-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Wk46UdYhFYI+B60TZxyM5dpRKhbRlDyUuFRbNFlBqze2MIi/vqjIDUHCr34xfKfa 8tZmHnZSzu8hfxddonYvnw== 0000891804-07-001009.txt : 20070409 0000891804-07-001009.hdr.sgml : 20070409 20070409091627 ACCESSION NUMBER: 0000891804-07-001009 CONFORMED SUBMISSION TYPE: N-CSRS PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20070131 FILED AS OF DATE: 20070409 DATE AS OF CHANGE: 20070409 EFFECTIVENESS DATE: 20070409 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NUVEEN ARIZONA PREMIUM INCOME MUNICIPAL FUND INC CENTRAL INDEX KEY: 0000892992 IRS NUMBER: 363847197 STATE OF INCORPORATION: MN FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: N-CSRS SEC ACT: 1940 Act SEC FILE NUMBER: 811-07278 FILM NUMBER: 07755121 BUSINESS ADDRESS: STREET 1: 333 W WACKER DR CITY: CHICAGO STATE: IL ZIP: 60606 BUSINESS PHONE: 3129178200 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, 2007 ------------------ 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, 2007 Nuveen Investments Municipal Closed-End 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: Woman and man at the beach. Photo of: A child. 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: Woman Photo of: Man and child 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 of: Timothy R. Schwertfeger Timothy R. Schwertfeger Chairman of the Board Chairman's LETTER TO SHAREHOLDERS Once again, I am pleased to report that over the six-month period covered by this report your Fund continued to provide you with attractive monthly tax-free income. For more details about the management strategy and performance of your Fund, please read the Portfolio Managers' Comments, the Dividend and Share Price Information, and the Performance Overview sections of this report. For some time, I've used these letters to remind you that municipal bonds can be an important building block in a well balanced investment portfolio. In addition to providing attractive tax-free monthly income, a municipal bond investment like your Fund may help you achieve and benefit from greater portfolio diversification. Portfolio diversification is a recognized way to try to reduce some of the risk that comes with investing. For more information about this important investment strategy, I encourage you to contact your personal financial advisor. "IN ADDITION TO PROVIDING ATTRACTIVE TAX-FREE MONTHLY INCOME, A MUNICIPAL BOND INVESTMENT LIKE YOUR FUND MAY HELP YOU ACHIEVE AND BENEFIT FROM GREATER PORTFOLIO DIVERSIFICATION." We also are pleased to be able to offer you a choice concerning how you receive your shareholder reports and other Fund information. As an alternative to mailed copies, you can sign up to receive future Fund reports and other Fund information by e-mail and the Internet. The inside front cover of this report contains information on how you can sign up. We are grateful that you have chosen us as a partner as you pursue your financial goals, and we look forward to continuing to earn your trust in the months and years ahead. At Nuveen Investments, our mission continues to be to assist you and your financial advisor by offering investment services and products that can help you to secure your financial objectives. Sincerely, /s/ Timothy R. Schwertfeger Timothy R. Schwertfeger Chairman of the Board March 15, 2007 Nuveen Investments Municipal Closed-End Funds (NAZ, NFZ, NKR, NXE, NTX) Portfolio Managers' COMMENTS Portfolio managers Scott Romans and Cathryn Steeves review key investment strategies and the six-month performance of these five Nuveen Funds. Scott, who joined Nuveen in 2000, has managed the Arizona Funds since 2003. Cathryn, who has been with Nuveen since 1996, assumed portfolio management responsibility for NTX in 2004. WHAT KEY STRATEGIES WERE USED TO MANAGE THE ARIZONA AND TEXAS FUNDS DURING THIS REPORTING PERIOD? During this six-month period, we saw very little change in short-term interest rates, while longer-term rates continued to decline, resulting in further flattening of the yield curve. In this environment, we continued to emphasize a disciplined approach to duration1 management and yield curve positioning. As part of this approach, our purchases for the Funds' portfolios focused mainly on attractively priced bonds in the 15-year to 20-year part of the yield curve for the Arizona Funds and in the 25-year to 30-year range for NTX. We believed that, in those states, bonds across these parts of the curve generally offered better value and reward opportunities more commensurate with their risk levels. To help us maintain the Funds' durations within our preferred strategic range, we also selectively sold holdings with shorter durations, including pre-refunded bonds and bonds priced to short call dates, in all of the Funds. We also continued to emphasize maintaining the Funds' weightings of lower credit quality bonds. As credit spreads continued to narrow during this period, we generally saw fewer interesting lower-rated credit offerings in the Texas market. However, Texas's status as the second largest state issuer of municipal debt (behind California) meant that we were still able to find opportunities to add lower-rated bonds, including a BBB rated long-term care credit, to NTX. At the same time, Arizona's rapid population growth and resulting infrastructure needs provided a number of value opportunities in the lower-rated and non-rated sectors. During this period, we added four new positions in community development district bonds to NFZ, NKR, and NXE. The relative newness of this type of credit in the Arizona market, plus the state's continued growth, made these bonds attractive value prospects. Among the other lower-rated credits we purchased during this period were hospital bonds, increasing the exposure of all four Funds to the lower credit quality categories. 1 Duration is a measure of a bond's price sensitivity as interest rates change, with longer duration bonds displaying more sensitivity to these changes than bonds with shorter durations. 4 Apart from credit, we also continued to find value in single family housing bonds, which were added to all of the Arizona Funds. During this period, we also purchased inverse floating rate trusts, a type of derivative financial instrument, in all of the Funds. The inverse floaters had the benefit of increasing the Funds' distributable income and bringing their durations closer to our preferred strategic target. In past shareholder reports, we have discussed the use of hedging as part of our duration management strategies. Going into this reporting period, NXE used forward interest rate swaps to reduce net asset value (NAV) volatility. We believed this strategy had been effective, and we removed the hedge in August 2006. HOW DID THE FUNDS PERFORM? Individual results for these Arizona and Texas Funds, as well as relevant index and peer group information, are presented in the accompanying table. TOTAL RETURNS ON NET ASSET VALUE* For periods ended 1/31/07 ARIZONA FUNDS 6-MONTH 1-YEAR 5-YEAR 10-YEAR - -------------------------------------------------------------------------------- NAZ 3.30% 4.00% 5.90% 5.57% - -------------------------------------------------------------------------------- NFZ 3.51% 4.48% 7.01% NA - -------------------------------------------------------------------------------- NKR 3.27% 4.34% NA NA - -------------------------------------------------------------------------------- NXE 3.48% 4.83% NA NA - -------------------------------------------------------------------------------- TEXAS FUND - -------------------------------------------------------------------------------- NTX 3.47% 4.67% 6.56% 6.24% - -------------------------------------------------------------------------------- Lehman Brothers Municipal Bond Index2 3.06% 4.29% 5.11% 5.71% - -------------------------------------------------------------------------------- Lipper Other States Municipal Debt Funds Average3 3.75% 4.98% 6.96% 6.57% - -------------------------------------------------------------------------------- *Six-month returns are cumulative; returns for one year, five years, and ten years are annualized. Past performance is not predictive of future results. Current performance may be higher or lower than the data shown. Returns do not reflect the deduction of taxes that shareholders may have to pay on Fund distributions or upon the sale of Fund shares. For additional information, see the individual Performance Overview for your Fund in this report. 2 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 Brothers Municipal Bond Index do not reflect any expenses. 3 The Lipper Other State Municipal Debt Funds category average is calculated using the returns of all closed-end funds in this category for each period as follows: 6 months, 46; 1 year, 46; 5 years, 27; and 10 years, 18. Fund and Lipper returns assume reinvestment of dividends. 5 For the six months ended January 31, 2007, the cumulative returns on NAV for all of the Funds outperformed the return on the Lehman Brothers Municipal Bond Index. All five of these Funds lagged the average return for the Lipper Other States peer group. Shareholders should note that the performance of the Lipper Other States category represents the overall average of returns for funds from 10 different states with a wide variety of municipal market conditions, making direct comparisons less meaningful. Factors that influenced the Funds' returns during this period included duration management, allocations to lower-rated credits (or credit risk), sector weightings, advance refunding activity4 and the use of financial leverage. As the yield curve continued to flatten over the course of this period, bonds with shorter maturities generally underperformed longer bonds. Overall, NTX was strategically well positioned in terms of duration, with limited exposure to the shortest maturities and good exposure to those parts of the yield curve that performed well during this period. However, the durations of all four of the Arizona Funds, particularly those of NAZ and NKR, were shorter than our preferred strategic target, which meant that these Funds were not able to capture as much performance as funds with longer durations. As previously mentioned, we worked to address this situation by purchasing inverse floaters in all of these Funds during this period. With bonds rated BBB or lower and non-rated bonds generally outperforming other credit quality sectors during this period, all of the Funds benefited from their weightings in lower-quality credits. The performance of this sector was largely the result of investor demand for the higher yields typically associated with lower-rated bonds, which drove up their value. Among the lower-rated holdings making contributions to the Funds' returns for this period were health care (including hospitals) credits and industrial development revenue bonds, which ranked as the top performing revenue sectors in the Lehman Brothers Municipal Bond Index. While lower-rated tobacco bonds also performed well during 4 Advance refundings, also known as pre-refundings or refinancings, occur when an issuer sells new bonds and uses the proceeds to fund principal and interest payments of older existing bonds. This process often results in lower borrowing costs for bond issuers. 6 this period, NAZ, NXE, and NTX held only small allocations (approximately 1% of their portfolios) of these bonds, and NFZ and NKR did not hold any tobacco bonds. In addition, NTX's exposure to the housing sector was a slightly negative factor in its six-month performance. In the Arizona Funds, especially in NAZ, we continued to see positive contributions from advance refunding activity, which benefited these four Funds through price appreciation and enhanced credit quality. All four of the Arizona Funds also benefited from the credit quality upgrade of their holdings of Catholic Healthcare West bonds to A2/A from A3/A-. On the other hand, holdings of older, previously pre-refunded bonds in the Funds tended to underperform the general municipal market, due primarily to their shorter effective maturities and higher credit quality. Among these five Funds, NAZ had the heaviest allocation of pre-refunded bonds going into this period. Another factor in the six-month performance of these Funds, especially relative to that of the unleveraged Lehman Brothers Municipal Bond Index, was the use of financial leverage. While leverage can add volatility to a Fund's NAV and share price, this strategy can also provide opportunities for additional income and total return for common shareholders. The Funds' leveraging strategy positively impacted their results over this period. 7 Dividend and Share Price INFORMATION As previously noted, all of the Funds in this report use leverage to potentially enhance opportunities for additional income for common shareholders. While the Funds' leveraging strategy continued to provide incremental income, the extent of this benefit was reduced during this period due to higher short-term interest rates, which increased the Funds' borrowing costs. The Funds' income streams were also impacted as the proceeds from older, higher-yielding bonds that matured or were called were reinvested into bonds currently available in the market, which generally offered lower yields. These factors resulted in one monthly dividend reduction in NKR and NTX and two in NFZ over the six-month period ended January 31, 2007. The dividends of NAZ and NXE remained stable during this period. Due to normal portfolio activity, common shareholders of the following Funds received capital gains and net ordinary income distributions at the end of December 2006, as follows: LONG-TERM CAPITAL GAINS ORDINARY INCOME (PER SHARE) (PER SHARE) - -------------------------------------------------------------------------------- NFZ $0.0614 $0.0016 - -------------------------------------------------------------------------------- NKR $0.0405 -- - -------------------------------------------------------------------------------- NTX $0.0363 -- - -------------------------------------------------------------------------------- These distributions, which were generated by bond calls and sales of appreciated securities, had a slight negative impact on the earning power per common share of these Funds and were a minor factor in the common share dividend reductions noted above. All of the Funds in this report seek to pay stable dividends at rates that reflect each Fund's past results and projected future performance. During certain periods, each Fund may pay dividends at a rate that may be more or less than the amount of net investment income actually earned by the Fund during the period. If a Fund has cumulatively earned more than it has paid in dividends, it holds the excess in reserve as undistributed net investment income (UNII) as part of the Fund's NAV. Conversely, if a Fund has cumulatively paid dividends in excess of its earnings, the excess constitutes negative UNII that is likewise reflected in the Fund's NAV. Each Fund will, over time, pay all of its net investment income as dividends to shareholders. As of January 31, 2007, all of the Arizona Funds had negative UNII balances for financial statement purposes and positive UNII balances, based on our best estimates, for tax purposes, while NTX had positive UNII balances for both financial statement and, based on our best estimates, for tax purposes. 8 At the end of the reporting period, the Funds' share prices were trading at premiums or discounts to their NAVs as shown in the accompanying chart: 1/31/07 6-MONTH AVERAGE PREMIUM/DISCOUNT PREMIUM/DISCOUNT - -------------------------------------------------------------------------------- NAZ -2.31% -3.80% - -------------------------------------------------------------------------------- NFZ +1.48% +4.15% - -------------------------------------------------------------------------------- NKR +0.53% +1.76% - -------------------------------------------------------------------------------- NXE -1.59% -4.45% - -------------------------------------------------------------------------------- NTX -4.22% -3.45% - -------------------------------------------------------------------------------- 9 Nuveen Arizona Premium Income Municipal Fund, Inc. NAZ Performance OVERVIEW As of January 31, 2007 Pie Chart: CREDIT QUALITY (as a % of total investments) AAA/U.S. Guaranteed 78% AA 6% A 5% BBB 9% N/R 2% Bar Chart: 2006-2007 MONTHLY TAX-FREE DIVIDENDS PER SHARE Feb 0.058 Mar 0.055 Apr 0.055 May 0.055 Jun 0.051 Jul 0.051 Aug 0.051 Sep 0.051 Oct 0.051 Nov 0.051 Dec 0.051 Jan 0.051 Line Chart: SHARE PRICE PERFORMANCE Weekly Closing Price Past performance is not predictive of future results. 2/01/06 14.24 14.18 14.19 14.3 14.25 14.13 14.26 14.23 14.19 14.14 14.2 14.22 14.1 14.18 13.75 13.46 13.64 13.63 13.62 13.64 13.29 13.44 13.2 13.32 13.3 13.35 13.44 13.46 13.82 13.68 13.767 13.75 13.72 13.69 13.85 13.8 13.69 13.8 13.7 13.7501 13.86 13.75 13.88 14.01 13.92 13.86 13.9212 14.2 13.97 13.75 13.81 13.81 13.88 13.94 13.88 13.85 1/31/07 13.93 FUND SNAPSHOT - ------------------------------------ Common Share Price $13.93 - ------------------------------------ Common Share Net Asset Value $14.26 - ------------------------------------ Premium/(Discount) to NAV -2.31% - ------------------------------------ Market Yield 4.39% - ------------------------------------ Taxable-Equivalent Yield1 6.37% - ------------------------------------ Net Assets Applicable to Common Shares ($000) $63,713 - ------------------------------------ Average Effective Maturity on Securities (Years) 14.18 - ------------------------------------ Leverage-Adjusted Duration 8.52 - ------------------------------------ AVERAGE ANNUAL TOTAL RETURN (Inception 11/19/92) - ------------------------------------ ON SHARE PRICE ON NAV - ------------------------------------ 6-Month (Cumulative) 4.02% 3.30% - ------------------------------------ 1-Year 2.30% 4.00% - ------------------------------------ 5-Year 2.43% 5.90% - ------------------------------------ 10-Year 5.39% 5.57% - ------------------------------------ INDUSTRIES (as a % of total investments) - ------------------------------------ Tax Obligation/Limited 26.3% - ------------------------------------ U.S. Guaranteed 23.4% - ------------------------------------ Water and Sewer 16.0% - ------------------------------------ Education and Civic Organizations 9.9% - ------------------------------------ Health Care 8.3% - ------------------------------------ Utilities 8.1% - ------------------------------------ Other 8.0% - ------------------------------------ 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 31.1%. When comparing this Fund to investments that generate qualified dividend income, the Taxable-Equivalent Yield is lower. 10 Nuveen Arizona Dividend Advantage Municipal Fund NFZ Performance OVERVIEW As of January 31, 2007 Pie Chart: CREDIT QUALITY (as a % of total investments) AAA/U.S. Guaranteed 69% AA 12% A 5% BBB 10% N/R 4% Bar Chart: 2006-2007 MONTHLY TAX-FREE DIVIDENDS PER SHARE2 Feb 0.069 Mar 0.069 Apr 0.069 May 0.069 Jun 0.0655 Jul 0.0655 Aug 0.0655 Sep 0.0615 Oct 0.0615 Nov 0.0615 Dec 0.0585 Jan 0.0585 Line Chart: SHARE PRICE PERFORMANCE Weekly Closing Price Past performance is not predictive of future results. 2/01/06 16.36 16.35 16.55 16.74 16.04 15.78 15.76 16 16.03 15.91 15.19 15.1 15.49 15.8 16.5 16.05 16.1 15.9 16.08 15.66 15.48 15.35 15.35 15.57 15.67 16.02 15.7 15.9 16 16.45 16.13 16 16.18 15.97 16 16.1 15.9 16.22 15.79 15.54 15.66 15.7699 15.85 15.65 15.51 15.51 15.7 15.5 15.29 15.24 15.045 15.045 15.35 15.24 14.98 14.9 1/31/07 15.08 FUND SNAPSHOT - ------------------------------------ Common Share Price $15.08 - ------------------------------------ Common Share Net Asset Value $14.86 - ------------------------------------ Premium/(Discount) to NAV 1.48% - ------------------------------------ Market Yield 4.66% - ------------------------------------ Taxable-Equivalent Yield1 6.76% - ------------------------------------ Net Assets Applicable to Common Shares ($000) $23,011 - ------------------------------------ Average Effective Maturity on Securities (Years) 15.09 - ------------------------------------ Leverage-Adjusted Duration 9.13 - ------------------------------------ AVERAGE ANNUAL TOTAL RETURN (Inception 1/30/01) - ------------------------------------ ON SHARE PRICE ON NAV - ------------------------------------ 6-Month (Cumulative) -2.50% 3.51% - ------------------------------------ 1-Year -1.22% 4.48% - ------------------------------------ 5-Year 5.63% 7.01% - ------------------------------------ Since Inception 5.97% 6.81% - ------------------------------------ INDUSTRIES (as a % of total investments) - ------------------------------------ Tax Obligation/Limited 34.3% - ------------------------------------ Utilities 15.6% - ------------------------------------ Tax Obligation/General 13.7% - ------------------------------------ U.S. Guaranteed 11.7% - ------------------------------------ Water and Sewer 7.2% - ------------------------------------ Health Care 5.1% - ------------------------------------ Other 12.4% - ------------------------------------ 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 31.1%. When comparing this Fund to investments that generate qualified dividend income, the Taxable-Equivalent Yield is lower. 2 The Fund paid shareholders capital gains and net ordinary income distributions in December 2006 of $0.0630 per share. 11 Nuveen Arizona Dividend Advantage Municipal Fund 2 NKR Performance OVERVIEW As of January 31, 2007 Pie Chart: CREDIT QUALITY (as a % of total investments) AAA/U.S. Guaranteed 67% AA 8% A 10% BBB 11% N/R 4% Bar Chart: 2006-2007 MONTHLY TAX-FREE DIVIDENDS PER SHARE2 Feb 0.0685 Mar 0.0685 Apr 0.0685 May 0.0685 Jun 0.0645 Jul 0.0645 Aug 0.0645 Sep 0.0615 Oct 0.0615 Nov 0.0615 Dec 0.0615 Jan 0.0615 Line Chart: SHARE PRICE PERFORMANCE Weekly Closing Price Past performance is not predictive of future results. 2/01/06 15.55 15.55 15.67 15.74 15.65 15.41 15.53 15.21 15.2 15.15 14.99 15.4 15.06 15.3 14.96 14.96 15.5 15 15.38 15.15 14.91 15.1 14.82 14.75 14.9 15.17 15.23 15.27 15.95 15.9 15.75 15.9 15.66 15.55 15.35 15.55 15.71 16.28 15.73 15.55 15.47 15.7 15.82 15.24 15.35 15.35 15.27 15.23 15.2 15.19 15.0307 15.0307 15.21 14.94 14.89 15.0501 1/31/07 15.16 FUND SNAPSHOT - ------------------------------------ Common Share Price $15.16 - ------------------------------------ Common Share Net Asset Value $15.08 - ------------------------------------ Premium/(Discount) to NAV 0.53% - ------------------------------------ Market Yield 4.87% - ------------------------------------ Taxable-Equivalent Yield1 7.07% - ------------------------------------ Net Assets Applicable to Common Shares ($000) $36,679 - ------------------------------------ Average Effective Maturity on Securities (Years) 15.36 - ------------------------------------ Leverage-Adjusted Duration 9.04 - ------------------------------------ AVERAGE ANNUAL TOTAL RETURN (Inception 3/25/02) - ------------------------------------ ON SHARE PRICE ON NAV - ------------------------------------ 6-Month (Cumulative) 1.31% 3.27% - ------------------------------------ 1-Year 3.15% 4.34% - ------------------------------------ Since Inception 6.21% 7.10% - ------------------------------------ INDUSTRIES (as a % of total investments) - ------------------------------------ Tax Obligation/Limited 32.9% - ------------------------------------ Tax Obligation/General 18.3% - ------------------------------------ Health Care 10.6% - ------------------------------------ U.S. Guaranteed 9.4% - ------------------------------------ Water and Sewer 7.8% - ------------------------------------ Education and Civic Organizations 7.2% - ------------------------------------ Housing/Multifamily 5.4% - ------------------------------------ Other 8.4% - ------------------------------------ 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 31.1%. When comparing this Fund to investments that generate qualified dividend income, the Taxable-Equivalent Yield is lower. 2 The Fund paid shareholders a capital gains distribution in December 2006 of $0.0405 per share. 12 Nuveen Arizona Dividend Advantage Municipal Fund 3 NXE Performance OVERVIEW As of January 31, 2007 Pie Chart: CREDIT QUALITY (as a % of total investments) AAA/U.S. Guaranteed 69% AA 8% A 8% BBB 11% N/R 4% Bar Chart: 2006-2007 MONTHLY TAX-FREE DIVIDENDS PER SHARE Feb 0.0605 Mar 0.0605 Apr 0.0605 May 0.0605 Jun 0.0565 Jul 0.0565 Aug 0.0565 Sep 0.0565 Oct 0.0565 Nov 0.0565 Dec 0.0565 Jan 0.0565 Line Chart: SHARE PRICE PERFORMANCE Weekly Closing Price Past performance is not predictive of future results. 2/01/06 14.35 14.2 14.27 14.56 14.4 14.36 14.43 14.5 14.4 14.3 14.3 14.7 14.19 14.5 14.3 13.85 13.7 13.6 14 13.65 13.8 13.56 13.59 13.62 13.59 13.45 13.64 13.58 13.89 13.81 14 13.95 13.98 13.8201 13.78 13.8635 13.8 14.05 13.75 13.8 13.99 14.1 13.9 14.08 14 14 14.19 14.4 14.42 13.8 13.85 13.85 13.9 14.1 13.76 13.99 1/31/06 14.25 FUND SNAPSHOT - ------------------------------------ Common Share Price $14.25 - ------------------------------------ Common Share Net Asset Value $14.48 - ------------------------------------ Premium/(Discount) to NAV -1.59% - ------------------------------------ Market Yield 4.76% - ------------------------------------ Taxable-Equivalent Yield1 6.91% - ------------------------------------ Net Assets Applicable to Common Shares ($000) $44,429 - ------------------------------------ Average Effective Maturity on Securities (Years) 15.65 - ------------------------------------ Leverage-Adjusted Duration 8.52 - ------------------------------------ AVERAGE ANNUAL TOTAL RETURN (Inception 9/25/02) - ------------------------------------ ON SHARE PRICE ON NAV - ------------------------------------ 6-Month (Cumulative) 7.97% 3.48% - ------------------------------------ 1-Year 4.46% 4.83% - ------------------------------------ Since Inception 4.25% 5.62% - ------------------------------------ INDUSTRIES (as a % of total investments) - ------------------------------------ Tax Obligation/Limited 25.5% - ------------------------------------ U.S. Guaranteed 15.4% - ------------------------------------ Health Care 12.2% - ------------------------------------ Education and Civic Organizations 9.1% - ------------------------------------ Transportation 9.0% - ------------------------------------ Utilities 8.1% - ------------------------------------ Water and Sewer 7.4% - ------------------------------------ Tax Obligation/General 6.1% - ------------------------------------ Other 7.2% - ------------------------------------ 1 Taxable-Equivalent Yield represents the yield that must be earned on a fully taxable investment in order to equal the yield of the Fund on an after-tax basis. It is based on a combined federal and state income tax rate of 31.1%. When comparing this Fund to investments that generate qualified dividend income, the Taxable-Equivalent Yield is lower. 13 Nuveen Texas Quality Income Municipal Fund NTX Performance OVERVIEW As of January 31, 2007 Pie Chart: CREDIT QUALITY (as a % of total investments) AAA/U.S. Guaranteed 68% AA 11% A 7% BBB 11% BB or Lower 1% N/R 2% Bar Chart: 2006-2007 MONTHLY TAX-FREE DIVIDENDS PER SHARE2 Feb 0.0695 Mar 0.066 Apr 0.066 May 0.066 Jun 0.0635 Jul 0.0635 Aug 0.0635 Sep 0.0605 Oct 0.0605 Nov 0.0605 Dec 0.0605 Jan 0.0605 Line Chart: SHARE PRICE PERFORMANCE Weekly Closing Price Past performance is not predictive of future results. 2/01/06 15.01 15.12 15.15 15.35 15.14 15.11 14.96 14.95 14.93 14.99 14.961 14.95 14.96 15.04 14.86 14.48 14.52 14.39 14.43 14.43 14.25 14.05 14.2 14.35 14.46 14.14 14.14 14.95 14.79 15 14.95 14.86 14.96 14.88 14.84 14.9 14.83 14.73 14.59 14.64 14.67 14.86 14.81 14.87 14.91 14.87 14.87 14.8 14.58 14.62 14.64 14.64 14.6 14.69 14.61 14.63 1/31/07 14.54 FUND SNAPSHOT - ------------------------------------ Common Share Price $14.54 - ------------------------------------ Common Share Net Asset Value $15.18 - ------------------------------------ Premium/(Discount) to NAV -4.22% - ------------------------------------ Market Yield 4.99% - ------------------------------------ Taxable-Equivalent Yield1 6.93% - ------------------------------------ Net Assets Applicable to Common Shares ($000) $144,142 - ------------------------------------ Average Effective Maturity on Securities (Years) 16.35 - ------------------------------------ Leverage-Adjusted Duration 7.51 - ------------------------------------ AVERAGE ANNUAL TOTAL RETURN (Inception 10/17/91) - ------------------------------------ ON SHARE PRICE ON NAV - ------------------------------------ 6-Month (Cumulative) 1.57% 3.47% - ------------------------------------ 1-Year 2.35% 4.67% - ------------------------------------ 5-Year 5.82% 6.56% - ------------------------------------ 10-Year 6.16% 6.24% - ------------------------------------ INDUSTRIES (as a % of total investments) - ------------------------------------ Tax Obligation/General 30.9% - ------------------------------------ U.S. Guaranteed 13.0% - ------------------------------------ Education and Civic Organizations 12.5% - ------------------------------------ Health Care 9.0% - ------------------------------------ Water and Sewer 7.3% - ------------------------------------ Utilities 6.5% - ------------------------------------ Long-Term Care 4.8% - ------------------------------------ Transportation 4.3% - ------------------------------------ Other 11.7% - ------------------------------------ 1 Taxable-Equivalent Yield represents the yield that must be earned on a fully taxable investment in order to equal the yield of the Fund on an after-tax basis. It is based on a federal income tax rate of 28%. When comparing this Fund to investments that generate qualified dividend income, the Taxable-Equivalent Yield is lower. 2 The Fund paid shareholders a capital gains distribution in December 2006 of $.0363 per share. 14 Shareholder MEETING REPORT The shareholder meeting was held in the offices of Nuveen Investments on November 14, 2006.
