ThZeal - The Zeal

N-CSRS 1 file001.txt NUVEEN CALIFORNIA DIVIDEND ADV MUNICIPAL FUND 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 811-09161 --------------------- Nuveen California Dividend Advantage Municipal Fund ------------------------------------------------------------------------------ (Exact name of registrant as specified in charter) Nuveen Investments 333 West Wacker Drive Chicago, IL 60606 ------------------------------------------------------------------------------ (Address of principal executive offices) (Zip code) Kevin J. McCarthy 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: February 28 ------------------ Date of reporting period: August 31, 2009 ------------------ 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. LOGO: NUVEEN INVESTMENTS Closed-End Funds Nuveen Investments Municipal Closed-End Funds IT'S NOT WHAT YOU EARN, IT'S WHAT YOU KEEP.(R) Semi-Annual Report August 31, 2009 ------------------------- ------------------------- ------------------------- NUVEEN INSURED CALIFORNIA NUVEEN INSURED CALIFORNIA NUVEEN CALIFORNIA PREMIUM INCOME MUNICIPAL PREMIUM INCOME MUNICIPAL PREMIUM INCOME FUND, INC. FUND 2, INC. MUNICIPAL FUND NPC NCL NCU ------------------------- ------------------------- ------------------------- NUVEEN CALIFORNIA NUVEEN CALIFORNIA NUVEEN CALIFORNIA DIVIDEND ADVANTAGE DIVIDEND ADVANTAGE DIVIDEND ADVANTAGE MUNICIPAL FUND MUNICIPAL FUND 2 MUNICIPAL FUND 3 NAC NVX NZH ------------------------- ------------------------- NUVEEN INSURED CALIFORNIA NUVEEN INSURED CALIFORNIA DIVIDEND ADVANTAGE TAX-FREE ADVANTAGE MUNICIPAL FUND MUNICIPAL FUND NKL NKX August 09 LIFE IS COMPLEX. Nuveen makes things e-simple. It only takes a minute to sign up for e-Reports. Once enrolled, you'll receive an e-mail as soon as your Nuveen Investments Fund information is ready. No more waiting for delivery by regular mail. Just click on the link within the e-mail to see the report and save it on your computer if you wish. Free e-Reports right to your e-mail! WWW.INVESTORDELIVERY.COM If you receive your Nuveen Fund dividends and statements from your financial advisor or brokerage account. OR WWW.NUVEEN.COM/ACCOUNTACCESS If you receive your Nuveen Fund dividends and statements directly from Nuveen. LOGO: NUVEEN INVESTMENTS Chairman's Letter to Shareholders [PHOTO OF ROBERT P. BREMNER] DEAR SHAREHOLDER, The financial markets in which your Fund operates continue to reflect the larger economic crosscurrents. The illiquidity that infected global credit markets over the last year appears to be slowly but steadily receding. The major institutions that are the linchpin of the international financial system are strengthening their capital structures, but many still struggle with losses in their various portfolios. There are encouraging signs of recovery in European and Asian economies, while the U.S. economy continues to feel the impact of job losses and an over-borrowed consumer. Global trends include modestly increasing trade and increased concern about the ability of the U.S. government to address its substantial budgetary deficits. Identifying those developments that will define the future is never easy, but rarely is it more difficult than at present. After considerable volatility in the first few months of 2009, both the fixed-income and equity markets have seen a partial recovery. A fundamental component of a successful long-term investment program is a commitment to remain invested during market downturns in order to be better positioned to benefit from any recovery. Another component is to re-evaluate investment disciplines and tactics and to confirm their validity following periods of extreme volatility and market dislocation, such as we have recently experienced. Your Board carried out an intensive review of investment performance with these objectives in mind during April and May of this year as part of the annual management contract renewal process. I encourage you to read the description of this process in the Annual Investment Management Agreement Approval Process section of this report. Remaining invested through market downturns and reconfirming the appropriateness of a long term investment strategy is as important for our shareholders as it is for professional investment managers. For that reason, I again encourage you to remain in communication with your financial consultant on these subjects. For recent developments on all your Nuveen Funds, please visit the Nuveen web site: www.nuveen.com. Nuveen remains committed to resolving the issues connected with outstanding auction rate preferred shares. In September 2009, Nuveen completed the refinancing at par of all the outstanding auction rate preferred shares issued by its taxable closed-end funds. For a variety of reasons, refinancing the remaining outstanding preferred shares issued by the municipal closed-end funds is taking longer but Nuveen is diligently pursuing a range of options to accomplish this. Please consult the Nuveen web site for the most recent information about the redemption of municipal auction rate preferred shares. On behalf of the other members of your Fund's Board, we look forward to continuing to earn your trust in the months and years ahead. Sincerely, /s/ Robert P. Bremner ----------------------------------- Robert P. Bremner Chairman of the Board October 20,2009 Nuveen Investments 1 Portfolio Manager's Comments 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) Nuveen Insured California Tax-Free Advantage Municipal Fund (NKX) Portfolio manager Scott Romans examines key investment strategies and the six-month performance of the Nuveen California Municipal Funds. Scott, who joined Nuveen in 2000, has managed NCU, NAC, NVX, NZH, NKL and NKX since 2003. He assumed portfolio management responsibility for NPC and NCL in 2005. WHAT KEY STRATEGIES WERE USED TO MANAGE THE CALIFORNIA FUNDS DURING THE SIX-MONTH REPORTING PERIOD ENDED AUGUST 31, 2009? During this reporting period, municipal bond prices generally rose, as strong cash flows into municipal bond funds combined with tighter new issue supply to provide favorable supply and demand conditions. Given the restricted supply during the period, investment activity in the California Funds was more limited than usual. One reason for the supply reduction was the introduction of the Build America Bonds program. Build America Bonds are a new class of taxable municipal debt created as part of the February 2009 economic stimulus package. They provide municipal issuers with a federal subsidy equal to 35% of the security's interest payments, and therefore offer issuers an attractive alternative to traditional tax-exempt debt. As of August 31, 2009, approximately 20% of new bonds issued in the municipal market have been issued as taxable Build America Bonds, which has reduced the supply of traditional tax-exempt municipal bond issuance. For the insured Funds, this situation was compounded by the severe decline in the issuance of AAA-rated insured bonds. During the first eight months of 2009, new insured bonds accounted for only 10.8% of national issuance, compared with 20.7% during the first eight months of 2008 and historical levels of approximately 50%. While we did see some new insured issuance during this period, none of it offered enough compelling opportunities to warrant significant turnover and its potential impact on earnings. CERTAIN STATEMENTS IN THIS REPORT ARE FORWARD-LOOKING STATEMENTS. DISCUSSIONS OF SPECIFIC INVESTMENTS ARE FOR ILLUSTRATION ONLY AND ARE NOT INTENDED AS RECOMMENDATIONS OF INDIVIDUAL INVESTMENTS. THE FORWARD-LOOKING STATEMENTS AND OTHER VIEWS EXPRESSED HEREIN ARE THOSE OF THE PORTFOLIO MANAGER AS OF THE DATE OF THIS REPORT. ACTUAL FUTURE RESULTS OR OCCURRENCES MAY DIFFER SIGNIFICANTLY FROM THOSE ANTICIPATED IN ANY FORWARD-LOOKING STATEMENTS AND THE VIEWS EXPRESSED HEREIN ARE SUBJECT TO CHANGE AT ANY TIME, DUE TO NUMEROUS MARKET AND OTHER FACTORS. THE FUNDS DISCLAIM ANY OBLIGATION TO UPDATE PUBLICLY OR REVISE ANY FORWARD-LOOKING STATEMENTS OR VIEWS EXPRESSED HEREIN. 2 Nuveen Investments When purchase opportunities did arise, we continued to focus on relative value, as we took a bottom-up approach to discovering undervalued sectors and individual credits with the potential to perform well over the long term. In some cases, we were able to add lower-rated and non-rated credits that we believed offered value at historically very attractive prices. Cash for new purchases during this period was generated largely by bond calls. During the spring of 2009, some of the Funds also sold positions in California general obligation (GO) bonds prior to the credit problems experienced by the state during the summer. We continued to use inverse floating rate securities(1) in all of these Funds. We employ inverse floaters for a variety of reasons, including duration(2) management, income enhancement and as a form of financial leverage. As of August 31, 2009, the inverse floaters remained in place in all of these Funds. HOW DID THE FUNDS PERFORM? Individual results for the Nuveen California Funds, as well as relevant index and peer group information, are presented in the accompanying table. AVERAGE ANNUAL TOTAL RETURNS ON COMMON SHARE NET ASSET VALUE* FOR PERIODS ENDED 8/31/09

