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
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Nuveen Arizona Premium Income Municipal Fund, Inc.
------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
Nuveen Investments
333 West Wacker Drive
Chicago, IL 60606
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(Address of principal executive offices) (Zip code)
Jessica R. Droeger
Nuveen Investments
333 West Wacker Drive
Chicago, IL 60606
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(Name and address of agent for service)
Registrant's telephone number, including area code: (312) 917-7700
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Date of fiscal year end: July 31, 2003
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Date of reporting period: July 31, 2003
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Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
Nuveen
Municipal Closed-End
Exchange-Traded
Funds
ANNUAL REPORT July 31, 2003
ARIZONA
NAZ
NFZ
NKR
NXE
TEXAS
NTX
PHOTO OF: WOMAN AND GIRL LOOKING AT PHOTO ALBUM.
PHOTO OF: 2 MEN TALKING.
DEPENDABLE,
TAX-FREE INCOME
BECAUSE
IT'S NOT WHAT YOU EARN,
IT'S WHAT YOU KEEP.(R)
Logo: NUVEEN Investments
FASTER INFORMATION
RECEIVE YOUR
NUVEEN FUND REPORT
ELECTRONICALLY
By registering for electronic delivery, you will receive an e-mail as soon as
your Nuveen Fund information is available. Click on the link and you will be
taken directly to the report. Your Fund report can be viewed and saved on your
computer. Your report will arrive faster via e-mail than by traditional mail.
Registering is easy and only takes a few minutes (see instructions at right).
--------------------------------------------------------------------------------
SOME COMMON CONCERNS:
WILL MY E-MAIL ADDRESS BE DISTRIBUTED TO OTHER COMPANIES?
No, your e-mail address is strictly confidential and will not be used for
anything other than notification of shareholder information.
WHAT IF I CHANGE MY MIND AND WANT TO RECEIVE INVESTOR MATERIALS THROUGH REGULAR
MAIL DELIVERY AGAIN?
If you decide you do not like receiving your reports electronically, it's a
simple process to go back to regular mail delivery.
--------------------------------------------------------------------------------
IF YOUR NUVEEN FUND DIVIDENDS AND STATEMENTS
COME FROM YOUR FINANCIAL ADVISOR OR BROKERAGE ACCOUNT,
FOLLOW THE STEPS OUTLINED BELOW:
1 Go to WWW.INVESTORDELIVERY.COM
2 Refer to the address sheet that accompanied this report. Enter the personal
13-CHARACTER ENROLLMENT NUMBER imprinted near your name.
3 You'll be taken to a page with several options. Select the NEW
ENROLLMENT-CREATE screen. Once there, enter your e-mail address (e.g.
yourID@providerID.com), and a personal, 4-digit PIN number of your choice.
(Pick a number that's easy to remember.)
4 Click Submit. Confirm the information you just entered is correct, then
click Submit again.
5 You should get a confirmation e-mail within 24 hours. If you do not, go
back through these steps to make sure all the information is correct.
6 Use this same process if you need to change your registration information
or cancel internet viewing.
IF YOUR NUVEEN FUND DIVIDENDS AND STATEMENTS
COME DIRECTLY TO YOU FROM NUVEEN,
FOLLOW THE STEPS OUTLINED BELOW:
1 Go to WWW.NUVEEN.COM
2 Select ACCESS YOUR ACCOUNT. Select the E-REPORT ENROLLMENT section. Click
on Enrollment Today.
3 You'll be taken to a screen that asks for your Social Security number and
e-mail address. Fill in this information, then click Enroll.
4 You should get a confirmation e-mail within 24 hours. If you do not, go
back through these steps to make sure all the information is correct.
5 Use this same process if you need to change your registration information
or cancel internet viewing.
Logo: NUVEEN Investments
Photo of: Timothy R. Schwertfeger
Chairman of the Board
Sidebar text: "NO ONE KNOWS WHAT THE FUTURE WILL BRING, WHICH IS WHY WE THINK A
WELL-BALANCED PORTFOLIO ..... IS AN IMPORTANT COMPONENT IN ACHIEVING YOUR
LONG-TERM FINANCIAL GOALS."
Dear
SHAREHOLDER
Once again, I am pleased to report that over the most recent reporting
period your Fund continued to provide you with attractive tax-free monthly
income and the opportunity for increased portfolio diversi fication. For more
specific information about the performance of your Fund, please see the
Portfolio Manager's Comments and Performance Overview sections of this report.
With interest rates at historically low levels, many have begun to wonder
whether interest rates will rise, and whether that possibility should cause them
to adjust their holdings of fixed-income investments. No one knows what the
future will bring, which is why we think a well-balanced portfolio that is
structured and carefully monitored with the help of an investment professional
is an important component in achieving your long-term financial goals. A
well-diversified portfolio may actually help to reduce your overall investment
risk, and we believe that municipal bond investments like your Nuveen Fund can
be important building blocks in a portfolio crafted to perform well through a
variety of market conditions.
I'd also like to direct your attention to the inside front cover of this report,
which explains the quick and easy process to begin receiving Fund reports like
this via e-mail and the internet. Thousands of Nuveen Fund shareholders already
have signed-up, and they are getting their Fund information faster and more
conveniently than ever. I urge you to consider joining them.
Since 1898, Nuveen Investments has offered financial products and solutions that
incorporate careful research, diversification, and the application of
conservative risk-management principles. We are grateful that you have chosen us
as a partner as you pursue your financial goals. We look forward to continuing
to earn your trust in the months and years ahead.
Sincerely,
/s/ Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
September 15, 2003
1
Nuveen Arizona and Texas Municipal Closed-End Exchange-Traded Funds (NAZ, NFZ,
NKR, NXE, NTX)
Portfolio Manager's
COMMENTS
Portfolio manager Rick Huber discusses economic and market conditions, key
investment strategies, and the recent performance of the Funds. With 18 years of
investment experience, Rick assumed portfolio management responsibility for
these Funds in January 2003.
WHAT FACTORS AFFECTED THE U.S. ECONOMY AND MUNICIPAL MARKET DURING THE
TWELVE-MONTH PERIOD ENDED JULY 31, 2003?
In June 2003, the Federal Reserve cut the fed funds rate to 1.0%, its lowest
level since 1958. Also in June, the GDP growth rate for the first quarter of
2003 was revised downward to 1.4%. The preliminary second-quarter growth rate,
announced in July, was 2.4%, which continued to lag the 3% level some economists
consider to be indicative of a recovery.
This was just the latest evidence of the two factors that, in our opinion,
continued to have the greatest influence on the performance of the U.S. economy
and the municipal market over the course of this reporting period - historically
low interest rate levels and the sluggish pace of economic growth. In addition,
inflation remained dormant through the period, while comments by the Fed kept
the topic of potential deflation in the news.
In combination, the slow rate of economic recovery, low interest rates and lack
of inflationary pressures created conditions that helped many municipal bonds
perform well during much of this reporting period. However, in July 2003 some
stronger-than-expected economic data raised the specter of a tighter monetary
policy sooner rather than later. This, along with volatility in the
mortgage-backed securities market, precipitated a spike in bond yields and a
corresponding drop in bond prices that impacted all fixed-income markets. One
barometer of the volatility experienced in the bond markets during the month of
July was the yield on the benchmark 10-year U.S. Treasury, which jumped
approximately 150 basis points from 45-year lows in June to its highest point in
more than a year by July 31, 2003.
During the first seven months of 2003, the municipal market followed up the
record issuance of 2002 with continued strong supply, issuing $230 billion in
new bonds. This represented an increase of 18% over the same period in 2002.
Much of the increase in supply reflected issuance intended to address the fiscal
problems facing many states as the result of slow growth, rising costs
(especially for healthcare and pensions), and sharp declines in the collection
of income and capital gains taxes. Matching the increased supply, demand for
municipal bonds also remained strong from both individual and institutional
investors, particularly insurance companies.
HOW WERE ECONOMIC AND MARKET CONDITIONS IN ARIZONA AND TEXAS?
Boosted by an improving tourism industry, reviving demand in the high-tech and
biotech areas, and increased defense-related spending, Arizona's economy
continued on the path to recovery during the reporting period. Healthy
population trends, affordable housing and low business costs also contributed to
the state's economic rebound. In June 2003, a $6.4 billion fiscal 2004 state
budget was approved. While Arizona's rainy day fund was depleted in 2002, the
state's pension liabilities are fully funded, and its debt burden remained rela
tively low. During the first seven months of 2003, Arizona issued just under $4
billion in new municipal bonds, down 18% from the same period in 2002. As of
July 31, 2003, the state's credit rating remained at A1/AA-, with negative
outlooks, from Moody's and Standard & Poor's, respectively. The negative
outlooks reflected the state's declining sales and income tax collections last
year as well as the rating agencies' expectations that, despite the economic
recovery projected for the second half of 2003, significant budgetary imbalances
could continue over the next several cycles.
Like Arizona, Texas has also benefited from positive demographic trends, a large
and diverse high-tech
2
and research sector, and relatively low costs of business and housing. As home
to more than 200,000 military personnel, the state's economic growth has been
helped by new defense spending contracts and increased activity at Texas
military bases. Many of the state's major metropolitan areas were returning to
healthy growth during the reporting period, including Houston (aided by a
booming energy industry), Austin (with its high-tech and government base), and
San Antonio. Northern Texas, including Dallas and Fort Worth, did not fare as
well, as this area's economy continued to be constrained by problems in the
airline and telecom industries. For the 2004-2005 biennium, the state balanced
its $117.4 billion budget by closing a $10 billion gap through across-the-board
spending cuts of 1.5%, fee increases, a drawdown of the state's $1 billion rainy
day fund, and a new tax amnesty program that is expected to increase
collections. While the state's debt levels remained relatively low, pension
liabilities were not fully funded. During the first seven months of 2003, Texas
retained its position as the third largest state issuer behind California and
New York, with $14.6 billion in new municipal bonds, up 9% over January-July
2002. The state's general obligation debt continued to be rated Aa1/AA with a
stable outlooks by Moody's and Standard & Poor's, respectively.
HOW DID THE FUNDS PERFORM OVER THE YEAR ENDED JULY 31, 2003?
Individual results for these Funds, as well as for selected benchmarks, are
presented in the accompanying table.
TOTAL RETURN LEHMAN LIPPER
MARKET YIELD ON NAV TOTAL RETURN1 AVERAGE2
------------------------------------------------------------------------
1 YEAR 1 YEAR 1 YEAR
TAXABLE- ENDED ENDED ENDED
7/31/03 EQUIVALENT3 7/31/03 7/31/03 7/31/03
------------------------------------------------------------------------
NAZ 6.12% 8.93% 2.21% 3.60% 4.35%
------------------------------------------------------------------------
NFZ 5.92% 8.64% 3.67% 3.60% 4.35%
------------------------------------------------------------------------
NKR 6.00% 8.76% 3.67% 3.60% 4.35%
------------------------------------------------------------------------
NXE 5.76% 8.41% NA - -
------------------------------------------------------------------------
NTX 6.53% 9.07% 2.54% 3.60% 4.35%
------------------------------------------------------------------------
Past performance is not predictive of future results.
For additional information, see the individual Performance Overview for your
Fund in this report.
For the twelve months ended July 31, 2003, both NFZ and NKR outperformed the
national, unleveraged Lehman Brothers Municipal Bond Index, while the returns of
NAZ and NTX trailed this benchmark over the period. While all four older Funds
trailed the Lipper Other States Municipal Debt Funds average, we believe this
comparison has more limited value since the Lipper average includes the results
of Funds from 10 different states, each with its own unique market environment.
The results of each of the Nuveen Funds over this reporting period were directly
affected by the performance of specific securities within their portfolios. For
example, for much of the reporting period, both NAZ and NTX had relatively large
positions in bonds with short call provisions. These bonds had relatively short
durations,4 which tended to restrain their performance in a market generally
more favorable to longer duration bonds. Over the course of the reporting
period, these callable bonds were replaced with longer maturity, longer duration
bonds. However, as the Funds worked through their call schedules, their ability
to benefit from the generally favorable interest rate environment in existence
over much of the reporting period was limited.
In addition, at the start of the reporting period, NTX held over $11 million
(par value) in bonds issued for Alliance and Dallas/Fort Worth airports and
backed by American Airlines. Over the reporting period, the market value of most
airline-backed bonds fell, due in part to a decline in passenger volume and in
part to the well-documented financial struggles of many carriers. Although we
significantly trimmed NTX's position in airline-backed bonds during the course
of the reporting period, the depreciation of these bonds over the twelve-month
period had a negative impact on NTX's total return.
NAZ's performance also was affected by its holdings of bonds issued for Phoenix
Children's Hospital and Winslow Memorial Hospital, which
1 The total annual returns on common share net asset value (NAV) for these
Nuveen Funds are compared with the total annual return of the Lehman Brothers
Municipal Bond Index, an unleveraged, unmanaged national index comprising a
broad range of investment-grade municipal bonds. Results for the Lehman index
do not reflect any expenses.
2 The total returns of the Nuveen Arizona and Texas Funds are compared with the
average annualized return of the 36 funds in the Lipper Other States Municipal
Debt Funds category. Fund and Lipper returns assume reinvestment of dividends.
It should be noted that the performance of the Lipper Other States category
represents the overall average of annual returns for funds from 10 different
states with a wide variety of economic and municipal market conditions and
investment guidelines, making direct comparisons less applicable.
3 The taxable-equivalent yield represents the yield that must be earned on a
taxable investment in order to equal the yield of the Nuveen Fund on an
after-tax basis. The taxable-equivalent yield is based on the Fund's market
yield on the indicated date and a federal income tax rate of 28% plus the
applicable state income tax rate. The combined federal and state tax rate used
for Arizona is 31.5%. Because Texas has no state income tax, NTX's
taxable-equivalent yield is based on a federal income tax rate of 28%.
4 Duration is a measure of a Fund's NAV volatility in reaction to interest rate
movements. Fund duration, also known as leverage-adjusted duration, takes into
account the leveraging process for a Fund and therefore is generally longer
than the duration of the actual portfolio of individual bonds that make up the
Fund. References to duration in this commentary are intended to indicate Fund
duration unless otherwise noted.
3
depreciated in value as these two credits experienced financial and management
difficulties. With new managements in place, both Phoenix Children's and Winslow
are currently working to resolve problems and achieve a potential turnaround.
NKR and NXE also held smaller positions in the Phoenix Children's Hospital
bonds.
NAZ, NXE, and NTX had less than 3% of their portfolios invested in bonds backed
by the 1998 master tobacco settlement agreement. In recent months, the prices of
these bonds weakened as the result of lawsuits involving the major tobacco
companies as well as the increased issuance of such bonds by states planning to
use the proceeds to help close budget gaps. Although the sector as a whole
produced negative returns over the twelve months ended July 31, 2003,
tobacco-backed bonds showed some recovery toward the end of the period. As of
the end of this reporting period, our strategy was to maintain our tobacco
holdings while we continued to regularly evaluate the situation.
HOW DID THE MARKET ENVIRONMENT AFFECT THE FUNDS' DIVIDENDS AND SHARE PRICES?
With short-term interest rates at historically low levels during the reporting
period, the dividend-paying capabilities of these Funds benefited from their use
of leverage. The amount of this benefit is tied in part to the short-term rates
the Funds pay their MuniPreferred(R) shareholders. Low short-term rates can
enable the Funds to reduce the amount of income paid to MuniPreferred
shareholders, which can potentially leave more earnings to support common share
dividends.
During the twelve months ended July 31, 2003, the continued low level of
short-term interest rates enabled us to implement three dividend increases in
NFZ and one in NTX. As of July 2003, NAZ had paid steady or increasing dividends
for 38 consec utive months, while NKR had offered shareholders stable,
attractive dividends for 15 consecutive months. NXE, which was introduced in
September 2002, declared its first monthly distribution in November 2002.
