naz.htm
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 811-7278

Nuveen Arizona Premium Income Municipal Fund, Inc.
(Exact name of registrant as specified in charter)

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

Kevin J. McCarthy
Nuveen Investments
333 West Wacker Drive
Chicago, IL 60606
(Name and address of agent for service)

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

Date of fiscal year end: February 28

Date of reporting period: August 31, 2012

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.
 


 
 

 
 
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Table of Contents

Chairman’s Letter to Shareholders
4
   
Portfolio Managers’ Comments
5
   
Fund Leverage and Other Information
10
   
Common Share Dividend and Price Information
12
   
Performance Overviews
14
   
Shareholder Meeting Report
19
   
Portfolios of Investments
20
   
Statement of Assets and Liabilities
42
   
Statement of Operations
43
   
Statement of Changes in Net Assets
44
   
Statement of Cash Flows
46
   
Financial Highlights
48
   
Notes to Financial Statements
57
   
Annual Investment Management Agreement Approval Process
70
   
Reinvest Automatically, Easily and Conveniently
80
   
Glossary of Terms Used in this Report
82
   
Additional Fund Information
87

 
 

 
 
Chairman’s
Letter to Shareholders
 
 
Dear Shareholders,
 
Investors have many reasons to remain cautious. The challenges in the Euro area are casting a shadow over global economies and financial markets. The political support for addressing fiscal issues is eroding as the economic and social impacts become more visible. At the same time, member nations appear unwilling to provide adequate financial support or to surrender sufficient sovereignty to strengthen the banks or unify the Euro area financial system. The gains made in reducing deficits, and the hard-won progress on winning popular acceptance of the need for economic austerity, are at risk. To their credit, European political leaders press on to find compromise solutions, but there is increasing concern that time will begin to run out.
 
In the U.S., strong corporate earnings have enabled the equity markets to withstand much of the downward pressures coming from weakening job creation, slower economic growth and political uncertainty. The Fed remains committed to low interest rates and announced on September 13, 2012 (after the close of this reporting period) another program of quantitative easing (QE3) to continue until mid-2015. Pre-election maneuvering has added to the already highly partisan atmosphere in Congress. The end of the Bush-era tax cuts and implementation of the spending restrictions of the Budget Control Act of 2011, both scheduled to take place at year-end, loom closer.
 
During the last year, U.S. based investors have experienced a sharp decline and a strong recovery in the equity markets. The experienced investment teams at Nuveen keep their eye on a longer time horizon and use their practiced investment disciplines to negotiate through market peaks and valleys to achieve long-term goals for investors. Experienced professionals pursue investments that will weather short-term volatility and at the same time, seek opportunities that are created by markets that overreact to negative developments. Monitoring this process is an important consideration for the Fund Board as it oversees your Nuveen Fund on your behalf.
 
As always, I encourage you to contact your financial consultant if you have any questions about your investment in a Nuveen Fund. On behalf of the other members of your Fund Board, we look forward to continuing to earn your trust in the months and years ahead.
 
Sincerely,
 
 
Robert P. Bremner
Chairman of the Board
October 22, 2012

4
 
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Portfolio Managers’ Comments
 
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)
 
Portfolio managers Michael Hamilton and Daniel Close discuss key investment strategies and the six-month performance of the Nuveen Arizona and Texas Funds. Michael assumed portfolio management responsibility for the Arizona Funds in January 2011 and Dan has managed NTX since 2007.
 
What key strategies were used to manage the Arizona and Texas Funds during the six-month reporting period ended August 31, 2012?
 
During this reporting period, municipal bond prices generally rallied, as strong demand and tight supply combined to create favorable market conditions for municipal bonds. Although the availability of tax-exempt supply improved over that of the same six-month period a year earlier, the pattern of new issuance remained light compared with long-term historical trends. This supply/demand dynamic served as a key driver of performance. Concurrent with rising prices, yields continued to decline across most maturities, especially at the longer end of the municipal yield curve, and the yield curve flattened. During this period, we saw an increasing number of borrowers come to market seeking to take advantage of the low rate environment, with approximately 60% of new municipal paper issued by borrowers that were calling existing debt and refinancing at lower rates.
 
In this environment, we continued to take a bottom-up approach to discovering sectors that appeared undervalued as well as individual credits that had the potential to perform well over the long term and helped us keep the Funds fully invested. During this period, NTX found value in several areas of the market, including health care, local general obligation (GO) bonds, airports, toll roads, public power and dedicated tax credits. In the Arizona Funds, we focused on managing cashflows from bond calls and maturing bonds and minimizing their impact by anticipating current and future inflows and closely monitoring opportunities for reinvestment. Our buying activity during this period included finding purchase opportunities in the secondary market, adding to the Funds’ holdings of existing bonds, and purchasing territorial paper issued by Puerto Rico and the Virgin Islands. These territorial bonds benefited the Funds through higher yields, added diversification, and triple exemption (i.e., exemption from federal, state, and local taxes).
 
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.
 
Ratings shown are the highest rating given by one of the following national rating agencies: Standard & Poor’s Group, Moody’s Investors Service, Inc. or Fitch, Inc. Credit ratings are subject to change. AAA, AA, A and BBB are investment grade ratings; BB, B, CCC, CC, C and D are below investment grade ratings. Certain bonds backed by U.S. Government or agency securities are regarded as having an implied rating equal to the rating of such securities. Holdings designated N/R are not rated by these national rating agencies.

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5

 
 

 
 
In general during this period, we focused on bonds with longer maturities. This enabled us to take advantage of attractive yields at the longer end of the municipal yield curve and also provided some protection for the Funds’ duration and yield curve positioning. We also purchased lower rated bonds when we found attractive opportunities, as we believed these bonds continued to offer relative value.
 
Cash for new purchases during this period was generated primarily by the proceeds from a meaningful number of bond calls resulting from the increase in refinancings. During this period, we worked to redeploy these proceeds to keep the Funds as fully invested as possible. Overall, selling was minimal because the bonds in our portfolios generally offered higher yields than those available in the current marketplace. The Arizona Funds sold a few pre-refunded bonds and credits with short call dates as part of our cashflow management program, while NTX had no sales activity during this period.
 
As of August 31, 2012, all of these Funds continued to use inverse floating rate securities. We employ inverse floaters for a variety of reasons, including duration management, income enhancement and total return enhancement.
 
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 8/31/12
 
                           
     
6-Month
 
1-Year
 
5-Year
 
10-Year
Arizona Funds
                         
NAZ
   
5.29
%
 
14.80
%
 
7.40
%
 
6.03
%
NFZ
   
5.14
%
 
14.72
%
 
7.14
%
 
5.95
%
NKR
   
4.82
%
 
13.89
%
 
7.26
%
 
6.15
%
NXE
   
4.32
%
 
13.02
%
 
7.27
%
 
N/A
                           
S&P Arizona Municipal Bond Index**
   
3.39
%
 
9.41
%
 
6.12
%
 
5.29
%
S&P Municipal Bond Index**
   
3.24
%
 
9.35
%
 
6.00
%
 
5.28
%
Lipper Other States Municipal Debt Funds Classification Average**
   
4.63
%
 
14.84
%
 
7.25
%
 
6.24
%
Texas Fund
                         
NTX
   
4.90
%
 
12.85
%
 
7.38
%
 
6.28
%
                           
S&P Texas Municipal Bond Index**
   
3.49
%
 
9.06
%
 
6.26
%
 
5.54
%
S&P Municipal Bond Index**
   
3.24
%
 
9.35
%
 
6.00
%
 
5.28
%
Lipper Other States Municipal Debt Funds Classification Average**
   
4.63
%
 
14.84
%
 
7.25
%
 
6.24
%

 
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 Performance Overview for your Fund in this report.
   
*
Six-month returns are cumulative; all other returns are annualized.
   
**
Refer to Glossary of Terms Used in this Report for definitions. Indexes and Lipper averages are not available for direct investment.
 
6
 
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For the six months ended August 31, 2012, the cumulative returns on common share net asset value (NAV) for all four Arizona Funds exceeded the return for the S&P Arizona Municipal Bond Index and NTX outperformed the S&P Texas Municipal Bond Index. All five of the Funds also outperformed the S&P Municipal Bond Index. For this same period, NAZ, NFZ, NKR and NTX exceeded the average return for the Lipper Other States Municipal Debt Funds Classification Average, while NXE trailed the Lipper average.
 
Key management factors that influenced the Funds’ returns during this period included duration and yield curve positioning, credit exposure and sector allocation. The use of regulatory leverage also was an important positive factor affecting the Funds’ performance. Leverage is discussed in more detail later in this report.
 
In an environment of declining rates and flattening yield curve, municipal bonds with longer maturities generally outperformed those with shorter maturities during this period. Overall, credits at the longest end of the municipal yield curve posted the strongest returns, while bonds at the shortest end produced the weakest results. For the period, duration and yield curve positioning was a positive contributor to the performance of all of these Funds, which had heavier exposures to the outperforming longer segments of the yield curve and correspondingly smaller weightings in the shorter parts of the curve that produced weaker returns. The performance of NXE, which had the shortest duration among the Arizona Funds, was marginally impacted by its shorter positioning. In addition, NTX benefited from its holdings of zero coupon bonds, which generally outperformed the market during this period due to their longer durations.
 
Credit exposure was another important factor in the Funds’ performance during these six months, as lower quality bonds generally outperformed higher quality bonds. This outperformance was due in part to the greater demand for lower-rated bonds as investors looked for investment vehicles offering higher yields. As investors became more comfortable taking on additional investment risk, credit spreads, or the difference in yield spreads between U.S. Treasury securities and comparable investments such as municipal bonds, narrowed through a variety of rating categories. As a result of this spread compression, the Funds benefited from their heavier exposure to lower rated credits and their underweightings in bonds rated AAA and AA.
 
During this period, revenue bonds as a whole outperformed the general municipal market. Holdings that generally made positive contributions to the Funds’ returns included health care (together with hospitals), education, housing and transportation credits. All of the Arizona Funds benefited from good weightings in the health care sector. This was especially true in NAZ, where the Fund’s health care holdings had a

Nuveen Investments
 
7

 
 

 
 
better call structure than those of the other Arizona Funds and thus a longer duration, which contributed to performance during this period.
 
In contrast, pre-refunded bonds, which are typically backed by U.S. Treasury securities, were the poorest performing market segment during this period. The underperformance of these bonds can be attributed primarily to their shorter effective maturities and higher credit quality. Among these five Funds, NKR had the smallest allocation of pre-refunded bonds, while an overweighting in these bonds detracted from the performance of NTX. Although holdings of previously pre-refunded bonds were generally detrimental to performance during this period, NFZ benefited from having bonds pre-refunded during this period, as bonds that had been trading at a discount were called at par. General obligation (GO) bonds and utilities credits also lagged the performance of the general municipal market for this period. While all of the Arizona Funds were overweight in GO and other tax supported bonds, NAZ had the smallest allocation of these bonds, which lessened the impact of these holdings.
 
APPROVED FUND REORGANIZATIONS
 
On April 18, 2012, the Funds’ Board of Directors/Trustees approved a series of reorganizations for all the Arizona Funds included in this report. The reorganizations are intended to create a single larger state Fund, which would potentially offer shareholders the following benefits:

 
Lower Fund expense ratios (excluding the effects of leverage), as fixed costs are spread over a larger asset base;
     
 
Enhanced secondary market trading, as larger Funds potentially make it easier for investors to buy and sell Fund shares;
     
 
Lower per share trading costs through reduced bid/ask spreads due to a larger common share float; and
     
 
Increased Fund flexibility in managing the structure and cost of leverage over time.
 
8
 
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The approved reorganizations are as follows:

Acquired Funds
 
Symbol
 
       Acquiring Fund
 
Symbol
Nuveen Arizona Dividend
 
NFZ
       
 
Advantage Municipal Fund
           
Nuveen Arizona Dividend
 
NKR
 
Nuveen Arizona Premium
 
NAZ
 
Advantage Municipal Fund 2
     
Income Municipal Fund, Inc.
   
Nuveen Arizona Dividend
 
NXE
       
 
Advantage Municipal Fund 3
           
 
If shareholders approve the reorganizations, and upon the closing of the reorganizations, the Acquired Funds will transfer their assets to the Acquiring Fund in exchange for common and preferred shares of the Acquiring Fund, and the assumption by the Acquiring Fund of the liabilities of the Acquired Funds. The Acquired Funds will then be liquidated, dissolved and terminated in accordance with their Declaration of Trust.
 
In addition, shareholders of the Acquired Funds will become shareholders of the Acquiring Fund. Holders of common shares will receive newly issued common shares of the Acquiring Fund, the aggregate net asset value of which will be equal to the aggregate net asset value of the common shares of the Acquired Funds held immediately prior to the reorganizations (including for this purpose fractional Acquiring Fund shares to which shareholders would be entitled). Fractional shares will be sold on the open market and shareholders will receive cash in lieu of such fractional shares. Holders of preferred shares of each Acquired Fund will receive on a one-for-one basis newly issued preferred shares of the Acquiring Fund, in exchange for preferred shares of the Acquired Funds held immediately prior to the reorganization.

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9

 
 

 
 
Fund Leverage and
Other Information
 
IMPACT OF THE FUNDS’ LEVERAGE STRATEGIES ON PERFORMANCE
 
One important factor impacting the return of the Funds relative to their benchmarks was the Funds’ use of leverage. The Funds use leverage because their managers believe that, over time, leveraging provides opportunities for additional income and total return for common shareholders. However, use of leverage also can expose common shareholders to additional volatility. For example, as the prices of securities held by a Fund decline, the negative impact of these valuation changes on common share net asset value and common shareholder total return is magnified by the use of leverage. Conversely, leverage may enhance common share returns during periods when the prices of securities held by a Fund generally are rising. Leverage had a positive impact on the performance of the Funds over this reporting period.
 
THE FUNDS’ REGULATORY LEVERAGE
 
As of August 31, 2012, the Funds have issued and outstanding MuniFund Term Preferred (MTP) Shares and Variable Rate MuniFund Term Preferred (VMTP) Shares as shown in the accompanying tables.
 
MTP Shares
                           
          MTP Shares Issued    
Annual
   
NYSE
 
Fund
   
Series
  at Liquidation Value    
Interest Rate
   
Ticker
 
NFZ
   
2015
 
$
11,100,000
   
2.05%
   
NFZ PrC
 
NKR
   
2015
 
$
18,725,000
   
2.05%
   
NKR PrC
 
NXE
   
2016
 
$
20,846,000
   
2.90%
   
NXE PrC
 
NTX
   
2015
 
$
70,920,000
   
2.30%
   
NTX PrC
 

VMTP Shares
               
          VMTP Shares Issued  
Fund
   
Series
  at Liquidation Value  
NAZ
   
2014
 
$
28,000,000
 
 
(Refer to Notes to Financial Statements, Footnote 1 – General Information and Significant Accounting Policies for further details on MTP and VMTP Shares.)

10
 
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RISK CONSIDERATIONS
 
Fund shares are not guaranteed or endorsed by any bank or other insured depository institution, and are not federally insured by the Federal Deposit Insurance Corporation. Past performance is no guarantee of future results. Fund common shares are subject to a variety of risks, including:
 
Investment and Market Risk. An investment in common shares is subject to investment risk, including the possible loss of the entire principal amount that you invest. Your investment in common shares represents an indirect investment in the municipal securities owned by the Fund, which generally trade in the over-the-counter markets. Your common shares at any point in time may be worth less than your original investment, even after taking into account the reinvestment of Fund dividends and distributions.
 
Price Risk. Shares of closed-end investment companies like these Funds frequently trade at a discount to their NAV. Your common shares at any point in time may be worth less than your original investment, even after taking into account the reinvestment of Fund dividends and distributions.
 
Leverage Risk. Each Fund’s use of leverage creates the possibility of higher volatility for the Fund’s per share NAV, market price, distributions and returns. There is no assurance that a Fund’s leveraging strategy will be successful.
 
Tax Risk. The tax treatment of Fund distributions may be affected by new IRS interpretations of the Internal Revenue Code and future changes in tax laws and regulations.
 
Issuer Credit Risk. This is the risk that a security in a Fund’s portfolio will fail to make dividend or interest payments when due.
 
Interest Rate Risk. Fixed-income securities such as bonds, preferred, convertible and other debt securities will decline in value if market interest rates rise.
 
Reinvestment Risk. If market interest rates decline, income earned from a Fund’s portfolio may be reinvested at rates below that of the original bond that generated the income.
 
Call Risk or Prepayment Risk. Issuers may exercise their option to prepay principal earlier than scheduled, forcing a Fund to reinvest in lower-yielding securities.
 
Inverse Floater Risk. The Funds invest in inverse floaters. Due to their leveraged nature, these investments can greatly increase a Fund’s exposure to interest rate risk and credit risk. In addition, investments in inverse floaters involve the risk that the Fund could lose more than its original principal investment.

Nuveen Investments
 
11

 
 

 
 
Common Share Dividend
and Price Information
 
DIVIDEND INFORMATION
 
During the six-month reporting period ended August 31, 2012, NFZ, NXE and NTX each had one monthly dividend decrease, while the dividends of NAZ and NKR remained stable throughout the reporting period.
 
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 August 31, 2012, all five of the Funds in this report had positive UNII balances, based upon our best estimate, for tax purposes. NAZ, NKR and NTX had positive UNII balances, while NFZ and NXE had negative UNII balances for financial reporting purposes.
 
COMMON SHARE REPURCHASES AND PRICE INFORMATION
 
As of August 31, 2012, and since the inception of the Funds’ repurchase programs, the Funds have cumulatively repurchased and retired their outstanding common shares as shown in the accompanying table. Since the inception of the Funds’ repurchase programs, NAZ and NTX have not repurchased any of their outstanding common shares.
 

     
Common Shares
   
% of Outstanding
Fund
   
Repurchased and Retired
   
Common Shares
NFZ
   
2,500
   
0.2%
 
NKR
   
800
   
0.0%
*
NXE
   
1,600
   
0.1%
 

*
Rounds to less than 0.1%.
 
During the six-month reporting period, the Funds did not repurchase any of their outstanding common shares.

12
 
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As of August 31, 2012, and during the current reporting period, the Funds’ common share prices were trading at (+) premiums and/or (-) discounts to their common share NAVs as shown in the accompanying table.
               
     
8/31/12
   
Six-Month Average
Fund
   
(+)Premium/(-)Discount
   
(+)Premium/(-)Discount
NAZ
   
(+)4.14%
   
(+)0.71
%
NFZ
   
(-)2.07%
   
(-)3.98
%
NKR
   
(+)0.38%
   
(-)2.42
%
NXE
   
(-)2.17%
   
(-)4.33
%
NTX
   
(+)7.97%
   
(+)6.68
%

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13

 
 

 

NAZ
 
Nuveen Arizona
Performance
 
Premium Income
OVERVIEW
 
Municipal Fund, Inc.
   
as of August 31, 2012
 
         
Fund Snapshot
       
Common Share Price
 
$
15.84
 
Common Share Net Asset Value (NAV)
 
$
15.21
 
Premium/(Discount) to NAV
   
4.14
%
Market Yield
   
4.85
%
Taxable-Equivalent Yield1
   
7.06
%
Net Assets Applicable to Common Shares ($000)
 
$
68,016
 

Leverage
       
Regulatory Leverage
   
29.16
%
Effective Leverage
   
30.71
%

Average Annual Total Returns
             
(Inception 11/19/92)
             
     
On Share Price
 
On NAV
6-Month (Cumulative)
   
11.22
%
 
5.29
%
1-Year
   
28.63
%
 
14.80
%
5-Year
   
10.01
%
 
7.40
%
10-Year
   
4.73
%
 
6.03
%

Portfolio Composition3
       
(as a % of total investments)
       
Tax Obligation/Limited
   
25.2
%
Utilities
   
18.7
%
Health Care
   
18.1
%
Education and Civic Organizations
   
13.0
%
Tax Obligation/General
   
8.3
%
Water and Sewer
   
7.9
%
U.S. Guaranteed
   
7.7
%
Other
   
1.1
%

 
Refer to the Glossary of Terms Used in this Report for further definition of the terms used within this Fund’s Performance Overview page.
1
Taxable-Equivalent Yield represents the yield that must be earned on a fully taxable investment in order to equal the yield of the Fund on an after-tax basis. It is based on a combined federal and state income tax rate of 31.3%. When comparing this Fund to investments that generate qualified dividend income, the Taxable-Equivalent Yield is lower.
2
Ratings shown are the highest rating given by one of the following national rating agencies: Standard & Poor’s Group, Moody’s Investors Service, Inc. or Fitch, Inc. Credit ratings are subject to change. AAA, AA, A, and BBB are investment grade ratings; BB, B, CCC, CC, C and D are below-investment grade ratings.Certain bonds backed by U.S. Government or agency securities are regarded as having an implied rating equal to the rating of such securities. Holdings designated N/R are not rated by these national rating agencies.
3
Holdings are subject to change.

14
 
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NFZ
 
Nuveen Arizona
Performance
 
Dividend Advantage
OVERVIEW
 
Municipal Fund
   
as of August 31, 2012
 
         
Fund Snapshot
       
Common Share Price
 
$
15.15
 
Common Share Net Asset Value (NAV)
 
$
15.47
 
Premium/(Discount) to NAV
   
-2.07
%
Market Yield
   
4.83
%
Taxable-Equivalent Yield1
   
7.03
%
Net Assets Applicable to Common Shares ($000)
 
$
23,947
 

Leverage
       
Regulatory Leverage
   
31.67
%
Effective Leverage
   
34.80
%

Average Annual Total Returns
             
(Inception 1/30/01)
             
     
On Share Price
 
On NAV
6-Month (Cumulative)
   
8.00
%
 
5.14
%
1-Year
   
22.86
%
 
14.72
%
5-Year
   
8.45
%
 
7.14
%
10-Year
   
5.70
%
 
5.95
%

Portfolio Composition3
       
(as a % of total investments)
       
Tax Obligation/Limited
   
30.6
%
Health Care
   
17.4
%
Utilities
   
17.2
%
Tax Obligation/General
   
12.3
%
U.S. Guaranteed
   
9.3
%
Education and Civic Organizations
   
9.1
%
Other
   
4.1
%

 
Refer to the Glossary of Terms Used in this Report for further definition of the terms used within this Fund’s Performance Overview page.
1
Taxable-Equivalent Yield represents the yield that must be earned on a fully taxable investment in order to equal the yield of the Fund on an after-tax basis. It is based on a combined federal and state income tax rate of 31.3%. When comparing this Fund to investments that generate qualified dividend income, the Taxable-Equivalent Yield is lower.
2
Ratings shown are the highest rating given by one of the following national rating agencies: Standard & Poor’s Group, Moody’s Investors Service, Inc. or Fitch, Inc. Credit ratings are subject to change. AAA, AA, A, and BBB are investment grade ratings; BB, B, CCC, CC, C and D are below-investment grade ratings. Certain bonds backed by U.S. Government or agency securities are regarded as having an implied rating equal to the rating of such securities. Holdings designated N/R are not rated by these national rating agencies.
3
Holdings are subject to change.
 
Nuveen Investments
 
15

 
 

 

NKR
 
Nuveen Arizona
Performance
 
Dividend Advantage
OVERVIEW
 
Municipal Fund 2
   
as of August 31, 2012
 
         
Fund Snapshot
       
Common Share Price
 
$
15.78
 
Common Share Net Asset Value (NAV)
 
$
15.72
 
Premium/(Discount) to NAV
   
0.38
%
Market Yield
   
5.10
%
Taxable-Equivalent Yield1
   
7.42
%
Net Assets Applicable to Common Shares ($000)
 
$
38,359
 

Leverage
       
Regulatory Leverage
   
32.80
%
Effective Leverage
   
34.35
%

Average Annual Total Returns
             
(Inception 3/25/02)
             
     
On Share Price
 
On NAV
6-Month (Cumulative)
   
9.61
%
 
4.82
%
1-Year
   
24.87
%
 
13.89
%
5-Year
   
6.78
%
 
7.26
%
10-Year
   
6.36
%
 
6.15
%

Portfolio Composition3
       
(as a % of total investments)
       
Tax Obligation/Limited
   
31.4
%
Health Care
   
22.7
%
Tax Obligation/General
   
18.0
%
Education and Civic Organizations
   
10.7
%
Utilities
   
7.5
%
Water and Sewer
   
6.6
%
Other
   
3.1
%

 
Refer to the Glossary of Terms Used in this Report for further definition of the terms used within this Fund’s Performance Overview page.
1
Taxable-Equivalent Yield represents the yield that must be earned on a fully taxable investment in order to equal the yield of the Fund on an after-tax basis. It is based on a combined federal and state income tax rate of 31.3%. When comparing this Fund to investments that generate qualified dividend income, the Taxable-Equivalent Yield is lower.
2
Ratings shown are the highest rating given by one of the following national rating agencies: Standard & Poor’s Group, Moody’s Investors Service, Inc. or Fitch, Inc. Credit ratings are subject to change. AAA, AA, A, and BBB are investment grade ratings; BB, B, CCC, CC, C and D are below-investment grade ratings. Certain bonds backed by U.S. Government or agency securities are regarded as having an implied rating equal to the rating of such securities. Holdings designated N/R are not rated by these national rating agencies.
3
Holdings are subject to change.
 
16
 
Nuveen Investments

 
 

 

NXE
 
Nuveen Arizona
Performance
 
Dividend Advantage
OVERVIEW
 
Municipal Fund 3
   
as of August 31, 2012
 
         
Fund Snapshot
       
Common Share Price
 
$
14.91
 
Common Share Net Asset Value (NAV)
 
$
15.24
 
Premium/(Discount) to NAV
   
-2.17
%
Market Yield
   
4.83
%
Taxable-Equivalent Yield1
   
7.03
%
Net Assets Applicable to Common Shares ($000)
 
$
46,718
 

Leverage
       
Regulatory Leverage
   
30.85
%
Effective Leverage
   
33.15
%

Average Annual Total Returns
             
(Inception 9/25/02)
             
     
On Share Price
 
On NAV
6-Month (Cumulative)
   
7.10
%
 
4.32
%
1-Year
   
21.84
%
 
13.02
%
5-Year
   
8.18
%
 
7.27
%
Since Inception
   
5.53
%
 
5.97
%

Portfolio Composition3
       
(as a % of total investments)
       
Tax Obligation/Limited
   
31.7
%
Health Care
   
19.9
%
Utilities
   
13.0
%
Education and Civic Organizations
   
11.9
%
Tax Obligation/General
   
9.0
%
Water and Sewer
   
5.9
%
Other
   
8.6
%

 
Refer to the Glossary of Terms Used in this Report for further definition of the terms used within this Fund’s Performance Overview page.
1
Taxable-Equivalent Yield represents the yield that must be earned on a fully taxable investment in order to equal the yield of the Fund on an after-tax basis. It is based on a combined federal and state income tax rate of 31.3%. When comparing this Fund to investments that generate qualified dividend income, the Taxable-Equivalent Yield is lower.
2
Ratings shown are the highest rating given by one of the following national rating agencies: Standard & Poor’s Group, Moody’s Investors Service, Inc. or Fitch, Inc. Credit ratings are subject to change. AAA, AA, A, and BBB are investment grade ratings; BB, B, CCC, CC, C and D are below-investment grade ratings. Certain bonds backed by U.S. Government or agency securities are regarded as having an implied rating equal to the rating of such securities. Holdings designated N/R are not rated by these national rating agencies.
3
Holdings are subject to change.
 
Nuveen Investments
 
17

 
 

 

NTX
 
Nuveen Texas
Performance
 
Quality Income
OVERVIEW
 
Municipal Fund
   
as of August 31, 2012
 
         
Fund Snapshot
       
Common Share Price
 
$
17.07
 
Common Share Net Asset Value (NAV)
 
$
15.81
 
Premium/(Discount) to NAV
   
7.97
%
Market Yield
   
4.50
%
Taxable-Equivalent Yield1
   
6.25
%
Net Assets Applicable to Common Shares ($000)
 
$
151,861
 

Leverage
       
Regulatory Leverage
   
31.83
%
Effective Leverage
   
33.02
%

Average Annual Total Returns
             
(Inception 10/17/91)
             
     
On Share Price
 
On NAV
6-Month (Cumulative)
   
7.28
%
 
4.90
%
1-Year
   
12.89
%
 
12.85
%
5-Year
   
10.44
%
 
7.38
%
10-Year
   
7.28
%
 
6.28
%

Portfolio Composition4
       
(as a % of total investments)
       
Tax Obligation/General
   
23.1
%
U.S. Guaranteed
   
11.8
%
Tax Obligation/Limited
   
11.6
%
Utilities
   
10.8
%
Transportation
   
10.3
%
Water and Sewer
   
9.6
%
Health Care
   
9.1
%
Education and Civic Organizations
   
7.7
%
Other
   
6.0
%

 
Refer to the Glossary of Terms Used in this Report for further definition of the terms used within this Fund’s Performance Overview page.
1
Taxable-Equivalent Yield represents the yield that must be earned on a fully taxable investment in order to equal the yield of the Fund on an after-tax basis. It is based on a federal income tax rate of 28%. When comparing this Fund to investments that generate qualified dividend income, the Taxable-Equivalent Yield is lower.
2
Ratings shown are the highest rating given by one of the following national rating agencies: Standard & Poor’s Group, Moody’s Investors Service, Inc. or Fitch, Inc. Credit ratings are subject to change. AAA, AA, A, and BBB are investment grade ratings; BB, B, CCC, CC, C and D are below-investment grade ratings. Certain bonds backed by U.S. Government or agency securities are regarded as having an implied rating equal to the rating of such securities. Holdings designated N/R are not rated by these national rating agencies.
3
The Fund paid shareholders a capital gains distribution in December 2011 of $0.0259 per share.
4 Holdings are subject to change.

18
 
Nuveen Investments

 
 

 
 
NFZ  
Shareholder Meeting Report
NKR    
NXE  
The annual meeting of shareholders for NFZ, NKR and NXE was held in the offices of Nuveen Investments on November 15, 2011; at this meeting the shareholders were asked to vote on the election of Board Members, the elimination of Fundamental Investment Policies and the approval of new Fundamental Investment Policies. The meeting was subsequently adjourned to December 16, 2011. The meeting was additionally adjourned to January 31, 2012 and March 5, 2012. The meeting for NKR was subsequently adjourned to March 14, 2012.

     
NFZ
   
NKR
   
NXE
 
     
Common and
   
 
   
Common and
          Common and        
     
Preferred
   
Preferred
   
Preferred
   
Preferred
   
Preferred
   
Preferred
 
     
shares voting
   
shares voting
   
shares voting
   
shares voting
   
shares voting
   
shares voting
 
     
together
   
together
   
together
   
together
   
together
   
together
 
     
as a class
   
as a class
   
as a class
   
as a class
   
as a class
   
as a class
 
To approve the elimination of the fundamental policies relating to the Fund’s ability to make loans.
                                     
For
   
1,186,605
   
417,800
   
2,006,923
   
737,175
   
2,407,059
   
736,200
 
Against
   
191,784
   
134,900
   
233,141
   
111,478
   
239,195
   
91,800
 
Abstain
   
46,123
   
1,000
   
77,985
   
27,000
   
100,908
   
20,000
 
Broker Non-Votes
   
212,705
   
20,199
   
348,065
   
79,611
   
489,254
   
197,749
 
Total
   
1,637,217
   
573,899
   
2,666,114
   
955,264
   
3,236,416
   
1,045,749
 
To approve the new fundamental policy relating to the Fund’s ability to make loans.
                                     
