, Electric System Project, Series 2002, 6.500%, 9/01/34 36 PRINCIPAL OPTIONAL CALL MARKET AMOUNT (000) DESCRIPTION(1) PROVISIONS* RATINGS** VALUE - ------------------------------------------------------------------------------------------------------------------------------------ UTILITIES (continued) $ 5,000 Merced Irrigation District, California, Revenue Certificates 9/13 at 102.00 Baa3 $ 4,780,650 of Participation, Electric System Project, Series 2003, 5.700%, 9/01/36 2,250 Salinas Valley Solid Waste Authority, California, Revenue 8/12 at 100.00 AAA 2,249,910 Bonds, Series 2002, 5.125%, 8/01/22 (Alternative Minimum Tax) - AMBAC Insured 6,085 Southern California Public Power Authority, Revenue Bonds, 7/13 at 100.00 AAA 6,531,822 Magnolia Power Project, Series 2003-1A, 5.250%, 7/01/16 - AMBAC Insured - ------------------------------------------------------------------------------------------------------------------------------------ WATER AND SEWER - 16.5% 6,080 California Department of Water Resources, Water System 12/12 at 100.00 AAA 6,323,990 Revenue Bonds, Central Valley Project, Series 2002Z, 5.000%, 12/01/17 - FGIC Insured California Department of Water Resources, Water System Revenue Bonds, Central Valley Project, Series 2003Y: 8,000 5.250%, 12/01/13 - FGIC Insured 6/13 at 100.00 AAA 8,784,400 2,270 5.250%, 12/01/16 - FGIC Insured 6/13 at 100.00 AAA 2,435,528 7,000 Carmichael Water District, Sacramento County, California, 9/09 at 102.00 AAA 6,989,990 Water Revenue Certificates of Participation, Series 1999, 5.125%, 9/01/29 - MBIA Insured 1,000 Pico Rivera Water Authority, California, Revenue Bonds, 12/11 at 102.00 N/R 996,420 Series 2001A, 6.250%, 12/01/32 San Diego Public Facilities Financing Authority, California, Subordinate Lien Water Revenue Bonds, Series 2002: 2,500 5.000%, 8/01/23 - MBIA Insured 8/12 at 100.00 AAA 2,504,350 8,910 5.000%, 8/01/24 - MBIA Insured 8/12 at 100.00 AAA 8,881,043 San Francisco City and County Public Utilities Commission, California, Clean Water Revenue Refunding Bonds, Series 2003A: 3,315 5.250%, 10/01/18 - MBIA Insured 4/13 at 100.00 AAA 3,502,794 12,000 5.250%, 10/01/19 - MBIA Insured 4/13 at 100.00 AAA 12,584,519 1,600 Sunnyvale Financing Authority, California, Water and 10/11 at 100.00 AAA 1,585,855 Wastewater Revenue Bonds, Series 2001, 5.000%, 10/01/26 - AMBAC Insured - ------------------------------------------------------------------------------------------------------------------------------------ $ 513,810 Total Long-Term Investments (cost $523,832,394) - 155.6% 514,723,236 =============----------------------------------------------------------------------------------------------------------------------- Other Assets Less Liabilities - 0.9% 3,106,097 -------------------------------------------------------------------------------------------------------------------- Preferred Shares, at Liquidation Value - (56.5)% (187,000,000) -------------------------------------------------------------------------------------------------------------------- Net Assets Applicable to Common Shares - 100% $330,829,333 ==================================================================================================================== (1) All percentages shown in the Portfolio of Investments are based on net assets applicable to Common shares. * Optional Call Provisions (not covered by the report of independent auditors): Dates (month and year) and prices of the earliest optional call or redemption. There may be other call provisions at varying prices at later dates. ** Ratings (not covered by the report of independent auditors): Using the higher of Standard & Poor's or Moody's rating. N/R Investment is not rated. (WI) Security purchased on a when-issued basis. See accompanying notes to financial statements. 37 Nuveen Insured California Dividend Advantage Municipal Fund (NKL) Portfolio of INVESTMENTS August 31, 2003 PRINCIPAL OPTIONAL CALL MARKET AMOUNT (000) DESCRIPTION(1) PROVISIONS* RATINGS** VALUE - ------------------------------------------------------------------------------------------------------------------------------------ CONSUMER STAPLES - 2.4% $ 5,500 Golden State Tobacco Securitization Corporation, California, 6/13 at 100.00 A- $ 5,254,315 Tobacco Settlement Asset-Backed Revenue Bonds, Series 2003A-2, 7.900%, 6/01/42 - ------------------------------------------------------------------------------------------------------------------------------------ EDUCATION AND CIVIC ORGANIZATIONS - 10.8% 3,070 California Educational Facilities Authority, Revenue Bonds, 3/09 at 101.00 Aa3 3,203,207 Claremont University Center, Series 1999B, 5.250%, 3/01/18 1,675 California Educational Facilities Authority, Revenue Bonds, 10/12 at 100.00 A2 1,679,121 University of San Diego, Series 2002A, 5.250%, 10/01/30 9,000 California State University, Systemwide Revenue Bonds, 11/12 at 100.00 AAA 9,012,420 Series 2002A, 5.125%, 11/01/26 - AMBAC Insured 1,000 California Statewide Community Development Authority, 8/12 at 100.00 A 1,010,840 Student Housing Revenue Bonds, EAH - Irvine East Campus Apartments LLC Project, Series 2002A, 5.500%, 8/01/22 - ACA Insured 9,000 University of California, Revenue Bonds, Multiple Purpose 9/08 at 101.00 Aa2 9,054,900 Projects, Series 2000K, 5.300%, 9/01/30 - ------------------------------------------------------------------------------------------------------------------------------------ HEALTHCARE - 7.2% 5,000 ABAG Finance Authority for Non-Profit Corporations, 4/12 at 100.00 BBB 5,093,550 California, Insured Revenue Bonds, Sansum-Santa Barbara Medical Foundation Clinic, Series 2002A, 5.600%, 4/01/26 California Health Facilities Financing Authority, Revenue Bonds, Cedars-Sinai Medical Center, Series 1999A: 2,500 6.125%, 12/01/30 12/09 at 101.00 A3 2,631,100 4,600 6.250%, 12/01/34 12/09 at 101.00 A3 4,863,902 3,700 California Health Facilities Financing Authority, Revenue 3/13 at 100.00 A 3,371,588 Bonds, Adventist Health System/West, Series 2003A, 5.000%, 3/01/28 - ------------------------------------------------------------------------------------------------------------------------------------ HOUSING/MULTIFAMILY - 0.9% 1,905 Los Angeles, California, Multifamily Housing Revenue Bonds, 7/11 at 102.00 AAA 1,961,064 GNMA Mortgage-Backed Securities Program, Park Plaza West Senior Apartments Project, Series 2001B, 5.300%, 1/20/21 (Alternative Minimum Tax) - ------------------------------------------------------------------------------------------------------------------------------------ HOUSING/SINGLE FAMILY - 2.5% 5,655 California Housing Finance Agency, Home Mortgage Revenue 2/09 at 101.50 AAA 5,629,553 Bonds, Series 1998E, 5.250%, 2/01/33 (Alternative Minimum Tax) - AMBAC Insured - ------------------------------------------------------------------------------------------------------------------------------------ LONG-TERM CARE - 1.3% 3,000 ABAG Finance Authority for Nonprofit Corporations, 11/12 at 100.00 BBB 2,980,650 California, Insured Senior Living Revenue Bonds, Odd Fellows Home of California, Series 2003A, 5.200%, 11/15/22 - ------------------------------------------------------------------------------------------------------------------------------------ TAX OBLIGATION/GENERAL - 36.7% 5,920 Cajon Valley Union School District, San Diego County, 8/10 at 102.00 AAA 5,923,966 California, General Obligation Bonds, Series 2002B, 5.125%, 8/01/32 - MBIA Insured 9,000 State of California, General Obligation Refunding Bonds, 2/12 at 100.00 AAA 8,994,240 Series 2002, 5.000%, 2/01/22 - MBIA Insured 4,300 State of California, General Obligation Bonds, 8/13 at 100.00 A3 4,243,240 Series 2003, 5.000%, 2/01/21 1,490 Campbell Union High School District, Santa Clara County, 8/11 at 102.00 Aaa 1,466,428 California, General Obligation Bonds, Series 2003, 5.000%, 8/01/32 - FGIC Insured 1,500 Centinela Valley Union High School District, Los Angeles No Opt. Call AAA 1,565,670 County, California, General Obligation Bonds, Series 2002A, 5.250%, 2/01/26 - MBIA Insured 2,415 El Monte Union High School District, Los Angeles County, 6/13 at 100.00 AAA 2,386,092 California, General Obligation Bonds, Series 2003A, 5.000%, 6/01/28 - FSA Insured 38 PRINCIPAL OPTIONAL CALL MARKET AMOUNT (000) DESCRIPTION(1) PROVISIONS* RATINGS** VALUE - ------------------------------------------------------------------------------------------------------------------------------------ TAX OBLIGATION/GENERAL (continued) $ 10,000 Fremont Unified School District, Alameda County, 8/12 at 101.00 AAA $ 9,927,200 California, General Obligation Bonds, Series 2002A, 5.000%, 8/01/25 - FSA Insured 2,070 Fresno Unified School District, Fresno County, California, 8/10 at 102.00 AAA 2,081,696 General Obligation Bonds, Election of 1995, Series 2002G, 5.125%, 8/01/26 - FSA Insured Fresno Unified School District, Fresno County, California, General Obligation Bonds, Election of 2001, Series 2002B: 1,135 5.125%, 8/01/23 - FGIC Insured 8/10 at 102.00 AAA 1,147,099 1,190 5.125%, 8/01/24 - FGIC Insured 8/10 at 102.00 AAA 1,198,425 1,245 5.125%, 8/01/25 - FGIC Insured 8/10 at 102.00 AAA 1,250,254 1,255 5.125%, 8/01/26 - FGIC Insured 8/10 at 102.00 AAA 1,262,091 5,000 Los Angeles Unified School District, California, General 7/12 at 100.00 AAA 5,017,300 Obligation Bonds, Election of 1997, Series 2002E, 5.125%, 1/01/27 - MBIA Insured 4,700 Los Angeles Unified School District, California, General 7/13 at 100.00 AAA 4,726,931 Obligation Bonds, Series 2003A, 5.000%, 7/01/22 - FSA Insured 1,500 Madera Unified School District, Madera County, California, 8/12 at 100.00 AAA 1,482,045 General Obligation Bonds, Series 2002, 5.000%, 8/01/28 - FSA Insured 1,155 Montara Sanitary District, California, General Obligation 8/11 at 101.00 AAA 1,141,175 Bonds, Series 2003, 5.000%, 8/01/28 - FGIC Insured 2,500 Oakland Unified School District, Alameda County, California, 8/12 at 100.00 AAA 2,565,250 General Obligation Bonds, Series 2002, 5.250%, 8/01/21 - FGIC Insured 3,300 Peralta Community College District, Alameda County, 8/09 at 102.00 AAA 3,248,586 California, General Obligation Bonds, Election of 2000, Series 2001A, 5.000%, 8/01/31 - FGIC Insured 3,250 San Diego Unified School District, San Diego County, 7/11 at 102.00 AAA 3,268,622 California, General Obligation Bonds, Election of 1998, Series 2001C, 5.000%, 7/01/22 - FSA Insured 3,500 San Mateo County Community College District, California, 9/12 at 100.00 AAA 3,469,270 General Obligation Bonds, Series 2002A, 5.000%, 9/01/26 - FGIC Insured 2,980 Santa Clarita Community College District, Los Angeles 8/11 at 101.00 AAA 2,990,460 County, California, General Obligation Bonds, Series 2002, 5.125%, 8/01/26 - FGIC Insured 2,460 Vacaville Unified School District, Solano County, California, 8/11 at 101.00 AAA 2,438,352 General Obligation Bonds, Series 2002, 5.000%, 8/01/26 - FSA Insured 10,000 Vista Unified School District, San Diego County, California, 8/12 at 100.00 AAA 10,017,400 General Obligation Bonds, Series 2002A, 5.000%, 8/01/23 - FSA Insured - ------------------------------------------------------------------------------------------------------------------------------------ TAX OBLIGATION/LIMITED - 39.8% 6,895 Brea and Olinda Unified School District, Orange County, 8/11 at 101.00 AAA 6,904,515 California, Certificates of Participation Refunding, Series 2002A, 5.125%, 8/01/26 - FSA Insured 2,290 Burbank Public Financing Authority, California, Revenue 12/13 at 100.00 AAA 2,407,569 Refunding Bonds, Golden State Redevelopment Project, Series 2003A, 5.250%, 12/01/19 - AMBAC Insured 7,035 Corona-Norco Unified School District, Riverside County, 9/13 at 100.00 AAA 6,950,861 California, Special Tax Bonds, Community Facilities District 98-1, Series 2003, 5.000%, 9/01/28 (WI, settling 9/10/03) - MBIA Insured 3,145 Culver City Redevelopment Agency, California, Tax Allocation 5/11 at 101.00 AAA 3,151,321 Revenue Bonds, Redevelopment Project, Series 2002A, 5.125%, 11/01/25 - MBIA Insured 1,020 Desert Sands Unified School District, Riverside County, 3/12 at 101.00 AAA 1,035,810 California, Refunding Certificates of Participation, Series 2002, 5.000%, 3/01/20 - MBIA Insured 8,720 El Monte, California, Senior Lien Certificates of Participation, 1/11 at 100.00 AAA 8,802,055 Department of Public Services Facility - Phase II, Series 2001, 5.000%, 1/01/21 - AMBAC Insured 6,615 Inglewood Redevelopment Agency, California, Tax No Opt. Call AAA 6,907,251 Allocation Refunding Bonds, Merged Area Redevelopment Project, Series 1998A, 5.250%, 5/01/23 - AMBAC Insured 1,400 Irvine Assessment District, California, Limited Obligation 3/04 at 103.00 N/R 1,351,532 Improvement Bonds, Assessment District 00-18, Group 3, Series 2003, 5.550%, 9/02/26 3,500 La Quinta Redevelopment Agency, California, Tax Allocation 9/11 at 102.00 AAA 3,477,775 Bonds, Project Area 1, Series 2001, 5.100%, 9/01/31 - AMBAC Insured 39 Nuveen Insured California Dividend Advantage Municipal Fund (NKL) (continued) Portfolio of INVESTMENTS August 31, 2003 PRINCIPAL OPTIONAL CALL MARKET AMOUNT (000) DESCRIPTION(1) PROVISIONS* RATINGS** VALUE - ------------------------------------------------------------------------------------------------------------------------------------ TAX OBLIGATION/LIMITED (continued) $ 3,400 La Quinta Redevelopment Agency, California, Tax Allocation 9/12 at 102.00 AAA $ 3,409,996 Bonds, Project Area 1, Series 2002, 5.000%, 9/01/22 - AMBAC Insured 1,460 City of Los Angeles, California, Certificates of Participation, 6/13 at 100.00 AAA 1,423,471 Municipal Improvement Corporation, Series 2003AW, 5.000%, 6/01/33 - AMBAC Insured 7,000 Los Angeles, California, Certificates of Participation, Real 4/12 at 100.00 AAA 7,057,540 Property Acquisition Program, Series 2002, 5.200%, 4/01/27 - AMBAC Insured 4,690 Los Angeles County Metropolitan Transportation Authority, 7/08 at 101.00 AAA 4,646,008 California, Proposition C Sales Tax Revenue Refunding Bonds, Second Senior Lien, Series 1998A, 5.000%, 7/01/23 - AMBAC Insured 8,470 Ontario Redevelopment Financing Authority, California, 8/11 at 101.00 AAA 8,551,397 Lease Revenue Bonds, Capital Projects, Series 2001, 5.200%, 8/01/29 - AMBAC Insured 5,000 Palm Desert Financing Authority, California, Tax Allocation 4/12 at 102.00 AAA 4,944,450 Revenue Refunding Bonds, Project Area 1, Series 2002, 5.000%, 4/01/25 - MBIA Insured 4,475 Riverside County, California, Asset Leasing Corporate 6/12 at 101.00 AAA 4,562,397 Leasehold Revenue Bonds, Riverside County Hospital Project, Series 1997B, 5.000%, 6/01/19 - MBIA Insured 3,175 San Buenaventura Public Facilities Financing Authority, 2/11 at 101.00 AAA 3,211,322 California, Certificates of Participation, Series 2001C, 5.250%, 2/01/31 - AMBAC Insured 3,730 San Diego Redevelopment Agency, California, Subordinate 9/09 at 101.00 Baa2 3,602,024 Tax Increment and Parking Revenue Bonds, Centre City Project, Series 2003B, 5.250%, 9/01/26 4,000 San Jose Financing Authority, California, Lease Revenue 9/11 at 100.00 AAA 4,088,640 Refunding Bonds, Convention Center Project, Series 2001F, 5.000%, 9/01/19 - MBIA Insured 2,160 Temecula Redevelopment Agency, California, Tax Allocation 8/08 at 102.00 AAA 2,160,907 Revenue Bonds, Redevelopment Project 1, Series 2002, 5.125%, 8/01/27 - MBIA Insured - ------------------------------------------------------------------------------------------------------------------------------------ TRANSPORTATION - 6.5% 5,000 California Infrastructure and Economic Development Bank, 7/13 at 100.00 AAA 4,901,650 Revenue Bonds, Bay Area Toll Bridges, First Lien, Series 2003A, 5.000%, 7/01/36 - AMBAC Insured 7,500 Foothill-Eastern Transportation Corridor Agency, California, 1/14 at 101.00 BBB- 4,973,925 Toll Road Refunding Revenue Bonds, Series 1999, 0.000%, 1/15/29 San Francisco City and County Airports Commission, California, Revenue Bonds, San Francisco International Airport, Second Series, Issue 29A: 2,185 5.250%, 5/01/16 (Alternative Minimum Tax) - FGIC Insured 5/13 at 100.00 AAA 2,262,786 2,300 5.250%, 5/01/17 (Alternative Minimum Tax) - FGIC Insured 5/13 at 100.00 AAA 2,363,940 - ------------------------------------------------------------------------------------------------------------------------------------ UTILITIES - 21.6% 9,000 Anaheim Public Financing Authority, California, 10/12 at 100.00 AAA 8,900,190 Electric System Distribution Facilities Revenue Bonds, Series 2002A, 5.000%, 10/01/27 - FSA Insured 10,000 California Pollution Control Financing Authority, Pollution 4/11 at 102.00 AAA 10,538,500 Control Revenue Refunding Bonds, Pacific Gas and Electric Company, Series 1996A Remarketed, 5.350%, 12/01/16 (Alternative Minimum Tax) - MBIA Insured 6,000 California Department of Water Resources, Power Supply 5/12 at 101.00 A3 6,058,800 Revenue Bonds, Series 2002A, 5.125%, 5/01/18 3,000 Los Angeles Department of Water and Power, California, 7/11 at 100.00 AAA 3,095,250 Power System Revenue Bonds, Series 2001A-1, 5.250%, 7/01/21 - FSA Insured 5,000 Los