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)
Jessica R. Droeger
Nuveen Investments
333 West Wacker Drive
Chicago, IL 60606
------------------------------------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: (312) 917-7700
-------------------
Date of fiscal year end: July 31
------------------
Date of reporting period: January 31, 2006
------------------
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.
----------------------------------
Semiannual Report January 31, 2006
----------------------------------
Nuveen Investments
Municipal Exchange-Traded
Closed-End
Funds
NUVEEN ARIZONA
PREMIUM INCOME
MUNICIPAL FUND, INC.
NAZ
NUVEEN ARIZONA
DIVIDEND ADVANTAGE
MUNICIPAL FUND
NFZ [GRAPHIC OMITTED]
NUVEEN ARIZONA
DIVIDEND ADVANTAGE
MUNICIPAL FUND 2
NKR
NUVEEN ARIZONA
DIVIDEND ADVANTAGE
MUNICIPAL FUND 3
NXE
NUVEEN TEXAS
QUALITY INCOME
MUNICIPAL FUND
NTX
DEPENDABLE,
TAX-FREE INCOME BECAUSE
IT'S NOT WHAT YOU EARN,
IT'S WHAT YOU KEEP.(R)
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NUVEEN
Investments
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Timothy R. Schwertfeger
Chairman of the Board
Chairman's
Letter to Shareholders
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 Distribution and Share Price Information, and the Performance Overview
sections of this report.
Municipal bonds can be an important building block in a well balanced
investment portfolio. In addition to providing attractive tax-free monthly
income, a municipal bond investment like your Fund may help you achieve
and benefit from greater portfolio diversification. Portfolio
diversification is a recognized way to try to reduce some of the risk that
comes with investing. I encourage you to contact your personal financial
advisor who can explain the advantages of diversification in more detail.
"Portfolio diversification is a recognized way to try to reduce some of the risk
that comes with investing."
Nuveen Investments is pleased to offer you choices when it comes to
receiving your Fund reports. Instead of mailed printed copies, you can
sign up to receive future Fund reports and other Fund information by
e-mail and the Internet. Not only will you be able to receive the
information faster, but this also may help lower your Fund's expenses. The
inside front cover of this report contains information on how you can sign
up - just follow the quick and easy step-by-step instructions.
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 15, 2006
Nuveen Investments Municipal Exchange-Traded Closed-End Funds
(NAZ, NFZ, NKR, NXE, NTX)
Portfolio Managers'
Comments
Portfolio managers Scott Romans and Cathryn Steeves review key investment
strategies and the semiannual performance of these five Nuveen Funds. Scott, who
joined Nuveen in 2000, has managed the Arizona Funds since 2003. Cathryn, who
has been with Nuveen since 1996, assumed portfolio management responsibility for
NTX in 2004.
What key strategies were used to manage the Arizona and Texas Funds during the
six-month reporting period ended January 31, 2006?
During this period, bond valuations generally declined as yields generally rose
and the yield curve flattened, with shorter-term rates rising to approach the
levels of longer-term rates.
In this environment, one of our key strategies continued to be careful duration
management. 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. Our purchase activity focused mainly
on finding attractively priced bonds maturing in 15 to 20 years for the Arizona
Funds and in 15 to 25 years for NTX. As the yield curve flattened, we believed
that bonds in this range of the curve generally offered the most attractive
opportunities and the best values. We also continued to look for bonds with
premium coupons; that is, bonds that at the time of purchase were trading above
their par value because their coupons were higher than current interest rate
levels. Premium bonds have been in demand recently because historically they
have held their value better than current coupon bonds when long-term interest
rates rise.
To help us maintain the Funds' durations within our preferred range, we also
selectively sold holdings with shorter maturities, including pre-refunded bonds,
and reinvested the proceeds in longer maturities as attractive opportunities
arose. Proceeds from called bonds also were reinvested into longer maturities.
We also kept an opportunistic eye out for all types of bonds that we believed
could add value to the Funds. Because of the overall high credit quality of new
issue supply in both states, the majority of our new purchases were highly rated
and/or insured. However, due to Arizona's rapid population growth and
corresponding infrastructure
4
needs, the credit market in that state also offered some unique opportunities
among lower-rated land-secured issues and community facilities district bonds.
In NTX, we found some good opportunities in AAA-rated utilities bonds.
In NFZ, NKR and NXE, our duration management strategies also included the use of
forward interest rate swaps, a type of derivative financial instrument. As
discussed in our last shareholder report, we began using these swaps in late
2004 in an effort to reduce the interest rate risk of these three Funds. These
hedges were not an attempt to profit from correctly predicting the timing and
direction of interest rate movements. Instead, our sole objective was to reduce
the Funds' durations (and resulting price sensitivity) without having a negative
impact on their income streams or common share dividends over the short term.
During this reporting period, the hedges performed as expected and had a
positive impact on the returns of NFZ, NKR and NXE. As long-term interest rates
rose, the value of the hedges increased while the valuation of the Funds'
holdings generally declined.
How did the Funds perform?
Individual results for these Funds, as well as for relevant indexes and peer
groups, are presented in the accompanying table.
Total Returns on Net Asset Value*
For periods ended 1/31/06
Arizona Funds 6-Month 1-Year 5-Year 10-Year
--------------------------------------------------------------------------------
NAZ 1.16% 2.80% 5.78% 5.40%
--------------------------------------------------------------------------------
NFZ 1.20% 2.71% 7.29% NA
--------------------------------------------------------------------------------
NKR 1.44% 2.90% NA NA
--------------------------------------------------------------------------------
NXE 1.70% 3.07% NA NA
--------------------------------------------------------------------------------
Texas Fund
--------------------------------------------------------------------------------
NTX 1.59% 3.10% 6.97% 6.14%
--------------------------------------------------------------------------------
Lehman Brothers Municipal
Bond Index(1) 1.33% 2.85% 5.44% 5.67%
--------------------------------------------------------------------------------
Lipper Other States
Municipal Debt Funds
Average(2) 1.06% 1.90% 4.18% 4.46%
--------------------------------------------------------------------------------
* Six-month returns are cumulative; returns for one year, five years, and
ten years are annualized.
Past performance is not predictive of future results. Current performance may be
higher or lower than the data shown. Returns do not reflect the deduction of
taxes that shareholders may have to pay on Fund distributions or upon the sale
of Fund shares.
For additional information, see the individual Performance Overview for your
Fund in this report.
(1) 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. It is not
possible to invest directly in an index.
(2) The Lipper Other State Municipal Debt Funds category average is calculated
using the returns of all closed-end exchange-traded funds in this category
for each period as follows: 6 months, 44 funds; 1 year, 44 funds; 5 years,
19 funds; and 10 years, 17 funds. Fund and Lipper returns assume
reinvestment of dividends.
5
For the six months ended January 31, 2006, the cumulative returns on net asset
value (NAV) for NKR, NXE and NTX outperformed the return on the Lehman Brothers
Municipal Bond Index, while NAZ and NFZ underperformed this measure. All five of
the Funds in this report exceeded the average return for the Lipper Other States
peer group over the reporting period.
One of the factors affecting the six-month performance of the Funds relative to
that of the unleveraged Lehman Brothers municipal index was the Funds' use of
financial leverage. While leveraging provides opportunities for additional
income and total returns for common shareholders when interest rates fall or
remain consistently low (as they have over the past several years), this benefit
is reduced when interest rates rise. With the increase in long-term interest
rates during this six-month period, the decline in value of the bonds in these
Funds' portfolios was exacerbated by the effects of leveraging. In addition, the
benefits of leveraging are tied in part to the short-term rates leveraged Funds
pay their MuniPreferred(R) shareholders. During periods of low short-term rates,
these Funds generally pay lower dividends to their MuniPreferred shareholders,
which can leave more earnings to support common share dividends. Conversely,
when short-term interest rates rise, as they did during this reporting period,
the Funds' borrowing costs also rise, impacting the Funds' income streams, and
total returns. However, we remain convinced that, over the long term, leveraging
should work to the benefit of the Funds' performance as the older Funds' 5-year
and 10-year absolute and relative return performance illustrates.
During this reporting period, positive contributors to the Funds' returns
included exposure to the intermediate part of the yield curve, allocations to
lower-rated credits, pre-refunding activity in all of the Funds, and credit
upgrades of several of the Arizona Funds' holdings. As mentioned earlier, the
hedging strategies we employed in NFZ, NKR and NXE also had a positive impact on
the performance of these Funds for the period.
As the yield curve continued to flatten over the course of this period, bonds
with intermediate maturities generally outperformed both longer-maturity bonds
and those with short maturities. Yield curve positioning or, more specifically,
greater exposure to the intermediate part of the curve helped the performance of
all of these Funds. However, NAZ had more exposure to the longer end of the
curve than the other four
6
Funds in this report, which hampered its performance. Part of the duration
management strategies discussed earlier included efforts to more closely align
the yield curve positioning of all of these Funds.
All of the Funds also benefited from their allocations of lower-quality credits,
as bonds rated BBB or lower and non-rated bonds generally outperformed
higher-rated securities. This was largely the result of investor demand for the
higher yields typically associated with lower-quality bonds, which drove up the
prices of these bonds. Among the holdings making positive contributions to the
Funds' returns for this period were those from sectors that tend to have a
greater number of lower-quality credits, including healthcare (especially
hospitals), housing, and bonds backed by the 1998 master tobacco settlement
agreement. With some signs of improvement in the airline industry, NTX's small
position in American Airlines bonds, which were rated CCC by S&P as of the end
of the reporting period, also contributed to this Fund's performance.
We continued to see a substantial number of refinancings during this period,
which benefited the Funds through price appreciation and enhanced credit
quality. As the yield curve flattened, the impact of price appreciation from
advance refundings generally was less than in the previous reporting period.
NAZ, NKR and NXE also benefited from price appreciation associated with the
recent credit upgrade and improved tradability of bonds issued by Arizona Health
for Phoenix Children's Hospital. These bonds, which had been rated Ba2
(sub-investment grade) by Moody's were upgraded prior to the beginning of this
reporting period to Baa3 (investment-grade) based on the hospital's stronger
financial picture. Due to the size of NAZ's position ($2 million in par value),
the appreciation of these bonds made this holding the second largest contributor
to NAZ's performance for the period.
While pre-refundings generally enhanced performance for this six-month period,
the rising interest rate environment (especially in the one- to five-year part
of the yield curve) during this time meant that the Funds' holdings of older,
previously pre-refunded bonds tended to underperform the general municipal
market, due primarily to the shorter effective maturities of these bonds. This
was especially true in NAZ, which had the largest allocation of pre-refunded
bonds among the Funds in this report. In addition, NFZ
7
held bonds issued for a federally guaranteed multifamily housing project that
were restructured by the Federal Housing Administration, which had a negative
impact on the Fund's performance during this period.
How were the Funds positioned in terms of credit quality and bond calls as of
January 31, 2006?
We continued to believe that maintaining strong credit quality was an important
requirement. As of January 31, 2006, all of these Funds continued to offer
excellent credit quality, with allocations of bonds rated AAA/U.S. guaranteed
and AA ranging from 75% in NKR to 78% in NXE, 79% in NTX and 81% in NFZ and NAZ.
As of January 31, 2006, potential call exposure for the period February 2006
through the end of 2007 ranged from 0% in NXE to 1% in NKR, 4% in NAZ, 6% in NTX
and 10% in NFZ. The number of actual bond calls in all of these Funds depends
largely on future market interest rates.
8
Dividend and Share Price
Information
All of these Funds use leverage to potentially enhance opportunities for
additional income for common shareholders. During periods of rising short-term
interest rates, as was the case during this reporting period, the Funds'
borrowing costs also rise, reducing the extent of the benefits of leveraging.
The Funds' income streams were also impacted as the proceeds from older,
higher-yielding bonds that matured or were called and were reinvested into bonds
that generally offered lower yields. These factors resulted in one monthly
dividend reduction in NKR, NXE and NTX and two reductions in NAZ and NFZ over
the six-month period ended January 31, 2006.
In addition, due to normal portfolio activity, common shareholders of the
following Funds received capital gains or net ordinary income distributions at
the end of December 2005 as follows:
Long-Term Capital Gains Ordinary Income
(per share) (per share)
--------------------------------------------------------------------------------
NFZ $0.0764 --
--------------------------------------------------------------------------------
NKR $0.1058 --
--------------------------------------------------------------------------------
NTX -- $0.0020
--------------------------------------------------------------------------------
These distributions, which represented an important part of NFZ's and NKR's
total returns for this period, were generated by bond calls and the sale of
appreciated securities. This had a slight negative impact on the Funds' earning
power per common share and was a minor factor in the common share dividend
reductions noted above.
All of the Funds in this report seek to pay stable dividends at rates that
reflect each Fund's past results and projected future performance. During
certain periods, each Fund may pay dividends at a rate that may be more or less
than the amount of net investment income actually earned by the Fund during the
period. If a Fund has cumulatively earned more than it has paid in dividends, it
holds the excess in reserve as undistributed net investment income (UNII) as
part of the Fund's NAV. Conversely, if a Fund has cumulatively paid dividends in
excess of its earnings, the excess constitutes negative UNII that is likewise
reflected in the Fund's NAV. Each Fund will, over time, pay all of its net
investment income as dividends to shareholders. As of January 31, 2006, NFZ, NKR
and NTX had positive UNII balances for financial statement purposes, and
positive UNII balances, based on our best estimate, for tax purposes. As of
January 31, 2006, NAZ and NXE had negative UNII balances for financial statement
purposes and positive UNII balances, based on our best estimates, for tax
purposes.
9
As of January 31, 2006, the Funds' share prices were trading at premiums or
discounts to their NAVs as shown in the accompanying chart:
1/31/06 6-Month Average
Premium/Discount Premium/Discount
--------------------------------------------------------------------------------
NAZ -0.56% +3.14%
--------------------------------------------------------------------------------
NFZ +7.05% +11.31%
--------------------------------------------------------------------------------
NKR +1.64% +3.78%
--------------------------------------------------------------------------------
NXE -1.10% +1.17%
--------------------------------------------------------------------------------
NTX -1.90% -2.89%
--------------------------------------------------------------------------------
10
Nuveen Arizona Premium Income Municipal Fund, Inc.
NAZ
Performance
Overview As of January 31, 2006
Credit Quality
(as a % of total investments)
-----------------------------------------
AAA/U.S. Guaranteed 69%
-----------------------------------------
AA 12%
-----------------------------------------
A 7% [PIE CHART]
-----------------------------------------
BBB 9%
-----------------------------------------
BB or Lower 1%
-----------------------------------------
N/R 2%
2005-2006 Monthly Tax-Free Dividends Per Share
--------------------------------------------------------------------------------
[BAR CHART]
----------------------------------------------
Feb 0.071
----------------------------------------------
Mar 0.068
----------------------------------------------
Apr 0.068
----------------------------------------------
May 0.068
----------------------------------------------
Jun 0.0645
----------------------------------------------
Jul 0.0645
----------------------------------------------
Aug 0.0645
----------------------------------------------
Sep 0.0615
----------------------------------------------
Oct 0.0615
----------------------------------------------
Nov 0.0615
----------------------------------------------
Dec 0.058
----------------------------------------------
Jan 0.058
----------------------------------------------
Share Price Performance
--------------------------------------------------------------------------------
[LINE GRAPH]
Weekly Closing
Date Price
---- --------------
2/01/2005 16.04
15.95
15.74
15.88
15.81
15.75
15.9
15.93
15.66
15.82
15.78
15.75
15.72
15.45
15.51
15.76
15.71
15.9
15.92
15.85
15.9
15.83
15.87
15.95
16.17
16.08
16
15.9
15.76
15.92
15.9
15.83
15.73
15.61
15.6
15.39
15.4
15.33
15.1
15.12
15.02
15.1
15.2
15.25
15.21
15.2
15.25
15.25
15.18
15.14
15.12
15.13
15.25
15.21
15.21
15.02
15.15
15.03
15.12
15.33
15.39
15.4
15.4
15.4
15.4
15.52
15.52
15.58
15.5
15.56
15.57
15.6
15.6
15.45
15.39
15.46
15.44
15.45
15.44
15.48
15.45
15.46
15.48
15.59
15.62
15.63
15.61
15.61
15.54
15.6
15.58
15.48
15.35
15.16
15.14
15.16
15.16
15.17
15.16
15.28
15.38
15.41
15.42
15.51
15.6
15.47
15.47
15.23
15.32
15.3
15.38
15.37
15.52
15.44
15.35
15.4
15.25
15.12
14.99
15
15.04
15.05
15.03
15.14
15.2
15.22
15.22
15.44
15.52
15.54
15.55
15.47
15.3
15.5
15.5
15.34
15.17
15.19
15.19
15.32
15.2
15.2
15.26
15.4
15.36
15.28
15.34
15.49
15.4
15.38
15.54
15.62
15.5
15.4
15.48
15.48
15.39
15.29
15.29
15.4
15.3
15.3
15.38
15.47
15.3
15.27
15.27
15.31
15.32
15.21
15.3
15.21
15.32
15.31
15.2
15.23
15.2
15.19
15.18
15.1
15
15
15.07
15
14.77
14.85
14.82
14.69
14.55
14.63
14.49
14.5
14.48
14.5
14.5
14.5
14.51
14.59
14.56
14.37
14.46
14.44
14.45
14.45
14.35
14.27
14.36
14.41
14.44
14.49
14.56
14.45
14.66
14.7
14.77
14.42
14.35
14.36
14.33
14.36
14.12
14.09
14
14.08
14.07
14.01
14.09
14.34
14.53
14.58
14.68
14.67
14.63
14.45
14.45
14.5
14.67
14.5
14.33
14.46
14.15
14.3
14.35
14.25
14.36
14.36
14.34
14.39
14.43
14.37
14.26
14.26
14.29
14.44
1/31/2006 14.25
Past performance is not predictive of future results.
Fund Snapshot
--------------------------------------------------------------------------------
Common Share Price $14.25
--------------------------------------------------------------------------------
Common Share
Net Asset Value $14.33
--------------------------------------------------------------------------------
Premium/(Discount) to NAV -0.56%
--------------------------------------------------------------------------------
Market Yield 4.88%
--------------------------------------------------------------------------------
Taxable-Equivalent Yield(1) 7.12%
--------------------------------------------------------------------------------
Net Assets Applicable to
Common Shares ($000) $64,003
--------------------------------------------------------------------------------
Average Effective
Maturity on Securities (Years) 15.25
--------------------------------------------------------------------------------
Leverage-Adjusted Duration 8.27
--------------------------------------------------------------------------------
Average Annual Total Return
(Inception 11/19/92)
--------------------------------------------------------------------------------
On Share Price On NAV
--------------------------------------------------------------------------------
6-Month
(Cumulative) -4.04% 1.16%
--------------------------------------------------------------------------------
1-Year -5.24% 2.80%
--------------------------------------------------------------------------------
5-Year 3.64% 5.78%
--------------------------------------------------------------------------------
10-Year 5.67% 5.40%
--------------------------------------------------------------------------------
Industries
(as a % of total investments)
--------------------------------------------------------------------------------
Tax Obligation/Limited 24.7%
--------------------------------------------------------------------------------
U.S. Guaranteed 17.3%
--------------------------------------------------------------------------------
Water and Sewer 15.7%
--------------------------------------------------------------------------------
Education and Civic Organizations 12.7%
--------------------------------------------------------------------------------
Health Care 9.8%
--------------------------------------------------------------------------------
Utilities 7.1%
--------------------------------------------------------------------------------
Tax Obligation/General 5.1%
--------------------------------------------------------------------------------
Other 7.6%
--------------------------------------------------------------------------------
(1) Taxable-Equivalent Yield represents the yield that must be earned on a
fully taxable investment in order to equal the yield of the Fund on an
after-tax basis. It is based on a combined federal and state income tax
rate of 31.5%. When comparing this Fund to investments that generate
qualified dividend income, the Taxable-Equivalent Yield is lower.
