N-CSRS 1 file001.txt NUVEEN ARIZONA PREMIUM INCOME MUNICIPAL FUND, INC. 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 811-07278 --------------------- Nuveen Arizona Premium Income Municipal Fund, Inc. ------------------------------------------------------------------------------ (Exact name of registrant as specified in charter) Nuveen Investments 333 West Wacker Drive Chicago, IL 60606 ------------------------------------------------------------------------------ (Address of principal executive offices) (Zip code) Jessica R. Droeger Nuveen Investments 333 West Wacker Drive Chicago, IL 60606 ------------------------------------------------------------------------------ (Name and address of agent for service) Registrant's telephone number, including area code: (312) 917-7700 ------------------- Date of fiscal year end: July 31 ------------------ Date of reporting period: January 31, 2005 ------------------ 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, 2005 Nuveen Investments Municipal Closed-End Exchange-Traded Funds NUVEEN ARIZONA PREMIUM INCOME MUNICIPAL FUND, INC. NAZ NUVEEN ARIZONA DIVIDEND ADVANTAGE MUNICIPAL FUND NFZ NUVEEN ARIZONA DIVIDEND ADVANTAGE MUNICIPAL FUND 2 NKR NUVEEN ARIZONA DIVIDEND ADVANTAGE MUNICIPAL FUND 3 NXE NUVEEN TEXAS QUALITY INCOME MUNICIPAL FUND NTX Photo of: Man and woman sitting on porch. Photo of: 2 children sitting in the grass. DEPENDABLE, TAX-FREE INCOME BECAUSE IT'S NOT WHAT YOU EARN, IT'S WHAT YOU KEEP.(R) Logo: NUVEEN Investments Photo of: Woman Photo of: Man and child Photo of: Woman NOW YOU CAN RECEIVE YOUR NUVEEN FUND REPORTS FASTER. NO MORE WAITING. SIGN UP TODAY TO RECEIVE NUVEEN FUND INFORMATION BY E-MAIL. It only takes a minute to sign up for E-Reports. Once enrolled, you'll receive an e-mail as soon as your Nuveen Investments Fund information is ready -- no more waiting for delivery by regular mail. Just click on the link within the e-mail to see the report, and save it on your computer if you wish. ------------------ DELIVERY DIRECT TO YOUR E-MAIL INBOX ------------------ IT'S FAST, EASY & FREE: WWW.INVESTORDELIVERY.COM if you get your Nuveen Fund dividends and statements from your financial advisor or brokerage account. OR WWW.NUVEEN.COM/ACCOUNTACCESS if you get your Nuveen Fund dividends and statements directly from Nuveen. (Be sure to have the address sheet that accompanied this report handy. You'll need it to complete the enrollment process.) Logo: NUVEEN Investments Photo: Timothy R. Schwertfeger Timothy R. Schwertfeger Chairman of the Board Chairman's LETTER TO SHAREHOLDERS I am pleased to report that over the six-month period covered by this semiannual report your Fund continued to provide you with monthly tax-free income and an attractive total return. For more details about the management strategy and performance of your Fund, please see the Portfolio Managers' Perspective and Performance Overview sections of this report. As I noted in my last letter to you, our conversations with financial advisors and investors suggest that many of you may be wondering whether long-term interest rates will soon begin to rise substantially, how high they might go, and whether that makes this a good time to adjust your holdings of fixed-income investments. We can't answer that question for you - no one knows what the future will bring. What we do know from our experience is that a well-balanced portfolio, structured and carefully monitored with the help of a trusted investment professional, can be an important component in helping you achieve your long-term financial goals. In "IN FACT, A WELL-DIVERSIFIED PORTFOLIO MAY ACTUALLY HELP TO REDUCE YOUR OVERALL INVESTMENT RISK." fact, a well-diversified portfolio may actually help to reduce your overall investment risk. That is one reason why we believe that a municipal bond investment like your Nuveen Fund can be an important building block in a comprehensive investment program designed to perform well in a variety of market conditions. As in past reports, I urge you to consider receiving 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. Sign up is quick and easy - see the inside front cover of this report for instructions. 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. 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. Sincerely, /s/ Timothy R. Schwertfeger Timothy R. Schwertfeger Chairman of the Board March 15, 2005 Nuveen Arizona and Texas Municipal Closed-End Exchange-Traded 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 Funds. Scott, who joined Nuveen in 2000, has managed the Arizona Funds (NAZ, NFZ, NKR and NXE) since November 2003. Cathryn, who has been with Nuveen since 1996, assumed portfolio management responsibility for NTX in August 2004. WHAT KEY STRATEGIES WERE USED TO MANAGE THE ARIZONA AND TEXAS FUNDS DURING THE SIX MONTHS ENDED JANUARY 31, 2005? Between August 2004 and January 2005, the Federal Reserve introduced four one- quarter-point increases in the fed funds rate, raising this short-term target from 1.25% to 2.25%. (On February 2, 2005, following the end of this reporting period, the Fed announced another 0.25% increase, bringing the fed funds rate to 2.50%.) With the market anticipating increases in interest rates throughout the period, our focus centered on finding bonds that we believed could add immediate value to the Funds' portfolios while also preserving their ability to perform well under a variety of future market scenarios. During this six-month period, municipal issuance in both Arizona and Texas declined substantially from that of the previous six months. However, Texas typically ranks among the nation's largest municipal issuers, and supply in Arizona for 2004 as a whole exceeded that of the preceding year. As a result, we continued to find attractive opportunities to make trades that we thought would benefit the Funds. In general, our purchase activities for all these Funds emphasized finding premium bonds (those trading above their par value) with intermediate and long-intermediate maturities - that is, bonds that matured in 20 to 25 years for the Arizona Funds and in 15 to 23 years for NTX. In many cases, bonds in these parts of the yield curve offered yields similar to those of longer-term bonds with less inherent interest rate risk (the risk that the value of a Fund's portfolio will decline if market interest rates rise, since bond prices move in the opposite direction of interest rates). 4 Some of the additions to our portfolios during this period were financed with the proceeds from sales of lower-rated holdings, as we took advantage of opportunities to selectively trim some of our concentrated BBB and nonrated positions. Because lower-rated bonds generally performed well over the past year, demand for these bonds was strong and we were able to obtain attractive prices for the bonds we sold. This process enabled us to reduce some of our more concentrated credit positions. At the same time, we improved the Funds' diversification by reinvesting the proceeds in other lower-rated and nonrated credits when the market provided suitable opportunities. Among the additions to some of the Arizona Funds during this period were nonrated bonds issued by Estrella Mountain Ranch Community Facilities District and securities rated BBB- issued by the Tucson Industrial Development Authority (IDA) for the Agribusiness and Equine Center, a charter school. In NTX, in addition to trimming concentrated credit positions, we also worked to reduce our holdings of pre-refunded bonds, which tended to underperform in the interest rate environment prevalent over the six-month period. Another strategy designed to help us reduce interest rate risk is to hedge some of our interest rate exposure in the derivatives markets. During this period, we employed this strategy in NFZ, NKR and NXE. Our sole objective was to reduce these Funds' durations (sensitivity to interest rate changes) without having a negative impact on their income streams or common share dividends over the short term. The costs of the hedges are reflected as additions or subtractions to the Funds' net asset values (NAV) as the market values of the hedges fluctuate. The hedges succeeded in reducing the volatility of the Funds' NAVs over the course of this reporting period. At the same time, the hedges had negative market values as of January 31, 2005, because long-term interest rates fell and bond prices rose during most of the time the hedges were in place. Please note that the hedges were put in place because the Funds' portfolio durations (and therefore their interest rate-related price volatility) were greater than the desired levels. This means that, although the hedges lost value because bond prices in fact went up after the hedges were entered, the Funds' longer-than-target portfolio durations resulted in interest rate-driven increases in value that were greater than if the portfolio durations 5 had been at the target levels, and these excess interest rate-driven portfolio returns roughly coincided with and offset the losses on the hedges. HOW DID THE FUNDS PERFORM? Individual results for the Arizona and Texas Funds, as well as for comparative indexes, are presented in the accompanying table. TOTAL RETURNS ON NET ASSET VALUE* For periods ended 1/31/05 ARIZONA FUNDS 6-MONTH 1-YEAR 5-YEAR 10-YEAR -------------------------------------------------------------------------------- NAZ 7.93% 8.55% 7.92% 7.11% -------------------------------------------------------------------------------- NFZ 7.44% 7.51% NA NA -------------------------------------------------------------------------------- NKR 8.25% 8.35% NA NA -------------------------------------------------------------------------------- NXE 8.74% 8.84% NA NA -------------------------------------------------------------------------------- TEXAS FUND -------------------------------------------------------------------------------- NTX 7.03% 7.46% 9.47% 7.57% -------------------------------------------------------------------------------- Lehman Brothers Municipal Bond Index1 4.80% 4.86% 7.50% 6.86% -------------------------------------------------------------------------------- Lipper Other States Municipal Debt Funds Average2 12.14% 7.17% 11.32% 9.15% -------------------------------------------------------------------------------- *Six-month returns are cumulative; returns for one year, five years, and ten years are annualized. Past performance is not predictive of future results. 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. For the six months ended January 31, 2005, the cumulative return on NAV for each of the Arizona and Texas Funds outperformed the return on the Lehman Brothers Municipal Bond Index. While these Funds underperformed the Lipper Other States category for this period, it is important to note that the Lipper return represents the overall average of returns for funds from 10 different states exhibiting a variety of municipal market conditions. We believe this makes direct comparisons between specific Funds and the Other States category average less meaningful. The primary factor benefiting the six-month performances of these Funds relative to that of the unleveraged Lehman Brothers index was the Funds' use of financial leverage. While leveraging can add volatility to the Funds' NAVs and share prices, especially during periods when interest rates rise, this strategy also can provide opportunities for 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 indexes do not reflect any expenses. 2 The Lipper Other States 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; 1 year, 44; 5 years, 19; and 10 years, 17. Fund and Lipper returns assume reinvestment of dividends. 6 additional income and total return for common shareholders when short-term interest rates remain relatively low and long-term rates fall or remain fairly constant, as they did during this reporting period. In general, shorter-term municipal rates tended to rise during this six-month period and longer-term rates tended to fall, causing a flattening of the municipal yield curve. As a result, bonds with longer maturities or greater sensitivity to interest rate movements generally tended to perform better than bonds with shorter maturities or less interest rate sensitivity. This benefited newer Funds like NKR and NXE, which were introduced in 2002, since they had less exposure to the shorter end of the yield curve than the three older Funds. This accounted for most of the performance differential between these Funds over the six-month reporting period. All of the Funds benefited from their holdings of lower quality bonds, which generally outperformed other credit quality sectors as the economy improved. For example, the top performing holding in both NAZ and NFZ during this reporting period was a B- rated pollution control revenue bond issued by Coconino County for Nevada Power Company. Bonds backed by the 1998 master tobacco settlement agreement also were among the lower-rated credits that produced strong results during this period as the litigation environment improved. As of January 31, 2005, NAZ, NXE and NTX held positions in tobacco bonds. Among the sectors making positive contributions to the Funds' cumulative six-month returns was healthcare, especially hospital bonds, which ranked second in terms of performance among the Lehman municipal revenue sectors for the period. The healthcare weighting in each of these Funds increased over this six-month period. Pre-refunded bonds tended to underperform during this reporting period, due primarily to their shorter effective maturities. Older Funds typically have more advance refunded bonds than the more recently introduced Funds. As of January 31, 2005, the two oldest Funds in this report--NAZ and NTX--had 9% and 7%, respectively, of their portfolios pre-refunded, although NFZ, which was introduced in 2001, held 8% in pre-refunded bonds. These holdings served as a mild constraint on the performances of these Funds during this period. By comparison, NKR held 2% of its portfolio in pre-refunded bonds, while NXE had less than 1% as of the end of the period. 7 HOW WERE THE FUNDS POSITIONED IN TERMS OF CREDIT QUALITY AND BOND CALLS AS OF JANUARY 31, 2005? We continued to believe that, given the current geopolitical and economic climate, maintaining strong credit quality was an important requirement. As of January 31, 2005, all five of these Funds continued to offer excellent credit quality, with allocations of bonds rated AAA/U.S. guaranteed and AA among the Arizona Funds ranging from 73% in NFZ to 78% in NKR and NXE to 82% in NAZ, while NTX had 78% of its portfolio allocated to bonds rated AAA/U.S. guaranteed and AA. On January 31, 2005, potential call exposure for the period 2005 through 2007 ranged from zero in NXE and 1% in NKR to 7% in NAZ, 9% 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 As short-term interest rates remained relatively low throughout this reporting period, the leveraged structures of these five Funds continued to support their dividend-paying capabilities. The extent of this benefit is tied in part to the short-term rates these Funds pay their MuniPreferred(R) shareholders. During periods of low short-term rates, leveraged Funds generally pay lower dividends to their MuniPreferred shareholders, which can leave more earnings to support common share dividends. This strategy helped to maintain the dividends of NFZ, NKR, NXE and NTX throughout the reporting period. NAZ, which was introduced in 1992, saw some of its older, higher-yielding holdings retired or called, and the resulting reduction in income caused by reinvesting the assets at today's lower rates led to two dividend cuts in that Fund during the course of this reporting period. In addition, due to capital gains generated by normal portfolio activity, common shareholders of NFZ and NKR received capital gains distributions of $0.0436 and $0.1191 per share, respectively, at the end of December 2004. All of these Funds 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, 2005, all of the Funds in this report had positive UNII balances for both financial statement and tax purposes. 9 At the end of the reporting period, the Funds' share prices were trading at premiums and discounts to their NAVs as shown in the accompanying chart: FUND 1/31 PREM/DISC PERIOD AVG. PREM/DISC -------------------------------------------------------------------------------- NAZ 7.62% 10.22% -------------------------------------------------------------------------------- NFZ 6.41% 2.62% -------------------------------------------------------------------------------- NKR 0.44% - 0.01% -------------------------------------------------------------------------------- NXE - 0.94% - 2.62% -------------------------------------------------------------------------------- NTX - 2.68% - 1.88% -------------------------------------------------------------------------------- 10 Nuveen Arizona Premium Income Municipal Fund, Inc. NAZ Performance OVERVIEW As of January 31, 2005 Pie Chart: CREDIT QUALITY (as a % of total investments) AAA/U.S. Guaranteed 69% AA 13% A 5% BBB 9% NR 1% BB or Lower 3% Bar Chart: 2004-2005 MONTHLY TAX-FREE DIVIDENDS PER SHARE Feb 0.0765 Mar 0.0765 Apr 0.0765 May 0.0765 Jun 0.0765 Jul 0.0765 Aug 0.0765 Sep 0.074 Oct 0.074 Nov 0.074 Dec 0.071 Jan 0.071 Line Chart: SHARE PRICE PERFORMANCE Weekly Closing Price Past performance is not predictive of future results. 