Form N-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM N-Q


QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED MANAGEMENT INVESTMENT COMPANY

Investment Company Act file number         811-10345         

        Nuveen Dividend Advantage Municipal Fund 3         
(Exact name of registrant as specified in charter)

Nuveen Investments
        333 West Wacker Drive, Chicago, Illinois 60606         
(Address of principal executive offices) (Zip code)


Jessica R. Droeger—Vice President and Secretary
        333 West Wacker Drive, Chicago, Illinois 60606         
(Name and address of agent for service)

Registrant's telephone number, including area code:         312-917-7700        

Date of fiscal year end:            10/31          

Date of reporting period:         1/31/07         

Form N-Q is to be used by management investment companies, other than small business investment companies registered on Form N-5 (§§ 239.24 and 274.5 of this chapter), to file reports with the Commission, not later than 60 days after the close of the first and third fiscal quarters, pursuant to rule 30b1-5 under the Investment Company Act of 1940 (17 CFR 270.30b1-5). The Commission may use the information provided on Form N-Q in its regulatory, disclosure review, inspection, and policymaking roles.

A registrant is required to disclose the information specified by Form N-Q, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-Q 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 the 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. § 3507.

Item 1. Schedule of Investments

    Portfolio of Investments (Unaudited)             
    Nuveen Dividend Advantage Municipal Fund 3 (NZF)             
    January 31, 2007             
Principal        Optional Call         
Amount (000)    Description (1)    Provisions (2)    Ratings (3)    Value 
    Alabama – 1.0% (0.6% of Total Investments)             
$          5,655    Alabama State Port Authority, Revenue Bonds, State Docks Department Facilities, Series 2001,    10/11 at 100.00    AAA   $    5,993,621 
     5.250%, 10/01/26 (Pre-refunded 10/01/11) – AMBAC Insured (Alternative Minimum Tax)              
    Alaska – 2.7% (1.7% of Total Investments)             
4,000    Alaska Student Loan Corporation, Student Loan Revenue Bonds, Series 1998A, 5.250%, 7/01/14 –    7/08 at 100.00    AAA    4,057,040 
     AMBAC Insured (Alternative Minimum Tax)             
12,500    Northern Tobacco Securitization Corporation, Alaska, Tobacco Settlement Asset-Backed Bonds,    6/14 at 100.00    Baa3    12,563,875 
     Series 2006A, 5.000%, 6/01/46             
16,500    Total Alaska            16,620,915 
    Arkansas – 0.9% (0.6% of Total Investments)             
    Sebastian County Health Facilities Board, Arkansas, Hospital Revenue Improvement Bonds, Sparks             
    Regional Medical Center, Series 2001A:             
1,805     5.500%, 11/01/13    11/11 at 101.00    Baa2    1,883,806 
1,900     5.500%, 11/01/14    11/11 at 101.00    Baa2    1,977,406 
1,745     5.250%, 11/01/21    11/11 at 101.00    Baa2    1,778,207 
5,450    Total Arkansas            5,639,419 
    California – 12.6% (8.1% of Total Investments)             
    California Health Facilities Financing Authority, Health Facility Revenue Bonds, Adventist             
    Health System/West, Series 2003A:             
855     5.000%, 3/01/28    3/13 at 100.00    A    876,358 
55     5.000%, 3/01/33    3/13 at 100.00    A    56,139 
10,000    California Infrastructure Economic Development Bank, First Lien Revenue Bonds, San Francisco    1/28 at 100.00    AAA    11,187,900 
     Bay Area Toll Bridge, Series 2003A, 5.000%, 7/01/33 (Pre-refunded 1/01/28) – AMBAC Insured (UB)             
5,000    California Infrastructure Economic Development Bank, Revenue Bonds, Kaiser Hospital Assistance    8/11 at 102.00    A+    5,287,550 
     LLC, Series 2001A, 5.550%, 8/01/31             
5,000    California Statewide Community Development Authority, Revenue Bonds, Kaiser Permanente System,    5/07 at 100.00    A+ (4)    4,980,250 
     Series 2004G, 2.300%, 4/01/34 (Pre-refunded 5/01/07)             
18,850    California, General Obligation Veterans Welfare Bonds, Series 2001BZ, 5.350%, 12/01/21 – MBIA    6/07 at 101.00    AAA    19,041,893 
     Insured (Alternative Minimum Tax)             
    Los Angeles Regional Airports Improvement Corporation, California, Lease Revenue Refunding             
    Bonds, LAXFUEL Corporation at Los Angeles International Airport, Series 2001:             
13,955     5.750%, 1/01/16 – AMBAC Insured (Alternative Minimum Tax)    1/12 at 100.00    AAA    14,935,060 
5,000     5.375%, 1/01/21 – AMBAC Insured (Alternative Minimum Tax)    1/12 at 100.00    AAA    5,186,150 
1,500     5.250%, 1/01/23 – AMBAC Insured (Alternative Minimum Tax)    1/12 at 100.00    AAA    1,543,740 
10,000     5.500%, 1/01/32 – AMBAC Insured (Alternative Minimum Tax)    1/12 at 100.00    AAA    10,440,800 
10,000    San Joaquin Hills Transportation Corridor Agency, Orange County, California, Toll Road Revenue    No Opt. Call    AAA    2,866,400 
     Refunding Bonds, Series 1997A, 0.000%, 1/15/35 – MBIA Insured             
3,000    San Mateo County Community College District, California, General Obligation Bonds, Series    No Opt. Call    AAA    1,038,300 
     2006C, 0.000%, 9/01/30 – MBIA Insured             
83,215    Total California            77,440,540 
    Colorado – 6.3% (4.1% of Total Investments)             
2,250    Canterberry Crossing Metropolitan District II, Parker, Colorado, Limited Tax General    12/12 at 100.00    N/R    2,442,105 
     Obligation Bonds, Series 2002, 7.375%, 12/01/32             
1,655    Colorado Educational and Cultural Facilities Authority, Charter School Revenue Bonds, Belle    3/12 at 100.00    N/R    1,724,361 
     Creek Education Center, Series 2002A, 7.625%, 3/15/32             
3,240    Colorado Educational and Cultural Facilities Authority, Charter School Revenue Bonds,    3/10 at 102.00    N/R (4)    3,621,575 
     Montessori Peaks Building Foundation, Series 2002A, 8.000%, 5/01/32 (Pre-refunded 3/01/10)             