For
   
1,189,255
   
417,800
   
2,001,261
   
737,175
   
2,387,809
   
731,200
 
Against
   
193,534
   
134,900
   
237,113
   
111,478
   
255,195
   
96,800
 
Abstain
   
41,723
   
1,000
   
79,675
   
27,000
   
104,158
   
20,000
 
Broker Non-Votes
   
212,705
   
20,199
   
348,065
   
79,611
   
489,254
   
197,749
 
Total
   
1,637,217
   
573,899
   
2,666,114
   
955,264
   
3,236,416
   
1,045,749
 

Nuveen Investments
 
19

 
 

 
   
Nuveen Arizona Premium Income Municipal Fund, Inc.
NAZ
 
Portfolio of Investments
   
August 31, 2012 (Unaudited)

 
Principal
   
Optional Call
       
 
Amount (000)
 
Description (1)
Provisions (2)
Ratings (3)
 
Value
 
     
Consumer Staples – 1.1% (0.8% of Total Investments)
         
$
730
 
Puerto Rico, The Children’s Trust Fund, Tobacco Settlement Asset-Backed Refunding Bonds, Series 2002, 5.375%, 5/15/33
11/12 at 100.00
BBB+
$
729,985
 
     
Education and Civic Organizations – 18.2% (13.0% of Total Investments)
         
 
2,500
 
Arizona Higher Education Loan Authority, Student Loan Revenue Bonds, Series 2007B, Auction Rate Securities, 0.525%, 11/01/41 (Alternative Minimum Tax) (4)
10/12 at 100.00
A
 
1,951,904
 
     
Arizona State University, System Revenue Bonds, Series 2005:
         
 
1,455
 
5.000%, 7/01/20 – AMBAC Insured
7/15 at 100.00
Aa3
 
1,613,930
 
 
750
 
5.000%, 7/01/21 – AMBAC Insured
7/15 at 100.00
Aa3
 
831,923
 
 
755
 
Glendale Industrial Development Authority, Arizona, Revenue Bonds, Midwestern University, Refunding Series 2007, 5.000%, 5/15/31
5/22 at 100.00
A–
 
833,407
 
 
1,600
 
Glendale Industrial Development Authority, Arizona, Revenue Bonds, Midwestern University, Refunding Series 2010, 5.125%, 5/15/40
5/20 at 100.00
A+
 
1,705,696
 
 
280
 
Phoenix Industrial Development Authority, Arizona, Education Facility Revenue Bonds, Brighter Choice Foundation Charter Middle Schools Project, Series 2012, 7.500%, 7/01/42
7/22 at 100.00
BB+
 
291,813
 
 
220
 
Phoenix Industrial Development Authority, Arizona, Education Revenue Bonds, Great Hearts Academies – Veritas Project, Series 2012, 6.300%, 7/01/42
7/21 at 100.00
BBB
 
235,275
 
 
280
 
Phoenix Industrial Development Authority, Arizona, Education Revenue Bonds, Painted Rock Academy Charter School Project, Series 2012A, 7.500%, 7/01/42
7/20 at 100.00
N/R
 
293,443
 
 
1,400
 
Phoenix Industrial Development Authority, Arizona, Lease Revenue Bonds, Rowan University Project, Series 2012, 5.000%, 6/01/42 – AGM Insured
6/22 at 100.00
A+
 
1,510,264
 
 
280
 
Pima County Industrial Development Authority, Arizona, Education Revenue Bonds, Carden Traditional Schools Project, Series 2012, 7.500%, 1/01/42
1/22 at 100.00
BBB–
 
300,748
 
     
Pima County Industrial Development Authority, Arizona, Education Revenue Bonds, Paradise Education Center Project, Series 2010:
         
 
170
 
6.000%, 6/01/40
6/19 at 100.00
BBB–
 
173,378
 
 
200
 
6.100%, 6/01/45
6/19 at 100.00
BBB–
 
204,298
 
 
1,500
 
Tempe Industrial Development Authority, Arizona, Lease Revenue Bonds, Arizona State University Foundation Project, Series 2003, 5.000%, 7/01/34 – AMBAC Insured
7/13 at 100.00
N/R
 
1,510,185
 
 
825
 
Yavapai County Industrial Development Authority, Arizona, Charter School Revenue Bonds, Arizona Agribusiness and Equine Center Charter School, Series 2011, 7.875%, 3/01/42
3/21 at 100.00
BB+
 
931,112
 
 
12,215
 
Total Education and Civic Organizations
     
12,387,376
 
     
Health Care – 25.3% (18.1% of Total Investments)
         
 
1,430
 
Arizona Health Facilities Authority, Hospital Revenue Bonds, Banner Health Systems, Series 2007A, 5.000%, 1/01/25
1/17 at 100.00
AA–
 
1,629,843
 
 
885
 
Arizona Health Facilities Authority, Hospital Revenue Bonds, Banner Health Systems, Series 2007B, 1.120%, 1/02/37
1/17 at 100.00
AA–
 
669,237
 
 
3,470
 
Arizona Health Facilities Authority, Hospital Revenue Bonds, Banner Health Systems, Series 2008D, 5.500%, 1/01/38
1/18 at 100.00
AA–
 
3,859,194
 
 
2,300
 
Arizona Health Facilities Authority, Hospital System Revenue Bonds, Phoenix Children’s Hospital, Refunding Series 2012, 5.000%, 2/01/42 (WI/DD, Settling 9/06/12)
2/22 at 100.00
BBB+
 
2,420,773
 
 
675
 
Glendale Industrial Development Authority, Arizona, Revenue Bonds, John C. Lincoln Health Network, Series 2005B, 5.000%, 12/01/37
12/15 at 100.00
BBB+
 
689,661
 
 
1,110
 
Glendale Industrial Development Authority, Arizona, Revenue Bonds, John C. Lincoln Health Network, Series 2007, 5.000%, 12/01/42
12/17 at 100.00
BBB+
 
1,143,733
 
 
2,150
 
Maricopa County Industrial Development Authority, Arizona, Health Facility Revenue Bonds, Catholic Healthcare West, Series 2004A, 5.375%, 7/01/23
7/14 at 100.00
A+
 
2,261,800
 
 
2,900
 
Maricopa County Industrial Development Authority, Arizona, Health Facility Revenue Bonds, Catholic Healthcare West, Series 2007A, 5.250%, 7/01/32
7/17 at 100.00
A+
 
3,141,831
 

20
 
Nuveen Investments

 
 

 

 
Principal
   
Optional Call
       
 
Amount (000)
 
Description (1)
Provisions (2)
Ratings (3)
 
Value
 
     
Health Care (continued)
         
$
425
 
Puerto Rico Industrial, Tourist, Educational, Medical and Environmental Control Facilities Financing Authority, Hospital Revenue Bonds, Hospital de la Concepcion, Series 2000A, 6.375%, 11/15/15
11/12 at 100.00
AA+
$
427,057
 
     
Show Low Industrial Development Authority, Arizona, Hospital Revenue Bonds, Navapache Regional Medical Center, Series 2005:
         
 
525
 
5.000%, 12/01/25 – RAAI Insured
12/15 at 100.00
BBB+
 
541,448
 
 
435
 
5.000%, 12/01/30 – RAAI Insured
12/15 at 100.00
BBB+
 
445,375
 
 
16,305
 
Total Health Care
     
17,229,952
 
     
Long-Term Care – 0.5% (0.3% of Total Investments)
         
 
295
 
Tempe Industrial Development Authority, Arizona, Revenue Bonds, Friendship Village of Tempe Project, Refunding Series 2012A, 6.000%, 12/01/32
12/21 at 100.00
N/R
 
317,287
 
     
Tax Obligation/General – 11.6% (8.3% of Total Investments)
         
 
420
 
El Mirage, Arizona, General Obligation Bonds Series 2012, 5.000%, 7/01/42 – AGM Insured
7/22 at 100.00
AA–
 
467,023
 
 
1,265
 
Gila County Unified School District 10 Payson, Arizona, School Improvement Bonds, Project 2006, Series 2008B, 5.750%, 7/01/28
7/18 at 100.00
Aa3
 
1,473,004
 
 
1,200
 
Maricopa County Unified School District 95 Queen Creek, Arizona, General Obligation Bonds, Series 2008, 5.000%, 7/01/27 – AGM Insured
7/18 at 100.00
Aa3
 
1,332,600
 
 
515
 
Pima County Continental Elementary School District 39, Arizona, General Obligation Bonds, Series 2011A, 6.000%, 7/01/30 – AGM Insured
7/21 at 100.00
AA–
 
646,675
 
 
3,530
 
Pinal County Unified School District 1, Florence, Arizona, General Obligation Bonds, Series 2008C, 5.250%, 7/01/28
7/18 at 100.00
A
 
3,957,023
 
 
6,930
 
Total Tax Obligation/General
     
7,876,325
 
     
Tax Obligation/Limited – 35.1% (25.2% of Total Investments)
         
 
990
 
Arizona Sports and Tourism Authority, Senior Revenue Refunding Bonds, Multipurpose Stadium Facility Project, Series 2012A, 5.000%, 7/01/36
7/22 at 100.00
A1
 
1,093,089
 
 
275
 
Buckeye, Arizona, Festival Ranch Community Facilities District District General Obligation Bonds, Series 2012, 5.000%, 7/15/31
7/22 at 100.00
BBB
 
285,959
 
 
300
 
Estrella Mountain Ranch Community Facilities District, Goodyear, Arizona, Special Assessment Lien Bonds, Series 2001A, 7.875%, 7/01/25
1/13 at 100.00
N/R
 
300,570
 
 
3,000
 
Glendale Western Loop 101 Public Facilities Corporation, Arizona, Third Lien Excise Tax Revenue Bonds, Series 2008B, 6.250%, 7/01/38
1/14 at 100.00
AA
 
3,186,720
 
 
1,280
 
Greater Arizona Development Authority, Infrastructure Revenue Bonds, Series 2006-1, 5.000%, 8/01/22 – NPFG Insured
8/16 at 100.00
AA–
 
1,455,744
 
 
740
 
Greater Arizona Development Authority, Infrastructure Revenue Bonds, Series 2006A, 5.000%, 8/01/23 – NPFG Insured
8/16 at 100.00
A1
 
824,523
 
 
1,095
 
Marana Municipal Property Corporation, Arizona, Municipal Facilities Revenue Bonds, Series 2008B, 5.125%, 7/01/28
1/13 at 100.00
AA
 
1,109,060
 
 
575
 
Marana Municipal Property Corporation, Arizona, Revenue Bonds, Series 2003, 5.000%, 7/01/28 – AMBAC Insured
7/13 at 100.00
AA
 
585,396
 
 
1,342
 
Marana, Arizona, Tangerine Farms Road Improvement District Revenue Bonds, Series 2006, 4.600%, 1/01/26
7/16 at 100.00
A2
 
1,389,936
 
 
3,400
 
Mesa, Arizona, Street and Highway User Tax Revenue Bonds, Series 2005, 5.000%, 7/01/24 – AGM Insured
7/15 at 100.00
AA
 
3,632,934
 
 
170
 
Phoenix Mesa Gateway Airport Authority, Arizona, Special Facility Revenue Bonds, Mesa Project, Series 2012, 5.000%, 7/01/38 (Alternative Minimum Tax)
7/22 at 100.00
AA+
 
178,825
 
 
1,140
 
Pinetop Fire District of Navajo County, Arizona, Certificates of Participation, Series 2008, 7.750%, 6/15/29
6/16 at 102.00
A3
 
1,223,300
 
 
135
 
Puerto Rico Public Buildings Authority, Guaranteed Government Facilities Revenue Refunding Bonds, Series 2002D, 5.125%, 7/01/24
1/13 at 100.00
Baa1
 
135,211
 

Nuveen Investments
 
21

 
 

 

   
Nuveen Arizona Premium Income Municipal Fund, Inc. (continued)
NAZ
 
Portfolio of Investments
      August 31, 2012 (Unaudited)

 
Principal
   
Optional Call
       
 
Amount (000)
 
Description (1)
Provisions (2)
Ratings (3)
 
Value
 
     
Tax Obligation/Limited (continued)
         
$
1,525
 
Puerto Rico Sales Tax Financing Corporation, Sales Tax Revenue Bonds, First Subordinate Series 2010A, 0.000%, 8/01/33
No Opt. Call
A+
$
492,529
 
 
1,700
 
Puerto Rico Sales Tax Financing Corporation, Sales Tax Revenue Bonds, First Subordinate Series 2010C, 0.000%, 8/01/38
No Opt. Call
A+
 
391,680
 
 
1,610
 
San Luis Civic Improvement Corporation, Arizona, Municipal Facilities Excise Tax Revenue Bonds, Series 2005, 5.000%, 7/01/25 – SYNCORA GTY Insured
7/15 at 100.00
A+
 
1,701,496
 
 
1,000
 
Scottsdale Municipal Property Corporation, Arizona, Excise Tax Revenue Bonds, Refunding Series 2006, 5.000%, 7/01/24
No Opt. Call
AAA
 
1,284,870
 
 
2,000
 
Scottsdale Municipal Property Corporation, Arizona, Excise Tax Revenue Bonds, Water & Sewer Improvements Project, Series 2010, 5.000%, 7/01/36
7/20 at 100.00
AAA
 
2,272,080
 
 
500
 
Tempe, Arizona, Transit Excise Tax Revenue Obligation Bonds, Refunding Series 2012, 5.000%, 7/01/37 (WI/DD, Settling 9/12/12)
7/22 at 100.00
AAA
 
573,805
 
 
1,000
 
Virgin Islands Public Finance Authority, Matching Fund Loan Notes Revenue Bonds, Senior Lien Series 2010A, 5.000%, 10/01/29
10/20 at 100.00
BBB+
 
1,092,640
 
 
645
 
Vistancia Community Facilities District, Peoria, Arizona, General Obligation Bonds, Series 2005, 5.750%, 7/15/24
7/15 at 100.00
A1
 
687,119
 
 
24,422
 
Total Tax Obligation/Limited
     
23,897,486
 
     
U.S. Guaranteed – 10.7% (7.7% of Total Investments) (5)
         
 
3,500
 
Glendale, Arizona, Water and Sewer Revenue Bonds, Subordinate Lien, Series 2003, 5.000%, 7/01/28 (Pre-refunded 7/01/13) – AMBAC Insured
7/13 at 100.00
AA (5)
 
3,638,739
 
 
1,250
 
Maricopa County Industrial Development Authority, Arizona, Hospital Revenue Refunding Bonds, Samaritan Health Services, Series 1990A, 7.000%,
No Opt. Call
N/R (5)
 
1,461,750
 
         12/01/16 – NPFG Insured (ETM)          
 
385
 
Maricopa County, Arizona, Hospital Revenue Bonds, Sun Health Corporation, Series 2005, 5.000%, 4/01/16 (Pre-refunded 4/01/15)
4/15 at 100.00
N/R (5)
 
430,680
 
 
500
 
Oro Valley Municipal Property Corporation, Arizona, Senior Lien Water Revenue Bonds, Series 2003, 5.000%, 7/01/23 (Pre-refunded 7/01/13) – NPFG Insured
7/13 at 100.00
AA (5)
 
519,820
 
 
1,200
 
Prescott Valley Municipal Property Corporation, Arizona, Municipal Facilities Revenue Bonds, Series 2003, 5.000%, 1/01/27 (Pre-refunded 1/01/13) – FGIC Insured
1/13 at 100.00
AA– (5)
 
1,219,164
 
 
6,835
 
Total U.S. Guaranteed
     
7,270,153
 
     
Utilities – 26.1% (18.7% of Total Investments)
         
 
470
 
Apache County Industrial Development Authority, Arizona, Pollution Control Revenue Bonds, Tucson Electric Power Company, Series 20102A, 4.500%, 3/01/30
3/22 at 100.00
BBB–
 
488,838
 
 
1,000
 
Arizona Power Authority, Special Obligation Power Resource Revenue Refunding Crossover Bonds, Hoover Project, Series 2001, 5.250%, 10/01/15
No Opt. Call
AA
 
1,141,020
 
 
1,600
 
Maricopa County Pollution Control Corporation, Arizona, Pollution Control Revenue Refunding Bonds, Southern California Edison Company, Series 2000A, 5.000%, 6/01/35
6/20 at 100.00
A1
 
1,775,920
 
 
1,340
 
Pima County Industrial Development Authority, Arizona, Revenue Bonds, Tucson Electric Power Company, Refunding Series 2008, 5.750%, 9/01/29
1/15 at 100.00
BBB–
 
1,431,509
 
 
650
 
Pinal County Electrical District 3, Arizona, Electric System Revenue Bonds, Refunding Series 2011, 5.250%, 7/01/36
7/21 at 100.00
A
 
730,243
 
 
2,170
 
Puerto Rico Electric Power Authority, Power Revenue Bonds, Series 2005RR, 5.000%, 7/01/27 – SYNCORA GTY Insured
7/15 at 100.00
BBB+
 
2,324,504
 
 
715
 
Salt River Project Agricultural Improvement and Power District, Arizona, Electric System Revenue Bonds, Tender Option Bond Trust 09-9W, 17.940%, 1/01/38 (IF) (6)
1/18 at 100.00
Aa1
 
1,025,339
 
     
Salt Verde Financial Corporation, Arizona, Senior Gas Revenue Bonds, Citigroup Energy Inc Prepay Contract Obligations, Series 2007:
         
 
4,500
 
5.500%, 12/01/29
No Opt. Call
A–
 
5,071,228
 
 
3,500
 
5.000%, 12/01/37
No Opt. Call
A–
 
3,739,994
 
 
15,945
 
Total Utilities
     
17,728,595
 

22
 
Nuveen Investments

 
 

 

 
Principal
   
Optional Call
       
 
Amount (000)
 
Description (1)
Provisions (2)
Ratings (3)
 
Value
 
     
Water and Sewer – 11.0% (7.9% of Total Investments)
         
$
1,005
 
Cottonwood, Arizona, Senior Lien Water System Revenue Bonds, Municipal Property Corporation, Series 2004, 5.000%, 7/01/24 – SYNCORA GTY Insured
7/14 at 100.00
A
$
1,030,869
 
 
1,425
 
Goodyear, Arizona, Water and Sewer Revenue Obligations, Series 2010, 5.625%, 7/01/39
7/20 at 100.00
A+
 
1,583,873
 
 
1,000
 
Phoenix Civic Improvement Corporation, Arizona, Junior Lien Wastewater System Revenue Bonds, Series 2004, 5.000%, 7/01/24 – NPFG Insured
7/14 at 100.00
AA+
 
1,072,190
 
 
1,250
 
Phoenix Civic Improvement Corporation, Arizona, Junior Lien Water System Revenue Refunding Bonds, Series 2001, 5.500%, 7/01/21 – FGIC Insured
No Opt. Call
AAA
 
1,610,788
 
     
Surprise Municipal Property Corporation, Arizona, Wastewater System Revenue Bonds, Series 2007:
         
 
600
 
4.700%, 4/01/22
4/14 at 100.00
A–
 
610,476
 
 
810
 
4.900%, 4/01/32
4/17 at 100.00
A–
 
830,777
 
 
905
 
Yuma County Industrial Development Authority, Arizona, Exempt Revenue Bonds, Far West Water & Sewer Inc. Refunding, Series 2007A, 6.375%, 12/01/37 (Alternative Minimum Tax)
12/17 at 100.00
N/R
 
778,210
 
 
6,995
 
Total Water and Sewer
     
7,517,183
 
$
90,672
 
Total Investments (cost $85,508,780) – 139.6%
     
94,954,342
 
     
Variable MuniFund Term Preferred Shares, at Liquidation Value – (41.2)% (7)
     
(28,000,000
     
Other Assets Less Liabilities – 1.6%
     
1,061,995
 
     
Net Assets Applicable to Common Shares – 100%
   
$
68,016,337
 
 

(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 highest of Standard & Poor’s Group (“Standard & Poor’s”), Moody’s Investors Service, Inc. (“Moody’s”) or Fitch, Inc. (“Fitch”) rating. Ratings below BBB by Standard & Poor’s, Baa by Moody’s or BBB by Fitch are considered to be below investment grade. Holdings designated N/R are not rated by any of these national rating agencies.
(4)
 
Investment valued at fair value using methods determined in good faith by, or at the discretion of, the Board of Directors. For fair value measurement disclosure purposes, investment categorized as Level 3. See Notes to Financial Statements, Footnote 1 – General Information and Significant Accounting Policies, Investment Valuation for more information.
(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. Certain bonds backed by U.S. Government or agency securities are regarded as having an implied rating equal to the rating of such securities.
(6)
 
Investment, or portion of investment, has been pledged to collateralize the net payment obligations for investments in inverse floating rate transactions.
(7)
 
Variable MuniFund Term Preferred Shares, at Liquidation Value as a percentage of Total Investments is 29.5%.
N/R
 
Not rated.
WI/DD
 
Investment, or portion of investment, purchased on a when-issued or delayed delivery basis.
(ETM)
 
Escrowed to maturity.
(IF)
 
Inverse floating rate investment.
 
 See accompanying notes to financial statements.

Nuveen Investments
 
23

 
 

 

   
Nuveen Arizona Dividend Advantage Municipal Fund
NFZ
 
Portfolio of Investments
   
August 31, 2012 (Unaudited)

 
Principal
   
Optional Call
       
 
Amount (000)
 
Description (1)
Provisions (2)
Ratings (3)
 
Value
 
     
Education and Civic Organizations – 13.1% (9.1% of Total Investments)
         
$
280
 
Arizona Higher Education Loan Authority, Student Loan Revenue Bonds, Series 2007B, Auction Rate Securities, 0.525%, 11/01/41 (Alternative Minimum Tax) (4)
10/12 at 100.00
A
$
218,613
 
 
275
 
Glendale Industrial Development Authority, Arizona, Revenue Bonds, Midwestern University, Refunding Series 2007, 5.000%, 5/15/31
5/22 at 100.00
A–
 
303,559
 
 
500
 
Glendale Industrial Development Authority, Arizona, Revenue Bonds, Midwestern University, Refunding Series 2010, 5.125%, 5/15/40
5/20 at 100.00
A+
 
533,030
 
 
105
 
Phoenix Industrial Development Authority, Arizona, Education Facility Revenue Bonds, Brighter Choice Foundation Charter Middle Schools Project, Series 2012, 7.500%, 7/01/42
7/22 at 100.00
BB+
 
109,430
 
 
80
 
Phoenix Industrial Development Authority, Arizona, Education Revenue Bonds, Great Hearts Academies – Veritas Project, Series 2012, 6.300%, 7/01/42
7/21 at 100.00
BBB
 
85,554
 
 
100
 
Phoenix Industrial Development Authority, Arizona, Education Revenue Bonds, Painted Rock Academy Charter School Project, Series 2012A, 7.500%, 7/01/42
7/20 at 100.00
N/R
 
104,801
 
 
500
 
Phoenix Industrial Development Authority, Arizona, Lease Revenue Bonds, Rowan University Project, Series 2012, 5.000%, 6/01/42 – AGM Insured
6/22 at 100.00
A+
 
539,380
 
 
100
 
Pima County Industrial Development Authority, Arizona, Education Revenue Bonds, Carden Traditional Schools Project, Series 2012, 7.500%, 1/01/42
1/22 at 100.00
BBB–
 
107,410
 
 
130
 
Pima County Industrial Development Authority, Arizona, Education Revenue Bonds, Paradise Education Center Project, Series 2010, 6.000%, 6/01/40
6/19 at 100.00
BBB–
 
132,583
 
 
165
 
Pima County Industrial Development Authority, Arizona, Educational Revenue Bonds, Paradise Education Center Charter School, Series 2006, 6.000%, 6/01/36
6/16 at 100.00
BBB–
 
166,688
 
 
220
 
Pima County Industrial Development Authority, Arizona, Educational Revenue Bonds, Valley Academy Charter School Project, Series 2008, 6.500%, 7/01/38
7/18 at 100.00
Baa3
 
233,759
 
 
300
 
Puerto Rico Industrial, Tourist, Educational, Medical and Environmental Control Facilities Financing Authority, Higher Education Revenue Bonds, University of the Sacred Heart, Series 2001, 5.250%, 9/01/21
3/13 at 100.00
BBB
 
300,438
 
 
305
 
Tucson Industrial Development Authority, Arizona, Charter School Revenue Bonds, Arizona Agribusiness and Equine Center Charter School, Series 2004A, 6.125%, 9/01/34
9/14 at 100.00
BB+
 
301,194
 
 
3,060
 
Total Education and Civic Organizations
     
3,136,439
 
     
Health Care – 25.1% (17.4% of Total Investments)
         
 
565
 
Arizona Health Facilities Authority, Hospital Revenue Bonds, Banner Health Systems, Series 2007A, 5.000%, 1/01/25
1/17 at 100.00
AA–
 
643,959
 
 
325
 
Arizona Health Facilities Authority, Hospital Revenue Bonds, Banner Health Systems, Series 2007B, 1.120%, 1/02/37
1/17 at 100.00
AA–
 
245,765
 
 
720
 
Arizona Health Facilities Authority, Hospital Revenue Bonds, Banner Health Systems, Series 2008D, 5.500%, 1/01/38
1/18 at 100.00
AA–
 
800,755
 
 
800
 
Arizona Health Facilities Authority, Hospital System Revenue Bonds, Phoenix Children’s Hospital, Refunding Series 2012, 5.000%, 2/01/42 (WI/DD, Settling 9/06/12)
2/22 at 100.00
BBB+
 
842,008
 
 
10
 
California Health Facilities Financing Authority, Health Facility Revenue Bonds, Adventist Health System/West, Series 2003A, 5.000%, 3/01/28
3/13 at 100.00
A
 
10,062
 
 
250
 
Glendale Industrial Development Authority, Arizona, Revenue Bonds, John C. Lincoln Health Network, Series 2005B, 5.000%, 12/01/37
12/15 at 100.00
BBB+
 
255,430
 
 
415
 
Glendale Industrial Development Authority, Arizona, Revenue Bonds, John C. Lincoln Health Network, Series 2007, 5.000%, 12/01/42
12/17 at 100.00
BBB+
 
427,612
 
 
750
 
Maricopa County Industrial Development Authority, Arizona, Health Facility Revenue Bonds, Catholic Healthcare West, Series 2004A, 5.375%, 7/01/23
7/14 at 100.00
A+
 
789,000
 
 
1,025
 
Maricopa County Industrial Development Authority, Arizona, Health Facility Revenue Bonds, Catholic Healthcare West, Series 2007A, 5.250%, 7/01/32
7/17 at 100.00
A+
 
1,110,475
 

24
 
Nuveen Investments

 
 

 

 
Principal
   
Optional Call
       
 
Amount (000)
 
Description (1)
Provisions (2)
Ratings (3)
 
Value
 
     
Health Care (continued)
         
     
Show Low Industrial Development Authority, Arizona, Hospital Revenue Bonds, Navapache Regional Medical Center, Series 2005:
         
$
200
 
5.000%, 12/01/25 – RAAI Insured
12/15 at 100.00
BBB+
$
206,266
 
 
150
 
5.000%, 12/01/30 – RAAI Insured
12/15 at 100.00
BBB+
 
153,578
 
 
450
 
University Medical Center Corporation, Tucson, Arizona, Hospital Revenue Bonds, Series 2011, 6.000%, 7/01/39
7/21 at 100.00
BBB+
 
520,196
 
 
5,660
 
Total Health Care
     
6,005,106
 
     
Long-Term Care – 0.5% (0.3% of Total Investments)
         
 
105
 
Tempe Industrial Development Authority, Arizona, Revenue Bonds, Friendship Village of Tempe Project, Refunding Series 2012A, 6.000%, 12/01/32
12/21 at 100.00
N/R
 
112,933
 
     
Tax Obligation/General – 17.8% (12.3% of Total Investments)
         
 
860
 
El Mirage, Arizona, General Obligation Bonds Series 2012, 5.000%, 7/01/42 – AGM Insured
7/22 at 100.00
AA–
 
956,286
 
 
180
 
Pima County Continental Elementary School District 39, Arizona, General Obligation Bonds, Series 2011A, 6.000%, 7/01/30 – AGM Insured
7/21 at 100.00
AA–
 
226,022
 
 
1,310
 
Scottsdale, Arizona, General Obligation Bonds, Preserve Acquisition Series 1999, 5.000%, 7/01/32
7/21 at 100.00
AAA
 
1,564,087
 
 
1,340
 
Yuma & La Paz Counties Community College District, Arizona, General Obligation Bonds, Series 2006, 5.000%, 7/01/21 – NPFG Insured
7/16 at 100.00
Aa2
 
1,504,564
 
 
3,690
 
Total Tax Obligation/General
     
4,250,959
 
     
Tax Obligation/Limited – 44.2% (30.6% of Total Investments)
         
 
660
 
Arizona Sports and Tourism Authority, Senior Revenue Refunding Bonds, Multipurpose Stadium Facility Project, Series 2012A, 5.000%, 7/01/36
7/22 at 100.00
A1
 
728,726
 
 
440
 
Buckeye, Arizona, Festival Ranch Community Facilities District District General Obligation Bonds, Series 2012, 5.000%, 7/15/31
7/22 at 100.00
BBB
 
457,534
 
 
82
 
Centerra Community Facilities District, Goodyear, Arizona, General Obligation Bonds, Series 2005, 5.500%, 7/15/29
7/15 at 100.00
N/R
 
77,101
 
 
203
 
Estrella Mountain Ranch Community Facilities District, Arizona, Special Assessment Bonds, Montecito Assessment District, Series 2007, 5.700%, 7/01/27
1/17 at 100.00
N/R
 
199,793
 
 
117
 
Estrella Mountain Ranch Community Facilities District, Goodyear, Arizona, Special Assessment Lien Bonds, Series 2001A, 7.875%, 7/01/25
1/13 at 100.00
N/R
 
117,222
 
 
1,000
 
Greater Arizona Development Authority, Infrastructure Revenue Bonds, Series 2006-1, 5.000%, 8/01/22 – NPFG Insured
8/16 at 100.00
AA–
 
1,137,300
 
 
275
 
Greater Arizona Development Authority, Infrastructure Revenue Bonds, Series 2006A, 5.000%, 8/01/23 – NPFG Insured
8/16 at 100.00
A1
 
306,411
 
 
1,180
 
Marana Municipal Property Corporation, Arizona, Revenue Bonds, Series 2003, 5.000%, 7/01/23 – AMBAC Insured
7/13 at 100.00
AA
 
1,220,261
 
 
468
 
Marana, Arizona, Tangerine Farms Road Improvement District Revenue Bonds, Series 2006, 4.600%, 1/01/26
7/16 at 100.00
A2
 
484,717
 
 
150
 
Marley Park Community Facilities District, City of Surprise, Arizona, Limited Tax General Obligation Bonds, Series 2008 (Bank Qualified), 6.100%, 7/15/32
7/17 at 100.00
N/R
 
149,816
 
 
255
 
Merrill Ranch Community Facilities District 1, Florence, Arizona, General Obligation Bonds, Series 2008A, 7.400%, 7/15/33
7/18 at 100.00
N/R
 
278,024
 
 
330
 
Palm Valley Community Facility District 3, Goodyear, Arizona, General Obligation Bonds, Series 2006, 5.300%, 7/15/31
7/16 at 100.00
N/R
 
301,656
 
 
225
 
Palm Valley Community Facility District 3, Goodyear, Arizona, Limited Tax General Obligation Bonds, Series 2007, 5.800%, 7/15/32
7/17 at 100.00
N/R
 
217,017
 
 
100
 
Parkway Community Facilities District 1, Prescott Valley, Arizona, General Obligation Bonds, Series 2006, 5.350%, 7/15/31
7/16 at 100.00
N/R
 
91,968
 

Nuveen Investments
 
25

 
 

 

   
Nuveen Arizona Dividend Advantage Municipal Fund (continued)
NFZ
 
Portfolio of Investments
August 31, 2012 (Unaudited)
 
 
Principal
   
Optional Call
       
 
Amount (000)
 
Description (1)
Provisions (2)
Ratings (3)
 
Value
 
     
Tax Obligation/Limited (continued)
         
$
725
 
Phoenix Industrial Development Authority, Arizona, Government Bonds, Capitol Mall LLC II, Series 2001, 5.250%, 9/15/16 – AMBAC Insured
9/12 at 100.00
A1
$
727,414
 
 
100
 
Phoenix Mesa Gateway Airport Authority, Arizona, Special Facility Revenue Bonds, Mesa Project, Series 2012, 5.000%, 7/01/38 (Alternative Minimum Tax)
7/22 at 100.00
AA+
 
105,191
 
 
680
 
Pinal County Industrial Development Authority, Arizona, Correctional Facilities Contract Revenue Bonds, Florence West Prison LLC, Series 2002A, 5.000%, 10/01/18 – ACA Insured
10/12 at 100.00
BBB–
 
680,660
 
 
600
 
San Luis Civic Improvement Corporation, Arizona, Municipal Facilities Excise Tax Revenue Bonds, Series 2005, 5.000%, 7/01/25 – SYNCORA GTY Insured
7/15 at 100.00
A+
 
634,098
 
 
1,000
 
Scottsdale Municipal Property Corporation, Arizona, Excise Tax Revenue Bonds, Refunding Series 2006, 5.000%, 7/01/24
No Opt. Call
AAA
 