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 4,201,587 -- 1,524,703 -- 2,318,969 -- Withhold 65,555 -- 3,051 -- 41,694 -- - ------------------------------------------------------------------------------------------------------------------------------------ Total 4,267,142 -- 1,527,754 -- 2,360,663 -- ==================================================================================================================================== Lawrence H. Brown For 4,194,800 -- 1,524,703 -- 2,314,969 -- Withhold 72,342 -- 3,051 -- 45,694 -- - ------------------------------------------------------------------------------------------------------------------------------------ Total 4,267,142 -- 1,527,754 -- 2,360,663 -- ==================================================================================================================================== Jack B. Evans For 4,201,587 -- 1,521,103 -- 2,318,969 -- Withhold 65,555 -- 6,651 -- 41,694 -- - ------------------------------------------------------------------------------------------------------------------------------------ Total 4,267,142 -- 1,527,754 -- 2,360,663 -- ==================================================================================================================================== William C. Hunter For 4,204,087 -- 1,521,103 -- 2,315,681 -- Withhold 63,055 -- 6,651 -- 44,982 -- - ------------------------------------------------------------------------------------------------------------------------------------ Total 4,267,142 -- 1,527,754 -- 2,360,663 -- ==================================================================================================================================== David J. Kundert For 4,203,087 -- 1,524,703 -- 2,318,569 -- Withhold 64,055 -- 3,051 -- 42,094 -- - ------------------------------------------------------------------------------------------------------------------------------------ Total 4,267,142 -- 1,527,754 -- 2,360,663 -- ==================================================================================================================================== William J. Schneider For -- 1,068 -- 467 -- 721 Withhold -- 1 -- 1 -- -- - ------------------------------------------------------------------------------------------------------------------------------------ Total -- 1,069 -- 468 -- 721 ==================================================================================================================================== Timothy R. Schwertfeger For -- 1,068 -- 467 -- 721 Withhold -- 1 -- 1 -- -- - ------------------------------------------------------------------------------------------------------------------------------------ Total -- 1,069 -- 468 -- 721 ==================================================================================================================================== Judith M. Stockdale For 4,178,759 -- 1,519,803 -- 2,313,511 -- Withhold 88,383 -- 7,951 -- 47,152 -- - ------------------------------------------------------------------------------------------------------------------------------------ Total 4,267,142 -- 1,527,754 -- 2,360,663 -- ==================================================================================================================================== Eugene S. Sunshine For 4,195,900 -- 1,524,703 -- 2,315,681 -- Withhold 71,242 -- 3,051 -- 44,982 -- - ------------------------------------------------------------------------------------------------------------------------------------ Total 4,267,142 -- 1,527,754 -- 2,360,663 -- ====================================================================================================================================
15 Shareholder MEETING REPORT (continued)
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 2,979,003 -- 8,583,557 -- Withhold 25,690 -- 176,465 -- - ------------------------------------------------------------------------------------------------------------------------------------ Total 3,004,693 -- 8,760,022 -- ==================================================================================================================================== Lawrence H. Brown For 2,960,435 -- 8,588,966 -- Withhold 44,258 -- 171,056 -- - ------------------------------------------------------------------------------------------------------------------------------------ Total 3,004,693 -- 8,760,022 -- ==================================================================================================================================== Jack B. Evans For 2,958,809 -- 8,592,043 -- Withhold 45,884 -- 167,979 -- - ------------------------------------------------------------------------------------------------------------------------------------ Total 3,004,693 -- 8,760,022 -- ==================================================================================================================================== William C. Hunter For 2,979,109 -- 8,592,712 -- Withhold 25,584 -- 167,310 -- - ------------------------------------------------------------------------------------------------------------------------------------ Total 3,004,693 -- 8,760,022 -- ==================================================================================================================================== David J. Kundert For 2,975,303 -- 8,587,772 -- Withhold 29,390 -- 172,250 -- - ------------------------------------------------------------------------------------------------------------------------------------ Total 3,004,693 -- 8,760,022 -- ==================================================================================================================================== William J. Schneider For -- 880 -- 2,392 Withhold -- -- -- -- - ------------------------------------------------------------------------------------------------------------------------------------ Total -- 880 -- 2,392 ==================================================================================================================================== Timothy R. Schwertfeger For -- 880 -- 2,392 Withhold -- -- -- -- - ------------------------------------------------------------------------------------------------------------------------------------ Total -- 880 -- 2,392 ==================================================================================================================================== Judith M. Stockdale For 2,974,303 -- 8,593,633 -- Withhold 30,390 -- 166,389 -- - ------------------------------------------------------------------------------------------------------------------------------------ Total 3,004,693 -- 8,760,022 -- ==================================================================================================================================== Eugene S. Sunshine For 2,976,335 -- 8,591,046 -- Withhold 28,358 -- 168,976 -- - ------------------------------------------------------------------------------------------------------------------------------------ Total 3,004,693 -- 8,760,022 -- ====================================================================================================================================
16 Nuveen Arizona Premium Income Municipal Fund, Inc. (NAZ) Portfolio of INVESTMENTS January 31, 2007 (Unaudited)
PRINCIPAL OPTIONAL CALL AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE - ------------------------------------------------------------------------------------------------------------------------------------ CONSUMER STAPLES - 1.5% (1.0% OF TOTAL INVESTMENTS) $ 895 Puerto Rico, The Children's Trust Fund, Tobacco Settlement 5/12 at 100.00 BBB $ 935,499 Asset-Backed Refunding Bonds, Series 2002, 5.375%, 5/15/33 - ------------------------------------------------------------------------------------------------------------------------------------ EDUCATION AND CIVIC ORGANIZATIONS - 14.8% (9.9% OF TOTAL INVESTMENTS) 1,000 Arizona State University, System Revenue Bonds, Series 2002, 7/12 at 100.00 AAA 1,042,300 5.000%, 7/01/25 - FGIC Insured Arizona State University, System Revenue Bonds, Series 2005: 2,455 5.000%, 7/01/20 - AMBAC Insured 7/15 at 100.00 AAA 2,611,752 1,500 5.000%, 7/01/21 - AMBAC Insured 7/15 at 100.00 AAA 1,594,680 1,250 Glendale Industrial Development Authority, Arizona, Revenue 5/11 at 101.00 A- 1,337,950 Bonds, Midwestern University, Series 2001A, 5.875%, 5/15/31 1,180 Northern Arizona University, System Revenue Bonds, 6/17 at 100.00 AAA 1,266,093 Series 2006, 5.000%, 6/01/24 - FGIC Insured 1,500 Tempe Industrial Development Authority, Arizona, Lease 7/13 at 100.00 AAA 1,568,550 Revenue Bonds, Arizona State University Foundation Project, Series 2003, 5.000%, 7/01/34 - AMBAC Insured - ------------------------------------------------------------------------------------------------------------------------------------ 8,885 Total Education and Civic Organizations 9,421,325 - ------------------------------------------------------------------------------------------------------------------------------------ HEALTH CARE - 12.4% (8.3% OF TOTAL INVESTMENTS) 800 Arizona Health Facilities Authority, Hospital Revenue Bonds, 7/10 at 101.00 A 879,048 Catholic Healthcare West, Series 1999A, 6.625%, 7/01/20 1,450 Arizona Health Facilities Authority, Hospital System Revenue 11/09 at 100.00 Baa3 1,512,539 Bonds, Phoenix Children's Hospital, Series 1999A, 6.125%, 11/15/22 675 Glendale Industrial Development Authority, Arizona, Revenue 12/15 at 100.00 BBB 686,043 Bonds, John C. Lincoln Health Network, Series 2005B, 5.000%, 12/01/37 550 Maricopa County Industrial Development Authority, Arizona, 5/16 at 100.00 AA 573,837 Health Facilities Revenue Bonds, Mayo Clinic, Series 2006, 5.000%, 11/15/36 2,150 Maricopa County Industrial Development Authority, Arizona, 7/14 at 100.00 A 2,265,348 Health Facility Revenue Bonds, Catholic Healthcare West, Series 2004A, 5.375%, 7/01/23 385 Maricopa County, Arizona, Hospital Revenue Bonds, 4/15 at 100.00 Baa1 400,681 Sun Health Corporation, Series 2005, 5.000%, 4/01/16 515 Puerto Rico Industrial, Tourist, Educational, Medical and 11/10 at 101.00 AA 559,918 Environmental Control Facilities Financing Authority, Hospital Revenue Bonds, Hospital de la Concepcion, Series 2000A, 6.375%, 11/15/15 1,055 Winslow Industrial Development Authority, Arizona, Hospital 6/08 at 101.00 N/R 1,030,366 Revenue Bonds, Winslow Memorial Hospital, Series 1998, 5.500%, 6/01/22 - ------------------------------------------------------------------------------------------------------------------------------------ 7,580 Total Health Care 7,907,780 - ------------------------------------------------------------------------------------------------------------------------------------ HOUSING/MULTIFAMILY - 1.5% (1.0% OF TOTAL INVESTMENTS) 400 Phoenix Industrial Development Authority, Arizona, GNMA 6/11 at 102.00 Aaa 420,900 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 539,593 Collateralized Multifamily Housing Revenue Bonds, Park Lee Apartments, Series 2004A, 5.050%, 10/20/44 (Alternative Minimum Tax) - ------------------------------------------------------------------------------------------------------------------------------------ 930 Total Housing/Multifamily 960,493 - ------------------------------------------------------------------------------------------------------------------------------------ HOUSING/SINGLE FAMILY - 2.7% (1.8% OF TOTAL INVESTMENTS) 1,690 The Industrial Development Authority of The City of Tucson, 1/17 at 103.00 Aaa 1,744,773 Arizona, Tax-Exempt Single Family Mortgage Revenue Bonds, Series 2007A-1, 5.100%, 7/01/38 - ------------------------------------------------------------------------------------------------------------------------------------ 17 Nuveen Arizona Premium Income Municipal Fund, Inc. (NAZ) (continued) Portfolio of INVESTMENTS January 31, 2007 (Unaudited) PRINCIPAL OPTIONAL CALL AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE - ------------------------------------------------------------------------------------------------------------------------------------ INDUSTRIALS - 2.1% (1.4% OF TOTAL INVESTMENTS) $ 1,345 Yavapai County Industrial Development Authority, Arizona, No Opt. Call BBB $ 1,347,703 Solid Waste Disposal Revenue Bonds, Waste Management Inc., Series 2003B, 4.450%, 3/01/28 (Mandatory put 3/01/08) (Alternative Minimum Tax) - ------------------------------------------------------------------------------------------------------------------------------------ TAX OBLIGATION/GENERAL - 4.1% (2.8% OF TOTAL INVESTMENTS) 630 Maricopa County Union High School District 210 Phoenix, 7/16 at 100.00 AAA 671,624 Arizona, General Obligation Bonds, Series 2006C, 5.000%, 7/01/24 - MBIA Insured 1,525 Maricopa County Union High School District 210, Phoenix, 7/14 at 100.00 AAA 1,615,463 Arizona, General Obligation Bonds, Series 2004A, 5.000%, 7/01/21 - FSA Insured 330 Puerto Rico, General Obligation and Public Improvement 7/11 at 100.00 BBB 345,065 Bonds, Series 2001A, 5.375%, 7/01/28 - ------------------------------------------------------------------------------------------------------------------------------------ 2,485 Total Tax Obligation/General 2,632,152 - ------------------------------------------------------------------------------------------------------------------------------------ TAX OBLIGATION/LIMITED - 39.3% (26.3% OF TOTAL INVESTMENTS) Bullhead City, Arizona, Special Assessment Bonds, Parkway District Improvements, Series 1993: 720 6.100%, 1/01/08 7/07 at 100.00 Baa2 725,544 775 6.100%, 1/01/09 7/07 at 100.00 Baa2 780,805 474 Estrella Mountain Ranch Community Facilities District, 7/10 at 102.00 N/R 523,348 Goodyear, Arizona, Special Assessment Lien Bonds, Series 2001A, 7.875%, 7/01/25 Greater Arizona Development Authority, Infrastructure Revenue Bonds, Series 2006A: 740 5.000%, 8/01/23 - MBIA Insured 8/16 at 100.00 AAA 786,879 875 5.000%, 8/01/25 - MBIA Insured 8/16 at 100.00 AAA 928,314 1,280 Greater Arizona Development Authority, Infrastructure Revenue 8/16 at 100.00 AAA 1,363,149 Bonds, Series 2006, 5.000%, 8/01/22 - MBIA Insured 575 Marana Municipal Property Corporation, Arizona, Revenue 7/13 at 100.00 AAA 599,144 Bonds, Series 2003, 5.000%, 7/01/28 - AMBAC Insured 1,110 Marana, Arizona, Tangerine Farms Road Improvement 7/16 at 100.00 Baa1 1,103,440 District Revenue Bonds, Series 2006, 4.600%, 1/01/26 3,400 Maricopa County Stadium District, Arizona, Revenue Refunding 6/12 at 100.00 Aaa 3,638,340 Bonds, Series 2002, 5.375%, 6/01/18 - AMBAC Insured 3,400 Mesa, Arizona, Street and Highway User Tax Revenue Bonds, 7/15 at 100.00 AAA 3,604,680 Series 2005, 5.000%, 7/01/24 - FSA Insured 2,000 Phoenix Civic Improvement Corporation, Arizona, Subordinate 7/13 at 100.00 AAA 2,116,200 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 1,246,920 Municipal Facilities Revenue Bonds, Series 2003, 5.000%, 1/01/27 - FGIC Insured Puerto Rico Infrastructure Financing Authority, Special Tax Revenue Bonds, Series 2005A 11,970 0.000%, 7/01/42 - FGIC Insured (UB) No Opt. Call AAA 2,366,230 2,875 0.000%, 7/01/43 - AMBAC Insured (UB) No Opt. Call AAA 541,822 1,000 Puerto Rico Public Buildings Authority, Guaranteed 7/12 at 100.00 BBB 1,039,700 Government Facilities Revenue Refunding Bonds, Series 2002D, 5.125%, 7/01/24 1,610 San Luis Civic Improvement Corporation, Arizona, Municipal 7/15 at 100.00 AAA 1,698,711 Facilities Excise Tax Revenue Bonds, Series 2005, 5.000%, 7/01/25 - XLCA Insured 1,350 Tempe, Arizona, Excise Tax Revenue Bonds, Series 2004, 7/14 at 100.00 AAA 1,456,434 5.250%, 7/01/20 - AMBAC Insured 500 Tucson, Arizona, Certificates of Participation, Series 2000, 7/08 at 100.00 AAA 512,235 5.700%, 7/01/20 - MBIA Insured - ------------------------------------------------------------------------------------------------------------------------------------ 35,854 Total Tax Obligation/Limited 25,031,895 - ------------------------------------------------------------------------------------------------------------------------------------ U.S. GUARANTEED - 35.1% (23.4% OF TOTAL INVESTMENTS) (4) 1,000 Arizona Health Facilities Authority, Hospital System Revenue 12/10 at 102.00 BBB (4) 1,128,290 Bonds, John C. Lincoln Health Network, Series 2000, 7.000%, 12/01/25 (Pre-refunded 12/01/10) 1,000 Arizona State University, Certificates of Participation, 7/12 at 100.00 AAA 1,075,660 Series 2002, 5.375%, 7/01/19 (Pre-refunded 7/01/12) - MBIA Insured 18 PRINCIPAL OPTIONAL CALL AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE - ------------------------------------------------------------------------------------------------------------------------------------ U.S. GUARANTEED (4) (continued) Arizona Tourism and Sports Authority, Tax Revenue Bonds, Multipurpose Stadium Facility Project, Series 2003A: $ 1,000 5.375%, 7/01/20 (Pre-refunded 7/01/13) - MBIA Insured 7/13 at 100.00 Aaa $ 1,087,420 1,000 5.375%, 7/01/21 (Pre-refunded 7/01/13) - MBIA Insured 7/13 at 100.00 Aaa 1,087,420 1,250 Maricopa County Industrial Development Authority, Arizona, No Opt. Call AAA 1,513,075 Hospital Revenue Refunding Bonds, Samaritan Health Services, Series 1990A, 7.000%, 12/01/16 - MBIA Insured (ETM) 3,000 Mesa Industrial Development Authority, Arizona, Revenue 1/10 at 101.00 AAA 3,190,710 Bonds, Discovery Health System, Series 1999A, 5.750%, 1/01/25 (Pre-refunded 1/01/10) - MBIA Insured 345 Mohave County Industrial Development Authority, Arizona, 2/07 at 100.00 AAA 345,000 GNMA Collateralized Healthcare Revenue Refunding Bonds, Chris Ridge and Silver Village Projects, Series 1996, 6.375%, 11/01/31 (Pre-refunded 2/01/07) 1,050 Northern Arizona University, System Revenue Bonds, 6/12 at 100.00 AAA 1,111,562 Series 2002, 5.000%, 6/01/34 (Pre-refunded 6/01/12) - FGIC Insured 2,000 Phoenix Civic Improvement Corporation, Arizona, Junior Lien 7/10 at 101.00 AAA 2,160,260 Wastewater System Revenue Bonds, Series 2000, 6.000%, 7/01/24 (Pre-refunded 7/01/10) - FGIC Insured Phoenix Industrial Development Authority, Arizona, Government Office Lease Revenue Bonds, Capitol Mall LLC, Series 2000: 700 5.375%, 9/15/22 (Pre-refunded 9/15/10) - AMBAC Insured 9/10 at 100.00 AAA 738,038 2,000 5.500%, 9/15/27 (Pre-refunded 9/15/10) - AMBAC Insured 9/10 at 100.00 AAA 2,117,080 1,000 Puerto Rico Highway and Transportation Authority, Highway 7/10 at 101.00 BBB+ (4) 1,095,010 Revenue Bonds, Series 2000B, 6.500%, 7/01/27 (Pre-refunded 7/01/10) 1,500 Scottsdale Industrial Development Authority, Arizona, 12/11 at 101.00 A3 (4) 1,641,315 Hospital Revenue Bonds, Scottsdale Healthcare, Series 2001, 5.800%, 12/01/31 (Pre-refunded 12/01/11) 3,215 Tucson Industrial Development Authority, Arizona, Senior 7/10 at 101.00 AA (4) 3,428,958 Living Facilities Revenue Bonds, Christian Care Project, Series 2000A, 5.625%, 7/01/20 (Pre-refunded 7/01/10) - RAAI Insured 600 Tucson, Arizona, Junior Lien Street and Highway User 7/10 at 100.00 AAA 623,724 Revenue Bonds, Series 2000E, 5.000%, 7/01/18 (Pre-refunded 7/01/10) - FGIC Insured - ------------------------------------------------------------------------------------------------------------------------------------ 20,660 Total U.S. Guaranteed 22,343,522 - ------------------------------------------------------------------------------------------------------------------------------------ UTILITIES - 12.1% (8.1% OF TOTAL INVESTMENTS) 1,000 Arizona Power Authority, Special Obligation Power Resource No Opt. Call AA 1,093,800 Revenue Refunding Crossover Bonds, Hoover Project, Series 2001, 5.250%, 10/01/15 620 Pima County Industrial Development Authority, Arizona, 7/07 at 100.50 AAA 637,112 Lease Obligation Revenue Refunding Bonds, Tucson Electric Power Company, Series 1988A, 7.250%, 7/15/10 - FSA Insured 2,170 Puerto Rico Electric Power Authority, Power Revenue Bonds, 7/15 at 100.00 AAA 2,294,298 Series 2005RR, 5.000%, 7/01/27 - XLCA Insured 530 Salt River Project Agricultural Improvement and Power 1/13 at 100.00 Aa1 555,954 District, Arizona, Electric System Revenue Bonds, Series 2002B, 5.000%, 1/01/22 Salt River Project Agricultural Improvement and Power District, Arizona, Electric System Revenue Refunding Bonds, Series 2002A: 2,000 5.125%, 1/01/27 1/12 at 101.00 Aa1 2,097,020 1,000 5.000%, 1/01/31 1/12 at 101.00 Aa1 1,041,490 - ------------------------------------------------------------------------------------------------------------------------------------ 7,320 Total Utilities 7,719,674 - ------------------------------------------------------------------------------------------------------------------------------------ WATER AND SEWER - 24.0% (16.0% OF TOTAL INVESTMENTS) 1,825 Arizona Water Infrastructure Finance Authority, Water 10/14 at 100.00 AAA 1,941,654 Quality Revenue Bonds, Series 2004A, 5.000%, 10/01/19 1,005 Cottonwood, Arizona, Senior Lien Water System Revenue 7/14 at 100.00 AAA 1,055,421 Bonds, Municipal Property Corporation, Series 2004, 5.000%, 7/01/24 - XLCA Insured 3,500 Glendale, Arizona, Water and Sewer Revenue Bonds, 7/13 at 100.00 AAA 3,659,948 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 630,870 Lien Water Revenue Bonds, Series 2003, 5.000%, 7/01/23 - MBIA Insured 19 Nuveen Arizona Premium Income Municipal Fund, Inc. (NAZ) (continued) Portfolio of INVESTMENTS January 31, 2007 (Unaudited) PRINCIPAL OPTIONAL CALL AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE - ------------------------------------------------------------------------------------------------------------------------------------ WATER AND SEWER (continued) $ 1,415 Phoenix Civic Improvement Corporation, Arizona, Junior Lien 7/14 at 100.00 AAA $ 1,491,523 Wastewater System Revenue Bonds, Series 2004, 5.000%, 7/01/24 - MBIA Insured 1,500 Phoenix Civic Improvement Corporation, Arizona, Junior Lien 7/12 at 100.00 AAA 1,559,025 Water System Revenue Bonds, Series 2002, 5.000%, 7/01/26 - FGIC Insured 3,295 Phoenix Civic Improvement Corporation, Arizona, Junior Lien 7/15 at 100.00 AAA 3,495,731 Water System Revenue Bonds, Series 2005, 5.000%, 7/01/23 - MBIA Insured 1,250 Phoenix Civic Improvement Corporation, Arizona, Junior Lien No Opt. Call AAA 1,444,200 Water System Revenue Refunding Bonds, Series 2001, 5.500%, 7/01/21 - FGIC Insured - ------------------------------------------------------------------------------------------------------------------------------------ 14,390 Total Water and Sewer 15,278,372 - ------------------------------------------------------------------------------------------------------------------------------------ $ 102,034 Total Investments (cost $91,688,321) - 149.6% 95,323,188 =============----------------------------------------------------------------------------------------------------------------------- Floating Rate Obligations - (3.2)% (2,054,352) -------------------------------------------------------------------------------------------------------------------- Other Assets Less Liabilities - 0.7% 444,554 -------------------------------------------------------------------------------------------------------------------- Preferred Shares, at Liquidation Value - (47.1)% (30,000,000) -------------------------------------------------------------------------------------------------------------------- Net Assets Applicable to Common Shares - 100% $ 63,713,390 ====================================================================================================================