1,775    Colorado Educational and Cultural Facilities Authority, Charter School Revenue Bonds, Weld    6/11 at 100.00    Ba1 (4)    2,005,395 
     County School District 6 – Frontier Academy, Series 2001, 7.375%, 6/01/31 (Pre-refunded             
     6/01/11)             
3,560    Colorado Educational and Cultural Facilities Authority, Revenue Bonds, Montessori Peaks    5/16 at 102.00    N/R    3,490,794 
     Academy, Series 2006, 5.400%, 5/01/26             
3,380    Colorado Housing Finance Authority, Multifamily Project Bonds, Class I, Series 2001A-1,    10/11 at 100.00    AAA    3,494,041 
     5.500%, 4/01/31 (Alternative Minimum Tax)             
10,100    Colorado Springs, Colorado, Utility System Revenue Refunding and Improvement Bonds, Series    11/07 at 100.00    AA    10,204,535 
     1997A, 5.375%, 11/15/26             
5,365    Denver City and County, Colorado, Airport Revenue Bonds, Series 2006, 5.000%, 11/15/23 – FGIC    11/16 at 100.00    AAA    5,699,615 
     Insured (UB)             
2,545    Denver City and County, Colorado, Airport Revenue Bonds, Series 2006, 7.261%, 11/15/25 – (IF)    11/16 at 100.00    N/R    3,003,864 
2,000    Denver City and County, Colorado, Airport System Revenue Refunding Bonds, Series 2001A,    11/11 at 100.00    AAA    2,117,380 
     5.500%, 11/15/16 – FGIC Insured (Alternative Minimum Tax)             
1,000    Plaza Metropolitan District 1, Lakewood, Colorado, Tax Increment Revenue Bonds, Series 2003,    6/14 at 101.00    N/R    1,107,620 
     8.000%, 12/01/25             
36,870    Total Colorado            38,911,285 
    Delaware – 0.4% (0.3% of Total Investments)             
2,560    Delaware Housing Authority, Multifamily Mortgage Revenue Bonds, Series 2001A, 5.400%, 7/01/24    7/12 at 100.00    Aa3    2,630,298 
    District of Columbia – 1.0% (0.7% of Total Investments)             
6,000    District of Columbia, Revenue Bonds, Catholic University of America, Series 1999, 5.625%,    10/09 at 101.00    AAA    6,299,460 
     10/01/29 – AMBAC Insured             
    Florida – 1.6% (1.0% of Total Investments)             
2,000    Dade County, Florida, Water and Sewerage System Revenue Bonds, Series 1997, 5.375%, 10/01/16 –    10/07 at 102.00    AAA    2,060,120 
     FGIC Insured             
    Orange County Housing Finance Authority, Florida, Multifamily Housing Revenue Bonds, Oak Glen             
    Apartments, Series 2001G:             
1,105     5.400%, 12/01/32 – FSA Insured    12/11 at 100.00    AAA    1,138,073 
2,195     5.450%, 12/01/41 – FSA Insured    12/11 at 100.00    AAA    2,256,219 
4,175    Pace Property Finance Authority Inc., Florida, Utility System Improvement and Revenue    9/07 at 102.00    AAA    4,291,399 
     Refunding Bonds, Series 1997, 5.250%, 9/01/17 – AMBAC Insured             
9,475    Total Florida            9,745,811 
    Georgia – 2.4% (1.5% of Total Investments)             
5,000    Atlanta, Georgia, Airport General Revenue Bonds, Series 2000B, 5.625%, 1/01/30 – FGIC Insured    1/10 at 101.00    AAA    5,238,450 
     (Alternative Minimum Tax)             
2,700    Atlanta, Georgia, Tax Allocation Bonds, Atlantic Station Project, Series 2001, 7.900%, 12/01/24    12/11 at 101.00    N/R    2,988,468 
2,000    Fulton County Residential Care Facilities Authority, Georgia, Revenue Bonds, Elderly Care,    7/17 at 100.00    N/R    1,947,340 
     Lenbrook Square Project, Series 2006A, 5.125%, 7/01/42             
3,740    Gainesville and Hall County Hospital Authority, Georgia, Revenue Anticipation Certificates,    5/11 at 100.00    A–    3,884,850 
     Northeast Georgia Health Services Inc., Series 2001, 5.500%, 5/15/31             
500    Gainesville Redevelopment Authority, Georgia, Educational Facilities Revenue Bonds, Riverside    3/17 at 100.00    N/R    511,045 
     Military Academy Project, Series 2007, 5.125%, 3/01/37             
13,940    Total Georgia            14,570,153 
    Illinois – 20.6% (13.5% of Total Investments)             
16,000    Chicago Greater Metropolitan Area Sanitary District, Illinois, General Obligation Bonds,    12/16 at 100.00    AAA    16,935,680 
     Series 2006, 5.000%, 12/01/35 (UB)             
285    Chicago, Illinois, General Obligation Refunding Bonds, Series 1996B, 5.125%, 1/01/25 – FGIC    7/07 at 101.00    AAA    287,719 
     Insured             
8,375    Chicago, Illinois, Revenue Bonds, Midway Airport, Series 2001A, 5.500%, 1/01/19 – FSA Insured    1/11 at 101.00    AAA    8,827,501 
     (Alternative Minimum Tax)             
1,750    Chicago, Illinois, Sales Tax Revenue Bonds, Series 1998, 5.250%, 1/01/28 – FGIC Insured    7/08 at 102.00    AAA    1,811,635 
10,800    Chicago, Illinois, Sales Tax Revenue Bonds, Series 1999, 5.375%, 1/01/30 (Pre-refunded    1/09 at 101.00    AAA    11,226,924 
     1/01/09) – FGIC Insured             
4,950    Chicago, Illinois, Second Lien Passenger Facility Charge Revenue Bonds, O’Hare International    1/11 at 101.00    AAA    5,160,870 
     Airport, Series 2001A, 5.375%, 1/01/32 – AMBAC Insured (Alternative Minimum Tax)             
8,610    Chicago, Illinois, Second Lien Wastewater Transmission Revenue Bonds, Series 2001A, 5.500%,    1/11 at 100.00    AAA    9,145,800 
     1/01/26 (Pre-refunded 1/01/11) – AMBAC Insured             
2,220    Chicago, Illinois, Second Lien Wastewater Transmission Revenue Bonds, Series 2001A, 5.500%,    No Opt. Call    AAA    2,466,731 
     1/01/16 – MBIA Insured             
10,000    Chicago, Illinois, Senior Lien Water Revenue Bonds, Series 2001, 5.000%, 11/01/26    11/11 at 100.00    AAA    10,527,600 
     (Pre-refunded 11/01/11) – AMBAC Insured             
1,665    Chicago, Illinois, Third Lien General Airport Revenue Bonds, O’Hare International Airport,    1/16 at 100.00    AAA    1,744,853 
     Series 2005A, 5.000%, 1/01/33 – FGIC Insured             
2,415    Illinois Finance Authority, General Obligation Debt Certificates, Local Government Program –    12/14 at 100.00    Aaa    2,536,933 
     Kankakee County, Series 2005B, 5.000%, 12/01/24 – AMBAC Insured             