Angeles Department of Water and Power, California, 7/13 at 100.00 AAA 4,923,400 Power System Revenue Bonds, Series 2003A-2, 5.000%, 7/01/30 - MBIA Insured 6,000 Northern California Power Agency, Revenue Refunding 7/08 at 101.00 AAA 6,037,980 Bonds, Hydroelectric Project 1, Series 1998A, 5.200%, 7/01/32 - MBIA Insured 3,000 Sacramento Municipal Utility District, California, Electric 8/11 at 100.00 AAA 2,964,090 Revenue Bonds, Series 2001N, 5.000%, 8/15/28 - MBIA Insured 5,630 Southern California Public Power Authority, Subordinate 7/12 at 100.00 AAA 5,647,791 Revenue Refunding Bonds, Transmission Project, Series 2002A, 4.750%, 7/01/19 - FSA Insured 40 PRINCIPAL OPTIONAL CALL MARKET AMOUNT (000) DESCRIPTION(1) PROVISIONS* RATINGS** VALUE - ------------------------------------------------------------------------------------------------------------------------------------ WATER AND SEWER - 18.3% $ 3,000 California Department of Water Resources, Water System 12/12 at 100.00 AAA $ 3,040,980 Revenue Bonds, Central Valley Project, Series 2002X, 5.150%, 12/01/23 - FGIC Insured 6,100 East Bay Municipal Utility District, Alameda and Contra 6/11 at 100.00 AAA 6,046,320 Costa Counties, California, Water System Subordinated Revenue Bonds, Series 2001, 5.000%, 6/01/26 - MBIA Insured 9,000 Eastern Municipal Water District, California, Water and 7/11 at 100.00 AAA 8,823,420 Sewer Revenue Certificates of Participation, Series 2001B, 5.000%, 7/01/30 - FGIC Insured 4,500 Los Angeles County Sanitation Districts Financing Authority, 10/13 at 100.00 AAA 4,508,640 California, Capital Projects Revenue Bonds, Senior Lien, Series 2003A, 5.000%, 10/01/23 - FSA Insured 4,500 Southern California Metropolitan Water District, Water 1/08 at 101.00 AAA 4,411,710 Revenue Bonds, Series 1997A, 5.000%, 7/01/30 - MBIA Insured 12,000 Orange County Sanitation District, California, Certificates 8/13 at 100.00 AAA 11,754,960 of Participation, Series 2003, 5.000%, 2/01/33 - FGIC Insured 2,000 Pico Rivera Water Authority, California, Revenue Refunding No Opt. Call AAA 2,193,419 Bonds, Water System Project, Series 1999A, 5.500%, 5/01/19 - MBIA Insured - ------------------------------------------------------------------------------------------------------------------------------------ $ 331,365 Total Long-Term Investments (cost $325,776,796) - 148.0% 329,652,594 =============----------------------------------------------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS - 0.9% 2,100 Stockton, California, Health Facilities Revenue Bonds, Dameron VMIG-1 2,100,000 Hospital Association, Variable Rate Demand Obligations, Series 2002A, 0.750%, 12/01/32+ - ------------------------------------------------------------------------------------------------------------------------------------ $ 2,100 Total Short-Term Investments (cost $2,100,000) 2,100,000 =============----------------------------------------------------------------------------------------------------------------------- Total Investments (cost $327,876,796) - 148.9% 331,752,594 -------------------------------------------------------------------------------------------------------------------- Other Assets Less Liabilities - 4.1% 8,997,914 -------------------------------------------------------------------------------------------------------------------- Preferred Shares, at Liquidation Value - (53.0)% (118,000,000) -------------------------------------------------------------------------------------------------------------------- Net Assets Applicable to Common Shares - 100% $222,750,508 ==================================================================================================================== At least 80% of the Fund's net assets (including net assets applicable to Preferred shares) are invested in municipal securities that are either covered by Original Issue Insurance, Secondary Market Insurance or Portfolio Insurance which ensures the timely payment of principal and interest. Up to 20% of the Fund's net assets (including net assets applicable to Preferred shares) may be invested in municipal securities that are (i) either backed by an escrow or trust containing sufficient U.S. Government or U.S. Government agency securities (also ensuring the timely payment of principal and interest), or (ii) municipal bonds that are rated, at the time of investment, within the four highest grades (Baa or BBB or better by Moody's, S&P or Fitch) or unrated but judged to be of comparable quality by the Adviser. (1) All percentages shown in the Portfolio of Investments are based on net assets applicable to Common shares. * Optional Call Provisions (not covered by the report of independent auditors): Dates (month and year) and prices of the earliest optional call or redemption. There may be other call provisions at varying prices at later dates. ** Ratings (not covered by the report of independent auditors): Using the higher of Standard & Poor's or Moody's rating. N/R Investment is not rated. (WI) Security purchased on a when-issued basis. + Security has a maturity of more than one year, but has variable rate and demand features which qualify it as a short-term security. The rate disclosed is that currently in effect. This rate changes periodically based on market conditions or a specified market index. See accompanying notes to financial statements. 41 Nuveen Insured California Tax-Free Advantage Municipal Fund (NKX) Portfolio of INVESTMENTS August 31, 2003 PRINCIPAL OPTIONAL CALL MARKET AMOUNT (000) DESCRIPTION(1) PROVISIONS* RATINGS** VALUE - ------------------------------------------------------------------------------------------------------------------------------------ CONSUMER STAPLES - 2.4% $ 2,000 Golden State Tobacco Securitization Corporation, California, 6/13 at 100.00 A- $ 1,910,660 Tobacco Settlement Asset-Backed Revenue Bonds, Series 2003A-2, 7.900%, 6/01/42 - ------------------------------------------------------------------------------------------------------------------------------------ HEALTHCARE - 13.1% 2,700 California Health Facilities Financing Authority, Revenue 12/09 at 101.00 A3 2,854,899 Bonds, Cedars-Sinai Medical Center, Series 1999A, 6.250%, 12/01/34 1,500 California Health Facilities Financing Authority, Revenue 11/08 at 101.00 AAA 1,454,670 Bonds, USCF - Stanford Health Care, 1998 Series A, 5.000%, 11/15/31 - FSA Insured California Health Facilities Financing Authority, Revenue Bonds, Adventist Health System/West, Series 2003A: 1,235 5.000%, 3/01/25 3/13 at 100.00 A 1,139,102 1,500 5.000%, 3/01/28 3/13 at 100.00 A 1,366,860 1,800 California Infrastructure and Economic Development Bank, 8/11 at 102.00 A 1,782,504 Revenue Bonds, Kaiser Hospital Assistance I-LLC, Series 2001A, 5.550%, 8/01/31 2,000 California Statewide Community Development Authority, 6/13 at 100.00 AAA 2,026,500 Hospital Revenue Bonds, Monterey Peninsula Hospital, Series 2003B, 5.250%, 6/01/23 - FSA Insured - ------------------------------------------------------------------------------------------------------------------------------------ LONG-TERM CARE - 3.6% 1,000 ABAG Finance Authority for Nonprofit Corporations, 11/12 at 100.00 BBB 993,550 California, Insured Senior Living Revenue Bonds, Odd Fellows Home of California, Series 2003A, 5.200%, 11/15/22 2,000 California Health Facilities Financing Authority, Revenue 1/13 at 100.00 BBB 1,957,380 Bonds, Northern California Retired Officers Community Corporation - Paradise Valley Estates, Series 2002, 5.250%, 1/01/26 - ------------------------------------------------------------------------------------------------------------------------------------ TAX OBLIGATION/GENERAL - 42.5% 1,000 Berryessa Union School District, Santa Clara County, 8/12 at 100.00 AAA 1,011,080 California, General Obligation Bonds, Series 2003C, 5.000%, 8/01/21 - FSA Insured 2,000 Butte-Glenn Community College District, Butte and Glenn 8/12 at 101.00 Aaa 1,982,400 Counties, California, General Obligation Bonds, Series 2002A, 5.000%, 8/01/26 - MBIA Insured 2,250 State of California, General Obligation Bonds, 2/13 at 100.00 A3 2,192,333 Series 2003, 5.250%, 2/01/33 State of California, General Obligation Refunding Bonds, Series 2002: 1,500 5.000%, 2/01/12 No Opt. Call A3 1,569,600 3,750 5.000%, 4/01/27 - AMBAC Insured 4/12 at 100.00 AAA 3,690,113 3,000 5.250%, 4/01/30 - XLCA Insured 4/12 at 100.00 AAA 3,013,230 450 Fremont Unified School District, Alameda County, California, 8/12 at 101.00 AAA 446,724 General Obligation Bonds, Series 2002A, 5.000%, 8/01/25 - FSA Insured 2,000 City of Los Angeles, California, General Obligation Bonds, 9/12 at 100.00 AAA 2,010,800 Series 2002A, 5.000%, 9/01/22 - MBIA Insured 10,750 Los Angeles Unified School District, Los Angeles County, 7/13 at 100.00 AAA 10,811,597 California, General Obligation Bonds, Series 2003A, 5.000%, 7/01/22 - FSA Insured 3,000 San Diego Unified School District, California, General 7/10 at 100.00 AAA 3,034,290 Obligation Bonds, Election of 1998, Series 2000B, 5.125%, 7/01/22 - MBIA Insured 3,855 San Rafael City High School District, Marin County, California, 8/12 at 100.00 AAA 3,808,856 General Obligation Bonds, Series 2003A, 5.000%, 8/01/28 - FSA Insured 905 San Rafael Elementary School District, Marin County, 8/12 at 100.00 AAA 894,167 California, General Obligation Bonds, Series 2003C, 5.000%, 8/01/28 - MBIA Insured 42 PRINCIPAL OPTIONAL CALL MARKET AMOUNT (000) DESCRIPTION(1) PROVISIONS* RATINGS** VALUE - ------------------------------------------------------------------------------------------------------------------------------------ TAX OBLIGATION/LIMITED - 56.3% $ 2,025 Burbank Public Financing Authority, California, Revenue 12/13 at 100.00 AAA $ 2,087,208 Refunding Bonds, Golden State Redevelopment Project, Series 2003A, 5.250%, 12/01/22 - AMBAC Insured 4,000 California State Public Works Board, Lease Revenue Bonds, 12/12 at 100.00 AAA 3,953,720 Department of General Services, Capital East End, Series 2002A, 5.000%, 12/01/27 - AMBAC Insured 600 Irvine Assessment District, California, Limited Obligation 3/04 at 103.00 N/R 579,228 Improvement Bonds, Assessment District 00-18, Group 3, Series 2003, 5.550%, 9/02/26 5,540 Irvine Public Facilities and Infrastructure Authority, 9/03 at 103.00 AAA 5,568,143 California, Assessment Revenue Bonds, Series 2003C, 5.000%, 9/02/21 - AMBAC Insured 9,840 City of Los Angeles, California, Certificates of Participation, 6/13 at 100.00 AAA 9,593,803 Municipal Improvement Corporation, Series 2003AW, 5.000%, 6/01/33 - AMBAC Insured 1,770 Los Angeles Unified School District, Los Angeles County, 10/12 at 100.00 AAA 1,743,114 California, Certificates of Participation, Series 2002C, Administration Building Project II, 5.000%, 10/01/27 - AMBAC Insured 1,500 Los Osos Community Services Wastewater Assessment 9/10 at 103.00 AAA 1,475,940 District No. 1, California, Improvement Bonds, Series 2002, 5.000%, 9/02/33 - MBIA Insured 1,165 Poway, California, Housing Revenue Bonds, Poinsettia 5/13 at 102.00 BBB+ 1,118,412 Mobile Home Park Project, Series 2003, 5.000%, 5/01/23 3,350 Puerto Rico Municipal Finance Agency, General Obligation 8/12 at 100.00 AAA 3,514,016 Bonds, 2002 Series A, 5.250%, 8/01/20 - FSA Insured San Buenaventura, California, Certificates of Participation, Golf Course Financing Project, Series 2002D: 3,000 5.000%, 2/01/27 - AMBAC Insured 2/12 at 100.00 AAA 2,960,340 3,300 5.000%, 2/01/32 - AMBAC Insured 2/12 at 100.00 AAA 3,233,637 2,405 San Diego Redevelopment Agency, California, Subordinate 9/11 at 101.00 Aaa 2,376,236 Lien Tax Allocation Bonds, Centre City Project, Series 2003A, 5.000%, 9/01/28 - MBIA Insured 1,200 San Diego Redevelopment Agency, California, Subordinate 9/09 at 101.00 Baa2 1,158,828 Tax Increment and Parking Revenue Bonds, Centre City Project, Series 2003B, 5.250%, 9/01/26 1,220 San Jose Redevelopment Agency, California, Tax Allocation 8/10 at 101.00 AAA 1,195,271 Bonds, Merged Area Redevelopment Project, Series 2002, 5.000%, 8/01/32 - MBIA Insured 2,770 City of San Jose Financing Authority, California, Lease Revenue 6/12 at 100.00 AAA 2,726,179 Bonds, Civic Center Project, Series 2002B Refunding, 5.000%, 6/01/32 - AMBAC Insured 2,390 Solano County, California, Certificates of Participation, 11/12 at 100.00 AAA 2,434,239 Series 2002, 5.250%, 11/01/24 - MBIA Insured - ------------------------------------------------------------------------------------------------------------------------------------ TRANSPORTATION - 21.9% 5,480 Bay Area Government Association, California, BART SFO 8/12 at 100.00 AAA 5,409,856 Extension Airport Premium Fare Revenue Bonds, Series 2002A, 5.000%, 8/01/26 - AMBAC Insured 2,000 Foothill-Eastern Transportation Corridor Agency, California, 1/10 at 100.00 BBB- 1,779,160 Toll Road Revenue Bonds, Series 1995A, 5.000%, 1/01/35 3,135 San Francisco City and County Airports Commission, 5/08 at 101.00 AAA 3,124,780 California, Revenue Bonds, San Francisco International Airport, Second Series, Issue 16B, 5.000%, 5/01/24 - FSA Insured 1,300 San Francisco City and County Airports Commission, 5/10 at 101.00 AAA 1,278,784 California, Revenue Bonds, San Francisco International Airport, Second Series, Issue 26B, 5.000%, 5/01/25 - FGIC Insured 6,000 San Francisco City and County Airports Commission, 5/13 at 100.00 AAA 6,212,520 California, Revenue Bonds, San Francisco International Airport, Second Series, Issue 29B, 5.125%, 5/01/19 - FGIC Insured - ------------------------------------------------------------------------------------------------------------------------------------ UTILITIES - 3.9% 3,055 Los Angeles Department of Water and Power, California, 7/11 at 100.00 AAA 3,132,505 Power System Revenue Bonds, Series 2001A-1, 5.250%, 7/01/22 - FSA Insured 43 Nuveen Insured California Tax-Free Advantage Municipal Fund (NKX) (continued) Portfolio of INVESTMENTS August 31, 2003 PRINCIPAL OPTIONAL CALL MARKET AMOUNT (000) DESCRIPTION(1) PROVISIONS* RATINGS** VALUE - ------------------------------------------------------------------------------------------------------------------------------------ WATER AND SEWER - 8.6% $ 1,495 Southern California Metropolitan Water District, Water 1/08 at 101.00 AAA $ 1,465,668 Revenue Bonds, Series 1997A, 5.000%, 7/01/30 - MBIA Insured San Diego Public Facilities Financing Authority, California, Subordinate Lien Water Revenue Bonds, Series 2002: 3,000 5.000%, 8/01/22 - MBIA Insured 8/12 at 100.00 AAA 3,015,960 2,500 5.000%, 8/01/23 - MBIA Insured 8/12 at 100.00 AAA 2,504,349 - ------------------------------------------------------------------------------------------------------------------------------------ $ 124,235 Total Long-Term Investments (cost $125,138,384) - 152.3% 123,593,211 =============----------------------------------------------------------------------------------------------------------------------- Other Assets Less Liabilities - 3.2% 2,547,365 -------------------------------------------------------------------------------------------------------------------- Preferred Shares, at Liquidation Value - (55.5)% (45,000,000) -------------------------------------------------------------------------------------------------------------------- Net Assets Applicable to Common Shares - 100% $81,140,576 ==================================================================================================================== At least 80% of the Fund's net assets (including net assets applicable to Preferred shares) are invested in municipal securities that are either covered by Original Issue Insurance, Secondary Market Insurance or Portfolio Insurance which ensures the timely payment of principal and interest. Up to 20% of the Fund's net assets (including net assets applicable to Preferred shares) may be invested in municipal securities that are (i) either backed by an escrow or trust containing sufficient U.S. Government or U.S. Government agency securities (also ensuring the timely payment of principal and interest), or (ii) municipal bonds that are rated, at the time of investment, within the four highest grades (Baa or BBB or better by Moody's, S&P or Fitch) or unrated but judged to be of comparable quality by the Adviser. (1) All percentages shown in the Portfolio of Investments are based on net assets applicable to Common shares. * Optional Call Provisions (not covered by the report of independent auditors): Dates (month and year) and prices of the earliest optional call or redemption. There may be other call provisions at varying prices at later dates. ** Ratings (not covered by the report of independent auditors): Using the higher of Standard & Poor's or Moody's rating. N/R Investment is not rated. See accompanying notes to financial statements. 