(1) All percentages shown in the Portfolio of Investments are based on net assets applicable to Common shares unless otherwise noted. (2) Optional Call Provisions: Dates (month and year) and prices of the earliest optional call or redemption. There may be other call provisions at varying prices at later dates. Certain mortgage-backed securities may be subject to periodic principal paydowns. (3) Ratings: Using the higher of Standard & Poor's or Moody's rating. Ratings below BBB by Standard & Poor's Group or Baa by Moody's Investor Service, Inc. are considered to be below investment grade. (4) Backed by an escrow or trust containing sufficient U.S. Government or U.S. Government agency securities which ensure the timely payment of principal and interest. Such investments are normally considered to be equivalent to AAA rated securities. N/R Not rated. (ETM) Escrowed to maturity. (UB) Underlying bond of an inverse floating rate trust reflected as a financing transaction pursuant to the provisions of SFAS No. 140. See accompanying notes to financial statements. 20 Nuveen Arizona Dividend Advantage Municipal Fund (NFZ) Portfolio of INVESTMENTS January 31, 2007 (Unaudited)
PRINCIPAL OPTIONAL CALL AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE - ------------------------------------------------------------------------------------------------------------------------------------ EDUCATION AND CIVIC ORGANIZATIONS - 7.2% (4.7% OF TOTAL INVESTMENTS) $ 1,000 Puerto Rico Industrial, Tourist, Educational, Medical and 2/09 at 101.00 BBB- $ 1,024,450 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 310,533 Environmental Control Facilities Financing Authority, Higher Education Revenue Bonds, University of the Sacred Heart, Series 2001, 5.250%, 9/01/21 305 Tucson Industrial Development Authority, Arizona, Charter 9/14 at 100.00 BBB- 318,691 School Revenue Bonds, Arizona Agribusiness and Equine Center Charter School, Series 2004A, 6.125%, 9/01/34 - ------------------------------------------------------------------------------------------------------------------------------------ 1,605 Total Education and Civic Organizations 1,653,674 - ------------------------------------------------------------------------------------------------------------------------------------ HEALTH CARE - 7.9% (5.1% OF TOTAL INVESTMENTS) 365 Arizona Health Facilities Authority, Hospital Revenue Bonds, 7/10 at 101.00 A 401,066 Catholic Healthcare West, Series 1999A, 6.625%, 7/01/20 10 California Health Facilities Financing Authority, Health Facility 3/13 at 100.00 A 10,250 Revenue Bonds, Adventist Health System/West, Series 2003A, 5.000%, 3/01/28 250 Glendale Industrial Development Authority, Arizona, Revenue 12/15 at 100.00 BBB 254,090 Bonds, John C. Lincoln Health Network, Series 2005B, 5.000%, 12/01/37 200 Maricopa County Industrial Development Authority, Arizona, 5/16 at 100.00 AA 208,668 Health Facilities Revenue Bonds, Mayo Clinic, Series 2006, 5.000%, 11/15/36 750 Maricopa County Industrial Development Authority, Arizona, 7/14 at 100.00 A 790,238 Health Facility Revenue Bonds, Catholic Healthcare West, Series 2004A, 5.375%, 7/01/23 140 Maricopa County, Arizona, Hospital Revenue Bonds, Sun Health 4/15 at 100.00 Baa1 145,702 Corporation, Series 2005, 5.000%, 4/01/16 - ------------------------------------------------------------------------------------------------------------------------------------ 1,715 Total Health Care 1,810,014 - ------------------------------------------------------------------------------------------------------------------------------------ HOUSING/MULTIFAMILY - 6.7% (4.3% OF TOTAL INVESTMENTS) 1,000 Maricopa County Industrial Development Authority, Arizona, 7/09 at 102.00 Aaa 1,034,900 Multifamily Housing Revenue Bonds, Whispering Palms Apartments, Series 1999A, 5.900%, 7/01/29 - MBIA Insured 275 Phoenix Industrial Development Authority, Arizona, GNMA 6/11 at 102.00 Aaa 289,369 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 208,711 Collateralized Multifamily Housing Revenue Bonds, Park Lee Apartments, Series 2004A, 5.050%, 10/20/44 (Alternative Minimum Tax) - ------------------------------------------------------------------------------------------------------------------------------------ 1,480 Total Housing/Multifamily 1,532,980 - ------------------------------------------------------------------------------------------------------------------------------------ HOUSING/SINGLE FAMILY - 3.0% (1.9% OF TOTAL INVESTMENTS) 25 Pima County Industrial Development Authority, Arizona, 11/10 at 101.00 AAA 25,849 FNMA/GNMA Single Family Mortgage Revenue Bonds, Series 2001A-4, 5.050%, 5/01/17 635 The Industrial Development Authority of The City of Tucson, 1/17 at 103.00 Aaa 655,580 Arizona, Tax-Exempt Single Family Mortgage Revenue Bonds, Series 2007A-1, 5.100%, 7/01/38 - ------------------------------------------------------------------------------------------------------------------------------------ 660 Total Housing/Single Family 681,429 - ------------------------------------------------------------------------------------------------------------------------------------ INDUSTRIALS - 2.2% (1.5% OF TOTAL INVESTMENTS) 510 Yavapai County Industrial Development Authority, Arizona, No Opt. Call BBB 511,025 Solid Waste Disposal Revenue Bonds, Waste Management Inc., Series 2003B, 4.450%, 3/01/28 (Mandatory put 3/01/08) (Alternative Minimum Tax) - ------------------------------------------------------------------------------------------------------------------------------------ TAX OBLIGATION/GENERAL - 21.1% (13.7% OF TOTAL INVESTMENTS) 1,000 Maricopa County Unified School District 11, Peoria, Arizona, 7/15 at 100.00 AAA 1,067,520 General Obligation Bonds, Second Series 2005, 5.000%, 7/01/20 - FGIC Insured 21 Nuveen Arizona Dividend Advantage Municipal Fund (NFZ) (continued) Portfolio of INVESTMENTS January 31, 2007 (Unaudited) PRINCIPAL OPTIONAL CALL AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE - ------------------------------------------------------------------------------------------------------------------------------------ TAX OBLIGATION/GENERAL (continued) $ 240 Maricopa County Union High School District 210 Phoenix, 7/16 at 100.00 AAA $ 255,857 Arizona, General Obligation Bonds, Series 2006C, 5.000%, 7/01/24 - MBIA Insured 1,020 Tucson, Arizona, General Obligation Refunding Bonds, 7/07 at 100.00 AA 1,024,763 Series 1997, 5.000%, 7/01/19 2,340 Yuma & La Paz Counties Community College District, Arizona, 7/16 at 100.00 AAA 2,505,907 General Obligation Bonds, Series 2006, 5.000%, 7/01/21 - MBIA Insured - ------------------------------------------------------------------------------------------------------------------------------------ 4,600 Total Tax Obligation/General 4,854,047 - ------------------------------------------------------------------------------------------------------------------------------------ TAX OBLIGATION/LIMITED - 52.8% (34.3% OF TOTAL INVESTMENTS) 1,500 Arizona School Facilities Board, School Improvement Revenue 7/14 at 100.00 AAA 1,674,105 Bonds, Series 2004A, 5.750%, 7/01/18 - AMBAC Insured 1,220 Arizona Tourism and Sports Authority, Tax Revenue Bonds, 7/13 at 100.00 Aaa 1,269,142 Multipurpose Stadium Facility Project, Series 2003A, 5.000%, 7/01/31 - MBIA Insured 98 Centerra Community Facilities District, Goodyear, Arizona, 7/15 at 100.00 N/R 100,493 General Obligation Bonds, Series 2005, 5.500%, 7/15/29 184 Estrella Mountain Ranch Community Facilities District, 7/10 at 102.00 N/R 203,156 Goodyear, Arizona, Special Assessment Lien Bonds, Series 2001A, 7.875%, 7/01/25 275 Greater Arizona Development Authority, Infrastructure Revenue 8/16 at 100.00 AAA 292,421 Bonds, Series 2006A, 5.000%, 8/01/23 - MBIA Insured 1,000 Greater Arizona Development Authority, Infrastructure Revenue 8/16 at 100.00 AAA 1,064,960 Bonds, Series 2006, 5.000%, 8/01/22 - MBIA Insured 1,180 Marana Municipal Property Corporation, Arizona, Revenue 7/13 at 100.00 AAA 1,240,711 Bonds, Series 2003, 5.000%, 7/01/23 - AMBAC Insured 415 Marana, Arizona, Tangerine Farms Road Improvement District 7/16 at 100.00 Baa1 412,547 Revenue Bonds, Series 2006, 4.600%, 1/01/26 330 Palm Valley Community Facility District 3, Goodyear, Arizona, 7/16 at 100.00 N/R 334,673 General Obligation Bonds, Series 2006, 5.300%, 7/15/31 100 Parkway Community Facilities District 1, Prescott Valley, 7/16 at 100.00 N/R 101,442 Arizona, General Obligation Bonds, Series 2006, 5.350%, 7/15/31 900 Phoenix Industrial Development Authority, Arizona, 3/12 at 100.00 AAA 956,223 Government Bonds, Capitol Mall LLC II, Series 2001, 5.250%, 9/15/16 - AMBAC Insured 680 Pinal County Industrial Development Authority, Arizona, No Opt. Call A 702,467 Correctional Facilities Contract Revenue Bonds, Florence West Prison LLC, Series 2002A, 5.000%, 10/01/18 - ACA Insured 75 Puerto Rico Infrastructure Financing Authority, Special Tax No Opt. Call AAA 62,384 Bonds, Residual Series 1534, 5.655%, 7/01/42 - AMBAC Insured (IF) 4,495 Puerto Rico Infrastructure Financing Authority, Special Tax No Opt. Call AAA 888,572 Revenue Bonds, Series 2005A, 0.000%, 7/01/42 - FGIC Insured (UB) 600 San Luis Civic Improvement Corporation, Arizona, Municipal 7/15 at 100.00 AAA 633,060 Facilities Excise Tax Revenue Bonds, Series 2005, 5.000%, 7/01/25 - XLCA Insured 1,000 Tempe, Arizona, Excise Tax Revenue Bonds, Series 2004, 7/14 at 100.00 AAA 1,078,840 5.250%, 7/01/20 - AMBAC Insured 500 Vistancia Community Facilities District, Arizona, Restricted 7/15 at 100.00 Baa1 544,460 General Obligation Bonds, Series 2005, 5.750%, 7/15/24 355 Watson Road Community Facilities District, Arizona, Special 7/16 at 100.00 N/R 375,508 Assessment Revenue Bonds, Series 2005, 6.000%, 7/01/30 225 Westpark Community Facilities District, Buckeye, Arizona, 7/16 at 100.00 N/R 226,577 General Obligation Tax Increment Bonds Series 2006, 5.250%, 7/15/31 - ------------------------------------------------------------------------------------------------------------------------------------ 15,132 Total Tax Obligation/Limited 12,161,741 - ------------------------------------------------------------------------------------------------------------------------------------ U.S. GUARANTEED - 18.0% (11.7% OF TOTAL INVESTMENTS) (4) 550 Arizona Health Facilities Authority, Hospital System Revenue 12/10 at 102.00 BBB (4) 618,233 Bonds, John C. Lincoln Health Network, Series 2000, 6.875%, 12/01/20 (Pre-refunded 12/01/10) 1,000 Arizona Tourism and Sports Authority, Tax Revenue Bonds, 7/13 at 100.00 Aaa 1,087,420 Multipurpose Stadium Facility Project, Series 2003A, 5.375%, 7/01/21 (Pre-refunded 7/01/13) - MBIA Insured 22 PRINCIPAL OPTIONAL CALL AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE - ------------------------------------------------------------------------------------------------------------------------------------ U.S. GUARANTEED (4) (continued) $ 1,300 Maricopa County Industrial Development Authority, Arizona, 6/07 at 102.00 A (4) $ 1,337,102 Education Revenue Bonds, Horizon Community Learning Center Project, Series 2000, 6.350%, 6/01/26 (Pre-refunded 6/01/07) - ACA Insured 1,000 Scottsdale Industrial Development Authority, Arizona, 12/11 at 101.00 A3 (4) 1,094,210 Hospital Revenue Bonds, Scottsdale Healthcare, Series 2001, 5.800%, 12/01/31 (Pre-refunded 12/01/11) - ------------------------------------------------------------------------------------------------------------------------------------ 3,850 Total U.S. Guaranteed 4,136,965 - ------------------------------------------------------------------------------------------------------------------------------------ UTILITIES - 24.0% (15.6% OF TOTAL INVESTMENTS) 1,500 Arizona Power Authority, Special Obligation Power Resource No Opt. Call AA 1,661,430 Revenue Refunding Crossover Bonds, Hoover Project, Series 2001, 5.250%, 10/01/17 1,000 Mesa, Arizona, Utility System Revenue Refunding Bonds, No Opt. Call AAA 1,113,270 Series 2002, 5.250%, 7/01/17 - FGIC Insured Puerto Rico Electric Power Authority, Power Revenue Bonds, Series 2005RR: 1,000 5.000%, 7/01/26 - XLCA Insured 7/15 at 100.00 AAA 1,059,470 170 5.000%, 7/01/27 - XLCA Insured 7/15 at 100.00 AAA 179,738 200 Salt River Project Agricultural Improvement and Power 1/13 at 100.00 Aa1 209,794 District, Arizona, Electric System Revenue Bonds, Series 2002B, 5.000%, 1/01/22 235 Salt River Project Agricultural Improvement and Power 1/08 at 101.00 Aa1 239,599 District, Arizona, Electric System Revenue Refunding Bonds, Series 1997A, 5.000%, 1/01/20 1,000 Salt River Project Agricultural Improvement and Power 1/12 at 101.00 Aa1 1,066,950 District, Arizona, Electric System Revenue Refunding Bonds, Series 2002A, 5.250%, 1/01/18 - ------------------------------------------------------------------------------------------------------------------------------------ 5,105 Total Utilities 5,530,251 - ------------------------------------------------------------------------------------------------------------------------------------ WATER AND SEWER - 11.1% (7.2% OF TOTAL INVESTMENTS) 225 Oro Valley Municipal Property Corporation, Arizona, Senior 7/13 at 100.00 AAA 236,576 Lien Water Revenue Bonds, Series 2003, 5.000%, 7/01/23 - MBIA Insured 200 Phoenix Civic Improvement Corporation, Arizona, Junior Lien 7/14 at 100.00 AAA 210,816 Wastewater System Revenue Bonds, Series 2004, 5.000%, 7/01/24 - MBIA Insured 1,500 Phoenix Civic Improvement Corporation, Arizona, Junior Lien 7/12 at 100.00 AAA 1,559,025 Water System Revenue Bonds, Series 2002, 5.000%, 7/01/26 - FGIC Insured 520 Phoenix Civic Improvement Corporation, Arizona, Junior Lien 7/15 at 100.00 AAA 551,678 Water System Revenue Bonds, Series 2005, 5.000%, 7/01/23 - MBIA Insured - ------------------------------------------------------------------------------------------------------------------------------------ 2,445 Total Water and Sewer 2,558,095 - ------------------------------------------------------------------------------------------------------------------------------------ $ 37,102 Total Investments (cost $34,306,399) - 154.0% 35,430,221 =============----------------------------------------------------------------------------------------------------------------------- Floating Rate Obligations - (2.7)% (622,856) -------------------------------------------------------------------------------------------------------------------- Other Assets Less Liabilities - 0.8% 203,660 -------------------------------------------------------------------------------------------------------------------- Preferred Shares, at Liquidation Value - (52.1)% (12,000,000) -------------------------------------------------------------------------------------------------------------------- Net Assets Applicable to Common Shares - 100% $ 23,011,025 ====================================================================================================================
(1) All percentages shown in the Portfolio of Investments are based on net assets applicable to Common shares unless otherwise noted. (2) Optional Call Provisions: Dates (month and year) and prices of the earliest optional call or redemption. There may be other call provisions at varying prices at later dates. Certain mortgage-backed securities may be subject to periodic principal paydowns. (3) Ratings: Using the higher of Standard & Poor's or Moody's rating. Ratings below BBB by Standard & Poor's Group or Baa by Moody's Investor Service, Inc. are considered to be below investment grade. (4) Backed by an escrow or trust containing sufficient U.S. Government or U.S. Government agency securities which ensure the timely payment of principal and interest. Such investments are normally considered to be equivalent to AAA rated securities. N/R Not rated. (IF) Inverse floating rate investment. (UB) Underlying bond of an inverse floating rate trust reflected as a financing transaction pursuant to the provisions of SFAS No. 140. See accompanying notes to financial statements. 23 Nuveen Arizona Dividend Advantage Municipal Fund 2 (NKR) Portfolio of INVESTMENTS January 31, 2007 (Unaudited)
PRINCIPAL OPTIONAL CALL AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE - ------------------------------------------------------------------------------------------------------------------------------------ EDUCATION AND CIVIC ORGANIZATIONS - 10.9% (7.2% OF TOTAL INVESTMENTS) $ 1,250 Glendale Industrial Development Authority, Arizona, Revenue 5/11 at 101.00 A- $ 1,337,950 Bonds, Midwestern University, Series 2001A, 5.875%, 5/15/31 460 Pima County Industrial Development Authority, Arizona, 12/14 at 100.00 BBB- 484,858 Charter School Revenue Bonds, Noah Webster Basic Schools Inc., Series 2004, 6.000%, 12/15/24 320 Puerto Rico Industrial, Tourist, Educational, Medical and 2/09 at 101.00 BBB- 328,992 Environmental Control Facilities Financing Authority, Higher Education Revenue Bonds, Ana G. Mendez University System, Series 1999, 5.375%, 2/01/19 480 Tucson Industrial Development Authority, Arizona, Charter 9/14 at 100.00 BBB- 501,547 School Revenue Bonds, Arizona Agribusiness and Equine Center Charter School, Series 2004A, 6.125%, 9/01/34 University of Arizona, Certificates of Participation, Series 2002A: 750 5.500%, 6/01/18 - AMBAC Insured 6/12 at 100.00 AAA 805,928 500 5.125%, 6/01/22 - AMBAC Insured 6/12 at 100.00 AAA 523,810 - ------------------------------------------------------------------------------------------------------------------------------------ 3,760 Total Education and Civic Organizations 3,983,085 - ------------------------------------------------------------------------------------------------------------------------------------ HEALTH CARE - 16.0% (10.6% OF TOTAL INVESTMENTS) 400 Arizona Health Facilities Authority, Hospital Revenue Bonds, 7/10 at 101.00 A 439,524 Catholic Healthcare West, Series 1999A, 6.625%, 7/01/20 735 Arizona Health Facilities Authority, Hospital System Revenue 2/12 at 101.00 Baa3 799,834 Bonds, Phoenix Children's Hospital, Series 2002A, 6.250%, 2/15/21 600 Arizona Health Facilities Authority, Revenue Bonds, Blood 4/14 at 100.00 A- 617,424 Systems Inc., Series 2004, 5.000%,4/01/20 400 Glendale Industrial Development Authority, Arizona, Revenue 12/15 at 100.00 BBB 406,544 Bonds, John C. Lincoln Health Network, Series 2005B, 5.000%, 12/01/37 320 Maricopa County Industrial Development Authority, Arizona, 5/16 at 100.00 AA 333,869 Health Facilities Revenue Bonds, Mayo Clinic, Series 2006, 5.000%, 11/15/36 1,375 Maricopa County Industrial Development Authority, Arizona, 7/14 at 100.00 A 1,448,769 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 512,115 Hospital Revenue Bonds, Mayo Clinic Hospital, Series 1998, 5.250%, 11/15/37 225 Maricopa County, Arizona, Hospital Revenue Bonds, Sun Health 4/15 at 100.00 Baa1 234,164 Corporation, Series 2005, 5.000%, 4/01/16 1,000 Yavapai County Industrial Development Authority, Arizona, 8/13 at 100.00 Baa2 1,077,600 Hospital Revenue Bonds, Yavapai Regional Medical Center, Series 2003A, 6.000%, 8/01/33 - ------------------------------------------------------------------------------------------------------------------------------------ 5,555 Total Health Care 5,869,843 - ------------------------------------------------------------------------------------------------------------------------------------ HOUSING/MULTIFAMILY - 8.1% (5.4% OF TOTAL INVESTMENTS) 1,000 Maricopa County Industrial Development Authority, Arizona, 10/11 at 105.00 AAA 1,071,780 GNMA Collateralized Multifamily Housing Revenue Refunding Bonds, Pine Ridge, Cambridge Court, Cove on 44th and Fountain Place Apartments, Series 2001A-1, 6.000%, 10/20/31 325 Phoenix Industrial Development Authority, Arizona, GNMA 4/15 at 100.00 Aaa 330,883 Collateralized Multifamily Housing Revenue Bonds, Park Lee Apartments, Series 2004A, 5.050%, 10/20/44 (Alternative Minimum Tax) 1,425 Phoenix Industrial Development Authority, Arizona, GNMA 7/12 at 105.00 AAA 1,551,412 Collateralized Multifamily Housing Revenue Bonds, Summit Apartments, Series 2002, 6.450%, 7/20/32 - ------------------------------------------------------------------------------------------------------------------------------------ 2,750 Total Housing/Multifamily 2,954,075 - ------------------------------------------------------------------------------------------------------------------------------------ 24 PRINCIPAL OPTIONAL CALL AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE - ------------------------------------------------------------------------------------------------------------------------------------ HOUSING/SINGLE FAMILY - 2.9% (2.0% OF TOTAL INVESTMENTS) $ 15 Pima County Industrial Development Authority, Arizona, 11/10 at 101.00 AAA $ 15,071 FNMA/GNMA Single Family Mortgage Revenue Bonds, Series 2001A-1, 5.350%, 11/01/24 (Alternative Minimum Tax) 1,000 The Industrial Development Authority of The City of Tucson, 1/17 at 103.00 Aaa 1,032,410 Arizona, Tax-Exempt Single Family Mortgage Revenue Bonds, Series 2007A-1, 5.100%, 7/01/38 - ------------------------------------------------------------------------------------------------------------------------------------ 1,015 Total Housing/Single Family 1,047,481 - ------------------------------------------------------------------------------------------------------------------------------------ TAX OBLIGATION/GENERAL - 27.6% (18.3% OF TOTAL INVESTMENTS) 1,725 Chandler, Arizona, General Obligation Bonds, Series 2002, 7/12 at 100.00 AAA 1,811,198 5.000%, 7/01/17 1,000 Maricopa County School District 6, Arizona, General Obligation No Opt. Call AAA 1,116,540 Refunding Bonds, Washington Elementary School, Series 2002A, 5.375%, 7/01/16 - FSA Insured 1,165 Maricopa County Unified School District 69, Paradise Valley, No Opt. Call AAA 1,271,283 Arizona, General Obligation Refunding Bonds, Series 2002A, 5.250%, 7/01/14 - FGIC Insured 375 Maricopa County Union High School District 210 Phoenix, 7/16 at 100.00 AAA 399,776 Arizona, General Obligation Bonds, Series 2006C, 5.000%, 7/01/24 - MBIA Insured 1,405 Mesa, Arizona, General Obligation Bonds, Series 2002, No Opt. Call AAA 1,554,014 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+ 1,780,308 500 5.000%, 7/01/27 7/12 at 100.00 AA+ 519,180 1,000 Pinal County Unified School District 43, Apache Junction, No Opt. Call AAA 1,135,070 Arizona, General Obligation Refunding Bonds, Series 2001, 5.750%, 7/01/15 - FGIC Insured 510 Scottsdale, Arizona, General Obligation Bonds, Series 2002, 7/11 at 100.00 AAA 529,186 5.000%, 7/01/24 - ------------------------------------------------------------------------------------------------------------------------------------ 9,380 Total Tax Obligation/General 10,116,555 - ------------------------------------------------------------------------------------------------------------------------------------ TAX OBLIGATION/LIMITED - 49.4% (32.9% OF TOTAL INVESTMENTS) Arizona State, Certificates of Participation, Series 2002A: 750 5.000%, 11/01/17 - MBIA Insured 5/12 at 100.00 AAA 786,495 1,000 5.000%, 11/01/18 - MBIA Insured 5/12 at 100.00 AAA 1,047,110 500 5.000%, 11/01/20 - MBIA Insured 5/12 at 100.00 AAA 523,315 138 Centerra Community Facilities District, Goodyear, Arizona, 7/15 at 100.00 N/R 141,511 General Obligation Bonds, Series 2005, 5.500%, 7/15/29 291 Estrella Mountain Ranch Community Facilities District, 7/10 at 102.00 N/R 321,296 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 702,462 General Obligation Bonds, Series 2003, 5.350%, 7/15/28 - ACA Insured 650 Marana, Arizona, Tangerine Farms Road Improvement District 7/16 at 100.00 Baa1 646,159 Revenue Bonds, Series 2006, 4.600%, 1/01/26 870 Maricopa County Public Finance Corporation, Arizona, Lease 7/11 at 100.00 Aaa 928,490 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 898,884 2,645 5.375%, 6/01/19 - AMBAC Insured 6/12 at 100.00 Aaa 2,830,412 530 Palm Valley Community Facility District 3, Goodyear, Arizona, 7/16 at 100.00 N/R 537,505 General Obligation Bonds, Series 2006, 5.300%, 7/15/31 140 Parkway Community Facilities District 1, Prescott Valley, 7/16 at 100.00 N/R 142,019 Arizona, General Obligation Bonds, Series 2006, 5.350%, 7/15/31 1,500 Phoenix Industrial Development Authority, Arizona, 3/12 at 100.00 AAA 1,593,705 Government Bonds, Capitol Mall