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 811-21157
---------------------
Nuveen Arizona Dividend Advantage Municipal Fund 3
------------------------------------------------------------------------------
(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: July 31
------------------
Date of reporting period: January 31, 2008
------------------
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.
SEMI-ANNUAL REPORT
January 31, 2008
Nuveen Investments
MUNICIPAL CLOSED-END FUNDS
Photo of: Small child
NUVEEN ARIZONA
PREMIUM INCOME
MUNICIPAL FUND, INC.
NAZ
NUVEEN ARIZONA
DIVIDEND ADVANTAGE
MUNICIPAL FUND
NFZ
NUVEEN ARIZONA
DIVIDEND ADVANTAGE
MUNICIPAL FUND 2
NKR
NUVEEN ARIZONA
DIVIDEND ADVANTAGE
MUNICIPAL FUND 3
NXE
NUVEEN TEXAS
QUALITY INCOME
MUNICIPAL FUND
NTX
IT'S NOT WHAT YOU EARN, IT'S WHAT YOU KEEP.(R)
Logo: NUVEEN Investments
Photo of: Man working on computer
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: Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
Once again, I am pleased to report that over the six-month period covered by
this report your Fund continued to provide you with attractive monthly tax-free
income. For more details about the management strategy and performance of your
Fund, please read the Portfolio Managers' Comments, the Common Share Dividend
and Share Price Information, and the Performance Overview sections of this
report.
I also wanted to update you on some important news about Nuveen Investments.
Since the last shareholder report, a group led by Madison Dearborn Partners,
LLC, completed its acquisition of Nuveen Investments. This change in corporate
ownership had no impact on the investment objectives, portfolio management
strategies or dividend policy of your Fund.
With the recent volatility in the stock and bond markets, many have begun to
wonder which way the market is headed, and whether they need to adjust their
holdings of investments. No one knows what the future will bring, which is why
we think a well-balanced portfolio that is structured and carefully monitored
with the help of an investment professional is an important component in
achieving your long term financial goals. A well-diversified portfolio may
actually help to reduce your overall investment risk, and we believe that
investments like your Nuveen Investments Fund can be important building blocks
in a portfolio crafted to perform well through a variety of market conditions.
We also are pleased to be able to offer you a choice concerning how you receive
your shareholder reports and other Fund information. As an alternative to mailed
copies, you can sign up to receive future Fund reports and other Fund
information by e-mail and the internet. The inside front cover of this report
contains information on how you can sign up.
We are grateful that you have chosen us as a partner as you pursue your
financial goals and we look forward to continuing to earn your trust in the
months and years ahead. At Nuveen Investments, our mission continues to be to
assist you and your financial advisor by offering investment services and
products that can help you to secure your financial objectives.
Sincerely,
/s/ Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
March 14, 2008
Portfolio Managers' COMMENTS
Nuveen Investments Municipal Closed-End Funds
NAZ, NFZ, NKR, NXE, NTX
Portfolio managers Scott Romans and Daniel Close discuss key investment
strategies and the six-month performance of these five Nuveen Funds. Scott, who
has been with Nuveen since 2000, has managed the Arizona Funds since 2003. Dan,
who joined Nuveen in 2000, assumed portfolio management responsibility for NTX
in March 2007.
WHAT KEY STRATEGIES WERE USED TO MANAGE THE ARIZONA AND TEXAS FUNDS DURING THE
SIX-MONTH REPORTING PERIOD ENDED JANUARY 31, 2008?
Over the course of this reporting period, we saw the municipal yield curve
steepen, as municipal bond interest rates at the short end of the curve declined
while longer-term rates were flat to slightly higher. In this environment, our
investment strategies continued to focus on finding relative value, as we looked
for undervalued sectors and individual credits with the potential to perform
well over the long term. Purchases were frequently driven by opportunities to
add lower-rated credits, with this period marking the first time in a while that
we found these bonds at attractive levels relative to their credit quality. When
liquidity issues caused the market to discount lower-quality and higher-yielding
bonds, we selectively took advantage of these opportunities to add uninsured,
lower-rated credits to the four Arizona Funds, including bonds issued for
communities facilities districts (CFD). We believed that the relative newness of
this type of credit in the Arizona market, combined with the state's continued
growth, made CFD bonds attractive value prospects. In NTX, we also added an AAA
rated transportation bond and purchased auction rate municipal bonds at
attractive yield levels late in the period. All of these purchases tended to
offer longer maturities, which helped to offset the shortening of the Funds'
portfolio durations(1) due to bond calls and the natural tendency of bond
durations to shorten as time passes.
To help generate cash for purchases and move the durations of the Arizona Funds
closer to our strategic range, we selectively sold holdings with shorter
durations. Selling shorter duration bonds and reinvesting further out on the
yield curve also helped to improve the Funds' overall call protection profiles.
The Arizona Funds also found opportunities to sell holdings that were purchased
when yields were lower and replace them with similar, newer credits that yielded
comparatively more. This process allowed us to maintain the Funds' current
portfolio characteristics while strengthening their
(1) 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.
Discussions of specific investments are for illustrative purposes only and are
not intended as recommendations of individual investments. The views expressed
in this commentary represent those of the portfolio managers as of the date of
this report and are subject to change at any time, based on market conditions
and other factors. The Funds disclaim any obligation to advise shareholders of
such changes.
4
future income streams. In NTX, where proceeds from bond calls provided adequate
cash for purchases, selling was more limited.
We continued to emphasize a disciplined approach to duration management. As part
of our duration strategies, we invested in inverse floating rate securities,(2)
a type of derivative financial instrument, in all the Funds. Inverse floaters
typically provide the dual benefit of lengthening the Funds' durations to be
closer to our strategic target and enhancing their income-generation
capabilities, albeit while adding risk to the portfolio. During this period, we
found it advantageous to terminate some of the inverse floating rate securities
in the Arizona Funds and modify our positions using bonds that offered more
attractive yields and better structures.
Going into this period, NFZ also used futures contracts, another type of
derivative financial instrument. The goal of this strategy was to help us manage
NFZ's net asset value (NAV) volatility without having a negative impact on the
Fund's income stream or common share dividend over the short term. During this
period, we were able to execute trades that accomplished the same goal, and we
removed the futures contracts from this Fund.
HOW DID THE FUNDS PERFORM?
Individual results for these Nuveen Arizona and Texas Funds, as well as relevant
index and peer group information, are presented in the accompanying table.
Total Returns on Common Share Net Asset Value*
For periods ended 1/31/08
Arizona Funds Six-Month 1-Year 5-Year 10-Year
NAZ 2.50% 2.82% 5.35% 4.69%
NFZ 2.34% 2.07% 5.28% NA
NKR 3.41% 3.73% 5.71% NA
NXE 2.62% 2.95% 5.81% NA
Texas Fund
NTX 2.97% 3.31% 5.88% 5.40%
Lehman Brothers
Municipal
Bond Index(3) 3.71% 4.93% 4.61% 5.20%
Lipper Other States
Municipal Debt Funds
Average(4) 2.66% 2.83% 5.63% 5.52%
*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.
(2) An inverse floating rate security 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 this reporting period, are
further defined within the Notes to Financial Statements and Glossary of
Terms Used in This Report sections of this shareholder report.
(3) The Lehman Brothers Municipal Bond Index is an unleveraged, unmanaged
national index comprising a broad range of investment-grade municipal
bonds. Results for the Lehman index do not reflect any expenses.
(4) The Lipper Other State Municipal Debt Funds Average is calculated using the
returns of all closed-end funds in this category for each period as
follows: 6 months, 46; 1 year, 46; 5 years, 46; and 10 years, 18. Fund and
Lipper returns assume reinvestment of dividends.
5
For the six months ended January 31, 2008, the cumulative returns on NAV for all
five of these state Funds underperformed the return on the national Lehman
Brothers Municipal Bond Index. NKR and NTX exceeded the average return for the
Lipper Other States Municipal Debt Funds Average, while NXE performed in-line,
and NAZ and NFZ trailed the group average. Shareholders should note that the
performance of the Lipper Other States Municipal Debt Funds Average represents
the overall average of returns for funds from 10 different states with a wide
variety of municipal market conditions, making direct comparisons with
state-specific funds less meaningful.
Major factors that influenced the Funds' returns included yield curve and
duration positioning, financial leverage, sector allocations, credit exposure,
the use of derivatives and holdings of bonds backed by certain municipal bond
insurers.
During this six-month period, bonds in the Lehman Brothers Municipal Bond Index
with maturities between four and eight years, especially those maturing in
approximately six to eight years, benefited the most from changes in the
interest rate environment. As a result, these bonds generally outperformed
credits with longer maturities, with bonds having the longest maturities (22
years and longer) posting poor returns. Although the Funds on the whole were
underexposed to the outperforming shorter maturity categories, this was
generally offset by weightings in the intermediate part of the curve, which
performed well. The performance of NKR was helped by its relatively greater
exposure to the two-year to six-year part of the yield curve and lower exposure
to bonds with maturities longer than six years. While our strategies during this
period included adding some longer bonds to the portfolios, all of the Funds
continued to be relatively underweighted in the underperforming longer part of
the yield curve. Overall, the Funds' duration and yield curve positioning was a
net positive for performance.
Another factor in the six-month performance of these Funds was the use of
financial leverage. While leverage can add volatility to a Fund's common share
NAV and share price, this strategy can also provide opportunities for additional
income and total return for common shareholders. The returns of all five of
these Funds were positively impacted by their use of leverage during this
reporting period.
6
Sectors of the market that generally made positive contributions to the Funds'
performances included water and sewer, special tax, education and
transportation. Pre-refunded bonds, especially those with shorter maturities,
performed exceptionally well, and general obligation credits also generally
outperformed the market. Among the credit quality groupings, "natural" AAA and
AA bonds (i.e., those that were not credit-enhanced by the addition of
insurance, etc.) were among the top performers.
On the other hand, bonds that carried any credit risk, regardless of sector,
generally tended to perform poorly. Revenue bonds as a whole, and specifically
the industrial development and health care sectors that had ranked among the top
performers in the Lehman Brothers Municipal Bond Index over the past few years,
underperformed the general municipal market. Bonds backed by the 1998 master
tobacco settlement agreement also generally posted poor returns, due to the
overall lower credit quality of the tobacco sector as well as the ample supply
of these bonds.
Lower credit quality bonds also generally underperformed the municipal market as
a whole for the first time in several years. The comparatively greater exposure
of these Funds to lower-rated bonds tended to be a negative contributor to their
performance. As of January 31, 2008, NFZ, NKR and NXE had weightings of bonds
rated BBB or lower and non-rated bonds of approximately 19%, 21% and 20%,
respectively. By comparison, NAZ and NTX held approximately 9% and 13%,
respectively, of their portfolios in lower-rated and non-rated securities.
In addition, some of the inverse floaters used by the Arizona Funds and NTX had
a negative impact on performance. This was generally due to the fact that they
effectively increased the Funds' exposure to longer maturity bonds during a
period when shorter maturities were in favor in the market. However, the inverse
floaters also benefited the Funds by helping to support their income streams.
Another factor that had an impact on the performance of the Arizona and Texas
Funds was their position in bonds backed by certain municipal insurers. NFZ,
NKR, and NXE had small positions (2% to 3%) in bonds insured by ACA Financial
Guaranty Corporation (ACA), and all four Arizona Funds had exposure to bonds
insured by XL Capital Assurance (XLCA), ranging from approximately 2% in NKR to
4% and 5% in the
7
other three Arizona Funds. All of the Funds in this report also had positions in
bonds insured by Financial Guaranty Insurance Company (FGIC), ranging from 5% in
NAZ to 10% and 11% in the other Funds. As concern increased about the balance
sheets of municipal bond insurers, prices on bonds insured by these three
companies declined, detracting from the performance of these Funds. At the same
time, NAZ, NKR, and NTX also had modest holdings of bonds backed by Financial
Security Assurance (FSA), which held their value well and benefited the Funds
through good performance. The holdings of all of our Funds continued to be well
diversified not only between insured and uninsured bonds, as well as within the
insured bond category.
RECENT DEVELOPMENTS REGARDING BOND INSURANCE COMPANIES
The AAA ratings shown in the Portfolio of Investments reflects the AAA ratings
on certain bonds insured by AMBAC, FGIC, XLCA or MBIA as of January 31, 2008.
Subsequent to January 31, 2008, at least one rating agency reduced the rating
for AMBAC-insured bonds to AA, the rating for XLCA-insured and FGIC-insured
bonds experienced further downgrades such that they no longer carry AAA ratings
which had the effect of reducing the ratings of many (if not all) of the bonds
insured by those particular insurers. One or more rating agencies have placed
each of these insurers on "negative credit watch", which may presage one or more
rating reductions for such insurer or insurers in the future. If one or more
insurers' ratings are reduced below AAA by these rating agencies, it would
likely reduce the effective rating of many of the bonds insured by that insurer
or insurers. It is important to note that municipal bonds historically have had
a very low rate of default.
RECENT DEVELOPMENTS IN THE AUCTION RATE PREFERRED MARKETS
Beginning in February 2008, after the close of this reporting period, more
shares for sale were submitted in the regularly scheduled auctions for the
Municipal Auction Preferred shares issued by these Funds than there were offers
to buy. This meant that these auctions "failed to clear," and that many or all
Auction Preferred shareholders who wanted to sell their shares in these auctions
were unable to do so. This decline in liquidity in Auction Preferred shares did
not lower the credit quality of these shares, and that Auctioned Preferred
shareholders unable to sell their shares received distributions at the "maximum
rate" calculated in accordance with the pre-established terms of the Municipal
Auctioned Preferred shares. At the time this report was prepared, the Funds'
managers
8
could not predict when future auctions might succeed in attracting sufficient
buyers for the shares offered, if ever. The Funds' managers are working
diligently to develop mechanisms designed to improve the liquidity of the
Municipal Auctioned Preferred shares, or to refund them, but at present there is
no assurance that these efforts will succeed. These developments generally do
not affect the management or investment policies of these Funds. However, one
implication of these auction failures for common shareholders is that the Funds'
cost of leverage will be higher than it otherwise would have been had the
auctions continued to be successful. As a result, the Funds' future common share
earnings may be lower than they otherwise would have been.
For current, up-to-date information please visit the Nuveen CEF Auction Rate
Preferred Resource Center, http://www.nuveen.com/ResourceCenter/AuctionRate
Preferred.aspx
9
Common Share
Dividend and Share Price
INFORMATION
As noted earlier, these five Funds use financial leverage to potentially enhance
opportunities for additional income for common shareholders. The Funds' use of
this strategy continued to provide incremental income, although the extent of
this benefit was reduced to a degree in some of the Funds by short-term interest
rates that remained relatively high during the earlier part of this period.
This, in turn, kept the Funds' borrowing costs high. The Funds' income streams
were also impacted as the proceeds from older, higher-yielding bonds that
matured or were called were reinvested into bonds currently available in the
market, which often offered lower yields during this period. The combination of
these factors resulted in one monthly common share dividend reduction in NFZ,
NKR, and NTX over the six-month period ended January 31, 2008. The common share
dividends of NAZ and NXE remained stable throughout this reporting period.
Due to normal portfolio activity, common shareholders of the following Funds
also received capital gains distributions at the end of December 2007 as
follows:
Long-Term Capital Gains
(per share)
NFZ $0.0119
NKR $0.0583
NTX $0.0559
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 common share 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 common share NAV. Each Fund will, over time,
pay all of its net investment income as dividends to shareholders. As of January
31, 2008, all of the Funds in this report had positive UNII balances, based upon
our best estimate, for tax purposes and negative UNII balances for financial
statement purposes.
10
As of January 31, 2008, the Funds' common share prices were trading at discounts
to their common share NAVs as shown in the accompanying chart:
Six-Month Average
Discount Discount
NAZ -6.77% - 8.41%
NFZ -6.84% - 7.37%
NKR -5.46% - 2.48%
NXE -5.83% - 4.64%
NTX -8.26% - 8.46%
11
NAZ
Performance
OVERVIEW
Nuveen Arizona
Premium Income
Municipal Fund, Inc.
as of January 31, 2008
Pie Chart:
Credit Quality (as a % of total investments(1)
AAA/U.S. Guaranteed 77%
AA 9%
A 5%
BBB 6%
N/R 3%
Bar Chart:
2007-2008 Monthly Tax-Free Dividends Per Common Share
Feb 0.051
Mar 0.051
Apr 0.051
May 0.051
Jun 0.051
Jul 0.051
Aug 0.051
Sep 0.051
Oct 0.051
Nov 0.051
Dec 0.051
Jan 0.051
Line Chart:
Common Share Price Performance -- Weekly Closing Price
2/01/07 14.029
14.03
14
14.01
14.1
14.1501
14.16
14.1999
14.05
14.08
14.06
14.05
14.01
13.97
14.12
14.05
14.11
13.96
13.98
13.95
14.099
14.11
14.1101
14.14
14.18
14.1501
14.2
14.11
14.16
14.05
14.09
14.0045
14.084
14.12
14.11
14.35
14.25
14.25
14.2201
14.34
14.34
14.34
14.32
14.24
14.4
14.35
14.39
14.39
14.31
14.33
14.35
14.22
14.19
14.15
14.25
14.34
14.25
14.24
14.23
14.23
14.26
14.21
14.16
14.15
14.23
14.15
14.2
14.2
14.11
14.14
14.1
14.06
14.05
14.09
14.09
13.93
13.83
13.79
13.81
13.76
13.78
13.71
13.69
13.73
13.69
13.69
13.74
13.75
13.65
13.5601
13.37
13.26
13.16
13.23
13.26
13.35
13.26
13.37
13.37
13.3401
13.5
13.54
13.51
13.51
13.42
13.42
13.45
13.46
13.42
13.4
13.35
13.29
13.33
13.35
13.32
13.31
13.36
13.05
13.07
13
12.9899
13.13
12.96
12.96
12.9401
13.1
13.0701
13.0701
13.12
13.1
12.99
13.04
13
13
12.95
12.85
12.67
12.4499
12.18
12.44
12.7
13
12.96
12.9599
12.9
12.9
12.81
12.8001
12.78
12.85
12.85
12.9899
13
13.15
13.3
13.3
13.2201
13.2
13.29
13.29
13.18
13.06
13.1
12.96
12.86
12.83
12.96
12.91
13
13
12.8601
12.99
12.99
13.0175
12.95
13
13.09
13.01
12.91
12.9
12.81
12.7899
12.8
12.85
12.85
12.9
13.05
13.05
12.89
12.89
12.58
12.65
12.61
12.61
12.586
12.4
12.4999
12.47
12.37
12.4
12.33
12.45
12.33
12.1
12.24
12.23
12.16
12.1701
12.03
12.15
12.12
12.2
12.32
12.44
12.56
12.58
12.59
12.55
12.49
12.388
12.44
12.39
12.23
12.14
12.18
12.18
12.1999
12.44
12.306
12.36
12.37
12.4
12.35
12.5
12.59
12.84
12.9001
12.99
13.11
13.305
13.38
13.26
13.37
13.5
13.49
13.38
13.1
13.01
12.98
12.99
13
13.07
13.12
13.04
1/31/08 13.09
FUND SNAPSHOT
------------------------------------
Common Share Price $13.09
------------------------------------
Common Share
Net Asset Value $14.04
------------------------------------
Premium/(Discount) to NAV -6.77%
------------------------------------
Market Yield 4.68%
------------------------------------
Taxable-Equivalent Yield2 6.81%
------------------------------------
Net Assets Applicable to
Common Shares ($000) $62,714
------------------------------------
Average Effective
Maturity on Securities (Years) 13.78
------------------------------------
Leverage-Adjusted Duration 9.22
------------------------------------
AVERAGE ANNUAL TOTAL RETURN
(Inception 11/19/92)
------------------------------------
ON SHARE PRICE ON NAV
------------------------------------
6-Month
(Cumulative) 2.56% 2.50%
------------------------------------
1-Year -1.62% 2.82%
------------------------------------
5-Year 1.65% 5.35%
------------------------------------
10-Year 3.11% 4.69%
------------------------------------
INDUSTRIES
(as a % of total investments)
------------------------------------
U.S. Guaranteed 29.5%
------------------------------------
Tax Obligation/Limited 19.0%
------------------------------------
Water and Sewer 14.7%
------------------------------------
Health Care 11.2%
------------------------------------
Utilities 10.6%
------------------------------------
Education and Civic
Organizations 7.8%
------------------------------------
Housing/Single Family 5.1%
------------------------------------
Other 2.1%
------------------------------------
(1) The percentage of AAA ratings shown in the foregoing chart reflects the AAA
ratings on certain bonds insured by AMBAC, FGIC, XLCA or MBIA as of January
31, 2008. As explained earlier in the Portfolio Managers' Comments section
of this report, at least one rating agency reduced the rating for
AMBAC-insured bonds to AA and XLCA-insured and FGIC-insured bonds
experienced further downgrades such that they no longer carry AAA ratings
which had the effect of reducing the rating of many (if not all) of the
bonds insured by those particular insurers. One or more rating agencies
have placed each of these insurers on "negative credit watch", which may
presage one or more rating reductions for such insurer or insurers in the
future. If one or more insurers' ratings are reduced below AAA by these
rating agencies, it would likely reduce the effective rating of many of the
bonds insured by that insurer or insurers, and thereby reduce the
percentage of the portfolio rated AAA from the percentage shown in the
foregoing chart.
(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 31.3%. When comparing this Fund to investments that generate
qualified dividend income, the Taxable-Equivalent Yield is lower.
12
NFZ
Performance
OVERVIEW
Nuveen Arizona
Dividend Advantage
Municipal Fund
as of January 31, 2008
Pie Chart:
Credit Quality (as a % of total investments(1)
AAA/U.S. Guaranteed 65%
AA 11%
A 5%
BBB 11%
N/R 8%
Bar Chart:
2007-2008 Monthly Tax-Free Dividends Per Common Share(3)
Feb 0.0585
Mar 0.0585
Apr 0.0585
May 0.0585
Jun 0.0555
Jul 0.0555
Aug 0.0555
Sep 0.0555
Oct 0.0525
Nov 0.0525
Dec 0.0525
Jan 0.0525
Line Chart:
Common Share Price Performance -- Weekly Closing Price
2/01/07 15.08
14.79
14.84
14.84
14.89
14.93
14.93
14.93
14.96
14.96
15.03
15.03
14.95
14.95
14.77
14.85
14.9
14.79
14.95
15.05
15.15
15.15
15.24
15.18
14.86
14.93
14.97
15.11
14.86
14.97
14.96
14.96
14.9
14.88
14.86
14.86
14.86
14.98
15.07
14.98
14.9501
14.9501
14.92
14.98
15.15
15.2
15.22
15.17
15.12
15.49
15.32
15.27
15.23
15.24
15.1
15.07
15.07
15.1
15.16
15.3
15.35
15.35
15.2201
15.3
15.4
15.4
15.53
15.53
15.37
15.26
15.26
15.15
15.15
15.12
15.22
15.22
15.18
15.15
15.07
15.07
15
15.13
15.247
15.247
15.18
15.28
15.1501
15.25
15.1
15.1
15.1
15.1
15.1
14.93
14.8
14.69
14.69
14.75
14.75
14.75
14.75
14.7001
14.7001
14.75
14.75
14.75
14.69
14.69
14.8
14.78
14.83
14.83
14.91
14.21
14.21
13.98
13.96
13.84
13.84
13.78
13.75
13.55
13.45
13.4
13.2
13.3
13.35
13.68
13.74
13.75
13.74
13.65
13.67
13.67
13.59
13.55
13.43
13.4
13.38
13.38
13.1
13.26
13.36
13.21
13.46
13.5
13.23
13.23
13.28
13.28
13.42
13.51
13.63
13.73
14.23
14.16
14.16
13.97
13.94
13.74
13.71
13.71
13.61
13.63
13.61
13.5
13.53
13.34
13.42
13.42
13.55
13.44
13.4
13.59
13.59
13.54
13.4
13.46
13.47
13.47
13.34
13.34
13.27
13.31
13.31
13.57
13.43
13.5
13.45
13.3701
13.7
13.7
13.7
13.67
13.57
13.43
13.35
13.4
13.35
13.17
12.84
12.66
12.82
12.71
12.71
12.71
12.82
12.82
12.82
12.79
12.78
12.78
12.81
12.8
12.88
13.02
13.07
13.06
13.05
12.95
12.95
12.952
12.89
12.87
12.75
12.71
12.74
12.78
12.73
12.68
12.58
12.65
12.77
12.81
13.03
13.1
13.17
13.31
13.42
13.52
13.6
13.56
13.64
13.73
13.68
13.64
13.6899
13.52
13.5801
13.5
13.55
13.59
13.61
13.51
1/31/08 13.49
FUND SNAPSHOT
------------------------------------
Common Share Price $13.49
------------------------------------
Common Share
Net Asset Value $14.48
------------------------------------
Premium/(Discount) to NAV -6.84%
------------------------------------
Market Yield 4.67%
------------------------------------
Taxable-Equivalent Yield2 6.80%
------------------------------------
Net Assets Applicable to
Common Shares ($000) $22,442
------------------------------------
Average Effective
Maturity on Securities (Years) 17.24
------------------------------------
Leverage-Adjusted Duration 10.33
------------------------------------
AVERAGE ANNUAL TOTAL RETURN
(Inception 1/30/01)
------------------------------------
ON SHARE PRICE ON NAV
------------------------------------
6-Month
(Cumulative) 3.60% 2.34%
------------------------------------
1-Year -6.11% 2.07%
------------------------------------
5-Year 3.19% 5.28%
------------------------------------
Since
Inception 4.15% 6.12%
------------------------------------
INDUSTRIES
(as a % of total investments)
------------------------------------
Tax Obligation/Limited 28.6%
------------------------------------
Utilities 15.1%
------------------------------------
Housing/Single Family 10.9%
------------------------------------
Tax Obligation/General 10.1%
------------------------------------
Health Care 9.4%
------------------------------------
Water and Sewer 8.3%
------------------------------------
U.S. Guaranteed 8.2%
------------------------------------
Education and Civic
Organizations 5.2%
------------------------------------
Other 4.2%
------------------------------------
(1) The percentage of AAA ratings shown in the foregoing chart reflects the AAA
ratings on certain bonds insured by AMBAC, FGIC, XLCA or MBIA as of January
31, 2008. As explained earlier in the Portfolio Managers' Comments section
of this report, at least one rating agency reduced the rating for
AMBAC-insured bonds to AA and XLCA-insured and FGIC-insured bonds
experienced further downgrades such that they no longer carry AAA ratings
which had the effect of reducing the rating of many (if not all) of the
bonds insured by those particular insurers. One or more rating agencies
have placed each of these insurers on "negative credit watch", which may
presage one or more rating reductions for such insurer or insurers in the
future. If one or more insurers' ratings are reduced below AAA by these
rating agencies, it would likely reduce the effective rating of many of the
bonds insured by that insurer or insurers, and thereby reduce the
percentage of the portfolio rated AAA from the percentage shown in the
foregoing chart.