44 Statement of ASSETS AND LIABILITIES August 31, 2003 INSURED INSURED CALIFORNIA CALIFORNIA CALIFORNIA CALIFORNIA PREMIUM DIVIDEND PREMIUM INCOME PREMIUM INCOME 2 INCOME ADVANTAGE (NPC) (NCL) (NCU) (NAC) - ------------------------------------------------------------------------------------------------------------------------------------ ASSETS Investments, at market value (cost $143,352,848, $267,897,010, $120,449,908 and $509,460,322, respectively) $152,791,340 $283,737,849 $121,271,882 $521,457,420 Cash 349,460 390,793 670,954 286,274 Receivables: Interest 2,121,224 4,082,793 1,628,541 7,277,848 Investments sold -- 13,083,700 10,300 2,433,150 Other assets 10,598 30,864 3,457 37,590 - ------------------------------------------------------------------------------------------------------------------------------------ Total assets 155,272,622 301,325,999 123,585,134 531,492,282 - ------------------------------------------------------------------------------------------------------------------------------------ LIABILITIES Payable for investments purchased 9,684,494 20,891,454 1,574,025 9,236,901 Accrued expenses: Management fees 79,806 152,258 67,129 147,339 Other 79,179 93,354 79,405 177,122 Preferred share dividends payable 2,160 8,273 5,293 12,421 - ------------------------------------------------------------------------------------------------------------------------------------ Total liabilities 9,845,639 21,145,339 1,725,852 9,573,783 - ------------------------------------------------------------------------------------------------------------------------------------ Preferred shares, at liquidation value 45,000,000 95,000,000 43,000,000 175,000,000 - ------------------------------------------------------------------------------------------------------------------------------------ Net assets applicable to Common shares $100,426,983 $185,180,660 $ 78,859,282 $346,918,499 ==================================================================================================================================== Common shares outstanding 6,441,830 12,681,101 5,774,216 23,412,013 ==================================================================================================================================== Net asset value per Common share outstanding (net assets applicable to Common shares, divided by Common shares outstanding) $ 15.59 $ 14.60 $ 13.66 $ 14.82 ==================================================================================================================================== NET ASSETS APPLICABLE TO COMMON SHARES CONSIST OF: - ------------------------------------------------------------------------------------------------------------------------------------ Common shares, $.01 par value per share $ 64,418 $ 126,811 $ 57,742 $ 234,120 Paid-in surplus 89,139,083 175,681,008 80,188,301 332,500,600 Undistributed (Over-distribution of) net investment income 1,458,167 2,165,243 930,997 4,145,773 Accumulated net realized gain (loss) from investments 326,823 (8,633,241) (3,139,732) (1,959,092) Net unrealized appreciation (depreciation) of investments 9,438,492 15,840,839 821,974 11,997,098 - ------------------------------------------------------------------------------------------------------------------------------------ Net assets applicable to Common shares $100,426,983 $185,180,660 $ 78,859,282 $346,918,499 ==================================================================================================================================== Authorized shares: Common 200,000,000 200,000,000 Unlimited Unlimited Preferred 1,000,000 1,000,000 Unlimited Unlimited ==================================================================================================================================== See accompanying notes to financial statements. 45 Statement of ASSETS AND LIABILITIES August 31, 2003 (continued) CALIFORNIA CALIFORNIA INSURED INSURED DIVIDEND DIVIDEND CALIFORNIA CALIFORNIA ADVANTAGE 2 ADVANTAGE 3 DIVIDEND TAX-FREE (NVX) (NZH) ADVANTAGE (NKL) ADVANTAGE (NKX) - ------------------------------------------------------------------------------------------------------------------------------------ ASSETS Investments, at market value (cost $311,202,914, $523,832,394, $327,876,796 and $125,138,384, respectively) $311,140,260 $514,723,236 $331,752,594 $123,593,211 Cash 627,484 5,338,943 12,384,632 948,481 Receivables: Interest 4,371,552 7,591,997 3,661,112 1,668,045 Investments sold 7,353,735 -- -- -- Other assets 22,333 7,737 19,702 5,977 - ------------------------------------------------------------------------------------------------------------------------------------ Total assets 323,515,364 527,661,913 347,818,040 126,215,714 - ------------------------------------------------------------------------------------------------------------------------------------ LIABILITIES Payable for investments purchased 3,629,077 9,568,446 6,897,184 -- Accrued expenses: Management fees 96,612 150,053 102,182 36,227 Other 55,266 102,540 56,289 31,319 Preferred share dividends payable 12,052 11,541 11,877 7,592 - ------------------------------------------------------------------------------------------------------------------------------------ Total liabilities 3,793,007 9,832,580 7,067,532 75,138 - ------------------------------------------------------------------------------------------------------------------------------------ Preferred shares, at liquidation value 110,000,000 187,000,000 118,000,000 45,000,000 - ------------------------------------------------------------------------------------------------------------------------------------ Net assets applicable to Common shares $209,722,357 $330,829,333 $222,750,508 $ 81,140,576 ==================================================================================================================================== Common shares outstanding 14,790,660 24,112,833 15,259,759 5,882,285 ==================================================================================================================================== Net asset value per Common share outstanding (net assets applicable to Common shares, divided by Common shares outstanding) $ 14.18 $ 13.72 $ 14.60 $ 13.79 ==================================================================================================================================== NET ASSETS APPLICABLE TO COMMON SHARES CONSIST OF: - ------------------------------------------------------------------------------------------------------------------------------------ Common shares, $.01 par value per share $ 147,907 $ 241,128 $ 152,598 $ 58,823 Paid-in surplus 210,031,314 342,482,133 216,626,387 82,985,669 Undistributed (Over-distribution of) net investment income 1,819,993 1,609,827 236,194 (37,648) Accumulated net realized gain (loss) from investments (2,214,203) (4,394,597) 1,859,531 (321,095) Net unrealized appreciation (depreciation) of investments (62,654) (9,109,158) 3,875,798 (1,545,173) - ------------------------------------------------------------------------------------------------------------------------------------ Net assets applicable to Common shares $209,722,357 $330,829,333 $222,750,508 $ 81,140,576 ==================================================================================================================================== Authorized shares: Common Unlimited Unlimited Unlimited Unlimited Preferred Unlimited Unlimited Unlimited Unlimited ==================================================================================================================================== See accompanying notes to financial statements. 46 Statement of OPERATIONS Year Ended August 31, 2003 INSURED INSURED CALIFORNIA CALIFORNIA CALIFORNIA CALIFORNIA PREMIUM DIVIDEND PREMIUM INCOME PREMIUM INCOME 2 INCOME ADVANTAGE (NPC) (NCL) (NCU) (NAC) - ------------------------------------------------------------------------------------------------------------------------------------ INVESTMENT INCOME $ 7,615,602 $14,813,026 $ 6,587,172 $27,255,530 - ------------------------------------------------------------------------------------------------------------------------------------ EXPENSES Management fees 967,370 1,838,182 817,185 3,382,954 Preferred shares - auction fees 112,687 237,896 107,679 438,227 Preferred shares - dividend disbursing agent fees 10,000 20,000 10,000 20,000 Shareholders' servicing agent fees and expenses 15,250 23,511 10,949 10,671 Custodian's fees and expenses 40,483 68,721 34,001 125,012 Directors'/Trustees' fees and expenses 1,958 3,320 1,699 6,922 Professional fees 12,842 16,810 11,185 21,925 Shareholders' reports - printing and mailing expenses 12,917 23,910 12,226 34,629 Stock exchange listing fees 11,434 16,035 1,288 16,001 Investor relations expense 9,987 19,389 8,873 36,868 Portfolio insurance expense 11,139 4,553 -- -- Other expenses 14,739 20,081 14,858 26,086 - ------------------------------------------------------------------------------------------------------------------------------------ Total expenses before custodian fee credit and expense reimbursement 1,220,806 2,292,408 1,029,943 4,119,295 Custodian fee credit (10,033) (8,295) (6,506) (10,038) Expense reimbursement -- -- -- (1,603,385) - ------------------------------------------------------------------------------------------------------------------------------------ Net expenses 1,210,773 2,284,113 1,023,437 2,505,872 - ------------------------------------------------------------------------------------------------------------------------------------ Net investment income 6,404,829 12,528,913 5,563,735 24,749,658 - ------------------------------------------------------------------------------------------------------------------------------------ REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENTS Net realized gain (loss) from investments 524,720 (166,188) 982,095 1,584,946 Change in net unrealized appreciation (depreciation) of investments (3,552,084) (6,281,308) (5,507,976) (12,671,586) - ------------------------------------------------------------------------------------------------------------------------------------ Net gain (loss) from investments (3,027,364) (6,447,496) (4,525,881) (11,086,640) - ------------------------------------------------------------------------------------------------------------------------------------ DISTRIBUTIONS TO PREFERRED SHAREHOLDERS From net investment income (382,478) (863,570) (383,629) (1,616,891) From accumulated net realized gains from investments (42,365) -- -- -- - ------------------------------------------------------------------------------------------------------------------------------------ Decrease in net assets applicable to Common shares from distributions to Preferred shareholders (424,843) (863,570) (383,629) (1,616,891) - ------------------------------------------------------------------------------------------------------------------------------------ Net increase in net assets applicable to Common shares from operations $ 2,952,622 $ 5,217,847 $ 654,225 $12,046,127 ==================================================================================================================================== See accompanying notes to financial statements. 47 Statement of OPERATIONS Year Ended August 31, 2003 (continued) ) CALIFORNIA CALIFORNIA INSURED INSURED DIVIDEND DIVIDEND CALIFORNIA CALIFORNIA ADVANTAGE 2 ADVANTAGE 3 DIVIDEND TAX-FREE (NVX) (NZH) ADVANTAGE (NKL) ADVANTAGE (NKX)* - ------------------------------------------------------------------------------------------------------------------------------------ INVESTMENT INCOME $16,405,530 $ 26,085,990 $16,791,646 $ 4,187,323 - ------------------------------------------------------------------------------------------------------------------------------------ EXPENSES Management fees 2,104,950 3,378,318 2,245,906 602,915 Preferred shares - auction fees 258,982 454,477 293,151 70,039 Preferred shares - dividend disbursing agent fees 20,000 20,000 20,000 6,219 Shareholders' servicing agent fees and expenses 5,089 6,796 3,873 3,053 Custodian's fees and expenses 105,464 142,483 103,375 24,305 Directors'/Trustees' fees and expenses 4,524 6,886 4,920 1,465 Professional fees 15,996 24,378 19,828 13,636 Shareholders' reports - printing and mailing expenses 23,555 43,123 26,196 15,308 Stock exchange listing fees 1,605 2,656 929 675 Investor relations expense 32,450 47,308 36,161 6,871 Portfolio insurance expense -- -- -- -- Other expenses 19,942 23,544 13,430 3,096 - ------------------------------------------------------------------------------------------------------------------------------------ Total expenses before custodian fee credit and expense reimbursement 2,592,557 4,149,969 2,767,769 747,582 Custodian fee credit (9,293) (22,782) (31,947) (12,179) Expense reimbursement (983,334) (1,597,406) (1,051,075) (297,025) - ------------------------------------------------------------------------------------------------------------------------------------ Net expenses 1,599,930 2,529,781 1,684,747 438,378 - ------------------------------------------------------------------------------------------------------------------------------------ Net investment income 14,805,600 23,556,209 15,106,899 3,748,945 - ------------------------------------------------------------------------------------------------------------------------------------ REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENTS Net realized gain (loss) from investments (1,481,214) 2,071,600 2,233,096 (319,256) Change in net unrealized appreciation (depreciation) of investments (7,762,388) (17,764,997) (9,779,462) (1,545,173) - ------------------------------------------------------------------------------------------------------------------------------------ Net gain (loss) from investments (9,243,602) (15,693,397) (7,546,366) (1,864,429) - ------------------------------------------------------------------------------------------------------------------------------------ DISTRIBUTIONS TO PREFERRED SHAREHOLDERS From net investment income (1,015,700) (1,834,161) (1,085,060) (233,784) From accumulated net realized gains from investments (49,489) -- (87,519) -- - ------------------------------------------------------------------------------------------------------------------------------------ Decrease in net assets applicable to Common shares from distributions to Preferred shareholders (1,065,189) (1,834,161) (1,172,579) (233,784) - ------------------------------------------------------------------------------------------------------------------------------------ Net increase in net assets applicable to Common shares from operations $ 4,496,809 $ 6,028,651 $ 6,387,954 $ 1,650,732 ==================================================================================================================================== * For the period November 22, 2002 (commencement of operations) through August 31, 2003. See accompanying notes to financial statements. 48 Statement of CHANGES IN NET ASSETS INSURED CALIFORNIA INSURED CALIFORNIA CALIFORNIA PREMIUM) PREMIUM INCOME (NPC) PREMIUM INCOME 2 (NCL) INCOME (NCU) ---------------------------- ------------------------------ --------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED 8/31/03 8/31/02 8/31/03 8/31/02 8/31/03 8/31/02 - ------------------------------------------------------------------------------------------------------------------------------------ OPERATIONS Net investment income $ 6,404,829 $ 6,729,063 $ 12,528,913 $ 12,715,990 $ 5,563,735 $ 5,735,508 Net realized gain (loss) from investments 524,720 2,870,032 (166,188) 92,173 982,095 709,477 Change in net unrealized appreciation (depreciation) of investments (3,552,084) (2,620,683) (6,281,308) (194,559) (5,507,976) 10,347 Distributions to Preferred Shareholders: From net investment income (382,478) (578,229) (863,570) (1,211,432) (383,629) (583,093) From accumulated net realized gains from investments (42,365) -- -- -- -- -- - ------------------------------------------------------------------------------------------------------------------------------------ Net increase in net assets applicable to Common shares from operations 2,952,622 6,400,183 5,217,847 11,402,172 654,225 5,872,239 - ------------------------------------------------------------------------------------------------------------------------------------ DISTRIBUTIONS TO COMMON SHAREHOLDERS From net investment income (6,218,425) (5,538,554) (11,323,762) (10,503,880) (5,043,780) (4,728,811) From accumulated net realized gains from investments (490,993) -- -- -- -- -- - ------------------------------------------------------------------------------------------------------------------------------------ Decrease in net assets applicable to Common shares from distributions to Common shareholders (6,709,418) (5,538,554) (11,323,762) (10,503,880) (5,043,780) (4,728,811) - ------------------------------------------------------------------------------------------------------------------------------------ CAPITAL SHARE TRANSACTIONS Common shares: Net proceeds from sale of shares -- -- -- -- -- -- Net proceeds from shares issued to shareholders due to reinvestment of distributions 47,136 207,189 416,645 338,627 -- 38,176 Preferred shares offering costs -- -- -- -- -- -- - ------------------------------------------------------------------------------------------------------------------------------------ Net increase in net assets applicable to Common shares from capital share transactions 47,136 207,189 416,645 338,627 -- 38,176 - ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in net assets applicable to Common shares (3,709,660) 1,068,818 (5,689,270) 1,236,919 (4,389,555) 1,181,604 Net assets applicable to Common shares at the beginning of period 104,136,643 103,067,825 190,869,930 189,633,011 83,248,837 82,067,233 - ------------------------------------------------------------------------------------------------------------------------------------ Net assets applicable to Common shares at the end of period $100,426,983 $104,136,643 $185,180,660 $190,869,930 $78,859,282 $83,248,837 ==================================================================================================================================== Undistributed (Over-distribution of) net investment income at the end of period $ 1,458,167 $ 1,830,679 $ 2,165,243 $ 1,761,555 $ 930,997 $ 830,638 ==================================================================================================================================== See accompanying notes to financial statements. 