For the six months ended August 31, 2009, the cumulative returns on common share net asset value (NAV) for NCU, NAC, NVX and NZH exceeded the returns on the Standard & Poor's (S&P) California Municipal Bond Index. NAC and NZH outperformed the average return for the Lipper California Municipal Debt Funds Average while NCU and NVX underperformed the Lipper average return. All of these Funds outperformed the Standard & Poor's (S&P) National Municipal Bond Index for the period. *Six-month returns are cumulative; returns for one-year, five-year and ten-year are annualized. Past performance is not predictive of future results. Current performance may be higher or lower than the data shown. Returns do not reflect the deduction of taxes that shareholders may have to pay on Fund distributions or upon the sale of Fund shares. For additional information, see the individual Performance Overview for your Fund in this report. (1) An inverse floating rate security, also known as inverse floaters, is a financial instrument designed to pay long-term tax-exempt interest at a rate that varies inversely with a short-term tax-exempt interest rate index. For the Nuveen Funds, the index typically used is the Securities Industry and Financial Markets (SIFM) Municipal Swap Index (previously referred to as the Bond Market Association Index or BMA). Inverse floaters, including those inverse floating rate securities in which the Funds invested during the reporting period, are further defined within the Notes to Financial Statements and Glossary of Terms Used in this Report sections of this report. (2) Duration is a measure of a bond's price sensitivity as interest rates change, with longer duration bonds displaying more sensitivity to these changes than bonds with shorter durations. (3) The Standard & Poor's (S&P) California Municipal Bond Index is an unleveraged, market value-weighted index designed to measure the performance of the investment-grade California municipal bond market. This index does not reflect any initial or on going expenses and is not available for direct investment. (4) The Lipper California Municipal Debt Funds Average is calculated using the returns of all closed-end funds in this category for each period as follows: Six-months, 24 funds; 1-year, 24 funds; 5-year, 24 funds; and 10-year, 12 funds. Fund and Lipper returns assume reinvestment of dividends. (5) The Standard & Poor's (S&P) National Municipal Bond Index is an unleveraged, market value-weighted index designed to measure the performance of the investment-grade U.S. municipal bond market, while the Standard & Poor's (S&P) Insured National Municipal Bond Index is an unleveraged, market value-weighted index designed to measure the performance of the insured segment of the U.S. municipal bond market. The indexes do not reflect any initial or on going expenses and are not available for direct investment. (6) The Barclays Capital (formerly Lehman Brothers) Municipal Bond Index is an unleveraged, unmanaged national index comprising a broad range of investment-grade municipal bonds, while the Barclays Capital (formerly Lehman Brothers) Insured Municipal Bond Index is an unleveraged, unmanaged national index containing a broad range of insured municipal bonds. Results for the Barclays Capital indexes do not reflect any expenses and are not available for direct investment. (7) The Lipper Single-State Insured Municipal Debt Funds Average is calculated using the returns of all closed-end funds in this category for each period as follows: Six-months, 44 funds; 1-year, 44 funds; 5-year, 44 funds; and 10-year, 24 funds. Fund and Lipper returns assume reinvestment of dividends. Nuveen Investments 3 For the insured Funds during the same period, the cumulative returns on common share NAV for NCL, NKL and NKX exceeded the returns on the Standard & Poor's (S&P) California Municipal Bond Index. NPC performed in line with the Standard & Poor's (S&P) California Municipal Bond Index. The four insured Funds underperformed the average return on the Lipper Single-State Insured Municipal Debt Funds Average. All of the Funds except NPC outperformed the Standard & Poor's (S&P) Insured National Municipal Bond Index for the period. Key management factors that influenced the Funds' returns during this period included duration and yield curve positioning, credit exposure and sector allocations. In addition, leverage was an important factor affecting the Funds' performances over this period. The impact of leverage is discussed in more detail on page 5. As previously noted, municipal bonds generally performed well over this period. Bonds in the Barclays Capital Municipal Bond Index with maturities longer than 15 years, especially those with the longest maturities (22 years or more), benefited the most from this environment. These bonds generally outperformed credits with shorter maturities, with bonds maturing in one to two years posting the weakest returns for the period. Among the uninsured Funds, NAC was the best positioned for this environment in terms of duration and yield curve positioning, while NCU had more exposure to the underper-forming shorter end of the yield curve, which hurt its performance. Similarly, among the insured Funds, NCL was more advantageously positioned, especially relative to NPC, which was negatively impacted by its lower weightings in the longer parts of the curve that performed well. The increase in demand for municipal bonds, among both institutional and individual investors, especially for lower-rated credits, was driven by a variety of factors. These included concerns about possible tax increases, the need to rebalance portfolio allocations, and a growing appetite to assume additional risk. At the same time, the supply of new municipal paper declined and bonds rated BBB or below and non-rated bonds generally outperformed those rated AAA. All of the uninsured Funds were helped by their weightings in the lower-rated credit categories, although the positive contribution from these bonds was smaller in NCU, which had less exposure to these categories. NKL and NKX also benefited from their holdings of uninsured BBB and non-rated bonds. In addition, individual security selection in the high-grade, longer maturity categories boosted the performance of NAC, as its selection of longer AAA, AA, and A rated bonds outperformed similar categories in the other California Funds. Holdings that generally contributed to the Funds' performances included industrial development revenue (IDR), health care and zero coupon bonds, all of which outperformed the general municipal market during this period. Bonds backed by the 1998 master tobacco settlement agreement also posted strong returns. As of August 31, 2009, holdings of lower-rated tobacco bonds ranged from approximately 3% to 5% of total net assets, providing a meaningful contribution to performance. (NPC and NCL do not hold any uninsured tobacco bonds.) 4 Nuveen Investments Pre-refunded(8) bonds, which often are backed by U.S. Treasury securities and which, were one of the top performing segments of the municipal bond market over the past two years, performed especially poorly during this period. This was due primarily to their shorter effective maturities and higher credit quality. Additional market segments that lagged the overall municipal market included resource recovery, water and sewer and GO credits. Although long-dated California GOs underperformed other bonds with the same effective duration, all of these Funds were significantly underweighted in California GOs relative to the California market in general, which helped their absolute and relative performances. As of August 31, 2009, California GOs were rated Baa1/A/BBB by Moody's, S&P and Fitch, respectively. These credit ratings, which were the lowest of any state, reflected two downgrades by Moody's and three downgrades by Fitch during this six-month period, most recently in July 2009. On the positive side, S&P, which had lowered its rating on California GOs in February 2009, reaffirmed its rating of A in August 2009 and removed the state from its negative credit watch list. IMPACT OF THE FUNDS' CAPITAL STRUCTURES AND LEVERAGE STRATEGIES ON PERFORMANCE One important factor impacting the returns of these Funds relative to the comparative indexes was the Funds' use of financial leverage. The Funds use leverage because their managers believe that, over time, leveraging provides opportunities for additional income and total returns for common shareholders. However, use of leverage also can expose common shareholders to additional risk--especially when market conditions are unfavorable. For example, as the prices of securities held by a Fund declines, the negative impact of these valuation changes on common share net asset value and common shareholder total return is magnified by the use of leverage. Conversely, leverage may enhance common share returns during periods when bond prices generally are rising. During this six-month period, leverage had a positive impact on the total return performance of the Funds that employed this strategy. RECENT DEVELOPMENTS REGARDING BOND INSURANCE COMPANIES Another factor that had an impact on the performance of these Funds was their positions in bonds backed by municipal bond insurers that experienced downgrades in their credit ratings. During the period covered by this report, all bond insurers experienced one or more rating reductions by at least one or more rating agencies. At the time this report was prepared, there are no longer any bond insurers rated AAA by more than one of the major rating agencies (Moody's Investor Service, S&P and Fitch) and at least one rating agency has placed each insurer on "negative credit watch," "credit outlook/watch developing" "credit outlook/watch negative," "credit watch evolving," "rating withdrawn" or "regulatory supervision" which may presage one or more rating reductions for any insurer in the future. As concern increased about the balance sheets of insurers, prices on insured bonds - especially those bonds issued by weaker underlying credits - declined, detracting from the Funds' performances. By the end of this period, most insured bonds were being valued according to their fundamentals as if they were uninsured. On the whole, the holdings of all of these Funds continued to be well diversified and it is important to note that municipal bonds historically have had a very low rate of default. (8) Pre-refundings, also known as advance refundings or refinancings, occur when an issuer sells new bonds and uses the proceeds to fund principal and interest payments of older existing bonds. This process often results in lower borrowing costs for bond issuers. Nuveen Investments 5 RECENT DEVELOPMENTS REGARDING THE FUND'S LEVERAGED CAPITAL STRUCTURE As noted in the last several shareholder reports, the auction rate preferred shares issued by many closed-end funds, including these Nuveen Funds, have been hampered by a lack of liquidity since February 2008. Since that time, more auction rate preferred shares have been submitted for sale in their regularly scheduled auctions than there have been offers to buy. In fact, offers to buy have been almost completely non-existent since late February, 2008. This means that these auctions have "failed to clear," and that many, or all, of the auction rate preferred shareholders who wanted to sell their shares in these auctions were unable to do so. This lack of liquidity in auction rate preferred shares did not lower the credit quality of these shares, and auction rate preferred shareholders unable to sell their shares received distributions at the "maximum rate" applicable to failed auctions, as calculated in accordance with the pre-established terms of the auction rate preferred shares. In the recent market, with short-term rates at multi-generational lows, those maximum rates also have been low. One continuing implication for common shareholders from the auction failures is that each Fund's cost of leverage likely has been incrementally higher at times than it otherwise might have been had the auctions continued to be successful. As a result, each Fund's common share earnings likely have been incrementally lower at times than they otherwise might have been. As noted in past shareholder reports, the Funds' Board of Directors/Trustees authorized a plan to use tender option bonds (TOBs), also known as floating rate securities, to refinance a portion of the Funds' outstanding auction rate preferred shares. The amount of TOBs that a Fund may use varies according to the composition of each Fund's portfolio. Some Funds have a greater ability to use TOBs than others. As of August 31, 2009, the amounts of auction rate preferred securities redeemed, at par, by each of the Funds are as shown in the accompanying table. AUCTION RATE % OF ORIGINAL PREFERRED SHARES AUCTION RATE FUND REDEEMED PREFERRED SHARES -------------------------------------------------------------------------------- NPC - - NCL $15,175,000 15.97% NCU $ 4,125,000 9.59% NAC $39,475,000 22.56% NVX $11,725,000 10.66% NZH $32,925,000 17.61% NKL $ 9,750,000 8.26% NKX $45,000,000 100.00% -------------------------------------------------------------------------------- 6 Nuveen Investments As noted in past shareholder reports, NKX's redemptions were achieved through the issuance of variable rate demand preferred shares (VRDP) in conjunction with the proceeds from the creation of TOBs. VRDP is a newly-developed instrument that essentially replaced the auction rate preferred shares used as leverage in NKX, and potentially, could be used to refinance the auction rate preferred shares of other Funds. The holder of VRDP has a right to put the shares to an external liquidity provider, whose fees are paid by the Fund and its common shareholders. VRDP is offered only to qualified institutional buyers, defined pursuant to Rule 144A under the Securities Act of 1933. As of August 31, 2009, NKX had issued $35.5 million of VRDP. Subsequent to the end of this reporting period, the following Funds noticed for redemption, at par, additional auction rate preferred securities as shown in the accompanying table. AUCTION RATE PREFERRED SHARES FUND REDEEMED -------------------------------------------------------------------------------- NCU $4,500,000 NVX $4,500,000 -------------------------------------------------------------------------------- The Funds, their Board of Directors/Trustees and Fund Management continue to work to resolve this situation. Several Funds have attempted to issue VRDP, but it has been difficult to find liquidity facilities on economically viable terms given the constrained credit environment. The Funds also have tried to develop other forms of preferred stock that have longer terms and do not require a Fund to obtain and pay for the services of an external liquidity provider. However, the Funds cannot provide any assurance on when the remaining outstanding auction rate preferred shares might be redeemed. As of August 31, 2009, 78 Nuveen closed-end municipal funds have redeemed, at par, a portion of their outstanding auction rate preferred shares. These redemptions bring the total amount of Nuveen's municipal closed-end funds' auction rate preferred share redemptions to approximately $2.3 billion of the original $11 billion outstanding. For up-to-date information, please visit the Nuveen CEF Auction Rate Preferred Resource Center at: http://www.nuveen.com/ResourceCenter/AuctionRatePreferred. aspx. Nuveen Investments 7 Common Share Dividend and Share Price Information During the six-month reporting period ended August 31, 2009, each of these eight California Funds had one monthly dividend increase. All of the Funds in this report seek to pay stable dividends at rates that reflect each Fund's past results and projected future performance. During certain periods, each Fund may pay dividends at a rate that may be more or less than the amount of net investment income actually earned by the Fund during the period. If a Fund has cumulatively earned more than it has paid in dividends, it holds the excess in reserve as undistributed net investment income (UNII) as part of the Fund's NAV. Conversely, if a Fund has cumulatively paid dividends in excess of its earnings, the excess constitutes negative UNII that is likewise reflected in the Fund's NAV. Each Fund will, over time, pay all of its net investment income as dividends to shareholders. As of August 31, 2009, all of the Funds in this report had positive UNII balances for tax purposes, based upon our best estimate, and positive UNII balances for financial statement purposes. COMMON SHARE REPURCHASES AND SHARE PRICE INFORMATION As of August 31, 2009, the following Funds cumulatively repurchased common shares as shown in the accompanying table. Since the inception of the Funds repurchase program, NAC and NKX have not repurchased any of their outstanding common shares. COMMON SHARES % OF OUTSTANDING FUND REPURCHASED COMMON SHARES -------------------------------------------------------------------------------- NPC 13,300 0.2% NCL 53,500 0.4% NCU 37,900 0.7% NVX 50,700 0.3% NZH 12,900 0.1% NKL 32,700 0.2% -------------------------------------------------------------------------------- 8 Nuveen Investments During the six-month reporting period, the following Funds repurchased common shares at a weighted average price and a weighted average discount per common share as shown in the accompanying table. WEIGHTED AVERAGE WEIGHTED AVERAGE COMMON SHARES PRICE PER SHARE DISCOUNT PER SHARE FUND REPURCHASED REPURCHASED REPURCHASED -------------------------------------------------------------------------------- NPC 7,100 $11.25 18.75% NCL 11,700 $10.43 18.03% NCU 23,200 $ 9.75 20.39% NVX 32,400 $10.28 19.87% NKL 13,700 $11.04 18.04% -------------------------------------------------------------------------------- As of August 31, 2009, the Funds' common share prices were trading at discounts to their common share NAVs as shown in the accompanying table. 8/31/09 SIX-MONTH AVERAGE FUND (-)DISCOUNT (-)DISCOUNT -------------------------------------------------------------------------------- NPC -9.62% -13.98% NCL -7.48% -10.86% NCU -8.27% -15.63% NAC -7.34% -11.60% NVX -7.74% -13.01% NZH -1.77% -7.92% NKL -7.65% -12.18% NKX -6.46% -9.27% -------------------------------------------------------------------------------- Nuveen Investments 9 NPC Performance OVERVIEW | Nuveen Insured California Premium Income Municipal Fund, Inc. as of August 31, 2009 FUND SNAPSHOT -------------------------------------------------------------------------------- Common Share Price $ 13.06 -------------------------------------------------------------------------------- Common Share Net Asset Value $ 14.45 -------------------------------------------------------------------------------- Premium/(Discount) to NAV -9.62% -------------------------------------------------------------------------------- Market Yield 5.65% -------------------------------------------------------------------------------- Taxable-Equivalent Yield(3) 8.68% -------------------------------------------------------------------------------- Net Assets Applicable to Common Shares ($000) $ 93,168 -------------------------------------------------------------------------------- Average Effective Maturity on Securities (Years) 14.65 -------------------------------------------------------------------------------- Leverage-Adjusted Duration 10.04 -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURN (Inception 11/19/92) -------------------------------------------------------------------------------- ON SHARE PRICE ON NAV -------------------------------------------------------------------------------- 6-Month (Cumulative) 11.73% 5.70% -------------------------------------------------------------------------------- 1-Year 1.41% 3.13% -------------------------------------------------------------------------------- 5-Year 2.42% 3.59% -------------------------------------------------------------------------------- 10-Year 4.62% 5.82% -------------------------------------------------------------------------------- PORTFOLIO COMPOSITION (as a % of total investments) -------------------------------------------------------------------------------- U.S. Guaranteed 30.0% -------------------------------------------------------------------------------- Tax Obligation/Limited 25.9% -------------------------------------------------------------------------------- Tax Obligation/General 23.4% -------------------------------------------------------------------------------- Water and Sewer 11.0% -------------------------------------------------------------------------------- Other 9.7% -------------------------------------------------------------------------------- INSURERS (as a % of total Insured investments) -------------------------------------------------------------------------------- NPFG(5) 36.1% -------------------------------------------------------------------------------- AMBAC 21.6% -------------------------------------------------------------------------------- FSA 21.1% -------------------------------------------------------------------------------- FGIC 15.6% -------------------------------------------------------------------------------- AGC 3.0% -------------------------------------------------------------------------------- Other 2.6% -------------------------------------------------------------------------------- CREDIT QUALITY (AS A % OF TOTAL INVESTMENTS)(1,2) [PIE CHART] Insured 70% U.S. Guaranteed* 30% * U.S. Guaranteed includes 10.5% (as a % of total investments) of Insured securities. 2008-2009 MONTHLY TAX-FREE DIVIDENDS PER COMMON SHARE(4) [BAR CHART] Sep $0.0605 Oct 0.0605 Nov 0.0605 Dec 0.0605 Jan 0.0605 Feb 0.0605 Mar 0.0605 Apr 0.0605 May 0.0615 Jun 0.0615 Jul 0.0615 Aug 0.0615 COMMON SHARE PRICE PERFORMANCE -- WEEKLY CLOSING PRICE [LINE CHART] 9/02/08 $ 13.91 13.89 13.64 13.16 12.02 11.83 8.3 10.46 11.14 11.57 12.1 11.3892 10 10.44 9.99 8.7332 10.04 10.47 10.84 12.45 11.69 11.924 12.37 12.6704 12.46 12.1 12.04 11.28 11.25 11.29 11.8 11.83 11.74 11.83 12.12 12.35 12.51 12.3799 12.32 12.36 12.25 11.86 12.18 11.79 11.86 12.04 12.15 12.62 12.75 12.9417 12.88 12.96 12.98 8/31/09 13.06 (1) Primarily all of the Fund's net assets are invested in municipal securities that guarantee the timely payment of principal and interest. See Notes to Financial Statements, Footnote 1 - Insurance, for more information. (2) The percentages shown in the foregoing chart may reflect the ratings on certain bonds whose insurer has experienced downgrades as of the end of the reporting period. Please see the Portfolio Manager's Comments for an expanded discussion of the affect on the Fund of changes to the ratings of certain bonds in the portfolio resulting from changes to the ratings of the underlying insurers both during the period and after period end. (3) Taxable-Equivalent Yield represents the yield that must be earned on a fully taxable investment in order to equal the yield of the Fund on an after-tax basis. It is based on a combined federal and state income tax rate of 34.9%. When comparing this Fund to investments that generate qualified dividend income, the Taxable-Equivalent Yield is lower. (4) The Fund paid shareholders capital gains and net ordinary income distributions in December 2008 of $0.1447 per share. (5) MBIA's public finance subsidiary. 10 Nuveen Investments NCL Performance OVERVIEW | Nuveen Insured California Premium Income Municipal Fund 2, Inc. as of August 31, 2009 CREDIT QUALITY (AS A % OF TOTAL INVESTMENTS)(1,2) [PIE CHART] Insured 87% U.S. Guaranteed* 13% * U.S. Guaranteed includes 10.7% (as a % of total investments) of Insured securities. 