(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 31.3%. 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 2007 of
$0.0119 per share.
13
NKR
Performance
OVERVIEW
Nuveen Arizona
Dividend Advantage
Municipal Fund 2
as of January 31, 2008
Pie Chart:
Credit Quality (as a % of total investments(1)
AAA/U.S. Guaranteed 67%
AA 5%
A 7%
BBB 13%
N/R 8%
Bar Chart:
2007-2008 Monthly Tax-Free Dividends Per Common Share(3)
Feb 0.0615
Mar 0.0615
Apr 0.0615
May 0.0615
Jun 0.0615
Jul 0.0615
Aug 0.0615
Sep 0.0615
Oct 0.0585
Nov 0.0585
Dec 0.0585
Jan 0.0585
Line Chart:
Common Share Price Performance -- Weekly Closing Price
2/01/07 15.3
14.94
15.1
15.17
15.25
15.45
15.31
15.25
15.01
15.12
15.12
15.17
15.14
15.14
15.17
15.5
15.5999
15.4
15.3
15.3
15.29
15.29
15.39
15.469
15.469
15.4645
15.5124
15.42
15.42
15.32
15.34
15.34
15.34
15.36
15.48
15.49
15.35
15.31
15.26
15.24
15.2999
15.2999
15.23
15.27
15.3
15.32
15.21
15.66
15.83
15.79
15.65
15.35
15.5
15.571
15.61
15.75
15.75
15.4
15.89
15.89
15.87
15.75
15.75
15.88
15.89
15.96
15.96
15.96
15.84
15.9
15.9
15.94
15.8501
16.1
16.23
16.23
16.3
16.45
16.3
16.06
16.06
16.06
16.1034
16.65
16.6
16.5
16.5
16.35
15.83
15.6
15.452
15.51
15.33
15.35
15.05
15.05
14.9025
14.9025
14.86
14.86
14.86
14.87
15
15.05
15
15
15.3
15.3
15.2
15.2
15.12
15.2
15.35
15.45
15.45
14.95
14.95
14.87
14.95
15.2
15.36
15.45
15.334
15.42
15.42
15.42
15.27
15.27
15.27
15.27
15.35
15.28
15.36
15.38
15.38
15.37
15.37
15.2
14.76
14.67
14.55
14.3
14.45
15.08
15.25
15.15
15.05
15.25
15.15
15.16
14.92
14.63
14.6
14.7
14.94
15.15
15.11
15.11
14.88
14.93
14.89
14.72
14.73
14.7
14.88
14.66
14.91
14.9799
15.16
15.16
15.16
14.73
14.66
14.63
14.6
14.6
14.62
14.62
14.52
14.41
14.18
14.22
14.26
14.26
14.26
14.25
14.38
14.38
14.38
14.1801
14.2
14.26
14.26
14.26
14.29
14.27
14.16
14.15
14.14
14.07
13.9
13.82
13.8
13.69
13.604
13.7
13.66
13.65
13.61
13.64
13.7
13.8
13.67
13.67
13.77
13.75
13.81
13.84
13.98
14.08
13.9
13.82
13.57
13.2
13.31
13.26
13.24
13.19
13.21
13.48
13.41
13.42
13.43
13.5899
13.59
13.79
13.96
14.12
14.2
14.2799
14.31
14.2
14.24
14.24
14.25
14.25
14.15
14
14.22
14.14
14.1
14.08
14.0899
13.97
1/31/08 14.03
FUND SNAPSHOT
------------------------------------
Common Share Price $14.03
------------------------------------
Common Share
Net Asset Value $14.84
------------------------------------
Premium/(Discount) to NAV -5.46%
------------------------------------
Market Yield 5.00%
------------------------------------
Taxable-Equivalent Yield2 7.28%
------------------------------------
Net Assets Applicable to
Common Shares ($000) $36,186
------------------------------------
Average Effective
Maturity on Securities (Years) 15.33
------------------------------------
Leverage-Adjusted Duration 9.14
------------------------------------
AVERAGE ANNUAL TOTAL RETURN
(Inception 3/25/02)
------------------------------------
ON SHARE PRICE ON NAV
------------------------------------
6-Month
(Cumulative) -5.40% 3.41%
------------------------------------
1-Year -2.39% 3.73%
------------------------------------
5-Year 3.86% 5.71%
------------------------------------
Since
Inception 4.69% 6.52%
------------------------------------
INDUSTRIES
(as a % of total investments)
------------------------------------
Tax Obligation/Limited 29.8%
------------------------------------
U.S. Guaranteed 16.1%
------------------------------------
Health Care 13.5%
------------------------------------
Tax Obligation/General 12.2%
------------------------------------
Water and Sewer 8.7%
------------------------------------
Housing/Single Family 5.1%
------------------------------------
Housing/Multifamily 5.0%
------------------------------------
Other 9.6%
------------------------------------
(1) The percentage of AAA ratings shown in the foregoing chart reflects the AAA
ratings on certain bonds insured by AMBAC, FGIC, XLCA or MBIA as of January
31, 2008. As explained earlier in the Portfolio Managers' Comments section
of this report, at least one rating agency reduced the rating for
AMBAC-insured bonds to AA and XLCA-insured and FGIC-insured bonds
experienced further downgrades such that they no longer carry AAA ratings
which had the effect of reducing the rating of many (if not all) of the
bonds insured by those particular insurers. One or more rating agencies
have placed each of these insurers on "negative credit watch", which may
presage one or more rating reductions for such insurer or insurers in the
future. If one or more insurers' ratings are reduced below AAA by these
rating agencies, it would likely reduce the effective rating of many of the
bonds insured by that insurer or insurers, and thereby reduce the
percentage of the portfolio rated AAA from the percentage shown in the
foregoing chart.
(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 31.3%. 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 2007 of
$0.0583 per share.
14
NXE
Performance
OVERVIEW
Nuveen Arizona
Dividend Advantage
Municipal Fund 3
as of January 31, 2008
Pie Chart:
Credit Quality (as a % of total investments(1)
AAA/U.S. Guaranteed 64%
AA 9%
A 7%
BBB 12%
N/R 8%
Bar Chart:
2007-2008 Monthly Tax-Free Dividends Per Common Share
Feb 0.0565
Mar 0.0545
Apr 0.0545
May 0.0545
Jun 0.0545
Jul 0.0545
Aug 0.0545
Sep 0.0545
Oct 0.0545
Nov 0.0545
Dec 0.0545
Jan 0.0545
Line Chart:
Common Share Price Performance -- Weekly Closing Price
2/01/07 14.25
14.1
14.3
14.28
14.4001
14.25
14.45
14.46
14.52
14.25
14.37
14.41
14.4
14.2
14.27
14.26
14.4
14.37
14.26
14.38
14.15
14.4
14.614
14.6
14.64
14.49
14.48
14.32
14.32
14.28
14.29
14.29
14.32
14.3
14.33
14.24
14.36
14.32
14.25
14.26
14.3
14.3
14.3
14.3896
14.36
14.46
14.38
14.42
14.22
14.44
14.36
14.56
14.45
14.4
14.4714
14.6
14.6
14.59
14.5
14.49
14.49
14.44
14.51
14.5
14.51
14.51
14.65
14.54
14.53
14.5
14.48
14.35
14.48
14.75
14.91
14.53
14.53
14.53
14.31
14.3
14.39
14.2
14.4
14.42
14.22
14.22
14.53
14.53
14.45
14.55
14.21
14.11
14.02
13.92
13.88
13.98
13.82
13.9225
14.02
13.92
13.95
13.95
14.15
14
14
14
14.0099
14
13.982
13.95
13.88
13.88
13.89
13.75
13.91
14.03
13.62
13.63
13.62
13.58
13.53
13.48
13.4
13.5
13.4
13.4
13.44
13.52
13.7
13.41
13.41
13.45
13.49
13.43
13.43
13.2801
13.15
13.18
13.13
13.19
13.05
13
13.09
13.1301
13.38
13.38
13.28
13.25
13.25
13.33
13.15
13.17
13.18
13.33
13.35
13.59
13.8
13.76
13.55
13.51
13.55
13.5
13.3515
13.95
13.5
13.5
13.47
13.47
13.4501
13.4501
13.43
13.75
13.81
13.71
13.65
13.61
13.63
13.6
13.5
13.73
13.5275
13.44
13.44
13.44
13.39
13.45
13.35
13.36
13.37
13.2
13.25
13.25
13.23
13.23
13.2001
13.2
13.02
13.04
13.02
13.08
13.2
13.15
13.05
13.05
12.981
12.98
13
13.0499
12.94
12.9
12.89
12.8899
12.81
12.76
12.8401
12.882
12.8
13.04
13.44
13
13.12
13.1
12.82
12.83
12.9
12.78
12.517
12.32
12.49
12.55
12.5
12.56
12.63
12.95
12.93
13.15
13.192
13.41
13.3887
13.37
13.5
13.5501
13.6799
13.6799
13.6101
13.55
13.5
13.54
13.556
13.38
13.36
13.3401
13.3199
13.3284
1/31/08 13.41
FUND SNAPSHOT
------------------------------------
Common Share Price $13.41
------------------------------------
Common Share
Net Asset Value $14.24
------------------------------------
Premium/(Discount) to NAV -5.83%
------------------------------------
Market Yield 4.88%
------------------------------------
Taxable-Equivalent Yield2 7.10%
------------------------------------
Net Assets Applicable to
Common Shares ($000) $43,693
------------------------------------
Average Effective
Maturity on Securities (Years) 15.92
------------------------------------
Leverage-Adjusted Duration 8.96
------------------------------------
AVERAGE ANNUAL TOTAL RETURN
(Inception 9/25/02)
------------------------------------
ON SHARE PRICE ON NAV
------------------------------------
6-Month
(Cumulative) 2.27% 2.62%
------------------------------------
1-Year -1.29% 2.95%
------------------------------------
5-Year 5.29% 5.81%
------------------------------------
Since
Inception 3.19% 5.12%
------------------------------------
INDUSTRIES
(as a % of total investments)
------------------------------------
Tax Obligation/Limited 22.4%
------------------------------------
U.S. Guaranteed 18.8%
------------------------------------
Health Care 15.3%
------------------------------------
Education and Civic
Organizations 9.9%
------------------------------------
Transportation 8.7%
------------------------------------
Water and Sewer 8.4%
------------------------------------
Utilities 7.8%
------------------------------------
Housing/Single Family 5.0%
------------------------------------
Other 3.7%
------------------------------------
(1) The percentage of AAA ratings shown in the foregoing chart reflects the AAA
ratings on certain bonds insured by AMBAC, FGIC, XLCA or MBIA as of January
31, 2008. As explained earlier in the Portfolio Managers' Comments section
of this report, at least one rating agency reduced the rating for
AMBAC-insured bonds to AA and XLCA-insured and FGIC-insured bonds
experienced further downgrades such that they no longer carry AAA ratings
which had the effect of reducing the rating of many (if not all) of the
bonds insured by those particular insurers. One or more rating agencies
have placed each of these insurers on "negative credit watch", which may
presage one or more rating reductions for such insurer or insurers in the
future. If one or more insurers' ratings are reduced below AAA by these
rating agencies, it would likely reduce the effective rating of many of the
bonds insured by that insurer or insurers, and thereby reduce the
percentage of the portfolio rated AAA from the percentage shown in the
foregoing chart.
(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 31.3%. When comparing this Fund to investments that generate
qualified dividend income, the Taxable-Equivalent Yield is lower.
15
NTX
Performance
OVERVIEW
Nuveen Texas
Quality Income
Municipal Fund
as of January 31, 2008
Pie Chart:
Credit Quality (as a % of total investments(1)
AAA/U.S. Guaranteed 72%
AA 12%
A 3%
BBB 9%
BB or Lower 2%
N/R 2%
Bar Chart:
2007-2008 Monthly Tax-Free Dividends Per Common Share(3)
Feb 0.0605
Mar 0.0605
Apr 0.0605
May 0.0605
Jun 0.0605
Jul 0.0605
Aug 0.0605
Sep 0.0605
Oct 0.057
Nov 0.057
Dec 0.057
Jan 0.057
Line Chart:
Common Share Price Performance -- Weekly Closing Price
2/01/07 14.67
14.61
14.55
14.67
14.63
14.61
14.5801
14.58
14.53
14.56
14.62
14.7
14.73
14.695
14.6
14.56
14.6
14.7
14.71
14.76
14.75
14.78
14.73
14.83
14.75
14.7
14.75
14.6899
14.71
14.67
14.6806
14.6799
14.6901
14.74
14.73
14.72
14.72
14.76
14.7
14.66
14.64
14.64
14.66
14.69
14.69
14.697
14.76
14.7
14.55
14.5899
14.53
14.63
14.61
14.68
14.6
14.58
14.63
14.68
14.697
14.74
14.61
14.64
14.65
14.7
14.7
14.69
14.69
14.67
14.69
14.67
14.62
14.63
14.47
14.5
14.42
14.4
14.38
14.3
14.3699
14.36
14.42
14.4
14.42
14.46
14.44
14.48
14.51
14.49
14.45
14.3
14.21
14.14
14.15
14.08
14.2
14.27
14.28
14.2588
14.3
14.2999
14.07
14.25
14.3252
14.34
14.4
14.4
14.47
14.4899
14.33
14.5499
14.52
14.38
14.3
14.27
14.16
14.06
14
13.94
13.94
13.87
13.94
13.94
13.97
13.76
13.83
13.77
13.89
13.97
14.07
14.09
14.0401
14.07
14.09
14.1
14.1
14.09
13.97
13.79
13.58
13.72
13.65
13.65
13.7
13.75
13.82
13.8399
13.67
13.73
13.73
13.8
13.98
14.08
14.23
14.2
14.25
14.3
14.39
14.3101
14.29
14.3
14.2399
14.13
14.18
14.06
14.01
13.85
13.76
13.7
13.74
13.74
13.71
13.66
13.7
13.6301
13.67
13.69
13.62
13.61
13.65
13.53
13.51
13.54
13.49
13.52
13.5
13.522
13.54
13.51
13.49
13.45
13.55
13.55
13.43
13.48
13.47
13.5
13.37
13.39
13.43
13.35
13.28
13.2701
13.16
13.05
13
12.9401
12.89
12.92
13
13.05
12.95
12.99
13.01
13.2
13.14
13.17
13.15
13.08
13.15
13.29
13.2901
13.15
13.16
13.2
13.2
13.15
13.08
13
12.94
13.12
13.05
12.97
12.95
13.01
13.12
13.34
13.53
13.626
13.69
13.71
13.88
13.8
13.82
13.82
13.86
13.8
13.61
13.65
13.59
13.66
13.6
13.66
13.63
13.62
1/31/08 13.67
FUND SNAPSHOT
------------------------------------
Common Share Price $13.67
------------------------------------
Common Share
Net Asset Value $14.90
------------------------------------
Premium/(Discount) to NAV -8.26%
------------------------------------
Market Yield 5.00%
------------------------------------
Taxable-Equivalent Yield2 6.94%
------------------------------------
Net Assets Applicable to
Common Shares ($000) $141,520
------------------------------------
Average Effective
Maturity on Securities (Years) 15.18
------------------------------------
Leverage-Adjusted Duration 7.97
------------------------------------
AVERAGE ANNUAL TOTAL RETURN
(Inception 10/17/91)
------------------------------------
ON SHARE PRICE ON NAV
------------------------------------
6-Month
(Cumulative) 1.38% 2.97%
------------------------------------
1-Year -0.71% 3.31%
------------------------------------
5-Year 4.91% 5.88%
------------------------------------
10-Year 4.77% 5.40%
------------------------------------
INDUSTRIES
(as a % of total investments)
------------------------------------
Tax Obligation/General 29.8%
------------------------------------
U.S. Guaranteed 16.0%
------------------------------------
Education and Civic
Organizations 13.0%
------------------------------------
Health Care 10.6%
------------------------------------
Water and Sewer 7.3%
------------------------------------
Utilities 6.2%
------------------------------------
Transportation 4.6%
------------------------------------
Other 12.5%
------------------------------------
(1) The percentage of AAA ratings shown in the foregoing chart reflects the AAA
ratings on certain bonds insured by AMBAC, FGIC or MBIA as of January 31,
2008. As explained earlier in the Portfolio Managers' Comments section of
this report, at least one rating agency reduced the rating for
AMBAC-insured bonds to AA and FGIC-insured bonds experienced further
downgrades such that they no longer carry AAA ratings which had the effect
of reducing the rating of many (if not all) of the bonds insured by that
particular insurer. One or more rating agencies have placed each of these
insurers on "negative credit watch", which may presage one or more rating
reductions for such insurer or insurers in the future. If one or more
insurers' ratings are reduced below AAA by these rating agencies, it would
likely reduce the effective rating of many of the bonds insured by that
insurer or insurers, and thereby reduce the percentage of the portfolio
rated AAA from the percentage shown in the foregoing chart.
(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 federal income tax rate of 28%. 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 2007 of
$.0559 per share.
16
NAZ
NFZ
NKR
Shareholder MEETING REPORT
The annual meeting of shareholders was held in the offices of Nuveen Investments
on October 12, 2007.
NAZ NFZ NKR
------------------------------------------------------------------------------------------------------------------------------------
TO APPROVE A NEW INVESTMENT MANAGEMENT AGREEMENT
Common and Common and Common and
MuniPreferred MuniPreferred MuniPreferred MuniPreferred MuniPreferred MuniPreferred
shares voting shares voting shares voting shares voting shares voting shares voting
together together together together together together
as a class as a class as a class as a class as a class as a class
====================================================================================================================================
For 2,359,397 -- 804,046 -- 1,268,611 --
Against 86,685 -- 23,304 -- 68,673 --
Abstain 76,296 -- 28,653 -- 37,162 --
Broker Non-Votes 723,195 -- 227,921 -- 405,189 --
------------------------------------------------------------------------------------------------------------------------------------
Total 3,245,573 -- 1,083,924 -- 1,779,635 --
====================================================================================================================================
APPROVAL OF THE BOARD MEMBERS WAS REACHED AS FOLLOWS:
Robert P. Bremner
For 3,114,028 -- -- -- -- --
Withhold 131,545 -- -- -- -- --
------------------------------------------------------------------------------------------------------------------------------------
Total 3,245,573 -- -- -- -- --
====================================================================================================================================
Jack B. Evans
For 3,116,125 -- -- -- -- --
Withhold 129,448 -- -- -- -- --
------------------------------------------------------------------------------------------------------------------------------------
Total 3,245,573 -- -- -- -- --
====================================================================================================================================
William C. Hunter
For 3,116,125 -- -- -- -- --
Withhold 129,448 -- -- -- -- --
------------------------------------------------------------------------------------------------------------------------------------
Total 3,245,573 -- -- -- -- --
====================================================================================================================================
David J. Kundert
For 3,114,028 -- -- -- -- --
Withhold 131,545 -- -- -- -- --
------------------------------------------------------------------------------------------------------------------------------------
Total 3,245,573 -- -- -- -- --
====================================================================================================================================
William J. Schneider
For -- 891 -- 358 -- 528
Withhold -- 9 -- -- -- 6
------------------------------------------------------------------------------------------------------------------------------------
Total -- 900 -- 358 -- 534
====================================================================================================================================
Timothy R. Schwertfeger
For -- 891 -- 358 -- 528
Withhold -- 9 -- -- -- 6
------------------------------------------------------------------------------------------------------------------------------------
Total -- 900 -- 358 -- 534
====================================================================================================================================
Judith M. Stockdale
For 3,113,569 -- 1,048,076 -- 1,717,810 --
Withhold 132,004 -- 35,848 -- 61,825 --
------------------------------------------------------------------------------------------------------------------------------------
Total 3,245,573 -- 1,083,924 -- 1,779,635 --
====================================================================================================================================
Carole E. Stone
For 3,115,125 -- 1,048,076 -- 1,719,110 --
Withhold 130,448 -- 35,848 -- 60,525 --
------------------------------------------------------------------------------------------------------------------------------------
Total 3,245,573 -- 1,083,924 -- 1,779,635 --
====================================================================================================================================
TO RATIFY THE SELECTION OF ERNST & YOUNG LLP AS THE INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM FOR THE CURRENT FISCAL YEAR:
For 3,182,241 -- 1,060,764 -- 1,734,137 --
Against 29,723 -- 10,208 -- 17,635 --
Abstain 33,609 -- 12,952 -- 27,863 --
------------------------------------------------------------------------------------------------------------------------------------
Total 3,245,573 -- 1,083,924 -- 1,779,635 --
====================================================================================================================================
17
NXE
NTX
Shareholder MEETING REPORT (continued)
NXE NTX
------------------------------------------------------------------------------------------------------------------------------------
TO APPROVE A NEW INVESTMENT MANAGEMENT AGREEMENT:
Common and Common and
MuniPreferred MuniPreferred MuniPreferred MuniPreferred
shares voting shares voting shares voting shares voting
together together together together
as a class as a class as a class as a class
====================================================================================================================================
For 1,617,868 -- 4,867,050 --
Against 71,718 -- 290,420 --
Abstain 54,873 -- 134,021 --
Broker Non-Votes 603,984 -- 1,444,643 --
------------------------------------------------------------------------------------------------------------------------------------
Total 2,348,443 -- 6,736,134 --
------------------------------------------------------------------------------------------------------------------------------------
APPROVAL OF THE BOARD MEMBERS WAS REACHED AS FOLLOWS:
Robert P. Bremner
For -- -- -- --
Withhold -- -- -- --
------------------------------------------------------------------------------------------------------------------------------------
Total -- -- -- --
====================================================================================================================================
Jack B. Evans
For -- -- -- --
Withhold -- -- -- --
------------------------------------------------------------------------------------------------------------------------------------
Total -- -- -- --
====================================================================================================================================
William C. Hunter
For -- -- -- --
Withhold -- -- -- --
------------------------------------------------------------------------------------------------------------------------------------
Total -- -- -- --
====================================================================================================================================
David J. Kundert
For -- -- -- --
Withhold -- -- -- --
------------------------------------------------------------------------------------------------------------------------------------
Total -- -- -- --
====================================================================================================================================
William J. Schneider
For -- 852 -- 1,874
Withhold -- -- -- 1
------------------------------------------------------------------------------------------------------------------------------------
Total -- 852 -- 1,875
====================================================================================================================================
Timothy R. Schwertfeger
For -- 852 -- 1,874
Withhold -- -- -- 1
------------------------------------------------------------------------------------------------------------------------------------
Total -- 852 -- 1,875
====================================================================================================================================
Judith M. Stockdale
For 2,267,259 -- 6,517,421 --
Withhold 81,184 -- 218,713 --
------------------------------------------------------------------------------------------------------------------------------------
Total 2,348,443 -- 6,736,134 --
====================================================================================================================================
Carole E. Stone
For 2,259,593 -- 6,514,680 --
Withhold 88,850 -- 221,454 --
------------------------------------------------------------------------------------------------------------------------------------
Total 2,348,443 -- 6,736,134 --
====================================================================================================================================
TO RATIFY THE SELECTION OF ERNST & YOUNG LLP AS THE INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM FOR THE CURRENT FISCAL YEAR:
For 2,278,843 -- 6,556,704 --
Against 34,234 -- 118,723 --
Abstain 35,366 -- 60,707 --
------------------------------------------------------------------------------------------------------------------------------------
Total 2,348,443 -- 6,736,134 --
====================================================================================================================================
18
NAZ
Nuveen Arizona Premium Income Municipal Fund, Inc.