2/1/04 16.55 16.22 16.31 16.36 16.75 16.75 17 16.97 16.85 16.96 16.72 16.84 16.77 16.75 16.75 16.9 16.76 16.8 16.72 16.72 16.74 16.7 16.8 16.7 16.99 16.75 16.83 16.88 16.93 16.96 16.93 16.9 17.02 16.99 16.94 17.05 17.19 17.2 17.22 17.25 17.19 17.19 17.2 17.4 17.13 17.15 17.1 17.05 16.95 17.15 16.55 16.82 16.76 16.73 16.65 16.62 16.3 16.16 16 15.67 15.57 15.56 15.58 15.56 15.7 15.71 15.6 15.55 15.52 15.03 14.93 14.8 14.8 14.81 14.75 14.68 14.77 14.6 14.65 14.7 14.74 14.68 15 15 15 14.82 14.77 14.76 14.7 14.84 14.79 14.6 14.56 14.44 14.5 14.5 14.54 14.54 14.47 14.47 14.52 14.45 14.52 14.49 14.45 14.49 14.63 15.1 15.03 15.09 15.27 15.35 15.25 15.22 15.15 15.2 15.31 15.36 15.36 15.21 15.26 15.21 15.14 14.93 15.04 15.14 15.27 15.27 15.17 15.3 15.5 15.54 15.95 15.93 15.94 15.77 15.73 15.71 15.85 15.87 15.81 16 16.06 15.96 16.22 16.17 16.22 16.32 16.4 16.46 16.29 16.25 16.2 16.45 16.22 16.25 16.44 16.23 16.14 16.14 16.47 16.49 16.59 16.66 16.8 16.52 16.7 16.79 16.72 16.71 16.61 16.6 16.56 16.65 16.75 16.67 16.75 16.55 16.6 16.56 16.5 16.51 16.5 16.44 16.42 16.47 16.61 16.53 16.4 16.39 16.39 16.28 16.28 16.22 16.29 16.12 16.05 15.72 15.62 15.42 15.53 15.71 15.78 15.82 15.6 15.77 15.77 15.58 15.6 15.64 15.68 15.69 15.46 15.41 15.37 15.35 15.61 15.55 15.46 15.47 15.4 15.4 15.33 15.37 15.46 15.32 15.33 15.335 15.4 15.33 15.32 15.29 15.29 15.31 15.17 15.21 15.27 15.27 15.33 15.31 15.45 15.37 15.27 15.22 15.22 15.21 15.21 15.35 15.49 15.62 15.61 15.52 15.6 15.71 15.66 1/31/05 15.82 FUND SNAPSHOT ------------------------------------ Share Price $15.82 ------------------------------------ Common Share Net Asset Value $14.70 ------------------------------------ Premium/(Discount) to NAV 7.62% ------------------------------------ Market Yield 5.39% ------------------------------------ Taxable-Equivalent Yield1 7.87% ------------------------------------ Net Assets Applicable to Common Shares ($000) $65,491 ------------------------------------ Average Effective Maturity (Years) 16.90 ------------------------------------ Leverage-Adjusted Duration 8.65 ------------------------------------ AVERAGE ANNUAL TOTAL RETURN (Inception 11/19/92) ------------------------------------ ON SHARE PRICE ON NAV ------------------------------------ 6-Month 6.50% 7.93% (Cumulative) ------------------------------------ 1-Year 2.92% 8.55% ------------------------------------ 5-Year 8.27% 7.92% ------------------------------------ 10-Year 7.73% 7.11% ------------------------------------ SECTORS (as a % of total investments) ------------------------------------ Tax Obligation/Limited 35.2% ------------------------------------ Water and Sewer 14.1% ------------------------------------ Healthcare 13.3% ------------------------------------ U.S. Guaranteed 12.2% ------------------------------------ Utilities 7.2% ------------------------------------ Education and Civic Organizations 6.5% ------------------------------------ Housing/Multifamily 5.9% ------------------------------------ Other 5.6% ------------------------------------ 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%. For 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, 2005 Pie Chart: CREDIT QUALITY (as a % of total investments) AAA/U.S. Guaranteed 53% AA 20% A 11% BBB 14% NR 1% BB or Lower 1% Bar Chart: 2004-2005 MONTHLY TAX-FREE DIVIDENDS PER SHARE2 Feb 0.0765 Mar 0.0765 Apr 0.0765 May 0.0765 Jun 0.0765 Jul 0.0765 Aug 0.0765 Sep 0.0765 Oct 0.0765 Nov 0.0765 Dec 0.0765 Jan 0.0765 Line Chart: SHARE PRICE PERFORMANCE Weekly Closing Price Past performance is not predictive of future results. 2/1/04 17.17 16.99 16.8 16.89 16.9 16.9 16.88 16.71 16.71 16.71 16.71 16.89 16.9 16.9 16.75 16.85 16.62 16.67 16.7 16.7 16.7 16.75 16.7 16.75 16.8 16.8 16.71 16.85 16.85 16.85 16.67 16.82 16.65 16.81 16.81 16.81 16.88 16.85 16.95 16.88 16.88 16.79 16.9 16.8 16.7 16.4 16.18 15.92 15.8 15.85 15.5 15.4 15.45 15.3 15.4 15.12 14.95 14.7 14.65 14.83 14.84 14.61 14.61 14.66 14.6 14.65 14.65 14.57 14.3 14.03 14.2 13.95 13.65 13.78 13.8 13.86 13.91 13.69 13.69 13.84 13.85 13.92 14.14 14.12 14.12 13.98 14 14.3 14.28 14.32 14.22 14.34 14.31 13.6 13.79 13.64 13.65 13.64 13.75 13.81 13.81 13.76 13.98 13.93 13.87 13.9 13.9 14.45 14.55 14.65 14.75 14.67 15.05 15.08 15.25 15.24 15.28 15.3 15.2 15.1 15.05 15.05 15.1 14.9 15.15 15.25 15.4 15.4 15.4 15.25 15.15 15.15 15.26 15.46 15.7 15.39 15.4 15.4 15.8 15.8 15.9 16.1 16.06 15.6 15.85 15.75 15.85 16 16 16.05 16.02 16 15.98 15.98 15.92 15.73 15.8 15.9 15.77 15.65 15.51 15.42 15.45 15.54 15.58 15.45 15.46 15.75 15.62 15.7 15.74 15.75 15.63 15.63 15.73 15.66 15.85 15.88 15.88 16.06 16.35 16.4 16.4 16.4 16.4 16.25 16.1 16.1 15.85 15.86 15.85 15.7 15.7 15.89 15.85 15.85 16 15.75 15.59 15.55 15.5 15.33 15.4 15.6 15.7 15.78 15.74 15.64 15.74 15.92 15.8 15.8 15.8 15.42 15.36 15.29 15.58 15.58 15.49 15.44 15.44 15.45 15.34 15.46 15.47 15.47 15.28 15.28 15.38 15.47 15.56 15.87 15.7 15.67 15.67 15.65 15.76 15.65 15.75 16.2 16.13 16.13 16.65 16.65 16.8 16.65 16.74 16.74 16.74 16.75 16.75 16.75 16.75 16.7 16.7 1/31/05 16.6 FUND SNAPSHOT ------------------------------------ Share Price $16.60 ------------------------------------ Common Share Net Asset Value $15.60 ------------------------------------ Premium/(Discount) to NAV 6.41% ------------------------------------ Market Yield 5.53% ------------------------------------ Taxable-Equivalent Yield1 8.07% ------------------------------------ Net Assets Applicable to Common Shares ($000) $24,100 ------------------------------------ Average Effective Maturity (Years) 16.71 ------------------------------------ Leverage-Adjusted Duration 7.97 ------------------------------------ AVERAGE ANNUAL TOTAL RETURN (Inception 1/30/01) ------------------------------------ ON SHARE PRICE ON NAV ------------------------------------ 6-Month 11.25% 7.44% (Cumulative) ------------------------------------ 1-Year 2.84% 7.51% ------------------------------------ Since Inception 8.65% 8.45% ------------------------------------ SECTORS (as a % of total investments) ------------------------------------ Tax Obligation/Limited 41.3% ------------------------------------ Utilities 14.9% ------------------------------------ Housing/Multifamily 10.7% ------------------------------------ Healthcare 8.1% ------------------------------------ U.S. Guaranteed 7.9% ------------------------------------ Education and Civic Organizations 6.7% ------------------------------------ Water and Sewer 5.1% ------------------------------------ Other 5.3% ------------------------------------ 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%. For investments that generate qualified dividend income, the taxable-equivalent yield is lower. 2 The Fund also paid shareholders a capital gains distribution in December 2004 of $0.0436 per share. 12 Nuveen Arizona Dividend Advantage Municipal Fund 2 NKR Performance OVERVIEW As of January 31, 2005 Pie Chart: CREDIT QUALITY (as a % of total investments) AAA/U.S. Guaranteed 67% AA 11% A 11% BBB 9% NR 1% BB or Lower 1% Bar Chart: 2004-2005 MONTHLY TAX-FREE DIVIDENDS PER SHARE2 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 0.072 Jan 0.072 Line Chart: SHARE PRICE PERFORMANCE Weekly Closing Price Past performance is not predictive of future results. 2/1/04 14.86 15.07 15.05 15.2 15.31 15.26 15.15 15.12 15.13 15.12 15.13 15.34 15.36 15.18 15.1 15.15 15.15 15.15 15.15 15.15 15.1 15.24 15.3 15.35 15.44 15.4 15.45 15.66 15.46 15.55 15.71 15.79 15.6 15.51 15.77 15.75 15.73 15.61 15.76 15.71 15.69 15.69 15.91 15.95 15.7 15.6 15.44 15.42 15.45 15.3 15.2 15.17 14.83 15.08 15.02 14.9 14.65 14.65 14.55 14.45 14.56 14.5 14.53 14.6 14.64 14.64 14.62 14.65 14.64 14.3 14.64 14.19 14.19 14.23 14.22 14.35 14.35 14.35 14.41 14.36 14.35 14.58 14.58 14.6 14.6 14.5 14.47 14.42 14.51 14.37 14.36 14.14 14.05 13.93 14.01 13.82 13.99 14.01 14.05 14.05 13.92 14.01 14.1 14.25 14.6 14.69 14.64 14.8 14.83 14.95 14.98 14.98 15 14.82 14.82 14.82 14.82 14.68 14.68 14.68 14.6 14.6 14.9 14.8 14.66 14.66 14.82 14.82 14.98 14.86 15.05 14.96 15.02 15.24 15.15 15.13 15.14 15.15 15.18 15.22 15.188 15.21 15.05 15.07 15.1 15.1 15.2 15.16 15.19 15.29 15.23 15.39 15.33 15.5 15.35 15.5 15.4 15.48 15.48 15.48 15.5 15.35 15.65 15.64 15.55 15.42 15.55 15.62 15.7 15.68 15.5 15.5 15.5 15.5 15.47 15.47 15.5 15.5 15.46 15.46 15.46 15.46 15.54 15.53 15.8 15.49 15.34 15.49 15.54 15.53 15.54 15.77 15.77 15.78 15.84 15.61 15.62 15.07 15.07 15.3 15.3 15.35 15.43 15.55 15.66 15.66 15.66 15.75 15.78 16 16.15 16.15 16.14 15.81 15.81 15.73 15.77 15.77 15.78 15.75 15.68 15.7 15.44 15.42 15.48 15.54 15.4 15.41 15.5 15.69 15.59 15.59 15.75 15.8 15.8 15.76 16 16 15.9 15.92 16.1 16.22 16.2 16.84 16.95 16.67 16.47 16.12 15.95 15.84 15.8 15.9 15.92 15.96 16.07 1/31/05 15.85 FUND SNAPSHOT ------------------------------------ Share Price $15.85 ------------------------------------ Common Share Net Asset Value $15.78 ------------------------------------ Premium/(Discount) to NAV 0.44% ------------------------------------ Market Yield 5.45% ------------------------------------ Taxable-Equivalent Yield1 7.96% ------------------------------------ Net Assets Applicable to Common Shares ($000) $38,232 ------------------------------------ Average Effective Maturity (Years) 16.56 ------------------------------------ Leverage-Adjusted Duration 7.76 ------------------------------------ AVERAGE ANNUAL TOTAL RETURN (Inception 3/25/02) ------------------------------------ ON SHARE PRICE ON NAV ------------------------------------ 6-Month 10.76% 8.25% (Cumulative) ------------------------------------ 1-Year 13.23% 8.35% ------------------------------------ Since Inception 8.11% 9.62% ------------------------------------ SECTORS (as a % of total investments) ------------------------------------ Tax Obligation/Limited 30.9% ------------------------------------ Tax Obligation/General 26.1% ------------------------------------ Healthcare 12.6% ------------------------------------ Education and Civic Organizations 7.0% ------------------------------------ Water and Sewer 5.8% ------------------------------------ Housing/Multifamily 5.3% ------------------------------------ Utilities 4.8% ------------------------------------ Other 7.5% ------------------------------------ 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%. For investments that generate qualified dividend income, the taxable-equivalent yield is lower. 2 The Fund also paid shareholders a capital gains distribution in December 2004 of $0.1191 per share. 13 Nuveen Arizona Dividend Advantage Municipal Fund 3 NXE Performance OVERVIEW As of January 31, 2005 Pie Chart: CREDIT QUALITY (as a % of total investments) AAA/U.S. Guaranteed 63% AA 15% A 7% BBB 12% NR 1% BB or Lower 2% Bar Chart: 2004-2005 MONTHLY TAX-FREE DIVIDENDS PER SHARE Feb 0.067 Mar 0.067 Apr 0.067 May 0.067 Jun 0.067 Jul 0.067 Aug 0.067 Sep 0.067 Oct 0.067 Nov 0.067 Dec 0.067 Jan 0.067 Line Chart: SHARE PRICE PERFORMANCE Weekly Closing Price Past performance is not predictive of future results. 2/1/04 14.25 14 14.02 14.32 14.15 14.25 14.2 14.09 14.05 14.05 14.18 14.15 14.25 14.28 14.01 14.1 14.13 14.13 14.23 14.23 14.35 14.51 14.4 14.44 14.46 14.77 14.69 14.69 14.35 14.3 14.45 14.4 14.43 14.38 14.55 14.7 14.74 14.58 14.58 14.77 14.76 14.76 14.85 14.88 14.7 14.6 14.41 14.55 14.58 14.5 14.3 14.15 13.82 13.71 13.87 13.95 13.87 13.75 13.76 13.68 13.65 13.65 13.61 13.3 13.35 13.4 13.19 13.25 12.89 12.34 12.4 12.35 12.3 12.39 12.39 12.34 12.28 12.28 12.43 12.6 12.77 12.6 12.76 12.78 12.78 12.62 12.75 12.8 12.7 12.76 12.8 13.11 13 12.54 12.56 12.54 12.55 12.55 12.75 12.79 12.58 12.65 12.75 12.84 12.95 12.93 12.9 13.25 13.15 13.25 13.29 13.38 13.42 13.32 13.39 13.35 13.49 13.5 13.61 13.5 13.58 13.35 13.35 13.268 13.35 13.3 13.3 13.3 13.18 13.36 13.7 13.74 13.79 13.78 13.79 13.76 13.6 13.65 13.65 13.65 13.67 13.56 13.6 13.6 13.65 13.61 13.71 13.72 13.9 13.9 13.85 13.66 13.68 13.65 13.65 13.65 13.72 13.64 13.98 14.15 14.05 13.9 13.92 14.21 14.28 14.23 14.16 14.29 14.2 14.1 14.08 14 14.01 14.01 14.09 13.85 14.11 14.11 14.21 14.15 14.21 14.41 14.47 14.42 14.49 14.54 14.55 14.6 14.5 14.5 14.47 14.4 14.4 14.45 14.45 14.61 14.66 14.66 14.35 14.18 14.05 14.2 14.23 14.04 14.18 14.16 14.04 13.89 14.07 14.04 14.25 14.26 14.07 13.99 14.02 14.05 14.15 14.15 14.03 14.2 14.14 14.15 14.08 14.01 14.15 13.97 13.95 13.9 13.97 14.04 14.06 14.06 13.98 14.04 14.08 14.14 14.14 14.18 14.2 14.22 14.29 14.35 14.33 14.49 14.35 14.4 14.55 14.6 14.65 14.5 14.5 14.54 14.59 14.66 14.71 1/31/05 14.68 FUND SNAPSHOT ------------------------------------ Share Price $14.68 ------------------------------------ Common Share Net Asset Value $14.82 ------------------------------------ Premium/(Discount) to NAV -0.94% ------------------------------------ Market Yield 5.48% ------------------------------------ Taxable-Equivalent Yield1 8.00% ------------------------------------ Net Assets Applicable to Common Shares ($000) $45,456 ------------------------------------ Average Effective Maturity (Years) 18.10 ------------------------------------ Leverage-Adjusted Duration 7.46 ------------------------------------ AVERAGE ANNUAL TOTAL RETURN (Inception 9/25/02) ------------------------------------ ON SHARE PRICE ON NAV ------------------------------------ 6-Month 13.54% 8.74% (Cumulative) ------------------------------------ 1-Year 10.30% 8.84% ------------------------------------ Since Inception 4.74% 7.07% ------------------------------------ SECTORS (as a % of total investments) ------------------------------------ Tax Obligation/Limited 27.5% ------------------------------------ Tax Obligation/General 15.9% ------------------------------------ Healthcare 14.7% ------------------------------------ Education and Civic Organizations 10.6% ------------------------------------ Transportation 9.1% ------------------------------------ Housing/Multifamily 7.1% ------------------------------------ Water and Sewer 6.6% ------------------------------------ Other 8.5% ------------------------------------ 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%. For 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, 2005 Pie Chart: CREDIT QUALITY (as a % of total investments) AAA/U.S. Guaranteed 64% AA 14% A 9% BBB 12% BB or Lower 1% Bar Chart: 2004-2005 MONTHLY TAX-FREE DIVIDENDS PER SHARE Feb 0.08 Mar 0.08 Apr 0.08 May 0.08 Jun 0.08 Jul 0.08 Aug 0.08 Sep 0.08 Oct 0.08 Nov 0.08 Dec 0.08 Jan 0.08 Line Chart: SHARE PRICE PERFORMANCE Weekly Closing Price Past performance is not predictive of future results. 2/1/04 15.1 15.23 15.23 15.11 15.22 15.15 15.26 15.2 15.25 15.29 15.59 15.7 15.58 15.55 15.48 15.41 15.45 15.42 15.5 15.5 15.66 15.8 15.8 15.84 15.91 16.03 15.83 15.64 15.71 15.66 15.6 15.52 15.64 15.7 15.8 15.78 15.66 15.7 15.7 15.7 15.7 15.65 15.65 15.71 15.5 15.05 14.65 14.91 14.85 14.94 14.84 14.57 14.2 14.49 14.25 14.23 14.13 13.8 13.7 13.56 13.65 13.53 13.58 13.68 13.72 13.73 13.7 13.55 13.23 12.93 13.15 13.27 13.25 13.36 13.46 13.21 13.52 13.51 13.37 13.35 13.62 13.63 13.94 13.87 13.87 13.86 14.01 14.2 14.19 14.16 14.13 14.15 14.1 13.9 13.99 13.88 13.94 14.11 14 14.024 14.024 14.12 13.96 14 13.92 13.95 13.97 14.15 14.25 14.4 14.35 14.3 14.4 14.24 14.24 14.17 14.21 14.25 14.25 14.2 14.27 14.2 14.3 14.16 14.39 14.4 14.59 14.59 14.4 14.5 14.56 14.51 14.76 14.85 14.85 14.5 14.48 14.61 14.58 14.65 14.6 14.65 14.65 14.75 14.77 14.97 14.96 15 15 15.05 15.07 15.1 15.12 15.11 15.17 15.3 15.13 15.1 15.12 15.13 15.2 15.1 15.07 14.97 15.12 15.05 15.15 15.26 15.38 15.14 14.99 14.99 14.98 15 15.01 15.09 15.24 15.25 15.31 15.47 15.7 15.49 15.5 15.55 15.47 15.46 15.46 15.31 15.52 15.52 15.52 15.56 15.56 15.6 15.67 15.7 15.71 15.4 15.2 15.3 15.36 15.25 15.44 15.62 15.75 15.78 15.81 15.52 15.56 15.52 15.53 15.63 15.63 15.54 15.6 15.5 15.59 15.58 15.43 15.45 15.4 15.39 15.31 15.2 15.15 15.134 15.05 14.99 14.98 14.86 14.91 14.8 14.87 14.93 14.92 15.01 15.06 15.08 15.15 15.19 15.11 15.15 15.19 15.02 15.08 15.02 15.09 15.14 15.14 15.25 15.27 15.22 15.19 15.26 15.21 1/31/05 15.27 FUND SNAPSHOT ------------------------------------ Share Price $15.27 ------------------------------------ Common Share Net Asset Value $15.69 ------------------------------------ Premium/(Discount) to NAV -2.68% ------------------------------------ Market Yield 6.29% ------------------------------------ Taxable-Equivalent Yield1 8.74% ------------------------------------ Net Assets Applicable to Common Shares ($000) $148,672 ------------------------------------ Average Effective Maturity (Years) 18.14 ------------------------------------ Leverage-Adjusted Duration 7.98 ------------------------------------ AVERAGE ANNUAL TOTAL RETURN (Inception 10/17/91) ------------------------------------ ON SHARE PRICE ON NAV ------------------------------------ 6-Month 7.99% 7.03% (Cumulative) ------------------------------------ 1-Year 7.47% 7.46% ------------------------------------ 5-Year 11.63% 9.47% ------------------------------------ 10-Year 7.93% 7.57% ------------------------------------ SECTORS (as a % of total investments) ------------------------------------ Tax Obligation/General 21.8% ------------------------------------ Healthcare 16.6% ------------------------------------ Tax Obligation/Limited 9.7% ------------------------------------ Education and Civic Organizations 8.7% ------------------------------------ U.S. Guaranteed 7.7% ------------------------------------ Water and Sewer 7.5% ------------------------------------ Housing/Multifamily 5.7% ------------------------------------ Utilities 5.7% ------------------------------------ Long-Term Care 5.0% ------------------------------------ Other 11.6% ------------------------------------ 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 federal income tax rate of 28%. For investments that generate qualified dividend income, the taxable-equivalent yield is lower. 15 Shareholder MEETING REPORT The Shareholder Meeting was held in San Francisco, California, on November 17, 2004.