11
Nuveen Arizona Dividend Advantage Municipal Fund
NFZ
Performance
Overview As of January 31, 2006
Fund Snapshot
--------------------------------------------------------------------------------
Common Share Price $16.10
--------------------------------------------------------------------------------
Common Share
Net Asset Value $15.04
--------------------------------------------------------------------------------
Premium/(Discount) to NAV 7.05%
--------------------------------------------------------------------------------
Market Yield 5.14%
--------------------------------------------------------------------------------
Taxable-Equivalent Yield(1) 7.50%
--------------------------------------------------------------------------------
Net Assets Applicable to
Common Shares ($000) $23,266
--------------------------------------------------------------------------------
Average Effective
Maturity on Securities (Years) 15.43
--------------------------------------------------------------------------------
Leverage-Adjusted Duration 7.72
--------------------------------------------------------------------------------
Average Annual Total Return
(Inception 1/30/01)
--------------------------------------------------------------------------------
On Share Price On NAV
--------------------------------------------------------------------------------
6-Month
(Cumulative) 3.20% 1.20%
--------------------------------------------------------------------------------
1-Year 2.85% 2.71%
--------------------------------------------------------------------------------
5-Year 7.48% 7.29%
--------------------------------------------------------------------------------
Since
Inception 7.47% 7.28%
--------------------------------------------------------------------------------
Industries
(as a % of total investments)
--------------------------------------------------------------------------------
Tax Obligation/Limited 36.4%
--------------------------------------------------------------------------------
Utilities 20.8%
--------------------------------------------------------------------------------
U.S. Guaranteed 10.1%
--------------------------------------------------------------------------------
Tax Obligation/General 8.1%
--------------------------------------------------------------------------------
Health Care 7.2%
--------------------------------------------------------------------------------
Water and Sewer 6.7%
--------------------------------------------------------------------------------
Other 10.7%
--------------------------------------------------------------------------------
Credit Quality
(as a % of total investments)
-----------------------------------------
AAA/U.S. Guaranteed 61%
-----------------------------------------
AA 20%
-----------------------------------------
A 8% [PIE CHART]
-----------------------------------------
BBB 7%
-----------------------------------------
BB or Lower 1%
-----------------------------------------
N/R 3%
-----------------------------------------
2005-2006 Monthly Tax-Free Dividends Per Share(2)
--------------------------------------------------------------------------------
[BAR CHART]
-----------------------------------------
Feb 0.0765
-----------------------------------------
Mar 0.0765
-----------------------------------------
Apr 0.0765
-----------------------------------------
May 0.0765
-----------------------------------------
Jun 0.0765
-----------------------------------------
Jul 0.0765
-----------------------------------------
Aug 0.0765
-----------------------------------------
Sep 0.073
-----------------------------------------
Oct 0.073
-----------------------------------------
Nov 0.073
-----------------------------------------
Dec 0.069
-----------------------------------------
Jan 0.069
-----------------------------------------
Share Price Performance
--------------------------------------------------------------------------------
[LINE GRAPH]
Weekly Closing
Date Price
--------- --------------
2/01/2005 16.55
16.45
16.38
16.46
16.48
16.39
16.39
16.39
16.34
16.54
16.54
16.44
16.5
16.48
16.55
16.7
16.8
16.37
16.39
16.39
16.39
16.35
16.35
16.17
16.2
16.15
15.97
16
16.15
16.15
16.15
16.05
16.05
16.05
16.05
15.95
15.95
15.83
15.83
15.83
15.5
15.5
15.5
15.42
15.44
15.33
15.4
15.4
15.32
15.11
15.01
15.06
15.25
15.3
15.22
15.3
15.31
15.2
15.35
15.57
15.54
15.55
15.55
15.55
15.54
15.45
15.54
15.55
15.62
15.6
15.72
15.7
16.04
15.9
15.7
15.66
15.9
16.02
15.83
16.08
16.02
16.02
16.02
16.14
16.14
16.5
16.59
16.42
16.58
16.6
16.84
16.65
16.46
16.35
16.35
16.6
16.53
16.33
16.2
16.14
16.25
16.27
16.35
16.75
16.9
17.15
17.1
17.3
17.79
17.95
18
17.05
16.91
17.25
16.78
16.74
16.68
16.35
16.3
16.25
16.25
16.03
15.94
16.1
16.1
16.08
16.08
16.07
16.16
16.25
16.25
16.25
16.25
16.21
16.55
16.7
17.25
17.35
17.64
17.85
17.82
17.82
17.75
17.75
17.7
17.6
17.6
17.75
17.75
17.72
17.73
18.25
18.4
18.4
18.4
18.4
18.4
18.15
18
17.7
17.65
17.65
17.56
17.56
17.47
17.47
17.03
16.86
16.86
17.03
16.7
16.7
16.8
16.8
16.81
16.81
16.8
16.7
16.7
16.8
16.8
17
16.9
16.99
17.25
17.38
17.2
17.25
16.7
16.45
16.45
16.55
16.55
16.62
16.58
16.5
16.35
16.45
16.58
16.45
16.45
16.08
16.08
15.7
15.8
15.8
15.78
15.89
15.76
15.95
15.98
16.05
16.3
16.3
16.55
16.59
16.6
16.59
16.6
16.6
16.6
16.4
16.1
16.1
16.48
16.47
16.55
16.59
16.8
17
16.9
16.9
17.01
17.11
17.11
17.2
17.15
17.05
17.1
16.9
17
17.08
17.09
17
16.8
16.8
16.6
16.6
16.51
16.64
16.64
16.64
16.64
16.2
1/31/2006 16.1
Past performance is not predictive of future results.
(1) Taxable-Equivalent Yield represents the yield that must be earned on a
fully taxable investment in order to equal the yield of the Fund on an
after-tax basis. It is based on a combined federal and state income tax
rate of 31.5%. When comparing this Fund to investments that generate
qualified dividend income, the Taxable-Equivalent Yield is lower.
(2) The Fund also paid shareholders a capital gains distribution in December
2005 of $0.1058 per share.
12
Nuveen Arizona Dividend Advantage Municipal Fund 2
NKR
Performance
Overview As of January 31, 2006
Credit Quality
(as a % of total investments)
-----------------------------------------
AAA/U.S. Guaranteed 64%
-----------------------------------------
AA 11%
-----------------------------------------
A 12% [PIE CHART]
-----------------------------------------
BBB 10%
-----------------------------------------
N/R 3%
-----------------------------------------
2005-2006 Monthly Tax-Free Dividends Per Share(2)
--------------------------------------------------------------------------------
[BAR CHART]
-----------------------------------------
Feb 0.072
-----------------------------------------
Mar 0.072
-----------------------------------------
Apr 0.072
-----------------------------------------
May 0.072
-----------------------------------------
Jun 0.072
-----------------------------------------
Jul 0.072
-----------------------------------------
Aug 0.072
-----------------------------------------
Sep 0.072
-----------------------------------------
Oct 0.072
-----------------------------------------
Nov 0.072
-----------------------------------------
Dec 0.0685
-----------------------------------------
Jan 0.0685
-----------------------------------------
Share Price Performance
--------------------------------------------------------------------------------
[LINE GRAPH]
Weekly Closing
Date Price
--------- --------------
2/01/2005 16.01
16.03
16.14
16.14
16.21
16.22
16.22
16.4
16.33
16.32
16.25
16.25
16.14
15.96
15.68
15.83
15.9
16.24
16.28
16.27
16.16
16.19
15.97
15.87
15.95
15.5
15.64
15.49
15.49
15.26
15.28
15
15
14.82
14.7
14.41
14.55
14.6
14.57
14.57
14.6
14.65
14.68
14.78
14.78
14.78
14.74
14.7
14.77
14.8
14.66
14.68
14.72
15
14.97
14.82
14.85
14.8
14.8
14.87
14.8
14.71
14.71
14.77
14.83
14.85
14.93
14.84
14.84
14.84
14.8
14.93
14.83
14.94
14.99
14.97
15.1
15.28
15.4
15.5
15.5
15.42
15.39
15.48
15.57
15.51
15.67
15.65
15.85
15.87
15.82
15.82
15.82
15.69
15.7
15.7
15.59
15.64
15.64
15.88
15.74
15.7
15.8
15.76
15.9
15.93
15.83
15.83
15.83
15.81
15.82
16
16.1
15.96
15.85
16.05
16.05
15.97
15.89
16.09
16.01
16.01
16.25
16.2
16.19
16.19
16.19
16.12
16.31
16.15
16.39
16.39
16.39
16.2
16.16
16.09
16.5
16.45
16.77
16.77
16.77
16.75
16.6
16.37
16.45
16.4
16.33
16.33
16.25
16.17
16.14
16.25
16.25
16.25
16.44
16.44
16.24
16.52
16.69
16.77
16.55
16.55
16.55
16.55
16.39
16.27
16.15
15.86
15.86
16
15.87
15.87
15.87
15.72
15.85
15.85
15.74
15.74
15.6
15.91
16.12
16.12
16.2
16.06
16.3
16.5
16.11
16.11
16.06
15.84
15.74
15.8
15.7
15.72
15.72
15.71
15.59
16.16
16.3
16.2
16.2
16.07
16.19
16.19
16.22
16.1
16.45
16.45
16.25
16.25
15.95
15.63
15.6
15.74
15.63
15.74
15.74
15.6
15.6
15.29
15.13
14.95
14.94
14.83
15.25
15.05
14.93
15.2
15.52
15.3
14.97
15.35
15.5
15.54
15.54
15.46
15.35
15.39
15.4
15.65
15.99
15.8
15.9
15.9
15.9
15.63
15.63
15.74
15.85
15.75
15.75
15.61
15.64
15.51
1/31/2006 15.5
Past performance is not predictive of future results.
Fund Snapshot
--------------------------------------------------------------------------------
Common Share Price $15.50
--------------------------------------------------------------------------------
Common Share
Net Asset Value $15.25
--------------------------------------------------------------------------------
Premium/(Discount) to NAV 1.64%
--------------------------------------------------------------------------------
Market Yield 5.30%
--------------------------------------------------------------------------------
Taxable-Equivalent Yield(1) 7.74%
--------------------------------------------------------------------------------
Net Assets Applicable to
Common Shares ($000) $37,022
--------------------------------------------------------------------------------
Average Effective
Maturity on Securities (Years) 15.17
--------------------------------------------------------------------------------
Leverage-Adjusted Duration 7.83
--------------------------------------------------------------------------------
Average Annual Total Return
(Inception 3/25/02)
--------------------------------------------------------------------------------
On Share Price On NAV
--------------------------------------------------------------------------------
6-Month
(Cumulative) -0.98% 1.44%
--------------------------------------------------------------------------------
1-Year 3.98% 2.90%
--------------------------------------------------------------------------------
Since
Inception 7.01% 7.83%
--------------------------------------------------------------------------------
Industries
(as a % of total investments)
--------------------------------------------------------------------------------
Tax Obligation/Limited 27.0%
--------------------------------------------------------------------------------
Tax Obligation/General 22.5%
--------------------------------------------------------------------------------
Health Care 11.5%
--------------------------------------------------------------------------------
U.S. Guaranteed 9.0%
--------------------------------------------------------------------------------
Water and Sewer 7.3%
--------------------------------------------------------------------------------
Education and Civic Organizations 7.2%
--------------------------------------------------------------------------------
Housing/Multifamily 5.3%
--------------------------------------------------------------------------------
Other 10.2%
--------------------------------------------------------------------------------
(1) Taxable-Equivalent Yield represents the yield that must be earned on a
fully taxable investment in order to equal the yield of the Fund on an
after-tax basis. It is based on a combined federal and state income tax
rate of 31.5%. When comparing this Fund to investments that generate
qualified dividend income, the Taxable-Equivalent Yield is lower.
(2) The Fund also paid shareholders a capital gains distribution in December
2005 of $0.1058 per share.
13
Nuveen Arizona Dividend Advantage Municipal Fund 3
NXE
Performance
Overview As of January 31, 2006
Fund Snapshot
--------------------------------------------------------------------------------
Common Share Price $14.33
--------------------------------------------------------------------------------
Common Share
Net Asset Value $14.49
--------------------------------------------------------------------------------
Premium/(Discount) to NAV -1.10%
--------------------------------------------------------------------------------
Market Yield 5.07%
--------------------------------------------------------------------------------
Taxable-Equivalent Yield(1) 7.40%
--------------------------------------------------------------------------------
Net Assets Applicable to
Common Shares ($000) $44,461
--------------------------------------------------------------------------------
Average Effective
Maturity on Securities (Years) 16.31
--------------------------------------------------------------------------------
Leverage-Adjusted Duration 7.12
--------------------------------------------------------------------------------
Average Annual Total Return
(Inception 9/25/02)
--------------------------------------------------------------------------------
On Share Price On NAV
--------------------------------------------------------------------------------
6-Month
(Cumulative) 1.50% 1.70%
--------------------------------------------------------------------------------
1-Year 2.91% 3.07%
--------------------------------------------------------------------------------
Since
Inception 4.19% 5.86%
--------------------------------------------------------------------------------
Industries
(as a % of total investments)
--------------------------------------------------------------------------------
Tax Obligation/Limited 25.6%
--------------------------------------------------------------------------------
Health Care 13.9%
--------------------------------------------------------------------------------
Tax Obligation/General 13.1%
--------------------------------------------------------------------------------
Education and Civic Organizations 10.9%
--------------------------------------------------------------------------------
Transportation 9.1%
--------------------------------------------------------------------------------
Water and Sewer 8.0%
--------------------------------------------------------------------------------
U.S. Guaranteed 7.2%
--------------------------------------------------------------------------------
Utilities 6.8%
--------------------------------------------------------------------------------
Other 5.4%
--------------------------------------------------------------------------------
Credit Quality
(as a % of total investments)
-----------------------------------------
AAA/U.S. Guaranteed 63%
-----------------------------------------
AA 15%
-----------------------------------------
A 10% [PIE CHART]
-----------------------------------------
BBB 8%
-----------------------------------------
N/R 4%
-----------------------------------------
2005-2006 Monthly Tax-Free Dividends Per Share
--------------------------------------------------------------------------------
[BAR CHART]
-----------------------------------------
Feb 0.067
-----------------------------------------
Mar 0.067
-----------------------------------------
Apr 0.067
-----------------------------------------
May 0.067
-----------------------------------------
Jun 0.0635
-----------------------------------------
Jul 0.0635
-----------------------------------------
Aug 0.0635
-----------------------------------------
Sep 0.0635
-----------------------------------------
Oct 0.0635
-----------------------------------------
Nov 0.0635
-----------------------------------------
Dec 0.0605
-----------------------------------------
Jan 0.0605
-----------------------------------------
Share Price Performance
--------------------------------------------------------------------------------
[LINE GRAPH]
Weekly Closing
Date Price
--------- --------------
2/01/2005 15.4
15.43
15.36
15.48
15.48
15.52
15.57
15.9
15.84
15.96
15.99
15.71
15.77
15.71
15.44
15.45
15.62
15.77
15.94
16.15
16.11
15.92
15.87
16.06
15.94
15.96
15.96
16.08
15.85
15.76
15.76
15.52
15.43
15.25
14.82
14.75
14.58
14.62
14.71
14.8
15
15.2
15.3
15.5
15.8
15.55
15.46
15.26
15.16
15.14
15.13
15.1
15.11
15.11
15.16
15.2
15.15
15.2
15.26
15.44
15.44
15.47
15.47
15.8
15.88
15.89
15.71
15.45
15.58
15.78
15.85
15.81
15.71
15.78
15.75
15.94
15.92
15.83
15.87
15.9
15.9
15.85
15.87
15.87
15.94
15.98
15.95
15.9
15.88
15.86
15.85
15.74
15.65
15.69
15.6
15.51
15.52
15.52
15.64
15.79
15.87
15.96
16.09
16.3
16.2
16.12
16.2
16.09
16.01
16.03
16.02
16.13
16.44
16.31
16.28
16.4
16.29
16.26
16.2
16.15
16.15
16.08
16.06
16.07
16.14
16.19
16.19
16.2
16
15.95
15.84
15.84
15.69
15.63
15.48
15.3
15.45
15.48
15.55
15.59
15.68
15.61
15.61
15.6
15.61
15.56
15.52
15.61
15.63
15.72
15.7
15.64
15.61
15.51
15.59
15.67
15.58
15.61
15.57
15.4
15.4
15.43
15.4
15.29
15.2
15.07
15.09
14.9
14.92
14.87
14.99
14.97
14.99
14.8
14.78
14.64
14.66
14.59
14.55
14.28
14.29
14.27
14.03
14.07
14.12
14.37
14.41
14.5
14.29
14.38
14.42
14.37
14.45
14.4
14.38
14.46
14.37
14.37
14.4
14.27
14.21
14.19
14.17
14.24
14.22
14.26
14.35
14.4
14.39
14.45
14.44
14.44
14.41
14.45
14.39
14.43
14.4
14.42
14.55
14.43
14.44
14.46
14.48
14.55
14.5
14.45
14.44
14.45
14.45
14.5
14.57
14.55
14.49
14.6
14.6
14.69
14.85
14.76
14.87
14.81
14.92
14.77
14.74
14.75
14.69
14.64
14.65
14.76
14.75
14.82
14.77
14.8
14.91
15.07
1/31/2006 14.99
Past performance is not predictive of future results.
(1) Taxable-Equivalent Yield represents the yield that must be earned on a
fully taxable investment in order to equal the yield of the Fund on an
after-tax basis. It is based on a combined federal and state income tax
rate of 31.5%. When comparing this Fund to investments that generate
qualified dividend income, the Taxable-Equivalent Yield is lower.
14
Nuveen Texas Quality Income Municipal Fund
NTX
Performance
Overview As of January 31, 2006
Credit Quality
(as a % of total investments)
-----------------------------------------
AAA/U.S. Guaranteed 67%
-----------------------------------------
AA 12%
-----------------------------------------
A 7% [PIE CHART]
-----------------------------------------
BBB 12%
-----------------------------------------
BB or Lower 2%
-----------------------------------------
2005-2006 Monthly Tax-Free Dividends Per Share(2)
--------------------------------------------------------------------------------
[BAR CHART]
-----------------------------------------
Feb 0.08
-----------------------------------------
Mar 0.077
-----------------------------------------
Apr 0.077
-----------------------------------------
May 0.077
-----------------------------------------
Jun 0.073
-----------------------------------------
Jul 0.073
-----------------------------------------
Aug 0.073
-----------------------------------------
Sep 0.0695
-----------------------------------------
Oct 0.0695
-----------------------------------------
Nov 0.0695
-----------------------------------------
Dec 0.0695
-----------------------------------------
Jan 0.0695
-----------------------------------------
Share Price Performance
--------------------------------------------------------------------------------
[LINE GRAPH]
Weekly Closing
Date Price
--------- --------------
2/01/2005 14.8
14.77
14.76
14.75
15.1
14.96
15.12
15.1
15.08
15
14.98
14.82
14.57
14.33
14.2
14.24
14.47
14.63
14.76
14.75
14.65
14.4
14.4
14.29
14.4
13.92
13.91
13.97
14.04
14.2
13.93
13.79
13.96
13.81
13.78
13.61
13.45
13.33
13.3
13.37
13.35
13.45
13.5
13.73
13.73
13.78
13.75
13.72
13.76
13.6
13.6
13.76
13.74
13.82
13.63
13.69
13.65
13.54
13.77
13.78
13.68
13.8
13.8
13.81
13.88
13.93
13.94
13.88
13.95
14.03
13.95
13.96
14.1
14.09
14
14.09
14.01
13.97
14.2
14.3
14.29
14.24
14.22
14.32
14.39
14.33
14.39
14.4
14.4
14.5
14.35
14.28
14.34
14.37
14.39
14.39
14.35
14.43
14.36
14.62
14.63
14.63
14.62
14.55
14.62
14.56
14.68
14.82
14.84
14.7
14.79
14.83
14.72
14.75
14.82
14.72
14.32
14.38
14.51
14.5
14.59
14.72
14.68
14.45
14.59
14.48
14.48
14.45
14.33
14.3
14.39
14.16
14.22
14.08
14.21
14.11
14.18
14.17
14.24
14.29
14.39
14.47
14.51
14.52
14.63
14.85
14.75
15.1
15.1
14.8
15
15.1
15
15
14.81
15.1
14.95
15.01
15.26
15.05
14.7
14.6
14.63
14.63
14.63
14.63
14.68
14.75
14.8
14.65
14.78
14.78
14.78
14.78
14.89
14.87
15.13
14.8
14.73
14.66
14.66
14.53
14.6
14.98
14.99
14.8
14.9
14.9
14.72
14.95
14.86
14.99
14.95
14.7
14.74
14.4
14.35
14.5
14.3
14.15
14.18
14.17
14.48
14.49
14.5
14.5
14.5
14.5
14.62
14.67
14.4
14.52
14.42
14.55
14.6
14.61
14.94
14.98
14.98
14.97
15.02
14.82
14.91
14.91
14.95
14.95
15.01
14.95
14.73
14.76
14.9
14.9
15.05
15.05
15.05
15.02
14.95
15.05
15.05
15.11
14.8
14.71
14.44
14.44
14.45
14.5
14.43
14.42
14.5
14.41
14.16
14.12
14.25
14.15
1/31/2006 14.33
Past performance is not predictive of future results.