Portfolio of INVESTMENTS
January 31, 2008 (Unaudited)
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
CONSUMER STAPLES - 1.3% (0.9% OF TOTAL INVESTMENTS)
$ 870 Puerto Rico, The Children's Trust Fund, Tobacco Settlement 5/12 at 100.00 BBB $ 845,336
Asset-Backed Refunding Bonds, Series 2002, 5.375%, 5/15/33
------------------------------------------------------------------------------------------------------------------------------------
EDUCATION AND CIVIC ORGANIZATIONS - 11.8% (7.8% OF TOTAL INVESTMENTS)
2,500 Arizona Higher Education Loan Authority, Student Loan Revenue 9/08 at 100.00 AAA 2,500,000
Bonds, Series 2007B, 5.800%,11/01/41
1,000 Arizona State University, System Revenue Bonds, Series 2002, 7/12 at 100.00 Aaa 1,027,770
5.000%, 7/01/25 - FGIC Insured
Arizona State University, System Revenue Bonds, Series 2005:
1,455 5.000%, 7/01/20 - AMBAC Insured 7/15 at 100.00 AAA 1,549,459
750 5.000%, 7/01/21 - AMBAC Insured 7/15 at 100.00 AAA 794,243
1,500 Tempe Industrial Development Authority, Arizona, Lease Revenue 7/13 at 100.00 AAA 1,526,985
Bonds, Arizona State University Foundation Project, Series 2003,
5.000%, 7/01/34 - AMBAC Insured
------------------------------------------------------------------------------------------------------------------------------------
7,205 Total Education and Civic Organizations 7,398,457
------------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE - 17.1% (11.2% OF TOTAL INVESTMENTS)
1,430 Arizona Health Facilities Authority, Hospital Revenue Bonds, Banner 1/17 at 100.00 AA- 1,451,007
Health Systems, Series 2007A, 5.000%, 1/01/25
675 Glendale Industrial Development Authority, Arizona, Revenue 12/15 at 100.00 BBB 629,012
Bonds, John C. Lincoln Health Network, Series 2005B,
5.000%, 12/01/37
1,110 Glendale Industrial Development Authority, Arizona, Revenue 12/17 at 100.00 BBB 1,015,617
Bonds, John C. Lincoln Health Network, Series 2007,
5.000%, 12/01/42
550 Maricopa County Industrial Development Authority, Arizona, 5/16 at 100.00 AA 553,113
Health Facilities Revenue Bonds, Mayo Clinic, Series 2006,
5.000%, 11/15/36
2,150 Maricopa County Industrial Development Authority, Arizona, 7/14 at 100.00 A 2,247,653
Health Facility Revenue Bonds, Catholic Healthcare West,
Series 2004A, 5.375%, 7/01/23 (UB)
2,800 Maricopa County Industrial Development Authority, Arizona, 7/17 at 100.00 A 2,843,541
Health Facility Revenue Bonds, Catholic Healthcare West ,
Series 2007A, 5.250%, 7/01/32 (UB)
385 Maricopa County, Arizona, Hospital Revenue Bonds, Sun Health 4/15 at 100.00 Baa1 398,687
Corporation, Series 2005, 5.000%, 4/01/16
515 Puerto Rico Industrial, Tourist, Educational, Medical and 11/10 at 101.00 Aa1 566,593
Environmental Control Facilities Financing Authority, Hospital
Revenue Bonds, Hospital de la Concepcion, Series 2000A,
6.375%, 11/15/15
1,055 Winslow Industrial Development Authority, Arizona, Hospital 6/08 at 101.00 N/R 974,124
Revenue Bonds, Winslow Memorial Hospital, Series 1998,
5.500%, 6/01/22
------------------------------------------------------------------------------------------------------------------------------------
10,670 Total Health Care 10,679,347
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/MULTIFAMILY - 1.5% (1.0% OF TOTAL INVESTMENTS)
400 Phoenix Industrial Development Authority, Arizona, GNMA 6/11 at 102.00 Aaa 410,776
Collateralized Multifamily Housing Revenue Bonds, Campaigne
Place on Jackson, Series 2001, 5.700%, 6/20/31 (Alternative
Minimum Tax)
530 Phoenix Industrial Development Authority, Arizona, GNMA 4/15 at 100.00 Aaa 509,033
Collateralized Multifamily Housing Revenue Bonds, Park Lee
Apartments, Series 2004A, 5.050%, 10/20/44
(Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
930 Total Housing/Multifamily 919,809
------------------------------------------------------------------------------------------------------------------------------------
19
NAZ
Nuveen Arizona Premium Income Municipal Fund, Inc. (continued)
Portfolio of INVESTMENTS January 31, 2008 (Unaudited)
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/SINGLE FAMILY - 7.8% (5.1% OF TOTAL INVESTMENTS)
$ 1,690 The Industrial Development Authority of The City of Tucson, 1/17 at 103.00 Aaa $ 1,758,327
Arizona, Tax-Exempt Single Family Mortgage Revenue Bonds,
Series 2007A-1, 5.100%, 7/01/38
3,010 Tucson and Pima County Industrial Development Authority, 6/17 at 101.00 Aaa 3,106,019
Arizona, Single Family Mortgage Revenue Bonds, Series 2007B,
5.350%, 6/01/47 (Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
4,700 Total Housing/Single Family 4,864,346
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL - 0.5% (0.2% OF TOTAL INVESTMENTS)
330 Puerto Rico, General Obligation and Public Improvement Bonds, 7/11 at 100.00 BBB- 331,515
Series 2001A, 5.375%, 7/01/28
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED - 28.8% (19.0% OF TOTAL INVESTMENTS)
775 Bullhead City, Arizona, Special Assessment Bonds, Parkway 7/08 at 100.00 Baa2 781,417
District Improvements, Series 1993, 6.100%, 1/01/09
445 Estrella Mountain Ranch Community Facilities District, Goodyear, 7/10 at 102.00 N/R 471,295
Arizona, Special Assessment Lien Bonds, Series 2001A,
7.875%, 7/01/25
1,280 Greater Arizona Development Authority, Infrastructure Revenue 8/16 at 100.00 AAA 1,345,562
Bonds, Series 2006-1, 5.000%, 8/01/22 - MBIA Insured
740 Greater Arizona Development Authority, Infrastructure Revenue 8/16 at 100.00 AAA 774,144
Bonds, Series 2006A, 5.000%, 8/01/23 - MBIA Insured
575 Marana Municipal Property Corporation, Arizona, Revenue Bonds, 7/13 at 100.00 AAA 589,916
Series 2003, 5.000%, 7/01/28 - AMBAC Insured
1,110 Marana, Arizona, Tangerine Farms Road Improvement District 7/16 at 100.00 Baa1 1,051,514
Revenue Bonds, Series 2006, 4.600%, 1/01/26
3,400 Maricopa County Stadium District, Arizona, Revenue Refunding 6/12 at 100.00 Aaa 3,678,968
Bonds, Series 2002, 5.375%, 6/01/18 - AMBAC Insured
3,400 Mesa, Arizona, Street and Highway User Tax Revenue Bonds, 7/15 at 100.00 AAA 3,577,207
Series 2005, 5.000%, 7/01/24 - FSA Insured
1,200 Prescott Valley Municipal Property Corporation, Arizona, 1/13 at 100.00 Aaa 1,220,064
Municipal Facilities Revenue Bonds, Series 2003,
5.000%, 1/01/27 - FGIC Insured
1,000 Puerto Rico Public Buildings Authority, Guaranteed Government 7/12 at 100.00 BBB- 1,002,300
Facilities Revenue Refunding Bonds, Series 2002D,
5.125%, 7/01/24
1,610 San Luis Civic Improvement Corporation, Arizona, Municipal 7/15 at 100.00 AAA 1,623,331
Facilities Excise Tax Revenue Bonds, Series 2005,
5.000%, 7/01/25 - XLCA Insured
1,350 Tempe, Arizona, Excise Tax Revenue Bonds, Series 2004, 7/14 at 100.00 AAA 1,460,417
5.250%, 7/01/20 - AMBAC Insured
500 Tucson, Arizona, Certificates of Participation, Series 2000, 7/08 at 100.00 AAA 505,330
5.700%, 7/01/20 - MBIA Insured
------------------------------------------------------------------------------------------------------------------------------------
17,385 Total Tax Obligation/Limited 18,081,465
------------------------------------------------------------------------------------------------------------------------------------
U.S. GUARANTEED - 44.8% (29.5% OF TOTAL INVESTMENTS) (4)
800 Arizona Health Facilities Authority, Hospital Revenue Bonds, 7/10 at 101.00 A (4) 886,128
Catholic Healthcare West, Series 1999A, 6.625%, 7/01/20
(Pre-refunded 7/01/10)
1,000 Arizona Health Facilities Authority, Hospital System Revenue 12/10 at 102.00 BBB (4) 1,140,590
Bonds, John C. Lincoln Health Network, Series 2000,
7.000%, 12/01/25 (Pre-refunded 12/01/10)
1,000 Arizona State University, Certificates of Participation, 7/12 at 100.00 AAA 1,112,630
Series 2002, 5.375%, 7/01/19 (Pre-refunded 7/01/12) -
MBIA Insured
Arizona Tourism and Sports Authority, Tax Revenue Bonds,
Multipurpose Stadium Facility Project, Series 2003A:
500 5.375%, 7/01/20 (Pre-refunded 7/01/13) - MBIA Insured 7/13 at 100.00 Aaa 566,295
1,000 5.375%, 7/01/21 (Pre-refunded 7/01/13) - MBIA Insured 7/13 at 100.00 Aaa 1,132,590
1,250 Glendale Industrial Development Authority, Arizona, Revenue 5/11 at 101.00 A- (4) 1,393,238
Bonds, Midwestern University, Series 2001A, 5.875%, 5/15/31
(Pre-refunded 5/15/11)
20
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
U.S. GUARANTEED (4) (continued)
$ 1,250 Maricopa County Industrial Development Authority, Arizona, No Opt. Call AAA $ 1,550,975
Hospital Revenue Refunding Bonds, Samaritan Health Services,
Series 1990A, 7.000%, 12/01/16 - MBIA Insured (ETM)
1,525 Maricopa County Union High School District 210, Phoenix, 7/14 at 100.00 AAA 1,712,667
Arizona, General Obligation Bonds, Series 2004A,
5.000%, 7/01/21 (Pre-refunded 7/01/14) - FSA Insured
3,000 Mesa Industrial Development Authority, Arizona, Revenue Bonds, 1/10 at 101.00 AAA 3,211,350
Discovery Health System, Series 1999A, 5.750%, 1/01/25
(Pre-refunded 1/01/10) - MBIA Insured
1,050 Northern Arizona University, System Revenue Bonds, Series 2002, 6/12 at 100.00 Aaa 1,151,157
5.000%, 6/01/34 (Pre-refunded 6/01/12) - FGIC Insured
2,000 Phoenix Civic Improvement Corporation, Arizona, Junior Lien 7/10 at 101.00 Aaa 2,191,120
Wastewater System Revenue Bonds, Series 2000,
6.000%, 7/01/24 (Pre-refunded 7/01/10) - FGIC Insured
2,000 Phoenix Civic Improvement Corporation, Arizona, Subordinate 7/13 at 100.00 AAA 2,229,780
Lien Excise Tax Revenue Bonds, Series 2003A,
5.000%, 7/01/21 (Pre-refunded 7/01/13) - MBIA Insured
Phoenix Industrial Development Authority, Arizona, Government
Office Lease Revenue Bonds, Capitol Mall LLC, Series 2000:
700 5.375%, 9/15/22 (Pre-refunded 9/15/10) - AMBAC Insured 9/10 at 100.00 AAA 753,858
2,000 5.500%, 9/15/27 (Pre-refunded 9/15/10) - AMBAC Insured 9/10 at 100.00 AAA 2,160,200
1,000 Puerto Rico Highway and Transportation Authority, Highway 7/10 at 101.00 BBB+ (4) 1,105,990
Revenue Bonds, Series 2000B, 6.500%, 7/01/27
(Pre-refunded 7/01/10)
1,500 Scottsdale Industrial Development Authority, Arizona, Hospital 12/11 at 101.00 A3 (4) 1,689,045
Revenue Bonds, Scottsdale Healthcare, Series 2001,
5.800%, 12/01/31 (Pre-refunded 12/01/11)
3,215 Tucson Industrial Development Authority, Arizona, Senior Living 7/10 at 101.00 AA (4) 3,491,682
Facilities Revenue Bonds, Christian Care Project, Series 2000A,
5.625%, 7/01/20 (Pre-refunded 7/01/10) - RAAI Insured
600 Tucson, Arizona, Junior Lien Street and Highway User Revenue 7/10 at 100.00 Aaa 637,638
Bonds, Series 2000E, 5.000%, 7/01/18 (Pre-refunded 7/01/10) -
FGIC Insured
------------------------------------------------------------------------------------------------------------------------------------
25,390 Total U.S. Guaranteed 28,116,933
------------------------------------------------------------------------------------------------------------------------------------
UTILITIES - 16.0% (10.6% OF TOTAL INVESTMENTS)
1,000 Arizona Power Authority, Special Obligation Power Resource No Opt. Call AA 1,136,890
Revenue Refunding Crossover Bonds, Hoover Project,
Series 2001, 5.250%, 10/01/15
465 Pima County Industrial Development Authority, Arizona, Lease 7/08 at 100.00 Aaa 480,117
Obligation Revenue Refunding Bonds, Tucson Electric Power
Company, Series 1988A, 7.250%, 7/15/10 - FSA Insured
2,170 Puerto Rico Electric Power Authority, Power Revenue Bonds, 7/15 at 100.00 AAA 2,196,062
Series 2005RR, 5.000%, 7/01/27 - XLCA Insured
530 Salt River Project Agricultural Improvement and Power District, 1/13 at 100.00 Aa1 558,991
Arizona, Electric System Revenue Bonds, Series 2002B,
5.000%, 1/01/22
Salt River Project Agricultural Improvement and Power District,
Arizona, Electric System Revenue Refunding Bonds, Series 2002A:
2,000 5.125%, 1/01/27 1/12 at 101.00 Aa1 2,115,560
1,000 5.000%, 1/01/31 1/12 at 101.00 Aa1 1,034,140
Salt Verde Financial Corporation, Arizona, Senior GAs Revenue
Drivers Trust 2267, Series 2007:
1,505 13.759%, 12/01/29 (IF) No Opt. Call AA- 1,508,281
1,095 11.056%, 12/01/37 (IF) No Opt. Call AA- 1,028,008
------------------------------------------------------------------------------------------------------------------------------------
9,765 Total Utilities 10,058,049
------------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER - 22.3% (14.7% OF TOTAL INVESTMENTS)
1,005 Cottonwood, Arizona, Senior Lien Water System Revenue Bonds, 7/14 at 100.00 AAA 1,023,170
Municipal Property Corporation, Series 2004, 5.000%, 7/01/24 -
XLCA Insured
3,500 Glendale, Arizona, Water and Sewer Revenue Bonds, Subordinate 7/13 at 100.00 AAA 3,583,159
Lien, Series 2003, 5.000%, 7/01/28 - AMBAC Insured
21
NAZ
Nuveen Arizona Premium Income Municipal Fund, Inc. (continued)
Portfolio of INVESTMENTS January 31, 2008 (Unaudited)
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER (continued)
$ 600 Oro Valley Municipal Property Corporation, Arizona, Senior Lien 7/13 at 100.00 AAA $ 626,862
Water Revenue Bonds, Series 2003, 5.000%, 7/01/23 -
MBIA Insured
1,000 Phoenix Civic Improvement Corporation, Arizona, Junior Lien 7/14 at 100.00 AAA 1,042,560
Wastewater System Revenue Bonds, Series 2004,
5.000%, 7/01/24 - MBIA Insured
1,500 Phoenix Civic Improvement Corporation, Arizona, Junior Lien 7/12 at 100.00 Aaa 1,535,715
Water System Revenue Bonds, Series 2002, 5.000%, 7/01/26 -
FGIC Insured
3,295 Phoenix Civic Improvement Corporation, Arizona, Junior Lien 7/15 at 100.00 AAA 3,481,793
Water System Revenue Bonds, Series 2005, 5.000%, 7/01/23 -
MBIA Insured
1,250 Phoenix Civic Improvement Corporation, Arizona, Junior Lien No Opt. Call Aaa 1,436,150
Water System Revenue Refunding Bonds, Series 2001,
5.500%, 7/01/21 - FGIC Insured
Surprise Municipal Property Corporation, Arizona, Wastewater
System Revenue Bonds, Series 2007:
600 4.700%, 4/01/22 4/14 at 100.00 N/R 593,238
695 4.900%, 4/01/32 4/17 at 100.00 N/R 650,666
------------------------------------------------------------------------------------------------------------------------------------
13,445 Total Water and Sewer 13,973,313
------------------------------------------------------------------------------------------------------------------------------------
$ 90,690 Total Investments (cost $91,791,608) - 151.9% 95,268,570
=============-----------------------------------------------------------------------------------------------------------------------
Floating Rate Obligations - (5.3)% (3,300,000)
--------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 1.2% 745,662
--------------------------------------------------------------------------------------------------------------------
Preferred Shares, at Liquidation Value - (47.8)% (5) (30,000,000)
--------------------------------------------------------------------------------------------------------------------
Net Assets Applicable to Common Shares - 100% $ 62,714,232
====================================================================================================================
(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 AAA ratings shown in the Portfolio of Investments
reflect the AAA ratings on certain bonds insured by AMBAC,
FGIC, XLCA or MBIA as of January 31, 2008. Subsequent to
January 31, 2008, at least one rating agency reduced the
rating for AMBAC-insured bonds to AA and XLCA-insured and
FGIC-insured bonds experienced further downgrades such that
they no longer carry AAA ratings which had the effect of
reducing the rating of many (if not all) of the bonds
insured by those particular insurers. One or more rating
agencies have placed each of these insurers on "negative
credit watch", which may presage one or more rating
reductions for such insurer or insurers in the future. If
one or more insurers' ratings are reduced below AAA by these
rating agencies, it would likely reduce the effective rating
of many of the bonds insured by that insurer or insurers.
(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) Preferred Shares, at Liquidation Value as a percentage of
total investments is (31.5)%.
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 accompanying notes to financial statements.
