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
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Nuveen Arizona Premium Income Municipal Fund, Inc.
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(Exact name of registrant as specified in charter)
Nuveen Investments
333 West Wacker Drive
Chicago, IL 60606
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(Address of principal executive offices) (Zip code)
Kevin J. McCarthy
Nuveen Investments
333 West Wacker Drive
Chicago, IL 60606
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(Name and address of agent for service)
Registrant's telephone number, including area code: (312) 917-7700
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Date of fiscal year end: July 31
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Date of reporting period: January 31, 2009
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Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
SEMI-ANNUAL REPORT | Nuveen Investments
January 31, 2009 | MUNICIPAL CLOSED-END FUNDS
[PHOTO OF: SMALL CHILD]
NUVEEN ARIZONA
PREMIUM INCOME
MUNICIPAL FUND, INC.
NAZ
NUVEEN ARIZONA
DIVIDEND ADVANTAGE
MUNICIPAL FUND
NFZ
NUVEEN ARIZONA
DIVIDEND ADVANTAGE
MUNICIPAL FUND 2
NKR
NUVEEN ARIZONA
DIVIDEND ADVANTAGE
MUNICIPAL FUND 3
NXE
NUVEEN TEXAS
QUALITY INCOME
MUNICIPAL FUND
NTX
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Chairman's
LETTER TO SHAREHOLDERS
[PHOTO OF ROBERT P. BREMNER] | Robert P. Bremner | Chairman of the Board
Dear Shareholders,
I write this letter in a time of continued uncertainty about the current state
of the U.S. financial system and pessimism about the future of the global
economy. Many have observed that the conditions that led to the crisis have
built up over time and will complicate and extend the course of recovery. At the
same time, government officials in the U.S. and abroad have implemented a wide
range of programs to restore stability to the financial system and encourage
economic recovery. It is believed that these efforts will moderate the extent of
the downturn and hasten the recovery, even though it is hard to envision that
outcome in the current environment.
As you will read in this report, the continuing financial and economic problems
are weighing heavily on asset values for equities and fixed income, and
unfortunately the performance of the Nuveen Funds has been similarly affected.
In addition to the financial statements, I hope that you will carefully review
the Portfolio Managers' Comments, the Common Share Dividend and Share Price
Information and the Performance Overview sections of this report. These comments
highlight each manager's pursuit of investment strategies that depend on
thoroughly researched securities, diversified portfolio holdings and well
established investment disciplines to achieve your Fund's investment goals. The
Fund Board believes that a consistent focus on long term investment goals
provides the basis for successful investment over time and we monitor your Fund
with that objective in mind.
Nuveen continues to work on resolving the issues related to the auction rate
preferred shares situation, but the unsettled conditions in the credit markets
have slowed progress. Nuveen is actively pursuing a number of solutions, all
with the goal of providing liquidity for preferred shareholders while preserving
the potential benefits of leverage for common shareholders. We appreciate the
patience you have shown as we work through the many issues involved. Please
consult the Nuveen website: www.nuveen.com, for the most recent information.
On behalf of myself and the other members of your Fund's Board, we look forward
to continuing to earn your trust in the months and years ahead.
Sincerely,
/s/ Robert P. Bremner
---------------------------------
Robert P. Bremner
Chairman of the Nuveen Fund Board
March 23, 2009
Portfolio Managers' COMMENTS
Nuveen Investments Municipal Closed-End Funds | NAZ, NFZ, NKR, NXE, NTX
Portfolio managers Scott Romans and Daniel Close review key investment
strategies, and the six month performance of these five Nuveen Funds. Scott, who
has been with Nuveen since 2000, has managed the Arizona Funds since 2003. Dan,
who joined Nuveen in 2000, assumed portfolio management responsibility for NTX
in March 2007.
WHAT KEY STRATEGIES WERE USED TO MANAGE THE ARIZONA AND TEXAS FUNDS DURING THE
SIX-MONTH REPORTING PERIOD ENDED JANUARY 31, 2009?
During this period, pressure in the financial and credit markets led to
increased price volatility for many municipal securities, reduced market
liquidity and produced a general flight to quality. In this environment, we
continued to focus on finding bonds that offered relative value, while seeking
to preserve liquidity and invest for the long term.
Much of our investment activity during this period was driven by the new
issuance in the municipal bond market, which provided opportunities to purchase
bonds with better structures (e.g., higher coupons, longer call protection) at
attractive prices. During periodic market dislocations, we found opportunities
in various market sectors, using a fundamental approach to discover undervalued
sectors and individual credits with the potential to perform well over the long
term. All five of these Funds purchased general obligation bonds issued for
various school districts, as well as health care credits. In addition, the
Arizona Funds added community facilities district (CFD) bonds, focusing on
credits with stronger security structures, such as backing by ad valorem pledges
(that is, property taxes from the local municipality that provide a backstop if
project development progresses more slowly than anticipated). These CFD bonds,
also known as "dirt deals," provide financing for schools, parks, public
utilities and other infrastructure and services such as police and fire
protection, maintenance and library programs. In NTX, we also added water and
sewer and utilities issues.
The majority of the additions to our portfolios were purchased at the longer end
of the yield curve, which we believed not only offered more value during this
period, but also helped to offset the natural shortening of the Funds'
durations(1) as well as to support and enhance yields. Most of these purchases
were uninsured, as the insurance penetration of the new issuance municipal
market declined dramatically from 47% in 2007 to 18% in 2008.
Certain statements in this report are forward-looking statements. Discussions of
specific investments are for illustration only and are not intended as
recommendations of individual investments. The forward-looking statements and
other views expressed herein are those of the portfolio managers as of the date
of this report. Actual future results or occurrences may differ significantly
from those anticipated in any forward-looking statements and the views expressed
herein are subject to change at any time, due to numerous market and other
factors. The Funds disclaim any obligation to update publicly or revise any
forward-looking statements or views expressed herein.
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(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
In an exceptionally illiquid market, we also believed that it was prudent to
focus on preserving potential liquidity and incorporating extra liquidity
opportunities when we found appropriate situations to do so. During this period,
a number of bond calls across all of these Funds provided the capital necessary
for purchases. In the Arizona Funds, we also monitored the types of credits and
bond structures that were attractive to the retail market and took advantage of
strong bids to sell such bonds into solid retail demand.
For much of this period, NAZ and NTX continued to use inverse floating rate
securities(2) as a way to bring their durations closer to our strategic target
and to enhance their income-generation capabilities. During this period, as
previously described, we were able to purchase longer maturity bonds offering
attractive yields and better structures that accomplished many of the same goals
as the inverse floaters. As a result, we terminated the inverse floaters in both
of these Funds before the period end.
HOW DID THE FUNDS PERFORM?
Individual results for these Nuveen Arizona and Texas Funds, as well as relevant
index and peer group information, are presented in the accompanying table.
Average Annual Total Returns on Common Share Net Asset Value*
For periods ended 1/31/09
Six-Month 1-Year 5-Year 10-Year
Arizona Funds
NAZ -5.90% -10.83% 1.25% 2.85%
NFZ -7.84% -13.62% 0.34% N/A
NKR -4.84% -10.17% 1.61% N/A
NXE -7.56% -13.06% 1.03% N/A
Texas Fund
NTX -2.28% -6.08% 2.39% 4.14%
Lipper Other States
Municipal Debt Funds
Average(3) -5.61% -9.20% 1.70% 3.67%
Barclays Capital
Municipal Bond Index(4) 0.70% -0.16% 3.34% 4.51%
S&P National Municipal
Bond Index(5) 0.78% -0.15% 3.42% 4.49%
For the six months ended January 31, 2009, the cumulative returns on common
share net asset value (NAV) for NKR and NTX exceeded the average return for the
Lipper Other States Municipal Debt Funds Average, while NAZ, NFZ and NXE trailed
this
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* 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) An inverse floating rate security, also known as inverse floaters, is a
financial instrument designed to pay long-term tax-exempt interest at a rate
that varies inversely with a short-term tax-exempt interest rate index. For the
Nuveen Funds, the index typically used is the Securities Industry and Financial
Markets (SIFM) Municipal Swap Index (previously referred to as the Bond Market
Association Index or BMA). Inverse floaters, including those inverse floating
rate securities in which the Funds invested during this reporting period, are
further defined within the Notes to Financial Statements and Glossary of Terms
Used in this Report sections of this shareholder report.
(3) The Lipper Other State Municipal Debt Funds Average is calculated using the
returns of all leveraged closed-end funds in this category for each period as
follows: 6 months, 43 funds; 1 year, 43 funds; 5 years, 43 funds; and 10 years,
20 funds. Fund and Lipper returns assume reinvestment of dividends. The
performance of the Lipper Other States Municipal Debt Funds Average represents
the overall average of returns for funds from ten different states with a wide
variety of municipal market conditions. Fund and Lipper returns assume
reinvestment of dividends.
(4) The Barclays Capital (formerly Lehman Brothers) Municipal Bond Index is an
unleveraged, unmanaged national index comprising a broad range of
investment-grade municipal bonds. Results for the Barclays Capital index do not
reflect any expenses.
(5) The Standard & Poor's National Municipal Bond Index is an unleveraged,
market value-weighted index designed to measure the performance of the
investment-grade U.S. municipal bond market.
5
Lipper group average. All of the Funds underperformed the national Barclays
Capital Municipal Bond Index and Standard & Poor's (S&P) National Municipal Bond
Index for the six-month period. Shareholders should note that all three of the
benchmarks shown in the accompanying table include bonds from states in addition
to Arizona and Texas, which may make direct comparisons between the Funds and
these benchmarks less meaningful.
Key management factors that influenced the Funds' returns during this period
included duration and yield curve positioning, credit exposure and sector
allocations. In addition, the use of leverage was an important factor affecting
each Fund's performance over this period. The impact of leverage is discussed in
more detail on page 7.
Over this period, the yield curve steepened, as interest rates at the short end
of the curve declined and longer rates rose. Given these changes in the interest
rate environment, bonds in the Barclays Capital Municipal Bond Index with
maturities of ten years or less generally outperformed the market as a whole,
with bonds maturing in four to eight years benefiting the most. Because they
were less sensitive to interest rate changes, these bonds generally outperformed
credits with longer maturities, with the biggest losses posted by bonds with the
longest maturities (22 years and longer). The performances of both NKR and NTX
were boosted by their relatively heavier weightings in the intermediate area of
the yield curve that performed best and their comparative underweighting of the
underperforming long part of the curve. In general, NAZ, NFZ and NXE were not as
advantageously positioned in terms of duration, particularly NFZ, which had
greater exposure to the long end of the curve than the other four Funds.
Credit exposure also was an important factor in performance during these past
six months. Because risk-averse investors generally sought higher quality
investments as disruptions in the financial markets deepened, bonds with higher
credit quality typically performed very well. At the same time, securities rated
BBB or below and non-rated bonds generally posted poor returns. In NFZ, NKR and
NXE, a relatively greater exposure to lower-rated bonds, especially non-rated
credits, generally had a negative impact on their performance, as did their
corresponding underexposure to bonds rated AAA and AA. In addition, NTX was
overweight to BBB rated bonds which had a negative impact on performance. We
continue to believe that lower-rated credits can offer attractive opportunities
despite their generally greater risks.
6
During this period, pre-refunded(6) bonds, which are backed by U.S. Treasury
securities, were one of the top performing segments of the municipal market, due
primarily to their shorter effective maturities, higher credit quality and
perceived safety. Additional sectors of the market that generally contributed
positively to the Funds' returns included general obligation and other
tax-backed bonds, water and sewer and education credits. NKR and NTX, in
particular, had greater weightings of tax-backed bonds than the market as a
whole, which magnified the positive contribution from this sector. NTX also
benefited from its holdings of school bonds guaranteed by the Texas Permanent
School Fund, which were in great demand by investors.
Holdings that generally detracted from the Funds' performances included
industrial development revenue (IDR) bonds, which performed very poorly during
this period. The health care and housing revenue sectors also underperformed the
overall municipal market. Next to the IDR sector, zero coupon bonds were among
the worst performing categories in the municipal market.
IMPACT OF THE FUNDS' CAPITAL STRUCTURES AND LEVERAGE STRATEGIES ON PERFORMANCE
In this generally unfavorable investment environment, the most significant
factor impacting the return of these Funds relative to the comparative benchmark
was the Funds' use of financial leverage. The Funds use leverage because its
managers believe that, over time, leveraging provides opportunities for
additional income and total returns for common shareholders. However, use of
leverage also can expose common shareholders to additional risk-especially when
market conditions are as unfavorable as they were during this period. As the
prices of most securities held by these Funds declined during the this time
period, the negative impact of these valuation changes on common share net asset
value and common shareholder total return was magnified by the use of leverage.
RECENT MARKET DEVELOPMENTS
Beginning in October, the nation's financial institutions and financial
markets-including the municipal bond market-experienced significant turmoil.
Reductions in demand decreased valuations of municipal bonds across all credit
ratings, especially those with lower credit ratings, and this generally reduced
the Funds' common share net asset values. The municipal market is one in which
dealer firms make markets in bonds on a principal basis using their proprietary
capital, and during the recent market turmoil these firms' capital was severely
constrained. As a result, some firms were unwilling to commit their capital to
purchase and to serve as a dealer for municipal bonds. This reduction in dealer
involvement in the market was accompanied by significant net selling pressure by
investors, particularly with respect to lower-rated municipal bonds, as
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(6) Pre-refundings, also known as advance 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.
7
institutional investors generally removed money from the municipal bond market,
at least in part because of their need to reduce the leveraging of their
municipal investments. This deleveraging was in part driven by the overall
reduction in the amount of financing available for such leverage, the increased
costs of such leverage financing, and the need to reduce leverage levels that
had recently increased due to the decline in municipal bond prices.
Municipal bond prices were further negatively impacted by concerns that the need
for further de-leveraging and a supply overhang (a large amount of new issues
that were postponed) would cause selling pressure to persist for a period of
time. In addition to falling prices, the following market conditions resulted in
greater price volatility of municipal bonds - wider credit spreads (i.e., lower
quality bonds fell in price more than higher quality bonds); significantly
reduced liquidity (i.e., the ability to sell bonds at a price close to their
carrying value), particularly for lower quality bonds; and a lack of price
transparency (i.e., the ability to accurately determine the price at which a
bond would likely trade). Reduced liquidity was most pronounced in mid-October,
although it improved considerably after that period.
RECENT DEVELOPMENTS REGARDING BOND INSURANCE COMPANIES
Another factor that had an impact on the performance of these Funds was their
position in bonds backed by municipal bond insurers that experienced downgrades
in their credit ratings. During the period covered by this report, ACA, AMBAC,
FGIC, FSA, MBIA, RAAI and SYNCORA (formerly XLCA) experienced one or more rating
reductions by at least one or more rating agencies. At the time this report was
prepared, at least one rating agency has placed each of these insurers on
"negative credit watch" or "credit watch developing," which may presage one or
more rating reductions for such insurer or insurers in the future. As concern
increased about the balance sheets of these insurers, prices on bonds insured by
these companies - especially those bonds with weaker underlying credits -
declined, detracting from the Funds' performance. By the end of this period,
most insured bonds were being valued according to their fundamentals as if they
were uninsured. On the whole, the holdings of all of our Funds continued to be
well diversified not only between insured and uninsured bonds, but also within
the insured bond category. It is important to note that municipal bonds
historically have had a very low rate of default and a very high recovery rate.
8
RECENT DEVELOPMENTS IN THE AUCTION RATE PREFERRED SECURITIES MARKETS
As noted in the last shareholder report, beginning in February 2008, more shares
were submitted for sale in the regularly scheduled auctions for the auction rate
preferred shares issued by these Funds than there were offers to buy. This meant
that these auctions "failed to clear," and that many or all of the Funds'
auction rate preferred shareholders who wanted to sell their shares in these
auctions were unable to do so. This decline in liquidity in auction rate
preferred shares did not lower the credit quality of these shares, and auction
rate preferred shareholders unable to sell their shares received distributions
at the "maximum rate" applicable to failed auctions, as calculated in accordance
with the pre-established terms of the auction rate preferred shares.
These developments generally have not affected the portfolio management or
investment policies of these Funds. However, one continuing implication for
common shareholders of these auction failures is that the Funds' cost of
leverage will likely be higher, at least temporarily, than it otherwise would
have been had the auctions continued to be successful. As a result, the Funds'
future common share earnings may be lower than they otherwise might have been.
As noted in the last shareholder report, the Funds' Board of Trustees authorized
a plan to use tender option bonds (TOBs), also known as floating rate
securities, to refinance a portion of the Funds' outstanding auction rate
preferred shares.
On January 8, 2009, thirty-five closed-end municipal funds called for redemption
at par a portion of their outstanding auction rate preferred securities. This
series of redemptions will collectively total $250.1 million. This new series of
redemptions brings the total amount of Nuveen's municipal closed-end funds'
auction rate preferred securities redemptions to nearly $2 billion of the
original $11 billion outstanding.
As of January 31, 2009, NFZ, NKR and NXE have redeemed $1,400,000, $525,000 and
$1,275,000 auction rate preferred shares, respectively, (11.7%, 2.8% and 5.8% of
their original outstanding auction rate preferred shares of $12,000,000,
$18,500,000 and $22,000,000, respectively). While the Funds' Board of Trustees
and management continue to work to resolve this situation, the Funds cannot
provide any assurance on when the remaining outstanding auction rate preferred
shares might be redeemed.
For up-to-date information, please visit the Nuveen CEF Auction Rate Preferred
Resource Center at:
http://www.nuveen.com/ResourceCenter/AuctionRatePreferred.aspx.
9
Common Share
Dividend and Share Price INFORMATION
During the six-month period ended January 31, 2009, NAZ and NTX each had one
dividend increase. The dividends of NFZ, NKR and NXE remained stable throughout
the reporting period.
Due to capital gains generated by normal portfolio activity, common shareholders
of NTX received a long-term capital gains distribution of $0.0212, a short-term
capital gains distribution of $0.0258, and a net ordinary income distribution of
$0.0041 at the end of December 2008.
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, 2009, all of
the Funds in this report had positive UNII balances, based upon our best
estimate, for tax purposes. NAZ and NTX had positive UNII balances and NFZ, NKR
and NXE had negative UNII balances for financial statement purposes.
On July 30, 2008, the Funds' Board of Trustees approved an open-market share
repurchase program, under which each Fund may repurchase up to 10% of its
outstanding common shares. As of January 31, 2009, the Funds have not
repurchased any of their common shares.
As of January 31, 2009, the Funds' common share prices were trading at discounts
to their common share NAVs as shown in the accompanying chart:
1/31/09 Six-Month
Discount Average Discount
NAZ -9.15% -7.31%
NFZ -13.87% -10.32%
NKR -12.42% -7.42%
NXE -12.26% -10.08%
NTX -4.83% -10.94%
10
NAZ Performance OVERVIEW | Nuveen Arizona Premium Income Municipal Fund, Inc. as
of January 31, 2009
[PIE CHART]
Credit Quality (as a % of total investments)(1)
AAA/U.S.
Guaranteed 32%
AA 28%
A 26%
BBB 11%
N/R 3%
[BAR CHART]
2008-2009 Monthly Tax-Free Dividends Per Common Share
Feb $ 0.051
Mar 0.051
Apr 0.051
May 0.051
Jun 0.051
Jul 0.051
Aug 0.051
Sep 0.053
Oct 0.053
Nov 0.053
Dec 0.053
Jan 0.053
[LINE CHART]
Common Share Price Performance -- Weekly Closing Price
2/01/08 $ 13.05
13.21
12.62
12.61
12.32
12.382
12.1
12.56
12.75
12.85
12.57
13
12.91
13.02
13.1
13.2
13.02
12.86
12.94
12.73
12.51
12.48
12.47
12.77
13.18
12.95
13.05
13.1
12.78
12.63
12.6
12.77
13
12.8
12.9
12.01
11.6325
9.2
9.62
10.49
10.57
11.5
10.77
9.36
10.09
9.84
9.39
8.94
9.23
9.65
10.82
10.56
10.4
1/31/09 10.8232
FUND SNAPSHOT
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Common Share Price $ 10.82
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Common Share Net Asset Value $ 11.91
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Premium/(Discount) to NAV -9.15%
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Market Yield 5.88%
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Taxable-Equivalent Yield(2) 8.56%
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Net Assets Applicable to Common Shares ($000) $ 53,218
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Average Effective Maturity on Securities (Years) 16.80
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Leverage-Adjusted Duration 11.38
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AVERAGE ANNUAL TOTAL RETURN
(Inception 11/19/92)
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ON SHARE PRICE ON NAV
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6-Month (Cumulative) -16.58% -5.90%
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1-Year -12.88% -10.83%
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5-Year -3.08% 1.25%
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10-Year 1.23% 2.85%
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INDUSTRIES
(as a % of total investments)
-------------------------------------------------------------------------------
Tax Obligation/Limited 23.3%
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U.S. Guaranteed 17.6%
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Health Care 14.0%
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Utilities 12.8%
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Water and Sewer 12.1%
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Tax Obligation/General 7.6%
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Education and Civic Organizations 7.4%
-------------------------------------------------------------------------------
Other 5.2%
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(1) The Portfolio of Investments may reflect the ratings on certain bonds
insured by ACA, AMBAC, FGIC, FSA, MBIA, RAAI and SYNCORA as of January 31,
2009. Please see the Portfolio Managers' Commentary for an expanded
discussion of the affect on the Fund of changes to the ratings of certain
bonds in the portfolio resulting from changes to the ratings of the
underlying insurers both during the period and after period end.
(2) Taxable-Equivalent Yield represents the yield that must be earned on a
fully taxable investment in order to equal the yield of the Fund on an
after-tax basis. It is based on a combined federal and state income tax
rate of 31.3%. When comparing this Fund to investments that generate
qualified dividend income, the Taxable-Equivalent Yield is lower.
11
NFZ Performance OVERVIEW | Nuveen Arizona Dividend Advantage Municipal Fund as
of January 31, 2009
FUND SNAPSHOT
-------------------------------------------------------------------------------
Common Share Price $ 10.25
-------------------------------------------------------------------------------
Common Share Net Asset Value $ 11.90
-------------------------------------------------------------------------------
Premium/(Discount) to NAV -13.87%
-------------------------------------------------------------------------------
Market Yield 6.15%
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Taxable-Equivalent Yield(2) 8.95%
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Net Assets Applicable to Common Shares ($000) $ 18,448
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Average Effective Maturity on Securities (Years) 15.64
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Leverage-Adjusted Duration 11.31
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AVERAGE ANNUAL TOTAL RETURN
(Inception 1/30/01)
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ON SHARE PRICE ON NAV
-------------------------------------------------------------------------------
6-Month (Cumulative) -22.97% -7.84%
-------------------------------------------------------------------------------
1-Year -19.90% -13.62%
-------------------------------------------------------------------------------
5-Year -4.71% 0.34%
-------------------------------------------------------------------------------
Since Inception 0.79% 3.42%
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INDUSTRIES
(as a % of total investments)
-------------------------------------------------------------------------------
Tax Obligation/Limited 30.0%
-------------------------------------------------------------------------------
Utilities 21.8%
-------------------------------------------------------------------------------
Health Care 12.2%
-------------------------------------------------------------------------------
Tax Obligation/General 9.3%
-------------------------------------------------------------------------------
Water and Sewer 8.2%
-------------------------------------------------------------------------------
U.S. Guaranteed 7.4%
-------------------------------------------------------------------------------
Education and Civic Organizations 5.0%
-------------------------------------------------------------------------------
Other 6.1%
-------------------------------------------------------------------------------
[PIE CHART]
Credit Quality (as a % of total investments)(1)
AAA/U.S.