1,100    Illinois Health Facilities Authority, Revenue Bonds, Condell Medical Center, Series 2000,    5/10 at 101.00    Baa2    1,175,790 
     6.500%, 5/15/30             
9,000    Illinois Health Facilities Authority, Revenue Bonds, Covenant Retirement Communities Inc.,    12/11 at 101.00    BBB    9,446,130 
     Series 2001, 5.875%, 12/01/31             
15,000    Illinois Health Facilities Authority, Revenue Bonds, Loyola University Health System, Series    7/11 at 100.00    Baa2 (4)    16,316,100 
     2001A, 6.125%, 7/01/31 (Pre-refunded 7/01/11)             
5,000    Lake County School District 38, Big Hallow, Illinois, General Obligation Bonds, Series 2005,    No Opt. Call    Aaa    2,602,800 
     0.000%, 2/01/22 – AMBAC Insured             
7,000    Lombard Public Facilities Corporation, Illinois, First Tier Conference Center and Hotel    1/16 at 100.00    N/R    7,521,220 
     Revenue Bonds, Series 2005A-1, 7.125%, 1/01/36             
16,900    Metropolitan Pier and Exposition Authority, Illinois, Revenue Bonds, McCormick Place Expansion    12/09 at 101.00    AAA    17,603,885 
     Project, Series 1999A, 5.250%, 12/15/28 – FGIC Insured             
2,000    Metropolitan Pier and Exposition Authority, Illinois, Revenue Refunding Bonds, McCormick Place    No Opt. Call    AAA    2,353,740 
     Expansion Project, Series 1998A, 5.500%, 6/15/29 – FGIC Insured             
123,070    Total Illinois            127,691,911 
    Indiana – 5.8% (3.7% of Total Investments)             
    Clark-Pleasant Community School Building Corporation, Indiana, First Mortgage Bonds,             
    Series 2001:             
1,255     5.000%, 7/15/21 (Pre-refunded 1/15/12) – AMBAC Insured    1/12 at 100.00    AAA    1,322,707 
1,000     5.000%, 1/15/26 (Pre-refunded 1/15/12) – AMBAC Insured    1/12 at 100.00    AAA    1,053,950 
    Evansville Vanderburgh Public Library Lease Corporation, Indiana, First Mortgage Bonds,             
    Series 2001:             
2,000     5.750%, 7/15/18 (Pre-refunded 1/15/12) – MBIA Insured    1/12 at 100.00    AAA    2,175,080 
2,750     5.125%, 1/15/24 (Pre-refunded 1/15/12) – MBIA Insured    1/12 at 100.00    AAA    2,913,763 
3,395    Gary, Indiana, GNMA/FHA Mortgage Revenue Bonds, Windsor Square Project, Series 2001A, 5.375%,    11/11 at 102.00    AAA    3,482,218 
     10/20/41 (Alternative Minimum Tax)             
1,250    Hamilton Southeastern Cumberland Campus School Building Corporation, Indiana, First Mortgage    1/12 at 100.00    AAA    1,324,438 
     Bonds, Series 2001, 5.125%, 1/15/23 (Pre-refunded 1/15/12) – AMBAC Insured             
9,500    Indiana Educational Facilities Authority, Revenue Bonds, Butler University, Series 2001,    2/11 at 100.00    AAA    10,003,975 
     5.500%, 2/01/26 – MBIA Insured             
4,230    Indiana Finance Authority, Educational Facilities Revenue Bonds, Tudor Park Foundation, Series    6/15 at 100.00    Aa3    4,409,690 
     2005B, 5.000%, 6/01/24             
2,800    Indiana Health Facility Financing Authority, Revenue Bonds, Community Hospitals of Indiana,    5/15 at 100.00    AAA    2,919,924 
     Series 2005A, 5.000%, 5/01/35 – AMBAC Insured             
3,500    University of Southern Indiana, Student Fee Bonds, Series 2001H, 5.000%, 10/01/21 – AMBAC    10/11 at 100.00    Aaa    3,652,775 
     Insured             
    Wayne County Jail Holding Corporation, Indiana, First Mortgage Bonds, Series 2001:             
1,150     5.625%, 7/15/18 – AMBAC Insured    1/13 at 101.00    AAA    1,259,457 
1,090     5.500%, 7/15/22 – AMBAC Insured    1/13 at 101.00    AAA    1,182,061 
33,920    Total Indiana            35,700,038 
    Iowa – 5.8% (3.8% of Total Investments)             
2,000    Iowa Finance Authority, Healthcare Revenue Bonds, Great River Medical Center, Series 2001,    5/11 at 100.00    Aaa    2,073,160 
     5.250%, 5/15/31 – FSA Insured             
    Iowa Tobacco Settlement Authority, Tobacco Settlement Asset-Backed Revenue Bonds, Series 2001B:             
28,000     5.300%, 6/01/25 (Pre-refunded 6/01/11)    6/11 at 101.00    AAA    29,640,519 
3,950     5.600%, 6/01/35 (Pre-refunded 6/01/11)    6/11 at 101.00    AAA    4,255,888 
33,950    Total Iowa            35,969,567 
    Kentucky – 3.1% (2.0% of Total Investments)             
18,500    Louisville and Jefferson County Metropolitan Sewer District, Kentucky, Sewer and Drainage    11/11 at 101.00    AAA    19,435,174 
     System Revenue Bonds, Series 2001A, 5.125%, 5/15/27 – MBIA Insured             
    Louisiana – 3.4% (2.2% of Total Investments)             
19,890    Tobacco Settlement Financing Corporation, Louisiana, Tobacco Settlement Asset-Backed Bonds,    5/11 at 101.00    BBB    21,292,642 
     Series 2001B, 5.875%, 5/15/39             
    Maine – 1.1% (0.7% of Total Investments)             
    Maine State Housing Authority, Single Family Mortgage Purchase Bonds, Series 2001B:             
4,610     5.400%, 11/15/21 (Alternative Minimum Tax)    11/10 at 100.00    AA+    4,737,697 
1,745     5.500%, 11/15/32 (Alternative Minimum Tax)    11/10 at 100.00    AA+    1,766,411 
6,355    Total Maine            6,504,108 
    Maryland – 2.3% (1.5% of Total Investments)             
1,570    Maryland Community Development Administration, Insured Multifamily Housing Mortgage Loan    7/11 at 100.00    Aa2    1,614,415 
     Revenue Bonds, Series 2001B, 5.250%, 7/01/21 (Alternative Minimum Tax)             
2,000    Maryland Economic Development Corporation, Revenue Bonds, Chesapeake Bay Hyatt Conference    12/16 at 100.00    N/R    2,006,800 
     Center, Series 2006A, 5.000%, 12/01/31             
10,600    Maryland Energy Financing Administration, Revenue Bonds, AES Warrior Run Project, Series 1995,    9/07 at 100.00    N/R    10,657,982 
     7.400%, 9/01/19 (Alternative Minimum Tax)             
14,170    Total Maryland            14,279,197 
    Massachusetts – 1.0% (0.7% of Total Investments)             
5,000    Massachusetts Port Authority, Special Facilities Revenue Bonds, Delta Air Lines Inc., Series    1/11 at 101.00    AAA    5,275,750 