Although the share prices and net asset values of these Funds performed well
during much of this twelve-month reporting period, the increased volatility that
led to a general weakening of bond prices during July 2003 resulted in share
prices and NAVs that were lower on July 31, 2003, than they had been one year
earlier. As of July 31, 2003, NAZ, NFZ, NXE and NTX were trading at premiums to
their common share NAVs, while NKR had moved to trading at a slight discount
(see charts on individual Performance Overview pages).
WHAT KEY STRATEGIES WERE USED TO MANAGE THESE FUNDS DURING THE PERIOD ENDED JULY
31, 2003?
Over this reporting period, we continued to place strong emphasis on
diversifying the portfolios, improving call protection and enhancing each Fund's
dividend-paying capabilities. Strategically, our main focus centered on
systematically controlling the Funds' durations, which we believed would enhance
our ability to mitigate the Funds' interest rate risk and produce more
consistent returns over time. Interest rate risk is the risk that the value of a
Fundport folio will decline when market interest rates rise (since bond prices
move in the opposite direction of interest rates). The longer the duration of a
Fund's portfolio, the greater its interest rate risk.
In line with our duration strategy, we concentrated on finding value in the
intermediate part of the yield curve (i.e., bonds that mature in 15 to 20
years), particularly in the Funds with longer durations that we were seeking to
moderate. In many cases, bonds in this part of the curve offered yields similar
to those of longer-term bonds but, in our opinion, had less inherent interest
rate risk. In NAZ and NTX, the need to replace shorter duration bonds that were
called from the portfolio with current bonds having longer durations served to
extend the Fund's duration over this reporting period.
4
In general, issuance in the Texas municipal market over the past year increased
our opportunities to make purchases for NTX, while finding appropriate bonds
among the tighter supply provided by the Arizona market was more difficult. In
both markets, we continued to look for individual issues that we thought would
perform relatively well regardless of the future direction of interest rates. In
carrying out trades, we watched for opportunities to take losses on selected
securities in order to offset the generation of capital gains. Over the past
year, we increased the Arizona Funds' exposure to limited tax obligation bonds,
which were more plentiful in the Arizona market, with the goal of enhancing the
diversification of these Funds.
NXE, our newest Arizona Fund introduced in September 2002, is now fully invested
and, as mentioned earlier, began declaring regular monthly dividends in November
2002. As attractive opportunities appeared in the market, we added Arizona
securities to this Fund to replace bonds from Puerto Rico that were purchased
during the initial investment phase last fall. As of July 31, 2003,
approximately 95% of NXE's portfolio was invested in Arizona bonds, up from 90%
last fall.
Given the current geopolitical and economic climate, we believed that
maintaining strong credit quality remained a vital requirement. As of July 31,
2003, the Arizona and Texas Funds offered excellent credit quality, with
allocations of bonds rated AAA/U.S. guaranteed and AA ranging from 73% to 89%.
In general, our weightings in insured and AAA bonds benefited the performance of
these Funds during the past year.
WHAT IS YOUR OUTLOOK FOR THESE FUNDS?
We continue to believe that the U.S. economy is slowly headed for a recovery. We
also think that inflation and interest rates will remain relatively low over the
near term. However, an eventual rise in interest rates remains a distinct risk,
and we plan to keep a careful watch on the Funds' durations and holdings in
order to be as well positioned as possible if and when this happens.
Looking ahead at potential bond calls for these Funds, the newer Arizona Funds
(NFZ, NKR, and NXE) should not experience any significant call exposure for
several years. Despite our actions to mitigate the call risks in NAZ and NTX,
these Funds still face potential calls on 22% and 11% of their portfolios,
respectively, through 2005. The number of actual calls in all of these Funds
will depend largely on market interest rates in coming months.
We will continue to manage the Funds' durations and seek to enhance their
income-generating capabilities. We also plan to continue closely monitoring the
budgetary situations in both states. We believe that these Nuveen Funds remain
attractive sources of tax-free income, and continue to offer the potential for
considerable portfolio diversification.
5
Nuveen Arizona Premium Income Municipal Fund, Inc.
Performance
OVERVIEW As of July 31, 2003
NAZ
CREDIT QUALITY
Pie Chart:
AAA/U.S. Guaranteed 63%
AA 13%
A 2%
BBB 17%
NR 1%
BB or lower 4%
PORTFOLIO STATISTICS
--------------------------------------------------
Share Price $15.00
--------------------------------------------------
Common Share Net Asset Value $13.66
--------------------------------------------------
Market Yield 6.12%
--------------------------------------------------
Taxable-Equivalent Yield
(Federal Income Tax Rate)1 8.50%
--------------------------------------------------
Taxable-Equivalent Yield
(Federal and State Income Tax Rate)1 8.93%
--------------------------------------------------
Net Assets Applicable to
Common Shares ($000) $60,547
--------------------------------------------------
Average Effective Maturity (Years) 16.63
--------------------------------------------------
Leverage-Adjusted Duration 9.32
--------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN (Inception 11/19/92)
--------------------------------------------------
ON SHARE PRICE ON NAV
--------------------------------------------------
1-Year -5.98% 2.21%
--------------------------------------------------
5-Year 3.77% 3.63%
--------------------------------------------------
10-Year 5.26% 5.35%
--------------------------------------------------
TOP FIVE SECTORS (as a % of total investments)
--------------------------------------------------
Tax Obligation/Limited 25%
--------------------------------------------------
Healthcare 17%
--------------------------------------------------
U.S. Guaranteed 17%
--------------------------------------------------
Tax Obligation/General 9%
--------------------------------------------------
Housing/Multifamily 9%
--------------------------------------------------
Bar Chart:
2002-2003 MONTHLY TAX-FREE DIVIDENDS PER SHARE
Aug 0.0765
Sep 0.0765
Oct 0.0765
Nov 0.0765
Dec 0.0765
Jan 0.0765
Feb 0.0765
Mar 0.0765
Apr 0.0765
May 0.0765
Jun 0.0765
Jul 0.0765
Line Chart:
SHARE PRICE PERFORMANCE
Weekly Closing Price
Past performance is not predictive of future results.
8/1/02 17
16.85
16.9
16.87
16.95
16.98
16.85
16.74
16.48
16.3
16.11
15.93
15.6
15.9
15.72
15.49
15.15
15.16
15.15
14.95
14.67
15.04
15.31
15.15
15.3
15.75
15.6
16.18
15.87
15.89
15.95
16
16.11
16.11
16.12
16.08
15.85
15.59
15.37
15.84
16
15.9
16.56
16.52
16.45
16.7
16.58
16.9
16.62
16.3
7/31/03 15
1 Taxable-equivalent yield represents the yield on a taxable investment
necessary to equal the yield of the Nuveen Fund on an after-tax basis. It is
calculated using the current market yield and a federal income tax rate of
28%. The rate shown for federal and state highlights the added value of owning
shares that are also exempt from state income taxes. It is based on a combined
federal and state income tax rate of 31.5%.
6
Nuveen Arizona Dividend Advantage Municipal Fund
Performance
OVERVIEW As of July 31, 2003
NFZ
Pie Chart:
CREDIT QUALITY
AAA/U.S. Guaranteed 53%
AA 20%
A 11%
BBB 15%
BB or lower 1%
PORTFOLIO STATISTICS
--------------------------------------------------
Share Price $15.30
--------------------------------------------------
Common Share Net Asset Value $14.45
--------------------------------------------------
Market Yield 5.92%
--------------------------------------------------
Taxable-Equivalent Yield
(Federal Income Tax Rate)1 8.22%
--------------------------------------------------
Taxable-Equivalent Yield
(Federal and State Income Tax Rate)1 8.64%
--------------------------------------------------
Net Assets Applicable to
Common Shares ($000) $22,290
--------------------------------------------------
Average Effective Maturity (Years) 19.27
--------------------------------------------------
Leverage-Adjusted Duration 11.86
--------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN (Inception 1/30/01)
--------------------------------------------------
ON SHARE PRICE ON NAV
--------------------------------------------------
1-Year 3.06% 3.67%
--------------------------------------------------
Since Inception 6.52% 6.32%
--------------------------------------------------
TOP FIVE SECTORS (as a % of total investments)
--------------------------------------------------
Tax Obligation/Limited 26%
--------------------------------------------------
Utilities 17%
--------------------------------------------------
Housing/Multifamily 13%
--------------------------------------------------
Tax Obligation/General 13%
--------------------------------------------------
U.S. Guaranteed 8%
--------------------------------------------------
Bar Chart:
2002-2003 MONTHLY TAX-FREE DIVIDENDS PER SHARE2
Aug 0.07
Sep 0.071
Oct 0.071
Nov 0.071
Dec 0.073
Jan 0.073
Feb 0.073
Mar 0.0755
Apr 0.0755
May 0.0755
Jun 0.0755
Jul 0.0755
Line Chart:
SHARE PRICE PERFORMANCE
Weekly Closing Price
Past performance is not predictive of future results.
8/1/02 15.8
15.71
15.9
15.41
15.25
15.44
15.38
15.58
15.55
15.6
15.36
15.25
15.15
15.2
15.45
15
15.2
15.2
15.35
15.25
15.15
15.2
15.5
15.6
15.8
15.5
15.28
15.28
15.24
15.5
15.65
16.19
16.23
16.09
15.8
15.53
15.52
15.56
15.38
15.65
16.01
16.3
16.25
16.57
16.5
16.54
16.79
16.88
16.52
16.35
7/31/03 15.3
1 Taxable-equivalent yield represents the yield on a taxable investment
necessary to equal the yield of the Nuveen Fund on an after-tax basis. It is
calculated using the current market yield and a federal income tax rate of
28%. The rate shown for federal and state highlights the added value of owning
shares that are also exempt from state income taxes. It is based on a combined
federal and state income tax rate of 31.5%.
2 The Fund also paid shareholders capital gains and net ordinary income
distributions in December 2002 of $0.0438 per share.
7
Nuveen Arizona Dividend Advantage Municipal Fund 2
Performance
OVERVIEW As of July 31, 2003
NKR
Pie Chart:
CREDIT QUALITY
AAA/U.S. Guaranteed 79%
AA 10%
A 3%
BBB 7%
BB or lower 1%
PORTFOLIO STATISTICS
--------------------------------------------------
Share Price $14.40
--------------------------------------------------
Common Share Net Asset Value $14.57
--------------------------------------------------
Market Yield 6.00%
--------------------------------------------------
Taxable-Equivalent Yield
(Federal Income Tax Rate)1 8.33%
--------------------------------------------------
Taxable-Equivalent Yield
(Federal and State Income Tax Rate)1 8.76%
--------------------------------------------------
Net Assets Applicable to
Common Shares ($000) $35,237
--------------------------------------------------
Average Effective Maturity (Years) 17.56
--------------------------------------------------
Leverage-Adjusted Duration 11.85
--------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN (Inception 3/25/02)
--------------------------------------------------
ON SHARE PRICE ON NAV
--------------------------------------------------
1-Year -3.53% 3.67%
--------------------------------------------------
Since Inception 2.26% 6.78%
--------------------------------------------------
TOP FIVE SECTORS (as a % of total investments)
--------------------------------------------------
Tax Obligation/General 30%
--------------------------------------------------
Tax Obligation/Limited 26%
--------------------------------------------------
Education and Civic Organizations 10%
--------------------------------------------------
Utilities 6%
--------------------------------------------------
Healthcare 6%
--------------------------------------------------
Bar Chart:
2002-2003 MONTHLY TAX-FREE DIVIDENDS PER SHARE2
Aug 0.072
Sep 0.072
Oct 0.072
Nov 0.072
Dec 0.072
Jan 0.072
Feb 0.072
Mar 0.072
Apr 0.072
May 0.072
Jun 0.072
Jul 0.072
Line Chart:
SHARE PRICE PERFORMANCE
Weekly Closing Price
Past performance is not predictive of future results.
8/1/02 15.7
15.5
15.85
15.65
15.2
15.25
15.31
15.34
15.5
15.68
15.2
14.76
14.78
14.89
14.75
14.7
15.2
15.22
15.29
15.1
15.4
15.49
15.59
15.59
15.5
15.53
15.55
15.3
15.09
15.15
15.34
15.21
15.26
15.1
15.1
15.23
15.31
15.32
15.12
15.21
15.44
15.86
15.8
16.08
15.83
16.15
16.18
16.2
15.76
15.5
7/31/03 14.4
1 Taxable-equivalent yield represents the yield on a taxable investment
necessary to equal the yield of the Nuveen Fund on an after-tax basis. It is
calculated using the current market yield and a federal income tax rate of
28%. The rate shown for federal and state highlights the added value of owning
shares that are also exempt from state income taxes. It is based on a combined
federal and state income tax rate of 31.5%.
2 The Fund also paid shareholders capital gains and net ordinary income
distributions in December 2002 of $0.0122 per share.
8
Nuveen Arizona Dividend Advantage Municipal Fund 3
Performance
OVERVIEW As of July 31, 2003
NXE
Pie Chart:
CREDIT QUALITY
AAA/U.S. Guaranteed 70%
AA 17%
A 5%
BBB 6%
BB or lower 2%
PORTFOLIO STATISTICS
--------------------------------------------------
Share Price $13.97
--------------------------------------------------
Common Share Net Asset Value $13.45
--------------------------------------------------
Market Yield 5.76%
--------------------------------------------------
Taxable-Equivalent Yield
(Federal Income Tax Rate)1 8.00%
--------------------------------------------------
Taxable-Equivalent Yield
(Federal and State Income Tax Rate)1 8.41%
--------------------------------------------------
Net Assets Applicable to
Common Shares ($000) $41,247
--------------------------------------------------
Average Effective Maturity (Years) 18.95
--------------------------------------------------
Leverage-Adjusted Duration 14.03
--------------------------------------------------
CUMULATIVE TOTAL RETURN (Inception 9/25/02)
--------------------------------------------------
ON SHARE PRICE ON NAV
--------------------------------------------------
Since Inception -2.76% -2.05%
--------------------------------------------------
TOP FIVE SECTORS (as a % of total investments)
--------------------------------------------------
Tax Obligation/Limited 21%
--------------------------------------------------
Tax Obligation/General 18%
--------------------------------------------------
Education and Civic Organizations 13%
--------------------------------------------------
Transportation 9%
--------------------------------------------------
Housing/Multifamily 9%
--------------------------------------------------
Bar Chart:
2002-2003 MONTHLY TAX-FREE DIVIDENDS PER SHARE
Nov 0.067
Dec 0.067
Jan 0.067
Feb 0.067
Mar 0.067
Apr 0.067
May 0.067
Jun 0.067
Jul 0.067
Line Chart:
SHARE PRICE PERFORMANCE
Weekly Closing Price
Past performance is not predictive of future results.
9/27/02 15.02
15.02
15
15
15
15
15
14.95
14.38
14.15
13.9
13.81
13.54
13.72
14.09
13.65
13.5
13.6
13.52
13.85
13.75
13.85
14
14.01
14.02
13.85
13.8
13.65
13.4
13.65
13.93
14.01
14.01
14.18
14.11
14.26
14.05
14.29
14.7
14.73
14.25
14.1
7/31/03 13.97
1 Taxable-equivalent yield represents the yield on a taxable investment
necessary to equal the yield of the Nuveen Fund on an after-tax basis. It is
calculated using the current market yield and a federal income tax rate of
28%. The rate shown for federal and state highlights the added value of owning
shares that are also exempt from state income taxes. It is based on a combined
federal and state income tax rate of 31.5%.