Guaranteed 19%
AA 41%
A 19%
BBB 13%
N/R 8%
[BAR CHART]
2008-2009 Monthly Tax-Free Dividends Per Common Share
Feb $ 0.0525
Mar 0.0525
Apr 0.0525
May 0.0525
Jun 0.0525
Jul 0.0525
Aug 0.0525
Sep 0.0525
Oct 0.0525
Nov 0.0525
Dec 0.0525
Jan 0.0525
[LINE CHART]
Common Share Price Performance -- Weekly Closing Price
2/01/08 $ 13.49
13.52
13.29
13.14
12.95
12.78
12.54
12.68
12.91
12.83
13.17
13.28
13.25
13.2
13.2
13.18
13.263
13.39
13.59
13.15
12.98
13.27
13.29
13.79
13.5
13.27
13.4
13.55
13.06
12.74
12.7999
13.25
13.1
12.94
12.9
12.6
11.4
7.95
9.1
9.75
9.55
10.25
10.86
9.39
10.15
9.25
8.6999
8.86
9.1399
9.44
10.6493
10.16
10.29
1/31/09 10.2465
(1) The Portfolio of Investments may reflect the ratings on certain bonds
insured by ACA, AMBAC, FGIC, FSA, MBIA, RAAI and SYNCORA as of January 31,
2009. Please see the Portfolio Managers' Commentary for an expanded
discussion of the affect on the Fund of changes to the ratings of certain
bonds in the portfolio resulting from changes to the ratings of the
underlying insurers both during the period and after period end.
(2) Taxable-Equivalent Yield represents the yield that must be earned on a
fully taxable investment in order to equal the yield of the Fund on an
after-tax basis. It is based on a combined federal and state income tax
rate of 31.3%. When comparing this Fund to investments that generate
qualified dividend income, the Taxable-Equivalent Yield is lower.
12
NKR Performance OVERVIEW | Nuveen Arizona Dividend Advantage Municipal Fund 2 as
of January 31, 2009
[PIE CHART]
Credit Quality (as a % of total investments)(1)
AAA/U.S.
Guaranteed 37%
AA 23%
A 15%
BBB 18%
N/R 7%
[BAR CHART]
2008-2009 Monthly Tax-Free Dividends Per Common Share
Feb $ 0.0585
Mar 0.0585
Apr 0.0585
May 0.0585
Jun 0.0585
Jul 0.0585
Aug 0.0585
Sep 0.0585
Oct 0.0585
Nov 0.0585
Dec 0.0585
Jan 0.0585
[LINE CHART]
Common Share Price Performance -- Weekly Closing Price
2/01/08 $ 13.95
14
13.86
13.74
13.33
13.4
13.26
13.358
13.6
13.65
13.72
13.6
13.65
13.51
13.52
13.7104
13.7501
13.7
14
13.85
13.9
13.656
13.732
14.04
13.72
13.5
13.1
13.76
13.36
13.34
13.3
13.74
13.92
13.3
12.93
11.88
12.1
8
11.08
13
11.28
11.65
11.52
10.48
10.3
9.89
10.4
10.21
10.03
10
11.08
11.17
11
1/31/09 11.07
FUND SNAPSHOT
-------------------------------------------------------------------------------
Common Share Price $ 11.07
-------------------------------------------------------------------------------
Common Share Net Asset Value $ 12.64
-------------------------------------------------------------------------------
Premium/(Discount) to NAV -12.42%
-------------------------------------------------------------------------------
Market Yield 6.34%
-------------------------------------------------------------------------------
Taxable-Equivalent Yield(2) 9.23%
-------------------------------------------------------------------------------
Net Assets Applicable to Common Shares ($000) $ 30,837
-------------------------------------------------------------------------------
Average Effective Maturity on Securities (Years) 14.62
-------------------------------------------------------------------------------
Leverage-Adjusted Duration 9.40
-------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
(Inception 3/25/02)
-------------------------------------------------------------------------------
ON SHARE PRICE ON NAV
-------------------------------------------------------------------------------
6-Month (Cumulative) -18.46% -4.84%
-------------------------------------------------------------------------------
1-Year -16.52% -10.17%
-------------------------------------------------------------------------------
5-Year -0.21% 1.61%
-------------------------------------------------------------------------------
Since Inception 1.29% 3.91%
-------------------------------------------------------------------------------
INDUSTRIES
(as a % of total investments)
-------------------------------------------------------------------------------
Tax Obligation/Limited 29.6%
-------------------------------------------------------------------------------
U.S. Guaranteed 15.5%
-------------------------------------------------------------------------------
Health Care 15.1%
-------------------------------------------------------------------------------
Tax Obligation/General 14.9%
-------------------------------------------------------------------------------
Water and Sewer 8.2%
-------------------------------------------------------------------------------
Housing/Multifamily 5.3%
-------------------------------------------------------------------------------
Other 11.4%
-------------------------------------------------------------------------------
(1) The Portfolio of Investments may reflect the ratings on certain bonds
insured by ACA, AMBAC, FGIC, FSA, MBIA, RAAI and SYNCORA as of January 31,
2009. Please see the Portfolio Managers' Commentary for an expanded
discussion of the affect on the Fund of changes to the ratings of certain
bonds in the portfolio resulting from changes to the ratings of the
underlying insurers both during the period and after period end.
(2) Taxable-Equivalent Yield represents the yield that must be earned on a
fully taxable investment in order to equal the yield of the Fund on an
after-tax basis. It is based on a combined federal and state income tax
rate of 31.3%. When comparing this Fund to investments that generate
qualified dividend income, the Taxable-Equivalent Yield is lower.
13
NXE Performance OVERVIEW | Nuveen Arizona Dividend Advantage Municipal Fund 3 as
of January 31, 2009
FUND SNAPSHOT
-------------------------------------------------------------------------------
Common Share Price $10.31
-------------------------------------------------------------------------------
Common Share Net Asset Value $11.75
-------------------------------------------------------------------------------
Premium/(Discount) to NAV -12.26%
-------------------------------------------------------------------------------
Market Yield 6.34%
-------------------------------------------------------------------------------
Taxable-Equivalent Yield(2) 9.23%
-------------------------------------------------------------------------------
Net Assets Applicable to Common Shares ($000) $36,042
-------------------------------------------------------------------------------
Average Effective Maturity on Securities (Years) 15.64
-------------------------------------------------------------------------------
Leverage-Adjusted Duration 11.27
-------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
(Inception 9/25/02)
-------------------------------------------------------------------------------
ON SHARE PRICE ON NAV
-------------------------------------------------------------------------------
6-Month (Cumulative) -20.00% -7.56%
-------------------------------------------------------------------------------
1-Year -18.67% -13.06%
-------------------------------------------------------------------------------
5-Year -0.98% 1.03%
-------------------------------------------------------------------------------
Since Inception -0.60% 2.02%
-------------------------------------------------------------------------------
INDUSTRIES
(as a % of total investments)
-------------------------------------------------------------------------------
Tax Obligation/Limited 20.8%
-------------------------------------------------------------------------------
Health Care 19.8%
-------------------------------------------------------------------------------
U.S. Guaranteed 17.1%
-------------------------------------------------------------------------------
Education and Civic Organizations 11.0%
-------------------------------------------------------------------------------
Transportation 10.3%
-------------------------------------------------------------------------------
Water and Sewer 8.4%
-------------------------------------------------------------------------------
Utilities 6.4%
-------------------------------------------------------------------------------
Other 6.2%
-------------------------------------------------------------------------------
[PIE CHART]
Credit Quality (as a % of total investments)(1)
AAA/U.S.
Guaranteed 26%
AA 26%
A 27%
BBB 14%
N/R 7%
[BAR CHART]
2008-2009 Monthly Tax-Free Dividends Per Common Share
Feb $ 0.057
Mar 0.057
Apr 0.057
May 0.057
Jun 0.057
Jul 0.057
Aug 0.057
Sep 0.058
Oct 0.058
Nov 0.058
Dec 0.058
Jan 0.058
[LINE CHART]
Common Share Price Performance -- Weekly Closing Price
2/01/08 $ 13.49
13.52
12.94
12.8
12.82
12.75
12.7
13
13.07
13.9
13.55
13.75
13.25
13.15
13.13
13.06
13.2
13.32
13.4
13.32
13.047
13.21
13.25
13.15
13.08
13.03
12.71
13.08
12.72
12.64
12.38
12.84
13.019
12.4801
11.4
11.5
10.8
8.03
9.4
11.13
9.97
10.205
11.0981
9.61
9.22
9.24
8.63
9.33
9.3
9.44
10.2
10.2101
10.19
1/31/09 10.31
(1) The Portfolio of Investments may reflect the ratings on certain bonds
insured by ACA, AMBAC, FGIC, FSA, MBIA, RAAI and SYNCORA as of January 31,
2009. Please see the Portfolio Managers' Commentary for an expanded
discussion of the affect on the Fund of changes to the ratings of certain
bonds in the portfolio resulting from changes to the ratings of the
underlying insurers both during the period and after period end.
(2) Taxable-Equivalent Yield represents the yield that must be earned on a
fully taxable investment in order to equal the yield of the Fund on an
after-tax basis. It is based on a combined federal and state income tax
rate of 31.3%. When comparing this Fund to investments that generate
qualified dividend income, the Taxable-Equivalent Yield is lower.
14
NTX Performance OVERVIEW | Nuveen Texas Quality Income Municipal Fund as of
January 31, 2009
[PIE CHART]
Credit Quality (as a % of total investments)(1)
AAA/U.S.
Guaranteed 44%
AA 32%
A 9%
BBB 11%
BB or Lower 4%
[BAR CHART]
2008-2009 Monthly Tax-Free Dividends Per Common Share(3)
Feb $ 0.0545
Mar 0.0545
Apr 0.0545
May 0.0545
Jun 0.0545
Jul 0.0545
Aug 0.0545
Sep 0.0545
Oct 0.0545
Nov 0.0545
Dec 0.0545
Jan 0.0545
[LINE CHART]
Common Share Price Performance -- Weekly Closing Price
2/01/08 $ 13.66
13.69
13.15
13.01
12.67
12.99
12.93
12.95
13.0599
13.304
13.25
13.2
13.38
13.42
13.38
13.3
13.42
13.47
13.27
13.06
13
13
13.08
13.03
12.969
12.69
12.71
12.5
12.8
12.74
12.672
12.77
12.8
12.6
12.2
11.37
11.54
8.43
10.2
12.3799
11.57
11.81
10.8
10.06
10.42
11.5
10.89
10.26
11.45
11.94
12.5
12.19
12.41
1/31/09 12.6
FUND SNAPSHOT
-------------------------------------------------------------------------------
Common Share Price $ 12.60
-------------------------------------------------------------------------------
Common Share Net Asset Value $ 13.24
-------------------------------------------------------------------------------
Premium/(Discount) to NAV -4.83%
-------------------------------------------------------------------------------
Market Yield 5.52%
-------------------------------------------------------------------------------
Taxable-Equivalent Yield(2) 7.67%
-------------------------------------------------------------------------------
Net Assets Applicable to Common Shares ($000) $ 125,726
-------------------------------------------------------------------------------
Average Effective Maturity on Securities (Years) 15.56
-------------------------------------------------------------------------------
Leverage-Adjusted Duration 10.90
-------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
(Inception 10/17/91)
-------------------------------------------------------------------------------
ON SHARE PRICE ON NAV
-------------------------------------------------------------------------------
6-Month (Cumulative) 4.61% -2.28%
-------------------------------------------------------------------------------
1-Year -2.14% -6.08%
-------------------------------------------------------------------------------
5-Year 2.12% 2.39%
-------------------------------------------------------------------------------
10-Year 4.10% 4.14%
-------------------------------------------------------------------------------
INDUSTRIES
(as a % of total investments)
-------------------------------------------------------------------------------
Tax Obligation/General 31.4%
-------------------------------------------------------------------------------
U.S. Guaranteed 14.1%
-------------------------------------------------------------------------------
Health Care 11.0%
-------------------------------------------------------------------------------
Education and Civic Organizations 10.8%
-------------------------------------------------------------------------------
Water and Sewer 8.5%
-------------------------------------------------------------------------------
Utilities 7.0%
-------------------------------------------------------------------------------
Tax Obligation/Limited 5.2%
-------------------------------------------------------------------------------
Other 12.0%
-------------------------------------------------------------------------------
(1) The Portfolio of Investments may reflect the ratings on certain bonds
insured by ACA, AMBAC, FGIC, FSA, MBIA, RAAI and SYNCORA as of January 31,
2009. Please see the Portfolio Managers' Commentary for an expanded
discussion of the affect on the Fund of changes to the ratings of certain
bonds in the portfolio resulting from changes to the ratings of the
underlying insurers both during the period and after period end.
(2) Taxable-Equivalent Yield represents the yield that must be earned on a
fully taxable investment in order to equal the yield of the Fund on an
after-tax basis. It is based on a federal income tax rate of 28%. When
comparing this Fund to investments that generate qualified dividend
income, the Taxable-Equivalent Yield is lower.
(3) The Fund paid shareholders capital gains and net ordinary income
distributions in December 2008 of $0.0511 per share.
15
NAZ | Nuveen Arizona Premium Income Municipal Fund, Inc.
| Portfolio of INVESTMENTS January 31, 2009 (Unaudited)
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
CONSUMER STAPLES - 1.1% (0.7% OF TOTAL INVESTMENTS)
$ 835 Puerto Rico, The Children's Trust Fund, Tobacco Settlement 5/12 at 100.00 BBB $ 598,904
Asset-Backed Refunding Bonds, Series 2002, 5.375%, 5/15/33
------------------------------------------------------------------------------------------------------------------------------------
EDUCATION AND CIVIC ORGANIZATIONS - 11.2% (7.4% OF TOTAL
INVESTMENTS)
2,500 Arizona Higher Education Loan Authority, Student Loan Revenue 3/09 at 100.00 AAA 1,474,557
Bonds, Series 2007B, Adjustable Rate, 0.930%, 11/01/41 (4)
1,000 Arizona State University, System Revenue Bonds, Series 2002, 7/12 at 100.00 AA 1,012,800
5.000%, 7/01/25 - FGIC Insured
Arizona State University, System Revenue Bonds, Series 2005:
1,455 5.000%, 7/01/20 - AMBAC Insured 7/15 at 100.00 A 1,526,528
750 5.000%, 7/01/21 - AMBAC Insured 7/15 at 100.00 A 773,213
1,500 Tempe Industrial Development Authority, Arizona, Lease Revenue 7/13 at 100.00 A 1,193,670
Bonds, Arizona State University Foundation Project,
Series 2003, 5.000%, 7/01/34 - AMBAC Insured
------------------------------------------------------------------------------------------------------------------------------------
7,205 Total Education and Civic Organizations 5,980,768
------------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE - 21.4% (14.0% OF TOTAL INVESTMENTS)
1,430 Arizona Health Facilities Authority, Hospital Revenue Bonds, 1/17 at 100.00 AA- 1,315,557
Banner Health Systems, Series 2007A, 5.000%, 1/01/25
885 Arizona Health Facilities Authority, Hospital Revenue Bonds, 1/17 at 100.00 AA- 340,725
Banner Health Systems, Series 2007B, 3.411%, 1/02/37
3,470 Arizona Health Facilities Authority, Hospital Revenue Bonds, 1/18 at 100.00 AA- 3,066,960
Banner Health Systems, Series 2008D, 5.500%, 1/01/38
675 Glendale Industrial Development Authority, Arizona, Revenue 12/15 at 100.00 BBB 416,077
Bonds, John C. Lincoln Health Network,
Series 2005B, 5.000%, 12/01/37
1,110 Glendale Industrial Development Authority, Arizona, Revenue 12/17 at 100.00 BBB 666,211
Bonds, John C. Lincoln Health Network,
Series 2007, 5.000%, 12/01/42
2,150 Maricopa County Industrial Development Authority, Arizona, 7/14 at 100.00 A 2,022,398
Health Facility Revenue Bonds, Catholic Healthcare West,
Series 2004A, 5.375%, 7/01/23
2,800 Maricopa County Industrial Development Authority, Arizona, 7/17 at 100.00 A 2,262,848
Health Facility Revenue Bonds, Catholic Healthcare West,
Series 2007A, 5.250%, 7/01/32
515 Puerto Rico Industrial, Tourist, Educational, Medical and 11/10 at 101.00 Aa1 551,235
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 6/09 at 100.00 N/R 760,666
Revenue Bonds, Winslow Memorial Hospital,
Series 1998, 5.500%, 6/01/22
------------------------------------------------------------------------------------------------------------------------------------
14,090 Total Health Care 11,402,677
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/SINGLE FAMILY - 7.0% (4.5% OF TOTAL INVESTMENTS)
915 Phoenix and Pima County Industrial Development Authority, 7/17 at 103.00 Aaa 886,059
Arizona, Single Family Mortgage Revenue Bonds,
Series 2007-4, 5.800%, 12/01/39 (Alternative Minimum Tax)
3,010 Tucson and Pima County Industrial Development Authority, 6/17 at 101.00 Aaa 2,814,531
Arizona, Joint Single Family Mortgage Revenue Bonds,
Series 2007B, 5.350%, 6/01/47 (Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
3,925 Total Housing/Single Family 3,700,590
------------------------------------------------------------------------------------------------------------------------------------
16
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL - 11.6% (7.6% OF TOTAL INVESTMENTS)
$ 1,265 Gila County Unified School District 10 Payson, Arizona, School 7/18 at 100.00 A2 $ 1,167,013
Improvement Bonds, Project 2006,
Series 2008B, 3.000%, 7/01/28
1,200 Maricopa County Unified School District 95 Queen Creek, 7/18 at 100.00 Aa3 1,207,116
Arizona, General Obligation Bonds,
Series 2008, 5.000%, 7/01/27 - FSA Insured
3,530 Pinal County Unified School District 1, Florence, Arizona, 7/18 at 100.00 A- 3,512,844
General Obligation Bonds, Series 2008C, 5.250%, 7/01/28
330 Puerto Rico, General Obligation and Public Improvement Bonds, 7/11 at 100.00 BBB- 290,017
Series 2001A, 5.375%, 7/01/28
------------------------------------------------------------------------------------------------------------------------------------
6,325 Total Tax Obligation/General 6,176,990
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED - 35.6% (23.3% OF TOTAL INVESTMENTS)
407 Estrella Mountain Ranch Community Facilities District, 7/10 at 102.00 N/R 353,345
Goodyear, Arizona, Special Assessment Lien Bonds,
Series 2001A, 7.875%, 7/01/25
3,000 Glendale Western Loop 101 Public Facilities Corporation, 1/14 at 100.00 AA 3,067,170
Arizona, Third Lien Excise Tax Revenue Bonds,
Series 2008B, 6.250%, 7/01/38
1,280 Greater Arizona Development Authority, Infrastructure Revenue 8/16 at 100.00 AA 1,323,251
Bonds, Series 2006-1, 5.000%, 8/01/22 - MBIA Insured
740 Greater Arizona Development Authority, Infrastructure Revenue 8/16 at 100.00 AA 756,717
Bonds, Series 2006A, 5.000%, 8/01/23 - MBIA Insured
575 Marana Municipal Property Corporation, Arizona, Revenue Bonds, 7/13 at 100.00 AA 576,334
Series 2003, 5.000%, 7/01/28 - AMBAC Insured
1,069 Marana, Arizona, Tangerine Farms Road Improvement District 7/16 at 100.00 Baa1 765,212
Revenue Bonds, Series 2006, 4.600%, 1/01/26
3,400 Maricopa County Stadium District, Arizona, Revenue Refunding 6/12 at 100.00 Baa1 3,618,752
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 3,497,580
Series 2005, 5.000%, 7/01/24 - FSA Insured
1,140 Pinetop Fire District of Navajo County, Arizona, Certificates 6/16 at 102.00 Baa2 1,060,804
of Participation, Series 2008, 7.750%, 6/15/29
1,200 Prescott Valley Municipal Property Corporation, Arizona, 1/13 at 100.00 AA- 1,173,552
Municipal Facilities Revenue Bonds,
Series 2003, 5.000%, 1/01/27 - FGIC Insured
265 Puerto Rico Public Buildings Authority, Guaranteed Government 7/12 at 100.00 BBB- 233,836
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 A- 1,494,016
Facilities Excise Tax Revenue Bonds,
Series 2005, 5.000%, 7/01/25 - SYNCORA GTY Insured
500 Tucson, Arizona, Certificates of Participation, Series 2000, 7/09 at 100.00 AA 506,770
5.700%, 7/01/20 - MBIA Insured
645 Vistancia Community Facilities District, Arizona, Restricted 7/15 at 100.00 Baa1 531,164
General Obligation Bonds, Series 2005, 5.750%, 7/15/24
------------------------------------------------------------------------------------------------------------------------------------
19,231 Total Tax Obligation/Limited 18,958,503
------------------------------------------------------------------------------------------------------------------------------------
U.S. GUARANTEED - 27.0% (17.6% OF TOTAL INVESTMENTS) (5)
800 Arizona Health Facilities Authority, Hospital Revenue Bonds, 7/10 at 101.00 A (5) 865,904
Catholic Healthcare West, Series 1999A, 6.625%, 7/01/20
(Pre-refunded 7/01/10)
1,000 Arizona Health Facilities Authority, Hospital System Revenue 12/10 at 102.00 BBB (5) 1,120,060
Bonds, John C. Lincoln Health Network,
Series 2000, 7.000%, 12/01/25 (Pre-refunded 12/01/10)
1,250 Glendale Industrial Development Authority, Arizona, Revenue 5/11 at 101.00 AAA 1,388,550
Bonds, Midwestern University,
Series 2001A, 5.875%, 5/15/31 (Pre-refunded 5/15/11)
1,250 Maricopa County Industrial Development Authority, Arizona, No Opt. Call AA (5) 1,596,988
Hospital Revenue Refunding Bonds, Samaritan Health
Services, Series 1990A, 7.000%, 12/01/16 - MBIA Insured (ETM)
17
NAZ | Nuveen Arizona Premium Income Municipal Fund, Inc. (continued)
| Portfolio of INVESTMENTS January 31, 2009 (Unaudited)
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
U.S. GUARANTEED (5) (continued)
$ 385 Maricopa County, Arizona, Hospital Revenue Bonds, Sun Health 4/15 at 100.00 BBB (5) $ 453,669
Corporation, Series 2005, 5.000%, 4/01/16
(Pre-refunded 4/01/15)
3,000 Mesa Industrial Development Authority, Arizona, Revenue Bonds, 1/10 at 101.00 AA (5) 3,163,650
Discovery Health System, Series 1999A, 5.750%, 1/01/25
(Pre-refunded 1/01/10) - MBIA Insured
2,000 Phoenix Civic Improvement Corporation, Arizona, Junior Lien 7/10 at 101.00 AA+ (5) 2,167,300
Wastewater System Revenue Bonds, Series 2000, 6.000%, 7/01/24
(Pre-refunded 7/01/10) - FGIC Insured
1,000 Puerto Rico Highway and Transportation Authority, Highway 7/10 at 101.00 BBB+ (5) 1,081,440
Revenue Bonds, Series 2000B, 6.500%, 7/01/27
(Pre-refunded 7/01/10)
735 Puerto Rico Public Buildings Authority, Guaranteed Government 7/12 at 100.00 Baa3 (5) 811,947
Facilities Revenue Refunding Bonds,
Series 2002D, 5.125%, 7/01/24 (Pre-refunded 7/01/12)
1,500 Scottsdale Industrial Development Authority, Arizona, Hospital 12/11 at 101.00 N/R (5) 1,692,105
Revenue Bonds, Scottsdale Healthcare,
Series 2001, 5.800%, 12/01/31 (Pre-refunded 12/01/11)
------------------------------------------------------------------------------------------------------------------------------------
12,920 Total U.S. Guaranteed 14,341,613
------------------------------------------------------------------------------------------------------------------------------------
UTILITIES - 19.5% (12.8% OF TOTAL INVESTMENTS)
1,000 Arizona Power Authority, Special Obligation Power Resource No Opt. Call AA 1,172,960
Revenue Refunding Crossover Bonds, Hoover Project,
Series 2001, 5.250%, 10/01/15
215 Pima County Industrial Development Authority, Arizona, Lease 7/09 at 100.00 Aa3 216,544
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 A3 1,802,901
Series 2005RR, 5.000%, 7/01/27 - SYNCORA GTY Insured
530 Salt River Project Agricultural Improvement and Power District, 1/13 at 100.00 Aa1 549,228
Arizona, Electric System Revenue Bonds,
Series 2002B, 5.000%, 1/01/22
1,000 Salt River Project Agricultural Improvement and Power District, 1/12 at 101.00 Aa1 1,014,300
Arizona, Electric System Revenue Refunding Bonds,
Series 2002A, 5.125%, 1/01/27
Salt Verde Financial Corporation, Arizona, Senior Gas
Revenue Bonds, Series 2007:
4,500 5.500%, 12/01/29 No Opt. Call A 3,331,170
3,500 5.000%, 12/01/37 No Opt. Call A 2,284,765
------------------------------------------------------------------------------------------------------------------------------------
12,915 Total Utilities 10,371,868
------------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER - 18.5% (12.1% OF TOTAL INVESTMENTS)
1,005 Cottonwood, Arizona, Senior Lien Water System Revenue Bonds, 7/14 at 100.00 BBB 952,167
Municipal Property Corporation,
Series 2004, 5.000%, 7/01/24 - SYNCORA GTY Insured
3,500 Glendale, Arizona, Water and Sewer Revenue Bonds, Subordinate 7/13 at 100.00 AA 3,373,475
Lien, Series 2003, 5.000%, 7/01/28 - AMBAC Insured
600 Oro Valley Municipal Property Corporation, Arizona, Senior Lien 7/13 at 100.00 AA 609,954
Water Revenue Bonds,
Series 2003, 5.000%, 7/01/23 - MBIA Insured
1,000 Phoenix Civic Improvement Corporation, Arizona, Junior Lien 7/14 at 100.00 AA+ 1,023,290
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 1,472,580
Water System Revenue Bonds,
Series 2002, 5.000%, 7/01/26 - FGIC Insured
1,250 Phoenix Civic Improvement Corporation, Arizona, Junior Lien No Opt. Call AAA 1,432,075
Water System Revenue Refunding Bonds,
Series 2001, 5.500%, 7/01/21 - FGIC Insured
18
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER (continued)
Surprise Municipal Property Corporation, Arizona, Wastewater
System Revenue Bonds, Series 2007:
$ 600 4.700%, 4/01/22 4/14 at 100.00 N/R $ 471,306
695 4.900%, 4/01/32 4/17 at 100.00 N/R 484,665
------------------------------------------------------------------------------------------------------------------------------------
10,150 Total Water and Sewer 9,819,512
------------------------------------------------------------------------------------------------------------------------------------
$ 87,596 Total Investments (cost $85,098,964) - 152.9% 81,351,425
============------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 3.5% 1,866,549
---------------------------------------------------------------------------------------------------------------------
Preferred Shares, at Liquidation Value - (56.4)% (6) (30,000,000)
---------------------------------------------------------------------------------------------------------------------
Net Assets Applicable to Common Shares - 100% $ 53,217,974
=====================================================================================================================
(1) All percentages shown in the Portfolio of Investments are based on net
assets applicable to Common shares unless otherwise noted.