Fund Snapshot
--------------------------------------------------------------------------------
Common Share Price $14.99
--------------------------------------------------------------------------------
Common Share
Net Asset Value $15.28
--------------------------------------------------------------------------------
Premium/(Discount) to NAV -1.90%
--------------------------------------------------------------------------------
Market Yield 5.56%
--------------------------------------------------------------------------------
Taxable-Equivalent Yield(1) 7.72%
--------------------------------------------------------------------------------
Net Assets Applicable to
Common Shares ($000) $145,068
--------------------------------------------------------------------------------
Average Effective
Maturity on Securities (Years) 16.94
--------------------------------------------------------------------------------
Leverage-Adjusted Duration 7.67
--------------------------------------------------------------------------------
Average Annual Total Return
(Inception 10/17/91)
--------------------------------------------------------------------------------
On Share Price On NAV
--------------------------------------------------------------------------------
6-Month
(Cumulative) -4.75% 1.59%
--------------------------------------------------------------------------------
1-Year 3.93% 3.10%
--------------------------------------------------------------------------------
5-Year 7.09% 6.97%
--------------------------------------------------------------------------------
10-Year 6.49% 6.14%
--------------------------------------------------------------------------------
Industries
(as a % of total investments)
--------------------------------------------------------------------------------
Tax Obligation/General 26.5%
--------------------------------------------------------------------------------
Health Care 13.1%
--------------------------------------------------------------------------------
U.S. Guaranteed 11.3%
--------------------------------------------------------------------------------
Education and Civic Organizations 9.9%
--------------------------------------------------------------------------------
Water and Sewer 7.4%
--------------------------------------------------------------------------------
Utilities 6.5%
--------------------------------------------------------------------------------
Long-Term Care 5.1%
--------------------------------------------------------------------------------
Housing/Multifamily 4.4%
--------------------------------------------------------------------------------
Transportation 4.0%
--------------------------------------------------------------------------------
Other 11.8%
--------------------------------------------------------------------------------
(1) Taxable-Equivalent Yield represents the yield that must be earned on a
fully taxable investment in order to equal the yield of the Fund on an
after-tax basis. It is based on a federal income tax rate of 28%. When
comparing this Fund to investments that generate qualified dividend
income, the Taxable-Equivalent Yield is lower.
(2) The Fund also paid shareholders a net ordinary income distribution in
December 2005 of $.0020 per share.
15
Special Shareholder
Meeting Report
The Special Shareholder Meeting was held at the offices of Nuveen
Investments on November 15, 2005.
NAZ NFZ NKR
------------------------------------------------------------------------------------------------------------------------------------
Approval of the the Board Members
was reached as follows:
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
------------------------------------------------------------------------------------------------------------------------------------
Robert P. Bremner
For 4,198,565 -- 1,516,999 -- 2,367,565 --
Withhold 56,771 -- 9,266 -- 14,004 --
------------------------------------------------------------------------------------------------------------------------------------
Total 4,255,336 -- 1,526,265 -- 2,381,569 --
====================================================================================================================================
Lawrence H. Brown
For 4,197,283 -- 1,514,999 -- 2,364,565 --
Withhold 58,053 -- 11,266 -- 17,004 --
------------------------------------------------------------------------------------------------------------------------------------
Total 4,255,336 -- 1,526,265 -- 2,381,569 --
====================================================================================================================================
Jack B. Evans
For 4,199,203 -- 1,514,999 -- 2,367,565 --
Withhold 56,133 -- 11,266 -- 14,004 --
------------------------------------------------------------------------------------------------------------------------------------
Total 4,255,336 -- 1,526,265 -- 2,381,569 --
====================================================================================================================================
William C. Hunter
For 4,188,834 -- 1,516,999 -- 2,367,565 --
Withhold 66,502 -- 9,266 -- 14,004 --
------------------------------------------------------------------------------------------------------------------------------------
Total 4,255,336 -- 1,526,265 -- 2,381,569 --
====================================================================================================================================
David J. Kundert
For 4,194,891 -- 1,514,999 -- 2,368,365 --
Withhold 60,445 -- 11,266 -- 13,204 --
------------------------------------------------------------------------------------------------------------------------------------
Total 4,255,336 -- 1,526,265 -- 2,381,569 --
====================================================================================================================================
William J. Schneider
For -- 1,081 -- 454 -- 699
Withhold -- -- -- -- -- 8
------------------------------------------------------------------------------------------------------------------------------------
Total -- 1,081 -- 454 -- 707
====================================================================================================================================
Timothy R. Schwertfeger
For -- 1,081 -- 454 -- 699
Withhold -- -- -- -- -- 8
------------------------------------------------------------------------------------------------------------------------------------
Total -- 1,081 -- 454 -- 707
====================================================================================================================================
Judith M. Stockdale
For 4,198,565 -- 1,516,999 -- 2,367,965 --
Withhold 56,771 -- 9,266 -- 13,604 --
------------------------------------------------------------------------------------------------------------------------------------
Total 4,255,336 -- 1,526,265 -- 2,381,569 --
====================================================================================================================================
Eugene S. Sunshine
For 4,184,522 -- 1,516,999 -- 2,365,267 --
Withhold 70,814 -- 9,266 -- 16,302 --
------------------------------------------------------------------------------------------------------------------------------------
Total 4,255,336 -- 1,526,265 -- 2,381,569 --
====================================================================================================================================
16
NXE NTX
--------------------------------------------------------------------------------------------------
Approval of the the Board Members
was reached as follows:
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
--------------------------------------------------------------------------------------------------
Robert P. Bremner
For 2,970,894 -- 8,425,789 --
Withhold 21,280 -- 62,749 --
--------------------------------------------------------------------------------------------------
Total 2,992,174 -- 8,488,538 --
==================================================================================================
Lawrence H. Brown
For 2,970,894 -- 8,424,085 --
Withhold 21,280 -- 64,453 --
--------------------------------------------------------------------------------------------------
Total 2,992,174 -- 8,488,538 --
==================================================================================================
Jack B. Evans
For 2,970,894 -- 8,425,143 --
Withhold 21,280 -- 63,395 --
--------------------------------------------------------------------------------------------------
Total 2,992,174 -- 8,488,538 --
==================================================================================================
William C. Hunter
For 2,970,894 -- 8,425,793 --
Withhold 21,280 -- 62,745 --
--------------------------------------------------------------------------------------------------
Total 2,992,174 -- 8,488,538 --
==================================================================================================
David J. Kundert
For 2,968,894 -- 8,422,340 --
Withhold 23,280 -- 66,198 --
--------------------------------------------------------------------------------------------------
Total 2,992,174 -- 8,488,538 --
==================================================================================================
William J. Schneider
For -- 874 -- 2,594
Withhold -- -- -- --
--------------------------------------------------------------------------------------------------
Total -- 874 -- 2,594
==================================================================================================
Timothy R. Schwertfeger
For -- 874 -- 2,594
Withhold -- -- -- --
--------------------------------------------------------------------------------------------------
Total -- 874 -- 2,594
==================================================================================================
Judith M. Stockdale
For 2,970,894 -- 8,427,443 --
Withhold 21,280 -- 61,095 --
--------------------------------------------------------------------------------------------------
Total 2,992,174 -- 8,488,538 --
==================================================================================================
Eugene S. Sunshine
For 2,970,894 -- 8,426,443 --
Withhold 21,280 -- 62,095 --
--------------------------------------------------------------------------------------------------
Total 2,992,174 -- 8,488,538 --
==================================================================================================
17
Nuveen Arizona Premium Income Municipal Fund, Inc. (NAZ)
Portfolio of
Investments January 31, 2006 (Unaudited)
Principal Optional Call
Amount (000) Description (1) Provisions (2) Ratings (3) Value
----------------------------------------------------------------------------------------------------------------------------------
Consumer Staples - 1.4% (1.0% of Total Investments)
$ 910 Puerto Rico, The Children's Trust Fund, Tobacco Settlement Asset-Backed 5/12 at 100.00 BBB $ 926,917
Refunding Bonds, Series 2002, 5.375%, 5/15/33
----------------------------------------------------------------------------------------------------------------------------------
Education and Civic Organizations - 18.4% (12.7% of Total Investments)
1,000 Arizona State University, Certificates of Participation, Series 2002, 7/12 at 100.00 AAA 1,083,870
5.375%, 7/01/19 - MBIA Insured
1,000 Arizona State University, System Revenue Bonds, Series 2002, 5.000%,
7/01/25 - FGIC Insured 7/12 at 100.00 AAA 1,049,430
Arizona State University, System Revenue Bonds, Series 2005:
2,455 5.000%, 7/01/20 - AMBAC Insured 7/15 at 100.00 AAA 2,619,166
1,500 5.000%, 7/01/21 - AMBAC Insured 7/15 at 100.00 AAA 1,595,490
1,395 5.000%, 7/01/26 - AMBAC Insured 7/15 at 100.00 AAA 1,464,945
1,250 Glendale Industrial Development Authority, Arizona, Revenue Bonds, 5/11 at 101.00 A- 1,332,288
Midwestern University, Series 2001A, 5.875%, 5/15/31
1,050 Northern Arizona University, System Revenue Bonds, Series 2002, 5.000%,
6/01/34 - FGIC Insured 6/12 at 100.00 AAA 1,079,463
1,500 Tempe Industrial Development Authority, Arizona, Lease Revenue Bonds, 7/13 at 100.00 AAA 1,551,090
Arizona State University Foundation Project, Series 2003, 5.000%,
7/01/34 - AMBAC Insured
----------------------------------------------------------------------------------------------------------------------------------
11,150 Total Education and Civic Organizations 11,775,742
----------------------------------------------------------------------------------------------------------------------------------
Health Care - 14.2% (9.8% of Total Investments)
800 Arizona Health Facilities Authority, Hospital Revenue Bonds, Catholic 7/10 at 101.00 A- 890,928
Healthcare West, Series 1999A, 6.625%, 7/01/20
2,000 Arizona Health Facilities Authority, Hospital System Revenue Bonds, 11/09 at 100.00 Baa3 2,062,340
Phoenix Children's Hospital, Series 1999A, 6.125%, 11/15/22
675 Glendale Industrial Development Authority, Arizona, Revenue Bonds, John C. 12/15 at 100.00 BBB 669,107
Lincoln Health Network, Series 2005B, 5.000%, 12/01/37
2,150 Maricopa County Industrial Development Authority, Arizona, Health Facility 7/14 at 100.00 A- 2,259,758
Revenue Bonds, Catholic Healthcare West, Series 2004A, 5.375%, 7/01/23
515 Puerto Rico Industrial, Tourist, Educational, Medical and Environmental 11/10 at 101.00 AA 573,787
Control Facilities Financing Authority, Hospital Revenue Bonds,
Hospital de la Concepcion, Series 2000A, 6.375%, 11/15/15
1,500 Scottsdale Industrial Development Authority, Arizona, Hospital Revenue 12/11 at 101.00 A3 1,603,290
Bonds, Scottsdale Healthcare, Series 2001, 5.800%, 12/01/31
1,055 Winslow Industrial Development Authority, Arizona, Hospital Revenue Bonds, 6/08 at 101.00 N/R 1,006,797
Winslow Memorial Hospital, Series 1998, 5.500%, 6/01/22
----------------------------------------------------------------------------------------------------------------------------------
8,695 Total Health Care 9,066,007
----------------------------------------------------------------------------------------------------------------------------------
Housing/Multifamily - 6.7% (4.7% of Total Investments)
400 Phoenix Industrial Development Authority, Arizona, GNMA Collateralized 6/11 at 102.00 Aaa 419,332
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 Collateralized 4/15 at 100.00 Aaa 531,314
Multifamily Housing Revenue Bonds, Park Lee Apartments, Series 2004A,
5.050%, 10/20/44 (Alternative Minimum Tax)
3,215 Tucson Industrial Development Authority, Arizona, Senior Living 7/10 at 101.00 AA 3,425,229
Facilities Revenue Bonds, Christian Care Project, Series 2000A, 5.625%,
7/01/20 - RAAI Insured
----------------------------------------------------------------------------------------------------------------------------------
4,145 Total Housing/Multifamily 4,375,875
----------------------------------------------------------------------------------------------------------------------------------
18
Principal Optional Call
Amount (000) Description (1) Provisions (2) Ratings (3) Value
----------------------------------------------------------------------------------------------------------------------------------
Industrials - 2.1% (1.5% of Total Investments)
$ 1,345 Yavapai County Industrial Development Authority, Arizona, Solid Waste 3/28 at 100.00 BBB $ 1,356,755
Disposal Revenue Bonds, Waste Management Inc., Series 2003B, 4.450%,
3/01/28 (Mandatory put 3/01/08) (Alternative Minimum Tax)
----------------------------------------------------------------------------------------------------------------------------------
Long-Term Care - 0.6% (0.4% of Total Investments)
345 Mohave County Industrial Development Authority, Arizona, GNMA 5/06 at 103.00 AAA 356,920
Collateralized Healthcare Revenue Refunding Bonds, Chris Ridge and
Silver Village Projects, Series 1996, 6.375%, 11/01/31
----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General - 7.0% (4.8% of Total Investments)
1,525 Maricopa County Union High School District 210, Phoenix, Arizona, General 7/14 at 100.00 AAA 1,617,903
Obligation Bonds, Series 2004A, 5.000%, 7/01/21 - FSA Insured
465 Maricopa County Union High School District 210, Phoenix, Arizona, General 7/15 at 100.00 AAA 493,114
Obligation Bonds, Series 2005B, 5.000%, 7/01/23 - MBIA Insured
330 Puerto Rico, General Obligation and Public Improvement Bonds, Series
2001A, 5.375%, 7/01/28 7/11 at 100.00 BBB 344,150
500 Puerto Rico, General Obligation and Public Improvement Bonds, Series No Opt. Call AAA 574,740
2002A, 5.500%, 7/01/19 - FGIC Insured
1,340 Tucson, Arizona, General Obligation Bonds, Series 2005, 5.000%,
7/01/20 - FGIC Insured No Opt. Call AAA 1,435,006
----------------------------------------------------------------------------------------------------------------------------------
4,160 Total Tax Obligation/General 4,464,913
----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited - 35.8% (24.7% of Total Investments)
2,000 Arizona School Facilities Board, School Improvement Revenue Bonds, Series 7/14 at 100.00 AAA 2,266,300
2004A, 5.750%, 7/01/18 - AMBAC Insured
2,000 Arizona State Transportation Board, Subordinate Highway Revenue Bonds, 7/14 at 100.00 AA 2,114,560
Series 2004B, 5.000%, 7/01/22
Arizona Tourism and Sports Authority, Tax Revenue Bonds, Multipurpose
Stadium Facility
Project, Series 2003A:
3,000 5.375%, 7/01/20 - MBIA Insured 7/13 at 100.00 Aaa 3,275,460
1,000 5.375%, 7/01/21 - MBIA Insured 7/13 at 100.00 Aaa 1,084,120
Bullhead City, Arizona, Special Assessment Bonds, Parkway District
Improvements, Series 1993:
730 6.100%, 1/01/08 7/06 at 100.00 Baa2 737,621
785 6.100%, 1/01/09 7/06 at 100.00 Baa2 792,834
499 Estrella Mountain Ranch Community Facilities District, Goodyear, 7/10 at 102.00 N/R 547,677
Arizona, Special Assessment Lien Bonds, Series 2001A, 7.875%, 7/01/25
575 Marana Municipal Property Corporation, Arizona, Revenue Bonds, Series 7/13 at 100.00 AAA 596,425
2003, 5.000%, 7/01/28 - AMBAC Insured
3,400 Maricopa County Stadium District, Arizona, Revenue Refunding Bonds, 6/12 at 100.00 Aaa 3,689,781
Series 2002, 5.375%, 6/01/18 - AMBAC Insured
1,340 Phoenix Civic Improvement Corporation, Arizona, Subordinate Excise Tax 7/15 at 100.00 AAA 1,422,088
Revenue Bonds, Civic Plaza Expansion Project, Series 2005A, 5.000%,
7/01/22 - FGIC Insured
2,000 Phoenix Civic Improvement Corporation, Arizona, Subordinate Lien Excise 7/13 at 100.00 AAA 2,112,860
Tax Revenue Bonds, Series 2003A, 5.000%, 7/01/21 - MBIA Insured
1,200 Prescott Valley Municipal Property Corporation, Arizona, Municipal 1/13 at 100.00 AAA 1,244,304
Facilities Revenue Bonds, Series 2003, 5.000%, 1/01/27 - FGIC Insured
1,000 Puerto Rico Public Buildings Authority, Guaranteed Government Facilities 7/12 at 100.00 BBB 1,033,330
Revenue Refunding Bonds, Series 2002D, 5.125%, 7/01/24
1,350 Tempe, Arizona, Excise Tax Revenue Bonds, Series 2004, 5.250%, 7/01/20 - 7/14 at 100.00 AAA 1,475,591
AMBAC Insured
500 Tucson, Arizona, Certificates of Participation, Series 2000, 5.700%, 7/08 at 100.00 AAA 524,705
7/01/20 - MBIA Insured
----------------------------------------------------------------------------------------------------------------------------------
21,379 Total Tax Obligation/Limited 22,917,656
----------------------------------------------------------------------------------------------------------------------------------
19
Nuveen Arizona Premium Income Municipal Fund, Inc. (NAZ) (continued)
Portfolio of Investments January 31, 2006 (Unaudited)
Principal Optional Call
Amount (000) Description (1) Provisions (2) Ratings (3) Value
----------------------------------------------------------------------------------------------------------------------------------
U.S. Guaranteed (4) - 25.1% (17.3% of Total Investments)
$ 1,000 Arizona Health Facilities Authority, Hospital System Revenue Bonds, 12/10 at 102.00 BBB (4) $ 1,164,660
John C. Lincoln Health Network, Series 2000, 7.000%, 12/01/25
(Pre-refunded 12/01/10)
1,000 Arizona School Facilities Board, School Improvement Revenue Bonds, Series 7/13 at 100.00 AAA 1,081,260
2003, 5.000%, 7/01/21 (Pre-refunded 7/01/13)
2,250 Maricopa County Industrial Development Authority, Arizona, Hospital No Opt. Call AAA 2,777,917
Revenue Refunding Bonds, Samaritan Health Services, Series 1990A,
7.000%, 12/01/16 (ETM) - MBIA Insured
3,000 Mesa Industrial Development Authority, Arizona, Revenue Bonds, Discovery 1/10 at 101.00 AAA 3,265,980
Health System, Series 1999A, 5.750%, 1/01/25 (Pre-refunded 1/01/10) -
MBIA Insured
2,000 Phoenix Civic Improvement Corporation, Arizona, Junior Lien Wastewater 7/10 at 101.00 AAA 2,223,100
System Revenue Bonds, Series 2000, 6.000%, 7/01/24 (Pre-refunded
7/01/10) - FGIC Insured
Phoenix Industrial Development Authority, Arizona, Government Office
Lease Revenue Bonds, Capitol Mall LLC, Series 2000:
1,000 5.375%, 9/15/22 (Pre-refunded 9/15/10) - AMBAC Insured 9/10 at 100.00 AAA 1,076,770
2,000 5.500%, 9/15/27 (Pre-refunded 9/15/10) - AMBAC Insured 9/10 at 100.00 AAA 2,164,120
1,000 Puerto Rico Highway and Transportation Authority, Highway Revenue Bonds, 7/10 at 101.00 BBB+ (4) 1,127,480
Series 2000B, 6.500%, 7/01/27 (Pre-refunded 7/01/10)
500 Surprise Municipal Property Corporation, Arizona, Excise Tax Revenue 7/09 at 101.00 AAA 540,990
Bonds, Series 2000, 5.700%, 7/01/20 (Pre-refunded 7/01/09) -
FGIC Insured
600 Tucson, Arizona, Junior Lien Street and Highway User Revenue Bonds, 7/10 at 100.00 AAA 637,398
Series 2000E, 5.000%, 7/01/18 (Pre-refunded 7/01/10) - FGIC Insured
----------------------------------------------------------------------------------------------------------------------------------
14,350 Total U.S. Guaranteed 16,059,675
----------------------------------------------------------------------------------------------------------------------------------
Utilities - 10.3% (7.1% of Total Investments)
1,000 Arizona Power Authority, Special Obligation Power Resource Revenue No Opt. Call AA 1,103,990
Refunding Crossover Bonds, Hoover Project, Series 2001, 5.250%,
10/01/15
1,000 Coconino County, Arizona, Pollution Control Revenue Bonds, Nevada Power 10/06 at 102.00 B- 1,021,380
Company Project, Series 1996, 6.375%, 10/01/36 (Alternative Minimum Tax)
765 Pima County Industrial Development Authority, Arizona, Lease Obligation 7/06 at 101.00 AAA 775,978
Revenue Refunding Bonds, Tucson Electric Power Company, Series 1988A,
7.250%, 7/15/10 - FSA Insured
530 Salt River Project Agricultural Improvement and Power District, Arizona, 1/13 at 100.00 AA 558,032
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 AA 2,096,400
1,000 5.000%, 1/01/31 1/12 at 101.00 AA 1,035,110
----------------------------------------------------------------------------------------------------------------------------------
6,295 Total Utilities 6,590,890
----------------------------------------------------------------------------------------------------------------------------------
Water and Sewer - 22.7% (15.7% of Total Investments)
Arizona Water Infrastructure Finance Authority, Water Quality Revenue
Bonds, Series 2004A:
1,825 5.000%, 10/01/19 10/14 at 100.00 AAA 1,952,622
1,815 5.000%, 10/01/22 10/14 at 100.00 AAA 1,924,209
1,005 Cottonwood, Arizona, Senior Lien Water System Revenue Bonds, Municipal 7/14 at 100.00 AAA 1,050,959
Property Corporation, Series 2004, 5.000%, 7/01/24 - XLCA Insured
3,500 Glendale, Arizona, Water and Sewer Revenue Bonds, Subordinate Lien, 7/13 at 100.00 AAA 3,639,405
Series 2003, 5.000%, 7/01/28 - AMBAC Insured
600 Oro Valley Municipal Property Corporation, Arizona, Senior Lien Water 7/13 at 100.00 AAA 632,250
Revenue Bonds, Series 2003, 5.000%, 7/01/23 - MBIA Insured
875 Phoenix Civic Improvement Corporation, Arizona, Junior Lien Wastewater 7/14 at 100.00 AAA 921,314
System Revenue Bonds, Series 2004, 5.000%, 7/01/24 - MBIA Insured
1,500 Phoenix Civic Improvement Corporation, Arizona, Junior Lien Water System 7/12 at 100.00 AAA 1,560,420
Revenue Bonds, Series 2002, 5.000%, 7/01/26 - FGIC Insured
20
Principal Optional Call
Amount (000) Description (1) Provisions (2) Ratings (3) Value
-----------------------------------------------------------------------------------------------------------------------------------
Water and Sewer (continued)
$ 1,325 Phoenix Civic Improvement Corporation, Arizona, Junior Lien Water System 7/15 at 100.00 AAA $ 1,389,355
Revenue Bonds, Series 2005, 5.000%, 7/01/29 - MBIA Insured
1,250 Phoenix Civic Improvement Corporation, Arizona, Junior Lien Water System No Opt. Call AAA 1,446,138
Revenue Refunding Bonds, Series 2001, 5.500%, 7/01/21 - FGIC Insured
-----------------------------------------------------------------------------------------------------------------------------------
13,695 Total Water and Sewer 14,516,672
-----------------------------------------------------------------------------------------------------------------------------------
$ 86,469 Total Long-Term Investments (cost $88,498,842) - 144.3% 92,408,022
============-----------------------------------------------------------------------------------------------------------------------
Short-Term Investments - 0.5% (0.3% of Total Investments)
300 Puerto Rico Government Development Bank, Adjustable Refunding Bonds, No Opt. Call VMIG-1 300,000
Variable Rate Demand Obligations, Series 1985, 2.930%, 12/01/15 - MBIA
Insured (5)
-----------------------------------------------------------------------------------------------------------------------------------
$ 300 Total Short-Term Investments (cost $300,000) 300,000
============-----------------------------------------------------------------------------------------------------------------------
Total Investments (cost $88,798,842) - 144.8% 92,708,022
---------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 2.1% 1,294,903
---------------------------------------------------------------------------------------------------------------------
Preferred Shares, at Liquidation Value - (46.9)% (30,000,000)
---------------------------------------------------------------------------------------------------------------------
Net Assets Applicable to Common Shares - 100% $ 64,002,925
=====================================================================================================================
(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 Baa by Moody's Investor Service, Inc. or BBB by
Standard & Poor's Group are considered to be below investment grade.