22
NFZ
Nuveen Arizona Dividend Advantage Municipal Fund
Portfolio of INVESTMENTS
January 31, 2008 (Unaudited)
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
EDUCATION AND CIVIC ORGANIZATIONS - 8.3% (5.2% OF TOTAL INVESTMENTS)
$ 280 Arizona Higher Education Loan Authority, Student Loan Revenue 9/08 at 100.00 AAA $ 280,000
Bonds, Series 2007B, 5.800%,11/01/41
1,000 Puerto Rico Industrial, Tourist, Educational, Medical and 2/09 at 101.00 BBB- 971,820
Environmental Control Facilities Financing Authority, Higher
Education Revenue Bonds, Ana G. Mendez University System,
Series 1999, 5.375%, 2/01/29
300 Puerto Rico Industrial, Tourist, Educational, Medical and 9/11 at 100.00 BBB 305,322
Environmental Control Facilities Financing Authority, Higher
Education Revenue Bonds, University of the Sacred Heart, Series
2001, 5.250%, 9/01/21
305 Tucson Industrial Development Authority, Arizona, Charter School 9/14 at 100.00 BBB- 307,772
Revenue Bonds, Arizona Agribusiness and Equine Center
Charter School, Series 2004A, 6.125%, 9/01/34
------------------------------------------------------------------------------------------------------------------------------------
1,885 Total Education and Civic Organizations 1,864,914
------------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE - 14.9% (9.4% OF TOTAL INVESTMENTS)
565 Arizona Health Facilities Authority, Hospital Revenue Bonds, 1/17 at 100.00 AA- 573,300
Banner Health Systems, Series 2007A, 5.000%, 1/01/25
10 California Health Facilities Financing Authority, Health Facility 3/13 at 100.00 A 10,006
Revenue Bonds, Adventist Health System/West, Series 2003A,
5.000%, 3/01/28
250 Glendale Industrial Development Authority, Arizona, Revenue 12/15 at 100.00 BBB 232,968
Bonds, John C. Lincoln Health Network, Series 2005B,
5.000%, 12/01/37
415 Glendale Industrial Development Authority, Arizona, Revenue 12/17 at 100.00 BBB 379,713
Bonds, John C. Lincoln Health Network, Series 2007,
5.000%, 12/01/42
200 Maricopa County Industrial Development Authority, Arizona, Health 5/16 at 100.00 AA 201,132
Facilities Revenue Bonds, Mayo Clinic, Series 2006,
5.000%, 11/15/36
750 Maricopa County Industrial Development Authority, Arizona, Health 7/14 at 100.00 A 784,065
Facility Revenue Bonds, Catholic Healthcare West, Series 2004A,
5.375%, 7/01/23 (UB)
1,025 Maricopa County Industrial Development Authority, Arizona, Health 7/17 at 100.00 A 1,040,939
Facility Revenue Bonds, Catholic Healthcare West , Series 2007A,
5.250%, 7/01/32 (UB)
140 Maricopa County, Arizona, Hospital Revenue Bonds, Sun Health 4/15 at 100.00 Baa1 144,977
Corporation, Series 2005, 5.000%, 4/01/16
------------------------------------------------------------------------------------------------------------------------------------
3,355 Total Health Care 3,367,100
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/MULTIFAMILY - 6.7% (4.2% OF TOTAL INVESTMENTS)
1,000 Maricopa County Industrial Development Authority, Arizona, 7/09 at 102.00 Aaa 1,025,340
Multifamily Housing Revenue Bonds, Whispering Palms
Apartments, Series 1999A, 5.900%, 7/01/29 - MBIA Insured
275 Phoenix Industrial Development Authority, Arizona, GNMA 6/11 at 102.00 Aaa 282,409
Collateralized Multifamily Housing Revenue Bonds, Campaigne
Place on Jackson, Series 2001, 5.700%, 6/20/31 (Alternative
Minimum Tax)
205 Phoenix Industrial Development Authority, Arizona, GNMA 4/15 at 100.00 Aaa 196,890
Collateralized Multifamily Housing Revenue Bonds, Park Lee
Apartments, Series 2004A, 5.050%, 10/20/44
(Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
1,480 Total Housing/Multifamily 1,504,639
------------------------------------------------------------------------------------------------------------------------------------
23
NFZ
Nuveen Arizona Dividend Advantage Municipal Fund (continued)
Portfolio of INVESTMENTS January 31, 2008 (Unaudited)
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/SINGLE FAMILY - 17.4% (10.9% OF TOTAL INVESTMENTS)
$ 5 Pima County Industrial Development Authority, Arizona, 11/10 at 101.00 AAA $ 5,189
FNMA/GNMA Single Family Mortgage Revenue Bonds,
Series 2001A-4, 5.050%, 5/01/17
1,995 The Industrial Development Authority of The City of Tucson, 7/16 at 103.00 Aaa 2,115,478
Arizona, Tax-Exempt Single Family Mortgage Revenue Bonds,
Series 2006A-1, 5.350%, 1/01/38 (Alternative Minimum Tax)
635 The Industrial Development Authority of The City of Tucson, 1/17 at 103.00 Aaa 660,673
Arizona, Tax-Exempt Single Family Mortgage Revenue Bonds,
Series 2007A-1, 5.100%, 7/01/38
1,085 Tucson and Pima County Industrial Development Authority, 6/17 at 101.00 Aaa 1,119,612
Arizona, Single Family Mortgage Revenue Bonds, Series 2007B,
5.350%, 6/01/47 (Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
3,720 Total Housing/Single Family 3,900,952
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL - 16.0% (10.1% OF TOTAL INVESTMENTS)
1,000 Maricopa County Unified School District 11, Peoria, Arizona, 7/15 at 100.00 Aaa 1,078,100
General Obligation Bonds, Second Series 2005,
5.000%, 7/01/20 - FGIC Insured
2,340 Yuma & La Paz Counties Community College District, Arizona, 7/16 at 100.00 AAA 2,521,347
General Obligation Bonds, Series 2006, 5.000%, 7/01/21 -
MBIA Insured
------------------------------------------------------------------------------------------------------------------------------------
3,340 Total Tax Obligation/General 3,599,447
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED - 45.6% (28.6% OF TOTAL INVESTMENTS)
1,220 Arizona Tourism and Sports Authority, Tax Revenue Bonds, 7/13 at 100.00 Aaa 1,241,069
Multipurpose Stadium Facility Project, Series 2003A,
5.000%, 7/01/31 - MBIA Insured
96 Centerra Community Facilities District, Goodyear, Arizona, 7/15 at 100.00 N/R 89,645
General Obligation Bonds, Series 2005, 5.500%, 7/15/29
210 Estrella Mountain Ranch Community Facilities District, Arizona, 1/17 at 100.00 N/R 201,218
Special Assessment Bonds, Montecito Assessment District,
Series 2007, 5.700%, 7/01/27
173 Estrella Mountain Ranch Community Facilities District, Goodyear, 7/10 at 102.00 N/R 183,223
Arizona, Special Assessment Lien Bonds, Series 2001A,
7.875%, 7/01/25
1,000 Greater Arizona Development Authority, Infrastructure Revenue 8/16 at 100.00 AAA 1,051,220
Bonds, Series 2006-1, 5.000%, 8/01/22 - MBIA Insured
275 Greater Arizona Development Authority, Infrastructure Revenue 8/16 at 100.00 AAA 287,689
Bonds, Series 2006A, 5.000%, 8/01/23 - MBIA Insured
1,180 Marana Municipal Property Corporation, Arizona, Revenue Bonds, 7/13 at 100.00 AAA 1,227,530
Series 2003, 5.000%, 7/01/23 - AMBAC Insured
415 Marana, Arizona, Tangerine Farms Road Improvement District 7/16 at 100.00 Baa1 393,134
Revenue Bonds, Series 2006, 4.600%, 1/01/26
150 Marley Park Community Facilities District, City of Surprise, 7/17 at 100.00 N/R 149,297
Arizona, Limited Tax General Obligation Bonds, Series 2007,
6.100%, 7/15/32
330 Palm Valley Community Facility District 3, Goodyear, Arizona, 7/16 at 100.00 N/R 333,732
General Obligation Bonds, Series 2006, 5.300%, 7/15/31
225 Palm Valley Community Facility District 3, Goodyear, Arizona, 7/17 at 100.00 N/R 216,610
Limited Tax General Obligation Bonds, Series 2007,
5.800%, 7/15/32
100 Parkway Community Facilities District 1, Prescott Valley, 7/16 at 100.00 N/R 90,648
Arizona, General Obligation Bonds, Series 2006,
5.350%, 7/15/31
900 Phoenix Industrial Development Authority, Arizona, Government 3/12 at 100.00 AAA 974,817
Bonds, Capitol Mall LLC II, Series 2001, 5.250%, 9/15/16 -
AMBAC Insured
680 Pinal County Industrial Development Authority, Arizona, No Opt. Call BBB- 676,342
Correctional Facilities Contract Revenue Bonds, Florence
West Prison LLC, Series 2002A, 5.000%, 10/01/18 -
ACA Insured
600 San Luis Civic Improvement Corporation, Arizona, Municipal 7/15 at 100.00 AAA 604,968
Facilities Excise Tax Revenue Bonds, Series 2005,
5.000%, 7/01/25 - XLCA Insured
24
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED (continued)
$ 350 Tartesso West Community Facility District, Buckeye, Arizona, 7/17 at 100.00 N/R $ 341,369
Limited Tax General Obligation Bonds, Series 2007,
5.900%, 7/15/32
1,000 Tempe, Arizona, Excise Tax Revenue Bonds, Series 2004, 7/14 at 100.00 AAA 1,081,790
5.250%, 7/01/20 - AMBAC Insured
500 Vistancia Community Facilities District, Arizona, Restricted 7/15 at 100.00 Baa1 520,405
General Obligation Bonds, Series 2005, 5.750%, 7/15/24
355 Watson Road Community Facilities District, Arizona, Special 7/16 at 100.00 N/R 353,030
Assessment Revenue Bonds, Series 2005, 6.000%, 7/01/30
225 Westpark Community Facilities District, Buckeye, Arizona, 7/16 at 100.00 N/R 203,767
General Obligation Tax Increment Bonds Series 2006,
5.250%, 7/15/31
------------------------------------------------------------------------------------------------------------------------------------
9,984 Total Tax Obligation/Limited 10,221,503
------------------------------------------------------------------------------------------------------------------------------------
U.S. GUARANTEED - 13.1% (8.2% OF TOTAL INVESTMENTS) (4)
365 Arizona Health Facilities Authority, Hospital Revenue Bonds, 7/10 at 101.00 A (4) 404,296
Catholic Healthcare West, Series 1999A, 6.625%, 7/01/20
(Pre-refunded 7/01/10)
1,000 Arizona Tourism and Sports Authority, Tax Revenue Bonds, 7/13 at 100.00 Aaa 1,132,590
Multipurpose Stadium Facility Project, Series 2003A,
5.375%, 7/01/21 (Pre-refunded 7/01/13) - MBIA Insured
240 Maricopa County Union High School District 210 Phoenix, 7/16 at 100.00 AAA 272,882
Arizona, General Obligation Bonds, Series 2006C,
5.000%, 7/01/24 (Pre-refunded 7/01/16) - MBIA Insured
1,000 Scottsdale Industrial Development Authority, Arizona, Hospital 12/11 at 101.00 A3 (4) 1,126,030
Revenue Bonds, Scottsdale Healthcare, Series 2001,
5.800%, 12/01/31 (Pre-refunded 12/01/11)
------------------------------------------------------------------------------------------------------------------------------------
2,605 Total U.S. Guaranteed 2,935,798
------------------------------------------------------------------------------------------------------------------------------------
UTILITIES - 24.1% (15.1% OF TOTAL INVESTMENTS)
1,500 Arizona Power Authority, Special Obligation Power Resource No Opt. Call AA 1,716,015
Revenue Refunding Crossover Bonds, Hoover Project,
Series 2001, 5.250%, 10/01/17
1,000 Mesa, Arizona, Utility System Revenue Refunding Bonds, No Opt. Call Aaa 1,126,930
Series 2002, 5.250%, 7/01/17 - FGIC Insured
1,000 Puerto Rico Electric Power Authority, Power Revenue Bonds, 7/15 at 100.00 AAA 1,013,870
Series 2005RR, 5.000%, 7/01/26 - XLCA Insured
200 Salt River Project Agricultural Improvement and Power 1/13 at 100.00 Aa1 210,940
District, Arizona, Electric System Revenue Bonds,
Series 2002B, 5.000%, 1/01/22
235 Salt River Project Agricultural Improvement and Power District, 7/08 at 101.00 Aa1 237,707
Arizona, Electric System Revenue Refunding Bonds,
Series 1997A, 5.000%, 1/01/20
1,000 Salt River Project Agricultural Improvement and Power District, 1/12 at 101.00 Aa1 1,082,360
Arizona, Electric System Revenue Refunding Bonds,
Series 2002A, 5.250%, 1/01/18
------------------------------------------------------------------------------------------------------------------------------------
4,935 Total Utilities 5,387,822
------------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER - 13.2% (8.3% OF TOTAL INVESTMENTS)
225 Oro Valley Municipal Property Corporation, Arizona, Senior Lien 7/13 at 100.00 AAA 235,073
Water Revenue Bonds, Series 2003, 5.000%, 7/01/23 -
MBIA Insured
1,500 Phoenix Civic Improvement Corporation, Arizona, Junior Lien Water 7/12 at 100.00 Aaa 1,535,715
System Revenue Bonds, Series 2002, 5.000%, 7/01/26 -
FGIC Insured
520 Phoenix Civic Improvement Corporation, Arizona, Junior Lien 7/15 at 100.00 AAA 549,479
Water System Revenue Bonds, Series 2005, 5.000%, 7/01/23 -
MBIA Insured
Surprise Municipal Property Corporation, Arizona, Wastewater
System Revenue Bonds, Series 2007:
225 4.700%, 4/01/22 4/14 at 100.00 N/R 222,464
260 4.900%, 4/01/32 4/17 at 100.00 N/R 243,415
25
NFZ
Nuveen Arizona Dividend Advantage Municipal Fund (continued)
Portfolio of INVESTMENTS January 31, 2008 (Unaudited)
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER (continued)
$ 175 Yuma County Industrial Development Authority, Arizona, Exempt 12/17 at 100.00 N/R $ 173,366
Revenue Bonds, Far West Water & Sewer Inc. Refunding,
Series 2007A, 6.375%, 12/01/37 (Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
2,905 Total Water and Sewer 2,959,512
------------------------------------------------------------------------------------------------------------------------------------
$ 34,209 Total Investments (cost $34,883,923) - 159.3% 35,741,687
=============-----------------------------------------------------------------------------------------------------------------------
Floating Rate Obligations - (5.3)% (1,180,000)
--------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - (0.5)% (119,609)
--------------------------------------------------------------------------------------------------------------------
Preferred Shares, at Liquidation Value - (53.5)% (5) (12,000,000)
--------------------------------------------------------------------------------------------------------------------
Net Assets Applicable to Common Shares - 100% $ 22,442,078
====================================================================================================================
(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 AAA ratings shown in the Portfolio of Investments
reflect the AAA ratings on certain bonds insured by AMBAC,
FGIC, XLCA or MBIA as of January 31, 2008. Subsequent to
January 31, 2008, at least one rating agency reduced the
rating for AMBAC-insured bonds to AA and XLCA-insured and
FGIC-insured bonds experienced further downgrades such that
they no longer carry AAA ratings which had the effect of
reducing the rating of many (if not all) of the bonds
insured by those particular insurers. One or more rating
agencies have placed each of these insurers on "negative
credit watch", which may presage one or more rating
reductions for such insurer or insurers in the future. If
one or more insurers' ratings are reduced below AAA by these
rating agencies, it would likely reduce the effective rating
of many of the bonds insured by that insurer or insurers.
(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) Preferred Shares, at Liquidation Value as a percentage of
total investments is (33.6)%.
N/R Not rated.
(UB) Underlying bond of an inverse floating rate trust reflected
as a financing transaction pursuant to the provisions of
SFAS No. 140.
See accompanying notes to financial statements.
26
NKR
Nuveen Arizona Dividend Advantage Municipal Fund 2
Portfolio of INVESTMENTS
January 31, 2008 (Unaudited)
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
EDUCATION AND CIVIC ORGANIZATIONS - 7.0% (4.4% OF TOTAL INVESTMENTS)
$ 1,130 Arizona Higher Education Loan Authority, Student Loan Revenue 9/08 at 100.00 AAA $ 1,130,000
Bonds, Series 2007B, 5.800%,11/01/41
460 Pima County Industrial Development Authority, Arizona, Charter 12/14 at 100.00 BBB- 468,634
School Revenue Bonds, Noah Webster Basic Schools Inc.,
Series 2004, 6.000%, 12/15/24
320 Puerto Rico Industrial, Tourist, Educational, Medical and 2/09 at 101.00 BBB- 322,816
Environmental Control Facilities Financing Authority, Higher
Education Revenue Bonds, Ana G. Mendez University System,
Series 1999, 5.375%, 2/01/19
480 Tucson Industrial Development Authority, Arizona, Charter School 9/14 at 100.00 BBB- 484,363
Revenue Bonds, Arizona Agribusiness and Equine Center Charter
School, Series 2004A, 6.125%, 9/01/34
University of Arizona, Certificates of Participation, Series 2002A:
65 5.500%, 6/01/18 - AMBAC Insured 6/12 at 100.00 AAA 70,549
40 5.125%, 6/01/22 - AMBAC Insured 6/12 at 100.00 AAA 41,950
------------------------------------------------------------------------------------------------------------------------------------
2,495 Total Education and Civic Organizations 2,518,312
------------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE - 21.2% (13.5% OF TOTAL INVESTMENTS)
845 Arizona Health Facilities Authority, Hospital Revenue Bonds, 1/17 at 100.00 AA- 857,413
Banner Health Systems, Series 2007A, 5.000%, 1/01/25
600 Arizona Health Facilities Authority, Revenue Bonds, Blood 4/14 at 100.00 A- 617,754
Systems Inc., Series 2004, 5.000%, 4/01/20
400 Glendale Industrial Development Authority, Arizona, Revenue 12/15 at 100.00 BBB 372,748
Bonds, John C. Lincoln Health Network, Series 2005B,
5.000%, 12/01/37
655 Glendale Industrial Development Authority, Arizona, Revenue 12/17 at 100.00 BBB 599,305
Bonds, John C. Lincoln Health Network, Series 2007,
5.000%, 12/01/42
320 Maricopa County Industrial Development Authority, Arizona, 5/16 at 100.00 AA 321,811
Health Facilities Revenue Bonds, Mayo Clinic, Series 2006,
5.000%, 11/15/36
500 Maricopa County Industrial Development Authority, Arizona, 5/08 at 101.00 AA 507,280
Hospital Revenue Bonds, Mayo Clinic Hospital, Series 1998,
5.250%, 11/15/37
1,375 Maricopa County Industrial Development Authority, Arizona, 7/14 at 100.00 A 1,437,453
Health Facility Revenue Bonds, Catholic Healthcare West,
Series 2004A, 5.375%, 7/01/23 (UB)
1,650 Maricopa County Industrial Development Authority, Arizona, 7/17 at 100.00 A 1,675,658
Health Facility Revenue Bonds, Catholic Healthcare West ,
Series 2007A, 5.250%, 7/01/32 (UB)
225 Maricopa County, Arizona, Hospital Revenue Bonds, Sun Health 4/15 at 100.00 Baa1 232,999
Corporation, Series 2005, 5.000%, 4/01/16
1,000 Yavapai County Industrial Development Authority, Arizona, 8/13 at 100.00 Baa2 1,032,780
Hospital Revenue Bonds, Yavapai Regional Medical Center,
Series 2003A, 6.000%, 8/01/33
------------------------------------------------------------------------------------------------------------------------------------
7,570 Total Health Care 7,655,201
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/MULTIFAMILY - 7.9% (5.0% OF TOTAL INVESTMENTS)
1,000 Maricopa County Industrial Development Authority, Arizona, 10/11 at 105.00 AAA 1,042,960
GNMA Collateralized Multifamily Housing Revenue Refunding
Bonds, Pine Ridge, Cambridge Court, Cove on 44th and
Fountain Place Apartments, Series 2001A-1, 6.000%, 10/20/31
325 Phoenix Industrial Development Authority, Arizona, GNMA 4/15 at 100.00 Aaa 312,143
Collateralized Multifamily Housing Revenue Bonds, Park Lee
Apartments, Series 2004A, 5.050%, 10/20/44
(Alternative Minimum Tax)
27
NKR
Nuveen Arizona Dividend Advantage Municipal Fund 2 (continued)
Portfolio of INVESTMENTS January 31, 2008 (Unaudited)
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/MULTIFAMILY (continued)
$ 1,425 Phoenix Industrial Development Authority, Arizona, GNMA 7/12 at 105.00 AAA $ 1,509,503
Collateralized Multifamily Housing Revenue Bonds, Summit
Apartments, Series 2002, 6.450%, 7/20/32
------------------------------------------------------------------------------------------------------------------------------------
2,750 Total Housing/Multifamily 2,864,606
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/SINGLE FAMILY - 7.9% (5.1% OF TOTAL INVESTMENTS)
1,000 The Industrial Development Authority of The City of Tucson, 1/17 at 103.00 Aaa 1,040,430
Arizona, Tax-Exempt Single Family Mortgage Revenue Bonds,
Series 2007A-1, 5.100%, 7/01/38
1,775 Tucson and Pima County Industrial Development Authority, 6/17 at 101.00 Aaa 1,831,623
Arizona, Single Family Mortgage Revenue Bonds, Series 2007B,
5.350%, 6/01/47 (Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
2,775 Total Housing/Single Family 2,872,053
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL - 19.2% (12.2% OF TOTAL INVESTMENTS)
1,000 Maricopa County School District 6, Arizona, General Obligation No Opt. Call AAA 1,162,150
Refunding Bonds, Washington Elementary School, Series 2002A,
5.375%, 7/01/16 - FSA Insured
1,165 Maricopa County Unified School District 69, Paradise Valley, No Opt. Call Aaa 1,320,201
Arizona, General Obligation Refunding Bonds, Series 2002A,
5.250%, 7/01/14 - FGIC Insured
1,405 Mesa, Arizona, General Obligation Bonds, Series 2002, No Opt. Call Aaa 1,613,797
5.375%, 7/01/15 - FGIC Insured
Phoenix, Arizona, Various Purpose General Obligation Bonds,
Series 2002B:
1,700 5.000%, 7/01/22 7/12 at 100.00 AAA 1,794,197
500 5.000%, 7/01/27 7/12 at 100.00 AAA 525,205
510 Scottsdale, Arizona, General Obligation Bonds, Series 2002, 7/11 at 100.00 AAA 533,919
5.000%, 7/01/24
------------------------------------------------------------------------------------------------------------------------------------
6,280 Total Tax Obligation/General 6,949,469
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED - 46.8% (29.8% OF TOTAL INVESTMENTS)
Arizona State, Certificates of Participation, Series 2002A:
750 5.000%, 11/01/17 - MBIA Insured 5/12 at 100.00 AAA 805,988
1,000 5.000%, 11/01/18 - MBIA Insured 5/12 at 100.00 AAA 1,058,910
500 5.000%, 11/01/20 - MBIA Insured 5/12 at 100.00 AAA
134 Centerra Community Facilities District, Goodyear, Arizona, 7/15 at 100.00 N/R 125,129
General Obligation Bonds, Series 2005, 5.500%, 7/15/29
345 Estrella Mountain Ranch Community Facilities District, Arizona, 1/17 at 100.00 N/R 327,940
Special Assessment Bonds, Montecito Assessment District,
Series 2007, 5.800%, 7/01/32
272 Estrella Mountain Ranch Community Facilities District, Goodyear, 7/10 at 102.00 N/R 288,072
Arizona, Special Assessment Lien Bonds, Series 2001A,
7.875%, 7/01/25
670 Goodyear Community Facilities Utility District 1, Arizona, General 7/13 at 100.00 BBB 646,182
Obligation Bonds, Series 2003, 5.350%, 7/15/28 - ACA Insured
650 Marana, Arizona, Tangerine Farms Road Improvement District 7/16 at 100.00 Baa1 615,752
Revenue Bonds, Series 2006, 4.600%, 1/01/26
Maricopa County Stadium District, Arizona, Revenue Refunding
Bonds, Series 2002:
840 5.375%, 6/01/18 - AMBAC Insured 6/12 at 100.00 Aaa 908,922
2,645 5.375%, 6/01/19 - AMBAC Insured 6/12 at 100.00 Aaa 2,862,019
240 Marley Park Community Facilities District, City of Surprise, 7/17 at 100.00 N/R 238,874
Arizona, Limited Tax General Obligation Bonds, Series 2007,
6.100%, 7/15/32
530 Palm Valley Community Facility District 3, Goodyear, Arizona, 7/16 at 100.00 N/R 535,994
General Obligation Bonds, Series 2006, 5.300%, 7/15/31
350 Palm Valley Community Facility District 3, Goodyear, Arizona, 7/17 at 100.00 N/R 336,949
Limited Tax General Obligation Bonds, Series 2007,
5.800%, 7/15/32
140 Parkway Community Facilities District 1, Prescott Valley, Arizona, 7/16 at 100.00 N/R 126,907
General Obligation Bonds, Series 2006, 5.350%, 7/15/31
28
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED (continued)
$ 1,500 Phoenix Industrial Development Authority, Arizona, Government 3/12 at 100.00 AAA $ 1,624,695
Bonds, Capitol Mall LLC II, Series 2001, 5.250%, 9/15/16 -
AMBAC Insured
1,070 Pinal County Industrial Development Authority, Arizona, No Opt. Call BBB- 1,064,243
Correctional Facilities Contract Revenue Bonds, Florence
West Prison LLC, Series 2002A, 5.000%, 10/01/18 -
ACA Insured
1,000 Puerto Rico Public Buildings Authority, Guaranteed Government 7/12 at 100.00 BBB- 1,002,300
Facilities Revenue Refunding Bonds, Series 2002D,
5.125%, 7/01/24
960 San Luis Civic Improvement Corporation, Arizona, Municipal 7/15 at 100.00 AAA 967,949
Facilities Excise Tax Revenue Bonds, Series 2005,
5.000%, 7/01/25 - XLCA Insured
555 Tartesso West Community Facility District, Buckeye, Arizona, 7/17 at 100.00 N/R 541,314
Limited Tax General Obligation Bonds, Series 2007,
5.900%, 7/15/32
750 Vistancia Community Facilities District, Arizona, Restricted 7/15 at 100.00 Baa1 780,608
General Obligation Bonds, Series 2005, 5.750%, 7/15/24
560 Watson Road Community Facilities District, Arizona, Special 7/16 at 100.00 N/R 556,892
Assessment Revenue Bonds, Series 2005, 6.000%, 7/01/30
350 Westpark Community Facilities District, Buckeye, Arizona, 7/16 at 100.00 N/R 316,971
General Obligation Tax Increment Bonds Series 2006,
5.250%, 7/15/31
640 Yuma Municipal Property Corporation, Arizona, Municipal 7/10 at 100.00 AAA 665,133
Facilities Tax Revenue Bonds, Series 2001, 5.000%, 7/01/21 -
AMBAC Insured
------------------------------------------------------------------------------------------------------------------------------------
16,451 Total Tax Obligation/Limited 16,927,198
------------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION - 5.6% (3.6% OF TOTAL INVESTMENTS)
1,000 Phoenix Civic Improvement Corporation, Arizona, Senior Lien 7/08 at 101.00 AAA 1,016,540
Airport Revenue Bonds, Series 1998A, 5.000%, 7/01/25 -
FSA Insured
1,000 Phoenix, Arizona, Civic Improvement Corporation, Senior Lien 7/12 at 100.00 Aaa 1,011,130
Airport Revenue Bonds, Series 2002B, 5.250%, 7/01/27 -
FGIC Insured (Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
2,000 Total Transportation 2,027,670
------------------------------------------------------------------------------------------------------------------------------------
U.S. GUARANTEED - 25.2% (16.1% OF TOTAL INVESTMENTS) (4)
400 Arizona Health Facilities Authority, Hospital Revenue Bonds, 7/10 at 101.00 A (4) 443,064
Catholic Healthcare West, Series 1999A, 6.625%, 7/01/20
(Pre-refunded 7/01/10)
735 Arizona Health Facilities Authority, Hospital System Revenue 2/12 at 101.00 Baa3 (4) 838,672
Bonds, Phoenix Children's Hospital, Series 2002A,
6.250%, 2/15/21 (Pre-refunded 2/15/12)
715 Arizona State University, System Revenue Bonds, Series 2002, 7/12 at 100.00 Aaa 807,271
5.750%, 7/01/27 (Pre-refunded 7/01/12) - FGIC Insured
1,725 Chandler, Arizona, General Obligation Bonds, Series 2002, 7/12 at 100.00 AAA 1,895,516
5.000%, 7/01/17 (Pre-refunded 7/01/12)
100 Maricopa County Unified School District 89, Dysart, Arizona, 7/14 at 100.00 AAA 113,761
General Obligation Bonds, Series 2004B, 5.250%, 7/01/20
(Pre-refunded 7/01/14) - FSA Insured
375 Maricopa County Union High School District 210 Phoenix, 7/16 at 100.00 AAA 426,379
Arizona, General Obligation Bonds, Series 2006C,
5.000%, 7/01/24 (Pre-refunded 7/01/16) - MBIA Insured
1,000 Mesa, Arizona, Street and Highway User Tax Revenue Bonds, 7/14 at 100.00 AAA 1,130,330
Series 2004, 5.125%, 7/01/23 (Pre-refunded 7/01/14) -
FSA Insured
1,000 Scottsdale Industrial Development Authority, Arizona, Hospital 12/11 at 101.00 A3 (4) 1,126,030
Revenue Bonds, Scottsdale Healthcare, Series 2001,
5.800%, 12/01/31 (Pre-refunded 12/01/11)
990 Scottsdale, Arizona, General Obligation Bonds, Series 2002, 7/11 at 100.00 AAA 1,072,408
5.000%, 7/01/24 (Pre-refunded 7/01/11)
University of Arizona, Certificates of Participation, Series 2002A:
685 5.500%, 6/01/18 (Pre-refunded 6/01/12) - AMBAC Insured 6/12 at 100.00 Aaa 762,556
460 5.125%, 6/01/22 (Pre-refunded 6/01/12) - AMBAC Insured 6/12 at 100.00 Aaa 505,075
------------------------------------------------------------------------------------------------------------------------------------
8,185 Total U.S. Guaranteed 9,121,062
------------------------------------------------------------------------------------------------------------------------------------
29
NKR
Nuveen Arizona Dividend Advantage Municipal Fund 2 (continued)
Portfolio of INVESTMENTS January 31, 2008 (Unaudited)
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
UTILITIES - 2.5% (1.6% OF TOTAL INVESTMENTS)
$ 1,000 Salt Verde Financial Corporation, Arizona, Senior Gas Revenue No Opt. Call AA- $ 920,860
Bonds, Series 2007, 5.000%, 12/01/37
------------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER - 13.7% (8.7% OF TOTAL INVESTMENTS)
500 Maricopa County Industrial Development Authority, Arizona, 6/08 at 102.00 AAA 509,255
Water System Improvement Revenue Bonds, Chaparral City
Water Company, Series 1997A, 5.400%, 12/01/22 -
AMBAC Insured (Alternative Minimum Tax)
360 Oro Valley Municipal Property Corporation, Arizona, Senior Lien 7/13 at 100.00 AAA 376,117
Water Revenue Bonds, Series 2003, 5.000%, 7/01/23 -
MBIA Insured
765 Phoenix Civic Improvement Corporation, Arizona, Junior Lien 7/15 at 100.00 AAA 808,368
Water System Revenue Bonds, Series 2005, 5.000%, 7/01/23 -
MBIA Insured
1,000 Phoenix Civic Improvement Corporation, Arizona, Junior Lien No Opt. Call Aaa 1,149,440
Water System Revenue Refunding Bonds, Series 2001,
5.500%, 7/01/22 - FGIC Insured
Surprise Municipal Property Corporation, Arizona, Wastewater
System Revenue Bonds, Series 2007:
350 4.700%, 4/01/22 4/14 at 100.00 N/R 346,056
410 4.900%, 4/01/32 4/17 at 100.00 N/R 383,846
1,000 Tucson, Arizona, Water System Revenue Refunding Bonds, 7/12 at 102.00 Aaa 1,105,920
Series 2002, 5.500%, 7/01/18 - FGIC Insured
275 Yuma County Industrial Development Authority, Arizona, Exempt 12/17 at 100.00 N/R 272,432
Revenue Bonds, Far West Water & Sewer Inc. Refunding,
Series 2007A, 6.375%, 12/01/37 (Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
4,660 Total Water and Sewer 4,951,434
------------------------------------------------------------------------------------------------------------------------------------
$ 54,166 Total Investments (cost $54,768,668) - 157.0% 56,807,865
=============-----------------------------------------------------------------------------------------------------------------------
Floating Rate Obligations - (5.6)% (2,015,000)
--------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - (0.3)% (106,953)
--------------------------------------------------------------------------------------------------------------------
Preferred Shares, at Liquidation Value - (51.1)% (5) (18,500,000)
--------------------------------------------------------------------------------------------------------------------
Net Assets Applicable to Common Shares - 100% $ 36,185,912
====================================================================================================================
(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 AAA ratings shown in the Portfolio of Investments
reflect the AAA ratings on certain bonds insured by AMBAC,
FGIC, XLCA or MBIA as of January 31, 2008. Subsequent to
January 31, 2008, at least one rating agency reduced the
rating for AMBAC-insured bonds to AA and XLCA-insured and
FGIC-insured bonds experienced further downgrades such that
they no longer carry AAA ratings which had the effect of
reducing the rating of many (if not all) of the bonds
insured by those particular insurers. One or more rating
agencies have placed each of these insurers on "negative
credit watch", which may presage one or more rating
reductions for such insurer or insurers in the future. If
one or more insurers' ratings are reduced below AAA by these
rating agencies, it would likely reduce the effective rating
of many of the bonds insured by that insurer or insurers.