NAZ NFZ NKR ------------------------------------------------------------------------------------------------------------------------------------ APPROVAL OF 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 4,192,096 -- 1,531,590 -- 2,399,663 -- Withhold 19,677 -- 2,105 -- 4,140 -- ------------------------------------------------------------------------------------------------------------------------------------ Total 4,211,773 -- 1,533,695 -- 2,403,803 -- ==================================================================================================================================== Lawrence H. Brown For 4,191,599 -- 1,531,590 -- 2,396,663 -- Withhold 20,174 -- 2,105 -- 7,140 -- ------------------------------------------------------------------------------------------------------------------------------------ Total 4,211,773 -- 1,533,695 -- 2,403,803 -- ==================================================================================================================================== Jack B. Evans For 4,183,638 -- 1,526,690 -- 2,395,187 -- Withhold 28,135 -- 7,005 -- 8,616 -- ------------------------------------------------------------------------------------------------------------------------------------ Total 4,211,773 -- 1,533,695 -- 2,403,803 -- ==================================================================================================================================== William C. Hunter For 4,183,638 -- 1,526,690 -- 2,395,187 -- Withhold 28,135 -- 7,005 -- 8,616 -- ------------------------------------------------------------------------------------------------------------------------------------ Total 4,211,773 -- 1,533,695 -- 2,403,803 -- ==================================================================================================================================== William J. Schneider For -- 1,018 -- 470 -- 732 Withhold -- 4 -- 5 -- -- ------------------------------------------------------------------------------------------------------------------------------------ Total -- 1,022 -- 475 -- 732 ==================================================================================================================================== Timothy R. Schwertfeger For -- 1,018 -- 470 -- 732 Withhold -- 4 -- 5 -- -- ------------------------------------------------------------------------------------------------------------------------------------ Total -- 1,022 -- 475 -- 732 ==================================================================================================================================== Judith M. Stockdale For 4,183,638 -- 1,526,690 -- 2,395,187 -- Withhold 28,135 -- 7,005 -- 8,616 -- ------------------------------------------------------------------------------------------------------------------------------------ Total 4,211,773 -- 1,533,695 -- 2,403,803 -- ====================================================================================================================================
16
NXE NTX ------------------------------------------------------------------------------------------------------------------------------------ APPROVAL OF 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 3,036,999 -- 8,375,936 -- Withhold 8,978 -- 61,617 -- ------------------------------------------------------------------------------------------------------------------------------------ Total 3,045,977 -- 8,437,553 -- ==================================================================================================================================== Lawrence H. Brown For 3,036,999 -- 8,374,101 -- Withhold 8,978 -- 63,452 -- ------------------------------------------------------------------------------------------------------------------------------------ Total 3,045,977 -- 8,437,553 -- ==================================================================================================================================== Jack B. Evans For 3,029,299 -- 8,375,136 -- Withhold 16,678 -- 62,417 -- ------------------------------------------------------------------------------------------------------------------------------------ Total 3,045,977 -- 8,437,553 -- ==================================================================================================================================== William C. Hunter For 3,034,811 -- 8,375,936 -- Withhold 11,166 -- 61,617 -- ------------------------------------------------------------------------------------------------------------------------------------ Total 3,045,977 -- 8,437,553 -- ==================================================================================================================================== William J. Schneider For -- 866 -- 2,435 Withhold -- -- -- -- ------------------------------------------------------------------------------------------------------------------------------------ Total -- 866 -- 2,435 ==================================================================================================================================== Timothy R. Schwertfeger For -- 866 -- 2,435 Withhold -- -- -- -- ------------------------------------------------------------------------------------------------------------------------------------ Total -- 866 -- 2,435 ==================================================================================================================================== Judith M. Stockdale For 3,031,811 -- 8,374,801 -- Withhold 14,166 -- 62,752 -- ------------------------------------------------------------------------------------------------------------------------------------ Total 3,045,977 -- 8,437,553 -- ====================================================================================================================================
17 Nuveen Arizona Premium Income Municipal Fund, Inc. (NAZ) Portfolio of INVESTMENTS January 31, 2005 (Unaudited)
PRINCIPAL OPTIONAL CALL MARKET AMOUNT (000) DESCRIPTION(1) PROVISIONS* RATINGS** VALUE ------------------------------------------------------------------------------------------------------------------------------------ CONSUMER STAPLES - 1.4% (1.0% OF TOTAL INVESTMENTS) $ 940 Puerto Rico, The Children's Trust Fund, Tobacco Settlement 5/12 at 100.00 BBB $ 918,540 Asset-Backed Refunding Bonds, Series 2002, 5.375%, 5/15/33 ------------------------------------------------------------------------------------------------------------------------------------ EDUCATION AND CIVIC ORGANIZATIONS - 9.4% (6.5% OF TOTAL INVESTMENTS) 1,000 Arizona State University, Certificates of Participation, 7/12 at 100.00 AAA 1,115,980 Series 2002, 5.375%, 7/01/19 - MBIA Insured 1,000 Arizona State University, System Revenue Bonds, Series 2002, 7/12 at 100.00 AAA 1,066,240 5.000%, 7/01/25 - FGIC Insured 1,250 Glendale Industrial Development Authority, Arizona, Revenue 5/11 at 101.00 A- 1,342,987 Bonds, Midwestern University, Series 2001A, 5.875%, 5/15/31 1,050 Northern Arizona University, System Revenue Bonds, 6/12 at 100.00 AAA 1,088,724 Series 2002, 5.000%, 6/01/34 - FGIC Insured 1,500 Tempe Industrial Development Authority, Arizona, Lease 7/13 at 100.00 AAA 1,565,370 Revenue Bonds, Arizona State University Foundation Project, Series 2003, 5.000%, 7/01/34 - AMBAC Insured ------------------------------------------------------------------------------------------------------------------------------------ HEALTHCARE - 19.3% (13.3% OF TOTAL INVESTMENTS) 2,000 Arizona Health Facilities Authority, Hospital System Revenue 11/09 at 100.00 Ba2 2,026,620 Bonds, Phoenix Children's Hospital, Series 1999A, 6.125%, 11/15/22 1,000 Arizona Health Facilities Authority, Hospital System Revenue 12/10 at 102.00 BBB 1,125,700 Bonds, John C. Lincoln Health Network, Series 2000, 7.000%, 12/01/25 800 Arizona Health Facilities Authority, Hospital Revenue Bonds, 7/10 at 101.00 BBB+ 897,608 Catholic Healthcare West, Series 1999A, 6.625%, 7/01/20 2,150 Maricopa County Industrial Development Authority, Arizona, 7/14 at 100.00 BBB+ 2,263,499 Health Facility Revenue Bonds, Catholic Healthcare West, Series 2004A, 5.375%, 7/01/23 3,000 Mesa Industrial Development Authority, Arizona, Revenue 1/10 at 101.00 AAA 3,329,100 Bonds, Discovery Health System, Series 1999A, 5.750%, 1/01/25 - MBIA Insured 515 Puerto Rico Industrial, Tourist, Educational, Medical and 11/10 at 101.00 AA 582,934 Environmental 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, 12/11 at 101.00 A3 1,617,885 Hospital Revenue Bonds, Scottsdale Healthcare, Series 2001, 5.800%, 12/01/31 1,055 Winslow Industrial Development Authority, Arizona, Hospital 6/08 at 101.00 N/R 813,595 Revenue Bonds, Winslow Memorial Hospital Project, Series 1998, 5.500%, 6/01/22 ------------------------------------------------------------------------------------------------------------------------------------ HOUSING/MULTIFAMILY - 8.5% (5.9% OF TOTAL INVESTMENTS) 400 Phoenix Industrial Development Authority, Arizona, GNMA 6/11 at 102.00 Aaa 422,300 Collateralized Multifamily Housing Revenue Bonds, Campaigne Place on Jackson, Series 2001, 5.700%, 6/20/31 (Alternative Minimum Tax) 530 Phoenix Industrial Development Authority, Arizona, GNMA 4/15 at 100.00 Aaa 532,523 Collateralized Multifamily Housing Revenue Bonds, Park Lee Apartments, Series 2004A, 5.050%, 10/20/44 (Alternative Minimum Tax) 1,000 Phoenix Industrial Development Authority, Arizona, GNMA 9/10 at 103.00 Aaa 1,084,930 Collateralized Mortgage Loan Multifamily Housing Revenue Bonds, Camelback Crossings Apartments Project, Series 2000, 6.350%, 9/20/35 3,215 Tucson Industrial Development Authority, Arizona, Senior 7/10 at 101.00 AA 3,523,447 Living Facilities Revenue Bonds, Christian Care Project, Series 2000A, 5.625%, 7/01/20 - RAAI Insured ------------------------------------------------------------------------------------------------------------------------------------ HOUSING/SINGLE FAMILY - 0.1% (0.0% OF TOTAL INVESTMENTS) 40 Phoenix Industrial Development Authority, Arizona, Statewide 6/05 at 102.00 AAA 41,087 Single Family Mortgage Revenue Bonds, Series 1995, 6.150%, 6/01/08 (Alternative Minimum Tax) 18 PRINCIPAL OPTIONAL CALL MARKET AMOUNT (000) DESCRIPTION(1) PROVISIONS* RATINGS** VALUE ------------------------------------------------------------------------------------------------------------------------------------ INDUSTRIALS - 2.1% (1.5% OF TOTAL INVESTMENTS) $ 1,345 Yavapai County Industrial Development Authority, Arizona, No Opt. Call BBB $ 1,376,029 Solid Waste Disposal Revenue Bonds, Waste Management Inc. Project, Series 2003B, 4.450%, 3/01/28 (Alternative Minimum Tax) (Mandatory put 3/01/08) ------------------------------------------------------------------------------------------------------------------------------------ LONG-TERM CARE - 0.6% (0.3% OF TOTAL INVESTMENTS) 345 Mohave County Industrial Development Authority, Arizona, 5/06 at 103.00 AAA 362,950 GNMA Collateralized Healthcare Revenue Refunding Bonds, Chris Ridge and Silver Village Projects, Series 1996, 6.375%, 11/01/31 ------------------------------------------------------------------------------------------------------------------------------------ TAX OBLIGATION/GENERAL - 4.0% (2.8% OF TOTAL INVESTMENTS) 1,525 Maricopa County Union High School District 210, Phoenix, 7/14 at 100.00 AAA 1,659,231 Arizona, General Obligation Bonds, Series 2004A, 5.000%, 7/01/21 - FSA Insured 500 Puerto Rico, General Obligation and Public Improvement No Opt. Call AAA 594,585 Bonds, Series 2002A, 5.500%, 7/01/19 - FGIC Insured 330 Puerto Rico, General Obligation and Public Improvement 7/11 at 100.00 A- 358,849 Bonds, Series 2001A, 5.375%, 7/01/28 ------------------------------------------------------------------------------------------------------------------------------------ TAX OBLIGATION/LIMITED - 50.9% (35.2% OF TOTAL INVESTMENTS) 1,985 Arizona School Facilities Board, State School Improvement 7/13 at 100.00 AAA 2,155,154 Revenue Bonds, Series 2003, 5.000%, 7/01/21 2,000 Arizona School Facilities Board, School Improvement Revenue 7/14 at 100.00 AAA 2,336,440 Bonds, Series 2004A, 5.750%, 7/01/18 - AMBAC Insured 2,000 Arizona State Transportation Board, Subordinate Highway 7/14 at 100.00 AA 2,166,200 Revenue Bonds, 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 3,372,480 1,000 5.375%, 7/01/21 - MBIA Insured 7/13 at 100.00 Aaa 1,123,390 Bullhead City, Arizona, Special Assessment Bonds, Parkway District Improvements, Series 1993: 815 6.100%, 1/01/08 7/05 at 101.00 Baa2 834,250 875 6.100%, 1/01/09 7/05 at 101.00 Baa2 894,740 524 Estrella Mountain Ranch Community Facilities District, 7/10 at 102.00 N/R 581,315 Goodyear, Arizona, Special Assessment Lien Bonds, Series 2001A, 7.875%, 7/01/25 575 Marana Municipal Property Corporation, Arizona, Revenue 7/13 at 100.00 AAA 603,359 Bonds, Series 2003, 5.000%, 7/01/28 - AMBAC Insured 3,400 Maricopa County Stadium District, Arizona, Revenue Refunding 6/12 at 100.00 Aaa 3,804,362 Bonds, Series 2002, 5.375%, 6/01/18 - AMBAC Insured Phoenix Industrial Development Authority, Arizona, Government Office Lease Revenue Bonds, Capitol Mall LLC Project, Series 2000: 1,000 5.375%, 9/15/22 - AMBAC Insured 9/10 at 100.00 AAA 1,101,120 2,000 5.500%, 9/15/27 - AMBAC Insured 9/10 at 100.00 AAA 2,198,180 2,150 Phoenix Civic Plaza Building Corporation, Arizona, Senior 7/05 at 101.00 AAA 2,205,169 Lien Excise Tax Revenue Bonds, Series 1994, 6.000%, 7/01/14 2,000 Phoenix Civic Improvement Corporation, Arizona, Subordinate 7/13 at 100.00 AAA 2,161,700 Lien Excise Tax Revenue Bonds, Series 2003A, 5.000%, 7/01/21 - MBIA Insured 1,200 Prescott Valley Municipal Property Corporation, Arizona, 1/13 at 100.00 AAA 1,262,808 Municipal Facilities Revenue Bonds, Series 2003, 5.000%, 1/01/27 - FGIC Insured 1,000 Puerto Rico Public Buildings Authority, Guaranteed 7/12 at 100.00 A- 1,061,010 Government Facilities Revenue Refunding Bonds, Series 2002D, 5.125%, 7/01/24 805 Scottsdale Preserve Authority, Arizona, Excise Tax Revenue No Opt. Call AAA 897,334 Bonds, Series 2004, 5.000%, 7/01/16 - FGIC Insured 1,350 Tempe, Arizona, Excise Tax Revenue Bonds, Series 2004, 7/14 at 100.00 AAA 1,509,934 5.250%, 7/01/20 - AMBAC Insured 500 Tucson, Arizona, Certificates of Participation, Series 2000, 7/08 at 100.00 AAA 545,895 5.700%, 7/01/20 - MBIA Insured 1,100 Tucson, Arizona, Junior Lien Street and Highway User 7/10 at 100.00 AAA 1,190,618 Revenue Bonds, Series 2000E, 5.000%, 7/01/18 - FGIC Insured 1,300 Virgin Islands Public Finance Authority, Gross Receipts Taxes 10/14 at 100.00 AA 1,355,601 Loan Notes, Series 2003, 5.000%, 10/01/33 - RAAI Insured 19 Nuveen Arizona Premium Income Municipal Fund, Inc. (NAZ) (continued) Portfolio of INVESTMENTS January 31, 2005 (Unaudited) PRINCIPAL OPTIONAL CALL MARKET AMOUNT (000) DESCRIPTION(1) PROVISIONS* RATINGS** VALUE ------------------------------------------------------------------------------------------------------------------------------------ U.S. GUARANTEED *** - 17.6% (12.2% OF TOTAL INVESTMENTS) $ 480 Puerto Rico, The Children's Trust Fund, Tobacco Settlement 7/10 at 100.00 AAA $ 517,306 Asset Backed Bonds, Series 2000, 5.750%, 7/01/20 (Pre-refunded to 7/01/10) 2,250 Maricopa County Industrial Development Authority, Arizona, No Opt. Call AAA 2,878,268 Hospital Revenue Refunding Bonds, Samaritan Health Services, Series 1990A, 7.000%, 12/01/16 - MBIA Insured 2,300 Mesa, Arizona, General Obligation Bonds, Series 1999, 7/09 at 100.00 AAA 2,509,300 5.000%, 7/01/18 (Pre-refunded to 7/01/09) - FGIC Insured 2,000 Phoenix Civic Improvement Corporation, Arizona, Junior Lien 7/10 at 101.00 AAA 2,315,420 Wastewater System Revenue Bonds, Series 2000, 6.000%, 7/01/24 (Pre-refunded to 7/01/10) - FGIC Insured 1,000 Puerto Rico Highway and Transportation Authority, Highway 7/10 at 101.00 A*** 1,177,590 Revenue Bonds, Series 2000B, 6.500%, 7/01/27 (Pre-refunded to 7/01/10) 1,400 Southern Arizona Capital Facilities Financing Corporation, 9/12 at 100.00 AAA 1,558,676 Student Housing Revenue Bonds, La Aldea Project at the University of Arizona, Series 2002, 5.000%, 9/01/23 (Pre-refunded to 9/01/12) - MBIA Insured 500 Surprise Municipal Property Corporation, Arizona, Excise 7/09 at 101.00 AAA 564,365 Tax Revenue Bonds, Series 2000, 5.700%, 7/01/20 (Pre-refunded to 7/01/09) - FGIC Insured ------------------------------------------------------------------------------------------------------------------------------------ UTILITIES - 10.5% (7.2% OF TOTAL INVESTMENTS) 1,000 Arizona Power Authority, Special Obligation Power Resource No Opt. Call AA 1,137,430 Revenue Refunding Crossover Bonds, Hoover Project, Series 2001, 5.250%, 10/01/15 1,000 Coconino County, Arizona, Pollution Control Revenue Bonds, 10/06 at 102.00 B- 1,020,860 Nevada Power Company Project, Series 1996, 6.375%, 10/01/36 (Alternative Minimum Tax) 905 Pima County Industrial Development Authority, Arizona, 7/05 at 101.50 AAA 946,087 Lease Obligation Revenue Refunding Bonds, Tucson Electric Power Company, Series 1988A, 7.250%, 7/15/10 - FSA Insured 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 2,127,320 1,000 5.000%, 1/01/31 1/12 at 101.00 AA 1,044,810 530 Salt River Project Agricultural Improvement and Power 1/13 at 100.00 AA 569,702 District, Arizona, Electric System Revenue Bonds, Series 2002B, 5.000%, 1/01/22 ------------------------------------------------------------------------------------------------------------------------------------ WATER AND SEWER - 20.4% (14.1% 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 2,006,131 1,815 5.000%, 10/01/22 10/14 at 100.00 AAA 1,972,125 1,005 Cottonwood, Arizona, Senior Lien Sewerage Revenue Bonds, 7/14 at 100.00 AAA 1,071,400 Series 2004, 5.000%, 7/01/24 - XLCA Insured 3,500 Glendale, Arizona, Water and Sewer Revenue Bonds, 7/13 at 100.00 AAA 3,680,180 Subordinate Lien, Series 2003, 5.000%, 7/01/28 - AMBAC Insured 600 Oro Valley Municipal Property Corporation, Arizona, Senior 7/13 at 100.00 AAA 643,608 Lien Water Revenue Bonds, Series 2003, 5.000%, 7/01/23 - MBIA Insured 875 Phoenix Civic Improvement Corporation, Arizona, Junior Lien 7/14 at 100.00 AAA 939,873 Wastewater System Revenue Bonds, Series 2004, 5.000%, 7/01/24 - MBIA Insured 20 PRINCIPAL OPTIONAL CALL MARKET AMOUNT (000) DESCRIPTION(1) PROVISIONS* RATINGS** VALUE ------------------------------------------------------------------------------------------------------------------------------------ WATER AND SEWER (continued) $ 1,250 Phoenix Civic Improvement Corporation, Arizona, Junior Lien No Opt. Call AAA $ 1,478,200 Water System Revenue Refunding Bonds, Series 2001, 5.500%, 7/01/21 - FGIC Insured 1,500 Phoenix Civic Improvement Corporation, Arizona, Junior 7/12 at 100.00 AAA 1,582,094 Lien Water System Revenue Bonds, Series 2002, 5.000%, 7/01/26 - FGIC Insured ------------------------------------------------------------------------------------------------------------------------------------ $ 87,304 Total Long-Term Investments (cost $88,790,839) - 144.8% 94,812,517 =============----------------------------------------------------------------------------------------------------------------------- Other Assets Less Liabilities - 1.0% 678,790 -------------------------------------------------------------------------------------------------------------------- Preferred Shares, at Liquidation Value - (45.8)% (30,000,000) -------------------------------------------------------------------------------------------------------------------- Net Assets Applicable to Common Shares - 100% $ 65,491,307 ====================================================================================================================