9
Nuveen Texas Quality Income Municipal Fund
Performance
OVERVIEW As of July 31, 2003
NTX
Pie Chart:
CREDIT QUALITY
AAA/U.S. Guaranteed 63%
AA 13%
A 12%
BBB 11%
BB or lower 1%
PORTFOLIO STATISTICS
--------------------------------------------------
Share Price $14.71
--------------------------------------------------
Common Share Net Asset Value $14.57
--------------------------------------------------
Market Yield 6.53%
--------------------------------------------------
Taxable-Equivalent Yield
(Federal Income Tax Rate)1 9.07%
--------------------------------------------------
Net Assets Applicable to
Common Shares ($000) $137,975
--------------------------------------------------
Average Effective Maturity (Years) 20.85
--------------------------------------------------
Leverage-Adjusted Duration 11.00
--------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN (Inception 10/17/91)
--------------------------------------------------
ON SHARE PRICE ON NAV
--------------------------------------------------
1-Year 4.14% 2.54%
--------------------------------------------------
5-Year 5.50% 4.76%
--------------------------------------------------
10-Year 6.03% 6.04%
--------------------------------------------------
TOP FIVE SECTORS (as a % of total investments)
--------------------------------------------------
Tax Obligation/General 22%
--------------------------------------------------
Healthcare 14%
--------------------------------------------------
Utilities 9%
--------------------------------------------------
Education and Civic Organizations 8%
--------------------------------------------------
Water and Sewer 8%
--------------------------------------------------
Bar Chart:
2002-2003 MONTHLY TAX-FREE DIVIDENDS PER SHARE2
Aug 0.079
Sep 0.079
Oct 0.079
Nov 0.079
Dec 0.079
Jan 0.079
Feb 0.079
Mar 0.08
Apr 0.08
May 0.08
Jun 0.08
Jul 0.08
Line Chart:
SHARE PRICE PERFORMANCE
Weekly Closing Price
Past performance is not predictive of future results.
8/1/02 15.17
15.41
15.51
15.24
15.1
15.39
15.38
15.54
15.66
15.56
15.37
14.31
14.09
14.56
14.48
14.23
14.11
14.35
14.39
14.19
14.08
14.39
14.63
14.25
14.19
14.35
14.43
14.51
14.29
14.39
14.55
14.9
14.93
14.74
14.82
14.94
14.9
15.09
15.09
15.05
15.17
15.34
15.38
15.54
15.53
15.25
15.44
15.7
15.17
15.25
7/31/03 14.71
1 Taxable-equivalent yield represents the yield on a taxable investment
necessary to equal the yield of the Nuveen Fund on an after-tax basis. It is
calculated using the current market yield and a federal income tax rate of
28%.
2 The Fund also paid shareholders capital gains and net ordinary income
distributions in December 2002 of $0.0112 per share.
10
Report of
INDEPENDENT AUDITORS
THE BOARDS OF DIRECTORS, TRUSTEES AND SHAREHOLDERS
NUVEEN ARIZONA PREMIUM INCOME MUNICIPAL FUND, INC.
NUVEEN ARIZONA DIVIDEND ADVANTAGE MUNICIPAL FUND
NUVEEN ARIZONA DIVIDEND ADVANTAGE MUNICIPAL FUND 2
NUVEEN ARIZONA DIVIDEND ADVANTAGE MUNICIPAL FUND 3
NUVEEN TEXAS QUALITY INCOME MUNICIPAL FUND
We have audited the accompanying statements of assets and liabilities, including
the portfolios of investments, of Nuveen Arizona Premium Income Municipal Fund,
Inc., Nuveen Arizona Dividend Advantage Municipal Fund, Nuveen Arizona Dividend
Advantage Municipal Fund 2, Nuveen Arizona Dividend Advantage Municipal Fund 3
and Nuveen Texas Quality Income Municipal Fund as of July 31, 2003, and the
related statements of operations, changes in net assets and the financial
highlights for the periods indicated therein. These financial statements and
financial highlights are the responsibility of the Funds' management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights. Our procedures included
confirmation of investments owned as of July 31, 2003, by correspondence with
the custodian. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial positions of
Nuveen Arizona Premium Income Municipal Fund, Inc., Nuveen Arizona Dividend
Advantage Municipal Fund, Nuveen Arizona Dividend Advantage Municipal Fund 2,
Nuveen Arizona Dividend Advantage Municipal Fund 3 and Nuveen Texas Quality
Income Municipal Fund at July 31, 2003, and the results of their operations,
changes in their net assets and the financial highlights for the periods
indicated therein in conformity with accounting principles generally accepted in
the United States.
/s/ Ernst & Young LLP
Chicago, Illinois
September 12, 2003
11
Nuveen Arizona Premium Income Municipal Fund, Inc. (NAZ)
Portfolio of
INVESTMENTS July 31, 2003
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT (000) DESCRIPTION(1) PROVISIONS* RATINGS** VALUE
------------------------------------------------------------------------------------------------------------------------------------
CONSUMER STAPLES - 1.4%
$ 970 Puerto Rico, The Children's Trust Fund, Tobacco Settlement 5/12 at 100.00 A- $ 841,213
Asset-Backed Refunding Bonds, Series 2002,
5.375%, 5/15/33
------------------------------------------------------------------------------------------------------------------------------------
EDUCATION AND CIVIC ORGANIZATIONS - 9.2%
1,000 Arizona State University, Certificates of Participation, 7/12 at 100.00 AAA 1,046,810
Series 2002, 5.375%, 7/01/19 - MBIA Insured
1,750 Arizona Student Loan Acquisition Authority, Subordinated 5/04 at 102.00 Aa1 1,850,503
Fixed-Rate Student Loan Revenue Bonds, Series 1994B,
6.600%, 5/01/10 (Alternative Minimum Tax)
1,250 Glendale Industrial Development Authority, Arizona, Revenue 5/11 at 101.00 BBB+ 1,273,050
Bonds, Midwestern University, Series 2001A,
5.875%, 5/15/31
1,400 Southern Arizona Capital Facilities Financing Corporation, 9/12 at 100.00 AAA 1,393,798
Student Housing Revenue Bonds, La Aldea Project at the
University of Arizona, Series 2002, 5.000%, 9/01/23 -
MBIA Insured
------------------------------------------------------------------------------------------------------------------------------------
HEALTHCARE - 22.9%
2,000 Arizona Health Facilities Authority, Hospital Revenue 11/09 at 100.00 Ba2 1,599,380
Bonds, Phoenix Children's Hospital, Series 1999A,
6.125%, 11/15/22
2,125 Arizona Health Facilities Authority, Hospital System Revenue 12/10 at 102.00 BBB 2,243,086
Bonds, John C. Lincoln Health Network, Series 2000,
7.000%, 12/01/25
2,000 Arizona Health Facilities Authority, Revenue Bonds, 7/10 at 101.00 BBB 2,098,260
Catholic Healthcare West, Series 1999A, 6.625%, 7/01/20
3,000 Mesa Industrial Development Authority, Arizona, Revenue 1/10 at 101.00 AAA 3,124,290
Bonds, Discovery Health System, Series 1999A,
5.750%, 1/01/25 - MBIA Insured
515 Puerto Rico Industrial, Tourist, Educational, Medical, and 11/10 at 101.00 AA 567,159
Environmental Control Facilities Financing Authority,
Hospital Revenue Bonds, Hospital de la Concepcion Project,
Series 2000A, 6.375%, 11/15/15
1,500 Scottsdale Industrial Development Authority, Arizona, 12/11 at 101.00 A3 1,517,850
Hospital Revenue Bonds, Scottsdale Healthcare, Series 2001,
5.800%, 12/01/31
2,000 University Medical Center Corporation, Tucson, Arizona, 1/04 at 101.00 AAA 2,026,880
Hospital Revenue Refunding Bonds, Series 1992,
6.250%, 7/01/16 - MBIA Insured
1,055 Industrial Development Authority, Winslow, Arizona, 6/08 at 101.00 N/R 705,753
Hospital Revenue Bonds, Winslow Memorial Hospital
Project, Series 1998, 5.500%, 6/01/22
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/MULTIFAMILY - 11.9%
2,011 Glendale Industrial Development Authority, Arizona, 10/10 at 105.00 Aaa 2,167,033
GNMA Collateralized Mortgage Loan Multifamily Housing
Revenue Bonds, Maridale Apartments Project,
Series 2000A, 7.500%, 10/20/35
1,275 Maricopa County Industrial Development Authority, Arizona, 10/10 at 105.00 Aaa 1,329,583
GNMA Collateralized Multifamily Housing Revenue Bonds,
Villas at Augusta Project, Series 2000, 6.400%, 10/20/20
400 Phoenix Industrial Development Authority, Arizona, 6/11 at 102.00 Aaa 409,628
GNMA Collateralized Multifamily Housing Revenue
Bonds, Campaigne Place on Jackson Project, Series 2001,
5.700%, 6/20/31 (Alternative Minimum Tax)
3,215 Tucson Industrial Development Authority, Arizona, 7/10 at 101.00 AA 3,298,654
Senior Living Facilities Revenue Bonds, Christian Care
Project, Series 2000A, 5.625%, 7/01/20 - RAAI Insured
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/SINGLE FAMILY - 0.5%
110 Phoenix Industrial Development Authority, Arizona, 6/05 at 102.00 AAA 115,878
Statewide Single Family Mortgage Revenue Bonds,
Series 1995, 6.150%, 6/01/08 (Alternative Minimum Tax)
50 Phoenix Industrial Development Authority, Arizona, 6/10 at 105.00 AAA 53,795
FNMA/GNMA Single Family Mortgage Revenue Bonds,
Series 2000-1B, 7.350%, 6/01/31 (Alternative Minimum Tax)
105 Pima County Industrial Development Authority, Arizona, 5/07 at 102.00 AAA 105,455
FNMA/GNMA Single Family Mortgage Revenue Bonds,
Series 1997A, 6.250%, 11/01/30 (Alternative Minimum Tax)
12
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT (000) DESCRIPTION(1) PROVISIONS* RATINGS** VALUE
------------------------------------------------------------------------------------------------------------------------------------
INDUSTRIALS - 3.3%
$ 2,000 Yavapai County Industrial Development Authority, Arizona, No Opt. Call BBB $ 2,027,240
Solid Waste Disposal Revenue Bonds, Waste Management,
Inc. Project, Series 2003B, 4.450%, 3/01/28 (Alternative
Minimum Tax) (Mandatory put 3/01/08)
------------------------------------------------------------------------------------------------------------------------------------
LONG-TERM CARE - 1.7%
1,000 Mohave County Industrial Development Authority, Arizona, 5/06 at 103.00 AAA 1,048,800
GNMA Collateralized Healthcare Revenue Refunding
Bonds, Chris Ridge and Silver Ridge Village Projects,
Series 1996, 6.375%, 11/01/31
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL - 12.6%
1,000 Maricopa County School District 6, Arizona, General No Opt. Call AAA 1,100,860
Obligation Refunding Bonds, Washington Elementary
School, Series 2002A, 5.375%, 7/01/15 - FSA Insured
3,000 Mesa, Arizona, General Obligation Bonds, Series 1999, 7/09 at 100.00 AAA 3,058,320
5.000%, 7/01/18 - FGIC Insured
1,255 Phoenix, Arizona, Various Purpose General Obligation Bonds, 7/12 at 100.00 AA+ 1,267,086
Series 2002B, 5.000%, 7/01/21
Puerto Rico Public Improvement, General Obligation Bonds,
Series 2002A:
1,000 5.500%, 7/01/19 - FGIC Insured No Opt. Call AAA 1,101,340
500 5.375%, 7/01/28 7/11 at 100.00 A- 501,415
585 Tempe Union High School District 213, Maricopa County, 7/04 at 101.00 AAA 614,970
Arizona, General Obligation Bonds, Series 1994,
6.000%, 7/01/12 - FGIC Insured
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED - 34.4%
1,070 Arizona School Facilities Board, State School Improvement 7/13 at 100.00 AAA 1,087,955
Revenue Bonds, Series 2003, 5.000%, 7/01/20
Arizona Tourism and Sports Authority, Tax Revenue Bonds,
Multipurpose Stadium Facility Project, Series 2003A:
2,000 5.375%, 7/01/20 - MBIA Insured 7/13 at 100.00 Aaa 2,093,840
1,000 5.375%, 7/01/21 - MBIA Insured 7/13 at 100.00 Aaa 1,041,300
Bullhead City, Arizona, Parkway District Special Assessment
Improvement Bonds, Series 1993:
830 6.100%, 1/01/08 1/04 at 102.00 Baa2 855,962
890 6.100%, 1/01/09 1/04 at 102.00 Baa2 916,478
1,500 Maricopa County Industrial Development Authority, 7/10 at 102.00 Baa3 1,473,780
Education Revenue Bonds, Arizona Charter Schools Project I,
Series 2000A, 6.750%, 7/01/29
3,400 Maricopa County Stadium District, Arizona, Revenue 6/12 at 100.00 Aaa 3,570,408
Refunding Bonds, Series 2002, 5.375%, 6/01/18 -
AMBAC Insured
Phoenix Industrial Development Authority, Arizona, Government
Office Lease Revenue Bonds, Capitol Mall LLC Project, Series
2000:
1,000 5.375%, 9/15/22 - AMBAC Insured 9/10 at 100.00 AAA 1,022,780
2,000 5.500%, 9/15/27 - AMBAC Insured 9/10 at 100.00 AAA 2,043,560
2,150 Phoenix Civic Plaza Building Corporation, Arizona, Senior 7/05 at 101.00 AAA 2,323,075
Lien Excise Tax Revenue Bonds, Series 1994,
6.000%, 7/01/14
1,200 Prescott Valley Municipal Property Corp., Arizona, Municipal 1/13 at 100.00 AAA 1,189,320
Facilities Revenue Bonds, Series 2003, 5.000%, 1/01/27 -
FGIC Insured
1,000 Puerto Rico Public Buildings Authority, Guaranteed 7/12 at 100.00 A- 981,090
Government Facilities Revenue Refunding Bonds,
Series 2002D, 5.125%, 7/01/24
500 Surprise Municipal Property Corporation, Arizona, Excise 7/09 at 101.00 AAA 531,550
Tax Revenue Bonds, Series 2000, 5.700%, 7/01/20 -
FGIC Insured
500 Tucson, Arizona, Certificates of Participation, Series 2000, 7/08 at 100.00 AAA 530,295
5.700%, 7/01/20 - MBIA Insured
1,100 Tucson, Arizona, Streets and Highway Junior Lien User Fee 7/10 at 100.00 AAA 1,121,208
Revenue Bonds, Series 1994E, 5.000%, 7/01/18 -
FGIC Insured
------------------------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES - 5.6%
2,000 Mohave County Industrial Development Authority, Arizona, 11/03 at 101.00 BBB 2,011,080
Revenue Bonds, Citizens Utility Company Project,
Series 1994, 6.600%, 5/01/29 (Alternative Minimum Tax)
1,450 Industrial Development Authority, Yavapai County, Arizona, 6/07 at 101.00 BBB 1,373,745
Revenue Bonds, Citizens Utilities Company Project,
Series 1998, 5.450%, 6/01/33 (Alternative Minimum Tax)
13
Nuveen Arizona Premium Income Municipal Fund, Inc. (NAZ) (continued)
Portfolio of INVESTMENTS July 31, 2003
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT (000) DESCRIPTION(1) PROVISIONS* RATINGS** VALUE
------------------------------------------------------------------------------------------------------------------------------------
U.S. GUARANTEED - 22.9%
$ 530 Puerto Rico, The Children's Trust Fund, Tobacco Settlement 7/10 at 100.00 AAA $ 590,113
Asset-Backed Bonds, Series 2000, 5.750%, 7/01/20
(Pre-refunded to 7/01/10)
3,500 Maricopa County Industrial Development Authority, Arizona, No Opt. Call AAA 4,327,995
Samaritan Health Services, Hospital Revenue Refunding
Bonds, Series 1990A, 7.000%, 12/01/16 - MBIA Insured
2,000 Phoenix Civic Improvement Corporation, Arizona, Junior Lien 7/10 at 101.00 AAA 2,322,480
Wastewater System Revenue Bonds, Series 2000,
6.000%, 7/01/24 (Pre-refunded to 7/01/10) - FGIC Insured
1,000 Puerto Rico Highway and Transportation Authority, 7/10 at 101.00 A*** 1,196,500
Highway Revenue Bonds, Series 2000B, 6.500%, 7/01/27
(Pre-refunded to 7/01/10)
1,415 Tempe Union High School District 213, Maricopa County, 7/04 at 101.00 AAA 1,494,410
Arizona, General Obligation Bonds, Series 1994,
6.000%, 7/01/12 (Pre-refunded to 7/01/04) - FGIC Insured
3,000 Tucson, Arizona, General Obligation Bonds, Series 1984G, 7/04 at 101.00 AAA 3,175,200
6.250%, 7/01/18 (Pre-refunded to 7/01/04) - FGIC Insured
725 Tucson, Arizona, Certificates of Participation, Series 1994, 7/04 at 100.00 AA*** 760,975
6.375%, 7/01/09 (Pre-refunded to 7/01/04) - RAAI Insured
------------------------------------------------------------------------------------------------------------------------------------
UTILITIES - 7.9%
1,000 Arizona Power Authority, Special Obligation Power Resource No Opt. Call AA 1,084,760
Revenue Refunding Crossover Bonds, Hoover Project,
Series 2001, 5.250%, 10/01/15
1,615 Coconino County, Arizona, Pollution Control Revenue Bonds, 10/06 at 102.00 B- 1,422,444
Nevada Power Company Project, Series 1996,
6.375%, 10/01/36 (Alternative Minimum Tax)
500 Navajo County Pollution Control Corp., Arizona, Pollution 8/03 at 102.00 AAA 511,415
Control Revenue Refunding Bonds, Arizona Public Service
Company, Series 1993A, 5.875%, 8/15/28 - MBIA Insured
1,200 Pima County Industrial Development Authority, Arizona, 1/04 at 102.00 AAA 1,270,380
Lease Obligation Revenue Refunding Bonds, Tucson
Electric Power Company Irvington Project, Series 1988A,
7.250%, 7/15/10 - FSA Insured
500 Agricultural Improvement and Power District, Arizona, 1/12 at 101.00 AA 492,272
Electric System Revenue Refunding Bonds, Salt River
Project, Series 2002A, 5.000%, 1/01/31
------------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER - 2.4%
1,500 Phoenix Civic Improvement Corporation, Arizona, Junior 7/12 at 100.00 AAA 1,476,810
Lien Water System Revenue Bonds, Series 2002,
5.000%, 7/01/26 - FGIC Insured
------------------------------------------------------------------------------------------------------------------------------------
$ 80,146 Total Long-Term Investments (cost $80,747,376) - 136.7% 82,781,269
=============-----------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 12.8% 7,765,541
--------------------------------------------------------------------------------------------------------------------
Preferred Shares, at Liquidation Value - (49.5)% (30,000,000)
--------------------------------------------------------------------------------------------------------------------
Net Assets Applicable to Common Shares - 100% $60,546,810
====================================================================================================================
(1) All percentages shown in the Portfolio of Investments
are based on net assets applicable to Common shares.