(2) Optional Call Provisions: Dates (month and year) and prices of the
earliest optional call or redemption. There may be other call provisions
at varying prices at later dates. Certain mortgage-backed securities may
be subject to periodic principal paydowns.
(3) Ratings: Using the higher of Standard & Poor's Group ("Standard & Poor's")
or Moody's Investor Service, Inc. ("Moody's") rating. Ratings below BBB by
Standard & Poor's or Baa by Moody's are considered to be below investment
grade.
The Portfolio of Investments may reflect the ratings on certain bonds
insured by ACA, AMBAC, FGIC, FSA, MBIA, RAAI and SYNCORA as of January 31,
2009. Please see the Portfolio Managers' Commentary for an expanded
discussion of the affect on the Fund of changes to the ratings of certain
bonds in the portfolio resulting from changes to the ratings of the
underlying insurers both during the period and after period end.
(4) Investment valued at fair value using methods determined in good faith by,
or at the discretion of, the Board of Directors.
(5) 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.
(6) Preferred Shares, at Liquidation Value as a percentage of Total
Investments is 36.9%.
N/R Not rated.
(ETM) Escrowed to maturity.
See accompanying notes to financial statements.
19
NFZ | Nuveen Arizona Dividend Advantage Municipal Fund
| Portfolio of INVESTMENTS January 31, 2009 (Unaudited)
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
EDUCATION AND CIVIC ORGANIZATIONS - 7.3% (5.0% OF TOTAL
INVESTMENTS)
$ 280 Arizona Higher Education Loan Authority, Student Loan Revenue 3/09 at 100.00 AAA $ 165,150
Bonds, Series 2007B, Adjustable Rate, 0.930%, 11/01/41 (4)
1,000 Puerto Rico Industrial, Tourist, Educational, Medical and 2/09 at 101.00 BBB- 693,500
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 260,727
Environmental Control Facilities Financing Authority, Higher
Education Revenue Bonds, University of the Sacred Heart,
Series 2001, 5.250%, 9/01/21
305 Tucson Industrial Development Authority, Arizona, Charter School 9/14 at 100.00 BBB- 217,206
Revenue Bonds, Arizona Agribusiness and Equine Center
Charter School, Series 2004A, 6.125%, 9/01/34
------------------------------------------------------------------------------------------------------------------------------------
1,885 Total Education and Civic Organizations 1,336,583
------------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE - 17.5% (12.2% OF TOTAL INVESTMENTS)
565 Arizona Health Facilities Authority, Hospital Revenue Bonds, 1/17 at 100.00 AA- 519,783
Banner Health Systems, Series 2007A, 5.000%, 1/01/25
325 Arizona Health Facilities Authority, Hospital Revenue Bonds, 1/17 at 100.00 AA- 125,125
Banner Health Systems, Series 2007B, 3.411%, 1/02/37
720 Arizona Health Facilities Authority, Hospital Revenue Bonds, 1/18 at 100.00 AA- 636,372
Banner Health Systems, Series 2008D, 5.500%, 1/01/38
10 California Health Facilities Financing Authority, Health 3/13 at 100.00 A 8,474
Facility 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 154,103
Bonds, John C. Lincoln Health Network,
Series 2005B, 5.000%, 12/01/37
415 Glendale Industrial Development Authority, Arizona, Revenue 12/17 at 100.00 BBB 249,079
Bonds, John C. Lincoln Health Network,
Series 2007, 5.000%, 12/01/42
750 Maricopa County Industrial Development Authority, Arizona, 7/14 at 100.00 A 705,488
Health Facility Revenue Bonds, Catholic Healthcare West,
Series 2004A, 5.375%, 7/01/23
1,025 Maricopa County Industrial Development Authority, Arizona, 7/17 at 100.00 A 828,364
Health Facility Revenue Bonds, Catholic Healthcare West,
Series 2007A, 5.250%, 7/01/32
------------------------------------------------------------------------------------------------------------------------------------
4,060 Total Health Care 3,226,788
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/MULTIFAMILY - 3.2% (2.3% OF TOTAL INVESTMENTS)
1,000 Maricopa County Industrial Development Authority, Arizona, 7/09 at 102.00 Baa1 596,970
Multifamily Housing Revenue Bonds, Whispering Palms Apartments,
Series 1999A, 5.900%, 7/01/29 - MBIA Insured
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/SINGLE FAMILY - 5.5% (3.8% OF TOTAL INVESTMENTS)
1,085 Tucson and Pima County Industrial Development Authority, 6/17 at 101.00 Aaa 1,014,540
Arizona, Joint Single Family Mortgage Revenue Bonds, Series
2007B, 5.350%, 6/01/47 (Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL - 13.4% (9.3% OF TOTAL INVESTMENTS)
1,000 Maricopa County Unified School District 11, Peoria, Arizona, 7/15 at 100.00 AA 1,072,760
General Obligation Bonds, Second
Series 2005, 5.000%, 7/01/20 - FGIC Insured
1,340 Yuma & La Paz Counties Community College District, Arizona, 7/16 at 100.00 AA 1,404,199
General Obligation Bonds,
Series 2006, 5.000%, 7/01/21 - MBIA Insured
------------------------------------------------------------------------------------------------------------------------------------
2,340 Total Tax Obligation/General 2,476,959
------------------------------------------------------------------------------------------------------------------------------------
20
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED - 43.2% (30.0% OF TOTAL INVESTMENTS)
$ 1,220 Arizona Tourism and Sports Authority, Tax Revenue Bonds, 7/13 at 100.00 A2 $ 1,122,742
Multipurpose Stadium Facility Project,
Series 2003A, 5.000%, 7/01/31 - MBIA Insured
94 Centerra Community Facilities District, Goodyear, Arizona, 7/15 at 100.00 N/R 55,989
General Obligation Bonds, Series 2005, 5.500%, 7/15/29
208 Estrella Mountain Ranch Community Facilities District, Arizona, 1/17 at 100.00 N/R 127,390
Special Assessment Bonds, Montecito Assessment District,
Series 2007, 5.700%, 7/01/27
158 Estrella Mountain Ranch Community Facilities District, Goodyear, 7/10 at 102.00 N/R 137,171
Arizona, Special Assessment Lien Bonds,
Series 2001A, 7.875%, 7/01/25
1,000 Greater Arizona Development Authority, Infrastructure Revenue 8/16 at 100.00 AA 1,033,790
Bonds, Series 2006-1, 5.000%, 8/01/22 - MBIA Insured
275 Greater Arizona Development Authority, Infrastructure Revenue 8/16 at 100.00 AA 281,212
Bonds, Series 2006A, 5.000%, 8/01/23 - MBIA Insured
1,180 Marana Municipal Property Corporation, Arizona, Revenue Bonds, 7/13 at 100.00 AA 1,199,576
Series 2003, 5.000%, 7/01/23 - AMBAC Insured
400 Marana, Arizona, Tangerine Farms Road Improvement District 7/16 at 100.00 Baa1 286,328
Revenue Bonds, Series 2006, 4.600%, 1/01/26
150 Marley Park Community Facilities District, City of Surprise, 7/17 at 100.00 N/R 93,947
Arizona, Limited Tax General Obligation Bonds,
Series 2007, 6.100%, 7/15/32
255 Merrill Ranch Community Facilities District 1, Florence, 7/18 at 100.00 N/R 187,744
Arizona, General Obligation Bonds,
Series 2008A, 7.400%, 7/15/33
330 Palm Valley Community Facility District 3, Goodyear, Arizona, 7/16 at 100.00 N/R 181,995
General Obligation Bonds, Series 2006, 5.300%, 7/15/31
225 Palm Valley Community Facility District 3, Goodyear, Arizona, 7/17 at 100.00 N/R 132,449
Limited Tax General Obligation Bonds,
Series 2007, 5.800%, 7/15/32
100 Parkway Community Facilities District 1, Prescott Valley, 7/16 at 100.00 N/R 56,118
Arizona, General Obligation Bonds,
Series 2006, 5.350%, 7/15/31
900 Phoenix Industrial Development Authority, Arizona, Government 3/12 at 100.00 A1 960,390
Bonds, Capitol Mall LLC II,
Series 2001, 5.250%, 9/15/16 - AMBAC Insured
680 Pinal County Industrial Development Authority, Arizona, No Opt. Call BBB- 590,512
Correctional Facilities Contract Revenue Bonds, Florence
West Prison LLC, Series 2002A, 5.000%, 10/01/18 - ACA Insured
600 San Luis Civic Improvement Corporation, Arizona, Municipal 7/15 at 100.00 A- 556,776
Facilities Excise Tax Revenue Bonds,
Series 2005, 5.000%, 7/01/25 - SYNCORA GTY Insured
350 Tartesso West Community Facility District, Buckeye, Arizona, 7/17 at 100.00 N/R 209,048
Limited Tax General Obligation Bonds,
Series 2007, 5.900%, 7/15/32
500 Vistancia Community Facilities District, Arizona, Restricted 7/15 at 100.00 Baa1 411,755
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 215,052
Assessment Revenue Bonds, Series 2005, 6.000%, 7/01/30
225 Westpark Community Facilities District, Buckeye, Arizona, 7/16 at 100.00 N/R 125,555
General Obligation Tax Increment Bonds
Series 2006, 5.250%, 7/15/31
------------------------------------------------------------------------------------------------------------------------------------
9,205 Total Tax Obligation/Limited 7,965,539
------------------------------------------------------------------------------------------------------------------------------------
U.S. GUARANTEED - 10.7% (7.4% OF TOTAL INVESTMENTS) (5)
365 Arizona Health Facilities Authority, Hospital Revenue Bonds, 7/10 at 101.00 A (5) 395,069
Catholic Healthcare West,
Series 1999A, 6.625%, 7/01/20 (Pre-refunded 7/01/10)
240 Maricopa County Union High School District 210 Phoenix, Arizona, 7/16 at 100.00 AA (5) 287,674
General Obligation Bonds, Series 2006C, 5.000%, 7/01/24
(Pre-refunded 7/01/16) - MBIA Insured
140 Maricopa County, Arizona, Hospital Revenue Bonds, Sun Health 4/15 at 100.00 BBB (5) 164,970
Corporation, Series 2005, 5.000%, 4/01/16
(Pre-refunded 4/01/15)
21
NFZ | Nuveen Arizona Dividend Advantage Municipal Fund (continued)
| Portfolio of INVESTMENTS January 31, 2009 (Unaudited)
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
U.S. GUARANTEED (5) (continued)
$ 1,000 Scottsdale Industrial Development Authority, Arizona, Hospital 12/11 at 101.00 N/R (5) $ 1,128,070
Revenue Bonds, Scottsdale Healthcare, Series 2001, 5.800%,
12/01/31 (Pre-refunded 12/01/11)
------------------------------------------------------------------------------------------------------------------------------------
1,745 Total U.S. Guaranteed 1,975,783
------------------------------------------------------------------------------------------------------------------------------------
UTILITIES - 28.7% (19.9% OF TOTAL INVESTMENTS)
1,500 Arizona Power Authority, Special Obligation Power Resource No Opt. Call AA 1,769,066
Revenue Refunding Crossover Bonds, Hoover Project,
Series 2001, 5.250%, 10/01/17
1,000 Mesa, Arizona, Utility System Revenue Refunding Bonds, Series No Opt. Call AA 1,163,860
2002, 5.250%, 7/01/17 - FGIC Insured
1,000 Puerto Rico Electric Power Authority, Power Revenue Bonds, 7/15 at 100.00 A3 839,390
Series 2005RR, 5.000%, 7/01/26 - SYNCORA GTY Insured
200 Salt River Project Agricultural Improvement and Power District, 1/13 at 100.00 Aa1 207,256
Arizona, Electric System Revenue Bonds,
Series 2002B, 5.000%, 1/01/22
235 Salt River Project Agricultural Improvement and Power District, 7/09 at 100.50 Aa1 236,645
Arizona, Electric System Revenue Refunding Bonds,
Series 1997A, 5.000%, 1/01/20
1,000 Salt River Project Agricultural Improvement and Power District, 1/12 at 101.00 Aa1 1,073,040
Arizona, Electric System Revenue Refunding Bonds,
Series 2002A, 5.250%, 1/01/18
------------------------------------------------------------------------------------------------------------------------------------
4,935 Total Utilities 5,289,257
------------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER - 11.8% (8.2% OF TOTAL INVESTMENTS)
225 Oro Valley Municipal Property Corporation, Arizona, Senior Lien 7/13 at 100.00 AA 228,733
Water Revenue Bonds, Series 2003, 5.000%, 7/01/23 -
MBIA Insured
1,500 Phoenix Civic Improvement Corporation, Arizona, Junior Lien 7/12 at 100.00 AAA 1,472,580
Water System Revenue Bonds, Series 2002, 5.000%, 7/01/26 -
FGIC Insured
Surprise Municipal Property Corporation, Arizona, Wastewater
System Revenue Bonds, Series 2007:
225 4.700%, 4/01/22 4/14 at 100.00 N/R 176,740
260 4.900%, 4/01/32 4/17 at 100.00 N/R 181,314
175 Yuma County Industrial Development Authority, Arizona, Exempt 12/17 at 100.00 N/R 118,346
Revenue Bonds, Far West Water & Sewer Inc. Refunding,
Series 2007A, 6.375%, 12/01/37 (Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
2,385 Total Water and Sewer 2,177,713
------------------------------------------------------------------------------------------------------------------------------------
$ 28,640 Total Long-Term Investments (cost $28,773,400) - 141.3% 26,060,132
============------------------------------------------------------------------------------------------------------------------------
22
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 2.7% (1.9% OF TOTAL INVESTMENTS)
$ 500 The Industrial Development Authority of the County of Apache, A-1+ $ 500,000
Arizona, Industrial Development Revenue Bonds, 1985
Series A, Tucson Electric Power Company Springville
Project, Variable Rate Demand Obligations, 0.450%,
12/01/20 (6)
============------------------------------------------------------------------------------------------------------------------------
Total Short-Term Investments (cost $500,000) 500,000
---------------------------------------------------------------------------------------------------------------------
Total Investments (cost $29,273,400) -- 144.0% 26,560,132
---------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 13.5% 2,488,089
---------------------------------------------------------------------------------------------------------------------
Preferred Shares, at Liquidation Value - (57.5)% (7) (10,600,000)
---------------------------------------------------------------------------------------------------------------------
Net Assets Applicable to Common Shares - 100% $ 18,448,221
=====================================================================================================================
(1) All percentages shown in the Portfolio of Investments are based on net
assets applicable to Common shares unless otherwise noted.
(2) Optional Call Provisions: Dates (month and year) and prices of the
earliest optional call or redemption. There may be other call provisions
at varying prices at later dates. Certain mortgage-backed securities may
be subject to periodic principal paydowns.
(3) Ratings: Using the higher of Standard & Poor's Group ("Standard & Poor's")
or Moody's Investor Service, Inc. ("Moody's") rating. Ratings below BBB by
Standard & Poor's or Baa by Moody's are considered to be below investment
grade.
The Portfolio of Investments may reflect the ratings on certain bonds
insured by ACA, AMBAC, FGIC, FSA, MBIA, RAAI and SYNCORA as of January 31,
2009. Please see the Portfolio Managers' Commentary for an expanded
discussion of the affect on the Fund of changes to the ratings of certain
bonds in the portfolio resulting from changes to the ratings of the
underlying insurers both during the period and after period end.
(4) Investment valued at fair value using methods determined in good faith by,
or at the discretion of, the Board of Trustees.
(5) 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.
(6) Investment has a maturity of more than one year, but has variable rate and
demand features which qualify it as a short-term investment. The rate
disclosed is that in effect at the end of the reporting period. This rate
changes periodically based on market conditions or a specified market
index.
(7) Preferred Shares, at Liquidation Value as a percentage of Total
Investments is 39.9%.
N/R Not rated.
See accompanying notes to financial statements.