(1) All percentages shown in the Portfolio of Investments are based on net assets applicable to Common shares unless otherwise noted. * 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. ** Ratings: Using the higher of Standard & Poor's or Moody's rating. *** 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. N/R Investment is not rated. See accompanying notes to financial statements. 21 Nuveen Arizona Dividend Advantage Municipal Fund (NFZ) Portfolio of INVESTMENTS January 31, 2005 (Unaudited)
PRINCIPAL OPTIONAL CALL MARKET AMOUNT (000) DESCRIPTION(1) PROVISIONS* RATINGS** VALUE ------------------------------------------------------------------------------------------------------------------------------------ EDUCATION AND CIVIC ORGANIZATIONS - 9.9% (6.7% OF TOTAL INVESTMENTS) $ 1,020 Mesa Industrial Development Authority, Arizona, Student 7/11 at 101.00 BBB- $ 1,043,501 Housing Revenue Bonds, ASU East/Maricopa County Community College District, Williams Campus Project, Series 2001A, 6.000%, 7/01/26 1,000 Puerto Rico Industrial, Tourist, Educational, Medical and 2/09 at 101.00 BBB 1,033,770 Environmental Control Facilities Financing Authority, Higher Education Revenue Bonds, Ana G. Mendez University System, Series 1999, 5.375%, 2/01/29 300 Puerto Rico Industrial, Tourist, Educational, Medical and 9/11 at 100.00 BBB 316,530 Environmental Control Facilities Financing Authority, Higher Education Revenue Bonds, University of the Sacred Heart, Series 2001, 5.250%, 9/01/21 ------------------------------------------------------------------------------------------------------------------------------------ HEALTHCARE - 12.0% (8.1% OF TOTAL INVESTMENTS) 550 Arizona Health Facilities Authority, Hospital System Revenue 12/10 at 102.00 BBB 622,138 Bonds, John C. Lincoln Health Network, Series 2000, 6.875%, 12/01/20 365 Arizona Health Facilities Authority, Hospital Revenue Bonds, 7/10 at 101.00 BBB+ 409,534 Catholic Healthcare West, Series 1999A, 6.625%, 7/01/20 750 Maricopa County Industrial Development Authority, Arizona, 7/14 at 100.00 BBB+ 789,593 Health Facility Revenue Bonds, Catholic Healthcare West, Series 2004A, 5.375%, 7/01/23 1,000 Scottsdale Industrial Development Authority, Arizona, 12/11 at 101.00 A3 1,078,590 Hospital Revenue Bonds, Scottsdale Healthcare, Series 2001, 5.800%, 12/01/31 ------------------------------------------------------------------------------------------------------------------------------------ HOUSING/MULTIFAMILY - 15.8% (10.7% OF TOTAL INVESTMENTS) 1,000 Maricopa County Industrial Development Authority, Arizona, 7/09 at 102.00 Aaa 1,021,160 Multifamily Housing Revenue Bonds, Whispering Palms Apartments, Series 1999A, 5.900%, 7/01/29 - MBIA Insured 1,125 Maricopa County Industrial Development Authority, Arizona, 10/11 at 103.00 Aaa 1,207,260 Multifamily Housing Revenue Bonds, Syl-Mar Apartments, Series 2001, 5.650%, 4/20/21 (Alternative Minimum Tax) 275 Phoenix Industrial Development Authority, Arizona, GNMA 6/11 at 102.00 Aaa 290,331 Collateralized Multifamily Housing Revenue Bonds, Campaigne Place on Jackson, Series 2001, 5.700%, 6/20/31 (Alternative Minimum Tax) 205 Phoenix Industrial Development Authority, Arizona, GNMA 4/15 at 100.00 Aaa 205,976 Collateralized Multifamily Housing Revenue Bonds, Park Lee Apartments, Series 2004A, 5.050%, 10/20/44 (Alternative Minimum Tax) 1,000 Phoenix Industrial Development Authority, Arizona, GNMA 9/10 at 103.00 Aaa 1,084,930 Collateralized Mortgage Loan Multifamily Housing Revenue Bonds, Camelback Crossings Apartments Project, Series 2000, 6.350%, 9/20/35 ------------------------------------------------------------------------------------------------------------------------------------ HOUSING/SINGLE FAMILY - 1.1% (0.8% OF TOTAL INVESTMENTS) 260 Pima County Industrial Development Authority, Arizona, 11/10 at 101.00 AAA 275,509 FNMA/GNMA Single 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, No Opt. Call BBB 521,766 Solid Waste Disposal Revenue Bonds, Waste Management Inc. Project, Series 2003B, 4.450%, 3/01/28 (Alternative Minimum Tax) (Mandatory put 3/01/08) ------------------------------------------------------------------------------------------------------------------------------------ TAX OBLIGATION/GENERAL - 4.4% (3.0% OF TOTAL INVESTMENTS) 1,020 Tucson, Arizona, General Obligation Refunding Bonds, 7/07 at 100.00 AA 1,069,745 Series 1997, 5.000%, 7/01/19 ------------------------------------------------------------------------------------------------------------------------------------ TAX OBLIGATION/LIMITED - 61.2% (41.3% OF TOTAL INVESTMENTS) 700 Arizona School Facilities Board, School Improvement Revenue 7/11 at 100.00 AAA 790,538 Bonds, Series 2001, 5.500%, 7/01/18 2,750 Arizona School Facilities Board, School Improvement Revenue 7/14 at 100.00 AAA 3,212,605 Bonds, Series 2004A, 5.750%, 7/01/18 - AMBAC Insured 1,000 Arizona Tourism and Sports Authority, Tax Revenue Bonds, 7/13 at 100.00 Aaa 1,123,390 Multipurpose Stadium Facility Project, Series 2003A, 5.375%, 7/01/21 - MBIA Insured 22 PRINCIPAL OPTIONAL CALL MARKET AMOUNT (000) DESCRIPTION(1) PROVISIONS* RATINGS** VALUE ------------------------------------------------------------------------------------------------------------------------------------ TAX OBLIGATION/LIMITED (continued) $ 203 Estrella Mountain Ranch Community Facilities District, 7/10 at 102.00 N/R $ 225,204 Goodyear, Arizona, Special Assessment Lien Bonds, Series 2001A, 7.875%, 7/01/25 1,180 Marana Municipal Property Corporation, Arizona, Revenue 7/13 at 100.00 AAA 1,265,762 Bonds, Series 2003, 5.000%, 7/01/23 - AMBAC Insured 2,000 Maricopa County Industrial Development Authority, Arizona, 6/07 at 102.00 A 2,105,760 Education Revenue Bonds, Horizon Community Learning Center Project, Series 2000, 6.350%, 6/01/26 - ACA Insured 900 Phoenix Industrial Development Authority, Arizona, Government 3/12 at 100.00 AAA 996,102 Bonds, Capitol Mall LLC II Project, Series 2001, 5.250%, 9/15/16 - AMBAC Insured 680 Pinal County Industrial Development Authority, Arizona, No Opt. Call A 705,371 Correctional Facilities Contract Revenue Bonds, Florence West Prison LLC, Series 2002A, 5.000%, 10/01/18 - ACA Insured 2,675 Tempe, Arizona, Excise Tax Revenue Refunding Bonds, 7/13 at 100.00 AA+ 2,891,274 Series 2003, 5.000%, 7/01/21 1,000 Tempe, Arizona, Excise Tax Revenue Bonds, Series 2004, 7/14 at 100.00 AAA 1,118,470 5.250%, 7/01/20 - AMBAC Insured 305 Tucson Industrial Development Authority, Arizona, Charter 9/14 at 100.00 BBB- 306,626 School Revenue Bonds, Arizona Agribusiness and Equine Center Charter School, Series 2004A, 6.125%, 9/01/34 ------------------------------------------------------------------------------------------------------------------------------------ U.S. GUARANTEED *** - 11.7% (7.9% OF TOTAL INVESTMENTS) 1,000 Mesa, Arizona, General Obligation Bonds, Series 1999, 7/09 at 100.00 AAA 1,091,000 5.000%, 7/01/17 (Pre-refunded to 7/01/09) - FGIC Insured 1,000 Mesa, Arizona, Utility System Revenue Bonds, Series 2000, 7/09 at 100.00 AAA 1,096,160 5.125%, 7/01/19 (Pre-refunded to 7/01/09) - FGIC 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 to 1/01/08) 1/08 at 101.00 AA*** 150,818 430 5.000%, 1/01/20 (Pre-refunded to 1/01/08) 1/08 at 101.00 AA*** 474,703 ------------------------------------------------------------------------------------------------------------------------------------ UTILITIES - 22.0% (14.9% OF TOTAL INVESTMENTS) 1,500 Arizona Power Authority, Special Obligation Power Resource No Opt. Call AA 1,712,925 Revenue Refunding Crossover Bonds, Hoover Project, Series 2001, 5.250%, 10/01/17 500 Coconino County, Arizona, Pollution Control Revenue Bonds, 5/05 at 100.00 B- 496,535 Nevada Power Company Project, Series 1997B, 5.800%, 11/01/32 (Alternative Minimum Tax) 1,000 Mesa, Arizona, Utility System Revenue Refunding Bonds, No Opt. Call AAA 1,147,250 Series 2002, 5.250%, 7/01/17 - FGIC Insured 350 Puerto Rico Electric Power Authority, Power Revenue Bonds, 7/12 at 101.00 AAA 376,670 Series 2002II, 5.125%, 7/01/26 - FSA Insured 1,000 Salt River Project Agricultural Improvement and Power 1/12 at 101.00 AA 1,108,270 District, Arizona, Electric System Revenue Refunding Bonds, Series 2002A, 5.250%, 1/01/18 200 Salt River Project Agricultural Improvement and Power District, 1/13 at 100.00 AA 214,982 Arizona, Electric System Revenue Bonds, Series 2002B, 5.000%, 1/01/22 235 Salt River Project Agricultural Improvement and Power District, 1/08 at 101.00 AA 249,030 Arizona, Electric System Revenue Refunding Bonds, Series 1997A, 5.000%, 1/01/20 23 Nuveen Arizona Dividend Advantage Municipal Fund (NFZ) (continued) Portfolio of INVESTMENTS January 31, 2005 (Unaudited) PRINCIPAL OPTIONAL CALL MARKET AMOUNT (000) DESCRIPTION(1) PROVISIONS* RATINGS** VALUE ------------------------------------------------------------------------------------------------------------------------------------ WATER AND SEWER - 7.6% (5.1% OF TOTAL INVESTMENTS) $ 225 Oro Valley Municipal Property Corporation, Arizona, Senior 7/13 at 100.00 AAA $ 241,353 Lien Water Revenue Bonds, Series 2003, 5.000%, 7/01/23 - MBIA Insured 1,500 Phoenix Civic Improvement Corporation, Arizona, Junior 7/12 at 100.00 AAA 1,582,093 Lien Water System Revenue Bonds, Series 2002, 5.000%, 7/01/26 - FGIC Insured ------------------------------------------------------------------------------------------------------------------------------------ $ 32,853 Total Long-Term Investments (cost $33,571,712) - 147.9% 35,653,224 =============----------------------------------------------------------------------------------------------------------------------- Other Assets Less Liabilities - 1.9% 446,383 -------------------------------------------------------------------------------------------------------------------- Preferred Shares, at Liquidation Value - (49.8)% (12,000,000) -------------------------------------------------------------------------------------------------------------------- Net Assets Applicable to Common Shares - 100% $ 24,099,607 ====================================================================================================================
FORWARD SWAP CONTRACTS OUTSTANDING AT JANUARY 31, 2005:
SWAP UNREALIZED NOTIONAL EFFECTIVE TERMINATION APPRECIATION AMOUNT DATE(2) DATE (DEPRECIATION) ------------------------------------------------------------------------------------------------------------------------------------ Agreement with Morgan Stanley dated August 4, 2004, to pay semi-annually the notional amount multiplied by 5.660% (annualized) and receive quarterly the notional amount multiplied by the three-month USD-LIBOR (United States Dollar - London Inter-Bank Offered Rates). $600,000 2/16/05 2/16/35 $(64,448) Agreement with Goldman Sachs dated December 6, 2004, to pay semi-annually the notional amount multiplied by 5.324% (annualized) and receive quarterly the notional amount multiplied by the three-month USD-LIBOR (United States Dollar - London Inter-Bank Offered Rates). 200,000 7/11/05 7/11/25 (8,826) ------------------------------------------------------------------------------------------------------------------------------------ $(73,274) ====================================================================================================================================
(1) All percentages shown in the Portfolio of Investments are based on net assets applicable to Common shares unless otherwise noted. (2) Effective date represents the date on which both the Fund and counterparty commence interest payment accruals on each forward swap contract. * 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. ** Ratings: Using the higher of Standard & Poor's or Moody's rating. *** 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. 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, 2005 (Unaudited)
PRINCIPAL OPTIONAL CALL MARKET AMOUNT (000) DESCRIPTION(1) PROVISIONS* RATINGS** VALUE ------------------------------------------------------------------------------------------------------------------------------------ EDUCATION AND CIVIC ORGANIZATIONS - 10.2% (7.0% OF TOTAL INVESTMENTS) $ 715 Arizona State University, System Revenue Bonds, Series 2002, 7/12 at 100.00 AAA $ 822,286 5.750%, 7/01/27 - FGIC Insured 1,250 Glendale Industrial Development Authority, Arizona, Revenue 5/11 at 101.00 A- 1,342,987 Bonds, Midwestern University, Series 2001A, 5.875%, 5/15/31 320 Puerto Rico Industrial, Tourist, Educational, Medical and 2/09 at 101.00 BBB 335,939 Environmental Control Facilities Financing Authority, Higher Education Revenue Bonds, Ana G. Mendez University System, Series 1999, 5.375%, 2/01/19 University of Arizona, Certificates of Participation, Series 2002A: 750 5.500%, 6/01/18 - AMBAC Insured 6/12 at 100.00 AAA 842,115 500 5.125%, 6/01/22 - AMBAC Insured 6/12 at 100.00 AAA 540,465 ------------------------------------------------------------------------------------------------------------------------------------ HEALTHCARE - 18.4% (12.6% OF TOTAL INVESTMENTS) 735 Arizona Health Facilities Authority, Hospital System Revenue 2/12 at 101.00 Ba2 755,992 Bonds, Phoenix Children's Hospital, Series 2002A, 6.250%, 2/15/21 400 Arizona Health Facilities Authority, Hospital Revenue Bonds, 7/10 at 101.00 BBB+ 448,804 Catholic Healthcare West, Series 1999A, 6.625%, 7/01/20 600 Arizona Health Facilities Authority, Revenue Bonds, Blood 4/14 at 100.00 A- 616,392 Systems Inc., Series 2004, 5.000%, 4/01/20 1,375 Maricopa County Industrial Development Authority, Arizona, 7/14 at 100.00 BBB+ 1,447,586 Health Facility Revenue Bonds, Catholic Healthcare West, Series 2004A, 5.375%, 7/01/23 500 Maricopa County Industrial Development Authority, Arizona, 5/08 at 101.00 AA 533,485 Hospital Revenue Bonds, Mayo Clinic Hospital, Series 1998, 5.250%, 11/15/37 1,000 Mesa Industrial Development Authority, Arizona, Revenue 1/10 at 101.00 AAA 1,099,810 Bonds, Discovery Health System, Series 1999A, 5.625%, 1/01/29 - MBIA Insured 1,000 Scottsdale Industrial Development Authority, Arizona, 12/11 at 101.00 A3 1,078,590 Hospital Revenue Bonds, Scottsdale Healthcare, Series 2001, 5.800%, 12/01/31 1,000 Yavapai County Industrial Development Authority, Arizona, 8/13 at 100.00 Baa2 1,065,360 Hospital Revenue Bonds, Yavapai Regional Medical Center, Series 2003A, 6.000%, 8/01/33 ------------------------------------------------------------------------------------------------------------------------------------ HOUSING/MULTIFAMILY - 7.7% (5.3% OF TOTAL INVESTMENTS) 1,000 Maricopa County Industrial Development Authority, Arizona, 10/11 at 105.00 AAA 1,062,230 GNMA Collateralized Multifamily Housing Revenue Refunding Bonds, Pine Ridge, Cambridge Court, Cove on 44th and Fountain Place Apartments, Series 2001A-1, 6.000%, 10/20/31 1,425 Phoenix Industrial Development Authority, Arizona, GNMA 7/12 at 105.00 AAA 1,555,673 Collateralized Multifamily Housing Revenue Bonds, Summit Apartments, Series 2002, 6.450%, 7/20/32 325 Phoenix Industrial Development Authority, Arizona, GNMA 4/15 at 100.00 Aaa 326,547 Collateralized Multifamily Housing Revenue Bonds, Park Lee Apartments, Series 2004A, 5.050%, 10/20/44 (Alternative Minimum Tax) ------------------------------------------------------------------------------------------------------------------------------------ HOUSING/SINGLE FAMILY - 0.3% (0.3% OF TOTAL INVESTMENTS) 125 Pima County Industrial Development Authority, Arizona, 11/10 at 101.00 AAA 130,260 FNMA/GNMA Single Family Mortgage Revenue Bonds, Series 2001A-1, 5.350%, 11/01/24 (Alternative Minimum Tax) ------------------------------------------------------------------------------------------------------------------------------------ INDUSTRIALS - 2.2% (1.5% OF TOTAL INVESTMENTS) 810 Yavapai County Industrial Development Authority, Arizona, No Opt. Call BBB 828,687 Solid Waste Disposal Revenue Bonds, Waste Management Inc. Project, Series 2003B, 4.450%, 3/01/28 (Alternative Minimum Tax) (Mandatory put 3/01/08) ------------------------------------------------------------------------------------------------------------------------------------ TAX OBLIGATION/GENERAL - 38.2% (26.1% OF TOTAL INVESTMENTS) 1,725 Chandler, Arizona, General Obligation Bonds, Series 2002, 7/12 at 100.00 AA+ 1,878,922 5.000%, 7/01/17 1,000 Gilbert, Arizona, General Obligation Bonds, Series 2002A, 7/11 at 100.00 AAA 1,088,510 5.000%, 7/01/18 - AMBAC Insured 25 Nuveen Arizona Dividend Advantage Municipal Fund 2 (NKR) (continued) Portfolio of INVESTMENTS January 31, 2005 (Unaudited) PRINCIPAL OPTIONAL CALL MARKET AMOUNT (000) DESCRIPTION(1) PROVISIONS* RATINGS** VALUE ------------------------------------------------------------------------------------------------------------------------------------ TAX OBLIGATION/GENERAL (continued) 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 $ 1,157,260 1,000 5.375%, 7/01/16 - FSA Insured No Opt. Call AAA 1,159,340 1,165 Maricopa County Unified School District 69, Paradise Valley, No Opt. Call AAA 1,328,822 Arizona, General Obligation Refunding Bonds, Series 2002A, 5.250%, 7/01/14 - FGIC Insured 1,000 Mesa, Arizona, General Obligation Bonds, Series 2000, No Opt. Call AAA 1,192,260 6.500%, 7/01/11 - FGIC Insured 1,405 Mesa, Arizona, General Obligation Bonds, Series 2002, No Opt. Call AAA 1,625,950 5.375%, 7/01/15 - FGIC Insured Phoenix, Arizona, Various Purpose General Obligation Bonds, Series 2002B: 1,700 5.000%, 7/01/22 7/12 at 100.00 AA+ 1,838,363 500 5.000%, 7/01/27 7/12 at 100.00 AA+ 525,735 1,000 Pinal County Unified School District 43, Apache Junction, No Opt. Call AAA 1,184,870 Arizona, General Obligation Refunding Bonds, Series 2001, 5.750%, 7/01/15 - FGIC Insured 1,500 Scottsdale, Arizona, General Obligation Bonds, Series 2002, 7/11 at 100.00 AAA 1,612,290 5.000%, 7/01/24 ------------------------------------------------------------------------------------------------------------------------------------ TAX OBLIGATION/LIMITED - 45.0% (30.9% OF TOTAL INVESTMENTS) Arizona State, Certificates of Participation, Series 2002A: 750 5.000%, 11/01/17 - MBIA Insured 5/12 at 100.00 AAA 813,600 1,000 5.000%, 11/01/18 - MBIA Insured 5/12 at 100.00 AAA 1,084,200 500 5.000%, 11/01/20 - MBIA Insured 5/12 at 100.00 AAA 1,000 Arizona State Transportation Board, Highway Revenue Bonds, 7/12 at 100.00 AAA 1,104,890 Series 2002B, 5.250%, 7/01/21 322 Estrella Mountain Ranch Community Facilities District, 7/10 at 102.00 N/R 357,220 Goodyear, Arizona, Special Assessment Lien Bonds, Series 2001A, 7.875%, 7/01/25 670 Goodyear Community Facilities Utility District 1, Arizona, 7/13 at 100.00 A 689,484 General Obligation Bonds, Series 2003, 5.350%, 7/15/28 - ACA Insured 1,000 Maricopa County Public Finance Authority, Arizona, Lease 7/11 at 100.00 Aaa 1,127,490 Revenue Bonds, 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 939,901 2,645 5.375%, 6/01/19 - AMBAC Insured 6/12 at 100.00 Aaa 2,959,570 1,000 Mesa, Arizona, Street and Highway User Tax Revenue Bonds, 7/14 at 100.00 AAA 1,090,720 Series 2004, 5.125%, 7/01/23 - FSA Insured 1,500 Phoenix Industrial Development Authority, Arizona, 3/12 at 100.00 AAA 1,660,170 Government Bonds, Capitol Mall LLC II Project, Series 2001, 5.250%, 9/15/16 - AMBAC Insured 460 Pima County Industrial Development Authority, Arizona, 12/14 at 100.00 BBB- 466,803 Charter School Revenue Bonds, Noah Webster Basic Schools Inc., Series 2004, 6.000%, 12/15/24 1,070 Pinal County Industrial Development Authority, Arizona, No Opt. Call A 1,109,922 Correctional Facilities Contract Revenue Bonds, Florence West Prison LLC, Series 2002A, 5.000%, 10/01/18 - ACA Insured 1,000 Puerto Rico Public Buildings Authority, Guaranteed Government 7/12 at 100.00 A- 1,061,010 Facilities Revenue Refunding