(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) Preferred Shares, at Liquidation Value as a percentage of
total investments is (32.6)%.
N/R Not rated.
(UB) Underlying bond of an inverse floating rate trust reflected
as a financing transaction pursuant to the provisions of
SFAS No. 140.
See accompanying notes to financial statements.
30
NXE
Nuveen Arizona Dividend Advantage Municipal Fund 3
Portfolio of INVESTMENTS
January 31, 2008 (Unaudited)
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
CONSUMER STAPLES - 1.3% (0.8% OF TOTAL INVESTMENTS)
$ 550 Puerto Rico, The Children's Trust Fund, Tobacco Settlement 5/12 at 100.00 BBB $ 534,408
Asset-Backed Refunding Bonds, Series 2002, 5.375%, 5/15/33
------------------------------------------------------------------------------------------------------------------------------------
EDUCATION AND CIVIC ORGANIZATIONS - 15.5% (9.9% OF TOTAL INVESTMENTS)
690 Arizona Higher Education Loan Authority, Student Loan Revenue 9/08 at 100.00 AAA 690,000
Bonds, Series 2007B, 5.800%,11/01/41
1,250 Arizona State University, System Revenue Bonds, Series 2005, 7/15 at 100.00 AAA 1,331,150
5.000%, 7/01/20 - AMBAC Insured
1,130 Energy Management Services LLC, Arizona State University, 7/12 at 100.00 AAA 1,213,835
Energy Conservation Revenue Bonds, Main Campus Project,
Series 2002, 5.250%, 7/01/18 - MBIA Insured
270 Glendale Industrial Development Authority, Arizona, Revenue 5/08 at 101.00 A- 273,143
Bonds, Midwestern University, Series 1998A, 5.375%, 5/15/28
540 Pima County Industrial Development Authority, Arizona, Charter 12/14 at 100.00 BBB- 550,136
School Revenue Bonds, Noah Webster Basic Schools Inc.,
Series 2004, 6.000%, 12/15/24
565 Tucson Industrial Development Authority, Arizona, Charter School 9/14 at 100.00 BBB- 570,136
Revenue Bonds, Arizona Agribusiness and Equine Center Charter
School, Series 2004A, 6.125%, 9/01/34
2,000 University of Arizona, Certificates of Participation, Series 2002B, 6/12 at 100.00 AAA 2,134,080
5.125%, 6/01/20 - AMBAC Insured
------------------------------------------------------------------------------------------------------------------------------------
6,445 Total Education and Civic Organizations 6,762,480
------------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE - 24.0% (15.3% OF TOTAL INVESTMENTS)
1,015 Arizona Health Facilities Authority, Hospital Revenue Bonds, 1/17 at 100.00 AA- 1,029,910
Banner Health Systems, Series 2007A, 5.000%, 1/01/25
625 Arizona Health Facilities Authority, Revenue Bonds, Blood 4/14 at 100.00 A- 643,494
Systems Inc., Series 2004, 5.000%, 4/01/20
475 Glendale Industrial Development Authority, Arizona, Revenue 12/15 at 100.00 BBB 442,638
Bonds, John C. Lincoln Health Network, Series 2005B,
5.000%, 12/01/37
785 Glendale Industrial Development Authority, Arizona, Revenue 12/17 at 100.00 BBB 718,251
Bonds, John C. Lincoln Health Network, Series 2007,
5.000%, 12/01/42
390 Maricopa County Industrial Development Authority, Arizona, 5/16 at 100.00 AA 392,207
Health Facilities Revenue Bonds, Mayo Clinic, Series 2006,
5.000%, 11/15/36
2,000 Maricopa County Industrial Development Authority, Arizona, 5/08 at 101.00 AA 2,029,120
Hospital Revenue Bonds, Mayo Clinic Hospital, Series 1998,
5.250%, 11/15/37
1,825 Maricopa County Industrial Development Authority, Arizona, 7/14 at 100.00 A 1,907,892
Health Facility Revenue Bonds, Catholic Healthcare West,
Series 2004A, 5.375%, 7/01/23 (UB)
1,985 Maricopa County Industrial Development Authority, Arizona, 7/17 at 100.00 A 2,015,867
Health Facility Revenue Bonds, Catholic Healthcare West ,
Series 2007A, 5.250%, 7/01/32 (UB)
270 Maricopa County, Arizona, Hospital Revenue Bonds, Sun Health 4/15 at 100.00 Baa1 279,599
Corporation, Series 2005, 5.000%, 4/01/16
1,000 Yavapai County Industrial Development Authority, Arizona, 8/13 at 100.00 Baa2 1,032,780
Hospital Revenue Bonds, Yavapai Regional Medical Center,
Series 2003A, 6.000%, 8/01/33
------------------------------------------------------------------------------------------------------------------------------------
10,370 Total Health Care 10,491,758
------------------------------------------------------------------------------------------------------------------------------------
31
NXE
Nuveen Arizona Dividend Advantage Municipal Fund 3 (continued)
Portfolio of INVESTMENTS January 31, 2008 (Unaudited)
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/MULTIFAMILY - 4.5% (2.9% OF TOTAL INVESTMENTS)
$ 1,545 Phoenix Industrial Development Authority, Arizona, GNMA 6/11 at 102.00 Aaa $ 1,605,780
Collateralized Multifamily Housing Revenue Bonds, Campaigne
Place on Jackson, Series 2001, 5.600%, 6/20/21 (Alternative
Minimum Tax)
380 Phoenix Industrial Development Authority, Arizona, GNMA 4/15 at 100.00 Aaa 364,967
Collateralized Multifamily Housing Revenue Bonds, Park Lee
Apartments, Series 2004A, 5.050%, 10/20/44
(Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
1,925 Total Housing/Multifamily 1,970,747
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/SINGLE FAMILY - 7.8% (5.0% OF TOTAL INVESTMENTS)
1,175 The Industrial Development Authority of The City of Tucson, 1/17 at 103.00 Aaa 1,222,505
Arizona, Tax-Exempt Single Family Mortgage Revenue Bonds,
Series 2007A-1, 5.100%, 7/01/38
2,130 Tucson and Pima County Industrial Development Authority, 6/17 at 101.00 Aaa 2,197,947
Arizona, Single Family Mortgage Revenue Bonds, Series 2007B,
5.350%, 6/01/47 (Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
3,305 Total Housing/Single Family 3,420,452
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED - 35.1% (22.4% OF TOTAL INVESTMENTS)
1,000 Arizona State Transportation Board, Highway Revenue Refunding 7/12 at 102.00 AAA 1,101,380
Bonds, Series 2002A, 5.250%, 7/01/18
154 Centerra Community Facilities District, Goodyear, Arizona, 7/15 at 100.00 N/R 143,805
General Obligation Bonds, Series 2005, 5.500%, 7/15/29
2,250 DC Ranch Community Facilities District, Scottsdale, Arizona, 7/13 at 100.00 Aaa 2,312,595
General Obligation Bonds, Series 2002, 5.000%, 7/15/27 -
AMBAC Insured
Estrella Mountain Ranch Community Facilities District, Arizona,
Special Assessment Bonds, Montecito Assessment District, Series 2007:
255 5.700%, 7/01/27 1/17 at 100.00 N/R 244,336
155 5.800%, 7/01/32 1/17 at 100.00 N/R 147,335
320 Estrella Mountain Ranch Community Facilities District, Goodyear, 7/10 at 102.00 N/R 338,909
Arizona, Special Assessment Lien Bonds, Series 2001A,
7.875%, 7/01/25
800 Goodyear Community Facilities Utility District 1, Arizona, General 7/13 at 100.00 BBB 771,560
Obligation Bonds, Series 2003, 5.350%, 7/15/28 - ACA Insured
525 Greater Arizona Development Authority, Infrastructure Revenue 8/16 at 100.00 AAA 549,224
Bonds, Series 2006A, 5.000%, 8/01/23 - MBIA Insured
785 Marana, Arizona, Tangerine Farms Road Improvement District 7/16 at 100.00 Baa1 743,638
Revenue Bonds, Series 2006, 4.600%, 1/01/26
290 Marley Park Community Facilities District, City of Surprise, 7/17 at 100.00 N/R 288,640
Arizona, Limited Tax General Obligation Bonds, Series 2007,
6.100%, 7/15/32
2,000 Mohave County, Arizona, Certificates of Participation, Series 2004, 7/14 at 100.00 AAA 2,119,860
5.250%, 7/01/19 - AMBAC Insured
640 Palm Valley Community Facility District 3, Goodyear, Arizona, 7/16 at 100.00 N/R 647,238
General Obligation Bonds, Series 2006, 5.300%, 7/15/31
425 Palm Valley Community Facility District 3, Goodyear, Arizona, 7/17 at 100.00 N/R 409,152
Limited Tax General Obligation Bonds, Series 2007,
5.800%, 7/15/32
160 Parkway Community Facilities District 1, Prescott Valley, Arizona, 7/16 at 100.00 N/R 145,037
General Obligation Bonds, Series 2006, 5.350%, 7/15/31
1,250 Pinal County Industrial Development Authority, Arizona, No Opt. Call BBB- 1,243,275
Correctional Facilities Contract Revenue Bonds, Florence
West Prison LLC, Series 2002A, 5.000%, 10/01/18 -
ACA Insured
1,130 San Luis Civic Improvement Corporation, Arizona, Municipal 7/15 at 100.00 AAA 1,139,356
Facilities Excise Tax Revenue Bonds, Series 2005,
5.000%, 7/01/25 - XLCA Insured
665 Tartesso West Community Facility District, Buckeye, Arizona, 7/17 at 100.00 N/R 648,601
Limited Tax General Obligation Bonds, Series 2007,
5.900%, 7/15/32
32
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED (continued)
$ 1,250 Vistancia Community Facilities District, Arizona, Restricted 7/15 at 100.00 Baa1 $ 1,301,013
General Obligation Bonds, Series 2005, 5.750%, 7/15/24
665 Watson Road Community Facilities District, Arizona, Special 7/16 at 100.00 N/R 661,309
Assessment Revenue Bonds, Series 2005, 6.000%, 7/01/30
425 Westpark Community Facilities District, Buckeye, Arizona, 7/16 at 100.00 N/R 384,893
General Obligation Tax Increment Bonds Series 2006,
5.250%, 7/15/31
------------------------------------------------------------------------------------------------------------------------------------
15,144 Total Tax Obligation/Limited 15,341,156
------------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION - 13.7% (8.7% OF TOTAL INVESTMENTS)
Phoenix, Arizona, Civic Improvement Corporation, Senior Lien
Airport Revenue Bonds, Series 2002B:
1,000 5.750%, 7/01/16 - FGIC Insured (Alternative Minimum Tax) 7/12 at 100.00 Aaa 1,102,710
2,300 5.250%, 7/01/21 - FGIC Insured (Alternative Minimum Tax) 7/12 at 100.00 Aaa 2,362,284
2,450 Tucson Airport Authority Inc., Arizona, Revenue Refunding Bonds, 6/11 at 100.00 AAA 2,499,221
Series 2001B, 5.000%, 6/01/20 - AMBAC Insured
(Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
5,750 Total Transportation 5,964,215
------------------------------------------------------------------------------------------------------------------------------------
U.S. GUARANTEED - 29.5% (18.8% OF TOTAL INVESTMENTS) (4)
300 Arizona Health Facilities Authority, Hospital Revenue Bonds, 7/10 at 101.00 A (4) 332,298
Catholic Healthcare West, Series 1999A, 6.625%, 7/01/20
(Pre-refunded 7/01/10)
1,000 Arizona Health Facilities Authority, Hospital System Revenue 12/10 at 102.00 BBB (4) 1,137,340
Bonds, John C. Lincoln Health Network, Series 2000,
6.875%, 12/01/20 (Pre-refunded 12/01/10)
Arizona Health Facilities Authority, Hospital System Revenue
Bonds, Phoenix Children's Hospital, Series 1999A:
350 6.125%, 11/15/22 (Pre-refunded 11/15/09) 11/09 at 100.00 Baa3 (4) 373,443
520 6.250%, 11/15/29 (Pre-refunded 11/15/09) 11/09 at 100.00 Baa3 (4) 555,963
2,660 Arizona Tourism and Sports Authority, Tax Revenue Bonds, 7/13 at 100.00 Aaa 3,012,689
Multipurpose Stadium Facility Project, Series 2003A,
5.375%, 7/01/20 (Pre-refunded 7/01/13) - MBIA Insured
660 Chandler, Arizona, General Obligation Bonds, Series 2002, 7/12 at 100.00 AAA 725,241
5.000%, 7/01/18 (Pre-refunded 7/01/12)
1,575 Maricopa County Union High School District 210, Phoenix, 7/14 at 100.00 AAA 1,768,820
Arizona, General Obligation Bonds, Series 2004A,
5.000%, 7/01/20 (Pre-refunded 7/01/14) - FSA Insured
1,250 Scottsdale Industrial Development Authority, Arizona, Hospital 12/11 at 101.00 A3 (4) 1,407,538
Revenue Bonds, Scottsdale Healthcare, Series 2001,
5.800%, 12/01/31 (Pre-refunded 12/01/11)
2,770 Tempe, Arizona, Excise Tax Revenue Refunding Bonds, 7/13 at 100.00 AAA 3,085,280
Series 2003, 5.000%, 7/01/22 (Pre-refunded 7/01/13)
440 Tucson, Arizona, General Obligation Bonds, Series 2001B, 7/11 at 100.00 AA (4) 476,326
5.000%, 7/01/20 (Pre-refunded 7/01/11)
------------------------------------------------------------------------------------------------------------------------------------
11,525 Total U.S. Guaranteed 12,874,938
------------------------------------------------------------------------------------------------------------------------------------
UTILITIES - 12.2% (7.8% OF TOTAL INVESTMENTS)
1,250 Maricopa County Pollution Control Corporation, Arizona, 11/12 at 100.00 AAA 1,276,875
Revenue Bonds, Arizona Public Service Company - Palo Verde
Project, Series 2002A, 5.050%, 5/01/29 - AMBAC Insured
1,660 Puerto Rico Electric Power Authority, Power Revenue Bonds, 7/15 at 100.00 AAA 1,683,024
Series 2005RR, 5.000%, 7/01/26 - XLCA Insured
Salt River Project Agricultural Improvement and Power District,
Arizona, Electric System Revenue Bonds, Series 2002B:
270 5.000%, 1/01/22 1/13 at 100.00 Aa1 284,769
1,000 5.000%, 1/01/31 1/13 at 100.00 Aa1 1,034,140
1,165 Salt Verde Financial Corporation, Arizona, Senior Gas Revenue No Opt. Call AA- 1,072,802
Bonds, Series 2007, 5.000%, 12/01/37
------------------------------------------------------------------------------------------------------------------------------------
5,345 Total Utilities 5,351,610
------------------------------------------------------------------------------------------------------------------------------------
33
NXE
Nuveen Arizona Dividend Advantage Municipal Fund 3 (continued)
Portfolio of INVESTMENTS January 31, 2008 (Unaudited)
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER - 13.2% (8.4% OF TOTAL INVESTMENTS)
$ 405 Oro Valley Municipal Property Corporation, Arizona, Senior Lien 7/13 at 100.00 AAA $ 423,132
Water Revenue Bonds, Series 2003, 5.000%, 7/01/23 -
MBIA Insured
1,000 Phoenix Civic Improvement Corporation, Arizona, Junior Lien 7/11 at 100.00 Aaa 1,057,990
Wastewater System Revenue Refunding Bonds, Series 2001,
5.125%, 7/01/21 - FGIC Insured
2,000 Phoenix Civic Improvement Corporation, Arizona, Junior Lien 7/12 at 100.00 Aaa 2,125,520
Water System Revenue Bonds, Series 2002,
5.000%, 7/01/18 - FGIC Insured
920 Phoenix Civic Improvement Corporation, Arizona, Junior Lien 7/15 at 100.00 AAA 972,155
Water System Revenue Bonds, Series 2005, 5.000%, 7/01/23 -
MBIA Insured
Surprise Municipal Property Corporation, Arizona, Wastewater
System Revenue Bonds, Series 2007:
425 4.700%, 4/01/22 4/14 at 100.00 N/R 420,210
490 4.900%, 4/01/32 4/17 at 100.00 N/R 458,743
330 Yuma County Industrial Development Authority, Arizona, Exempt 12/17 at 100.00 N/R 326,918
Revenue Bonds, Far West Water & Sewer Inc. Refunding,
Series 2007A, 6.375%, 12/01/37 (Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
5,570 Total Water and Sewer 5,784,668
------------------------------------------------------------------------------------------------------------------------------------
$ 65,929 Total Investments (cost $66,942,970) - 156.8% 68,496,432
=============-----------------------------------------------------------------------------------------------------------------------
Floating Rate Obligations - (5.8)% (2,545,000)
--------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - (0.6)% (258,841)
--------------------------------------------------------------------------------------------------------------------
Preferred Shares, at Liquidation Value - (50.4)% (5) (22,000,000)
--------------------------------------------------------------------------------------------------------------------
Net Assets Applicable to Common Shares - 100% $ 43,692,591
====================================================================================================================
(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 AAA ratings shown in the Portfolio of Investments
reflect the AAA ratings on certain bonds insured by AMBAC,
FGIC, XLCA or MBIA as of January 31, 2008. Subsequent to
January 31, 2008, at least one rating agency reduced the
rating for AMBAC-insured bonds to AA and XLCA-insured and
FGIC-insured bonds experienced further downgrades such that
they no longer carry AAA ratings which had the effect of
reducing the rating of many (if not all) of the bonds
insured by those particular insurers. One or more rating
agencies have placed each of these insurers on "negative
credit watch", which may presage one or more rating
reductions for such insurer or insurers in the future. If
one or more insurers' ratings are reduced below AAA by these
rating agencies, it would likely reduce the effective rating
of many of the bonds insured by that insurer or insurers.
(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) Preferred Shares, at Liquidation Value as a percentage of
total investments is (32.1)%.
N/R Not rated.
(UB) Underlying bond of an inverse floating rate trust reflected
as a financing transaction pursuant to the provisions of
SFAS No. 140.
See accompanying notes to financial statements.