23
NKR | Nuveen Arizona Dividend Advantage Municipal Fund 2
| Portfolio of INVESTMENTS January 31, 2009 (Unaudited)
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
EDUCATION AND CIVIC ORGANIZATIONS - 5.7% (3.7% OF TOTAL
INVESTMENTS)
$ 1,130 Arizona Higher Education Loan Authority, Student Loan Revenue 3/09 at 100.00 AAA $ 666,500
Bonds, Series 2007B, Adjustable Rate, 0.930%, 11/01/41 (4)
460 Pima County Industrial Development Authority, Arizona, Charter 12/14 at 100.00 BBB- 361,914
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- 269,645
Environmental Control Facilities Financing Authority,
Higher Education Revenue Bonds, Ana G. Mendez University
System, Series 1999, 5.375%, 2/01/19
480 Tucson Industrial Development Authority, Arizona, Charter School 9/14 at 100.00 BBB- 341,832
Revenue Bonds, Arizona Agribusiness and Equine Center Charter
School, Series 2004A, 6.125%, 9/01/34
University of Arizona, Certificates of Participation,
Series 2002A:
65 5.500%, 6/01/18 - AMBAC Insured 6/12 at 100.00 AA- 69,969
40 5.125%, 6/01/22 - AMBAC Insured 6/12 at 100.00 AAA 41,106
------------------------------------------------------------------------------------------------------------------------------------
2,495 Total Education and Civic Organizations 1,750,966
------------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE - 22.9% (15.1% OF TOTAL INVESTMENTS)
845 Arizona Health Facilities Authority, Hospital Revenue Bonds, 1/17 at 100.00 AA- 777,375
Banner Health Systems, Series 2007A, 5.000%, 1/01/25
520 Arizona Health Facilities Authority, Hospital Revenue Bonds, 1/17 at 100.00 AA- 200,200
Banner Health Systems, Series 2007B, 3.411%, 1/02/37
1,150 Arizona Health Facilities Authority, Hospital Revenue Bonds, 1/18 at 100.00 AA- 1,016,428
Banner Health Systems, Series 2008D, 5.500%, 1/01/38
600 Arizona Health Facilities Authority, Revenue Bonds, Blood 4/14 at 100.00 A 597,420
Systems Inc., Series 2004, 5.000%, 4/01/20
400 Glendale Industrial Development Authority, Arizona, Revenue 12/15 at 100.00 BBB 246,564
Bonds, John C. Lincoln Health Network,
Series 2005B, 5.000%, 12/01/37
655 Glendale Industrial Development Authority, Arizona, Revenue 12/17 at 100.00 BBB 393,124
Bonds, John C. Lincoln Health Network,
Series 2007, 5.000%, 12/01/42
1,375 Maricopa County Industrial Development Authority, Arizona, 7/14 at 100.00 A 1,293,394
Health Facility Revenue Bonds, Catholic Healthcare West,
Series 2004A, 5.375%, 7/01/23
1,650 Maricopa County Industrial Development Authority, Arizona, 7/17 at 100.00 A 1,333,464
Health Facility Revenue Bonds, Catholic Healthcare West,
Series 2007A, 5.250%, 7/01/32
500 Maricopa County Industrial Development Authority, Arizona, 5/09 at 100.50 AA 452,960
Hospital Revenue Bonds, Mayo Clinic Hospital,
Series 1998, 5.250%, 11/15/37
1,000 Yavapai County Industrial Development Authority, Arizona, 8/13 at 100.00 Baa2 761,930
Hospital Revenue Bonds, Yavapai Regional Medical Center,
Series 2003A, 6.000%, 8/01/33
------------------------------------------------------------------------------------------------------------------------------------
8,695 Total Health Care 7,072,859
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/MULTIFAMILY - 8.0% (5.3% OF TOTAL INVESTMENTS)
1,000 Maricopa County Industrial Development Authority, Arizona, GNMA 10/11 at 105.00 AAA 1,020,300
Collateralized Multifamily Housing Revenue Refunding Bonds,
Pine Ridge, Cambridge Court, Cove on 44th and Fountain Place
Apartments, Series 2001A-1, 6.000%, 10/20/31
1,425 Phoenix Industrial Development Authority, Arizona, GNMA 7/12 at 105.00 AAA 1,443,497
Collateralized Multifamily Housing Revenue Bonds,
Summit Apartments, Series 2002, 6.450%, 7/20/32
------------------------------------------------------------------------------------------------------------------------------------
2,425 Total Housing/Multifamily 2,463,797
------------------------------------------------------------------------------------------------------------------------------------
24
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/SINGLE FAMILY - 5.4% (3.5% OF TOTAL INVESTMENTS)
$ 1,775 Tucson and Pima County Industrial Development Authority, 6/17 at 101.00 Aaa $ 1,659,732
Arizona, Joint Single Family Mortgage Revenue Bonds,
Series 2007B, 5.350%, 6/01/47 (Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL - 22.5% (14.9% OF TOTAL INVESTMENTS)
1,000 Maricopa County School District 6, Arizona, General Obligation No Opt. Call AAA 1,175,800
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 AA 1,320,096
Arizona, General Obligation Refunding Bonds,
Series 2002A, 5.250%, 7/01/14 - FGIC Insured
1,405 Mesa, Arizona, General Obligation Bonds, Series 2002, 5.375%, No Opt. Call AA 1,649,990
7/01/15 - FGIC Insured
Phoenix, Arizona, Various Purpose General Obligation Bonds,
Series 2002B:
1,700 5.000%, 7/01/22 7/12 at 100.00 AAA 1,777,554
500 5.000%, 7/01/27 7/12 at 100.00 AAA 507,825
510 Scottsdale, Arizona, General Obligation Bonds, Series 2002, 7/11 at 100.00 AAA 520,572
5.000%, 7/01/24
------------------------------------------------------------------------------------------------------------------------------------
6,280 Total Tax Obligation/General 6,951,837
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED - 44.9% (29.6% OF TOTAL INVESTMENTS)
Arizona State, Certificates of Participation, Series 2002A:
750 5.000%, 11/01/17 - MBIA Insured 5/12 at 100.00 AA 790,170
1,000 5.000%, 11/01/18 - MBIA Insured 5/12 at 100.00 AA 1,046,250
500 5.000%, 11/01/20 - MBIA Insured 5/12 at 100.00 AA 515,155
131 Centerra Community Facilities District, Goodyear, Arizona, 7/15 at 100.00 N/R 78,028
General Obligation Bonds, Series 2005, 5.500%, 7/15/29
345 Estrella Mountain Ranch Community Facilities District, Arizona, 1/17 at 100.00 N/R 199,310
Special Assessment Bonds, Montecito Assessment District,
Series 2007, 5.800%, 7/01/32
250 Estrella Mountain Ranch Community Facilities District, Goodyear, 7/10 at 102.00 N/R 217,043
Arizona, Special Assessment Lien Bonds,
Series 2001A, 7.875%, 7/01/25
626 Marana, Arizona, Tangerine Farms Road Improvement District 7/16 at 100.00 Baa1 448,103
Revenue Bonds, Series 2006, 4.600%, 1/01/26
Maricopa County Stadium District, Arizona, Revenue Refunding
Bonds, Series 2002:
840 5.375%, 6/01/18 - AMBAC Insured 6/12 at 100.00 Baa1 894,046
2,645 5.375%, 6/01/19 - AMBAC Insured 6/12 at 100.00 Baa1 2,815,175
240 Marley Park Community Facilities District, City of Surprise, 7/17 at 100.00 N/R 150,314
Arizona, Limited Tax General Obligation Bonds,
Series 2007, 6.100%, 7/15/32
415 Merrill Ranch Community Facilities District 1, Florence, 7/18 at 100.00 N/R 305,544
Arizona, General Obligation Bonds,
Series 2008A, 7.400%, 7/15/33
530 Palm Valley Community Facility District 3, Goodyear, Arizona, 7/16 at 100.00 N/R 292,295
General Obligation Bonds, Series 2006, 5.300%, 7/15/31
350 Palm Valley Community Facility District 3, Goodyear, Arizona, 7/17 at 100.00 N/R 206,031
Limited Tax General Obligation Bonds,
Series 2007, 5.800%, 7/15/32
140 Parkway Community Facilities District 1, Prescott Valley, 7/16 at 100.00 N/R 78,565
Arizona, General Obligation Bonds, Series 2006,
5.350%, 7/15/31
1,500 Phoenix Industrial Development Authority, Arizona, Government 3/12 at 100.00 A1 1,600,650
Bonds, Capitol Mall LLC II, Series 2001, 5.250%, 9/15/16 -
AMBAC Insured
1,070 Pinal County Industrial Development Authority, Arizona, No Opt. Call BBB- 929,188
Correctional Facilities Contract Revenue Bonds, Florence
West Prison LLC, Series 2002A, 5.000%, 10/01/18 - ACA Insured
270 Puerto Rico Public Buildings Authority, Guaranteed Government 7/12 at 100.00 BBB- 238,248
Facilities Revenue Refunding Bonds, Series 2002D,
5.125%, 7/01/24
960 San Luis Civic Improvement Corporation, Arizona, Municipal 7/15 at 100.00 A- 890,842
Facilities Excise Tax Revenue Bonds, Series 2005, 5.000%,
7/01/25 - SYNCORA GTY Insured
555 Tartesso West Community Facility District, Buckeye, Arizona, 7/17 at 100.00 N/R 331,490
Limited Tax General Obligation Bonds, Series 2007,
5.900%, 7/15/32
25
NKR | Nuveen Arizona Dividend Advantage Municipal Fund 2 (continued)
| Portfolio of INVESTMENTS January 31, 2009 (Unaudited)
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED (continued)
$ 750 Vistancia Community Facilities District, Arizona, Restricted 7/15 at 100.00 Baa1 $ 617,633
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 339,237
Assessment Revenue Bonds, Series 2005, 6.000%, 7/01/30
350 Westpark Community Facilities District, Buckeye, Arizona, 7/16 at 100.00 N/R 195,307
General Obligation Tax Increment Bonds
Series 2006, 5.250%, 7/15/31
640 Yuma Municipal Property Corporation, Arizona, Municipal 7/10 at 100.00 AA- 654,522
Facilities Tax Revenue Bonds, Series 2001, 5.000%,
7/01/21 - AMBAC Insured
------------------------------------------------------------------------------------------------------------------------------------
15,417 Total Tax Obligation/Limited 13,833,146
------------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION - 4.3% (2.8% OF TOTAL INVESTMENTS)
470 Phoenix Civic Improvement Corporation, Arizona, Senior Lien 7/09 at 100.50 AAA 471,067
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 AA 866,830
Airport Revenue Bonds, Series 2002B, 5.250%, 7/01/27 -
FGIC Insured (Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
1,470 Total Transportation 1,337,897
------------------------------------------------------------------------------------------------------------------------------------
U.S. GUARANTEED - 23.5% (15.5% OF TOTAL INVESTMENTS) (5)
400 Arizona Health Facilities Authority, Hospital Revenue Bonds, 7/10 at 101.00 A (5) 432,952
Catholic Healthcare West, Series 1999A, 6.625%, 7/01/20
(Pre-refunded 7/01/10)
735 Arizona Health Facilities Authority, Hospital System Revenue 2/12 at 101.00 Baa3 (5) 839,517
Bonds, Phoenix Children's Hospital,
Series 2002A, 6.250%, 2/15/21 (Pre-refunded 2/15/12)
715 Arizona State University, System Revenue Bonds, Series 2002, 7/12 at 100.00 AAA 821,721
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 118,503
General Obligation Bonds, Series 2004B, 5.250%, 7/01/20
(Pre-refunded 7/01/14) - FSA Insured
375 Maricopa County Union High School District 210 Phoenix, Arizona, 7/16 at 100.00 AA (5) 449,490
General Obligation Bonds, Series 2006C, 5.000%, 7/01/24
(Pre-refunded 7/01/16) - MBIA Insured
225 Maricopa County, Arizona, Hospital Revenue Bonds, Sun Health 4/15 at 100.00 BBB (5) 265,131
Corporation, Series 2005, 5.000%, 4/01/16
(Pre-refunded 4/01/15)
730 Puerto Rico Public Buildings Authority, Guaranteed Government 7/12 at 100.00 Baa3 (5) 806,424
Facilities Revenue Refunding Bonds,
Series 2002D, 5.125%, 7/01/24 (Pre-refunded 7/01/12)
1,000 Scottsdale Industrial Development Authority, Arizona, Hospital 12/11 at 101.00 N/R (5) 1,128,070
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 1,083,545
5.000%, 7/01/24 (Pre-refunded 7/01/11)
University of Arizona, Certificates of Participation,
Series 2002A:
685 5.500%, 6/01/18 (Pre-refunded 6/01/12) - AMBAC Insured 6/12 at 100.00 AA- (5) 776,817
460 5.125%, 6/01/22 (Pre-refunded 6/01/12) - AMBAC Insured 6/12 at 100.00 A1 (5) 516,051
------------------------------------------------------------------------------------------------------------------------------------
6,415 Total U.S. Guaranteed 7,238,221
------------------------------------------------------------------------------------------------------------------------------------
UTILITIES - 2.1% (1.4% OF TOTAL INVESTMENTS)
1,000 Salt Verde Financial Corporation, Arizona, Senior Gas Revenue No Opt. Call A 652,790
Bonds, Series 2007, 5.000%, 12/01/37
------------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER - 12.4% (8.2% OF TOTAL INVESTMENTS)
500 Maricopa County Industrial Development Authority, Arizona, Water 6/09 at 101.00 A 457,855
System Improvement Revenue Bonds, Chaparral City Water
Company, Series 1997A, 5.400%, 12/01/22 - AMBAC Insured
(Alternative Minimum Tax)
360 Oro Valley Municipal Property Corporation, Arizona, Senior Lien 7/13 at 100.00 AA 365,972
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)
$ 1,000 Phoenix Civic Improvement Corporation, Arizona, Junior Lien No Opt. Call AAA $ 1,127,350
Water System Revenue Refunding Bonds, Series 2001, 5.500%,
7/01/22 - FGIC Insured
Surprise Municipal Property Corporation, Arizona, Wastewater
System Revenue Bonds, Series 2007:
350 4.700%, 4/01/22 4/14 at 100.00 N/R 274,929
410 4.900%, 4/01/32 4/17 at 100.00 N/R 285,918
1,000 Tucson, Arizona, Water System Revenue Refunding Bonds, Series 7/12 at 102.00 AA 1,121,190
2002, 5.500%, 7/01/18 - FGIC Insured
275 Yuma County Industrial Development Authority, Arizona, Exempt 12/17 at 100.00 N/R 185,972
Revenue Bonds, Far West Water & Sewer Inc. Refunding,
Series 2007A, 6.375%, 12/01/37 (Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
3,895 Total Water and Sewer 3,819,186
------------------------------------------------------------------------------------------------------------------------------------
$ 49,867 Total Investments (cost $49,950,725) - 151.7% 46,780,431
============------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 6.6% 2,031,574
---------------------------------------------------------------------------------------------------------------------
Preferred Shares, at Liquidation Value - (58.3)% (6) (17,975,000)
---------------------------------------------------------------------------------------------------------------------
Net Assets Applicable to Common Shares - 100% $ 30,837,005
=====================================================================================================================
(1) All percentages shown in the Portfolio of Investments are based on net
assets applicable to Common shares unless otherwise noted.
(2) Optional Call Provisions: Dates (month and year) and prices of the
earliest optional call or redemption. There may be other call provisions
at varying prices at later dates. Certain mortgage-backed securities may
be subject to periodic principal paydowns.
(3) Ratings: Using the higher of Standard & Poor's Group ("Standard & Poor's")
or Moody's Investor Service, Inc. ("Moody's") rating. Ratings below BBB by
Standard & Poor's or Baa by Moody's are considered to be below investment
grade.
The Portfolio of Investments may reflect the ratings on certain bonds
insured by ACA, AMBAC, FGIC, FSA, MBIA, RAAI and SYNCORA as of January 31,
2009. Please see the Portfolio Managers' Commentary for an expanded
discussion of the affect on the Fund of changes to the ratings of certain
bonds in the portfolio resulting from changes to the ratings of the
underlying insurers both during the period and after period end.
(4) Investment valued at fair value using methods determined in good faith by,
or at the discretion of, the Board of Trustees.
(5) 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.
(6) Preferred Shares, at Liquidation Value as a percentage of Total
Investments is 38.4%.
N/R Not rated.
See accompanying notes to financial statements.
27
NXE | Nuveen Arizona Dividend Advantage Municipal Fund 3
| Portfolio of INVESTMENTS January 31, 2009 (Unaudited)
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
CONSUMER STAPLES - 1.1% (0.7% OF TOTAL INVESTMENTS)
$ 530 Puerto Rico, The Children's Trust Fund, Tobacco Settlement 5/12 at 100.00 BBB $ 380,143
Asset-Backed Refunding Bonds, Series 2002, 5.375%, 5/15/33
------------------------------------------------------------------------------------------------------------------------------------
EDUCATION AND CIVIC ORGANIZATIONS - 16.2% (11.0% OF TOTAL INVESTMENTS)
690 Arizona Higher Education Loan Authority, Student Loan Revenue 3/09 at 100.00 AAA 406,978
Bonds, Series 2007B, Adjustable Rate, 0.930%, 11/01/41 (4)
1,250 Arizona State University, System Revenue Bonds, Series 2005, 7/15 at 100.00 A 1,311,450
5.000%, 7/01/20 - AMBAC Insured
1,130 Energy Management Services LLC, Arizona State University, Energy 7/12 at 100.00 AA 1,205,947
Conservation Revenue Bonds, Main Campus Project, Series 2002,
5.250%, 7/01/18 - MBIA Insured
540 Pima County Industrial Development Authority, Arizona, Charter School 12/14 at 100.00 BBB- 424,856
Revenue Bonds, Noah Webster Basic Schools Inc.,
Series 2004, 6.000%, 12/15/24
565 Tucson Industrial Development Authority, Arizona, Charter School 9/14 at 100.00 BBB- 402,365
Revenue Bonds, Arizona Agribusiness and Equine Center Charter
School, Series 2004A, 6.125%, 9/01/34
2,000 University of Arizona, Certificates of Participation, Series 2002B, 6/12 at 100.00 AA- 2,104,620
5.125%, 6/01/20 - AMBAC Insured
------------------------------------------------------------------------------------------------------------------------------------
6,175 Total Education and Civic Organizations 5,856,216
------------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE - 29.3% (19.8% OF TOTAL INVESTMENTS)
1,015 Arizona Health Facilities Authority, Hospital Revenue Bonds, Banner 1/17 at 100.00 AA- 933,770
Health Systems, Series 2007A, 5.000%, 1/01/25
620 Arizona Health Facilities Authority, Hospital Revenue Bonds, Banner 1/17 at 100.00 AA- 238,700
Health Systems, Series2007B, 3.411%, 1/02/37
2,390 Arizona Health Facilities Authority, Hospital Revenue Bonds, Banner 1/18 at 100.00 AA- 2,112,402
Health Systems, Series 2008D, 5.500%, 1/01/38
625 Arizona Health Facilities Authority, Revenue Bonds, Blood Systems 4/14 at 100.00 A 622,313
Inc., Series 2004, 5.000%, 4/01/20
475 Glendale Industrial Development Authority, Arizona, Revenue Bonds, 12/15 at 100.00 BBB 292,795
John C. Lincoln Health Network, Series 2005B, 5.000%, 12/01/37
785 Glendale Industrial Development Authority, Arizona, Revenue Bonds, 12/17 at 100.00 BBB 471,149
John C. Lincoln Health Network, Series 2007, 5.000%, 12/01/42
1,825 Maricopa County Industrial Development Authority, Arizona, Health 7/14 at 100.00 A 1,716,686
Facility Revenue Bonds, Catholic Healthcare West, Series 2004A,
5.375%, 7/01/23
1,985 Maricopa County Industrial Development Authority, Arizona, Health 7/17 at 100.00 A 1,604,198
Facility Revenue Bonds, Catholic Healthcare West, Series 2007A,
5.250%, 7/01/32
2,000 Maricopa County Industrial Development Authority, Arizona, Hospital 5/09 at 100.50 AA 1,811,840
Revenue Bonds, Mayo Clinic Hospital, Series 1998, 5.250%, 11/15/37
1,000 Yavapai County Industrial Development Authority, Arizona, Hospital 8/13 at 100.00 Baa2 761,930
Revenue Bonds, Yavapai Regional Medical Center, Series 2003A,
6.000%, 8/01/33
------------------------------------------------------------------------------------------------------------------------------------
12,720 Total Health Care 10,565,783
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/SINGLE FAMILY - 5.5% (3.7% OF TOTAL INVESTMENTS)
2,130 Tucson and Pima County Industrial Development Authority, Arizona, 6/17 at 101.00 Aaa 1,991,678
Joint Single Family Mortgage Revenue Bonds, Series 2007B, 5.350%,
6/01/47 (Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
28
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL - 2.8% (1.8% OF TOTAL INVESTMENTS)
$ 1,000 Pinal County Unified School District 1, Florence, Arizona, General 7/18 at 100.00 A- $ 995,140
Obligation Bonds, Series2008C, 5.250%, 7/01/28
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED - 30.8% (20.8% OF TOTAL INVESTMENTS)
150 Centerra Community Facilities District, Goodyear, Arizona, General 7/15 at 100.00 N/R 89,345
Obligation Bonds, Series2005, 5.500%, 7/15/29
2,250 DC Ranch Community Facilities District, Scottsdale, Arizona, General 7/13 at 100.00 Baa1 1,879,538
Obligation Bonds, Series2002, 5.000%, 7/15/27 - AMBAC Insured
Estrella Mountain Ranch Community Facilities District, Arizona,
Special Assessment Bonds, Montecito Assessment District,
Series 2007:
253 5.700%, 7/01/27 1/17 at 100.00 N/R 154,950
155 5.800%, 7/01/32 1/17 at 100.00 N/R 89,545
293 Estrella Mountain Ranch Community Facilities District, Goodyear, 7/10 at 102.00 N/R 254,374
Arizona, Special Assessment Lien Bonds, Series 2001A, 7.875%,
7/01/25
525 Greater Arizona Development Authority, Infrastructure Revenue Bonds, 8/16 at 100.00 AA 536,860
Series 2006A, 5.000%,8/01/23 - MBIA Insured
756 Marana, Arizona, Tangerine Farms Road Improvement District Revenue 7/16 at 100.00 Baa1 541,160
Bonds, Series 2006, 4.600%, 1/01/26
290 Marley Park Community Facilities District, City of Surprise, Arizona, 7/17 at 100.00 N/R 181,630
Limited Tax General Obligation Bonds, Series 2007, 6.100%, 7/15/32
490 Merrill Ranch Community Facilities District 1, Florence, Arizona, 7/18 at 100.00 N/R 360,763
General Obligation Bonds, Series 2008A, 7.400%, 7/15/33
2,000 Mohave County, Arizona, Certificates of Participation, Series 2004, 7/14 at 100.00 A 2,125,659
5.250%, 7/01/19 - AMBAC Insured
640 Palm Valley Community Facility District 3, Goodyear, Arizona, General 7/16 at 100.00 N/R 352,960
Obligation Bonds, Series2006, 5.300%, 7/15/31
425 Palm Valley Community Facility District 3, Goodyear, Arizona, Limited 7/17 at 100.00 N/R 250,181
Tax General Obligation Bonds, Series 2007, 5.800%, 7/15/32
160 Parkway Community Facilities District 1, Prescott Valley, Arizona, 7/16 at 100.00 N/R 89,789
General Obligation Bonds, Series 2006, 5.350%, 7/15/31
1,250 Pinal County Industrial Development Authority, Arizona, Correctional No Opt. Call BBB- 1,085,500
Facilities Contract Revenue Bonds, Florence West Prison LLC, Series
2002A, 5.000%, 10/01/18 - ACA Insured
1,130 San Luis Civic Improvement Corporation, Arizona, Municipal Facilities 7/15 at 100.00 A- 1,048,595
Excise Tax Revenue Bonds, Series 2005, 5.000%, 7/01/25 - SYNCORA
GTY Insured
665 Tartesso West Community Facility District, Buckeye, Arizona, Limited 7/17 at 100.00 N/R 397,191
Tax General Obligation Bonds, Series 2007, 5.900%, 7/15/32
1,250 Vistancia Community Facilities District, Arizona, Restricted General 7/15 at 100.00 Baa1 1,029,388
Obligation Bonds, Series2005, 5.750%, 7/15/24
664 Watson Road Community Facilities District, Arizona, Special 7/16 at 100.00 N/R 402,238
Assessment Revenue Bonds, Series2005, 6.000%, 7/01/30
425 Westpark Community Facilities District, Buckeye, Arizona, General 7/16 at 100.00 N/R 237,159
Obligation Tax Increment Bonds Series 2006, 5.250%, 7/15/31
------------------------------------------------------------------------------------------------------------------------------------
13,771 Total Tax Obligation/Limited 11,106,825
------------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION - 15.3% (10.3% 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 AA 1,027,680
2,300 5.250%, 7/01/21 - FGIC Insured (Alternative Minimum Tax) 7/12 at 100.00 AA 2,165,702
29
NXE | Nuveen Arizona Dividend Advantage Municipal Fund 3 (continued)
| Portfolio of INVESTMENTS January 31, 2009 (Unaudited)
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION (continued)
$ 2,450 Tucson Airport Authority Inc., Arizona, Revenue Refunding Bonds, 6/11 at 100.00 A1 $ 2,310,570
Series 2001B, 5.000%,6/01/20 - AMBAC Insured (Alternative
Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
5,750 Total Transportation 5,503,952
------------------------------------------------------------------------------------------------------------------------------------
U.S. GUARANTEED - 25.3% (17.1% OF TOTAL INVESTMENTS) (5)
300 Arizona Health Facilities Authority, Hospital Revenue Bonds, Catholic 7/10 at 101.00 A (5) 324,714
Healthcare West, Series1999A, 6.625%, 7/01/20
(Pre-refunded 7/01/10)
1,000 Arizona Health Facilities Authority, Hospital System Revenue Bonds, 12/10 at 102.00 BBB (5) 1,117,900
John C. Lincoln Health Network, Series 2000, 6.875%, 12/01/20
(Pre-refunded 12/01/10)
Arizona Health Facilities Authority, Hospital System Revenue Bonds,
Phoenix Children's Hospital, Series 1999A:
350 6.125%, 11/15/22 (Pre-refunded 11/15/09) 11/09 at 100.00 Baa3 (5) 363,976
520 6.250%, 11/15/29 (Pre-refunded 11/15/09) 11/09 at 100.00 Baa3 (5) 541,273
1,575 Maricopa County Union High School District 210, Phoenix, Arizona, 7/14 at 100.00 AAA 1,846,105
General Obligation Bonds, Series 2004A, 5.000%, 7/01/20
(Pre-refunded 7/01/14) - FSA Insured
270 Maricopa County, Arizona, Hospital Revenue Bonds, Sun Health 4/15 at 100.00 BBB (5) 318,157
Corporation, Series 2005, 5.000%,4/01/16 (Pre-refunded 4/01/15)
1,250 Scottsdale Industrial Development Authority, Arizona, Hospital 12/11 at 101.00 N/R (5) 1,410,088
Bonds, Scottsdale Healthcare, Series 2001, 5.800%, 12/01/31
Revenue (Pre-refunded 12/01/11)
2,770 Tempe, Arizona, Excise Tax Revenue Refunding Bonds, Series 2003, 7/13 at 100.00 AAA 3,196,520
5.000%, 7/01/22(Pre-refunded 7/01/13)
------------------------------------------------------------------------------------------------------------------------------------
8,035 Total U.S. Guaranteed 9,118,733
------------------------------------------------------------------------------------------------------------------------------------
UTILITIES - 9.5% (6.4% OF TOTAL INVESTMENTS)
1,250 Maricopa County Pollution Control Corporation, Arizona, Revenue Bonds, 11/12 at 100.00 A 977,913
Arizona Public Service Company - Palo Verde Project, Series 2002A,
5.050%, 5/01/29 - AMBAC Insured
1,660 Puerto Rico Electric Power Authority, Power Revenue Bonds, Series 7/15 at 100.00 A3 1,393,387
2005RR, 5.000%, 7/01/26 - SYNCORA GTY Insured
270 Salt River Project Agricultural Improvement and Power District, 1/13 at 100.00 Aa1 279,796
Arizona, Electric System Revenue Bonds,
Series 2002B, 5.000%, 1/01/22
1,165 Salt Verde Financial Corporation, Arizona, Senior Gas Revenue Bonds, No Opt. Call A 760,500
Series 2007 5.000%, 12/01/37
------------------------------------------------------------------------------------------------------------------------------------
4,345 Total Utilities 3,411,596
------------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER - 12.4% (8.4% OF TOTAL INVESTMENTS)
405 Oro Valley Municipal Property Corporation, Arizona, Senior Lien Water 7/13 at 100.00 AA 411,719
Revenue Bonds, Series2003, 5.000%, 7/01/23 - MBIA Insured
1,000 Phoenix Civic Improvement Corporation, Arizona, Junior Lien Wastewater 7/11 at 100.00 AA+ 1,035,540
System Revenue Refunding Bonds, Series 2001, 5.125%, 7/01/21 -
FGIC Insured
2,000 Phoenix Civic Improvement Corporation, Arizona, Junior Lien Water 7/12 at 100.00 AAA 2,129,019
System Revenue Bonds, Series2002, 5.000%, 7/01/18 - FGIC Insured
Surprise Municipal Property Corporation, Arizona, Wastewater System
Revenue Bonds, Series 2007:
425 4.700%, 4/01/22 4/14 at 100.00 N/R 333,842
490 4.900%, 4/01/32 4/17 at 100.00 N/R 341,706
30
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER (continued)
$ 330 Yuma County Industrial Development Authority, Arizona, Exempt Revenue 12/17 at 100.00 N/R $ 223,166
Bonds, Far West Water & Sewer Inc. Refunding, Series 2007A, 6.375%,
12/01/37 (Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
4,650 Total Water and Sewer 4,474,992
------------------------------------------------------------------------------------------------------------------------------------
$ 59,106 Total Investments (cost $59,192,220) 148.2% 53,405,058
============------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 9.3% 3,362,073
---------------------------------------------------------------------------------------------------------------------
Preferred Shares, at Liquidation Value - (57.5)% (6) (20,725,000)
---------------------------------------------------------------------------------------------------------------------
Net Assets Applicable to Common Shares - 100% $ 36,042,131
=====================================================================================================================
(1) All percentages shown in the Portfolio of Investments are based on net
assets applicable to Common shares unless otherwise noted.