(4) Securities are backed by an escrow or trust containing sufficient
U.S. Government or U.S. Government agency securities which ensures
the timely payment of principal and interest. Such securities are
normally considered to be equivalent to AAA rated securities.
(5) Security 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.
N/R Investment is not rated.
(ETM) Security is escrowed to maturity.
See accompanying notes to financial statements.
21
Nuveen Arizona Dividend Advantage Municipal Fund (NFZ)
Portfolio of
Investments January 31, 2006 (Unaudited)
Principal Optional Call
Amount (000) Description (1) Provisions (2) Ratings (3) Value
----------------------------------------------------------------------------------------------------------------------------------
Education and Civic Organizations - 7.0% (4.7% of Total Investments)
$ 1,000 Puerto Rico Industrial, Tourist, Educational, Medical and Environmental 2/09 at 101.00 BBB- $ 1,015,530
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 Environmental 9/11 at 100.00 BBB 310,314
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 Revenue 9/14 at 100.00 BBB- 311,094
Bonds, Arizona Agribusiness and Equine Center Charter School, Series
2004A, 6.125%, 9/01/34
----------------------------------------------------------------------------------------------------------------------------------
1,605 Total Education and Civic Organizations 1,636,938
----------------------------------------------------------------------------------------------------------------------------------
Health Care - 10.8% (7.2% of Total Investments)
365 Arizona Health Facilities Authority, Hospital Revenue Bonds, Catholic 7/10 at 101.00 A- 406,486
Healthcare West, Series 1999A, 6.625%, 7/01/20
250 Glendale Industrial Development Authority, Arizona, Revenue Bonds, 12/15 at 100.00 BBB 247,818
John C. Lincoln Health Network, Series 2005B, 5.000%, 12/01/37
750 Maricopa County Industrial Development Authority, Arizona, Health 7/14 at 100.00 A- 788,288
Facility Revenue Bonds, Catholic Healthcare West, Series 2004A,
5.375%, 7/01/23
1,000 Scottsdale Industrial Development Authority, Arizona, Hospital Revenue 12/11 at 101.00 A3 1,068,860
Bonds, Scottsdale Healthcare, Series 2001, 5.800%, 12/01/31
----------------------------------------------------------------------------------------------------------------------------------
2,365 Total Health Care 2,511,452
----------------------------------------------------------------------------------------------------------------------------------
Housing/Multifamily - 6.5% (4.3% of Total Investments)
1,000 Maricopa County Industrial Development Authority, Arizona, Multifamily 7/09 at 102.00 Aaa 1,022,450
Housing Revenue Bonds, Whispering Palms Apartments, Series 1999A,
5.900%, 7/01/29 - MBIA Insured
275 Phoenix Industrial Development Authority, Arizona, GNMA Collateralized 6/11 at 102.00 Aaa 288,291
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 Collateralized 4/15 at 100.00 Aaa 205,508
Multifamily Housing Revenue Bonds, Park Lee Apartments, Series 2004A,
5.050%, 10/20/44(Alternative Minimum Tax)
----------------------------------------------------------------------------------------------------------------------------------
1,480 Total Housing/Multifamily 1,516,249
----------------------------------------------------------------------------------------------------------------------------------
Housing/Single Family - 0.5% (0.2% of Total Investments)
105 Pima County Industrial Development Authority, Arizona, FNMA/GNMA Single 11/10 at 101.00 AAA 108,574
Family Mortgage Revenue Bonds, Series 2001A-4, 5.050%, 5/01/17
----------------------------------------------------------------------------------------------------------------------------------
Industrials - 2.2% (1.5% of Total Investments)
510 Yavapai County Industrial Development Authority, Arizona, Solid Waste 3/28 at 100.00 BBB 514,457
Disposal Revenue Bonds, Waste Management Inc., Series 2003B, 4.450%,
3/01/28 (Mandatory put 3/01/08) (Alternative Minimum Tax)
----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General - 12.2% (8.1% of Total Investments)
1,000 Maricopa County Unified School District 11, Peoria, Arizona, General 7/15 at 100.00 AAA 1,066,070
Obligation Bonds, Second Series 2005, 5.000%, 7/01/20 - FGIC Insured
180 Maricopa County Union High School District 210, Phoenix, Arizona, General 7/15 at 100.00 AAA 190,883
Obligation Bonds, Series 2005B, 5.000%, 7/01/23 - MBIA Insured
500 Tucson, Arizona, General Obligation Bonds, Series 2005, 5.000%, 7/01/20 - No Opt. Call AAA 535,450
FGIC Insured
1,020 Tucson, Arizona, General Obligation Refunding Bonds, Series 1997, 5.000%, 7/07 at 100.00 AA 1,040,298
7/01/19
----------------------------------------------------------------------------------------------------------------------------------
2,700 Total Tax Obligation/General 2,832,701
----------------------------------------------------------------------------------------------------------------------------------
22
Principal Optional Call
Amount (000) Description (1) Provisions (2) Ratings (3) Value
----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited - 54.8% (36.4% of Total Investments)
$ 2,750 Arizona School Facilities Board, School Improvement Revenue Bonds, Series 7/14 at 100.00 AAA $ 3,116,160
2004A, 5.750%, 7/01/18 - AMBAC Insured
1,000 Arizona Tourism and Sports Authority, Tax Revenue Bonds, Multipurpose 7/13 at 100.00 Aaa 1,084,120
Stadium Facility Project, Series 2003A, 5.375%, 7/01/21 - MBIA Insured
100 Centerra Community Facilities District, Goodyear, Arizona, General 7/15 at 100.00 N/R 100,546
Obligation Bonds, Series 2005, 5.500%, 7/15/29
194 Estrella Mountain Ranch Community Facilities District, Goodyear, Arizona, 7/10 at 102.00 N/R 212,925
Special Assessment Lien Bonds, Series 2001A, 7.875%, 7/01/25
1,180 Marana Municipal Property Corporation, Arizona, Revenue Bonds, Series 7/13 at 100.00 AAA 1,243,425
2003, 5.000%, 7/01/23 - AMBAC Insured
510 Phoenix Civic Improvement Corporation, Arizona, Subordinate Excise Tax 7/15 at 100.00 AAA 541,243
Revenue Bonds, Civic Plaza Expansion Project, Series 2005A, 5.000%,
7/01/22 - FGIC Insured
900 Phoenix Industrial Development Authority, Arizona, Government Bonds, 3/12 at 100.00 AAA 972,333
Capitol Mall LLC II, Series 2001, 5.250%, 9/15/16 - AMBAC Insured
680 Pinal County Industrial Development Authority, Arizona, Correctional No Opt. Call A 699,040
Facilities Contract Revenue Bonds, Florence West Prison LLC, Series
2002A, 5.000%, 10/01/18 - ACA Insured
1,000 Tempe, Arizona, Excise Tax Revenue Bonds, Series 2004, 5.250%, 7/01/20 - 7/14 at 100.00 AAA 1,093,030
AMBAC Insured
2,675 Tempe, Arizona, Excise Tax Revenue Refunding Bonds, Series 2003, 5.000%, 7/13 at 100.00 AA+ 2,825,950
7/01/21
500 Vistancia Community Facilities District, Arizona, Restricted General 7/15 at 100.00 N/R 507,080
Obligation Bonds, Series 2005, 5.750%, 7/15/24
355 Watson Road Community Facilities District, Arizona, Special Assessement 7/16 at 100.00 N/R 355,934
Revenue Bonds, Series 2005, 6.000%, 7/01/30
----------------------------------------------------------------------------------------------------------------------------------
11,844 Total Tax Obligation/Limited 12,751,786
----------------------------------------------------------------------------------------------------------------------------------
U.S. Guaranteed (4) - 15.2% (10.1% of Total Investments)
550 Arizona Health Facilities Authority, Hospital System Revenue Bonds, 12/10 at 102.00 BBB (4) 637,808
John C. Lincoln Health Network, Series 2000, 6.875%, 12/01/20
(Pre-refunded 12/01/10)
400 Arizona School Facilities Board, School Improvement Revenue Bonds, Series 7/11 at 100.00 AAA 438,428
2001, 5.500%, 7/01/18 (Pre-refunded 7/01/11)
2,000 Maricopa County Industrial Development Authority, Arizona, Education 6/07 at 102.00 A (4) 2,116,780
Revenue Bonds, Horizon Community Learning Center Project, Series 2000,
6.350%, 6/01/26 (Pre-refunded 6/01/07) - ACA Insured
Salt River Project Agricultural Improvement and Power District, Arizona,
Electric System Revenue Refunding Bonds, Series 1997A:
140 5.000%, 1/01/20 (Pre-refunded 1/01/08) 1/08 at 101.00 AA (4) 145,629
180 5.000%, 1/01/20 (Pre-refunded 1/01/11) 1/08 at 101.00 AA (4) 191,884
----------------------------------------------------------------------------------------------------------------------------------
3,270 Total U.S. Guaranteed 3,530,529
----------------------------------------------------------------------------------------------------------------------------------
Utilities - 31.3% (20.8% of Total Investments)
1,500 Arizona Power Authority, Special Obligation Power Resource Revenue No Opt. Call AA 1,667,430
Refunding Crossover Bonds, Hoover Project, Series 2001, 5.250%,
10/01/17
500 Coconino County, Arizona, Pollution Control Revenue Bonds, Nevada Power 5/06 at 100.00 B- 499,980
Company Project, Series 1997B, 5.800%, 11/01/32
(Alternative Minimum Tax)
1,000 Mesa, Arizona, Utility System Revenue Refunding Bonds, Series 2002, No Opt. Call AAA 1,117,040
5.250%, 7/01/17 - FGIC Insured
350 Puerto Rico Electric Power Authority, Power Revenue Bonds, Series 2002II, 7/12 at 101.00 AAA 370,412
5.125%, 7/01/26 - FSA Insured
Puerto Rico Electric Power Authority, Power Revenue Bonds, Series 2005RR:
1,000 5.000%, 7/01/26 - XLCA Insured 7/15 at 100.00 AAA 1,054,100
1,000 5.000%, 7/01/30 - XLCA Insured 7/15 at 100.00 AAA 1,044,640
23
Nuveen Arizona Dividend Advantage Municipal Fund (NFZ) (continued)
Portfolio of Investments January 31, 2006 (Unaudited)
Principal Optional Call
Amount (000) Description (1) Provisions (2) Ratings (3) Value
-----------------------------------------------------------------------------------------------------------------------------------
Utilities (continued)
$ 200 Salt River Project Agricultural Improvement and Power District, Arizona, 1/13 at 100.00 AA $ 210,578
Electric System Revenue Bonds, Series 2002B, 5.000%, 1/01/22
235 Salt River Project Agricultural Improvement and Power District, Arizona, 1/08 at 101.00 AA 243,072
Electric System Revenue Refunding Bonds, Series 1997A, 5.000%, 1/01/20
1,000 Salt River Project Agricultural Improvement and Power District, Arizona, 1/12 at 101.00 AA 1,081,120
Electric System Revenue Refunding Bonds, Series 2002A, 5.250%, 1/01/18
-----------------------------------------------------------------------------------------------------------------------------------
6,785 Total Utilities 7,288,372
-----------------------------------------------------------------------------------------------------------------------------------
Water and Sewer - 10.0% (6.7% of Total Investments)
225 Oro Valley Municipal Property Corporation, Arizona, Senior Lien Water 7/13 at 100.00 AAA 237,094
Revenue Bonds, Series 2003, 5.000%, 7/01/23 - MBIA Insured
1,500 Phoenix Civic Improvement Corporation, Arizona, Junior Lien Water System 7/12 at 100.00 AAA 1,560,420
Revenue Bonds, Series 2002, 5.000%, 7/01/26 - FGIC Insured
510 Phoenix Civic Improvement Corporation, Arizona, Junior Lien Water System 7/15 at 100.00 AAA 534,771
Revenue Bonds, Series 2005, 5.000%, 7/01/29 - MBIA Insured
-----------------------------------------------------------------------------------------------------------------------------------
2,235 Total Water and Sewer 2,332,285
-----------------------------------------------------------------------------------------------------------------------------------
$ 32,899 Total Investments (cost $33,769,618) - 150.5% 35,023,343
============-----------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 1.1% 242,870
---------------------------------------------------------------------------------------------------------------------
Preferred Shares, at Liquidation Value - (51.6)% (12,000,000)
---------------------------------------------------------------------------------------------------------------------
Net Assets Applicable to Common Shares - 100% $ 23,266,213
=====================================================================================================================
Forward Swaps outstanding at January 31, 2006:
Fixed Rate Floating Rate
Paid Fixed Rate Received Floating Rate Unrealized
Notional by the Fund Payment by the Fund Payment Effective Termination Appreciation
Counterparty Amount (annualized) Frequency Based On Frequency Date (5) Date (Depreciation)
----------------------------------------------------------------------------------------------------------------------------------
Citigroup Inc. $200,000 4.699% Semi-Annually 3 Month USD-LIBOR Quarterly 2/27/06 2/27/26 $11,073
Morgan Stanley 700,000 4.816 Semi-Annually 3 Month USD-LIBOR Quarterly 2/15/06 2/15/36 35,817
----------------------------------------------------------------------------------------------------------------------------------
$46,890
==================================================================================================================================
USD-LIBOR (United States Dollar-London Inter-Bank Offered Rates)
(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 Baa by Moody's Investor Service, Inc. or BBB by
Standard & Poor's Group are considered to be below investment grade.
(4) Securities are backed by an escrow or trust containing sufficient
U.S. Government or U.S. Government agency securities which ensures
the timely payment of principal and interest. Such securities are
normally considered to be equivalent to AAA rated securities.
(5) Effective date represents the date on which both the Fund and
counterparty commence interest payment accruals on each forward swap
contract.
N/R Investment is not rated.
See accompanying notes to financial statements.