2008-2009 MONTHLY TAX-FREE DIVIDENDS PER COMMON SHARE(4) [BAR CHART] Sep $0.056 Oct 0.056 Nov 0.056 Dec 0.056 Jan 0.056 Feb 0.056 Mar 0.058 Apr 0.058 May 0.065 Jun 0.065 Jul 0.065 Aug 0.065 COMMON SHARE PRICE PERFORMANCE -- WEEKLY CLOSING PRICE [LINE CHART] 9/02/08 $12.63 12.87 12.7 11.74 11.06 10.8 7.77 9.52 10.68 10.3 12.3614 11.41 10.51 9.89 9.15 7.8 9.07 9.05 9.97 11.25 10.667 10.28 10.7 10.79 11.2 10.29 10.89 10.36 10.53 10.72 10.81 11.02 11.22 11.15 11.67 11.95 12.03 11.89 11.98 12.08 12.22 11.95 11.66 11.3 11.29 11.43 11.68 12 12.27 12.34 12.32 12.53 12.6 8/31/09 12.61 FUND SNAPSHOT -------------------------------------------------------------------------------- Common Share Price $ 12.61 -------------------------------------------------------------------------------- Common Share Net Asset Value $ 13.63 -------------------------------------------------------------------------------- Premium/(Discount) to NAV -7.48% -------------------------------------------------------------------------------- Market Yield 6.19% -------------------------------------------------------------------------------- Taxable-Equivalent Yield(3) 9.51% -------------------------------------------------------------------------------- Net Assets Applicable to Common Shares ($000) $ 172,637 -------------------------------------------------------------------------------- Average Effective Maturity on Securities (Years) 17.38 -------------------------------------------------------------------------------- Leverage-Adjusted Duration 12.71 -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURN (Inception 3/18/93) -------------------------------------------------------------------------------- ON SHARE PRICE ON NAV -------------------------------------------------------------------------------- 6-Month (Cumulative) 19.50% 9.15% -------------------------------------------------------------------------------- 1-Year 7.62% 3.26% -------------------------------------------------------------------------------- 5-Year 1.98% 3.31% -------------------------------------------------------------------------------- 10-Year 4.57% 5.67% -------------------------------------------------------------------------------- PORTFOLIO COMPOSITION (as a % of total investments) -------------------------------------------------------------------------------- Tax Obligation/Limited 39.6% -------------------------------------------------------------------------------- Tax Obligation/General 16.4% -------------------------------------------------------------------------------- Water and Sewer 15.0% -------------------------------------------------------------------------------- U.S. Guaranteed 13.0% -------------------------------------------------------------------------------- Utilities 5.3% -------------------------------------------------------------------------------- Other 10.7% -------------------------------------------------------------------------------- INSURERS (as a % of total Insured investments) -------------------------------------------------------------------------------- FGIC 28.8% -------------------------------------------------------------------------------- AMBAC 27.5% -------------------------------------------------------------------------------- NPFG(5) 21.7% -------------------------------------------------------------------------------- FSA 19.0% -------------------------------------------------------------------------------- Other 3.0% -------------------------------------------------------------------------------- (1) Primarily all of the Fund's net assets are invested in municipal securities that guarantee the timely payment of principal and interest. See Notes to Financial Statements, Footnote 1 - Insurance, for more information. (2) The percentages shown in the foregoing chart may reflect the ratings on certain bonds whose insurer has experienced downgrades as of the end of the reporting period. Please see the Portfolio Manager's Comments for an expanded discussion of the affect on the Fund of changes to the ratings of certain bonds in the portfolio resulting from changes to the ratings of the underlying insurers both during the period and after period end. (3) Taxable-Equivalent Yield represents the yield that must be earned on a fully taxable investment in order to equal the yield of the Fund on an after-tax basis. It is based on a combined federal and state income tax rate of 34.9%. When comparing this Fund to investments that generate qualified dividend income, the Taxable-Equivalent Yield is lower. (4) The Fund paid shareholders capital gains and net ordinary income distributions in December 2008 of $0.1431 per share. (5) MBIA's public finance subsidiary. Nuveen Investments 11 NCU Performance OVERVIEW | Nuveen California Premium Income Municipal Fund as of August 31, 2009 FUND SNAPSHOT -------------------------------------------------------------------------------- Common Share Price $ 12.09 -------------------------------------------------------------------------------- Common Share Net Asset Value $ 13.18 -------------------------------------------------------------------------------- Premium/(Discount) to NAV -8.27% -------------------------------------------------------------------------------- Market Yield 5.66% -------------------------------------------------------------------------------- Taxable-Equivalent Yield(2) 8.69% -------------------------------------------------------------------------------- Net Assets Applicable to Common Shares ($000) $ 75,631 -------------------------------------------------------------------------------- Average Effective Maturity on Securities (Years) 16.97 -------------------------------------------------------------------------------- Leverage-Adjusted Duration 12.14 -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURN (Inception 6/18/93) -------------------------------------------------------------------------------- ON SHARE PRICE ON NAV -------------------------------------------------------------------------------- 6-Month (Cumulative) 23.95% 9.26% -------------------------------------------------------------------------------- 1-Year 2.60% 1.69% -------------------------------------------------------------------------------- 5-Year 3.26% 3.31% -------------------------------------------------------------------------------- 10-Year 5.02% 5.74% -------------------------------------------------------------------------------- PORTFOLIO COMPOSITION (as a % of total investments) -------------------------------------------------------------------------------- Tax Obligation/Limited 31.0% -------------------------------------------------------------------------------- Health Care 17.7% -------------------------------------------------------------------------------- Tax Obligation/General 17.0% -------------------------------------------------------------------------------- U.S. Guaranteed 10.5% -------------------------------------------------------------------------------- Utilities 5.3% -------------------------------------------------------------------------------- Water and Sewer 4.6% -------------------------------------------------------------------------------- Other 13.9% -------------------------------------------------------------------------------- CREDIT QUALITY (AS A % OF TOTAL INVESTMENTS)(1) [PIE CHART] AAA/U.S. Guaranteed 25% AA 30% A 31% BBB 11% BB or Lower 2% N/R 1% 2008-2009 MONTHLY TAX-FREE DIVIDENDS PER COMMON SHARE(3) [BAR CHART] Sep $0.0555 Oct 0.0555 Nov 0.0555 Dec 0.0555 Jan 0.0555 Feb 0.0555 Mar 0.0555 Apr 0.0555 May 0.057 Jun 0.057 Jul 0.057 Aug 0.057 COMMON SHARE PRICE PERFORMANCE -- WEEKLY CLOSING PRICE [LINE CHART] 9/02/08 $ 12.58 12.76 12.44 11.72 10.76 10.55 7.69 8.859 10.25 9.95 10.62 9.84 8.58 8.85 8.34 7.76 8.55 8.6 9.22 10.51 10.06 10 10.22 10.3 10.41 9.52 10.06 9.52 9.68 9.79 9.85 9.91 10 10.12 10.48 10.77 10.95 10.85 10.82 10.93 10.92 10.76 10.7 10.53 10.64 10.73 10.8 11.07 11.492 11.53 11.58 11.84 12.03 8/31/09 12.09 (1) Excluding short-term investments. (2) Taxable-Equivalent Yield represents the yield that must be earned on a fully taxable investment in order to equal the yield of the Fund on an after-tax basis. It is based on a combined federal and state income tax rate of 34.9%. When comparing this Fund to investments that generate qualified dividend income, the Taxable-Equivalent Yield is lower. (3) The Fund paid shareholders a capital gains distribution in December 2008 of $0.0061 per share. 12 Nuveen Investments NAC Performance OVERVIEW | Nuveen California Dividend Advantage Municipal Fund as of August 31, 2009 CREDIT QUALITY (AS A % OF TOTAL INVESTMENTS)(1) [PIE CHART] AAA/U.S. Guaranteed 33% AA 15% A 33% BBB 10% BB or Lower 1% N/R 8% 2008-2009 MONTHLY TAX-FREE DIVIDENDS PER COMMON SHARE(3) [BAR CHART] Sep $ 0.063 Oct 0.063 Nov 0.063 Dec 0.063 Jan 0.063 Feb 0.063 Mar 0.063 Apr 0.063 May 0.0665 Jun 0.0665 Jul 0.0665 Aug 0.0665 COMMON SHARE PRICE PERFORMANCE -- WEEKLY CLOSING PRICE [LINE CHART] 9/02/08 $ 13.31 13.46 13.63 12.79 11.98 11.1 8.15 9.6 10.9 11.01 11.21 10.25 8.76 9.73 9.1 7.57 9.27 9 10.17 11.3 10.55 10.4 10.51 10.69 11.15 9.92 10.82 9.7 9.805 10.3 10.13 10.55 10.46 10.64 10.99 11.3 11.42 11.33 11.4 11.62 11.33 10.83 10.935 10.9 10.92 11.1 11.2 11.45 11.7 11.83 11.99 12.15 12.16 8/31/09 12.24 FUND SNAPSHOT -------------------------------------------------------------------------------- Common Share Price $ 12.24 -------------------------------------------------------------------------------- Common Share Net Asset Value $ 13.21 -------------------------------------------------------------------------------- Premium/(Discount) to NAV -7.34% -------------------------------------------------------------------------------- Market Yield 6.52% -------------------------------------------------------------------------------- Taxable-Equivalent Yield(2) 10.02% -------------------------------------------------------------------------------- Net Assets Applicable to Common Shares ($000) $ 310,213 -------------------------------------------------------------------------------- Average Effective Maturity on Securities (Years) 18.03 -------------------------------------------------------------------------------- Leverage-Adjusted Duration 12.53 -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURN (Inception 5/26/99) -------------------------------------------------------------------------------- ON SHARE PRICE ON NAV -------------------------------------------------------------------------------- 6-Month (Cumulative) 17.10% 12.62% -------------------------------------------------------------------------------- 1-Year 0.55% -0.27% -------------------------------------------------------------------------------- 5-Year 2.71% 3.10% -------------------------------------------------------------------------------- 10-Year 4.59% 6.34% -------------------------------------------------------------------------------- PORTFOLIO COMPOSITION (as a % of total investments) -------------------------------------------------------------------------------- Tax Obligation/Limited 23.7% -------------------------------------------------------------------------------- U.S. Guaranteed 18.4% -------------------------------------------------------------------------------- Health Care 17.4% -------------------------------------------------------------------------------- Transportation 13.6% -------------------------------------------------------------------------------- Tax Obligation/General 6.1% -------------------------------------------------------------------------------- Education and Civic Organizations 4.8% -------------------------------------------------------------------------------- Water and Sewer 4.4% -------------------------------------------------------------------------------- Other 11.6% -------------------------------------------------------------------------------- (1) Excluding short-term investments. (2) Taxable-Equivalent Yield represents the yield that must be earned on a fully taxable investment in order to equal the yield of the Fund on an after-tax basis. It is based on a combined federal and state income tax rate of 34.9%. When comparing this Fund to investments that generate qualified dividend income, the Taxable-Equivalent Yield is lower. (3) The Fund paid shareholders capital gains and net ordinary income distributions in December 2008 of $0.2634 per share. Nuveen Investments 13 NVX Performance OVERVIEW | Nuveen California Dividend Advantage Municipal Fund 2 as of August 31, 2009 FUND SNAPSHOT -------------------------------------------------------------------------------- Common Share Price $ 12.75 -------------------------------------------------------------------------------- Common Share Net Asset Value $ 13.82 -------------------------------------------------------------------------------- Premium/(Discount) to NAV -7.74% -------------------------------------------------------------------------------- Market Yield 6.54% -------------------------------------------------------------------------------- Taxable-Equivalent Yield(1) 10.05% -------------------------------------------------------------------------------- Net Assets Applicable to Common Shares ($000) $ 203,836 -------------------------------------------------------------------------------- Average Effective Maturity on Securities (Years) 15.20 -------------------------------------------------------------------------------- Leverage-Adjusted Duration 11.40 -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURN (Inception 3/27/01) -------------------------------------------------------------------------------- ON SHARE PRICE ON NAV -------------------------------------------------------------------------------- 6-Month (Cumulative) 25.61% 10.40% -------------------------------------------------------------------------------- 1-Year 8.24% 2.23% -------------------------------------------------------------------------------- 5-Year 4.02% 3.96% -------------------------------------------------------------------------------- Since Inception 4.18% 5.37% -------------------------------------------------------------------------------- PORTFOLIO COMPOSITION (as a % of total investments) -------------------------------------------------------------------------------- U.S. Guaranteed 28.0% -------------------------------------------------------------------------------- Tax Obligation/Limited 15.2% -------------------------------------------------------------------------------- Health Care 12.5% -------------------------------------------------------------------------------- Transportation 7.5% -------------------------------------------------------------------------------- Water and Sewer 7.3% -------------------------------------------------------------------------------- Tax Obligation/General 6.8% -------------------------------------------------------------------------------- Education and Civic Organizations 5.8% -------------------------------------------------------------------------------- Utilities 5.4% -------------------------------------------------------------------------------- Other 11.5% -------------------------------------------------------------------------------- CREDIT QUALITY (AS A % OF TOTAL INVESTMENTS) [PIE CHART] AAA/U.S. Guaranteed 36% AA 18% A 26% BBB 11% BB or Lower 2% N/R 7% 2008-2009 MONTHLY TAX-FREE DIVIDENDS PER COMMON SHARE(2) [BAR CHART] Sep $0.0605 Oct 0.0605 Nov 0.0605 Dec 0.0605 Jan 0.0605 Feb 0.0605 Mar 0.066 Apr 0.066 May 0.0695 Jun 0.0695 Jul 0.0695 Aug 0.0695 COMMON SHARE PRICE PERFORMANCE -- WEEKLY CLOSING PRICE [LINE CHART] 9/02/08 $ 12.72 12.89 12.78 12.4 11.34 10.89 7.63 9.37 10.65 10.63 10.86 10.28 9 9.91 8.93 8.35 9.54 9.38 9.9 11.2301 10.45 10.5 10.91 10.8 10.99 9.96 10.51 10.2 10.37 10.55 10.72 11 10.92 10.98 11.2 11.48 12 11.88 11.8 12.05 11.69 11.51 11.44 11.33 11.42 11.5 11.81 11.9 12.26 12.33 12.4 12.5863 12.65 8/31/09 12.75 (1) Taxable-Equivalent Yield represents the yield that must be earned on a fully taxable investment in order to equal the yield of the Fund on an after-tax basis. It is based on a combined federal and state income tax rate of 34.9%. When comparing this Fund to investments that generate qualified dividend income, the Taxable-Equivalent Yield is lower. (2) The Fund paid shareholders capital gains and net ordinary income distributions in December 2008 of $0.035 per share. 14 Nuveen Investments NZH Performance OVERVIEW | Nuveen California Dividend Advantage Municipal Fund 3 as of August 31, 2009 CREDIT QUALITY (AS A % OF TOTAL INVESTMENTS)(1) [PIE CHART] AAA/U.S. Guaranteed 31% AA 17% A 30% BBB 14% BB or Lower 1% N/R 7% 2008-2009 MONTHLY TAX-FREE DIVIDENDS PER COMMON SHARE [BAR CHART] Sep $0.0615 Oct 0.0615 Nov 0.0615 Dec 0.0615 Jan 0.0615 Feb 0.0615 Mar 0.064 Apr 0.064 May 0.0675 Jun 0.0675 Jul 0.0675 Aug 0.0675 COMMON SHARE PRICE PERFORMANCE -- WEEKLY CLOSING PRICE [LINE CHART] 9/02/08 $ 12.76 13.05 12.86 12.35 11.6 10.78 7.75 9 10.4 10.5 10.9 9.84 8.62 9.8 8.13 7.38 8.85 8.63 9.44 10.44 9.69 9.65 10.355 10.48 10.72 9.45 10.23 9.6 10.01 9.86 10.18 10.23 10.2 10.22 10.7099 10.89 11.38 11.12 11.34 11.37 11.27 10.72 10.77 10.461 10.53 10.65 10.95 11.09 11.35 11.45 11.75 12.14 12.13 8/31/09 12.2 FUND SNAPSHOT -------------------------------------------------------------------------------- Common Share Price $ 12.20 -------------------------------------------------------------------------------- Common Share Net Asset Value $ 12.42 -------------------------------------------------------------------------------- Premium/(Discount) to NAV -1.77% -------------------------------------------------------------------------------- Market Yield 6.64% -------------------------------------------------------------------------------- Taxable-Equivalent Yield(2) 10.20% -------------------------------------------------------------------------------- Net Assets Applicable to Common Shares ($000) $ 299,575 -------------------------------------------------------------------------------- Average Effective Maturity on Securities (Years) 16.86 -------------------------------------------------------------------------------- Leverage-Adjusted Duration 13.54 -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURN (Inception 9/25/01) -------------------------------------------------------------------------------- ON SHARE PRICE ON NAV -------------------------------------------------------------------------------- 6-Month (Cumulative) 23.62% 11.40% -------------------------------------------------------------------------------- 1-Year 1.88% -2.57% -------------------------------------------------------------------------------- 5-Year 4.27% 2.34% -------------------------------------------------------------------------------- Since Inception 3.49% 3.98% -------------------------------------------------------------------------------- PORTFOLIO COMPOSITION (as a % of total investments) -------------------------------------------------------------------------------- Tax Obligation/Limited 26.0% -------------------------------------------------------------------------------- Health Care 18.1% -------------------------------------------------------------------------------- U.S. Guaranteed 16.0% -------------------------------------------------------------------------------- Tax Obligation/General 12.1% -------------------------------------------------------------------------------- Water and Sewer 5.9% -------------------------------------------------------------------------------- Consumer Staples 4.9% -------------------------------------------------------------------------------- Transportation 4.6% -------------------------------------------------------------------------------- Other 12.4% -------------------------------------------------------------------------------- (1) Excluding short-term investments. (2) Taxable-Equivalent Yield represents the yield that must be earned on a fully taxable investment in order to equal the yield of the Fund on an after-tax basis. It is based on a combined federal and state income tax rate of 34.9%. When comparing this Fund to investments that generate qualified dividend income, the Taxable-Equivalent Yield is lower. Nuveen Investments 15 NKL Performance OVERVIEW | Nuveen Insured California Dividend Advantage Municipal Fund as of August 31, 2009 FUND SNAPSHOT -------------------------------------------------------------------------------- Common Share Price $ 13.15 -------------------------------------------------------------------------------- Common Share Net Asset Value $ 14.24 -------------------------------------------------------------------------------- Premium/(Discount) to NAV -7.65% -------------------------------------------------------------------------------- Market Yield 6.34% -------------------------------------------------------------------------------- Taxable-Equivalent Yield(3) 9.74% -------------------------------------------------------------------------------- Net Assets Applicable to Common Shares ($000) $ 217,150 -------------------------------------------------------------------------------- Average Effective Maturity on Securities (Years) 16.43 -------------------------------------------------------------------------------- Leverage-Adjusted Duration 10.00 -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURN (Inception 3/25/02) -------------------------------------------------------------------------------- ON SHARE PRICE ON NAV -------------------------------------------------------------------------------- 6-Month (Cumulative) 21.74% 8.46% -------------------------------------------------------------------------------- 1-Year 4.43% 3.58% -------------------------------------------------------------------------------- 5-Year 3.74% 4.12% -------------------------------------------------------------------------------- Since Inception 4.37% 5.84% -------------------------------------------------------------------------------- PORTFOLIO COMPOSITION (as a % of total investments) -------------------------------------------------------------------------------- Tax Obligation/Limited 32.1% -------------------------------------------------------------------------------- Tax Obligation/General 18.2% -------------------------------------------------------------------------------- U.S. Guaranteed 14.3% -------------------------------------------------------------------------------- Utilities 9.9% -------------------------------------------------------------------------------- Water and Sewer 9.7% -------------------------------------------------------------------------------- Health Care 4.3% -------------------------------------------------------------------------------- Other 11.5% -------------------------------------------------------------------------------- INSURERS (as a % of total Insured investments) -------------------------------------------------------------------------------- AMBAC 27.4% -------------------------------------------------------------------------------- FSA 25.3% -------------------------------------------------------------------------------- NFPG(5) 24.0% -------------------------------------------------------------------------------- FGIC 15.3% -------------------------------------------------------------------------------- SYNCORA 4.8% -------------------------------------------------------------------------------- Other 3.2% -------------------------------------------------------------------------------- CREDIT QUALITY (AS A % OF TOTAL INVESTMENTS)(1,2) [PIE CHART] Insured 74% U.S. Guaranteed* 14% GNMA/FNMA Guaranteed 1% A (Uninsured) 5% BBB (Uninsured) 6% * U.S. Guaranteed includes 9.4% (as a % of total investments) of Insured securities. 2008-2009 MONTHLY TAX-FREE DIVIDENDS PER COMMON SHARE(4) [BAR CHART] Sep $ 0.062 Oct 0.062 Nov 0.062 Dec 0.062 Jan 0.062 Feb 0.062 Mar 0.0635 Apr 0.0635 May 0.0695 Jun 0.0695 Jul 0.0695 Aug 0.0695 COMMON SHARE PRICE PERFORMANCE -- WEEKLY CLOSING PRICE [LINE CHART] 9/02/08 $13.5099 13.65 13.71 13.6 12.3 11.52 8.28 10.039 11.16 11.84 12 11.26 9.9999 10.16 9.9 8.65 9.66 10.25 10.91 11.8 11.35 11.35 11.5056 11.83 11.7 10.61 11.16 10.95 10.95 11.15 11.38 11.54 11.25 11.48 11.9 11.98 12.48 12.46 12.51 12.6 12.1 11.55 11.81 11.78 11.884 11.88 12.14 12.44 12.89 12.8 13.05 13.13 13.145 8/31/09 13.15 (1) At least 80% of the Fund's net assets are invested in municipal securities that guarantee the timely payment of principal and interest. See Notes to Financial Statements, Footnote 1 - Insurance, for more information. (2) The percentages shown in the foregoing chart may reflect the ratings on certain bonds whose insurer has experienced downgrades as of the end of the reporting period. Please see the Portfolio Manager's Comments for an expanded discussion of the affect on the Fund of changes to the ratings of certain bonds in the portfolio resulting from changes to the ratings of the underlying insurers both during the period and after period end. (3) Taxable-Equivalent Yield represents the yield that must be earned on a fully taxable investment in order to equal the yield of the Fund on an after-tax basis. It is based on a combined federal and state income tax rate of 34.9%. When comparing this Fund to investments that generate qualified dividend income, the Taxable-Equivalent Yield is lower. (4) The Fund paid shareholders capital gains and net ordinary income distributions in December 2008 of $0.0372 per share. (5) MBIA's public finance subsidiary. 16 Nuveen Investments NKX Performance OVERVIEW | Nuveen Insured California Tax-Free Advantage Municipal Fund as of August 31, 2009 CREDIT QUALITY (AS A % OF TOTAL INVESTMENTS)(1,2,3) [PIE CHART] Insured 72% U.S. Guaranteed* 14% AA (Uninsured) 7% A (Uninsured) 1% BBB (Uninsured) 6% * U.S. Guaranteed includes 10.6% (as a % of long-term investments) of Insured securities. 2008-2009 MONTHLY TAX-FREE DIVIDENDS PER COMMON SHARE(5) [BAR CHART] Sep $ 0.059 Oct 0.059 Nov 0.059 Dec 0.059 Jan 0.059 Feb 0.059 Mar 0.059 Apr 0.059 May 0.063 Jun 0.063 Jul 0.063 Aug 0.063 COMMON SHARE PRICE PERFORMANCE -- WEEKLY CLOSING PRICE [LINE CHART] 9/02/08 $ 13.7 13.93 13.62 13.15 11.73 11.8 8.136 9.835 10.9 11.8511 12.3 10.6 9.83 10.32 9.3 8.6 9.47 10.35 10.67 12.14 11.58 10.97 11.26 11.41 11.76 11.65 11.75 10.75 10.99 10.96 11.488 11.6899 11.3 11.5 12.04 12.4 12.26 11.86 12.19 12.45 11.97 11.48 11.73 11.47 11.8 11.78 11.9 12.04 12.3 12.34 12.33 12.6461 12.7499 8/31/09 12.75 FUND SNAPSHOT -------------------------------------------------------------------------------- Common Share Price $ 12.75 -------------------------------------------------------------------------------- Common Share Net Asset Value $ 13.63 -------------------------------------------------------------------------------- Premium/(Discount) to NAV -6.46% -------------------------------------------------------------------------------- Market Yield 5.93% -------------------------------------------------------------------------------- Taxable-Equivalent Yield(4) 9.11% -------------------------------------------------------------------------------- Net Assets Applicable to Common Shares ($000) $ 80,226 -------------------------------------------------------------------------------- Average Effective Maturity on Securities (Years) 17.15 -------------------------------------------------------------------------------- Leverage-Adjusted Duration 12.10 -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURN (Inception 11/21/02) -------------------------------------------------------------------------------- ON SHARE PRICE ON NAV -------------------------------------------------------------------------------- 6-Month (Cumulative) 11.87% 9.10% -------------------------------------------------------------------------------- 1-Year -1.06% 2.09% -------------------------------------------------------------------------------- 5-Year 3.43% 3.96% -------------------------------------------------------------------------------- Since Inception 3.27% 4.81% -------------------------------------------------------------------------------- PORTFOLIO COMPOSITION (as a % of total investments) -------------------------------------------------------------------------------- Tax Obligation/Limited 31.3% -------------------------------------------------------------------------------- Tax Obligation/General 15.6% -------------------------------------------------------------------------------- Health Care 14.6% -------------------------------------------------------------------------------- U.S. Guaranteed 13.7% -------------------------------------------------------------------------------- Water and Sewer 9.5% -------------------------------------------------------------------------------- Transportation 7.0% -------------------------------------------------------------------------------- Other 8.3% -------------------------------------------------------------------------------- INSURERS (as a % of total Insured investments) -------------------------------------------------------------------------------- AMBAC 47.6% -------------------------------------------------------------------------------- NPFG(6) 22.3% -------------------------------------------------------------------------------- FSA 9.0% -------------------------------------------------------------------------------- AGC 7.9% -------------------------------------------------------------------------------- BHAC 6.2% -------------------------------------------------------------------------------- FGIC 5.5% -------------------------------------------------------------------------------- Other 1.5% -------------------------------------------------------------------------------- (1) Excluding short-term investments. (2) At least 80% of the Fund's net assets are invested in municipal securities that guarantee the timely payment of principal and interest. See Notes to Financial Statements, Footnote 1 - Insurance, for more information. (3) The percentages shown in the foregoing chart may reflect the ratings on certain bonds whose insurer has experienced downgrades as of the end of the reporting period. Please see the Portfolio Manager's Comments for an expanded discussion of the affect on the Fund of changes to the ratings of certain bonds in the portfolio resulting from changes to the ratings of the underlying insurers both during the period and after period end. (4) Taxable-Equivalent Yield represents the yield that must be earned on a fully taxable investment in order to equal the yield of the Fund on an after-tax basis. It is based on a combined federal and state income tax rate of 34.9%. When comparing this Fund to investments that generate qualified dividend income, the Taxable-Equivalent Yield is lower. (5) The Fund paid shareholders a capital gains distribution in December 2008 of $0.0516 per share. (6) MBIA's public finance subsidiary. Nuveen Investments 17 NPC | Nuveen Insured California Premium Income Municipal Fund, Inc. | Portfolio of Investments August 31, 2009 (Unaudited)