(2) Optional Call Provisions: Dates (month and year) and prices of the
earliest optional call or redemption. There may be other call provisions
at varying prices at later dates. Certain mortgage-backed securities may
be subject to periodic principal paydowns.
(3) Ratings: Using the higher of Standard & Poor's Group ("Standard & Poor's")
or Moody's Investor Service, Inc. ("Moody's") rating. Ratings below BBB by
Standard & Poor's or Baa by Moody's are considered to be below investment
grade.
The Portfolio of Investments may reflect the ratings on certain bonds
insured by ACA, AMBAC, FGIC, FSA, MBIA, RAAI and SYNCORA as of January 31,
2009. Please see the Portfolio Managers' Commentary for an expanded
discussion of the affect on the Fund of changes to the ratings of certain
bonds in the portfolio resulting from changes to the ratings of the
underlying insurers both during the period and after period end.
(4) Investment valued at fair value using methods determined in good faith by,
or at the discretion of, the Board of Trustees.
(5) 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.
(6) Preferred Shares, at Liquidation Value as a percentage of Total
Investments is 38.8%.
N/R Not rated.
See accompanying notes to financial statements.
31
NTX | Nuveen Texas Quality Income Municipal Fund
| Portfolio of INVESTMENTS January 31, 2009 (Unaudited)
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
CONSUMER STAPLES - 1.4% (0.9% OF TOTAL INVESTMENTS)
$ 2,500 Puerto Rico, The Children's Trust Fund, Tobacco Settlement 5/12 at 100.00 BBB $ 1,793,125
Asset-Backed Refunding Bonds, Series 2002, 5.375%, 5/15/33
------------------------------------------------------------------------------------------------------------------------------------
EDUCATION AND CIVIC ORGANIZATIONS - 16.4% (10.8% OF TOTAL INVESTMENTS)
1,000 Central Texas Higher Education Authority Inc., Texas, Student Loan 8/12 at 100.00 A3 933,143
Revenue Bonds, Auction Rate Coupon, 5.000%, 8/15/23 - MBIA Insured
(Alternative Minimum Tax) (4)
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 1,125,142
1,230 5.000%, 5/15/28 5/15 at 100.00 AA 1,167,147
1,290 5.000%, 5/15/29 5/15 at 100.00 AA 1,207,130
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 Ba3 1,652,578
1,795 5.000%, 5/01/19 - FGIC Insured 5/13 at 100.00 Ba3 1,701,498
1,885 5.000%, 5/01/20 - FGIC Insured 5/13 at 100.00 Ba3 1,740,911
1,665 Texas State University System, Financing Revenue Bonds, Series 2004, 9/14 at 100.00 AAA 1,707,208
5.000%, 3/15/24 - FSA Insured
2,000 Texas State University System, Financing Revenue Refunding Bonds, 3/12 at 100.00 AAA 2,082,100
Series 2002, 5.000%,3/15/20 - FSA Insured
2,330 Universal City Education Facilities Corporation, Texas, Revenue 3/11 at 102.00 A- 2,283,563
Bonds, Wayland Baptist University Project, Series 2001,
5.625%, 3/01/26
5,000 University of North Texas, Financing System Revenue Bonds, Series 4/12 at 100.00 AAA 5,045,300
2001, 5.000%, 4/15/24 - FSA Insured
------------------------------------------------------------------------------------------------------------------------------------
21,075 Total Education and Civic Organizations 20,645,720
------------------------------------------------------------------------------------------------------------------------------------
ENERGY - 1.5% (1.0% OF TOTAL INVESTMENTS)
3,000 Gulf Coast Waste Disposal Authority, Texas, Waste Disposal Revenue 4/09 at 101.00 BBB 1,889,040
Bonds, Valero Energy Corporation Project, Series 1998, 5.600%,
4/01/32 (Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE - 16.7% (11.0% OF TOTAL INVESTMENTS)
3,270 Abilene Health Facilities Development Corporation, Texas, Hospital 3/09 at 100.00 AA 2,995,647
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 A3 1,623,496
1,835 5.250%, 7/01/21 - RAAI Insured 7/14 at 100.00 A3 1,671,355
4,140 Midland County Hospital District, Texas, Hospital Revenue Bonds, No Opt. Call BBB 3,652,060
Series 1992, 0.000%, 6/01/11
2,000 North Central Texas Health Facilities Development Corporation, 5/11 at 100.00 Aa2 1,807,980
Hospital Revenue Bonds, Baylor Healthcare System, Series 2001A,
5.125%, 5/15/29
2,000 Richardson Hospital Authority, Texas, Revenue Bonds, Richardson 12/13 at 100.00 Baa2 1,622,660
Regional Medical Center, Series 2004, 5.875%, 12/01/24
2,500 Tarrant County Cultural & Educational Facilities Financing 11/17 at 100.00 AA- 1,982,200
Corporation, Texas, Revenue Bonds, Tarrant County Health Resources,
Series 2007B, 5.000%, 11/15/42
32
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE (continued)
$ 2,000 Tarrant County Cultural Education Facilities Finance Corporation, 1/19 at 100.00 AAA $ 2,098,200
Texas, Revenue Refunding Bonds, Christus Health, Series 2008,
6.500%, 7/01/37
2,000 Tom Green County Health Facilities Development Corporation, Texas, 5/11 at 101.00 Baa3 1,892,100
Hospital Revenue Bonds, Shannon Health System Project, Series 2001,
6.750%, 5/15/21
700 Tyler Health Facilities Development Corporation, Texas, Hospital 7/17 at 100.00 Baa1 412,699
Revenue Bonds, Mother Frances Hospital Regional Healthcare Center,
Series 2007B, 5.000%, 7/01/37
2,000 Tyler Health Facilities Development Corporation, Texas, Hospital 7/17 at 100.00 Baa1 1,225,940
Revenue Bonds, Mother Frances Hospital Regional Healthcare Center,
Series 2007, 5.000%, 7/01/33
------------------------------------------------------------------------------------------------------------------------------------
24,190 Total Health Care 20,984,337
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/MULTIFAMILY - 1.4% (0.9% 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 Baa1 1,280,260
750 6.050%, 8/01/36 - MBIA Insured 8/11 at 102.00 Baa1 468,330
------------------------------------------------------------------------------------------------------------------------------------
2,750 Total Housing/Multifamily 1,748,590
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/SINGLE FAMILY - 3.5% (2.3% OF TOTAL INVESTMENTS)
1,770 El Paso Housing Finance Corporation, Texas, GNMA Collateralized Single 4/11 at 106.75 AAA 1,811,657
Family Mortgage Revenue Bonds, Series 2001A-3, 6.180%, 4/01/33
40 Galveston Property Finance Authority Inc., Texas, Single Family 3/09 at 100.00 Caa1 38,541
Mortgage Revenue Bonds, Series1991A, 8.500%, 9/01/11
2,805 Texas Department of Housing and Community Affairs, Single Family 3/12 at 100.00 AAA 2,579,590
Mortgage Bonds, Series 2002B, 5.550%, 9/01/33 - MBIA Insured
(Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
4,615 Total Housing/Single Family 4,429,788
------------------------------------------------------------------------------------------------------------------------------------
LONG-TERM CARE - 0.8% (0.5% OF TOTAL INVESTMENTS)
Bexar County, Texas, Health Facilities Development Corporation Revenue
Bonds, Army Retirement Residence, Series 2007:
1,000 5.000%, 7/01/27 7/17 at 100.00 BBB 650,180
600 5.000%, 7/01/37 7/17 at 100.00 BBB 345,954
------------------------------------------------------------------------------------------------------------------------------------
1,600 Total Long-Term Care 996,134
------------------------------------------------------------------------------------------------------------------------------------
MATERIALS - 4.0% (2.6% OF TOTAL INVESTMENTS)
3,000 Cass County Industrial Development Corporation, Texas, Environmental 3/10 at 101.00 BBB 2,232,750
Improvement Revenue Bonds, International Paper Company,
Series 2000A, 6.600%, 3/15/24 (Alternative Minimum Tax)
3,000 Guadalupe-Blanco River Authority, Texas, Sewage and Solid Waste 4/09 at 100.00 A 2,761,080
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 4,993,830
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL - 47.9% (31.4% OF TOTAL INVESTMENTS)
1,260 Bexar County, Texas, Combined Tax and Revenue Certificates of 6/14 at 100.00 AA+ 1,359,515
Obligation, Series 2004, 5.000%, 6/15/19
2,500 Borger Independent School District, Hutchison County, Texas, General 2/16 at 100.00 AAA 2,470,700
Obligation Bonds, Series2006, 5.000%, 2/15/36
1,190 Canutillo Independent School District, El Paso County, Texas, General 8/15 at 100.00 AAA 1,263,435
Obligation Bonds, Series2006A, 5.000%, 8/15/22
2,305 Corpus Christi, Texas, Combination Tax and Municipal Hotel Occupancy 9/12 at 100.00 AAA 2,426,450
Tax Revenue Certificates of Obligation,
Series 2002, 5.500%, 9/01/21 - FSA Insured
2,595 Denton County, Texas, Permanent Improvement General Obligation Bonds, 7/12 at 100.00 AA+ 2,641,892
Series 2005, 5.000%, 7/15/25
1,750 El Paso County, Texas, Certificates of Obligation, Series 2001, 5.000%, No Opt. Call AAA 1,974,875
2/15/21 - FSA Insured
33
NTX | Nuveen Texas Quality Income Municipal Fund (continued)
| Portfolio of INVESTMENTS January 31, 2009 (Unaudited)
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL (continued)
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 AA $ 1,316,062
1,320 5.000%, 10/01/27 - FGIC Insured 10/12 at 100.00 AA 1,290,142
3,615 Frisco, Texas, General Obligation Bonds, Series 2006, 5.000%, 2/16 at 100.00 AA 3,668,249
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 AA 2,626,200
2,235 5.000%, 2/15/21 - AMBAC Insured 2/13 at 100.00 AA 2,313,381
5,000 Houston, Texas, General Obligation Bonds, Series 2005E, 5.000%, 3/15 at 100.00 AA 5,181,450
3/01/23 - AMBAC Insured
100 Judson Independent School District, Bexar County, Texas, General 2/11 at 100.00 Aaa 103,055
Obligation Refunding Bonds, Series 2002, 5.250%, 2/01/21
4,900 Leander Independent School District, Williamson and Travis Counties, 8/14 at 17.78 AAA 572,222
Texas, General Obligation Bonds, Series 2006, 0.000%, 8/15/45
5,220 Leander Independent School District, Williamson and Travis Counties, 8/09 at 46.74 AAA 2,406,994
Texas, Unlimited Tax School Building and Refunding Bonds, Series
2000, 0.000%, 8/15/21
1,000 Mansfield Independent School District, Tarrant County, Texas, General 2/14 at 100.00 AAA 1,073,980
Obligation Bonds, Series2004, 5.000%, 2/15/20
1,010 Mercedes Independent School District, Hidalgo County, Texas, General 8/15 at 100.00 AAA 1,060,551
Obligation Bonds, Series2005, 5.000%, 8/15/23
5,515 Midlothian Independent School District, Ellis County, Texas, General 2/15 at 100.00 Aaa 5,468,178
Obligation Bonds, Series2005, 5.000%, 2/15/34
925 Northside Independent School District, Bexar County, Texas, Unlimited 8/10 at 100.00 AAA 945,433
Tax School Building and Refunding Bonds, Series 2000,
5.875%, 8/15/25
2,000 Plano Independent School District, Collin County, Texas, General 2/18 at 100.00 Aa1 2,027,260
Obligation Bonds, Series2008, 5.250%, 2/15/34
Roma Independent School District, Texas, General Obligation
Bonds, Series 2005:
1,110 5.000%, 8/15/22 8/15 at 100.00 AAA 1,178,498
1,165 5.000%, 8/15/23 - FSA Insured 8/15 at 100.00 AAA 1,223,308
1,250 Southside Independent School District, Bexar County, Texas, General 8/14 at 100.00 Aaa 1,316,575
Obligation Bonds, Series2004A, 5.000%, 8/15/22
1,140 Sunnyvale School District, Texas, General Obligation Bonds, Series 2/14 at 100.00 AAA 1,182,796
2004, 5.250%, 2/15/25
5,000 Texas State, General Obligation Bonds, Transportation Commission 4/17 at 100.00 Aa1 4,971,900
Mobility Fund, Series 2006A, 5.000%, 4/01/33
1,000 Texas State, General Obligation Bonds, Transportation Commission 4/18 at 100.00 Aa1 1,005,780
Mobility Fund, Series 2008, 5.000%, 4/01/30
1,110 Texas State, General Obligation Bonds, Water Utility, Series 2001, 8/11 at 100.00 Aa1 1,155,355
5.250%, 8/01/23
1,500 Texas, General Obligation Refunding Bonds, Public Finance Authority, 10/12 at 100.00 Aa1 1,612,095
Series 2002, 5.000%, 10/01/18
3,025 Victoria Independent School District, Victoria County, Texas, General 2/17 at 100.00 AAA 3,024,940
Obligation Bonds, Series2007, 5.000%, 2/15/32
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 496,900
1,000 0.000%, 8/15/24 8/13 at 54.88 AAA 436,660
White Settlement Independent School District, Tarrant County, Texas,
General Obligation Bonds, Series 2006:
1,500 0.000%, 8/15/43 8/15 at 23.11 AAA 193,485
1,500 0.000%, 8/15/44 8/15 at 21.88 AAA 181,830
425 0.000%, 8/15/45 8/15 at 20.76 AAA 48,412
------------------------------------------------------------------------------------------------------------------------------------
69,995 Total Tax Obligation/General 60,218,558
------------------------------------------------------------------------------------------------------------------------------------
34
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED - 7.8% (5.2% OF TOTAL INVESTMENTS)
$ 8,000 Dallas Area Rapid Transit, Texas, Senior Lien Sales Tax Revenue Bonds, 12/16 at 100.00 AAA $ 7,823,036
Series 2007, 5.000%,12/01/36 - AMBAC Insured
2,250 Harris County-Houston Sports Authority, Texas, Senior Lien Revenue 11/11 at 100.00 AA 2,043,833
Bonds, Series 2001G, 5.250%, 11/15/22 - MBIA Insured
------------------------------------------------------------------------------------------------------------------------------------
10,250 Total Tax Obligation/Limited 9,866,869
------------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION - 5.9% (3.8% OF TOTAL INVESTMENTS)
1,000 Austin, Texas, Airport System Prior Lien Revenue Bonds, Series 2003, 11/13 at 100.00 AA 1,092,720
5.250%, 11/15/16 - MBIA Insured
3,260 Central Texas Regional Mobility Authority, Travis and Williamson 1/15 at 100.00 AA 2,896,934
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+ 1,136,980
Corporation, Texas, Revenue Bonds, American Airlines Inc., Series
1999, 6.375%, 5/01/35 (Alternative Minimum Tax)
2,000 Houston, Texas, Subordinate Lien Airport System Revenue Bonds, Series 7/10 at 100.00 AAA 1,794,800
2000A, 5.625%, 7/01/30 - FSA Insured (Alternative Minimum Tax)
500 North Texas Thruway Authority, Second Tier System Revenue Refunding 1/18 at 100.00 A3 441,345
Bonds, Series 2008, 5.750%, 1/01/38
------------------------------------------------------------------------------------------------------------------------------------
9,360 Total Transportation 7,362,779
------------------------------------------------------------------------------------------------------------------------------------
U.S. GUARANTEED - 21.6% (14.1% OF TOTAL INVESTMENTS) (5)
Coppell Independent School District, Dallas County, Texas, Unlimited
Tax School Building and Refunding Bonds, Series 1992:
3,835 0.000%, 8/15/14 (Pre-refunded 8/15/09) - MBIA Insured 8/09 at 75.34 AA (5) 2,860,833
295 0.000%, 8/15/14 (Pre-refunded 8/15/09) - MBIA Insured 8/09 at 75.34 Aa3 (5) 221,176
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 A3 (5) 2,181,000
3,250 6.375%, 10/01/25 (Pre-refunded 10/01/10) - RAAI Insured 10/10 at 101.00 A3 (5) 3,517,865
500 Harris County Health Facilities Development Corporation, Texas, 8/11 at 100.00 AAA 549,890
Revenue Bonds, St. Luke's Episcopal Hospital, Series 2001A, 5.500%,
2/15/21 (Pre-refunded 8/15/11)
1,400 Judson Independent School District, Bexar County, Texas, General 2/11 at 100.00 Aaa 1,515,122
Obligation Refunding Bonds, Series 2002, 5.250%, 2/01/21
(Pre-refunded 2/01/11)
1,000 North Central Texas Health Facilities Development Corporation, No Opt. Call Aaa 1,140,810
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, Unlimited 8/10 at 100.00 AAA 1,159,388
Tax School Building and Refunding Bonds, Series 2000, 5.875%,
8/15/25 (Pre-refunded 8/15/10)
1,760 Parker County Hospital District, Texas, Hospital Revenue Bonds, 8/09 at 102.00 BB- (5) 1,849,619
Campbell Health System, Series1999, 6.250%, 8/15/19 (Pre-refunded
8/15/09)
2,500 Retama Development Corporation, Texas, Special Facilities Revenue 12/17 at 100.00 AAA 3,534,775
Bonds, Retama Park Racetrack, Series 1993, 8.750%, 12/15/18
(Pre-refunded 12/15/17) (6)
1,750 San Antonio, Texas, Electric and Gas System Revenue Refunding Bonds, 2/12 at 100.00 AAA 1,936,515
Series 2002, 5.375%,2/01/20 (Pre-refunded 2/01/12)
1,440 South Texas Community College District, General Obligation Bonds, 8/12 at 100.00 A1 (5) 1,648,397
Series 2002, 5.500%, 8/15/17(Pre-refunded 8/15/12) - AMBAC Insured
3,500 Tarrant County Health Facilities Development Corporation, Texas, 11/10 at 101.00 A+ (5) 3,868,410
Hospital Revenue Bonds, Adventist Health System - Sunbelt Obligated
Group, Series 2000, 6.625%, 11/15/20 (Pre-refunded 11/15/10)
1,000 Tyler Health Facilities Development Corporation, Texas, Hospital 7/12 at 100.00 Baa1 (5) 1,136,350
Revenue Bonds, Mother Frances Hospital Regional Healthcare Center,
Series 2001, 6.000%, 7/01/31 (Pre-refunded 7/01/12)
------------------------------------------------------------------------------------------------------------------------------------
25,305 Total U.S. Guaranteed 27,120,150
------------------------------------------------------------------------------------------------------------------------------------
35
NTX | Nuveen Texas Quality Income Municipal Fund (continued)
| Portfolio of INVESTMENTS January 31, 2009 (Unaudited)
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
UTILITIES - 10.6% (7.0% OF TOTAL INVESTMENTS)
$ 2,560 Brazos River Authority, Texas, Pollution Control Revenue Refunding 4/13 at 101.00 Caa1 $ 1,415,654
Bonds, TXU Electric Company, Series 1999C, 7.700%, 3/01/32
(Alternative Minimum Tax)
2,400 Brazos River Authority, Texas, Revenue Bonds, Reliant Energy Inc., 4/09 at 101.00 BBB- 2,054,496
Series 1999A, 5.375%, 4/01/19
200 Brazos River Authority, Texas, Revenue Refunding Bonds, Houston 5/09 at 101.00 A 169,538
Industries Inc., Series 1998C, 5.125%, 5/01/19 - AMBAC Insured
5,000 Brownsville, Texas, Utility System Priority Revenue Bonds, Series 9/15 at 100.00 A 4,887,350
2005A, 5.000%, 9/01/27 - AMBAC Insured
2,000 Harris County Health Facilities Development Corporation, Texas, 2/10 at 100.00 Aa3 2,028,760
Thermal Utility Revenue Bonds, TECO Project, Series 2000, 5.750%,
2/15/15 - AMBAC Insured (Alternative Minimum Tax)
2,000 Lower Colorado River Authority, Texas, Revenue Bonds, Series 2008, 5/15 at 100.00 A1 1,972,300
5.750%, 5/15/37
1,000 Matagorda County Navigation District 1, Texas, Revenue Bonds, Reliant 5/09 at 101.00 BBB- 794,120
Energy Inc., Series1999B, 5.950%, 5/01/30 (Alternative
Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
15,160 Total Utilities 13,322,218
------------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER - 13.0% (8.5% OF TOTAL INVESTMENTS)
Coastal Water Authority, Texas, Contract Revenue Bonds, Houston Water
Projects, Series 2004:
1,005 5.000%, 12/15/20 - FGIC Insured 12/14 at 100.00 AA 1,042,929
1,030 5.000%, 12/15/21 - FGIC Insured 12/14 at 100.00 AA 1,054,833
1,000 El Paso, Texas, Water and Sewer Revenue Bonds, Refunding Series 2008C, 3/18 at 100.00 AA 1,018,290
5.375%, 3/01/29
3,000 Houston, Texas, First Lien Combined Utility System Revenue Bonds, 5/14 at 100.00 AA 3,048,180
Series 2004A, 5.250%,5/15/23 - FGIC Insured
3,500 Houston, Texas, Junior Lien Water and Sewerage System Revenue 12/11 at 100.00 AAA 3,832,360
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 AA 1,747,402
1,760 5.000%, 8/15/23 - AMBAC Insured 8/14 at 100.00 AA 1,814,982
1,260 Rowlett, Rockwall and Dallas Counties, Texas, Waterworks and Sewerage 3/14 at 100.00 AA 1,291,765
System Revenue Bonds, Series 2004A, 5.000%, 3/01/22 - MBIA Insured
36
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER (continued)
$ 1,500 Texas Water Development Board, Senior Lien State Revolving Fund 7/09 at 100.00 AAA $ 1,517,940
Revenue Bonds, Series 1999A, 5.500%, 7/15/21
------------------------------------------------------------------------------------------------------------------------------------
15,735 Total Water and Sewer 16,368,681
------------------------------------------------------------------------------------------------------------------------------------
$ 211,535 Total Investments (cost $199,846,079) - 152.5% 191,739,819
============------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 2.4% 2,985,820
---------------------------------------------------------------------------------------------------------------------
Preferred Shares, at Liquidation Value - (54.9)% (7) (69,000,000)
---------------------------------------------------------------------------------------------------------------------
Net Assets Applicable to Common Shares - 100% $125,725,639
=====================================================================================================================
(1) All percentages shown in the Portfolio of Investments are based on net
assets applicable to Common shares unless otherwise noted.