     2001A, 5.500%, 1/01/18 – AMBAC Insured (Alternative Minimum Tax)             
1,000    Massachusetts Water Resources Authority, General Revenue Bonds, Series 2007, Residual Trust    2/17 at 100.00    Aaa    942,940 
     7039, 5.850%, 8/01/46 (WI/DD, Settling 2/01/07) – (IF)             
6,000    Total Massachusetts            6,218,690 
    Michigan – 9.2% (5.9% of Total Investments)             
15,000    Detroit City School District, Wayne County, Michigan, Unlimited Tax School Building and Site    No Opt. Call    AAA    18,502,050 
     Improvement Bonds, Series 2001A, 6.000%, 5/01/29 – FSA Insured             
11,000    Kent Hospital Finance Authority, Michigan, Revenue Bonds, Spectrum Health, Series 2001A,    7/11 at 101.00    AA (4)    11,836,220 
     5.500%, 1/15/31 (Pre-refunded 7/15/11)             
1,235    Michigan State Building Authority, Revenue Bonds, Facilities Program, Series 2001I, 5.500%,    10/11 at 100.00    AA–    1,318,844 
     10/15/18             
1,355    Michigan State Hospital Finance Authority, Hospital Revenue Bonds, Detroit Medical Center    8/08 at 101.00    BB–    1,368,902 
     Obligated Group, Series 1998A, 5.250%, 8/15/23             
3,485    Michigan State Hospital Finance Authority, Hospital Revenue Refunding Bonds, Sisters of Mercy    No Opt. Call    AAA    3,690,859 
     Health Corporation, Series 1993P, 5.375%, 8/15/14 – MBIA Insured (ETM)             
    Michigan State Hospital Finance Authority, Hospital Revenue Refunding Bonds, Sparrow Obligated             
    Group, Series 2001:             
1,400     5.500%, 11/15/21    11/11 at 101.00    A+    1,484,266 
2,500     5.625%, 11/15/31    11/11 at 101.00    A+    2,656,075 
12,640    Royal Oak Hospital Finance Authority, Michigan, Hospital Revenue Bonds, William Beaumont    11/11 at 100.00    AAA    13,167,720 
     Hospital, Series 2001M, 5.250%, 11/15/31 – MBIA Insured             
2,395    Ypsilanti Community Utilities Authority, Washtenaw County, Michigan, General Obligation Bonds,    5/11 at 100.00    AAA    2,523,204 
     Sanitary Sewerage System 3, Series 2001, 5.100%, 5/01/31 (Pre-refunded 5/01/11) – FGIC Insured             
51,010    Total Michigan            56,548,140 
    Minnesota – 0.6% (0.4% of Total Investments)             
2,330    Dakota County Community Development Agency, Minnesota, GNMA Collateralized Multifamily Housing    10/11 at 105.00    Aaa    2,476,417 
     Revenue Bonds, Rose Apartments Project, Series 2001, 6.350%, 10/20/37 (Alternative Minimum Tax)             
1,000    Saint Paul Port Authority, Minnesota, Lease Revenue Bonds, Regions Hospital Parking Ramp    8/16 at 100.00    N/R    1,008,280 
     Project, Series 2007-1, 5.000%, 8/01/36             
3,330    Total Minnesota            3,484,697 
    Mississippi – 0.4% (0.2% of Total Investments)             
2,155    Mississippi Business Finance Corporation, GNMA Collateralized Retirement Facility Mortgage    5/09 at 103.00    AAA    2,239,045 
     Revenue Refunding Bonds, Aldersgate Retirement Community Inc. Project, Series 1999A, 5.450%,             
     5/20/34             
    Missouri – 2.5% (1.6% of Total Investments)             
1,825    Fenton, Missouri, Tax Increment Refunding and Improvement Revenue Bonds, Gravois Bluffs    10/12 at 100.00    N/R (4)    2,037,412 
     Redevelopment Project, Series 2002, 6.125%, 10/01/21 (Pre-refunded 10/01/12)             
    Missouri Development Finance Board, Cultural Facilities Revenue Bonds, Nelson Gallery             
    Foundation, Series 2001A:             
3,335     5.250%, 12/01/19 – MBIA Insured    12/11 at 100.00    AAA    3,530,664 
3,510     5.250%, 12/01/20 – MBIA Insured    12/11 at 100.00    AAA    3,715,932 
3,695     5.250%, 12/01/21 – MBIA Insured    12/11 at 100.00    AAA    3,911,786 
2,040     5.250%, 12/01/22 – MBIA Insured    12/11 at 100.00    AAA    2,148,202 
14,405    Total Missouri            15,343,996 
    Montana – 0.8% (0.5% of Total Investments)             
5,000    Montana Board of Investments, Exempt Facility Revenue Bonds, Stillwater Mining Company, Series    7/10 at 101.00    B2    5,185,600 
     2000, 8.000%, 7/01/20 (Alternative Minimum Tax)             
    Nebraska – 1.6% (1.1% of Total Investments)             
    Nebraska Investment Finance Authority, Single Family Housing Revenue Bonds, Series 2001D:             
2,255     5.250%, 9/01/21 (Alternative Minimum Tax)    9/11 at 100.00    AAA    2,281,519 
3,035     5.375%, 9/01/32 (Alternative Minimum Tax)    9/11 at 100.00    AAA    3,069,811 
4,490    Omaha Public Power District, Nebraska, Separate Electric System Revenue Bonds, Nebraska City    2/17 at 100.00    AAA    4,709,786 
     2, Series 2006A, 5.000%, 2/01/49 – AMBAC Insured (UB)             
9,780    Total Nebraska            10,061,116 
    Nevada – 7.8% (5.0% of Total Investments)             
35,000    Clark County, Nevada, Limited Tax General Obligation Bank Bonds, Series 2000, 5.500%, 7/01/30    7/10 at 100.00    AAA    36,940,049 
     (Pre-refunded 7/01/10) – MBIA Insured (5)             
2,000    Director of Nevada State Department of Business and Industry, Revenue Bonds, Las Vegas    1/10 at 100.00    AAA    2,064,920 
     Monorail Project, First Tier, Series 2000, 5.375%, 1/01/40 – AMBAC Insured             
4,000    Director of Nevada State Department of Business and Industry, Revenue Bonds, Las Vegas    1/10 at 102.00    N/R    4,258,680 
     Monorail Project, Second Tier, Series 2000, 7.375%, 1/01/40             
255    Nevada Housing Division, Single Family Mortgage Bonds, Senior Series 1998A-1, 5.300%, 4/01/18    4/08 at 101.50    Aaa    255,627 
     (Alternative Minimum Tax)             
4,290    University of Nevada, Revenue Bonds, Community College System, Series 2001A, 5.250%, 7/01/26 –    1/12 at 100.00    AAA    4,505,573 
     FGIC Insured             
45,545    Total Nevada            48,024,849 
    New Hampshire – 0.3% (0.2% of Total Investments)             
2,000    New Hampshire Health and Education Authority, Hospital Revenue Bonds, Concord Hospital, Series    10/11 at 101.00    Aaa    2,140,420 