LLC II, Series 2001, 5.250%, 9/15/16 - AMBAC Insured 1,070 Pinal County Industrial Development Authority, Arizona, No Opt. Call A 1,105,353 Correctional Facilities Contract Revenue Bonds, Florence West Prison LLC, Series 2002A, 5.000%, 10/01/18 - ACA Insured 111 Puerto Rico Infrastructure Financing Authority, Special Tax No Opt. Call AAA 91,531 Bonds, Residual Series 1534, 5.655%, 7/01/42 - AMBAC Insured (IF) 25 Nuveen Arizona Dividend Advantage Municipal Fund 2 (NKR) (continued) Portfolio of INVESTMENTS January 31, 2007 (Unaudited) PRINCIPAL OPTIONAL CALL AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE - ------------------------------------------------------------------------------------------------------------------------------------ TAX OBLIGATION/LIMITED (continued) $ 7,065 Puerto Rico Infrastructure Financing Authority, Special Tax No Opt. Call AAA $ 1,396,609 Revenue Bonds, Series 2005A, 0.000%, 7/01/42 - FGIC Insured (UB) 1,000 Puerto Rico Public Buildings Authority, Guaranteed Government 7/12 at 100.00 BBB 1,039,700 Facilities Revenue Refunding Bonds, Series 2002D, 5.125%, 7/01/24 960 San Luis Civic Improvement Corporation, Arizona, Municipal 7/15 at 100.00 AAA 1,012,896 Facilities Excise Tax Revenue Bonds, Series 2005, 5.000%, 7/01/25 - XLCA Insured 750 Vistancia Community Facilities District, Arizona, Restricted 7/15 at 100.00 Baa1 816,690 General Obligation Bonds, Series 2005, 5.750%, 7/15/24 560 Watson Road Community Facilities District, Arizona, Special 7/16 at 100.00 N/R 592,351 Assessment Revenue Bonds, Series 2005, 6.000%, 7/01/30 350 Westpark Community Facilities District, Buckeye, Arizona, 7/16 at 100.00 N/R 352,454 General Obligation Tax Increment Bonds Series 2006, 5.250%, 7/15/31 640 Yuma Municipal Property Corporation, Arizona, Municipal 7/10 at 100.00 AAA 661,363 Facilities Tax Revenue Bonds, Series 2001, 5.000%, 7/01/21 - AMBAC Insured - ------------------------------------------------------------------------------------------------------------------------------------ 23,030 Total Tax Obligation/Limited 18,168,310 - ------------------------------------------------------------------------------------------------------------------------------------ TRANSPORTATION - 5.6% (3.7% OF TOTAL INVESTMENTS) 1,000 Phoenix Civic Improvement Corporation, Arizona, Senior Lien 7/08 at 101.00 AAA 1,020,770 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 1,041,760 Airport Revenue Bonds, Series 2002B, 5.250%, 7/01/27 - FGIC Insured (Alternative Minimum Tax) - ------------------------------------------------------------------------------------------------------------------------------------ 2,000 Total Transportation 2,062,530 - ------------------------------------------------------------------------------------------------------------------------------------ U.S. GUARANTEED - 14.1% (9.4% OF TOTAL INVESTMENTS) (4) 715 Arizona State University, System Revenue Bonds, Series 2002, 7/12 at 100.00 AAA 783,569 5.750%, 7/01/27 (Pre-refunded 7/01/12) - FGIC Insured 100 Maricopa County Unified School District 89, Dysart, Arizona, 7/14 at 100.00 AAA 109,123 General Obligation Bonds, Series 2004B, 5.250%, 7/01/20 (Pre-refunded 7/01/14) - FSA Insured 1,000 Mesa, Arizona, Street and Highway User Tax Revenue Bonds, 7/14 at 100.00 AAA 1,083,230 Series 2004, 5.125%, 7/01/23 (Pre-refunded 7/01/14) - FSA Insured 1,000 Mesa, Arizona, Utility System Revenue Bonds, Series 2002, 7/11 at 100.00 AAA 1,049,370 5.000%, 7/01/20 (Pre-refunded 7/01/11) - FGIC Insured 1,000 Scottsdale Industrial Development Authority, Arizona, Hospital 12/11 at 101.00 A3 (4) 1,094,210 Revenue Bonds, Scottsdale Healthcare, Series 2001, 5.800%, 12/01/31 (Pre-refunded 12/01/11) 990 Scottsdale, Arizona, General Obligation Bonds, Series 2002, 7/11 at 100.00 AAA 1,039,708 5.000%, 7/01/24 (Pre-refunded 7/01/11) - ------------------------------------------------------------------------------------------------------------------------------------ 4,805 Total U.S. Guaranteed 5,159,210 - ------------------------------------------------------------------------------------------------------------------------------------ UTILITIES - 4.1% (2.7% OF TOTAL INVESTMENTS) 1,115 Arizona Power Authority, Special Obligation Power Resource No Opt. Call AA 1,219,587 Revenue Refunding Crossover Bonds, Hoover Project, Series 2001, 5.250%, 10/01/15 270 Puerto Rico Electric Power Authority, Power Revenue Bonds, 7/15 at 100.00 AAA 285,466 Series 2005RR, 5.000%, 7/01/27 - XLCA Insured - ------------------------------------------------------------------------------------------------------------------------------------ 1,385 Total Utilities 1,505,053 - ------------------------------------------------------------------------------------------------------------------------------------ WATER AND SEWER - 11.7% (7.8% OF TOTAL INVESTMENTS) 500 Maricopa County Industrial Development Authority, Arizona, 12/07 at 102.00 AAA 514,845 Water System Improvement Revenue Bonds, Chaparral City Water Company, Series 1997A, 5.400%, 12/01/22 - AMBAC Insured (Alternative Minimum Tax) 360 Oro Valley Municipal Property Corporation, Arizona, Senior 7/13 at 100.00 AAA 378,522 Lien Water Revenue Bonds, Series 2003, 5.000%, 7/01/23 - MBIA Insured 26 PRINCIPAL OPTIONAL CALL AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE - ------------------------------------------------------------------------------------------------------------------------------------ WATER AND SEWER (continued) $ 320 Phoenix Civic Improvement Corporation, Arizona, Junior Lien 7/14 at 100.00 AAA $ 337,306 Wastewater System Revenue Bonds, Series 2004, 5.000%, 7/01/24 - MBIA Insured 765 Phoenix Civic Improvement Corporation, Arizona, Junior Lien 7/15 at 100.00 AAA 811,604 Water System Revenue Bonds, Series 2005, 5.000%, 7/01/23 - MBIA Insured 1,000 Phoenix Civic Improvement Corporation, Arizona, Junior Lien No Opt. Call AAA 1,159,400 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 1,093,890 Series 2002, 5.500%, 7/01/18 - FGIC Insured - ------------------------------------------------------------------------------------------------------------------------------------ 3,945 Total Water and Sewer 4,295,567 - ------------------------------------------------------------------------------------------------------------------------------------ $ 57,625 Total Investments (cost $52,824,958) - 150.4% 55,161,709 =============----------------------------------------------------------------------------------------------------------------------- Floating Rate Obligations - (2.7)% (994,488) -------------------------------------------------------------------------------------------------------------------- Other Assets Less Liabilities - 2.7% 1,011,386 -------------------------------------------------------------------------------------------------------------------- Preferred Shares, at Liquidation Value - (50.4)% (18,500,000) -------------------------------------------------------------------------------------------------------------------- Net Assets Applicable to Common Shares - 100% $ 36,678,607 ====================================================================================================================
(1) All percentages shown in the Portfolio of Investments are based on net assets applicable to Common shares unless otherwise noted. (2) Optional Call Provisions: Dates (month and year) and prices of the earliest optional call or redemption. There may be other call provisions at varying prices at later dates. Certain mortgage-backed securities may be subject to periodic principal paydowns. (3) Ratings: Using the higher of Standard & Poor's or Moody's rating. Ratings below BBB by Standard & Poor's Group or Baa by Moody's Investor Service, Inc. are considered to be below investment grade. (4) Backed by an escrow or trust containing sufficient U.S. Government or U.S. Government agency securities which ensure the timely payment of principal and interest. Such investments are normally considered to be equivalent to AAA rated securities. N/R Not rated. (IF) Inverse floating rate investment. (UB) Underlying bond of an inverse floating rate trust reflected as a financing transaction pursuant to the provisions of SFAS No. 140. See accompanying notes to financial statements. 27 Nuveen Arizona Dividend Advantage Municipal Fund 3 (NXE) Portfolio of INVESTMENTS January 31, 2007 (Unaudited)
PRINCIPAL OPTIONAL CALL AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE - ------------------------------------------------------------------------------------------------------------------------------------ CONSUMER STAPLES - 1.3% (1.0% OF TOTAL INVESTMENTS) $ 570 Puerto Rico, The Children's Trust Fund, Tobacco Settlement 5/12 at 100.00 BBB $ 595,793 Asset-Backed Refunding Bonds, Series 2002, 5.375%, 5/15/33 - ------------------------------------------------------------------------------------------------------------------------------------ EDUCATION AND CIVIC ORGANIZATIONS - 13.7% (9.1% OF TOTAL INVESTMENTS) 1,250 Arizona State University, System Revenue Bonds, 7/15 at 100.00 AAA 1,329,813 Series 2005, 5.000%, 7/01/20 - AMBAC Insured 1,130 Energy Management Services LLC, Arizona State University, 7/12 at 100.00 AAA 1,202,388 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- 276,259 Bonds, Midwestern University, Series 1998A, 5.375%, 5/15/28 540 Pima County Industrial Development Authority, Arizona, 12/14 at 100.00 BBB- 569,182 Charter School Revenue Bonds, Noah Webster Basic Schools Inc., Series 2004, 6.000%, 12/15/24 565 Tucson Industrial Development Authority, Arizona, Charter 9/14 at 100.00 BBB- 590,363 School Revenue Bonds, Arizona Agribusiness and Equine Center Charter School, Series 2004A, 6.125%, 9/01/34 2,000 University of Arizona, Certificates of Participation, 6/12 at 100.00 AAA 2,108,460 Series 2002B, 5.125%, 6/01/20 - AMBAC Insured - ------------------------------------------------------------------------------------------------------------------------------------ 5,755 Total Education and Civic Organizations 6,076,465 - ------------------------------------------------------------------------------------------------------------------------------------ HEALTH CARE - 18.2% (12.2% OF TOTAL INVESTMENTS) 300 Arizona Health Facilities Authority, Hospital Revenue Bonds, 7/10 at 101.00 A 329,643 Catholic Healthcare West, Series 1999A, 6.625%, 7/01/20 Arizona Health Facilities Authority, Hospital System Revenue Bonds, Phoenix Children's Hospital, Series 1999A: 350 6.125%, 11/15/22 11/09 at 100.00 Baa3 365,096 520 6.250%, 11/15/29 11/09 at 100.00 Baa3 543,837 625 Arizona Health Facilities Authority, Revenue Bonds, Blood 4/14 at 100.00 A- 643,150 Systems Inc., Series 2004, 5.000%, 4/01/20 475 Glendale Industrial Development Authority, Arizona, Revenue 12/15 at 100.00 BBB 482,771 Bonds, John C. Lincoln Health Network, Series 2005B, 5.000%, 12/01/37 390 Maricopa County Industrial Development Authority, Arizona, 5/16 at 100.00 AA 406,903 Health Facilities Revenue Bonds, Mayo Clinic, Series 2006, 5.000%, 11/15/36 1,825 Maricopa County Industrial Development Authority, Arizona, 7/14 at 100.00 A 1,922,911 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 2,048,460 Hospital Revenue Bonds, Mayo Clinic Hospital, Series 1998, 5.250%, 11/15/37 270 Maricopa County, Arizona, Hospital Revenue Bonds, Sun Health 4/15 at 100.00 Baa1 280,997 Corporation, Series 2005, 5.000%, 4/01/16 1,000 Yavapai County Industrial Development Authority, Arizona, 8/13 at 100.00 Baa2 1,077,600 Hospital Revenue Bonds, Yavapai Regional Medical Center, Series 2003A, 6.000%, 8/01/33 - ------------------------------------------------------------------------------------------------------------------------------------ 7,755 Total Health Care 8,101,368 - ------------------------------------------------------------------------------------------------------------------------------------ 28 PRINCIPAL OPTIONAL CALL AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE - ------------------------------------------------------------------------------------------------------------------------------------ HOUSING/MULTIFAMILY - 4.5% (3.0% OF TOTAL INVESTMENTS) $ 1,545 Phoenix Industrial Development Authority, Arizona, GNMA 6/11 at 102.00 Aaa $ 1,625,479 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 386,878 Collateralized Multifamily Housing Revenue Bonds, Park Lee Apartments, Series 2004A, 5.050%, 10/20/44 (Alternative Minimum Tax) - ------------------------------------------------------------------------------------------------------------------------------------ 1,925 Total Housing/Multifamily 2,012,357 - ------------------------------------------------------------------------------------------------------------------------------------ HOUSING/SINGLE FAMILY - 2.7% (1.8% OF TOTAL INVESTMENTS) 1,175 The Industrial Development Authority of The City of Tucson, 1/17 at 103.00 Aaa 1,213,082 Arizona, Tax-Exempt Single Family Mortgage Revenue Bonds, Series 2007A-1, 5.100%, 7/01/38 - ------------------------------------------------------------------------------------------------------------------------------------ INDUSTRIALS - 2.1% (1.4% OF TOTAL INVESTMENTS) 945 Yavapai County Industrial Development Authority, Arizona, No Opt. Call BBB 946,899 Solid Waste Disposal Revenue Bonds, Waste Management Inc., Series 2003B, 4.450%, 3/01/28 (Mandatory put 3/01/08) (Alternative Minimum Tax) - ------------------------------------------------------------------------------------------------------------------------------------ TAX OBLIGATION/GENERAL - 9.1% (6.1% OF TOTAL INVESTMENTS) 660 Chandler, Arizona, General Obligation Bonds, Series 2002, 7/12 at 100.00 AAA 693,310 5.000%, 7/01/18 730 Glendale, Arizona, General Obligation Refunding Bonds, 7/11 at 100.00 AA 760,616 Series 2002, 5.000%, 7/01/19 445 Maricopa County Union High School District 210 Phoenix, 7/16 at 100.00 AAA 474,401 Arizona, General Obligation Bonds, Series 2006C, 5.000%, 7/01/24 - MBIA Insured 1,575 Maricopa County Union High School District 210, Phoenix, 7/14 at 100.00 AAA 1,670,492 Arizona, General Obligation Bonds, Series 2004A, 5.000%, 7/01/20 - FSA Insured 440 Tucson, Arizona, General Obligation Bonds, Series 2001B, 7/11 at 100.00 AA 458,454 5.000%, 7/01/20 - ------------------------------------------------------------------------------------------------------------------------------------ 3,850 Total Tax Obligation/General 4,057,273 - ------------------------------------------------------------------------------------------------------------------------------------ TAX OBLIGATION/LIMITED - 38.3% (25.5% OF TOTAL INVESTMENTS) 2,000 Arizona State Transportation Board, Highway Revenue 7/12 at 102.00 AAA 2,164,600 Refunding Bonds, Series 2002A, 5.250%, 7/01/18 158 Centerra Community Facilities District, Goodyear, Arizona, 7/15 at 100.00 N/R 162,020 General Obligation Bonds, Series 2005, 5.500%, 7/15/29 2,250 DC Ranch Community Facilities District, Scottsdale, Arizona, 7/13 at 100.00 Aaa 2,353,410 General Obligation Bonds, Series 2002, 5.000%, 7/15/27 - AMBAC Insured 341 Estrella Mountain Ranch Community Facilities District, 7/10 at 102.00 N/R 376,502 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 838,760 General Obligation Bonds, Series 2003, 5.350%, 7/15/28 - ACA Insured 525 Greater Arizona Development Authority, Infrastructure Revenue 8/16 at 100.00 AAA 558,259 Bonds, Series 2006A, 5.000%, 8/01/23 - MBIA Insured 785 Marana, Arizona, Tangerine Farms Road Improvement District 7/16 at 100.00 Baa1 780,361 Revenue Bonds, Series 2006, 4.600%, 1/01/26 2,000 Mohave County, Arizona, Certificates of Participation, 7/14 at 100.00 AAA 2,163,000 Series 2004, 5.250%, 7/01/19 - AMBAC Insured 640 Palm Valley Community Facility District 3, Goodyear, Arizona, 7/16 at 100.00 N/R 649,062 General Obligation Bonds, Series 2006, 5.300%, 7/15/31 160 Parkway Community Facilities District 1, Prescott Valley, 7/16 at 100.00 N/R 162,307 Arizona, General Obligation Bonds, Series 2006, 5.350%, 7/15/31 1,250 Pinal County Industrial Development Authority, Arizona, No Opt. Call A 1,291,300 Correctional Facilities Contract Revenue Bonds, Florence West Prison LLC, Series 2002A, 5.000%, 10/01/18 - ACA Insured 29 Nuveen Arizona Dividend Advantage Municipal Fund 3 (NXE) (continued) Portfolio of INVESTMENTS January 31, 2007 (Unaudited) PRINCIPAL OPTIONAL CALL AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE - ------------------------------------------------------------------------------------------------------------------------------------ TAX OBLIGATION/LIMITED (continued) $ 136 Puerto Rico Infrastructure Financing Authority, Special Tax No Opt. Call AAA $ 112,318 Bonds, Residual Series 1534, 5.655%, 7/01/42 - AMBAC Insured (IF) 8,470 Puerto Rico Infrastructure Financing Authority, Special Tax No Opt. Call AAA 1,674,350 Revenue Bonds, Series 2005A, 0.000%, 7/01/42 - FGIC Insured (UB) 1,130 San Luis Civic Improvement Corporation, Arizona, Municipal 7/15 at 100.00 AAA 1,192,263 Facilities Excise Tax Revenue Bonds, Series 2005, 5.000%, 7/01/25 - XLCA Insured 1,250 Vistancia Community Facilities District, Arizona, Restricted 7/15 at 100.00 Baa1 1,361,150 General Obligation Bonds, Series 2005, 5.750%, 7/15/24 665 Watson Road Community Facilities District, Arizona, Special 7/16 at 100.00 N/R 703,417 Assessment Revenue Bonds, Series 2005, 6.000%, 7/01/30 425 Westpark Community Facilities District, Buckeye, Arizona, 7/16 at 100.00 N/R 427,979 General Obligation Tax Increment Bonds Series 2006, 5.250%, 7/15/31 - ------------------------------------------------------------------------------------------------------------------------------------ 22,985 Total Tax Obligation/Limited 16,971,058 - ------------------------------------------------------------------------------------------------------------------------------------ TRANSPORTATION - 13.5% (9.0% OF TOTAL INVESTMENTS) Phoenix, Arizona, Civic Improvement Corporation, Senior Lien Airport Revenue Bonds, Series 2002B: 1,000 5.750%, 7/01/16 - FGIC Insured (Alternative Minimum Tax) 7/12 at 100.00 AAA 1,082,160 2,300 5.250%, 7/01/21 - FGIC Insured (Alternative Minimum Tax) 7/12 at 100.00 AAA 2,399,981 2,450 Tucson Airport Authority Inc., Arizona, Revenue Refunding 6/11 at 100.00 AAA 2,513,112 Bonds, Series 2001B, 5.000%, 6/01/20 - AMBAC Insured (Alternative Minimum Tax) - ------------------------------------------------------------------------------------------------------------------------------------ 5,750 Total Transportation 5,995,253 - ------------------------------------------------------------------------------------------------------------------------------------ U.S. GUARANTEED - 23.2% (15.4% OF TOTAL INVESTMENTS) (4) 1,000 Arizona Health Facilities Authority, Hospital System Revenue 12/10 at 102.00 BBB (4) 1,124,060 Bonds, John C. Lincoln Health Network, Series 2000, 6.875%, 12/01/20 (Pre-refunded 12/01/10) 1,760 Arizona State University, System Revenue Bonds, Series 2002, 7/12 at 100.00 AAA 1,928,784 5.750%, 7/01/27 (Pre-refunded 7/01/12) - FGIC Insured 2,660 Arizona Tourism and Sports Authority, Tax Revenue Bonds, 7/13 at 100.00 Aaa 2,892,537 Multipurpose Stadium Facility Project, Series 2003A, 5.375%, 7/01/20 (Pre-refunded 7/01/13) - MBIA Insured 1,250 Scottsdale Industrial Development Authority, Arizona, Hospital 12/11 at 101.00 A3 (4) 1,367,763 Revenue Bonds, Scottsdale Healthcare, Series 2001, 5.800%, 12/01/31 (Pre-refunded 12/01/11) 2,770 Tempe, Arizona, Excise Tax Revenue Refunding Bonds, 7/13 at 100.00 AAA 2,960,047 Series 2003, 5.000%, 7/01/22 (Pre-refunded 7/01/13) - ------------------------------------------------------------------------------------------------------------------------------------ 9,440 Total U.S. Guaranteed 10,273,191 - ------------------------------------------------------------------------------------------------------------------------------------ UTILITIES - 12.1% (8.1% OF TOTAL INVESTMENTS) 1,250 Maricopa County Pollution Control Corporation, Arizona, 11/12 at 100.00 AAA 1,301,238 Revenue Bonds, Arizona Public Service Company - Palo Verde Project, Series 2002A, 5.050%, 5/01/29 - AMBAC Insured Puerto Rico Electric Power Authority, Power Revenue Bonds, Series 2005RR: 1,660 5.000%, 7/01/26 - XLCA Insured 7/15 at 100.00 AAA 1,758,720 935 5.000%, 7/01/27 - XLCA Insured 7/15 at 100.00 AAA 988,557 Salt River Project Agricultural Improvement and Power District, Arizona, Electric System Revenue Bonds, Series 2002B: 270 5.000%, 1/01/22 1/13 at 100.00 Aa1 283,222 1,000 5.000%, 1/01/31 1/13 at 100.00 Aa1 1,041,490 - ------------------------------------------------------------------------------------------------------------------------------------ 5,115 Total Utilities 5,373,227 - ------------------------------------------------------------------------------------------------------------------------------------ 30 PRINCIPAL OPTIONAL CALL AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE - ------------------------------------------------------------------------------------------------------------------------------------ WATER AND SEWER - 11.1% (7.4% OF TOTAL INVESTMENTS) $ 405 Oro Valley Municipal Property Corporation, Arizona, Senior 7/13 at 100.00 AAA $ 425,837 Lien Water Revenue Bonds, Series 2003, 5.000%, 7/01/23 - MBIA Insured 380 Phoenix Civic Improvement Corporation, Arizona, Junior Lien 7/14 at 100.00 AAA 400,550 Wastewater System Revenue Bonds, Series 2004, 5.000%, 7/01/24 - MBIA Insured 1,000 Phoenix Civic Improvement Corporation, Arizona, Junior Lien 7/11 at 100.00 AAA 1,047,780 Wastewater System Revenue Refunding Bonds, Series 2001, 5.125%, 7/01/21 - FGIC Insured 2,000 Phoenix Civic Improvement Corporation, Arizona, Junior Lien 7/12 at 100.00 AAA 2,100,940 Water System Revenue Bonds, Series 2002, 5.000%, 7/01/18 - FGIC Insured 920 Phoenix Civic Improvement Corporation, Arizona, Junior Lien 7/15 at 100.00 AAA 976,046 Water System Revenue Bonds, Series 2005, 5.000%, 7/01/23 - MBIA Insured - ------------------------------------------------------------------------------------------------------------------------------------ 4,705 Total Water and Sewer 4,951,153 - ------------------------------------------------------------------------------------------------------------------------------------ $ 69,970 Total Investments (cost $64,637,108) - 149.8% 66,567,119 =============----------------------------------------------------------------------------------------------------------------------- Floating Rate Obligations - (2.7)% (1,185,379) -------------------------------------------------------------------------------------------------------------------- Other Assets Less Liabilities - 2.4% 1,046,856 -------------------------------------------------------------------------------------------------------------------- Preferred Shares, at Liquidation Value - (49.5)% (22,000,000) -------------------------------------------------------------------------------------------------------------------- Net Assets Applicable to Common Shares - 100% $ 44,428,596 ====================================================================================================================