1,284,869
 
 
350
 
Tartesso West Community Facility District, Buckeye, Arizona, Limited Tax General Obligation Bonds, Series 2007, 5.900%, 7/15/32
7/17 at 100.00
N/R
 
337,680
 
 
500
 
Vistancia Community Facilities District, Peoria, Arizona, General Obligation Bonds, Series 2005, 5.750%, 7/15/24
7/15 at 100.00
A1
 
532,650
 
 
337
 
Watson Road Community Facilities District, Arizona, Special Assessment Revenue Bonds, Series 2005, 6.000%, 7/01/30
7/16 at 100.00
N/R
 
320,005
 
 
225
 
Westpark Community Facilities District, Buckeye, Arizona, General Obligation Tax Increment Bonds Series 2006, 5.250%, 7/15/31
7/16 at 100.00
N/R
 
204,422
 
 
10,002
 
Total Tax Obligation/Limited
     
10,594,535
 
     
U.S. Guaranteed – 13.4% (9.3% of Total Investments) (5)
         
 
1,000
 
Arizona Tourism and Sports Authority, Tax Revenue Bonds, Multipurpose Stadium Facility Project, Series 2003A, 5.000%, 7/01/31 (Pre-refunded 7/01/13) – NPFG Insured
7/13 at 100.00
A1 (5)
 
1,039,640
 
 
1,000
 
Maricopa County Unified School District 11, Peoria, Arizona, General Obligation Bonds, Second Series 2005, 5.000%, 7/01/20 (Pre-refunded 7/01/15) – FGIC Insured
7/15 at 100.00
Aa2 (5)
 
1,131,130
 
 
240
 
Maricopa County Union High School District 210 Phoenix, Arizona, General Obligation Bonds Series 2006C, 5.000%, 7/01/24 (Pre-refunded 7/01/16) – NPFG Insured,
7/16 at 100.00
AA (5)
 
281,705
 
 
630
 
Mesa, Arizona, Utility System Revenue Refunding Bonds, Series 2002, 5.250%, 7/01/17 – FGIC Insured (ETM)
No Opt. Call
Aa2 (5)
 
764,820
 
 
2,870
 
Total U.S. Guaranteed
     
3,217,295
 
     
Utilities – 24.9% (17.2% of Total Investments)
         
 
1,500
 
Arizona Power Authority, Special Obligation Power Resource Revenue Refunding Crossover Bonds, Hoover Project, Series 2001, 5.250%, 10/01/17
No Opt. Call
AA
 
1,820,744
 
 
600
 
Maricopa County Pollution Control Corporation, Arizona, Pollution Control Revenue Refunding Bonds, Southern California Edison Company, Series 2000A, 5.000%, 6/01/35
6/20 at 100.00
A1
 
665,970
 
 
370
 
Mesa, Arizona, Utility System Revenue Refunding Bonds, Series 2002, 5.250%, 7/01/17 – FGIC Insured
No Opt. Call
Aa2
 
442,946
 
 
665
 
Pima County Industrial Development Authority, Arizona, Revenue Bonds, Tucson Electric Power Company, Refunding Series 2008, 5.750%, 9/01/29
1/15 at 100.00
BBB–
 
710,413
 
 
400
 
Pinal County Electrical District 3, Arizona, Electric System Revenue Bonds, Refunding Series 2011, 5.250%, 7/01/36
7/21 at 100.00
A
 
449,380
 
 
1,000
 
Puerto Rico Electric Power Authority, Power Revenue Bonds, Series 2005RR, 5.000%, 7/01/26 – SYNCORA GTY Insured
7/15 at 100.00
BBB+
 
1,071,200
 
 
560
 
Salt River Project Agricultural Improvement and Power District, Arizona, Electric System Revenue Bonds, Tender Option Bond Trust 09-9W, 17.940%, 1/01/38 (IF) (6)
1/18 at 100.00
Aa1
 
803,062
 
 
5,095
 
Total Utilities
     
5,963,715
 

26
 
Nuveen Investments

 
 

 

 
Principal
   
Optional Call
       
 
Amount (000)
 
Description (1)
Provisions (2)
Ratings (3)
 
Value
 
     
Water and Sewer – 5.4% (3.8% of Total Investments)
         
$
475
 
Goodyear, Arizona, Water and Sewer Revenue Obligations, Series 2010, 5.625%, 7/01/39
7/20 at 100.00
A+
$
527,958
 
     
Surprise Municipal Property Corporation, Arizona, Wastewater System Revenue Bonds, Series 2007:
         
 
225
 
4.700%, 4/01/22
4/14 at 100.00
A–
 
228,929
 
 
260
 
4.900%, 4/01/32
4/17 at 100.00
A–
 
266,669
 
 
325
 
Yuma County Industrial Development Authority, Arizona, Exempt Revenue Bonds, Far West Water & Sewer Inc. Refunding, Series 2007A, 6.375%, 12/01/37 (Alternative Minimum Tax)
12/17 at 100.00
N/R
 
279,468
 
 
1,285
 
Total Water and Sewer
     
1,303,024
 
$
31,767
 
Total Investments (cost $31,816,208) – 144.4%
     
34,584,006
 
     
MuniFund Term Preferred Shares, at Liquidation Value – (46.4)% (7)
     
(11,100,000
     
Other Assets Less Liabilities – 2.0%
     
463,409
 
     
Net Assets Applicable to Common Shares – 100%
   
$
23,947,415
 

(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 highest of Standard & Poor’s Group (“Standard & Poor’s”), Moody’s Investors Service, Inc. (“Moody’s”) or Fitch, Inc. (“Fitch”) rating. Ratings below BBB by Standard & Poor’s, Baa by Moody’s or BBB by Fitch are considered to be below investment grade. Holdings designated N/R are not rated by any of these national rating agencies.
(4)
 
Investment valued at fair value using methods determined in good faith by, or at the discretion of, the Board of Trustees. For fair value measurement disclosure purposes, investment categorized as Level 3. See Notes to Financial Statements, Footnote 1 – General Information and Significant Accounting Policies, Investment Valuation for more information.
(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. Certain bonds backed by U.S. Government or agency securities are regarded as having an implied rating equal to the rating of such securities.
(6)
 
Investment, or portion of investment, has been pledged to collateralize the net payment obligations for investments in inverse floating rate transactions.
(7)
 
MuniFund Term Preferred Shares, at Liquidation Value as a percentage of Total Investments is 32.1%.
N/R
 
Not rated.
WI/DD
 
Investment, or portion of investment, purchased on a when-issued or delayed delivery basis.
(ETM)
 
Escrowed to maturity.
(IF)
 
Inverse floating rate investment.

See accompanying notes to financial statements.

Nuveen Investments
 
27

 
 

 


   
Nuveen Arizona Dividend Advantage Municipal Fund 2
NKR
 
Portfolio of Investments
   
August 31, 2012 (Unaudited)

 
Principal
   
Optional Call
       
 
Amount (000)
 
Description (1)
Provisions (2)
Ratings (3)
 
Value
 
     
Education and Civic Organizations – 15.3% (10.7% of Total Investments)
         
$
1,130
 
Arizona Higher Education Loan Authority, Student Loan Revenue Bonds, Series 2007B, Auction Rate Securities, 0.525%, 11/01/41 (Alternative Minimum Tax) (4)
10/12 at 100.00
A
$
882,261
 
 
450
 
Glendale Industrial Development Authority, Arizona, Revenue Bonds, Midwestern University, Refunding Series 2007, 5.000%, 5/15/31
5/22 at 100.00
A–
 
496,733
 
 
775
 
Glendale Industrial Development Authority, Arizona, Revenue Bonds, Midwestern University, Refunding Series 2010, 5.125%, 5/15/40
5/20 at 100.00
A+
 
826,197
 
 
360
 
Northern Arizona University, System Revenue Bonds, Series 2012, 5.000%, 6/01/41
6/21 at 100.00
A+
 
396,814
 
 
170
 
Phoenix Industrial Development Authority, Arizona, Education Facility Revenue Bonds, Brighter Choice Foundation Charter Middle Schools Project, Series 2012, 7.500%, 7/01/42
7/22 at 100.00
BB+
 
177,172
 
 
130
 
Phoenix Industrial Development Authority, Arizona, Education Revenue Bonds, Great Hearts Academies – Veritas Project, Series 2012, 6.300%, 7/01/42
7/21 at 100.00
BBB
 
139,026
 
 
165
 
Phoenix Industrial Development Authority, Arizona, Education Revenue Bonds, Painted Rock Academy Charter School Project, Series 2012A, 7.500%, 7/01/42
7/20 at 100.00
N/R
 
172,922
 
 
810
 
Phoenix Industrial Development Authority, Arizona, Lease Revenue Bonds, Rowan University Project, Series 2012, 5.000%, 6/01/42 – AGM Insured
6/22 at 100.00
A+
 
873,796
 
 
485
 
Pima County Industrial Development Authority, Arizona, Charter School Revenue Bonds, Noah Webster Basic Schools Inc., Series 2004, 6.000%, 12/15/24
12/14 at 100.00
BBB–
 
495,010
 
 
165
 
Pima County Industrial Development Authority, Arizona, Education Revenue Bonds, Carden Traditional Schools Project, Series 2012, 7.500%, 1/01/42
1/22 at 100.00
BBB–
 
177,227
 
 
210
 
Pima County Industrial Development Authority, Arizona, Education Revenue Bonds, Paradise Education Center Project, Series 2010, 6.000%, 6/01/40
6/19 at 100.00
BBB–
 
214,173
 
 
175
 
Pima County Industrial Development Authority, Arizona, Educational Revenue Bonds, Paradise Education Center Charter School, Series 2006, 6.000%, 6/01/36
6/16 at 100.00
BBB–
 
176,790
 
 
365
 
Pima County Industrial Development Authority, Arizona, Educational Revenue Bonds, Valley Academy Charter School Project, Series 2008, 6.500%, 7/01/38
7/18 at 100.00
Baa3
 
387,827
 
 
480
 
Tucson Industrial Development Authority, Arizona, Charter School Revenue Bonds, Arizona Agribusiness and Equine Center Charter School, Series 2004A, 6.125%, 9/01/34
9/14 at 100.00
BB+
 
474,010
 
 
5,870
 
Total Education and Civic Organizations
     
5,889,958
 
     
Health Care – 32.5% (22.7% of Total Investments)
         
 
845
 
Arizona Health Facilities Authority, Hospital Revenue Bonds, Banner Health Systems, Series 2007A, 5.000%, 1/01/25
1/17 at 100.00
AA–
 
963,089
 
 
520
 
Arizona Health Facilities Authority, Hospital Revenue Bonds, Banner Health Systems, Series 2007B, 1.120%, 1/02/37
1/17 at 100.00
AA–
 
393,224
 
 
1,150
 
Arizona Health Facilities Authority, Hospital Revenue Bonds, Banner Health Systems, Series 2008D, 5.500%, 1/01/38
1/18 at 100.00
AA–
 
1,278,984
 
 
750
 
Arizona Health Facilities Authority, Hospital System Revenue Bonds, Phoenix Children’s Hospital, Refunding Series 2012, 5.000%, 2/01/42 (WI/DD, Settling 9/06/12)
2/22 at 100.00
BBB+
 
789,383
 
 
600
 
Arizona Health Facilities Authority, Revenue Bonds, Blood Systems Inc., Series 2004, 5.000%, 4/01/20
4/14 at 100.00
A
 
625,752
 
 
400
 
Glendale Industrial Development Authority, Arizona, Revenue Bonds, John C. Lincoln Health Network, Series 2005B, 5.000%, 12/01/37
12/15 at 100.00
BBB+
 
408,688
 
 
655
 
Glendale Industrial Development Authority, Arizona, Revenue Bonds, John C. Lincoln Health Network, Series 2007, 5.000%, 12/01/42
12/17 at 100.00
BBB+
 
674,905
 
 
1,375
 
Maricopa County Industrial Development Authority, Arizona, Health Facility Revenue Bonds, Catholic Healthcare West, Series 2004A, 5.375%, 7/01/23
7/14 at 100.00
A+
 
1,446,499
 
 
1,650
 
Maricopa County Industrial Development Authority, Arizona, Health Facility Revenue Bonds, Catholic Healthcare West, Series 2007A, 5.250%, 7/01/32
7/17 at 100.00
A+
 
1,787,591
 
 
1,120
 
Scottsdale Industrial Development Authority, Arizona, Hospital Revenue Bonds, Scottsdale Healthcare, Series 2006C. Re-offering, 5.000%, 9/01/35 – AGC Insured
9/20 at 100.00
AA–
 
1,239,224
 

28
 
Nuveen Investments

 
 

 

 
Principal
   
Optional Call
       
 
Amount (000)
 
Description (1)
Provisions (2)
Ratings (3)
 
Value
 
     
Health Care (continued)
         
     
Show Low Industrial Development Authority, Arizona, Hospital Revenue Bonds, Navapache Regional Medical Center, Series 2005:
         
$
315
 
5.000%, 12/01/25 – RAAI Insured
12/15 at 100.00
BBB+
$
324,869
 
 
260
 
5.000%, 12/01/30 – RAAI Insured
12/15 at 100.00
BBB+
 
266,201
 
 
1,050
 
University Medical Center Corporation, Tucson, Arizona, Hospital Revenue Bonds, Series 2011, 6.000%, 7/01/39
7/21 at 100.00
BBB+
 
1,213,790
 
 
1,000
 
Yavapai County Industrial Development Authority, Arizona, Hospital Revenue Bonds, Yavapai Regional Medical Center, Series 2003A, 6.000%, 8/01/33
8/13 at 100.00
BBB+
 
1,041,440
 
 
11,690
 
Total Health Care
     
12,453,639
 
     
Long-Term Care – 0.5% (0.3% of Total Investments)
         
 
175
 
Tempe Industrial Development Authority, Arizona, Revenue Bonds, Friendship Village of Tempe Project, Refunding Series 2012A, 6.000%, 12/01/32
12/21 at 100.00
N/R
 
188,221
 
     
Tax Obligation/General – 25.7% (18.0% of Total Investments)
         
 
1,000
 
Maricopa County Elementary School District 83 Cartwright, Arizona, General Obligation Bonds, School Improvement, Project 2010, Series 2011A, 5.375%, 7/01/30 – AGM Insured
7/21 at 100.00
AA–
 
1,149,970
 
 
1,000
 
Maricopa County School District 6, Arizona, General Obligation Refunding Bonds, Washington Elementary School, Series 2002A, 5.375%, 7/01/16 – AGM Insured
No Opt. Call
Aa2
 
1,174,230
 
 
775
 
Maricopa County School District 79 Litchfield Elementary, Arizona, General Obligation Bonds, Series 2011, 5.000%, 7/01/23
7/21 at 100.00
Aa2
 
945,539
 
 
1,165
 
Maricopa County Unified School District 69, Paradise Valley, Arizona, General Obligation Refunding Bonds, Series 2002A, 5.250%, 7/01/14 – FGIC Insured
No Opt. Call
Aa2
 
1,265,971
 
 
1,405
 
Mesa, Arizona, General Obligation Bonds, Series 2002, 5.375%, 7/01/15 – FGIC Insured
No Opt. Call
AA
 
1,589,152
 
 
310
 
Pima County Continental Elementary School District 39, Arizona, General Obligation Bonds, Series 2011A, 6.000%, 7/01/30 – AGM Insured
7/21 at 100.00
AA–
 
389,261
 
 
500
 
Pima County Unified School District 08 Flowing Wells, Arizona, General Obligation Bonds, Series 2011B, 5.375%, 7/01/29
7/21 at 100.00
A+
 
573,750
 
 
1,000
 
Pima County Unified School District 6, Marana, Arizona, General Obligation Bonds, School Improvement Project 2010 Series 2011A, 5.000%, 7/01/25
7/21 at 100.00
A+
 
1,142,890
 
 
1,360
 
Scottsdale, Arizona, General Obligation Bonds, Preserve Acquisition Series 1999, 5.000%, 7/01/33
7/21 at 100.00
AAA
 
1,615,489
 
 
8,515
 
Total Tax Obligation/General
     
9,846,252
 
     
Tax Obligation/Limited – 44.9% (31.4% of Total Investments)
         
     
Arizona State, Certificates of Participation, Series 2002A:
         
 
750
 
5.000%, 11/01/17 – NPFG Insured
11/12 at 100.00
A+
 
752,835
 
 
1,000
 
5.000%, 11/01/18 – NPFG Insured
11/12 at 100.00
A+
 
1,003,740
 
 
370
 
Buckeye, Arizona, Festival Ranch Community Facilities District District General Obligation Bonds, Series 2012, 5.000%, 7/15/31
7/22 at 100.00
BBB
 
384,745
 
 
116
 
Centerra Community Facilities District, Goodyear, Arizona, General Obligation Bonds, Series 2005, 5.500%, 7/15/29
7/15 at 100.00
N/R
 
109,070
 
 
332
 
Estrella Mountain Ranch Community Facilities District, Arizona, Special Assessment Bonds, Montecito Assessment District, Series 2007, 5.800%, 7/01/32
1/17 at 100.00
N/R
 
320,231
 
 
184
 
Estrella Mountain Ranch Community Facilities District, Goodyear, Arizona, Special Assessment Lien Bonds, Series 2001A, 7.875%, 7/01/25
1/13 at 100.00
N/R
 
184,350
 
 
970
 
Marana Municipal Property Corporation, Arizona, Municipal Facilities Revenue Bonds, Series 2008B, 5.125%, 7/01/28
1/13 at 100.00
AA
 
982,455
 
 
784
 
Marana, Arizona, Tangerine Farms Road Improvement District Revenue Bonds, Series 2006, 4.600%, 1/01/26
7/16 at 100.00
A2
 
812,004
 
 
240
 
Marley Park Community Facilities District, City of Surprise, Arizona, Limited Tax General Obligation Bonds, Series 2008 (Bank Qualified), 6.100%, 7/15/32
7/17 at 100.00
N/R
 
239,705
 
 
415
 
Merrill Ranch Community Facilities District 1, Florence, Arizona, General Obligation Bonds, Series 2008A, 7.400%, 7/15/33
7/18 at 100.00
N/R
 
452,470
 

Nuveen Investments
 
29

 
 

 

   
Nuveen Arizona Dividend Advantage Municipal Fund 2 (continued)
NKR
 
Portfolio of Investments
August 31, 2012 (Unaudited)
 
 
Principal
   
Optional Call
       
 
Amount (000)
 
Description (1)
Provisions (2)
Ratings (3)
 
Value
 
     
Tax Obligation/Limited (continued)
         
$
530
 
Palm Valley Community Facility District 3, Goodyear, Arizona, General Obligation Bonds, Series 2006, 5.300%, 7/15/31
7/16 at 100.00
N/R
$
484,478
 
 
350
 
Palm Valley Community Facility District 3, Goodyear, Arizona, Limited Tax General Obligation Bonds, Series 2007, 5.800%, 7/15/32
7/17 at 100.00
N/R
 
337,582
 
 
140
 
Parkway Community Facilities District 1, Prescott Valley, Arizona, General Obligation Bonds, Series 2006, 5.350%, 7/15/31
7/16 at 100.00
N/R
 
128,755
 
 
1,000
 
Phoenix Industrial Development Authority, Arizona, Government Bonds, Capitol Mall LLC II, Series 2001, 5.250%, 9/15/16 – AMBAC Insured
9/12 at 100.00
A1
 
1,003,330
 
 
140
 
Phoenix Mesa Gateway Airport Authority, Arizona, Special Facility Revenue Bonds, Mesa Project, Series 2012, 5.000%, 7/01/38 (Alternative Minimum Tax)
7/22 at 100.00
AA+
 
147,267
 
 
1,070
 
Pinal County Industrial Development Authority, Arizona, Correctional Facilities Contract Revenue Bonds, Florence West Prison LLC, Series 2002A, 5.000%, 10/01/18 – ACA Insured
10/12 at 100.00
BBB–
 
1,071,038
 
 
140
 
Puerto Rico Public Buildings Authority, Guaranteed Government Facilities Revenue Refunding Bonds, Series 2002D, 5.125%, 7/01/24
1/13 at 100.00
Baa1
 
140,218
 
     
Puerto Rico Sales Tax Financing Corporation, Sales Tax Revenue Bonds, First Subordinate Series 2010A:
         
 
3,055
 
0.000%, 8/01/33
No Opt. Call
A+
 
986,673
 
 
250
 
5.375%, 8/01/39
2/20 at 100.00
A+
 
267,640
 
 
960
 
San Luis Civic Improvement Corporation, Arizona, Municipal Facilities Excise Tax Revenue Bonds, Series 2005, 5.000%, 7/01/25 – SYNCORA GTY Insured
7/15 at 100.00
A+
 
1,014,557
 
 
1,000
 
Scottsdale Municipal Property Corporation, Arizona, Excise Tax Revenue Bonds, Refunding Series 2006, 5.000%, 7/01/24
No Opt. Call
AAA
 
1,284,870
 
 
1,000
 
Scottsdale Municipal Property Corporation, Arizona, Excise Tax Revenue Bonds, Water & Sewer Improvements Project, Series 2010, 5.000%, 7/01/36
7/20 at 100.00
AAA
 
1,136,040
 
 
555
 
Tartesso West Community Facility District, Buckeye, Arizona, Limited Tax General Obligation Bonds, Series 2007, 5.900%, 7/15/32
7/17 at 100.00
N/R
 
535,464
 
 
1,500
 
Tempe, Arizona, Transit Excise Tax Revenue Obligation Bonds, Refunding Series 2012, 5.000%, 7/01/37 (WI/DD, Settling 9/12/12)
7/22 at 100.00
AAA
 
1,721,414
 
 
750
 
Vistancia Community Facilities District, Peoria, Arizona, General Obligation Bonds, Series 2005, 5.750%, 7/15/24
7/15 at 100.00
A1
 
798,975
 
 
633
 
Watson Road Community Facilities District, Arizona, Special Assessment Revenue Bonds, Series 2005, 6.000%, 7/01/30
7/16 at 100.00
N/R
 
601,078
 
 
350
 
Westpark Community Facilities District, Buckeye, Arizona, General Obligation Tax Increment Bonds Series 2006, 5.250%, 7/15/31
7/16 at 100.00
N/R
 
317,989
 
 
18,584
 
Total Tax Obligation/Limited
     
17,218,973
 
     
Transportation – 2.6% (1.8% of Total Investments)
         
 
1,000
 
Phoenix Civic Improvement Corporation, Arizona, Senior Lien Airport Revenue Bonds, Series 2002B, 5.250%, 7/01/27 – FGIC Insured (Alternative Minimum Tax)
1/13 at 100.00
AA–
 
1,001,500
 
     
U.S. Guaranteed – 1.4% (1.0% of Total Investments) (5)
         
 
100
 
Maricopa County Unified School District 89, Dysart, Arizona, General Obligation Bonds, Series 2004B, 5.250%, 7/01/20 (Pre-refunded 7/01/14) – AGM Insured
7/14 at 100.00
AA– (5)
 
109,072
 
 
375
 
Maricopa County Union High School District 210 Phoenix, Arizona, General Obligation Bonds, Series 2006C, 5.000%, 7/01/24 (Pre-refunded 7/01/16) – NPFG Insured
7/16 at 100.00
AA (5)
 
440,164
 
 
475
 
Total U.S. Guaranteed
     
549,236
 
     
Utilities – 10.7% (7.5% of Total Investments)
         
 
400
 
Apache County Industrial Development Authority, Arizona, Pollution Control Revenue Bonds, Tucson Electric Power Company, Series 20102A, 4.500%, 3/01/30
3/22 at 100.00
BBB–
 
416,032
 
 
900
 
Maricopa County Pollution Control Corporation, Arizona, Pollution Control Revenue Refunding Bonds, Southern California Edison Company, Series 2000A, 5.000%, 6/01/35
6/20 at 100.00
A1
 
998,955
 

30
 
Nuveen Investments

 
 

 

 
Principal
   
Optional Call
       
 
Amount (000)
 
Description (1)
Provisions (2)
Ratings (3)
 
Value
 
     
Utilities (continued)
         
$
665
 
Pima County Industrial Development Authority, Arizona, Revenue Bonds, Tucson Electric Power Company, Refunding Series 2008, 5.750%, 9/01/29
1/15 at 100.00
BBB–
$
710,413
 
 
250
 
Pinal County Electrical District 3, Arizona, Electric System Revenue Bonds, Refunding Series 2011, 5.250%, 7/01/36
7/21 at 100.00
A
 
280,863
 
 
450
 
Salt River Project Agricultural Improvement and Power District, Arizona, Electric System Revenue Bonds, Tender Option Bond Trust 09-9W, 17.940%, 1/01/38 (IF) (6)
1/18 at 100.00
Aa1
 
645,318
 
 
1,000
 
Salt Verde Financial Corporation, Arizona, Senior Gas Revenue Bonds, Citigroup Energy Inc Prepay Contract Obligations, Series 2007, 5.000%, 12/01/37
No Opt. Call
A–
 
1,068,570
 
 
3,665
 
Total Utilities
     
4,120,151
 
     
Water and Sewer – 9.4% (6.6% of Total Investments)
         
 
500
 
City of Goodyear, Arizona Subordinate Lien Water and Sewer Revenue Obligations, Series 2011, 5.500%, 7/01/41
7/21 at 100.00
AA–
 
574,780
 
 
490
 
Maricopa County Industrial Development Authority, Arizona, Water System Improvement Revenue Bonds, Chaparral City Water Company, Series 1997A, 5.400%, 12/01/22 – AMBAC Insured (Alternative Minimum Tax)
12/12 at 100.00
N/R
 
490,549
 
 
1,000
 
Phoenix Civic Improvement Corporation, Arizona, Junior Lien Water System Revenue Refunding Bonds, Series 2001, 5.500%, 7/01/22 – FGIC Insured
No Opt. Call
AAA
 
1,302,690
 
     
Surprise Municipal Property Corporation, Arizona, Wastewater System Revenue Bonds, Series 2007:
         
 
350
 
4.700%, 4/01/22
4/14 at 100.00
A–
 
356,111
 
 
410
 
4.900%, 4/01/32
4/17 at 100.00
A–
 
420,517
 
 
525
 
Yuma County Industrial Development Authority, Arizona, Exempt Revenue Bonds, Far West Water & Sewer Inc. Refunding, Series 2007A, 6.375%, 12/01/37 (Alternative Minimum Tax)
12/17 at 100.00
N/R
 
451,448
 
 
3,275
 
Total Water and Sewer
     
3,596,095
 
$
53,249
 
Total Investments (cost $50,800,963) – 143.0%
     
54,864,025
 
     
MuniFund Term Preferred Shares, at Liquidation Value – (48.8)% (7)
     
(18,725,000
     
Other Assets Less Liabilities – 5.8%
     
2,220,398
 
     
Net Assets Applicable to Common Shares – 100%
   
$
38,359,423
 

(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 highest of Standard & Poor’s Group (“Standard & Poor’s”), Moody’s Investors Service, Inc. (“Moody’s”) or Fitch, Inc. (“Fitch”) rating. Ratings below BBB by Standard & Poor’s, Baa by Moody’s or BBB by Fitch are considered to be below investment grade. Holdings designated N/R are not rated by any of these national rating agencies.
(4)
 
Investment valued at fair value using methods determined in good faith by, or at the discretion of, the Board of Trustees. For fair value measurement disclosure purposes, investment categorized as Level 3. See Notes to Financial Statements, Footnote 1 – General Information and Significant Accounting Policies, Investment Valuation for more information.
(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. Certain bonds backed by U.S. Government or agency securities are regarded as having an implied rating equal to the rating of such securities.
(6)
 
Investment, or portion of investment, has been pledged to collateralize the net payment obligations for investments in inverse floating rate transactions.
(7)
 
MuniFund Term Preferred Shares, at Liquidation Value as a percentage of Total Investments is 34.1%.
N/R
 
Not rated.
WI/DD
 
Investment, or portion of investment, purchased on a when-issued or delayed delivery basis.
(IF)
 
Inverse floating rate investment.

See accompanying notes to financial statements.