     2001, 5.500%, 10/01/21 – FSA Insured             
    New Jersey – 4.0% (2.6% of Total Investments)             
10,000    New Jersey Economic Development Authority, Water Facilities Revenue Bonds, American Water    11/12 at 101.00    Aaa    10,532,800 
     Company, Series 2002A, 5.250%, 11/01/32 – AMBAC Insured (Alternative Minimum Tax)             
4,125    New Jersey Transit Corporation, Certificates of Participation, Federal Transit Administration    No Opt. Call    AAA    4,505,490 
     Grants, Series 2002A, 5.500%, 9/15/13 – AMBAC Insured             
20,000    New Jersey Transportation Trust Fund Authority, Transportation System Bonds, Series 2006C,    No Opt. Call    AAA    7,621,400 
     0.000%, 12/15/28 – AMBAC Insured             
2,000    Tobacco Settlement Financing Corporation, New Jersey, Tobacco Settlement Asset-Backed Bonds,    6/17 at 100.00    BBB    1,918,600 
     Series 2007-1A, 4.750%, 6/01/34             
36,125    Total New Jersey            24,578,290 
    New York – 4.0% (2.6% of Total Investments)             
1,780    East Rochester Housing Authority, New York, GNMA Secured Revenue Bonds, Gates Senior Housing    10/11 at 101.00    AAA    1,847,248 
     Inc., Series 2001, 5.300%, 4/20/31             
5,015    Hudson Yards Infrastructure Corporation, New York, Revenue Bonds, Series 2006A, 4.500%,    2/17 at 100.00    AAA    4,958,882 
     2/15/47 – MBIA Insured (UB)             
4,155    Monroe County Airport Authority, New York, Revenue Refunding Bonds, Greater Rochester    No Opt. Call    AAA    4,502,732 
     International Airport, Series 1999, 5.750%, 1/01/13 – MBIA Insured (Alternative Minimum Tax)             
7,000    New York City Industrial Development Agency, New York, American Airlines-JFK International    8/16 at 101.00    B    8,603,420 
     Airport Special Facility Revenue Bonds, Series 2005, 7.750%, 8/01/31 (Alternative Minimum Tax)             
1,715    New York City, New York, General Obligation Bonds, Fiscal Series 2002G, 5.625%, 8/01/20 – MBIA    8/12 at 100.00    AAA    1,868,595 
     Insured             
785    New York City, New York, General Obligation Bonds, Fiscal Series 2002G, 5.625%, 8/01/20    8/12 at 100.00    AAA    859,253 
     (Pre-refunded 8/01/12) – MBIA Insured             
2,000    New York State Tobacco Settlement Financing Corporation, Tobacco Settlement Asset-Backed and    6/11 at 100.00    AA–    2,130,860 
     State Contingency Contract-Backed Bonds, Series 2003B-1C, 5.500%, 6/01/16             
22,450    Total New York            24,770,990 
    North Carolina – 1.1% (0.7% of Total Investments)             
    Charlotte-Mecklenburg Hospital Authority, North Carolina, Healthcare System Revenue Bonds, DBA             
    Carolinas Healthcare System, Series 2005A:             
1,750     4.875%, 1/15/32    1/15 at 100.00    AA    1,782,305 
3,000     5.000%, 1/15/45    1/15 at 100.00    AA    3,104,400 
1,800    North Carolina Municipal Power Agency 1, Catawba Electric Revenue Bonds, Series 2003A, 5.500%,    No Opt. Call    A3    1,937,502 
     1/01/13             
6,550    Total North Carolina            6,824,207 
    Ohio – 2.2% (1.4% of Total Investments)             
2,170    Ohio Housing Finance Agency, GNMA Mortgage-Backed Securities Program Residential Mortgage    3/08 at 101.50    AAA    2,218,174 
     Revenue Bonds, Series 1998A-1, 5.300%, 9/01/19 – FSA Insured (Alternative Minimum Tax)             
7,400    Ohio Water Development Authority, Solid Waste Disposal Revenue Bonds, Bay Shore Power, Series    9/09 at 102.00    N/R    7,661,220 
     1998B, 6.625%, 9/01/20 (Alternative Minimum Tax)             
    Portage County, Ohio, General Obligation Bonds, Series 2001:             
1,870     5.000%, 12/01/21 – FGIC Insured    12/11 at 100.00    AAA    1,955,104 
1,775     5.000%, 12/01/23 – FGIC Insured    12/11 at 100.00    AAA    1,845,876 
13,215    Total Ohio            13,680,374 
    Oklahoma – 0.4% (0.3% of Total Investments)             
2,500    Oklahoma Development Finance Authority, Revenue Refunding Bonds, Hillcrest Healthcare System,    8/09 at 101.00    AAA    2,634,275 
     Series 1999A, 5.625%, 8/15/29 (Pre-refunded 8/15/09)             
    Oregon – 2.5% (1.6% of Total Investments)             
4,700    Oregon Health, Housing, Educational and Cultural Facilities Authority, Revenue Bonds,    11/11 at 101.00    AAA    4,966,020 
     PeaceHealth Project, Series 2001, 5.250%, 11/15/21 – AMBAC Insured             
10,000    Oregon Housing and Community Services Department, Multifamily Housing Revenue Bonds, Series    7/10 at 100.00    Aaa    10,303,700 
     2000A, 6.050%, 7/01/42 (Alternative Minimum Tax)             
14,700    Total Oregon            15,269,720 
    Pennsylvania – 1.9% (1.2% of Total Investments)             
    Allegheny County Hospital Development Authority, Pennsylvania, Revenue Bonds, West Penn             
    Allegheny Health System, Series 2000B:             
2,000     9.250%, 11/15/22    11/10 at 102.00    Ba3    2,372,680 
2,000     9.250%, 11/15/30    11/10 at 102.00    Ba3    2,368,820 
3,500    Pennsylvania Economic Development Financing Authority, Senior Lien Resource Recovery Revenue    7/07 at 100.00    B+    3,537,660 
     Bonds, Northampton Generating Project, Series 1994A, 6.600%, 1/01/19 (Alternative Minimum Tax)             
3,205    Philadelphia School District, Pennsylvania, General Obligation Bonds, Series 2002B, 5.625%,    8/12 at 100.00    AAA    3,498,674 
     8/01/16 (Pre-refunded 8/01/12) – FGIC Insured             
10,705    Total Pennsylvania            11,777,834 
    South Carolina – 1.6% (1.0% of Total Investments)             
2,185    Greenville County, South Carolina, Special Source Revenue Bonds, Road Improvement Project,    4/11 at 101.00    AAA    2,332,378 
     Series 2001, 5.500%, 4/01/21 – AMBAC Insured             
6,850    South Carolina Transportation Infrastructure Bank, Revenue Bonds, Series 2001A, 5.500%,    10/11 at 100.00    Aaa    7,338,748 
     10/01/22 (Pre-refunded 10/01/11) – AMBAC Insured             