Bonds, Series 2002D, 5.125%, 7/01/24 480 Tucson Industrial Development Authority, Arizona, 9/14 at 100.00 BBB- 482,558 Charter School Revenue Bonds, Arizona Agribusiness and Equine Center Charter School, Series 2004A, 6.125%, 9/01/34 1,000 Tucson, Arizona, Junior Lien Street and Highway User Revenue 7/10 at 100.00 AAA 1,082,380 Bonds, Series 2000E, 5.000%, 7/01/18 - FGIC Insured 640 Yuma Municipal Property Corporation, Arizona, Municipal 7/10 at 100.00 AAA 685,997 Facilities Tax Revenue Bonds, Series 2001, 5.000%, 7/01/21 - AMBAC Insured ------------------------------------------------------------------------------------------------------------------------------------ TRANSPORTATION - 5.5% (3.7% OF TOTAL INVESTMENTS) 1,000 Phoenix Civic Improvement Corporation, Arizona, Senior Lien 7/08 at 101.00 AAA 1,036,930 Airport Revenue Bonds, Series 1998A, 5.000%, 7/01/25 - FSA Insured 1,000 Phoenix, Arizona, Civic Improvement Corporation, Senior Lien 7/12 at 100.00 AAA 1,047,450 Airport Revenue Bonds, Series 2002B, 5.250%, 7/01/27 (Alternative Minimum Tax) - FGIC Insured 26 PRINCIPAL OPTIONAL CALL MARKET AMOUNT (000) DESCRIPTION(1) PROVISIONS* RATINGS** VALUE ------------------------------------------------------------------------------------------------------------------------------------ U.S. GUARANTEED *** - 3.0% (2.0% OF TOTAL INVESTMENTS) $ 1,000 Maricopa County Unified School District 89, Dysart, Arizona, 7/14 at 100.00 AAA $ 1,139,760 General Obligation Bonds, Series 2004B, 5.250%, 7/01/20 (Pre-refunded to 7/01/14) - FSA Insured ------------------------------------------------------------------------------------------------------------------------------------ UTILITIES - 7.1% (4.8% OF TOTAL INVESTMENTS) 1,115 Arizona Power Authority, Special Obligation Power Resource No Opt. Call AA 1,268,234 Revenue Refunding Crossover Bonds, Hoover Project, Series 2001, 5.250%, 10/01/15 1,000 Mesa, Arizona, Utility System Revenue Bonds, Series 2002, 7/11 at 100.00 AAA 1,084,200 5.000%, 7/01/20 - FGIC Insured 320 Salt River Project Agricultural Improvement and Power 1/13 at 100.00 AA 343,971 District, Arizona, Electric System Revenue Bonds, Series 2002B, 5.000%, 1/01/22 ------------------------------------------------------------------------------------------------------------------------------------ WATER AND SEWER - 8.5% (5.8% OF TOTAL INVESTMENTS) 500 Maricopa County Industrial Development Authority, Arizona, 12/07 at 102.00 AAA 535,505 Water System Improvement Revenue Bonds, Chaparral City Water Company, Series 1997A, 5.400%, 12/01/22 (Alternative Minimum Tax) - AMBAC Insured 360 Oro Valley Municipal Property Corporation, Arizona, Senior 7/13 at 100.00 AAA 386,166 Lien Water Revenue Bonds, Series 2003, 5.000%, 7/01/23 - MBIA Insured 1,000 Phoenix Civic Improvement Corporation, Arizona, Junior Lien No Opt. Call AAA 1,184,750 Water System Revenue Refunding Bonds, Series 2001, 5.500%, 7/01/22 - FGIC Insured 1,000 Tucson, Arizona, Water System Revenue Refunding Bonds, 7/12 at 102.00 AAA 1,138,100 Series 2002, 5.500%, 7/01/18 - FGIC Insured ------------------------------------------------------------------------------------------------------------------------------------ $ 50,997 Total Long-Term Investments (cost $52,124,847) - 146.1% 55,845,706 =============----------------------------------------------------------------------------------------------------------------------- Other Assets Less Liabilities - 2.3% 886,649 -------------------------------------------------------------------------------------------------------------------- Preferred Shares, at Liquidation Value - (48.4)% (18,500,000) -------------------------------------------------------------------------------------------------------------------- Net Assets Applicable to Common Shares - 100% $ 38,232,355 ====================================================================================================================
FORWARD SWAP CONTRACTS OUTSTANDING AT JANUARY 31, 2005:
SWAP UNREALIZED NOTIONAL EFFECTIVE TERMINATION APPRECIATION AMOUNT DATE(2) DATE (DEPRECIATION) ------------------------------------------------------------------------------------------------------------------------------------ Agreement with Morgan Stanley dated August 4, 2004, to pay semi-annually the notional amount multiplied by 5.660% (annualized) and receive quarterly the notional amount multiplied by the three-month USD-LIBOR (United States Dollar - London Inter-Bank Offered Rates). $1,100,000 2/16/05 2/16/35 $(118,155) Agreement with Goldman Sachs dated December 6, 2004, to pay semi-annually the notional amount multiplied by 5.324% (annualized) and receive quarterly the notional amount multiplied by the three-month USD-LIBOR (United States Dollar - London Inter-Bank Offered Rates). 800,000 7/11/05 7/11/25 (35,303) Agreement with JP Morgan dated January 11, 2005, to pay semi-annually the notional amount multiplied by 5.235% (annualized) and receive quarterly the notional amount multiplied by the three-month USD-LIBOR (United States Dollar - London Inter-Bank Offered Rates). 750,000 8/17/05 8/17/25 (23,231) ------------------------------------------------------------------------------------------------------------------------------------ $(176,689) ====================================================================================================================================
(1) All percentages shown in the Portfolio of Investments are based on net assets applicable to Common shares unless otherwise noted. (2) Effective date represents the date on which both the Fund and counterparty commence interest payment accruals on each forward swap contract. * 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. ** Ratings: Using the higher of Standard & Poor's or Moody's rating. *** 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. N/R Investment is not rated. See accompanying notes to financial statements. 27 Nuveen Arizona Dividend Advantage Municipal Fund 3 (NXE) Portfolio of INVESTMENTS January 31, 2005 (Unaudited)
PRINCIPAL OPTIONAL CALL MARKET AMOUNT (000) DESCRIPTION(1) PROVISIONS* RATINGS** VALUE ------------------------------------------------------------------------------------------------------------------------------------ CONSUMER STAPLES - 4.0% (2.7% OF TOTAL INVESTMENTS) $ 1,880 Puerto Rico, The Children's Trust Fund, Tobacco Settlement 5/12 at 100.00 BBB $ 1,837,080 Asset-Backed Refunding Bonds, Series 2002, 5.375%, 5/15/33 ------------------------------------------------------------------------------------------------------------------------------------ EDUCATION AND CIVIC ORGANIZATIONS - 15.6% (10.6% OF TOTAL INVESTMENTS) 2,000 Arizona State University, System Revenue Bonds, Series 2002, 7/12 at 100.00 AAA 2,300,100 5.750%, 7/01/27 - FGIC Insured 1,000 Arizona Student Loan Acquisition Authority, Student Loan 11/09 at 102.00 Aaa 1,090,750 Revenue Refunding Bonds, Senior Series 1999A-1, 5.750%, 5/01/15 (Alternative Minimum Tax) 1,130 Energy Management Services LLC, Arizona State University, 7/12 at 100.00 AAA 1,255,046 Energy Conservation Revenue Bonds, Main Campus Project, Series 2002, 5.250%, 7/01/18 - MBIA Insured 270 Glendale Industrial Development Authority, Arizona, Revenue 5/08 at 101.00 A- 279,250 Bonds, Midwestern University, Series 1998A, 5.375%, 5/15/28 2,000 University of Arizona, Certificates of Participation, 6/12 at 100.00 AAA 2,177,060 Series 2002B, 5.125%, 6/01/20 - AMBAC Insured ------------------------------------------------------------------------------------------------------------------------------------ HEALTHCARE - 21.7% (14.7% OF TOTAL INVESTMENTS) 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 Ba2 759,983 520 6.250%, 11/15/29 11/09 at 100.00 Ba2 529,604 1,000 Arizona Health Facilities Authority, Hospital System Revenue 12/10 at 102.00 BBB 1,131,160 Bonds, John C. Lincoln Health Network, Series 2000, 6.875%, 12/01/20 300 Arizona Health Facilities Authority, Hospital Revenue Bonds, 7/10 at 101.00 BBB+ 336,603 Catholic Healthcare West, Series 1999A, 6.625%, 7/01/20 625 Arizona Health Facilities Authority, Revenue Bonds, Blood 4/14 at 100.00 A- 642,075 Systems Inc., Series 2004, 5.000%, 4/01/20 1,825 Maricopa County Industrial Development Authority, Arizona, 7/14 at 100.00 BBB+ 1,921,342 Health Facility Revenue Bonds, Catholic Healthcare West, Series 2004A, 5.375%, 7/01/23 2,000 Maricopa County Industrial Development Authority, Arizona, 5/08 at 101.00 AA 2,133,940 Hospital Revenue Bonds, Mayo Clinic Hospital, Series 1998, 5.250%, 11/15/37 1,250 Scottsdale Industrial Development Authority, Arizona, 12/11 at 101.00 A3 1,348,237 Hospital Revenue Bonds, Scottsdale Healthcare, Series 2001, 5.800%, 12/01/31 1,000 Yavapai County Industrial Development Authority, Arizona, 8/13 at 100.00 Baa2 1,065,360 Hospital Revenue Bonds, Yavapai Regional Medical Center, Series 2003A, 6.000%, 8/01/33 ------------------------------------------------------------------------------------------------------------------------------------ HOUSING/MULTIFAMILY - 10.5% (7.1% OF TOTAL INVESTMENTS) 2,500 Maricopa County Industrial Development Authority, Arizona, 10/10 at 105.00 Aaa 2,712,850 GNMA Collateralized Multifamily Housing Revenue Bonds, Villas at Augusta, Series 2000, 6.500%, 10/20/33 1,545 Phoenix Industrial Development Authority, Arizona, GNMA 6/11 at 102.00 Aaa 1,659,191 Collateralized Multifamily Housing Revenue Bonds, Campaigne Place on Jackson, Series 2001, 5.600%, 6/20/21 (Alternative Minimum Tax) 380 Phoenix Industrial Development Authority, Arizona, GNMA 4/15 at 100.00 Aaa 381,809 Collateralized Multifamily Housing Revenue Bonds, Park Lee Apartments, Series 2004A, 5.050%, 10/20/44 (Alternative Minimum Tax) ------------------------------------------------------------------------------------------------------------------------------------ INDUSTRIALS - 2.1% (1.4% OF TOTAL INVESTMENTS) 945 Yavapai County Industrial Development Authority, Arizona, No Opt. Call BBB 966,801 Solid Waste Disposal Revenue Bonds, Waste Management Inc. Project, Series 2003B, 4.450%, 3/01/28 (Alternative Minimum Tax) (Mandatory put 3/01/08) 28 PRINCIPAL OPTIONAL CALL MARKET AMOUNT (000) DESCRIPTION(1) PROVISIONS* RATINGS** VALUE ------------------------------------------------------------------------------------------------------------------------------------ TAX OBLIGATION/GENERAL - 23.5% (15.9% OF TOTAL INVESTMENTS) $ 660 Chandler, Arizona, General Obligation Bonds, Series 2002, 7/12 at 100.00 AA+ $ 718,852 5.000%, 7/01/18 2,250 DC Ranch Community Facilities District, Scottsdale, Arizona, 7/13 at 100.00 Aaa 2,374,493 General Obligation Bonds, Series 2002, 5.000%, 7/15/27 - AMBAC Insured 1,930 Glendale, Arizona, General Obligation Refunding Bonds, 7/11 at 100.00 AA 2,097,929 Series 2002, 5.000%, 7/01/19 1,000 Maricopa County Unified School District 11, Peoria, Arizona, No Opt. Call AAA 1,120,220 General Obligation Refunding Bonds, Series 2002, 5.000%, 7/01/15 - FSA Insured 765 Maricopa County Unified School District 69, Paradise Valley, No Opt. Call AAA 859,799 Arizona, General Obligation Refunding Bonds, Second Series 2002, 5.000%, 7/01/15 - FSA Insured 1,575 Maricopa County Union High School District 210, Phoenix, 7/14 at 100.00 AAA 1,718,829 Arizona, General Obligation Bonds, Series 2004A, 5.000%, 7/01/20 - FSA Insured 1,150 Scottsdale, Arizona, General Obligation Refunding Bonds, No Opt. Call AAA 1,297,878 Series 2002, 5.000%, 7/01/16 440 Tucson, Arizona, General Obligation Bonds, Series 2001B, 7/11 at 100.00 AA 477,048 5.000%, 7/01/20 ------------------------------------------------------------------------------------------------------------------------------------ TAX OBLIGATION/LIMITED - 40.8% (27.5% OF TOTAL INVESTMENTS) 2,000 Arizona School Facilities Board, School Improvement Revenue 7/12 at 100.00 AAA 2,229,600 Bonds, Series 2002, 5.250%, 7/01/20 3,000 Arizona State Transportation Board, Highway Revenue 7/12 at 102.00 AAA 3,334,470 Refunding Bonds, Series 2002A, 5.250%, 7/01/18 1,000 Arizona State Transportation Board, Highway Revenue Bonds, 7/12 at 100.00 AAA 1,104,000 Series 2002B, 5.250%, 7/01/22 2,660 Arizona Tourism and Sports Authority, Tax Revenue Bonds, 7/13 at 100.00 Aaa 2,990,266 Multipurpose Stadium Facility Project, Series 2003A, 5.375%, 7/01/20 - MBIA Insured (PLG) 376 Estrella Mountain Ranch Community Facilities District, 7/10 at 102.00 N/R 417,127 Goodyear, Arizona, Special Assessment Lien Bonds, Series 2001A, 7.875%, 7/01/25 800 Goodyear Community Facilities Utility District 1, Arizona, 7/13 at 100.00 A 823,264 General Obligation Bonds, Series 2003, 5.350%, 7/15/28 - ACA Insured 2,000 Mohave County, Arizona, Certificates of Participation, 7/14 at 100.00 AAA 2,233,580 Series 2004, 5.250%, 7/01/19 - AMBAC Insured 540 Pima County Industrial Development Authority, Arizona, 12/14 at 100.00 BBB- 547,987 Charter School Revenue Bonds, Noah Webster Basic Schools Inc., Series 2004, 6.000%, 12/15/24 1,250 Pinal County Industrial Development Authority, Arizona, No Opt. Call A 1,296,637 Correctional Facilities Contract Revenue Bonds, Florence West Prison LLC, Series 2002A, 5.000%, 10/01/18 - ACA Insured 2,770 Tempe, Arizona, Excise Tax Revenue Refunding Bonds, 7/13 at 100.00 AA+ 2,981,794 Series 2003, 5.000%, 7/01/22 565 Tucson Industrial Development Authority, Arizona, Charter 9/14 at 100.00 BBB- 568,011 School Revenue Bonds, Arizona Agribusiness and Equine Center Charter School, Series 2004A, 6.125%, 9/01/34 ------------------------------------------------------------------------------------------------------------------------------------ TRANSPORTATION - 13.5% (9.1% OF TOTAL INVESTMENTS) Phoenix, Arizona, Civic Improvement Corporation, Senior Lien Airport Revenue Bonds, Series 2002B: 1,000 5.750%, 7/01/16 (Alternative Minimum Tax) - FGIC Insured 7/12 at 100.00 AAA 1,129,520 2,300 5.250%, 7/01/21 (Alternative Minimum Tax) - FGIC Insured 7/12 at 100.00 AAA 2,451,708 2,450 Tucson Airport Authority Inc., Arizona, Revenue Refunding 6/11 at 100.00 AAA 2,553,023 Bonds, Series 2001B, 5.000%, 6/01/20 (Alternative Minimum Tax) - AMBAC Insured ------------------------------------------------------------------------------------------------------------------------------------ U.S. GUARANTEED *** - 0.6% (0.3% OF TOTAL INVESTMENTS) 230 Glendale Industrial Development Authority, Arizona, 5/08 at 101.00 AAA 252,098 Revenue Bonds, Midwestern University, Series 1998A, 5.375%, 5/15/28 (Pre-refunded to 5/15/08) ------------------------------------------------------------------------------------------------------------------------------------ UTILITIES - 6.0% (4.1% OF TOTAL INVESTMENTS) 1,250 Maricopa County Pollution Control Corporation, Arizona, 11/12 at 100.00 AAA 1,311,325 Revenue Bonds, Arizona Public Service Company - Palo Verde Project, Series 2002A, 5.050%, 5/01/29 - AMBAC 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 386,968 1,000 5.000%, 1/01/31 1/13 at 100.00 AA 1,044,810 29 Nuveen Arizona Dividend Advantage Municipal Fund 3 (NXE) (continued) Portfolio of INVESTMENTS January 31, 2005 (Unaudited) PRINCIPAL OPTIONAL CALL MARKET AMOUNT (000) DESCRIPTION(1) PROVISIONS* RATINGS** VALUE ------------------------------------------------------------------------------------------------------------------------------------ WATER AND SEWER - 9.7% (6.6% OF TOTAL INVESTMENTS) $ 650 Arizona Water Infrastructure Finance Authority, Water Quality 10/14 at 100.00 AAA $ 706,271 Revenue Bonds, Series 2004A, 5.000%, 10/01/22 405 Oro Valley Municipal Property Corporation, Arizona, Senior 7/13 at 100.00 AAA 434,435 Lien Water Revenue Bonds, Series 2003, 5.000%, 7/01/23 - MBIA Insured 1,000 Phoenix Civic Improvement Corporation, Arizona, Junior 7/11 at 100.00 AAA 1,092,640 Lien Wastewater System Revenue Refunding Bonds, Series 2001, 5.125%, 7/01/21 - FGIC Insured 2,000 Phoenix Civic Improvement Corporation, Arizona, Junior 7/12 at 100.00 AAA 2,174,000 Lien Water System Revenue Bonds, Series 2002, 5.000%, 7/01/18 - FGIC Insured ------------------------------------------------------------------------------------------------------------------------------------ $ 62,296 Total Long-Term Investments (cost $64,469,098) - 148.0% 67,256,823 =============----------------------------------------------------------------------------------------------------------------------- Other Assets Less Liabilities - 0.4% 199,577 -------------------------------------------------------------------------------------------------------------------- Preferred Shares, at Liquidation Value - (48.4)% (22,000,000) -------------------------------------------------------------------------------------------------------------------- Net Assets Applicable to Common Shares - 100% $ 45,456,400 ====================================================================================================================
FORWARD SWAP CONTRACTS OUTSTANDING AT JANUARY 31, 2005:
SWAP UNREALIZED NOTIONAL EFFECTIVE TERMINATION APPRECIATION AMOUNT DATE(2) DATE (DEPRECIATION) ------------------------------------------------------------------------------------------------------------------------------------ Agreement with Morgan Stanley dated August 4, 2004, to pay semi-annually the notional amount multiplied by 5.660% (annualized) and receive quarterly the notional amount multiplied by the three-month USD-LIBOR (United States Dollar - London Inter-Bank Offered Rates). $2,000,000 2/16/05 2/16/35 $(214,827) Agreement with Goldman Sachs dated December 6, 2004, to pay semi-annually the notional amount multiplied by 5.324% (annualized) and receive quarterly the notional amount multiplied by the three-month USD-LIBOR (United States Dollar - London Inter-Bank Offered Rates). 1,000,000 7/11/05 7/11/25 (44,127) Agreement with JP Morgan dated January 11, 2005, to pay semi-annually the notional amount multiplied by 5.235% (annualized) and receive quarterly the notional amount multiplied by the three-month USD-LIBOR (United States Dollar - London Inter-Bank Offered Rates). 850,000 8/17/05 8/17/25 (26,330) ------------------------------------------------------------------------------------------------------------------------------------ $(285,284) ====================================================================================================================================
(1) All percentages shown in the Portfolio of Investments are based on net assets applicable to Common shares unless otherwise noted. (2) Effective date represents the date on which both the Fund and counterparty commence interest payment accruals on each forward swap contract. * 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 later dates. ** Ratings: Using the higher of Standard & Poor's or Moody's rating. *** 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. N/R Investment is not rated. (PLG) Portion of security, with an aggregate market value of $337,248, has been pledged to collateralize the net payment obligations under forward swap contracts. See accompanying notes to financial statements. 30 Nuveen Texas Quality Income Municipal Fund (NTX) Portfolio of INVESTMENTS January 31, 2005 (Unaudited)