Nuveen Investments
 
31

 
 

 


   
Nuveen Arizona Dividend Advantage Municipal Fund 3
NXE
 
Portfolio of Investments
   
August 31, 2012 (Unaudited)

 
Principal
   
Optional Call
       
 
Amount (000)
 
Description (1)
Provisions (2)
Ratings (3)
 
Value
 
     
Consumer Staples – 1.0% (0.7% of Total Investments)
         
$
460
 
Puerto Rico, The Children’s Trust Fund, Tobacco Settlement Asset-Backed Refunding Bonds, Series 2002, 5.375%, 5/15/33
11/12 at 100.00
BBB+
$
459,991
 
     
Education and Civic Organizations – 16.9% (11.9% of Total Investments)
         
 
690
 
Arizona Higher Education Loan Authority, Student Loan Revenue Bonds, Series 2007B, Auction Rate Securities, 0.525%, 11/01/41 (Alternative Minimum Tax) (4)
10/12 at 100.00
A
 
538,725
 
 
1,250
 
Arizona State University, System Revenue Bonds, Series 2005, 5.000%,
7/15 at 100.00
Aa3
 
1,386,538
 
         7/01/20 – AMBAC Insured          
 
520
 
Glendale Industrial Development Authority, Arizona, Revenue Bonds, Midwestern University, Refunding Series 2007, 5.000%, 5/15/31
5/22 at 100.00
A–
 
574,002
 
 
900
 
Glendale Industrial Development Authority, Arizona, Revenue Bonds, Midwestern University, Refunding Series 2010, 5.125%, 5/15/40
5/20 at 100.00
A+
 
959,454
 
 
430
 
Northern Arizona University, System Revenue Bonds, Series 2012, 5.000%, 6/01/41
6/21 at 100.00
A+
 
473,972
 
 
200
 
Phoenix Industrial Development Authority, Arizona, Education Facility Revenue Bonds, Brighter Choice Foundation Charter Middle Schools Project, Series 2012, 7.500%, 7/01/42
7/22 at 100.00
BB+
 
208,438
 
 
155
 
Phoenix Industrial Development Authority, Arizona, Education Revenue Bonds, Great Hearts Academies – Veritas Project, Series 2012, 6.300%, 7/01/42
7/21 at 100.00
BBB
 
165,762
 
 
200
 
Phoenix Industrial Development Authority, Arizona, Education Revenue Bonds, Painted Rock Academy Charter School Project, Series 2012A, 7.500%, 7/01/42
7/20 at 100.00
N/R
 
209,602
 
 
965
 
Phoenix Industrial Development Authority, Arizona, Lease Revenue Bonds, Rowan University Project, Series 2012, 5.000%, 6/01/42 – AGM Insured
6/22 at 100.00
A+
 
1,041,003
 
 
560
 
Pima County Industrial Development Authority, Arizona, Charter School Revenue Bonds, Noah Webster Basic Schools Inc., Series 2004, 6.000%, 12/15/24
12/14 at 100.00
BBB–
 
571,558
 
 
200
 
Pima County Industrial Development Authority, Arizona, Education Revenue Bonds, Carden Traditional Schools Project, Series 2012, 7.500%, 1/01/42
1/22 at 100.00
BBB–
 
214,820
 
 
235
 
Pima County Industrial Development Authority, Arizona, Education Revenue Bonds, Paradise Education Center Project, Series 2010, 6.000%, 6/01/40
6/19 at 100.00
BBB–
 
239,669
 
 
315
 
Pima County Industrial Development Authority, Arizona, Educational Revenue Bonds, Paradise Education Center Charter School, Series 2006, 6.000%, 6/01/36
6/16 at 100.00
BBB–
 
318,222
 
 
415
 
Pima County Industrial Development Authority, Arizona, Educational Revenue Bonds, Valley Academy Charter School Project, Series 2008, 6.500%, 7/01/38
7/18 at 100.00
Baa3
 
440,954
 
 
565
 
Tucson Industrial Development Authority, Arizona, Charter School Revenue Bonds, Arizona Agribusiness and Equine Center Charter School, Series 2004A, 6.125%, 9/01/34
9/14 at 100.00
BB+
 
557,949
 
 
7,600
 
Total Education and Civic Organizations
     
7,900,668
 
     
Health Care – 28.3% (19.9% of Total Investments)
         
 
1,015
 
Arizona Health Facilities Authority, Hospital Revenue Bonds, Banner Health Systems, Series 2007A, 5.000%, 1/01/25
1/17 at 100.00
AA–
 
1,156,846
 
 
620
 
Arizona Health Facilities Authority, Hospital Revenue Bonds, Banner Health Systems, Series 2007B, 1.120%, 1/02/37
1/17 at 100.00
AA–
 
468,844
 
 
2,390
 
Arizona Health Facilities Authority, Hospital Revenue Bonds, Banner Health Systems, Series 2008D, 5.500%, 1/01/38
1/18 at 100.00
AA–
 
2,658,058
 
 
625
 
Arizona Health Facilities Authority, Revenue Bonds, Blood Systems Inc., Series 2004, 5.000%, 4/01/20
4/14 at 100.00
A
 
651,825
 
 
475
 
Glendale Industrial Development Authority, Arizona, Revenue Bonds, John C. Lincoln Health Network, Series 2005B, 5.000%, 12/01/37
12/15 at 100.00
BBB+
 
485,317
 
 
785
 
Glendale Industrial Development Authority, Arizona, Revenue Bonds, John C. Lincoln Health Network, Series 2007, 5.000%, 12/01/42
12/17 at 100.00
BBB+
 
808,856
 
 
1,825
 
Maricopa County Industrial Development Authority, Arizona, Health Facility Revenue Bonds, Catholic Healthcare West, Series 2004A, 5.375%, 7/01/23
7/14 at 100.00
A+
 
1,919,900
 
 
1,985
 
Maricopa County Industrial Development Authority, Arizona, Health Facility Revenue Bonds, Catholic Healthcare West, Series 2007A, 5.250%, 7/01/32
7/17 at 100.00
A+
 
2,150,529
 

32
 
Nuveen Investments
 
 
 

 
 
 
Principal
   
Optional Call
       
 
Amount (000)
 
Description (1)
Provisions (2)
Ratings (3)
 
Value
 
     
Health Care (continued)
         
     
Show Low Industrial Development Authority, Arizona, Hospital Revenue Bonds, Navapache Regional Medical Center, Series 2005:
         
$
375
 
5.000%, 12/01/25 – RAAI Insured
12/15 at 100.00
BBB+
$
386,749
 
 
315
 
5.000%, 12/01/30 – RAAI Insured
12/15 at 100.00
BBB+
 
322,513
 
 
1,000
 
University Medical Center Corporation, Tucson, Arizona, Hospital Revenue Bonds, Series 2011, 6.000%, 7/01/39
7/21 at 100.00
BBB+
 
1,155,990
 
 
1,000
 
Yavapai County Industrial Development Authority, Arizona, Hospital Revenue Bonds, Yavapai Regional Medical Center, Series 2003A, 6.000%, 8/01/33
8/13 at 100.00
BBB+
 
1,041,440
 
 
12,410
 
Total Health Care
     
13,206,867
 
     
Long-Term Care – 0.4% (0.3% of Total Investments)
         
 
205
 
Tempe Industrial Development Authority, Arizona, Revenue Bonds, Friendship Village of Tempe Project, Refunding Series 2012A, 6.000%, 12/01/32
12/21 at 100.00
N/R
 
220,488
 
     
Tax Obligation/General – 12.8% (9.0% of Total Investments)
         
 
860
 
El Mirage, Arizona, General Obligation Bonds Series 2012, 5.000%, 7/01/42 – AGM Insured
7/22 at 100.00
AA–
 
956,286
 
 
365
 
Pima County Continental Elementary School District 39, Arizona, General Obligation Bonds, Series 2011A, 6.000%, 7/01/30 – AGM Insured
7/21 at 100.00
AA–
 
458,323
 
 
500
 
Pima County Unified School District 08 Flowing Wells, Arizona, General Obligation Bonds, Series 2011B, 5.375%, 7/01/29
7/21 at 100.00
A+
 
573,750
 
 
750
 
Pima County Unified School District 6, Marana, Arizona, General Obligation Bonds, School Improvement Project 2010 Series 2011A, 5.000%, 7/01/25
7/21 at 100.00
A+
 
857,168
 
 
1,000
 
Pinal County Unified School District 1, Florence, Arizona, General Obligation Bonds, Series 2008C, 5.250%, 7/01/28
7/18 at 100.00
A
 
1,120,970
 
 
1,705
 
Scottsdale, Arizona, General Obligation Bonds, Preserve Acquisition Series 1999, 5.000%, 7/01/34
7/21 at 100.00
AAA
 
2,013,503
 
 
5,180
 
Total Tax Obligation/General
     
5,980,000
 
     
Tax Obligation/Limited – 45.0% (31.7% of Total Investments)
         
 
660
 
Arizona Sports and Tourism Authority, Senior Revenue Refunding Bonds, Multipurpose Stadium Facility Project, Series 2012A, 5.000%, 7/01/36
7/22 at 100.00
A1
 
728,726
 
 
1,000
 
Arizona State Transportation Board, Highway Revenue Bonds, Subordinate Refunding Series 2011A, 5.000%, 7/01/36
7/21 at 100.00
AA+
 
1,142,060
 
 
345
 
Buckeye, Arizona, Festival Ranch Community Facilities District District General Obligation Bonds, Series 2012, 5.000%, 7/15/27
7/22 at 100.00
BBB
 
363,533
 
 
133
 
Centerra Community Facilities District, Goodyear, Arizona, General Obligation Bonds, Series 2005, 5.500%, 7/15/29
7/15 at 100.00
N/R
 
125,055
 
 
2,000
 
DC Ranch Community Facilities District, Scottsdale, Arizona, General Obligation Bonds, Series 2002, 5.000%, 7/15/27 – AMBAC Insured
7/13 at 100.00
A1
 
2,029,340
 
     
Estrella Mountain Ranch Community Facilities District, Arizona, Special Assessment Bonds, Montecito Assessment District, Series 2007:
         
 
245
 
5.700%, 7/01/27
1/17 at 100.00
N/R
 
241,129
 
 
152
 
5.800%, 7/01/32
1/17 at 100.00
N/R
 
146,612
 
 
217
 
Estrella Mountain Ranch Community Facilities District, Goodyear, Arizona, Special Assessment Lien Bonds, Series 2001A, 7.875%, 7/01/25
1/13 at 100.00
N/R
 
217,412
 
 
510
 
Government of Guam, Business Privilege Tax Bonds, Series 2011A, 5.000%, 1/01/31
1/22 at 100.00
A
 
579,794
 
 
525
 
Greater Arizona Development Authority, Infrastructure Revenue Bonds, Series 2006A, 5.000%, 8/01/23 – NPFG Insured
8/16 at 100.00
A1
 
584,966
 
 
917
 
Marana, Arizona, Tangerine Farms Road Improvement District Revenue Bonds, Series 2006, 4.600%, 1/01/26
7/16 at 100.00
A2
 
949,755
 
 
290
 
Marley Park Community Facilities District, City of Surprise, Arizona, Limited Tax General Obligation Bonds, Series 2008 (Bank Qualified), 6.100%, 7/15/32
7/17 at 100.00
N/R
 
289,643
 
 
490
 
Merrill Ranch Community Facilities District 1, Florence, Arizona, General Obligation Bonds, Series 2008A, 7.400%, 7/15/33
7/18 at 100.00
N/R
 
534,242
 
 
2,175
 
Mohave County, Arizona, Certificates of Participation, Series 2004, 5.250%, 7/01/19 – AMBAC Insured
7/14 at 100.00
N/R
 
2,263,153
 

Nuveen Investments
 
33

 
 

 


   
Nuveen Arizona Dividend Advantage Municipal Fund 3 (continued)
NXE
 
Portfolio of Investments
August 31, 2012 (Unaudited)
 
 
Principal
   
Optional Call
       
 
Amount (000)
 
Description (1)
Provisions (2)
Ratings (3)
 
Value
 
     
Tax Obligation/Limited (continued)
         
$
300
 
Page, Arizona, Pledged Revenue Bonds, Refunding Series 2011, 5.000%, 7/01/26
7/21 at 100.00
AA–
$
349,026
 
 
640
 
Palm Valley Community Facility District 3, Goodyear, Arizona, General Obligation Bonds, Series 2006, 5.300%, 7/15/31
7/16 at 100.00
N/R
 
585,030
 
 
425
 
Palm Valley Community Facility District 3, Goodyear, Arizona, Limited Tax General Obligation Bonds, Series 2007, 5.800%, 7/15/32
7/17 at 100.00
N/R
 
409,921
 
 
160
 
Parkway Community Facilities District 1, Prescott Valley, Arizona, General Obligation Bonds, Series 2006, 5.350%, 7/15/31
7/16 at 100.00
N/R
 
147,149
 
 
170
 
Phoenix Mesa Gateway Airport Authority, Arizona, Special Facility Revenue Bonds, Mesa Project, Series 2012, 5.000%, 7/01/38 (Alternative Minimum Tax)
7/22 at 100.00
AA+
 
178,825
 
 
1,250
 
Pinal County Industrial Development Authority, Arizona, Correctional Facilities Contract Revenue Bonds, Florence West Prison LLC, Series 2002A, 5.000%, 10/01/18 – ACA Insured
10/12 at 100.00
BBB–
 
1,251,213
 
 
250
 
Puerto Rico Sales Tax Financing Corporation, Sales Tax Revenue Bonds, First Subordinate Series 2010A, 5.375%, 8/01/39
2/20 at 100.00
A+
 
267,640
 
 
1,650
 
Puerto Rico Sales Tax Financing Corporation, Sales Tax Revenue Bonds, First Subordinate Series 2010C, 0.000%, 8/01/38
No Opt. Call
A+
 
380,160
 
 
1,130
 
San Luis Civic Improvement Corporation, Arizona, Municipal Facilities Excise Tax Revenue Bonds, Series 2005, 5.000%, 7/01/25 – SYNCORA GTY Insured
7/15 at 100.00
A+
 
1,194,218
 
 
2,000
 
Scottsdale Municipal Property Corporation, Arizona, Excise Tax Revenue Bonds, Water & Sewer Improvements Project, Series 2010, 5.000%, 7/01/36
7/20 at 100.00
AAA
 
2,272,080
 
 
665
 
Tartesso West Community Facility District, Buckeye, Arizona, Limited Tax General Obligation Bonds, Series 2007, 5.900%, 7/15/32
7/17 at 100.00
N/R
 
641,592
 
 
750
 
Virgin Islands Public Finance Authority, Matching Fund Loan Notes Revenue Bonds, Senior Lien Series 2010A, 5.000%, 10/01/29
10/20 at 100.00
BBB+
 
819,480
 
 
1,250
 
Vistancia Community Facilities District, Peoria, Arizona, General Obligation Bonds, Series 2005, 5.750%, 7/15/24
7/15 at 100.00
A1
 
1,331,625
 
 
634
 
Watson Road Community Facilities District, Arizona, Special Assessment Revenue Bonds, Series 2005, 6.000%, 7/01/30
7/16 at 100.00
N/R
 
602,027
 
 
425
 
Westpark Community Facilities District, Buckeye, Arizona, General Obligation Tax Increment Bonds Series 2006, 5.250%, 7/15/31
7/16 at 100.00
N/R
 
386,130
 
 
21,358
 
Total Tax Obligation/Limited
     
21,011,536
 
     
Transportation – 5.6% (3.9% of Total Investments)
         
     
Phoenix Civic Improvement Corporation, Arizona, Senior Lien Airport Revenue Bonds, Series 2002B:
         
 
300
 
5.750%, 7/01/16 – FGIC Insured (Alternative Minimum Tax)
1/13 at 100.00
AA–
 
301,092
 
 
2,300
 
5.250%, 7/01/21 – FGIC Insured (Alternative Minimum Tax)
1/13 at 100.00
AA–
 
2,304,738
 
 
2,600
 
Total Transportation
     
2,605,830
 
     
U.S. Guaranteed – 5.2% (3.7% of Total Investments) (5)
         
 
1,575
 
Maricopa County Union High School District 210, Phoenix, Arizona, General Obligation Bonds, Series 2004A, 5.000%, 7/01/20 (Pre-refunded 7/01/14) – AGM Insured
7/14 at 100.00
AA (5)
 
1,711,600
 
 
270
 
Maricopa County, Arizona, Hospital Revenue Bonds, Sun Health Corporation, Series 2005, 5.000%, 4/01/16 (Pre-refunded 4/01/15)
4/15 at 100.00
N/R (5)
 
302,036
 
 
405
 
Oro Valley Municipal Property Corporation, Arizona, Senior Lien Water Revenue Bonds, Series 2003, 5.000%, 7/01/23 (Pre-refunded 7/01/13) – NPFG Insured
7/13 at 100.00
AA (5)
 
421,054
 
 
2,250
 
Total U.S. Guaranteed
     
2,434,690
 
     
Utilities – 18.5% (13.0% of Total Investments)
         
 
625
 
Apache County Industrial Development Authority, Arizona, Pollution Control Revenue Bonds, Tucson Electric Power Company, Series 20102A, 4.500%, 3/01/30
3/22 at 100.00
BBB–
 
650,050
 
 
1,200
 
Maricopa County Pollution Control Corporation, Arizona, Pollution Control Revenue Refunding Bonds, Southern California Edison Company, Series 2000A, 5.000%, 6/01/35
6/20 at 100.00
A1
 
1,331,940
 
 
1,250
 
Maricopa County Pollution Control Corporation, Arizona, Revenue Bonds, Arizona Public Service Company – Palo Verde Project, Series 2002A, 5.050%,
11/12 at 100.00
Baa1
 
1,252,925
 
         5/01/29 – AMBAC Insured          

34
 
Nuveen Investments

 
 

 

 
Principal
   
Optional Call
       
 
Amount (000)
 
Description (1)
Provisions (2)
Ratings (3)
 
Value
 
     
Utilities (continued)
         
$
665
 
Pima County Industrial Development Authority, Arizona, Revenue Bonds, Tucson Electric Power Company, Refunding Series 2008, 5.750%, 9/01/29
1/15 at 100.00
BBB–
$
710,413
 
 
500
 
Pinal County Electrical District 3, Arizona, Electric System Revenue Bonds, Refunding Series 2011, 5.250%, 7/01/36
7/21 at 100.00
A
 
561,725
 
 
1,660
 
Puerto Rico Electric Power Authority, Power Revenue Bonds, Series 2005RR, 5.000%, 7/01/26 – SYNCORA GTY Insured
7/15 at 100.00
BBB+
 
1,778,192
 
 
775
 
Salt River Project Agricultural Improvement and Power District, Arizona, Electric System Revenue Bonds, Tender Option Bond Trust 09-9W, 17.940%, 1/01/38 (IF) (6)
1/18 at 100.00
Aa1
 
1,111,381
 
 
1,165
 
Salt Verde Financial Corporation, Arizona, Senior Gas Revenue Bonds, Citigroup Energy Inc Prepay Contract Obligations, Series 2007, 5.000%, 12/01/37
No Opt. Call
A–
 
1,244,884
 
 
7,840
 
Total Utilities
     
8,641,510
 
     
Water and Sewer – 8.4% (5.9% of Total Investments)
         
 
500
 
Glendale, Arizona, Water and Sewer Revenue Bonds, Refunding Series 2012, 5.000%, 7/01/28
7/22 at 100.00
AA
 
593,255
 
 
955
 
Goodyear, Arizona, Water and Sewer Revenue Obligations, Series 2010, 5.625%, 7/01/39
7/20 at 100.00
A+
 
1,061,473
 
 
750
 
Puerto Rico Aqueduct and Sewerage Authority, Revenue Bonds, Senior Lien Series 2008A, 6.000%, 7/01/38
7/18 at 100.00
Baa2
 
799,380
 
     
Surprise Municipal Property Corporation, Arizona, Wastewater System Revenue Bonds, Series 2007:
         
 
425
 
4.700%, 4/01/22
4/14 at 100.00
A–
 
432,421
 
 
490
 
4.900%, 4/01/32
4/17 at 100.00
A–
 
502,569
 
 
615
 
Yuma County Industrial Development Authority, Arizona, Exempt Revenue Bonds, Far West Water & Sewer Inc. Refunding, Series 2007A, 6.375%, 12/01/37 (Alternative Minimum Tax)
12/17 at 100.00
N/R
 
528,839
 
 
3,735
 
Total Water and Sewer
     
3,917,937
 
$
63,638
 
Total Investments (cost $61,795,261) – 142.1%
     
66,379,517
 
     
MuniFund Term Preferred Shares, at Liquidation Value – (44.6)% (7)
     
(20,846,000
     
Other Assets Less Liabilities – 2.5%
     
1,184,957
 
     
Net Assets Applicable to Common Shares – 100%
   
$
46,718,474
 

(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 highest of Standard & Poor’s Group (“Standard & Poor’s”), Moody’s Investors Service, Inc. (“Moody’s”) or Fitch, Inc. (“Fitch”) rating. Ratings below BBB by Standard & Poor’s, Baa by Moody’s or BBB by Fitch are considered to be below investment grade. Holdings designated N/R are not rated by any of these national rating agencies.
(4)
 
Investment valued at fair value using methods determined in good faith by, or at the discretion of, the Board of Trustees. For fair value measurement disclosure purposes, investment categorized as Level 3. See Notes to Financial Statements, Footnote 1 – General Information and Significant Accounting Policies, Investment Valuation for more information.
(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. Certain bonds backed by U.S. Government or agency securities are regarded as having an implied rating equal to the rating of such securities.
(6)
 
Investment, or portion of investment, has been pledged to collateralize the net payment obligations for investments in inverse floating rate transactions.
(7)
 
MuniFund Term Preferred Shares, at Liquidation Value as a percentage of Total Investments is 31.4%.
N/R
 
Not rated.
(IF)
 
Inverse floating rate investment.

See accompanying notes to financial statements.
 
Nuveen Investments
 
35

 
 

 

   
Nuveen Texas Quality Income Municipal Fund
NTX
 
Portfolio of Investments
   
August 31, 2012 (Unaudited)

 
Principal
   
Optional Call
       
 
Amount (000)
 
Description (1)
Provisions (2)
Ratings (3)
 
Value
 
     
Consumer Discretionary – 1.1% (0.7% of Total Investments)
         
$
1,450
 
Austin Convention Enterprises Inc., Texas, Convention Center Hotel Revenue Bonds, First Tier Series 2006A, 5.250%, 1/01/18 – SYNCORA GTY Insured
1/17 at 100.00
BB+
$
1,595,827
 
     
Consumer Staples – 1.4% (1.0% of Total Investments)
         
 
2,185
 
Puerto Rico, The Children’s Trust Fund, Tobacco Settlement Asset-Backed Refunding Bonds, Series 2002, 5.375%, 5/15/33
11/12 at 100.00
BBB+
 
2,184,956
 
     
Education and Civic Organizations – 11.3% (7.7% of Total Investments)
         
 
2,000
 
Board of Regents, University of Texas System, Financing System Revenue Bonds, Refunding Series 2012B, 5.000%, 8/15/22
No Opt. Call
AAA
 
2,569,360
 
 
1,000
 
Hale Center Education Facilities Corporation, Texas, Revenue Bonds, Wayland Baptist University Project, Improvement and Refunding Series 2010, 5.000%, 3/01/35
3/21 at 100.00
A–
 
1,085,340
 
 
2,000
 
Laredo Community College District, Webb County, Texas, Combined Fee Revenue Bonds, Series 2010, 5.250%, 8/01/35 – AGM Insured
8/20 at 100.00
AA–
 
2,263,020
 
     
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
 
1,281,255
 
 
1,230
 
5.000%, 5/15/28
5/15 at 100.00
AA
 
1,335,460
 
 
1,290
 
5.000%, 5/15/29
5/15 at 100.00
AA
 
1,400,605
 
     
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
Baa1
 
1,727,579
 
 
1,795
 
5.000%, 5/01/19 – FGIC Insured
5/13 at 100.00
Baa1
 
1,812,394
 
 
1,885
 
5.000%, 5/01/20 – FGIC Insured
5/13 at 100.00
Baa1
 
1,901,513
 
 
1,665
 
Texas State University System, Financing Revenue Bonds, Series 2004, 5.000%, 3/15/24 – AGM Insured
9/14 at 100.00
Aa2
 
1,795,519
 
 
15,745
 
Total Education and Civic Organizations
     
17,172,045
 
     
Health Care – 13.3% (9.1% of Total Investments)
         
 
1,000
 
Harris County Cultural Education Facilities Finance Corporation, Texas, Medical Facilities Revenue Refunding Bonds, Baylor College of Medicine, Series 2012A, 5.000%, 11/15/26 (WI/DD, Settling 9/06/12)
11/22 at 100.00
A–
 
1,123,180
 
 
1,350
 
Harrison County Health Facilities Development Corporation, Texas, Hospital Revenue Bonds, Good Shepherd Health System, Refunding Series 2010, 5.250%, 7/01/28
7/20 at 100.00
BBB+
 
1,435,833
 
 
2,000
 
North Central Texas Health Facilities Development Corporation, Texas, Revenue Bonds, Children’s Medical Center Dallas Project, Series 2009, 5.750%, 8/15/39
8/19 at 100.00
AA
 
2,288,260
 
 
885
 
North Central Texas Health Facilities Development Corporation, Texas, Revenue Bonds, Children’s Medical Center Dallas Project, Series 2012, 5.000%, 8/15/32
8/22 at 100.00
AA
 
1,009,750
 
     
Richardson Hospital Authority, Texas, Revenue Bonds, Richardson Regional Medical Center, Series 2004:
         
 
2,000
 
5.875%, 12/01/24
12/13 at 100.00
A+
 
2,058,300
 
 
1,000
 
6.000%, 12/01/34
12/13 at 100.00
A+
 
1,027,960
 
 
1,250
 
Tarrant County Cultural Education Facilities Finance Corporation, Texas, Hospital Revenue Bonds, Scott & White HealthCare Project, Series 2010, 5.250%, 8/15/40
8/20 at 100.00
AA–
 
1,371,163
 
 
2,500
 
Tarrant County Cultural Education Facilities Finance Corporation, Texas, Revenue Bonds, Texas Health Resources, Series 2007B, 5.000%, 11/15/42
11/17 at 100.00
AA–
 
2,697,275
 
 
2,000
 
Tarrant County Cultural Education Facilities Finance Corporation, Texas, Revenue Refunding Bonds, Christus Health, Series 2008, 6.500%, 7/01/37 – AGC Insured
1/19 at 100.00
AA–
 
2,351,100
 
 
1,720
 
Tyler Health Facilities Development Corporation, Texas, Hospital Revenue Bonds, East Texas Medical Center Regional Healthcare System, Series 2007A, 5.375%, 11/01/37
11/17 at 100.00
Baa2
 
1,839,420
 
 
700
 
Tyler Health Facilities Development Corporation, Texas, Hospital Revenue Bonds, Mother Frances Hospital Regional Healthcare Center, Series 2007B, 5.000%, 7/01/37
7/17 at 100.00
Baa1
 
724,689
 
 
2,250
 
Tyler Health Facilities Development Corporation, Texas, Hospital Revenue Bonds, Mother Frances Hospital Regional Healthcare Center, Series 2007, 5.000%, 7/01/33
7/17 at 100.00
Baa1
 
2,340,360
 
 
18,655
 
Total Health Care
     
20,267,290
 

36
 
Nuveen Investments

 
 

 

 
Principal
   
Optional Call
       
 
Amount (000)
 
Description (1)
Provisions (2)
Ratings (3)
 
Value
 
     
Housing/Multifamily – 1.8% (1.2% 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 – NPFG Insured
2/13 at 101.00
Baa2
$
1,951,340
 
 
750
 
6.050%, 8/01/36 – NPFG Insured
2/13 at 101.00
Baa2
 
719,798
 
 
2,750
 
Total Housing/Multifamily
     
2,671,138
 
     
Housing/Single Family – 1.5% (1.0% of Total Investments)
         
 
2,250
 
Texas Department of Housing and Community Affairs, Single Family Mortgage Bonds, Series 2002B, 5.550%, 9/01/33 – NPFG Insured (Alternative Minimum Tax)
9/12 at 100.00
AA+
 
2,252,745
 
     
Long-Term Care – 1.0% (0.7% of Total Investments)
         
     
Bexar County, Texas, Health Facilities Development Corporation Revenue Bonds, Army Retirement Residence, Series 2007:
         
 
955
 
5.000%, 7/01/27
7/17 at 100.00
BBB
 
978,398
 
 
600
 
5.000%, 7/01/37
7/17 at 100.00
BBB
 
607,794
 
 
1,555
 
Total Long-Term Care
     
1,586,192
 
     
Materials – 2.0% (1.4% of Total Investments)
         
 
3,000
 
Cass County Industrial Development Corporation, Texas, Environmental Improvement Revenue Bonds, International Paper Company, Series 2000A, 6.600%, 3/15/24 (Alternative Minimum Tax)
9/12 at 100.00
BBB
 
3,011,640
 
     
Tax Obligation/General – 34.1% (23.1% of Total Investments)
         
 
650
 
Bexar County, Texas, General Obligation Bonds, Series 2004, 5.000%, 6/15/19
6/14 at 100.00
Aaa
 
698,978
 
 
2,000
 
Borger Independent School District, Hutchison County, Texas, General Obligation Bonds, Series 2006, 5.000%, 2/15/36
2/16 at 100.00
AAA
 
2,234,780
 
 
400
 
Calallen Independent School District, Nueces County, Texas, General Obligation Bonds, School Building Series 2008, 5.000%, 2/15/38
2/18 at 100.00
AAA
 
438,816
 
 
1,620
 
Cameron County, Texas, General Obligation Bonds, State Highway 550 Project, Series 2012, 5.000%, 2/15/32 – AGM Insured
2/22 at 100.00
AA–
 
1,855,564
 
 
1,190
 
Canutillo Independent School District, El Paso County, Texas, General Obligation Bonds, Series 2006A, 5.000%, 8/15/22
8/15 at 100.00
AAA
 
1,332,717
 
 
1,500
 
College Station, Texas, Certificates of Obligation, Series 2012, 5.000%, 2/15/32
2/21 at 100.00
AA
 
1,742,625
 
 
2,305
 
Corpus Christi, Texas, Combination Tax and Municipal Hotel Occupancy Tax Revenue Certificates of Obligation, Series 2002, 5.500%, 9/01/21 – AGM Insured
9/12 at 100.00
Aa2
 
2,314,635
 
 
1,750
 
El Paso County, Texas, Certificates of Obligation, Series 2001, 5.000%, 2/15/21 – AGM Insured
No Opt. Call
AA
 
2,153,935
 
     
Fort Bend County Municipal Utility District 25, Texas, General Obligation Bonds, Series 2005:
         
 
960
 
5.000%, 10/01/26 – FGIC Insured
10/12 at 100.00
A–
 
961,469
 
 
950
 
5.000%, 10/01/27 – FGIC Insured
10/12 at 100.00
A–
 
951,387
 
 
3,615
 
Frisco, Texas, General Obligation Bonds, Series 2006, 5.000%, 2/15/26 – FGIC Insured
2/16 at 100.00
Aa1
 
4,025,266
 
 
8,500
 
Grand Prairie Independent School District, Dallas County, Texas, General Obligation Bonds, Capital Appreciation Refunding Series 2009, 0.000%, 8/15/39
8/18 at 22.64
AA
 
1,546,150
 
 
3,255
 
Hutto Independent School District, Williamson County, Texas, General Obligation Bonds, Refunding Series 2012A, 0.000%, 8/01/45
8/21 at 24.48
A
 
491,733
 
 
4,900
 
Leander Independent School District, Williamson and Travis Counties, Texas, General Obligation Bonds, Series 2006, 0.000%, 8/15/45
8/14 at 17.78
AAA
 
837,263
 
 
1,000
 
Leander Independent School District, Williamson and Travis Counties, Texas, General Obligation Bonds, Series 2008, 0.000%, 8/15/36
8/17 at 33.01
AAA
 
288,330
 
 
365
 
Lone Star College System, Harris and Montgomery Counties, Texas, General Obligation Bonds, Series 2009, 5.000%, 8/15/34
8/19 at 100.00
AAA
 
433,813
 
 
1,750
 
Martin County Hospital District, Texas, Combination Limited Tax and Revenue Bonds, Series 2011A, 7.250%, 4/01/36
4/21 at 100.00
BBB
 
1,952,125
 
 
1,010
 
Mercedes Independent School District, Hidalgo County, Texas, General Obligation Bonds, Series 2005, 5.000%, 8/15/23
8/15 at 100.00
AAA
 
1,131,129
 
 
5,515
 
Midlothian Independent School District, Ellis County, Texas, General Obligation Bonds, Series 2005, 5.000%, 2/15/34
2/15 at 100.00
Aaa
 
5,989,068
 

Nuveen Investments
 
37

 
 

 

   
Nuveen Texas Quality Income Municipal Fund (continued)
NTX
 
Portfolio of Investments
August 31, 2012 (Unaudited)
 
 
Principal
   
Optional Call
       
 
Amount (000)
 
Description (1)
Provisions (2)
Ratings (3)
 
Value
 
     
Tax Obligation/General (continued)
         
$
1,500
 
Montgomery County, Texas, General Obligation Bonds, Refunding Series 2008B, 5.250%, 3/01/32
3/19 at 100.00
Aa1
$
1,746,555
 
 
2,000
 
Plano Independent School District, Collin County, Texas, General Obligation Bonds, Series 2008A, 5.250%, 2/15/34
2/18 at 100.00
Aaa
 
2,377,020
 
 
1,425
 
Port of Houston Authority, Harris County, Texas, General Obligation Bonds, Series 2010E, 0.000%, 10/01/35
No Opt. Call
AAA
 
596,961
 
     
Roma Independent School District, Texas, General Obligation Bonds, Series 2005:
         
 
1,110
 
5.000%, 8/15/22
8/15 at 100.00
AAA
 
1,243,122
 
 
1,165
 
5.000%, 8/15/23 – AGM Insured
8/15 at 100.00
AAA
 
1,304,718
 
 
1,250
 
Southside Independent School District, Bexar County, Texas, General Obligation Bonds, Series 2004A, 5.000%, 8/15/22
8/14 at 100.00
Aaa
 
1,352,550
 
 
5,000
 
Texas State, General Obligation Bonds, Transportation Commission Mobility Fund, Series 2006A, 5.000%, 4/01/33 (UB)
4/17 at 100.00
AAA
 
5,737,100
 
 
1,000
 
Texas State, General Obligation Bonds, Transportation Commission Mobility Fund, Series 2008, 5.000%, 4/01/30 (UB)
4/18 at 100.00
AAA
 
1,161,050
 
 
650
 
Texas State, General Obligation Bonds, Water Utility, Series 2001, 5.250%, 8/01/23
11/12 at 100.00
Aaa
 
650,000
 
 
3,025
 
Victoria Independent School District, Victoria County, Texas, General Obligation Bonds, Series 2007, 5.000%, 2/15/32
2/17 at 100.00
AAA
 
3,473,880
 
     
West Texas Independent School District, McLennan and Hill Counties, General Obligation Refunding Bonds, Series 1998:
         
 
45
 
0.000%, 8/15/22
8/13 at 61.20
AAA
 
27,274
 
 
45
 
0.000%, 8/15/24
8/13 at 54.88
AAA
 
24,429
 
     
White Settlement Independent School District, Tarrant County, Texas, General Obligation Bonds, Series 2006:
         
 
1,500
 
0.000%, 8/15/43
8/15 at 23.12
AAA
 
308,535
 
 
1,500
 
0.000%, 8/15/44
8/15 at 21.88
AAA
 
291,750
 
 
425
 
0.000%, 8/15/45
8/15 at 20.76
AAA
 
78,387
 
 
64,875
 
Total Tax Obligation/General
     
51,753,114
 
     
Tax Obligation/Limited – 17.1% (11.6% of Total Investments)
         
 
1,000
 
Bexar County, Texas, Venue Project Revenue Bonds, Refunding Series 2010, 5.250%, 8/15/38 – AGM Insured
8/19 at 100.00
AA–
 
1,110,780
 
 
7,940
 
Dallas Area Rapid Transit, Texas, Sales Tax Revenue Bonds, Senior Lien Refunding Series 2007, 5.000%, 12/01/36 – AMBAC Insured
12/16 at 100.00
AA+
 
9,040,880
 
 
1,390
 
Harris County Metropolitan Transit Authority, Texas, Sales and Use Tax Revenue Bonds, Series 2011A, 5.000%, 11/01/41
11/21 at 100.00
AA
 
1,589,131
 
     
Harris County-Houston Sports Authority, Texas, Revenue Bonds, Junior Lien Series 2001H:
         