* Optional Call Provisions (not covered by the report of
independent auditors): Dates (month and year) and
prices of the earliest optional call or redemption.
There may be other call provisions at varying prices at
later dates.
** Ratings (not covered by the report of independent
auditors): Using the higher of Standard & Poor's or
Moody's rating.
*** Securities are backed by an escrow or trust containing
sufficient U.S. Government or U.S. Government agency
securities which ensures the timely payment of
principal and interest. Such securities are normally
considered to be equivalent to AAA rated securities.
N/R Investment is not rated.
See accompanying notes to financial statements.
14
Nuveen Arizona Dividend Advantage Municipal Fund (NFZ)
Portfolio of
INVESTMENTS July 31, 2003
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT (000) DESCRIPTION(1) PROVISIONS* RATINGS** VALUE
------------------------------------------------------------------------------------------------------------------------------------
EDUCATION AND CIVIC ORGANIZATIONS - 10.2%
$ 1,020 Mesa Industrial Development Authority, Arizona, Student 7/11 at 101.00 BBB- $ 1,010,534
Housing Revenue Bonds, ASU East/Maricopa County
Community College District, Williams Campus Project,
Series 2001A, 6.000%, 7/01/26
1,000 Puerto Rico Industrial, Tourist, Educational, Medical, and 2/09 at 101.00 BBB 971,630
Environmental Control Facilities Financing Authority, Higher
Education Revenue Bonds, Ana G. Mendez University System
Project, Series 1999, 5.375%, 2/01/29
300 Puerto Rico Industrial, Tourist, Educational, Medical, and 9/11 at 100.00 BBB 295,341
Environmental Control Facilities Financing Authority, Higher
Education Revenue Bonds, University of the Sacred Heart
Project, Series 2001, 5.250%, 9/01/21
------------------------------------------------------------------------------------------------------------------------------------
HEALTHCARE - 11.5%
550 Arizona Health Facilities Authority, Hospital System Revenue 12/10 at 102.00 BBB 580,415
Bonds, John C. Lincoln Health Network, Series 2000,
6.875%, 12/01/20
920 Arizona Health Facilities Authority, Revenue Bonds, 7/10 at 101.00 BBB 965,200
Catholic Healthcare West, Series 1999A, 6.625%, 7/01/20
1,000 Scottsdale Industrial Development Authority, Arizona, Hospital 12/11 at 101.00 A3 1,011,900
Revenue Bonds, Scottsdale Healthcare, Series 2001,
5.800%, 12/01/31
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/MULTIFAMILY - 19.8%
1,000 Maricopa County Industrial Development Authority, Arizona, 7/09 at 102.00 Aaa 1,013,370
Multifamily Housing Revenue Bonds, Whispering Palms
Apartments Project, Series 1999A, 5.900%, 7/01/29 -
MBIA Insured
1,125 Maricopa County Industrial Development Authority, Arizona, 10/11 at 103.00 Aaa 1,140,953
Multifamily Housing Revenue Bonds, Syl-Mar Apartments
Project, Series 2001, 5.650%, 4/20/21 (Alternative
Minimum Tax)
275 Phoenix Industrial Development Authority, Arizona, 6/11 at 102.00 Aaa 281,619
GNMA Collateralized Multifamily Housing Revenue
Bonds, Campaigne Place on Jackson Project, Series 2001,
5.700%, 6/20/31 (Alternative Minimum Tax)
1,000 Phoenix Industrial Development Authority, Arizona, 11/11 at 105.00 AAA 1,023,350
GNMA Collateralized Multifamily Housing Revenue Bonds,
Bay Club Apartments Project, Series 2001, 5.900%, 11/20/31
990 Phoenix Industrial Development Authority, Arizona, 10/12 at 102.00 Aaa 944,024
GNMA Enhanced Mortgage Loan Multifamily Housing
Revenue Bonds, Liberty Cove Apartments, Series 2002A,
5.050%, 10/20/32
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/SINGLE FAMILY - 1.5%
320 Pima County Industrial Development Authority, Arizona, 11/10 at 101.00 AAA 323,885
FNMA/GNMA Single Family Mortgage Revenue Bonds,
Series 2001A-4, 5.050%, 5/01/17
------------------------------------------------------------------------------------------------------------------------------------
INDUSTRIALS - 4.5%
1,000 Yavapai County Industrial Development Authority, Arizona, No Opt. Call BBB 1,013,620
Solid Waste Disposal Revenue Bonds, Waste Management,
Inc. Project, Series 2003B, 4.450%, 3/01/28 (Alternative
Minimum Tax) (Mandatory put 3/01/08)
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL - 18.9%
1,500 Maricopa County School District 6, Arizona, General No Opt. Call AAA 1,651,290
Obligation Refunding Bonds, Washington Elementary
School, Series 2002A, 5.375%, 7/01/15 - FSA Insured
1,000 Mesa, Arizona, General Obligation Bonds, Series 1999, 7/09 at 100.00 AAA 1,024,120
5.000%, 7/01/17 - FGIC Insured
500 Puerto Rico Public Improvement, General Obligation Bonds, No Opt. Call A- 505,860
Series 2002A, 5.500%, 7/01/29
1,020 Tucson, Arizona, General Obligation Refunding Bonds, 7/07 at 100.00 AA 1,029,333
Series 1997, 5.000%, 7/01/19
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED - 38.2%
700 Arizona School Facilities Board, School Improvement Revenue 7/11 at 100.00 AAA 748,853
Bonds, Series 2001, 5.500%, 7/01/18
1,000 Arizona State Transportation Board, Highway Revenue 7/13 at 100.00 AAA 1,000,340
Bonds, Series 2003A, 5.000%, 7/01/22
15
Nuveen Arizona Dividend Advantage Municipal Fund (NFZ) (continued)
Portfolio of INVESTMENTS July 31, 2003
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT (000) DESCRIPTION(1) PROVISIONS* RATINGS** VALUE
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED (continued)
$ 1,000 Arizona Tourism and Sports Authority, Tax Revenue Bonds, 7/13 at 100.00 Aaa $ 1,041,300
Multipurpose Stadium Facility Project, Series 2003A,
5.375%, 7/01/21 - MBIA Insured
2,000 Maricopa County Industrial Development Authority, 6/07 at 102.00 A 2,087,820
Arizona, Education Revenue Bonds, Horizon Community
Learning Center Project, Series 2000, 6.350%, 6/01/26 -
ACA Insured
900 Phoenix Industrial Development, Arizona, Government Office 3/12 at 100.00 AAA 949,392
Lease Revenue Bonds, Capitol Mall LLC II Project,
Series 2001, 5.250%, 9/15/16 - AMBAC Insured
2,675 Tempe, Arizona, Excise Tax Revenue Refunding Bonds, 7/13 at 100.00 AA+ 2,684,229
Series 2003, 5.000%, 7/01/21
------------------------------------------------------------------------------------------------------------------------------------
U.S. GUARANTEED - 11.6%
500 Maricopa County Industrial Development Authority, Arizona, 9/05 at 101.00 AAA 546,265
Baptist Hospital System Revenue Refunding Bonds,
Series 1995, 5.500%, 9/01/16 (Pre-refunded to 9/01/05) -
MBIA Insured
1,350 Puerto Rico Infrastructure Financing Authority, Special 10/10 at 101.00 AAA 1,419,188
Obligation Bonds, Series 2000A, 5.500%, 10/01/40
Agricultural Improvement and Power District, Arizona, Electric
System Revenue Refunding Bonds, Salt River Project, Series
1997A:
140 5.000%, 1/01/20 (Pre-refunded to 1/01/08) 1/08 at 101.00 AA*** 154,717
430 5.000%, 1/01/20 (Pre-refunded to 1/01/11) 1/08 at 101.00 AA*** 464,942
------------------------------------------------------------------------------------------------------------------------------------
UTILITIES - 25.8%
1,500 Arizona Power Authority, Special Obligation Power Resource No Opt. Call AA 1,611,105
Revenue Refunding Crossover Bonds, Hoover Project,
Series 2001, 5.250%, 10/01/17
500 Coconino County, Arizona, Pollution Control Revenue Bonds, 11/03 at 101.00 B- 407,515
Nevada Power Company Project, Series 1997B,
5.800%, 11/01/32 (Alternative Minimum Tax)
1,000 Mesa, Arizona, Utility System Revenue Bonds, Series 2000, 7/09 at 100.00 AAA 1,019,620
5.125%, 7/01/19 - FGIC Insured
1,000 Mesa, Arizona, Utility System Revenue Refunding Bonds, No Opt. Call AAA 1,079,600
Series 2002, 5.250%, 7/01/17 - FGIC Insured
350 Puerto Rico Electric Power Authority, Power Revenue Bonds, 7/12 at 101.00 AAA 355,481
Series 2002II, 5.125%, 7/01/26 - FSA Insured
1,000 Agricultural Improvement and Power District, Arizona, 1/12 at 101.00 AA 1,045,680
Electric System Revenue Refunding Bonds, Salt River
Project, Series 2002A, 5.250%, 1/01/18
235 Agricultural Improvement and Power District, Arizona, 1/08 at 101.00 AA 237,170
Electric System Revenue Refunding Bonds, Salt River
Project, Series 1997A, 5.000%, 1/01/20
------------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER - 6.6%
1,500 Phoenix Civic Improvement Corporation, Arizona, Junior Lien 7/12 at 100.00 AAA 1,476,810
Water System Revenue Bonds, Series 2002,
5.000%, 7/01/26 - FGIC Insured
------------------------------------------------------------------------------------------------------------------------------------
$ 32,300 Total Long-Term Investments (cost $32,884,139) - 148.6% 33,116,471
=============-----------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 5.2% 1,173,938
--------------------------------------------------------------------------------------------------------------------
Preferred Shares, at Liquidation Value - (53.8)% (12,000,000)
--------------------------------------------------------------------------------------------------------------------
Net Assets Applicable to Common Shares - 100% $22,290,409
====================================================================================================================
(1) All percentages shown in the Portfolio of Investments
are based on net assets applicable to Common shares.
* Optional Call Provisions (not covered by the report of
independent auditors): Dates (month and year) and
prices of the earliest optional call or redemption.
There may be other call provisions at varying prices at
later dates.
** Ratings (not covered by the report of independent
auditors): Using the higher of Standard & Poor's or
Moody's rating.
*** Securities are backed by an escrow or trust containing
sufficient U.S. Government or U.S. Government agency
securities which ensures the timely payment of
principal and interest. Such securities are normally
considered to be equivalent to AAA rated securities.
See accompanying notes to financial statements.