49 Statement of CHANGES IN NET ASSETS (continued) CALIFORNIA CALIFORNIA CALIFORNIA DIVIDEND ADVANTAGE (NAC) DIVIDEND ADVANTAGE 2 (NVX) DIVIDEND ADVANTAGE 3 (NZH) ----------------------------- ------------------------------- ----------------------------- FOR THE PERIOD 9/25/01 (COMMENCEMENT YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED OF OPERATIONS 8/31/03 8/31/02 8/31/03 8/31/02 8/31/03 THROUGH 8/31/02 - ------------------------------------------------------------------------------------------------------------------------------------ OPERATIONS Net investment income $ 24,749,658 $ 24,981,916 $ 14,805,600 $ 15,663,509 $ 23,556,209 $ 20,039,962 Net realized gain (loss) from investments 1,584,946 3,991,908 (1,481,214) 351,147 2,071,600 (6,468,859) Change in net unrealized appreciation (depreciation) of investments (12,671,586) (3,853,349) (7,762,388) (6,268,122) (17,764,997) 8,660,828 Distributions to Preferred Shareholders: From net investment income (1,616,891) (2,424,510) (1,015,700) (1,578,722) (1,834,161) (1,962,036) From accumulated net realized gains from investments -- -- (49,489) -- -- -- - ------------------------------------------------------------------------------------------------------------------------------------ Net increase in net assets applicable to Common shares from operations 12,046,127 22,695,965 4,496,809 8,167,812 6,028,651 20,269,895 - ------------------------------------------------------------------------------------------------------------------------------------ DISTRIBUTIONS TO COMMON SHAREHOLDERS From net investment income (21,948,762) (20,156,545) (13,178,729) (12,867,313) (20,833,487) (17,358,987) From accumulated net realized gains from investments -- -- (430,161) -- -- -- - ------------------------------------------------------------------------------------------------------------------------------------ Decrease in net assets applicable to Common shares from distributions to Common shareholders (21,948,762) (20,156,545) (13,608,890) (12,867,313) (20,833,487) (17,358,987) - ------------------------------------------------------------------------------------------------------------------------------------ CAPITAL SHARE TRANSACTIONS Common shares: Net proceeds from sale of shares -- -- (1,664) -- 171,736 344,509,500 Net proceeds from shares issued to shareholders due to reinvestment of distributions -- 84,644 -- 73,486 -- 79,128 Preferred shares offering costs -- -- 21,719 -- (7,528) (2,129,850) - ------------------------------------------------------------------------------------------------------------------------------------ Net increase in net assets applicable to Common shares from capital share transactions -- 84,644 20,055 73,486 164,208 342,458,778 - ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in net assets applicable to Common shares (9,902,635) 2,624,064 (9,092,026) (4,626,015) (14,640,628) 345,369,686 Net assets applicable to Common shares at the beginning of period 356,821,134 354,197,070 218,814,383 223,440,398 345,469,961 100,275 - ------------------------------------------------------------------------------------------------------------------------------------ Net assets applicable to Common shares at the end of period $346,918,499 $356,821,134 $209,722,357 $218,814,383 $330,829,333 $345,469,961 ==================================================================================================================================== Undistributed (Over-distribution of) net investment income at the end of period $ 4,145,773 $ 2,840,186 $ 1,819,993 $ 1,221,035 $ 1,609,827 $ 718,939 ==================================================================================================================================== See accompanying notes to financial statements. 50 INSURED CALIFORNIA TAX-FREE INSURED CALIFORNIA ADVANTAGE DIVIDEND ADVANTAGE (NKL) (NKX) ----------------------------- --------------- FOR THE FOR THE PERIOD 3/27/02 PERIOD 11/22/02 (COMMENCEMENT (COMMENCEMENT YEAR ENDED OF OPERATIONS) OF OPERATIONS) 8/31/03 THROUGH 8/31/02 THROUGH 8/31/03 - ------------------------------------------------------------------------------------------------------------------------------------ OPERATIONS Net investment income $ 15,106,899 $ 5,170,454 $ 3,748,945 Net realized gain (loss) from investments 2,233,096 486,634 (319,256) Change in net unrealized appreciation (depreciation) of investments (9,779,462) 13,672,712 (1,545,173) Distributions to Preferred Shareholders: From net investment income (1,085,060) (406,088) (233,784) From accumulated net realized gains from investments (87,519) -- -- - ------------------------------------------------------------------------------------------------------------------------------------ Net increase in net assets applicable to Common shares from operations 6,387,954 18,923,712 1,650,732 - ------------------------------------------------------------------------------------------------------------------------------------ DISTRIBUTIONS TO COMMON SHAREHOLDERS From net investment income (13,916,900) (4,638,508) (3,552,809) From accumulated net realized gains from investments (784,735) -- -- - ------------------------------------------------------------------------------------------------------------------------------------ Decrease in net assets applicable to Common shares from distributions to Common shareholders (14,701,635) (4,638,508) (3,552,809) - ------------------------------------------------------------------------------------------------------------------------------------ CAPITAL SHARE TRANSACTIONS Common shares: Net proceeds from sale of shares 9,614 217,998,750 83,983,125 Net proceeds from shares issued to shareholders due to reinvestment of distributions -- 41,170 4,206 Preferred shares offering costs (7,636) (1,363,188) (1,044,953) - ------------------------------------------------------------------------------------------------------------------------------------ Net increase in net assets applicable to Common shares from capital share transactions 1,978 216,676,732 82,942,378 - ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in net assets applicable to Common shares (8,311,703) 230,961,936 81,040,301 Net assets applicable to Common shares at the beginning of period 231,062,211 100,275 100,275 - ------------------------------------------------------------------------------------------------------------------------------------ Net assets applicable to Common shares at the end of period $222,750,508 $231,062,211 $81,140,576 ==================================================================================================================================== Undistributed (Over-distribution of) net investment income at the end of period $ 236,194 $ 125,858 $ (37,648) ==================================================================================================================================== See accompanying notes to financial statements. 51 Notes to FINANCIAL STATEMENTS 1. GENERAL INFORMATION AND SIGNIFICANT ACCOUNTING POLICIES The California Funds (the "Funds") covered in this report and their corresponding Common share stock exchange symbols are Nuveen Insured California Premium Income Municipal Fund, Inc. (NPC), Nuveen Insured California Premium Income Municipal Fund 2, Inc. (NCL), Nuveen California Premium Income Municipal Fund (NCU), Nuveen California Dividend Advantage Municipal Fund (NAC), Nuveen California Dividend Advantage Municipal Fund 2 (NVX), Nuveen California Dividend Advantage Municipal Fund 3 (NZH), Nuveen Insured California Dividend Advantage Municipal Fund (NKL) and Nuveen Insured California Tax-Free Advantage Municipal Fund (NKX). Common shares of Insured California Premium Income (NPC), Insured California Premium Income 2 (NCL) and California Dividend Advantage (NAC) are traded on the New York Stock Exchange while Common shares of California Premium Income (NCU), California Dividend Advantage 2 (NVX), California Dividend Advantage 3 (NZH), Insured California Dividend Advantage (NKL) and Insured California Tax-Free Advantage (NKX) are traded on the American Stock Exchange. The Funds are registered under the Investment Company Act of 1940, as amended, as closed-end management investment companies. Prior to the commencement of operations of California Dividend Advantage 3 (NZH), Insured California Dividend Advantage (NKL) and Insured California Tax-Free Advantage (NKX), each Fund had no operations other than those related to organizational matters, the initial capital contribution of $100,275 per Fund by Nuveen Advisory Corp. (the "Adviser"), a wholly owned subsidiary of Nuveen Investments, Inc. (formerly, The John Nuveen Company), and the recording of the organization expenses ($11,500 per Fund) and their reimbursement by Nuveen Investments, LLC (formerly, Nuveen Investments), also a wholly owned subsidiary of Nuveen Investments, Inc. Each Fund seeks to provide current income exempt from both regular federal and California state income taxes, and in the case of Insured California Tax-Free Advantage (NKX) the alternative minimum tax applicable to individuals, by investing primarily in a diversified portfolio of municipal obligations issued by state and local government authorities within the state of California. 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. Securities Valuation The prices of municipal bonds in each Fund's investment portfolio are provided by a pricing service approved by the Fund's Board of Directors/Trustees. When price quotes are not readily available (which is usually the case for municipal securities), the pricing service establishes fair market value based on yields or prices of municipal bonds of comparable quality, type of issue, coupon, maturity and rating, indications of value from securities dealers, evaluations of anticipated cash flows or collateral and general market conditions. If it is determined that market prices for a security are unavailable or inappropriate, the Board of Directors/Trustees of the Funds, or its designee, may establish a fair value for the security. Temporary investments in securities that have variable rate and demand features qualifying them as short-term securities are valued at amortized cost, which approximates market value. Securities Transactions Securities transactions are recorded on a trade date basis. Realized gains and losses from such transactions are determined on the specific identification method. Securities purchased or sold on a when-issued or delayed delivery basis may have extended settlement periods. The securities so purchased are subject to market fluctuation during this period. The Funds have instructed the custodian to segregate assets with a current value at least equal to the amount of the when-issued and delayed delivery purchase commitments. At August 31, 2003, Insured California Premium Income (NPC), Insured California Premium Income 2 (NCL), California Premium Income (NCU), California Dividend Advantage (NAC), California Dividend Advantage 2 (NVX), California Dividend Advantage 3 (NZH) and Insured California Dividend Advantage (NKL) had outstanding when-issued and delayed delivery purchase commitments of $9,684,494, $20,891,454, $1,574,025, $9,236,901, $3,629,077, $9,568,446, and $6,897,184, respectively. There were no such outstanding purchase commitments in Insured California Tax-Free Advantage (NKX). Investment Income Interest income, which includes the amortization of premiums and accretion of discounts for financial reporting purposes, is recorded on an accrual basis. 52 Income Taxes Each Fund is a separate taxpayer for federal income tax purposes. Each Fund intends to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its net investment income to its shareholders. Therefore, no federal income tax provision is required. Furthermore, each Fund intends to satisfy conditions which will enable interest from municipal securities, which is exempt from regular federal and California state income taxes, and in the case of Insured California Tax-Free Advantage (NKX) the alternative minimum tax applicable to individuals, to retain such tax-exempt status when distributed to shareholders of the Funds. All monthly tax-exempt income dividends paid during the fiscal year ended August 31, 2003, have been designated Exempt Interest Dividends. Dividends and Distributions to Common Shareholders Dividends from tax-exempt net investment income are declared monthly. Net realized capital gains and/or market discount from investment transactions, if any, are distributed to shareholders not less frequently than annually. Furthermore, capital gains are distributed only to the extent they exceed available capital loss carryforwards. Distributions to Common shareholders of tax-exempt net investment income, net realized capital gains and/or market discount, if any, are recorded on the ex-dividend date. The amount and timing of distributions are determined in accordance with federal income tax regulations, which may differ from accounting principles generally accepted in the United States. Preferred Shares The Funds have issued and outstanding $25,000 stated value Preferred shares. Each Fund's Preferred shares are issued in one or more Series. The dividend rate on each Series may change every seven days, as set pursuant to a dutch auction process by the auction agent, and is payable at or near the end of each rate period. The number of Preferred shares outstanding, by series and in total, for each Fund is as follows: INSURED INSURED CALIFORNIA CALIFORNIA CALIFORNIA CALIFORNIA PREMIUM PREMIUM PREMIUM DIVIDEND INCOME INCOME 2 INCOME ADVANTAGE (NPC) (NCL) (NCU) (NAC) - --------------------------------------------------------------------------------------------------------- Number of shares: Series M -- -- 1,720 -- Series T 1,800 1,900 -- -- Series TH -- 1,900 -- 3,500 Series F -- -- -- 3,500 - --------------------------------------------------------------------------------------------------------- Total 1,800 3,800 1,720 7,000 ========================================================================================================= INSURED INSURED CALIFORNIA CALIFORNIA CALIFORNIA CALIFORNIA DIVIDEND DIVIDEND DIVIDEND TAX-FREE ADVANTAGE 2 ADVANTAGE 3 ADVANTAGE ADVANTAGE (NVX) (NZH) (NKL) (NKX) - --------------------------------------------------------------------------------------------------------- Number of shares: Series M 2,200 3,740 -- -- Series T -- -- 2,360 -- Series TH -- 3,740 -- 1,800 Series F 2,200 -- 2,360 -- - --------------------------------------------------------------------------------------------------------- Total 4,400 7,480 4,720 1,800 ========================================================================================================= Effective January 17, 2003, Insured California Tax-Free Advantage (NKX) issued 1,800 Series TH, $25,000 stated value Preferred shares. 