9,035    Total South Carolina            9,671,126 
    Tennessee – 1.4% (0.9% of Total Investments)             
3,680    Knox County Health, Educational and Housing Facilities Board, Tennessee, Hospital Revenue    1/17 at 30.07    A–    651,618 
     Refunding Bonds, Covenant Health, Series 2006, 0.000%, 1/01/41             
5,210    Memphis-Shelby County Airport Authority, Tennessee, Airport Revenue Bonds, Series 2001A,    3/11 at 100.00    AAA    5,467,530 
     5.500%, 3/01/14 – FSA Insured (Alternative Minimum Tax)             
275    Sullivan County Health Educational and Housing Facilities Board, Tennessee, Revenue Bonds,    9/16 at 100.00    BBB+    286,982 
     Wellmont Health System, Series 2006C, 5.250%, 9/01/36             
945    Tennessee Housing Development Agency, Homeownership Program Bonds, Series 1998-2, 5.350%,    1/09 at 101.00    AA    964,023 
     7/01/23 (Alternative Minimum Tax)             
975    Tennessee Housing Development Agency, Homeownership Program Bonds, Series 2001-3A, 5.200%,    7/11 at 100.00    AA    998,420 
     7/01/22 (Alternative Minimum Tax)             
11,085    Total Tennessee            8,368,573 
    Texas – 17.7% (11.6% of Total Investments)             
5,445    Board of Regents, University of Texas System, Financing System Revenue Bonds, Series 2006F,    2/17 at 100.00    AAA    5,215,112 
     4.250%, 8/15/36 (UB)             
1,125    Brushy Creek Municipal Utility District, Williamson County, Texas, Combination Unlimited Tax    6/09 at 100.00    Aaa    1,150,346 
     and Revenue Refunding Bonds, Series 2001, 5.125%, 6/01/26 – FSA Insured             
    Collins and Denton Counties, Frisco, Texas, General Obligation Bonds, Series 2001:             
1,910     5.000%, 2/15/20 – FGIC Insured    2/11 at 100.00    AAA    1,978,741 
2,005     5.000%, 2/15/21 – FGIC Insured    2/11 at 100.00    AAA    2,080,188 
3,850    Dallas-Ft. Worth International Airport, Texas, Joint Revenue Refunding and Improvement Bonds,    11/11 at 100.00    AAA    4,062,366 
     Series 2001A, 5.500%, 11/01/35 – FGIC Insured (Alternative Minimum Tax)             
5,000    Decatur Hospital Authority, Texas, Revenue Bonds, Wise Regional Health System, Series 2004A,    9/14 at 100.00    N/R    5,485,600 
     7.000%, 9/01/25             
4,040    Harris County, Texas, Tax and Revenue Certificates of Obligation, Series 2001, 5.000%, 8/15/27    8/11 at 100.00    AA+    4,164,634 
6,000    Houston, Texas, Junior Lien Water and Sewerage System Revenue Refunding Bonds, Series 2001B,    No Opt. Call    AAA    7,132,920 
     5.500%, 12/01/29 – MBIA Insured (ETM)             
7,000    Houston, Texas, Subordinate Lien Airport System Revenue Bonds, Series 1998B, 5.250%, 7/01/14 –    7/08 at 101.00    AAA    7,188,230 
     FGIC Insured (Alternative Minimum Tax)             
    Houston, Texas, Subordinate Lien Airport System Revenue Refunding Bonds, Series 2001A:             
2,525     5.500%, 7/01/13 – FGIC Insured (Alternative Minimum Tax)    1/12 at 100.00    AAA    2,677,409 
2,905     5.500%, 7/01/14 – FGIC Insured (Alternative Minimum Tax)    1/12 at 100.00    AAA    3,098,299 
4,735    Hutto Independent School District, Williamson County, Texas, General Obligation Bonds, Series    No Opt. Call    AAA    4,946,749 
     2007, Residuals 07-1001, 6.510%, 2/01/14 (WI/DD, Settling 2/01/07) (IF)             
    Jefferson County Health Facilities Development Corporation, Texas, FHA-Insured Mortgage             
    Revenue Bonds, Baptist Hospital of Southeast Texas, Series 2001:             
8,500     5.400%, 8/15/31 – AMBAC Insured    8/11 at 100.00    AAA    8,910,975 
8,500     5.500%, 8/15/41 – AMBAC Insured    8/11 at 100.00    AAA    8,948,545 
10,700    Laredo Independent School District, Webb County, Texas, General Obligation Refunding Bonds,    8/11 at 100.00    AAA    11,087,661 
     Series 2001, 5.000%, 8/01/25             
2,500    Matagorda County Navigation District 1, Texas, Collateralized Revenue Refunding Bonds, Houston    No Opt. Call    AAA    2,738,975 
     Light and Power Company, Series 1997, 5.125%, 11/01/28 – AMBAC Insured (Alternative Minimum             
     Tax)             
1,540    Medina Valley Independent School District, Medina County, Texas, General Obligation Bonds,    2/11 at 100.00    Aaa    1,624,330 
     Series 2001, 5.250%, 2/15/26 (Pre-refunded 2/15/11)             
5,430    Mineral Wells Independent School District, Pale Pinto and Parker Counties, Texas, Unlimited    2/08 at 100.00    Aaa    5,464,372 
     School Tax Building and Refunding Bonds, Series 1998, 4.750%, 2/15/22             
2,905    North Central Texas Health Facilities Development Corporation, Revenue Bonds, Texas Health    2/08 at 102.00    AAA    2,997,640 
     Resources System, Series 1997B, 5.375%, 2/15/26 – MBIA Insured             
95    North Central Texas Health Facilities Development Corporation, Revenue Bonds, Texas Health    2/08 at 102.00    Aaa    98,469 
     Resources System, Series 1997B, 5.375%, 2/15/26 (Pre-refunded 2/15/08) – MBIA Insured             
3,045    Port of Houston Authority, Harris County, Texas, General Obligation Port Improvement Bonds,    10/11 at 100.00    AAA    3,211,653 
     Series 2001B, 5.500%, 10/01/17 – FGIC Insured (Alternative Minimum Tax)             
10,665    Texas Department of Housing and Community Affairs, Residential Mortgage Revenue Bonds, Series    7/11 at 100.00    AAA    10,957,861 
     2001A, 5.350%, 7/01/33 (Alternative Minimum Tax)             
    White Settlement Independent School District, Tarrant County, Texas, General Obligation Bonds,             
    Series 2006:             
9,110     0.000%, 8/15/37    8/15 at 31.98    AAA    1,949,449 
9,110     0.000%, 8/15/40    8/15 at 27.11    AAA    1,651,188 
7,110     0.000%, 8/15/44    8/15 at 21.88    AAA    1,039,340 
125,750    Total Texas            109,861,052 
    Utah – 0.8% (0.5% of Total Investments)             
    Utah Housing Corporation, Single Family Mortgage Bonds, Series 2001E:             
1,695     5.200%, 1/01/18 (Alternative Minimum Tax)    7/11 at 100.00    AA–    1,726,612 