 
1,720
 
0.000%, 11/15/34 – NPFG Insured
11/31 at 83.17
BBB
 
475,735
 
 
930
 
0.000%, 11/15/36 – NPFG Insured
11/31 at 73.51
BBB
 
225,265
 
 
3,265
 
0.000%, 11/15/38 – NPFG Insured
11/31 at 64.91
BBB
 
698,286
 
 
2,000
 
0.000%, 11/15/39 – NPFG Insured
11/31 at 60.98
BBB
 
401,820
 
     
Harris County-Houston Sports Authority, Texas, Revenue Bonds, Senior Lien Series 2001G:
         
 
2,250
 
5.250%, 11/15/22 – NPFG Insured
11/12 at 100.00
BBB
 
2,252,970
 
 
3,275
 
0.000%, 11/15/41 – NPFG Insured
11/31 at 53.78
BBB
 
568,540
 
 
2,000
 
Houston, Texas, Hotel Occupancy Tax and Special Revenue Bonds, Convention and Entertainment Project, Refunding Series 2012, 5.000%, 9/01/33
9/13 at 100.00
A2
 
2,057,340
 
 
1,470
 
Houston, Texas, Hotel Occupancy Tax and Special Revenue Bonds, Convention and Entertainment Project, Series 2001B, 0.000%, 9/01/32 – AMBAC Insured
No Opt. Call
A2
 
542,695
 
 
3,000
 
North Texas Tollway Authority, Special Projects System Revenue Bonds, Current Interest Series 2011D, 5.000%, 9/01/31
9/21 at 100.00
AA
 
3,507,570
 
 
2,000
 
North Texas Tollway Authority, Special Projects System Revenue Bonds, Series 2011A, 5.500%, 9/01/41
9/21 at 100.00
AA
 
2,378,780
 
 
1,000
 
Uptown Development Authority, Houston, Texas, Tax Increment Revenue Bonds, Infrastructure Improvement Facilities, Series 2009, 5.500%, 9/01/29
9/19 at 100.00
BBB
 
1,096,550
 
 
33,240
 
Total Tax Obligation/Limited
     
25,946,342
 

38
 
Nuveen Investments

 
 

 

 
Principal
   
Optional Call
       
 
Amount (000)
 
Description (1)
Provisions (2)
Ratings (3)
 
Value
 
     
Transportation – 15.2% (10.3% of Total Investments)
         
$
1,000
 
Austin, Texas, Airport System Prior Lien Revenue Bonds, Series 2003, 5.250%, 11/15/16 – NPFG Insured
11/13 at 100.00
A
$
1,048,940
 
     
Central Texas Regional Mobility Authority, Senior Lien Revenue Bonds, Series 2010:
         
 
2,945
 
0.000%, 1/01/36
No Opt. Call
BBB–
 
824,335
 
 
2,205
 
0.000%, 1/01/37
No Opt. Call
BBB–
 
583,046
 
 
2,160
 
0.000%, 1/01/38
No Opt. Call
BBB–
 
539,438
 
 
1,000
 
0.000%, 1/01/40
No Opt. Call
BBB–
 
223,240
 
 
3,260
 
Central Texas Regional Mobility Authority, Travis and Williamson Counties, Toll Road Revenue Bonds, Series 2005, 5.000%, 1/01/22 – FGIC Insured
1/15 at 100.00
BBB
 
3,333,220
 
 
1,000
 
Dallas-Fort Worth International Airport, Texas, Joint Revenue Bonds, Refunding Series 2010A, 5.000%, 11/01/42
11/20 at 100.00
A+
 
1,109,080
 
 
1,165
 
Dallas-Fort Worth International Airport, Texas, Joint Revenue Bonds, Refunding Series 2012B, 5.000%, 11/01/35
11/20 at 100.00
A+
 
1,304,392
 
 
2,000
 
Houston, Texas, Subordinate Lien Airport System Revenue Refunding Bonds, Series Series 2012A, 5.000%, 7/01/31 (Alternative Minimum Tax)
7/22 at 100.00
A+
 
2,239,720
 
 
3,000
 
Love Field Airport Modernization Corporation, Texas, Special Facilities Revenue Bonds, Southwest Airlines Company, Series 2010, 5.250%, 11/01/40
11/20 at 100.00
BBB–
 
3,235,050
 
 
395
 
North Texas Tollway Authority, First Tier System Revenue Refunding Bonds, Series 2008A, 5.750%, 1/01/40
1/18 at 100.00
A2
 
443,494
 
     
North Texas Tollway Authority, First Tier System Revenue Refunding Bonds, Series 2008B:
         
 
325
 
5.750%, 1/01/40
1/18 at 100.00
A2
 
364,900
 
 
225
 
5.750%, 1/01/40 – NPFG Insured
1/18 at 100.00
A2
 
252,623
 
 
2,500
 
North Texas Tollway Authority, First Tier System Revenue Refunding Bonds, Series 2008D, 0.000%, 1/01/36 – AGC Insured
No Opt. Call
AA–
 
840,425
 
 
950
 
North Texas Tollway Authority, Second Tier System Revenue Refunding Bonds, Series 2008F, 5.750%, 1/01/38
1/18 at 100.00
A3
 
1,042,701
 
     
North Texas Tollway Authority, System Revenue Bonds, First Tier Series 2009A:
         
 
100
 
6.100%, 1/01/28
1/19 at 100.00
A2
 
118,547
 
 
2,000
 
6.250%, 1/01/39
1/19 at 100.00
A2
 
2,303,140
 
 
2,500
 
San Antonio, Texas, Airport System Revenue Bonds, Refunding Series 2012, 5.000%, 7/01/27 Alternative Minimum Tax)
7/22 at 100.00
A+
 
2,845,300
 
 
1,250
 
Texas Turnpike Authority, Central Texas Turnpike System Revenue Bonds, First Tier Series 2002A, 0.000%, 8/15/29 – AMBAC Insured
11/12 at 37.62
BBB+
 
463,750
 
 
29,980
 
Total Transportation
     
23,115,341
 
     
U.S. Guaranteed – 17.4% (11.8% of Total Investments) (4)
         
 
610
 
Bexar County, Texas, General Obligation Bonds, Series 2004, 5.000%, 6/15/19 (Pre-refunded 6/15/14)
6/14 at 100.00
Aaa
 
661,210
 
     
Brazoria County Health Facilities Development Corporation, Texas, Revenue Bonds, Brazosport Memorial Hospital, Series 2004:
         
 
1,745
 
5.250%, 7/01/20 (Pre-refunded 7/01/14) – RAAI Insured
7/14 at 100.00
BBB– (4)
 
1,900,270
 
 
1,835
 
5.250%, 7/01/21 (Pre-refunded 7/01/14) – RAAI Insured
7/14 at 100.00
BBB– (4)
 
1,998,278
 
 
295
 
Coppell Independent School District, Dallas County, Texas, Unlimited Tax School Building and Refunding Bonds, Series 1992, 0.000%, 8/15/14 – NPFG Insured (ETM)
No Opt. Call
Aa3 (4)
 
292,180
 
     
Houston Community College System, Texas, Limited Tax General Obligation Bonds, Series 2003:
         
 
2,500
 
5.000%, 2/15/20 (Pre-refunded 2/15/13) – AMBAC Insured
2/13 at 100.00
AA+ (4)
 
2,553,400
 
 
2,235
 
5.000%, 2/15/21 (Pre-refunded 2/15/13) – AMBAC Insured
2/13 at 100.00
AA+ (4)
 
2,282,740
 
 
5,000
 
Houston, Texas, General Obligation Bonds, Series 2005E, 5.000%, 3/01/23 (Pre-refunded 3/01/15) – AMBAC Insured
3/15 at 100.00
AA (4)
 
5,570,899
 
 
40
 
Lower Colorado River Authority, Texas, Revenue Bonds, Series 2008, 5.750%, 5/15/37 (Pre-refunded 5/15/15)
5/15 at 100.00
A1 (4)
 
45,747
 
 
1,000
 
Mansfield Independent School District, Tarrant County, Texas, General Obligation Bonds, Series 2004, 5.000%, 2/15/20 (Pre-refunded 2/15/14)
2/14 at 100.00
AAA
 
1,065,070
 

Nuveen Investments
 
39

 
 

 

   
Nuveen Texas Quality Income Municipal Fund (continued)
NTX
 
Portfolio of Investments
August 31, 2012 (Unaudited)
 
 
Principal
   
Optional Call
       
 
Amount (000)
 
Description (1)
Provisions (2)
Ratings (3)
 
Value
 
     
U.S. Guaranteed (4) (continued)
         
$
1,000
 
North Central Texas Health Facilities Development Corporation, Hospital Revenue Bonds, Presbyterian Healthcare System, Series 1996A, 5.750%, 6/01/26 – NPFG Insured (ETM)
No Opt. Call
Aaa
$
1,298,970
 
 
2,500
 
Retama Development Corporation, Texas, Special Facilities Revenue Bonds, Retama Park Racetrack, Series 1993, 8.750%, 12/15/18 (Pre-refunded 12/15/17)
12/17 at 100.00
Aaa
 
3,504,575
 
 
1,260
 
Rowlett, Rockwall and Dallas Counties, Texas, Waterworks and Sewerage System Revenue Bonds, Series 2004A, 5.000%, 3/01/22 (Pre-refunded
3/14 at 100.00
AA– (4)
 
1,348,742
 
         3/01/14) – NPFG Insured          
 
1,140
 
Sunnyvale School District, Texas, General Obligation Bonds, Series 2004, 5.250%, 2/15/25 (Pre-refunded 2/15/14)
2/14 at 100.00
AAA
 
1,222,639
 
 
1,500
 
Texas, General Obligation Refunding Bonds, Public Finance Authority, Series 2002, 5.000%, 10/01/18 (Pre-refunded 10/01/12)
10/12 at 100.00
Aaa
 
1,506,045
 
     
West Texas Independent School District, McLennan and Hill Counties, General Obligation Refunding Bonds, Series 1998:
         
 
955
 
0.000%, 8/15/22 (Pre-refunded 8/15/13)
8/13 at 61.20
Aaa
 
582,378
 
 
955
 
0.000%, 8/15/24 (Pre-refunded 8/15/13)
8/13 at 54.88
Aaa
 
522,184
 
 
24,570
 
Total U.S. Guaranteed
     
26,355,327
 
     
Utilities – 15.9% (10.8% of Total Investments)
         
 
2,560
 
Brazos River Authority, Texas, Pollution Control Revenue Refunding Bonds, TXU Electric Company, Series 1999C, 7.700%, 3/01/32 (Alternative Minimum Tax)
4/13 at 101.00
Ca
 
355,610
 
 
5,000
 
Brownsville, Texas, Utility System Priority Revenue Bonds, Series 2005A, 5.000%, 9/01/27 – AMBAC Insured
9/15 at 100.00
A+
 
5,284,099
 
 
2,000
 
Bryan, Brazos County, Texas, Electric System Revenue Bonds, Series 2009, 5.000%, 7/01/34
7/17 at 100.00
A+
 
2,161,340
 
 
3,000
 
Lower Colorado River Authority, Texas, Refunding Revenue Bonds, Series 2010A, 5.000%, 5/15/40
5/20 at 100.00
A1
 
3,323,910
 
 
1,960
 
Lower Colorado River Authority, Texas, Revenue Bonds, Series 2008, 5.750%, 5/15/37
5/15 at 100.00
A1
 
2,150,120
 
 
1,500
 
Matagorda County Navigation District Number One, Texas, Pollution Control Revenue Refunding Bonds, Central Power and Light Company Project, Series 2009A, 6.300%, 11/01/29
7/19 at 102.00
BBB
 
1,743,960
 
 
1,000
 
Sam Rayburn Municipal Power Agency, Texas, Power Supply System Revenue Refunding Bonds, Series 2012, 5.000%, 10/01/20 (WI/DD, Settling 9/19/12)
No Opt. Call
BBB+
 
1,186,510
 
     
Texas Municipal Gas Acquisition and Supply Corporation I, Gas Supply Revenue Bonds, Senior Lien Series 2008D:
         
 
1,340
 
5.625%, 12/15/17
No Opt. Call
A–
 
1,498,710
 
 
3,000
 
6.250%, 12/15/26
No Opt. Call
A–
 
3,570,870
 
 
1,000
 
Texas Municipal Gas Acquisition and Supply Corporation I, Gas Supply Revenue Bonds, Series 2006A, 5.250%, 12/15/20
No Opt. Call
A–
 
1,085,010
 
     
Texas Municipal Power Agency, Revenue Bonds, Transmission Refunding Series 2010:
         
 
640
 
5.000%, 9/01/34
9/20 at 100.00
A+
 
720,026
 
 
1,000
 
5.000%, 9/01/40
9/20 at 100.00
A+
 
1,115,330
 
 
24,000
 
Total Utilities
     
24,195,495
 
     
Water and Sewer – 14.2% (9.6% of Total Investments)
         
 
2,500
 
Bexar Metropolitan Water District, Texas, Waterworks System Revenue Bonds, Refunding Series 2010, 5.875%, 5/01/40
5/20 at 100.00
A1
 
2,873,425
 
 
2,500
 
Canadian River Municipal Water Authority, Texas, Contract Revenue Bonds, Conjunctive Use Groundwater Supply Project, Subordinate Lien Series 2011, 5.000%, 2/15/31
2/21 at 100.00
AA
 
2,875,975
 
     
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
 
1,061,692
 
 
1,030
 
5.000%, 12/15/21 – FGIC Insured
12/14 at 100.00
AA
 
1,084,096
 
 
1,000
 
El Paso, Texas, Water and Sewer Revenue Bonds, Refunding Series 2008C, 5.375%, 3/01/29
3/18 at 100.00
AA+
 
1,199,450
 
 
3,000
 
Houston, Texas, First Lien Combined Utility System Revenue Bonds, Series 2004A, 5.250%, 5/15/23 – FGIC Insured
5/14 at 100.00
AA
 
3,228,630
 

40
 
Nuveen Investments

 
 

 

 
Principal
   
Optional Call
       
 
Amount (000)
 
Description (1)
Provisions (2)
Ratings (3)
 
Value
 
     
Water and Sewer (continued)
         
     
Irving, Texas, Subordinate Lien Waterworks and Sewerage Revenue Bonds, Series 2004:
         
$
1,680
 
5.000%, 8/15/22 – AMBAC Insured
8/14 at 100.00
Aa1
$
1,824,010
 
 
1,760
 
5.000%, 8/15/23 – AMBAC Insured
8/14 at 100.00
Aa1
 
1,910,867
 
 
4,000
 
Laredo, Webb County, Texas, Waterworks and Sewer System Revenue Bonds, Series 2010, 5.250%, 3/01/40
3/20 at 100.00
AA–
 
4,666,759
 
 
710
 
North Fort Bend Water Authority, Texas, Water System Revenue Bonds, Series 2011, 5.000%, 12/15/36 – AGM Insured
12/21 at 100.00
AA–
 
787,553
 
 
19,185
 
Total Water and Sewer
     
21,512,457
 
$
243,440
 
Total Investments (cost $205,814,680) – 147.3%
     
223,619,909
 
     
Floating Rate Obligations – (2.6)%
     
(3,960,000
     
MuniFund Term Preferred Shares, at Liquidation Value – (46.7)% (5)
     
(70,920,000
     
Other Assets Less Liabilities – 2.0%
     
3,120,805
 
     
Net Assets Applicable to Common Shares – 100%
   
$
151,860,714
 

(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 highest of Standard & Poor’s Group (“Standard & Poor’s”), Moody’s Investors Service, Inc. (“Moody’s”) or Fitch, Inc. (“Fitch”) rating. Ratings below BBB by Standard & Poor’s, Baa by Moody’s or BBB by Fitch are considered to be below investment grade. Holdings designated N/R are not rated by any of these national rating agencies.
(4)
 
Backed by an escrow or trust containing sufficient U.S. Government or U.S. Government agency securities, which ensure the timely payment of principal and interest. Certain bonds backed by U.S. Government or agency securities are regarded as having an implied rating equal to the rating of such securities.
(5)
 
MuniFund Term Preferred Shares, at Liquidation Value as a percentage of Total Investments is 31.7%.
WI/DD
 
Investment, or portion of investment, purchased on a when-issued or delayed delivery basis.
(ETM)
 
Escrowed to maturity.
(UB)
 
Underlying bond of an inverse floating rate trust reflected as a financing transaction. See Notes to Financial Statements, Footnote 1 – General Information and Significant Accounting Policies, Inverse Floating Rate Securities for more information.

See accompanying notes to financial statements.

Nuveen Investments
 
41

 
 

 

   
Statement of
   
Assets & Liabilities
   
August 31, 2012 (Unaudited)

     
Arizona
Premium
Income
(NAZ
)  
Arizona
Dividend
Advantage
(NFZ
)  
Arizona
Dividend
Advantage 2
(NKR
)  
Arizona
Dividend
Advantage 3
(NXE
)  
Texas
Quality
Income
(NTX
)
Assets
                               
Investments, at value (cost $85,508,780, $31,816,208, $50,800,963, $61,795,261 and $205,814,680, respectively)
 
$
94,954,342
 
$
34,584,006
 
$
54,864,025
 
$
66,379,517
 
$
223,619,909
 
Cash
   
   
1,095,297
   
695,191
   
762,634
   
1,913,746
 
Receivables:
                               
Interest
   
920,579
   
346,244
   
542,444
   
657,971
   
2,587,915
 
Investments sold
   
3,447,718
   
   
3,533,911
   
   
780,000
 
Deferred assets:
                               
Offering costs
   
124,631
   
308,890
   
383,912
   
470,037
   
949,889
 
Shelf offering costs
   
   
   
   
   
125,000
 
Other assets
   
6,053
   
1,890
   
7,422
   
7,696
   
14,164
 
Total assets
   
99,453,323
   
36,336,327
   
60,026,905
   
68,277,855
   
229,990,623
 
Liabilities
                               
Cash overdraft
   
8,863
   
   
   
   
 
Floating rate obligations
   
   
   
   
   
3,960,000
 
Payables:
                               
Common share dividends
   
271,311
   
92,135
   
159,435
   
182,316
   
554,791
 
Interest
   
28,168
   
18,963
   
31,989
   
50,377
   
135,928
 
Investments purchased
   
2,953,781
   
829,675
   
2,483,099
   
   
2,279,520
 
Offering costs
   
   
128,412
   
103,038
   
127,933
   
 
MuniFund Term Preferred (MTP) Shares, at liquidation value
   
   
11,100,000
   
18,725,000
   
20,846,000
   
70,920,000
 
Variable Rate MuniFund Term Preferred (VMTP) Shares, at liquidation value
   
28,000,000
   
   
   
   
 
Accrued expenses:
                               
Management fees
   
51,594
   
18,508
   
30,778
   
36,906
   
118,117
 
Directors’/Trustees’ fees
   
411
   
151
   
245
   
291
   
955
 
Shelf offering costs
   
   
   
   
   
80,864
 
Other
   
122,858
   
201,068
   
133,898
   
315,558
   
79,734
 
Total liabilities
   
31,436,986
   
12,388,912
   
21,667,482
   
21,559,381
   
78,129,909
 
Net assets applicable to Common shares
 
$
68,016,337
 
$
23,947,415
 
$
38,359,423
 
$
46,718,474
 
$
151,860,714
 
Common shares outstanding
   
4,472,678
   
1,548,312
   
2,439,730
   
3,066,030
   
9,602,535
 
Net asset value per Common share outstanding (net assets applicable to Common shares, divided by Common shares outstanding)
 
$
15.21
 
$
15.47
 
$
15.72
 
$
15.24
 
$
15.81
 
Net assets applicable to Common shares consist of:
                               
Common shares, $.01 par value per share
 
$
44,727
 
$
15,483
 
$
24,397
 
$
30,660
 
$
96,025
 
Paid-in surplus
   
60,454,674
   
21,781,665
   
34,415,536
   
43,099,258
   
135,888,200
 
Undistributed (Over-distribution of) net investment income
   
1,200,748
   
(55,852
)
 
111,872
   
(76,156
)
 
618,510
 
Accumulated net realized gain (loss)
   
(3,129,374
)
 
(561,679
)
 
(255,444
)
 
(919,544
)
 
(2,547,250
)
Net unrealized appreciation (depreciation)
   
9,445,562
   
2,767,798
   
4,063,062
   
4,584,256
   
17,805,229
 
Net assets applicable to Common shares
 
$
68,016,337
 
$
23,947,415
 
$
38,359,423
 
$
46,718,474
 
$
151,860,714
 
Authorized shares:
                               
Common
   
200,000,000
   
Unlimited
   
Unlimited
   
Unlimited
   
Unlimited
 
Preferred
   
1,000,000
   
Unlimited
   
Unlimited
   
Unlimited
   
Unlimited
 

   
See accompanying notes to financial statements.
     
42
 
Nuveen Investments
 
 
 

 

   
Statement of
   
Operations
     
Six Months ended August 31, 2012
     
(Unaudited)

     
Arizona
Premium
Income
(NAZ
)  
Arizona
Dividend
Advantage
(NFZ
)  
Arizona
Dividend
Advantage 2
(NKR
)  
Arizona
Dividend
Advantage 3
(NXE
)  
Texas
Quality
Income
(NTX
)
Investment Income
 
$
2,294,120
 
$
835,151
 
$
1,376,742
 
$
1,637,036
 
$
5,109,820
 
Expenses
                               
Management fees
   
304,127
   
108,930
   
181,304
   
217,553
   
696,696
 
Shareholders’ servicing agent fees and expenses
   
9,939
   
2,094
   
8,766
   
8,717
   
12,651
 
Interest expense and amortization of offering costs
   
189,812
   
162,264
   
251,912
   
368,269
   
961,531
 
Custodian’s fees and expenses
   
10,085
   
6,418
   
8,285
   
9,245
   
22,075
 
Directors’/Trustees’ fees and expenses
   
1,319
   
483
   
785
   
932
   
3,063
 
Professional fees
   
15,955
   
14,517
   
15,039
   
16,444
   
19,013
 
Shareholders’ reports – printing and mailing expenses
   
21,937
   
18,828
   
24,910
   
27,396
   
49,464
 
Stock exchange listing fees
   
4,172
   
196
   
7,698
   
8,307
   
11,783
 
Investor relations expense
   
4,432
   
1,855
   
2,958
   
3,359
   
11,225
 
Reorganization expense
   
80,000
   
170,000
   
95,000
   
275,000
   
 
Other expenses
   
9,778
   
11,715
   
12,442
   
12,404
   
16,290
 
Total expenses before custodian fee credit and expense reimbursement
   
651,556
   
497,300
   
609,099
   
947,626
   
1,803,791
 
Custodian fee credit
   
(174
)
 
(168
)
 
(125
)
 
(339
)
 
(1,816
)
Expense reimbursement
   
   
   
(2,431
)
 
   
 
Net expenses
   
651,382
   
497,132
   
606,543
   
947,287
   
1,801,975
 
Net investment income (loss)
   
1,642,738
   
338,019
   
770,199
   
689,749
   
3,307,845
 
Realized and Unrealized Gain (Loss)
                               
Net realized gain (loss) from investments
   
76,507
   
89,149
   
37,026
   
20,602
   
142,840
 
Change in net unrealized appreciation (depreciation) of investments
   
1,716,447
   
754,153
   
983,594
   
1,235,462
   
3,764,046
 
Net realized and unrealized gain (loss)
   
1,792,954
   
843,302
   
1,020,620
   
1,256,064
   
3,906,886
 
Net increase (decrease) in net assets applicable to Common shares from operations
 
$
3,435,692
 
$
1,181,321
 
$
1,790,819
 
$
1,945,813
 
$
7,214,731
 
 
See accompanying notes to financial statements.
 
Nuveen Investments
 
43

 
 

 

   
Statement of
   
Changes in Net Assets (Unaudited)

   
Arizona
Premium Income (NAZ)
 
Arizona
Dividend Advantage (NFZ)
 
Arizona
Dividend Advantage 2 (NKR)
 
     
Six Months
Ended
8/31/12
   
Year
Ended
2/29/12
   
Six Months
Ended
8/31/12
   
Year
Ended
2/29/12
   
Six Months
Ended
8/31/12
   
Year
Ended
2/29/12
 
Operations
                                     
Net investment income (loss)
 
$
1,642,738
 
$
3,565,697
 
$
338,019
 
$
1,008,402
 
$
770,199
 
$
1,769,263
 
Net realized gain (loss) from investments
   
76,507
   
109,602
   
89,149
   
53,319
   
37,026
   
307,097
 
Change in net unrealized appreciation (depreciation) of investments
   
1,716,447
   
6,768,696
   
754,153
   
2,855,887
   
983,594
   
3,579,761
 
Distributions to Auction Rate Preferred Shareholders from net investment income
   
   
(38,807
)
 
   
   
   
 
Net increase (decrease) in net assets applicable to Common shares from operations
   
3,435,692
   
10,405,188
   
1,181,321
   
3,917,608
   
1,790,819
   
5,656,121
 
Distributions to Common Shareholders
                                     
From net investment income
   
(1,717,089
)
 
(3,393,258
)
 
(582,939
)
 
(1,198,393
)
 
(980,711
)
 
(1,961,397
)
From accumulated net realized gains
   
   
   
   
   
   
 
Decrease in net assets applicable to Common shares from distributions to Common shareholders
   
(1,717,089
)
 
(3,393,258
)
 
(582,939
)
 
(1,198,393
)
 
(980,711
)
 
(1,961,397
)
Capital Share Transactions
                                     
Net proceeds from Common shares issued to shareholders due to reinvestment of distributions
   
29,710
   
   
   
   
2,836
   
 
Net increase (decrease) in net assets applicable to Common shares from capital share transactions
   
29,710
   
   
   
   
2,836
   
 
Net increase (decrease) in net assets applicable to Common shares
   
1,748,313
   
7,011,930
   
598,382
   
2,719,215
   
812,944
   
3,694,724
 
Net assets applicable to Common shares at the beginning of period
   
66,268,024
   
59,256,094
   
23,349,033
   
20,629,818
   
37,546,479
   
33,851,755
 
Net assets applicable to Common shares at the end of period
 
$
68,016,337
 
$
66,268,024
 
$
23,947,415
 
$
23,349,033
 
$
38,359,423
 
$
37,546,479
 
Undistributed (Over-distribution of) net investment income at the end of period
 
$
1,200,748
 
$
1,275,099
 
$
(55,852
)
$
189,068
 
$
111,872
 
$
322,384
 

   
See accompanying notes to financial statements.
     
44
 
Nuveen Investments

 
 

 

   
Arizona
Dividend Advantage 3 (NXE)
 
Texas
Quality Income (NTX)
 
     
Six Months
Ended
8/31/12
   
Year
Ended
2/29/12
   
Six Months
Ended
8/31/12
   
Year
Ended
2/29/12
 
Operations
                         
Net investment income (loss)
 
$
689,749
 
$
2,012,239
 
$
3,307,845
 
$
7,182,013
 
Net realized gain (loss) from investments
   
20,602
   
136,252
   
142,840
   
(1,681,044
)
Change in net unrealized appreciation (depreciation) of investments
   
1,235,462
   
4,821,432
   
3,764,046
   
15,782,348
 
Distributions to Auction Rate Preferred Shareholders from net investment income
   
   
(4,515
)
 
   
 
Net increase (decrease) in net assets applicable to Common shares from operations
   
1,945,813
   
6,965,408
   
7,214,731
   
21,283,317
 
Distributions to Common Shareholders
                         
From net investment income
   
(1,131,365
)
 
(2,317,919
)
 
(3,814,560
)
 
(8,211,637
)
From accumulated net realized gains
   
   
   
   
(248,069
)
Decrease in net assets applicable to Common shares from distributions to Common shareholders
   
(1,131,365
)
 
(2,317,919
)
 
(3,814,560
)
 
(8,459,706
)
Capital Share Transactions
                         
Net proceeds from Common shares issued to shareholders due to reinvestment of distributions
   
   
   
238,106
   
548,918
 
Net increase (decrease) in net assets applicable to Common shares from capital share transactions
   
   
   
238,106
   
548,918
 
Net increase (decrease) in net assets applicable to Common shares
   
814,448
   
4,647,489
   
3,638,277
   
13,372,529
 
Net assets applicable to Common shares at the beginning of period
   
45,904,026
   
41,256,537
   
148,222,437
   
134,849,908
 
Net assets applicable to Common shares at the end of period
 
$
46,718,474
 
$
45,904,026
 
$
151,860,714
 
$
148,222,437
 
Undistributed (Over-distribution of) net investment income at the end of period
 
$
(76,156
)
$
365,460
 
$
618,510
 
$
1,125,225
 

See accompanying notes to financial statements.
     
Nuveen Investments
 
45

 
 

 

   
Statement of
   
Cash Flows
   
Six Months ended August 31, 2012 (Unaudited)

     
Arizona
Premium
Income
(NAZ
)  
Arizona
Dividend
Advantage
(NFZ
)  
Arizona
Dividend
Advantage 2
(NKR
)
Cash Flows from Operating Activities:
                   
Net Increase (Decrease) In Net Assets Applicable to Common Shares from Operations
 
$
3,435,692
 
$
1,181,321
 
$
1,790,819
 
Adjustments to reconcile the net increase (decrease) in net assets applicable to Common shares from operations to net cash provided by (used in) operating activities:
                   
Purchases of investments
   
(7,185,227
)
 
(3,636,399
)
 
(4,399,126
)
Proceeds from sales and maturities of investments
   
7,347,973
   
3,753,677
   
6,019,950
 
Amortization (Accretion) of premiums and discounts, net
   
9,348
   
24,691
   
(7,238
)
(Increase) Decrease in:
                   
Receivable for interest
   
21,977
   
2,578
   
35,476
 
Receivable for investments sold
   
(3,068,826
)
 
   
(3,298,384
)
Other assets
   
(3,555
)
 
(500
)
 
(5,797
)
Increase (Decrease) in:
                   
Payable for interest
   
1,813
   
(633
)
 
(1,069
)
Payable for investments purchased
   
2,953,781
   
829,675
   
2,483,099
 
Accrued management fees
   
4,033
   
1,498
   
4,618
 
Accrued Directors’/Trustees’ fees
   
(581
)
 
(212
)
 
(348
)
Accrued other expenses
   
81,158
   
167,846
   
96,678
 
Net realized (gain) loss from investments
   
(76,507
)
 
(89,149
)
 
(37,026
)
Change in net unrealized (appreciation) depreciation of investments
   
(1,716,447
)
 
(754,153
)
 
(983,594
)
Taxes paid on undistributed capital gains
   
   
(103
)
 
 
Net cash provided by (used in) operating activities
   
1,804,632
   
1,480,137
   
1,698,058
 
Cash Flows from Financing Activities:
                   
(Increase) Decrease in:
                   
Deferred offering costs
   
(44,341
)
 
49,124
   
61,054
 
Deferred shelf offering costs
   
   
   
 
Increase (Decrease) in:
                   
Cash overdraft balance
   
(73,011
)
 
   
(85,698
)
Payable for offering costs
   
   
24,005
   
(444
)
Accrued shelf offering costs
   
   
   
 
Cash distributions paid to Common shareholders
   
(1,687,280
)
 
(587,903
)
 
(977,779
)
Net cash provided by (used in) financing activities
   
(1,804,632
)
 
(514,774
)
 
(1,002,867
)
Net Increase (Decrease) in Cash
   
   
965,363
   
695,191
 
Cash at the beginning of period
   
   
129,934
   
 
Cash at the End of Period
 
$
 
$
1,095,297
 
$
695,191
 
Supplemental Disclosure of Cash Flow Information
                   
Non-cash financing activities not included herein consist of reinvestments of Common share distributions as follows:

                     
     
Arizona
   
Arizona
   
Arizona
 
     
Premium
   
Dividend
   
Dividend
 
     
Income
   
Advantage
   
Advantage 2
 
     
(NAZ
)
 
(NFZ
)
 
(NKR
)
   
$
29,710
 
$
 
$
2,836
 

Cash paid for interest (excluding amortization of offering costs) was as follows:
     
Arizona
   
Arizona
   
Arizona
 
     
Premium
   
Dividend
   
Dividend
 
     
Income
   
Advantage
   
Advantage 2
 
     
(NAZ
)
 
(NFZ
)
 
(NKR
)
   
$
170,938
 
$
113,772
 
$
191,928
 

See accompanying notes to financial statements.