53 Notes to FINANCIAL STATEMENTS (continued) Insurance Insured California Premium Income (NPC) and Insured California Premium Income 2 (NCL) invest in municipal securities which are either covered by insurance or are backed by an escrow or trust account containing sufficient U.S. Government or U.S. Government agency securities, both of which ensure the timely payment of principal and interest. Insured California Dividend Advantage (NKL) and Insured California Tax-Free Advantage (NKX) invest at least 80% of their net assets (including net assets applicable to Preferred shares) in municipal securities that are covered by insurance. Each Fund may also invest up to 20% of its net assets (including net assets applicable to Preferred shares) in municipal securities which are either (i) backed by an escrow or trust containing sufficient U.S. Government or U.S. Government agency securities, or (ii) municipal bonds that are rated, at the time of investment, within the four highest grades (Baa or BBB or better by Moody's, S&P or Fitch) or unrated but judged to be of comparable quality by the Adviser. Each insured municipal security is covered by Original Issue Insurance, Secondary Market Insurance or Portfolio Insurance. Such insurance does not guarantee the market value of the municipal securities or the value of the Funds' Common shares. Original Issue Insurance and Secondary Market Insurance remain in effect as long as the municipal securities covered thereby remain outstanding and the insurer remains in business, regardless of whether the Funds ultimately dispose of such municipal securities. Consequently, the market value of the municipal securities covered by Original Issue Insurance or Secondary Market Insurance may reflect value attributable to the insurance. Portfolio Insurance is effective only while the municipal securities are held by the Funds. Accordingly, neither the prices used in determining the market value of the underlying municipal securities nor the Common share net asset value of the Funds include value, if any, attributable to the Portfolio Insurance. Each policy of the Portfolio Insurance does, however, give the Funds the right to obtain permanent insurance with respect to the municipal security covered by the Portfolio Insurance policy at the time of its sale. Derivative Financial Instruments The Funds may invest in certain derivative financial instruments including futures, forward, swap and option contracts, and other financial instruments with similar characteristics. Although the Funds are authorized to invest in such financial instruments, and may do so in the future, they did not make any such investments during the fiscal year ended August 31, 2003. Custodian Fee Credit Each Fund has an arrangement with the custodian bank whereby certain custodian fees and expenses are reduced by credits earned on each Fund's cash on deposit with the bank. Such deposit arrangements are an alternative to overnight investments. Offering Costs Nuveen Investments, LLC has agreed to pay all Common share offering costs (other than the sales load) that exceed $.03 per Common share for California Dividend Advantage 3 (NZH), Insured California Dividend Advantage (NKL) and Insured California Tax-Free Advantage (NKX). California Dividend Advantage 3's (NZH), Insured California Dividend Advantage's (NKL) and Insured California Tax-Free Advantage's (NKX) share of Common share offering costs ($551,264, $447,886 and $176,250, respectively) were recorded as a reduction of the proceeds from the sale of Common shares. Costs incurred by California Dividend Advantage 3 (NZH), Insured California Dividend Advantage (NKL) and Insured California Tax-Free Advantage (NKX) in connection with their offering of Preferred shares ($2,137,378, $1,370,824 and $1,044,953, respectively) were recorded as a reduction to paid-in surplus. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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 applicable to Common shares from operations during the reporting period. Actual results may differ from those estimates. 54 2. FUND SHARES Transactions in Common and Preferred shares were as follows: INSURED CALIFORNIA INSURED CALIFORNIA CALIFORNIA PREMIUM INCOME (NPC) PREMIUM INCOME 2 (NCL) PREMIUM INCOME (NCU) ---------------------- ----------------------- ----------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED 8/31/03 8/31/02 8/31/03 8/31/02 8/31/03 8/31/02 - ----------------------------------------------------------------------------------------------------------- Common shares: Shares sold -- -- -- -- -- -- Shares issued to shareholders due to reinvestment of distributions 2,919 13,079 27,169 22,774 -- 2,696 - ----------------------------------------------------------------------------------------------------------- 2,919 13,079 27,169 22,774 -- 2,696 =========================================================================================================== Preferred shares sold -- -- -- -- -- -- =========================================================================================================== CALIFORNIA DIVIDEND CALIFORNIA DIVIDEND CALIFORNIA DIVIDEND ADVANTAGE (NAC) ADVANTAGE 2 (NVX) ADVANTAGE 3 (NZH) ---------------------- ----------------------- ------------------------- FOR THE PERIOD 9/25/01 (COMMENCEMENT OF OPERATIONS) YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED THROUGH 8/31/03 8/31/02 8/31/03 8/31/02 8/31/03 8/31/02 - ----------------------------------------------------------------------------------------------------------- Common shares: Shares sold -- -- -- -- -- 24,100,000 Shares issued to shareholders due to reinvestment of distributions -- 5,665 -- 3,644 -- 5,833 - ----------------------------------------------------------------------------------------------------------- -- 5,665 -- 3,644 -- 24,105,833 =========================================================================================================== Preferred shares sold -- -- -- -- -- 7,480 =========================================================================================================== INSURED INSURED CALIFORNIA DIVIDEND CALIFORNIA TAX-FREE ADVANTAGE (NKL) ADVANTAGE (NKX) --------------------------- --------------------- FOR THE FOR THE PERIOD 3/27/02 PERIOD 11/22/02 (COMMENCEMENT (COMMENCEMENT OF OPERATIONS) OF OPERATIONS YEAR ENDED THROUGH THROUGH 8/31/03 8/31/02 8/31/03 - ----------------------------------------------------------------------------------------------------------- Common shares: Shares sold -- 15,250,000 5,875,000 Shares issued to shareholders due to reinvestment of distributions -- 2,759 285 - ----------------------------------------------------------------------------------------------------------- -- 15,252,759 5,875,285 =========================================================================================================== Preferred shares sold -- 4,720 1,800 =========================================================================================================== 55 Notes to FINANCIAL STATEMENTS (continued) 3. SECURITIES TRANSACTIONS Purchases and sales (including maturities) of investments in long-term municipal securities during the fiscal year ended August 31, 2003, were as follows: INSURED INSURED CALIFORNIA CALIFORNIA CALIFORNIA CALIFORNIA PREMIUM PREMIUM PREMIUM DIVIDEND INCOME INCOME 2 INCOME ADVANTAGE (NPC) (NCL) (NCU) (NAC) - ------------------------------------------------------------------------------------------------------------ Purchases $45,146,980 $67,879,363 $31,185,950 $67,750,971 Sales and maturities 37,137,174 61,374,564 29,676,129 60,203,482 ============================================================================================================ INSURED INSURED CALIFORNIA CALIFORNIA CALIFORNIA CALIFORNIA DIVIDEND DIVIDEND DIVIDEND TAX-FREE ADVANTAGE 2 ADVANTAGE 3 ADVANTAGE ADVANTAGE (NVX) (NZH) (NKL) (NKX)* - ------------------------------------------------------------------------------------------------------------ Purchases $133,727,841 $271,458,501 $246,398,251 $176,293,906 Sales and maturities 128,490,031 252,516,190 257,393,182 50,751,631 ============================================================================================================ * For the period November 22, 2002 (commencement of operations) through August 31, 2003. 4. 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 income on taxable market discount securities and timing differences in recognizing certain gains and losses on security transactions. At August 31, 2003, the cost of investments were as follows: INSURED INSURED CALIFORNIA CALIFORNIA CALIFORNIA CALIFORNIA PREMIUM PREMIUM PREMIUM DIVIDEND INCOME INCOME 2 INCOME ADVANTAGE (NPC) (NCL) (NCU) (NAC) - ------------------------------------------------------------------------------------------------------------ Cost of investments $143,098,832 $267,710,329 $120,406,029 $509,286,772 ============================================================================================================ INSURED INSURED CALIFORNIA CALIFORNIA CALIFORNIA CALIFORNIA DIVIDEND DIVIDEND DIVIDEND TAX-FREE ADVANTAGE 2 ADVANTAGE 3 ADVANTAGE ADVANTAGE (NVX) (NZH) (NKL) (NKX) - ------------------------------------------------------------------------------------------------------------ Cost of investments $311,183,341 $523,827,527 $327,983,022 $125,137,914 ============================================================================================================ 56 Gross unrealized appreciation and gross unrealized depreciation of investments at August 31, 2003, were as follows: INSURED INSURED CALIFORNIA CALIFORNIA CALIFORNIA CALIFORNIA PREMIUM PREMIUM PREMIUM DIVIDEND INCOME INCOME 2 INCOME ADVANTAGE (NPC) (NCL) (NCU) (NAC) - ------------------------------------------------------------------------------------------------------------ Gross unrealized: Appreciation $9,807,588 $16,223,814 $ 3,583,789 $16,567,059 Depreciation (115,080) (196,294) (2,717,936) (4,396,411) - ------------------------------------------------------------------------------------------------------------ Net unrealized appreciation (depreciation) of investments $9,692,508 $16,027,520 $ 865,853 $12,170,648 ============================================================================================================ INSURED INSURED CALIFORNIA CALIFORNIA CALIFORNIA CALIFORNIA DIVIDEND DIVIDEND DIVIDEND TAX-FREE ADVANTAGE 2 ADVANTAGE 3 ADVANTAGE ADVANTAGE (NVX) (NZH) (NKL) (NKX) - ------------------------------------------------------------------------------------------------------------ Gross unrealized: Appreciation $ 5,112,566 $ 2,173,027 $ 5,396,639 $ 129,977 Depreciation (5,155,647) (11,277,318) (1,627,067) (1,674,680) - ------------------------------------------------------------------------------------------------------------ Net unrealized appreciation (depreciation) of investments $ (43,081) $ (9,104,291) $ 3,769,572 $(1,544,703) ============================================================================================================ The tax components of undistributed net investment income and net realized gains at August 31, 2003, were as follows: INSURED INSURED CALIFORNIA CALIFORNIA CALIFORNIA CALIFORNIA PREMIUM PREMIUM PREMIUM DIVIDEND INCOME INCOME 2 INCOME ADVANTAGE (NPC) (NCL) (NCU) (NAC) - ------------------------------------------------------------------------------------------------------------ Undistributed net tax-exempt income $1,636,577 $2,950,611 $1,313,927 $5,854,730 Undistributed net ordinary income * 59,311 -- -- 2,875 Undistributed net long-term capital gains 326,823 -- -- -- ============================================================================================================ INSURED INSURED CALIFORNIA CALIFORNIA CALIFORNIA CALIFORNIA DIVIDEND DIVIDEND DIVIDEND TAX-FREE ADVANTAGE 2 ADVANTAGE 3 ADVANTAGE ADVANTAGE (NVX) (NZH) (NKL) (NKX) - ------------------------------------------------------------------------------------------------------------ Undistributed net tax-exempt income $2,921,637 $3,350,890 $1,362,657 $408,586 Undistributed net ordinary income * 131 1,734 1,783,045 -- Undistributed net long-term capital gains -- -- 227,868 -- ============================================================================================================ * Net ordinary income consists of taxable market discount income and net short-term capital gains, if any. 57 Notes to FINANCIAL STATEMENTS (continued) The tax character of distributions paid during the fiscal years ended August 31, 2003 and August 31, 2002, was designated for purposes of the dividends paid deduction as follows: INSURED INSURED CALIFORNIA CALIFORNIA CALIFORNIA CALIFORNIA PREMIUM PREMIUM PREMIUM DIVIDEND INCOME INCOME 2 INCOME ADVANTAGE 2003 (NPC) (NCL) (NCU) (NAC) - ------------------------------------------------------------------------------------------------------------ Distributions from net tax-exempt income $6,123,025 $12,130,717 $5,376,229 $23,425,975 Distributions from net ordinary income * 459,740 -- 40,993 -- Distributions from net long-term capital gains 533,358 -- -- -- ============================================================================================================ INSURED INSURED CALIFORNIA CALIFORNIA CALIFORNIA CALIFORNIA DIVIDEND DIVIDEND DIVIDEND TAX-FREE ADVANTAGE 2 ADVANTAGE 3 ADVANTAGE ADVANTAGE 2003 (NVX) (NZH) (NKL) (NKX) - ------------------------------------------------------------------------------------------------------------ Distributions from net tax-exempt income $14,174,057 $22,678,767 $15,008,754 $3,339,890 Distributions from net ordinary income * 540 -- 872,254 -- Distributions from net long-term capital gains 479,390 -- -- -- ============================================================================================================ INSURED INSURED CALIFORNIA CALIFORNIA CALIFORNIA CALIFORNIA PREMIUM PREMIUM PREMIUM DIVIDEND INCOME INCOME 2 INCOME ADVANTAGE 2002 (NPC) (NCL) (NCU) (NAC) - ------------------------------------------------------------------------------------------------------------ Distributions from net tax-exempt income $6,096,991 $11,644,088 $5,280,680 $22,478,680 Distributions from net ordinary income * -- -- -- -- Distributions from net long-term capital gains -- -- -- -- ============================================================================================================ INSURED CALIFORNIA CALIFORNIA CALIFORNIA DIVIDEND DIVIDEND DIVIDEND ADVANTAGE 2 ADVANTAGE 3 ADVANTAGE 2002 (NVX) (NZH) (NKL) - ------------------------------------------------------------------------------------------------------------ Distributions from net tax-exempt income $14,436,589 $17,562,240 $3,866,185 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. 58 At August 31, 2003, the following Funds had unused capital loss carryforwards available for federal income tax purposes to be applied against future capital gains, if any. If not applied, the carryforwards will expire as follows: INSURED INSURED CALIFORNIA CALIFORNIA CALIFORNIA CALIFORNIA CALIFORNIA PREMIUM PREMIUM DIVIDEND DIVIDEND TAX-FREE INCOME 2 INCOME ADVANTAGE ADVANTAGE 3 ADVANTAGE (NCL) (NCU) (NAC) (NZH) (NKX) - --------------------------------------------------------------------------------------------------------- Expiration year: 2004 $4,345,091 $2,089,738 $ -- $ -- $ -- 2005 1,283,948 1,049,994 -- -- -- 2006 -- -- -- -- -- 2007 -- -- -- -- -- 2008 -- -- -- -- -- 2009 2,185,870 -- 1,959,092 -- -- 2010 440,510 -- -- -- -- 2011 -- -- -- 4,394,597 321,095 - --------------------------------------------------------------------------------------------------------- Total $8,255,419 $3,139,732 $1,959,092 $4,394,597 $321,095 ========================================================================================================= The following Funds have elected to defer net realized losses from investments incurred from November 1, 2002 through August 31, 2003 ("post-October losses") in accordance with Federal income tax regulations. The following post-October losses are treated as having arisen in the following fiscal year: INSURED CALIFORNIA CALIFORNIA PREMIUM DIVIDEND INCOME 2 ADVANTAGE 2 (NCL) (NVX) - --------------------------------------------------------------------------------------------------------- $377,822 $2,214,203 ========================================================================================================= 5. MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES Under Insured California Premium Income's (NPC), Insured California Premium Income 2's (NCL) and California Premium Income's (NCU) investment management agreements with the Adviser, each Fund pays an annual management fee, payable monthly, at the rates set forth below, which are based upon the average daily net assets (including net assets attributable to Preferred shares) of each Fund as follows: AVERAGE DAILY NET ASSETS (INCLUDING NET ASSETS ATTRIBUTABLE TO PREFERRED SHARES) MANAGEMENT FEE - -------------------------------------------------------------------------------- For the first $125 million .6500% For the next $125 million .6375 For the next $250 million .6250 For the next $500 million .6125 For the next $1 billion .6000 For the next $3 billion .5875 For net assets over $5 billion .5750 ================================================================================ Under California Dividend Advantage's (NAC), California Dividend Advantage 2's (NVX), California Dividend Advantage 3's (NZH), Insured California Dividend Advantage's (NKL) and Insured California Tax-Free Advantage (NKX) investment management agreements with the Adviser, each Fund pays an annual management fee, payable monthly, at the rates set forth below, which are based upon the average daily net assets (including net assets attributable to Preferred shares) of each Fund as follows: AVERAGE DAILY NET ASSETS (INCLUDING NET ASSETS ATTRIBUTABLE TO PREFERRED SHARES) MANAGEMENT FEE - -------------------------------------------------------------------------------- For the first $125 million .6500% For the next $125 million .6375 For the next $250 million .6250 For the next $500 million .6125 For the next $1 billion .6000 For net assets over $2 billion .5750 ================================================================================ The management fee compensates the Adviser for overall investment advisory and administrative services and general office facilities. The Funds pay no compensation directly to those of its Directors/Trustees who are affiliated with the Adviser or to their officers, all of whom receive remuneration for their services to the Funds from the Adviser. 