24
Nuveen Arizona Dividend Advantage Municipal Fund 2 (NKR)
Portfolio of
Investments January 31, 2006 (Unaudited)
Principal Optional Call
Amount (000) Description (1) Provisions (2) Ratings (3) Value
----------------------------------------------------------------------------------------------------------------------------------
Education and Civic Organizations - 10.7% (7.2% of Total Investments)
$ 1,250 Glendale Industrial Development Authority, Arizona, Revenue Bonds, 5/11 at 101.00 A- $ 1,332,288
Midwestern University, Series 2001A, 5.875%, 5/15/31
460 Pima County Industrial Development Authority, Arizona, Charter School 12/14 at 100.00 BBB- 472,208
Revenue Bonds, Noah Webster Basic Schools Inc., Series 2004,
6.000%, 12/15/24
320 Puerto Rico Industrial, Tourist, Educational, Medical and Environmental 2/09 at 101.00 BBB- 328,762
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 Revenue 9/14 at 100.00 BBB- 489,590
Bonds, Arizona Agribusiness and Equine Center Charter School,
Series 2004A, 6.125%, 9/01/34
University of Arizona, Certificates of Participation, Series 2002A:
750 5.500%, 6/01/18 - AMBAC Insured 6/12 at 100.00 AAA 818,700
500 5.125%, 6/01/22 - AMBAC Insured 6/12 at 100.00 AAA 530,450
----------------------------------------------------------------------------------------------------------------------------------
3,760 Total Education and Civic Organizations 3,971,998
----------------------------------------------------------------------------------------------------------------------------------
Health Care - 17.1% (11.5% of Total Investments)
400 Arizona Health Facilities Authority, Hospital Revenue Bonds, Catholic 7/10 at 101.00 A- 445,464
Healthcare West, Series 1999A, 6.625%, 7/01/20
735 Arizona Health Facilities Authority, Hospital System Revenue Bonds, 2/12 at 101.00 Baa3 783,275
Phoenix Children's Hospital, Series 2002A, 6.250%, 2/15/21
600 Arizona Health Facilities Authority, Revenue Bonds, Blood Systems Inc., 4/14 at 100.00 A- 619,242
Series 2004, 5.000%, 4/01/20
400 Glendale Industrial Development Authority, Arizona, Revenue Bonds, 12/15 at 100.00 BBB 396,508
John C. Lincoln Health Network, Series 2005B, 5.000%, 12/01/37
1,375 Maricopa County Industrial Development Authority, Arizona, Health 7/14 at 100.00 A- 1,445,194
Facility Revenue Bonds, Catholic Healthcare West, Series
2004A, 5.375%, 7/01/23
500 Maricopa County Industrial Development Authority, Arizona, Hospital 5/08 at 101.00 AA 520,085
Revenue Bonds, Mayo Clinic Hospital, Series 1998, 5.250%, 11/15/37
1,000 Scottsdale Industrial Development Authority, Arizona, Hospital Revenue 12/11 at 101.00 A3 1,068,860
Bonds, Scottsdale Healthcare, Series 2001, 5.800%, 12/01/31
1,000 Yavapai County Industrial Development Authority, Arizona, Hospital Revenue 8/13 at 100.00 Baa2 1,067,380
Bonds, Yavapai Regional Medical Center, Series 2003A, 6.000%, 8/01/33
----------------------------------------------------------------------------------------------------------------------------------
6,010 Total Health Care 6,346,008
----------------------------------------------------------------------------------------------------------------------------------
Housing/Multifamily - 7.9% (5.3% of Total Investments)
1,000 Maricopa County Industrial Development Authority, Arizona, GNMA 10/11 at 105.00 AAA 1,062,480
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 Collateralized 4/15 at 100.00 Aaa 325,806
Multifamily Housing Revenue Bonds, Park Lee Apartments, Series 2004A,
5.050%, 10/20/44 (Alternative Minimum Tax)
1,425 Phoenix Industrial Development Authority, Arizona, GNMA Collateralized 7/12 at 105.00 AAA 1,539,257
Multifamily Housing Revenue Bonds, Summit Apartments,
Series 2002, 6.450%, 7/20/32
----------------------------------------------------------------------------------------------------------------------------------
2,750 Total Housing/Multifamily 2,927,543
----------------------------------------------------------------------------------------------------------------------------------
Housing/Single Family - 0.2% (0.2% of Total Investments)
50 Pima County Industrial Development Authority, Arizona, FNMA/GNMA Single 11/10 at 101.00 AAA 51,472
Family Mortgage Revenue Bonds, Series 2001A-1, 5.350%, 11/01/24
(Alternative Minimum Tax)
----------------------------------------------------------------------------------------------------------------------------------
25
Nuveen Arizona Dividend Advantage Municipal Fund 2 (NKR) (continued)
Portfolio of Investments January 31, 2006 (Unaudited)
Principal Optional Call
Amount (000) Description (1) Provisions (2) Ratings (3) Value
----------------------------------------------------------------------------------------------------------------------------------
Industrials - 2.2% (1.5% of Total Investments)
$ 810 Yavapai County Industrial Development Authority, Arizona, Solid Waste 3/28 at 100.00 BBB $ 817,079
Disposal Revenue Bonds, Waste Management Inc., Series 2003B, 4.450%,
3/01/28 (Mandatory put 3/01/08) (Alternative Minimum Tax)
----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General - 33.5% (22.5% of Total Investments)
1,725 Chandler, Arizona, General Obligation Bonds, Series 2002, 5.000%, 7/01/17 7/12 at 100.00 AA+ 1,836,280
Maricopa County School District 6, Arizona, General Obligation Refunding
Bonds, Washington Elementary School, Series 2002A:
1,000 5.375%, 7/01/15 - FSA Insured No Opt. Call AAA 1,122,410
1,000 5.375%, 7/01/16 - FSA Insured No Opt. Call AAA 1,125,240
1,165 Maricopa County Unified School District 69, Paradise Valley, Arizona, No Opt. Call AAA 1,286,113
General Obligation Refunding Bonds, Series 2002A, 5.250%, 7/01/14 -
FGIC Insured
285 Maricopa County Union High School District 210, Phoenix, Arizona, General 7/15 at 100.00 AAA 302,231
Obligation Bonds, Series 2005B, 5.000%, 7/01/23 - MBIA Insured
1,000 Mesa, Arizona, General Obligation Bonds, Series 2000, 6.500%, 7/01/11 - No Opt. Call AAA 1,141,790
FGIC Insured
1,405 Mesa, Arizona, General Obligation Bonds, Series 2002, 5.375%, 7/01/15 - No Opt. Call AAA 1,576,986
FGIC Insured
Phoenix, Arizona, Various Purpose General Obligation Bonds, Series 2002B:
1,700 5.000%, 7/01/22 7/12 at 100.00 AA+ 1,799,858
500 5.000%, 7/01/27 7/12 at 100.00 AA+ 518,435
1,000 Pinal County Unified School District 43, Apache Junction, Arizona, No Opt. Call AAA 1,148,420
General Obligation Refunding Bonds, Series 2001, 5.750%,
7/01/15 - FGIC Insured
510 Scottsdale, Arizona, General Obligation Bonds, Series 2002, 7/11 at 100.00 AAA 539,437
5.000%, 7/01/24
----------------------------------------------------------------------------------------------------------------------------------
11,290 Total Tax Obligation/General 12,397,200
----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited - 40.2% (27.0% of Total Investments)
Arizona State, Certificates of Participation, Series 2002A:
750 5.000%, 11/01/17 - MBIA Insured 5/12 at 100.00 AAA 795,540
1,000 5.000%, 11/01/18 - MBIA Insured 5/12 at 100.00 AAA 1,060,720
500 5.000%, 11/01/20 - MBIA Insured 5/12 at 100.00 AAA 528,510
140 Centerra Community Facilities District, Goodyear, Arizona, General 7/15 at 100.00 N/R 140,764
Obligation Bonds, Series 2005, 5.500%, 7/15/29
307 Estrella Mountain Ranch Community Facilities District, Goodyear, Arizona, 7/10 at 102.00 N/R 336,948
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 A 692,130
Obligation Bonds, Series 2003, 5.350%, 7/15/28 - ACA Insured
870 Maricopa County Public Finance Corporation, Arizona, Lease Revenue Bonds, 7/11 at 100.00 Aaa 947,091
Series 2001, 5.500%, 7/01/15 - AMBAC Insured
Maricopa County Stadium District, Arizona, Revenue Refunding Bonds,
Series 2002:
840 5.375%, 6/01/18 - AMBAC Insured 6/12 at 100.00 Aaa 911,593
2,645 5.375%, 6/01/19 - AMBAC Insured 6/12 at 100.00 Aaa 2,870,432
800 Phoenix Civic Improvement Corporation, Arizona, Subordinate Excise Tax 7/15 at 100.00 AAA 849,008
Revenue Bonds, Civic Plaza Expansion Project, Series 2005A, 5.000%,
7/01/22 - FGIC Insured
1,500 Phoenix Industrial Development Authority, Arizona, Government Bonds, 3/12 at 100.00 AAA 1,620,555
Capitol Mall LLC II, Series 2001, 5.250%, 9/15/16 - AMBAC Insured
1,070 Pinal County Industrial Development Authority, Arizona, Correctional No Opt. Call A 1,099,960
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 Facilities 7/12 at 100.00 BBB 1,033,330
Revenue Refunding Bonds, Series 2002D, 5.125%, 7/01/24
750 Vistancia Community Facilities District, Arizona, Restricted General 7/15 at 100.00 N/R 760,620
Obligation Bonds, Series 2005, 5.750%, 7/15/24
26
Principal Optional Call
Amount (000) Description (1) Provisions (2) Ratings (3) Value
----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited (continued)
$ 560 Watson Road Community Facilities District, Arizona, Special Assessement 7/16 at 100.00 N/R $ 561,473
Revenue Bonds, Series 2005, 6.000%, 7/01/30
640 Yuma Municipal Property Corporation, Arizona, Municipal Facilities Tax 7/10 at 100.00 AAA 671,597
Revenue Bonds, Series 2001, 5.000%, 7/01/21 - AMBAC Insured
----------------------------------------------------------------------------------------------------------------------------------
14,042 Total Tax Obligation/Limited 14,880,271
----------------------------------------------------------------------------------------------------------------------------------
Transportation - 5.6% (3.7% of Total Investments)
1,000 Phoenix Civic Improvement Corporation, Arizona, Senior Lien Airport 7/08 at 101.00 AAA 1,025,700
Revenue Bonds, Series 1998A, 5.000%, 7/01/25 - FSA Insured
1,000 Phoenix, Arizona, Civic Improvement Corporation, Senior Lien Airport 7/12 at 100.00 AAA 1,037,970
Revenue Bonds, Series 2002B, 5.250%, 7/01/27 - FGIC Insured
(Alternative Minimum Tax)
----------------------------------------------------------------------------------------------------------------------------------
2,000 Total Transportation 2,063,670
----------------------------------------------------------------------------------------------------------------------------------
U.S. Guaranteed (4) - 13.4% (9.0% of Total Investments)
400 Arizona State Transportation Board, Highway Revenue Bonds, Series 2002B, 7/12 at 100.00 AAA 437,624
5.250%, 7/01/21 (Pre-refunded 7/01/12)
715 Arizona State University, System Revenue Bonds, Series 2002, 5.750%, 7/12 at 100.00 AAA 802,573
7/01/27 (Pre-refunded 7/01/12) - FGIC Insured
1,000 Gilbert, Arizona, General Obligation Bonds, Series 2002A, 5.000%, 7/01/18 7/11 at 100.00 AAA 1,071,620
(Pre-refunded 7/01/11) - AMBAC Insured
130 Maricopa County Public Finance Corporation, Arizona, Lease Revenue Bonds, 7/11 at 100.00 Aaa 142,489
Series 2001, 5.500%, 7/01/15 (Pre-refunded 7/01/11) - AMBAC Insured
300 Maricopa County Unified School District 89, Dysart, Arizona, General 7/14 at 100.00 AAA 331,416
Obligation Bonds, Series 2004B, 5.250%, 7/01/20 (Pre-refunded
7/01/14) - FSA Insured
1,000 Mesa, Arizona, Street and Highway User Tax Revenue Bonds, Series 2004, 7/14 at 100.00 AAA 1,095,780
5.125%, 7/01/23 (Pre-refunded 7/01/14) - FSA Insured
990 Scottsdale, Arizona, General Obligation Bonds, Series 2002, 5.000%, 7/11 at 100.00 AAA 1,061,914
7/01/24 (Pre-refunded 7/01/11)
----------------------------------------------------------------------------------------------------------------------------------
4,535 Total U.S. Guaranteed 4,943,416
----------------------------------------------------------------------------------------------------------------------------------
Utilities - 7.1% (4.8% of Total Investments)
1,115 Arizona Power Authority, Special Obligation Power Resource Revenue No Opt. Call AA 1,230,949
Refunding Crossover Bonds, Hoover Project, Series 2001, 5.250%, 10/01/15
1,000 Mesa, Arizona, Utility System Revenue Bonds, Series 2002, 5.000%, 7/11 at 100.00 AAA 1,059,980
7/01/20 - FGIC Insured
320 Salt River Project Agricultural Improvement and Power District, Arizona, 1/13 at 100.00 AA 336,925
Electric System Revenue Bonds, Series 2002B, 5.000%, 1/01/22
----------------------------------------------------------------------------------------------------------------------------------
2,435 Total Utilities 2,627,854
----------------------------------------------------------------------------------------------------------------------------------
Water and Sewer - 10.8% (7.3% of Total Investments)
500 Maricopa County Industrial Development Authority, Arizona, Water System 12/07 at 102.00 AAA 522,090
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 Water 7/13 at 100.00 AAA 379,350
Revenue Bonds, Series 2003, 5.000%, 7/01/23 - MBIA Insured
805 Phoenix Civic Improvement Corporation, Arizona, Junior Lien Water System 7/15 at 100.00 AAA 844,099
Revenue Bonds, Series 2005, 5.000%, 7/01/29 - MBIA Insured
1,000 Phoenix Civic Improvement Corporation, Arizona, Junior Lien Water System No Opt. Call AAA 1,160,170
Revenue Refunding Bonds, Series 2001, 5.500%, 7/01/22 - FGIC Insured
27
Nuveen Arizona Dividend Advantage Municipal Fund 2 (NKR) (continued)
Portfolio of Investments January 31, 2006 (Unaudited)
Principal Optional Call
Amount (000) Description (1) Provisions (2) Ratings (3) Value
-----------------------------------------------------------------------------------------------------------------------------------
Water and Sewer (continued)
$ 1,000 Tucson, Arizona, Water System Revenue Refunding Bonds, Series 2002, 7/12 at 102.00 AAA $ 1,110,760
5.500%, 7/01/18 - FGIC Insured
-----------------------------------------------------------------------------------------------------------------------------------
3,665 Total Water and Sewer 4,016,469
-----------------------------------------------------------------------------------------------------------------------------------
$ 51,347 Total Investments (cost $52,415,010) - 148.7% 55,042,980
============-----------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 1.3% 478,785
---------------------------------------------------------------------------------------------------------------------
Preferred Shares, at Liquidation Value - (50.0)% (18,500,000)
---------------------------------------------------------------------------------------------------------------------
Net Assets Applicable to Common Shares - 100% $ 37,021,765
=====================================================================================================================
Forward Swaps outstanding at January 31, 2006:
Fixed Rate Floating Rate
Paid Fixed Rate Received Floating Rate Unrealized
Notional by the Fund Payment by the Fund Payment Effective Termination Appreciation
Counterparty Amount (annualized) Frequency Based On Frequency Date (5) Date (Depreciation)
------------------------------------------------------------------------------------------------------------------------------------
Citigroup Inc. $600,000 4.699% Semi-Annually 3 Month USD-LIBOR Quarterly 2/27/06 2/27/26 $33,219
JPMorgan 500,000 4.833 Semi-Annually 3 Month USD-LIBOR Quarterly 2/09/06 2/09/36 24,279
Morgan Stanley 700,000 4.816 Semi-Annually 3 Month USD-LIBOR Quarterly 2/15/06 2/15/36 35,817
------------------------------------------------------------------------------------------------------------------------------------
$93,315
====================================================================================================================================
USD-LIBOR (United States Dollar-London Inter-Bank Offered Rates)
(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 Baa by Moody's Investor Service, Inc. or BBB by
Standard & Poor's Group are considered to be below investment grade.
(4) Securities are backed by an escrow or trust containing sufficient
U.S. Government or U.S. Government agency securities which ensures
the timely payment of principal and interest.
(5) Effective date represents the date on which both the Fund and
counterparty commence interest payment accruals on each forward swap
contract.
N/R Investment is not rated.
See accompanying notes to financial statements.
28
Nuveen Arizona Dividend Advantage Municipal Fund 3 (NXE)
Portfolio of
Investments January 31, 2006 (Unaudited)
Principal Optional Call
Amount (000) Description (1) Provisions (2) Ratings (3) Value
----------------------------------------------------------------------------------------------------------------------------------
Consumer Staples - 1.4% (1.0% of Total Investments)
$ 580 Puerto Rico, The Children's Trust Fund, Tobacco Settlement Asset-Backed 5/12 at 100.00 BBB $ 590,782
Refunding Bonds, Series 2002, 5.375%, 5/15/33
----------------------------------------------------------------------------------------------------------------------------------
Education and Civic Organizations - 16.1% (10.9% of Total Investments)
1,250 Arizona State University, System Revenue Bonds, Series 2005, 5.000%, 7/15 at 100.00 AAA 1,333,588
7/01/20 - AMBAC Insured
1,000 Arizona Student Loan Acquisition Authority, Student Loan Revenue 11/09 at 102.00 Aaa 1,067,060
Refunding Bonds, Senior Series 1999A-1, 5.750%, 5/01/15
(Alternative Minimum Tax)
1,130 Energy Management Services LLC, Arizona State University, Energy 7/12 at 100.00 AAA 1,218,818
Conservation Revenue Bonds, Main Campus Project, Series 2002, 5.250%,
7/01/18 - MBIA Insured
270 Glendale Industrial Development Authority, Arizona, Revenue Bonds, 5/08 at 101.00 A- 277,592
Midwestern University, Series 1998A, 5.375%, 5/15/28
540 Pima County Industrial Development Authority, Arizona, Charter School 12/14 at 100.00 BBB- 554,332
Revenue Bonds, Noah Webster Basic Schools Inc., Series 2004,
6.000%, 12/15/24
565 Tucson Industrial Development Authority, Arizona, Charter School Revenue 9/14 at 100.00 BBB- 576,289
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 2,136,780
5.125%, 6/01/20 - AMBAC Insured
----------------------------------------------------------------------------------------------------------------------------------
6,755 Total Education and Civic Organizations 7,164,459
----------------------------------------------------------------------------------------------------------------------------------
Health Care - 20.6% (13.9% of Total Investments)
300 Arizona Health Facilities Authority, Hospital Revenue Bonds, Catholic 7/10 at 101.00 A- 334,098
Healthcare West, Series 1999A, 6.625%, 7/01/20
Arizona Health Facilities Authority, Hospital System Revenue Bonds,
Phoenix Children's Hospital, Series 1999A:
750 6.125%, 11/15/22 11/09 at 100.00 Baa3 773,378
520 6.250%, 11/15/29 11/09 at 100.00 Baa3 536,796
625 Arizona Health Facilities Authority, Revenue Bonds, Blood Systems Inc., 4/14 at 100.00 A- 645,044
Series 2004, 5.000%, 4/01/20
475 Glendale Industrial Development Authority, Arizona, Revenue Bonds, 12/15 at 100.00 BBB 470,853
John C. Lincoln Health Network, Series 2005B, 5.000%, 12/01/37
1,825 Maricopa County Industrial Development Authority, Arizona, Health 7/14 at 100.00 A- 1,918,166
Facility Revenue Bonds, Catholic Healthcare West, Series 2004A,
5.375%, 7/01/23
2,000 Maricopa County Industrial Development Authority, Arizona, Hospital 5/08 at 101.00 AA 2,080,340
Revenue Bonds, Mayo Clinic Hospital, Series 1998, 5.250%, 11/15/37
1,250 Scottsdale Industrial Development Authority, Arizona, Hospital Revenue 12/11 at 101.00 A3 1,336,075
Bonds, Scottsdale Healthcare, Series 2001, 5.800%, 12/01/31
1,000 Yavapai County Industrial Development Authority, Arizona, Hospital 8/13 at 100.00 Baa2 1,067,380
Revenue Bonds, Yavapai Regional Medical Center,
Series 2003A, 6.000%, 8/01/33
----------------------------------------------------------------------------------------------------------------------------------
8,745 Total Health Care 9,162,130
----------------------------------------------------------------------------------------------------------------------------------
Housing/Multifamily - 4.5% (3.0% of Total Investments)
1,545 Phoenix Industrial Development Authority, Arizona, GNMA Collateralized 6/11 at 102.00 Aaa 1,628,183
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 Collateralized 4/15 at 100.00 Aaa 380,942
Multifamily Housing Revenue Bonds, Park Lee Apartments, Series 2004A,
5.050%, 10/20/44 (Alternative Minimum Tax)
----------------------------------------------------------------------------------------------------------------------------------
1,925 Total Housing/Multifamily 2,009,125
----------------------------------------------------------------------------------------------------------------------------------
29
Nuveen Arizona Dividend Advantage Municipal Fund 3 (NXE) (continued)
Portfolio of Investments January 31, 2006 (Unaudited)
Principal Optional Call
Amount (000) Description (1) Provisions (2) Ratings (3) Value
----------------------------------------------------------------------------------------------------------------------------------
Industrials - 2.2% (1.4% of Total Investments)
$ 945 Yavapai County Industrial Development Authority, Arizona, Solid Waste 3/28 at 100.00 BBB $ 953,259
Disposal Revenue Bonds, Waste Management Inc., Series 2003B, 4.450%,
3/01/28 (Mandatory put 3/01/08) (Alternative Minimum Tax)
----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General - 19.5% (13.1% of Total Investments)
660 Chandler, Arizona, General Obligation Bonds, Series 2002, 5.000%, 7/01/18 7/12 at 100.00 AA+ 702,577
2,250 DC Ranch Community Facilities District, Scottsdale, Arizona, General 7/13 at 100.00 Aaa 2,344,410
Obligation Bonds, Series 2002, 5.000%, 7/15/27 - AMBAC Insured
1,930 Glendale, Arizona, General Obligation Refunding Bonds,
Series 2002, 5.000%, 7/01/19 7/11 at 100.00 AA 2,045,761
1,000 Maricopa County Unified School District 11, Peoria, Arizona, General No Opt. Call AAA 1,089,670
Obligation Refunding Bonds, Series 2002, 5.000%, 7/01/15 - FSA Insured
1,575 Maricopa County Union High School District 210, Phoenix, Arizona, General 7/14 at 100.00 AAA 1,676,714
Obligation Bonds, Series 2004A, 5.000%, 7/01/20 - FSA Insured