16
Nuveen Arizona Dividend Advantage Municipal Fund 2 (NKR)
Portfolio of
INVESTMENTS July 31, 2003
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT (000) DESCRIPTION(1) PROVISIONS* RATINGS** VALUE
------------------------------------------------------------------------------------------------------------------------------------
EDUCATION AND CIVIC ORGANIZATIONS - 14.7%
$ 510 Arizona State University, Certificates of Participation, 7/12 at 100.00 AAA $ 510,699
Series 2002, 5.125%, 7/01/26 - MBIA Insured
Arizona State University, System Revenue Bonds, Series 2002:
1,000 5.000%, 7/01/25 - FGIC Insured 7/12 at 100.00 AAA 992,720
715 5.750%, 7/01/27 - FGIC Insured 7/12 at 100.00 AAA 764,464
1,250 Glendale Industrial Development Authority, Arizona, Revenue 5/11 at 101.00 BBB+ 1,273,050
Bonds, Midwestern University, Series 2001A,
5.875%, 5/15/31
320 Puerto Rico Industrial, Tourist, Educational, Medical, and 2/09 at 101.00 BBB 321,174
Environmental Control Facilities Financing Authority, Higher
Education Revenue Bonds, Ana G. Mendez University
System Project, Series 1999, 5.375%, 2/01/19
University of Arizona, Certificates of Participation, Series 2002A:
750 5.500%, 6/01/18 - AMBAC Insured 6/12 at 100.00 AAA 799,335
500 5.125%, 6/01/22 - AMBAC Insured 6/12 at 100.00 AAA 504,240
------------------------------------------------------------------------------------------------------------------------------------
HEALTHCARE - 9.0%
735 Arizona Health Facilities Authority, Hospital System Revenue 2/12 at 101.00 Ba2 602,288
Bonds, Phoenix Children's Hospital, Series 2002A,
6.250%, 2/15/21
1,000 Arizona Health Facilities Authority, Revenue Bonds, 7/10 at 101.00 BBB 1,049,130
Catholic Healthcare West, Series 1999A, 6.625%, 7/01/20
500 Maricopa County Industrial Development Authority, 5/08 at 101.00 AA 485,870
Arizona, Hospital Revenue Bonds, Mayo Clinic Hospital,
Series 1998, 5.250%, 11/15/37
1,000 Mesa Industrial Development Authority, Arizona, Revenue 1/10 at 101.00 AAA 1,022,740
Bonds, Discovery Health System, Series 1999A,
5.625%, 1/01/29 - MBIA Insured
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/MULTIFAMILY - 7.2%
1,000 Maricopa County Industrial Development Authority, 10/11 at 105.00 AAA 1,040,420
Arizona, GNMA Collateralized Multifamily Housing Revenue
Refunding Bonds, Pine Ridge, Cambridge Court, Cove
on 44th and Fountain Place Apartments Projects,
Series 2001A-1, 6.000%, 10/20/31
1,425 Phoenix Industrial Development Authority, Arizona, 7/12 at 105.00 AAA 1,502,178
GNMA Collateralized Multifamily Housing Revenue Bonds,
Summit Apartments Project, Series 2002, 6.450%, 7/20/32
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/SINGLE FAMILY - 0.4%
150 Pima County Industrial Development Authority, Arizona, 11/10 at 101.00 AAA 150,894
FNMA/GNMA Single Family Mortgage Revenue Bonds,
Series 2001A-1, 5.350%, 11/01/24 (Alternative
Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
INDUSTRIALS - 2.9%
1,000 Yavapai County Industrial Development Authority, Arizona, No Opt. Call BBB 1,013,620
Solid Waste Disposal Revenue Bonds, Waste Management,
Inc. Project, Series 2003B, 4.450%, 3/01/28 (Alternative
Minimum Tax) (Mandatory put 3/01/08)
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL - 44.8%
1,725 Chandler, Arizona, General Obligation Bonds, Series 2002, 7/12 at 100.00 AA+ 1,780,666
5.000%, 7/01/17
1,000 Gilbert, Arizona, General Obligation Bonds, Series 2002A, 7/11 at 100.00 AAA 1,025,580
5.000%, 7/01/18 - AMBAC Insured
Maricopa County School District 6, Arizona, General Obligation
Refunding Bonds, Washington Elementary School, Series 2002A:
1,000 5.375%, 7/01/15 - FSA Insured No Opt. Call AAA 1,100,860
2,000 5.375%, 7/01/16 - FSA Insured No Opt. Call AAA 2,193,600
2,165 Maricopa County Unified School District 69, Paradise Valley, No Opt. Call AAA 2,353,442
Arizona, General Obligation Refunding Bonds, Series 2002A,
5.250%, 7/01/14 - FGIC Insured
1,000 Mesa, Arizona, General Obligation Bonds, Series 2000, No Opt. Call AAA 1,177,080
6.500%, 7/01/11 - FGIC Insured
17
Nuveen Arizona Dividend Advantage Municipal Fund 2 (NKR) (continued)
Portfolio of INVESTMENTS July 31, 2003
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT (000) DESCRIPTION(1) PROVISIONS* RATINGS** VALUE
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL (continued)
$ 1,405 Mesa, Arizona, General Obligation Bonds, Series 2002, No Opt. Call AAA $ 1,546,708
5.375%, 7/01/15 - FGIC Insured
Phoenix, Arizona, Various Purpose General Obligation Bonds,
Series 2002B:
1,700 5.000%, 7/01/22 7/12 at 100.00 AA+ 1,709,044
250 5.000%, 7/01/27 7/12 at 100.00 AA+ 248,885
1,000 Pinal County Unified School District 43, Apache Junction, No Opt. Call AAA 1,133,560
Arizona, General Obligation Refunding Bonds, Series 2001,
5.750%, 7/01/15 - FGIC Insured
1,500 Scottsdale, Arizona, General Obligation Bonds, 7/11 at 100.00 AAA 1,507,245
Series 2002, 5.000%, 7/01/24
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED - 37.7%
Arizona State, Certificates of Participation, Series 2002A:
750 5.000%, 11/01/17 - MBIA Insured 5/12 at 100.00 AAA 771,630
1,000 5.000%, 11/01/18 - MBIA Insured 5/12 at 100.00 AAA 1,021,610
500 5.000%, 11/01/20 - MBIA Insured 5/12 at 100.00 AAA 504,370
1,000 Arizona State Transportation Board, Highway Revenue 7/12 at 100.00 AAA 1,026,090
Bonds, Series 2002B, 5.250%, 7/01/21
1,000 Maricopa County Public Finance Authority, Arizona, Lease 7/11 at 100.00 Aaa 1,081,290
Revenue Bonds, Series 2001, 5.500%, 7/01/15 -
AMBAC Insured
Maricopa County Stadium District, Arizona, Revenue
Refunding Bonds, Series 2002:
840 5.375%, 6/01/18 - AMBAC Insured 6/12 at 100.00 Aaa 882,101
2,645 5.375%, 6/01/19 - AMBAC Insured 6/12 at 100.00 Aaa 2,763,919
1,500 Phoenix Industrial Development, Arizona, Government Office 3/12 at 100.00 AAA 1,582,320
Lease Revenue Bonds, Capitol Mall LLC II Project,
Series 2001, 5.250%, 9/15/16 - AMBAC Insured
500 Puerto Rico Highway and Transportation Authority, Highway 7/16 at 100.00 A 509,805
Revenue Bonds, Series 1996Y, 5.500%, 7/01/36
500 Puerto Rico Highway and Transportation Authority, Highway 7/12 at 100.00 AAA 501,945
Revenue Bonds, Series 2002D, 5.000%, 7/01/32 -
FSA Insured
1,000 Puerto Rico Public Buildings Authority, Guaranteed 7/12 at 100.00 A- 981,090
Government Facilities Revenue Refunding Bonds,
Series 2002D, 5.125%, 7/01/24
1,000 Tucson, Arizona, Streets and Highway Junior Lien User Fee 7/10 at 100.00 AAA 1,019,280
Revenue Bonds, Series 1994E, 5.000%, 7/01/18 -
FGIC Insured
640 Yuma Municipal Property Corporation, Arizona, Municipal 7/10 at 100.00 AAA 642,573
Facilities Tax Revenue Bonds, Series 2001,
5.000%, 7/01/21 - AMBAC Insured
------------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION - 5.6%
1,000 Phoenix Civic Improvement Corporation, Arizona, Senior Lien 7/08 at 101.00 AAA 987,500
Airport Revenue Bonds, Series 1998A, 5.000%, 7/01/25 -
FSA Insured
1,000 Phoenix Civic Improvement Corporation, Arizona, Senior 7/12 at 100.00 AAA 993,890
Lien Airport Revenue Bonds, Series 2002B,
5.250%, 7/01/27 (Alternative Minimum Tax) -
FGIC Insured
------------------------------------------------------------------------------------------------------------------------------------
U.S. GUARANTEED - 8.4%
1,215 Puerto Rico, The Children's Trust Fund, Tobacco Settlement 7/10 at 100.00 AAA 1,388,429
Asset-Backed Bonds, Series 2000, 5.750%, 7/01/12
(Pre-refunded to 7/01/10)
1,500 Puerto Rico Infrastructure Financing Authority, Special 10/10 at 101.00 AAA 1,576,875
Obligation Bonds, Series 2000A, 5.500%, 10/01/40
------------------------------------------------------------------------------------------------------------------------------------
UTILITIES - 9.4%
1,115 Arizona Power Authority, Special Obligation Power Resource No Opt. Call AA 1,209,507
Revenue Refunding Crossover Bonds, Hoover Project,
Series 2001, 5.250%, 10/01/15
1,000 Mesa, Arizona, Utility System Revenue Bonds, Series 2002, 7/11 at 100.00 AAA 1,009,720
5.000%, 7/01/20 - FGIC Insured
1,000 Mesa, Arizona, Utility System Revenue Refunding Bonds, No Opt. Call AAA 1,079,600
Series 2002, 5.250%, 7/01/17 - FGIC Insured
18
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT (000) DESCRIPTION(1) PROVISIONS* RATINGS** VALUE
------------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER - 7.5%
$ 500 Maricopa County Industrial Development Authority, Arizona, 12/07 at 102.00 AAA $ 502,890
Water System Improvement Revenue Bonds, Chaparra
City Water Company Project, Series 1997A, 5.400%, 12/01/22
(Alternative Minimum Tax) - AMBAC Insured
1,000 Phoenix Civic Improvement Corporation, Arizona, Junior Lien No Opt. Call AAA 1,077,900
Water System Revenue Refunding Bonds, Series 2001,
5.500%, 7/01/22 - FGIC Insured
1,000 Tucson, Arizona, Water System Revenue Refunding Bonds, 7/12 at 102.00 AAA 1,077,860
Series 2001, 5.500%, 7/01/18 - FGIC Insured
------------------------------------------------------------------------------------------------------------------------------------
$ 49,805 Total Long-Term Investments (cost $51,188,087) - 147.6% 52,001,686
=============-----------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 4.9% 1,735,790
--------------------------------------------------------------------------------------------------------------------
Preferred Shares, at Liquidation Value - (52.5)% (18,500,000)
--------------------------------------------------------------------------------------------------------------------
Net Assets Applicable to Common Shares - 100% $35,237,476
====================================================================================================================
(1) All percentages shown in the Portfolio of Investments
are based on net assets applicable to Common shares.
* Optional Call Provisions (not covered by the report of
independent auditors): Dates (month and year) and
prices of the earliest optional call or redemption.
There may be other call provisions at varying prices at
later dates.
** Ratings (not covered by the report of independent
auditors): Using the higher of Standard & Poor's or
Moody's rating.
See accompanying notes to financial statements.
19
Nuveen Arizona Dividend Advantage Municipal Fund 3 (NXE)
Portfolio of
INVESTMENTS July 31, 2003
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT (000) DESCRIPTION(1) PROVISIONS* RATINGS** VALUE
------------------------------------------------------------------------------------------------------------------------------------
CONSUMER STAPLES - 4.1%
$ 1,940 Puerto Rico, The Children's Trust Fund, Tobacco Settlement 5/12 at 100.00 A- $ 1,682,426
Asset-Backed Refunding Bonds, Series 2002, 5.375%, 5/15/33
------------------------------------------------------------------------------------------------------------------------------------
EDUCATION AND CIVIC ORGANIZATIONS - 19.1%
2,000 Arizona State University, System Revenue Bonds, 7/12 at 100.00 AAA 2,138,360
Series 2002, 5.750%, 7/01/27 - FGIC Insured
1,000 Arizona Student Loan Acquisition Authority, Student Loan 11/09 at 102.00 Aaa 1,066,810
Revenue Refunding Bonds, Senior Series 1999A-1,
5.750%, 5/01/15 (Alternative Minimum Tax)
1,130 Energy Management Services LLC, Arizona State University, 7/12 at 100.00 AAA 1,176,884
Energy Conservation Revenue Bonds, Main Campus
Project, Series 2002, 5.250%, 7/01/18 - MBIA Insured
500 Glendale Industrial Development Authority, Arizona, Revenue 5/08 at 101.00 BBB+ 497,245
Bonds, Midwestern University, Series 1998A,
5.375%, 5/15/28
1,000 Tucson Industrial Development Authority, Arizona, Lease 7/12 at 100.00 AAA 975,330
Revenue Bonds, University of Arizona-Marshall
Foundation Project, Series 2002A, 5.000%, 7/15/32 -
AMBAC Insured
2,000 University of Arizona, Certificates of Participation, 6/12 at 100.00 AAA 2,038,420
Series 2002B, 5.125%, 6/01/20 - AMBAC Insured
------------------------------------------------------------------------------------------------------------------------------------
HEALTHCARE - 13.4%
Arizona Health Facilities Authority, Hospital Revenue Bonds,
Phoenix Children's Hospital, Series 1999A:
750 6.125%, 11/15/22 11/09 at 100.00 Ba2 599,767
520 6.250%, 11/15/29 11/09 at 100.00 Ba2 406,172
1,000 Arizona Health Facilities Authority, Hospital System Revenue 12/10 at 102.00 BBB 1,055,300
Bonds, John C. Lincoln Health Network, Series 2000,
6.875%, 12/01/20
250 Arizona Health Facilities Authority, Revenue Bonds, Catholic 7/10 at 101.00 BBB 262,283
Healthcare West, Series 1999A, 6.625%, 7/01/20
2,000 Maricopa County Industrial Development Authority, Arizona, 5/08 at 101.00 AA 1,943,480
Hospital Revenue Bonds, Mayo Clinic Hospital, Series 1998,
5.250%, 11/15/37
1,250 Scottsdale Industrial Development Authority, Arizona, Hospital 12/11 at 101.00 A3 1,264,875
Revenue Bonds, Scottsdale Healthcare, Series 2001,
5.800%, 12/01/31
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/MULTIFAMILY - 13.7%
1,750 Maricopa County Industrial Development Authority, Arizona, 1/18 at 100.00 AAA 1,702,383
Multifamily Housing Senior Revenue Bonds, National
Voluntary Health Facilities II Project, Series 1998A,
5.100%, 1/01/33 - FSA Insured
1,545 Phoenix Industrial Development Authority, Arizona, 6/11 at 102.00 Aaa 1,579,979
GNMA Collateralized Multifamily Housing Revenue Bonds,
Campaigne Place on Jackson Project, Series 2001,
5.600%, 6/20/21 (Alternative Minimum Tax)
2,460 Phoenix Industrial Development Authority, Arizona, 10/12 at 102.00 Aaa 2,379,829
GNMA Enhanced Mortgage Loan Multifamily Housing
Revenue Bonds, Liberty Cove Apartments, Series 2002A,
4.950%, 10/20/22 (Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
INDUSTRIALS - 3.7%
1,500 Yavapai County Industrial Development Authority, Arizona, No Opt. Call BBB 1,520,430
Solid Waste Disposal Revenue Bonds, Waste Management,
Inc. Project, Series 2003B, 4.450%, 3/01/28 (Alternative
Minimum Tax) (Mandatory put 3/01/08)
20
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT (000) DESCRIPTION(1) PROVISIONS* RATINGS** VALUE
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL - 27.0%
$ 660 Chandler, Arizona, General Obligation Bonds, Series 2002, 7/12 at 100.00 AA+ $ 675,952
5.000%, 7/01/18
2,250 DC Ranch Community Facilities District, Scottsdale, Arizona, 7/13 at 100.00 Aaa 2,223,315
General Obligation Bonds, Series 2002, 5.000%, 7/15/27 -
AMBAC Insured
1,930 Glendale, Arizona, General Obligation Refunding Bonds, 7/11 at 100.00 AA 1,958,275
Series 2002, 5.000%, 7/01/19
1,000 Maricopa County School District 11, Peoria, Arizona, General No Opt. Call AAA 1,070,010
Obligation Refunding Bonds, Series 2002,
5.000%, 7/01/15 - FSA Insured
765 Maricopa County Unified School District 69, Paradise Valley, No Opt. Call AAA 816,339
Arizona, General Obligation Refunding Bonds, Series 2002,
5.000%, 7/01/15 - FSA Insured
1,000 Maricopa County Unified School District 95, Queen Creek, No Opt. Call Aaa 1,066,280
Arizona, General Obligation Bonds, Series 2002,
5.000%, 7/01/14 - FGIC Insured
1,500 Puerto Rico Public Improvement, General Obligation Refunding No Opt. Call AAA 1,643,505
Bonds, Series 2002A, 5.500%, 7/01/20 - MBIA Insured
1,150 Scottsdale, Arizona, General Obligation Refunding Bonds, No Opt. Call AAA 1,221,473
Series 2002, 5.000%, 7/01/16
440 Tucson, Arizona, General Obligation Bonds, Series 2001B, 7/11 at 100.00 AA 444,136
5.000%, 7/01/20
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED - 31.6%
2,000 Arizona School Facilities Board, School Improvement Revenue 7/12 at 100.00 AAA 2,074,120
Bonds, Series 2002, 5.250%, 7/01/20
1,000 Goodyear, Arizona, Municipal Financing Program, Certificates No Opt. Call AAA 1,212,090
of Participation, Series 31, 7.250%, 8/01/09 - MBIA Insured
2,000 Arizona State Transportation Board, Highway Revenue Bonds, 7/11 at 100.00 AAA 2,051,980
Series 2001, 5.250%, 7/01/20
3,000 Arizona State Transportation Board, Highway Revenue 7/12 at 102.00 AAA 3,171,000
Refunding Bonds, Series 2002A, 5.250%, 7/01/18
1,000 Arizona State Transportation Board, Highway Revenue Bonds, 7/12 at 100.00 AAA 1,021,730
Series 2002B, 5.250%, 7/01/22
680 Avondale Municipal Development Corporation, Arizona, 7/12 at 100.00 AAA 705,990
Excise Tax Revenue Bonds, Series 2002, 5.000%, 7/01/16 -
FGIC Insured
2,770 Tempe, Arizona, Excise Tax Revenue Refunding Bonds, 7/13 at 100.00 AA+ 2,761,496
Series 2003, 5.000%, 7/01/22
------------------------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES - 1.1%
500 Industrial Development Authority, Yavapai County, Arizona, 6/07 at 101.00 BBB 473,705
Revenue Bonds, Citizens Utilities Company Project,
Series 1998, 5.450%, 6/01/33 (Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION - 14.0%
Phoenix, Arizona, Civic Improvement Corporation, Senior Lien
Airport Revenue Bonds, Series 2002B:
1,000 5.750%, 7/01/16 (Alternative Minimum Tax) - FGIC Insured 7/12 at 100.00 AAA 1,073,090
2,300 5.250%, 7/01/21 (Alternative Minimum Tax) - FGIC Insured 7/12 at 100.00 AAA 2,302,323
2,450 Tucson Airport Authority, Inc., Arizona, Revenue Refunding 6/11 at 100.00 AAA 2,391,274
Bonds, Series 2001B, 5.000%, 6/01/20 (Alternative
Minimum Tax) - AMBAC Insured
------------------------------------------------------------------------------------------------------------------------------------
UTILITIES - 11.4%
1,750 Maricopa County, Arizona, Pollution Control Corporation 11/12 at 100.00 AAA 1,719,655
Revenue Bonds, Arizona Public Service Company Palo Verde
Project, Series 2002A, 5.050%, 5/01/29 - AMBAC Insured
2,000 Agricultural Improvement and Power District, Arizona, 1/12 at 101.00 AA 2,010,300
Electric System Revenue Refunding Bonds, Salt River
Project, Series 2002A, 5.125%, 1/01/27
1,000 Agricultural Improvement and Power District, Arizona, 1/13 at 100.00 AA 980,210
Electric System Revenue Bonds, Salt River Project,
Series 2002B, 5.000%, 1/01/31
21
Nuveen Arizona Dividend Advantage Municipal Fund 3 (NXE) (continued)
Portfolio of INVESTMENTS July 31, 2003
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT (000) DESCRIPTION(1) PROVISIONS* RATINGS** VALUE
------------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER - 10.7%
$ 1,000 Phoenix Civic Improvement Corporation, Arizona, Junior Lien 7/11 at 100.00 AAA $ 1,012,610
Wastewater System Revenue Refunding Bonds,
Series 2001, 5.125%, 7/01/21 - FGIC Insured
1,250 Phoenix Civic Improvement Corporation, Arizona, Junior Lien No Opt. Call AAA 1,356,672
Water System Revenue Refunding Bonds, Series 2001,
5.500%, 7/01/21 - FGIC Insured
2,000 Phoenix Civic Improvement Corporation, Arizona, Junior 7/12 at 100.00 AAA 2,046,880
Lien Water System Revenue Bonds, Series 2002,
5.000%, 7/01/18 - FGIC Insured
------------------------------------------------------------------------------------------------------------------------------------
$ 60,990 Total Long-Term Investments (cost $63,733,881) - 149.8% 61,774,383
=============-----------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 3.5% 1,472,659
--------------------------------------------------------------------------------------------------------------------
Preferred Shares, at Liquidation Value - (53.3)% (22,000,000)
--------------------------------------------------------------------------------------------------------------------
Net Assets Applicable to Common Shares - 100% $41,247,042
====================================================================================================================
(1) All percentages shown in the Portfolio of Investments
are based on net assets applicable to Common shares.