18 Nuveen Investments

Nuveen Investments 19 NPC | Nuveen Insured California Premium Income Municipal Fund, Inc. (continued) | Portfolio of Investments August 31, 2009 (Unaudited)

Primarily all of the Fund's net assets are invested in municipal securities that guarantee the timely payment of principal and interest. See Notes to Financial Statements, Footnote 1 - Insurance, for more information. (1) All percentages shown in the Portfolio of Investments are based on net assets applicable to Common shares unless otherwise noted. (2) Optional Call Provisions: Dates (month and year) and prices of the earliest optional call or redemption. There may be other call provisions at varying prices at later dates. Certain mortgage-backed securities may be subject to periodic principal paydowns. (3) Ratings: Using the higher of Standard & Poor's Group ("Standard & Poor's") or Moody's Investor Service, Inc. ("Moody's") rating. Ratings below BBB by Standard & Poor's or Baa by Moody's are considered to be below investment grade. The Portfolio of Investments may reflect the ratings on certain bonds whose insurer has experienced downgrades as of the end of the reporting period. Please see the Portfolio Manager's Comments for an expanded discussion of the affect on the Fund of changes to the ratings of certain bonds in the portfolio resulting from changes to the ratings of the underlying insurers both during the period and after period end. (4) Backed by an escrow or trust containing sufficient U.S. Government or U.S. Government agency securities which ensure the timely payment of principal and interest. Such investments are normally considered to be equivalent to AAA rated securities. (5) Auction Rate Preferred Shares, at Liquidation Value as a percentage of Total Investments is 34.0%. N/R Not rated. (ETM) Escrowed to maturity. (IF) Inverse floating rate investment. See accompanying notes to financial statements. 20 Nuveen Investments NCL | Nuveen Insured California Premium Income Municipal Fund 2, Inc. | Portfolio of Investments August 31, 2009 (Unaudited)

Nuveen Investments 21 NCL | Nuveen Insured California Premium Income Municipal Fund 2, Inc.(continued) | Portfolio of Investments August 31, 2009 (Unaudited)

22 Nuveen Investments

Nuveen Investments 23 NCL | Nuveen Insured California Premium Income Municipal Fund 2, Inc.(continued) | Portfolio of Investments August 31, 2009 (Unaudited)

24 Nuveen Investments

Primarily all of the Fund's net assets are invested in municipal securities that guarantee the timely payment of principal and interest. See Notes to Financial Statements, Footnote 1 - Insurance, for more information. (1) All percentages shown in the Portfolio of Investments are based on net assets applicable to Common shares unless otherwise noted. (2) Optional Call Provisions: Dates (month and year) and prices of the earliest optional call or redemption. There may be other call provisions at varying prices at later dates. Certain mortgage-backed securities may be subject to periodic principal paydowns. (3) Ratings: Using the higher of Standard & Poor's Group ("Standard & Poor's") or Moody's Investor Service, Inc. ("Moody's") rating. Ratings below BBB by Standard & Poor's or Baa by Moody's are considered to be below investment grade. The Portfolio of Investments may reflect the ratings on certain bonds whose insurer has experienced downgrades as of the end of the reporting period. Please see the Portfolio Manager's Comments for an expanded discussion of the affect on the Fund of changes to the ratings of certain bonds in the portfolio resulting from changes to the ratings of the underlying insurers both during the period and after period end. (4) Backed by an escrow or trust containing sufficient U.S. Government or U.S. Government agency securities which ensure the timely payment of principal and interest. Such investments are normally considered to be equivalent to AAA rated securities. (5) Auction Rate Preferred Shares, at Liquidation Value as a percentage of Total Investments is 30.3%. N/R Not rated. (ETM) Escrowed to maturity. (IF) Inverse floating rate investment. (UB) Underlying bond of an inverse floating rate trust reflected as a financing transaction pursuant to the provisions of SFAS No. 140. See Notes to Financial Statements, Footnote 1 - Inverse Floating Rate Securities for more information. See accompanying notes to financial statements. Nuveen Investments 25 NCU | Nuveen California Premium Income Municipal Fund | Portfolio of Investments August 31, 2009 (Unaudited)

26 Nuveen Investments

Nuveen Investments 27 NCU | Nuveen California Premium Income Municipal Fund (continued) | Portfolio of Investments August 31, 2009 (Unaudited)

28 Nuveen Investments

(1) All percentages shown in the Portfolio of Investments are based on net assets applicable to Common shares unless otherwise noted. (2) Optional Call Provisions: Dates (month and year) and prices of the earliest optional call or redemption. There may be other call provisions at varying prices at later dates. Certain mortgage-backed securities may be subject to periodic principal paydowns. (3) Ratings: Using the higher of Standard & Poor's Group ("Standard & Poor's") or Moody's Investor Service, Inc. ("Moody's") rating. Ratings below BBB by Standard & Poor's or Baa by Moody's are considered to be below investment grade. (4) Backed by an escrow or trust containing sufficient U.S. Government or U.S. Government agency securities which ensure the timely payment of principal and interest. Such investments are normally considered to be equivalent to AAA rated securities. (5) Investment has a maturity of more than one year, but has variable rate and demand features which qualify it as a short-term investment. The rate disclosed is that in effect at the end of the reporting period. This rate changes periodically based on market conditions or a specified market index. (6) Auction Rate Preferred Shares, at Liquidation Value as a percentage of Total Investments is 33.5%. N/R Not rated. (ETM) Escrowed to maturity. (IF) Inverse floating rate investment. (UB) Underlying bond of an inverse floating rate trust reflected as a financing transaction pursuant to the provisions of SFAS No. 140. See Notes to Financial Statements, Footnote 1 - Inverse Floating Rate Securities for more information. See accompanying notes to financial statements. Nuveen Investments 29 NAC | Nuveen California Dividend Advantage Municipal Fund | Portfolio of Investments August 31, 2009 (Unaudited)

30 Nuveen Investments

Nuveen Investments 31 NAC | Nuveen California Dividend Advantage Municipal Fund (continued) | Portfolio of Investments August 31, 2009 (Unaudited)

32 Nuveen Investments

Nuveen Investments 33 NAC | Nuveen California Dividend Advantage Municipal Fund (continued) | Portfolio of Investments August 31, 2009 (Unaudited)

34 Nuveen Investments

(1) All percentages shown in the Portfolio of Investments are based on net assets applicable to Common shares unless otherwise noted. (2) Optional Call Provisions: Dates (month and year) and prices of the earliest optional call or redemption. There may be other call provisions at varying prices at later dates. Certain mortgage-backed securities may be subject to periodic principal paydowns. (3) Ratings: Using the higher of Standard & Poor's Group ("Standard & Poor's") or Moody's Investor Service, Inc. ("Moody's") rating. Ratings below BBB by Standard & Poor's or Baa by Moody's are considered to be below investment grade. (4) Backed by an escrow or trust containing sufficient U.S. Government or U.S. Government agency securities which ensure the timely payment of principal and interest. Such investments are normally considered to be equivalent to AAA rated securities. (5) Investment has a maturity of more than one year, but has variable rate and demand features which qualify it as a short-term investment. The rate disclosed is that in effect at the end of the reporting period. This rate changes periodically based on market conditions or a specified market index. (6) Auction Rate Preferred Shares, at Liquidation Value as a percentage of Total Investments is 29.0%. N/R Not rated. (ETM) Escrowed to maturity. (IF) Inverse floating rate investment. (UB) Underlying bond of an inverse floating rate trust reflected as a financing transaction pursuant to the provisions of SFAS No. 140. See Notes to Financial Statements, Footnote 1 - Inverse Floating Rate Securities for more information. See accompanying notes to financial statements. Nuveen Investments 35 NVX | Nuveen California Dividend Advantage Municipal Fund 2 | Portfolio of Investments August 31, 2009 (Unaudited)

36 Nuveen Investments

Nuveen Investments 37 NVX | Nuveen California Dividend Advantage Municipal Fund 2 (continued) | Portfolio of Investments August 31, 2009 (Unaudited)

38 Nuveen Investments

Nuveen Investments 39 NVX | Nuveen California Dividend Advantage Municipal Fund 2 (continued) | Portfolio of Investments August 31, 2009 (Unaudited)