330 Maricopa County Union High School District 210, Phoenix, Arizona, General 7/15 at 100.00 AAA 349,952
Obligation Bonds, Series 2005B, 5.000%, 7/01/23 - MBIA Insured
440 Tucson, Arizona, General Obligation Bonds, Series 2001B, 5.000%, 7/01/20 7/11 at 100.00 AA 466,391
----------------------------------------------------------------------------------------------------------------------------------
8,185 Total Tax Obligation/General 8,675,475
----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited - 38.0% (25.6% of Total Investments)
3,000 Arizona State Transportation Board, Highway Revenue Refunding Bonds, 7/12 at 102.00 AAA 3,284,008
Series 2002A, 5.250%, 7/01/18
2,660 Arizona Tourism and Sports Authority, Tax Revenue Bonds, Multipurpose 7/13 at 100.00 Aaa 2,904,241
Stadium Facility Project, Series 2003A, 5.375%, 7/01/20 - MBIA Insured
160 Centerra Community Facilities District, Goodyear, Arizona, General 7/15 at 100.00 N/R 160,874
Obligation Bonds, Series 2005, 5.500%, 7/15/29
358 Estrella Mountain Ranch Community Facilities District, Goodyear, Arizona, 7/10 at 102.00 N/R 392,923
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 A 826,424
Obligation Bonds, Series 2003, 5.350%, 7/15/28 - ACA Insured
2,000 Mohave County, Arizona, Certificates of Participation, Series 2004, 7/14 at 100.00 AAA 2,176,360
5.250%, 7/01/19 - AMBAC Insured
950 Phoenix Civic Improvement Corporation, Arizona, Subordinate Excise Tax 7/15 at 100.00 AAA 1,008,197
Revenue Bonds, Civic Plaza Expansion Project, Series 2005A, 5.000%,
7/01/22 - FGIC Insured
1,250 Pinal County Industrial Development Authority, Arizona, Correctional No Opt. Call A 1,285,000
Facilities Contract evenue Bonds, Florence West Prison LLC,
Series 2002A, 5.000%, 10/01/18 - ACA Insured
2,770 Tempe, Arizona, Excise Tax Revenue Refunding Bonds, Series 2003, 7/13 at 100.00 AA+ 2,919,802
5.000%, 7/01/22
1,250 Vistancia Community Facilities District, Arizona, Restricted General 7/15 at 100.00 N/R 1,267,700
Obligation Bonds, Series 2005, 5.750%, 7/15/24
665 Watson Road Community Facilities District, Arizona, Special Assessement 7/16 at 100.00 N/R 666,749
Revenue Bonds, Series 2005, 6.000%, 7/01/30
----------------------------------------------------------------------------------------------------------------------------------
15,863 Total Tax Obligation/Limited 16,892,278
----------------------------------------------------------------------------------------------------------------------------------
Transportation - 13.5% (9.1% of Total Investments)
Phoenix, Arizona, Civic Improvement Corporation, Senior Lien Airport
Revenue Bonds, Series Series 2002B:
1,000 5.750%, 7/01/16 - FGIC Insured (Alternative Minimum Tax) 7/12 at 100.00 AAA 1,087,820
2,300 5.250%, 7/01/21 - FGIC Insured (Alternative Minimum Tax) 7/12 at 100.00 AAA 2,408,836
2,450 Tucson Airport Authority Inc., Arizona, Revenue Refunding Bonds, Series 6/11 at 100.00 AAA 2,513,798
2001B, 5.000%, 6/01/20 - AMBAC Insured (Alternative Minimum Tax)
----------------------------------------------------------------------------------------------------------------------------------
5,750 Total Transportation 6,010,454
----------------------------------------------------------------------------------------------------------------------------------
U.S. Guaranteed (4) - 10.7% (7.2% of Total Investments)
1,000 Arizona Health Facilities Authority, Hospital System Revenue Bonds, 12/10 at 102.00 BBB (4) 1,159,650
John C. Lincoln Health Network, Series 2000, 6.875%, 12/01/20
(Pre-refunded 12/01/10)
30
Principal Optional Call
Amount (000) Description (1) Provisions (2) Ratings (3) Value
-----------------------------------------------------------------------------------------------------------------------------------
U.S. Guaranteed (4) (continued)
$ 1,500 Arizona School Facilities Board, School Improvement Revenue Bonds, 7/12 at 100.00 AAA $ 1,641,090
Series 2002, 5.250%, 7/01/20 (Pre-refunded 7/01/12)
1,760 Arizona State University, System Revenue Bonds, Series 2002, 5.750%, 7/12 at 100.00 AAA 1,975,565
7/01/27 (Pre-refunded 7/01/12) - FGIC Insured
-----------------------------------------------------------------------------------------------------------------------------------
4,260 Total U.S. Guaranteed 4,776,305
-----------------------------------------------------------------------------------------------------------------------------------
Utilities - 10.0% (6.8% of Total Investments)
1,250 Maricopa County Pollution Control Corporation, Arizona, Revenue Bonds, 11/12 at 100.00 AAA 1,291,975
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, Series 2005RR, 7/15 at 100.00 AAA 1,749,806
5.000%, 7/01/26 - XLCA Insured
Salt River Project Agricultural Improvement and Power District, Arizona,
Electric System Revenue Bonds, Series 2002B:
360 5.000%, 1/01/22 1/13 at 100.00 AA 379,040
1,000 5.000%, 1/01/31 1/13 at 100.00 AA 1,035,110
-----------------------------------------------------------------------------------------------------------------------------------
4,270 Total Utilities 4,455,931
-----------------------------------------------------------------------------------------------------------------------------------
Water and Sewer - 11.9% (8.0% of Total Investments)
650 Arizona Water Infrastructure Finance Authority, Water Quality Revenue 10/14 at 100.00 AAA 689,111
Bonds, Series 2004A, 5.000%, 10/01/22
405 Oro Valley Municipal Property Corporation, Arizona, Senior Lien Water 7/13 at 100.00 AAA 426,769
Revenue Bonds, Series 2003, 5.000%, 7/01/23 - MBIA Insured
1,000 Phoenix Civic Improvement Corporation, Arizona, Junior Lien Wastewater 7/11 at 100.00 AAA 1,061,770
System Revenue Refunding Bonds, Series 2001, 5.125%,
7/01/21 - FGIC Insured
2,000 Phoenix Civic Improvement Corporation, Arizona, Junior Lien Water System 7/12 at 100.00 AAA 2,129,020
Revenue Bonds, Series 2002, 5.000%, 7/01/18 - FGIC Insured
955 Phoenix Civic Improvement Corporation, Arizona, Junior Lien Water System 7/15 at 100.00 AAA 1,001,384
Revenue Bonds, Series 2005, 5.000%, 7/01/29 - MBIA Insured
-----------------------------------------------------------------------------------------------------------------------------------
5,010 Total Water and Sewer 5,308,054
-----------------------------------------------------------------------------------------------------------------------------------
$ 62,288 Total Investments (cost $64,170,631) - 148.4% 65,998,252
============-----------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 1.1% 463,168
---------------------------------------------------------------------------------------------------------------------
Preferred Shares, at Liquidation Value - (49.5)% (22,000,000)
---------------------------------------------------------------------------------------------------------------------
Net Assets Applicable to Common Shares - 100% $ 44,461,420
=====================================================================================================================
Forward Swaps outstanding at January 31, 2006:
Fixed Rate Floating Rate
Paid Fixed Rate Received Floating Rate Unrealized
Notional by the Fund Payment by the Fund Payment Effective Termination Appreciation
Counterparty Amount (annualized) Frequency Based On Frequency Date (5) Date (Depreciation)
------------------------------------------------------------------------------------------------------------------------------------
Citigroup Inc. $ 500,000 4.699% Semi-Annually 3 Month USD-LIBOR Quarterly 2/27/06 2/27/26 $ 27,682
JPMorgan 800,000 4.833 Semi-Annually 3 Month USD-LIBOR Quarterly 2/09/06 2/09/36 38,847
Morgan Stanley 1,600,000 4.816 Semi-Annually 3 Month USD-LIBOR Quarterly 2/15/06 2/15/36 81,868
------------------------------------------------------------------------------------------------------------------------------------
$148,397
====================================================================================================================================
USD-LIBOR (United States Dollar-London Inter-Bank Offered Rates)
(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 Baa by Moody's Investor Service, Inc. or BBB by
Standard & Poor's Group are considered to be below investment grade.
(4) Securities are backed by an escrow or trust containing sufficient
U.S. Government or U.S. Government agency securities which ensures
the timely payment of principal and interest. Such securities are
normally considered to be equivalent to AAA rated securities.
(5) Effective date represents the date on which both the Fund and
counterparty commence interest payment accruals on each forward swap
contract.
N/R Investment is not rated.
See accompanying notes to financial statements.
31
Nuveen Texas Quality Income Municipal Fund (NTX)
Portfolio of
Investments January 31, 2006 (Unaudited)
Principal Optional Call
Amount (000) Description (1) Provisions (2) Ratings (3) Value
----------------------------------------------------------------------------------------------------------------------------------
Consumer Staples - 2.0% (1.4% of Total Investments)
$ 2,730 Puerto Rico, The Children's Trust Fund, Tobacco Settlement Asset-Backed 5/12 at 100.00 BBB $ 2,780,751
Refunding Bonds, Series 2002, 5.375%, 5/15/33
----------------------------------------------------------------------------------------------------------------------------------
Education and Civic Organizations - 14.5% (9.9% of Total Investments)
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 1,209,441
1,230 5.000%, 5/15/28 5/15 at 100.00 AA 1,269,581
1,290 5.000%, 5/15/29 5/15 at 100.00 AA 1,328,558
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 1,811,625
1,795 5.000%, 5/01/19 - FGIC Insured 5/13 at 100.00 Aaa 1,897,638
1,885 5.000%, 5/01/20 - FGIC Insured 5/13 at 100.00 Aaa 1,986,130
1,665 Texas State University System, Financing Revenue Bonds, Series 2004, 9/14 at 100.00 AAA 1,742,656
5.000%, 3/15/24 - FSA Insured
2,000 Texas State University System, Financing Revenue Refunding Bonds, 3/12 at 100.00 AAA 2,108,460
Series 2002, 5.000%, 3/15/20 - FSA Insured
2,330 Universal City Education Facilities Corporation, Texas, Revenue Bonds, 3/11 at 102.00 A- 2,438,834
Wayland Baptist University Project, Series 2001, 5.625%, 3/01/26
5,000 University of North Texas, Financing System Revenue Bonds, Series 2001, 4/12 at 100.00 AAA 5,237,350
5.000%, 4/15/24 - FSA Insured
----------------------------------------------------------------------------------------------------------------------------------
20,075 Total Education and Civic Organizations 21,030,273
----------------------------------------------------------------------------------------------------------------------------------
Energy - 2.1% (1.5% of Total Investments)
3,000 Gulf Coast Waste Disposal Authority, Texas, Waste Disposal Revenue Bonds, 4/08 at 102.00 BBB- 3,014,550
Valero Energy Corporation Project, Series 1998, 5.600%, 4/01/32
(Alternative Minimum Tax)
----------------------------------------------------------------------------------------------------------------------------------
Health Care - 19.1% (13.1% of Total Investments)
3,500 Abilene Health Facilities Development Corporation, Texas, Hospital 3/06 at 102.00 AAA 3,577,385
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 1,837,031
1,835 5.250%, 7/01/21 - RAAI Insured 7/14 at 100.00 AA 1,926,530
Gregg County Health Facilities Development Corporation, Texas, Hospital
Revenue Bonds, Good Shepherd Medical Center Project, Series 2000:
2,000 6.875%, 10/01/20 - RAAI Insured 10/10 at 101.00 AA 2,248,600
3,250 6.375%, 10/01/25 - RAAI Insured 10/10 at 101.00 AA 3,585,628
5,750 Midland County Hospital District, Texas, Hospital Revenue Bonds, Series No Opt. Call BBB 4,232,403
1992, 0.000%, 6/01/11
2,000 North Central Texas Health Facilities Development Corporation, Hospital 5/11 at 100.00 AA- 2,037,380
Revenue Bonds, Baylor Healthcare System, Series 2001A, 5.125%, 5/15/29
1,760 Parker County Hospital District, Texas, Hospital Revenue Bonds, Campbell 8/09 at 102.00 BB 1,847,982
Health System, Series 1999, 6.250%, 8/15/19
2,000 Richardson Hospital Authority, Texas, Revenue Bonds, Richardson Regional 12/13 at 100.00 BBB 2,153,040
Medical Center, Series 2004, 5.875%, 12/01/24
1,050 Tarrant County Health Facilities Development Corporation, Texas, Hospital 11/08 at 101.00 A+ 1,086,803
Revenue Bonds, Adventist Health System - Sunbelt Obligated Group,
Series 1998, 5.375%, 11/15/20
32
Principal Optional Call
Amount (000) Description (1) Provisions (2) Ratings (3) Value
----------------------------------------------------------------------------------------------------------------------------------
Health Care (continued)
$ 2,000 Tom Green County Health Facilities Development Corporation, Texas, 5/11 at 101.00 Baa3 $ 2,192,200
Hospital Revenue Bonds, Shannon Health System Project,
Series 2001, 6.750%, 5/15/21
1,000 Tyler Health Facilities Development Corporation, Texas, Hospital Revenue 7/12 at 100.00 Baa1 1,055,110
Bonds, Mother Frances Hospital Regional Healthcare Center, Series
2001, 6.000%, 7/01/31
----------------------------------------------------------------------------------------------------------------------------------
27,890 Total Health Care 27,780,092
----------------------------------------------------------------------------------------------------------------------------------
Housing/Multifamily - 6.5% (4.4% 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 2,057,220
750 6.050%, 8/01/36 - MBIA Insured 8/11 at 102.00 Aaa 771,428
Grand Prairie Housing Finance Corporation, Texas, GNMA Multifamily
Housing Revenue Bonds, Landings of Carrier Project, Series 2000A:
1,000 6.650%, 9/20/22 9/10 at 105.00 AAA 1,098,300
2,030 6.750%, 9/20/28 9/10 at 105.00 AAA 2,224,616
2,064 Houston Housing Finance Corporation, Texas, GNMA Collateralized Mortgage 9/11 at 105.00 Aaa 2,182,123
Multifamily Housing Revenue Bonds, RRG Apartments Project,
Series 2001, 6.250%, 9/20/35
1,000 Raven Hills Higher Education Corporation, Texas, Student Housing Revenue 8/11 at 100.00 Aaa 1,064,570
Bonds, Lamar University - Cardinal Village LLC, Series 2001A, 5.250%,
8/01/24 - MBIA Insured
----------------------------------------------------------------------------------------------------------------------------------
8,844 Total Housing/Multifamily 9,398,257
----------------------------------------------------------------------------------------------------------------------------------
Housing/Single Family - 5.1% (3.5% of Total Investments)
2,752 El Paso Housing Finance Corporation, Texas, GNMA Collateralized Single 4/11 at 106.75 AAA 2,933,349
Family Mortgage Revenue Bonds, Series 2001A-3, 6.180%, 4/01/33
150 Galveston Property Finance Authority Inc., Texas, Single Family Mortgage 3/06 at 100.00 A3 150,444
Revenue Bonds, Series 1991A, 8.500%, 9/01/11
2,900 Texas Department of Housing and Community Affairs, Single Family Mortgage 3/12 at 100.00 AAA 2,987,377
Bonds, Series 2002B, 5.550%, 9/01/33 - MBIA Insured
(Alternative Minimum Tax)
1,250 Texas Department of Housing, Single Family Mortgage Revenue Bonds, 9/06 at 102.00 AAA 1,302,500
Series 1996E, 6.000%, 9/01/17 - MBIA Insured
75 Victoria Housing Finance Corporation, Texas, FNMA Single Family Mortgage No Opt. Call Aaa 75,277
Revenue Refunding Bonds, Series 1995, 8.125%, 1/01/11
----------------------------------------------------------------------------------------------------------------------------------
7,127 Total Housing/Single Family 7,448,947
----------------------------------------------------------------------------------------------------------------------------------
Long-Term Care - 7.4% (5.1% of Total Investments)
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 11/08 at 101.00 A- 3,480,206
5,000 5.250%, 11/15/28 11/08 at 101.00 A- 5,049,100
2,000 Tarrant County Health Facilities Development Corporation, Texas, 1/08 at 105.00 AAA 2,176,520
Tax-Exempt Mortgage Revenue Bonds, South Central Nursing Homes Inc.,
Series 1997A, 6.000%, 1/01/37 - MBIA Insured
----------------------------------------------------------------------------------------------------------------------------------
10,400 Total Long-Term Care 10,705,826
----------------------------------------------------------------------------------------------------------------------------------
Materials - 4.3% (3.0% of Total Investments)
3,000 Cass County Industrial Development Corporation, Texas, Environmental 3/10 at 101.00 BBB 3,202,230
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 Solid Waste Disposal 4/06 at 102.00 A 3,071,190
Facility Bonds, E.I. DuPont de Nemours and Company Project,
Series 1996, 6.400%, 4/01/26 (Alternative Minimum Tax)
----------------------------------------------------------------------------------------------------------------------------------
6,000 Total Materials 6,273,420
----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General - 38.8% (26.5% of Total Investments)
Bexar County, Texas, Combined Tax and Revenue Certificates of Obligation,
Series 2004:
1,235 5.000%, 6/15/17 6/14 at 100.00 AA 1,315,386
1,295 5.000%, 6/15/18 6/14 at 100.00 AA 1,374,474
1,260 5.000%, 6/15/19 6/14 at 100.00 AA 1,332,752
33
Nuveen Texas Quality Income Municipal Fund (NTX) (continued)
Portfolio of Investments January 31, 2006 (Unaudited)
Principal Optional Call
Amount (000) Description (1) Provisions (2) Ratings (3) Value
----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General (continued)
$ 4,130 Coppell Independent School District, Dallas County, Texas, Unlimited Tax 8/09 at 75.34 AAA $ 2,724,437
School Building and Refunding Bonds, Series 1992, 0.000%,
8/15/14 - MBIA Insured
1,275 Copperas Cove, Texas, Certificates of Obligation, Series 2003, 5.000%, 8/12 at 100.00 AAA 1,337,386
8/15/23 - MBIA Insured
2,305 Corpus Christi, Texas, Combination Tax and Municipal Hotel Occupancy Tax 9/12 at 100.00 AAA 2,505,673
Revenue Certificates of Obligation, Series 2002, 5.500%,
9/01/21 - FSA Insured
2,595 Denton County, Texas, Permanent Improvement General Obligation Bonds, 7/12 at 100.00 AA 2,731,341
Series 2005, 5.000%, 7/15/25
5,000 Dickinson Independent School District, Galveston County, Texas, General 2/15 at 100.00 AAA 5,182,000
Obligation Bonds, Series 2005, 5.000%, 2/15/30
1,750 El Paso County, Texas, Certificates of Obligation, Series 2001, 5.000%, No Opt. Call AAA 1,838,918
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 1,371,336
1,320 5.000%, 10/01/27 - FGIC Insured 10/12 at 100.00 AAA 1,358,716
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 2,635,550
2,235 5.000%, 2/15/21 - AMBAC Insured 2/13 at 100.00 AAA 2,348,918
5,000 Houston, Texas, General Obligation Bonds, Series 2005E, 5.000%, 3/15 at 100.00 AAA 5,262,650
3/01/23 - AMBAC Insured
1,500 Judson Independent School District, Bexar County, Texas, General 2/11 at 100.00 Aaa 1,591,680
Obligation Refunding Bonds, Series 2002, 5.250%, 2/01/21
5,220 Leander Independent School District, Williamson and Travis Counties, 8/09 at 46.74 AAA 2,089,984
Texas, Unlimited Tax School Building and Refunding Bonds,
Series 2000, 0.000%, 8/15/21
1,000 Mansfield Independent School District, Tarrant County, Texas, General 2/14 at 100.00 AAA 1,056,530
Obligation Bonds, Series 2004, 5.000%, 2/15/20
Mercedes Independent School District, Hidalgo County, Texas, General
Obligation Bonds, Series 2005:
2,020 5.000%, 8/15/22 8/15 at 100.00 AAA 2,136,938
1,010 5.000%, 8/15/23 8/15 at 100.00 AAA 1,066,045
1,545 Montgomery County, Texas, General Obligation Refunding Bonds, Series 9/07 at 72.39 AAA 1,056,193
1997, 0.000%, 3/01/14 - MBIA Insured
925 Northside Independent School District, Bexar County, Texas, Unlimited Tax 8/10 at 100.00 AAA 1,005,956
School Building and Refunding Bonds, Series 2000, 5.875%, 8/15/25
1,255 Pasadena, Texas, Certificates of Obligation, Series 2002, 5.125%, 4/11 at 100.00 AAA 1,301,736
4/01/24 - FGIC Insured
500 Puerto Rico, General Obligation and Public Improvement Bonds, No Opt. Call BBB 567,580
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 1,174,258
1,165 5.000%, 8/15/23 - FSA Insured 8/15 at 100.00 AAA 1,229,646
1,440 South Texas Community College District, General Obligation Bonds, 8/12 at 100.00 AAA 1,575,734
Series 2002, 5.500%, 8/15/17 - AMBAC Insured
1,250 Southside Independent School District, Bexar County, Texas, General 8/14 at 100.00 Aaa 1,316,075
Obligation Bonds, Series 2004A, 5.000%, 8/15/22
1,140 Sunnyvale School District, Texas, General Obligation Bonds, Series 2/14 at 100.00 AAA 1,218,124
2004, 5.250%, 2/15/25
2,000 Texas, General Obligation Bonds, Water Financial Assistance Program, 8/11 at 100.00 Aa1 2,131,180
Series 2001, 5.250%, 8/01/23
1,500 Texas, General Obligation Refunding Bonds, Public Finance Authority, 10/12 at 100.00 Aa1 1,591,440
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 428,100
1,000 0.000%, 8/15/24 8/13 at 54.88 AAA 381,880
----------------------------------------------------------------------------------------------------------------------------------
59,810 Total Tax Obligation/General 56,238,616
----------------------------------------------------------------------------------------------------------------------------------
34
Principal Optional Call
Amount (000) Description (1) Provisions (2) Ratings (3) Value
----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited - 3.5% (2.4% of Total Investments)
$ 2,250 Harris County-Houston Sports Authority, Texas, Senior Lien Revenue Bonds, 11/11 at 100.00 AAA $ 2,376,067
Series 2001G, 5.250%, 11/15/22 - MBIA Insured
2,685 San Antonio, Texas, Hotel Occupancy Tax Revenue Bonds, Henry B. Gonzalez 8/06 at 102.00 AAA 2,767,725
Convention Center Project, Series 1996, 5.700%, 8/15/26 - FGIC Insured
----------------------------------------------------------------------------------------------------------------------------------