535     5.500%, 1/01/23 (Alternative Minimum Tax)    7/11 at 100.00    Aa2    546,160 
    Utah Housing Corporation, Single Family Mortgage Bonds, Series 2001F-1:             
2,175     4.950%, 7/01/18 (Alternative Minimum Tax)    7/11 at 100.00    Aa2    2,189,747 
550     5.300%, 7/01/23 (Alternative Minimum Tax)    7/11 at 100.00    AA–    555,660 
4,955    Total Utah            5,018,179 
    Virginia – 0.8% (0.5% of Total Investments)             
7,000    Pocahontas Parkway Association, Virginia, Senior Lien Revenue Bonds, Route 895 Connector Toll    8/08 at 77.58    AAA    5,126,940 
     Road, Series 1998B, 0.000%, 8/15/13 (Pre-refunded 8/15/08)             
    Washington – 15.5% (10.2% of Total Investments)             
    Bellingham Housing Authority, Washington, Housing Revenue Bonds, Varsity Village Project,             
    Series 2001A:             
1,000     5.500%, 12/01/27 – MBIA Insured    12/11 at 100.00    Aaa    1,060,760 
2,000     5.600%, 12/01/36 – MBIA Insured    12/11 at 100.00    Aaa    2,130,200 
1,500    Grays Harbor County Public Utility District 1, Washington, Electric System Revenue Bonds,    1/11 at 100.00    AAA    1,573,035 
     Series 2001, 5.125%, 1/01/22 (Pre-refunded 1/01/11) – AMBAC Insured             
2,475    Klickitat County Public Utility District 1, Washington, Electric Revenue Bonds, Series 2001B,    12/11 at 100.00    AAA    2,607,685 
     5.000%, 12/01/26 (Pre-refunded 12/01/11) – AMBAC Insured             
12,955    Port of Seattle, Washington, Passenger Facility Charge Revenue Bonds, Series 1998B, 5.300%,    12/08 at 101.00    AAA    13,338,209 
     12/01/16 – AMBAC Insured (Alternative Minimum Tax)             
    Port of Seattle, Washington, Revenue Bonds, Series 2001B:             
2,535     5.625%, 4/01/18 – FGIC Insured (Alternative Minimum Tax)    10/11 at 100.00    AAA    2,694,756 
16,000     5.100%, 4/01/24 – FGIC Insured (Alternative Minimum Tax)    10/08 at 100.00    AAA    16,168,160 
2,090    Public Utility District 1, Benton County, Washington, Electric Revenue Refunding Bonds, Series    11/11 at 100.00    AAA    2,250,449 
     2001A, 5.625%, 11/01/15 – FSA Insured             
5,680    Seattle, Washington, Municipal Light and Power Revenue Refunding and Improvement Bonds, Series    3/11 at 100.00    AAA    6,007,736 
     2001, 5.500%, 3/01/18 – FSA Insured             
4,530    Tacoma, Washington, Solid Waste Utility Revenue Refunding Bonds, Series 2001, 5.250%, 12/01/21    12/11 at 100.00    AAA    4,822,457 
     (Pre-refunded 12/01/11) – AMBAC Insured             
3,720    Washington State Healthcare Facilities Authority, Revenue Bonds, Children’s Hospital and    10/11 at 100.00    Aaa    3,965,743 
     Regional Medical Center, Series 2001, 5.375%, 10/01/18 (Pre-refunded 10/01/11) – AMBAC Insured             
    Washington State Healthcare Facilities Authority, Revenue Bonds, Good Samaritan Hospital,             
    Series 2001:             
5,480     5.500%, 10/01/21 – RAAI Insured    10/11 at 101.00    AA    5,810,444 
25,435     5.625%, 10/01/31 – RAAI Insured    10/11 at 101.00    AA    27,103,281 
    Washington State Healthcare Facilities Authority, Revenue Bonds, Group Health Cooperative of             
    Puget Sound, Series 2001:             
3,005     5.375%, 12/01/17 – AMBAC Insured    12/11 at 101.00    AAA    3,194,195 
2,915     5.375%, 12/01/18 – AMBAC Insured    12/11 at 101.00    AAA    3,097,071 
91,320    Total Washington            95,824,181 
    Wisconsin – 4.2% (2.7% of Total Investments)             
    Appleton, Wisconsin, Waterworks Revenue Refunding Bonds, Series 2001:             
3,705     5.375%, 1/01/20 (Pre-refunded 1/01/12) – FGIC Insured    1/12 at 100.00    Aaa    3,968,611 
1,850     5.000%, 1/01/21 (Pre-refunded 1/01/12) – FGIC Insured    1/12 at 100.00    Aaa    1,950,770 
12,250    La Crosse, Wisconsin, Pollution Control Revenue Refunding Bonds, Dairyland Power Cooperative,    12/08 at 102.00    AAA    12,846,085 
     Series 1997B, 5.550%, 2/01/15 – AMBAC Insured             
350    Wisconsin Health and Educational Facilities Authority, Revenue Bonds, Froedtert and Community    10/11 at 101.00    AA–    370,829 
     Health Obligated Group, Series 2001, 5.375%, 10/01/30             
3,650    Wisconsin Health and Educational Facilities Authority, Revenue Bonds, Froedtert and Community    10/11 at 101.00    N/R (4)    3,915,246 
     Health Obligated Group, Series 2001, 5.375%, 10/01/30 (Pre-refunded 10/01/11)             
2,500    Wisconsin Health and Educational Facilities Authority, Revenue Bonds, Marshfield Clinic,    2/12 at 100.00    BBB+    2,684,225 
     Series 2001B, 6.000%, 2/15/25             
24,305    Total Wisconsin            25,735,766 
$      948,440    Total Long-Term Investments (cost $902,205,558) – 153.3%            947,112,199 
    Short-Term Investments – 1.0% (0.6% of Total Investments)             
$          1,400    East Bay Municipal Utility District, Alameda and Contra Costa Counties, California, Water        A-1+    1,400,000 
     System Subordinated Revenue Bonds, Variable Rate Demand Obligations, Series 2005B-2, 3.330%,             
     6/01/38 – XLCA Insured (6)             
2,000    Idaho Health Facilities Authority, Revenue Bonds, St. Luke’s Regional Medical Center, Variable        A-1+    2,000,000 
     Rate Demand Obligations, Series 2005, 3.700%, 7/01/35 – FSA Insured (6)             
2,650    Puerto Rico Government Development Bank, Adjustable Refunding Bonds, Variable Rate Demand        A-1+    2,650,000 
     Obligations, Series 1985, 3.300%, 12/01/15 – MBIA Insured (6)             
$          6,050    Total Short-Term Investments (cost $6,050,000)            6,050,000 
    Total Investments (cost $908,255,558) – 154.3%            953,162,199 
    Floating Rate Obligations – (5.0)%            (30,780,000) 
    Other Assets Less Liabilities – 1.2%            7,474,408 
    Preferred Shares, at Liquidation Value – (50.5)%            (312,000,000) 
    Net Assets Applicable to Common Shares – 100%           $   617,856,607 