(2) Optional Call Provisions: Dates (month and year) and prices of the
earliest optional call or redemption. There may be other call provisions
at varying prices at later dates. Certain mortgage-backed securities may
be subject to periodic principal paydowns.
(3) Ratings: Using the higher of Standard & Poor's Group ("Standard & Poor's")
or Moody's Investor Service, Inc. ("Moody's") rating. Ratings below BBB by
Standard & Poor's or Baa by Moody's are considered to be below investment
grade.
The Portfolio of Investments may reflect the ratings on certain bonds
insured by ACA, AMBAC, FGIC, FSA, MBIA, RAAI and SYNCORA as of January 31,
2009. Please see the Portfolio Managers' Commentary for an expanded
discussion of the affect on the Fund of changes to the ratings of certain
bonds in the portfolio resulting from changes to the ratings of the
underlying insurers both during the period and after period end.
(4) Investment valued at fair value using methods determined in good faith by,
or at the discretion of, the Board of Trustees.
(5) 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.
(6) The issuer has received a formal adverse determination from the Internal
Revenue Service (the "IRS") regarding the tax-exempt status of the bonds'
coupon payments. The Fund will continue to treat coupon payments as
tax-exempt income until such time it is formally determined that the
interest on the bonds should be treated as taxable
(7) Preferred Shares, at Liquidation Value as a percentage of Total
Investments is 36.0%
(ETM) Escrowed to maturity.
See accompanying notes to financial statements.
37
| Statement of ASSETS & LIABILITIES January 31, 2009 (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 $85,098,964,
$29,273,400, $49,950,725, $59,192,220 and
$199,846,079, respectively) $ 81,351,425 $ 26,560,132 $ 46,780,431 $ 53,405,058 $ 191,739,819
Cash 1,517,349 2,836,984 1,785,207 3,146,900 --
Cash equivalents (1) -- 1,400,675 126 1,275,596 --
Receivables:
Interest 619,055 244,014 406,604 418,655 3,116,288
Investments sold 15,000 -- -- -- 1,552,575
Other assets 1,216 1,066 2,837 399 2,982
-------------------------------------------------------------------------------------------------------------------------------
Total assets 83,504,045 31,042,871 48,975,205 58,246,608 196,411,664
-------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Cash overdraft -- -- -- -- 887,344
Payables:
Investment purchased -- 500,112 -- -- --
Preferred shares noticed for redemption,
at liquidation value -- 1,400,000 -- 1,275,000 --
Common share dividends 217,763 76,512 133,561 163,277 485,102
Preferred share dividends 1,176 963 1,103 1,973 160,651
Accrued expenses:
Management fees 45,656 12,801 18,661 23,911 106,256
Other 21,476 4,262 9,875 15,316 46,672
-------------------------------------------------------------------------------------------------------------------------------
Total liabilities 286,071 1,994,650 163,200 1,479,477 1,686,025
-------------------------------------------------------------------------------------------------------------------------------
Preferred shares, at liquidation value 30,000,000 10,600,000 17,975,000 20,725,000 69,000,000
-------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common shares $ 53,217,974 $ 18,448,221 $ 30,837,005 $ 36,042,131 $ 125,725,639
===============================================================================================================================
Common shares outstanding 4,469,154 1,550,520 2,440,351 3,067,630 9,495,144
===============================================================================================================================
Net asset value per Common share outstanding
(net assets applicable to Common shares,
divided by Common shares outstanding) $ 11.91 $ 11.90 $ 12.64 $ 11.75 $ 13.24
===============================================================================================================================
NET ASSETS APPLICABLE TO COMMON SHARES
CONSIST OF:
-------------------------------------------------------------------------------------------------------------------------------
Common shares, $.01 par value per share $ 44,692 $ 15,505 $ 24,404 $ 30,676 $ 94,951
Paid-in surplus 62,155,941 21,934,021 34,586,260 43,248,456 134,624,383
Undistributed (Over-distribution of) net
investment income 136,941 (9,870) (33,281) (74,976) 106,961
Accumulated net realized gain (loss) from
investments and derivative transactions (5,372,061) (778,167) (570,084) (1,374,863) (994,396)
Net unrealized appreciation (depreciation) of
investments and derivative transactions (3,747,539) (2,713,268) (3,170,294) (5,787,162) (8,106,260)
-------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common shares $ 53,217,974 $ 18,448,221 $ 30,837,005 $ 36,042,131 $ 125,725,639
===============================================================================================================================
Authorized shares:
Common 200,000,000 Unlimited Unlimited Unlimited Unlimited
Preferred 1,000,000 Unlimited Unlimited Unlimited Unlimited
===============================================================================================================================
(1) Segregated for the payment of Preferred shares.
See accompanying notes to financial statements.
38
| Statement of OPERATIONS Six Months Ended January 31, 2009 (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 $ 2,285,916 $ 810,017 $ 1,322,094 $ 1,581,680 $ 5,260,372
------------------------------------------------------------------------------------------------------------------------------------
EXPENSES
Management fees 270,642 99,613 160,440 190,104 625,241
Preferred shares - auction fees 37,808 15,123 23,304 27,725 86,958
Preferred shares - dividend disbursing agent fees 5,041 5,041 5,041 5,014 10,082
Shareholders' servicing agent fees and expenses 1,602 207 227 179 4,453
Custodian's fees and expenses 12,978 5,865 8,605 10,331 19,412
Directors'/Trustees' fees and expenses 578 100 196 340 1,503
Professional fees 8,244 4,809 5,358 5,700 9,920
Shareholders' reports - printing and mailing expenses 8,679 4,353 6,017 6,569 15,224
Stock exchange listing fees 4,637 110 173 218 4,637
Investor relations expense 3,683 1,467 2,241 2,672 10,229
Other expenses 7,502 6,399 6,731 7,822 9,281
------------------------------------------------------------------------------------------------------------------------------------
Total expenses before custodian fee credit and expense
reimbursement 361,394 143,087 218,333 256,674 796,940
Custodian fee credit (3,268) (2,745) (3,558) (4,067) (2,992)
Expense reimbursement -- (23,153) (49,719) (55,444) --
------------------------------------------------------------------------------------------------------------------------------------
Net expenses 358,126 117,189 165,056 197,163 793,948
------------------------------------------------------------------------------------------------------------------------------------
Net investment income 1,927,790 692,828 1,157,038 1,384,517 4,466,424
------------------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) from:
Investments (2,716,781) (429,223) (246,820) (324,504) (287,195)
Futures -- -- -- -- 279,232
Change in net unrealized appreciation (depreciation) of:
Investments (2,218,938) (1,699,970) (2,252,428) (3,748,944) (6,290,000)
Futures -- -- -- -- (80,805)
------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) (4,935,719) (2,129,193) (2,499,248) (4,073,448) (6,378,768)
------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO PREFERRED SHAREHOLDERS
From net investment income (470,712) (186,660) (292,147) (346,393) (1,151,856)
From accumulated net realized gains -- -- -- -- (143,345)
------------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets applicable to Common shares
from distributions to Preferred Shareholders (470,712) (186,660) (292,147) (346,393) (1,295,201)
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets applicable to
Common shares from operations $ (3,478,641) $ (1,623,025) $ (1,634,357) $ (3,035,324) $ (3,207,545)
====================================================================================================================================
See accompanying notes to financial statements.
39
| Statement of CHANGES in NET ASSETS (Unaudited)
ARIZONA ARIZONA ARIZONA
PREMIUM INCOME (NAZ) DIVIDEND ADVANTAGE (NFZ) DIVIDEND ADVANTAGE 2 (NKR)
-------------------------- -------------------------- --------------------------
SIX MONTHS YEAR SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
1/31/09 7/31/08 1/31/09 7/31/08 1/31/09 7/31/08
-----------------------------------------------------------------------------------------------------------------------------
OPERATIONS
Net investment income $ 1,927,790 $ 3,939,586 $ 692,828 $ 1,404,791 $ 1,157,038 $ 2,352,606
Net realized gain (loss) from:
Investments (2,716,781) (695,247) (429,223) (246,231) (246,820) (210,967)
Futures -- (46,730) -- (144,540) -- --
Change in net unrealized appreciation
(depreciation) of:
Investments (2,218,938) (3,907,909) (1,699,970) (1,551,069) (2,252,428) (2,351,438)
Futures -- -- -- 42,042 -- --
Distributions to Preferred Shareholders:
From net investment income (470,712) (992,215) (186,660) (381,010) (292,147) (574,591)
From accumulated net realized gains -- -- -- (6,331) -- (47,034)
-----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
applicable to Common shares
from operations (3,478,641) (1,702,515) (1,623,025) (882,348) (1,634,357) (831,424)
-----------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO COMMON SHAREHOLDERS
From net investment income (1,412,253) (2,734,545) (488,380) (985,763) (856,530) (1,726,396)
From accumulated net realized gains -- -- -- (18,444) -- (142,165)
-----------------------------------------------------------------------------------------------------------------------------
Decrease in net assets applicable to
Common shares from distributions
to Common Shareholders (1,412,253) (2,734,545) (488,380) (1,004,207) (856,530) (1,868,561)
-----------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
Net proceeds from Common shares
issued to shareholders due to
reinvestment of distributions 12,298 -- 7,372 -- 16,440 35,757
-----------------------------------------------------------------------------------------------------------------------------
Net increase in net assets
applicable to Common shares
from capital share transactions 12,298 -- 7,372 -- 16,440 35,757
-----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
applicable to Common shares (4,878,596) (4,437,060) (2,104,033) (1,886,555) (2,474,447) (2,664,228)
Net assets applicable to Common
shares at the beginning of period 58,096,570 62,533,630 20,552,254 22,438,809 33,311,452 35,975,680
-----------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common
shares at the end of period $ 53,217,974 $ 58,096,570 $ 18,448,221 $ 20,552,254 $ 30,837,005 $ 33,311,452
=============================================================================================================================
Undistributed (Over-distribution of)
net investment income
at the end of period $ 136,941 $ 92,116 $ (9,870) $ (27,658) $ (33,281) $ (41,642)
=============================================================================================================================
See accompanying notes to financial statements.
40
ARIZONA TEXAS
DIVIDEND ADVANTAGE 3 (NXE) QUALITY INCOME (NTX)
----------------------------- -----------------------------
SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED
1/31/09 7/31/08 1/31/09 7/31/08
---------------------------------------------------------------------------------------------------------
OPERATIONS
Net investment income $ 1,384,517 $ 2,785,211 $ 4,466,424 $ 8,965,057
Net realized gain (loss) from:
Investments (324,504) (469,351) (287,195) (359,565)
Futures -- -- 279,232 (19,596)
Change in net unrealized appreciation
(depreciation) of:
Investments (3,748,944) (3,032,163) (6,290,000) (7,706,392)
Futures -- -- (80,805) 80,805
Distributions to Preferred Shareholders:
From net investment income (346,393) (748,495) (1,151,856) (2,207,108)
From accumulated net realized gains -- -- (143,345) (186,315)
---------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
applicable to Common shares
from operations (3,035,324) (1,464,798) (3,207,545) (1,433,114)
---------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO COMMON SHAREHOLDERS
From net investment income (1,003,115) (2,006,230) (3,333,745) (6,561,144)
From accumulated net realized gains -- -- (446,272) (530,779)
---------------------------------------------------------------------------------------------------------
Decrease in net assets applicable to
Common shares from distributions
to Common Shareholders (1,003,115) (2,006,230) (3,780,017) (7,091,923)
---------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
Net proceeds from Common shares
issued to shareholders due to
reinvestment of distributions -- -- -- --
---------------------------------------------------------------------------------------------------------
Net increase in net assets
applicable to Common shares
from capital share transactions -- -- -- --
---------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
applicable to Common shares (4,038,439) (3,471,028) (6,987,562) (8,525,037)
Net assets applicable to Common
shares at the beginning of period 40,080,570 43,551,598 132,713,201 141,238,238
---------------------------------------------------------------------------------------------------------
Net assets applicable to Common
shares at the end of period $ 36,042,131 $ 40,080,570 $ 125,725,639 $ 132,713,201
=========================================================================================================
Undistributed (Over-distribution of)
net investment income
at the end of period $ (74,976) $ (109,985) $ 106,961 $ 126,138
=========================================================================================================
See accompanying notes to financial statements.
41
| Notes to FINANCIAL STATEMENTS (Unaudited)
1. GENERAL INFORMATION AND SIGNIFICANT ACCOUNTING POLICIES
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) (collectively,
the "Funds"). 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 NYSE Alternext US (formerly
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 US
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. Prices
of forward swap contracts are also provided by an independent pricing service
approved by each Fund's Board of Directors/Trustees. Futures contracts are
valued using the closing settlement price, or, in the absence of such a price,
at the mean of the bid and asked prices. When market price quotes are not
readily available (which is usually the case for municipal securities), the
pricing service or, in the absence of a pricing service for a particular
investment or derivative instrument, the Board of Directors/Trustees of the
Fund, or its designee, may establish fair value using a wide variety of market
data including yields or prices of investments of comparable quality, type of
issue, coupon, maturity and rating, market quotes or indications of value from
security dealers, evaluations of anticipated cash flows or collateral, general
market conditions and other information and analysis, including the obligor's
credit characteristics considered relevant. Temporary investments in securities
that have variable rate and demand features qualifying them as short-term
investments are valued at amortized cost, which approximates 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, 2009, there
were no such outstanding purchase commitments in any of the Funds.
Investment Income
Interest income, which includes the amortization of premiums and accretion of
discounts for financial reporting purposes, is recorded on an accrual basis.
Investment income also includes paydown gains and losses, if any.
Income Taxes
Each Fund is a separate taxpayer for federal income tax purposes. Each Fund
intends to distribute substantially all of its 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.
42
For all open tax years and all major taxing jurisdictions, management of the
Funds has concluded that there are no significant uncertain tax positions that
would require recognition in the financial statements. Open tax years are those
that are open for examination by taxing authorities (i.e., generally the last
four tax year ends and the interim tax period since then). Further, management
of the Funds is also not aware of any tax positions for which it is reasonably
possible that the total amounts of unrecognized tax benefits will significantly
change in the next twelve months.
Dividends and Distributions to Common Shareholders
Dividends from tax-exempt net investment income are declared monthly. Net
realized capital gains and/or market discount from investment transactions, if
any, are distributed to shareholders at least 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 US
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. As
of January 31, 2009, the number of Preferred shares outstanding, by Series or 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 -- -- -- 829 760
Series T -- 424 -- -- --
Series W -- -- 719 -- --
Series TH 1,200 -- -- -- 2,000
--------------------------------------------------------------------------------
Total 1,200 424 719 829 2,760
================================================================================
Beginning in February 2008, more shares for sale were submitted in the regularly
scheduled auctions for the Preferred shares issued by the Funds than there were
offers to buy. This meant that these auctions "failed to clear," and that many
Preferred shareholders who wanted to sell their shares in these auctions were
unable to do so. Preferred shareholders unable to sell their shares received
distributions at the "maximum rate" applicable to failed auctions as calculated
in accordance with the pre-established terms of the Preferred shares.
These developments have generally not affected the portfolio management or
investment policies of the Funds. However, one implication of these auction
failures for Common shareholders is that the Funds' cost of leverage will likely
be higher, at least temporarily, than it otherwise would have been had the
auctions continued to be successful. As a result, the Funds' future Common share
earnings may be lower than they otherwise would have been.
As of January 31, 2009, Arizona Dividend Advantage (NFZ), Arizona Dividend
Advantage 2 (NKR) and Arizona Dividend Advantage 3 (NXE) redeemed and/or noticed
for redemption $1,400,000, $525,000 and $1,275,000 of their outstanding
Preferred shares, respectively, at liquidation value. Arizona Premium Income
(NAZ) and Texas Quality Income (NTX) have not redeemed and/or noticed for
redemption any of their Preferred shares.
43
| Notes to FINANCIAL STATEMENTS (continued) (Unaudited)
Inverse Floating Rate Securities
Each Fund is authorized to invest in inverse floating rate securities. An
inverse floating rate security is created by depositing a municipal bond,
typically with a fixed interest rate, into a special purpose trust created by a
broker-dealer. In turn, this trust (a) issues floating rate certificates, in
face amounts equal to some fraction of the deposited bond's par amount or market
value, that typically pay short-term tax-exempt interest rates to third parties,
and (b) issues to a long-term investor (such as one of the Funds) an inverse
floating rate certificate (sometimes referred to as an "inverse floater") that
represents all remaining or residual interest in the trust. The income received
by the inverse floater holder varies inversely with the short-term rate paid to
the floating rate certificates' holders, and in most circumstances the inverse
floater holder bears substantially all of the underlying bond's downside
investment risk and also benefits disproportionately from any potential
appreciation of the underlying bond's value. The price of an inverse floating
rate security will be more volatile than that of the underlying bond because the
interest rate is dependent on not only the fixed coupon rate of the underlying
bond but also on the short-term interest paid on the floating rate certificates,
and because the inverse floating rate security essentially bears the risk of
loss of the greater face value of the underlying bond.
A Fund may purchase an inverse floating rate security in a secondary market
transaction without first owning the underlying bond (referred to as an
"externally-deposited inverse floater"), or instead by first selling a
fixed-rate bond to a broker-dealer for deposit into the special purpose trust
and receiving in turn the residual interest in the trust (referred to as a
"self-deposited inverse floater"). The inverse floater held by a Fund gives the
Fund the right (a) to cause the holders of the floating rate certificates to
tender their notes at par, and (b) to have the broker transfer the fixed-rate
bond held by the trust to the Fund, thereby collapsing the trust. An investment
in an externally-deposited inverse floater is identified in the Portfolio of
Investments as an "Inverse floating rate investment". An investment in a
self-deposited inverse floater is accounted for as a financing transaction in
accordance with Statement of Financial Accounting Standards No. 140 (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 the related interest paid to the holders of the short-term floating rate
certificates as "Interest expense on floating rate obligations" on the Statement
of Operations.
During the six months ended January 31, 2009, each Fund invested in
externally-deposited inverse floaters. None of the Funds invested in
self-deposited inverse floaters during the six months ended January 31, 2009.
Each Fund may also enter into shortfall and forbearance agreements (sometimes
referred to as a "recourse trust" or "credit recovery swap") (such agreements
referred to herein as "Recourse Trusts") with a broker-dealer by which a Fund
agrees to reimburse the broker-dealer, in certain circumstances, for the
difference between the liquidation value of the fixed-rate bond held by the
trust and the liquidation value of the floating rate certificates issued by the
trust plus any shortfalls in interest cash flows. Under these agreements, a
Fund's potential exposure to losses related to or on inverse floaters may
increase beyond the value of a Fund's inverse floater investments as a Fund may
potentially be liable to fulfill all amounts owed to holders of the floating
rate certificates. At period end, any such shortfall is recognized as
"Unrealized depreciation on Recourse Trusts" on the Statement of Assets and
Liabilities. At January 31, 2009, none of the Funds had exposure to
externally-deposited Recourse Trusts.
44
Futures Contracts
Each Fund is authorized to invest in futures contracts. Upon entering into a
futures contract, a Fund is required to deposit with the broker an amount of
cash or liquid securities equal to a specified percentage of the contract
amount. This is known as the "initial margin." Subsequent payments ("variation
margin") are made or received by a Fund each day, depending on the daily
fluctuation of the value of the contract.
During the period the futures contract is open, changes in the value of the
contract are recognized as an unrealized gain or loss by "marking-to-market" on
a daily basis to reflect the changes in market value of the contract. When the
contract is closed or expired, a Fund records a realized gain or loss equal to
the difference between the value of the contract on the closing date and value
of the contract when originally entered into. Cash held by the broker to cover
initial margin requirements on open futures contracts, if any, is recognized on
the Statement of Assets and Liabilities. Additionally, the Statement of Assets
and Liabilities reflects a receivable or payable for the variation margin, when
applicable. Texas Quality Income (NTX) was the only Fund to invest in futures
contracts during the six months ended January 31, 2009.