4,935 Total Tax Obligation/Limited 5,143,792
----------------------------------------------------------------------------------------------------------------------------------
Transportation - 5.9% (4.0% of Total Investments)
1,000 Austin, Texas, Airport System Prior Lien Revenue Bonds, Series 2003, 11/13 at 100.00 AAA 1,078,650
5.250%, 11/15/16 - MBIA Insured
3,260 Central Texas Regional Mobility Authority, Travis and Williamson Counties, 1/15 at 100.00 AAA 3,416,350
Toll Road Revenue Bonds, Series 2005, 5.000%, 1/01/22 - FGIC Insured
2,600 Dallas-Ft. Worth International Airport Facility Improvement Corporation, 11/09 at 101.00 CCC 1,933,568
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, Series 7/10 at 100.00 AAA 2,118,280
2000A, 5.625%, 7/01/30 - FSA Insured (Alternative Minimum Tax)
----------------------------------------------------------------------------------------------------------------------------------
8,860 Total Transportation 8,546,848
----------------------------------------------------------------------------------------------------------------------------------
U.S. Guaranteed (4) - 16.5% (11.3% of Total Investments)
130 Abilene Housing Development Corporation, Texas, Section 8 First Lien No Opt. Call N/R (4) 135,521
Revenue Bonds, Abilene East Apartments, Series 1978, 7.000%,
7/01/08 (ETM)
2,000 Harris County Health Facilities Development Corporation, Texas, Hospital 6/11 at 101.00 A (4) 2,276,040
Revenue Bonds, Memorial Hermann Healthcare System, Series 2001A,
6.375%, 6/01/29 (Pre-refunded 6/01/11)
1,500 Harris County Health Facilities Development Corporation, Texas, Revenue 8/11 at 100.00 AA- (4) 1,638,390
Bonds, St. Luke's Episcopal Hospital, Series 2001A, 5.500%, 2/15/21
(Pre-refunded 8/15/11)
1,000 North Central Texas Health Facilities Development Corporation, Hospital No Opt. Call AAA 1,161,950
Revenue Bonds, Presbyterian Healthcare System, Series 1996B, 5.750%,
6/01/26 (ETM) - MBIA Insured
1,075 Northside Independent School District, Bexar County, Texas, Unlimited Tax 8/10 at 100.00 AAA 1,182,930
School Building and Refunding Bonds, Series 2000, 5.875%, 8/15/25
(Pre-refunded 8/15/10)
2,500 Retama Development Corporation, Texas, Special Facilities Revenue Bonds, 12/17 at 100.00 AAA 3,267,375
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 Bonds, 2/12 at 100.00 AAA 1,905,943
Series 2002, 5.375% 2/01/20 (Pre-refunded 2/01/12)
665 San Antonio, Texas, Water System Revenue Refunding Bonds, Series 1992, No Opt. Call AAA 725,335
6.500%, 5/15/10 (ETM) - MBIA Insured
3,500 Tarrant County Health Facilities Development Corporation, Texas, Hospital 11/10 at 101.00 A+ (4) 3,988,705
Revenue Bonds, Adventist Health System - Sunbelt Obligated Group,
Series 2000, 6.625%, 11/15/20 (Pre-refunded 11/15/10)
1,795 United Independent School District, Webb County, Texas, Unlimited Tax 8/12 at 100.00 AAA 1,974,751
School Building Bonds, Series 2000, 5.375%, 8/15/18
(Pre-refunded 8/15/12
5,290 Weslaco Independent School District, Hidalgo County, Texas, General 2/10 at 100.00 Aaa 5,696,536
Obligation School Building Bonds, Series 2000, 5.500%, 2/15/25
(Pre-refunded 2/15/10)
----------------------------------------------------------------------------------------------------------------------------------
21,205 Total U.S. Guaranteed 23,953,476
----------------------------------------------------------------------------------------------------------------------------------
Utilities - 9.5% (6.5% of Total Investments)
2,560 Brazos River Authority, Texas, Pollution Control Revenue Refunding Bonds, 4/13 at 101.00 Baa2 3,034,138
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- 2,451,096
Series 1999A, 5.375%, 4/01/19
5,000 Brownsville, Texas, Utility System Priority Revenue Bonds, Series 9/15 at 100.00 AAA 5,206,550
2005A, 5.000%, 9/01/27 - AMBAC Insured
35
Nuveen Texas Quality Income Municipal Fund (NTX) (continued)
Portfolio of Investments January 31, 2006 (Unaudited)
Principal Optional Call
Amount (000) Description (1) Provisions (2) Ratings (3) Value
-----------------------------------------------------------------------------------------------------------------------------------
Utilities (continued)
$ 2,000 Harris County Health Facilities Development Corporation, Texas, Thermal 2/10 at 100.00 AAA $ 2,118,980
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, Reliant 5/09 at 101.00 BBB- 1,020,000
Energy Inc., Series 1999B, 5.950%, 5/01/30 (Alternative Minimum Tax)
-----------------------------------------------------------------------------------------------------------------------------------
12,960 Total Utilities 13,830,764
-----------------------------------------------------------------------------------------------------------------------------------
Water and Sewer - 10.8% (7.4% 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 1,064,375
1,030 5.000%, 12/15/21 - FGIC Insured 12/14 at 100.00 AAA 1,087,721
3,000 Houston, Texas, First Lien Combined Utility System Revenue Bonds, 5/14 at 100.00 AAA 3,225,990
Series 2004A, 5.250%, 5/15/23 - FGIC Insured
3,500 Houston, Texas, Junior Lien Water and Sewerage System Revenue Refunding 12/11 at 100.00 AAA 3,815,175
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 1,765,109
1,760 5.000%, 8/15/23 - AMBAC Insured 8/14 at 100.00 AAA 1,845,325
1,260 Rowlett, Rockwall and Dallas Counties, Texas, Waterworks and Sewerage 3/14 at 100.00 AAA 1,320,959
System Revenue Bonds, Series 2004A, 5.000%, 3/01/22 - MBIA Insured
1,500 Texas Water Development Board, Senior Lien State Revolving Fund Revenue 7/09 at 100.00 AAA 1,587,300
Bonds, Series 1999A, 5.500%, 7/15/21
-----------------------------------------------------------------------------------------------------------------------------------
14,735 Total Water and Sewer 15,711,954
-----------------------------------------------------------------------------------------------------------------------------------
$ 208,571 Total Investments (cost $202,483,055) - 146.0% 211,857,566
============-----------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 1.6% 2,210,097
---------------------------------------------------------------------------------------------------------------------
Preferred Shares, at Liquidation Value - (47.6)% (69,000,000)
---------------------------------------------------------------------------------------------------------------------
Net Assets Applicable to Common Shares - 100% $145,067,663
=====================================================================================================================
(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 Baa by Moody's Investor Service, Inc. or BBB by
Standard & Poor's Group are considered to be below investment grade.
(4) Securities are backed by an escrow or trust containing sufficient
U.S. Government or U.S. Government agency securities which ensures
the timely payment of principal and interest. Such securities are
normally considered to be equivalent to AAA rated securities.
(5) The issuer has received a proposed 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 that it is
formally determined that the interest on the bonds should be treated
as taxable.
N/R Investment is not rated.
(ETM) Security is escrowed to maturity.
See accompanying notes to financial statements.
36
Statement of
Assets and Liabilities January 31, 2006 (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 $88,798,842,
$33,769,618, $52,415,010, $64,170,631
and $202,483,055, respectively) $ 92,708,022 $ 35,023,343 $ 55,042,980 $ 65,998,252 $ 211,857,566
Cash 756,345 -- -- -- --
Receivables:
Interest 630,084 265,795 430,314 437,161 3,287,176
Investments sold -- -- -- -- 28,639
Unrealized appreciation on forward swaps -- 46,890 93,315 148,397 --
Other assets 1,438 1,208 2,976 8,039 3,471
-----------------------------------------------------------------------------------------------------------------------------------
Total assets 94,095,889 35,337,236 55,569,585 66,591,849 215,176,852
-----------------------------------------------------------------------------------------------------------------------------------
Liabilities
Cash overdraft -- 47,055 12,051 102,497 934,620
Accrued expenses:
Management fees 51,175 10,188 16,031 18,055 115,473
Other 32,541 8,486 10,769 8,672 38,596
Preferred share dividends payable 9,248 5,294 8,969 1,205 20,500
-----------------------------------------------------------------------------------------------------------------------------------
Total liabilities 92,964 71,023 47,820 130,429 1,109,189
-----------------------------------------------------------------------------------------------------------------------------------
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 $ 64,002,925 $ 23,266,213 $ 37,021,765 $ 44,461,420 $ 145,067,663
===================================================================================================================================
Common shares outstanding 4,467,309 1,546,588 2,427,087 3,067,531 9,495,144
===================================================================================================================================
Net asset value per Common share
outstanding (net assets applicable to
Common shares, divided by Common
shares outstanding) $ 14.33 $ 15.04 $ 15.25 $ 14.49 $ 15.28
===================================================================================================================================
Net assets applicable to Common shares
consist of:
-----------------------------------------------------------------------------------------------------------------------------------
Common shares, $.01 par value per share $ 44,673 $ 15,466 $ 24,271 $ 30,675 $ 94,951
Paid-in surplus 62,130,982 21,874,470 34,386,372 43,247,055 134,624,794
Undistributed (Over-distribution of) net
investment income (96,422) 94,814 41,341 (35,249) 574,537
Accumulated net realized gain (loss)
from investments and derivative
transactions (1,985,488) (19,152) (151,504) (757,079) 398,870
Net unrealized appreciation (depreciation)
of investments and derivative
transactions 3,909,180 1,300,615 2,721,285 1,976,018 9,374,511
-----------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common shares $ 64,002,925 $ 23,266,213 $ 37,021,765 $ 44,461,420 $ 145,067,663
===================================================================================================================================
Authorized shares:
Common 200,000,000 Unlimited Unlimited Unlimited Unlimited
Preferred 1,000,000 Unlimited Unlimited Unlimited Unlimited
===================================================================================================================================
See accompanying notes to financial statements.
37
Statement of
Operations Six Months Ended January 31, 2006 (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 $ 2,243,068 $ 830,050 $ 1,319,275 $ 1,522,974 $ 5,438,540
------------------------------------------------------------------------------------------------------------------------------------
Expenses
Management fees 303,772 114,297 179,950 214,453 685,826
Preferred shares - auction fees 38,384 15,353 23,669 28,147 87,892
Preferred shares - dividend disbursing
agent fees 5,041 5,041 5,041 5,041 10,082
Shareholders' servicing agent fees and
expenses 2,746 183 124 122 7,419
Custodian's fees and expenses 14,877 6,889 9,950 13,063 34,962
Directors'/Trustees' fees and expenses 948 390 600 635 2,249
Professional fees 6,203 4,930 5,172 5,520 8,756
Shareholders' reports - printing and
mailing expenses 5,993 4,303 5,890 6,540 12,620
Stock exchange listing fees 5,261 66 104 132 5,246
Investor relations expense 6,146 2,236 3,528 4,145 13,049
Other expenses 6,150 4,694 5,206 6,255 8,696
------------------------------------------------------------------------------------------------------------------------------------
Total expenses before custodian fee credit
and expense reimbursement 395,521 158,382 239,234 284,053 876,797
Custodian fee credit (4,543) (3,860) (3,262) (663) (16,738)
Expense reimbursement -- (53,588) (84,370) (107,250) --
------------------------------------------------------------------------------------------------------------------------------------
Net expenses 390,978 100,934 151,602 176,140 860,059
------------------------------------------------------------------------------------------------------------------------------------
Net investment income 1,852,090 729,116 1,167,673 1,346,834 4,578,481
------------------------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss)
Net realized gain (loss) from investments 237,715 37,555 104,987 165,542 1,602,888
Net realized gain (loss) from forward swaps -- -- -- -- --
Change in net unrealized appreciation
(depreciation) of investments (1,017,023) (358,957) (525,365) (534,677) (2,972,685)
Change in net unrealized appreciation
(depreciation) of forward swaps -- 21,545 42,759 69,732 --
------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) (779,308) (299,857) (377,619) (299,403) (1,369,797)
------------------------------------------------------------------------------------------------------------------------------------
Distributions to Preferred Shareholders
From net investment income (350,395) (130,689) (205,602) (269,359) (935,435)
From accumulated net realized gains -- (14,818) (34,000) -- --
------------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets applicable to Common
shares from distributions to Preferred
shareholders (350,395) (145,507) (239,602) (269,359) (935,435)
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
applicable to Common shares from
operations $ 722,387 $ 283,752 $ 550,452 $ 778,072 $ 2,273,249
====================================================================================================================================
See accompanying notes to financial statements.
38
Statement of
Changes in Net Assets (Unaudited)
Arizona Arizona
Premium Income (NAZ) Dividend Advantage (NFZ)
--------------------------------- ----------------------------------
Six Months Six Months
Ended Year Ended Ended Year Ended
1/31/06 7/31/05 1/31/06 7/31/05
------------------------------------------------------------------------------------------------------------------------------------
Operations
Net investment income $ 1,852,090 $ 3,821,484 $ 729,116 $ 1,497,128
Net realized gain (loss) from investments 237,715 769,058 37,555 205,471
Net realized gain (loss) from
forward swaps -- -- -- (129,087)
Change in net unrealized appreciation
(depreciation) of investments (1,017,023) 1,754,362 (358,957) 620,243
Change in net unrealized appreciation
(depreciation) of forward swaps -- -- 21,545 25,345
Distributions to Preferred shareholders:
From net investment income (350,395) (405,070) (130,689) (157,504)
From accumulated net realized gains -- -- (14,818) (4,003)
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
applicable to Common shares
from operations 722,387 5,939,834 283,752 2,057,593
------------------------------------------------------------------------------------------------------------------------------------
Distributions to Common Shareholders
From net investment income (1,629,665) (3,762,499) (670,224) (1,418,195)
From accumulated net realized gains -- -- (118,137) (67,355)
------------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets applicable to
Common shares from distributions
to Common shareholders (1,629,665) (3,762,499) (788,361) (1,485,550)
------------------------------------------------------------------------------------------------------------------------------------
Capital Share Transactions
Net proceeds from Common shares
issued to shareholders due to
reinvestment of distributions 87,737 213,665 18,144 27,860
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
applicable to Common shares
from capital share transactions 87,737 213,665 18,144 27,860
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
applicable to Common shares (819,541) 2,391,000 (486,465) 599,903
Net assets applicable to Common
shares at the beginning of period 64,822,466 62,431,466 23,752,678 23,152,775
------------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common
shares at the end of period $ 64,002,925 $ 64,822,466 $ 23,266,213 $ 23,752,678
====================================================================================================================================
Undistributed (Over-distribution of)
net investment income
at the end of period $ (96,422) $ 31,548 $ 94,814 $ 166,611
====================================================================================================================================
Arizona
Dividend Advantage 2 (NKR)
----------------------------------
Six Months
Ended Year Ended
1/31/06 7/31/05
--------------------------------------------------------------------------------------------
Operations
Net investment income $ 1,167,673 $ 2,346,916
Net realized gain (loss) from investments 104,987 357,503
Net realized gain (loss) from
forward swaps -- (323,226)
Change in net unrealized appreciation
(depreciation) of investments (525,365) 1,331,714
Change in net unrealized appreciation
(depreciation) of forward swaps 42,759 50,556
Distributions to Preferred shareholders:
From net investment income (205,602) (262,016)
From accumulated net realized gains (34,000) (19,342)
--------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
applicable to Common shares
from operations 550,452 3,482,105
--------------------------------------------------------------------------------------------
Distributions to Common Shareholders
From net investment income (1,031,007) (2,092,582)
From accumulated net realized gains (256,789) (288,186)
--------------------------------------------------------------------------------------------
Decrease in net assets applicable to
Common shares from distributions
to Common shareholders (1,287,796) (2,380,768)
--------------------------------------------------------------------------------------------
Capital Share Transactions
Net proceeds from Common shares
issued to shareholders due to
reinvestment of distributions 54,765 60,045
--------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
applicable to Common shares
from capital share transactions 54,765 60,045
--------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
applicable to Common shares (682,579) 1,161,382
Net assets applicable to Common
shares at the beginning of period 37,704,344 36,542,962
--------------------------------------------------------------------------------------------
Net assets applicable to Common
shares at the end of period $ 37,021,765 $ 37,704,344
============================================================================================
Undistributed (Over-distribution of)
net investment income
at the end of period $ 41,341 $ 110,277
============================================================================================
See accompanying notes to financial statements.
39
Statement of
Changes in Net Assets (Unaudited) (continued)
Arizona Texas
Dividend Advantage 3 (NXE) Quality Income (NTX)
--------------------------------- ---------------------------------
Six Months Six Months
Ended Year Ended Ended Year Ended
1/31/06 7/31/05 1/31/06 7/31/05
------------------------------------------------------------------------------------------------------------------------------------
Operations
Net investment income $ 1,346,834 $ 2,735,161 $ 4,578,481 $ 9,447,714
Net realized gain (loss) from investments 165,542 (44,805) 1,602,888 1,544,028
Net realized gain (loss) from
forward swaps -- (530,167) -- --
Change in net unrealized appreciation
(depreciation) of investments (534,677) 2,365,824 (2,972,685) 2,354,555
Change in net unrealized appreciation
(depreciation) of forward swaps 69,732 78,665 -- --
Distributions to Preferred shareholders:
From net investment income (269,359) (313,291) (935,435) (1,225,414)
From accumulated net realized gains -- -- -- --
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
applicable to Common shares
from operations 778,072 4,291,387 2,273,249 12,120,883
------------------------------------------------------------------------------------------------------------------------------------
Distributions to Common Shareholders
From net investment income (1,150,271) (2,444,592) (4,011,494) (8,881,918)
From accumulated net realized gains -- -- -- --
------------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets applicable to
Common shares from distributions
to Common shareholders (1,150,271) (2,444,592) (4,011,494) (8,881,918)
------------------------------------------------------------------------------------------------------------------------------------
Capital Share Transactions
Net proceeds from Common shares
issued to shareholders due to
reinvestment of distributions 4,303 -- 88,077 245,790
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
applicable to Common shares
from capital share transactions 4,303 -- 88,077 245,790
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
applicable to Common shares (367,896) 1,846,795 (1,650,168) 3,484,755
Net assets applicable to Common
shares at the beginning of period 44,829,316 42,982,521 146,717,831 143,233,076
------------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common
shares at the end of period $ 44,461,420 $ 44,829,316 $ 145,067,663 $ 146,717,831
====================================================-===============================================================================
Undistributed (Over-distribution of)
net investment income
at the end of period $ (35,249) $ 37,547 $ 574,537 $ 942,985
====================================================-===============================================================================
See accompanying notes to financial statements.