59 Notes to FINANCIAL STATEMENTS (continued) For the first ten years of California Dividend Advantage's (NAC) operations, the Adviser has agreed to reimburse the Fund, as a percentage of average daily net assets (including net assets attributable to Preferred shares), for fees and expenses in the amounts, and for the time periods set forth below: YEAR ENDING YEAR ENDING JULY 31, JULY 31, - -------------------------------------------------------------------------------- 1999* .30% 2005 .25% 2000 .30 2006 .20 2001 .30 2007 .15 2002 .30 2008 .10 2003 .30 2009 .05 2004 .30 ================================================================================ * From the commencement of operations. The Adviser has not agreed to reimburse California Dividend Advantage (NAC) for any portion of its fees and expenses beyond July 31, 2009. For the first ten years of California Dividend Advantage 2's (NVX) operations, the Adviser has agreed to reimburse the Fund, as a percentage of average daily net assets (including net assets attributable to Preferred shares), for fees and expenses in the amounts, and for the time periods set forth below: YEAR ENDING YEAR ENDING MARCH 31, MARCH 31, - -------------------------------------------------------------------------------- 2001* .30% 2007 .25% 2002 .30 2008 .20 2003 .30 2009 .15 2004 .30 2010 .10 2005 .30 2011 .05 2006 .30 ================================================================================ * From the commencement of operations. The Adviser has not agreed to reimburse California Dividend Advantage 2 (NVX) for any portion of its fees and expenses beyond March 31, 2011. 60 For the first ten years of California Dividend Advantage 3's (NZH) operations, the Adviser has agreed to reimburse the Fund, as a percentage of average daily net assets (including net assets attributable to Preferred shares), for fees and expenses in the amounts, and for the time periods set forth below: YEAR ENDING YEAR ENDING SEPTEMBER 30, SEPTEMBER 30, - -------------------------------------------------------------------------------- 2001* .30% 2007 .25% 2002 .30 2008 .20 2003 .30 2009 .15 2004 .30 2010 .10 2005 .30 2011 .05 2006 .30 ================================================================================ * From the commencement of operations. The Adviser has not agreed to reimburse California Dividend Advantage 3 (NZH) for any portion of its fees and expenses beyond September 30, 2011. For the first ten years of Insured California Dividend Advantage's (NKL) operations, the Adviser has agreed to reimburse the Fund, as a percentage of average daily net assets (including net assets attributable to Preferred shares), for fees and expenses in the amounts, and for the time periods set forth below: YEAR ENDING YEAR ENDING MARCH 31, MARCH 31, - -------------------------------------------------------------------------------- 2002* .30% 2008 .25% 2003 .30 2009 .20 2004 .30 2010 .15 2005 .30 2011 .10 2006 .30 2012 .05 2007 .30 ================================================================================ * From the commencement of operations. The Adviser has not agreed to reimburse Insured California Dividend Advantage (NKL) for any portion of its fees and expenses beyond March 31, 2012. For the first eight years of Insured California Tax-Free Advantage's (NKX) operations, the Adviser has agreed to reimburse the Fund, as a percentage of average daily net assets (including net assets attributable to Preferred shares), for fees and expenses in the amounts, and for the time periods set forth below: YEAR ENDING YEAR ENDING NOVEMBER 30, NOVEMBER 30, - -------------------------------------------------------------------------------- 2002* .32% 2007 .32% 2003 .32 2008 .24 2004 .32 2009 .16 2005 .32 2010 .08 2006 .32 ================================================================================ * From the commencement of operations. The Adviser has not agreed to reimburse Insured California Tax-Free Advantage (NKX) for any portion of its fees and expenses beyond November 30, 2010. 61 Notes to FINANCIAL STATEMENTS (continued) 6. SUBSEQUENT EVENT - DISTRIBUTIONS TO COMMON SHAREHOLDERS The Funds declared Common share dividend distributions from their tax-exempt net investment income which were paid on October 1, 2003, to shareholders of record on September 15, 2003, as follows: INSURED INSURED CALIFORNIA CALIFORNIA CALIFORNIA CALIFORNIA PREMIUM PREMIUM PREMIUM DIVIDEND INCOME INCOME 2 INCOME ADVANTAGE (NPC) (NCL) (NCU) (NAC) - ---------------------------------------------------------------------------------------------------------- Dividend per share $.0760 $.0760 $.0730 $.0810 ========================================================================================================== INSURED INSURED CALIFORNIA CALIFORNIA CALIFORNIA CALIFORNIA DIVIDEND DIVIDEND DIVIDEND TAX-FREE ADVANTAGE 2 ADVANTAGE 3 ADVANTAGE ADVANTAGE (NVX) (NZH) (NKL) (NKX) - ---------------------------------------------------------------------------------------------------------- Dividend per share $.0760 $.0720 $.0760 $.0755 ========================================================================================================== 62 Financial HIGHLIGHTS 63 Financial HIGHLIGHTS Selected data for a Common share outstanding throughout each period: Investment Operations Less Distributions ------------------------------------------------------------------- ----------------------------- Distributions Distributions from Net from Net Beginning Net Investment Capital Investment Capital Common Realized/ Income to Gains to Income to Gains to Share Net Unrealized Preferred Preferred Common Common Net Asset Investment Investment Share- Share- Share- Share- Value Income Gain (Loss) holders+ holders+ Total holders holders Total ==================================================================================================================================== INSURED CALIFORNIA PREMIUM INCOME (NPC) - ------------------------------------------------------------------------------------------------------------------------------------ Year Ended 8/31: 2003 $16.17 $ .99 $ (.45) $(.06) $(.01) $ .47 $(.97) $(.08) $(1.05) 2002 16.04 1.05 .03 (.09) -- .99 (.86) -- (.86) 2001 15.08 1.04 .99 (.21) -- 1.82 (.86) -- (.86) 2000 14.81 1.09 .30 (.24) -- 1.15 (.88) -- (.88) 1999 16.31 1.09 (1.56) (.20) -- (.67) (.83) -- (.83) INSURED CALIFORNIA PREMIUM INCOME 2 (NCL) - ------------------------------------------------------------------------------------------------------------------------------------ Year Ended 8/31: 2003 15.08 .99 (.51) (.07) -- .41 (.89) -- (.89) 2002 15.01 1.02 (.02) (.10) -- .90 (.83) -- (.83) 2001 14.09 1.01 .91 (.22) -- 1.70 (.78) -- (.78) 2000 13.70 1.02 .41 (.24) -- 1.19 (.80) -- (.80) 1999 14.82 1.01 (1.14) (.21) -- (.34) (.78) -- (.78) CALIFORNIA PREMIUM INCOME (NCU) - ------------------------------------------------------------------------------------------------------------------------------------ Year Ended 8/31: 2003 14.42 .96 (.78) (.07) -- .11 (.87) -- (.87) 2002 14.22 .99 .13 (.10) -- 1.02 (.82) -- (.82) 2001 13.34 1.00 .90 (.23) -- 1.67 (.79) -- (.79) 2000 13.19 1.03 .14 (.23) -- .94 (.79) -- (.79) 1999 14.30 1.00 (1.13) (.21) -- (.34) (.77) -- (.77) ==================================================================================================================================== Total Returns ----------------- Based Offering on Costs and Ending Common Preferred Common Based Share Share Share Ending on Net Underwriting Net Asset Market Market Asset Discounts Value Value Value* Value* ================================================================================== INSURED CALIFORNIA PREMIUM INCOME (NPC) - ---------------------------------------------------------------------------------- Year Ended 8/31: 2003 $-- $15.59 $15.0700 1.55% 2.82% 2002 -- 16.17 15.8500 6.73 6.47 2001 -- 16.04 15.6900 14.12 12.43 2000 -- 15.08 14.5625 .84 8.34 1999 -- 14.81 15.3750 1.62 (4.35) INSURED CALIFORNIA PREMIUM INCOME 2 (NCL) - ---------------------------------------------------------------------------------- Year Ended 8/31: 2003 -- 14.60 14.3200 2.69 2.71 2002 -- 15.08 14.8000 5.57 6.29 2001 -- 15.01 14.8300 11.99 12.45 2000 -- 14.09 14.0000 3.58 9.21 1999 -- 13.70 14.3750 2.27 (2.50) CALIFORNIA PREMIUM INCOME (NCU) - ---------------------------------------------------------------------------------- Year Ended 8/31: 2003 -- 13.66 13.0200 (.91) .69 2002 -- 14.42 14.0000 4.84 7.48 2001 -- 14.22 14.1700 12.84 12.92 2000 -- 13.34 13.3125 5.93 7.63 1999 -- 13.19 13.3750 .81 (2.57) ================================================================================== Ratios/Supplemental Data ---------------------------------------------------------------------------------------------- Before Credit/Reimbursement After Credit/Reimbursement** ------------------------------ ------------------------------- Ratio of Net Ratio of Net Ratio of Investment Ratio of Investment Ending Expenses Income to Expenses Income to Net to Average Average to Average Average Assets Net Assets Net Assets Net Assets Net Assets Applicable Applicable Applicable Applicable Applicable Portfolio to Common to Common to Common to Common to Common Turnover Shares (000) Shares++ Shares++ Shares++ Shares++ Rate ======================================================================================================================= INSURED CALIFORNIA PREMIUM INCOME (NPC) - ----------------------------------------------------------------------------------------------------------------------- Year Ended 8/31: 2003 $100,427 1.17% 6.13% 1.16% 6.14% 26% 2002 104,137 1.21 6.65 1.19 6.66 30 2001 103,068 1.22 6.77 1.21 6.79 21 2000 96,903 1.25 7.65 1.24 7.66 27 1999 95,091 1.22 6.81 1.22 6.82 50 INSURED CALIFORNIA PREMIUM INCOME 2 (NCL) - ----------------------------------------------------------------------------------------------------------------------- Year Ended 8/31: 2003 185,181 1.20 6.53 1.19 6.54 22 2002 190,870 1.23 6.83 1.22 6.84 6 2001 189,633 1.24 7.01 1.24 7.02 18 2000 177,977 1.28 7.65 1.26 7.66 26 1999 172,833 1.24 6.86 1.24 6.86 35 CALIFORNIA PREMIUM INCOME (NCU) - ----------------------------------------------------------------------------------------------------------------------- Year Ended 8/31: 2003 78,859 1.24 6.72 1.24 6.72 24 2002 83,249 1.27 7.07 1.26 7.08 10 2001 82,067 1.32 7.36 1.30 7.38 18 2000 76,878 1.38 8.09 1.36 8.10 19 1999 75,877 1.30 7.08 1.30 7.08 36 ======================================================================================================================= Preferred Shares at End of Period -------------------------------------- Aggregate Liquidation Amount and Market Asset Outstanding Value Coverage (000) Per Share Per Share =============================================================== INSURED CALIFORNIA PREMIUM INCOME (NPC) - --------------------------------------------------------------- Year Ended 8/31: 2003 $45,000 $25,000 $80,793 2002 45,000 25,000 82,854 2001 45,000 25,000 82,260 2000 45,000 25,000 78,835 1999 45,000 25,000 77,828 INSURED CALIFORNIA PREMIUM INCOME 2 (NCL) - --------------------------------------------------------------- Year Ended 8/31: 2003 95,000 25,000 73,732 2002 95,000 25,000 75,229 2001 95,000 25,000 74,903 2000 95,000 25,000 71,836 1999 95,000 25,000 70,482 CALIFORNIA PREMIUM INCOME (NCU) - --------------------------------------------------------------- Year Ended 8/31: 2003 43,000 25,000 70,848 2002 43,000 25,000 73,400 2001 43,000 25,000 72,714 2000 43,000 25,000 69,696 1999 43,000 25,000 69,115 =============================================================== * Total Investment Return on Market Value is the combination of reinvested dividend income, reinvested capital gains distributions, if any, and changes in stock price per share. Total Return on Common Share Net Asset Value is the combination of reinvested dividend income, reinvested capital gains distributions, if any, and changes in Common Share net asset value per share. Total returns are not annualized. ** After custodian fee credit and expense reimbursement, where applicable. + The amounts shown are based on Common share equivalents. ++ Ratios do not reflect the effect of dividend payments to Preferred shareholders; income ratios reflect income earned on assets attributable to Preferred shares. See accompanying notes to financial statements. 64-65 SPREAD Financial HIGHLIGHTS (continued) Selected data for a Common share outstanding throughout each period: Investment Operations Less Distributions ------------------------------------------------------------------- ----------------------------- Distributions Distributions from Net from Net Beginning Net Investment Capital Investment Capital Common Realized/ Income to Gains to Income to Gains to Share Net Unrealized Preferred Preferred Common Common Net Asset Investment Investment Share- Share- Share- Share- Value Income Gain (Loss) holders+ holders+ Total holders holders Total ==================================================================================================================================== CALIFORNIA DIVIDEND ADVANTAGE (NAC) - ------------------------------------------------------------------------------------------------------------------------------------ Year Ended 8/31: 2003 $15.24 $1.06 $ (.47) $(.07) $ -- $ .52 $(.94) $ -- $(.94) 2002 15.13 1.07 -- (.10) -- .97 (.86) -- (.86) 2001 13.82 1.07 1.28 (.23) -- 2.12 (.81) -- (.81) 2000 13.33 1.07 .52 (.26) -- 1.33 (.84) -- (.84) 1999(a) 14.33 .20 (.92) (.03) -- (.75) (.14) -- (.14) CALIFORNIA DIVIDEND ADVANTAGE 2 (NVX) - ------------------------------------------------------------------------------------------------------------------------------------ Year Ended 8/31: 2003 14.79 1.00 (.62) (.07) -- .31 (.89) (.03) (.92) 2002 15.11 1.06 (.40) (.11) -- .55 (.87) -- (.87) 2001(b) 14.33 .34 .90 (.05) -- 1.19 (.29) -- (.29) CALIFORNIA DIVIDEND ADVANTAGE 3 (NZH) - ------------------------------------------------------------------------------------------------------------------------------------ Year Ended 8/31: 2003 14.33 .98 (.66) (.08) -- .24 (.86) -- (.86) 2002(c) 14.33 .83 .09 (.08) -- .84 (.72) -- (.72) INSURED CALIFORNIA DIVIDEND ADVANTAGE (NKL) - ------------------------------------------------------------------------------------------------------------------------------------ Year Ended 8/31: 2003 15.14 .99 (.49) (.07) (.01) .42 (.91) (.05) (.96) 2002(d) 14.33 .34 .92 (.03) -- 1.23 (.30) -- (.30) INSURED CALIFORNIA TAX-FREE ADVANTAGE (NKX) - ------------------------------------------------------------------------------------------------------------------------------------ Year Ended 8/31: 2003(e) 14.33 .64 (.33) (.04) -- .27 (.60) -- (.60) ==================================================================================================================================== Total Returns ----------------- Based Offering on Costs and Ending Common Preferred Common Based Share Share Share Ending on Net Underwriting Net Asset Market Market Asset Discounts Value Value Value** Value** ================================================================================ CALIFORNIA DIVIDEND ADVANTAGE (NAC) - -------------------------------------------------------------------------------- Year Ended 8/31: 2003 $ -- $14.82 $14.3000 4.79% 3.37% 2002 -- 15.24 14.5500 3.67 6.75 2001 -- 15.13 14.8900 15.06 15.85 2000 -- 13.82 13.7500 (2.18) 10.80 1999(a) (.11) 13.33 15.0000 .96 (5.99) CALIFORNIA DIVIDEND ADVANTAGE 2 (NVX) - -------------------------------------------------------------------------------- Year Ended 8/31: 2003 -- 14.18 13.2400 (.95) 2.16 2002 -- 14.79 14.2800 (.27) 3.90 2001(b) (.12) 15.11 15.2100 3.40 7.55 CALIFORNIA DIVIDEND ADVANTAGE 3 (NZH) - -------------------------------------------------------------------------------- Year Ended 8/31: 2003 .01 13.72 12.7100 (3.20) 1.68 2002(c) (.12) 14.33 14.0000 (1.68) 5.32 INSURED CALIFORNIA DIVIDEND ADVANTAGE (NKL) - -------------------------------------------------------------------------------- Year Ended 8/31: 2003 -- 14.60 14.0000 (.35) 2.70 2002(d) (.12) 15.14 