* Optional Call Provisions (not covered by the report of
independent auditors): Dates (month and year) and
prices of the earliest optional call or redemption.
There may be other call provisions at varying prices at
later dates.
** Ratings (not covered by the report of independent
auditors): Using the higher of Standard & Poor's or
Moody's rating.
See accompanying notes to financial statements.
22
Nuveen Texas Quality Income Municipal Fund (NTX)
Portfolio of
INVESTMENTS July 31, 2003
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT (000) DESCRIPTION(1) PROVISIONS* RATINGS** VALUE
------------------------------------------------------------------------------------------------------------------------------------
CONSUMER STAPLES - 1.8%
$ 2,910 Puerto Rico, The Children's Trust Fund, Tobacco Settlement 5/12 at 100.00 A- $ 2,523,639
Asset-Backed Refunding Bonds, Series 2002,
5.375%, 5/15/33
------------------------------------------------------------------------------------------------------------------------------------
EDUCATION AND CIVIC ORGANIZATIONS - 11.7%
205 Brazos Higher Education Authority, Inc., Texas, Student Loan No Opt. Call Aa2 215,498
Revenue Refunding Bonds, Subordinate Series 1993A-2,
6.800%, 12/01/04 (Alternative Minimum Tax)
1,000 Georgetown Higher Education Finance Corporation, Texas, 2/04 at 100.00 Aa3 1,008,150
Higher Education Revenue Bonds, Southwestern University
Project, Series 1994, 6.300%, 2/15/14
1,000 Raven Hills Higher Education Corporation, Texas, Student 8/11 at 100.00 Aaa 1,008,120
Housing Revenue Bonds, Cardinal Village LLC - Lamar
University Project, Series 2001A, 5.250%, 8/01/24 -
MBIA Insured
3,000 Texas State University System, Financing Revenue Refunding No Opt. Call AAA 3,013,380
Bonds, Series 2002, 5.000%, 3/15/20 - FSA Insured
1,445 Tyler Junior College District, Smith and Van Zanlt Counties, 8/04 at 100.00 AAA 1,509,823
Texas, Combined Fee Improvement Revenue Refunding
Bonds, Series 1994, 5.900%, 8/15/13 - MBIA Insured
2,330 Universal City Education Facilities Corporation, Texas, 3/11 at 102.00 A- 2,341,697
Revenue Bonds, Wayland Baptist University Project,
Series 2001, 5.625%, 3/01/26
2,000 University of Houston, Texas, Consolidated Revenue Bonds, 2/05 at 100.00 AAA 2,113,100
Series 1995, 6.000%, 2/15/17 - FGIC Insured
5,000 University of North Texas, Financing System Revenue Bonds, 4/12 at 100.00 AAA 4,901,700
Series 2001, 5.000%, 4/15/24 - FSA Insured
------------------------------------------------------------------------------------------------------------------------------------
ENERGY - 2.9%
3,000 Gulf Coast Waste Disposal Authority, Texas, Waste Disposal 4/08 at 102.00 BBB 2,774,910
Revenue Bonds, Valero Energy Corporation Project,
Series 1998, 5.600%, 4/01/32 (Alternative Minimum Tax)
1,300 Gulf Coast Waste Disposal Authority, Texas, Waste 4/09 at 101.00 BBB 1,219,855
Disposal Revenue Bonds, Valero Energy Corporation Project,
Series 1999, 5.700%, 4/01/32 (Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
HEALTHCARE - 20.5%
3,500 Abilene Health Facilities Development Corporation, Texas, 9/05 at 102.00 AAA 3,748,115
Hospital Revenue Refunding and Improvement Bonds,
Hendrick Medical Center Project, Series 1995C,
6.150%, 9/01/25 - MBIA Insured
Gregg County Health Facilities Development Corporation, Texas,
Hospital Revenue Bonds, Good Shepherd Medical Center Project,
Series 2000:
2,000 6.875%, 10/01/20 - RAAI Insured 10/10 at 101.00 AA 2,283,720
3,250 6.375%, 10/01/25 - RAAI Insured 10/10 at 101.00 AA 3,515,070
1,500 Harris County Health Facilities Development Corporation, 8/11 at 100.00 AA- 1,514,025
Texas, Revenue Bonds, St. Luke's Episcopal Hospital,
Series 2001A, 5.500%, 2/15/21
2,000 Harris County Health Facilities Development Corporation, 6/11 at 101.00 A 2,107,380
Texas, Hospital Revenue Bonds, Memorial Hermann
Healthcare System, Series 2001A, 6.375%, 6/01/29
5,750 Midland County Hospital District, Texas, Hospital Revenue No Opt. Call A- 3,719,215
Bonds, Series 1992, 0.000%, 6/01/11
2,000 North Central Texas Health Facilities Development 5/11 at 100.00 AA- 1,898,440
Corporation, Hospital Revenue Bonds, Baylor Healthcare
System Project, Series 2001A, 5.125%, 5/15/29
1,760 Parker County Hospital District, Texas, Hospital Revenue 8/09 at 102.00 BBB- 1,754,826
Bonds, Campbell Health System, Series 1999, 6.250%, 8/15/19
1,050 Tarrant County Health Facilities Development Corporation, 11/08 at 101.00 A 1,019,771
Texas, Hospital Revenue Bonds, Adventist Health System/
Sunbelt Obligated Group, Series 1998, 5.375%, 11/15/20
23
Nuveen Texas Quality Income Municipal Fund (NTX) (continued)
Portfolio of INVESTMENTS July 31, 2003
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT (000) DESCRIPTION(1) PROVISIONS* RATINGS** VALUE
------------------------------------------------------------------------------------------------------------------------------------
HEALTHCARE (continued)
$ 3,500 Tarrant County Health Facilities Development Corporation, 11/10 at 101.00 A $ 3,744,615
Texas, Hospital Revenue Bonds, Adventist Health System/
Sunbelt Obligated Group, Series 2000, 6.625%, 11/15/20
2,000 Tom Green County Health Facilities Development 5/11 at 101.00 Baa3 2,044,400
Corporation, Texas, Hospital Revenue Bonds, Shannon
Health System Project, Series 2001, 6.750%, 5/15/21
1,000 Tyler Health Facilities Development Corporation, Texas, 7/12 at 100.00 Baa1 992,570
Hospital Revenue Bonds, Mother Frances Hospital Regional
Health Center, Series 2001, 6.000%, 7/01/31
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/MULTIFAMILY - 8.7%
Bexar County Housing Finance Corporation, Texas, Multifamily
Housing Revenue Bonds, Waters at Northern Hills Apartments
Project, Series 2001A:
2,000 6.000%, 8/01/31 - MBIA Insured 8/11 at 102.00 Aaa 2,090,220
750 6.050%, 8/01/36 - MBIA Insured 8/11 at 102.00 Aaa 785,048
Grand Prairie Housing Finance Corporation, Texas, GNMA
Multifamily Housing Revenue Bonds, Landings of Carrier Project,
Series 2000A:
1,000 6.650%, 9/20/22 9/10 at 105.00 AAA 1,052,370
2,030 6.750%, 9/20/28 9/10 at 105.00 AAA 2,123,685
5,668 Houston Housing Finance Corporation, Texas, GNMA 9/11 at 105.00 Aaa 5,900,785
Collateralized Mortgage Multifamily Housing Revenue
Bonds, RRG Apartments Project, Series 2001,
6.250%, 9/20/35
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/SINGLE FAMILY - 6.6%
2,800 El Paso Housing Finance Corporation, Texas, GNMA 4/11 at 106.75 AAA 2,894,500
Collateralized Single Family Mortgage Revenue Bonds,
Series 2001A-3, 6.180%, 4/01/33
270 Galveston Property Finance Authority, Inc., Texas, Single 9/03 at 101.00 A3 276,059
Family Mortgage Revenue Bonds, Series 1991A,
8.500%, 9/01/11
585 Houston Housing Finance Corporation, Texas, Single Family 12/03 at 102.00 AAA 589,177
Mortgage Revenue Refunding Bonds, Series 1993A,
5.950%, 12/01/10 - FSA Insured
1,940 Texas Department of Housing, Single Family Mortgage 9/06 at 102.00 AAA 2,015,893
Revenue Bonds, Series 1996E, 6.000%, 9/01/17 -
MBIA Insured
3,000 Texas Department of Housing and Community Affairs, 3/12 at 100.00 AAA 3,012,450
Single Family Mortgage Bonds, Series 2002B,
5.550%, 9/01/33 (Alternative Minimum Tax) -
MBIA Insured
320 Victoria Housing Finance Corporation, Texas, FNMA Single No Opt. Call Aaa 327,254
Family Mortgage Revenue Refunding Bonds, Series 1995,
8.125%, 1/01/11
------------------------------------------------------------------------------------------------------------------------------------
LONG-TERM CARE - 7.2%
Bell County Health Facilities Development Corporation, Texas,
Retirement Facility Revenue Bonds, Buckner Retirement
Services, Inc. Obligated Group Project, Series 1998:
3,400 5.250%, 11/15/19 11/08 at 101.00 A- 3,224,220
5,000 5.250%, 11/15/28 11/08 at 101.00 A- 4,596,800
2,000 Tarrant County Health Facilities Development Corporation, 1/08 at 105.00 AAA 2,101,280
Texas, Tax-Exempt Mortgage Revenue Bonds, South Central
Nursing Homes, Inc. Project, Series 1997A, 6.000%, 1/01/37 -
MBIA Insured
------------------------------------------------------------------------------------------------------------------------------------
MATERIALS - 5.7%
4,500 Cass County Industrial Development Corporation, Texas, 3/10 at 101.00 BBB 4,737,465
Environmental Improvement Revenue Bonds, International
Paper Company Project, Series 2000A, 6.600%, 3/15/24
(Alternative Minimum Tax)
3,000 Guadalupe-Blanco River Authority, Texas, Sewage and Solid 4/06 at 102.00 AA- 3,074,700
Waste Disposal Facility Bonds, E.I. DuPont de Nemours and
Company Project, Series 1996, 6.400%, 4/01/26 (Alternative
Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL - 32.2%
4,130 Coppell Independent School District, Dallas County, Texas, 8/09 at 75.34 AAA 2,343,610
Unlimited Tax School Building and Refunding Bonds,
Series 1992, 0.000%, 8/15/14 - MBIA Insured
1,450 Donna Independent School District, Hidalgo County, Texas, 2/11 at 100.00 AAA 1,611,501
Unlimited Tax School Building Bonds, Series 2000,
6.000%, 2/15/17
1,750 El Paso County, Texas, Certificates of Obligation, 2/12 at 100.00 AAA 1,744,908
Series 2001, 5.000%, 2/15/21 - FSA Insured
2,000 Harlingen Independent School District, Cameron County, 8/09 at 100.00 AAA 2,071,520
Texas, Unlimited Tax School Building Bonds, Series 1999,
5.650%, 8/15/29
24
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT (000) DESCRIPTION(1) PROVISIONS* RATINGS** VALUE
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL (continued)
$ 2,000 Harris County, Texas, Tax and Revenue Certificates of 8/11 at 100.00 AA+ $ 1,957,780
Obligation, Series 2001, 5.000%, 8/15/27
1,500 Judson Independent School District, Bexar County, Texas, 2/11 at 100.00 Aaa 1,529,790
General Obligation Refunding Bonds, Series 2002,
5.250%, 2/01/21
1,250 Katy Independent School District, Harris, Fort Bend, and 2/12 at 100.00 AAA 1,197,775
Waller Counties, Texas, General Obligation Bonds,
Series 2002A, 5.000%, 2/15/32
2,600 Klein Independent School District, Harris County, Texas, 8/09 at 100.00 AAA 2,651,272
Unlimited Tax Schoolhouse Bonds, Series 1999A,
5.000%, 8/01/18
1,500 Lake Dallas Independent School District, Denton County, 8/11 at 100.00 Aaa 1,440,900
Texas, General Obligation Building Bonds, Series 2001,
5.000%, 8/15/30
5,220 Leander Independent School District, Williamson and 8/09 at 46.74 AAA 1,843,756
Travis Counties, Texas, Unlimited Tax School Building and
Refunding Bonds, Series 2000, 0.000%, 8/15/21
1,545 Montgomery County, Texas, General Obligation Refunding 9/07 at 72.39 AAA 897,830
Bonds, Series 1997, 0.000%, 3/01/14 - MBIA Insured
2,000 Northside Independent School District, Bexar County, 8/10 at 100.00 AAA 2,137,300
Texas, Unlimited Tax School Building and Refunding Bonds,
Series 2000, 5.875%, 8/15/25
500 Puerto Rico Public Improvement, General Obligation No Opt. Call A- 505,860
Bonds, Series 2002A, 5.500%, 7/01/29
1,825 Socorro Independent School District, El Paso County, Texas, 2/06 at 100.00 Aaa 1,931,781
General Obligation Bonds, Series 1996, 5.750%, 2/15/21
1,440 South Texas Community College District, General Obligation 8/12 at 100.00 AAA 1,536,581
Bonds, Series 2002, 5.500%, 8/15/17 - AMBAC Insured
2,000 Texas State, General Obligation Bonds, Veterans Land Board, 12/04 at 100.00 Aa1 2,104,540
Series 1994, 6.400%, 12/01/24 (Alternative Minimum Tax)
3,490 Texas State, General Obligation Bonds, Veterans Housing 12/03 at 102.00 Aa1 3,582,415
Assistance Program Fund, Series 1993, 6.800%, 12/01/23
(Alternative Minimum Tax)
2,000 Texas State, General Obligation Bonds, Water Financial 8/11 at 100.00 Aa1 2,028,040
Assistance Program, Series 2001, 5.250%, 8/01/23
1,500 Texas State Public Finance Authority, General Obligation 10/12 at 100.00 Aa1 1,531,425
Refunding Bonds, Series 2002, 5.000%, 10/01/18
1,795 United Independent School District, Webb County, Texas, 8/12 at 100.00 AAA 1,878,647
Unlimited Tax School Building Bonds, Series 2000,
5.375%, 8/15/18
5,290 Weslaco Independent School District, Hidalgo County, 2/10 at 100.00 Aaa 5,406,274