(1) All percentages shown in the Portfolio of Investments are based on net assets applicable to Common shares unless otherwise noted. (2) Optional Call Provisions: Dates (month and year) and prices of the earliest optional call or redemption. There may be other call provisions at varying prices at later dates. Certain mortgage-backed securities may be subject to periodic principal paydowns. (3) Ratings: Using the higher of Standard & Poor's or Moody's rating. Ratings below BBB by Standard & Poor's Group or Baa by Moody's Investor Service, Inc. are considered to be below investment grade. (4) Backed by an escrow or trust containing sufficient U.S. Government or U.S. Government agency securities which ensure the timely payment of principal and interest. Such investments are normally considered to be equivalent to AAA rated securities. N/R Not rated. (IF) Inverse floating rate investment. (UB) Underlying bond of an inverse floating rate trust reflected as a financing transaction pursuant to the provisions of SFAS No. 140. See accompanying notes to financial statements. 31 Nuveen Texas Quality Income Municipal Fund (NTX) Portfolio of INVESTMENTS January 31, 2007 (Unaudited)
PRINCIPAL OPTIONAL CALL AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE - ------------------------------------------------------------------------------------------------------------------------------------ CONSUMER STAPLES - 1.9% (1.3% OF TOTAL INVESTMENTS) $ 2,680 Puerto Rico, The Children's Trust Fund, Tobacco Settlement 5/12 at 100.00 BBB $ 2,801,270 Asset-Backed Refunding Bonds, Series 2002, 5.375%, 5/15/33 - ------------------------------------------------------------------------------------------------------------------------------------ EDUCATION AND CIVIC ORGANIZATIONS - 18.6% (12.5% OF TOTAL INVESTMENTS) 6,000 Board of Regents, University of Texas System, Financing 2/17 at 100.00 AAA 5,746,680 System Revenue Bonds, Series 2006F, 4.250%, 8/15/36 (UB) Red River Education Finance Corporation, Texas, Revenue Bonds, Hockaday School, Series 2005: 1,170 5.000%, 5/15/27 5/15 at 100.00 AA 1,216,999 1,230 5.000%, 5/15/28 5/15 at 100.00 AA 1,279,409 1,290 5.000%, 5/15/29 5/15 at 100.00 AA 1,342,735 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 1,806,051 1,795 5.000%, 5/01/19 - FGIC Insured 5/13 at 100.00 Aaa 1,891,768 1,885 5.000%, 5/01/20 - FGIC Insured 5/13 at 100.00 Aaa 1,985,546 1,665 Texas State University System, Financing Revenue Bonds, 9/14 at 100.00 AAA 1,747,151 Series 2004, 5.000%, 3/15/24 - FSA Insured 2,000 Texas State University System, Financing Revenue Refunding 3/12 at 100.00 AAA 2,091,240 Bonds, Series 2002, 5.000%, 3/15/20 - FSA Insured 2,330 Universal City Education Facilities Corporation, Texas, 3/11 at 102.00 A- 2,448,131 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 5,208,700 Series 2001, 5.000%, 4/15/24 - FSA Insured - ------------------------------------------------------------------------------------------------------------------------------------ 26,075 Total Education and Civic Organizations 26,764,410 - ------------------------------------------------------------------------------------------------------------------------------------ ENERGY - 2.1% (1.4% OF TOTAL INVESTMENTS) 3,000 Gulf Coast Waste Disposal Authority, Texas, Waste Disposal 4/08 at 102.00 BBB 3,064,650 Revenue Bonds, Valero Energy Corporation Project, Series 1998, 5.600%, 4/01/32 (Alternative Minimum Tax) - ------------------------------------------------------------------------------------------------------------------------------------ HEALTH CARE - 13.3% (9.0% OF TOTAL INVESTMENTS) 3,500 Abilene Health Facilities Development Corporation, Texas, 3/07 at 101.00 AAA 3,541,160 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 1,845,285 1,835 5.250%, 7/01/21 - RAAI Insured 7/14 at 100.00 AA 1,938,072 5,750 Midland County Hospital District, Texas, Hospital Revenue No Opt. Call N/R 4,416,403 Bonds, Series 1992, 0.000%, 6/01/11 2,000 North Central Texas Health Facilities Development Corporation, 5/11 at 100.00 AA- 2,044,600 Hospital Revenue Bonds, Baylor Healthcare System, Series 2001A, 5.125%, 5/15/29 2,000 Richardson Hospital Authority, Texas, Revenue Bonds, 12/13 at 100.00 BBB 2,169,880 Richardson Regional Medical Center, Series 2004, 5.875%, 12/01/24 2,000 Tom Green County Health Facilities Development Corporation, 5/11 at 101.00 Baa3 2,168,520 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 1,064,190 Hospital Revenue Bonds, Mother Frances Hospital Regional Healthcare Center, Series 2001, 6.000%, 7/01/31 - ------------------------------------------------------------------------------------------------------------------------------------ 19,830 Total Health Care 19,188,110 - ------------------------------------------------------------------------------------------------------------------------------------ 32 PRINCIPAL OPTIONAL CALL AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE - ------------------------------------------------------------------------------------------------------------------------------------ HOUSING/MULTIFAMILY - 3.5% (2.3% OF TOTAL INVESTMENTS) Bexar County Housing Finance Corporation, Texas, Insured Multifamily Housing Revenue Bonds, Waters at Northern Hills Apartments Project, Series 2001A: $ 2,000 6.000%, 8/01/31 - MBIA Insured 8/11 at 102.00 Aaa $ 2,040,140 750 6.050%, 8/01/36 - MBIA Insured 8/11 at 102.00 Aaa 765,435 2,064 Houston Housing Finance Corporation, Texas, GNMA 9/11 at 105.00 Aaa 2,199,894 Collateralized Mortgage Multifamily Housing Revenue Bonds, RRG Apartments Project, Series 2001, 6.250%, 9/20/35 - ------------------------------------------------------------------------------------------------------------------------------------ 4,814 Total Housing/Multifamily 5,005,469 - ------------------------------------------------------------------------------------------------------------------------------------ HOUSING/SINGLE FAMILY - 3.9% (2.7% OF TOTAL INVESTMENTS) 2,416 El Paso Housing Finance Corporation, Texas, GNMA 4/11 at 106.75 AAA 2,553,984 Collateralized Single Family Mortgage Revenue Bonds, Series 2001A-3, 6.180%, 4/01/33 110 Galveston Property Finance Authority Inc., Texas, Single 3/07 at 100.00 A3 111,973 Family Mortgage Revenue Bonds, Series 1991A, 8.500%, 9/01/11 2,900 Texas Department of Housing and Community Affairs, 3/12 at 100.00 AAA 3,002,370 Single Family Mortgage Bonds, Series 2002B, 5.550%, 9/01/33 - MBIA Insured (Alternative Minimum Tax) 20 Victoria Housing Finance Corporation, Texas, FNMA Single No Opt. Call Aaa 20,727 Family Mortgage Revenue Refunding Bonds, Series 1995, 8.125%, 1/01/11 - ------------------------------------------------------------------------------------------------------------------------------------ 5,446 Total Housing/Single Family 5,689,054 - ------------------------------------------------------------------------------------------------------------------------------------ LONG-TERM CARE - 7.1% (4.8% 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- 3,471,876 5,000 5.250%, 11/15/28 11/08 at 101.00 A- 5,098,750 Bexar County, Texas, Health Facilities Development Corporation Revenue Bonds, Army Retirement Residence, Series 2007: 1,000 5.000%, 7/01/27 7/17 at 100.00 BBB 1,026,940 600 5.000%, 7/01/37 7/17 at 100.00 BBB 611,202 - ------------------------------------------------------------------------------------------------------------------------------------ 10,000 Total Long-Term Care 10,208,768 - ------------------------------------------------------------------------------------------------------------------------------------ MATERIALS - 4.3% (2.9% OF TOTAL INVESTMENTS) 3,000 Cass County Industrial Development Corporation, Texas, 3/10 at 101.00 BBB 3,204,360 Environmental Improvement Revenue Bonds, International Paper Company, Series 2000A, 6.600%, 3/15/24 (Alternative Minimum Tax) 3,000 Guadalupe-Blanco River Authority, Texas, Sewage and Solid 4/07 at 101.00 A 3,064,470 Waste Disposal Facility Bonds, E.I. DuPont de Nemours and Company Project, Series 1996, 6.400%, 4/01/26 (Alternative Minimum Tax) - ------------------------------------------------------------------------------------------------------------------------------------ 6,000 Total Materials 6,268,830 - ------------------------------------------------------------------------------------------------------------------------------------ TAX OBLIGATION/GENERAL - 45.9% (30.9% OF TOTAL INVESTMENTS) 1,260 Bexar County, Texas, Combined Tax and Revenue Certificates 6/14 at 100.00 AA 1,327,360 of Obligation, Series 2004, 5.000%, 6/15/19 2,500 Borger Independent School District, Hutchison County, Texas, 2/16 at 100.00 AAA 2,623,200 General Obligation Bonds, Series 2006, 5.000%, 2/15/36 1,190 Canutillo Independent School District, El Paso County, Texas, 8/15 at 100.00 AAA 1,257,259 General Obligation Bonds, Series 2006A, 5.000%, 8/15/22 4,130 Coppell Independent School District, Dallas County, Texas, 8/09 at 75.34 AAA 2,795,101 Unlimited Tax School Building and Refunding Bonds, Series 1992, 0.000%, 8/15/14 - MBIA Insured 1,275 Copperas Cove, Texas, Certificates of Obligation, Series 2003, 8/12 at 100.00 AAA 1,332,605 5.000%, 8/15/23 - MBIA Insured 2,305 Corpus Christi, Texas, Combination Tax and Municipal Hotel 9/12 at 100.00 AAA 2,479,973 Occupancy Tax Revenue Certificates of Obligation, Series 2002, 5.500%, 9/01/21 - FSA Insured 2,595 Denton County, Texas, Permanent Improvement General 7/12 at 100.00 AA 2,705,521 Obligation Bonds, Series 2005, 5.000%, 7/15/25 2,110 Duncanville Independent School District, Dallas County, 2/15 at 100.00 AAA 2,216,049 Texas, General Obligation Bonds, Series 2005, 5.000%, 2/15/26 33 Nuveen Texas Quality Income Municipal Fund (NTX) (continued) Portfolio of INVESTMENTS January 31, 2007 (Unaudited) PRINCIPAL OPTIONAL CALL AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE - ------------------------------------------------------------------------------------------------------------------------------------ TAX OBLIGATION/GENERAL (continued) $ 1,750 El Paso County, Texas, Certificates of Obligation, Series 2001, No Opt. Call AAA $ 1,909,968 5.000%, 2/15/21 - FSA Insured Fort Bend County Municipal Utility District 25, Texas, General Obligation Bonds, Series 2005: 1,330 5.000%, 10/01/26 - FGIC Insured 10/12 at 100.00 AAA 1,373,943 1,320 5.000%, 10/01/27 - FGIC Insured 10/12 at 100.00 AAA 1,362,266 3,615 Frisco, Texas, General Obligation Bonds, Series 2006, 2/16 at 100.00 AAA 3,812,487 5.000%, 2/15/26 - FGIC Insured Houston Community College, Texas, Limited Tax General Obligation Bonds, Series 2003: 2,500 5.000%, 2/15/20 - AMBAC Insured 2/13 at 100.00 AAA 2,632,225 2,235 5.000%, 2/15/21 - AMBAC Insured 2/13 at 100.00 AAA 2,353,209 5,000 Houston, Texas, General Obligation Bonds, Series 2005E, 3/15 at 100.00 AAA 5,273,350 5.000%, 3/01/23 - AMBAC Insured 1,500 Judson Independent School District, Bexar County, Texas, 2/11 at 100.00 Aaa 1,567,545 General Obligation Refunding Bonds, Series 2002, 5.250%, 2/01/21 5,220 Leander Independent School District, Williamson and Travis 8/09 at 46.74 AAA 2,186,867 Counties, Texas, Unlimited Tax School Building and Refunding Bonds, Series 2000, 0.000%, 8/15/21 1,000 Mansfield Independent School District, Tarrant County, Texas, 2/14 at 100.00 AAA 1,052,340 General Obligation Bonds, Series 2004, 5.000%, 2/15/20 1,010 Mercedes Independent School District, Hidalgo County, 8/15 at 100.00 AAA 1,066,348 Texas, General Obligation Bonds, Series 2005, 5.000%, 8/15/23 5,515 Midlothian Independent School District, Ellis County, Texas, 2/15 at 100.00 Aaa 5,761,574 General Obligation Bonds, Series 2005, 5.000%, 2/15/34 1,545 Montgomery County, Texas, General Obligation Refunding 9/07 at 72.39 AAA 1,091,373 Bonds, Series 1997, 0.000%, 3/01/14 - MBIA Insured 925 Northside Independent School District, Bexar County, Texas, 8/10 at 100.00 AAA 983,571 Unlimited Tax School Building and Refunding Bonds, Series 2000, 5.875%, 8/15/25 500 Puerto Rico, General Obligation and Public Improvement Bonds, No Opt. Call BBB 579,035 Series 2001A, 5.500%, 7/01/29 Roma Independent School District, Texas, General Obligation Bonds, Series 2005: 1,110 5.000%, 8/15/22 8/15 at 100.00 AAA 1,173,559 1,165 5.000%, 8/15/23 - FSA Insured 8/15 at 100.00 AAA 1,229,995 1,440 South Texas Community College District, General Obligation 8/12 at 100.00 AAA 1,551,082 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 1,314,438 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 1,222,319 Series 2004, 5.250%, 2/15/25 5,000 Texas, General Obligation Bonds, Transportation Commission 4/17 at 100.00 Aa1 5,287,650 Mobility Fund, Series 2006A, 5.000%, 4/01/33 2,000 Texas, General Obligation Bonds, Water Financial Assistance 8/11 at 100.00 Aa1 2,100,340 Program, Series 2001, 5.250%, 8/01/23 1,500 Texas, General Obligation Refunding Bonds, Public Finance 10/12 at 100.00 Aa1 1,578,795 Authority, Series 2002, 5.000%, 10/01/18 West Texas Independent School District, McLennan and Hill Counties, General Obligation Refunding Bonds, Series 1998: 1,000 0.000%, 8/15/22 8/13 at 61.20 AAA 458,980 1,000 0.000%, 8/15/24 8/13 at 54.88 AAA 409,180 - ------------------------------------------------------------------------------------------------------------------------------------ 68,935 Total Tax Obligation/General 66,069,507 - ------------------------------------------------------------------------------------------------------------------------------------ TAX OBLIGATION/LIMITED - 1.6% (1.1% OF TOTAL INVESTMENTS) 2,250 Harris County-Houston Sports Authority, Texas, Senior Lien 11/11 at 100.00 AAA 2,357,348 Revenue Bonds, Series 2001G, 5.250%, 11/15/22 - MBIA Insured - ------------------------------------------------------------------------------------------------------------------------------------ 34 PRINCIPAL OPTIONAL CALL AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE - ------------------------------------------------------------------------------------------------------------------------------------ TRANSPORTATION - 6.4% (4.3% OF TOTAL INVESTMENTS) $ 1,000 Austin, Texas, Airport System Prior Lien Revenue Bonds, 11/13 at 100.00 AAA $ 1,069,200 Series 2003, 5.250%, 11/15/16 - MBIA Insured 3,260 Central Texas Regional Mobility Authority, Travis and 1/15 at 100.00 AAA 3,417,197 Williamson Counties, Toll Road Revenue Bonds, Series 2005, 5.000%, 1/01/22 - FGIC Insured 2,600 Dallas-Ft. Worth International Airport Facility Improvement 11/09 at 101.00 CCC+ 2,686,840 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 2,095,260 Bonds, Series 2000A, 5.625%, 7/01/30 - FSA Insured (Alternative Minimum Tax) - ------------------------------------------------------------------------------------------------------------------------------------ 8,860 Total Transportation 9,268,497 - ------------------------------------------------------------------------------------------------------------------------------------ U.S. GUARANTEED - 19.4% (13.0% OF TOTAL INVESTMENTS) (4) Gregg County Health Facilities Development Corporation, Texas, Hospital Revenue Bonds, Good Shepherd Medical Center Project, Series 2000: 2,000 6.875%, 10/01/20 (Pre-refunded 10/01/10) - RAAI Insured 10/10 at 101.00 AA (4) 2,223,760 3,250 6.375%, 10/01/25 (Pre-refunded 10/01/10) - RAAI Insured 10/10 at 101.00 AA (4) 3,559,693 2,000 Harris County Health Facilities Development Corporation, 6/11 at 101.00 A+ (4) 2,218,300 Texas, Hospital Revenue Bonds, Memorial Hermann Healthcare System, Series 2001A, 6.375%, 6/01/29 (Pre-refunded 6/01/11) 1,500 Harris County Health Facilities Development Corporation, 8/11 at 100.00 AAA 1,604,070 Texas, Revenue Bonds, St. Luke's Episcopal Hospital, Series 2001A, 5.500%, 2/15/21 (Pre-refunded 8/15/11) 1,000 North Central Texas Health Facilities Development No Opt. Call AAA 1,168,460 Corporation, Hospital Revenue Bonds, Presbyterian Healthcare System, Series 1996B, 5.750%, 6/01/26 - MBIA Insured (ETM) 1,075 Northside Independent School District, Bexar County, Texas, 8/10 at 100.00 AAA 1,150,583 Unlimited Tax School Building and Refunding Bonds, Series 2000, 5.875%, 8/15/25 (Pre-refunded 8/15/10) 1,760 Parker County Hospital District, Texas, Hospital Revenue 8/09 at 102.00 BB- (4) 1,896,506 Bonds, Campbell Health System, Series 1999, 6.250%, 8/15/19 (Pre-refunded 8/15/09) 2,500 Retama Development Corporation, Texas, Special Facilities 12/17 at 100.00 AAA 3,166,500 Revenue Bonds, Retama Park Racetrack, Series 1993, 8.750%, 12/15/18 (Pre-refunded 12/15/17) (5) 1,750 San Antonio, Texas, Electric and Gas System Revenue 2/12 at 100.00 AAA 1,868,283 Refunding Bonds, Series 2002, 5.375%, 2/01/20 (Pre-refunded 2/01/12) 1,050 Tarrant County Health Facilities Development Corporation, 11/08 at 101.00 Aaa 1,090,593 Texas, Hospital Revenue Bonds, Adventist Health System - Sunbelt Obligated Group, Series 1998, 5.375%, 11/15/20 (Pre-refunded 11/15/08) 3,500 Tarrant County Health Facilities Development Corporation, 11/10 at 101.00 A+ (4) 3,870,055 Texas, Hospital Revenue Bonds, Adventist Health System - Sunbelt Obligated Group, Series 2000, 6.625%, 11/15/20 (Pre-refunded 11/15/10) 2,000 Tarrant County Health Facilities Development Corporation, 1/08 at 105.00 AAA 2,138,380 Texas, Tax-Exempt Mortgage Revenue Bonds, South Central Nursing Homes Inc., Series 1997A, 6.000%, 1/01/37 (Pre-refunded 1/01/08) - MBIA Insured 1,790 Weslaco Independent School District, Hidalgo County, Texas, 2/10 at 100.00 Aaa 1,878,891 General Obligation School Building Bonds, Series 2000, 5.500%, 2/15/25 (Pre-refunded 2/15/10) - ------------------------------------------------------------------------------------------------------------------------------------ 25,175 Total U.S. Guaranteed 27,834,074 - ------------------------------------------------------------------------------------------------------------------------------------ UTILITIES - 9.6% (6.5% OF TOTAL INVESTMENTS) 2,560 Brazos River Authority, Texas, Pollution Control Revenue 4/13 at 101.00 Baa2 2,974,822 Refunding Bonds, TXU Electric Company, 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- 2,463,336 Energy Inc., Series 1999A, 5.375%, 4/01/19 5,000 Brownsville, Texas, Utility System Priority Revenue Bonds, 9/15 at 100.00 AAA 5,258,000 Series 2005A, 5.000%, 9/01/27 - AMBAC Insured 35 Nuveen Texas Quality Income Municipal Fund (NTX) (continued) Portfolio of INVESTMENTS January 31, 2007 (Unaudited) PRINCIPAL OPTIONAL CALL AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE - ------------------------------------------------------------------------------------------------------------------------------------ UTILITIES (continued) $ 2,000 Harris County Health Facilities Development Corporation, 2/10 at 100.00 AAA $ 2,094,800 Texas, Thermal Utility Revenue Bonds, TECO Project, Series 2000, 5.750%, 2/15/15 - AMBAC Insured (Alternative Minimum Tax) 1,000 Matagorda County Navigation District 1, Texas, Revenue 5/09 at 101.00 BBB- 1,028,990 Bonds, Reliant Energy Inc., Series 1999B, 5.950%, 5/01/30 (Alternative Minimum Tax) - ------------------------------------------------------------------------------------------------------------------------------------ 12,960 Total Utilities 13,819,948 - ------------------------------------------------------------------------------------------------------------------------------------ WATER AND SEWER - 10.8% (7.3% OF TOTAL INVESTMENTS) Coastal Water Authority, Texas, Contract Revenue Bonds, Houston Water Projects, Series 2004: 1,005 5.000%, 12/15/20 - FGIC Insured 12/14 at 100.00 AAA 1,062,164 1,030 5.000%, 12/15/21 - FGIC Insured 12/14 at 100.00 AAA 1,087,175 3,000 Houston, Texas, First Lien Combined Utility System Revenue 5/14 at 100.00 AAA 3,223,110 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 3,749,095 Revenue Refunding Bonds, Series 2001A, 5.500%, 12/01/17 - FSA Insured Irving, Texas, Subordinate Lien Waterworks and Sewerage Revenue Bonds, Series 2004: 1,680 5.000%, 8/15/22 - AMBAC Insured 8/14 at 100.00 AAA 1,765,495 1,760 5.000%, 8/15/23 - AMBAC Insured 8/14 at 100.00 AAA 1,847,243 1,260 Rowlett, Rockwall and Dallas Counties, Texas, Waterworks 3/14 at 100.00 AAA 1,316,839 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 1,553,865 Fund Revenue Bonds, Series 1999A, 5.500%, 7/15/21 - ------------------------------------------------------------------------------------------------------------------------------------ 14,735 Total Water and Sewer 15,604,986 - ------------------------------------------------------------------------------------------------------------------------------------ $ 210,760 Total Investments (cost $204,934,890) - 148.4% 213,944,921 =============----------------------------------------------------------------------------------------------------------------------- Floating Rate Obligations - (2.6)% (3,775,000) -------------------------------------------------------------------------------------------------------------------- Other Assets Less Liabilities - 2.1% 2,972,199 -------------------------------------------------------------------------------------------------------------------- Preferred Shares, at Liquidation Value - (47.9)% (69,000,000) -------------------------------------------------------------------------------------------------------------------- Net Assets Applicable to Common Shares - 100% $ 144,142,120 ====================================================================================================================
(1) All percentages shown in the Portfolio of Investments are based on net assets applicable to Common shares unless otherwise noted. (2) Optional Call Provisions: Dates (month and year) and prices of the earliest optional call or redemption. There may be other call provisions at varying prices at later dates. Certain mortgage-backed securities may be subject to periodic principal paydowns. (3) Ratings: Using the higher of Standard & Poor's or Moody's rating. Ratings below BBB by Standard & Poor's Group or Baa by Moody's Investor Service, Inc. are considered to be below investment grade. (4) Backed by an escrow or trust containing sufficient U.S. Government or U.S. Government agency securities which ensure the timely payment of principal and interest. Such investments are normally considered to be equivalent to AAA rated securities. (5) The issuer has received a formal adverse determination from the Internal Revenue Service (the "IRS") regarding the tax-exempt status of the bonds' coupon payments. The Fund will continue to treat coupon payments as tax-exempt income until such time that it is formally determined that the interest on the bonds should be treated as taxable. N/R Not rated. (ETM) Escrowed to maturity. (UB) Underlying bond of an inverse floating rate trust reflected as a financing transaction pursuant to the provisions of SFAS No. 140. See accompanying notes to financial statements. 36 Statement of ASSETS AND LIABILITIES January 31, 2007 (Unaudited)