46
 
Nuveen Investments

 
 

 
 
     
Arizona
Dividend
Advantage 3
(NXE
)  
Texas
Quality
Income
(NTX
)
Cash Flows from Operating Activities:
             
Net Increase (Decrease) In Net Assets Applicable to Common Shares from Operations
 
$
1,945,813
 
$
7,214,731
 
Adjustments to reconcile the net increase (decrease) in net assets applicable to Common shares from operations to net cash provided by (used in) operating activities:
             
Purchases of investments
   
(3,992,272
)
 
(16,366,610
)
Proceeds from sales and maturities of investments
   
4,593,776
   
15,032,759
 
Amortization (Accretion) of premiums and discounts, net
   
22,589
   
32,820
 
(Increase) Decrease in:
             
Receivable for interest
   
(4,191
)
 
115,790
 
Receivable for investments sold
   
614,402
   
1,223,681
 
Other assets
   
(5,821
)
 
(8,738
)
Increase (Decrease) in:
             
Payable for interest
   
(1,676
)
 
(4,519
)
Payable for investments purchased
   
   
(1,534,635
)
Accrued management fees
   
2,815
   
9,016
 
Accrued Directors’/Trustees’ fees
   
(414
)
 
(1,362
)
Accrued other expenses
   
278,453
   
(1,610
)
Net realized (gain) loss from investments
   
(20,602
)
 
(142,840
)
Change in net unrealized (appreciation) depreciation of investments
   
(1,235,462
)
 
(3,764,046
)
Taxes paid on undistributed capital gains
   
   
(3,626
)
Net cash provided by (used in) operating activities
   
2,197,410
   
1,800,811
 
Cash Flows from Financing Activities:
             
(Increase) Decrease in:
             
Deferred offering costs
   
67,674
   
109,239
 
Deferred shelf offering costs
   
   
(125,000
)
Increase (Decrease) in:
             
Cash overdraft balance
   
(364,407
)
 
 
Payable for offering costs
   
3,883
   
(39,399
)
Accrued shelf offering costs
   
   
80,864
 
Cash distributions paid to Common shareholders
   
(1,141,926
)
 
(3,637,642
)
Net cash provided by (used in) financing activities
   
(1,434,776
)
 
(3,611,938
)
Net Increase (Decrease) in Cash
   
762,634
   
(1,811,127
)
Cash at the beginning of period
   
   
3,724,873
 
Cash at the End of Period
 
$
762,634
 
$
1,913,746
 
Supplemental Disclosure of Cash Flow Information
             

Non-cash financing activities not included herein consist of reinvestments of Common share distributions as follows:
 
     
Arizona
   
Texas
 
     
Dividend
   
Quality
 
     
Advantage 3
   
Income
 
     
(NXE
)
 
(NTX
)
   
$
 
$
238,106
 
 
Cash paid for interest (excluding amortization of offering costs) was as follows:
 
     
Arizona
   
Texas
 
     
Dividend
   
Quality
 
     
Advantage 3
   
Income
 
     
(NXE
)
 
(NTX
)
   
$
302,271
 
$
823,822
 

See accompanying notes to financial statements.
     
Nuveen Investments
 
47

 
 

 

   
Financial
   
Highlights (Unaudited)
     
  Selected data for a Common share outstanding throughout each period:

         
Investment Operations
 
Less Distributions
             
   
Beginning
Common
Share
Net Asset
Value
 
Net
Investment
Income
(Loss)
 
Net
Realized/
Unrealized
Gain (Loss)
 
Distributions
from Net
Investment
Income to
Auction Rate
Preferred
Shareholders
(a)
Distributions
from
Capital
Gains to
Auction Rate
Preferred
Shareholders
(a)
Total
 
Net
Investment
Income to
Common
Shareholders
 
Capital
Gains to
Common
Shareholders
 
Total
 
Discount
from
Common
Shares
Repurchased
and
Retired
 
Ending
Common
Share
Net Asset
Value
 
Ending
Market
Value
 
Arizona Premium Income (NAZ)
 
Year Ended 2/28–2/29:
 
2013(g)
 
$
14.82
 
$
.37
 
$
.40
 
$
 
$
 
$
.77
 
$
(.38
)
$
 
$
(.38
)
$
 
$
15.21
 
$
15.84
 
2012
   
13.25
   
.80
   
1.54
   
(.01
)
 
   
2.33
   
(.76
)
 
   
(.76
)
 
   
14.82
   
14.61
 
2011(f)
   
13.99
   
.49
   
(.77
)
 
(.02
)
 
   
(.30
)
 
(.44
)
 
   
(.44
)
 
   
13.25
   
12.32
 
Year Ended 7/31:
                                                                         
2010
   
12.92
   
.84
   
.96
   
(.03
)
 
   
1.77
   
(.70
)
 
   
(.70
)
 
   
13.99
   
13.34
 
2009
   
13.00
   
.85
   
(.16
)
 
(.13
)
 
   
.56
   
(.64
)
 
   
(.64
)
 
   
12.92
   
12.29
 
2008
   
14.00
   
.88
   
(1.05
)
 
(.22
)
 
   
(.39
)
 
(.61
)
 
   
(.61
)
 
   
13.00
   
13.35
 
2007
   
14.10
   
.83
   
(.10
)
 
(.22
)
 
   
.51
   
(.61
)
 
   
(.61
)
 
   
14.00
   
13.07
 
Arizona Dividend Advantage (NFZ)
 
Year Ended 2/28–2/29:
 
2013(g)
   
15.08
   
.22
   
.55
   
   
   
.77
   
(.38
)
 
   
(.38
)
 
   
15.47
   
15.15
 
2012
   
13.32
   
.65
   
1.88
   
   
   
2.53
   
(.77
)
 
   
(.77
)
 
   
15.08
   
14.39
 
2011(f)
   
14.20
   
.44
   
(.86
)
 
(.01
)
 
   
(.43
)
 
(.45
)
 
   
(.45
)
 
   
13.32
   
12.14
 
Year Ended 7/31:
                                                                         
2010
   
12.66
   
.85
   
1.41
   
(.03
)
 
   
2.23
   
(.69
)
 
   
(.69
)
 
   
14.20
   
14.19
 
2009
   
13.26
   
.84
   
(.67
)
 
(.14
)
 
   
.03
   
(.63
)
 
   
(.63
)
 
 
12.66
   
12.14
 
2008
   
14.48
   
.91
   
(1.23
)
 
(.25
)
 
 
(.57
)
 
(.64
)
 
(.01
)
 
(.65
)
 
   
13.26
   
13.70
 
2007
   
14.77
   
.91
   
(.17
)
 
(.24
)
 
(.02
)
 
.48
   
(.71
)
 
(.06
)
 
(.77
)
 
   
14.48
   
13.35
 
 
(a)
The amounts shown are based on Common share equivalents.
(b)
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.
 
48
 
Nuveen Investments

 
 

 

       
Ratios/Supplemental Data
 
   
Total Returns
       
Ratios to Average Net Assets
Applicable to Common Shares
Before Reimbursement(c)
 
Ratios to Average Net Assets
Applicable to Common Shares
After Reimbursement(c)(d)
       
                                   
   
Based
on
Market
Value
(b)
Based
on
Common
Share Net
Asset
Value
(b)
Ending
Net
Assets
Applicable
to Common
Shares (000)
 
Expenses
(e)
Net
Investment
Income
(Loss)
 
Expenses
(e)
Net
Investment
Income
(Loss)
 
Portfolio
Turnover
Rate
 
                                                   
     
11.22
%
 
5.29
%
$
68,016
   
1.82
%**
 
4.99
%**
 
N/A
   
N/A
   
8
%
     
25.48
   
18.08
   
66,268
   
1.52
   
5.73
   
N/A
   
N/A
   
7
 
     
(4.55
)
 
(2.23
)
 
59,256
   
1.19
**   
6.11
**   
N/A
   
N/A
   
5
 
                                                   
     
14.47
   
13.94
   
62,549
   
1.21
   
6.13
   
N/A
   
N/A
   
8
 
     
(2.61
)
 
4.73
   
57,755
   
1.33
   
7.01
   
N/A
   
N/A
   
25
 
     
7.10
   
(2.87
)
 
58,097
   
1.40
   
6.42
   
N/A
   
N/A
   
21
 
     
(.22
)
 
3.62
   
62,534
   
1.32
   
5.81
   
N/A
   
N/A
   
13
 
                                                   
                                                   
     
8.00
   
5.14
   
23,947
   
3.47
**   
3.54
**   
N/A
   
N/A
   
11
 
     
25.66
   
19.56
   
23,349
   
2.95
   
4.62
   
N/A
   
N/A
   
8
 
     
(11.47
)
 
(3.10
)
 
20,630
   
2.29
**   
5.37
**   
2.23
%**
 
5.43
%**
 
5
 
                                                   
     
23.34
   
17.93
   
21,984
   
1.35
   
6.12
   
1.23
   
6.23
   
3
 
     
(6.12
)
 
.58
   
19,605
   
1.51
   
6.70
   
1.30
   
6.91
   
6
 
     
7.72
   
(4.09
)
 
20,552
   
1.58
   
6.14
   
1.31
   
6.42
   
10
 
     
(11.63
)
 
3.24
   
22,439
   
1.48
   
5.74
   
1.14
   
6.08
   
19
 
 
(c)
Ratios do not reflect the effect of dividend payments to Auction Rate Preferred shareholders, where applicable; Net Investment Income (Loss) ratios reflect income earned and expenses incurred on assets attributable to Auction Rate Preferred Shares (ARPS), MTP Shares and/or VMTP Shares, where applicable.
(d)
Ratios do not reflect the effect of custodian fee credits earned on the Fund’s net cash on deposit with the custodian bank, where applicable. As of January 31, 2011, the Adviser is no longer reimbursing Arizona Dividend Advantage (NFZ) for any fees and expenses.
(e)
The expense ratios reflect, among other things, all interest expense and other costs related to MTP Shares, VMTP Shares and/or the interest expense deemed to have been paid by the Fund on the floating rate certificates issued by the special purpose trusts for the self-deposited inverse floaters held by the Fund, where applicable, each as described in Footnote 1 –General Information and Significant Accounting Policies, MuniFund Term Preferred Shares, Variable Rate MuniFund Term Preferred Shares and Inverse Floating Rate Securities, respectively, as follows:
 
Arizona Premium Income (NAZ)
       
Year Ended 2/28–2/29:
       
2013(g)
   
.56
%**
2012
   
.35
 
2011(f)
   
 
Year Ended 7/31:
       
2010
   
 
2009
   
 
2008
   
.14
 
2007
   
.08
 
         
Arizona Dividend Advantage (NFZ)
       
Year Ended 2/28–2/29:
       
2013(g)
   
1.36
%**
2012
   
1.49
 
2011(f)
   
.96
** 
Year Ended 7/31:
       
2010
   
 
2009
   
 
2008
   
.14
 
2007
   
.10
 

(f)
For the seven months ended February 28, 2011.
(g)
For the six months ended August 31, 2012.
*
Rounds to less than $.01 per share.
**
Annualized.
N/A
The Fund did not have, or no longer has, a contractual reimbursement agreement with the Adviser.

See accompanying notes to financial statements.
     
Nuveen Investments
 
49

 
 

 
 
   
Financial
   
Highlights (Unaudited) (continued)
     
  Selected data for a Common share outstanding throughout each period:

         
Investment Operations
 
Less Distributions
             
   
Beginning
Common
Share
Net Asset
Value
 
Net
Investment
Income
(Loss)
 
Net
Realized/
Unrealized
Gain (Loss)
 
Distributions
from Net
Investment
Income to
Auction Rate
Preferred
Shareholders
(a)
Distributions
from
Capital
Gains to
Auction Rate
Preferred
Shareholders
(a)
Total
 
Net
Investment
Income to
Common
Shareholders
 
Capital
Gains to
Common
Shareholders
 
Total
 
Discount
from
Common
Shares
Repurchased
and
Retired
 
Ending
Common
Share
Net Asset
Value
 
Ending
Market
Value
 
Arizona Dividend Advantage 2 (NKR)
 
Year Ended 2/28–2/29:
 
2013(g)
 
$
15.39
 
$
.32
 
$
.41
 
$
 
$
 
$
.73
 
$
(.40
)
$
 
$
(.40
)
$
 
$
15.72
 
$
15.78
 
2012
   
13.88
   
.72
   
1.59
   
   
   
2.31
   
(.80
)
 
   
(.80
)
 
   
15.39
   
14.78
 
2011(f)
   
14.65
   
.45
   
(.74
)
 
(.01
)
 
   
(.30
)
 
(.47
)
 
   
(.47
)
 
   
13.88
   
12.66
 
Year Ended 7/31:
                                                                         
2010
   
13.46
   
.90
   
1.08
   
(.03
)
 
   
1.95
   
(.76
)
 
   
(.76
)
 
   
14.65
   
13.92
 
2009
   
13.66
   
.93
   
(.29
)
 
(.14
)
 
   
.50
   
(.70
)
 
   
(.70
)
 
 
13.46
   
12.52
 
2008
   
14.76
   
.96
   
(1.03
)
 
(.24
)
 
(.02
)
 
(.33
)
 
(.71
)
 
(.06
)
 
(.77
)
 
   
13.66
   
14.00
 
2007
   
15.00
   
.97
   
(.18
)
 
(.24
)
 
(.01
)
 
.54
   
(.74
)
 
(.04
)
 
(.78
)
 
   
14.76
   
15.27
 
Arizona Dividend Advantage 3 (NXE)
 
Year Ended 2/28–2/29:
 
2013(g)
   
14.97
   
.22
   
.42
   
   
   
.64
   
(.37
)
 
   
(.37
)
 
   
15.24
   
14.91
 
2012
   
13.46
   
.66
   
1.61
   
 
   
2.27
   
(.76
)
 
   
(.76
)
 
   
14.97
   
14.28
 
2011(f)
   
14.12
   
.47
   
(.68
)
 
(.01
)
 
   
(.22
)
 
(.44
)
 
   
(.44
)
 
   
13.46
   
12.24
 
Year Ended 7/31:
                                                                         
2010
   
12.76
   
.86
   
1.26
   
(.03
)
 
   
2.09
   
(.73
)
 
   
(.73
)
 
   
14.12
   
13.14
 
2009
   
13.07
   
.88
   
(.41
)
 
(.13
)
 
   
.34
   
(.65
)
 
   
(.65
)
 
 
12.76
   
11.73
 
2008
   
14.20
   
.91
   
(1.15
)
 
(.24
)
 
   
(.48
)
 
(.65
)
 
   
(.65
)
 
   
13.07
   
13.30
 
2007
   
14.32
   
.90
   
(.10
)
 
(.25
)
 
   
.55
   
(.67
)
 
   
(.67
)
 
   
14.20
   
13.44
 
 
(a)
The amounts shown are based on Common share equivalents.
(b)
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.
 
50
 
Nuveen Investments

 
 

 
 
     
Ratios/Supplemental Data
 
 
Total Returns
       
Ratios to Average Net Assets
Applicable to Common Shares
Before Reimbursement(c)
 
Ratios to Average Net Assets
Applicable to Common Shares
After Reimbursement(c)(d)
       
                                               
 
Based
on
Market
Value
(b)  
Based
on
Common
Share Net
Asset
Value
(b)  
Ending
Net
Assets
Applicable
to Common
Shares (000)
   
Expenses
(e)  
Net
Investment
Income
(Loss)
   
Expenses
(e)  
Net
Investment
Income
(Loss)
   
Portfolio
Turnover
Rate
 
                                               
                                               
 
9.61
%
 
4.82
%
$
38,359
   
2.95
%**
 
4.28
%**
 
2.94
%**
 
4.30
%**
 
8
%
 
23.88
   
16.91
   
37,546
   
2.78
   
4.92
   
2.70
   
5.00
   
16
 
 
(5.84
)
 
(1.90
)
 
33,852
   
2.22
**   
5.18
**   
2.06
**   
5.34
**   
7
 
                                               
 
17.65
   
14.75
   
35,733
   
1.27
   
6.11
   
1.07
   
6.31
   
4
 
 
(4.99
)
 
4.09
   
32,829
   
1.40
   
6.93
   
1.11
   
7.22
   
5
 
 
(3.16
)
 
(2.38
)
 
33,311
   
1.49
   
6.32
   
1.13
   
6.68
   
15
 
 
4.52
   
3.59
   
35,976
   
1.39
   
5.92
   
.96
   
6.35
   
14
 
                                               
                                               
 
7.10
   
4.32
   
46,718
   
3.48
**   
3.55
**   
N/A
   
N/A
   
6
 
 
23.63
   
17.30
   
45,904
   
2.87
   
4.64
   
N/A
   
N/A
   
14
 
 
(3.63
)
 
(1.60
)
 
41,257
   
1.46
**   
5.85
**   
1.43
**   
5.88
**   
6
 
                                               
 
18.58
   
16.66
   
43,280
   
1.22
   
6.15
   
1.08
   
6.29
   
5
 
 
(6.18
)
 
3.08
   
39,129
   
1.37
   
6.97
   
1.09
   
7.25
   
9
 
 
3.96
   
(3.48
)
 
40,081
   
1.46
   
6.17
   
1.08
   
6.55
   
16
 
 
4.21
   
3.81
   
43,552
   
1.36
   
5.69
   
.88
   
6.16
   
15
 
 
(c)
Ratios do not reflect the effect of dividend payments to Auction Rate Preferred shareholders, where applicable; Net Investment Income (Loss) ratios reflect income earned and expenses incurred on assets attributable to ARPS and/or MTP Shares, where applicable.
(d)
After expense reimbursement from the Adviser, where applicable. Ratios do not reflect the effect of custodian fee credits earned on the Fund’s net cash on deposit with the custodian bank, where applicable. As of March 31, 2012, the Adviser is no longer reimbursing Arizona Dividend Advantage 2 (NKR) for any fees and expenses. As of September 30, 2010, the Adviser is no longer reimbursing Arizona Dividend Advantage 3 (NXE) for any fees and expenses.
(e)
The expense ratios reflect, among other things, all interest expense and other costs related to MTP Shares and/or the interest expense deemed to have been paid by the Fund on the floating rate certificates issued by the special purpose trusts for the self-deposited inverse floaters held by the Fund, where applicable, both as described in Footnote 1 – General Information and Significant Accounting Policies, MuniFund Term Preferred Shares and Inverse Floating Rate Securities, respectively, as follows:
 
Arizona Dividend Advantage 2 (NKR)
       
Year Ended 2/28–2/29:
       
2013(g)
   
1.32
%**
2012
   
1.43
 
2011(f)
   
.91
** 
Year Ended 7/31:
       
2010
   
 
2009
   
 
2008
   
.15
 
2007
   
.10
 
 
Arizona Dividend Advantage 3 (NXE)
       
Year Ended 2/28–2/29:
       
2013(g)
   
1.58
%**
2012
   
1.71
 
2011(f)
   
.01
** 
Year Ended 7/31:
       
2010
   
 
2009
   
 
2008
   
.16
 
2007
   
.10
 
 
(f)
For the seven months ended February 28, 2011.
(g) For the six months ended August 31, 2012.
*
Rounds to less than $.01 per share.
**
Annualized.
N/A
The Fund no longer has a contractual reimbursement agreement with the Adviser.
 

See accompanying notes to financial statements.
     
Nuveen Investments
 
51

 
 

 
 
   
Financial
   
Highlights (Unaudited) (continued)
     
  Selected data for a Common share outstanding throughout each period:

         
Investment Operations
 
Less Distributions
             
   
Beginning
Common
Share
Net Asset
Value
 
Net
Investment
Income
(Loss)
 
Net
Realized/
Unrealized
Gain (Loss)
 
Distributions
from Net
Investment
Income to
Auction Rate
Preferred
Shareholders
(a)
Distributions
from
Capital
Gains to
Auction Rate
Preferred
Shareholders
(a)
Total
 
Net
Investment
Income to
Common
Shareholders
 
Capital
Gains to
Common
Shareholders
 
Total
 
Discount
from
Common
Shares
Repurchased
and
Retired
 
Ending
Common
Share
Net Asset
Value
 
Ending
Market
Value
 
Texas Quality Income (NTX)
 
Year Ended 2/28–2/29:
 
2013(g)
 
$
15.46
 
$
.34
 
$
.41
 
$
 
$
 
$
.75
 
$
(.40
)
$
 
$
(.40
)
$
 
$
15.81
 
$
17.07
 
2012
   
14.12
   
.75
   
1.48
   
   
   
2.23
   
(.86
)
 
(.03
)
 
(.89
)
 
   
15.46
   
16.31
 
2011(f)
   
15.01
   
.48
   
(.85
)
 
(.01
)
 
   
(.38
)
 
(.50
)
 
(.01
)
 
(.51
)
 
   
14.12
   
15.19
 
Year Ended 7/31:
 
2010
   
13.84
   
.94
   
1.08
   
(.03
)
 
 
1.99
   
(.81
)
 
(.01
)
 
(.82
)
 
   
15.01
   
16.92
 
2009
   
13.98
   
.94
   
(.17
)
 
(.13
)
 
(.02
)
 
.62
   
(.71
)
 
(.05
)
 
(.76
)
 
   
13.84
   
14.78
 
2008
   
14.87
   
.94
   
(.83
)
 
(.23
)
 
(.02
)
 
(.14
)
 
(.69
)
 
(.06
)
 
(.75
)
 
   
13.98
   
12.46
 
2007
   
15.06
   
.95
   
(.11
)
 
(.25
)
 
(.01
)
 
.58
   
(.73
)
 
(.04
)
 
(.77
)
 
   
14.87
   
13.89
 
 
(a)
The amounts shown are based on Common share equivalents.
(b)
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.
 
52
 
Nuveen Investments

 
 

 

 
 
   
Ratios/Supplemental Data
 
 
Total Returns
         
Ratios to Average Net Assets
Applicable to Common Shares(c)(d)
       
                                   
 
Based
on
Market
Value
(b)  
Based
on
Common
Share Net
Asset
Value
(b)  
Ending
Net
Assets
Applicable
to Common
Shares (000)
   
Expenses
(e)  
Net
Investment
Income
(Loss)
   
Portfolio
Turnover
Rate
 
                                   
                                   
 
7.28
%
 
4.90
%
$
151,861
   
2.40
%**
 
4.39
%**
 
7
%
 
13.81
   
16.23
   
148,222
   
2.48
   
5.10
   
9
 
 
(7.15
)
 
(2.61
)
 
134,850
   
1.92
**   
5.69
**   
10
 
                                   
 
20.92
   
14.71
   
143,080
   
1.19
   
6.42
   
6
 
 
25.98
   
4.80
   
131,513
   
1.27
   
7.06
   
10
 
 
(5.16
)
 
(1.04
)
 
132,713
   
1.26
   
6.46
   
8
 
 
(.52
)
 
3.82
   
141,238
   
1.24
   
6.24
   
9
 
 
(c)
Ratios do not reflect the effect of dividend payments to Auction Rate Preferred shareholders, where applicable; Net Investment Income (Loss) ratios reflect income earned and expenses incurred on assets attributable to ARPS and/or MTP Shares, where applicable.
(d)
Ratios do not reflect the effect of custodian fee credits earned on the Fund’s net cash on deposit with the custodian bank, where applicable.
(e)
The expense ratios reflect, among other things, all interest expense and other costs related to MTP Shares and/or the interest expense deemed to have been paid by the Fund on the floating rate certificates issued by the special purpose trusts for the self-deposited inverse floaters held by the Fund, where applicable, both as described in Footnote 1 – General Information and Significant Accounting Policies, MuniFund Term Preferred Shares and Inverse Floating Rate Securities, respectively, as follows:
 
Texas Quality Income (NTX)
 
Year Ended 2/28–2/29:
       
2013(g)
   
1.28
%**
2012
   
1.37
 
2011(f)
   
.80
** 
Year Ended 7/31:
       
2010
   
.02
 
2009
   
.01
 
2008
   
.05
 
2007
   
.06
 
 
(f)
For the seven months ended February 28, 2011.
(g)
For the six months ended August 31, 2012.
*
Rounds to less than $.01 per share.
**
Annualized.
 
See accompanying notes to financial statements.
     
Nuveen Investments
 
53

 
 

 

   
Financial
   
Highlights (Unaudited) (continued)

   
ARPS at the End of Period
 
MTP Shares at the End of Period (h)
 
VMTP Shares at the End of Period
 
   
Aggregate
Amount
Outstanding
(000)
 
Liquidation
Value
Per Share
 
Asset
Coverage
Per Share
 
Aggregate
Amount
Outstanding
(000)
 
Liquidation
Value
Per Share
 
Asset
Coverage
Per Share
 
Aggregate
Amount
Outstanding
(000)
 
Liquidation
Value
Per Share
 
Asset
Coverage
Per Share
 
Arizona Premium Income (NAZ)
 
Year Ended 2/28–2/29:
 
2013(g)
 
$
 
$
 
$
 
$
 
$
 
$
 
$
28,000
 
$
100,000
 
$
342,915
 
2012
   
   
   
   
   
   
   
28,000
   
100,000
   
336,672
 
2011(f)
   
27,875
   
25,000
   
78,144
   
   
   
   
   
   
 
Year Ended 7/31:
 
2010
   
27,875
   
25,000
   
81,097
   
   
   
   
   
   
 
2009
   
27,875
   
25,000
   
76,798
   
   
   
   
   
   
 
2008
   
30,000
   
25,000
   
73,414
   
   
   
   
   
   
 
2007
   
30,000
   
25,000
   
77,111
   
   
   
   
   
   
 
   
Arizona Dividend Advantage (NFZ)
 
Year Ended 2/28–2/29:
 
2013(g)
   
   
   
   
11,100
   
10.00
   
31.57
   
   
   
 
2012
   
   
   
   
11,100
   
10.00
   
31.04
   
   
   
 
2011(f)
   
   
   
   
11,100
   
10.00
   
28.59
   
   
   
 
Year Ended 7/31:
 
2010
   
10,600
   
25,000
   
76,850
   
   
   
   
   
   
 
2009
   
10,600
   
25,000
   
71,238
   
   
   
   
   
   
 
2008
   
12,000
   
25,000
   
67,817
   
   
   
   
   
   
 
2007
   
12,000
   
25,000
   
71,748
   
   
   
   
   
   
 
 
(f)
For the seven months ended February 28, 2011.
(g)
For the six months ended August 31, 2012.
(h)
The Ending and Average Market Value Per Share for each Series of the Fund’s MTP Shares were as follows:
 
                     
           
Ending
   
Average
 
           
Market Value
   
Market Value
 
     
Series
   
Per Share
   
Per Share
 
Arizona Dividend Advantage (NFZ)
                   
Year Ended 2/28–2/29:
                   
2013(g)
   
2015
 
$
10.05
 
$
10.05
 
2012
   
2015
   
10.08
   
9.93
 
2011(f)
   
2015
   
9.63
   
9.83
Year Ended 7/31:
                   
2010
   
   
   
 
2009
   
   
   
 
2008
   
   
   
 
2007
   
   
   
 
 
^
For the period October 18, 2010 (first issuance date of shares) through February 28, 2011.
 
54
 
Nuveen Investments

 
 

 
 
   
ARPS at the End of Period
 
MTP Shares at the End of Period (h)
 
ARPS and
MTP Shares at
the End of Period
 
     
Aggregate
Amount
Outstanding
(000)
   
Liquidation
Value
Per Share
   
Asset
Coverage
Per Share
   
Aggregate
Amount
Outstanding
(000)
   
Liquidation
Value
Per Share
   
Asset
Coverage
Per Share
   
Asset Coverage
Per $1
Liquidation
Preference
 
Arizona Dividend Advantage 2 (NKR)
 
Year Ended 2/28–2/29:
 
2013(g)
 
$
 
$
 
$
 
$
18,725
 
$
10.00
 
$
30.49
 
$
 
2012
   
   
   
   
18,725
   
10.00
   
30.05
   
 
2011(f)
   
   
   
   
18,725
   
10.00
   
28.08
   
 
Year Ended 7/31:
                                           
2010
   
16,625
   
25,000
   
78,734
   
   
   
   
 
2009
   
16,625
   
25,000
   
74,367
   
   
   
   
 
2008
   
18,500
   
25,000
   
70,015
   
   
   
   
 
2007
   
18,500
   
25,000
   
73,616
   
   
   
   
 
   
Arizona Dividend Advantage 3 (NXE)
 
Year Ended 2/28–2/29:
 
2013(g)
   
   
   
   
20,846
   
10.00
   
32.41
   
 
2012
   
   
   
   
20,846
   
10.00
   
32.02
   
 
2011(f)
   
18,400
   
25,000
   
52,544
   
19,046
   
10.00
   
21.02
   
2.10
 
Year Ended 7/31:
                                           
2010
   
18,400
   
25,000
   
83,805
   
   
   
   
 
2009
   
18,400
   
25,000
   
78,164
   
   
   
   
 
2008
   
22,000
   
25,000
   
70,546
   
   
   
   
 
2007
   
22,000
   
25,000
   
74,490
   
   
   
   
 
 
(f)
For the seven months ended February 28, 2011.
(g)
For the six months ended August 31, 2012.
(h)
The Ending and Average Market Value Per Share for each Series of the Fund’s MTP Shares were as follows:
 
           
Ending
   
Average
 
           
Market Value
   
Market Value
 
     
Series
   
Per Share
   
Per Share
 
Arizona Dividend Advantage 2 (NKR)
                   
Year Ended 2/28–2/29:
                   
2013(g)
   
2015
 
$
10.07
 
$
10.05
 
2012
   
2015
   
10.05
   
9.89
 
2011(f)
   
2015
   
9.58
   
9.71
Year Ended 7/31:
                   
2010
   
   
   
 
2009
   
   
   
 
2008
   
   
   
 
2007
   
   
   
 
                     
Arizona Dividend Advantage 3 (NXE)
                   
Year Ended 2/28–2/29:
                   
2013(g)
   
2016
   
10.21
   
10.17
 
2012
   
2016
   
10.17
   
10.11
 
2011(f)
   
2016
   
9.97
   
9.96
^^ 
Year Ended 7/31:
                   
2010
   
   
   
 
2009
   
   
   
 
2008
   
   
   
 
2007
   
   
   
 
 
^
For the period October 18, 2010 (first issuance date of shares) through February 28, 2011.
^^
As of February 28, 2011 (first issuance date of shares).

See accompanying notes to financial statements.
     
Nuveen Investments
 
55

 
 

 

   
Financial
   
Highlights (Unaudited) (continued)
 
   
ARPS at the End of Period
 
MTP Shares at the End of Period (h)
 
   
Aggregate
Amount
Outstanding
(000)
 
Liquidation
Value
Per Share
 
Asset
Coverage
Per Share
 
Aggregate
Amount
Outstanding
(000)
 
Liquidation
Value
Per Share
 
Asset
Coverage
Per Share
 
Texas Quality Income (NTX)
                                     
Year Ended 2/28–2/29:
                                     
2013(g)
 
$
 
$
 
$
 
$
70,920
 
$
10.00
 
$
31.41
 
2012
   
   
   
   
70,920
   
10.00
   
30.90
 
2011(f)
   
   
   
   
70,920
   
10.00
   
29.01
 
Year Ended 7/31:
                                     
2010
   
65,050
   
25,000
   
79,988
   
   
   
 
2009
   
65,050
   
25,000
   
75,543
   
   
   
 
2008
   
69,000
   
25,000
   
73,084
   
   
   
 
2007
   
69,000
   
25,000
   
76,173
   
   
   
 
 
(f)
For the seven months ended February 28, 2011.
(g)
For the six months ended August 31, 2012.
(h)
The Ending and Average Market Value Per Share for each Series of the Fund’s MTP Shares were as follows:

           
Ending
   
Average
 
           
Market Value
   
Market Value
 
     
Series
   
Per Share
   
Per Share
 
Texas Quality Income (NTX)
                   
Year Ended 2/28–2/29:
                   
2013(g)
   
2015
 
$
10.09
 
$
10.07
 
2012
   
2015
   
10.05
   
9.97
 
2011(f)
   
2015
   
9.85
   
9.86
Year Ended 7/31:
                   
2010
   
   
   
 
2009
   
   
   
 
2008
   
   
   
 
2007
   
   
   
 
 
^
For the period November 2, 2010 (first issuance date of shares) through February 28, 2011.
 
   
See accompanying notes to financial statements.
     
56
 
Nuveen Investments

 
 

 

   
Notes to
   
Financial Statements (Unaudited)
 
1. General Information and Significant Accounting Policies
 
General Information
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) (each a “Fund” and collectively, the “Funds”). Common shares of Arizona Premium Income (NAZ) and Texas Quality Income (NTX) are traded on the New York Stock Exchange (“NYSE”) while Common shares of Arizona Dividend Advantage (NFZ), Arizona Dividend Advantage 2 (NKR) and Arizona Dividend Advantage 3 (NXE) are traded on the NYSE MKT (formerly known as NYSE Amex). The Funds are registered under the Investment Company Act of 1940, as amended, as closed-end registered investment companies.
 