34
NTX
Nuveen Texas Quality Income Municipal Fund
Portfolio of INVESTMENTS
January 31, 2008 (Unaudited)
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
CONSUMER STAPLES - 1.8% (1.2% OF TOTAL INVESTMENTS)
$ 2,600 Puerto Rico, The Children's Trust Fund, Tobacco Settlement 5/12 at 100.00 BBB $ 2,526,290
Asset-Backed Refunding Bonds, Series 2002, 5.375%, 5/15/33
------------------------------------------------------------------------------------------------------------------------------------
EDUCATION AND CIVIC ORGANIZATIONS - 19.7% (13.0% OF TOTAL INVESTMENTS)
6,000 Board of Regents, University of Texas System, Financing System 2/17 at 100.00 AAA 5,678,100
Revenue Bonds, Series 2006F, 4.250%, 8/15/36 (UB)
1,000 Central Texas Higher Education Authority Inc., Texas, Student 4/08 at 100.00 A2 1,000,000
Loan Revenue Bonds, 4.750%, 12/01/37
Red River Education Finance Corporation, Texas, Revenue Bonds,
Hockaday School, Series 2005:
1,170 5.000%, 5/15/27 5/15 at 100.00 AA 1,198,256
1,230 5.000%, 5/15/28 5/15 at 100.00 AA 1,256,654
1,290 5.000%, 5/15/29 5/15 at 100.00 AA 1,315,555
Texas Public Finance Authority, Revenue Bonds, Texas Southern
University Financing System, Series 2003:
1,710 5.000%, 5/01/18 - FGIC Insured 5/13 at 100.00 Aaa 1,818,876
1,795 5.000%, 5/01/19 - FGIC Insured 5/13 at 100.00 Aaa 1,909,288
1,885 5.000%, 5/01/20 - FGIC Insured 5/13 at 100.00 Aaa 2,002,605
1,665 Texas State University System, Financing Revenue Bonds, 9/14 at 100.00 AAA 1,750,564
Series 2004, 5.000%, 3/15/24 - FSA Insured
2,000 Texas State University System, Financing Revenue Refunding 3/12 at 100.00 AAA 2,127,180
Bonds, Series 2002, 5.000%, 3/15/20 - FSA Insured
2,330 Universal City Education Facilities Corporation, Texas, Revenue 3/11 at 102.00 A- 2,420,218
Bonds, Wayland Baptist University Project, Series 2001,
5.625%, 3/01/26
5,000 University of North Texas, Financing System Revenue Bonds, 4/12 at 100.00 AAA 5,256,700
Series 2001, 5.000%, 4/15/24 - FSA Insured
------------------------------------------------------------------------------------------------------------------------------------
27,075 Total Education and Civic Organizations 27,733,996
------------------------------------------------------------------------------------------------------------------------------------
ENERGY - 2.0% (1.4% OF TOTAL INVESTMENTS)
3,000 Gulf Coast Waste Disposal Authority, Texas, Waste Disposal 4/08 at 102.00 BBB 2,882,730
Revenue Bonds, Valero Energy Corporation Project,
Series 1998, 5.600%, 4/01/32 (Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE - 15.9% (10.6% OF TOTAL INVESTMENTS)
3,500 Abilene Health Facilities Development Corporation, Texas, 3/08 at 100.00 AAA 3,505,985
Hospital Revenue Refunding and Improvement Bonds, Hendrick
Medical Center Project, Series 1995C, 6.150%, 9/01/25 -
MBIA Insured
Brazoria County Health Facilities Development Corporation,
Texas, Revenue Bonds, Brazosport Memorial Hospital, Series 2004:
1,745 5.250%, 7/01/20 - RAAI Insured 7/14 at 100.00 AA 1,812,252
1,835 5.250%, 7/01/21 - RAAI Insured 7/14 at 100.00 AA 1,897,463
5,750 Midland County Hospital District, Texas, Hospital Revenue Bonds, No Opt. Call N/R 4,735,930
Series 1992, 0.000%, 6/01/11
2,000 North Central Texas Health Facilities Development Corporation, 5/11 at 100.00 AA- 2,008,840
Hospital Revenue Bonds, Baylor Healthcare System,
Series 2001A, 5.125%, 5/15/29
2,000 Richardson Hospital Authority, Texas, Revenue Bonds, Richardson 12/13 at 100.00 BBB 2,062,960
Regional Medical Center, Series 2004, 5.875%, 12/01/24
35
NTX
Nuveen Texas Quality Income Municipal Fund (continued)
Portfolio of INVESTMENTS January 31, 2008 (Unaudited)
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE (continued)
$ 2,500 Tarrant County Cultural & Educational Facilities Financing 11/17 at 100.00 AA- $ 2,457,300
Corporation, Texas, Revenue Bonds, Tarrant County Health
Resources, Series 2007B, 5.000%, 11/15/42
2,000 Tom Green County Health Facilities Development Corporation, 5/11 at 101.00 Baa3 2,122,420
Texas, Hospital Revenue Bonds, Shannon Health System
Project, Series 2001, 6.750%, 5/15/21
2,000 Tyler Health Facilities Development Corporation, Texas, Hospital 7/17 at 100.00 BBB+ 1,899,260
Revenue Bonds, Mother Frances Hospital Regional Healthcare
Center, Series 2007, 5.000%, 7/01/33
------------------------------------------------------------------------------------------------------------------------------------
23,330 Total Health Care 22,502,410
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/MULTIFAMILY - 2.0% (1.3% OF TOTAL INVESTMENTS)
Bexar County Housing Finance Corporation, Texas, Insured
Multifamily Housing Revenue Bonds, Waters at Northern Hills
Apartments Project, Series 2001A:
2,000 6.000%, 8/01/31 - MBIA Insured 8/11 at 102.00 Aaa 2,069,420
750 6.050%, 8/01/36 - MBIA Insured 8/11 at 102.00 Aaa 776,460
------------------------------------------------------------------------------------------------------------------------------------
2,750 Total Housing/Multifamily 2,845,880
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/SINGLE FAMILY - 3.7% (2.5% OF TOTAL INVESTMENTS)
2,088 El Paso Housing Finance Corporation, Texas, GNMA 4/11 at 106.75 AAA 2,298,467
Collateralized Single Family Mortgage Revenue Bonds,
Series 2001A-3, 6.180%, 4/01/33
70 Galveston Property Finance Authority Inc., Texas, Single Family 3/08 at 100.00 Caa1 68,729
Mortgage Revenue Bonds, Series 1991A, 8.500%, 9/01/11
2,870 Texas Department of Housing and Community Affairs, Single 3/12 at 100.00 AAA 2,901,455
Family Mortgage Bonds, Series 2002B, 5.550%, 9/01/33 -
MBIA Insured (Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
5,028 Total Housing/Single Family 5,268,651
------------------------------------------------------------------------------------------------------------------------------------
LONG-TERM CARE - 1.2% (0.7% OF TOTAL INVESTMENTS)
Bexar County, Texas, Health Facilities Development Corporation
Revenue Bonds, Army Retirement Residence, Series 2007:
1,000 5.000%, 7/01/27 7/17 at 100.00 BBB 963,260
600 5.000%, 7/01/37 7/17 at 100.00 BBB 551,988
------------------------------------------------------------------------------------------------------------------------------------
1,600 Total Long-Term Care 1,515,248
------------------------------------------------------------------------------------------------------------------------------------
MATERIALS - 4.3% (2.9% OF TOTAL INVESTMENTS)
3,000 Cass County Industrial Development Corporation, Texas, 3/10 at 101.00 BBB 3,085,980
Environmental Improvement Revenue Bonds, International
Paper Company, Series 2000A, 6.600%, 3/15/24
(Alternative Minimum Tax)
3,000 Guadalupe-Blanco River Authority, Texas, Sewage and 4/08 at 100.00 A 3,009,330
Solid Waste Disposal Facility Bonds, E.I. DuPont de Nemours
and Company Project, Series 1996, 6.400%, 4/01/26
(Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
6,000 Total Materials 6,095,310
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL - 44.8% (29.8% OF TOTAL INVESTMENTS)
1,260 Bexar County, Texas, Combined Tax and Revenue Certificates 6/14 at 100.00 Aa1 1,349,662
of Obligation, Series 2004, 5.000%, 6/15/19
2,500 Borger Independent School District, Hutchison County, Texas, 2/16 at 100.00 AAA 2,572,450
General Obligation Bonds, Series 2006, 5.000%, 2/15/36
1,190 Canutillo Independent School District, El Paso County, Texas, 8/15 at 100.00 AAA 1,267,172
General Obligation Bonds, Series 2006A, 5.000%, 8/15/22
3,835 Coppell Independent School District, Dallas County, Texas, 8/09 at 75.34 AAA 2,756,560
Unlimited Tax School Building and Refunding Bonds,
Series 1992, 0.000%, 8/15/14 - MBIA Insured
1,275 Copperas Cove, Texas, Certificates of Obligation, Series 2003, 8/12 at 100.00 AAA 1,336,595
5.000%, 8/15/23 - MBIA Insured
2,305 Corpus Christi, Texas, Combination Tax and Municipal Hotel 9/12 at 100.00 AAA 2,490,460
Occupancy Tax Revenue Certificates of Obligation, Series 2002,
5.500%, 9/01/21 - FSA Insured
36
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL (continued)
$ 2,595 Denton County, Texas, Permanent Improvement General 7/12 at 100.00 AA+ $ 2,708,090
Obligation Bonds, Series 2005, 5.000%, 7/15/25
2,110 Duncanville Independent School District, Dallas County, Texas, 2/15 at 100.00 AAA 2,203,410
General Obligation Bonds, Series 2005, 5.000%, 2/15/26
1,750 El Paso County, Texas, Certificates of Obligation, Series 2001, No Opt. Call AAA 1,946,018
5.000%, 2/15/21 - FSA Insured
Fort Bend County Municipal Utility District 25, Texas, General
Obligation Bonds, Series 2005:
1,330 5.000%, 10/01/26 - FGIC Insured 10/12 at 100.00 Aaa 1,340,746
1,320 5.000%, 10/01/27 - FGIC Insured 10/12 at 100.00 Aaa 1,327,986
3,615 Frisco, Texas, General Obligation Bonds, Series 2006, 2/16 at 100.00 Aaa 3,761,697
5.000%, 2/15/26 - FGIC Insured
Houston Community College, Texas, Limited Tax General
Obligation Bonds, Series 2003:
2,500 5.000%, 2/15/20 - AMBAC Insured 2/13 at 100.00 AAA 2,653,425
2,235 5.000%, 2/15/21 - AMBAC Insured 2/13 at 100.00 AAA 2,362,797
5,000 Houston, Texas, General Obligation Bonds, Series 2005E, 3/15 at 100.00 AAA 5,263,050
5.000%, 3/01/23 - AMBAC Insured
100 Judson Independent School District, Bexar County, Texas, 2/11 at 100.00 Aaa 105,776
General Obligation Refunding Bonds, Series 2002,
5.250%, 2/01/21
4,900 Leander Independent School District, Williamson and Travis 8/14 at 17.78 AAA 611,128
Counties, Texas, General Obligation Bonds, Series 2006,
0.000%, 8/15/45
5,220 Leander Independent School District, Williamson and Travis 8/09 at 46.74 AAA 2,317,576
Counties, Texas, Unlimited Tax School Building and Refunding
Bonds, Series 2000, 0.000%, 8/15/21
1,000 Mansfield Independent School District, Tarrant County, Texas, 2/14 at 100.00 AAA 1,063,860
General Obligation Bonds, Series 2004, 5.000%, 2/15/20
1,010 Mercedes Independent School District, Hidalgo County, Texas, 8/15 at 100.00 AAA 1,071,448
General Obligation Bonds, Series 2005, 5.000%, 8/15/23
5,515 Midlothian Independent School District, Ellis County, Texas, 2/15 at 100.00 Aaa 5,664,619
General Obligation Bonds, Series 2005, 5.000%, 2/15/34
625 Montgomery County, Texas, General Obligation Refunding Bonds, No Opt. Call AAA 463,650
Series 1997, 0.000%, 3/01/14 - MBIA Insured
925 Northside Independent School District, Bexar County, Texas, 8/10 at 100.00 AAA 977,216
Unlimited Tax School Building and Refunding Bonds,
Series 2000, 5.875%, 8/15/25
500 Puerto Rico, General Obligation and Public Improvement Bonds, No Opt. Call BBB- 518,230
Series 2001A, 5.500%, 7/01/29
Roma Independent School District, Texas, General Obligation
Bonds, Series 2005:
1,110 5.000%, 8/15/22 8/15 at 100.00 AAA 1,181,984
1,165 5.000%, 8/15/23 - FSA Insured 8/15 at 100.00 AAA 1,235,879
1,250 Southside Independent School District, Bexar County, Texas, 8/14 at 100.00 Aaa 1,321,650
General Obligation Bonds, Series 2004A, 5.000%, 8/15/22
1,140 Sunnyvale School District, Texas, General Obligation Bonds, 2/14 at 100.00 AAA 1,219,732
Series 2004, 5.250%, 2/15/25
5,000 Texas State, General Obligation Bonds, Transportation 4/17 at 100.00 Aa1 5,218,250
Commission Mobility Fund, Series 2006A, 5.000%, 4/01/33
1,000 Texas State, General Obligation Bonds, Transportation 4/18 at 100.00 Aa1 1,050,790
Commission Mobility Fund, Series 2008, 5.000%, 4/01/30
(WI/DD, Settling 2/28/08)
1,110 Texas State, General Obligation Bonds, Water Utility, 8/11 at 100.00 Aa1 1,171,594
Series 2001, 5.250%, 8/01/23
1,500 Texas, General Obligation Refunding Bonds, Public Finance 10/12 at 100.00 Aa1 1,605,705
Authority, Series 2002, 5.000%, 10/01/18
West Texas Independent School District, McLennan and Hill
Counties, General Obligation Refunding Bonds, Series 1998:
1,000 0.000%, 8/15/22 8/13 at 61.20 AAA 477,560
1,000 0.000%, 8/15/24 8/13 at 54.88 AAA 423,130
37
NTX
Nuveen Texas Quality Income Municipal Fund (continued)
Portfolio of INVESTMENTS January 31, 2008 (Unaudited)
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL (continued)
White Settlement Independent School District, Tarrant County,
Texas, General Obligation Bonds, Series 2006:
$ 1,500 0.000%, 8/15/43 8/15 at 23.11 AAA $ 214,365
1,500 0.000%, 8/15/44 8/15 at 21.88 AAA 202,950
425 0.000%, 8/15/45 8/15 at 20.76 AAA 54,358
------------------------------------------------------------------------------------------------------------------------------------
73,315 Total Tax Obligation/General 63,511,568
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED - 3.7% (2.5% OF TOTAL INVESTMENTS)
2,670 Dallas Area Rapid Transit, Texas, Senior Lien Sales Tax Revenue 12/16 at 100.00 AAA 2,908,751
Bonds, Series 2007, Drivers 1771, 9.382%, 12/01/36 -
AMBAC Insured (IF)
2,250 Harris County-Houston Sports Authority, Texas, Senior Lien 11/11 at 100.00 AAA 2,364,795
Revenue Bonds, Series 2001G, 5.250%, 11/15/22 - MBIA Insured
------------------------------------------------------------------------------------------------------------------------------------
4,920 Total Tax Obligation/Limited 5,273,546
------------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION - 6.9% (4.6% OF TOTAL INVESTMENTS)
1,000 Austin, Texas, Airport System Prior Lien Revenue Bonds, 11/13 at 100.00 AAA 1,077,240
Series 2003, 5.250%, 11/15/16 - MBIA Insured
3,260 Central Texas Regional Mobility Authority, Travis and Williamson 1/15 at 100.00 Aaa 3,360,734
Counties, Toll Road Revenue Bonds, Series 2005,
5.000%, 1/01/22 - FGIC Insured
1,000 Dallas-Fort Worth International Airport Texas, Series 2004-A1, 4/08 at 100.00 AAA 998,500
4.000%, 11/01/24 - MBIA Insured
2,600 Dallas-Ft. Worth International Airport Facility Improvement 11/09 at 101.00 CCC+ 2,301,598
Corporation, Texas, Revenue Bonds, American Airlines Inc.,
Series 1999, 6.375%, 5/01/35 (Alternative Minimum Tax)
2,000 Houston, Texas, Subordinate Lien Airport System Revenue Bonds, 7/10 at 100.00 AAA 2,057,580
Series 2000A, 5.625%, 7/01/30 - FSA Insured
(Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
9,860 Total Transportation 9,795,652
------------------------------------------------------------------------------------------------------------------------------------
U.S. GUARANTEED - 24.1% (16.0% OF TOTAL INVESTMENTS) (4)
Bell County Health Facilities Development Corporation, Texas,
Retirement Facility Revenue Bonds, Buckner Retirement Services
Inc. Obligated Group, Series 1998:
3,400 5.250%, 11/15/19 (Pre-refunded 11/15/08) 11/08 at 101.00 AAA 3,515,736
5,000 11/15/28 (Pre-refunded 11/15/08) 11/08 at 101.00 AAA 5,170,200
295 Coppell Independent School District, Dallas County, Texas, 8/09 at 75.34 Aaa 214,733
Unlimited Tax School Building and Refunding Bonds,
Series 1992, 0.000%, 8/15/14 (Pre-refunded 8/15/09) -
MBIA Insured
Gregg County Health Facilities Development Corporation, Texas,
Hospital Revenue Bonds, Good Shepherd Medical Center Project,
Series 2000:
2,000 6.875%, 10/01/20 (Pre-refunded 10/01/10) - RAAI Insured 10/10 at 101.00 AA (4) 2,250,200
3,250 6.375%, 10/01/25 (Pre-refunded 10/01/10) - RAAI Insured 10/10 at 101.00 AA (4) 3,615,268
500 Harris County Health Facilities Development Corporation, Texas, 8/11 at 100.00 AAA 550,585
Revenue Bonds, St. Luke's Episcopal Hospital, Series 2001A,
5.500%, 2/15/21 (Pre-refunded 8/15/11)
1,400 Judson Independent School District, Bexar County, Texas, 2/11 at 100.00 Aaa 1,513,484
General Obligation Refunding Bonds, Series 2002,
5.250%, 2/01/21 (Pre-refunded 2/01/11)
1,000 North Central Texas Health Facilities Development Corporation, No Opt. Call AAA 1,167,490
Hospital Revenue Bonds, Presbyterian Healthcare System,
Series 1996B, 5.750%, 6/01/26 - MBIA Insured (ETM)
1,075 Northside Independent School District, Bexar County, Texas, 8/10 at 100.00 AAA 1,168,826
Unlimited Tax School Building and Refunding Bonds,
Series 2000, 5.875%, 8/15/25 (Pre-refunded 8/15/10)
1,760 Parker County Hospital District, Texas, Hospital Revenue Bonds, 8/09 at 102.00 BB- (4) 1,902,278
Campbell Health System, Series 1999, 6.250%, 8/15/19
(Pre-refunded 8/15/09)
2,500 Retama Development Corporation, Texas, Special Facilities 12/17 at 100.00 AAA 3,280,575
Revenue Bonds, Retama Park Racetrack, Series 1993,
8.750%, 12/15/18 (Pre-refunded 12/15/17) (5)
1,750 San Antonio, Texas, Electric and Gas System Revenue Refunding 2/12 at 100.00 AAA 1,926,505
Bonds, Series 2002, 5.375%, 2/01/20 (Pre-refunded 2/01/12)
38
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
U.S. GUARANTEED (4) (continued)
$ 1,440 South Texas Community College District, General Obligation 8/12 at 100.00 AAA $ 1,615,262
Bonds, Series 2002, 5.500%, 8/15/17 (Pre-refunded 8/15/12) -
AMBAC Insured
1,050 Tarrant County Health Facilities Development Corporation, 11/08 at 101.00 Aaa 1,087,349
Texas, Hospital Revenue Bonds, Adventist Health System -
Sunbelt Obligated Group, Series 1998, 5.375%, 11/15/20
(Pre-refunded 11/15/08)
3,500 Tarrant County Health Facilities Development Corporation, Texas, 11/10 at 101.00 A+ (4) 3,928,190
Hospital Revenue Bonds, Adventist Health System - Sunbelt
Obligated Group, Series 2000, 6.625%, 11/15/20
(Pre-refunded 11/15/10)
1,000 Tyler Health Facilities Development Corporation, Texas, Hospital 7/12 at 100.00 Baa1 (4) 1,135,830
Revenue Bonds, Mother Frances Hospital Regional Healthcare
Center, Series 2001, 6.000%, 7/01/31 (Pre-refunded 7/01/12)
------------------------------------------------------------------------------------------------------------------------------------
30,920 Total U.S. Guaranteed 34,042,511
------------------------------------------------------------------------------------------------------------------------------------
UTILITIES - 9.3% (6.2% OF TOTAL INVESTMENTS)
2,560 Brazos River Authority, Texas, Pollution Control Revenue 4/13 at 101.00 Caa1 2,653,952
Refunding Bonds, TXU Electric Company, Series 1999C,
7.700%, 3/01/32 (Alternative Minimum Tax)
2,400 Brazos River Authority, Texas, Revenue Bonds, Reliant Energy Inc., 4/09 at 101.00 BBB- 2,346,264
Series 1999A, 5.375%, 4/01/19
5,000 Brownsville, Texas, Utility System Priority Revenue Bonds, 9/15 at 100.00 AAA 5,180,050
Series 2005A, 5.000%, 9/01/27 - AMBAC Insured
2,000 Harris County Health Facilities Development Corporation, Texas, 2/10 at 100.00 AAA 2,064,860
Thermal Utility Revenue Bonds, TECO Project, Series 2000,
5.750%, 2/15/15 - AMBAC Insured (Alternative Minimum Tax)
1,000 Matagorda County Navigation District 1, Texas, Revenue Bonds, 5/09 at 101.00 BBB- 978,310
Reliant Energy Inc., Series 1999B, 5.950%, 5/01/30
(Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
12,960 Total Utilities 13,223,436
------------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER - 11.0% (7.3% OF TOTAL INVESTMENTS)
Coastal Water Authority, Texas, Contract Revenue Bonds, Houston
Water Projects, Series 2004:
1,005 5.000%, 12/15/20 - FGIC Insured 12/14 at 100.00 Aaa 1,062,657
1,030 5.000%, 12/15/21 - FGIC Insured 12/14 at 100.00 Aaa 1,082,777
3,000 Houston, Texas, First Lien Combined Utility System Revenue 5/14 at 100.00 Aaa 3,154,530
Bonds, Series 2004A, 5.250%, 5/15/23 - FGIC Insured
3,500 Houston, Texas, Junior Lien Water and Sewerage System 12/11 at 100.00 AAA 3,852,205
Revenue Refunding Bonds, Series 2001A, 5.500%, 12/01/17 -
FSA Insured
Irving, Texas, Subordinate Lien Waterworks and Sewerage
Revenue Bonds, Series 2004:
1,680 5.000%, 8/15/22 - AMBAC Insured 8/14 at 100.00 AAA 1,766,419
1,760 5.000%, 8/15/23 - AMBAC Insured 8/14 at 100.00 AAA 1,844,357
1,260 Rowlett, Rockwall and Dallas Counties, Texas, Waterworks 3/14 at 100.00 AAA 1,324,273
and Sewerage System Revenue Bonds, Series 2004A,
5.000%, 3/01/22 - MBIA Insured
1,500 Texas Water Development Board, Senior Lien State Revolving 7/09 at 100.00 AAA 1,544,550
Fund Revenue Bonds, Series 1999A, 5.500%, 7/15/21
------------------------------------------------------------------------------------------------------------------------------------
14,735 Total Water and Sewer 15,631,768
------------------------------------------------------------------------------------------------------------------------------------
$ 218,093 Total Investments (cost $206,214,181) - 150.4% 212,848,996
=============-----------------------------------------------------------------------------------------------------------------------
Floating Rate Obligations - (2.7)% (3,775,000)
--------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 1.1% 1,445,527
--------------------------------------------------------------------------------------------------------------------
Preferred Shares, at Liquidation Value - (48.8)% (6) (69,000,000)
--------------------------------------------------------------------------------------------------------------------
Net Assets Applicable to Common Shares - 100% $ 141,519,523
====================================================================================================================
39
NTX
Nuveen Texas Quality Income Municipal Fund (continued)
Portfolio of INVESTMENTS January 31, 2008 (Unaudited)
The Fund may 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 Portfolio 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.
(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 AAA ratings shown in the Portfolio of Investments
reflect the AAA ratings on certain bonds insured by AMBAC,
FGIC or MBIA as of January 31, 2008. Subsequent to January
31, 2008, at least one rating agency reduced the rating for
AMBAC-insured bonds to AA and FGIC-insured bonds experienced
further downgrades such that they no longer carry AAA
ratings which had the effect of reducing the rating of many
(if not all) of the bonds insured by that particular
insurer. One or more rating agencies have placed each of
these insurers on "negative credit watch", which may presage
one or more rating reductions for such insurer or insurers
in the future. If one or more insurers' ratings are reduced
below AAA by these rating agencies, it would likely reduce
the effective rating of many of the bonds insured by that
insurer or insurers.
(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) The issuer has received a formal adverse determination from
the Internal Revenue Service (the "IRS") regarding the
tax-exempt status of the bonds' coupon payments. The Fund
will continue to treat coupon payments as tax-exempt income
until such time it is formally determined that the interest
on the bonds should be treated as taxable.
(6) Preferred Shares, at Liquidation Value as a percentage of
total investments is (32.4)%.
N/R Not rated.
WI/DD Purchased on a when-issued or delayed delivery basis.
(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 accompanying notes to financial statements.
40
Statement of
ASSETS & LIABILITIES
January 31, 2008 (Unaudited)
ARIZONA ARIZONA ARIZONA ARIZONA TEXAS
PREMIUM DIVIDEND DIVIDEND DIVIDEND QUALITY
INCOME ADVANTAGE ADVANTAGE 2 ADVANTAGE 3 INCOME
(NAZ) (NFZ) (NKR) (NXE) (NTX)
------------------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments, at value (cost $91,791,608,
$34,883,923, $54,768,668, $66,942,970
and $206,214,181, respectively) $95,268,570 $35,741,687 $56,807,865 $68,496,432 $212,848,996
Cash 371,966 -- -- -- 131,962
Receivables:
Interest 664,069 272,662 435,636 459,246 3,159,382
Investments sold -- -- -- -- 22,043
Other assets 1,333 1,184 2,920 7,953 3,222
------------------------------------------------------------------------------------------------------------------------------------
Total assets 96,305,938 36,015,533 57,246,421 68,963,631 216,165,605
------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Cash overdraft -- 294,683 376,567 528,635 --
Floating rate obligations 3,300,000 1,180,000 2,015,000 2,545,000 3,775,000
Payable for investments purchased -- -- -- -- 1,064,370
Accrued expenses:
Management fees 50,052 12,725 17,826 21,991 112,613
Other 17,574 6,114 16,041 4,399 181,512
Common share dividends payable 205,672 77,698 133,433 164,725 472,914
Preferred share dividends payable 18,408 2,235 1,642 6,290 39,673
------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 3,591,706 1,573,455 2,560,509 3,271,040 5,646,082
------------------------------------------------------------------------------------------------------------------------------------
Preferred shares, at liquidation value 30,000,000 12,000,000 18,500,000 22,000,000 69,000,000
------------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common shares $62,714,232 $22,442,078 $36,185,912 $43,692,591 $141,519,523
====================================================================================================================================
Common shares outstanding 4,468,210 1,549,939 2,438,516 3,067,630 9,495,144
====================================================================================================================================
Net asset value per Common share outstanding
(net assets applicable to Common shares,
divided by Common shares outstanding) $ 14.04 $ 14.48 $ 14.84 $ 14.24 $ 14.90
====================================================================================================================================
NET ASSETS APPLICABLE TO COMMON SHARES CONSIST OF:
------------------------------------------------------------------------------------------------------------------------------------
Common shares, $.01 par value per share $ 44,682 $ 15,499 $ 24,385 $ 30,676 $ 94,951
Paid-in surplus 62,143,653 21,926,440 34,560,956 43,248,456 134,624,791
Undistributed (Over-distribution of)
net investment income (43,352) (47,514) (72,230) (146,843) (24,998)
Accumulated net realized gain (loss)
from investments and
derivative transactions (2,907,713) (310,111) (366,396) (993,160) 189,964
Net unrealized appreciation
(depreciation) of investments
and derivative transactions 3,476,962 857,764 2,039,197 1,553,462 6,634,815
------------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common shares $62,714,232 $22,442,078 $36,185,912 $43,692,591 $141,519,523
====================================================================================================================================
Authorized shares:
Common 200,000,000 Unlimited Unlimited Unlimited Unlimited
Preferred 1,000,000 Unlimited Unlimited Unlimited Unlimited
====================================================================================================================================
See accompanying notes to financial statements.