15.0000 2.05 7.84 INSURED CALIFORNIA TAX-FREE ADVANTAGE (NKX) - -------------------------------------------------------------------------------- Year Ended 8/31: 2003(e) (.21) 13.79 13.5600 (5.79) .34 ================================================================================ Ratios/Supplemental Data ---------------------------------------------------------------------------------------------- Before Credit/Reimbursement After Credit/Reimbursement*** ------------------------------ ------------------------------- Ratio of Net Ratio of Net Ratio of Investment Ratio of Investment Ending Expenses Income to Expenses Income to Net to Average Average to Average Average Assets Net Assets Net Assets Net Assets Net Assets Applicable Applicable Applicable Applicable Applicable Portfolio to Common to Common to Common to Common to Common Turnover Shares (000) Shares++ Shares++ Shares++ Shares++ Rate ==================================================================================================================== CALIFORNIA DIVIDEND ADVANTAGE (NAC) - -------------------------------------------------------------------------------------------------------------------- Year Ended 8/31: 2003 $346,918 1.15% 6.44% .70% 6.88% 11% 2002 356,821 1.18 6.76 .72 7.22 33 2001 354,197 1.19 7.03 .72 7.50 17 2000 323,326 1.24 7.93 .75 8.43 25 1999(a) 311,367 .93* 5.06* .55* 5.45* 8 CALIFORNIA DIVIDEND ADVANTAGE 2 (NVX) - -------------------------------------------------------------------------------------------------------------------- Year Ended 8/31: 2003 209,722 1.18 6.30 .73 6.75 40 2002 218,814 1.19 6.82 .73 7.28 32 2001(b) 223,440 1.05* 5.23* .62* 5.65* 40 CALIFORNIA DIVIDEND ADVANTAGE 3 (NZH) - -------------------------------------------------------------------------------------------------------------------- Year Ended 8/31: 2003 330,829 1.20 6.33 .73 6.79 48 2002(c) 345,470 1.15* 6.01* .69* 6.47* 49 INSURED CALIFORNIA DIVIDEND ADVANTAGE (NKL) - -------------------------------------------------------------------------------------------------------------------- Year Ended 8/31: 2003 222,751 1.18 6.00 .72 6.46 71 2002(d) 231,062 1.10* 4.98* .60* 5.47* 12 INSURED CALIFORNIA TAX-FREE ADVANTAGE (NKX) - -------------------------------------------------------------------------------------------------------------------- Year Ended 8/31: 2003(e) 81,141 1.14* 5.25* .67* 5.72* 45 ==================================================================================================================== Preferred Shares at End of Period -------------------------------------- Aggregate Liquidation Amount and Market Asset Outstanding Value Coverage (000) Per Share Per Share ============================================================== CALIFORNIA DIVIDEND ADVANTAGE (NAC) - -------------------------------------------------------------- Year Ended 8/31: 2003 $175,000 $25,000 $74,560 2002 175,000 25,000 75,974 2001 175,000 25,000 75,600 2000 175,000 25,000 71,189 1999(a) 175,000 25,000 69,481 CALIFORNIA DIVIDEND ADVANTAGE 2 (NVX) - -------------------------------------------------------------- Year Ended 8/31: 2003 110,000 25,000 72,664 2002 110,000 25,000 74,731 2001(b) 110,000 25,000 75,782 CALIFORNIA DIVIDEND ADVANTAGE 3 (NZH) - -------------------------------------------------------------- Year Ended 8/31: 2003 187,000 25,000 69,229 2002(c) 187,000 25,000 71,186 INSURED CALIFORNIA DIVIDEND ADVANTAGE (NKL) - -------------------------------------------------------------- Year Ended 8/31: 2003 118,000 25,000 72,193 2002(d) 118,000 25,000 73,954 INSURED CALIFORNIA TAX-FREE ADVANTAGE (NKX) - -------------------------------------------------------------- Year Ended 8/31: 2003(e) 45,000 25,000 70,078 ============================================================== * Annualized. ** Total Investment Return on Market Value is the combination of reinvested dividend income, reinvested capital gains distributions, if any, and changes in stock price per share. Total Return on Common Share Net Asset Value is the combination of reinvested dividend income, reinvested capital gains distributions, if any, and changes in Common Share net asset value per share. Total returns are not annualized. *** After custodian fee credit and expense reimbursement, where applicable. + The amounts shown are based on Common share equivalents. ++ Ratios do not reflect the effect of dividend payments to Preferred shareholders; income ratios reflect income earned on assets attributable to Preferred shares. (a) For the period May 26, 1999 (commencement of operations) through August 31, 1999. (b) For the period March 27, 2001 (commencement of operations) through August 31, 2001. (c) For the period September 25, 2001 (commencement of operations) through August 31, 2002. (d) For the period March 27, 2002 (commencement of operations) through August 31, 2002. (e) For the period November 22, 2002 (commencement of operations) through August 31, 2003. See accompanying notes to financial statements. 66-67 SPREAD Directors/Trustees AND OFFICERS 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 Directors/ Trustees of the Funds. The number of directors/trustees of the Funds is currently set at eight. None of the directors/trustees who are not "interested" persons of the Funds has ever been a director/trustee or employee of, or consultant to, Nuveen or its affiliates. The names and business addresses of the directors/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. NUMBER OF PORTFOLIOS IN FUND COMPLEX YEAR FIRST PRINCIPAL OCCUPATION(S) OVERSEEN NAME, BIRTHDATE POSITION(S) HELD ELECTED OR INCLUDING OTHER DIRECTORSHIPS BY DIRECTOR/ AND ADDRESS WITH THE FUNDS APPOINTED(2) DURING PAST 5 YEARS TRUSTEE - ------------------------------------------------------------------------------------------------------------------------------------ DIRECTOR/TRUSTEE WHO IS AN INTERESTED PERSON OF THE FUNDS: - ------------------------------------------------------------------------------------------------------------------------------------ Timothy R. Schwertfeger (1) Chairman of the 1994 Chairman and Director (since 1996) of Nuveen 141 3/28/49 Board and Investments, Inc. and Nuveen Investments, LLC; 333 W. Wacker Drive Director/Trustee Director (since 1992) and Chairman (since 1996) of Chicago, IL 60606 Nuveen Advisory Corp. and Nuveen Institutional Advisory Corp.; Chairman and Director (since 1997) of Nuveen Asset Management, Inc.; Director (since 1996) of Institutional Capital Corporation; Chairman and Director (since 1999) of Rittenhouse Asset Management, Inc.; Chairman of Nuveen Investments Advisers Inc. (since 2002). DIRECTORS/TRUSTEES WHO ARE NOT INTERESTED PERSONS OF THE FUNDS: - ------------------------------------------------------------------------------------------------------------------------------------ William E. Bennett Director/Trustee 2001 Private Investor; previously, President and Chief 141 10/16/46 Executive Officer, Draper & Kramer, Inc., a private 333 W. Wacker Drive company that handles mortgage banking, real estate Chicago, IL 60606 development, pension advisory and real estate management (1995-1998). Prior thereto, Executive Vice President and Chief Credit Officer of First Chicago Corporation and its principal subsidiary, The First National Bank of Chicago. - ------------------------------------------------------------------------------------------------------------------------------------ Robert P. Bremner Director/Trustee 1997 Private Investor and Management Consultant. 135 8/22/40 333 W. Wacker Drive Chicago, IL 60606 - ------------------------------------------------------------------------------------------------------------------------------------ Lawrence H. Brown Director/Trustee 1993 Retired (since 1989) as Senior Vice President of The 135 7/29/34 Northern Trust Company; Director of the United Way of 333 W. Wacker Drive Highland Park-Highwood (since 2002). Chicago, IL 60606 - ------------------------------------------------------------------------------------------------------------------------------------ Anne E. Impellizzeri Director/Trustee 1994 Retired, formerly, Executive Director (since 1998) 135 1/26/33 of Manitoga/The Russel Wright Design Center; prior 333 W. Wacker Drive thereto, President and Chief Executive Officer of Chicago, IL 60606 Blanton-Peale Institute (since 1990); prior thereto, Vice President, Metropolitan Life Insurance Co. - ------------------------------------------------------------------------------------------------------------------------------------ Peter R. Sawers Director/Trustee 1991 Adjunct Professor of Business and Economics, 135 4/3/33 University of Dubuque, Iowa; formerly (1991-2000) 333 W. Wacker Drive Adjunct Professor, Lake Forest Graduate School of Chicago, IL 60606 Management, Lake Forest, Illinois; prior thereto, Executive Director, Towers Perrin Australia, a management consulting firm; Chartered Financial Analyst; Certified Management Consultant; Director, Executive Service Corps of Chicago, a not-for-profit organization. - ------------------------------------------------------------------------------------------------------------------------------------ William J. Schneider Director/Trustee 1997 Senior Partner and Chief Operating Officer, 135 9/24/44 Miller-Valentine Group, Vice President, 333 W. Wacker Drive Miller-Valentine Realty, a construction company; Chicago, IL 60606 Chair, MiamiValley Hospital; Chair, Dayton Development Coalition; formerly, Member, Community Advisory Board, National City Bank, Dayton, Ohio and Business Advisory Council, Cleveland Federal Reserve Bank. - ------------------------------------------------------------------------------------------------------------------------------------ Judith M. Stockdale Director/Trustee 1997 Executive Director, Gaylord and Dorothy Donnelley 135 12/29/47 Foundation (since 1994); prior thereto, Executive 333 W. Wacker Drive Director, Great Lakes Protection Fund (from 1990 Chicago, IL 60606 to 1994). 68 NUMBER OF PORTFOLIOS IN FUND YEAR FIRST COMPLEX NAME, BIRTHDATE POSITION(S) HELD ELECTED OR PRINCIPAL OCCUPATION(S) OVERSEEN AND ADDRESS WITH THE FUNDS APPOINTED (3) DURING PAST 5 YEARS BY OFFICER - ------------------------------------------------------------------------------------------------------------------------------------ OFFICERS OF THE FUNDS: - ------------------------------------------------------------------------------------------------------------------------------------ Gifford R. Zimmerman Chief 1988 Managing Director (since 2002), Assistant Secretary 141 9/9/56 Administrative and Associate General Counsel, formerly, Vice President 333 W. Wacker Drive Officer and Assistant General Counsel of Nuveen Investments, Chicago, IL 60606 LLC; Managing Director (since 2002), General Counsel and Assistant Secretary, formerly, Vice President of Nuveen Advisory Corp. and Nuveen Institutional Advisory Corp.; Managing Director (since 2002), Assistant Secretary and Associate General Counsel, formerly, Vice President (since 2000), of Nuveen Asset Management, Inc.; Assistant Secretary of Nuveen Investments, Inc. (since 1994); Assistant Secretary of NWQ Investment Management Company, LLC (since 2002); Vice President and Assistant Secretary of Nuveen Investments Advisers Inc. (since 2002); Managing Director, Associate General Counsel and Assistant Secretary of Rittenhouse Asset Management, Inc. (since May 2003); Chartered Financial Analyst. - ------------------------------------------------------------------------------------------------------------------------------------ Michael T. Atkinson Vice President 2000 Vice President (since 2002), formerly, Assistant 141 2/3/66 and Assistant Vice President (since 2000), previously, Associate of 333 W. Wacker Drive Secretary Nuveen Investments, LLC. Chicago, IL 60606 - ------------------------------------------------------------------------------------------------------------------------------------ Paul L. Brennan Vice President 1999 Vice President (since 2002), formerly, Assistant 127 11/10/66 Vice President (since 1997), of Nuveen Advisory Corp.; 333 W. Wacker Drive prior thereto, portfolio manager of Flagship Financial Chicago, IL 60606 Inc.; Chartered Financial Analyst and Certified Public Accountant. - ------------------------------------------------------------------------------------------------------------------------------------ Peter H. D'Arrigo Vice President 1999 Vice President of Nuveen Investments, LLC (since 141 11/28/67 and Treasurer 1999), prior thereto, Assistant Vice President (since 333 W. Wacker Drive 1997); Vice President and Treasurer of Nuveen Chicago, IL 60606 Investments, Inc. (since 1999); Vice President and Treasurer of Nuveen Advisory Corp. and Nuveen Institutional Advisory Corp. (since 1999); Vice President and Treasurer of Nuveen Asset Management, Inc. (since 2002) and of Nuveen Investments Advisers Inc. (since 2002); Assistant Treasurer of NWQ Investment Management Company, LLC (since 2002); Chartered Financial Analyst. - ------------------------------------------------------------------------------------------------------------------------------------ Susan M. DeSanto Vice President 2001 Vice President of Nuveen Advisory Corp. (since 2001); 141 9/8/54 previously, Vice President of Van Kampen Investment 333 W. Wacker Drive Advisory Corp. (since 1998); Vice President of Nuveen Chicago, IL 60606 Institutional Advisory Corp. (since 2002); prior thereto, Assistant Vice President of Van Kampen Investment Advisory Corp. (since 1994). - ------------------------------------------------------------------------------------------------------------------------------------ Jessica R. Droeger Vice President 2000 Vice President (since 2002) and Assistant General 141 9/24/64 and Secretary Counsel (since 1998); formerly, Assistant Vice 333 W. Wacker Drive President (since 1998) of Nuveen Investments, LLC; Chicago, IL 60606 Vice President (since 2002) and Assistant Secretary (since 1998), formerly Assistant Vice President of Nuveen Advisory Corp. and Nuveen Institutional Advisory Corp. 69 Directors/Trustees AND OFFICERS (continued) NUMBER OF PORTFOLIOS IN FUND YEAR FIRST COMPLEX NAME, BIRTHDATE POSITION(S) HELD ELECTED OR PRINCIPAL OCCUPATION(S) OVERSEEN AND ADDRESS WITH THE FUNDS APPOINTED (3) DURING PAST 5 YEARS BY OFFICER - ------------------------------------------------------------------------------------------------------------------------------------ OFFICERS OF THE FUNDS (CONTINUED): - ------------------------------------------------------------------------------------------------------------------------------------ Lorna C. Ferguson Vice President 1998 Vice President of Nuveen Investments, LLC; Vice 141 10/24/45 President (since 1998) of Nuveen Advisory Corp. and 333 W. Wacker Drive Nuveen Institutional Advisory Corp. Chicago, IL 60606 - ------------------------------------------------------------------------------------------------------------------------------------ William M. Fitzgerald Vice President 1995 Managing Director (since 2002) of Nuveen Investments, 141 3/2/64 LLC; Managing Director (since 2001), formerly Vice 333 W. Wacker Drive President of Nuveen Advisory Corp. and Nuveen Chicago, IL 60606 Institutional Advisory Corp. (since 1995); Managing Director of Nuveen Asset Management, Inc. (since 2001); Vice President of Nuveen Investment Advisers Inc. (since 2002); Chartered Financial Analyst. - ------------------------------------------------------------------------------------------------------------------------------------ Stephen D. Foy Vice President 1998 Vice President (since 1993) and Funds Controller 141 5/31/54 and Controller (since 1998) of Nuveen Investments, LLC and Vice 333 W. Wacker Drive President and Funds Controller (since 1998) of Nuveen Chicago, IL 60606 Investments, Inc.; Certified Public Accountant. - ------------------------------------------------------------------------------------------------------------------------------------ J. Thomas Futrell Vice President 1988 Vice President of Nuveen Advisory Corp.; Chartered 127 7/5/55 Financial Analyst. 