Each Fund seeks to provide current income exempt from both regular federal and designated state income taxes by investing primarily in a portfolio of municipal obligations issued by state and local government authorities within a single state or certain U.S. territories.
 
Approved Fund Reorganizations
On April 18, 2012, the Funds’ Board of Directors/Trustees approved a series of reorganizations for all the Arizona Funds included in this report. The reorganizations are intended to create a single larger state Fund, which would potentially offer shareholders the following benefits:

 
Lower Fund expense ratios (excluding the effects of leverage), as fixed costs are spread over a larger asset base;
     
 
Enhanced secondary market trading, as larger Funds potentially make it easier for investors to buy and sell Fund shares;
     
 
Lower per share trading costs through reduced bid/ask spreads due to a larger common share float; and
     
 
Increased Fund flexibility in managing the structure and cost of leverage over time.
 
The approved reorganizations are as follows:

 
Acquired Funds
 
Acquiring Fund
 
Arizona Dividend Advantage (NFZ)
 
Arizona Premium Income (NAZ)
 
Arizona Dividend Advantage 2 (NKR)
   
 
Arizona Dividend Advantage 3 (NXE)
   
 
If shareholders approve the reorganizations, and upon the closing of the reorganizations, the Acquired Funds will transfer all of their assets to the Acquiring Fund in exchange for common and preferred shares of the Acquiring Fund, and the assumption by the Acquiring Fund of the liabilities of the Acquired Funds. The Acquired Funds will then be liquidated, dissolved and terminated in accordance with their Declaration of Trust.
 
In addition, shareholders of the Acquired Funds will become shareholders of the Acquiring Fund. Holders of common shares will receive newly issued common shares of the Acquiring Fund, the aggregate net asset value of which will be equal to the aggregate net asset value of the common shares of the Acquired Funds held immediately prior to the reorganizations (including for this purpose fractional Acquiring Fund shares to which shareholders would be entitled). Fractional shares will be sold on the open market and shareholders will receive cash in lieu of such fractional shares. Holders of preferred shares of each Acquired Fund will receive on a one-for-one basis newly issued preferred shares of the Acquiring Fund, in exchange for preferred shares of the Acquired Funds held immediately prior to the reorganization.
 
In connection with the reorganizations, the Funds have accrued for certain associated costs and expenses. Such amounts are included as components of “Accrued other expenses” on the Statement of Assets and Liabilities and “Reorganization expense” on the Statement of Operations.
 
Significant Accounting Policies
The following is a summary of significant accounting policies followed by the Funds in the preparation of their financial statements in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”).

Nuveen Investments
 
57

 
 

 

   
Notes to
   
Financial Statements (Unaudited) (continued)
 
Investment Valuation
Prices of municipal bonds are provided by a pricing service approved by the Funds’ Board of Directors/Trustees. These securities are generally classified as Level 2 for fair value measurement purposes. The pricing service establishes a security’s fair value using methods that may include consideration of the following: 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. In pricing certain securities, particularly less liquid and lower quality securities, the pricing service may consider information about a security, its issuer, or market activity, provided by Nuveen Fund Advisors, Inc. (the “Adviser”), a wholly-owned subsidiary of Nuveen Investments, Inc. (“Nuveen”). These securities are generally classified as Level 2 or Level 3 depending on the priority of the significant inputs.
 
Certain securities may not be able to be priced by the pre-established pricing methods as described above. Such securities may be valued by the Funds’ Board of Directors/Trustees or its designee at fair value. These securities generally include, but are not limited to, restricted securities (securities which may not be publicly sold without registration under the Securities Act of 1933, as amended) for which a pricing service is unable to provide a market price; securities whose trading has been formally suspended; debt securities that have gone into default and for which there is no current market quotation; a security whose market price is not available from a pre-established pricing source; a security with respect to which an event has occurred that is likely to materially affect the value of the security after the market has closed but before the calculation of a Fund’s net asset value (as may be the case in non-U.S. markets on which the security is primarily traded) or make it difficult or impossible to obtain a reliable market quotation; and a security whose price, as provided by the pricing service, is not deemed to reflect the security’s fair value. As a general principle, the fair value of a security would appear to be the amount that the owner might reasonably expect to receive for it in a current sale. A variety of factors may be considered in determining the fair value of such securities, which may include consideration of the following: 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. These securities are generally classified as Level 2 or Level 3 depending on the priority of the significant inputs. Regardless of the method employed to value a particular security, all valuations are subject to review by the Funds’ Board of Directors/Trustees or its designee.
 
Refer to Footnote 2 – Fair Value Measurements for further details on the leveling of securities held by the Funds as of the end of the reporting period.
 
Investment Transactions
Investment transactions are recorded on a trade date basis. Realized gains and losses from transactions are determined on the specific identification method, which is the same basis used for federal income tax purposes. 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 earmark securities in the Funds’ portfolios with a current value at least equal to the amount of the when-issued/delayed delivery purchase commitments. At August 31, 2012, Arizona Premium Income (NAZ), Arizona Dividend Advantage (NFZ), Arizona Dividend Advantage 2 (NKR) and Texas Quality Income (NTX) had outstanding when issued/delayed delivery purchase commitments of $2,953,781, $829,675, $2,483,099 and $2,279,520, respectively. There were no such outstanding purchase commitments in Arizona Dividend Advantage 3 (NXE).
 
Investment Income
Interest income, which reflects the amortization of premiums and includes accretion of discounts for financial reporting purposes, is recorded on an accrual basis. Investment income also reflects 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 that 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.
 
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). Furthermore, 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 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.

58
 
Nuveen Investments

 
 

 
 
Distributions to Common shareholders of net investment income, net realized capital gains and/or market discount, if any, are recorded on the ex-dividend date. The amount and timing of distributions are determined in accordance with federal income tax regulations, which may differ from U.S. GAAP.
 
Auction Rate Preferred Shares
Each Fund is authorized to issue Auction Rate Preferred Shares (“ARPS”). As of February 29, 2012, the Funds redeemed all of their outstanding ARPS, at liquidation value.
 
MuniFund Term Preferred Shares
The following Funds have issued and outstanding MuniFund Term Preferred (“MTP”) Shares, with a $10 stated (“par”) value per share. Proceeds from the issuance of MTP Shares, net of offering expenses, were used to redeem all, or a portion of, each Fund’s outstanding ARPS. Each Fund’s MTP Shares are issued in one Series. Dividends on MTP shares, which are recognized as interest expense for financial reporting purposes, are paid monthly at a fixed annual rate, subject to adjustments in certain circumstances. The MTP Shares trade on the NYSE. As of August 31, 2012, the number of MTP Shares outstanding, annual interest rate and NYSE “ticker” symbol for each Fund’s series of MTP Shares are as follows:
                                       
   
Arizona Dividend Advantage (NFZ)
 
Arizona Dividend Advantage 2 (NKR)
 
   
Shares
Outstanding
 
Annual
Interest Rate
 
NYSE
Ticker
 
Shares
Outstanding
 
Annual
Interest Rate
 
NYSE
Ticker
 
Series 2015
   
1,110,000
   
2.05
%
 
NFZ Pr C
   
1,872,500
   
2.05
%
 
NKR Pr C
 

   
Arizona Dividend Advantage 3 (NXE)
 
   
Shares
Outstanding
 
Annual
Interest Rate
 
NYSE
Ticker
 
Series 2016
   
2,084,600
   
2.90
%
 
NXE Pr C
 

   
Texas Quality Income (NTX)
 
   
Shares
Outstanding
 
Annual
Interest Rate
 
NYSE
Ticker
 
Series 2015
   
7,092,000
   
2.30
%
 
NTX Pr C
 
 
Each Fund is obligated to redeem its MTP Shares by the date as specified in its offering document (“Term Redemption Date”), unless earlier redeemed or repurchased by the Fund. MTP Shares are subject to optional and mandatory redemption in certain circumstances. MTP Shares will be subject to redemption at the option of each Fund (“Optional Redemption Date”), subject to a payment of premium for one year following the Optional Redemption Date (“Premium Expiration Date”), and at par thereafter. MTP Shares also will be subject to redemption, at the option of each Fund, at par in the event of certain changes in the credit rating of the MTP Shares. Each Fund may be obligated to redeem certain of the MTP Shares if the Fund fails to maintain certain asset coverage and leverage ratio requirements and such failures are not cured by the applicable cure date. The redemption price per share is equal to the sum of the liquidation value per share plus any accumulated but unpaid dividends. The Term Redemption Date, Optional Redemption Date and Premium Expiration Date for each Fund’s series of MTP Shares are as follows.
                           
   
Arizona
Dividend
Advantage
 
Arizona
Dividend
Advantage 2
 
Arizona
Dividend
Advantage 3
 
Texas
Quality
Income
 
   
(NFZ
)
(NKR
)
(NXE
)
(NTX
)
   
Series 2015
 
Series 2015
 
Series 2016
 
Series 2015
 
Term Redemption Date
   
November 1, 2015
   
November 1, 2015
   
March 1, 2016
   
December 1, 2015
 
Optional Redemption Date
   
November 1, 2011
   
November 1, 2011
   
March 1, 2012
   
December 1, 2011
 
Premium Expiration Date
   
October 31, 2012
   
October 31, 2012
   
February 28, 2013
   
November 30, 2012
 
 
The average liquidation value of all MTP Shares outstanding for each Fund during the six months ended August 31, 2012, was as follows:
                           
   
Arizona
Dividend
Advantage
 
Arizona
Dividend
Advantage 2
 
Arizona
Dividend
Advantage 3
 
Texas
Quality
Income
 
     
(NFZ
)
 
(NKR
)
 
(NXE
)
 
(NTX
)
Average liquidation value of MTP Shares outstanding
 
$
11,100,000
 
$
18,725,000
 
$
20,846,000
 
$
70,920,000
 

Nuveen Investments
 
59

 
 

 

   
Notes to
   
Financial Statements (Unaudited) (continued)
 
For financial reporting purposes only, the liquidation value of MTP Shares is recorded as a liability on the Statement of Assets and Liabilities. Unpaid dividends on MTP Shares are recognized as a component of “Interest payable” on the Statement of Assets and Liabilities. Dividends paid on MTP Shares are recognized as a component of “Interest expense and amortization of offering costs” on the Statement of Operations.
 
Variable Rate MuniFund Term Preferred Shares
Arizona Premium Income (NAZ) has issued and outstanding Variable Rate MuniFund Term Preferred (“VMTP”) Shares, with a $100,000 liquidation value per share. The Fund issued its VMTP Shares in a privately negotiated offering during July 2011. Proceeds from the issuance of VMTP Shares, net of offering expenses, were used to redeem the Fund’s outstanding ARPS. The Fund’s VMTP Shares were offered to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933. As of August 31, 2012, the number of VMTP Shares outstanding, at liquidation value, for the Fund are as follows:
         
   
Arizona
Premium
Income
 
     
(NAZ
)
Series 2014
 
$
28,000,000
 
 
The Fund is obligated to redeem its VMTP Shares by the date as specified in its offering document (“Term Redemption Date”), unless earlier redeemed or repurchased by the Fund. VMTP Shares are subject to optional and mandatory redemption in certain circumstances. The VMTP Shares are subject to redemption at the option of each Fund (“Optional Redemption Date”), subject to payment of premium for one year following the Optional Redemption Date (“Premium Expiration Date”), and at par thereafter. The Fund may be obligated to redeem certain of the VMTP Shares if the Fund fails to maintain certain asset coverage and leverage ratio requirements and such failures are not cured by the applicable cure date. The redemption price per share is equal to the sum of the liquidation value per share plus any accumulated but unpaid dividends. The Term Redemption Date, Optional Redemption Date and Premium Expiration Date for the Fund’s VMTP Shares are as follows:
         
   
Arizona
Premium
Income
 
     
(NAZ
)
Term Redemption Date
   
August 1, 2014
 
Optional Redemption Date
   
August 1, 2012
 
Premium Expiration Date
   
July 31, 2012
 
 
The average liquidation value of VMTP Shares outstanding and annualized dividend rate of VMTP Shares for the Fund during the six months ended August 31, 2012, were as follows:
         
   
Arizona
Premium
Income
 
     
(NAZ
)
Average liquidation value of VMTP Shares outstanding
 
$
28,000,000
 
Annualized dividend rate
   
1.22
%
 
Dividends on VMTP shares (which are treated as interest payments for financial reporting purposes) are set weekly.
 
For financial reporting purposes only, the liquidation value of VMTP Shares is recognized as a liability on the Statement of Assets and Liabilities. Unpaid dividends on VMTP Shares are recognized as a component of “Interest payable” on the Statement of Assets and Liabilities, when applicable. Dividends paid on VMTP Shares are recognized as a component of “Interest expense and amortization of offering costs” on the Statement of Operations.
 
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

60
 
Nuveen Investments

 
 

 
 
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 “(IF) – Inverse floating rate investment.” An investment in a self-deposited inverse floater is accounted for as a financing transaction. In such instances, a fixed-rate bond deposited into a special purpose trust is identified in the Portfolio of Investments as “(UB) – Underlying bond of an inverse floating rate trust reflected as a financing transaction,” 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 related interest paid to the holders of the short-term floating rate certificates as a component of “Interest expense and amortization of offering costs” on the Statement of Operations.
 
During the six months ended August 31, 2012, each Fund invested in externally-deposited inverse floaters and/or self-deposited inverse floaters.
 
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 August 31, 2012, each Fund’s maximum exposure to externally-deposited Recourse Trusts was as follows:
                                 
   
Arizona
Premium
Income
 
Arizona
Dividend
Advantage
 
Arizona
Dividend
Advantage 2
 
Arizona
Dividend
Advantage 3
 
Texas
Quality
Income
 
     
(NAZ
)
 
(NFZ
)
 
(NKR
)
 
(NXE
)
 
(NTX
)
Maximum exposure to Recourse Trusts
 
$
2,145,000
 
$
1,680,000
 
$
1,350,000
 
$
2,325,000
 
$
 

The average floating rate obligations outstanding and average annual interest rate and fees related to self-deposited inverse floaters during the six months ended August 31, 2012, were as follows:
         
   
Texas
Quality
Income
 
     
(NTX
)
Average floating rate obligations outstanding
 
$
3,960,000
 
Average annual interest rate and fees
   
0.41
%
 
Derivative Financial Instruments
Each Fund is authorized to invest in certain derivative instruments, including foreign currency forwards, futures, options and swap contracts. Although the Funds are authorized to invest in such derivative instruments, and may do so in the future, they did not make any such investments during the six months ended August 31, 2012.
 
Market and Counterparty Credit Risk
In the normal course of business each Fund may invest in financial instruments and enter into financial transactions where risk of potential loss exists due to changes in the market (market risk) or failure of the other party to the transaction to perform (counterparty credit risk). The potential loss could exceed the value of the financial assets recorded on the financial statements. Financial assets, which potentially expose each Fund to counterparty credit risk, consist principally of cash due from counterparties on forward, option and swap transactions, when applicable. The extent of each Fund’s exposure to counterparty credit risk in respect to these financial assets approximates their carrying value as recorded on the Statement of Assets and Liabilities. Futures contracts, when applicable, expose a Fund to minimal counterparty credit risk as they are exchange traded and the exchange’s clearinghouse, which is counterparty to all exchange traded futures, guarantees the futures contracts against default.
 
Each Fund helps manage counterparty credit risk by entering into agreements only with counterparties the Adviser believes have the financial resources to honor their obligations and by having the Adviser monitor the financial stability of the counterparties. Additionally, counterparties may be required to

Nuveen Investments
 
61

 
 

 

   
Notes to
   
Financial Statements (Unaudited) (continued)
 
pledge collateral daily (based on the daily valuation of the financial asset) on behalf of each Fund with a value approximately equal to the amount of any unrealized gain above a pre-determined threshold. Reciprocally, when each Fund has an unrealized loss, the Funds have instructed the custodian to pledge assets of the Funds as collateral with a value approximately equal to the amount of the unrealized loss above a pre-determined threshold. Collateral pledges are monitored and subsequently adjusted if and when the valuations fluctuate, either up or down, by at least the pre-determined threshold amount.
 
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. 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. The market prices of zero coupon securities generally are more volatile than the market prices of securities that pay interest periodically.
 
Offering Costs
Costs incurred by the Funds in connection with their offerings of MTP Shares or VMTP Shares were recorded as a deferred charge, which will be amortized over the life of the shares. Each Fund’s amortized deferred charges are recognized as a component of “Interest expense and amortization of offering costs” on the Statement of Operations. Each Fund’s total offering costs incurred were as follows:
                           
   
Arizona
Dividend
Advantage
 
Arizona
Dividend
Advantage 2
 
Arizona
Dividend
Advantage 3
 
Texas
Quality
Income
 
     
(NFZ
)
 
(NKR
)
 
(NXE
)
 
(NTX
)
MTP Shares offering costs
 
$
491,500
 
$
588,375
 
$
672,690
 
$
1,366,300
 

   
Arizona
Premium
Income
 
     
(NAZ
)
VMTP Shares offering costs
 
$
100,000
 
 
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 U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets applicable to Common shares from operations during the reporting period. Actual results may differ from those estimates.
 
2. Fair Value Measurements
Fair value is defined as the price that the Funds would receive upon selling an investment or transferring a liability in an orderly transaction to an independent buyer in the principal or most advantageous market for the investment. A three-tier hierarchy is used to maximize the use of observable market data and minimize the use of unobservable inputs and to establish classification of fair value measurements for disclosure purposes. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability. Observable inputs are based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability. Unobservable inputs are based on the best information available in the circumstances. The following is a summary of the three-tiered hierarchy of valuation input levels.

62
 
Nuveen Investments

 
 

 

 
Level 1 –  
Inputs are unadjusted and prices are determined using quoted prices in active markets for identical securities.
     
 
Level 2 –  
Prices are determined using other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.).
     
 
Level 3 –  
Prices are determined using significant unobservable inputs (including management’s assumptions in determining the fair value of investments).
 
The inputs or methodologies used for valuing securities are not an indication of the risks associated with investing in those securities. The following is a summary of each Fund’s fair value measurements as of the end of the reporting period:
                           
Arizona Premium Income (NAZ)
   
Level 1
   
Level 2
   
Level 3
   
Total
 
                           
Long-Term Investments:
                         
Municipal Bonds
 
$
 
$
93,002,438
 
$
1,951,904
 
$
94,954,342
 
Arizona Dividend Advantage (NFZ)
   
Level 1
   
Level 2
   
Level 3
   
Total
 
                           
Long-Term Investments:
                         
Municipal Bonds
 
$
 
$
34,365,393
 
$
218,613
 
$
34,584,006
 
Arizona Dividend Advantage 2 (NKR)
   
Level 1
   
Level 2
   
Level 3
   
Total
 
                           
Long-Term Investments:
                         
Municipal Bonds
 
$
 
$
53,981,764
 
$
882,261
 
$
54,864,025
 
Arizona Dividend Advantage 3 (NXE)
   
Level 1
   
Level 2
   
Level 3
   
Total
 
                           
Long-Term Investments:
                         
Municipal Bonds
 
$
 
$
65,840,792
 
$
538,725
 
$
66,379,517
 
Texas Quality Income (NTX)
   
Level 1
   
Level 2
   
Level 3
   
Total
 
                           
Long-Term Investments:
                         
Municipal Bonds
 
$
 
$
223,619,909
 
$
 
$
223,619,909
 
 
The following is a reconciliation of each Fund’s Level 3 investments held at the beginning and end of the measurement period:
                           
   
Arizona
Premium
Income
 
Arizona
Dividend
Advantage
 
Arizona
Dividend
Advantage 2
 
Arizona
Dividend
Advantage 3
 
   
(NAZ
)
(NFZ
)
(NKR
)
(NXE
)
   
Level 3
 
Level 3
 
Level 3
 
Level 3
 
   
Municipal
 
Municipal
 
Municipal
 
Municipal
 
   
Bonds
 
Bonds
 
Bonds
 
Bonds
 
Balance at the beginning of period
 
$
1,959,607
 
$
219,476
 
$
885,742
 
$
540,851
 
Gains (losses):
                         
Net realized gains (losses)
   
   
   
   
 
Net change in unrealized appreciation (depreciation)
   
(7,703
)
 
(863
)
 
(3,481
)
 
(2,126
)
Purchases at cost
   
   
   
   
 
Sales at proceeds
   
   
   
   
 
Net discounts (premiums)
   
   
   
   
 
Transfers in to
   
   
   
   
 
Transfers out of
   
   
   
   
 
Balance at the end of period
 
$
1,951,904
 
$
218,613
 
$
882,261
 
$
538,725
 
Change in net unrealized appreciation (depreciation) during the period of Level 3 securities held as of August 31, 2012
 
$
(7,703
)
$
(863
)
$
(3,481
)
$
(2,126
)
 
Nuveen Investments
 
63

 
 

 

   
Notes to
   
Financial Statements (Unaudited) (continued)
 
The valuation techniques and significant unobservable inputs used in recurring Level 3 fair value measurements of assets as of August 31, 2012, were as follows:
                   
   
Market
Value
 
Techniques
 
Unobservable
Inputs
 
Range
 
Arizona Premium Income (NAZ)
                 
Municipal Bonds
$
1,951,904
 
Discounted Cash Flow
 
MMD Spread
 
0-6%
 
           
AAA - Rated MMD
     
           
Liquidity Discount
 
0-5%
 
Arizona Dividend Advantage (NFZ)
                 
Municipal Bonds
$
218,613
 
Discounted Cash Flow
 
MMD Spread
 
0-6%
 
           
AAA - Rated MMD
     
           
Liquidity Discount
 
0-5%
 
Arizona Dividend Advantage 2 (NKR)
                 
Municipal Bonds
$
882,261
 
Discounted Cash Flow
 
MMD Spread
 
0-6%
 
           
AAA - Rated MMD
     
           
Liquidity Discount
 
0-5%
 
Arizona Dividend Advantage 3 (NXE)
                 
Municipal Bonds
$
538,725
 
Discounted Cash Flow
 
MMD Spread
 
0-6%
 
           
AAA - Rated MMD
     
           
Liquidity Discount
 
0-5%
 
 
MMD - Municipal Market Data
 
The Nuveen funds’ Board of Directors/Trustees is responsible for the valuation process and has delegated the oversight of the daily valuation process to the Adviser’s Valuation Committee. The Valuation Committee, pursuant to the valuation policies and procedures adopted by the Board of Directors/Trustees, is responsible for making fair value determinations, evaluating the effectiveness of the funds’ pricing policies, and reporting to the Board of Directors/Trustees. The Valuation Committee is aided in its efforts by the Adviser’s dedicated Securities Valuation Team, which is responsible for administering the daily valuation process and applying fair value methodologies as approved by the Valuation Committee. When determining the reliability of independent pricing services for investments owned by the funds, the Valuation Committee, among other things, conducts due diligence reviews of the pricing services and monitors the quality of security prices received through various testing reports conducted by the Securities Valuation Team.
 
The Valuation Committee will consider pricing methodologies it deems relevant and appropriate when making fair value determinations. Examples of possible methodologies include, but are not limited to, multiple of earnings; discount from market of a similar freely traded security; discounted cash-flow analysis; book value or a multiple thereof; risk premium/yield analysis; yield to maturity; and/or fundamental investment analysis. The Valuation Committee will also consider factors it deems relevant and appropriate in light of the facts and circumstances. Examples of possible factors include, but are not limited to, the type of security; the issuer’s financial statements; the purchase price of the security; the discount from market value of unrestricted securities of the same class at the time of purchase; analysts’ research and observations from financial institutions; information regarding any transactions or offers with respect to the security; the existence of merger proposals or tender offers affecting the security; the price and extent of public trading in similar securities of the issuer or comparable companies; and the existence of a shelf registration for restricted securities.
 
For each portfolio security that has been fair valued pursuant to the policies adopted by the Board of Directors/Trustees, the fair value price is compared against the last available and next available market quotations. The Valuation Committee reviews the results of such testing and fair valuation occurrences are reported to the Board of Directors/Trustees.
 
3. Derivative Instruments and Hedging Activities
The Funds record derivative instruments at fair value, with changes in fair value recognized on the Statement of Operations, when applicable. Even though the Funds’ investments in derivatives may represent economic hedges, they are not considered to be hedge transactions for financial reporting purposes. The Funds did not invest in derivative instruments during the six months ended August 31, 2012.

64
 
Nuveen Investments

 
 

 

4. Fund Shares
 
Common Shares
Transactions in Common shares were as follows:
                           
   
Arizona Premium
Income (NAZ)
 
Arizona Dividend
Advantage 2 (NKR)
 
   
Six
Months
Ended
8/31/12
 
Year
Ended
2/29/12
 
Six
Months
Ended
8/31/12
 
Year
Ended
2/29/12
 
Common shares issued to shareholders due to reinvestment of distributions
   
1,983
   
   
179
   
 

   
Texas Quality
Income (NTX)
 
   
Six
Months
Ended
8/31/12
 
Year
Ended
2/29/12
 
Common shares issued to shareholders due to reinvestment of distributions
   
15,081
   
36,629
 
 
Preferred Shares
Transactions in ARPS were as follows:
                           
   
Arizona Premium Income (NAZ)
 
   
Six Months
Ended
8/31/12
 
Year
Ended
2/29/12
 
   
Shares
Amount  
Shares
Amount  
ARPS redeemed and/or noticed for redemption:
                         
Series TH
   
N/A
   
N/A
   
1,115
 
$
27,875,000
 
 
N/A – As of February 29, 2012, the Fund redeemed all of its outstanding ARPS at liquidation value.
 
Transactions in MTP shares were as follows:
                           
   
Arizona Dividend Advantage 3 (NXE)
 
   
Six Months
Ended
8/31/12
 
Year
Ended
2/29/12
 
   
Shares
  Amount  
Shares
 Amount  
MTP Shares issued:
                         
Series 2016
   
 
$
   
180,000
 
$
1,800,000
 

Transactions in VMTP Shares were as follows:
                           
   
Arizona Premium Income (NAZ)
 
   
Six Months
Ended
8/31/12
 
Year
Ended
2/29/12
 
   
Shares
  Amount  
Shares
  Amount  
VMTP Shares issued:
                         
Series 2014
   
 
$
   
280
 
$
28,000,000
 

Nuveen Investments
 
65

 
 

 
 
   
Notes to
   
Financial Statements (Unaudited) (continued)
 
5. Investment Transactions
Purchases and sales (including maturities but excluding short-term investments, where applicable) during the six months ended August 31, 2012, were as follows:
                                 
   
Arizona
Premium
Income
 
Arizona
Dividend
Advantage
 
Arizona
Dividend
Advantage 2
 
Arizona
Dividend
Advantage 3
 
Texas
Quality
Income
 
     
(NAZ
)
 
(NFZ
)
 
(NKR
)
 
(NXE
)
 
(NTX
)
Purchases
 
$
7,185,227
 
$
3,636,399
 
$
4,399,126
 
$
3,992,272
 
$
16,366,610
 
Sales and maturities
   
7,347,973
   
3,753,677
   
6,019,950
   
4,593,776
   
15,032,759
 
 
6. 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 securities reflected as financing transactions, if any. To the extent that differences arise that are permanent in nature, such amounts are reclassified within the capital accounts as detailed below. Temporary differences do not require reclassification. Temporary and permanent differences do not impact the net asset values of the Funds.
 
At August 31, 2012, the cost and unrealized appreciation (depreciation) of investments, as determined on a federal income tax basis, were as follows:
                                 
   
Arizona
Premium
Income
 
Arizona
Dividend
Advantage
 
Arizona
Dividend
Advantage 2
 
Arizona
Dividend
Advantage 3
 
Texas
Quality
Income
 
     
(NAZ
)
 
(NFZ
)
 
(NKR
)
 
(NXE
)
 
(NTX
)
Cost of investments
 
$
87,571,596
 
$
31,790,742
 
$
50,750,924
 
$
61,738,625
 
$
202,692,729
 
Gross unrealized:
                               
Appreciation
 
$
10,295,951
 
$
2,992,358
 
$
4,599,685
 
$
5,065,605
 
$
20,276,618
 
Depreciation
   
(2,913,205
)
 
(199,094
)
 
(486,584
)
 
(424,713
)
 
(3,309,454
)
Net unrealized appreciation (depreciation) of investments
 
$
7,382,746
 
$
2,793,264
 
$
4,113,101
 
$
4,640,892
 
$
16,967,164
 
 
Permanent differences, primarily due to expiration of capital loss carryforwards, federal taxes paid, taxable market discount, nondeductible offering costs and distribution character reclassifications, resulted in reclassifications among the Funds’ components of Common share net assets at February 29, 2012, the Funds’ last tax year end, as follows:
                                 
   
Arizona
Premium
Income
 
Arizona
Dividend
Advantage
 
Arizona
Dividend
Advantage 2
 
Arizona
Dividend
Advantage 3
 
Texas
Quality
Income
 
     
(NAZ
)
 
(NFZ
)
 
(NKR
)
 
(NXE
)
 
(NTX
)
Paid-in surplus
 
$
(1,463,538
)
$
(96,700
)
$
(120,807
)
$
(133,481
)
$
(256,188
)
Undistributed (Over-distribution of) net investment income
   
19,513
   
96,700
   
119,157
   
131,166
   
263,630
 
Accumulated net realized gain (loss)
   
1,444,025
   
   
1,650
   
2,315
   
(7,442
)
 
The tax components of undistributed net tax-exempt income, net ordinary income and net long-term capital gains at February 29, 2012, the Funds’ last tax year end, were as follows:
                                 
   
Arizona
Premium
Income
 
Arizona
Dividend
Advantage
 
Arizona
Dividend
Advantage 2
 
Arizona
Dividend
Advantage 3
 
Texas
Quality
Income
 
     
(NAZ
)
 
(NFZ
)
 
(NKR
)
 
(NXE
)
 
(NTX
)
Undistributed net tax-exempt income *
 
$
1,409,529
 
$
279,569
 
$
478,398
 
$
564,544
 
$
1,813,987
 
Undistributed net ordinary income **
   
   
686
   
   
   
24,171
 
Undistributed net long-term capital gains
   
   
   
   
   
 

*
Undistributed net tax-exempt income (on a tax basis) has not been reduced for the dividend declared on February 1, 2012, paid on March 1, 2012.
**
Net ordinary income consists of taxable market discount income and net short-term capital gains, if any.

66
 
Nuveen Investments

 
 

 
 
The tax character of distributions paid during the Funds’ last tax year ended February 29, 2012, was designated for purposes of the dividends paid deduction as follows:
                                 
   
Arizona
Premium
Income
 
Arizona
Dividend
Advantage
 
Arizona
Dividend
Advantage 2
 
Arizona
Dividend
Advantage 3
 
Texas
Quality
Income
 
     
(NAZ
)
 
(NFZ
)
 
(NKR
)
 
(NXE
)
 
(NTX
)
Distributions from net tax-exempt income
 
$
3,597,007
 
$
1,425,938
 
$
2,345,251
 
$
2,882,011
 
$
9,840,206
 
Distributions from net ordinary income**
   
   
   
   
   
351
 
Distributions from net long-term capital gains
   
   
   
   
   
247,718
 
 
**  Net ordinary income consists of taxable market discount income and net short-term capital gains, if any. 
          
At February 29, 2012, 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
Premium
Income
 
Arizona
Dividend
Advantage
 
Arizona
Dividend
Advantage 2
 
Arizona
Dividend
Advantage 3
 
     
(NAZ
)
 
(NFZ
)
 
(NKR
)
 
(NXE
)
Expiration:
                         
February 28, 2014
 
$
 
$
 
$
 
$
208,948
 
February 29, 2016
   
562,384
   
122,620
   
   
363,937
 
February 28, 2017
   
323,876
   
210,308
   
68,614
   
258,905
 
February 28, 2018
   
43,720
   
318,004
   
223,857
   
108,356
 
Total
 
$
929,980
 
$
650,932
 
$
292,471
 
$
940,146
 
 
During the Funds’ last tax year ended February 29, 2012, the following Funds utilized capital loss carryforwards as follows:
                           
   
Arizona
Premium
Income
 
Arizona
Dividend
Advantage
 
Arizona
Dividend
Advantage 2
 
Arizona
Dividend
Advantage 3
 
     
(NAZ
)
 
(NFZ
)
 
(NKR
)
 
(NXE
)
Utilized capital loss carryforwards
 
$
109,799
 
$
53,319
 
$
308,747
 
$
138,567
 
 
At February 29, 2012, the Funds’ last tax year end, $1,443,828 of Arizona Premium Income’s (NAZ) capital loss carryforward expired.
 