Texas, General School Building Obligation Bonds,
Series 2000, 5.500%, 2/15/25
West Texas Independent School District, McLennan and Hill
Counties, Unlimited Tax School Building and Refunding Bonds,
Series 1998:
1,000 0.000%, 8/15/22 8/13 at 61.20 AAA 325,080
1,000 0.000%, 8/15/24 8/13 at 54.88 AAA 283,620
1,800 Williamson County, Texas, General Obligation Road Bonds, 2/12 at 100.00 AAA 1,923,120
Series 2002, 5.500%, 2/15/16 - FSA Insured
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED - 11.1%
4,500 Austin, Texas, Hotel Occupancy Tax Subordinate Lien 11/09 at 100.00 AAA 4,755,690
Revenue Refunding Bonds, Series 1999, 5.800%, 11/15/29 -
AMBAC Insured
2,305 Corpus Christi, Texas, Certificates of Obligation, Limited Tax 9/12 at 100.00 AAA 2,413,058
and Hotel Occupancy Tax Revenue Bonds, Series 2002,
5.500%, 9/01/21 - FSA Insured
2,250 Harris County-Houston Sports Authority, Texas, Senior Lien 11/11 at 100.00 AAA 2,289,150
Revenue Bonds, Series 2001G, 5.250%, 11/15/22 -
MBIA Insured
1,000 Laredo, Texas, Sports Venue Sales Tax Revenue Bonds, 3/09 at 100.00 AAA 1,009,120
Series 2001, 5.300%, 3/15/26 - FGIC Insured
4,580 San Antonio, Texas, Hotel Occupancy Tax Revenue Bonds, 8/06 at 102.00 AAA 4,782,436
Henry B. Gonzalez Convention Center Project, Series 1996,
5.700%, 8/15/26 - FGIC Insured
25
Nuveen Texas Quality Income Municipal Fund (NTX) (continued)
Portfolio of INVESTMENTS July 31, 2003
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT (000) DESCRIPTION(1) PROVISIONS* RATINGS** VALUE
------------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION - 5.3%
$ 2,600 Dallas-Fort Worth International Airport Facility Improvement 11/09 at 101.00 CCC $ 1,222,000
Corporation, Texas, Revenue Bonds, American Airlines,
Inc., Series 1999, 6.375%, 5/01/35 (Alternative Minimum Tax)
1,000 Harris County, Texas, Toll Road Senior Lien Revenue Refunding 8/04 at 102.00 AAA 1,025,860
Bonds, Series 1994, 5.375%, 8/15/20 - FGIC Insured
2,000 Houston, Texas, Airport System Subordinate Lien Revenue 7/10 at 100.00 AAA 2,035,280
Bonds, Series 2000A, 5.625%, 7/01/30 (Alternative
Minimum Tax) - FSA Insured
3,000 Texas Turnpike Authority, Central Texas Turnpike System 8/12 at 100.00 AAA 3,078,540
First Tier Revenue Bonds, Series 2002A, 5.500%, 8/15/39 -
AMBAC Insured
------------------------------------------------------------------------------------------------------------------------------------
U.S. GUARANTEED - 8.0%
195 Abilene Housing Development Corporation, Texas, Section 8 No Opt. Call N/R*** 219,203
First Lien Revenue Bonds, Abilene East Apartments,
Series 1978, 7.000%, 7/01/08
1,000 Caddo Mills Independent School District, Hunt County, Texas, 2/05 at 100.00 N/R*** 1,076,430
General Obligation Unlimited Tax School Building and
Refunding Bonds, Series 1995, 6.375%, 8/15/25
(Pre-refunded to 2/15/05)
575 Puerto Rico, The Children's Trust Fund, Tobacco Settlement 7/10 at 100.00 AAA 640,217
Asset-Backed Bonds, Series 2000, 5.750%, 7/01/20
(Pre-refunded to 7/01/10)
1,185 Fort Bend County Levee Improvement District 11, Texas, 9/04 at 100.00 AAA 1,260,674
Unlimited Tax Levee Improvement Bonds, Series 1994,
6.900%, 9/01/17 (Pre-refunded to 9/01/04) - MBIA Insured
1,450 Galveston Industrial Development Corporation, Texas, Sales 9/05 at 100.00 AAA 1,576,890
Tax Revenue Bonds, Series 1995, 5.750%, 9/01/15
(Pre-refunded to 9/01/05) - AMBAC Insured
800 Laredo, Webb County, Texas, Waterworks System Combined 8/04 at 100.00 AAA 838,360
Tax and Revenue Certificates of Obligation, Series 1994,
5.625%, 8/15/11 (Pre-refunded to 8/15/04) - MBIA Insured
1,000 North Central Texas Health Facilities Development No Opt. Call AAA 1,090,140
Corporation, Hospital Revenue Bonds, Presbyterian
Healthcare System Project, Series 1996B, 5.750%, 6/01/26 -
MBIA Insured
2,500 Retama Development Corporation, Texas, Special Facilities No Opt. Call AAA 3,612,675
Revenue Bonds, Retama Park Racetrack Project, Series 1993,
8.750%, 12/15/17
665 San Antonio, Texas, Water System Revenue Refunding Bonds, No Opt. Call AAA 772,803
Series 1992, 6.500%, 5/15/10 - MBIA Insured
------------------------------------------------------------------------------------------------------------------------------------
UTILITIES - 13.3%
5,000 Austin, Texas, Electric Utility System Revenue Refunding 5/13 at 100.00 AAA 4,810,850
Bonds, Series 2003, 5.000%, 11/15/28 - MBIA Insured
2,560 Brazos River Authority, Texas, Pollution Control Revenue 4/13 at 101.00 BBB 2,819,507
Refunding Bonds, TXU Electric Company Project,
Series 1999C, 7.700%, 4/01/32 (Alternative Minimum Tax)
2,500 Brazos River Authority, Texas, Revenue Refunding Bonds, 4/09 at 101.00 BBB- 2,236,075
Reliant Energy, Incorporated Project, Series 1999A,
5.375%, 4/01/19
2,000 Harris County Health Facilities Development Corporation, 2/10 at 100.00 AAA 2,126,600
Texas, Thermal Utility Revenue Bonds, TECO Project,
Series 2000, 5.750%, 2/15/15 (Alternative Minimum Tax) -
AMBAC Insured
1,500 Matagorda County Navigation District 1, Texas, Pollution 1/04 at 102.00 AAA 1,534,725
Control Revenue Refunding Bonds, Central Power and Light
Company Project, Series 1993, 6.000%, 7/01/28 -
MBIA Insured
1,000 Matagorda County Navigation District 1, Texas, Revenue 5/09 at 101.00 BBB- 943,830
Refunding Bonds, Reliant Energy Project, Series 1999B,
5.950%, 5/01/30 (Alternative Minimum Tax)
2,000 Sabine River Authority, Texas, Pollution Control Revenue No Opt. Call BBB 2,061,040
Refunding Bonds, TXU Electric Company Project,
Series 2001A, 5.500%, 5/01/22 (Mandatory put 11/01/11)
1,750 San Antonio, Texas, Electric and Gas System Revenue 2/12 at 100.00 AA+ 1,812,755
Refunding Bonds, Series 2002, 5.375%, 2/01/20
------------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER - 11.4%
3,500 Houston, Texas, Water and Sewer System Junior Lien 12/12 at 100.00 AAA 3,375,960
Revenue Refunding Bonds, Series 2002A,
5.000%, 12/01/30 - FSA Insured
5,275 Houston, Texas, Water and Sewer System Junior Lien 12/10 at 100.00 AAA 5,306,492
Revenue Refunding Bonds, Series 2000B,
5.250%, 12/01/30 - FGIC Insured
800 Houston, Texas, Water and Sewer System Junior Lien 12/07 at 101.00 AAA 810,856
Revenue Refunding Bonds, Series 1997A,
5.375%, 12/01/27 - FGIC Insured
26
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT (000) DESCRIPTION(1) PROVISIONS* RATINGS** VALUE
------------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER (continued)
$ 3,500 Houston, Texas, Water and Sewer System Junior Lien 12/11 at 100.00 AAA $ 3,741,500
Revenue Refunding Bonds, Series 2001A,
5.500% 12/01/17 - FSA Insured
1,000 San Antonio, Texas, Water System Senior Lien Revenue 5/12 at 100.00 AAA 967,900
Refunding Bonds, Series 2002, 5.000%, 5/15/28 - FSA Insured
1,500 Texas Water Development Board, State Revolving Fund 7/09 at 100.00 AAA 1,548,312
Senior Lien Revenue Bonds, Series 1999A, 5.500%, 7/15/21
------------------------------------------------------------------------------------------------------------------------------------
$ 207,838 Total Long-Term Investments (cost $196,080,113) - 146.4% 202,034,178
------------------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 3.6% 4,940,931
------------------------------------------------------------------------------------------------------------------------------------
Preferred Shares, at Liquidation Value - (50.0)% (69,000,000)
------------------------------------------------------------------------------------------------------------------------------------
Net Assets Applicable to Common Shares - 100% $137,975,109
====================================================================================================================
(1) All percentages shown in the Portfolio of Investments
are based on net assets applicable to Common shares.
* Optional Call Provisions (not covered by the report of
independent auditors): Dates (month and year) and
prices of the earliest optional call or redemption.
There may be other call provisions at varying prices at
later dates.
** Ratings (not covered by the report of independent
auditors): Using the higher of Standard & Poor's or
Moody's rating.
*** Securities are backed by an escrow or trust containing
sufficient U.S. Government or U.S. Government agency
securities which ensures the timely payment of
principal and interest. Such securities are normally
considered to be equivalent to AAA rated securities.
N/R Investment is not rated.
See accompanying notes to financial statements.
27
Statement of
ASSETS AND LIABILITIES July 31, 2003
ARIZONA ARIZONA ARIZONA ARIZONA TEXAS
PREMIUM DIVIDEND DIVIDEND DIVIDEND QUALITY
INCOME ADVANTAGE ADVANTAGE 2 ADVANTAGE 3 INCOME
(NAZ) (NFZ) (NKR) (NXE) (NTX)
------------------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments, at market value (cost $80,747,376,
$32,884,139, $51,188,087, $63,733,881, and
$196,080,113, respectively) $82,781,269 $33,116,471 $52,001,686 $61,774,383 $202,034,178
Cash 2,940,076 886,917 1,381,467 1,064,564 34,252
Receivables:
Interest 751,853 317,765 384,028 437,639 3,548,321
Investments sold 4,187,653 -- -- -- 1,560,000
Other assets 11,302 7,397 9,131 4,188 17,852
------------------------------------------------------------------------------------------------------------------------------------
Total assets 90,672,153 34,328,550 53,776,312 63,280,774 207,194,603
------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Accrued expenses:
Management fees 51,264 18,239 21,236 21,025 117,064
Other 70,983 19,541 17,408 11,715 94,716
Preferred share dividends payable 3,096 361 192 992 7,714
------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 125,343 38,141 38,836 33,732 219,494
------------------------------------------------------------------------------------------------------------------------------------
Preferred shares, at liquidation value 30,000,000 12,000,000 18,500,000 22,000,000 69,000,000
------------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to
Common shares $60,546,810 $22,290,409 $35,237,476 $41,247,042 $137,975,109
====================================================================================================================================
Common shares outstanding 4,431,048 1,542,142 2,418,271 3,067,000 9,466,888
====================================================================================================================================
Net asset value per Common share outstanding
(net assets applicable to Common
shares, divided by Common shares
outstanding) $ 13.66 $ 14.45 $ 14.57 $ 13.45 $ 14.57
====================================================================================================================================
NET ASSETS APPLICABLE TO COMMON SHARES CONSIST OF:
------------------------------------------------------------------------------------------------------------------------------------
Common shares, $.01 par value per share $ 44,310 $ 15,421 $ 24,183 $ 30,670 $ 94,669
Paid-in surplus 61,569,117 21,800,653 34,248,894 43,256,304 134,168,594
Undistributed (Over-distribution of) net
investment income 612,114 211,017 36,173 (8,658) 1,595,053
Accumulated net realized gain (loss)
from investments (3,712,624) 30,986 114,627 (71,776) (3,837,272)
Net unrealized appreciation
(depreciation) of investments 2,033,893 232,332 813,599 (1,959,498) 5,954,065
------------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common shares $60,546,810 $22,290,409 $35,237,476 $41,247,042 $137,975,109
====================================================================================================================================
Authorized shares:
Common 200,000,000 Unlimited Unlimited Unlimited Unlimited
Preferred 1,000,000 Unlimited Unlimited Unlimited Unlimited
====================================================================================================================================
See accompanying notes to financial statements.