Forward Swaps outstanding at January 31, 2007:                         
        Fund            Fixed Rate            Unrealized 
    Notional    Pay/Receive    Floating Rate    Fixed Rate    Payment    Effective    Termination    Appreciation 
Counterparty    Amount    Floating Rate    Index    (Annualized)    Frequency    Date (7)    Date    (Depreciation) 
Merrill Lynch    $26,750,000    Pay    3-Month USD-LIBOR    5.184%    Semi-Annually    10/30/07    10/30/16    $(243,734) 
USD-LIBOR (United States Dollar-London Inter-Bank Offered Rate)                     

Futures Contracts outstanding at January 31, 2007:                     
                    Unrealized 
    Contract    Number of    Contract    Value at    Appreciation 
Type    Position    Contracts    Expiration    January 31, 2007    (Depreciation) 
U.S. Treasury Bonds    Long    159    3/07    $17,509,875    $(554,493) 

(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 or Moody's rating. Ratings below BBB by Standard & 
    Poor's Group or Baa by Moody's Investor Service, Inc. are considered to be below investment grade. 
(4)    Backed by an escrow or trust containing sufficient U.S. Government or U.S. Government agency 
    securities which ensure the timely payment of principal and interest. Such investments are normally 
    considered to be equivalent to AAA rated securities. 
(5)    Portion of the investment, with an aggregate market value of $179,423, has been pledged to collateralize 
    the net payment obligations under forward swap contracts. 
(6)    Investment has a maturity of more than one year, but has variable rate and demand features which 
    qualify it as a short-term investment. The rate disclosed is that in effect at the end of the reporting 
    period. This rate changes periodically based on market conditions or a specified market index. 
(7)    Effective date represents the date on which both the Fund and counterparty commence interest payment 
    accruals on each forward swap contract. 
N/R    Not rated. 
WI/DD    Purchased on a when-issued or delayed delivery basis. 
(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. 

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.

At January 31, 2007, the cost of investments was $877,220,150.

Gross unrealized appreciation and gross unrealized depreciation of investments at January 31, 2007, were as follows:

Gross unrealized:     
  Appreciation    $45,872,467 
  Depreciation    (674,915) 
Net unrealized appreciation (depreciation) of investments    $45,197,552 

Item 2. Controls and Procedures.

  1. 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 Rule 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934 (17 CFR 240.13a-15(b) or 240.15d-15(b)).
  2. There were no changes in the registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR 270.30a-3(d)) that occurred during the registrant's last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the registrant's internal control over financial reporting.

Item 3. Exhibits.

File as exhibits as part of this Form 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)), exactly as set forth below: EX-99 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 Dividend Advantage Municipal Fund 3        

By (Signature and Title)*          /s/ Jessica R. Droeger                     
                                                    Jessica R. Droeger
                                                    Vice President and Secretary

Date         March 30, 2007        

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         March 30, 2007        

By (Signature and Title)*         /s/ Stephen D. Foy                              
                                                   Stephen D. Foy
                                                   Vice President and Controller (principal financial officer) 

Date        March 30, 2007        

* Print the name and title of each signing officer under his or her signature.