40 Nuveen Investments

(1) All percentages shown in the Portfolio of Investments are based on net assets applicable to Common shares unless otherwise noted. (2) Optional Call Provisions: Dates (month and year) and prices of the earliest optional call or redemption. There may be other call provisions at varying prices at later dates. Certain mortgage-backed securities may be subject to periodic principal paydowns. (3) Ratings: Using the higher of Standard & Poor's Group ("Standard & Poor's") or Moody's Investor Service, Inc. ("Moody's") rating. Ratings below BBB by Standard & Poor's or Baa by Moody's are considered to be below investment grade. (4) Backed by an escrow or trust containing sufficient U.S. Government or U.S. Government agency securities which ensure the timely payment of principal and interest. Such investments are normally considered to be equivalent to AAA rated securities. (5) Auction Rate Preferred Shares, at Liquidation Value as a percentage of Total Investments is 32.0%. N/R Not rated. (ETM) Escrowed to maturity. (IF) Inverse floating rate investment. (UB) Underlying bond of an inverse floating rate trust reflected as a financing transaction pursuant to the provisions of SFAS No. 140. See Notes to Financial Statements, Footnote 1 - Inverse Floating Rate Securities for more information. See accompanying notes to financial statements. Nuveen Investments 41 NZH | Nuveen California Dividend Advantage Municipal Fund 3 | Portfolio of Investments August 31, 2009 (Unaudited)

42 Nuveen Investments

Nuveen Investments 43 NZH | Nuveen California Dividend Advantage Municipal Fund 3 (continued) | Portfolio of Investments August 31, 2009 (Unaudited)

44 Nuveen Investments

Nuveen Investments 45 NZH | Nuveen California Dividend Advantage Municipal Fund 3 (continued) | Portfolio of Investments August 31, 2009 (Unaudited)

46 Nuveen Investments

(1) All percentages shown in the Portfolio of Investments are based on net assets applicable to Common shares unless otherwise noted. (2) Optional Call Provisions: Dates (month and year) and prices of the earliest optional call or redemption. There may be other call provisions at varying prices at later dates. Certain mortgage-backed securities may be subject to periodic principal paydowns. (3) Ratings: Using the higher of Standard & Poor's Group ("Standard & Poor's") or Moody's Investor Service, Inc. ("Moody's") rating. Ratings below BBB by Standard & Poor's or Baa by Moody's are considered to be below investment grade. (4) Backed by an escrow or trust containing sufficient U.S. Government or U.S. Government agency securities which ensure the timely payment of principal and interest. Such investments are normally considered to be equivalent to AAA rated securities. (5) Investment has a maturity of more than one year, but has variable rate and demand features which qualify it as a short-term investment. The rate disclosed is that in effect at the end of the reporting period. This rate changes periodically based on market conditions or a specified market index. (6) Auction Rate Preferred Shares, at Liquidation Value as a percentage of Total Investments is 33.7%. N/R Not rated. (IF) Inverse floating rate investment. (UB) Underlying bond of an inverse floating rate trust reflected as a financing transaction pursuant to the provisions of SFAS No. 140. See Notes to Financial Statements, Footnote 1 - Inverse Floating Rate Securities for more information. See accompanying notes to financial statements. Nuveen Investments 47 NKL | Nuveen Insured California Dividend Advantage Municipal Fund | Portfolio of Investments August 31, 2009 (Unaudited)

48 Nuveen Investments

Nuveen Investments 49 NKL | Nuveen Insured California Dividend Advantage Municipal Fund (continued) Portfolio of Investments August 31, 2009 (Unaudited)

50 Nuveen Investments

Nuveen Investments 51 NKL | Nuveen Insured California Dividend Advantage Municipal Fund (continued) | Portfolio of Investments August 31, 2009 (Unaudited)

At least 80% of the Fund's net assets are invested in municipal securities that guarantee the timely payment of principal and interest. See Notes to Financial Statements, Footnote 1 - Insurance, for more information. (1) All percentages shown in the Portfolio of Investments are based on net assets applicable to Common shares unless otherwise noted. (2) Optional Call Provisions: Dates (month and year) and prices of the earliest optional call or redemption. There may be other call provisions at varying prices at later dates. Certain mortgage-backed securities may be subject to periodic principal paydowns. (3) Ratings: Using the higher of Standard & Poor's Group ("Standard & Poor's") or Moody's Investor Service, Inc. ("Moody's") rating. Ratings below BBB by Standard & Poor's or Baa by Moody's are considered to be below investment grade. The Portfolio of Investments may reflect the ratings on certain bonds whose insurer has experienced downgrades as of the end of the reporting period. Please see the Portfolio Manager's Comments for an expanded discussion of the affect on the Fund of changes to the ratings of certain bonds in the portfolio resulting from changes to the ratings of the underlying insurers both during the period and after period end. (4) Backed by an escrow or trust containing sufficient U.S. Government or U.S. Government agency securities which ensure the timely payment of principal and interest. Such investments are normally considered to be equivalent to AAA rated securities. (5) Auction Rate Preferred Shares, at Liquidation Value as a percentage of Total Investments is 32.9%. N/R Not rated. (ETM) Escrowed to maturity. (IF) Inverse floating rate investment. (UB) Underlying bond of an inverse floating rate trust reflected as a financing transaction pursuant to the provisions of SFAS No. 140. See Notes to Financial Statements, Footnote 1 - Inverse Floating Rate Securities for more information. See accompanying notes to financial statements. 52 Nuveen Investments NKX | Nuveen Insured California Tax-Free Advantage Municipal Fund | Portfolio of Investments August 31, 2009 (Unaudited)

Nuveen Investments 53 NKX | Nuveen Insured California Tax-Free Advantage Municipal Fund (continued) | Portfolio of Investments August 31, 2009 (Unaudited)

54 Nuveen Investments

Nuveen Investments 55 NKX | Nuveen Insured California Tax-Free Advantage Municipal Fund (continued) | Portfolio of Investments August 31, 2009 (Unaudited)

At least 80% of the Fund's net assets are invested in municipal securities that guarantee the timely payment of principal and interest. See Notes to Financial Statements, Footnote 1 - Insurance, for more information. (1) All percentages shown in the Portfolio of Investments are based on net assets applicable to Common shares unless otherwise noted. (2) Optional Call Provisions: Dates (month and year) and prices of the earliest optional call or redemption. There may be other call provisions at varying prices at later dates. Certain mortgage-backed securities may be subject to periodic principal paydowns. (3) Ratings: Using the higher of Standard & Poor's Group ("Standard & Poor's") or Moody's Investor Service, Inc. ("Moody's") rating. Ratings below BBB by Standard & Poor's or Baa by Moody's are considered to be below investment grade. The Portfolio of Investments may reflect the ratings on certain bonds whose insurer has experienced downgrades as of the end of the reporting period. Please see the Portfolio Manager's Comments for an expanded discussion of the affect on the Fund of changes to the ratings of certain bonds in the portfolio resulting from changes to the ratings of the underlying insurers both during the period and after period end. (4) Backed by an escrow or trust containing sufficient U.S. Government or U.S. Government agency securities which ensure the timely payment of principal and interest. Such investments are normally considered to be equivalent to AAA rated securities. (5) Investment has a maturity of more than one year, but has variable rate and demand features which qualify it as a short-term investment. The rate disclosed is that in effect at the end of the reporting period. This rate changes periodically based on market conditions or a specified market index. (6) Variable Rate Demand Preferred Shares, at Liquidation Value as a percentage of Total Investments is 30.2%. N/R Not rated. (IF) Inverse floating rate investment. (UB) Underlying bond of an inverse floating rate trust reflected as a financing transaction pursuant to the provisions of SFAS No. 140. See Notes to Financial Statements, Footnote 1 - Inverse Floating Rate Securities for more information. See accompanying notes to financial statements. 56 Nuveen Investments | Statement of | Assets & Liabilities August 31, 2009 (Unaudited)

See accompanying notes to financial statements. Nuveen Investments 57 | Statement of | Assets & Liabilities (continued) August 31, 2009 (Unaudited)

See accompanying notes to financial statements. 58 Nuveen Investments | Statement of | Operations Six Months ended August 31, 2009 (Unaudited)

See accompanying notes to financial statements. Nuveen Investments 59 | Statement of | Operations (continued) Six Months Ended August 31, 2009 (Unaudited)

See accompanying notes to financial statements. 60 Nuveen Investments | Statement of | Changes in Net Assets(Unaudited)

See accompanying notes to financial statements. Nuveen Investments 61 | Statement of | Changes in Net Assets (Unaudited) (continued)

62 Nuveen Investments

See accompanying notes to financial statements. Nuveen Investments 63 | Statement of | Changes in Net Assets (Unaudited) (continued)

See accompanying notes to financial statements. 64 Nuveen Investments | Statement of | Cash Flows Six Months ended August 31, 2009 (Unaudited)

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid for interest (excluding amortization of offering costs, where applicable) was as follows:

See accompanying notes to financial statements. Nuveen Investments 65 | Notes to | Financial Statements(Unaudited) 1. GENERAL INFORMATION AND SIGNIFICANT ACCOUNTING POLICIES 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) (collectively, the "Funds"). 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 NYSE Amex. The Funds are registered under the Investment Company Act of 1940, as amended, as closed-end management investment companies. 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 portfolio of municipal obligations issued by state and local government authorities within the state of California or certain U.S. territories. During the prior fiscal period, the Board of Directors/Trustees of the Funds approved a change in the Funds' fiscal and tax year ends from August 31 to February 28/29. The following is a summary of significant accounting policies followed by the Funds in the preparation of their financial statements in accordance with US generally accepted accounting principles. Investment 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. Prices of forward swap contracts are also provided by an independent pricing service approved by each Fund's Board of Directors/Trustees. Futures contracts are valued using the closing settlement price, or, in the absence of such a price, at the mean of the bid and asked prices. When market price quotes are not readily available (which is usually the case for municipal securities), the pricing service or, in the absence of a pricing service for a particular investment or derivative instrument, the Board of Directors/Trustees of the Fund, or its designee, may establish fair value using a wide variety of market data including yields or prices of investments of comparable quality, type of issue, coupon, maturity and rating, market quotes or indications of value from security dealers, evaluations of anticipated cash flows or collateral, general market conditions and other information and analysis, including the obligor's credit characteristics considered relevant. Temporary investments in securities that have variable rate and demand features qualifying them as short-term investments are valued at amortized cost, which approximates value. Investment Transactions Investment transactions are recorded on a trade date basis. Realized gains and losses from transactions are determined on the specific identification method. Investments purchased on a when-issued/delayed delivery basis may have extended settlement periods. Any investments so purchased are subject to market fluctuation during this period. The Funds have instructed the custodian to segregate assets with a current value at least equal to the amount of the when-issued/delayed delivery purchase commitments. At August 31, 2009, there were no such outstanding purchase commitments in any of the Funds. Investment Income Interest income, which includes the amortization of premiums and accretion of discounts for financial reporting purposes, is recorded on an accrual basis. Investment income also includes paydown gains and losses, if any. Income Taxes Each Fund is a separate taxpayer for federal income tax purposes. Each Fund intends to distribute substantially all of its net investment income and net capital gains to shareholders and to otherwise comply with the requirements of Subchapter M of the Internal Revenue Code applicable to regulated investment companies. Therefore, no federal income tax provision is required. Furthermore, each Fund intends to satisfy conditions which will enable interest from municipal securities, which is exempt from regular federal and California state income taxes, and in the case of Insured 66 Nuveen Investments 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. Net realized capital gains and ordinary income distributions paid by the Funds are subject to federal taxation. For all open tax years and all major taxing jurisdictions, management of the Funds has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements. Open tax years are those that are open for examination by taxing authorities (i.e., generally the last four tax year ends and the interim tax period since then). Furthermore, management of the Funds is also not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months. Dividends and Distributions to 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 at least 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 US generally accepted accounting principles. Auction Rate Preferred Shares The following Funds have issued and outstanding Auction Rate Preferred shares, $25,000 stated value per share, as a means of effecting financial leverage. Each Fund's Auction Rate Preferred shares are issued in one or more Series. The dividend rate paid by the Funds on each Series is determined every seven days, pursuant to a dutch auction process overseen by the auction agent, and is payable at the end of each rate period. As of August 31, 2009, the number of Auction Rate Preferred shares outstanding, by Series and in total, for each Fund is as follows:

Beginning in February 2008, more shares for sale were submitted in the regularly scheduled auctions for the Auction Rate Preferred shares issued by the Funds than there were offers to buy. This meant that these auctions "failed to clear," and that many Auction Rate Preferred shareholders who wanted to sell their shares in these auctions were unable to do so. Auction Rate Preferred shareholders unable to sell their shares received distributions at the "maximum rate" applicable to failed auctions as calculated in accordance with the pre-established terms of the Auction Rate Preferred shares. Nuveen Investments 67 | Notes to | Financial Statements (Unaudited) (continued) These developments have generally not affected the portfolio management or investment policies of the Funds. However, one continuing implication of these auction failures for Common shareholders is that the Funds' cost of leverage likely has been incrementally higher at times, than it otherwise might have been had the auctions continued to be successful. As a result, the Funds' future Common share earnings may likely have been incrementally lower than they otherwise might have been. As of August 31, 2009, the aggregate amount of outstanding Auction Rate Preferred shares redeemed by each Fund is as follows:

Effective May 1, 2009, auction participation fees with respect to auctions that have failed have been reduced from 25 bps (annualized) to 15 bps (annualized). All auction participants have signed new agreements incorporating this change. Variable Rate Demand Preferred Shares On August 7, 2008, Insured California Tax-Free Advantage (NKX) issued 355 Series 1 Variable Rate Demand Preferred shares, $100,000 liquidation value per share, in a privately negotiated offering. Proceeds of this offering along with the proceeds from the Fund's creation of tender option bonds (TOBs), also known as "floaters" or floating rate obligations, were used to redeem all of the Fund's outstanding Auction Rate Preferred shares totaling $45,000,000. The Variable Rate Demand Preferred shares were offered to institutional buyers as defined pursuant to Rule 144A under the Securities Act of 1933, have a maturity date of August 1, 2038 and include a liquidity feature that allows the Variable Rate Demand Preferred shareholders to have their shares purchased by the liquidity provider in the event that sell orders are not matched with purchase orders in a remarketing. Dividends on the Variable Rate Demand Preferred shares (which are treated as interest payments for financial reporting purposes) are set weekly at a rate established by a remarketing agent; therefore, the liquidation value of the Variable Rate Demand Preferred shares approximates fair value. Subject to certain conditions, Variable Rate Demand Preferred shares may be redeemed, in whole or in part, at any time at the option of the Fund. The Fund may also redeem certain of the Variable Rate Demand Preferred shares if the Fund fails to maintain certain asset coverage requirements and such failures are not cured by the applicable cure date. The redemption price per share is equal to the sum of the liquidation value per share plus any accumulated but unpaid dividends. Insured California Tax-Free Advantage (NKX) had all of its $35,500,000 Variable Rate Demand Preferred shares outstanding during the six months ended August 31, 2009, with an annualized interest rate of 0.47%. For financial reporting purposes only, the liquidation value of Variable Rate Demand Preferred shares is recognized as a liability on the Statement of Assets and Liabilities and the dividends paid on the Variable Rate Demand Preferred shares are included as a component of "Interest expense and amortization of offering costs" on the Statement of Operations. In addition to interest expense, the Fund also paid a per annum liquidity fee which is recognized as "Liquidity fees" on the Statement of Operations. Insurance Except to the extent that each of Insured California Premium Income (NPC) and Insured California Premium Income 2 (NCL) invests in temporary investments, all of the net assets of each Fund will be invested in municipal securities that are covered by insurance guaranteeing the timely payment of principal and interest or backed by an escrow or trust account containing sufficient U.S. government or U.S. government agency securities to ensure timely payment of principal and interest. Insurers must have a claims paying ability rated "Aaa" by Moody's or "AAA" by Standard & Poor's. Municipal securities backed by an escrow account or trust account will not constitute more than 20% of the Fund's net assets. Under normal circumstances, Insured California Dividend Advantage (NKL) and Insured California Tax-Free Advantage (NKX) invests at least 80% of their net assets (as defined in Footnote 7 - Management Fees and Other Transactions with Affiliates) in municipal securities that are covered by insurance guaranteeing the timely payment of principal and interest. For purposes of this 80% test, insurers must have a claims paying ability rated at least "A" at the time of purchase by at least one independent rating agency. In addition, each of Insured California Dividend Advantage (NKL) and Insured California Tax-Free Advantage (NKX) invests at least 80% of its net assets in municipal securities that are rated at least "AA" at the time of 68 Nuveen Investments purchase (based on the higher of the rating of the insurer, if any, or the underlying security) by at least one independent rating agency, or are unrated but judged to be of similar credit quality by Nuveen Asset Management (the "Adviser"), a wholly owned subsidiary of Nuveen Investments, Inc. ("Nuveen"), or are backed by an escrow or trust account containing sufficient U.S. government or U.S. government agency securities or U.S. Treasury-issued State and Local Government Series (SLGS) securities to ensure timely payment of principal and interest. Inverse floating rate securities whose underlying bonds are covered by insurance are included for purposes of the 80% test. Each of Insured California Dividend Advantage (NKL) and Insured California Tax-Free Advantage (NKX) may also invest up to 20% of its net assets in municipal securities rated below "AA" but at least "BBB" (based on the higher rating of the insurer, if any, or the underlying bond) or are 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, in contrast, 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. Inverse Floating Rate Securities Each Fund is authorized to invest in inverse floating rate securities. An inverse floating rate security is created by depositing a municipal bond, typically with a fixed interest rate, into a special purpose trust created by a broker-dealer. In turn, this trust (a) issues floating rate certificates, in face amounts equal to some fraction of the deposited bond's par amount or market value, that typically pay short-term tax-exempt interest rates to third parties, and (b) issues to a long-term investor (such as one of the Funds) an inverse floating rate certificate (sometimes referred to as an "inverse floater") that represents all remaining or residual interest in the trust. The income received by the inverse floater holder varies inversely with the short-term rate paid to the floating rate certificates' holders, and in most circumstances the inverse floater holder bears substantially all of the underlying bond's downside investment risk and also benefits disproportionately from any potential appreciation of the underlying bond's value. The price of an inverse floating rate security will be more volatile than that of the underlying bond because the interest rate is dependent on not only the fixed coupon rate of the underlying bond but also on the short-term interest paid on the floating rate certificates, and because the inverse floating rate security essentially bears the risk of loss of the greater face value of the underlying bond. A Fund may purchase an inverse floating rate security in a secondary market transaction without first owning the underlying bond (referred to as an "externally-deposited inverse floater"), or instead by first selling a fixed-rate bond to a broker-dealer for deposit into the special purpose trust and receiving in turn the residual interest in the trust (referred to as a "self-deposited inverse floater"). The inverse floater held by a Fund gives the Fund the right (a) to cause the holders of the floating rate certificates to tender their notes at par, and (b) to have the broker transfer the fixed-rate bond held by the trust to the Fund, thereby collapsing the trust. An investment in an externally-deposited inverse floater is identified in the Portfolio of Investments as "(IF) - Inverse floating rate investment." An investment in a self-deposited inverse floater is accounted for as a financing transaction in accordance with Statement of Financial Accounting Standards No. 140 (SFAS No. 140) "Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities." In such instances, a fixed-rate bond deposited into a special purpose trust is identified in the Portfolio of Investments as "(UB) - Underlying bond of an inverse floating rate trust," with the Fund accounting for the short-term floating rate certificates issued by the trust as "Floating rate obligations" on the Statement of Assets and Liabilities. In addition, the Fund reflects in "Investment Income" the entire earnings of the underlying bond and recognizes the related interest paid to the holders of the short-term floating rate certificates as a component of "Interest expense and amortization of offering costs" on the Statement of Operations. During the six months ended August 31, 2009, each Fund invested in externally-deposited inverse floaters and/or self-deposited inverse floaters. Each Fund may also enter into shortfall and forbearance agreements (sometimes referred to as a "recourse trust" or "credit recovery swap") (such agreements referred to herein as "Recourse Trusts") with a broker-dealer by which a Fund agrees to reimburse the broker-dealer, in certain circumstances, for the difference between the liquidation value of the fixed-rate bond held by the trust and the liquidation value of the floating rate certificates issued by the trust plus any shortfalls in interest cash flows. Under these agreements, a Fund's potential exposure to losses related to or on inverse floaters may increase beyond the value of a Fund's inverse floater investments as a Fund may potentially be liable to fulfill all amounts owed to holders of the floating rate certificates. At period end, any such shortfall is recognized as "Unrealized depreciation on Recourse Trusts" on the Statement of Assets and Liabilities. At August 31, 2009, the Funds were not invested in externally-deposited Recourse Trusts. Nuveen Investments 69 | Notes to | Financial Statements (Unaudited) (continued)

The average floating rate obligations outstanding and average annual interest rate and fees related to self-deposited inverse floaters during the six months ended August 31, 2009, were as follows:

Futures Contracts Each Fund is subject to interest rate risk in the normal course of pursuing its investment objectives and is authorized to invest in futures contracts in attempt to manage such risk. Upon entering into a futures contract, a Fund is required to deposit with the broker an amount of cash or liquid securities equal to a specified percentage of the contract amount. This is known as the "initial margin." Cash held by the broker to cover initial margin requirements on open futures contracts, if any, is recognized as "Deposits with brokers for open futures contracts" on the Statement of Assets and Liabilities. Subsequent payments ("variation margin") are made or received by a Fund each day, depending on the daily fluctuation of the value of the contract. Variation margin is recognized as a receivable or payable for "Variation margin on futures contracts" on the Statement of Assets and Liabilities, when applicable. During the period the futures contract is open, changes in the value of the contract are recorded as an unrealized gain or loss by "marking-to-market" on a daily basis to reflect the changes in market value of the contract and is recognized as "Change in net unrealized appreciation (depreciation) of futures contracts" on the Statement of Operations. When the contract is closed or expired, a Fund records a realized gain or loss equal to the difference between the value of the contract on the closing date and value of the contract when originally entered into and is recognized as "Net realized gain (loss) from futures contracts" on the Statement of Operations. The Funds did not invest in futures contracts during the six months ended August 31, 2009. Risks of investments in futures contracts include the possible adverse movement of the securities or indices underlying the contracts, the possibility that there may not be a liquid secondary market for the contracts and/or that a change in the value of the contract may not correlate with a change in the value of the underlying securities or indices. Swap Contracts Each Fund is authorized to enter into forward interest rate swap contracts consistent with their investment objectives and policies to reduce, increase or otherwise alter its risk profile or to alter its portfolio characteristics (i.e. duration, yield curve positioning and credit quality). Each Fund is subject to interest rate risk in the normal course of pursuing its investment objectives. Each Fund's use of forward interest rate swap transactions is intended to help the Fund manage its overall interest rate sensitivity, either shorter or longer, generally to more closely align the Fund's interest rate sensitivity with that of the broader municipal market. Forward interest rate swap transactions involve each Fund's agreement with a counterparty to pay, in the future, a fixed or variable rate payment in exchange for the counterparty paying the Fund a variable or fixed rate payment, the accruals for which would begin at a specified date in the future (the "effective date"). The amount of the payment obligation is based on the notional amount of the swap contract and the termination date of the swap (which is akin to a bond's maturity). The value of the Fund's swap commitment would increase or decrease based primarily on the extent to which long-term interest rates for bonds having a maturity of the swap's 70 Nuveen Investments termination date increases or decreases. Forward interest rate swap contracts are valued daily. The net amount recorded on these transactions for each counterparty is recognized on the Statement of Assets and Liabilities as "Unrealized appreciation or depreciation on forward swaps" with the change during the fiscal period recognized on the Statement of Operations as "Change in net unrealized appreciation (depreciation) of forward swaps." The Funds may terminate a swap contract prior to the effective date, at which point a realized gain or loss is recognized. When a forward swap is terminated, it ordinarily does not involve the delivery of securities or other underlying assets or principal, but rather is settled in cash on a net basis. Net realized gains and losses during the fiscal period are recognized on the Statement of Operations as "Net realized gain (loss) from forward swaps." Each Fund intends, but is not obligated, to terminate its forward swaps before the effective date. Accordingly, the risk of loss with respect to the swap counterparty on such transactions is limited to the credit risk associated with a counterparty failing to honor its commitment to pay any realized gain to the Fund upon termination. Insured California Premium Income 2 (NCL) and California Dividend Advantage 3 (NZH) invested in forward interest rate swaps transactions during the six months ended August 31, 2009. The average notional amount of forward swap contracts outstanding during the six months ended August 31, 2009, were as follows:

Refer to Footnote 3 - Derivative Instruments and Hedging Activities for further details on forward swap contract activity. Market and Counterparty Credit Risk In the normal course of business each Fund may invest in financial instruments and enter into financial transactions where risk of potential loss exists due to changes in the market (market risk) or failure of the other party to the transaction to perform (counterparty credit risk). The potential loss could exceed the value of the financial assets recorded on the financial statements. Financial assets, which potentially expose each Fund to counterparty credit risk, consist principally of cash due from counterparties on forward, option and swap transactions. The extent of each Fund's exposure to counterparty credit risk in respect to these financial assets approximates their carrying value as recorded on the Statement of Assets and Liabilities. Futures contracts expose a Fund to minimal counterparty credit risk as they are exchange traded and the exchange's clearinghouse, which is counterparty to all exchange traded futures, guarantees the futures contracts against default. Each Fund helps manage counterparty credit risk by entering into agreements only with counterparties the Adviser believes have the financial resources to honor their obligations and by having the Adviser monitor the financial stability of the counterparties. Additionally, counterparties may be required to pledge collateral daily (based on the daily valuation of the financial asset) on behalf of each Fund with a value approximately equal to the amount of any unrealized gain above a pre-determined threshold. Reciprocally, when each Fund has an unrealized loss, the Funds have instructed the custodian to pledge assets of the Funds as collateral with a value approximately equal to the amount of the unrealized loss above a pre-determined threshold. Collateral pledges are monitored and subsequently adjusted if and when the valuations fluctuate, either up or down, by at least the predetermined threshold amount. Zero Coupon Securities Each Fund is authorized to invest in zero coupon securities. A zero coupon security does not pay a regular interest coupon to its holders during the life of the security. Tax-exempt income to the holder of the security comes from accretion of the difference between the original purchase price of the security at issuance and the par value of the security at maturity and is effectively paid at maturity. Such securities are included in the Portfolios of Investments with a 0.000% coupon rate in their description. The market prices of zero coupon securities generally are more volatile than the market prices of securities that pay interest periodically. Offering Costs Costs incurred by Insured California Tax-Free Advantage (NKX) in connection with its offering of Variable Rate Demand Preferred shares ($530,000) were recorded as a deferred charge which will be amortized over the 30-year life of the shares and are included as a component of "Interest expense and amortization of offering costs" on the Statement of Operations. Custodian Fee Credit Each Fund has an arrangement with the custodian bank whereby certain custodian fees and expenses are reduced by net credits earned on each Fund's cash on deposit with the bank. Such deposit arrangements are an alternative to overnight investments. Credits for cash balances may be offset by charges for any days on which a Fund overdraws its account at the custodian bank. Indemnifications Under the Funds' organizational documents, their Officers and Directors/Trustees are indemnified against certain liabilities arising out of the performance of their duties to the Funds. In addition, in the normal course of business, the Funds enter into contracts that provide general Nuveen Investments 71 | Notes to | Financial Statements (Unaudited) (continued) indemnifications to other parties. The Funds' maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Funds that have not yet occurred. However, the Funds have not had prior claims or losses pursuant to these contracts and expect the risk of loss to be remote. Use of Estimates The preparation of financial statements in conformity with US generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets applicable to Common shares from operations during the reporting period. Actual results may differ from those estimates. 2. FAIR VALUE MEASUREMENTS In determining the value of each Fund's investments various inputs are used. These inputs are summarized in the three broad levels listed below: Level 1 - Quoted prices in active markets for identical securities. Level 2 - Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.). Level 3 - Significant unobservable inputs (including management's assumptions in determining the fair value of investments). The inputs or methodology used for valuing securities are not an indication of the risk associated with investing in those securities. The following is a summary of each Fund's fair value measurements as of August 31, 2009:

72 Nuveen Investments 3. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES During the current fiscal period, the Funds adopted the provisions of Statement of Financial Accounting Standards No. 161 (SFAS No. 161) "Disclosures about Derivative Instruments and Hedging Activities." This standard is intended to enhance financial statement disclosures for derivative instruments and hedging activities and enable investors to better understand: a) how and why a fund uses derivative instruments; b) how derivative instruments are accounted for; and c) how derivative instruments affect a fund's financial position, results of operations and cash flows, if any. The Funds record derivative instruments at fair value with changes in fair value recognized on the Statement of Operations, when applicable. Even though the Funds' investments in derivatives may represent economic hedges, they are considered to be non-hedge transactions for SFAS No. 161 disclosure purposes. For additional information on the derivative instruments in which each Fund was invested during and at the end of the reporting period, refer to the Portfolio of Investments, Financial Statements and Footnote 1 - General Information and Significant Accounting Policies. The following tables presents the amount of net realized gain (loss) and change in net unrealized appreciation (depreciation) recognized for the six months ended August 31, 2009, on derivative instruments, as well as the primary risk exposure associated with each. Insured California Premium Income 2 (NCL) and California Dividend Advantage 3 (NZH) invested in derivative instruments during the six months ended August 31, 2009. The Funds had no derivative contracts outstanding at August 31, 2009.

4. FUND SHARES Common Shares Transactions in Common shares were as follows:

Nuveen Investments 73 | Notes to | Financial Statements (Unaudited) (continued)

Preferred Shares Insured California Premium Income (NPC) did not redeem and/or notice for redemption any of their Auction Rate Preferred shares during the six months ended August 31, 2009, the six months ended February 28, 2009, or during the fiscal year ended August 31, 2008. Transactions in Auction Rate Preferred shares were as follows:

74 Nuveen Investments

Nuveen Investments 75 | Notes to | Financial Statements (Unaudited) (continued)

N/A - All $45,000,000 of the Fund's outstanding Auction Rate Preferred shares were redeemed during the fiscal year ended August 31, 2008. Transactions in Variable Rate Demand Preferred shares were as follows:

5. INVESTMENT TRANSACTIONS Purchases and sales (including maturities but excluding short-term investments and derivative transactions) during the six months ended August 31, 2009, were as follows:

6. INCOME TAX INFORMATION The following information is presented on an income tax basis. Differences between amounts for financial statement and federal income tax purposes are primarily due to timing differences in recognizing taxable market discount, timing differences in recognizing certain gains and losses on investment transactions and the treatment of investments in inverse floating rate transactions subject to SFAS No.140, if any. To the extent that differences arise that are permanent in nature, such amounts are reclassified within the capital accounts on the Statement of Assets and Liabilities presented in the annual report, based on their federal tax basis treatment; temporary differences do not require reclassification. Temporary and permanent differences do not impact the net asset values of the Funds. At August 31, 2009, the cost of investments was as follows:

76 Nuveen Investments

Gross unrealized appreciation and gross unrealized depreciation of investments at August 31, 2009, were as follows:

The tax components of undistributed net tax-exempt income, net ordinary income and net long-term capital gains at February 28, 2009, the Funds' last tax year end, were as follows:

* Undistributed net tax-exempt income (on a tax basis) has not been reduced for the dividend declared on February 3, 2009, paid on March 2, 2009. ** Net ordinary income consists of taxable market discount income and net short-term capital gains, if any. Nuveen Investments 77 | Notes to | Financial Statements (Unaudited) (continued) The tax character of distributions paid during the six months ended February 28, 2009, and during the tax year ended August 31, 2008, was designated for purposes of the dividends paid deduction as follows:

** Net ordinary income consists of taxable market discount income and net short-term capital gains, if any.

** Net ordinary income consists of taxable market discount income and net short-term capital gains, if any. At February 28, 2009, the Funds' last tax year end, 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:

78 Nuveen Investments The Funds have elected to defer net realized losses from investments incurred from November 1, 2008 through February 28, 2009, the Funds' last tax year end, ("post-October losses") in accordance with federal income tax regulations. Post-October losses are treated as having arisen on the first day of the current fiscal year:

7.MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES Each Fund's management fee is separated into two components - a complex-level component, based on the aggregate amount of all fund assets managed by the Adviser, and a specific fund-level component, based only on the amount of assets within each individual Fund. This pricing structure enables Nuveen fund shareholders to benefit from growth in the assets within each individual fund as well as from growth in the amount of complex-wide assets managed by the Adviser. The annual fund-level fee, payable monthly, for each Fund is based upon the average daily net assets of each Fund as follows:

The annual complex-level fee, payable monthly, which is additive to the fund-level fee, for all Nuveen sponsored funds in the U.S., is based on the aggregate amount of total fund net assets managed as stated in the following table. As of August 31, 2009, the complex-level fee rate was .1936%. Nuveen Investments 79 | Notes to | Financial Statements (Unaudited) (continued) The complex-level fee schedule is as follows:

(1) The complex-level fee component of the management fee for the funds is calculated based upon the aggregate daily managed net assets of all Nuveen funds, with such daily managed net assets defined separately for each fund in its management agreement, but excluding assets attributable to investments in other Nuveen funds. For the complex-level and fund-level fee components, daily managed net assets include assets managed by the Adviser that are attributable to financial leverage. For these purposes, financial leverage includes the funds use of preferred stock and borrowings and investments in the residual interest certificates (also called inverse floating rate securities) in tender option bond (TOB) trusts, including the portion of assets held by the TOB trust that has been effectively financed by the trust's issuance of floating rate securities, subject to an agreement by the Adviser to limit the amount of such assets for determining managed net assets in certain circumstances. 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 its Officers, all of whom receive remuneration for their services to the Funds from the Adviser or its affiliates. The Board of Directors/Trustees has adopted a deferred compensation plan for independent Directors/Trustees that enables Directors/Trustees to elect to defer receipt of all or a portion of the annual compensation they are entitled to receive from certain Nuveen advised funds. Under the plan, deferred amounts are treated as though equal dollar amounts had been invested in shares of select Nuveen advised funds. 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, for fees and expenses in the amounts and for the time periods set forth below:

* 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, for fees and expenses in the amounts and for the time periods set forth below:

* From the commencement of operations. 80 Nuveen Investments The Adviser has not agreed to reimburse California Dividend Advantage 2 (NVX) for any portion of its fees and expenses beyond March 31, 2011. 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, for fees and expenses in the amounts and for the time periods set forth below:

* 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, for fees and expenses in the amounts and for the time periods set forth below:

* 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, for fees and expenses in the amounts and for the time periods set forth below:

* 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. 8. NEW ACCOUNTING PRONOUNCEMENTS Financial Accounting Standards Board Statement of Financial Accounting Standards No. 166 (SFAS No. 166) During June 2009, the Financial Accounting Standards Board issued SFAS No. 166, "Accounting for Transfers of Financial Assets - an amendment of SFAS No. 140." The objective of SFAS No. 166 is to improve the relevance, representational faithfulness, and comparability of the information that a reporting entity provides in its financial statements about a transfer of financial assets; the effects of a transfer on its financial position, financial performance, and cash flows; and a transferor's continuing involvement, if any, in transferred financial assets. SFAS No. 166 is effective as of the beginning of each reporting entity's first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period and for interim and annual reporting periods thereafter. Earlier application is prohibited. The recognition and measurement provisions of SFAS No. 166 must be applied to transfers occurring on or after the effective date. Additionally, the disclosure provisions of SFAS No. 166 should be applied to transfers that occurred both before and after the effective date of SFAS No. 166. At this time, management is evaluating the implications of SFAS No. 166 and the impact it will have on the financial statement amounts and disclosures, if any. Nuveen Investments 81 | Notes to | Financial Statements (Unaudited) (continued) 9. SUBSEQUENT EVENTS Distributions to Common Shareholders The Funds declared Common share dividend distributions from their tax-exempt net investment income which were paid on October 1, 2009, to shareholders of record on September 15, 2009, as follows:

Auction Rate Preferred Shares On October 1, 2009, California Premium Income (NCU) and California Dividend Advantage 2 (NVX), each noticed for redemption $4.5 million of their outstanding Auction Rate Preferred shares, at liquidation value. Each Fund will use be using tender option bonds (TOBs) to finance the partial redemption of its Auction Rate Preferred shares. Financial Accounting Standards Board Statement of Financial Accounting Standards No. 165 (SFAS No. 165) In May 2009, the Financial Accounting Standards Board issued SFAS No. 165 "Subsequent Events." SFAS No. 165 requires an entity to recognize in the financial statements the effects of all subsequent events that provide additional evidence about conditions that existed at the date of the balance sheet. SFAS No. 165 is intended to establish general standards of accounting and for disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. SFAS No. 165 requires the disclosure of the date through which an entity has evaluated subsequent events and the basis for that date - that is, whether that date represents the date the financial statements were issued or were available to be issued. SFAS No. 165 is effective for interim and annual periods ending after June 15, 2009. The Funds have performed an evaluation of subsequent events through October 27, 2009, which is the date the financial statements were issued. 82 Nuveen Investments | Financial | Highlights (Unaudited) Nuveen Investments 83 | Financial | Highlights (Unaudited) Selected data for a Common share outstanding throughout each period:

84 Nuveen Investments

86 Nuveen Investments

88 Nuveen Investments

90 Nuveen Investments

* Total Return Based on Market Value is the combination of changes in the market price per share and the effect of reinvested dividend income and reinvested capital gains distributions, if any, at the average price paid per share at the time of reinvestment. The last dividend declared in the period, which is typically paid on the first business day of the following month, is assumed to be reinvested at the ending market price. The actual reinvestment for the last dividend declared in the period may take place over several days, and in some instances may not be based on the market price, so the actual reinvestment price may be different from the price used in the calculation. Total returns are not annualized. Total Return Based on Common Share Net Asset Value is the combination of changes in Common share net asset value, reinvested dividend income at net asset value and reinvested capital gains distributions at net asset value, if any. The last dividend declared in the period, which is typically paid on the first business day of the following month, is assumed to be reinvested at the ending net asset value. The actual reinvest price for the last dividend declared in the period may often be based on the Fund's market price (and not its net asset value), and therefore may be different from the price used in the calculation. Total returns are not annualized. ** After custodian fee credit and expense reimbursement, where applicable. *** Annualized. **** Rounds to less than $.01 per share. + The amounts shown are based on Common share equivalents. ++ Ratios do not reflect the effect of dividend payments to Auction Rate Preferred shareholders; Net Investment Income ratios reflect income earned and expenses incurred on assets attributable to Auction Rate Preferred shares or Variable Rate Demand Preferred shares, where applicable. (a) Interest expense arises from payments to Variable Rate Demand Preferred shareholders and the application of SFAS No. 140 to certain inverse floating rate transactions entered into by the Fund, where applicable, as both are more fully described in Footnote 1 - Variable Rate Demand Preferred Shares and Inverse Floating Rate Securities, respectively. (b) For the six months ended February 28, 2009. (c) For the six months ended August 31, 2009. See accompanying notes to financial statements. Nuveen Investments 91 Annual Investment Management Agreement Approval Process The Investment Company Act of 1940, as amended (the "1940 Act"), provides, in substance, that each investment advisory agreement between a fund and its investment adviser will continue in effect from year to year only if its continuance is approved at least annually by the fund's board members, including by a vote of a majority of the board members who are not parties to the advisory agreement or "interested persons" of any parties (the "Independent Board Members"), cast in person at a meeting called for the purpose of considering such approval. In connection with such approvals, the fund's board members must request and evaluate, and the investment adviser is required to furnish, such information as may be reasonably necessary to evaluate the terms of the advisory agreement. Accordingly, at a meeting held on May 27-29, 2009 (the "May Meeting"), the Boards of Trustees or Directors (as the case may be) (each a "Board" and each Trustee or Director, a "Board Member") of the Funds, including a majority of the Independent Board Members, considered and approved the continuation of the advisory agreements (each an "Advisory Agreement") between each Fund and Nuveen Asset Management ("NAM") for an additional one-year period. In preparation for their considerations at the May Meeting, the Board also held a separate meeting on April 21-22, 2009 (the "April Meeting"). Accordingly, the factors considered and determinations made regarding the renewals by the Independent Board Members include those made at the April Meeting. In addition, in evaluating the Advisory Agreements, the Independent Board Members reviewed a broad range of information relating to the Funds and NAM, including absolute performance, fee and expense information for the Funds as well as comparative performance, fee and expense information for a comparable peer group of funds, the performance information of recognized and/or customized benchmarks (as applicable) of the Funds, the profitability of Nuveen for its advisory activities (which includes its wholly owned subsidiaries other than Winslow Capital Management, Inc. ("Winslow Capital"), which was recently acquired in December 2008), and other information regarding the organization, personnel, and services provided by NAM. The Independent Board Members also met quarterly as well as at other times as the need arose during the year and took into account the information provided at such meetings and the knowledge gained therefrom. Prior to approving the renewal of the Advisory Agreements, the Independent Board Members reviewed the foregoing information with their independent legal counsel and with management, reviewed materials from independent legal counsel describing applicable law and their duties in reviewing advisory contracts, and met with independent legal counsel in private sessions without management present. The Independent Board Members considered the legal advice provided 92 Nuveen Investments by independent legal counsel and relied upon their knowledge of NAM, its services and the Funds resulting from their meetings and other interactions throughout the year and their own business judgment in determining the factors to be considered in evaluating the Advisory Agreements. Each Board Member may have accorded different weight to the various factors in reaching his or her conclusions with respect to a Fund's Advisory Agreement. The Independent Board Members did not identify any single factor as all-important or controlling. The Independent Board Members' considerations were instead based on a comprehensive consideration of all the information presented. The principal factors considered by the Board and its conclusions are described below. A. NATURE, EXTENT AND QUALITY OF SERVICES In considering renewal of the Advisory Agreements, the Independent Board Members considered the nature, extent and quality of NAM's services, including advisory services and administrative services. The Independent Board Members reviewed materials outlining, among other things, NAM's organization and business; the types of services that NAM or its affiliates provide and are expected to provide to the Funds; the performance record of the applicable Fund (as described in further detail below); and any initiatives Nuveen had taken for the applicable fund product line. In reviewing the services provided and the initiatives undertaken during the past year, the Independent Board Members recognized the severe market turmoil experienced in the capital markets during recent periods, including sustained periods of high volatility, credit disruption and government intervention. The Independent Board Members considered NAM's efforts, expertise and other actions taken to address matters as they arose that impacted the Funds. The Independent Board Members recognized the role of the Investment Services group which, among other things, monitors the various positions throughout the Nuveen fund complex to identify and address any systematic risks. In addition, the Capital Markets Committee of NAM provides a multi-departmental venue for developing new policies to mitigate any risks. The Independent Board Members further recognized NAM's continuous review of the Nuveen funds' investment strategies and mandates in seeking to continue to refine and improve the investment process for the funds, particularly in light of market conditions. With respect to closed-end funds that issued auction rate preferred shares ("ARPs") or that otherwise utilize leverage, the Independent Board Members noted, in particular, NAM's efforts in refi-nancing the preferred shares of such funds frozen by the collapse of the auction rate market and managing leverage during a period of rapid market declines, particularly for the non-equity funds. Such efforts included negotiating and maintaining the availability of bank loan facilities and other sources of credit used for investment purposes or to satisfy liquidity needs, liquidating portfolio securities during difficult times to meet leverage ratios, and seeking alternative forms of debt and other leverage that may over time reduce financing costs associated with ARPs and enable the funds that have issued ARPs to restore liquidity to ARPs holders. The Independent Board Members also noted Nuveen's continued commitment and efforts to keep investors and financial advisers Nuveen Investments 93 Annual Investment Management Agreement Approval Process (continued) informed as to its progress with the ARPs through, among other things, conference calls, emails, press releases, information posted on its website, and telephone calls and in-person meetings with financial advisers. In addition to the foregoing, the Independent Board Members also noted the additional services that NAM or its affiliates provide to closed-end funds, including, in particular, Nuveen's continued commitment to supporting the secondary market for the common shares of its closed-end funds through a variety of programs designed to raise investor and analyst awareness and understanding of closed-end funds. These efforts include maintaining an investor relations program to provide timely information and education to financial advisers and investors; providing advertising and marketing for the closed-end funds; maintaining websites; and providing educational seminars. As part of their review, the Independent Board Members also evaluated the background, experience and track record of NAM's investment personnel. In this regard, the Independent Board Members considered any changes in the personnel, and the impact on the level of services provided to the Funds, if any. The Independent Board Members also reviewed information regarding portfolio manager compensation arrangements to evaluate NAM's ability to attract and retain high quality investment personnel, preserve stability, and reward performance but not provide an incentive for taking undue risks. In addition to advisory services, the Independent Board Members considered the quality of administrative services provided by NAM and its affiliates including product management, fund administration, oversight of service providers, shareholder services, administration of Board relations, regulatory and portfolio compliance and legal support. Given the importance of compliance, the Independent Board Members considered NAM's compliance program, including the report of the chief compliance officer regarding the Funds' compliance policies and procedures. Based on their review, the Independent Board Members found that, overall, the nature, extent and quality of services provided (and expected to be provided) to the respective Funds under the Advisory Agreements were satisfactory. B. THE INVESTMENT PERFORMANCE OF THE FUNDS AND NAM The Board considered the investment performance of each Fund, including the Fund's historic performance as well as its performance compared to funds with similar investment objectives (the "Performance Peer Group") based on data provided by an independent provider of mutual fund data as well as recognized and/or customized benchmarks (as applicable). The Independent Board Members reviewed performance information including, among other things, total return information compared with the Fund's Performance Peer Group and recognized and/or customized benchmarks (as applicable) for the quarter-, one-, three- and five-year periods (as applicable) ending December 31, 2008 and for the same periods (as applicable) ending March 31, 2009. The Independent Board Members also reviewed performance information of the Nuveen municipal funds managed by NAM in the aggregate ranked by peer group and 94 Nuveen Investments the performance of such funds, in the aggregate, relative to their benchmark. This information supplemented the Fund performance information provided to the Board at each of its quarterly meetings. In comparing a fund's performance with that of its Performance Peer Group, the Independent Board Members took into account that the closest Performance Peer Group in certain instances may not adequately reflect the respective fund's investment objectives and strategies thereby hindering a meaningful comparison of the fund's performance with that of the Performance Peer Group. The Independent Board Members further considered the performance of the Funds in the context of the volatile market conditions during the past year, and their impact on various asset classes and the portfolio management of the Funds. Based on their review and factoring in the severity of market turmoil in 2008, the Independent Board Members determined that each Fund's investment performance over time had been satisfactory. C. FEES, EXPENSES AND PROFITABILITY 1. FEES AND EXPENSES The Board evaluated the management fees and expenses of each Fund reviewing, among other things, such Fund's gross management fees, net management fees and total expense ratios (before and after expense reimbursements and/or waivers) in absolute terms as well as compared to the fee and expenses of a comparable universe of unaffiliated funds based on data provided by an independent fund data provider the "Peer Universe") and in certain cases, to a more focused subset of funds in the Peer Universe (the "Peer Group"). The Independent Board Members further reviewed data regarding the construction of the applicable Peer Universe and Peer Group. In reviewing the comparisons of fee and expense information, the Independent Board Members took into account that in certain instances various factors such as the asset level of a fund relative to peers, the size and particular composition of the Peer Universe or Peer Group, the investment objectives of the peers, expense anomalies, changes in the funds comprising the Peer Universe or Peer Group from year to year, levels of reimbursement and the timing of information used may impact the comparative data, thereby limiting the ability to make a meaningful comparison. In addition, the Independent Board Members also considered, among other things, the differences in the use and type of leverage compared to the peers. The Independent Board Members also considered the differences in the states reflected in the respective Peer Group. In reviewing the fee schedule for a Fund, the Independent Board Members also considered the fund-level and complex-wide breakpoint schedules (described in further detail below) and any fee waivers and reimbursements provided by Nuveen (applicable, in particular, for certain closed-end funds launched since 1999). Nuveen Investments 95 Annual Investment Management Agreement Approval Process (continued) Based on their review of the fee and expense information provided, the Independent Board Members determined that each Fund's management fees and net total expense ratio were reasonable in light of the nature, extent and quality of services provided to the Fund. 2. COMPARISONS WITH THE FEES OF OTHER CLIENTS The Independent Board Members further reviewed information regarding the nature of services and fee rates offered by NAM to other clients. Such other clients include NAM's municipal separately managed accounts. In evaluating the comparisons of fees, the Independent Board Members noted that the fee rates charged to the Funds and other clients vary, among other things, because of the different services involved and the additional regulatory and compliance requirements associated with registered investment companies, such as the Funds. Accordingly, the Independent Board Members considered the differences in the product types, including, but not limited to, the services provided, the structure and operations, product distribution and costs thereof, portfolio investment policies, investor profiles, account sizes and regulatory requirements. The Independent Board Members noted, in particular, that the range of services provided to the Funds (as discussed above) is much more extensive than that provided to separately managed accounts. Given the inherent differences in the products, particularly the extensive services provided to the Funds, the Independent Board Members believe such facts justify the different levels of fees. 3. PROFITABILITY OF NUVEEN In conjunction with its review of fees, the Independent Board Members also considered the profitability of Nuveen for its advisory activities (which incorporated Nuveen's wholly-owned affiliated sub-advisers other than Winslow Capital) and its financial condition. The Independent Board Members reviewed the revenues and expenses of Nuveen's advisory activities for the last two years, the allocation methodology used in preparing the profitability data and an analysis of the key drivers behind the changes in revenues and expenses that impacted profitability in 2008. In addition, the Independent Board Members reviewed information regarding the financial results of Nuveen for 2008 based on its Form 8-K filed on March 31, 2009. The Independent Board Members noted this information supplemented the profitability information requested and received during the year to help keep them apprised of developments affecting profitability (such as changes in fee waivers and expense reimbursement commitments). In this regard, the Independent Board Members noted that they had also appointed an Independent Board Member as a point person to review and keep them apprised of changes to the profitability analysis and/or methodologies during the year. The Independent Board Members also considered Nuveen's revenues for advisory activities, expenses, and profit margin compared to that of various unaffiliated management firms with similar amounts of 96 Nuveen Investments assets under management and relatively comparable asset composition prepared by Nuveen. In reviewing profitability, the Independent Board Members recognized the subjective nature of determining profitability which may be affected by numerous factors including the allocation of expenses. Further, the Independent Board Members recognized the difficulties in making comparisons as the profitability of other advisers generally is not publicly available and the profitability information that is available for certain advisers or management firms may not be representative of the industry and may be affected by, among other things, the adviser's particular business mix, capital costs, types of funds managed and expense allocations. Notwithstanding the foregoing, the Independent Board Members reviewed Nuveen's methodology and assumptions for allocating expenses across product lines to determine profitability. In reviewing profitability, the Independent Board Members recognized Nuveen's investment in its fund business. Based on their review, the Independent Board Members concluded that Nuveen's level of profitability for its advisory activities was reasonable in light of the services provided. In evaluating the reasonableness of the compensation, the Independent Board Members also considered other amounts paid to NAM by the Funds as well as any indirect benefits (such as soft dollar arrangements, if any) NAM and its affiliates receive, or are expected to receive, that are directly attributable to the management of the Funds, if any. See Section E below for additional information on indirect benefits NAM may receive as a result of its relationship with the Funds. Based on their review of the overall fee arrangements of each Fund, the Independent Board Members determined that the advisory fees and expenses of the respective Fund were reasonable. D. ECONOMIES OF SCALE AND WHETHER FEE LEVELS REFLECT THESE ECONOMIES OF SCALE With respect to economies of scale, the Independent Board Members have recognized the potential benefits resulting from the costs of a fund being spread over a larger asset base, although economies of scale are difficult to measure and predict with precision, particularly on a fund-by-fund basis. One method to help ensure the shareholders share in these benefits is to include breakpoints in the advisory fee schedule. Generally, management fees for funds in the Nuveen complex are comprised of a fund-level component and a complex-level component, subject to certain exceptions. Accordingly, the Independent Board Members reviewed and considered the applicable fund-level breakpoints in the advisory fee schedules that reduce advisory fees as asset levels increase. In this regard, the Independent Board Members noted that although closed-end funds may from time-to-time make additional share offerings, the growth of their assets will occur primarily through the appreciation of such funds' investment portfolio. Nuveen Investments 97 Annual Investment Management Agreement Approval Process (continued) While economies of scale result when costs can be spread over a larger asset base, the Independent Board Members also recognized that the asset levels generally declined in 2008 due to, among other things, the market downturn. Accordingly, for funds with a reduction in assets under management, advisory fee levels may have increased as breakpoints in the fee schedule were no longer surpassed. In addition to fund-level advisory fee breakpoints, the Board also considered the Funds' complex-wide fee arrangement. Pursuant to the complex-wide fee arrangement, the fees of the funds in the Nuveen complex generally are reduced as the assets in the fund complex reach certain levels. The complex-wide fee arrangement seeks to provide the benefits of economies of scale to fund shareholders when total fund complex assets increase, even if assets of a particular fund are unchanged or have decreased. The approach reflects the notion that some of Nuveen's costs are attributable to services provided to all its funds in the complex and therefore all funds benefit if these costs are spread over a larger asset base. Generally, the complex-wide pricing reduces Nuveen's revenue because total complex fund assets have consistently grown in prior years. As noted, however, total fund assets declined in 2008 resulting in a smaller downward adjustment of revenues due to complex-wide pricing compared to the prior year. Based on their review, the Independent Board Members concluded that the breakpoint schedules and complex-wide fee arrangement were acceptable and reflect economies of scale to be shared with shareholders when assets under management increase. E. INDIRECT BENEFITS In evaluating fees, the Independent Board Members received and considered information regarding potential "fall out" or ancillary benefits NAM or its affiliates may receive as a result of its relationship with each Fund. In this regard, the Independent Board Members considered revenues received by affiliates of NAM for serving as agent at Nuveen's trading desk. In addition to the above, the Independent Board Members considered whether NAM received any benefits from soft dollar arrangements whereby a portion of the commissions paid by a Fund for brokerage may be used to acquire research that may be useful to NAM in managing the assets of the Funds and other clients. The Independent Board Members noted that NAM does not currently have any soft dollar arrangements; however, to the extent certain bona fide agency transactions that occur on markets that traditionally trade on a principal basis and riskless principal transactions are considered as generating "commissions," NAM intends to comply with the applicable safe harbor provisions. Based on their review, the Independent Board Members concluded that any indirect benefits received by NAM as a result of its relationship with the Funds were reasonable and within acceptable parameters. 98 Nuveen Investments F. OTHER CONSIDERATIONS The Independent Board Members did not identify any single factor discussed previously as all-important or controlling. The Board Members, including the Independent Board Members, unanimously concluded that the terms of the Advisory Agreements are fair and reasonable, that NAM's fees are reasonable in light of the services provided to each Fund and that the Advisory Agreements be renewed. Nuveen Investments 99 Reinvest Automatically Easily and Conveniently NUVEEN MAKES REINVESTING EASY. A PHONE CALL IS ALL IT TAKES TO SET UP YOUR REINVESTMENT ACCOUNT. NUVEEN CLOSED-END FUNDS DIVIDEND REINVESTMENT PLAN Your Nuveen Closed-End 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 greater of the net asset value or 95% of 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. If the Plan Agent begins purchasing Fund shares on the open market while shares are trading below net asset value, but the Fund's shares subsequently trade at or above their net asset value before the Plan Agent is able to complete its purchases, the Plan Agent may cease open-market purchases and may invest the uninvested portion of the distribution in newly-issued Fund shares at a price equal to the greater of the shares' net asset value or 95% of the shares' market value on the last business day immediately prior to the purchase date. 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 the shares may increase before purchases are completed, the average purchase price 100 Nuveen Investments 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. FLEXIBLE 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. CALL TODAY TO START REINVESTING DIVIDENDS AND/OR DISTRIBUTIONS 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. Nuveen Investments 101 Glossary of Terms Used in this Report o AUCTION RATE BOND: An auction rate bond is a security whose interest payments are adjusted periodically through an auction process, which process typically also serves as a means for buying and selling the bond. Auctions that fail to attract enough buyers for all the shares offered for sale are deemed to have "failed," with current holders receiving a formula-based interest rate until the next scheduled auction. o AVERAGE ANNUAL TOTAL RETURN: This is a commonly used method to express an investment's performance over a particular, usually multi-year time period. It expresses the return that would have been necessary each year to equal the investment's actual cumulative performance (including change in NAV or market price and reinvested dividends and capital gains distributions, if any) over the time period being considered. o AVERAGE EFFECTIVE MATURITY: The average of the number of years to maturity of the bonds in a Fund's portfolio, computed by weighting each bond's time to maturity (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 unless an escrow account has been established to redeem the bond before maturity. The market value weighting for an investment in an inverse floating rate security is the value of the portfolio's residual interest in the inverse floating rate trust, and does not include the value of the floating rate securities issued by the trust. o INVERSE FLOATERS: Inverse floating rate securities, also known as inverse floaters, are created by depositing a municipal bond, typically with a fixed interest rate, into a special purpose trust created by a broker-dealer. This trust, in turn, (a) issues floating rate certificates typically paying short-term tax-exempt interest rates to third parties in amounts equal to some fraction of the deposited bond's par amount or market value, and (b) issues an inverse floating rate certificate (sometimes referred to as an "inverse floater") to an investor (such as a Fund) interested in gaining investment exposure to a long-term municipal bond. The income received by the holder of the inverse floater varies inversely with the short-term rate paid to the floating rate certificates' holders, and in most circumstances the holder of the inverse floater bears substantially all of the underlying bond's downside investment risk. The holder of the inverse floater typically also benefits disproportionately from any potential appreciation of the underlying bond's value. Hence, an inverse floater essentially represents an investment in the underlying bond on a leveraged basis. 102 Nuveen Investments o LEVERAGE-ADJUSTED DURATION: Duration is a measure of the expected period over which a bond's principal and interest will be paid, and consequently is a measure of the sensitivity of a bond's or bond Fund's value to changes when market interest rates change. Generally, the longer a bond's 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 longer than the duration of the Fund's portfolio of bonds. o MARKET YIELD (ALSO KNOWN AS DIVIDEND YIELD OR CURRENT YIELD): An investment's current annualized dividend divided by its current market price. o NET ASSET VALUE (NAV): A Fund's NAV per common share is calculated by subtracting the liabilities of the Fund (including any Preferred shares issued in order to leverage the Fund) from its total assets and then dividing the remainder by the number of common shares outstanding. Fund NAVs are calculated at the end of each business day. o 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. o ZERO COUPON BOND: A zero coupon bond does not pay a regular interest coupon to its holders during the life of the bond. Tax-exempt income to the holder of the bond comes from accretion of the difference between the original purchase price of the bond at issuance and the par value of the bond at maturity and is effectively paid at maturity. The market prices of zero coupon bonds generally are more volatile than the market prices of bonds that pay interest periodically. Nuveen Investments 103 Notes 104 Nuveen Investments Other Useful Information BOARD OF DIRECTORS/TRUSTEES John P. Amboian Robert P. Bremner Jack B. Evans William C. Hunter David J. Kundert William J. Schneider Judith M. Stockdale Carole E. Stone Terence J. Toth FUND MANAGER Nuveen Asset Management 333 West Wacker Drive Chicago, IL 60606 CUSTODIAN State Street Bank & Trust Company Boston, MA TRANSFER AGENT AND SHAREHOLDER SERVICES State Street Bank & Trust Company Nuveen Funds P.O. Box 43071 Providence, RI 02940-3071 (800) 257-8787 LEGAL COUNSEL Chapman and Cutler LLP Chicago, IL INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Ernst & Young LLP Chicago, IL QUARTERLY PORTFOLIO OF INVESTMENTS AND PROXY VOTING INFORMATION You may obtain (i) each Fund's quarterly portfolio of investments, (ii) information regarding how the Funds voted proxies relating to portfolio securities held during the twelve-month period ended June 30, 2009, and (iii) a description of the policies and procedures that the Funds used to determine how to vote proxies relating to portfolio securities without charge, upon request, by calling Nuveen Investments toll-free at (800) 257-8787 or on Nuveen's website at www.nuveen.com. You may also obtain this and other Fund information directly from the Securities and Exchange Commission ("SEC"). The SEC may charge a copying fee for this information. Visit the SEC on-line at http://www.sec.gov or in person at the SEC's Public Reference Room in Washington, D.C. Call the SEC at (202) 942-8090 for room hours and operation. You may also request Fund information by sending an e-mail request to publicinfo@sec.gov or by writing to the SEC's Public References Section at 100 F Street NE, Washington, D.C. 20549. CEO CERTIFICATION DISCLOSURE Each Fund's Chief Executive Officer has submitted to the New York Stock Exchange (NYSE) the annual CEO certification as required by Section 303A.12(a) of the NYSE Listed Company Manual. Each Fund has filed with the SEC the certification of its Chief Executive Officer and Chief Financial Officer required by Section 302 of the Sarbanes-Oxley Act. COMMON AND PREFERRED SHARE INFORMATION Each Fund intends to repurchase and/or redeem shares of its own common or preferred stock in the future at such times and in such amounts as is deemed advisable. During the period covered by this report, the Funds repurchased and/or redeemed shares of their common and/or preferred stock as shown in the accompanying table. COMMON SHARES PREFERRED SHARES FUND REPURCHASED REDEEMED NPC 7,100 -- NCL 11,700 -- NCU 23,200 80 NAC -- -- NVX 32,400 469 NZH -- -- NKL 13,700 -- NKX -- -- Any future repurchases and/or redemptions will be reported to shareholders in the next annual or semi-annual report. Nuveen Investments 105 Nuveen Investments: 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. WE OFFER MANY DIFFERENT INVESTING SOLUTIONS FOR OUR CLIENTS' DIFFERENT NEEDS. Nuveen Investments is a global investment management firm that seeks to help secure the long-term goals of institutions and high net worth investors as well as the consultants and financial advisors who serve them. Nuveen Investments markets its growing range of specialized investment solutions under the high-quality brands of HydePark, NWQ, Nuveen, Santa Barbara, Symphony, Tradewinds and Winslow Capital. In total, the Company managed $128 billion of assets on June 30, 2009. FIND OUT HOW WE CAN HELP YOU REACH YOUR FINANCIAL GOALS. To learn more about the products and services Nuveen Investments offers, talk to your financial advisor, or call us at (800) 257-8787. Please read the information provided carefully before you invest. Be sure to obtain a prospectus, where applicable. Investors should consider the investment objective and policies, risk considerations, charges and expenses of the Fund carefully before investing. The prospectus contains this and other information relevant to an investment in the Fund. For a prospectus, please contact your securities representative or NUVEEN INVESTMENTS, 333 W. WACKER DR., CHICAGO, IL 60606. Please read the prospectus carefully before you invest or send money. Learn more about Nuveen Funds at: WWW.NUVEEN.COM/CEF o Share prices o Fund details o Daily financial news o Investor education o Interactive planning tools Distributed by Nuveen Investments, LLC 333 West Wacker Drive Chicago, IL 60606 www.nuveen.com It's not what you earn, it's what you keep.(R) ESA-B-0809D ITEM 2. CODE OF ETHICS. Not applicable to this filing. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. Not applicable to this filing. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. Not applicable to this filing. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable to this filing. ITEM 6. SCHEDULE OF INVESTMENTS. (a) See Portfolio of Investments in Item 1. (b) Not applicable. ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable to this filing. ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable to this filing. ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. Not applicable. ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. There have been no material changes to the procedures by which shareholders may recommend nominees to the registrant's Board of Directors or Trustees implemented after the registrant last provided disclosure in response to this Item. ITEM 11. 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 Securities Exchange Act of 1934, as amended (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 second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. ITEM 12. EXHIBITS. File the exhibits listed below as part of this Form. (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 to this filing. (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 1940 Act (17 CFR 270.30a-2(a)) in the exact form set forth below: See Ex-99.CERT attached hereto. (a)(3) Any written solicitation to purchase securities under Rule 23c-1 under the 1940 Act (17 CFR 270.23c-1) sent or given during the period covered by the report by or on behalf of the registrant to 10 or more persons: Not applicable. (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 1940 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: See 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 California Dividend Advantage Municipal Fund ----------------------------------------------------------- By (Signature and Title) /s/ Kevin J. McCarthy ---------------------------------------------- Kevin J. McCarthy (Vice President and Secretary) Date: November 6, 2009 ------------------------------------------------------------------- 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 6, 2009 ------------------------------------------------------------------- By (Signature and Title) /s/ Stephen D. Foy ---------------------------------------------- Stephen D. Foy Vice President and Controller (principal financial officer) Date: November 6, 2009 -------------------------------------------------------------------