PRINCIPAL OPTIONAL CALL MARKET AMOUNT (000) DESCRIPTION(1) PROVISIONS* RATINGS** VALUE ------------------------------------------------------------------------------------------------------------------------------------ CONSUMER STAPLES - 1.9% (1.2% OF TOTAL INVESTMENTS) $ 2,820 Puerto Rico, The Children's Trust Fund, Tobacco Settlement 5/12 at 100.00 BBB $ 2,755,619 Asset-Backed Refunding Bonds, Series 2002, 5.375%, 5/15/33 ------------------------------------------------------------------------------------------------------------------------------------ EDUCATION AND CIVIC ORGANIZATIONS - 12.5% (8.7% OF TOTAL INVESTMENTS) 1,000 Raven Hills Higher Education Corporation, Texas, Student 8/11 at 100.00 Aaa 1,089,730 Housing Revenue Bonds, Lamar University - Cardinal Village LLC, Series 2001A, 5.250%, 8/01/24 - MBIA Insured 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 1,855,829 1,795 5.000%, 5/01/19 - FGIC Insured 5/13 at 100.00 Aaa 1,942,262 1,885 5.000%, 5/01/20 - FGIC Insured 5/13 at 100.00 Aaa 2,034,104 2,000 Texas State University System, Financing Revenue Refunding 3/12 at 100.00 AAA 2,156,980 Bonds, Series 2002, 5.000%, 3/15/20 - FSA Insured 1,665 Texas State University System, Financing Revenue Bonds, 9/14 at 100.00 AAA 1,775,573 Series 2004, 5.000%, 3/15/24 - FSA Insured 2,330 Universal City Education Facilities Corporation, Texas, 3/11 at 102.00 A- 2,459,478 Revenue Bonds, Wayland Baptist University Project, Series 2001, 5.625%, 3/01/26 5,000 University of North Texas, Financing System Revenue Bonds, 4/12 at 100.00 AAA 5,318,750 Series 2001, 5.000%, 4/15/24 - FSA Insured ------------------------------------------------------------------------------------------------------------------------------------ ENERGY - 2.0% (1.4% OF TOTAL INVESTMENTS) 3,000 Gulf Coast Waste Disposal Authority, Texas, Waste 4/08 at 102.00 BBB 3,028,770 Disposal Revenue Bonds, Valero Energy Corporation Project, Series 1998, 5.600%, 4/01/32 (Alternative Minimum Tax) ------------------------------------------------------------------------------------------------------------------------------------ HEALTHCARE - 24.0% (16.6% OF TOTAL INVESTMENTS) 3,500 Abilene Health Facilities Development Corporation, Texas, 9/05 at 102.00 AAA 3,642,310 Hospital Revenue Refunding and Improvement Bonds, Hendrick Medical Center Project, Series 1995C, 6.150%, 9/01/25 - MBIA Insured Brazoria County Health Facilities Development Corporation, Texas, Revenue Bonds, Brazosport Memorial Hospital, Series 2004: 1,745 5.250%, 7/01/20 - RAAI Insured 7/14 at 100.00 AA 1,879,191 1,835 5.250%, 7/01/21 - RAAI Insured 7/14 at 100.00 AA 1,970,221 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 2,339,740 3,250 6.375%, 10/01/25 - RAAI Insured 10/10 at 101.00 AA 3,719,657 1,500 Harris County Health Facilities Development Corporation, 8/11 at 100.00 AA- 1,608,255 Texas, Revenue Bonds, St. Luke's Episcopal Hospital, Series 2001A, 5.500%, 2/15/21 2,000 Harris County Health Facilities Development Corporation, 6/11 at 101.00 A 2,201,020 Texas, Hospital Revenue Bonds, Memorial Hermann Healthcare System, Series 2001A, 6.375%, 6/01/29 5,750 Midland County Hospital District, Texas, Hospital Revenue No Opt. Call BBB 4,072,093 Bonds, Series 1992, 0.000%, 6/01/11 2,000 North Central Texas Health Facilities Development 5/11 at 100.00 AA- 2,056,640 Corporation, Hospital Revenue Bonds, Baylor Healthcare System, Series 2001A, 5.125%, 5/15/29 1,760 Parker County Hospital District, Texas, Hospital Revenue 8/09 at 102.00 BBB- 1,821,002 Bonds, Campbell Health System, Series 1999, 6.250%, 8/15/19 2,000 Richardson Hospital Authority, Texas, Revenue Bonds, 12/13 at 100.00 BBB 2,104,020 Richardson Regional Medical Center, Series 2004, 5.875%, 12/01/24 1,050 Tarrant County Health Facilities Development Corporation, 11/08 at 101.00 A 1,088,724 Texas, Hospital Revenue Bonds, Adventist Health System - Sunbelt Obligated Group, Series 1998, 5.375%, 11/15/20 31 Nuveen Texas Quality Income Municipal Fund (NTX) (continued) Portfolio of INVESTMENTS January 31, 2005 (Unaudited) PRINCIPAL OPTIONAL CALL MARKET AMOUNT (000) DESCRIPTION(1) PROVISIONS* RATINGS** VALUE ------------------------------------------------------------------------------------------------------------------------------------ HEALTHCARE (continued) $ 3,500 Tarrant County Health Facilities Development Corporation, 11/10 at 101.00 A $ 3,914,995 Texas, Hospital Revenue Bonds, Adventist Health System - Sunbelt Obligated Group, Series 2000, 6.625%, 11/15/20 2,000 Tom Green County Health Facilities Development Corporation, 5/11 at 101.00 Baa3 2,171,480 Texas, Hospital Revenue Bonds, Shannon Health System Project, Series 2001, 6.750%, 5/15/21 1,000 Tyler Health Facilities Development Corporation, Texas, 7/12 at 100.00 Baa1 1,056,210 Hospital Revenue Bonds, Mother Frances Hospital Regional Healthcare Center, Series 2001, 6.000%, 7/01/31 ------------------------------------------------------------------------------------------------------------------------------------ HOUSING/MULTIFAMILY - 8.3% (5.7% 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 2,100,400 750 6.050%, 8/01/36 - MBIA Insured 8/11 at 102.00 Aaa 787,830 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 1,117,840 2,030 6.750%, 9/20/28 9/10 at 105.00 AAA 2,245,099 5,668 Houston Housing Finance Corporation, Texas, GNMA 9/11 at 105.00 Aaa 6,044,412 Collateralized Mortgage Multifamily Housing Revenue Bonds, RRG Apartments Project, Series 2001, 6.250%, 9/20/35 ------------------------------------------------------------------------------------------------------------------------------------ HOUSING/SINGLE FAMILY - 5.4% (3.7% OF TOTAL INVESTMENTS) 2,800 El Paso Housing Finance Corporation, Texas, GNMA 4/11 at 106.75 AAA 2,984,632 Collateralized Single Family Mortgage Revenue Bonds, Series 2001A-3, 6.180%, 4/01/33 205 Galveston Property Finance Authority Inc., Texas, Single 3/05 at 100.00 A3 205,588 Family Mortgage Revenue Bonds, Series 1991A, 8.500%, 9/01/11 200 Houston Housing Finance Corporation, Texas, Single Family 6/05 at 100.00 AAA 201,324 Mortgage Revenue Refunding Bonds, Series 1993A, 5.950%, 12/01/10 - FSA Insured 1,405 Texas Department of Housing, Single Family Mortgage 9/06 at 102.00 AAA 1,470,712 Revenue Bonds, Series 1996E, 6.000%, 9/01/17 - MBIA Insured 2,930 Texas Department of Housing and Community Affairs, 3/12 at 100.00 AAA 3,039,318 Single Family Mortgage Bonds, Series 2002B, 5.550%, 9/01/33 (Alternative Minimum Tax) - MBIA Insured 130 Victoria Housing Finance Corporation, Texas, FNMA No Opt. Call Aaa 130,589 Single Family Mortgage Revenue Refunding Bonds, Series 1995, 8.125%, 1/01/11 ------------------------------------------------------------------------------------------------------------------------------------ LONG-TERM CARE - 7.2% (5.0% 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- 3,497,852 5,000 5.250%, 11/15/28 11/08 at 101.00 A- 5,026,350 2,000 Tarrant County Health Facilities Development Corporation, 1/08 at 105.00 AAA 2,244,340 Texas, Tax-Exempt Mortgage Revenue Bonds, South Central Nursing Homes Inc., Series 1997A, 6.000%, 1/01/37 - MBIA Insured ------------------------------------------------------------------------------------------------------------------------------------ MATERIALS - 4.3% (3.0% OF TOTAL INVESTMENTS) 3,000 Cass County Industrial Development Corporation, Texas, 3/10 at 101.00 BBB 3,288,420 Environmental Improvement Revenue Bonds, International Paper Company Project, Series 2000A, 6.600%, 3/15/24 (Alternative Minimum Tax) 3,000 Guadalupe-Blanco River Authority, Texas, Sewage and Solid 4/06 at 102.00 AA- 3,168,690 Waste Disposal Facility Bonds, E.I. DuPont de Nemours and Company Project, Series 1996, 6.400%, 4/01/26 (Alternative Minimum Tax) ------------------------------------------------------------------------------------------------------------------------------------ TAX OBLIGATION/GENERAL - 31.6% (21.8% OF TOTAL INVESTMENTS) 4,130 Coppell Independent School District, Dallas County, 8/09 at 75.34 AAA 2,670,086 Texas, Unlimited Tax School Building and Refunding Bonds, Series 1992, 0.000%, 8/15/14 - MBIA Insured 2,595 Denton County, Texas, Permanent Improvement General 7/12 at 100.00 AA 2,752,750 Obligation Bonds, Series 2005, 5.000%, 7/15/25 1,450 Donna Independent School District, Hidalgo County, Texas, 2/11 at 100.00 AAA 1,662,744 Unlimited Tax School Building Bonds, Series 2000, 6.000%, 2/15/17 32 PRINCIPAL OPTIONAL CALL MARKET AMOUNT (000) DESCRIPTION(1) PROVISIONS* RATINGS** VALUE ------------------------------------------------------------------------------------------------------------------------------------ TAX OBLIGATION/GENERAL (continued) $ 1,750 El Paso County, Texas, Certificates of Obligation, Series 2001, 2/12 at 100.00 AAA $ 1,880,515 5.000%, 2/15/21 - FSA Insured 2,000 Harlingen Independent School District, Cameron County, 8/09 at 100.00 AAA 2,197,300 Texas, Unlimited Tax School Building Bonds, Series 1999, 5.650%, 8/15/29 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 2,695,850 2,235 5.000%, 2/15/21 - AMBAC Insured 2/13 at 100.00 AAA 2,401,955 1,500 Judson Independent School District, Bexar County, Texas, 2/11 at 100.00 Aaa 1,643,415 General Obligation Refunding Bonds, Series 2002, 5.250%, 2/01/21 2,600 Klein Independent School District, Harris County, Texas, 8/09 at 100.00 AAA 2,789,618 Unlimited Tax Schoolhouse Bonds, Series 1999A, 5.000%, 8/01/18 5,220 Leander Independent School District, Williamson and 8/09 at 46.74 AAA 2,046,919 Travis Counties, Texas, Unlimited Tax School Building and Refunding Bonds, Series 2000, 0.000%, 8/15/21 1,000 Mansfield Independent School District, Tarrant County, 2/14 at 100.00 AAA 1,080,330 Texas, General Obligation Bonds, Series 2004, 5.000%, 2/15/20 1,545 Montgomery County, Texas, General Obligation Refunding 9/07 at 72.39 AAA 1,007,773 Bonds, Series 1997, 0.000%, 3/01/14 - MBIA Insured 925 Northside Independent School District, Bexar County, 8/10 at 100.00 AAA 1,040,671 Texas, Unlimited Tax School Building and Refunding Bonds, Series 2000, 5.875%, 8/15/25 500 Puerto Rico, General Obligation and Public Improvement No Opt. Call A- 568,370 Bonds, Series 2001A, 5.500%, 7/01/29 1,825 Socorro Independent School District, El Paso County, Texas, 2/06 at 100.00 Aaa 1,884,568 General Obligation Bonds, Series 1996, 5.750%, 2/15/21 1,440 South Texas Community College District, General Obligation 8/12 at 100.00 AAA 1,625,299 Bonds, Series 2002, 5.500%, 8/15/17 - AMBAC Insured 1,250 Southside Independent School District, Bexar County, Texas, 8/14 at 100.00 Aaa 1,344,700 General Obligation Bonds, Series 2004A, 5.000%, 8/15/22 1,140 Sunnyvale School District, Texas, General Obligation Bonds, 2/14 at 100.00 AAA 1,239,522 Series 2004, 5.250%, 2/15/25 2,000 Texas, General Obligation Bonds, Water Financial Assistance 8/11 at 100.00 Aa1 2,190,960 Program, Series 2001, 5.250%, 8/01/23 1,500 Texas, General Obligation Refunding Bonds, Public Finance 10/12 at 100.00 Aa1 1,630,725 Authority, Series 2002, 5.000%, 10/01/18 1,795 United Independent School District, Webb County, Texas, 8/12 at 100.00 AAA 2,011,244 Unlimited Tax School Building Bonds, Series 2000, 5.375%, 8/15/18 5,290 Weslaco Independent School District, Hidalgo County, Texas, 2/10 at 100.00 Aaa 5,764,566 General Obligation School Building Bonds, Series 2000, 5.500%, 2/15/25 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 405,490 1,000 0.000%, 8/15/24 8/13 at 54.88 AAA 360,560 1,800 Williamson County, Texas, General Obligation Bonds, 2/12 at 100.00 AAA 2,018,088 Series 2002, 5.500%, 2/15/16 - FSA Insured ------------------------------------------------------------------------------------------------------------------------------------ TAX OBLIGATION/LIMITED - 14.0% (9.7% OF TOTAL INVESTMENTS) 4,500 Austin, Texas, Subordinate Lien Hotel Occupancy Tax Revenue 11/09 at 100.00 AAA 5,012,865 Refunding Bonds, Series 1999, 5.800%, 11/15/29 - AMBAC Insured 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 1,348,336 1,295 5.000%, 6/15/18 6/14 at 100.00 AA 1,409,595 1,260 5.000%, 6/15/19 6/14 at 100.00 AA 1,365,311 1,275 Copperas Cove, Texas, Certificates of Obligation, Series 2003, 8/12 at 100.00 AAA 1,361,279 5.000%, 8/15/23 - MBIA Insured 2,305 Corpus Christi, Texas, Combination Tax and Municipal Hotel 9/12 at 100.00 AAA 2,599,833 Occupancy Tax Revenue Certificates of Obligation, Series 2002, 5.500%, 9/01/21 - FSA Insured 2,250 Harris County-Houston Sports Authority, Texas, Senior Lien 11/11 at 100.00 AAA 2,408,715 Revenue Bonds, Series 2001G, 5.250%, 11/15/22 - MBIA Insured 1,000 Laredo, Texas, Sports Venue Sales Tax Revenue Bonds, 3/09 at 100.00 AAA 1,069,290 Series 2001, 5.300%, 3/15/26 - FGIC Insured 33 Nuveen Texas Quality Income Municipal Fund (NTX) (continued) Portfolio of INVESTMENTS January 31, 2005 (Unaudited) PRINCIPAL OPTIONAL CALL MARKET AMOUNT (000) DESCRIPTION(1) PROVISIONS* RATINGS** VALUE ------------------------------------------------------------------------------------------------------------------------------------ TAX OBLIGATION/LIMITED (continued) $ 1,255 Pasadena, Texas, Certificates of Obligation, Series 2002, 4/11 at 100.00 AAA $ 1,354,672 5.125%, 4/01/24 - FGIC Insured 2,685 San Antonio, Texas, Hotel Occupancy Tax Revenue Bonds, 8/06 at 102.00 AAA 2,857,968 Henry B. Gonzalez Convention Center Project, Series 1996, 5.700%, 8/15/26 - FGIC Insured ------------------------------------------------------------------------------------------------------------------------------------ TRANSPORTATION - 3.3% (2.3% OF TOTAL INVESTMENTS) 1,000 Austin, Texas, Airport System Prior Lien Revenue Bonds, 11/13 at 100.00 AAA 1,108,610 Series 2003, 5.250%, 11/15/16 - MBIA Insured 2,600 Dallas-Ft. Worth International Airport Facility Improvement 11/09 at 101.00 Caa2 1,646,320 Corporation, Texas, Revenue Bonds, American Airlines Inc., Series 1999, 6.375%, 5/01/35 (Alternative Minimum Tax) 2,000 Houston, Texas, Subordinate Lien Airport System Revenue 7/10 at 100.00 AAA 2,178,120 Bonds, Series 2000A, 5.625%, 7/01/30 (Alternative Minimum Tax) - FSA Insured ------------------------------------------------------------------------------------------------------------------------------------ U.S. GUARANTEED *** - 11.2% (7.7% OF TOTAL INVESTMENTS) 160 Abilene Housing Development Corporation, Texas, No Opt. Call N/R*** 171,947 Section 8 First Lien Revenue Bonds, Abilene East Apartments, Series 1978, 7.000%, 7/01/08 520 Puerto Rico, The Children's Trust Fund, Tobacco Settlement 7/10 at 100.00 AAA 560,414 Asset Backed Bonds, Series 2000, 5.750%, 7/01/20 (Pre-refunded to 7/01/10) 1,450 Galveston Industrial Development Corporation, Texas, Sales 9/05 at 100.00 AAA 1,480,653 Tax Revenue Bonds, Series 1995, 5.750%, 9/01/15 (Pre-refunded to 9/01/05) - AMBAC Insured 5,275 Houston, Texas, Junior Lien Water and Sewerage System 12/10 at 100.00 AAA 5,894,232 Revenue Refunding Bonds, Series 2000B, 5.250%, 12/01/30 (Pre-refunded to 12/01/10) - FGIC Insured 1,000 North Central Texas Health Facilities Development No Opt. Call AAA 1,182,120 Corporation, Hospital Revenue Bonds, Presbyterian Healthcare System, Series 1996B, 5.750%, 6/01/26 - MBIA Insured 1,075 Northside Independent School District, Bexar County, Texas, 8/10 at 100.00 AAA 1,231,327 Unlimited Tax School Building and Refunding Bonds, Series 2000, 5.875%, 8/15/25 (Pre-refunded to 8/15/10) 2,500 Retama Development Corporation, Texas, Special Facilities 12/17 at 100.00 AAA 3,376,925 Revenue Bonds, Retama Park Racetrack, Series 1993, 8.750%, 12/15/18 (Pre-refunded to 12/15/17) 1,895 San Antonio, Texas, Hotel Occupancy Tax Revenue Bonds, 8/06 at 102.00 AAA 2,027,082 Henry B. Gonzalez Convention Center Project, Series 1996, 5.700%, 8/15/26 (Pre-refunded to 8/15/06) - FGIC Insured 665 San Antonio, Texas, Water System Revenue Refunding Bonds, No Opt. Call AAA 758,965 Series 1992, 6.500%, 5/15/10 - MBIA Insured ------------------------------------------------------------------------------------------------------------------------------------ UTILITIES - 8.2% (5.7% OF TOTAL INVESTMENTS) 2,560 Brazos River Authority, Texas, Pollution Control Revenue 4/13 at 101.00 BBB 3,054,669 Refunding Bonds, TXU Electric Company Project, Series 1999C, 7.700%, 3/01/32 (Alternative Minimum Tax) 2,400 Brazos River Authority, Texas, Revenue Bonds, Reliant 4/09 at 101.00 BBB- 2,482,752 Energy Inc., Series 1999A, 5.375%, 4/01/19 2,000 Harris County Health Facilities Development Corporation, 2/10 at 100.00 AAA 2,188,320 Texas, Thermal Utility Revenue Bonds, TECO Project, Series 2000, 5.750%, 2/15/15 (Alternative Minimum Tax) - AMBAC Insured 1,500 Matagorda County Navigation District 1, Texas, Pollution 7/05 at 100.00 AAA 1,527,240 Control Revenue Refunding Bonds, Central Power and Light Company Project, Series 1993, 6.000%, 7/01/28 - MBIA Insured 1,000 Matagorda County Navigation District 1, Texas, Revenue 5/09 at 101.00 BBB- 1,012,890 Bonds, Reliant Energy Inc., Series 1999B, 5.950%, 5/01/30 (Alternative Minimum Tax) 1,750 San Antonio, Texas, Electric and Gas System Revenue 2/12 at 100.00 Aa1 1,945,265 Refunding Bonds, Series 2002, 5.375%, 2/01/20 ------------------------------------------------------------------------------------------------------------------------------------ WATER AND SEWER - 10.9% (7.5% 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 1,091,812 1,030 5.000%, 12/15/21 - FGIC Insured 12/14 at 100.00 AAA 1,115,469 3,000 Houston, Texas, First Lien Combined Utility System Revenue 5/14 at 100.00 AAA 3,304,290 Bonds, Series 2004A, 5.250%, 5/15/23 - FGIC Insured 3,500 Houston, Texas, Junior Lien Water and Sewerage System 12/11 at 100.00 AAA 3,953,740 Revenue Refunding Bonds, Series 2001A, 5.500%, 12/01/17 - FSA Insured 34 PRINCIPAL OPTIONAL CALL MARKET AMOUNT (000) DESCRIPTION(1) PROVISIONS* RATINGS** VALUE ------------------------------------------------------------------------------------------------------------------------------------ WATER AND SEWER (continued) 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 $ 1,807,277 1,760 5.000%, 8/15/23 - AMBAC Insured 8/14 at 100.00 AAA 1,887,582 1,260 Rowlett, Rockwall and Dallas Counties, Texas, Waterworks 3/14 at 100.00 AAA 1,350,670 and Sewerage System Revenue Bonds, Series 2004A, 5.000%, 3/01/22 - MBIA Insured 1,500 Texas Water Development Board, Senior Lien State Revolving 7/09 at 100.00 AAA 1,644,071 Fund Revenue Bonds, Series 1999A, 5.500%, 7/15/21 ------------------------------------------------------------------------------------------------------------------------------------ $ 208,748 Total Long-Term Investments (cost $199,916,477) - 144.8% 215,300,693 =============----------------------------------------------------------------------------------------------------------------------- Other Assets Less Liabilities - 1.6% 2,371,116 -------------------------------------------------------------------------------------------------------------------- Preferred Shares, at Liquidation Value - (46.4)% (69,000,000) -------------------------------------------------------------------------------------------------------------------- Net Assets Applicable to Common Shares - 100% $ 148,671,809 ====================================================================================================================