Risks of investments in futures contracts include the possible adverse movement
of the securities or indices underlying the contracts, the possibility that
there may not be a liquid secondary market for the contracts and/or that a
change in the value of the contract may not correlate with a change in the value
of the underlying securities or indices.
Zero Coupon Securities
Each Fund is authorized to invest in zero coupon securities. A zero coupon
security does not pay a regular interest coupon to its holders during the life
of the security. Tax-exempt income to the holder of the security comes from
accretion of the difference between the original purchase price of the security
at issuance and the par value of the security at maturity and is effectively
paid at maturity. Such securities are included in the Portfolios of Investments
with a 0.000% coupon rate in their description. The market prices of zero coupon
securities generally are more volatile than the market prices of securities that
pay interest periodically.
Custodian Fee Credit
Each Fund has an arrangement with the custodian bank whereby certain custodian
fees and expenses are reduced by net credits earned on each Fund's cash on
deposit with the bank. Such deposit arrangements are an alternative to overnight
investments. Credits for cash balances may be offset by charges for any days on
which a Fund overdraws its account at the custodian bank.
Indemnifications
Under the Funds' organizational documents, their Officers and Directors/Trustees
are indemnified against certain liabilities arising out of the performance of
their duties to the Funds. In addition, in the normal course of business, the
Funds enter into contracts that provide general indemnifications to other
parties. The Funds' maximum exposure under these arrangements is unknown as this
would involve future claims that may be made against the Funds that have not yet
occurred. However, the Funds have not had prior claims or losses pursuant to
these contracts and expect the risk of loss to be remote.
Use of Estimates
The preparation of financial statements in conformity with US 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.
45
| Notes to FINANCIAL STATEMENTS (continued) (Unaudited)
2. FAIR VALUE MEASUREMENTS
During the current fiscal period, the Funds adopted the provisions of Statement
of Financial Accounting Standards No. 157 (SFAS No. 157) "Fair Value
Measurements." SFAS No. 157 defines fair value, establishes a framework for
measuring fair value in generally accepted accounting principles, and expands
disclosure about fair value measurements. In determining the value of each
Fund's investments various inputs are used. These inputs are summarized in the
three broad levels listed below:
Level 1 - Quoted prices in active markets for identical securities.
Level 2 - Other significant observable inputs (including quoted prices for
similar securities, interest rates, prepayment speeds, credit
risk, etc.).
Level 3 - Significant unobservable inputs (including management's assumptions in
determining the fair value of investments).
The inputs or methodology used for valuing securities are not an indication of
the risk associated with investing in those securities.
The following is a summary of each Fund's fair value measurements as of January
31, 2009:
ARIZONA PREMIUM INCOME (NAZ) LEVEL 1 LEVEL 2 LEVEL 3 TOTAL
-------------------------------------------------------------------------------------------
Investments $ -- $ 79,876,868 $ 1,474,557 $ 81,351,425
===========================================================================================
ARIZONA DIVIDEND ADVANTAGE (NFZ) LEVEL 1 LEVEL 2 LEVEL 3 TOTAL
-------------------------------------------------------------------------------------------
Investments $ -- $ 26,394,982 $ 165,150 $ 26,560,132
===========================================================================================
ARIZONA DIVIDEND ADVANTAGE 2 (NKR) LEVEL 1 LEVEL 2 LEVEL 3 TOTAL
-------------------------------------------------------------------------------------------
Investments $ -- $ 46,113,931 $ 666,500 $ 46,780,431
===========================================================================================
ARIZONA DIVIDEND ADVANTAGE 3 (NXE) LEVEL 1 LEVEL 2 LEVEL 3 TOTAL
-------------------------------------------------------------------------------------------
Investments $ -- $ 52,998,080 $ 406,978 $ 53,405,058
===========================================================================================
TEXAS QUALITY INCOME (NTX) LEVEL 1 LEVEL 2 LEVEL 3 TOTAL
-------------------------------------------------------------------------------------------
Investments $ -- $ 190,806,676 $ 933,143 $ 191,739,819
===========================================================================================
46
The following is a reconciliation of each Fund's Level 3 investments held at the
beginning and end of the measurement period:
ARIZONA ARIZONA ARIZONA ARIZONA TEXAS
PREMIUM DIVIDEND DIVIDEND DIVIDEND QUALITY
INCOME ADVANTAGE ADVANTAGE 2 ADVANTAGE 3 INCOME
(NAZ) (NFZ) (NKR) (NXE) (NTX)
LEVEL 3 LEVEL 3 LEVEL 3 LEVEL 3 LEVEL 3
INVESTMENTS INVESTMENTS INVESTMENTS INVESTMENTS INVESTMENTS
--------------------------------------------------------------------------------------------------------------------
Balance at beginning of period $ 1,278,800 $ 143,226 $ 578,017 $ 352,949 $ 544,376
Gains (losses):
Net realized gains (losses) -- -- -- -- --
Net change in unrealized appreciation
(depreciation) 195,757 21,924 88,483 54,029 388,767
Net purchases at cost (sales at proceeds) -- -- -- -- --
Net discounts (premiums) -- -- -- -- --
Net transfers in to (out of) at end -- -- -- -- --
of period fair value
--------------------------------------------------------------------------------------------------------------------
Balance at end of period $ 1,474,557 $ 165,150 $ 666,500 $ 406,978 $ 933,143
====================================================================================================================
"Change in net unrealized appreciation (depreciation) of investments" presented
on the Statement of Operations includes net appreciation (depreciation) related
to securities classified as Level 3 at period end as follows:
ARIZONA ARIZONA ARIZONA ARIZONA TEXAS
PREMIUM DIVIDEND DIVIDEND DIVIDEND QUALITY
INCOME ADVANTAGE ADVANTAGE 2 ADVANTAGE 3 INCOME
(NAZ) (NFZ) (NKR) (NXE) (NTX)
--------------------------------------------------------------------------------------------------------------------
Level 3 net appreciation (depreciation) $ 195,757 $ 21,924 $ 88,483 $ 54,029 $ 388,767
====================================================================================================================
3. FUND SHARES
Common Shares
On July 30, 2008, the Funds' Board of Directors/Trustees approved an open market
share repurchase program under which each Fund may repurchase an aggregate of up
to approximately 10% of its outstanding Common shares. The Funds did not
repurchase any of their Common shares during the six months ended January 31,
2009.
Transactions in Common shares were as follows:
ARIZONA PREMIUM ARIZONA DIVIDEND ARIZONA DIVIDEND
INCOME (NAZ) ADVANTAGE (NFZ) ADVANTAGE 2 (NKR)
------------------------ ------------------------ ------------------------
SIX MONTHS YEAR SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
1/31/09 7/31/08 01/31/09 7/31/08 1/31/09 7/31/08
---------------------------------------------------------------------------------------------------------------------------------
Common shares issued to shareholders
due to reinvestment of distributions 944 -- 581 -- 1,193 2,471
=================================================================================================================================
ARIZONA DIVIDEND TEXAS QUALITY
ADVANTAGE 3 (NXE) INCOME (NTX)
------------------------ ------------------------
SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED
1/31/09 7/31/08 01/31/09 7/31/08
---------------------------------------------------------------------------------------------------------------------------------
Common shares issued to shareholders
due to reinvestment of distributions -- -- -- --
=================================================================================================================================
47
| Notes to FINANCIAL STATEMENTS (continued) (Unaudited)
Preferred Shares
Transactions in Preferred shares were as follows:
ARIZONA DIVIDEND ADVANTAGE (NFZ) ARIZONA DIVIDEND ADVANTAGE 2 (NKR)
----------------------------------------- ----------------------------------------
SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED
1/31/09 7/31/08 1/31/09 7/31/08
-------------------- ------------------ --------------------- -----------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------------------------------------------------------------------------------------------------------------------------
Preferred shares redeemed and/or
noticed for redemption:
Series T 56 $ 1,400,000 -- $ -- -- $ -- -- $ --
Series W -- -- -- -- 21 525,000 -- --
---------------------------------------------------------------------------------------------------------------------------
Total 56 $ 1,400,000 -- $ -- 21 $ 525,000 -- $ --
===========================================================================================================================
ARIZONA DIVIDEND ADVANTAGE 3 (NXE)
----------------------------------------
SIX MONTHS YEAR
ENDED ENDED
1/31/09 7/31/08
-------------------- -----------------
SHARES AMOUNT SHARES AMOUNT
---------------------------------------------------------------------------------------------------------------------------
Preferred shares redeemed and/or
noticed for redemption:
Series M 51 $ 1,275,000 -- $ --
---------------------------------------------------------------------------------------------------------------------------
Total 51 $ 1,275,000 -- $ --
===========================================================================================================================
4. INVESTMENT TRANSACTIONS
Purchases and sales (including maturities but excluding short-term investments
and derivative transactions) during the six months ended January 31, 2009, 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 $ 19,741,735 $ 1,169,905 $ 1,876,896 $ 4,226,647 $ 15,026,677
Sales and maturities 20,052,026 4,578,062 2,906,831 7,133,061 13,849,102
=========================================================================================================================
48
5. 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 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, 2009, 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 $ 85,060,609 $ 29,266,440 $ 49,945,594 $ 59,185,109 $ 199,816,085
===========================================================================================================================
Gross unrealized appreciation and gross unrealized depreciation of investments
at January 31, 2009, 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 $ 2,208,958 $ 762,361 $ 1,969,643 $ 1,334,182 $ 5,245,333
Depreciation (5,918,142) (3,468,669) (5,134,806) (7,114,233) (13,321,599)
---------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of
investments $ (3,709,184) $ (2,706,308) $ (3,165,163) $ (5,780,051) $ (8,076,266)
===========================================================================================================================
The tax components of undistributed net tax-exempt income, net ordinary income
and net long-term capital gains at July 31, 2008, 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 * $ 309,613 $ 50,716 $ 100,150 $ 59,592 $ 619,240
Undistributed net ordinary income ** -- -- -- -- 2,718
Undistributed net long-term capital gains -- -- -- -- --
===========================================================================================================================
* Undistributed net tax-exempt income (on a tax basis) has not been reduced
for the dividend declared on July 1, 2008, paid on August 1, 2008.
** 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, 2008, 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 $ 3,718,906 $ 1,375,879 $ 2,317,202 $ 2,750,182 $ 8,786,039
Distributions from net ordinary income** -- -- -- -- 439
Distributions from net long-term capital gains -- 24,687 189,057 -- 716,654
===========================================================================================================================
** Net ordinary income consists of taxable market discount income and net
short-term capital gains, if any.
49
| Notes to FINANCIAL STATEMENTS (continued) (Unaudited)
At July 31, 2008, 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 ARIZONA ARIZONA
PREMIUM DIVIDEND DIVIDEND DIVIDEND
INCOME ADVANTAGE ADVANTAGE 2 ADVANTAGE 3
(NAZ) (NFZ) (NKR) (NXE)
---------------------------------------------------------------------------------------------------------------------------
Expiration:
July 31, 2011 $ 359,724 $ -- $ -- $ --
July 31, 2012 1,553,627 -- -- 158,487
July 31, 2013 -- -- -- 160,902
July 31, 2014 -- -- -- 218,127
July 31, 2016 562,384 246,571 212,903 363,937
---------------------------------------------------------------------------------------------------------------------------
Total $ 2,475,735 $ 246,571 $ 212,903 $ 901,453
===========================================================================================================================
The Funds have elected to defer net realized losses from investments incurred
from November 1, 2007 through July 31, 2008, the Funds' last tax year end,
("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 ARIZONA ARIZONA TEXAS
PREMIUM DIVIDEND DIVIDEND DIVIDEND QUALITY
INCOME ADVANTAGE ADVANTAGE 2 ADVANTAGE 3 INCOME
(NAZ) (NFZ) (NKR) (NXE) (NTX)
---------------------------------------------------------------------------------------------------------------------------
Post-October capital losses $ 179,544 $ 102,159 $ 110,362 $ 148,906 $ 316,420
===========================================================================================================================
6. 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:
ARIZONA PREMIUM INCOME (NAZ)
TEXAS QUALITY INCOME (NTX)
AVERAGE DAILY NET ASSETS (INCLUDING NET ASSETS ATTRIBUTABLE TO PREFERRED SHARES) FUND-LEVEL FEE RATE
--------------------------------------------------------------------------------------------------------------------------
For the first $125 million .4500%
For the next $125 million .4375
For the next $250 million .4250
For the next $500 million .4125
For the next $1 billion .4000
For the next $3 billion .3875
For net assets over $5 billion .3750
==========================================================================================================================
50
ARIZONA DIVIDEND ADVANTAGE (NFZ)
ARIZONA DIVIDEND ADVANTAGE 2 (NKR)
ARIZONA DIVIDEND ADVANTAGE 3 (NXE)
AVERAGE DAILY NET ASSETS (INCLUDING NET ASSETS ATTRIBUTABLE TO PREFERRED SHARES) FUND-LEVEL FEE RATE
--------------------------------------------------------------------------------------------------------------------------
For the first $125 million .4500%
For the next $125 million .4375
For the next$250 million .4250
For the next $500 million .4125
For the next $1 billion .4000
For net assets over $2 billion .3750
==========================================================================================================================
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 following table.
As of January 31, 2009, the complex-level fee rate was .2000%.
The complex-level fee schedule is as follows:
COMPLEX-LEVEL ASSET BREAKPOINT LEVEL (1) EFFECTIVE RATE AT BREAKPOINT LEVEL
--------------------------------------------------------------------------------------------------------------------------
$55 billion .2000%
$56 billion .1996
$57 billion .1989
$60 billion .1961
$63 billion .1931
$66 billion .1900
$71 billion .1851
$76 billion .1806
$80 billion .1773
$91 billion .1691
$125 billion .1599
$200 billion .1505
$250 billion .1469
$300 billion .1445
==========================================================================================================================
(1) The complex-level fee component of the management fee for the funds is
calculated based upon the aggregate daily net assets of all Nuveen funds,
with such daily net assets to include assets attributable to preferred
stock issued by or borrowings by such funds but to exclude assets
attributable to investments in other Nuveen funds.
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.
51
| Notes to FINANCIAL STATEMENTS (continued) (Unaudited)
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.
52
7. NEW ACCOUNTING PRONOUNCEMENTS
Financial Accounting Standards Board Statement of Financial Accounting Standards
No. 161 (SFAS No. 161)
In March 2008, the FASB issued SFAS No. 161, "Disclosures about Derivative
Instruments and Hedging Activities." This standard is intended to enhance
financial statement disclosures for derivative instruments and hedging
activities and enable investors to understand: a) how and why a fund uses
derivative instruments, b) how derivative instruments and related hedge items
are accounted for, and c) how derivative instruments and related hedge items
affect a fund's financial position, results of operations and cash flows. SFAS
No. 161 is effective for financial statements issued for fiscal years and
interim periods beginning after November 15, 2008. As of January 31, 2009,
management does not believe the adoption of SFAS No. 161 will impact the
financial statement amounts; however, additional footnote disclosures may be
required about the use of derivative instruments and hedging items.
8. 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 2, 2009, to shareholders of record on
February 15, 2009, 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 $ .0530 $ .0525 $ .0585 $ .0545 $ .0580
===========================================================================================================================
53
| Financial HIGHLIGHTS (Unaudited)
Selected data for a Common share outstanding throughout each period:
Investment Operations
--------------------------------------------------------------------
Distributions Distributions
Beginning from Net from
Common Net Investment Capital
Share Net Realized/ Income to Gains to
Net Asset Investment Unrealized Preferred Preferred
Value Income Gain (Loss) Shareholders+ Shareholders+ Total
-------------------------------------------------------------------------------------------------------------------------
ARIZONA PREMIUM INCOME (NAZ)
-------------------------------------------------------------------------------------------------------------------------
Year Ended 7/31:
2009(b) $ 13.00 $ .43 $ (1.09) $ (.11) $ -- $ (.77)
2008 14.00 .88 (1.05) (.22) -- (.39)
2007 14.10 .83 (.10) (.22) -- .51
2006 14.53 .83 (.39) (.18) -- .26
2005 14.04 .86 .56 (.09) -- 1.33
2004 13.66 .92 .43 (.05) -- 1.30
ARIZONA DIVIDEND ADVANTAGE (NFZ)
-------------------------------------------------------------------------------------------------------------------------
Year Ended 7/31:
2009(b) 13.26 .45 (1.37) (.12) -- (1.04)
2008 14.48 .91 (1.23) (.25) --*** (.57)
2007 14.77 .91 (.17) (.24) (.02) .48
2006 15.37 .93 (.40) (.20) (.01) .32
2005 15.00 .97 .46 (.10) -- 1.33
2004 14.45 .99 .57 (.06) -- 1.50
=========================================================================================================================
Less Distributions
-------------------------------------------------------
Offering
Net Costs and Ending
Investment Capital Preferred Common
Income to Gains to Share Share Ending
Common Common Underwriting Net Asset Market
Shareholders Shareholders Total Discounts Value Value
---------------------------------------------------------------------------------------------------------------------------
ARIZONA PREMIUM INCOME (NAZ)
---------------------------------------------------------------------------------------------------------------------------
Year Ended 7/31:
2009(b) $ (.32) $ -- $ (.32) $ -- $ 11.91 $ 10.82
2008 (.61) -- (.61) -- 13.00 13.35
2007 (.61) -- (.61) -- 14.00 13.07
2006 (.69) -- (.69) -- 14.10 13.69
2005 (.84) -- (.84) -- 14.53 15.22
2004 (.92) -- (.92) -- 14.04 15.27
ARIZONA DIVIDEND ADVANTAGE (NFZ)
---------------------------------------------------------------------------------------------------------------------------
Year Ended 7/31:
2009(b) (.32) -- (.32) -- 11.90 10.25
2008 (.64) (.01) (.65) -- 13.26 13.70
2007 (.71) (.06) (.77) -- 14.48 13.35
2006 (.84) (.08) (.92) -- 14.77 15.90
2005 (.92) (.04) (.96) -- 15.37 16.08
2004 (.91) (.04) (.95) -- 15.00 15.40
===========================================================================================================================
Preferred Shares at End of Period
--------------------------------------
Aggregate Liquidation
Amount and Market Asset
Outstanding Value Coverage
(000) Per Share Per Share
------------------------------------------------------------------------
ARIZONA PREMIUM INCOME (NAZ)
------------------------------------------------------------------------
Year Ended 7/31:
2009(b) $ 30,000 $ 25,000 $ 69,348
2008 30,000 25,000 73,414
2007 30,000 25,000 77,111
2006 30,000 25,000 77,520
2005 30,000 25,000 79,019
2004 30,000 25,000 77,026
ARIZONA DIVIDEND ADVANTAGE (NFZ)
------------------------------------------------------------------------
Year Ended 7/31:
2009(b) 10,600 25,000 68,510
2008 12,000 25,000 67,817
2007 12,000 25,000 71,748
2006 12,000 25,000 72,628
2005 12,000 25,000 74,485
2004 12,000 25,000 73,235
========================================================================
54
Ratios/Supplemental Data
-------------------------------------------------------
Ratios to Average Net Assets
Applicable to Common Shares
Total Returns Before Credit/Reimbursement
------------------ ----------------------------------------
Based
on Ending
Common Net
Based Share Assets
on Net Applicable Expenses Expenses Net
Market Asset to Common Including Excluding Investment
Value** Value** Shares (000) Interest++(a) Interest++(a) Income++
-----------------------------------------------------------------------------------------------------------------
ARIZONA PREMIUM INCOME (NAZ)
-----------------------------------------------------------------------------------------------------------------
Year Ended 7/31:
2009(b) (16.58)% (5.90)% $ 53,218 1.35% 1.35%* 7.18%*
2008 7.10 (2.87) 58,097 1.40 1.26 6.42
2007 (.22) 3.62 62,534 1.32 1.24 5.81
2006 (5.62) 1.84 63,024 1.21 1.21 5.83
2005 5.17 9.69 64,822 1.20 1.20 5.91
2004 7.97 9.66 62,431 1.22 1.22 6.49
ARIZONA DIVIDEND ADVANTAGE (NFZ)
-----------------------------------------------------------------------------------------------------------------
Year Ended 7/31:
2009(b) (22.97) (7.84) 18,448 1.53* 1.53* 7.11*
2008 7.72 (4.09) 20,552 1.58 1.44 6.14
2007 (11.63) 3.24 22,439 1.48 1.38 5.74
2006 4.54 2.14 22,862 1.36 1.36 5.79
2005 10.88 9.04 23,753 1.34 1.34 5.82
2004 7.05 10.56 23,153 1.30 1.30 6.10
=================================================================================================================
Ratios/Supplemental Data
---------------------------------------------------------
Ratios to Average Net Assets
Applicable to Common Shares
After Credit/Reimbursement****
--------------------------------------------
Expenses Expenses Net Portfolio
Including Excluding Investment Turnover
Interest++(a) Interest++(a) Income++ Rate
-------------------------------------------------------------------------------------------
ARIZONA PREMIUM INCOME (NAZ)
-------------------------------------------------------------------------------------------
Year Ended 7/31:
2009(b) 1.34%* 1.34%* 7.19%* 24%
2008 1.38 1.24 6.44 21
2007 1.30 1.21 5.84 13
2006 1.19 1.19 5.84 22
2005 1.19 1.19 5.92 17
2004 1.21 1.21 6.50 26
ARIZONA DIVIDEND ADVANTAGE (NFZ)
-------------------------------------------------------------------------------------------
Year Ended 7/31:
2009(b) 1.25* 1.25* 7.39* 4
2008 1.29 1.14 6.44 10
2007 1.10 1.00 6.12 19
2006 .92 .92 6.23 24
2005 .87 .87 6.28 18
2004 .83 .83 6.57 24
===========================================================================================
* Annualized.
** Total Return Based on Market Value is the combination of changes in the
market price per share and the effect of reinvested dividend income and
reinvested capital gains distributions, if any, at the average price paid
per share at the time of reinvestment. The last dividend declared in the
period, which is typically paid on the first business day of the following
month, is assumed to be reinvested at the ending market price. The actual
reinvestment for the last dividend declared in the period may take place
over several days, and in some instances may not be based on the market
price, so the actual reinvestment price may be different from the price
used in the calculation. Total returns are not annualized.
Total Return Based on Common Share Net Asset Value is the combination of
changes in Common share net asset value, reinvested dividend income at net
asset value and reinvested capital gains distributions at net asset value,
if any. The last dividend declared in the period, which is typically paid
on the first business day of the following month, is assumed to be
reinvested at the ending net asset value. The actual reinvest price for
the last dividend declared in the period may often be based on the Fund's
market price (and not its net asset value), and therefore may be different
from the price used in the calculation. Total returns are not annualized.
*** Rounds to less than $.01 per share.
**** 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) Interest expense arises from the application of SFAS No. 140 to certain
inverse floating rate transactions entered into by the Fund as more fully
described in Footnote 1 - Inverse Floating Rate Securities.
(b) For the six months ended January 31, 2009.
See accompanying notes to financial statements.