41
Statement of
OPERATIONS
Six Months Ended January 31, 2008 (Unaudited)
ARIZONA ARIZONA ARIZONA ARIZONA TEXAS
PREMIUM DIVIDEND DIVIDEND DIVIDEND QUALITY
INCOME ADVANTAGE ADVANTAGE 2 ADVANTAGE 3 INCOME
(NAZ) (NFZ) (NKR) (NXE) (NTX)
------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME $2,412,462 $ 849,504 $1,380,028 $1,632,993 $ 5,387,681
------------------------------------------------------------------------------------------------------------------------------------
EXPENSES
Management fees 294,276 109,365 173,248 208,239 663,718
Preferred shares - auction fees 37,808 15,123 23,315 27,725 86,958
Preferred shares - dividend disbursing agent fees 5,016 5,016 5,020 5,035 10,034
Shareholders' servicing agent fees and expenses 1,972 196 129 130 5,385
Interest expense on floating rate obligations 66,938 21,941 38,173 48,067 68,011
Custodian's fees and expenses 11,817 10,452 16,500 12,064 32,099
Directors'/Trustees' fees and expenses 916 549 233 1,013 2,247
Professional fees 7,083 3,731 4,114 4,277 7,286
Shareholders' reports - printing and mailing expenses 10,937 5,959 8,135 8,366 20,629
Stock exchange listing fees 4,860 63 104 131 4,856
Investor relations expense 5,144 1,996 2,976 3,643 11,762
Other expenses 6,481 5,216 5,410 6,736 9,302
------------------------------------------------------------------------------------------------------------------------------------
Total expenses before custodian
fee credit and expense reimbursement 453,248 179,607 277,357 325,426 922,287
Custodian fee credit (6,977) (3,927) (4,825) (1,689) (7,647)
Expense reimbursement -- (34,490) (68,295) (87,468) --
------------------------------------------------------------------------------------------------------------------------------------
Net expenses 446,271 141,190 204,237 236,269 914,640
------------------------------------------------------------------------------------------------------------------------------------
Net investment income 1,966,191 708,314 1,175,791 1,396,724 4,473,041
------------------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) from:
Investments (947,630) (207,525) (253,931) (411,691) 215,723
Futures (46,730) (144,540) -- -- --
Change in net unrealized
appreciation (depreciation) of:
Investments 1,097,654 319,993 605,625 559,517 744,683
Futures -- 42,042 -- -- --
------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) 103,294 9,970 351,694 147,826 960,406
------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO PREFERRED SHAREHOLDERS
From net investment income (521,611) (192,709) (284,490) (400,441) (1,121,262)
From accumulated net realized gains -- (6,331) (47,034) -- (186,315)
------------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets applicable
to Common shares from distributions
to Preferred shareholders (521,611) (199,040) (331,524) (400,441) (1,307,577)
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in
net assets applicable to
Common shares from operations $1,547,874 $ 519,244 $1,195,961 $1,144,109 $ 4,125,870
====================================================================================================================================
See accompanying notes to financial statements.
42
Statement of
CHANGES in NET ASSETS (Unaudited)
ARIZONA ARIZONA ARIZONA
PREMIUM INCOME (NAZ) DIVIDEND ADVANTAGE (NFZ) DIVIDEND ADVANTAGE 2 (NKR)
----------------------------- --------------------------- -----------------------------
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED ENDED YEAR ENDED
1/31/08 7/31/07 1/31/08 7/31/07 1/31/08 7/31/07
------------------------------------------------------------------------------------------------------------------------------------
OPERATIONS
Net investment income $ 1,966,191 $ 3,728,433 $ 708,314 $ 1,413,692 $ 1,175,791 $ 2,350,259
Net realized gain (loss) from:
Investments (947,630) 189,070 (207,525) 66,786 (253,931) 241,754
Forward swaps -- -- -- -- -- --
Futures (46,730) -- (144,540) -- -- --
Change in net unrealized
appreciation (depreciation) of:
Investments 1,097,654 (676,216) 319,993 (293,258) 605,625 (656,316)
Forward swaps -- -- -- -- -- --
Futures -- -- 42,042 (42,042) -- --
Distributions to
Preferred shareholders:
From net investment income (521,611) (996,807) (192,709) (378,572) (284,490) (593,932)
From accumulated
net realized gains -- -- (6,331) (24,096) (47,034) (24,790)
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
applicable to Common shares
from operations 1,547,874 2,244,480 519,244 742,510 1,195,961 1,316,975
------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO COMMON SHAREHOLDERS
From net investment income (1,367,272) (2,734,545) (497,531) (1,105,248) (870,438) (1,803,414)
From accumulated net
realized gains -- -- (18,444) (95,091) (142,165) (98,537)
------------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets applicable to
Common shares from distributions
to Common shareholders (1,367,272) (2,734,545) (515,975) (1,200,339) (1,012,603) (1,901,951)
------------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
Net proceeds from Common shares
issued to shareholders due to
reinvestment of distributions -- -- -- 35,133 26,874 95,591
------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets
applicable to Common shares
from capital share transactions -- -- -- 35,133 26,874 95,591
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
applicable to Common shares 180,602 (490,065) 3,269 (422,696) 210,232 (489,385)
Net assets applicable to Common
shares at the beginning
of period 62,533,630 63,023,695 22,438,809 22,861,505 35,975,680 36,465,065
------------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common
shares at the end of period $62,714,232 $62,533,630 $22,442,078 $22,438,809 $36,185,912 $35,975,680
====================================================================================================================================
Undistributed (Over-distribution of)
net investment income
at the end of period $ (43,352) $ (120,660) $ (47,514) $ (65,588) $ (72,230) $ (93,093)
====================================================================================================================================
See accompanying notes to financial statements.
43
Statement of
CHANGES in NET ASSETS (continued) (Unaudited)
ARIZONA TEXAS
DIVIDEND ADVANTAGE 3 (NXE) QUALITY INCOME (NTX)
---------------------------- ----------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED
1/31/08 7/31/07 1/31/08 7/31/07
------------------------------------------------------------------------------------------------------------------------------------
OPERATIONS
Net investment income $ 1,396,724 $ 2,758,019 $ 4,473,041 $ 9,028,772
Net realized gain (loss) from:
Investments (411,691) 75,705 215,723 896,242
Forward swaps -- 10,344 -- --
Futures -- -- -- --
Change in net unrealized appreciation (depreciation) of:
Investments 559,517 (354,681) 744,683 (1,939,151)
Forward swaps -- (48,098) -- --
Futures -- -- -- --
Distributions to Preferred shareholders:
From net investment income (400,441) (755,446) (1,121,262) (2,392,641)
From accumulated net realized gains -- -- (186,315) (97,712)
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
applicable to Common shares
from operations 1,144,109 1,685,843 4,125,870 5,495,510
------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO COMMON SHAREHOLDERS
From net investment income (1,003,116) (2,049,116) (3,313,806) (6,921,959)
From accumulated net realized gains -- -- (530,779) (344,674)
------------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets applicable to
Common shares from distributions
to Common shareholders (1,003,116) (2,049,116) (3,844,585) (7,266,633)
------------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
Net proceeds from Common shares
issued to shareholders due to
reinvestment of distributions -- 1,401 -- --
------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets
applicable to Common shares
from capital share transactions -- 1,401 -- --
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
applicable to Common shares 140,993 (361,872) 281,285 (1,771,123)
Net assets applicable to Common
shares at the beginning of period 43,551,598 43,913,470 141,238,238 143,009,361
------------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common
shares at the end of period $43,692,591 $43,551,598 $141,519,523 $141,238,238
====================================================================================================================================
Undistributed (Over-distribution of)
net investment income
at the end of period $ (146,843) $ (140,010) $ (24,998) $ (62,971)
====================================================================================================================================
See accompanying notes to financial statements.
44
Notes to
FINANCIALSTATEMENTS (Unaudited)
1. GENERAL INFORMATION AND SIGNIFICANT ACCOUNTING POLICIES
The state funds (the "Funds") covered in this report and their corresponding
Common share stock exchange symbols are Nuveen Arizona Premium Income Municipal
Fund, Inc. (NAZ), Nuveen Arizona Dividend Advantage Municipal Fund (NFZ), Nuveen
Arizona Dividend Advantage Municipal Fund 2 (NKR), Nuveen Arizona Dividend
Advantage Municipal Fund 3 (NXE) and Nuveen Texas Quality Income Municipal Fund
(NTX). Common shares of Arizona Premium Income (NAZ) and Texas Quality Income
(NTX) are traded on the New York Stock Exchange while Common shares of Arizona
Dividend Advantage (NFZ), Arizona Dividend Advantage 2 (NKR) and Arizona
Dividend Advantage 3 (NXE) are traded on the American Stock Exchange. The Funds
are registered under the Investment Company Act of 1940, as amended, as
closed-end management investment companies.
Each Fund seeks to provide current income exempt from both regular federal and
designated state income taxes by investing primarily in a diversified portfolio
of municipal obligations issued by state and local government authorities within
a single state or certain U.S. territories.
The following is a summary of significant accounting policies followed by the
Funds in the preparation of their financial statements in accordance with U.S.
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. When
market price quotes are not readily available (which is usually the case for
municipal securities), the pricing service may establish fair value based on
yields or prices of municipal bonds of comparable quality, type of issue,
coupon, maturity and rating, indications of value from securities dealers,
evaluations of anticipated cash flows or collateral and general market
conditions. 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. If the pricing service is
unable to supply a price for a municipal bond, forward swap or futures contract,
each Fund may use market quotes provided by major broker/dealers in such
investments. If it is determined that the market price for an investment or
derivative instrument is unavailable or inappropriate, the Board of
Directors/Trustees of the Funds, or its designee, may establish fair value in
accordance with procedures established in good faith by the Board of
Directors/Trustees. Temporary investments in securities that have variable rate
and demand features qualifying them as short-term investments are valued at
amortized cost, which approximates market value.
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 January 31, 2008, Texas
Quality Income (NTX) had outstanding when-issued/delayed-delivery purchase
commitments of $1,064,370. There were no such outstanding purchase commitments
in any of the other 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.
45
Notes to
FINANCIAL STATEMENTS (continued) (Unaudited)
Income Taxes
Each Fund is a separate taxpayer for federal income tax purposes. Each Fund
intends to distribute substantially all 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 designated state
income taxes, to retain such tax-exempt status when distributed to shareholders
of the Funds. Net realized capital gains and ordinary income distributions paid
by the Funds are subject to federal taxation.
Effective January 31, 2008, the Funds adopted Financial Accounting Standards
Board (FASB) Interpretation No. 48 "Accounting for Uncertainty in Income Taxes"
(FIN 48). FIN 48 provides guidance for how uncertain tax positions should be
recognized, measured, presented and disclosed in the financial statements. FIN
48 requires the affirmative evaluation of tax positions taken or expected to be
taken in the course of preparing the Funds' tax returns to determine whether it
is "more-likely-than-not" (i.e. greater than 50-percent) of being sustained by
the applicable tax authority. Tax positions not deemed to meet the
more-likely-than-not threshold may result in a tax benefit or expense in the
current year.
Implementation of FIN 48 required management of the Funds to analyze all open
tax years, as defined by the statute of limitations, for all major
jurisdictions, which includes federal and certain states. 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). The Funds have
no examinations in progress.
For all open tax years and all major taxing jurisdictions through the end of the
reporting period, management of the Funds has reviewed all tax positions taken
or expected to be taken in the preparation of the Funds' tax returns and
concluded the adoption of FIN 48 resulted in no impact to the Funds' net assets
or results of operations as of and during the six months ended January 31, 2008.
The Funds are 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 not less frequently than annually.
Furthermore, capital gains are distributed only to the extent they exceed
available capital loss carryforwards.
Distributions to Common shareholders of tax-exempt net investment income, net
realized capital gains and/or market discount, if any, are recorded on the
ex-dividend date. The amount and timing of distributions are determined in
accordance with federal income tax regulations, which may differ from U.S.
generally accepted accounting principles.
46
Preferred Shares
The Funds have issued and outstanding Preferred shares, $25,000 stated value per
share, as a means of effecting financial leverage. Each Fund's 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.
The number of Preferred shares outstanding, by Series and in total, for each
Fund is as follows:
ARIZONA ARIZONA ARIZONA ARIZONA TEXAS
PREMIUM DIVIDEND DIVIDEND DIVIDEND QUALITY
INCOME ADVANTAGE ADVANTAGE 2 ADVANTAGE 3 INCOME
(NAZ) (NFZ) (NKR) (NXE) (NTX)
------------------------------------------------------------------------------------------------------------------------------------
Number of shares:
Series M -- -- -- 880 760
Series T -- 480 -- -- --
Series W -- -- 740 -- --
Series TH 1,200 -- -- -- 2,000
------------------------------------------------------------------------------------------------------------------------------------
Total 1,200 480 740 880 2,760
====================================================================================================================================
Inverse Floating Rate Securities
Each Fund may 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"). A Fund may also enter into shortfall and
forbearance agreements (sometimes referred to as a "recourse trust" or "credit
recovery swap") 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, as well as any shortfalls in interest
cash flows. 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 an "Inverse floating rate investment". An investment in a
self-deposited inverse floater, recourse trust or credit recovery swap is
accounted for as a financing transaction in accordance with Statement of
Financial Accounting Standards (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 an "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 accounts for the related interest
paid to the holders of the short-term floating rate certificates as "Interest
expense on floating rate obligations" in the Statement of Operations.
During the six months ended January 31, 2008, each Fund invested in externally
deposited inverse floaters and/or self-deposited inverse floaters.
47
Notes to
FINANCIAL STATEMENTS (continued) (Unaudited)
The average floating rate obligations outstanding and average annual interest
rate and fees related to self-deposited inverse floaters during the six months
ended January 31, 2008, were as follows:
ARIZONA ARIZONA ARIZONA ARIZONA TEXAS
PREMIUM DIVIDEND DIVIDEND DIVIDEND QUALITY
INCOME ADVANTAGE ADVANTAGE 2 ADVANTAGE 3 INCOME
(NAZ) (NFZ) (NKR) (NXE) (NTX)
------------------------------------------------------------------------------------------------------------------------------------
Average floating rate obligations $3,684,329 $1,207,807 $2,102,880 $2,650,180 $3,775,000
Average annual interest rate and fees 3.60% 3.60% 3.60% 3.60% 3.57%
====================================================================================================================================
Forward Swap Transactions
Each Fund is authorized to invest in forward interest rate swap transactions.
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 forward swap contract and the
termination date of the swap (which is akin to a bond's maturity). The value of
the Fund's swap commitment would increase or decrease based primarily on the
extent to which long-term interest rates for bonds having a maturity of the
swap's termination date increases or decreases. 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. 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. To reduce such credit
risk, all counterparties are required to pledge collateral daily (based on the
daily valuation of each swap) on behalf of each Fund with a value approximately
equal to the amount of any unrealized gain above a pre-determined threshold.
Reciprocally, when any of the Funds have an unrealized loss on a swap contract,
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 swap valuations fluctuate, either up or
down, by at least the predetermined threshold amount. None of the Funds invested
in forward interest rate swap transactions during the six months ended January
31, 2008.
Futures Contracts
Each Fund is authorized to invest in futures contracts. 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." Subsequent payments ("variation
margin") are made or received by a Fund each day, depending on the daily
fluctuation of the value of the contract.
48
During the period the futures contract is open, changes in the value of the
contract are recognized as an unrealized gain or loss by "marking-to-market" on
a daily basis to reflect the changes in market value of the contract. 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. Cash held by the broker to cover
initial margin requirements on open futures contracts, if any, is recognized on
the Statement of Assets and Liabilities. Additionally, the Statement of Assets
and Liabilities reflects a receivable or payable for the variation margin when
applicable. Arizona Premium Income (NAZ) and Arizona Dividend Advantage (NFZ)
were the only Funds to invest in futures contracts during the six months ended
January 31, 2008.
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.
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 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 U.S. 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. FUND SHARES
Transactions in Common shares were as follows:
ARIZONA PREMIUM ARIZONA DIVIDEND ARIZONA DIVIDEND
INCOME (NAZ) ADVANTAGE (NFZ) ADVANTAGE 2 (NKR)
------------------------ ----------------------- -----------------------
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED ENDED YEAR ENDED
1/31/08 7/31/07 1/31/08 7/31/07 1/31/08 7/31/07
-----------------------------------------------------------------------------------------------------------------
Common shares issued to shareholders
due to reinvestment of distributions -- -- -- 2,295 1,829 6,191
=================================================================================================================
ARIZONA DIVIDEND TEXAS QUALITY
ADVANTAGE 3 (NXE) INCOME (NTX)
----------------------- -----------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED
1/31/08 7/31/07 1/31/08 7/31/07
-----------------------------------------------------------------------------------------------------------------
Common shares issued to shareholders
due to reinvestment of distributions -- 99 -- --
=================================================================================================================
49
Notes to
FINANCIAL STATEMENTS (continued) (Unaudited)
3. INVESTMENT TRANSACTIONS
Purchases and sales (including maturities but excluding short-term investments
and derivative transactions) during the six months ended January 31, 2008, were
as follows:
ARIZONA ARIZONA ARIZONA ARIZONA TEXAS
PREMIUM DIVIDEND DIVIDEND DIVIDEND QUALITY
INCOME ADVANTAGE ADVANTAGE 2 ADVANTAGE 3 INCOME
(NAZ) (NFZ) (NKR) (NXE) (NTX)
------------------------------------------------------------------------------------------------------------------------------------
Purchases $ 9,279,536 $1,805,037 $5,473,394 $5,841,989 $3,064,190
Sales and maturities 10,490,315 1,619,682 5,651,243 6,219,086 3,002,826
====================================================================================================================================
4. INCOME TAX INFORMATION
The following information is presented on an income tax basis. Differences
between amounts for financial statement and federal income tax purposes are
primarily due to the treatment of paydown gains and losses, 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. 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 January 31, 2008, the cost of investments was as follows:
ARIZONA ARIZONA ARIZONA ARIZONA TEXAS
PREMIUM DIVIDEND DIVIDEND DIVIDEND QUALITY
INCOME ADVANTAGE ADVANTAGE 2 ADVANTAGE 3 INCOME
(NAZ) (NFZ) (NKR) (NXE) (NTX)
------------------------------------------------------------------------------------------------------------------------------------
Cost of investments $88,463,889 $33,699,586 $52,859,020 $64,443,966 $202,215,799
====================================================================================================================================
Gross unrealized appreciation and gross unrealized depreciation of investments
at January 31, 2008, were as follows:
ARIZONA ARIZONA ARIZONA ARIZONA TEXAS
PREMIUM DIVIDEND DIVIDEND DIVIDEND QUALITY
INCOME ADVANTAGE ADVANTAGE 2 ADVANTAGE 3 INCOME
(NAZ) (NFZ) (NKR) (NXE) (NTX)
------------------------------------------------------------------------------------------------------------------------------------
Gross unrealized:
Appreciation $4,049,419 $1,101,775 $2,456,281 $2,026,702 $8,006,281
Depreciation (544,874) (239,514) (527,882) (514,075) (1,292,539)
------------------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation)
of investments $3,504,545 $ 862,261 $1,928,399 $1,512,627 $6,713,742
====================================================================================================================================
50
The tax components of undistributed net tax-exempt income, net ordinary income
and net long-term capital gains at July 31, 2007, the Funds' last tax year end,
were as follows:
ARIZONA ARIZONA ARIZONA ARIZONA TEXAS
PREMIUM DIVIDEND DIVIDEND DIVIDEND QUALITY
INCOME ADVANTAGE ADVANTAGE 2 ADVANTAGE 3 INCOME
(NAZ) (NFZ) (NKR) (NXE) (NTX)
------------------------------------------------------------------------------------------------------------------------------------
Undistributed net tax-exempt income * $94,638 $23,011 $66,180 $26,437 $457,648
Undistributed net ordinary income ** -- -- -- -- --
Undistributed net long-term capital gains -- 24,687 189,057 -- 691,335
====================================================================================================================================
* Undistributed net tax-exempt income (on a tax basis) has not been reduced
for the dividend declared on July 2, 2007, paid on August 1, 2007.
** Net ordinary income consists of taxable market discount income and net
short-term capital gains, if any.
The tax character of distributions paid during the Funds' last tax year ended
July 31, 2007, was designated for purposes of the dividends paid deduction as
follows:
ARIZONA ARIZONA ARIZONA ARIZONA TEXAS
PREMIUM DIVIDEND DIVIDEND DIVIDEND QUALITY
INCOME ADVANTAGE ADVANTAGE 2 ADVANTAGE 3 INCOME
(NAZ) (NFZ) (NKR) (NXE) (NTX)
------------------------------------------------------------------------------------------------------------------------------------
Distributions from net tax-exempt income $3,727,652 $1,496,276 $2,402,229 $2,822,896 $9,349,744
Distributions from net ordinary income** -- 3,027 -- -- --
Distributions from net long-term capital gains -- 119,187 123,327 -- 442,386
====================================================================================================================================
** Net ordinary income consists of taxable market discount income and net
short-term capital gains, if any.
At July 31, 2007, 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:
ARIZONA ARIZONA
PREMIUM DIVIDEND
INCOME ADVANTAGE 3
(NAZ) (NXE)
--------------------------------------------------------------------------------
Expiration year:
2011 $ 359,726 $ --
2012 1,553,627 158,487
2013 -- 160,902
2014 -- 218,127
--------------------------------------------------------------------------------
Total $1,913,353 $537,516
================================================================================
5. 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 Nuveen
Asset Management (the "Adviser"), a wholly owned subsidiary of Nuveen
Investments, Inc. ("Nuveen"), 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 (including net assets attributable to Preferred shares)
of each Fund as follows:
AVERAGE DAILY NET ASSETS ARIZONA PREMIUM INCOME (NAZ)
(INCLUDING NET ASSETS TEXAS QUALITY INCOME (NTX)
ATTRIBUTABLE TO PREFERRED SHARES) FUND-LEVEL FEE RATE
--------------------------------------------------------------------------------
For the first $125 million .4500%
For the next $125 million .4375
For the next $250 million .4250
For the next $500 million .4125
For the next $1 billion .4000
For the next $3 billion .3875
For net assets over $5 billion .3750
================================================================================
51
Notes to
FINANCIAL STATEMENTS (continued) (Unaudited)
ARIZONA DIVIDEND ADVANTAGE (NFZ)
AVERAGE DAILY NET ASSETS ARIZONA DIVIDEND ADVANTAGE 2 (NKR)
(INCLUDING NET ASSETS ARIZONA DIVIDEND ADVANTAGE 3 (NXE)
ATTRIBUTABLE TO PREFERRED SHARES) FUND-LEVEL FEE RATE
--------------------------------------------------------------------------------
For the first $125 million .4500%
For the next $125 million .4375
For the next $250 million .4250
For the next $500 million .4125
For the next $1 billion .4000
For net assets over $2 billion .3750
================================================================================
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 assets managed as stated in the tables below. As
of January 31, 2008, the complex-level fee rate was .1847%.
Effective August 20, 2007, the complex-level fee schedule is as follows:
COMPLEX-LEVEL ASSET BREAKPOINT LEVEL (1) EFFECTIVE RATE AT BREAKPOINT LEVEL
--------------------------------------------------------------------------------
$55 billion .2000%
$56 billion .1996
$57 billion .1989
$60 billion .1961
$63 billion .1931
$66 billion .1900
$71 billion .1851
$76 billion .1806
$80 billion .1773
$91 billion .1691
$125 billion .1599
$200 billion .1505
$250 billion .1469
$300 billion .1445
================================================================================
52
Prior to August 20, 2007, the complex-level fee schedule was as follows:
COMPLEX-LEVEL ASSET BREAKPOINT LEVEL (1) EFFECTIVE RATE AT BREAKPOINT LEVEL
--------------------------------------------------------------------------------
$55 billion .2000%
$56 billion .1996
$57 billion .1989
$60 billion .1961
$63 billion .1931
$66 billion .1900
$71 billion .1851
$76 billion .1806
$80 billion .1773
$91 billion .1698
$125 billion .1617
$200 billion .1536
$250 billion .1509
$300 billion .1490
================================================================================
(1) The complex-level fee component of the management fee for the funds is
calculated based upon the aggregate Managed Assets ("Managed Assets" means
the average daily net assets of each fund including assets attributable to
preferred stock issued by or borrowings by the Nuveen funds) of
Nuveen-sponsored funds in the U.S.
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 Arizona Dividend Advantage's (NFZ) operations, the
Adviser has agreed to reimburse the Fund, as a percentage of average daily net
assets (including net assets attributable to Preferred shares), for fees and
expenses in the amounts and for the time periods set forth below:
YEAR ENDING YEAR ENDING
JANUARY 31, JANUARY 31,
--------------------------------------------------------------------------------
2001* .30% 2007 .25%
2002 .30 2008 .20
2003 .30 2009 .15
2004 .30 2010 .10
2005 .30 2011 .05
2006 .30
================================================================================
* From the commencement of operations.
The Adviser has not agreed to reimburse Arizona Dividend Advantage (NFZ) for any
portion of its fees and expenses beyond January 31, 2011.
For the first ten years of Arizona Dividend Advantage 2's (NKR) operations, the
Adviser has agreed to reimburse the Fund, as a percentage of average daily net
assets (including net assets attributable to Preferred shares), for fees and
expenses in the amounts and for the time periods set forth below:
YEAR ENDING YEAR ENDING
MARCH 31, MARCH 31,
--------------------------------------------------------------------------------
2002* .30% 2008 .25%
2003 .30 2009 .20
2004 .30 2010 .15
2005 .30 2011 .10
2006 .30 2012 .05
2007 .30
================================================================================
* From the commencement of operations.
The Adviser has not agreed to reimburse Arizona Dividend Advantage 2 (NKR) for
any portion of its fees and expenses beyond March 31, 2012.