(1) All percentages shown in the Portfolio of Investments are based on net assets applicable to Common shares unless otherwise noted. * 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. ** Ratings: Using the higher of Standard & Poor's or Moody's rating. *** 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. N/R Investment is not rated. See accompanying notes to financial statements. 35 Statement of ASSETS AND LIABILITIES January 31, 2005 (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 market value (cost $88,790,839, $33,571,712, $52,124,847, $64,469,098, and $199,916,477, respectively) $94,812,517 $35,653,224 $55,845,706 $67,256,823 $215,300,693 Cash 80,006 250,482 672,231 37,541 -- Receivables: Interest 701,840 288,262 419,732 472,598 3,617,027 Investments sold -- -- -- -- 1,000,000 Other assets 1,804 1,852 3,585 8,631 2,977 ------------------------------------------------------------------------------------------------------------------------------------ Total assets 95,596,167 36,193,820 56,941,254 67,775,593 219,920,697 ------------------------------------------------------------------------------------------------------------------------------------ LIABILITIES Cash overdraft -- -- -- -- 2,065,322 Forward swaps, at value -- 73,274 176,689 285,284 -- Accrued expenses: Management fees 51,832 10,462 16,412 18,380 117,191 Other 48,098 8,111 11,210 7,891 50,555 Preferred share dividends payable 4,930 2,366 4,588 7,638 15,820 ------------------------------------------------------------------------------------------------------------------------------------ Total liabilities 104,860 94,213 208,899 319,193 2,248,888 ------------------------------------------------------------------------------------------------------------------------------------ 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 $65,491,307 $24,099,607 $38,232,355 $45,456,400 $148,671,809 ==================================================================================================================================== Common shares outstanding 4,455,066 1,544,931 2,422,341 3,067,243 9,477,520 ==================================================================================================================================== Net asset value per Common share outstanding (net assets applicable to Common shares, divided by Common shares outstanding) $ 14.70 $ 15.60 $ 15.78 $ 14.82 $ 15.69 ==================================================================================================================================== NET ASSETS APPLICABLE TO COMMON SHARES CONSIST OF: ------------------------------------------------------------------------------------------------------------------------------------ Common shares, $.01 par value per share $ 44,551 $ 15,449 $ 24,223 $ 30,672 $ 94,775 Paid-in surplus 61,943,896 21,846,926 34,310,263 43,241,324 134,328,306 Undistributed net investment income 190,816 231,565 169,078 90,558 1,346,540 Accumulated net realized gain (loss) from investments and forward swaps (2,709,634) (2,571) 184,621 (408,595) (2,482,028) Net unrealized appreciation (depreciation) of investments and forward swaps 6,021,678 2,008,238 3,544,170 2,502,441 15,384,216 ------------------------------------------------------------------------------------------------------------------------------------ Net assets applicable to Common shares $65,491,307 $24,099,607 $38,232,355 $45,456,400 $148,671,809 ==================================================================================================================================== Authorized shares: Common 200,000,000 Unlimited Unlimited Unlimited Unlimited Preferred 1,000,000 Unlimited Unlimited Unlimited Unlimited ====================================================================================================================================
See accompanying notes to financial statements. 36 Statement of OPERATIONS Six Months Ended January 31, 2005 (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 $2,312,826 $ 853,933 $1,327,736 $1,539,086 $5,604,508 ------------------------------------------------------------------------------------------------------------------------------------ EXPENSES Management fees 305,652 116,067 182,288 215,455 693,499 Preferred shares - auction fees 37,808 15,123 23,315 27,725 86,958 Preferred shares - dividend disbursing agent fees 5,042 5,042 5,042 5,042 10,081 Shareholders' servicing agent fees and expenses 2,963 201 224 98 7,678 Custodian's fees and expenses 13,418 5,900 9,389 8,395 24,213 Directors'/Trustees' fees and expenses 1,351 517 806 884 2,838 Professional fees 5,829 5,059 5,589 5,687 8,106 Shareholders' reports - printing and mailing expenses 7,185 2,265 3,509 4,904 12,610 Stock exchange listing fees 5,529 66 104 128 5,503 Investor relations expense 5,400 2,416 3,769 4,329 12,587 Other expenses 6,037 4,548 5,087 6,149 7,838 ------------------------------------------------------------------------------------------------------------------------------------ Total expenses before custodian fee credit and expense reimbursement 396,214 157,204 239,122 278,796 871,911 Custodian fee credit (5,655) (2,202) (1,778) (3,637) (11,316) Expense reimbursement -- (54,108) (84,979) (107,137) -- ------------------------------------------------------------------------------------------------------------------------------------ Net expenses 390,559 100,894 152,365 168,022 860,595 ------------------------------------------------------------------------------------------------------------------------------------ Net investment income 1,922,267 753,039 1,175,371 1,371,064 4,743,913 ------------------------------------------------------------------------------------------------------------------------------------ REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain from investments 282,644 17,430 234,239 28,867 273,015 Net realized gain (loss) from forward swaps -- (19,865) (49,915) (89,813) -- Change in net unrealized appreciation (depreciation) of investments 2,849,836 1,089,073 1,899,238 2,791,251 5,391,576 Change in net unrealized appreciation (depreciation) of forward swaps -- (73,274) (176,689) (285,284) -- ------------------------------------------------------------------------------------------------------------------------------------ Net realized and unrealized gain 3,132,480 1,013,364 1,906,873 2,445,021 5,664,591 ------------------------------------------------------------------------------------------------------------------------------------ DISTRIBUTIONS TO PREFERRED SHAREHOLDERS From net investment income (147,955) (57,707) (78,659) (109,175) (473,571) From accumulated net realized gains from investments -- (4,003) (19,342) -- -- ------------------------------------------------------------------------------------------------------------------------------------ Decrease in net assets applicable to Common shares from distributions to Preferred shareholders (147,955) (61,710) (98,001) (109,175) (473,571) ------------------------------------------------------------------------------------------------------------------------------------ Net increase in net assets applicable to Common shares from operations $4,906,792 $1,704,693 $2,984,243 $3,706,910 $9,934,933 ====================================================================================================================================
See accompanying notes to financial statements. 37 Statement of CHANGES IN NET ASSETS (Unaudited)
ARIZONA ARIZONA ARIZONA PREMIUM INCOME (NAZ) DIVIDEND ADVANTAGE (NFZ) DIVIDEND ADVANTAGE 2 (NKR) ---------------------------- ---------------------------- ----------------------------- SIX MONTHS SIX MONTHS SIX MONTHS ENDED YEAR ENDED ENDED YEAR ENDED ENDED YEAR ENDED 1/31/05 7/31/04 1/31/05 7/31/04 1/31/05 7/31/04 ------------------------------------------------------------------------------------------------------------------------------------ OPERATIONS Net investment income $ 1,922,267 $ 4,078,915 $ 753,039 $ 1,530,494 $ 1,175,371 $ 2,320,417 Net realized gain (loss) from investments 282,644 713,547 17,430 108,890 234,239 307,836 Net realized gain (loss) from forward swaps -- -- (19,865) -- (49,915) -- Change in net unrealized appreciation (depreciation) of investments 2,849,836 1,137,949 1,089,073 760,107 1,899,238 1,008,021 Change in net unrealized appreciation (depreciation) of forward swaps -- -- (73,274) -- (176,689) -- Distributions to Preferred Shareholders: From net investment income (147,955) (230,103) (57,707) (85,893) (78,659) (146,950) From accumulated net realized gains from investments -- -- (4,003) (4,168) (19,342) (9,227) ------------------------------------------------------------------------------------------------------------------------------------ Net increase in net assets applicable to Common shares from operations 4,906,792 5,700,308 1,704,693 2,309,430 2,984,243 3,480,097 ------------------------------------------------------------------------------------------------------------------------------------ DISTRIBUTIONS TO COMMON SHAREHOLDERS From net investment income (1,961,146) (4,076,294) (708,949) (1,410,436) (1,045,613) (2,091,535) From accumulated net realized gains from investments -- -- (67,355) (64,486) (288,186) (105,537) ------------------------------------------------------------------------------------------------------------------------------------ Decrease in net assets applicable to Common shares from distributions to Common shareholders (1,961,146) (4,076,294) (776,304) (1,474,922) (1,333,799) (2,197,072) ------------------------------------------------------------------------------------------------------------------------------------ CAPITAL SHARE TRANSACTIONS Net proceeds from Common shares issued to shareholders due to reinvestment of distributions 114,195 260,642 18,443 27,858 38,949 23,870 Preferred shares offering costs -- -- -- -- -- (1,409) ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in net assets applicable to Common shares from capital share transactions 114,195 260,642 18,443 27,858 38,949 22,461 ------------------------------------------------------------------------------------------------------------------------------------ Net increase in net assets applicable to Common shares 3,059,841 1,884,656 946,832 862,366 1,689,393 1,305,486 Net assets applicable to Common shares at the beginning of period 62,431,466 60,546,810 23,152,775 22,290,409 36,542,962 35,237,476 ------------------------------------------------------------------------------------------------------------------------------------ Net assets applicable to Common shares at the end of period $65,491,307 $62,431,466 $24,099,607 $23,152,775 $38,232,355 $36,542,962 ==================================================================================================================================== Undistributed net investment income at the end of period $ 190,816 $ 377,650 $ 231,565 $ 245,182 $ 169,078 $ 117,979 ====================================================================================================================================
See accompanying notes to financial statements. 38
ARIZONA TEXAS DIVIDEND ADVANTAGE 3 (NXE) QUALITY INCOME (NTX) ----------------------------- ---------------------------- SIX MONTHS SIX MONTHS ENDED YEAR ENDED ENDED YEAR ENDED 1/31/05 7/31/04 1/31/05 7/31/04 ------------------------------------------------------------------------------------------------------------------------------------ OPERATIONS Net investment income $ 1,371,064 $ 2,721,867 $ 4,743,913 $ 9,753,219 Net realized gain (loss) from investments 28,867 (276,088) 273,015 1,077,835 Net realized gain (loss) from forward swaps (89,813) -- -- -- Change in net unrealized appreciation (depreciation) of investments 2,791,251 1,955,972 5,391,576 4,038,575 Change in net unrealized appreciation (depreciation) of forward swaps (285,284) -- -- -- Distributions to Preferred Shareholders: From net investment income (109,175) (185,513) (473,571) (628,703) From accumulated net realized gains from investments -- -- -- -- ------------------------------------------------------------------------------------------------------------------------------------ Net increase in net assets applicable to Common shares from operations 3,706,910 4,216,238 9,934,933 14,240,926 ------------------------------------------------------------------------------------------------------------------------------------ DISTRIBUTIONS TO COMMON SHAREHOLDERS From net investment income (1,233,031) (2,465,996) (4,548,144) (9,093,044) From accumulated net realized gains from investments -- -- -- -- ------------------------------------------------------------------------------------------------------------------------------------ Decrease in net assets applicable to Common shares from distributions to Common shareholders (1,233,031) (2,465,996) (4,548,144) (9,093,044) ------------------------------------------------------------------------------------------------------------------------------------ CAPITAL SHARE TRANSACTIONS Net proceeds from Common shares issued to shareholders due to reinvestment of distributions -- 3,508 51,944 110,085 Preferred shares offering costs -- (18,271) -- -- ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in net assets applicable to Common shares from capital share transactions -- (14,763) 51,944 110,085 ------------------------------------------------------------------------------------------------------------------------------------ Net increase in net assets applicable to Common shares 2,473,879 1,735,479 5,438,733 5,257,967 Net assets applicable to Common shares at the beginning of period 42,982,521 41,247,042 143,233,076 137,975,109 ------------------------------------------------------------------------------------------------------------------------------------ Net assets applicable to Common shares at the end of period $45,456,400 $42,982,521 $148,671,809 $143,233,076 ==================================================================================================================================== Undistributed net investment income at the end of period $ 90,558 $ 61,700 $ 1,346,540 $ 1,624,342 ====================================================================================================================================
See accompanying notes to financial statements. 39 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 designated state income taxes, where applicable, by investing primarily in a diversified portfolio of municipal obligations issued by state and local government authorities within a single state. 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 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 derivative investment each Fund may use a market quote provided by a major broker/dealer in such investments. If it is determined that market prices for an investment are 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 securities are valued at amortized cost, which approximates market value. Securities Transactions Securities transactions are recorded on a trade date basis. Realized gains and losses from transactions are determined on the specific identification method. Securities purchased on a when-issued or delayed delivery basis may have extended settlement periods. Any securities so purchased are subject to market fluctuation during this period. The Funds have instructed the custodian to segregate assets with a current value at least equal to the amount of the when-issued and delayed delivery purchase commitments. At January 31, 2005, there were no such outstanding purchase commitments in any of the Funds. Investment Income Interest income, which includes the amortization of premiums and accretion of discounts for financial reporting purposes, is recorded on an accrual basis. Investment income also includes paydown gains and losses, if any. Income Taxes Each Fund is a separate taxpayer for federal income tax purposes. Each Fund intends to distribute substantially all 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 state income taxes, where applicable, 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. 40 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 on each Series is determined every seven days, pursuant to a dutch auction process overseen by the auction agent, and is payable weekly 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 may 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 amount of the payment obligation is based on the notional amount of the forward swap contract. 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 does not involve the delivery of securities or other underlying assets or principal, but rather is settled in cash. 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 pre-determined threshold amount. 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, its 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. 41 Notes to FINANCIAL STATEMENTS (Unaudited) (continued) 2. FUND SHARES Transactions in Common shares were as follows:
ARIZONA PREMIUM ARIZONA DIVIDEND ARIZONA DIVIDEND INCOME (NAZ) ADVANTAGE (NFZ) ADVANTAGE 2 (NKR) ------------------------ ------------------------ ------------------------ SIX MONTHS SIX MONTHS SIX MONTHS ENDED YEAR ENDED ENDED YEAR ENDED ENDED YEAR ENDED 1/31/05 7/31/04 1/31/05 7/31/04 1/31/05 7/31/04 --------------------------------------------------------------------------------------------------------- Common shares issued to shareholders due to reinvestment of distributions 7,236 16,782 1,172 1,617 2,463 1,607 ========================================================================================================= ARIZONA DIVIDEND TEXAS QUALITY ADVANTAGE 3 (NXE) INCOME (NTX) ------------------------ ------------------------ SIX MONTHS SIX MONTHS ENDED YEAR ENDED ENDED YEAR ENDED 1/31/05 7/31/04 1/31/05 7/31/04 --------------------------------------------------------------------------------------------------------- Common shares issued to shareholders due to reinvestment of distributions -- 243 3,329 7,303 =========================================================================================================
3. SECURITIES TRANSACTIONS Purchases and sales (including maturities) of investments in long-term municipal securities during the six months ended January 31, 2005, 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 $8,392,468 $1,510,065 $3,448,912 $3,881,680 $14,104,643 Sales and maturities 8,215,735 1,434,841 3,985,359 3,406,610 11,273,500 =============================================================================================================
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 on investments, timing differences in recognizing income on taxable market discount securities and timing differences in recognizing certain gains and losses on security transactions. At January 31, 2005, 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 $88,774,400 $33,567,131 $52,124,059 $64,467,930 $199,826,065 ============================================================================================================
42 Gross unrealized appreciation and gross unrealized depreciation of investments at January 31, 2005, 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 $6,271,541 $2,093,851 $3,747,140 $2,788,893 $16,339,075 Depreciation (233,424) (7,758) (25,493) -- (864,447) ------------------------------------------------------------------------------------------------------------ Net unrealized appreciation of investments $6,038,117 $2,086,093 $3,721,647 $2,788,893 $15,474,628 ============================================================================================================
The tax components of undistributed net investment income and net realized gains at July 31, 2004, 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 * $704,535 $360,168 $292,499 $266,693 $2,277,128 Undistributed net ordinary income ** -- -- -- 1,432 14,741 Undistributed net long-term capital gains -- 71,222 307,825 -- -- =========================================================================================================
* Undistributed net tax exempt income (on a tax basis) has not been reduced for the dividend declared on July 1, 2004, paid on August 2, 2004. ** 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, 2004, 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 $4,307,222 $1,494,232 $2,236,394 $2,650,674 $9,723,403 Distributions from net ordinary income ** -- 68,654 110,761 -- -- Distributions from net long-term capital gains -- -- 5,257 -- -- ===========================================================================================================