ARIZONA ARIZONA ARIZONA ARIZONA TEXAS PREMIUM DIVIDEND DIVIDEND DIVIDEND QUALITY INCOME ADVANTAGE ADVANTAGE 2 ADVANTAGE 3 INCOME (NAZ) (NFZ) (NKR) (NXE) (NTX) - ------------------------------------------------------------------------------------------------------------------------------------ ASSETS Investments, at value (cost $91,688,321, $34,306,399, $52,824,958, $64,637,108 and $204,934,890, respectively) $95,323,188 $35,430,221 $55,161,709 $66,567,119 $213,944,921 Cash -- -- -- 650,102 64,726 Receivables: Interest 666,070 286,404 415,193 425,591 3,229,580 Investments sold -- -- 1,113,599 -- 14,558 Other assets 1,398 1,190 2,951 8,011 3,379 - ------------------------------------------------------------------------------------------------------------------------------------ Total assets 95,990,656 35,717,815 56,693,452 67,650,823 217,257,164 - ------------------------------------------------------------------------------------------------------------------------------------ LIABILITIES Cash overdraft 126,716 51,037 485,808 -- -- Floating rate obligations 2,054,352 622,856 994,488 1,185,379 3,775,000 Accrued expenses: Management fees 50,724 11,483 15,741 17,804 114,260 Other 29,202 20,379 7,456 14,976 193,086 Preferred share dividends payable 16,272 1,035 11,352 4,068 32,698 - ------------------------------------------------------------------------------------------------------------------------------------ Total liabilities 2,277,266 706,790 1,514,845 1,222,227 4,115,044 - ------------------------------------------------------------------------------------------------------------------------------------ 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 $63,713,390 $23,011,025 $36,678,607 $44,428,596 $144,142,120 ==================================================================================================================================== Common shares outstanding 4,468,210 1,548,711 2,433,004 3,067,531 9,495,144 ==================================================================================================================================== Net asset value per Common share outstanding (net assets applicable to Common shares, divided by Common shares outstanding) $ 14.26 $ 14.86 $ 15.08 $ 14.48 $ 15.18 ==================================================================================================================================== NET ASSETS APPLICABLE TO COMMON SHARES CONSIST OF: - ------------------------------------------------------------------------------------------------------------------------------------ Common shares, $.01 par value per share $ 44,682 $ 15,487 $ 24,330 $ 30,675 $ 94,951 Paid-in surplus 62,143,653 21,908,212 34,477,587 43,247,056 134,624,791 Undistributed (Over-distribution of) net investment income (116,585) (38,104) (55,747) (145,516) 128,011 Accumulated net realized gain (loss) from investments and derivative transactions (1,993,227) 1,608 (104,314) (633,630) 284,336 Net unrealized appreciation (depreciation) of investments and derivative transactions 3,634,867 1,123,822 2,336,751 1,930,011 9,010,031 - ------------------------------------------------------------------------------------------------------------------------------------ Net assets applicable to Common shares $63,713,390 $23,011,025 $36,678,607 $44,428,596 $144,142,120 ==================================================================================================================================== Authorized shares: Common 200,000,000 Unlimited Unlimited Unlimited Unlimited Preferred 1,000,000 Unlimited Unlimited Unlimited Unlimited ====================================================================================================================================
See accompanying notes to financial statements. 37 Statement of OPERATIONS Six Months Ended January 31, 2007 (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 $2,262,239 $826,734 $1,335,947 $1,548,803 $ 5,377,612 - ------------------------------------------------------------------------------------------------------------------------------------ EXPENSES Management fees 301,947 113,011 178,142 213,782 680,755 Preferred shares - auction fees 37,808 15,123 23,315 27,725 86,958 Preferred shares - dividend disbursing agent fees 5,041 5,041 5,041 5,041 10,082 Shareholders' servicing agent fees and expenses 2,144 172 163 100 5,533 Floating rate obligations interest expense and fees 15,474 4,691 7,488 8,927 11,030 Custodian's fees and expenses 16,502 10,366 10,693 14,621 27,622 Directors'/Trustees' fees and expenses 1,244 394 814 968 3,008 Professional fees 6,698 5,388 5,826 6,080 9,410 Shareholders' reports - printing and mailing expenses 7,614 4,032 5,363 6,304 14,770 Stock exchange listing fees 4,974 66 104 131 4,983 Investor relations expense 6,116 2,260 3,519 4,169 13,182 Other expenses 8,103 6,231 6,821 6,854 10,276 - ------------------------------------------------------------------------------------------------------------------------------------ Total expenses before custodian fee credit and expense reimbursement 413,665 166,775 247,289 294,702 877,609 Custodian fee credit (6,956) (4,367) (3,657) (5,086) (14,473) Expense reimbursement -- (44,466) (84,112) (107,668) -- - ------------------------------------------------------------------------------------------------------------------------------------ Net expenses 406,709 117,942 159,520 181,948 863,136 - ------------------------------------------------------------------------------------------------------------------------------------ Net investment income 1,855,530 708,792 1,176,427 1,366,855 4,514,476 - ------------------------------------------------------------------------------------------------------------------------------------ REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) from investments 111,296 1,665 61,460 23,544 502,967 Net realized gain (loss) from forward swaps -- -- -- 10,344 -- Change in net unrealized appreciation (depreciation) of investments 579,343 292,793 246,863 581,385 1,180,748 Change in net unrealized appreciation (depreciation) of forward swaps -- -- -- (48,098) -- - ------------------------------------------------------------------------------------------------------------------------------------ Net realized and unrealized gain (loss) 690,639 294,458 308,323 567,175 1,683,715 - ------------------------------------------------------------------------------------------------------------------------------------ DISTRIBUTIONS TO PREFERRED SHAREHOLDERS From net investment income (489,202) (180,715) (282,079) (379,010) (1,147,823) From accumulated net realized gains -- (24,096) (24,790) -- (97,712) - ------------------------------------------------------------------------------------------------------------------------------------ Decrease in net assets applicable to Common shares from distributions to Preferred shareholders (489,202) (204,811) (306,869) (379,010) (1,245,535) - ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in net assets applicable to Common shares from operations $2,056,967 $798,439 $1,177,881 $1,555,020 $ 4,952,656 ====================================================================================================================================
See accompanying notes to financial statements. 38 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 1/31/07 7/31/06 1/31/07 7/31/06 1/31/07 7/31/06 - ------------------------------------------------------------------------------------------------------------------------------------ OPERATIONS Net investment income $ 1,855,530 $ 3,721,825 $ 708,792 $ 1,443,824 $ 1,176,427 $ 2,339,566 Net realized gain (loss) from investments 111,296 118,668 1,665 129,877 61,460 124,725 Net realized gain (loss) from forward swaps -- -- -- 45,960 -- 89,291 Change in net unrealized appreciation (depreciation) of investments 579,343 (1,870,680) 292,793 (781,653) 246,863 (1,063,447) Change in net unrealized appreciation (depreciation) of forward swaps -- -- -- (25,345) -- (50,556) Distributions to Preferred shareholders: From net investment income (489,202) (787,320) (180,715) (305,984) (282,079) (485,176) From accumulated net realized gains -- -- (24,096) (14,818) (24,790) (34,003) - ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in net assets applicable to Common shares from operations 2,056,967 1,182,493 798,439 491,861 1,177,881 920,400 - ------------------------------------------------------------------------------------------------------------------------------------ DISTRIBUTIONS TO COMMON SHAREHOLDERS From net investment income (1,367,272) (3,081,682) (570,721) (1,299,911) (904,843) (2,009,891) From accumulated net realized gains -- -- (95,091) (118,137) (98,537) (256,786) - ------------------------------------------------------------------------------------------------------------------------------------ Decrease in net assets applicable to Common shares from distributions to Common shareholders (1,367,272) (3,081,682) (665,812) (1,418,048) (1,003,380) (2,266,677) - ------------------------------------------------------------------------------------------------------------------------------------ CAPITAL SHARE TRANSACTIONS Net proceeds from Common shares issued to shareholders due to reinvestment of distributions -- 100,418 16,893 35,014 39,041 106,998 - ------------------------------------------------------------------------------------------------------------------------------------ Net increase in net assets applicable to Common shares from capital share transactions -- 100,418 16,893 35,014 39,041 106,998 - ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in net assets applicable to Common shares 689,695 (1,798,771) 149,520 (891,173) 213,542 (1,239,279) Net assets applicable to Common shares at the beginning of period 63,023,695 64,822,466 22,861,505 23,752,678 36,465,065 37,704,344 - ------------------------------------------------------------------------------------------------------------------------------------ Net assets applicable to Common shares at the end of period $63,713,390 $63,023,695 $23,011,025 $22,861,505 $36,678,607 $36,465,065 ==================================================================================================================================== Undistributed (Over-distribution of) net investment income at the end of period $ (116,585) $ (115,641) $ (38,104) $ 4,540 $ (55,747) $ (45,252) ====================================================================================================================================
See accompanying notes to financial statements. 39 Statement of CHANGES IN NET ASSETS (Unaudited) (continued)
ARIZONA TEXAS DIVIDEND ADVANTAGE 3 (NXE) QUALITY INCOME (NTX) ----------------------------- ---------------------------- SIX MONTHS SIX MONTHS ENDED YEAR ENDED ENDED YEAR ENDED 1/31/07 7/31/06 1/31/07 7/31/06 - ------------------------------------------------------------------------------------------------------------------------------------ OPERATIONS Net investment income $ 1,366,855 $ 2,706,006 $ 4,514,476 $ 9,149,206 Net realized gain (loss) from investments 23,544 111,246 502,967 1,401,122 Net realized gain (loss) from forward swaps 10,344 143,857 -- -- Change in net unrealized appreciation (depreciation) of investments 581,385 (1,013,672) 1,180,748 (4,517,912) Change in net unrealized appreciation (depreciation) of forward swaps (48,098) (30,567) -- -- Distributions to Preferred shareholders: From net investment income (379,010) (597,775) (1,147,823) (2,071,629) From accumulated net realized gains -- -- (97,712) -- - ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in net assets applicable to Common shares from operations 1,555,020 1,319,095 4,952,656 3,960,787 - ------------------------------------------------------------------------------------------------------------------------------------ DISTRIBUTIONS TO COMMON SHAREHOLDERS From net investment income (1,039,894) (2,239,245) (3,475,223) (7,757,330) From accumulated net realized gains -- -- (344,674) -- - ------------------------------------------------------------------------------------------------------------------------------------ Decrease in net assets applicable to Common shares from distributions to Common shareholders (1,039,894) (2,239,245) (3,819,897) (7,757,330) - ------------------------------------------------------------------------------------------------------------------------------------ CAPITAL SHARE TRANSACTIONS Net proceeds from Common shares issued to shareholders due to reinvestment of distributions -- 4,304 -- 88,073 - ------------------------------------------------------------------------------------------------------------------------------------ Net increase in net assets applicable to Common shares from capital share transactions -- 4,304 -- 88,073 - ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in net assets applicable to Common shares 515,126 (915,846) 1,132,759 (3,708,470) Net assets applicable to Common shares at the beginning of period 43,913,470 44,829,316 143,009,361 146,717,831 - ------------------------------------------------------------------------------------------------------------------------------------ Net assets applicable to Common shares at the end of period $44,428,596 $43,913,470 $144,142,120 $143,009,361 ==================================================================================================================================== Undistributed (Over-distribution of) net investment income at the end of period $ (145,516) $ (93,467) $ 128,011 $ 236,581 ====================================================================================================================================
See accompanying notes to financial statements. 40 Notes to FINANCIAL STATEMENTS (Unaudited) 1. GENERAL INFORMATION AND SIGNIFICANT ACCOUNTING POLICIES The state funds (the "Funds") covered in this report and their corresponding Common share stock exchange symbols are Nuveen Arizona Premium Income Municipal Fund, Inc. (NAZ), Nuveen Arizona Dividend Advantage Municipal Fund (NFZ), Nuveen Arizona Dividend Advantage Municipal Fund 2 (NKR), Nuveen Arizona Dividend Advantage Municipal Fund 3 (NXE) and Nuveen Texas Quality Income Municipal Fund (NTX). Common shares of Arizona Premium Income (NAZ) and Texas Quality Income (NTX) are traded on the New York Stock Exchange while Common shares of Arizona Dividend Advantage (NFZ), Arizona Dividend Advantage 2 (NKR) and Arizona Dividend Advantage 3 (NXE) are traded on the American Stock Exchange. The Funds are registered under the Investment Company Act of 1940, as amended, as closed-end management investment companies. Each Fund seeks to provide current income exempt from both regular federal and designated state income taxes by investing primarily in a diversified portfolio of municipal obligations issued by state and local government authorities within a single state or certain U.S. territories. The following is a summary of significant accounting policies followed by the Funds in the preparation of their financial statements in accordance with U.S. generally accepted accounting principles. Investment Valuation The prices of municipal bonds in each Fund's investment portfolio are provided by a pricing service approved by the Fund's Board of Directors/Trustees. When market price quotes are not readily available (which is usually the case for municipal securities), the pricing service may establish fair value based on yields or prices of municipal bonds of comparable quality, type of issue, coupon, maturity and rating, indications of value from securities dealers, evaluations of anticipated cash flows or collateral and general market conditions. Prices of forward swap contracts are also provided by an independent pricing service approved by each Fund's Board of Directors/Trustees. If the pricing service is unable to supply a price for a municipal bond or a forward swap contract, each Fund may use a market price or fair market value quote provided by a major broker/dealer in such investments. If it is determined that the market price or fair market value for an investment is unavailable or inappropriate, the Board of Directors/Trustees of the Funds, or its designee, may establish a fair value for the investment. Temporary investments in securities that have variable rate and demand features qualifying them as short-term investments are valued at amortized cost, which approximates market value. Investment Transactions Investment transactions are recorded on a trade date basis. Realized gains and losses from transactions are determined on the specific identification method. Investments purchased on a when-issued/delayed delivery basis may have extended settlement periods. Any investments so purchased are subject to market fluctuation during this period. The Funds have instructed the custodian to segregate assets with a current value at least equal to the amount of the when-issued/delayed delivery purchase commitments. At January 31, 2007, there were no such outstanding purchase commitments in any of the Funds. Investment Income Interest income, which includes the amortization of premiums and accretion of discounts for financial reporting purposes, is recorded on an accrual basis. Investment income also includes paydown gains and losses, if any. 41 Notes to FINANCIAL STATEMENTS (Unaudited) (continued) Income Taxes Each Fund is a separate taxpayer for federal income tax purposes. Each Fund intends to distribute substantially all net investment income and net capital gains to shareholders and to otherwise comply with the requirements of Subchapter M of the Internal Revenue Code applicable to regulated investment companies. Therefore, no federal income tax provision is required. Furthermore, each Fund intends to satisfy conditions which will enable interest from municipal securities, which is exempt from regular federal and designated state income taxes, to retain such tax-exempt status when distributed to shareholders of the Funds. Net realized capital gains and ordinary income distributions paid by the Funds are subject to federal taxation. Dividends and Distributions to Common Shareholders Dividends from tax-exempt net investment income are declared monthly. Net realized capital gains and/or market discount from investment transactions, if any, are distributed to shareholders not less frequently than annually. Furthermore, capital gains are distributed only to the extent they exceed available capital loss carryforwards. Distributions to Common shareholders of tax-exempt net investment income, net realized capital gains and/or market discount, if any, are recorded on the ex-dividend date. The amount and timing of distributions are determined in accordance with federal income tax regulations, which may differ from U.S. generally accepted accounting principles. Preferred Shares The Funds have issued and outstanding Preferred shares, $25,000 stated value per share, as a means of effecting financial leverage. Each Fund's Preferred shares are issued in one or more Series. The dividend rate paid by the Funds on each Series is determined every seven days, pursuant to a dutch auction process overseen by the auction agent, and is payable at the end of each rate period. The number of Preferred shares outstanding, by Series and in total, for each Fund is as follows:
ARIZONA ARIZONA ARIZONA ARIZONA TEXAS PREMIUM DIVIDEND DIVIDEND DIVIDEND QUALITY INCOME ADVANTAGE ADVANTAGE 2 ADVANTAGE 3 INCOME (NAZ) (NFZ) (NKR) (NXE) (NTX) - -------------------------------------------------------------------------------------------------------------- Number of shares: Series M -- -- -- 880 760 Series T -- 480 -- -- -- Series W -- -- 740 -- -- Series TH 1,200 -- -- -- 2,000 - -------------------------------------------------------------------------------------------------------------- Total 1,200 480 740 880 2,760 ==============================================================================================================
Inverse Floating Rate Securities Each Fund may invest in inverse floating rate securities. An inverse floating rate security is created by depositing a municipal bond, typically with a fixed interest rate, into a special purpose trust created by a broker-dealer. In turn, this trust (a) issues floating rate certificates, in face amounts equal to some fraction of the deposited bond's par amount or market value, that typically pay short-term tax-exempt interest rates to third parties, and (b) issues to a long-term investor (such as one of the Funds) an inverse floating rate certificate (sometimes referred to as an "inverse floater") that represents all remaining or residual interest in the trust. The income received by the inverse floater holder varies inversely with the short-term rate paid to the floating rate certificates' holders, and in most circumstances the inverse floater holder bears substantially all of the underlying bond's downside investment risk and also benefits disproportionately from any potential appreciation of the underlying bond's value. The price of an inverse floating rate security will be more volatile than that of the underlying bond because the interest rate is dependent on not only the fixed coupon rate of the underlying bond but also on the short-term interest paid on the floating rate certificates, and because the inverse floating rate security essentially bears the risk of loss of the greater face value of the underlying bond. 42 A Fund may purchase an inverse floating rate security in a secondary market transaction without first owning the underlying bond (referred to as an "externally-deposited inverse floater"), or instead by first selling a fixed-rate bond to a broker-dealer for deposit into the special purpose trust and receiving in turn the residual interest in the trust (referred to as a "self-deposited inverse floater"). An investment in an externally-deposited inverse floater is identified in the Portfolio of Investments as an "Inverse floating rate investment". An investment in a self-deposited inverse floater is accounted for as a financing transaction in accordance with Statement of Financial Accounting Standards (SFAS) No. 140 "Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities". In such instances, a fixed-rate bond deposited into a special purpose trust is identified in the Portfolio of Investments as an "Underlying bond of an inverse floating rate trust", with the Fund accounting for the short-term floating rate certificates issued by the trust as "Floating rate obligations" on the Statement of Assets and Liabilities. In addition, the Fund reflects in Investment Income the entire earnings of the underlying bond and accounts for the related interest paid to the holders of the short-term floating rate certificates as "Floating rate obligations interest expense and fees" in the Statement of Operations. During the six months ended January 31, 2007, each Fund invested in externally deposited inverse floaters and/or self-deposited inverse floaters. The average floating rate obligations outstanding and average annual interest rate related to self-deposited inverse floaters during the six months ended January 31, 2007, were as follows:
ARIZONA ARIZONA ARIZONA ARIZONA TEXAS PREMIUM DIVIDEND DIVIDEND DIVIDEND QUALITY INCOME ADVANTAGE ADVANTAGE 2 ADVANTAGE 3 INCOME (NAZ) (NFZ) (NKR) (NXE) (NTX) - --------------------------------------------------------------------------------------------------------------- Average floating rate obligations $790,628 $239,705 $382,743 $456,203 $574,457 Average annual interest rate 3.88% 3.88% 3.88% 3.88% 3.81% ===============================================================================================================