40
Notes to
Financial Statements (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
applicable state income taxes, if any, 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 establishes fair market value based
on yields or prices of municipal bonds of comparable quality, type of issue,
coupon, maturity and rating, indications of value from securities dealers,
evaluations of anticipated cash flows or collateral and general market
conditions. Prices of derivative investments are also provided by an independent
pricing service approved by each Fund's Board of Directors/Trustees. If the
pricing service is unable to supply a price for a municipal bond or derivative
investment, each Fund may use a market price or fair market value quote provided
by a major broker/dealer in such investments. If it is determined that the
market price or fair market value quote for an investment is unavailable or
inappropriate, the Board of Directors/Trustees of the Funds, or its designee,
may establish a fair value for the investment. 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 or 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 and delayed delivery purchase commitments. At January 31, 2006,
there were no such outstanding purchase commitments in any of the Funds.
Investment Income
Interest income, which includes the amortization of premiums and accretion of
discounts for financial reporting purposes, is recorded on an accrual basis.
Investment income also includes paydown gains and losses, if any.
41
Notes to
Financial Statements (Unaudited) (continued)
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 applicable state
income taxes, if any, 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.
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.
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
================================================================================
Forward Swap Transactions
The Funds are authorized to invest in certain derivative financial instruments.
The Funds' use of forward interest rate swap transactions is intended to
mitigate the negative impact that an increase in long-term interest rates could
have on Common share net asset value. Forward interest rate swap transactions
involve each Fund's agreement with the counterparty to pay, in the future, a
fixed rate payment in exchange for the counterparty paying the Fund a variable
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 would increase or decrease
in value based primarily on the extent to which long-term interest rates for
bonds having a maturity of the swaps' termination date were to increase or
decrease. The Funds may close out a contract prior to the effective date, at
which point a realized gain or loss would be 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 minimize 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.
42
Custodian Fee Credit
Each Fund has an arrangement with the custodian bank whereby certain custodian
fees and expenses are reduced by credits earned on each Fund's cash on deposit
with the bank. Such deposit arrangements are an alternative to overnight
investments.
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 Year Six Months Year Six Months Year
Ended Ended Ended Ended Ended Ended
1/31/06 7/31/05 1/31/06 7/31/05 1/31/06 7/31/05
-------------------------------------------------------------------------------------------------------------------------
Common shares issued to
shareholders due to
reinvestment of distributions 5,860 13,619 1,079 1,750 3,439 3,770
=========================================================================================================================
Arizona Dividend Texas Quality
Advantage 3 (NXE) Income (NTX)
------------------------- ---------------------------
Six Months Year Six Months Year
Ended Ended Ended Ended
1/31/06 7/31/05 1/31/06 7/31/05
-------------------------------------------------------------------------------------------------------------------------
Common shares issued to
shareholders due to
reinvestment of distributions 288 -- 5,523 15,430
=========================================================================================================================
3. Investment Transactions
Purchases and sales (including maturities but excluding short-term investments
and derivative transactions) during the six months ended January 31, 2006, 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 $ 3,690,860 $ 2,207,617 $ 1,811,612 $ 2,151,289 $ 14,363,938
Sales and maturities 4,631,418 1,790,375 1,788,658 2,952,081 13,709,903
=================================================================================================================
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 and timing differences in recognizing
certain gains and losses on investment transactions.
At January 31, 2006, 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 $88,778,083 $33,820,272 $52,597,463 $64,374,350 $202,415,554
=================================================================================================================
43
Notes to
Financial Statements (Unaudited) (continued)
Gross unrealized appreciation and gross unrealized depreciation of investments
at January 31, 2006, 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 $ 4,080,019 $ 1,294,102 $ 2,684,154 $ 1,876,508 $10,317,404
Depreciation (150,080) (91,031) (238,637) (252,606) (875,392)
------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation
(depreciation) of investments $ 3,929,939 $ 1,203,071 $ 2,445,517 $ 1,623,902 $ 9,442,012
==================================================================================================================
The tax components of undistributed net investment income and net realized gains
at July 31, 2005, the Funds' last fiscal 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 * $ 304,454 $ 282,284 $ 287,112 $ 236,832 $ 1,544,239
Undistributed net ordinary income ** -- -- -- -- 22,028
Undistributed net long-term capital gains -- 132,895 217,992 -- --
=================================================================================================================
* Undistributed net tax-exempt income (on a tax basis) has not been reduced
for the dividend declared on July 1, 2005, paid on August 1, 2005.
** 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 fiscal year ended July 31,
2005, the Funds' last fiscal year end, 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 $ 4,217,354 $ 1,573,643 $ 2,351,896 $ 2,764,463 $ 10,161,664
Distributions from net ordinary income ** -- -- -- -- --
Distributions from net long-term
capital gains -- 71,358 307,825 -- --
==================================================================================================================
** Net ordinary income consists of taxable market discount income and net
short-term capital gains, if any.
44
At July 31, 2005, the Funds' last fiscal 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 Texas
Premium Dividend Quality
Income Advantage 3 Income
(NAZ) (NXE) (NTX)
-------------------------------------------------------------------------------
Expiration year:
2011 $ 669,574 $ -- $ --
2012 1,553,629 205,820 1,204,018
2013 -- 134,877 --
-------------------------------------------------------------------------------
Total $2,223,203 $340,697 $1,204,018
===============================================================================
Arizona Dividend Advantage 3 (NXE) elected to defer net realized losses from
investments incurred from November 1, 2004 through July 31, 2005 ("post-October
losses"), in accordance with federal income tax regulations. Post-October losses
of $376,462 were treated as having arisen on the first day of the current fiscal
year.
5. Management Fee 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., 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:
Arizona Premium Income (NAZ)
Average Daily Net Assets (including net Texas Quality Income (NTX)
assets 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
================================================================================
Arizona Dividend Advantage (NFZ)
Arizona Dividend Advantage 2 (NKR)
Average Daily Net Assets (including net Arizona Dividend Advantage 3 (NXE)
assets 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
================================================================================
45
Notes to
Financial Statements (Unaudited) (continued)
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 table below. As
of January 31, 2006, the complex-level fee rate was .1891%.
Complex-Level Assets(1) Complex-Level Fee Rate
--------------------------------------------------------------------------------
For the first $55 billion .2000%
For the next $1 billion .1800
For the next $1 billion .1600
For the next $3 billion .1425
For the next $3 billion .1325
For the next $3 billion .1250
For the next $5 billion .1200
For the next $5 billion .1175
For the next $15 billion .1150
For Managed Assets over $91 billion(2) .1400
================================================================================
(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
all types of leverage used by the Nuveen funds) of Nuveen-sponsored funds
in the U.S.
(2) With respect to the complex-wide Managed Assets over $91 billion, the fee
rate or rates that will apply to such assets will be determined at a later
date. In the unlikely event that complex-wide Managed Assets reach $91
billion prior to a determination of the complex-level fee rate or rates to
be applied to Managed Assets in excess of $91 billion, the complex-level
fee rate for such complex-wide Managed Assets shall be .1400% until such
time as a different rate or rates is determined.
The management fee compensates the Adviser for overall investment advisory and
administrative services and general office facilities. The Funds pay no
compensation directly to those of its Directors/Trustees who are affiliated with
the Adviser or to their officers, all of whom receive remuneration for their
services to the Funds from the Adviser 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.
46
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.
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.
6. Subsequent Event - Distributions to Common Shareholders
The Funds declared Common share dividend distributions from their tax-exempt net
investment income which were paid on March 1, 2006, to shareholders of record on
February 15, 2006, 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 $.0580 $.0690 $.0685 $.0605 $.0695
===============================================================================
47
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:
2006(d) $14.53 $ .41 $ (.16) $ (.08) $ -- $ .17
2005 14.04 .86 .56 (.09) -- 1.33
2004 13.66 .92 .43 (.05) -- 1.30
2003 14.25 .97 (.57) (.07) -- .33
2002 14.77 1.07 (.57) (.09) (.01) .40
2001 14.25 1.09 .50 (.23) -- 1.36
Arizona Dividend Advantage (NFZ)
------------------------------------------------------------------------------------------------------------------------
Year Ended 7/31:
2006(d) 15.37 .47 (.20) (.08) (.01) .18
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
2002 14.37 1.04 .36 (.11) -- 1.29
2001(a) 14.33 .44 .23 (.08) -- .59
Arizona Dividend Advantage 2 (NKR)
------------------------------------------------------------------------------------------------------------------------
Year Ended 7/31:
2006(d) 15.56 .48 (.16) (.08) (.01) .23
2005 15.10 .97 .59 (.11) (.01) 1.44
2004 14.57 .96 .53 (.06) -- 1.43
2003 14.88 .96 (.31) (.08) -- .57
2002(b) 14.33 .24 .71 (.02) -- .93
Arizona Dividend Advantage 3 (NXE)
------------------------------------------------------------------------------------------------------------------------
Year Ended 7/31:
2006(d) 14.62 .44 (.10) (.09) -- .25
2005 14.01 .89 .62 (.10) -- 1.41
2004 13.45 .89 .54 (.06) -- 1.37
2003(c) 14.33 .66 (.67) (.05) -- (.06)
Texas Quality Income (NTX)
------------------------------------------------------------------------------------------------------------------------
Year Ended 7/31:
2006(d) 15.46 .48 (.14) (.10) -- .24
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
2002 15.16 1.11 (.02) (.10) (.02) .97
2001 14.26 1.16 .88 (.27) -- 1.77
========================================================================================================================
Less Distributions
---------------------------------
Net Offering
Investment Capital Costs and Ending
Income to Gains to Preferred Common
Common Common Share Share Ending
Share- Share- Underwriting Net Asset Market
holders holders Total Discounts Value Value
=============================================================================================================
Arizona Premium Income (NAZ)
-------------------------------------------------------------------------------------------------------------
Year Ended 7/31:
2006(d) $(.37) $ -- $ (.37) $ -- $14.33 $ 14.25
2005 (.84) -- (.84) -- 14.53 15.22
2004 (.92) -- (.92) -- 14.04 15.27
2003 (.92) -- (.92) -- 13.66 15.00
2002 (.88) (.04) (.92) -- 14.25 16.90
2001 (.83) (.01) (.84) -- 14.77 16.32
Arizona Dividend Advantage (NFZ)
-------------------------------------------------------------------------------------------------------------
Year Ended 7/31:
2006(d) (.43) (.08) (.51) -- 15.04 16.10
2005 (.92) (.04) (.96) -- 15.37 16.08
2004 (.91) (.04) (.95) -- 15.00 15.40
2003 (.88) (.04) (.92) .02 14.45 15.30
2002 (.84) (.01) (.85) -- 14.81 15.75
2001(a) (.35) -- (.35) (.20) 14.37 15.65
Arizona Dividend Advantage 2 (NKR)
-------------------------------------------------------------------------------------------------------------
Year Ended 7/31:
2006(d) (.43) (.11) (.54) -- 15.25 15.50
2005 (.86) (.12) (.98) -- 15.56 16.19
2004 (.86) (.04) (.90) -- 15.10 14.82
2003 (.86) (.01) (.87) (.01) 14.57 14.40
2002(b) (.22) -- (.22) (.16) 14.88 15.80
Arizona Dividend Advantage 3 (NXE)
-------------------------------------------------------------------------------------------------------------
Year Ended 7/31:
2006(d) (.38) -- (.38) -- 14.49 14.33
2005 (.80) -- (.80) -- 14.62 14.48
2004 (.80) -- (.80) (.01) 14.01 13.30
2003(c) (.61) -- (.61) (.21) 13.45 13.97
Texas Quality Income (NTX)
-------------------------------------------------------------------------------------------------------------
Year Ended 7/31:
2006(d) (.42) -- (.42) -- 15.28 14.99
2005 (.94) -- (.94) -- 15.46 16.19
2004 (.96) -- (.96) -- 15.12 14.59
2003 (.95) (.01) (.96) -- 14.57 14.71
2002 (.92) (.07) (.99) -- 15.14 15.07
2001 (.87) -- (.87) -- 15.16 14.73
=============================================================================================================
* Annualized.
** 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. 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. Total returns are not
annualized.
*** After custodian fee credit and expense reimbursement, where applicable.
+ The amounts shown are based on Common share equivalents.
++ Ratios do not reflect the effect of dividend payments to Preferred
shareholders; income ratios reflect income earned on assets attributable
to Preferred shares.
(a) For the period January 30, 2001 (commencement of operations) through July
31, 2001.
(b) For the period March 25, 2002 (commencement of operations) through July
31, 2002.
(c) For the period September 25, 2002 (commencement of operations) through
July 31, 2003.
(d) For the six months ended January 31, 2006.
48
Ratios/Supplemental Data
------------------------------------------------------------------------------------
Before Credit/ After Credit/
Total Returns Reimbursement Reimbursement***
-------------------- ---------------------------- ---------------------------
Ratio of Net Ratio of Net
Ratio of Investment Ratio of Investment
Based Ending Expenses Income to Expenses Income to
on Net to Average Average to Average Average
Based Common Assets Net Assets Net Assets Net Assets Net Assets
on Share Net Applicable Applicable Applicable Applicable Applicable Portfolio
Market Asset to Common to Common to Common to Common to Common Turnover
Value** Value** Shares (000) Shares++ Shares++ Shares++ Shares++ Rate
====================================================================================================================================
Arizona Premium Income (NAZ)
------------------------------------------------------------------------------------------------------------------------------------
Year Ended 7/31:
2006(d) (4.04)% 1.16% $64,003 1.22%* 5.71%* 1.21%* 5.73%* 4%
2005 5.17 9.69 64,822 1.20 5.91 1.19 5.92 17
2004 7.97 9.66 62,431 1.22 6.49 1.21 6.50 26
2003 (5.98) 2.21 60,547 1.25 6.81 1.24 6.82 17
2002 9.63 2.88 62,876 1.28 7.45 1.26 7.47 19
2001 17.77 9.74 64,859 1.28 7.47 1.27 7.48 18
Arizona Dividend Advantage (NFZ)
------------------------------------------------------------------------------------------------------------------------------------
Year Ended 7/31:
2006(d) 3.20 1.20 23,266 1.34* 5.69* .85* 6.17* 5
2005 10.88 9.04 23,753 1.34 5.82 .87 6.28 18
2004 7.05 10.56 23,153 1.30 6.10 .83 6.57 24
2003 3.06 3.67 22,290 1.35 6.11 .91 6.55 20
2002 6.38 9.32 22,791 1.41 6.72 .93 7.20 40
2001(a) 6.76 2.81 22,072 1.43* 5.80* .95* 6.28* 21
Arizona Dividend Advantage 2 (NKR)
------------------------------------------------------------------------------------------------------------------------------------
Year Ended 7/31:
2006(d) (.98) 1.44 37,022 1.27* 5.75* .81* 6.21* 3
2005 16.30 9.74 37,704 1.27 5.76 .82 6.22 11
2004 9.46 9.98 36,543 1.27 5.83 .80 6.30 14
2003 (3.53) 3.67 35,237 1.27 5.78 .82 6.23 4
2002(b) 6.81 5.38 35,913 1.19* 4.43* .77* 4.85* 1
Arizona Dividend Advantage 3 (NXE)
------------------------------------------------------------------------------------------------------------------------------------
Year Ended 7/31:
2006(d) 1.50 1.70 44,461 1.27* 5.53* .79* 6.01* 3
2005 15.11 10.21 44,829 1.25 5.63 .76 6.12 15
2004 1.01 10.25 42,983 1.25 5.80 .76 6.29 22
2003(c) (2.76) (2.05) 41,247 1.19* 5.05* .73* 5.52* 16
Texas Quality Income (NTX)
------------------------------------------------------------------------------------------------------------------------------------
Year Ended 7/31:
2006(d) (4.75) 1.59 145,068 1.20* 6.23* 1.17* 6.25* 6
2005 17.83 8.61 146,718 1.18 6.42 1.16 6.44 14
2004 5.87 10.51 143,233 1.18 6.77 1.18 6.77 16
2003 4.14 2.54 137,975 1.20 6.93 1.19 6.94 12
2002 9.29 6.61 143,305 1.23 7.40 1.22 7.42 22
2001 21.16 12.74 143,127 1.21 7.87 1.19 7.88 24
====================================================================================================================================
Preferred Shares at End of Period
--------------------------------------------
Aggregate Liquidation
Amount and Market Asset
Outstanding Value Coverage
(000) Per Share Per Share
==============================================================================
Arizona Premium Income (NAZ)
------------------------------------------------------------------------------
Year Ended 7/31:
2006(d) $30,000 $25,000 $78,336
2005 30,000 25,000 79,019
2004 30,000 25,000 77,026
2003 30,000 25,000 75,456
2002 30,000 25,000 77,397
2001 30,000 25,000 79,049
Arizona Dividend Advantage (NFZ)
------------------------------------------------------------------------------
Year Ended 7/31:
2006(d) 12,000 25,000 73,471
2005 12,000 25,000 74,485
2004 12,000 25,000 73,235
2003 12,000 25,000 71,438
2002 12,000 25,000 72,480
2001(a) 12,000 25,000 70,984
Arizona Dividend Advantage 2 (NKR)
------------------------------------------------------------------------------
Year Ended 7/31:
2006(d) 18,500 25,000 75,029
2005 18,500 25,000 75,952
2004 18,500 25,000 74,382
2003 18,500 25,000 72,618
2002(b) 18,500 25,000 73,531
Arizona Dividend Advantage 3 (NXE)
------------------------------------------------------------------------------
Year Ended 7/31:
2006(d) 22,000 25,000 75,524
2005 22,000 25,000 75,942
2004 22,000 25,000 73,844
2003(c) 22,000 25,000 71,872
Texas Quality Income (NTX)
------------------------------------------------------------------------------
Year Ended 7/31:
2006(d) 69,000 25,000 77,561
2005 69,000 25,000 78,159
2004 69,000 25,000 76,896
2003 69,000 25,000 74,991
2002 69,000 25,000 76,922
2001 69,000 25,000 76,858
==============================================================================
See accompanying notes to financial statements.
49
Reinvest Automatically
Easily and Conveniently
Nuveen makes reinvesting easy. A phone call is all it takes to set up your
reinvestment account.
Nuveen Exchange-Traded Closed-End Funds
Dividend Reinvestment Plan
Your Nuveen Exchange-Traded 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
then-current market price. If the shares are trading at less than net asset
value, shares for your account will be purchased on the open market. Dividends
and distributions received to purchase shares in the open market will normally
be invested shortly after the dividend payment date. No interest will be paid on
dividends and distributions awaiting reinvestment. Because the market price of
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.
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.
50
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
12-month period ended June 30, 2006, 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.
Glossary of terms used in this report
Average Annual Total Return: This is a commonly used method to express an
investment's performance over a particular, usually multi-year time period. It
expresses the return that would have been necessary each year to equal the
investment's actual cumulative performance (including change in NAV or market
price and reinvested dividends and capital gains distributions, if any) over the
time period being considered.
Average Effective Maturity: The average of all the maturities of the bonds in a
Fund's portfolio, computed by weighting each maturity date (the date the
security comes due) by the market value of the security. This figure does not
account for the likelihood of prepayments or the exercise of call provisions.
Leverage-Adjusted Duration: Duration is a measure of 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.
Market Yield (also known as Dividend Yield or Current Yield): An investment's
current annualized dividend divided by its current market price.
Net Asset Value (NAV): A Fund's 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.
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.
Board of Directors/Trustees
Robert P. Bremner
Lawrence H. Brown
Jack B. Evans
William C. Hunter
David J. Kundert
William J. Schneider
Timothy R. Schwertfeger
Judith M. Stockdale
Eugene S. Sunshine
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 shares
were repurchased during the period covered by this report. Any future
repurchases will be reported to shareholders in the next annual or semiannual
report.
51
[GRAPHIC OMITTED]
Learn more
about Nuveen Funds at
www.nuveen.com/etf
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 more than $135 billion in assets, Nuveen Investments offers access to a
number of different asset classes and investing solutions through a variety of
products. Nuveen Investments markets its capabilities under four distinct
brands: Nuveen, a leader in fixed-income investments; NWQ, a leader in
value-style equities; Rittenhouse, a leader in growth-style equities; and
Symphony, a leading institutional manager of market-neutral alternative
investment portfolios.
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.
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NUVEEN
Investments
ESA-A-0106D
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/ Jessica R. Droeger
----------------------------------------------
Jessica R. Droeger
Vice President and Secretary
Date: April 7, 2006
-------------------------------------------------------------------
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 7, 2006
-------------------------------------------------------------------
By (Signature and Title)* /s/ Stephen D. Foy
----------------------------------------------
Stephen D. Foy
Vice President and Controller
(principal financial officer)
Date: April 7, 2006
-------------------------------------------------------------------
* Print the name and title of each signing officer under his or her signature.