333 W. Wacker Drive Chicago, IL 60606 - ------------------------------------------------------------------------------------------------------------------------------------ Richard A. Huber Vice President 1997 Vice President of Nuveen Institutional Advisory Corp. 127 3/26/63 (since 1998) and Nuveen Advisory Corp. (since 1997); 333 W. Wacker Drive prior thereto, Vice President and Portfolio Manager of Chicago, IL 60606 Flagship Financial, Inc. - ------------------------------------------------------------------------------------------------------------------------------------ Steven J. Krupa Vice President 1990 Vice President of Nuveen Advisory Corp. 127 8/21/57 333 W. Wacker Drive Chicago, IL 60606 - ------------------------------------------------------------------------------------------------------------------------------------ David J. Lamb Vice President 2000 Vice President (since 2000) of Nuveen Investments, 141 3/22/63 LLC, previously Assistant Vice President (since 333 W. Wacker Drive 1999); prior thereto, Associate of Nuveen Investments, Chicago, IL 60606 LLC; Certified Public Accountant. - ------------------------------------------------------------------------------------------------------------------------------------ Tina M. Lazar Vice President 2002 Vice President (since 1999), previously, Assistant 141 8/27/61 Vice President (since 1993) of Nuveen Investments, LLC. 333 W. Wacker Drive Chicago, IL 60606 - ------------------------------------------------------------------------------------------------------------------------------------ Larry W. Martin Vice President 1988 Vice President, Assistant Secretary and Assistant 141 7/27/51 and Assistant General Counsel of Nuveen Investments, LLC; Vice 333 W. Wacker Drive Secretary President and Assistant Secretary of Nuveen Advisory Chicago, IL 60606 Corp. and Nuveen Institutional Advisory Corp.; Assistant Secretary of Nuveen Investments, Inc. and (since 1997) Nuveen Asset Management, Inc.; Vice President (since 2000), Assistant Secretary and Assistant General Counsel (since 1998) of Rittenhouse Asset Management, Inc.; Vice President and Assistant Secretary of Nuveen Investments Advisers Inc. (since 2002); Assistant Secretary of NWQ Investment Management Company, LLC (since 2002). 70 NUMBER OF PORTFOLIOS IN FUND YEAR FIRST COMPLEX NAME, BIRTHDATE POSITION(S) HELD ELECTED OR PRINCIPAL OCCUPATION(S) OVERSEEN AND ADDRESS WITH THE FUNDS APPOINTED (3) DURING PAST 5 YEARS BY OFFICER - ------------------------------------------------------------------------------------------------------------------------------------ OFFICERS OF THE FUNDS (CONTINUED): - ------------------------------------------------------------------------------------------------------------------------------------ John V. Miller Vice President 2003 Vice President (since 2003), previously, Assistant 127 4/10/67 Vice President (since 1999), prior thereto, credit 333 W. Wacker Drive analyst (since 1996) of Nuveen Advisory Corp.; Chicago, IL 60606 Chartered Financial Analyst. - ------------------------------------------------------------------------------------------------------------------------------------ Edward F. Neild, IV Vice President 1996 Managing Director (since 2002) of Nuveen Investments, 141 7/7/65 LLC; Managing Director (since 1997), formerly Vice 333 W. Wacker Drive President (since 1996) of Nuveen Advisory Corp. and Chicago, IL 60606 Nuveen Institutional Advisory Corp.; Managing Director of Nuveen Asset Management, Inc. (since 1999). Chartered Financial Analyst. - ------------------------------------------------------------------------------------------------------------------------------------ Thomas J. O'Shaughnessy Vice President 1999 Vice President (since 2002), formerly, Assistant 127 9/4/60 Vice President (since 1998), of Nuveen Advisory Corp.; 333 W. Wacker Drive prior thereto, portfolio manager. Chicago, IL 60606 - ------------------------------------------------------------------------------------------------------------------------------------ Thomas C. Spalding Vice President 1982 Vice President of Nuveen Advisory Corp. and Nuveen 127 7/31/51 Institutional Advisory Corp.; Chartered Financial 333 W. Wacker Drive Analyst. Chicago, IL 60606 (1) Mr. Schwertfeger is an "interested person" of the Funds, as defined in the Investment Company Act of 1940, because he is an officer and trustee of the Adviser. (2) Directors/Trustees serve a one-year term until his/her successor is elected. The year first elected or appointed represents the year in which the Directors/Trustees was first elected or appointed to any fund in the Nuveen Complex. (3) Officers serve a one-year term through July 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 Complex. 71 Build Your Wealth AUTOMATICALLY SIDEBAR TEXT: NUVEEN MAKES REINVESTING EASY. A PHONE CALL IS ALL IT TAKES TO SET UP YOUR REINVESTMENT ACCOUNT. NUVEEN CLOSED-END EXCHANGE-TRADED FUNDS DIVIDEND REINVESTMENT PLAN Your Nuveen Closed-End Exchange-Traded Fund allows you to conveniently reinvest dividends and/or capital gains distributions in additional fund shares. By choosing to reinvest, you'll be able to invest money regularly and automatically, and watch your investment grow through the power of tax-free compounding. Just like dividends or distributions in cash, there may be times when income or capital gains taxes may be payable on dividends or distributions that are reinvested. It is important to note that an automatic reinvestment plan does not ensure a profit, nor does it protect you against loss in a declining market. EASY AND CONVENIENT To make recordkeeping easy and convenient, each month you'll receive a statement showing your total dividends and distributions, the date of investment, the shares acquired and the price per share, and the total number of shares you own. HOW SHARES ARE PURCHASED The shares you acquire by reinvesting will either be purchased on the open market or newly issued by the Fund. If the shares are trading at or above net asset value at the time of valuation, the Fund will issue new shares at the then-current market price. If the shares are trading at less than net asset value, shares for your account will be purchased on the open market. Dividends and distributions received to purchase shares in the open market will normally be invested shortly after the dividend payment date. No interest will be paid on dividends and distributions awaiting reinvestment. Because the market price of shares may increase before purchases are completed, the average purchase price per share may exceed the market price at the time of valuation, resulting in the acquisition of fewer shares than if the dividend or distribution had been paid in shares issued by the Fund. A pro rata portion of any applicable brokerage commissions on open market purchases will be paid by Plan participants. These commissions usually will be lower than those charged on individual transactions. FLEXIBILITY You may change your distribution option or withdraw from the Plan at any time, should your needs or situation change. Should you withdraw, you can receive a certificate for all whole shares credited to your reinvestment account and cash payment for fractional shares, or cash payment for all reinvestment account shares, less brokerage commissions and a $2.50 service fee. You can reinvest whether your shares are registered in your name, or in the name of a brokerage firm, bank, or other nominee. Ask your investment advisor if his or her firm will participate on your behalf. Participants whose shares are registered in the name of one firm may not be able to transfer the shares to another firm and continue to participate in the Plan. The Fund reserves the right to amend or terminate the Plan at any time. Although the Fund reserves the right to amend the Plan to include a service charge payable by the participants, there is no direct service charge to participants in the Plan at this time. For more information on the Nuveen Automatic Reinvestment Plan or to enroll in or withdraw from the Plan, speak with your financial advisor or call us at (800) 257-8787. 72 Fund INFORMATION BOARD OF DIRECTORS/TRUSTEES William E. Bennett Robert P. Bremner Lawrence H. Brown Anne E. Impellizzeri Peter R. Sawers William J. Schneider Timothy R. Schwertfeger Judith M. Stockdale FUND MANAGER Nuveen Advisory Corp. 333 West Wacker Drive Chicago, IL 60606 CUSTODIAN State Street Bank & Trust Boston, MA TRANSFER AGENT AND SHAREHOLDER SERVICES State Street Bank & Trust Nuveen Funds P.O. Box 43071 Providence, RI 02940-3071 (800) 257-8787 LEGAL COUNSEL Chapman and Cutler LLP Chicago, IL INDEPENDENT AUDITORS Ernst & Young LLP Chicago, IL POLICY CHANGE On November 14, 2002, the Board adopted a policy that allows each Fund, in addition to investments in municipal bonds, to invest up to 5% of its net assets (including assets attributable to preferred shares, if any) in tax-exempt or taxable fixed-income securities 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 Advisory determines that such investment should enable the Fund to better maximize the value of its existing investment in such issuer. This policy is a non-fundamental policy of each Fund which means that it can be changed at any time by the Board of Directors without vote of the shareholders. 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 (including change in NAV and reinvested dividends) that would have been necessary on an annual basis to equal the investment's actual performance over the time period being considered. Average Effective Maturity: The average of all the maturities of the bonds in a fund's portfolio, computed by weighting each maturity date (the date the security comes due) by the market value of the security. This figure does not account for the likelihood of prepayments or the exercise of call provisions. Leverage-Adjusted Duration: Duration is a measure of a bond or bond fund's sensitivity to changes in interest rates. Generally, the longer a bond or fund's duration, the more the price of the bond or fund will change as interest rates change. Leverage-adjusted duration takes into account the leveraging process for a Fund and therefore is generally longer than the duration of the actual portfolio of individual bonds that make up the Fund. Market Yield (also known as Dividend Yield or Current Yield): An investment's current annualized dividend divided by its current market price. Net Asset Value (NAV): A fund's NAV 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. Taxable-Equivalent Yield: The yield necessary from a fully taxable investment to equal, on an after-tax basis, the yield of a municipal bond investment. - --------- Each Fund intends to repurchase shares of its own common or preferred stock in the future at such times and in such amounts as is deemed advisable. No shares were repurchased during the fiscal year ended August 31, 2003. Any future repurchases will be reported to shareholders in the next annual or semiannual report. 73 Serving Investors FOR GENERATIONS Since 1898, financial advisors and their clients have relied on Nuveen Investments to provide dependable investment solutions. For the past century, Nuveen Investments has adhered to the belief that the best approach to investing is to apply conservative risk-management principles to help minimize volatility. Building on this tradition, we today offer a range of high quality equity and fixed-income solutions that are integral to a well-diversified core portfolio. Our clients have come to appreciate this diversity, as well as our continued adherence to proven, long-term investing principles. Managing $90 billion in assets, Nuveen Investments offers access to a number of different asset classes and investing solutions through a variety of products. Nuveen Investments markets its capabilities under four distinct brands: Nuveen, a leader in tax-free investments; NWQ, a leader in value-style equities; Rittenhouse, a leader in growth-style equities; and Symphony, a leading institutional manager of market-neutral alternative investment portfolios. To learn more about the products and services Nuveen Investments offers and for a prospectus, where applicable, talk to your financial advisor, or call us at (800) 257-8787. Please read the information carefully before you invest. Distributed by NUVEEN INVESTMENTS, LLC | 333 West Wacker Drive | Chicago, Illinois 60606 | www.nuveen.com EAN-B-0803D ITEM 2. CODE OF ETHICS. As of the end of the period covered by this report, the registrant has adopted a code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. The registrant has posted such code of ethics on its website at www.nuveen.com/etf. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. The registrant's board of directors has determined that the registrant has at least one "audit committee financial expert" (as defined in Item 3 of Form N-CSR) serving on its audit committee. The registrant's audit committee financial expert is William E. Bennett, who is "independent" for purposes of Item 3 of Form N-CSR. Mr. Bennett was formerly Executive Vice President and Chief Credit Officer for First Chicago Corp./First National Bank. As part of his role as Chief Credit Officer, Mr. Bennett set policy as to accrual of assets/loans; designated performing/non-performing assets; set the level of reserves against the credit portfolio and determined the carrying value of credit related assets and exposure. Among other things, Mr. Bennett was also responsible for the oversight of the internal analysis function including setting ground rules for the review and preparation of financial analysis and financial statements for use in making credit and risk decisions for clients. Mr. Bennett has significant experience reviewing, analyzing and evaluating financial statements of domestic and international companies in a variety of industries with complex accounting issues. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. Not applicable at this time. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable at this time. ITEM 6. [RESERVED] ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES In the rare event that a municipal issuer held by the Fund were to issue a proxy or that the Fund were to receive a proxy issued by a cash management security, Nuveen Advisory Corp. (the "Adviser") 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 Trustees or its representative. In the case of a conflict of interest, the proxy would be submitted to the applicable fund's Board to determine how the proxy should be voted. A member of the Adviser'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 SEC on Form N-PX, and the results were provided to the Board of Directors or Trustees and made available to shareholders as required by applicable rules. ITEM 8. [RESERVED] ITEM 9. CONTROLS AND PROCEDURES. (a) The registrant's principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the "1940 Act") (17 CFR 270.30a-3(c))) are effective, as of a date within 90 days of the filing date of this report that includes the disclosure required by this paragraph, based on their evaluation of the controls and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Exchange Act (17 CFR 240.13a-15(b) or 240.15d-15(b)). (b) There were no changes in the registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR 270.30a-3(d)) that occurred during the registrant's last fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. ITEM 10. EXHIBITS. File the exhibits listed below as part of this Form. Letter or number the exhibits in the sequence indicated. (a)(1) Any code of ethics, or amendment thereto, that is the subject of the disclosure required by Item 2, to the extent that the registrant intends to satisfy the Item 2 requirements through filing of an exhibit: Not applicable because posted on registrant's website at www.nuveen.com/etf (a)(2) A separate certification for each principal executive officer and principal financial officer of the registrant as required by Rule 30a-2(a) under the Act (17 CFR 270.30a-2(a)) in the exact form set forth below: Ex-99.CERT Attached hereto. (b) If the report is filed under Section 13(a) or 15(d) of the Exchange Act, provide the certifications required by Rule 30a-2(b) under the Act (17 CFR 270.30a-2(b), Rule 13a-14(b) or Rule 15d-14(b) under the Exchange Act (17 CFR 240.13a-14(b) or 240.15d-14(b)), and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350) as an exhibit. A certification furnished pursuant to this paragraph will not be deemed "filed" for purposes of Section 18 of the Exchange Act (15 U.S.C. 78r), or otherwise subject to the liability of that section. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference. Ex-99.906 CERT attached hereto. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (Registrant) Nuveen Insured California Premium Income Municipal Fund 2, Inc. ----------------------------------------------------------------- By (Signature and Title)* /s/ Jessica R. Droeger ---------------------------------------------- Jessica R. Droeger Vice President and Secretary Date: November 7, 2003 ------------------------------------------------------------------- Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By (Signature and Title)* /s/ Gifford R. Zimmerman ---------------------------------------------- Gifford R. Zimmerman Chief Administrative Officer (Principal Executive Officer) Date: November 7, 2003 ------------------------------------------------------------------- By (Signature and Title)* /s/ Stephen D. Foy ---------------------------------------------- Stephen D. Foy Vice President and Controller (Principal Financial Officer) Date: November 7, 2003 ------------------------------------------------------------------- * Print the name and title of each signing officer under his or her signature.