Under the Regulated Investment Company Modernization Act of 2010, capital losses incurred by the Fund after December 31, 2010 will not be subject to expiration. During the Funds’ last tax year ended February 29, 2012, there were no post-enactment capital losses generated.
 
The Funds have elected to defer losses incurred from November 1, 2011 through February 29, 2012, the Funds’ last tax year end, in accordance with federal income tax rules. These losses are treated as having arisen on the first day of the current fiscal year. The following Fund has elected to defer losses as follows:
         
     
Texas
 
     
Quality
 
     
Income
 
     
(NTX
)
Post-October capital losses
 
$
1,722,730
 
Late-year ordinary losses
   
 
 
7. Management Fees and Other Transactions with Affiliates
Each Fund’s management fee consists of two components – a fund-level fee, based only on the amount of assets within the Fund, and a complex-level fee, based on the aggregate amount of all eligible fund assets managed by the Adviser. This pricing structure enables Fund shareholders to benefit from growth in the assets within their Fund as well as from growth in the amount of complex-wide assets managed by the Adviser.

Nuveen Investments
 
67

 
 

 

   
Notes to
   
Financial Statements (Unaudited) (continued)
 
The annual fund-level fee for each Fund, payable monthly, is calculated according to the following schedule:
       
     
Arizona Premium Income (NAZ)
     
Texas Quality Income (NTX)
Average Daily Managed Assets*
   
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 managed assets over $5 billion
   
.3750
 

         
     
Arizona Dividend Advantage (NFZ)
     
Arizona Dividend Advantage 2 (NKR)
     
Arizona Dividend Advantage 3 (NXE)
Average Daily Managed Assets*
   
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 managed assets over $2 billion
   
.3750
 

The annual complex-level fee for each Fund, payable monthly, is calculated according to the following schedule:
         
Complex-Level Managed Asset Breakpoint Level*
   
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
 

*
For the fund-level and complex-level fees, managed assets include closed-end fund assets managed by the Adviser that are attributable to financial leverage. For these purposes, financial leverage includes the funds’ use of preferred stock and borrowings and certain investments in the residual interest certificates (also called inverse floating rate securities) in tender option bond (TOB) trusts, including the portion of assets held by a TOB trust that has been effectively financed by the trust’s issuance of floating rate securities, subject to an agreement by the Adviser as to certain funds to limit the amount of such assets for determining managed assets in certain circumstances. The complex-level fee is calculated based upon the aggregate daily managed assets of all Nuveen Funds that constitute “eligible assets.” Eligible assets do not include assets attributable to investments in other Nuveen Funds and assets in excess of $2 billion added to the Nuveen Fund complex in connection with the Adviser’s assumption of the management of the former First American Funds effective January 1, 2011. As of August 31, 2012, the complex-level fee rate for these Funds was .1702%.
 
The management fee compensates the Adviser for overall investment advisory and administrative services and general office facilities. The Adviser is responsible for each Fund’s overall strategy and asset allocation decisions. The Adviser has entered into sub-advisory agreements with Nuveen Asset Management, LLC (the “Sub-Adviser”), a wholly-owned subsidiary of the Adviser, under which the Sub-Adviser manages the investment portfolios of the Funds. The Sub-Adviser is compensated for its services to the Funds from the management fees paid to the Adviser.
 
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.

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Nuveen Investments

 
 

 
 
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 managed assets, 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.
 
8. New Accounting Pronouncement
 
Financial Accounting Standards Board (“FASB”) Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities
In December 2011, the FASB issued Accounting Standards Update (“ASU”) No. 2011-11 (“ASU No. 2011-11”) to enhance disclosures about financial instruments and derivative instruments that are subject to offsetting (“netting”) on the Statement of Assets and Liabilities. This information will enable users of the entity’s financial statements to evaluate the effect or potential effect of netting arrangements on the entity’s financial position. ASU No. 2011-11 is effective prospectively during interim or annual periods beginning on or after January 1, 2013. At this time, management is evaluating the implications of this guidance and the impact it will have to the financial statements amounts and footnote disclosures, if any.

Nuveen Investments
 
69

 
 

 
 
Annual Investment Management
Agreement Approval Process (Unaudited)
 
The Board of Trustees or Directors (as the case may be) (each, a “Board” and each Trustee or Director, a “Board Member”) of the Funds, including the Board Members who are not parties to the Funds’ advisory or sub-advisory agreements or “interested persons” of any such parties (the “Independent Board Members”), is responsible for approving the advisory agreements (each, an “Investment Management Agreement”) between each Fund and Nuveen Fund Advisors, Inc. (the “Advisor”) and the sub-advisory agreements (each a “Sub-Advisory Agreement”) between the Advisor and Nuveen Asset Management, LLC (the “Sub-Advisor”) (the Investment Management Agreements and the Sub-Advisory Agreements are referred to collectively as the “Advisory Agreements”) and their periodic continuation. Pursuant to the Investment Company Act of 1940, as amended (the “1940 Act”), the Board is required to consider the continuation of the Advisory Agreements on an annual basis. Accordingly, at an in-person meeting held on May 21-23, 2012 (the “May Meeting”), the Board, including a majority of the Independent Board Members, considered and approved the continuation of the Advisory Agreements for the Funds for an additional one-year period.
 
In preparation for its considerations at the May Meeting, the Board requested and received extensive materials prepared in connection with the review of the Advisory Agreements. The materials provided a broad range of information regarding the Funds, the Advisor and the Sub-Advisor (the Advisor and the Sub-Advisor are collectively, the “Fund Advisers” and each, a “Fund Adviser”). As described in more detail below, the information provided included, among other things, a review of Fund performance, including Fund investment performance assessments against peer groups and appropriate benchmarks, a comparison of Fund fees and expenses relative to peers, a description and assessment of shareholder service levels for the Funds, a summary of the performance of certain service providers, a review of product initiatives and shareholder communications and an analysis of the Advisor’s profitability with comparisons to comparable peers in the managed fund business. As part of its annual review, the Board also held a separate meeting on April 18-19, 2012, to review the Funds’ investment performance and consider an analysis provided by the Advisor of the Sub-Advisor which generally evaluated the Sub-Advisor’s investment team, investment mandate, organizational structure and history, investment philosophy and process, performance of the applicable Fund, and significant changes to the foregoing. As a result of its review of the materials and discussions, the Board presented the Advisor with questions and the Advisor responded.

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The materials and information prepared in connection with the annual review of the Advisory Agreements supplement the information and analysis provided to the Board during the year. In this regard, throughout the year, the Board, acting directly or through its committees, regularly reviews the performance and various services provided by the Advisor and the Sub-Advisor. The Board meets at least quarterly as well as at other times as the need arises. At its quarterly meetings, the Board reviews reports by the Advisor which include, among other things, Fund performance, a review of the investment teams and reports on compliance, regulatory matters and risk management. The Board also meets with key investment personnel managing the Fund portfolios during the year. In October 2011, the Board also created two new standing committees (the Open-end Fund Committee and the Closed-end Fund Committee) to assist the full Board in monitoring and gaining a deeper insight into the distinctive issues and business practices of open-end and closed-end funds.
 
In addition, the Board continues its program of seeking to have the Board Members or a subset thereof visit each sub-advisor to the Nuveen funds at least once over a multiple year rotation, meeting with key investment and business personnel. In this regard, the Board visited with the Sub-Advisor’s municipal team in Minneapolis in September 2011, and with the Sub-Advisor’s municipal team in Chicago in November 2011. Further, an ad hoc committee of the Board visited the then-current transfer agents of the Nuveen funds in 2011 and the audit committee of the Board visited the various pricing agents for the Nuveen funds in January 2012. The Board considers factors and information that are relevant to its annual consideration of the renewal of the Advisory Agreements at the meetings held throughout the year. Accordingly, the Board considers the information provided and knowledge gained at these meetings when performing its annual review of the Advisory Agreements. The Independent Board Members are assisted throughout the process by independent legal counsel who provided materials describing applicable law and the duties of directors or trustees in reviewing advisory contracts and met with the Independent Board Members in executive sessions without management present. In addition, it is important to recognize that the management arrangements for the Nuveen funds are the result of many years of review and discussion between the Independent Board Members and fund management and that the Board Members’ conclusions may be based, in part, on their consideration of fee arrangements and other factors developed in previous years.
 
The Board considered all factors it believed relevant with respect to each Fund, including among other factors: (a) the nature, extent and quality of the services provided by the Fund Advisers, (b) the investment performance of the Fund and Fund Advisers, (c) the advisory fees and costs of the services to be provided to the Fund and the profitability of the Fund Advisers, (d) the extent of any economies of scale, (e) any benefits derived by the Fund Advisers from the relationship with the Fund and (f) other factors. Each Board Member may have accorded different weight to the various factors in reaching his or her

Nuveen Investments
 
71

 
 

 
 
Annual Investment Management Agreement
Approval Process (Unaudited) (continued)
 
conclusions with respect to a Fund’s Advisory Agreements. The Independent Board Members did not identify any single factor as all important or controlling. The Independent Board Members’ considerations were instead based on a comprehensive consideration of all the information presented. The principal factors considered by the Board and its conclusions are described below.
 
A. Nature, Extent and Quality of Services
In considering renewal of the Advisory Agreements, the Independent Board Members considered the nature, extent and quality of the Fund Adviser’s services, including advisory services and the resulting Fund performance and administrative services. The Independent Board Members further considered the overall reputation and capabilities of the Advisor and its affiliates, the commitment of the Advisor to provide high quality service to the Funds, their overall confidence in the Advisor’s integrity and the Advisor’s responsiveness to questions and concerns raised by them. The Independent Board Members reviewed materials outlining, among other things, the Fund Adviser’s organization and business; the types of services that the Fund Adviser or its affiliates provide to the Funds; the performance record of the applicable Fund (as described in further detail below); and any initiatives Nuveen had taken for the applicable fund product line.
 
In considering advisory services, the Board recognized that the Advisor provides various oversight, administrative, compliance and other services for the Funds and the Sub-Advisor generally provides the portfolio investment management services to the Funds. In reviewing the portfolio management services provided to each Fund, the Board reviewed the materials provided by the Nuveen Investment Services Oversight Team analyzing, among other things, the Sub-Advisor’s investment team and changes thereto, organization and history, assets under management, Fund objectives and mandate, the investment team’s philosophy and strategies in managing the Fund, developments affecting the Sub-Advisor or Fund and Fund performance. The Independent Board Members also reviewed portfolio manager compensation arrangements to evaluate each Fund Adviser’s ability to attract and retain high quality investment personnel, preserve stability, and reward performance but not provide an inappropriate incentive to take undue risks. In addition, the Board considered the Advisor’s execution of its oversight responsibilities over the Sub-Advisor. Given the importance of compliance, the Independent Board Members also considered Nuveen’s compliance program, including the report of the chief compliance officer regarding the Funds’ compliance policies and procedures; the resources dedicated to compliance; and the record of compliance with the policies and procedures.
 
In addition to advisory services, the Board considered the quality and extent of administrative and other non-investment advisory services the Advisor and its affiliates provide to the Funds, including product management, investment services (such as oversight of investment policies and procedures, risk management, and pricing), fund

72
 
Nuveen Investments

 
 

 
 
administration, oversight of service providers, shareholder services and communications, administration of Board relations, regulatory and portfolio compliance, legal support, managing leverage and promoting an orderly secondary market for common shares. The Board further recognized Nuveen’s additional investments in personnel, including in compliance and risk management.
 
In reviewing the services provided, the Board also reviewed materials describing various notable initiatives and projects the Advisor performed in connection with the closed-end fund product line. These initiatives included completion of the refinancing of auction rate preferred securities; efforts to eliminate product overlap with fund mergers; elimination of the insurance mandate on several funds; ongoing services to manage leverage that has become increasingly complex; continued secondary market offerings, share repurchases and other support initiatives for certain funds; and continued communications efforts with shareholders, fund analysts and financial advisers. With respect to the latter, the Independent Board Members noted Nuveen’s continued commitment to supporting the secondary market for the common shares of its closed-end funds through a comprehensive secondary market communication program designed to raise investor and analyst awareness and understanding of closed-end funds. Nuveen’s support services included, among other things: continuing communications concerning the refinancing efforts related to auction rate preferred securities; supporting and promoting munifund term preferred shares (MTP) including by launching a microsite dedicated to MTP shares; sponsoring and participating in conferences; communicating with closed-end fund analysts covering the Nuveen funds throughout the year; providing marketing and product updates for the closed-end funds; and maintaining and enhancing a closed-end fund website.
 
Based on their review, the Independent Board Members found that, overall, the nature, extent and quality of services provided to the respective Funds under each applicable Advisory Agreement were satisfactory.
 
B. The Investment Performance of the Funds and Fund Advisers
The Board, including the Independent Board Members, reviewed and considered the performance history of each Fund over various time periods. The Board reviewed, among other things, each Fund’s historic investment performance as well as information comparing the Fund’s performance information with that of other funds (the “Performance Peer Group”) based on data compiled by Nuveen that was provided by an independent provider of mutual fund data and with recognized and/or customized benchmarks (i.e., benchmarks derived from multiple recognized benchmarks).
 
The Board reviewed reports, including a comprehensive analysis of the Funds’ performance and the applicable investment team. In this regard, the Board reviewed each Fund’s total return information compared to its Performance Peer Group for the quarter,

Nuveen Investments
 
73

 
 

 
 
Annual Investment Management Agreement
Approval Process (Unaudited) (continued)
 
one-, three- and five-year periods ending December 31, 2011, as well as performance information reflecting the first quarter of 2012. In addition, the Board reviewed each Fund’s total return information compared to recognized and/or customized benchmarks for the quarter, one- and three-year periods ending December 31, 2011, as well as performance information reflecting the first quarter of 2012.
 
The Independent Board Members also reviewed historic premium and discount levels, including a summary of actions taken to address or discuss other developments affecting the secondary market discounts of various funds. This information supplemented the fund performance information provided to the Board at each of its quarterly meetings.
 
In reviewing performance comparison information, the Independent Board Members recognized that the usefulness of the comparisons of the performance of certain funds with the performance of their respective Performance Peer Group may be limited because the Performance Peer Group may not adequately represent the objectives and strategies of the applicable funds or may be limited in size or number. In this regard, the Independent Board Members noted that the Performance Peer Group of each Fund was classified as having significant differences from the respective Fund based on various considerations such as special fund objectives, potential investable universe and the composition of the peer set (e.g., the number and size of competing funds and number of competing managers). The Independent Board Members also noted that the investment experience of a particular shareholder in the Nuveen funds will vary depending on when such shareholder invests in the applicable fund, the class held (if multiple classes are offered in a fund) and the performance of the fund (or respective class) during that shareholder’s investment period. In addition, although the performance below reflects the performance results for the time periods ending as of the most recent calendar year end (unless otherwise indicated), the Board also recognized that selecting a different ending time period may derive different results. Furthermore, while the Board is cognizant of the relevant performance of a fund’s peer set and/or benchmark(s), the Board evaluated fund performance in light of the respective fund’s investment objectives, investment parameters and guidelines and recognized that the objectives, investment parameters and guidelines of peers and/or benchmarks may differ to some extent, thereby resulting in differences in performance results. Nevertheless, with respect to any Nuveen funds that the Board considers to have underperformed their peers and/or benchmarks from time to time, the Board monitors such funds closely and considers any steps necessary or appropriate to address such issues.
 
As noted above, each Fund had significant differences from its respective Performance Peer Group. Therefore, the Independent Board Members considered the Funds’ performance compared to their benchmarks. In this regard, the Independent Board Members noted that each Fund outperformed its respective benchmark in the one- and three-year periods.

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Based on their review, the Independent Board Members determined that each Fund’s investment performance had been satisfactory.

C.
Fees, Expenses and Profitability
 
1. Fees and Expenses
The Board evaluated the management fees and expenses of each Fund reviewing, among other things, such Fund’s gross management fees, net management fees and net expense ratios in absolute terms as well as compared to the fee and expenses of a comparable universe of funds provided by an independent fund data provider (the “Peer Universe”) and any expense limitations.
 
The Independent Board Members further reviewed the methodology regarding the construction of the applicable Peer Universe. In reviewing the comparisons of fee and expense information, the Independent Board Members took into account that in certain instances various factors such as: the limited size and particular composition of the Peer Universe (including the inclusion of other Nuveen funds in the peer set); expense anomalies; changes in the funds comprising the Peer Universe from year to year; levels of reimbursement or fee waivers; the timing of information used; the differences in the type and use of leverage; and differences in the states reflected in the Peer Universe may impact the comparative data, thereby limiting somewhat the ability to make a meaningful comparison with peers.
 
In reviewing the fee schedule for a Fund, the Independent Board Members also considered the fund-level and complex-wide breakpoint schedules (described in further detail below) and any fee waivers and reimbursements provided by Nuveen (applicable, in particular, for certain closed-end funds launched since 1999). In reviewing fees and expenses (excluding leverage costs and leveraged assets), the Board considered the expenses and fees to be higher if they were over 10 basis points higher, slightly higher if they were approximately 6 to 10 basis points higher, in line if they were within approximately 5 basis points higher than the peer average and below if they were below the peer average of the Peer Universe. In reviewing the reports, the Board noted that the overwhelming majority of the Nuveen funds were at, close to or below their peer set average based on the net total expense ratio.
 
The Independent Board Members noted that the Nuveen Arizona Dividend Advantage Municipal Fund 3 had a net expense ratio that was slightly higher than its peer average, but a net management fee below its peer average, while the other Funds each had net management fees and net expense ratios (including fee waivers and expense reimbursements) below or in line with their peer averages.
 
Based on their review of the fee and expense information provided, the Independent Board Members determined that each Fund’s management fees were reasonable in light of the nature, extent and quality of services provided to the Fund.

Nuveen Investments
 
75

 
 

 
 
Annual Investment Management Agreement
Approval Process (Unaudited) (continued)

 
2. Comparisons with the Fees of Other Clients
The Independent Board Members further reviewed information regarding the nature of services and range of fees offered by the Advisor to other clients, including municipal separately managed accounts and passively managed exchange traded funds (ETFs) sub-advised by the Advisor. In evaluating the comparisons of fees, the Independent Board Members noted that the fee rates charged to the Funds and other clients vary, among other things, because of the different services involved and the additional regulatory and compliance requirements associated with registered investment companies, such as the Funds. Accordingly, the Independent Board Members considered the differences in the product types, including, but not limited to, the services provided, the structure and operations, product distribution and costs thereof, portfolio investment policies, investor profiles, account sizes and regulatory requirements. The Independent Board Members noted, in particular, that the range of services provided to the Funds (as discussed above) is much more extensive than that provided to separately managed accounts. Given the inherent differences in the various products, particularly the extensive services provided to the Funds, the Independent Board Members believe such facts justify the different levels of fees.
 
In considering the fees of the Sub-Advisor, the Independent Board Members also considered the pricing schedule or fees that the Sub-Advisor charges for similar investment management services for other Nuveen funds, funds of other sponsors (if any), and other clients (such as retail and/or institutional managed accounts).
 
3. Profitability of Fund Advisers
In conjunction with its review of fees, the Independent Board Members also considered the profitability of Nuveen for its advisory activities and its financial condition. The Independent Board Members reviewed the revenues and expenses of Nuveen’s advisory activities for the last two calendar years, the allocation methodology used in preparing the profitability data and an analysis of the key drivers behind the changes in revenues and expenses that impacted profitability in 2011. The Independent Board Members noted this information supplemented the profitability information requested and received during the year to help keep them apprised of developments affecting profitability (such as changes in fee waivers and expense reimbursement commitments). In this regard, the Independent Board Members noted that they have an Independent Board Member serve as a point person to review and keep them apprised of changes to the profitability analysis and/or methodologies during the year. The Independent Board Members also considered Nuveen’s revenues for advisory activities, expenses, and profit margin compared to that of various unaffiliated management firms with comparable assets under management (based on asset size and asset composition).
 
76
 
Nuveen Investments

 
 

 

 
In reviewing profitability, the Independent Board Members recognized the Advisor’s continued investment in its business to enhance its services, including capital improvements to investment technology, updated compliance systems, and additional personnel in compliance, risk management, and product development as well as its ability to allocate resources to various areas of the Advisor as the need arises. In addition, in evaluating profitability, the Independent Board Members also recognized the subjective nature of determining profitability which may be affected by numerous factors including the allocation of expenses. Further, the Independent Board Members recognized the difficulties in making comparisons as the profitability of other advisers generally is not publicly available and the profitability information that is available for certain advisers or management firms may not be representative of the industry and may be affected by, among other things, the adviser’s particular business mix, capital costs, types of funds managed and expense allocations. Notwithstanding the foregoing, the Independent Board Members reviewed Nuveen’s methodology and assumptions for allocating expenses across product lines to determine profitability. In reviewing profitability, the Independent Board Members recognized Nuveen’s investment in its fund business. Based on their review, the Independent Board Members concluded that the Advisor’s level of profitability for its advisory activities was reasonable in light of the services provided.
 
With respect to sub-advisers affiliated with Nuveen, including the Sub-Advisor, the Independent Board Members reviewed the sub-adviser’s revenues, expenses and profitability margins (pre- and post-tax) for its advisory activities and the methodology used for allocating expenses among the internal sub-advisers. Based on their review, the Independent Board Members were satisfied that the Sub-Advisor’s level of profitability was reasonable in light of the services provided.
 
In evaluating the reasonableness of the compensation, the Independent Board Members also considered other amounts paid to a Fund Adviser by the Funds as well as any indirect benefits (such as soft dollar arrangements, if any) the Fund Adviser and its affiliates receive, or are expected to receive, that are directly attributable to the management of the Funds, if any. See Section E below for additional information on indirect benefits a Fund Adviser may receive as a result of its relationship with the Funds. Based on their review of the overall fee arrangements of each Fund, the Independent Board Members determined that the advisory fees and expenses of the respective Fund were reasonable.
   
D.
Economies of Scale and Whether Fee Levels Reflect These Economies of Scale
With respect to economies of scale, the Independent Board Members have recognized the potential benefits resulting from the costs of a fund being spread over a larger asset base, although economies of scale are difficult to measure and predict with precision,

Nuveen Investments
 
77

 
 

 
 
Annual Investment Management Agreement
Approval Process (Unaudited) (continued)
 
particularly on a fund-by-fund basis. One method to help ensure the shareholders share in these benefits is to include breakpoints in the advisory fee schedule. Generally, management fees for funds in the Nuveen complex are comprised of a fund-level component and a complex-level component, subject to certain exceptions. Accordingly, the Independent Board Members reviewed and considered the applicable fund-level breakpoints in the advisory fee schedules that reduce advisory fees as asset levels increase. Further, the Independent Board Members noted that although closed-end funds may from time-to-time make additional share offerings, the growth of their assets will occur primarily through the appreciation of such funds’ investment portfolio.
 
In addition to fund-level advisory fee breakpoints, the Board also considered the Funds’ complex-wide fee arrangement. Pursuant to the complex-wide fee arrangement, the fees of the funds in the Nuveen complex are generally reduced as the assets in the fund complex reach certain levels. The complex-wide fee arrangement seeks to provide the benefits of economies of scale to fund shareholders when total fund complex assets increase, even if assets of a particular fund are unchanged or have decreased. The approach reflects the notion that some of Nuveen’s costs are attributable to services provided to all its funds in the complex and therefore all funds benefit if these costs are spread over a larger asset base. In addition, with the acquisition of the funds previously advised by FAF Advisors, Inc., the Board noted that a portion of such funds’ assets at the time of acquisition were deemed eligible to be included in the complex-wide fee calculation in order to deliver fee savings to shareholders in the combined complex and such funds were subject to differing complex-level fee rates.
 
Based on their review, the Independent Board Members concluded that the breakpoint schedules and complex-wide fee arrangement were acceptable and reflect economies of scale to be shared with shareholders when assets under management increase.

E. Indirect Benefits
In evaluating fees, the Independent Board Members received and considered information regarding potential “fall out” or ancillary benefits the respective Fund Adviser or its affiliates may receive as a result of its relationship with each Fund. In this regard, the Independent Board Members considered any revenues received by affiliates of the Advisor for serving as co-manager in initial public offerings of new closed-end funds as well as revenues received in connection with secondary offerings.
 
In addition to the above, the Independent Board Members considered whether the Fund Advisers received any benefits from soft dollar arrangements whereby a portion of the commissions paid by a Fund for brokerage may be used to acquire research that may be useful to the Fund Adviser in managing the assets of the Funds and other clients. The Independent Board Members recognized that each Fund Adviser has the authority to pay a higher commission in return for brokerage and research services if it

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determines in good faith that the commission paid is reasonable in relation to the value of the brokerage and research services provided and may benefit from such soft dollar arrangements. Similarly, the Board recognized that the research received pursuant to soft dollar arrangements by a Fund Adviser may also benefit a Fund and shareholders to the extent the research enhances the ability of the Fund Adviser to manage the Fund. The Independent Board Members noted that the Fund Advisers’ profitability may be somewhat lower if they did not receive the research services pursuant to the soft dollar arrangements and had to acquire such services directly.
 
Based on their review, the Independent Board Members concluded that any indirect benefits received by a Fund Adviser as a result of its relationship with the Funds were reasonable and within acceptable parameters.

F. Other Considerations
The Independent Board Members did not identify any single factor discussed previously as all-important or controlling. The Board Members, including the Independent Board Members, unanimously concluded that the terms of each Advisory Agreement are fair and reasonable, that the respective Fund Adviser’s fees are reasonable in light of the services provided to each Fund and that the Advisory Agreements be renewed.

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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 Automatic Reinvestment Plan
 
Your Nuveen Closed-End Fund allows you to conveniently reinvest 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 compounding. Just like distributions in cash, there may be times when income or capital gains taxes may be payable on 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 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. Distributions received to purchase shares in the open market will normally be invested shortly after the distribution payment date. No interest will be paid on distributions awaiting reinvestment. Because the market price of the shares may increase before purchases are completed, the average purchase price per share may

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exceed the market price at the time of valuation, resulting in the acquisition of fewer shares than if the distribution had been paid in shares issued by the Fund. A pro rata portion of any applicable brokerage commissions on open market purchases will be paid by Plan participants. These commissions usually will be lower than those charged on individual transactions.
 
Flexible
 
You may change your distribution option or withdraw from the Plan at any time, should your needs or situation change.
 
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 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.

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Glossary of Terms
Used in this Report

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.
   
Average Annual Total Return: This is a commonly used method to express an investment’s performance over a particular, usually multi-year time period. It expresses the return that would have been necessary each year to equal the investment’s actual cumulative performance (including change in NAV or market price and reinvested dividends and capital gains distributions, if any) over the time period being considered.
   
Average Effective Maturity: The market-value-weighted average of the effective maturity dates of the individual securities including cash. In the case of a bond that has been advance-refunded to a call date, the effective maturity is the date on which the bond is scheduled to be redeemed using the proceeds of an escrow account. In most other cases the effective maturity is the stated maturity date of the security.
   
Effective Leverage: Effective leverage is a Fund’s effective economic leverage, and includes both regulatory leverage (see below) and the leverage effects of certain derivative investments in the Fund’s portfolio. Currently, the leverage effects of Tender Option Bond (TOB) inverse floater holdings are included in effective leverage values, in addition to any regulatory leverage.
   
Inverse Floating Rate Securities: Inverse floating rate securities, also known as inverse floaters or tender option bonds (TOBs), 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.

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Leverage: Using borrowed money to invest in securities or other assets, seeking to increase the return of an investment or portfolio.
   
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.
   
Lipper Other States Municipal Debt Funds Classification Average: Calculated using the returns of all closed-end funds in this category. Lipper returns account for the effects of management fees and assume reinvestment of distributions, but do not reflect any applicable sales charges.
   
Market Yield (also known as Dividend Yield or Current Yield): An investment’s current annualized dividend divided by its current market price.
   
Net Asset Value (NAV): The net market value of all securities held in a portfolio.
   
Net Asset Value (NAV) Per Share: The market value of one share of a mutual fund or closed-end fund. For a Fund, the NAV is calculated daily by taking the Fund’s total assets (securities, cash, and accrued earnings), subtracting the Fund’s liabilities, and dividing by the number of shares outstanding.
   
Pre-Refunding: Pre-Refunding, also known as advanced refundings or refinancings, is a procedure used by state and local governments to refinance municipal bonds to lower interest expenses. The issuer sells new bonds with a lower yield and uses the proceeds to buy U.S. Treasury securities, the interest from which is used to make payments on the higher-yielding bonds. Because of this collateral, pre-refunding generally raises a bond’s credit rating and thus its value.
   
Regulatory Leverage: Regulatory leverage consists of preferred shares issued by or borrowings of a Fund. Both of these are part of a Fund’s capital structure. Regulatory leverage is sometimes referred to as “’40 Act Leverage” and is subject to asset coverage limits set in the Investment Company Act of 1940.
   
S&P Arizona and Texas Municipal Bond Indexes: An unleveraged, market value-weighted indexes designed to measure the performance of the tax-exempt, investment-grade municipal bond markets in Arizona and Texas, respectively. Index returns assume reinvestment of distributions, but do not reflect any applicable sales charges or management fees.
   
S&P Municipal Bond Index: An unleveraged, market value-weighted index designed to measure the performance of the tax-exempt, investment-grade U.S. municipal bond market. Index returns assume reinvestment of distributions, but do not reflect any applicable sales charges or management fees.
   
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.

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Glossary of Terms
Used in this Report (continued)
 
Zero Coupon Bond: A zero coupon bond does not pay a regular interest coupon to its holders during the life of the bond. 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.

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Notes

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Notes

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Additional Fund Information
 
Board of
Directors/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
Virginia L. Stringer
Terence J. Toth
 
Fund Manager
Nuveen Fund Advisors, Inc.
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
 
Quarterly Portfolio of Investments and Proxy Voting Information
 
You may obtain (i) each Fund’s quarterly portfolio of investments, (ii) information regarding how each Fund voted proxies relating to portfolio securities held during the most recent twelve-month period ended June 30, and (iii) a description of the policies and procedures that each Fund 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 (CEO) 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 SEC the certification of its Chief Executive Officer and Chief Financial Officer required by Section 302 of the Sarbanes-Oxley Act.
 
Common Share Information
 
Each Fund intends to repurchase its own common stock in the future at such times and in such amounts as is deemed advisable. During the period covered by this report, the Funds repurchased shares of their common stock as shown in the accompanying table.

 
Common Shares
Fund
Repurchased
NAZ
NFZ
NKR
NXE
NTX
 
Any future repurchases will be reported to shareholders in the next annual or semiannual report.

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Nuveen Investments:
Serving Investors for Generations
 
Since 1898, financial advisors and their clients have relied on Nuveen Investments to provide dependable investment solutions through continued adherence to proven, long-term investing principles. Today, we offer a range of high quality equity and fixed-income solutions designed to be integral components of a well-diversified core portfolio.
 
Focused on meeting investor needs.
Nuveen Investments provides high-quality investment services designed to help secure the long-term goals of institutional and individual investors as well as the consultants and financial advisors who serve them. Nuveen Investments markets a wide range of specialized investment solutions which provide investors access to capabilities of its high-quality boutique investment affiliates—Nuveen Asset Management, Symphony Asset Management, NWQ Investment Management Company, Santa Barbara Asset Management, Tradewinds Global Investors, Winslow Capital Management and Gresham Investment Management. In total, Nuveen Investments managed $212 billion as of June 30, 2012.
 
Find out how we can help you.
To learn more about how the products and services of Nuveen Investments may be able to help you meet your financial goals, talk to your financial advisor, or call us at (800) 257-8787. Please read the information provided carefully before you invest. Investors should consider the investment objective and policies, risk considerations, charges and expenses of any investment carefully. Where applicable, be sure to obtain a prospectus, which contains this and other relevant information. To obtain 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/cef
 
Distributed by
Nuveen Securities, LLC
333 West Wacker Drive
Chicago, IL 60606
www.nuveen.com/cef
 
ESA-D-0812D

 
 

 
 
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.

(a) See Portfolio of Investments in Item 1.

(b) Not applicable.

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: November 8, 2012

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: November 8, 2012

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

Date: November 8, 2012