55
| Financial HIGHLIGHTS (continued) (Unaudited)
Selected data for a Common share outstanding throughout each period:
Investment Operations
-------------------------------------------------------------
Distributions Distributions
Beginning from Net from
Common Net Investment Capital
Share Net Realized/ Income to Gains to
Net Asset Investment Unrealized Preferred Preferred
Value Income Gain (Loss) Shareholders+ Shareholders+ Total
--------------------------------------------------------------------------------------------------------------
ARIZONA DIVIDEND ADVANTAGE 2 (NKR)
--------------------------------------------------------------------------------------------------------------
Year Ended 7/31:
2009(b) $ 13.66 $ .47 $ (1.02) $ (.12) $ -- $ (.67)
2008 14.76 .96 (1.03) (.24) (.02) (.33)
2007 15.00 .97 (.18) (.24) (.01) .54
2006 15.56 .96 (.37) (.20) (.01) .38
2005 15.10 .97 .59 (.11) (.01) 1.44
2004 14.57 .96 .53 (.06) -- 1.43
ARIZONA DIVIDEND ADVANTAGE 3 (NXE)
--------------------------------------------------------------------------------------------------------------
Year Ended 7/31:
2009(b) 13.07 .45 (1.33) (.11) -- (.99)
2008 14.20 .91 (1.15) (.24) -- (.48)
2007 14.32 .90 (.10) (.25) -- .55
2006 14.62 .88 (.26) (.19) -- .43
2005 14.01 .89 .62 (.10) -- 1.41
2004 13.45 .89 .54 (.06) -- 1.37
==============================================================================================================
Less Distributions
---------------------------------------------------
Offering
Net Costs and Ending
Investment Capital Preferred Common
Income to Gains to Share Share Ending
Common Common Underwriting Net Asset Market
Shareholders Shareholders Total Discounts Value Value
------------------------------------------------------------------------------------------------------------
ARIZONA DIVIDEND ADVANTAGE 2 (NKR)
------------------------------------------------------------------------------------------------------------
Year Ended 7/31:
2009(b) $ (.35) $ -- $ (.35) $ -- $ 12.64 $ 11.07
2008 (.71) (.06) (.77) -- 13.66 14.00
2007 (.74) (.04) (.78) -- 14.76 15.27
2006 (.83) (.11) (.94) -- 15.00 15.37
2005 (.86) (.12) (.98) -- 15.56 16.19
2004 (.86) (.04) (.90) -- 15.10 14.82
ARIZONA DIVIDEND ADVANTAGE 3 (NXE)
------------------------------------------------------------------------------------------------------------
Year Ended 7/31:
2009(b) (.33) -- (.33) -- 11.75 10.31
2008 (.65) -- (.65) -- 13.07 13.30
2007 (.67) -- (.67) -- 14.20 13.44
2006 (.73) -- (.73) -- 14.32 13.52
2005 (.80) -- (.80) -- 14.62 14.48
2004 (.80) -- (.80) (.01) 14.01 13.30
============================================================================================================
Preferred Shares at End of Period
-----------------------------------
Aggregate Liquidation
Amount and Market Asset
Outstanding Value Coverage
(000) Per Share Per Share
------------------------------------------------------------------------
ARIZONA DIVIDEND ADVANTAGE 2 (NKR)
------------------------------------------------------------------------
Year Ended 7/31:
2009(b) $ 17,975 $ 25,000 $ 67,889
2008 18,500 25,000 70,015
2007 18,500 25,000 73,616
2006 18,500 25,000 74,277
2005 18,500 25,000 75,952
2004 18,500 25,000 74,382
ARIZONA DIVIDEND ADVANTAGE 3 (NXE)
------------------------------------------------------------------------
Year Ended 7/31:
2009(b) 20,725 25,000 68,477
2008 22,000 25,000 70,546
2007 22,000 25,000 74,490
2006 22,000 25,000 74,902
2005 22,000 25,000 75,942
2004 22,000 25,000 73,844
========================================================================
56
Ratios/Supplemental Data
-----------------------------------------------------------
Ratios to Average Net Assets
Applicable to Common Shares
Total Returns Before Credit/Reimbursement
---------------------- --------------------------------------------
Based on Ending Net
Based Common Assets
on Share Net Applicable Expenses Expenses Net
Market Asset to Common Including Excluding Investment
Value** Value** Shares (000) Interest++(a) Interest++(a) Income++
------------------------------------------------------------------------------------------------------------------------
ARIZONA DIVIDEND ADVANTAGE 2 (NKR)
------------------------------------------------------------------------------------------------------------------------
Year Ended 7/31:
2009(b) (18.46)% (4.84)% $ 30,837 1.41%* 1.41%* 7.11%*
2008 (3.16) (2.38) 33,311 1.49 1.34 6.32
2007 4.52 3.59 35,976 1.39 1.29 5.92
2006 .82 2.49 36,465 1.28 1.28 5.88
2005 16.30 9.74 37,704 1.27 1.27 5.76
2004 9.46 9.98 36,543 1.27 1.27 5.83
ARIZONA DIVIDEND ADVANTAGE 3 (NXE)
------------------------------------------------------------------------------------------------------------------------
Year Ended 7/31:
2009(b) (20.00) (7.56) 36,042 1.40* 1.40* 7.22*
2008 3.96 (3.48) 40,081 1.46 1.30 6.17
2007 4.21 3.81 43,552 1.36 1.26 5.69
2006 (1.80) 3.03 43,913 1.26 1.26 5.63
2005 15.11 10.21 44,829 1.25 1.25 5.63
2004 1.01 10.25 42,983 1.25 1.25 5.80
========================================================================================================================
Ratios/Supplemental Data
------------------------------------------------------
Ratios to Average Net Assets
Applicable to Common Shares
After Credit/Reimbursement***
------------------------------------------
Expenses Expenses Net Portfolio
Including Excluding Investment Turnover
Interest++(a) Interest++(a) Income++ Rate
-------------------------------------------------------------------------------------------
ARIZONA DIVIDEND ADVANTAGE 2 (NKR)
-------------------------------------------------------------------------------------------
Year Ended 7/31:
2009(b) 1.06%* 1.06%* 7.45%* 4%
2008 1.11 .96 6.70 15
2007 .93 .83 6.38 14
2006 .82 .82 6.34 11
2005 .82 .82 6.22 11
2004 .80 .80 6.30 14
ARIZONA DIVIDEND ADVANTAGE 3 (NXE)
-------------------------------------------------------------------------------------------
Year Ended 7/31:
2009(b) 1.07* 1.07* 7.55* 7
2008 1.07 .91 6.56 16
2007 .85 .75 6.19 15
2006 .78 .78 6.12 12
2005 .76 .76 6.12 15
2004 .76 .76 6.29 22
===========================================================================================
* Annualized.
** Total Return Based on Market Value is the combination of changes in the
market price per share and the effect of reinvested dividend income and
reinvested capital gains distributions, if any, at the average price paid
per share at the time of reinvestment. The last dividend declared in the
period, which is typically paid on the first business day of the following
month, is assumed to be reinvested at the ending market price. The actual
reinvestment for the last dividend declared in the period may take place
over several days, and in some instances may not be based on the market
price, so the actual reinvestment price may be different from the price
used in the calculation. Total returns are not annualized.
Total Return Based on Common Share Net Asset Value is the combination of
changes in Common share net asset value, reinvested dividend income at net
asset value and reinvested capital gains distributions at net asset value,
if any. The last dividend declared in the period, which is typically paid
on the first business day of the following month, is assumed to be
reinvested at the ending net asset value. The actual reinvest price for
the last dividend declared in the period may often be based on the Fund's
market price (and not its net asset value), and therefore may be different
from the price used in the calculation. Total returns are not annualized.
*** After custodian fee credit and expense reimbursement, where applicable.
+ The amounts shown are based on Common share equivalents.
++ Ratios do not reflect the effect of dividend payments to Preferred
shareholders; income ratios reflect income earned on assets attributable
to Preferred shares.
(a) Interest expense arises from the application of SFAS No. 140 to certain
inverse floating rate transactions entered into by the Fund as more fully
described in Footnote 1 - Inverse Floating Rate Securities.
(b) For the six months ended January 31, 2009.
See accompanying notes to financial statements.
57
| Financial HIGHLIGHTS (continued) (Unaudited)
Selected data for a Common share outstanding throughout each period:
Investment Operations
-------------------------------------------------------------
Distributions Distributions
Beginning from Net from
Common Net Investment Capital
Share Net Realized/ Income to Gains to
Net Asset Investment Unrealized Preferred Preferred
Value Income Gain (Loss) Shareholders+ Shareholders+ Total
--------------------------------------------------------------------------------------------------------------
TEXAS QUALITY INCOME (NTX)
--------------------------------------------------------------------------------------------------------------
Year Ended 7/31:
2009(b) $ 13.98 $ .47 $ (.67) $ (.12) $ (.02) $ (.34)
2008 14.87 .94 (.83) (.23) (.02) (.14)
2007 15.06 .95 (.11) (.25) (.01) .58
2006 15.46 .96 (.32) (.22) -- .42
2005 15.12 1.00 .41 (.13) -- 1.28
2004 14.57 1.03 .55 (.07) -- 1.51
==============================================================================================================
Less Distributions
-------------------------------------------------
Offering
Net Costs and Ending
Investment Capital Preferred Common
Income to Gains to Share Share Ending
Common Common Underwriting Net Asset Market
Shareholders Shareholders Total Discounts Value Value
--------------------------------------------------------------------------------------------------------
TEXAS QUALITY INCOME (NTX)
--------------------------------------------------------------------------------------------------------
Year Ended 7/31:
2009(b) $ (.35) $ (.05) $ (.40) $ -- $ 13.24 $ 12.60
2008 (.69) (.06) (.75) -- 13.98 12.46
2007 (.73) (.04) (.77) -- 14.87 13.89
2006 (.82) -- (.82) -- 15.06 14.71
2005 (.94) -- (.94) -- 15.46 16.19
2004 (.96) -- (.96) -- 15.12 14.59
========================================================================================================
Preferred Shares at End of Period
-----------------------------------
Aggregate Liquidation
Amount and Market Asset
Outstanding Value Coverage
(000) Per Share Per Share
------------------------------------------------------------------------
TEXAS QUALITY INCOME (NTX)
------------------------------------------------------------------------
Year Ended 7/31:
2009(b) $ 69,000 $ 25,000 $ 70,553
2008 69,000 25,000 73,084
2007 69,000 25,000 76,173
2006 69,000 25,000 76,815
2005 69,000 25,000 78,159
2004 69,000 25,000 76,896
========================================================================
58
Ratios/Supplemental Data
-----------------------------------------------------------
Ratios to Average Net Assets
Applicable to Common Shares
Total Returns Before Credit/Reimbursement
------------------ --------------------------------------------
Based on Ending Net
Based Common Assets
on Share Net Applicable Expenses Expenses Net
Market Asset to Common Including Excluding Investment
Value** Value** Shares (000) Interest++(a) Interest++(a) Income++
------------------------------------------------------------------------------------------------------------------------
TEXAS QUALITY INCOME (NTX)
------------------------------------------------------------------------------------------------------------------------
Year Ended 7/31:
2009(b) 4.61% (2.28)% $ 125,726 1.27%* 1.27%* 7.11%*
2008 (5.16) (1.04) 132,713 1.26 1.21 6.46
2007 (.52) 3.82 141,238 1.24 1.18 6.24
2006 (4.03) 2.77 143,009 1.19 1.19 6.31
2005 17.83 8.61 146,718 1.18 1.18 6.42
2004 5.87 10.51 143,233 1.18 1.18 6.77
========================================================================================================================
Ratios/Supplemental Data
--------------------------------------------------------
Ratios to Average Net Assets
Applicable to Common Shares
After Credit/Reimbursement***
--------------------------------------------
Expenses Expenses Net Portfolio
Including Excluding Investment Turnover
Interest++(a) Interest++(a) Income++ Rate
------------------------------------------------------------------------------------------------
TEXAS QUALITY INCOME (NTX)
------------------------------------------------------------------------------------------------
Year Ended 7/31:
2009(b) 1.27%* 1.27%* 7.12%* 7%
2008 1.25 1.20 6.47 8
2007 1.22 1.16 6.26 9
2006 1.18 1.18 6.33 13
2005 1.16 1.16 6.44 14
2004 1.18 1.18 6.77 16
================================================================================================
* Annualized.
** Total Return Based on Market Value is the combination of changes in the
market price per share and the effect of reinvested dividend income and
reinvested capital gains distributions, if any, at the average price paid
per share at the time of reinvestment. The last dividend declared in the
period, which is typically paid on the first business day of the following
month, is assumed to be reinvested at the ending market price. The actual
reinvestment for the last dividend declared in the period may take place
over several days, and in some instances may not be based on the market
price, so the actual reinvestment price may be different from the price
used in the calculation. Total returns are not annualized.
Total Return Based on Common Share Net Asset Value is the combination of
changes in Common share net asset value, reinvested dividend income at net
asset value and reinvested capital gains distributions at net asset value,
if any. The last dividend declared in the period, which is typically paid
on the first business day of the following month, is assumed to be
reinvested at the ending net asset value. The actual reinvest price for
the last dividend declared in the period may often be based on the Fund's
market price (and not its net asset value), and therefore may be different
from the price used in the calculation. Total returns are not annualized.
*** After custodian fee credit and expense reimbursement, where applicable.
+ The amounts shown are based on Common share equivalents.
++ Ratios do not reflect the effect of dividend payments to Preferred
shareholders; income ratios reflect income earned on assets attributable
to Preferred shares.
(a) Interest expense arises from the application of SFAS No. 140 to certain
inverse floating rate transactions entered into by the Fund as more fully
described in Footnote 1 - Inverse Floating Rate Securities.
(b) For the six months ended January 31, 2009.
See accompanying notes to financial statements.
59
Reinvest Automatically
EASILY and CONVENIENTLY
NUVEEN MAKES REINVESTING EASY. A PHONE CALL IS ALL IT TAKES TO SET UP YOUR
REINVESTMENT ACCOUNT.
NUVEEN CLOSED-END FUNDS DIVIDEND REINVESTMENT PLAN
Your Nuveen Closed-End Fund allows you to conveniently reinvest dividends and/or
capital gains distributions in additional Fund shares.
By choosing to reinvest, you'll be able to invest money regularly and
automatically, and watch your investment grow through the power of tax-free
compounding. Just like dividends or distributions in cash, there may be times
when income or capital gains taxes may be payable on dividends or distributions
that are reinvested.
It is important to note that an automatic reinvestment plan does not ensure a
profit, nor does it protect you against loss in a declining market.
EASY AND CONVENIENT
To make recordkeeping easy and convenient, each month you'll receive a statement
showing your total dividends and distributions, the date of investment, the
shares acquired and the price per share, and the total number of shares you own.
HOW SHARES ARE PURCHASED
The shares you acquire by reinvesting will either be purchased on the open
market or newly issued by the Fund. If the shares are trading at or above net
asset value at the time of valuation, the Fund will issue new shares at the
greater of the net asset value or 95% of the then-current market price. If the
shares are trading at less than net asset value, shares for your account will be
purchased on the open market. If the Plan Agent begins purchasing Fund shares on
the open market while shares are trading below net asset value, but the Fund's
shares subsequently trade at or above their net asset value before the Plan
Agent is able to complete its purchases, the Plan Agent may cease open-market
purchases and may invest the uninvested portion of the distribution in
newly-issued Fund shares at a price equal to the greater of the shares' net
asset value or 95% of the shares' market value on the last business day
immediately prior to the purchase date. Dividends and distributions received to
purchase shares in the open market will normally be invested shortly after the
dividend payment date. No interest will be paid on dividends and distributions
awaiting reinvestment. Because the market price of the shares may increase
before purchases are completed, the average purchase price per share may exceed
the market price at the time of valuation, resulting in the acquisition of fewer
shares than if the dividend or distribution had been paid in shares issued by
the Fund. A pro rata portion of any applicable brokerage commissions on open
market purchases will be paid by Plan participants. These commissions usually
will be lower than those charged on individual transactions.
60
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.
61
Glossary of
TERMS USED in this REPORT
o AUCTION RATE BOND: An auction rate bond is a security whose interest
payments are adjusted periodically through an auction process, which
process typically also serves as a means for buying and selling the bond.
Auctions that fail to attract enough buyers for all the shares offered for
sale are deemed to have "failed", with current holders receiving a
formula-based interest rate until the next scheduled auction.
o AVERAGE ANNUAL TOTAL RETURN: This is a commonly used method to express an
investment's performance over a particular, usually multi-year time
period. It expresses the return that would have been necessary each year
to equal the investment's actual cumulative performance (including change
in NAV or market price and reinvested dividends and capital gains
distributions, if any) over the time period being considered.
o AVERAGE EFFECTIVE MATURITY: The average of the number of years to maturity
of the bonds in a Fund's portfolio, computed by weighting each bond's time
to maturity (the date the security comes due) by the market value of the
security. This figure does not account for the likelihood of prepayments
or the exercise of call provisions unless an escrow account has been
established to redeem the bond before maturity. The market value weighting
for an investment in an inverse floating rate security is the value of the
portfolio's residual interest in the inverse floating rate trust, and does
not include the value of the floating rate securities issued by the trust.
o INVERSE FLOATERS: Inverse floating rate securities are created by
depositing a municipal bond, typically with a fixed interest rate, into a
special purpose trust created by a broker-dealer. This trust, in turn, (a)
issues floating rate certificates typically paying short-term tax-exempt
interest rates to third parties in amounts equal to some fraction of the
deposited bond's par amount or market value, and (b) issues an inverse
floating rate certificate (sometimes referred to as an "inverse floater")
to an investor (such as a Fund) interested in gaining investment exposure
to a long-term municipal bond. The income received by the holder of the
inverse floater varies inversely with the short-term rate paid to the
floating rate certificates' holders, and in most circumstances the holder
of the inverse floater bears substantially all of the underlying bond's
downside investment risk. The holder of the inverse floater typically also
benefits disproportionately from any potential appreciation of the
underlying bond's value. Hence, an inverse floater essentially represents
an investment in the underlying bond on a leveraged basis.
o LEVERAGE-ADJUSTED DURATION: Duration is a measure of the expected period
over which a bond's principal and interest will be paid, and consequently
is a measure of the sensitivity of a bond's or bond Fund's value to
changes when market interest rates change. Generally, the longer a bond's
or Fund's duration, the more the price of the bond or Fund will change as
interest rates change. Leverage-adjusted duration takes into account the
leveraging process for a Fund and therefore is longer than the duration of
the Fund's portfolio of bonds.
o MARKET YIELD (ALSO KNOWN AS DIVIDEND YIELD OR CURRENT YIELD): An
investment's current annualized dividend divided by its current market
price.
o NET ASSET VALUE (NAV): A Fund's NAV per common share is calculated by
subtracting the liabilities of the Fund (including any Preferred shares
issued in order to leverage the Fund) from its total assets and then
dividing the remainder by the number of common shares outstanding. Fund
NAVs are calculated at the end of each business day.
o TAXABLE-EQUIVALENT YIELD: The yield necessary from a fully taxable
investment to equal, on an after-tax basis, the yield of a municipal bond
investment.
o ZERO COUPON BOND: A zero coupon bond does not pay a regular interest
coupon to its holders during the life of the bond. Tax-exempt income to
the holder of the bond comes from accretion of the difference between the
original purchase price of the bond at issuance and the par value of the
bond at maturity and is effectively paid at maturity. The market prices of
zero coupon bonds generally are more volatile than the market prices of
bonds that pay interest periodically.
62
| Other Useful INFORMATION
QUARTERLY PORTFOLIO OF INVESTMENTS AND PROXY VOTING INFORMATION
You may obtain (i) each Fund's quarterly portfolio of investments, (ii)
information regarding how the Funds voted proxies relating to portfolio
securities held during the twelve-month period ended June 30, 2008, and (iii) a
description of the policies and procedures that the Funds used to determine how
to vote proxies relating to portfolio securities 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 (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 100 F Street NE, Washington, D.C. 20549.
CEO Certification Disclosure
Each Fund's Chief Executive Officer has submitted to the New York Stock Exchange
(NYSE) the annual CEO certification as required by Section 303A.12(a) of the
NYSE Listed Company Manual.
Each Fund has filed with the Securities and Exchange Commission the
certification of its Chief Executive Officer and Chief Financial Officer
required by Section 302 of the Sarbanes-Oxley Act.
BOARD OF DIRECTOR/TRUSTEES
John P. Amboian
Robert P. Bremner
Jack B. Evans
William C. Hunter
David J. Kundert
William J. Schneider
Judith M. Stockdale
Carole E. Stone
Terence J. Toth
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 and/or redeem shares of its own common or
preferred stock in the future at such times and in such amounts as is deemed
advisable. During the period covered by this report, NFZ, NKR and NXE redeemed
and/or noticed for redemption 56, 21 and 51 shares of their preferred stock,
respectively. Any future repurchases and/or redemptions will be reported to
shareholders in the next annual or semi-annual report.
63
Nuveen Investments:
-------------------
SERVING INVESTORS FOR GENERATIONS
Since 1898, financial advisors and their clients have relied on Nuveen
Investments to provide dependable investment solutions. For the past century,
Nuveen Investments has adhered to the belief that the best approach to investing
is to apply conservative risk-management principles to help minimize volatility.
Building on this tradition, we today offer a range of high quality equity and
fixed-income solutions that are integral to a well-diversified core portfolio.
Our clients have come to appreciate this diversity, as well as our continued
adherence to proven, long-term investing principles.
WE OFFER MANY DIFFERENT INVESTING SOLUTIONS FOR OUR CLIENTS' DIFFERENT NEEDS.
Nuveen Investments is a global investment management firm that seeks to help
secure the long-term goals of institutions and high net worth investors as well
as the consultants and financial advisors who serve them. Nuveen Investments
markets its growing range of specialized investment solutions under the
high-quality brands of HydePark, NWQ, Nuveen, Santa Barbara, Symphony,
Tradewinds and Winslow Capital. In total, the Company managed $119 billion of
assets on December 31, 2008.
FIND OUT HOW WE CAN HELP YOU REACH YOUR FINANCIAL GOALS.
To learn more about the products and services Nuveen Investments offers, talk to
your financial advisor, or call us at (800) 257-8787. Please read the
information provided carefully before you invest. Be sure to obtain a
prospectus, where applicable. Investors should consider the investment objective
and policies, risk considerations, charges and expenses of the Fund carefully
before investing. The prospectus contains this and other information relevant to
an investment in the Fund. For a prospectus, please contact your securities
representative or NUVEEN INVESTMENTS, 333 W. WACKER DR., CHICAGO, IL 60606.
PLEASE read the prospectus carefully before you invest or send money.
Learn more about Nuveen Funds at: www.nuveen.com/etf
SHARE PRICES
FUND DETAILS
DAILY FINANCIAL NEWS
INVESTOR EDUCATION
INTERACTIVE PLANNING TOOLS
ESA-A-0109D
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: See
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: See 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/ Kevin J. McCarthy
----------------------------------------------
Kevin J. McCarthy
(Vice President and Secretary)
Date: April 9, 2009
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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, 2009
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By (Signature and Title) /s/ Stephen D. Foy
----------------------------------------------
Stephen D. Foy
Vice President and Controller
(principal financial officer)
Date: April 9, 2009
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