Forward Swap Transactions The Funds are authorized to invest in certain derivative financial instruments. The Funds' use of forward interest rate swap transactions is intended to help the Fund manage its overall interest rate sensitivity, either shorter or longer, generally to more closely align the Fund's interest rate sensitivity with that of the broader municipal market. Forward interest rate swap transactions involve each Fund's agreement with a counterparty to pay, in the future, a fixed or variable rate payment in exchange for the counterparty paying the Fund a variable or fixed rate payment, the accruals for which would begin at a specified date in the future (the "effective date"). The amount of the payment obligation is based on the notional amount of the forward swap contract and the termination date of the swap (which is akin to a bond's maturity). The value of the Fund's swap commitment would increase or decrease based primarily on the extent to which long-term interest rates for bonds having a maturity of the swap's termination date increases or decreases. The Funds may terminate a swap contract prior to the effective date, at which point a realized gain or loss is recognized. When a forward swap is terminated, it ordinarily does not involve the delivery of securities or other underlying assets or principal, but rather is settled in cash on a net basis. Each Fund intends, but is not obligated, to terminate its forward swaps before the effective date. Accordingly, the risk of loss with respect to the swap counterparty on such transactions is limited to the credit risk associated with a counterparty failing to honor its commitment to pay any realized gain to the Fund upon termination. To reduce such credit risk, all counterparties are required to pledge collateral daily (based on the daily valuation of each swap) on behalf of each Fund with a value approximately equal to the amount of any unrealized gain above a pre-determined threshold. Reciprocally, when any of the Funds have an unrealized loss on a swap contract, the Funds have instructed the custodian to pledge assets of the Funds as collateral with a value approximately equal to the amount of the unrealized loss above a pre-determined threshold. Collateral pledges are monitored and subsequently adjusted if and when the swap valuations fluctuate, either up or down, by at least the predetermined threshold amount. Custodian Fee Credit Each Fund has an arrangement with the custodian bank whereby certain custodian fees and expenses are reduced by credits earned on each Fund's cash on deposit with the bank. Such deposit arrangements are an alternative to overnight investments. Indemnifications Under the Funds' organizational documents, their Officers and Directors/Trustees are indemnified against certain liabilities arising out of the performance of their duties to the Funds. In addition, in the normal course of business, the Funds enter into contracts that provide general indemnifications to other parties. The Funds' maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Funds that have not yet occurred. However, the Funds have not had prior claims or losses pursuant to these contracts and expect the risk of loss to be remote. Use of Estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets applicable to Common shares from operations during the reporting period. Actual results may differ from those estimates. 43 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 1/31/07 7/31/06 1/31/07 7/31/06 1/31/07 7/31/06 - --------------------------------------------------------------------------------------------------------------- Common shares issued to shareholders due to reinvestment of distributions -- 6,761 1,067 2,135 2,508 6,848 =============================================================================================================== ARIZONA DIVIDEND TEXAS QUALITY ADVANTAGE 3 (NXE) INCOME (NTX) ------------------------ ------------------------ SIX MONTHS SIX MONTHS ENDED YEAR ENDED ENDED YEAR ENDED 1/31/07 7/31/06 1/31/07 7/31/06 - --------------------------------------------------------------------------------------------------------------- Common shares issued to shareholders due to reinvestment of distributions -- 288 -- 5,523 ===============================================================================================================
3. INVESTMENT TRANSACTIONS Purchases and sales (including maturities but excluding short-term investments and derivative transactions) during the six months ended January 31, 2007, 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 $7,608,870 $4,400,459 $4,904,775 $6,997,732 $15,325,212 Sales and maturities 5,998,571 1,672,813 4,208,100 6,361,859 11,156,152 ==============================================================================================================
4. INCOME TAX INFORMATION The following information is presented on an income tax basis. Differences between amounts for financial statement and federal income tax purposes are primarily due to the treatment of paydown gains and losses, timing differences in recognizing taxable market discount, timing differences in recognizing certain gains and losses on investment transactions and the treatment of investments in inverse floating rate transactions subject to SFAS No.140. To the extent that differences arise that are permanent in nature, such amounts are reclassified within the capital accounts on the Statement of Assets and Liabilities presented in the annual report, based on their federal tax basis treatment; temporary differences do not require reclassification. Temporary and permanent differences do not impact the net asset values of the Funds. At January 31, 2007, 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 $89,609,894 $33,672,049 $51,950,749 $63,510,713 $200,926,131 ==============================================================================================================
44 Gross unrealized appreciation and gross unrealized depreciation of investments at January 31, 2007, 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 $3,873,457 $1,201,738 $2,455,281 $2,071,975 $9,369,407 Depreciation (215,447) (74,212) (229,121) (199,058) (276,112) - -------------------------------------------------------------------------------------------------------------- Net unrealized appreciation (depreciation) of investments $3,658,010 $1,127,526 $2,226,160 $1,872,917 $9,093,295 ==============================================================================================================
The tax components of undistributed net tax-exempt income, net ordinary income and net long-term capital gains at July 31, 2006, the Funds' last tax year end, were as follows:
ARIZONA ARIZONA ARIZONA ARIZONA TEXAS PREMIUM DIVIDEND DIVIDEND DIVIDEND QUALITY INCOME ADVANTAGE ADVANTAGE 2 ADVANTAGE 3 INCOME (NAZ) (NFZ) (NKR) (NXE) (NTX) - -------------------------------------------------------------------------------------------------------------- Undistributed net tax-exempt income * $98,264 $106,365 $118,647 $91,940 $795,438 Undistributed net ordinary income ** -- 3,027 -- -- -- Undistributed net long-term capital gains -- 119,130 69,876 -- 223,755 ==============================================================================================================
* Undistributed net tax-exempt income (on a tax basis) has not been reduced for the dividend declared on July 3, 2006, paid on August 1, 2006. ** Net ordinary income consists of taxable market discount income and net short-term capital gains, if any. The tax character of distributions paid during the Funds' last tax year ended July 31, 2006, was designated for purposes of the dividends paid deduction as follows:
ARIZONA ARIZONA ARIZONA ARIZONA TEXAS PREMIUM DIVIDEND DIVIDEND DIVIDEND QUALITY INCOME ADVANTAGE ADVANTAGE 2 ADVANTAGE 3 INCOME (NAZ) (NFZ) (NKR) (NXE) (NTX) - -------------------------------------------------------------------------------------------------------------- Distributions from net tax-exempt income $3,923,547 $1,618,663 $2,507,532 $2,850,308 $9,881,946 Distributions from net ordinary income ** -- -- -- -- 22,028 Distributions from net long-term capital gains -- 132,955 290,789 -- -- ==============================================================================================================
** Net ordinary income consists of taxable market discount income and net short-term capital gains, if any. At July 31, 2006, the Funds' last tax year end, the following Funds had unused capital loss carryforwards available for federal income tax purposes to be applied against future capital gains, if any. If not applied, the carryforwards will expire as follows: ARIZONA ARIZONA PREMIUM DIVIDEND INCOME ADVANTAGE 3 (NAZ) (NXE) - -------------------------------------------------------------------------------- Expiration year: 2011 $ 477,877 $ -- 2012 1,553,627 205,820 2013 -- 160,902 2014 -- 218,127 - -------------------------------------------------------------------------------- Total $2,031,504 $584,849 ================================================================================ The following Funds elected to defer net realized losses from investments incurred from November 1, 2005 through July 31, 2006 ("post-October losses"), in accordance with Federal income tax regulations. Post-October losses are treated as having arisen on the first day of the current fiscal year: ARIZONA ARIZONA PREMIUM DIVIDEND INCOME ADVANTAGE 3 (NAZ) (NXE) - -------------------------------------------------------------------------------- $73,017 $23,223 ================================================================================ 45 Notes to FINANCIAL STATEMENTS (Unaudited) (continued) 5. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES Each Fund's management fee is separated into two components - a complex-level component, based on the aggregate amount of all fund assets managed by Nuveen Asset Management (the "Adviser"), a wholly owned subsidiary of Nuveen Investments, Inc. ("Nuveen"), and a specific fund-level component, based only on the amount of assets within each individual fund. This pricing structure enables Nuveen fund shareholders to benefit from growth in the assets within each individual fund as well as from growth in the amount of complex-wide assets managed by the Adviser. The annual fund-level fee, payable monthly, for each Fund is based upon the average daily net assets (including net assets attributable to Preferred shares) of each Fund as follows: AVERAGE DAILY NET ASSETS ARIZONA PREMIUM INCOME (NAZ) (INCLUDING NET ASSETS TEXAS QUALITY INCOME (NTX) ATTRIBUTABLE 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 ================================================================================ The annual complex-level fee, payable monthly, which is additive to the fund-level fee, for all Nuveen sponsored funds in the U.S., is based on the aggregate amount of total fund assets managed as stated in the table below. As of January 31, 2007, the complex-level fee rate was .1844%. 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 preferred stock issued by or borrowings 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. 46 The management fee compensates the Adviser for overall investment advisory and administrative services and general office facilities. The Funds pay no compensation directly to those of its Directors/Trustees who are affiliated with the Adviser or to its Officers, all of whom receive remuneration for their services to the Funds from the Adviser or its affiliates. The Board of Directors/Trustees has adopted a deferred compensation plan for independent Directors/Trustees that enables Directors/Trustees to elect to defer receipt of all or a portion of the annual compensation they are entitled to receive from certain Nuveen advised Funds. Under the plan, deferred amounts are treated as though equal dollar amounts had been invested in shares of select Nuveen advised funds. For the first ten years of Arizona Dividend Advantage's (NFZ) operations, the Adviser has agreed to reimburse the Fund, as a percentage of average daily net assets (including net assets attributable to Preferred shares), for fees and expenses in the amounts and for the time periods set forth below: YEAR ENDING YEAR ENDING JANUARY 31, JANUARY 31, - -------------------------------------------------------------------------------- 2001* .30% 2007 .25% 2002 .30 2008 .20 2003 .30 2009 .15 2004 .30 2010 .10 2005 .30 2011 .05 2006 .30 ================================================================================ * From the commencement of operations. The Adviser has not agreed to reimburse Arizona Dividend Advantage (NFZ) for any portion of its fees and expenses beyond January 31, 2011. For the first ten years of Arizona Dividend Advantage 2's (NKR) operations, the Adviser has agreed to reimburse the Fund, as a percentage of average daily net assets (including net assets attributable to Preferred shares), for fees and expenses in the amounts and for the time periods set forth below: YEAR ENDING YEAR ENDING MARCH 31, MARCH 31, - -------------------------------------------------------------------------------- 2002* .30% 2008 .25% 2003 .30 2009 .20 2004 .30 2010 .15 2005 .30 2011 .10 2006 .30 2012 .05 2007 .30 ================================================================================ * From the commencement of operations. The Adviser has not agreed to reimburse Arizona Dividend Advantage 2 (NKR) for any portion of its fees and expenses beyond March 31, 2012. 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. 47 Notes to FINANCIAL STATEMENTS (Unaudited) (continued) 6. NEW ACCOUNTING PRONOUNCEMENTS Financial Accounting Standards Board Interpretation No. 48 On July 13, 2006, the Financial Accounting Standards Board (FASB) released FASB Interpretation No. 48 Accounting for Uncertainty in Income Taxes (FIN 48). FIN 48 provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. FIN 48 requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Fund's tax returns to determine whether the tax positions are "more-likely-than-not" of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year. Adoption of FIN 48 is required for fiscal years beginning after December 15, 2006 and is to be applied to all open tax years as of the effective date. Recent SEC guidance allows funds to delay implementing FIN 48 into NAV calculations until the fund's last NAV calculation in the first required financial statement reporting period. As a result, the Funds must begin to incorporate FIN 48 into their NAV calculations by July 31, 2007. At this time, management is continuing to evaluate the implications of FIN 48 and does not expect the adoption of FIN 48 will have a significant impact on the net assets or results of operations of the Funds. Financial Accounting Standards Board Statement of Financial Accounting Standards No. 157 In September 2006, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 157, "Fair Value Measurements." This standard establishes a single authoritative definition of fair value, sets out a framework for measuring fair value and requires additional disclosures about fair value measurements. SFAS No. 157 applies to fair value measurements already required or permitted by existing standards. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. The changes to current generally accepted accounting principles from the application of this standard relate to the definition of fair value, the methods used to measure fair value, and the expanded disclosures about fair value measurements. As of January 31, 2007, the Funds do not believe the adoption of SFAS No. 157 will impact the financial statement amounts; however, additional disclosures may be required about the inputs used to develop the measurements and the effect of certain of the measurements included within the Statement of Operations for the period. 7. SUBSEQUENT EVENTS Distributions to Common Shareholders The Funds declared Common share dividend distributions from their tax-exempt net investment income which were paid on March 1, 2007, to shareholders of record on February 15, 2007, as follows:
ARIZONA ARIZONA ARIZONA ARIZONA TEXAS PREMIUM DIVIDEND DIVIDEND DIVIDEND QUALITY INCOME ADVANTAGE ADVANTAGE 2 ADVANTAGE 3 INCOME (NAZ) (NFZ) (NKR) (NXE) (NTX) - -------------------------------------------------------------------------------------------------------------- Dividend per share $.0510 $.0585 $.0615 $.0565 $.0605 ==============================================================================================================
48 Financial HIGHLIGHTS (Unaudited) 49 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: 2007(a) $14.10 $ .42 $.16 $(.11) $ -- $ .47 $(.31) $ -- $(.31) 2006 14.53 .83 (.39) (.18) -- .26 (.69) -- (.69) 2005 14.04 .86 .56 (.09) -- 1.33 (.84) -- (.84) 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) ARIZONA DIVIDEND ADVANTAGE (NFZ) - ------------------------------------------------------------------------------------------------------------------------------------ Year Ended 7/31: 2007(a) 14.77 .46 .20 (.12) (.02) .52 (.37) (.06) (.43) 2006 15.37 .93 (.40) (.20) (.01) .32 (.84) (.08) (.92) 2005 15.00 .97 .46 (.10) -- 1.33 (.92) (.04) (.96) 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) ==================================================================================================================================== 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: 2007(a) $ -- $14.26 $13.93 4.02% 3.30% 2006 -- 14.10 13.69 (5.62) 1.84 2005 -- 14.53 15.22 5.17 9.69 2004 -- 14.04 15.27 7.97 9.66 2003 -- 13.66 15.00 (5.98) 2.21 2002 -- 14.25 16.90 9.63 2.88 ARIZONA DIVIDEND ADVANTAGE (NFZ) - ---------------------------------------------------------------------------------------- Year Ended 7/31: 2007(a) -- 14.86 15.08 (2.50) 3.51 2006 -- 14.77 15.90 4.54 2.14 2005 -- 15.37 16.08 10.88 9.04 2004 -- 15.00 15.40 7.05 10.56 2003 .02 14.45 15.30 3.06 3.67 2002 -- 14.81 15.75 6.38 9.32 ======================================================================================== Ratios/Supplemental Data ------------------------------------------------------------------------------------------------------------------- Ratios to Average Net Assets Ratios to Average Net Assets Applicable to Common Shares Applicable to Common Shares Before Credit/Reimbursement After Credit/Reimbursement*** -------------------------------------------- ------------------------------------------- Ending Net Assets Applicable Expenses Expenses Net Expenses Expenses Net Portfolio to Common Including Excluding Investment Including Excluding Investment Turnover Shares (000) Interest++(b) Interest++(b) Income++ Interest++(b) Interest++(b) Income++ Rate ==================================================================================================================================== ARIZONA PREMIUM INCOME (NAZ) - ------------------------------------------------------------------------------------------------------------------------------------ Year Ended 7/31: 2007(a) $63,713 1.28%* 1.23%* 5.71%* 1.26%* 1.21%* 5.73%* 6% 2006 63,024 1.21 1.21 5.83 1.19 1.19 5.84 22 2005 64,822 1.20 1.20 5.91 1.19 1.19 5.92 17 2004 62,431 1.22 1.22 6.49 1.21 1.21 6.50 26 2003 60,547 1.25 1.25 6.81 1.24 1.24 6.82 17 2002 62,876 1.28 1.28 7.45 1.26 1.26 7.47 19 ARIZONA DIVIDEND ADVANTAGE (NFZ) - ------------------------------------------------------------------------------------------------------------------------------------ Year Ended 7/31: 2007(a) 23,011 1.42* 1.38* 5.62* 1.00* .96* 6.04* 5 2006 22,862 1.36 1.36 5.79 .92 .92 6.23 24 2005 23,753 1.34 1.34 5.82 .87 .87 6.28 18 2004 23,153 1.30 1.30 6.10 .83 .83 6.57 24 2003 22,290 1.35 1.35 6.11 .91 .91 6.55 20 2002 22,791 1.41 1.41 6.72 .93 .93 7.20 40 ====================================================================================================================================
Floating Rate Obligations Preferred Shares at End of Period at End of Period -------------------------------------- ------------------------- Aggregate Liquidation Aggregate Amount and Market Asset Amount Asset Outstanding Value Coverage Outstanding Coverage (000) Per Share Per Share (000) Per $1,000 ================================================================================ ARIZONA PREMIUM INCOME (NAZ) - -------------------------------------------------------------------------------- Year Ended 7/31: 2007(a) $30,000 $25,000 $78,094 $2,054 $46,617 2006 30,000 25,000 77,520 -- -- 2005 30,000 25,000 79,019 -- -- 2004 30,000 25,000 77,026 -- -- 2003 30,000 25,000 75,456 -- -- 2002 30,000 25,000 77,397 -- -- ARIZONA DIVIDEND ADVANTAGE (NFZ) - -------------------------------------------------------------------------------- Year Ended 7/31: 2007(a) 12,000 25,000 72,940 623 57,210 2006 12,000 25,000 72,628 -- -- 2005 12,000 25,000 74,485 -- -- 2004 12,000 25,000 73,235 -- -- 2003 12,000 25,000 71,438 -- -- 2002 12,000 25,000 72,480 -- -- ================================================================================ * Annualized. ** Total Return on Market Value is the combination of changes in the market price per share and the effect of reinvested dividend income and reinvested capital gains distributions, if any, at the average price paid per share at the time of reinvestment. Total Return on Common Share Net Asset Value is the combination of changes in Common Share net asset value, reinvested dividend income at net asset value and reinvested capital gains distributions at net asset value, if any. Total returns are not annualized. *** After custodian fee credit and expense reimbursement, where applicable. + The amounts shown are based on Common share equivalents. ++ Ratios do not reflect the effect of dividend payments to Preferred shareholders; income ratios reflect income earned on assets attributable to Preferred shares. (a) For the six months ended January 31, 2007. (b) Interest expense arises from the application of SFAS No. 140 to certain inverse floating rate transactions entered into by the Fund as more fully described in Footnote 1 - Inverse Floating Rate Securities. See accompanying notes to financial statements. 50-51 spread FINANCIAL HIGHLIGHTS (Unaudited) (continued) 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 DIVIDEND ADVANTAGE 2 (NKR) - ------------------------------------------------------------------------------------------------------------------------------------ Year Ended 7/31: 2007(c) $15.00 $.48 $.14 $(.12) $(.01) $ .49 $(.37) $(.04) $(.41) 2006 15.56 .96 (.37) (.20) (.01) .38 (.83) (.11) (.94) 2005 15.10 .97 .59 (.11) (.01) 1.44 (.86) (.12) (.98) 2004 14.57 .96 .53 (.06) -- 1.43 (.86) (.04) (.90) 2003 14.88 .96 (.31) (.08) -- .57 (.86) (.01) (.87) 2002(a) 14.33 .24 .71 (.02) -- .93 (.22) -- (.22) ARIZONA DIVIDEND ADVANTAGE 3 (NXE) - ------------------------------------------------------------------------------------------------------------------------------------ Year Ended 7/31: 2007(c) 14.32 .45 .17 (.12) -- .50 (.34) -- (.34) 2006 14.62 .88 (.26) (.19) -- .43 (.73) -- (.73) 2005 14.01 .89 .62 (.10) -- 1.41 (.80) -- (.80) 2004 13.45 .89 .54 (.06) -- 1.37 (.80) -- (.80) 2003(b) 14.33 .66 (.67) (.05) -- (.06) (.61) -- (.61) ==================================================================================================================================== 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 DIVIDEND ADVANTAGE 2 (NKR) - ----------------------------------------------------------------------------------------- Year Ended 7/31: 2007(c) $ -- $15.08 $15.16 1.31% 3.27% 2006 -- 15.00 15.37 .82 2.49 2005 -- 15.56 16.19 16.30 9.74 2004 -- 15.10 14.82 9.46 9.98 2003 (.01) 14.57 14.40 (3.53) 3.67 2002(a) (.16) 14.88 15.80 6.81 5.38 ARIZONA DIVIDEND ADVANTAGE 3 (NXE) - ----------------------------------------------------------------------------------------- Year Ended 7/31: 2007(c) -- 14.48 14.25 7.97 3.48 2006 -- 14.32 13.52 (1.80) 3.03 2005 -- 14.62 14.48 15.11 10.21 2004 (.01) 14.01 13.30 1.01 10.25 2003(b) (.21) 13.45 13.97 (2.76) (2.05) ========================================================================================= Ratios/Supplemental Data ------------------------------------------------------------------------------------------------------------------ Ratios to Average Net Assets Ratios to Average Net Assets Applicable to Common Shares Applicable to Common Shares Before Credit/Reimbursement After Credit/Reimbursement*** -------------------------------------------- ------------------------------------------- Ending Net Assets Applicable Expenses Expenses Net Expenses Expenses Net Portfolio to Common Including Excluding Investment Including Excluding Investment Turnover Shares (000) Interest++(d) Interest++(d) Income++ Interest++(d) Interest++(d) Income++ Rate ==================================================================================================================================== ARIZONA DIVIDEND ADVANTAGE 2 (NKR) - ------------------------------------------------------------------------------------------------------------------------------------ Year Ended 7/31: 2007(c) 36,679 1.32%* 1.28%* 5.82%* .85%* .81%* 6.29%* 7% 2006 36,465 1.28 1.28 5.88 .82 .82 6.34 11 2005 37,704 1.27 1.27 5.76 .82 .82 6.22 11 2004 36,543 1.27 1.27 5.83 .80 .80 6.30 14 2003 35,237 1.27 1.27 5.78 .82 .82 6.23 4 2002(a) 35,913 1.19* 1.19* 4.43* .77* .77* 4.85* 1 ARIZONA DIVIDEND ADVANTAGE 3 (NXE) - ------------------------------------------------------------------------------------------------------------------------------------ Year Ended 7/31: 2007(c) 44,429 1.31* 1.27* 5.56* .81* .77* 6.06* 9 2006 43,913 1.26 1.26 5.63 .78 .78 6.12 12 2005 44,829 1.25 1.25 5.63 .76 .76 6.12 15 2004 42,983 1.25 1.25 5.80 .76 .76 6.29 22 2003(b) 41,247 1.19* 1.19* 5.05* .73* .73* 5.52* 16 ===================================================================================================================================