** Net ordinary income consists of taxable market discount income and net short-term capital gains, if any. At July 31, 2004, 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: 2010 $ 2,164 $-- $-- 2011 1,436,486 -- 855,431 2012 1,553,628 205,820 1,901,823 --------------------------------------------------------------------------------------------------------- Total $2,992,278 $205,820 $2,757,254 =========================================================================================================
Arizona Dividend Advantage 3 (NXE) elected to defer net realized losses from investments incurred from November 1, 2003 through July 31, 2004 ("post-October losses"), in accordance with Federal income tax regulations. Post-October losses of $142,044 were treated as having arisen on the first day of the current fiscal year. 43 Notes to FINANCIAL STATEMENTS (Unaudited) (continued) 5. MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES Effective January 1, 2005, Nuveen Advisory Corp. ("NAC"), the Funds' previous Adviser, and its affiliate, Nuveen Institutional Advisory Corp. ("NIAC"), were merged into Nuveen Asset Management ("NAM"), each wholly owned subsidiaries of Nuveen Investments, Inc. ("Nuveen"). As a result of the merger, NAM is now the Adviser to all funds previously advised by either NAC or NIAC. As approved by the Board of Trustees, effective August 1, 2004, a complex-wide management fee structure was adopted for all funds sponsored by the Adviser, or its predecessor, and its affiliates. This fee structure separates each fund's management fee into two components - a complex-level component, based on the aggregate amount of all fund assets managed by the Adviser and its affiliates, 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 and its affiliates. Under no circumstances will this pricing structure result in a fund paying management fees at a rate higher than would otherwise have been applicable had the complex-wide management fee structure not been implemented. As a consequence of this new management fee structure, the funds' effective management fees were reduced by approximately .009% as of February 28, 2005. Effective August 1, 2004, the annual fund-level fee, payable monthly, for each of the Funds is based upon the average daily net assets (including net assets attributable to Preferred shares) of each Fund as follows: AVERAGE DAILY NET ASSETS ARIZONA PREMIUM INCOME (NAZ) (INCLUDING NET ASSETS TEXAS QUALITY INCOME (NTX) ATTRIBUTABLE TOPREFERRED 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) AVERAGE DAILY NET ASSETS ARIZONA DIVIDEND ADVANTAGE 2 (NKR) (INCLUDING NET ASSETS ARIZONA DIVIDEND ADVANTAGE 3 (NXE) ATTRIBUTABLE TOPREFERRED 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 ================================================================================ 44 Effective August 1, 2004, 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 follows: 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. Each Fund paid through July 31, 2004, an annual management fee, payable monthly, at the rates set forth below, which were based upon the average daily net assets (including net assets attributable to Preferred shares) of each Fund as follows: AVERAGE DAILY NET ASSETS ARIZONA PREMIUM INCOME (NAZ) (INCLUDING NET ASSETS TEXAS QUALITY INCOME (NTX) ATTRIBUTABLE TOPREFERRED SHARES) MANAGEMENT FEE RATE -------------------------------------------------------------------------------- For the first $125 million .6500% For the next $125 million .6375 For the next $250 million .6250 For the next $500 million .6125 For the next $1 billion .6000 For the next $3 billion .5875 For net assets over $5 billion .5750 ================================================================================ ARIZONA DIVIDEND ADVANTAGE (NFZ) AVERAGE DAILY NET ASSETS ARIZONA DIVIDEND ADVANTAGE 2 (NKR) (INCLUDING NET ASSETS ARIZONA DIVIDEND ADVANTAGE 3 (NXE) ATTRIBUTABLE TOPREFERRED SHARES) MANAGEMENT FEE RATE -------------------------------------------------------------------------------- For the first $125 million .6500% For the next $125 million .6375 For the next $250 million .6250 For the next $500 million .6125 For the next $1 billion .6000 For net assets over $2 billion .5750 ================================================================================ The management fee compensates the Adviser for overall investment advisory and administrative services and general office facilities. The Funds pay no compensation directly to those of its Directors/Trustees who are affiliated with the Adviser or to their officers, all of whom receive remuneration for their services to the Funds from the Adviser 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. 45 Notes to FINANCIAL STATEMENTS (Unaudited) (continued) 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. 46 6. SUBSEQUENT EVENTS Distributions to Common Shareholders The Funds declared Common share dividend distributions from their tax-exempt net investment income which were paid on March 1, 2005, to shareholders of record on February 15, 2005, 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 $.0710 $.0765 $.0720 $.0670 $.0800 ==========================================================================================================
Announcement Regarding Parent Company of Adviser Recently, The St. Paul Travelers Companies, Inc. announced that it intended to explore strategic alternatives to divest its equity stake in Nuveen. This divestiture could take the form of a sale by The St. Paul Travelers Companies, Inc. of its interest in Nuveen to another party or the form of the sale of its interest to the public in a registered, broadly disseminated offering. Any resulting divestiture could be deemed to be an "assignment" (as defined in the 1940 Act) of the investment management agreement between the Fund and NAM and the investment sub-advisory agreement between NAM and Gateway, which would result in the automatic termination of each agreement. The Board of Directors/Trustees thereupon may consider both an interim investment management agreement and interim investment sub-advisory agreement (as permitted under the 1940 Act) and new ongoing investment management and investment sub-advisory agreements. If approved by the Board, the new ongoing agreements would be presented to the Funds' shareholders for approval, and would take effect upon such approval. There can be no assurance that these approvals will be obtained. 47 Financial HIGHLIGHTS (Unaudited) Selected data for a Common share outstanding throughout each period:
Investment Operations Less Distributions ----------------------------------------------------------------- ------------------------------- Distributions Distributions from Net from Net Beginning Investment Capital Investment Capital Common Net Income to Gains to Income to Gains to Share Net Realized/ Preferred Preferred Common Common Net Asset Investment Unrealized Share- Share- Share- Share- Value Income Gain (Loss) holders+ holders+ Total holders holders Total ==================================================================================================================================== ARIZONA PREMIUM INCOME (NAZ) ------------------------------------------------------------------------------------------------------------------------------------ Year Ended 7/31: 2005(d) $14.04 $ .43 $ .70 $(.03) $ -- $1.10 $ (.44) $ -- $ (.44) 2004 13.66 .92 .43 (.05) -- 1.30 (.92) -- (.92) 2003 14.25 .97 (.57) (.07) -- .33 (.92) -- (.92) 2002 14.77 1.07 (.57) (.09) (.01) .40 (.88) (.04) (.92) 2001 14.25 1.09 .50 (.23) -- 1.36 (.83) (.01) (.84) 2000 14.90 1.06 (.61) (.25) -- .20 (.85) -- (.85) ARIZONA DIVIDEND ADVANTAGE (NFZ) ------------------------------------------------------------------------------------------------------------------------------------ Year Ended 7/31: 2005(d) 15.00 .49 .65 (.04) -- 1.10 (.46) (.04) (.50) 2004 14.45 .99 .57 (.06) -- 1.50 (.91) (.04) (.95) 2003 14.81 1.00 (.38) (.07) (.01) .54 (.88) (.04) (.92) 2002 14.37 1.04 .36 (.11) -- 1.29 (.84) (.01) (.85) 2001(a) 14.33 .44 .23 (.08) -- .59 (.35) -- (.35) ARIZONA DIVIDEND ADVANTAGE 2 (NKR) ------------------------------------------------------------------------------------------------------------------------------------ Year Ended 7/31: 2005(d) 15.10 .49 .78 (.03) (.01) 1.23 (.43) (.12) (.55) 2004 14.57 .96 .53 (.06) -- 1.43 (.86) (.04) (.90) 2003 14.88 .96 (.31) (.08) -- .57 (.86) (.01) (.87) 2002(b) 14.33 .24 .71 (.02) -- .93 (.22) -- (.22) ARIZONA DIVIDEND ADVANTAGE 3 (NXE) ------------------------------------------------------------------------------------------------------------------------------------ Year Ended 7/31: 2005(d) 14.01 .45 .80 (.04) -- 1.21 (.40) -- (.40) 2004 13.45 .89 .54 (.06) -- 1.37 (.80) -- (.80) 2003(c) 14.33 .66 (.67) (.05) -- (.06) (.61) -- (.61) TEXAS QUALITY INCOME (NTX) ------------------------------------------------------------------------------------------------------------------------------------ Year Ended 7/31: 2005(d) 15.12 .50 .60 (.05) -- 1.05 (.48) -- (.48) 2004 14.57 1.03 .55 (.07) -- 1.51 (.96) -- (.96) 2003 15.14 1.05 (.58) (.08) -- .39 (.95) (.01) (.96) 2002 15.16 1.11 (.02) (.10) (.02) .97 (.92) (.07) (.99) 2001 14.26 1.16 .88 (.27) -- 1.77 (.87) -- (.87) 2000 15.13 1.16 (.74) (.27) (.02) .13 (.91) (.09) (1.00) ==================================================================================================================================== Total Returns ---------------------- Based Offering on Costs and Ending Common Preferred Common Based Share Share Share Ending on Net Underwriting Net Asset Market Market Asset Discounts Value Value Value** Value** =========================================================================================== ARIZONA PREMIUM INCOME (NAZ) ------------------------------------------------------------------------------------------- Year Ended 7/31: 2005(d) $ -- $14.70 $15.8200 6.50% 7.93% 2004 -- 14.04 15.2700 7.97 9.66 2003 -- 13.66 15.0000 (5.98) 2.21 2002 -- 14.25 16.9000 9.63 2.88 2001 -- 14.77 16.3200 17.77 9.74 2000 -- 14.25 14.6250 (8.80) 1.61 ARIZONA DIVIDEND ADVANTAGE (NFZ) ------------------------------------------------------------------------------------------- Year Ended 7/31: 2005(d) -- 15.60 16.6000 11.25 7.44 2004 -- 15.00 15.4000 7.05 10.56 2003 .02 14.45 15.3000 3.06 3.67 2002 -- 14.81 15.7500 6.38 9.32 2001(a) (.20) 14.37 15.6500 6.76 2.81 ARIZONA DIVIDEND ADVANTAGE 2 (NKR) ------------------------------------------------------------------------------------------- Year Ended 7/31: 2005(d) -- 15.78 15.8500 10.76 8.25 2004 -- 15.10 14.8200 9.46 9.98 2003 (.01) 14.57 14.4000 (3.53) 3.67 2002(b) (.16) 14.88 15.8000 6.81 5.38 ARIZONA DIVIDEND ADVANTAGE 3 (NXE) ------------------------------------------------------------------------------------------- Year Ended 7/31: 2005(d) -- 14.82 14.6800 13.54 8.74 2004 (.01) 14.01 13.3000 1.01 10.25 2003(c) (.21) 13.45 13.9700 (2.76) (2.05) TEXAS QUALITY INCOME (NTX) ------------------------------------------------------------------------------------------- Year Ended 7/31: 2005(d) -- 15.69 15.2700 7.99 7.03 2004 -- 15.12 14.5900 5.87 10.51 2003 -- 14.57 14.7100 4.14 2.54 2002 -- 15.14 15.0700 9.29 6.61 2001 -- 15.16 14.7300 21.16 12.74 2000 -- 14.26 12.9375 (7.93) 1.15 =========================================================================================== Ratios/Supplemental Data --------------------------------------------------------------------------------------------- Before Credit/Reimbursement After Credit/Reimbursement*** ---------------------------- ------------------------------- Ratio of Net Ratio of Net Ratio of Investment Ratio of Investment Ending Expenses Income to Expenses Income to Net to Average Average to Average Average Assets Net Assets Net Assets Net Assets Net Assets Applicable Applicable Applicable Applicable Applicable Portfolio to Common to Common to Common to Common to Common Turnover Shares (000) Shares++ Shares++ Shares++ Shares++ Rate ====================================================================================================================== ARIZONA PREMIUM INCOME (NAZ) ---------------------------------------------------------------------------------------------------------------------- Year Ended 7/31: 2005(d) $ 65,491 1.22%* 5.92%* 1.21%* 5.94%* 9% 2004 62,431 1.22 6.49 1.21 6.50 26 2003 60,547 1.25 6.81 1.24 6.82 17 2002 62,876 1.28 7.45 1.26 7.47 19 2001 64,859 1.28 7.47 1.27 7.48 18 2000 62,287 1.26 7.58 1.25 7.59 33 ARIZONA DIVIDEND ADVANTAGE (NFZ) ---------------------------------------------------------------------------------------------------------------------- Year Ended 7/31: 2005(d) 24,100 1.31* 5.81* .84* 6.28* 4 2004 23,153 1.30 6.10 .83 6.57 24 2003 22,290 1.35 6.11 .91 6.55 20 2002 22,791 1.41 6.72 .93 7.20 40 2001(a) 22,072 1.43* 5.80* .95* 6.28* 21 ARIZONA DIVIDEND ADVANTAGE 2 (NKR) ---------------------------------------------------------------------------------------------------------------------- Year Ended 7/31: 2005(d) 38,232 1.26* 5.73* .80* 6.18* 6 2004 36,543 1.27 5.83 .80 6.30 14 2003 35,237 1.27 5.78 .82 6.23 4 2002(b) 35,913 1.19* 4.43* .77* 4.85* 1 ARIZONA DIVIDEND ADVANTAGE 3 (NXE) ---------------------------------------------------------------------------------------------------------------------- Year Ended 7/31: 2005(d) 45,456 1.24* 5.63* .75* 6.12* 5 2004 42,983 1.25 5.80 .76 6.29 22 2003(c) 41,247 1.19* 5.05* .73* 5.52* 16 TEXAS QUALITY INCOME (NTX) ---------------------------------------------------------------------------------------------------------------------- Year Ended 7/31: 2005(d) 148,672 1.18* 6.41* 1.16* 6.42* 5 2004 143,233 1.18 6.77 1.18 6.77 16 2003 137,975 1.20 6.93 1.19 6.94 12 2002 143,305 1.23 7.40 1.22 7.42 22 2001 143,127 1.21 7.87 1.19 7.88 24 2000 134,637 1.27 8.18 1.26 8.19 32 ====================================================================================================================== 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: 2005(d) $30,000 $25,000 $79,576 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 2000 30,000 25,000 76,906 ARIZONA DIVIDEND ADVANTAGE (NFZ) ---------------------------------------------------------------- Year Ended 7/31: 2005(d) 12,000 25,000 75,208 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: 2005(d) 18,500 25,000 76,665 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: 2005(d) 22,000 25,000 76,655 2004 22,000 25,000 73,844 2003(c) 22,000 25,000 71,872 TEXAS QUALITY INCOME (NTX) ---------------------------------------------------------------- Year Ended 7/31: 2005(d) 69,000 25,000 78,867 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 2000 69,000 25,000 73,782 ================================================================
* Annualized. ** Total Investment 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, 2005. 48-49 See accompanying notes to financial statements. Reinvest Automatically EASILY AND CONVENIENTLY Sidebar text: NUVEEN MAKES REINVESTING EASY. A PHONE CALL IS ALL IT TAKES TO SET UP YOUR REINVESTMENT ACCOUNT. NUVEEN CLOSED-END EXCHANGE-TRADED FUNDS DIVIDEND REINVESTMENT PLAN Your Nuveen Closed-End Exchange-Traded Fund allows you to conveniently reinvest dividends and/or capital gains distributions in additional fund shares. By choosing to reinvest, you'll be able to invest money regularly and automatically, and watch your investment grow through the power of tax-free compounding. Just like dividends or distributions in cash, there may be times when income or capital gains taxes may be payable on dividends or distributions that are reinvested. It is important to note that an automatic reinvestment plan does not ensure a profit, nor does it protect you against loss in a declining market. EASY AND CONVENIENT To make recordkeeping easy and convenient, each month you'll receive a statement showing your total dividends and distributions, the date of investment, the shares acquired and the price per share, and the total number of shares you own. HOW SHARES ARE PURCHASED The shares you acquire by reinvesting will either be purchased on the open market or newly issued by the Fund. If the shares are trading at or above net asset value at the time of valuation, the Fund will issue new shares at the then-current market price. If the shares are trading at less than net asset value, shares for your account will be purchased on the open market. Dividends and distributions received to purchase shares in the open market will normally be invested shortly after the dividend payment date. No interest will be paid on dividends and distributions awaiting reinvestment. Because the market price of 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 Effective Jan. 1, 2005, the asset management services and operations of Nuveen Advisory Corp. (NAC) and Nuveen Institutional Advisory Corp (NIAC) became part of Nuveen Asset Management (NAM). This internal consolidation is intended to simplify the delivery of services to the investment management clients of Nuveen Investments. It does not affect the investment objectives or portfolio management of any Fund. QUARTERLY PORTFOLIO OF INVESTMENTS AND PROXY VOTING Each Fund's (i) quarterly portfolio of investments, (ii) information regarding how the Funds voted proxies relating to portfolio securities held during the most recent 12-month period ended June 30, 2004, 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 Reference 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 sensitivity of a bond or bond Fund's value to changes when interest rates change. Generally, the longer a bond or Fund's duration, the more the price of the bond or Fund will change as interest rates change. Leverage-adjusted duration takes into account the leveraging process for a Fund and therefore is 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 Boston, MA TRANSFER AGENT AND SHAREHOLDER SERVICES State Street Bank & Trust Nuveen Funds P.O. Box 43071 Providence, RI 02940-3071 (800) 257-8787 LEGAL COUNSEL Chapman and Cutler LLP Chicago, IL INDEPENDENT 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. 52 Nuveen Investments: SERVING Investors For GENERATIONS Photo of: 2 women looking at a photo album. 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 $115 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. o Share prices Learn more o Fund details about Nuveen Funds at o Daily financial news WWW.NUVEEN.COM/ETF o Investor education o Interactive planning tools Logo: NUVEEN Investments ESA-A-0105D 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 Schedule I 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 Premium Income Municipal Fund, Inc. ----------------------------------------------------------- By (Signature and Title)* /s/ Jessica R. Droeger ---------------------------------------------- Jessica R. Droeger Vice President and Secretary Date: April 8, 2005 ------------------------------------------------------------------- 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 8, 2005 ------------------------------------------------------------------- By (Signature and Title)* /s/ Stephen D. Foy ---------------------------------------------- Stephen D. Foy Vice President and Controller (principal financial officer) Date: April 8, 2005 ------------------------------------------------------------------- * Print the name and title of each signing officer under his or her signature.