53
Notes to
FINANCIAL STATEMENTS (continued) (Unaudited)
For the first eight years of Arizona Dividend Advantage 3's (NXE) operations,
the Adviser has agreed to reimburse the Fund, as a percentage of average daily
net assets (including net assets attributable to Preferred shares), for fees and
expenses in the amounts and for the time periods set forth below:
YEAR ENDING YEAR ENDING
SEPTEMBER 30, SEPTEMBER 30,
--------------------------------------------------------------------------------
2002* .32% 2007 .32%
2003 .32 2008 .24
2004 .32 2009 .16
2005 .32 2010 .08
2006 .32
================================================================================
* From the commencement of operations.
The Adviser has not agreed to reimburse Arizona Dividend Advantage 3 (NXE) for
any portion of its fees and expenses beyond September 30, 2010.
Agreement and Plan of Merger
On June 20, 2007, Nuveen Investments announced that it had entered into a
definitive Agreement and Plan of Merger ("Merger Agreement") with Windy City
Investments, Inc. ("Windy City"), a corporation formed by investors led by
Madison Dearborn Partners, LLC ("Madison Dearborn"), pursuant to which Windy
City would acquire Nuveen Investments. Madison Dearborn is a private equity
investment firm based in Chicago, Illinois. The merger was consummated on
November 13, 2007.
The consummation of the merger was deemed to be an "assignment" (as that term is
defined in the Investment Company Act of 1940) of the investment management
agreement between each Fund and the Adviser, and resulted in the automatic
termination of each Fund's agreement. The Board of Directors/Trustees of each
Fund considered and approved a new investment management agreement with the
Adviser on the same terms as the previous agreements. Each new ongoing
agreement, was approved by the shareholders of each Fund and took effect on
November 13, 2007.
The investors led by Madison Dearborn includes an affiliate of Merrill Lynch. As
a result, Merrill Lynch is an indirect "affiliated person" (as that term is
defined in the Investment Company Act of 1940) of each Fund. Certain conflicts
of interest may arise as a result of such indirect affiliation. For example, the
Funds are generally prohibited from entering into principal transactions with
Merrill Lynch and its affiliates. The Adviser does not believe that any such
prohibitions or limitations as a result of Merrill Lynch's affiliation will
significantly impact the ability of the Funds to pursue their investment
objectives and policies.
54
6. NEW ACCOUNTING PRONOUNCEMENT
Financial Accounting Standards Board Statement of Financial Accounting
Standards No. 157
In September 2006, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 157, "Fair Value
Measurements." This standard establishes a single authoritative definition of
fair value, sets out a framework for measuring fair value and requires
additional disclosures about fair value measurements. SFAS No. 157 applies to
fair value measurements already required or permitted by existing standards.
SFAS No. 157 is effective for financial statements issued for fiscal years
beginning after November 15, 2007, and interim periods within those fiscal
years. The changes to current generally accepted accounting principles from the
application of this standard relate to the definition of fair value, the methods
used to measure fair value, and the expanded disclosures about fair value
measurements. As of January 31, 2008, management does not believe the adoption
of SFAS No. 157 will impact the financial statement amounts; however, additional
disclosures may be required about the inputs used to develop the measurements
and the effect of certain of the measurements included within the Statement of
Operations for the period.
7. SUBSEQUENT EVENTS
Auction Rate Preferred Markets
Beginning in February 2008, more shares for sale were submitted in the regularly
scheduled auctions for the Municipal Auction Preferred shares issued by the
Funds than there were offers to buy. This meant that these auctions "failed to
clear," and that many Municipal Auction Preferred shareholders who wanted to
sell their shares in these auctions were unable to do so. Municipal Auction
Preferred shareholders unable to sell their shares received distributions at the
"maximum rate" calculated in accordance with the pre-established terms of the
Municipal Auction Preferred shares.
These developments generally do not affect the management or investment policies
of the Funds. However, one implication of these auction failures for Common
shareholders is that the Funds' cost of leverage will be higher than it
otherwise would have been had the auctions continued to be successful. As a
result, the Funds' future Common share earnings may be lower than they otherwise
would have been.
Distributions to Common Shareholders
The Funds declared Common share dividend distributions from their tax-exempt net
investment income which were paid on March 3, 2008, to shareholders of record on
February 15, 2008, as follows:
ARIZONA ARIZONA ARIZONA ARIZONA TEXAS
PREMIUM DIVIDEND DIVIDEND DIVIDEND QUALITY
INCOME ADVANTAGE ADVANTAGE 2 ADVANTAGE 3 INCOME
(NAZ) (NFZ) (NKR) (NXE) (NTX)
------------------------------------------------------------------------------------------------------------------------------------
Dividend per share $.0510 $.0525 $.0585 $.0545 $.0570
====================================================================================================================================
55
Financial
HIGHLIGHTS (Unaudited)
Selected data for a Common share outstanding throughout each period:
Investment Operations
------------------------------------------------------------------
Distributions Distributions
from Net from
Beginning Investment Capital
Common Net Income to Gains to
Share Net Realized/ Preferred Preferred
Net Asset Investment Unrealized Share- Share-
Value Income Gain (Loss) holders+ holders+ Total
================================================================================================
ARIZONA PREMIUM
INCOME (NAZ)
------------------------------------------------------------------------------------------------
Year Ended 7/31:
2008(b) $14.00 $ .44 $ .03 $(.12) $ -- $ .35
2007 14.10 .83 (.10) (.22) -- .51
2006 14.53 .83 (.39) (.18) -- .26
2005 14.04 .86 .56 (.09) -- 1.33
2004 13.66 .92 .43 (.05) -- 1.30
2003 14.25 .97 (.57) (.07) -- .33
ARIZONA DIVIDEND
ADVANTAGE (NFZ)
------------------------------------------------------------------------------------------------
Year Ended 7/31:
2008(b) 14.48 .46 (.01) (.12) --* .33
2007 14.77 .91 (.17) (.24) (.02) .48
2006 15.37 .93 (.40) (.20) (.01) .32
2005 15.00 .97 .46 (.10) -- 1.33
2004 14.45 .99 .57 (.06) -- 1.50
2003 14.81 1.00 (.38) (.07) (.01) .54
================================================================================================
Less Distributions Total Returns
----------------------------------------------- ----------------------
Net Offering Based
Investment Capital Costs and Ending on
Income to Gains to Preferred Common Based Common
Common Common Share Share Ending on Share Net
Share- Share- Underwriting Asset Market Market Asset
holders holders Total Discounts Value Value Value** Value**
====================================================================================================================
ARIZONA PREMIUM
INCOME (NAZ)
--------------------------------------------------------------------------------------------------------------------
Year Ended 7/31:
2008(b) $(.31) $ -- $(.31) $ -- $14.04 $13.09 2.56% 2.50%
2007 (.61) -- (.61) -- 14.00 13.07 (.22) 3.62
2006 (.69) -- (.69) -- 14.10 13.69 (5.62) 1.84
2005 (.84) -- (.84) -- 14.53 15.22 5.17 9.69
2004 (.92) -- (.92) -- 14.04 15.27 7.97 9.66
2003 (.92) -- (.92) -- 13.66 15.00 (5.98) 2.21
ARIZONA DIVIDEND
ADVANTAGE (NFZ)
--------------------------------------------------------------------------------------------------------------------
Year Ended 7/31:
2008(b) (.32) (.01) (.33) -- 14.48 13.49 3.60 2.34
2007 (.71) (.06) (.77) -- 14.48 13.35 (11.63) 3.24
2006 (.84) (.08) (.92) -- 14.77 15.90 4.54 2.14
2005 (.92) (.04) (.96) -- 15.37 16.08 10.88 9.04
2004 (.91) (.04) (.95) -- 15.00 15.40 7.05 10.56
2003 (.88) (.04) (.92) .02 14.45 15.30 3.06 3.67
====================================================================================================================
Ratios/Supplemental Data
-------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets Ratios to Average Net Assets
Applicable to Common Shares Applicable to Common Shares
Before Credit/Reimbursement After Credit/Reimbursement***
-------------------------------------------- -------------------------------------------
Ending
Net
Assets
Applicable Expenses Expenses Net Expenses Expenses Net Portfolio
to Common Including Excluding Investment Including Excluding Investment Turnover
Shares (000) Interest++(a) Interest++(a) Income++ Interest++(a) Interest++(a) Income++ Rate
====================================================================================================================================
ARIZONA PREMIUM
INCOME (NAZ)
------------------------------------------------------------------------------------------------------------------------------------
Year Ended 7/31:
2008(b) $62,714 1.44%**** 1.23%**** 6.24%**** 1.42%**** 1.21%**** 6.26%**** 10%
2007 62,534 1.32 1.24 5.81 1.30 1.21 5.84 13
2006 63,024 1.21 1.21 5.83 1.19 1.19 5.84 22
2005 64,822 1.20 1.20 5.91 1.19 1.19 5.92 17
2004 62,431 1.22 1.22 6.49 1.21 1.21 6.50 26
2003 60,547 1.25 1.25 6.81 1.24 1.24 6.82 17
ARIZONA DIVIDEND
ADVANTAGE (NFZ)
------------------------------------------------------------------------------------------------------------------------------------
Year Ended 7/31:
2008(b) 22,442 1.60**** 1.40**** 5.96**** 1.26**** 1.06**** 6.30**** 5
2007 22,439 1.48 1.38 5.74 1.10 1.00 6.12 19
2006 22,862 1.36 1.36 5.79 .92 .92 6.23 24
2005 23,753 1.34 1.34 5.82 .87 .87 6.28 18
2004 23,153 1.30 1.30 6.10 .83 .83 6.57 24
2003 22,290 1.35 1.35 6.11 .91 .91 6.55 20
====================================================================================================================================
Floating Rate Obligations
Preferred Shares at End of Period at End of Period
-------------------------------------- --------------------------
Aggregate Liquidation Aggregate
Amount and Market Asset Amount Asset
Outstanding Value Coverage Outstanding Coverage
(000) Per Share Per Share (000) Per $1,000
================================================================================
ARIZONA PREMIUM INCOME (NAZ)
--------------------------------------------------------------------------------
Year Ended 7/31:
2008(b) $30,000 $25,000 $77,262 $3,300 $29,095
2007 30,000 25,000 77,111 4,708 20,653
2006 30,000 25,000 77,520 -- --
2005 30,000 25,000 79,019 -- --
2004 30,000 25,000 77,026 -- --
2003 30,000 25,000 75,456 -- --
ARIZONA DIVIDEND ADVANTAGE (NFZ)
--------------------------------------------------------------------------------
Year Ended 7/31:
2008(b) 12,000 25,000 71,754 1,180 30,188
2007 12,000 25,000 71,748 1,819 19,933
2006 12,000 25,000 72,628 -- --
2005 12,000 25,000 74,485 -- --
2004 12,000 25,000 73,235 -- --
2003 12,000 25,000 71,438 -- --
================================================================================
* Distributions from Capital Gains to Preferred Shareholders rounds to less
than $.01 per share.
** Total Return 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 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.
+ The amounts shown are based on Common share equivalents.
++ Ratios do not reflect the effect of dividend payments to Preferred
shareholders; income ratios reflect income earned on assets attributable to
Preferred shares.
(a) Interest expense arises from the application of SFAS No. 140 to certain
inverse floating rate transactions entered into by the Fund as more fully
described in Footnote 1 - Inverse Floating Rate Securities.
(b) For the six months ended January 31, 2008.
See accompanying notes to financial statements.
56-57 spread
Financial
HIGHLIGHTS (continued) (Unaudited)
Selected data for a Common share outstanding throughout each period:
Investment Operations
------------------------------------------------------------------
Distributions Distributions
from Net from
Beginning Investment Capital
Common Net Income to Gains to
Share Net Realized/ Preferred Preferred
Net Asset Investment Unrealized Share- Share-
Value Income Gain (Loss) holders+ holders+ Total
=================================================================================================
ARIZONA DIVIDEND
ADVANTAGE 2 (NKR)
-------------------------------------------------------------------------------------------------
Year Ended 7/31:
2008(c) $14.76 $.48 $ .16 $(.12) $(.02) $ .50
2007 15.00 .97 (.18) (.24) (.01) .54
2006 15.56 .96 (.37) (.20) (.01) .38
2005 15.10 .97 .59 (.11) (.01) 1.44
2004 14.57 .96 .53 (.06) -- 1.43
2003 14.88 .96 (.31) (.08) -- .57
ARIZONA DIVIDEND
ADVANTAGE 3 (NXE)
-------------------------------------------------------------------------------------------------
Year Ended 7/31:
2008(c) 14.20 .46 .04 (.13) -- .37
2007 14.32 .90 (.10) (.25) -- .55
2006 14.62 .88 (.26) (.19) -- .43
2005 14.01 .89 .62 (.10) -- 1.41
2004 13.45 .89 .54 (.06) -- 1.37
2003(b) 14.33 .66 (.67) (.05) -- (.06)
=================================================================================================
Less Distributions Total Returns
----------------------------------------------- ----------------------
Net Offering Based
Investment Capital Costs and Ending on
Income to Gains to Preferred Common Based Common
Common Common Share Share Ending on Share Net
Share- Share- Underwriting Asset Market Market Asset
holders holders Total Discounts Value Value Value** Value**
===================================================================================================================
ARIZONA DIVIDEND
ADVANTAGE 2 (NKR)
-------------------------------------------------------------------------------------------------------------------
Year Ended 7/31:
2008(c) $ (.36) $(.06) $(.42) $ -- $14.84 $14.03 (5.40)% 3.41%
2007 (.74) (.04) (.78) -- 14.76 15.27 4.52 3.59
2006 (.83) (.11) (.94) -- 15.00 15.37 .82 2.49
2005 (.86) (.12) (.98) -- 15.56 16.19 16.30 9.74
2004 (.86) (.04) (.90) -- 15.10 14.82 9.46 9.98
2003 (.86) (.01) (.87) (.01) 14.57 14.40 (3.53) 3.67
ARIZONA DIVIDEND
ADVANTAGE 3 (NXE)
-------------------------------------------------------------------------------------------------------------------
Year Ended 7/31:
2008(c) (.33) -- (.33) -- 14.24 13.41 2.27 2.62
2007 (.67) -- (.67) -- 14.20 13.44 4.21 3.81
2006 (.73) -- (.73) -- 14.32 13.52 (1.80) 3.03
2005 (.80) -- (.80) -- 14.62 14.48 15.11 10.21
2004 (.80) -- (.80) (.01) 14.01 13.30 1.01 10.25
2003(b) (.61) -- (.61) (.21) 13.45 13.97 (2.76) (2.05)
===================================================================================================================
Ratios/Supplemental Data
------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets Ratios to Average Net Assets
Applicable to Common Shares Applicable to Common Shares
Before Credit/Reimbursement After Credit/Reimbursement***
-------------------------------------------- -------------------------------------------
Ending
Net
Assets
Applicable Expenses Expenses Net Expenses Expenses Net Portfolio
to Common Including Excluding Investment Including Excluding Investment Turnover
Shares (000) Interest++(a) Interest++(a) Income++ Interest++(a) Interest++(a) Income++ Rate
====================================================================================================================================
ARIZONA DIVIDEND
ADVANTAGE 2 (NKR)
------------------------------------------------------------------------------------------------------------------------------------
Year Ended 7/31:
2008(c) $36,186 1.53%*** 1.32%*** 6.10%*** 1.13%*** .92%*** 6.51%*** 10%
2007 35,976 1.39 1.29 5.92 .93 .83 6.38 14
2006 36,465 1.28 1.28 5.88 .82 .82 6.34 11
2005 37,704 1.27 1.27 5.76 .82 .82 6.22 11
2004 36,543 1.27 1.27 5.83 .80 .80 6.30 14
2003 35,237 1.27 1.27 5.78 .82 .82 6.23 4
ARIZONA DIVIDEND
ADVANTAGE 3 (NXE)
------------------------------------------------------------------------------------------------------------------------------------
Year Ended 7/31:
2008(c) 43,693 1.49*** 1.27*** 5.99*** 1.08*** .86*** 6.40*** 9
2007 43,552 1.36 1.26 5.69 .85 .75 6.19 15
2006 43,913 1.26 1.26 5.63 .78 .78 6.12 12
2005 44,829 1.25 1.25 5.63 .76 .76 6.12 15
2004 42,983 1.25 1.25 5.80 .76 .76 6.29 22
2003(b) 41,247 1.19*** 1.19*** 5.05*** .73*** .73*** 5.52*** 16
====================================================================================================================================
Floating Rate Obligations
Preferred Shares at End of Period at End of Period
-------------------------------------- --------------------------
Aggregate Liquidation Aggregate
Amount and Market Asset Amount Asset
Outstanding Value Coverage Outstanding Coverage
(000) Per Share Per Share (000) Per $1,000
================================================================================
ARIZONA DIVIDEND ADVANTAGE 2 (NKR)
--------------------------------------------------------------------------------
Year Ended 7/31:
2008(c) $18,500 $25,000 $73,900 $2,015 $28,139
2007 18,500 25,000 73,616 3,026 19,005
2006 18,500 25,000 74,277 -- --
2005 18,500 25,000 75,952 -- --
2004 18,500 25,000 74,382 -- --
2003 18,500 25,000 72,618 -- --
ARIZONA DIVIDEND ADVANTAGE 3 (NXE)
--------------------------------------------------------------------------------
Year Ended 7/31:
2008(c) 22,000 25,000 74,651 2,545 26,812
2007 22,000 25,000 74,490 3,755 18,459
2006 22,000 25,000 74,902 -- --
2005 22,000 25,000 75,942 -- --
2004 22,000 25,000 73,844 -- --
2003(b) 22,000 25,000 71,872 -- --
================================================================================
* Total Return 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 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.
+ The amounts shown are based on Common share equivalents.
++ Ratios do not reflect the effect of dividend payments to Preferred
shareholders; income ratios reflect income earned on assets attributable to
Preferred shares.
(a) Interest expense arises from the application of SFAS No. 140 to certain
inverse floating rate transactions entered into by the Fund as more fully
described in Footnote 1 - Inverse Floating Rate Securities.
(b) For the period September 25, 2002 (commencement of operations) through July
31, 2003. (c) For the six months ended January 31, 2008.
See accompanying notes to financial statements.
58-59 spread
Financial
HIGHLIGHTS (continued) (Unaudited)
Selected data for a Common share outstanding throughout each period:
Investment Operations
------------------------------------------------------------------
Distributions Distributions
from Net from
Beginning Investment Capital
Common Net Income to Gains to
Share Net Realized/ Preferred Preferred
Net Asset Investment Unrealized Share- Share-
Value Income Gain (Loss) holders+ holders+ Total
================================================================================================
TEXAS QUALITY
INCOME (NTX)
------------------------------------------------------------------------------------------------
Year Ended 7/31:
2008(b) $14.87 $ .47 $ .11 $(.12) $(.02) $ .44
2007 15.06 .95 (.11) (.25) (.01) .58
2006 15.46 .96 (.32) (.22) -- .42
2005 15.12 1.00 .41 (.13) -- 1.28
2004 14.57 1.03 .55 (.07) -- 1.51
2003 15.14 1.05 (.58) (.08) -- .39
================================================================================================
Less Distributions Total Returns
----------------------------------------------- ----------------------
Net Offering Based
Investment Capital Costs and Ending on
Income to Gains to Preferred Common Based Common
Common Common Share Share Ending on Share Net
Share- Share- Underwriting Asset Market Market Asset
holders holders Total Discounts Value Value Value** Value**
====================================================================================================================
TEXAS QUALITY
INCOME (NTX)
--------------------------------------------------------------------------------------------------------------------
Year Ended 7/31:
2008(b) $(.35) $(.06) $(.41) $ -- $14.90 $13.67 1.38% 2.97%
2007 (.73) (.04) (.77) -- 14.87 13.89 (.52) 3.82
2006 (.82) -- (.82) -- 15.06 14.71 (4.03) 2.77
2005 (.94) -- (.94) -- 15.46 16.19 17.83 8.61
2004 (.96) -- (.96) -- 15.12 14.59 5.87 10.51
2003 (.95) (.01) (.96) -- 14.57 14.71 4.14 2.54
====================================================================================================================
Ratios/Supplemental Data
-------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets Ratios to Average Net Assets
Applicable to Common Shares Applicable to Common Shares
Before Credit/Reimbursement After Credit/Reimbursement***
-------------------------------------------- -------------------------------------------
Ending
Net
Assets
Applicable Expenses Expenses Net Expenses Expenses Net Portfolio
to Common Including Excluding Investment Including Excluding Investment Turnover
Shares (000) Interest++(a) Interest++(a) Income++ Interest++(a) Interest++(a) Income++ Rate
====================================================================================================================================
TEXAS QUALITY
INCOME (NTX)
------------------------------------------------------------------------------------------------------------------------------------
Year Ended 7/31:
2008(b) $141,520 1.30%*** 1.20%*** 6.29%*** 1.29%*** 1.19%*** 6.30%*** 1%
2007 141,238 1.24 1.18 6.24 1.22 1.16 6.26 9
2006 143,009 1.19 1.19 6.31 1.18 1.18 6.33 13
2005 146,718 1.18 1.18 6.42 1.16 1.16 6.44 14
2004 143,233 1.18 1.18 6.77 1.18 1.18 6.77 16
2003 137,975 1.20 1.20 6.93 1.19 1.19 6.94 12
====================================================================================================================================
Floating Rate Obligations
Preferred Shares at End of Period at End of Period
-------------------------------------- --------------------------
Aggregate Liquidation Aggregate
Amount and Market Asset Amount Asset
Outstanding Value Coverage Outstanding Coverage
(000) Per Share Per Share (000) Per $1,000
================================================================================
TEXAS QUALITY INCOME (NTX)
--------------------------------------------------------------------------------
Year Ended 7/31:
2008(b) $69,000 $25,000 $76,275 $3,775 $56,767
2007 69,000 25,000 76,173 3,775 56,692
2006 69,000 25,000 76,815 -- --
2005 69,000 25,000 78,159 -- --
2004 69,000 25,000 76,896 -- --
2003 69,000 25,000 74,991 -- --
================================================================================
* Total Return 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 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.
+ The amounts shown are based on Common share equivalents.
++ Ratios do not reflect the effect of dividend payments to Preferred
shareholders; income ratios reflect income earned on assets attributable to
Preferred shares.
(a) Interest expense arises from the application of SFAS No. 140 to certain
inverse floating rate transactions entered into by the Fund as more fully
described in Footnote 1 - Inverse Floating Rate Securities.
(b) For the six months ended January 31, 2008.
See accompanying notes to financial statements.
60-61 spread
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 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.
62
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.
63
NOTES
64
NOTES
65
Glossary of
TERMS USED in this REPORT
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 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.
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 common share NAV per share is calculated by
subtracting the liabilities of the Fund (including any MuniPreferred shares
issued in order to leverage the Fund) from its total assets and then
dividing the remainder by the number of shares outstanding. Fund NAVs are
calculated at the end of each business day.
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.
66
Other Useful INFORMATION
QUARTERLY PORTFOLIO OF INVESTMENTS AND PROXY VOTING INFORMATION
Each Fund's (i) 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, 2007, and (iii) a description of the policies
and procedures that the Funds used to determine how to vote proxies relating to
portfolio securities are available 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 1-202-942-8090
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 450 Fifth Street NW, Washington, D.C. 20549.
CEO CERTIFICATION DISCLOSURE
Each Fund's Chief Executive Officer has submitted to the New York Stock Exchange
the annual CEO certification as required by Section 303A.12(a) of the NYSE
Listed Company Manual.
Each Fund has filed with the Securities and Exchange Commission the
certification of its Chief Executive Officer and Chief Financial Officer
required by Section 302 of the Sarbanes-Oxley Act.
BOARD OF TRUSTEES
Robert P. Bremner
Jack B. Evans
William C. Hunter
David J. Kundert
William J. Schneider
Timothy R. Schwertfeger
Judith M. Stockdale
Carole E. Stone
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
Each Fund intends to repurchase shares of its own common or preferred stock in
the future at such times and in such amounts as is deemed advisable. No common
or preferred shares were repurchased during the period covered by this report.
Any future repurchases will be reported to shareholders in the next annual or
semi-annual report.
67
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.
Managing $164 billion in assets, as of December 31, 2007, Nuveen Investments
offers access to a number of different asset classes and investing solutions
through a variety of products. Nuveen Investments markets its capabilities under
six distinct brands: Nuveen, a leader in fixed-income investments; NWQ, a leader
in value-style equities; Rittenhouse, a leader in growth-style equities;
Symphony, a leading institutional manager of market-neutral alternative
investment portfolios; Santa Barbara, a leader in growth equities; and
Tradewinds, a leader in global equities.
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/etf
Share prices
Fund details
Daily financial news
Investor education
Interactive planning tools
ESA-A-0108D
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.
See Portfolio of Investments in Item 1.
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 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: 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. 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 Arizona Dividend Advantage Municipal Fund 3
-----------------------------------------------------------
By (Signature and Title)* /s/ Kevin J. McCarthy
----------------------------------------------
Kevin J. McCarthy
(Vice President and Secretary)
Date: April 9, 2008
-------------------------------------------------------------------
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: April 9, 2008
-------------------------------------------------------------------
By (Signature and Title)* /s/ Stephen D. Foy
----------------------------------------------
Stephen D. Foy
Vice President and Controller
(principal financial officer)
Date: April 9, 2008
-------------------------------------------------------------------
* Print the name and title of each signing officer under his or her signature.