Floating Rate Obligations Preferred Shares at End of Period at End of Period -------------------------------------- ------------------------- Aggregate Liquidation Aggregate Amount and Market Asset Amount Asset Outstanding Value Coverage Outstanding Coverage (000) Per Share Per Share (000) Per $1,000 ================================================================================ ARIZONA DIVIDEND ADVANTAGE 2 (NKR) - -------------------------------------------------------------------------------- Year Ended 7/31: 2007(c) $18,500 $25,000 $74,566 $ 994 $56,484 2006 18,500 25,000 74,277 -- -- 2005 18,500 25,000 75,952 -- -- 2004 18,500 25,000 74,382 -- -- 2003 18,500 25,000 72,618 -- -- 2002(a) 18,500 25,000 73,531 -- -- ARIZONA DIVIDEND ADVANTAGE 3 (NXE) - -------------------------------------------------------------------------------- Year Ended 7/31: 2007(c) 22,000 25,000 75,487 1,185 57,040 2006 22,000 25,000 74,902 -- -- 2005 22,000 25,000 75,942 -- -- 2004 22,000 25,000 73,844 -- -- 2003(b) 22,000 25,000 71,872 -- -- ================================================================================ * Annualized. ** Total Return on Market Value is the combination of changes in the market price per share and the effect of reinvested dividend income and reinvested capital gains distributions, if any, at the average price paid per share at the time of reinvestment. Total Return on Common Share Net Asset Value is the combination of changes in Common Share net asset value, reinvested dividend income at net asset value and reinvested capital gains distributions at net asset value, if any. Total returns are not annualized. *** After custodian fee credit and expense reimbursement, where applicable. + The amounts shown are based on Common share equivalents. ++ Ratios do not reflect the effect of dividend payments to Preferred shareholders; income ratios reflect income earned on assets attributable to Preferred shares. (a) For the period March 25, 2002 (commencement of operations) through July 31, 2002. (b) For the period September 25, 2002 (commencement of operations) through July 31, 2003. (c) For the six months ended January 31, 2007. (d) Interest expense arises from the application of SFAS No. 140 to certain inverse floating rate transactions entered into by the Fund as more fully described in Footnote 1 - Inverse Floating Rate Securities. See accompanying notes to financial statements. 52-53 spread FINANCIAL HIGHLIGHTS (Unaudited) (continued) 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 ==================================================================================================================================== TEXAS QUALITY INCOME (NTX) - ------------------------------------------------------------------------------------------------------------------------------------ Year Ended 7/31: 2007(a) $15.06 $ .48 $.18 $(.12) $(.01) $ .53 $(.37) $(.04) $(.41) 2006 15.46 .96 (.32) (.22) -- .42 (.82) -- (.82) 2005 15.12 1.00 .41 (.13) -- 1.28 (.94) -- (.94) 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) ==================================================================================================================================== 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** ================================================================================== TEXAS QUALITY INCOME (NTX) - ---------------------------------------------------------------------------------- Year Ended 7/31: 2007(a) $ -- $15.18 $14.54 1.57% 3.47% 2006 -- 15.06 14.71 (4.03) 2.77 2005 -- 15.46 16.19 17.83 8.61 2004 -- 15.12 14.59 5.87 10.51 2003 -- 14.57 14.71 4.14 2.54 2002 -- 15.14 15.07 9.29 6.61 ================================================================================== Ratios/Supplemental Data ------------------------------------------------------------------------------------------------------------------ Ratios to Average Net Assets Ratios to Average Net Assets Applicable to Common Shares Applicable to Common Shares Before Credit/Reimbursement After Credit/Reimbursement*** -------------------------------------------- ------------------------------------------- Ending Net Assets Applicable Expenses Expenses Net Expenses Expenses Net Portfolio to Common Including Excluding Investment Including Excluding Investment Turnover Shares (000) Interest++(b) Interest++(b) Income++ Interest++(b) Interest++(b) Income++ Rate ==================================================================================================================================== TEXAS QUALITY INCOME (NTX) - ------------------------------------------------------------------------------------------------------------------------------------ Year Ended 7/31: 2007(a) 144,142 1.20%* 1.18%* 6.14%* 1.18%* 1.16%* 6.16%* 5% 2006 143,009 1.19 1.19 6.31 1.18 1.18 6.33 13 2005 146,718 1.18 1.18 6.42 1.16 1.16 6.44 14 2004 143,233 1.18 1.18 6.77 1.18 1.18 6.77 16 2003 137,975 1.20 1.20 6.93 1.19 1.19 6.94 12 2002 143,305 1.23 1.23 7.40 1.22 1.22 7.42 22 ====================================================================================================================================
Floating Rate Obligations Preferred Shares at End of Period at End of Period -------------------------------------- ------------------------- Aggregate Liquidation Aggregate Amount and Market Asset Amount Asset Outstanding Value Coverage Outstanding Coverage (000) Per Share Per Share (000) Per $1,000 ================================================================================ TEXAS QUALITY INCOME (NTX) - -------------------------------------------------------------------------------- Year Ended 7/31: 2007(a) $69,000 $25,000 $77,225 $3,775 $57,461 2006 69,000 25,000 76,815 -- -- 2005 69,000 25,000 78,159 -- -- 2004 69,000 25,000 76,896 -- -- 2003 69,000 25,000 74,991 -- -- 2002 69,000 25,000 76,922 -- -- ================================================================================ * Annualized. ** Total Return on Market Value is the combination of changes in the market price per share and the effect of reinvested dividend income and reinvested capital gains distributions, if any, at the average price paid per share at the time of reinvestment. Total Return on Common Share Net Asset Value is the combination of changes in Common Share net asset value, reinvested dividend income at net asset value and reinvested capital gains distributions at net asset value, if any. Total returns are not annualized. *** After custodian fee credit and expense reimbursement, where applicable. + The amounts shown are based on Common share equivalents. ++ Ratios do not reflect the effect of dividend payments to Preferred shareholders; income ratios reflect income earned on assets attributable to Preferred shares. (a) For the six months ended January 31, 2007. (b) Interest expense arises from the application of SFAS No. 140 to certain inverse floating rate transactions entered into by the Fund as more fully described in Footnote 1 - Inverse Floating Rate Securities. See accompanying notes to financial statements. 54-55 spread 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 FUNDS DIVIDEND REINVESTMENT PLAN Your Nuveen Closed-End Fund allows you to conveniently reinvest dividends and/or capital gains distributions in additional fund shares. By choosing to reinvest, you'll be able to invest money regularly and automatically, and watch your investment grow through the power of tax-free compounding. Just like dividends or distributions in cash, there may be times when income or capital gains taxes may be payable on dividends or distributions that are reinvested. It is important to note that an automatic reinvestment plan does not ensure a profit, nor does it protect you against loss in a declining market. EASY AND CONVENIENT To make recordkeeping easy and convenient, each month you'll receive a statement showing your total dividends and distributions, the date of investment, the shares acquired and the price per share, and the total number of shares you own. HOW SHARES ARE PURCHASED The shares you acquire by reinvesting will either be purchased on the open market or newly issued by the Fund. If the shares are trading at or above net asset value at the time of valuation, the Fund will issue new shares at the 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. 56 Automatic Dividend REINVESTMENT PLAN NOTICE OF AMENDMENT TO THE TERMS AND CONDITIONS These Funds are amending the terms and conditions of their Automatic Dividend Reinvestment Plan (the "Plan") as further described below effective with the close of business on May 1, 2007. THESE CHANGES ARE INTENDED TO ENABLE PLAN PARTICIPANTS UNDER CERTAIN CIRCUMSTANCES TO REINVEST FUND DISTRIBUTIONS AT A LOWER AGGREGATE COST THAN IS POSSIBLE UNDER THE EXISTING PLAN. Shareholders who do not wish to continue as participants under the amended Plan may withdraw from the Plan by notifying the Plan Agent prior to the effective date of the amendments. Participants should refer to their Plan document for notification instructions, or may simply call Nuveen at (800) 257-8787. Fund shareholders who elect to participate in the Plan are able to have Fund distributions consisting of income dividends, realized capital gains and returns of capital automatically reinvested in additional Fund shares. Under the Plan's existing terms, the Plan Agent purchases Fund shares in the open market if the Fund's shares are trading at a discount to their net asset value on the payable date for the distribution. If the Fund's shares are trading at or above their net asset value on the payable date for the distribution, the Plan Agent purchases newly-issued Fund shares directly from the Fund at a price equal to the greater of the shares' net asset value or 95% of the shares' market value. Under the Plan's amended terms, if the Plan Agent begins purchasing Fund shares on the open market while shares are trading below net asset value, but the Fund's shares subsequently trade at or above their net asset value before the Plan Agent is able to complete its purchases, the Plan Agent may cease open-market purchases and may invest the uninvested portion of the distribution in newly-issued Fund shares at a price equal to the greater of the shares' net asset value or 95% of the shares' market value. This change will permit Plan participants under these circumstances to reinvest Fund distributions at a lower aggregate cost than is possible under the existing Plan. 57 Notes 58 Other Useful INFORMATION QUARTERLY PORTFOLIO OF INVESTMENTS AND PROXY VOTING INFORMATION Each Fund's (i) quarterly portfolio of investments, (ii) information regarding how the Funds voted proxies relating to portfolio securities held during the 12-month period ended June 30, 2006, and (iii) a description of the policies and procedures that the Funds used to determine how to vote proxies relating to portfolio securities are available without charge, upon request, by calling Nuveen Investments toll-free at (800) 257-8787 or on Nuveen's website at www.nuveen.com. You may also obtain this and other Fund information directly from the Securities and Exchange Commission ("SEC"). The SEC may charge a copying fee for this information. Visit the SEC on-line at http://www.sec.gov or in person at the SEC's Public Reference Room in Washington, D.C. Call the SEC at 1-202-942-8090 for room hours and operation. You may also request Fund information by sending an e-mail request to publicinfo@sec.gov or by writing to the SEC's Public References Section at 450 Fifth Street NW, Washington, D.C. 20549. CEO CERTIFICATION DISCLOSURE Each Fund's Chief Executive Officer has submitted to the New York Stock Exchange the annual CEO certification as required by Section 303A.12(a) of the NYSE Listed Company Manual. Each Fund has filed with the Securities and Exchange Commission the certification of its Chief Executive Officer and Chief Financial Officer required by Section 302 of the Sarbanes-Oxley Act. 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 the number of years to maturity of the bonds in a Fund's portfolio, computed by weighting each bond's time to maturity (the date the security comes due) by the market value of the security. This figure does not account for the likelihood of prepayments or the exercise of call provisions unless an escrow account has been established to redeem the bond before maturity. The market value weighting for an investment in an inverse floating rate security is the value of the portfolio's residual interest in the inverse floating rate trust, and does not include the value of the floating rate securities issued by the trust. INVERSE FLOATERS: Inverse floating rate securities are created by depositing a municipal bond, typically with a fixed interest rate, into a special purpose trust created by a broker-dealer. This trust, in turn, (a) issues floating rate certificates typically paying short-term tax-exempt interest rates to third parties in amounts equal to some fraction of the deposited bond's par amount or market value, and (b) issues an inverse floating rate certificate (sometimes referred to as an "inverse floater") to an investor (such as a Fund) interested in gaining investment exposure to a long-term municipal bond. The income received by the holder of the inverse floater varies inversely with the short-term rate paid to the floating rate certificates' holders, and in most circumstances the holder of the inverse floater bears substantially all of the underlying bond's downside investment risk. The holder of the inverse floater typically also benefits disproportionately from any potential appreciation of the underlying bond's value. Hence, an inverse floater essentially represents an investment in the underlying bond on a leveraged basis. LEVERAGE-ADJUSTED DURATION: Duration is a measure of the expected period over which a bond's principal and interest will be paid, and consequently is a measure of the sensitivity of a bond's or bond Fund's value to changes when market interest rates change. Generally, the longer a bond's or Fund's duration, the more the price of the bond or Fund will change as interest rates change. Leverage-adjusted duration takes into account the leveraging process for a Fund and therefore is longer than the duration of the Fund's portfolio of bonds. MARKET YIELD (ALSO KNOWN AS DIVIDEND YIELD OR CURRENT YIELD): An investment's current annualized dividend divided by its current market price. NET ASSET VALUE (NAV): A Fund's common share NAV per share is calculated by subtracting the liabilities of the Fund (including any MuniPreferred shares issued in order to leverage the Fund) from its total assets and then dividing the remainder by the number of shares outstanding. Fund NAVs are calculated at the end of each business day. TAXABLE-EQUIVALENT YIELD: The yield necessary from a fully taxable investment to equal, on an after-tax basis, the yield of a municipal bond investment. BOARD OF DIRECTORS/TRUSTEES Robert P. Bremner Lawrence H. Brown Jack B. Evans William C. Hunter David J. Kundert William J. Schneider Timothy R. Schwertfeger Judith M. Stockdale Carol E. Stone Eugene S. Sunshine FUND MANAGER Nuveen Asset Management 333 West Wacker Drive Chicago, IL 60606 CUSTODIAN State Street Bank & Trust Company Boston, MA TRANSFER AGENT AND SHAREHOLDER SERVICES State Street Bank & Trust Company Nuveen Funds P.O. Box 43071 Providence, RI 02940-3071 (800) 257-8787 LEGAL COUNSEL Chapman and Cutler LLP Chicago, IL INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Ernst & Young LLP Chicago, IL Each Fund intends to repurchase shares of its own common or preferred stock in the future at such times and in such amounts as is deemed advisable. No shares were repurchased during the period covered by this report. Any future repurchases will be reported to shareholders in the next annual or semiannual report. 59 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 approximately $162 billion in assets, as of December 31, 2006, Nuveen Investments offers access to a number of different asset classes and investing solutions through a variety of products. Nuveen Investments markets its capabilities under six distinct brands: NWQ, specializing in value-style equities; Nuveen, managing fixed-income investments; Santa Barbara, committed to growth equities; Tradewinds, specializing in global value equities; Rittenhouse, focused on "blue-chip" growth equities; and Symphony, with expertise in alternative investments as well as equity and income 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/CEF o Investor education o Interactive planning tools Logo: NUVEEN Investments ESA-A-0107D ITEM 2. CODE OF ETHICS. Not applicable to this filing. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. Not applicable to this filing. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. Not applicable to this filing. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable to this filing. ITEM 6. SCHEDULE OF INVESTMENTS. See Portfolio of Investments in Item 1. ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable to this filing. ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable to this filing. ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. Not applicable. ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. There have been no material changes to the procedures by which shareholders may recommend nominees to the registrant's Board implemented after the registrant last provided disclosure in response to this Item. ITEM 11. CONTROLS AND PROCEDURES. (a) The registrant's principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the "1940 Act") (17 CFR 270.30a-3(c))) are effective, as of a date within 90 days of the filing date of this report that includes the disclosure required by this paragraph, based on their evaluation of the controls and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")(17 CFR 240.13a-15(b) or 240.15d-15(b)). (b) There were no changes in the registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR 270.30a-3(d)) that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. ITEM 12. EXHIBITS. File the exhibits listed below as part of this Form. (a)(1) Any code of ethics, or amendment thereto, that is the subject of the disclosure required by Item 2, to the extent that the registrant intends to satisfy the Item 2 requirements through filing of an exhibit: Not applicable to this filing. (a)(2) A separate certification for each principal executive officer and principal financial officer of the registrant as required by Rule 30a-2(a) under the 1940 Act (17 CFR 270.30a-2(a)) in the exact form set forth below: Ex-99.CERT attached hereto. (a)(3) Any written solicitation to purchase securities under Rule 23c-1 under the 1940 Act (17 CFR 270.23c-1) sent or given during the period covered by the report by or on behalf of the registrant to 10 or more persons: Not applicable. (b) If the report is filed under Section 13(a) or 15(d) of the Exchange Act, provide the certifications required by Rule 30a-2(b) under the 1940 Act (17 CFR 270.30a-2(b)); Rule 13a-14(b) or Rule 15d-14(b) under the Exchange Act (17 CFR 240.13a-14(b) or 240.15d-14(b)), and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350) as an exhibit. A certification furnished pursuant to this paragraph will not be deemed "filed" for purposes of Section 18 of the Exchange Act (15 U.S.C. 78r), or otherwise subject to the liability of that section. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference. Ex-99.906 CERT attached hereto. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (Registrant) Nuveen Arizona Premium Income Municipal Fund, Inc. ----------------------------------------------------------- By (Signature and Title)* /s/ Jessica R. Droeger ---------------------------------------------- Jessica R. Droeger Vice President and Secretary Date: April 9, 2007 ------------------------------------------------------------------- Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By (Signature and Title)* /s/ Gifford R. Zimmerman ---------------------------------------------- Gifford R. Zimmerman Chief Administrative Officer (principal executive officer) Date: April 9, 2007 ------------------------------------------------------------------- By (Signature and Title)* /s/ Stephen D. Foy ---------------------------------------------- Stephen D. Foy Vice President and Controller (principal financial officer) Date: April 9, 2007 ------------------------------------------------------------------- * Print the name and title of each signing officer under his or her signature. EX-99.CERT 2 file002.txt CERTIFICATIONS CERTIFICATION I, Gifford R. Zimmerman, certify that: 1. I have reviewed this report on Form N-CSR of Nuveen Arizona Premium Income Municipal Fund, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: (a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (d) disclosed in this report any change in the registrant's internal control over financial reporting 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; and 5. The registrant's other certifying officer and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: April 9, 2007 /s/ Gifford R. Zimmerman ------------------------- -------------------------------- Gifford R. Zimmerman Chief Administrative Officer (principal executive officer) CERTIFICATION I, Stephen D. Foy, certify that: 1. I have reviewed this report on Form N-CSR of Nuveen Arizona Premium Income Municipal Fund, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: (a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (d) disclosed in this report any change in the registrant's internal control over financial reporting 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; and 5. The registrant's other certifying officer and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: April 9, 2007 /s/ Stephen D. Foy ------------------------- -------------------------------- Stephen D. Foy Vice President and Controller (principal financial officer) EX-99.906CERT 3 file003.txt CERTIFICATIONS Certification Pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002; provided by the Chief Executive Officer and Chief Financial Officer, based on each such officer's knowledge and belief. The undersigned officers of Nuveen Arizona Premium Income Municipal Fund, Inc. (the "Fund"), certify that, to the best of each such officer's knowledge and belief: 1. The Form N-CSR of the Fund for the period ended January 31, 2007 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Fund. Date: April 9, 2007 ----------------------- /s/ Gifford R. Zimmerman --------------------------------- Gifford R. Zimmerman Chief Administrative Officer (principal executive officer) /s/ Stephen D. Foy --------------------------------- Stephen D. Foy Vice President, Controller (principal financial officer) -----END PRIVACY-ENHANCED MESSAGE-----