28
Statement of
OPERATIONS Year Ended July 31, 2003
ARIZONA ARIZONA ARIZONA ARIZONA TEXAS
PREMIUM DIVIDEND DIVIDEND DIVIDEND QUALITY
INCOME ADVANTAGE ADVANTAGE 2 ADVANTAGE 3 INCOME
(NAZ) (NFZ) (NKR) (NXE)* (NTX)
------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME $ 5,096,247 $1,748,393 $2,613,161 $ 2,273,708 $11,683,964
------------------------------------------------------------------------------------------------------------------------------------
EXPENSES
Management fees 605,885 230,324 361,168 338,172 1,372,325
Preferred shares - auction fees 76,972 32,996 45,552 38,468 172,658
Preferred shares - dividend
disbursing agent fees 10,000 10,000 10,000 7,097 20,000
Shareholders' servicing agent
fees and expenses 7,824 766 1,281 1,665 19,617
Custodian's fees and expenses 30,622 18,064 21,431 14,158 49,363
Directors'/Trustees' fees and expenses 1,343 349 914 889 2,497
Professional fees 9,939 9,156 9,699 15,001 7,909
Shareholders' reports - printing
and mailing expenses 12,838 5,591 8,827 13,303 26,412
Stock exchange listing fees 11,540 177 129 163 11,555
Investor relations expense 10,754 2,105 7,090 3,739 23,341
Other expenses 11,851 6,461 5,641 2,352 16,062
------------------------------------------------------------------------------------------------------------------------------------
Total expenses before custodian fee
credit and expense reimbursement 789,568 315,989 471,732 435,007 1,721,739
Custodian fee credit (6,660) (5,071) (7,038) (5,670) (14,918)
Expense reimbursement -- (98,590) (162,020) (163,847) --
------------------------------------------------------------------------------------------------------------------------------------
Net expenses 782,908 212,328 302,674 265,490 1,706,821
------------------------------------------------------------------------------------------------------------------------------------
Net investment income 4,313,339 1,536,065 2,310,487 2,008,218 9,977,143
------------------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN
(LOSS) FROM INVESTMENTS
Net realized gain (loss) from investments (3,250,460) 43,532 132,780 (72,291) (3,211,937)
Change in net unrealized appreciation
(depreciation) of investments 649,626 (623,996) (880,264) (1,959,498) (2,256,490)
------------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) from investments (2,600,834) (580,464) (747,484) (2,031,789) (5,468,427)
------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO PREFERRED SHAREHOLDERS
From net investment income (295,481) (100,618) (185,421) (166,960) (768,750)
From accumulated net realized
gains from investments -- (8,316) (3,802) -- (8,765)
------------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets applicable
to Common shares from distributions
to Preferred shareholders (295,481) (108,934) (189,223) (166,960) (777,515)
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net
assets applicable to Common
shares from operations $ 1,417,024 $ 846,667 $1,373,780 $ (190,531) $ 3,731,201
====================================================================================================================================
* For the period September 26, 2002 (commencement of operations) through July
31, 2003.
See accompanying notes to financial statements.
29
Statement of
CHANGES IN NET ASSETS
ARIZONA ARIZONA ARIZONA
PREMIUM INCOME (NAZ) DIVIDEND ADVANTAGE (NFZ) DIVIDEND ADVANTAGE 2 (NKR)
---------------------------- ------------------------------ ----------------------------
FOR THE
PERIOD 3/26/02
(COMMENCEMENT
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED OF OPERATIONS)
7/31/03 7/31/02 7/31/03 7/31/02 7/31/03 THROUGH 7/31/02
------------------------------------------------------------------------------------------------------------------------------------
OPERATIONS
Net investment income $ 4,313,339 $ 4,726,364 $ 1,536,065 $ 1,597,001 $ 2,310,487 $ 572,359
Net realized gain (loss)
from investments (3,250,460) (462,165) 43,532 148,987 132,780 13,996
Change in net unrealized appreciation
(depreciation) of investments 649,626 (2,058,272) (623,996) 425,309 (880,264) 1,693,697
Distributions to Preferred
Shareholders:
From net investment income (295,481) (414,197) (100,618) (175,122) (185,421) (51,112)
From accumulated net realized
gains from investments -- (51,989) (8,316) (4,730) (3,802) --
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
applicable to Common shares
from operations 1,417,024 1,739,741 846,667 1,991,445 1,373,780 2,228,940
------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO COMMON SHAREHOLDERS
From net investment income (4,059,731) (3,884,716) (1,357,099) (1,291,796) (2,088,653) (521,078)
From accumulated net realized gains
from investments -- (182,992) (65,547) (21,217) (28,590) --
------------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets applicable to
Common shares from distributions
to Common shareholders (4,059,731) (4,067,708) (1,422,646) (1,313,013) (2,117,243) (521,078)
------------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
Common shares:
Net proceeds from sale of shares -- -- -- -- -- 34,379,475
Net proceeds from shares
issued to shareholders due to
reinvestment of distributions 313,593 344,887 45,775 39,766 80,623 16,872
Preferred shares offering costs -- -- 29,976 -- (12,866) (291,302)
------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets applicable
to Common shares from capital
share transactions 313,593 344,887 75,751 39,766 67,757 34,105,045
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in
net assets applicable
to Common shares (2,329,114) (1,983,080) (500,228) 718,198 (675,706) 35,812,907
Net assets applicable to Common
shares at the beginning
of period 62,875,924 64,859,004 22,790,637 22,072,439 35,913,182 100,275
------------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common
shares at the end of period $60,546,810 $62,875,924 $22,290,409 $22,790,637 $35,237,476 $35,913,182
====================================================================================================================================
Undistributed (Over-distribution of)
net investment income at the
end of period $ 612,114 $ 656,041 $ 211,017 $ 135,959 $ 36,173 $ 169
====================================================================================================================================
See accompanying notes to financial statements.
30
ARIZONA TEXAS
DIVIDEND ADVANTAGE 3 (NXE) QUALITY INCOME (NTX)
------------------------------- ----------------------------
FOR THE
PERIOD 9/26/02
(COMMENCEMENT
OF OPERATIONS) YEAR ENDED YEAR ENDED
THROUGH 7/31/03 7/31/03 7/31/02
------------------------------------------------------------------------------------------------------------------------------------
OPERATIONS
Net investment income $ 2,008,218 $ 9,977,143 $ 10,521,496
Net realized gain (loss) from investments (72,291) (3,211,937) (267,356)
Change in net unrealized appreciation
(depreciation) of investments (1,959,498) (2,256,490) 1,647
Distributions to Preferred Shareholders:
From net investment income (166,960) (768,750) (919,736)
From accumulated net realized gains
from investments -- (8,765) (197,372)
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
applicable to Common shares
from operations (190,531) 3,731,201 9,138,679
------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO COMMON SHAREHOLDERS
From net investment income (1,849,401) (9,027,160) (8,653,941)
From accumulated net realized gains
from investments -- (100,152) (634,401)
------------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets applicable to
Common shares from distributions
to Common shareholders (1,849,401) (9,127,312) (9,288,342)
------------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
Common shares:
Net proceeds from sale of shares 43,742,700 -- --
Net proceeds from shares
issued to shareholders due to
reinvestment of distributions -- 66,550 327,339
Preferred shares offering costs (556,001) -- --
------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets applicable
to Common shares from capital
share transactions 43,186,699 66,550 327,339
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
applicable to Common shares 41,146,767 (5,329,561) 177,676
Net assets applicable to Common
shares at the beginning of period 100,275 143,304,670 143,126,994
------------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common
shares at the end of period $41,247,042 $137,975,109 $143,304,670
====================================================================================================================================
Undistributed (Over-distribution of)
net investment income at the
end of period $ (8,658) $ 1,595,053 $ 1,424,229
====================================================================================================================================
See accompanying notes to financial statements.
31
Notes to
FINANCIAL STATEMENTS
1. GENERAL INFORMATION AND SIGNIFICANT ACCOUNTING POLICIES
The state funds (the "Funds") covered in this report and their corresponding
common share stock exchange symbols are Nuveen Arizona Premium Income Municipal
Fund, Inc. (NAZ), Nuveen Arizona Dividend Advantage Municipal Fund (NFZ), Nuveen
Arizona Dividend Advantage Municipal Fund 2 (NKR), Nuveen Arizona Dividend
Advantage Municipal Fund 3 (NXE), and Nuveen Texas Quality Income Municipal Fund
(NTX). Common shares of Arizona Premium Income (NAZ), and Texas Quality Income
(NTX) are traded on the New York Stock Exchange while Common shares of Arizona
Dividend Advantage (NFZ), Arizona Dividend Advantage 2 (NKR), and Arizona
Dividend Advantage 3 (NXE) are traded on the American Stock Exchange. The Funds
are registered under the Investment Company Act of 1940, as amended, as
closed-end management investment companies.
Prior to the commencement of operations of Arizona Dividend Advantage 2 (NKR),
and Arizona Dividend Advantage 3 (NXE), each Fund had no operations other than
those related to organizational matters, the initial capital contribution of
$100,275 per Fund by Nuveen Advisory Corp. (the "Adviser"), a wholly owned
subsidiary of Nuveen Investments, Inc. (formerly, The John Nuveen Company), and
the recording of the organization expenses ($11,500 per Fund) and their
reimbursement by Nuveen Investments, LLC (formerly, Nuveen Investments), also a
wholly owned subsidiary of Nuveen Investments, Inc.
Each Fund seeks to provide current income exempt from both regular federal and
designated state income taxes, where applicable, by investing primarily in a
diversified portfolio of municipal obligations issued by state and local
government authorities within a single state.
The following is a summary of significant accounting policies followed by the
Funds in the preparation of their financial statements in accordance with
accounting principles generally accepted in the United States.
Securities Valuation
The prices of municipal bonds in each Fund's investment portfolio are provided
by a pricing service approved by the Funds' Board of Directors/Trustees. When
price quotes are not readily available (which is usually the case for municipal
securities), the pricing service establishes fair market value based on yields
or prices of municipal bonds of comparable quality, type of issue, coupon,
maturity and rating, indications of value from securities dealers and general
market conditions. If it is determined that market prices for a security are
unavailable or inappropriate, the Board of Directors/Trustees of the Funds, or
its designee, may establish a fair value for the security. Temporary investments
in securities that have variable rate and demand features qualifying them as
short-term securities are valued at amortized cost, which approximates market
value.
Securities Transactions
Securities transactions are recorded on a trade date basis. Realized gains and
losses from such transactions are determined on the specific identification
method. Securities purchased or sold on a when-issued or delayed delivery basis
may have extended settlement periods. The securities so purchased are subject to
market fluctuation during this period. The Funds have instructed the custodian
to segregate assets with a current value at least equal to the amount of the
when-issued and delayed delivery purchase commitments. At July 31, 2003, there
were no such outstanding purchase commitments in any of the Funds.
32
Investment Income
Interest income, which includes the amortization of premiums and accretion of
discounts for financial reporting purposes, is recorded on an accrual basis.
Income Taxes
Each Fund is a separate taxpayer for federal income tax purposes. Each Fund
intends to comply with the requirements of the Internal Revenue Code applicable
to regulated investment companies and to distribute all of its net investment
income to its share holders. Therefore, no federal income tax provision is
required. Furthermore, each Fund intends to satisfy conditions which will enable
interest from municipal securities, which is exempt from regular federal and
designated state income taxes, where applicable, to retain such tax-exempt
status when distributed to shareholders of the Funds. All monthly tax-exempt
income dividends paid during the fiscal year ended July 31, 2003, have been
designated Exempt Interest Dividends.
Dividends and Distributions to Common Shareholders
Dividends from tax-exempt net investment income are declared monthly. Net
realized capital gains and/or market discount from investment transactions, if
any, are distributed to shareholders not less frequently than annually.
Furthermore, capital gains are distributed only to the extent they exceed
available capital loss carryforwards.
Distributions to Common shareholders of tax-exempt net investment income, net
realized capital gains and/or market discount, if any, are recorded on the
ex-dividend date. The amount and timing of distributions are determined in
accordance with federal income tax regulations, which may differ from accounting
principles generally accepted in the United States.
Preferred Shares
The Funds have issued and outstanding $25,000 stated value Preferred shares.
Each Fund's Preferred shares are issued in one or more Series. The dividend rate
on each Series may change every seven days, as set pursuant to a dutch auction
process by the auction agent, and is payable at or near the end of each rate
period. The number of Preferred shares outstanding, for each Fund is as follows:
ARIZONA ARIZONA ARIZONA ARIZONA TEXAS
PREMIUM DIVIDEND DIVIDEND DIVIDEND QUALITY
INCOME ADVANTAGE ADVANTAGE 2 ADVANTAGE 3 INCOME
(NAZ) (NFZ) (NKR) (NXE) (NTX)
---------------------------------------------------------------------------------------------------------
Number of shares:
Series M -- -- -- 880 760
Series T -- 480 -- -- --
Series W -- -- 740 -- --
Series TH 1,200 -- -- -- 2,000
---------------------------------------------------------------------------------------------------------
Total 1,200 480 740 880 2,760
=========================================================================================================
Effective November 15, 2002, Arizona Dividend Advantage 3 (NXE) issued 880
Series M, $25,000 stated value Preferred shares.
33
Notes to
FINANCIAL STATEMENTS (continued)
Derivative Financial Instruments
The Funds may invest in certain derivative financial instruments including
futures, forward, swap, and option contracts, and other financial instruments
with similar characteristics. Although the Funds are authorized to invest in
such financial instruments, and may do so in the future, they did not make any
such investments during the fiscal year ended July 31, 2003.
Custodian Fee Credit
Each Fund has an arrangement with the custodian bank whereby certain custodian
fees and expenses are reduced by credits earned on each Fund's cash on deposit
with the bank. Such deposit arrangements are an alternative to overnight
investments.
Offering Costs
Nuveen Investments, LLC has agreed to pay all common share offering costs (other
than the sales load) that exceed $.03 per Common share for Arizona Dividend
Advantage 2 (NKR), and Arizona Dividend Advantage 3 (NXE). Arizona Dividend
Advantage 2's (NKR), and Arizona Dividend Advantage 3's (NXE) share of common
share offering costs ($72,150, and $91,800, respectively) were recorded as a
reduction of the proceeds from the sale of common shares.
Costs incurred by Arizona Dividend Advantage 2 (NKR), and Arizona Dividend
Advantage 3 (NXE) in connection with their offering of Preferred shares
($304,168, and $556,001, respectively) were recorded as a reduction to paid-in
surplus.
Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States 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.
34
2. FUND SHARES
Transactions in Common and Preferred shares were as follows:
ARIZONA PREMIUM ARIZONA DIVIDEND ARIZONA DIVIDEND
INCOME (NAZ) ADVANTAGE (NFZ) ADVANTAGE 2 (NKR)
------------------------ ------------------------ -------------------------
FOR THE
PERIOD 3/26/02
(COMMENCE-
MENT OF
OPERATIONS)
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED THROUGH
7/31/03 7/31/02 7/31/03 7/31/02 7/31/03 7/31/02
----------------------------------------------------------------------------------------------------------
Common shares:
Shares sold -- -- -- -- -- 2,405,000
Shares issued to
shareholders due to
reinvestment of
distributions 19,523 21,407 2,947 2,811 5,171 1,100
----------------------------------------------------------------------------------------------------------
19,523 21,407 2,947 2,811 5,171 2,406,100
==========================================================================================================
Preferred shares sold -- -- -- -- -- 740
==========================================================================================================
ARIZONA
DIVIDEND
ADVANTAGE 3 TEXAS QUALITY
(NXE) INCOME (NTX)
-------------- -------------------------
FOR THE
PERIOD 9/26/02
(COMMENCE-
MENT OF
OPERATIONS)
THROUGH YEAR ENDED YEAR ENDED
7/31/03 7/31/03 7/31/02
----------------------------------------------------------------------------------------------------------
Common shares:
Shares sold 3,060,000 -- --
Shares issued to shareholders
due to reinvestment of
distributions -- 4,266 21,816
----------------------------------------------------------------------------------------------------------
3,060,000 4,266 21,816
==========================================================================================================
Preferred shares sold 880 -- --
==========================================================================================================
35
Notes to
FINANCIAL STATEMENTS (continued
3. SECURITIES TRANSACTIONS
Purchases and sales (including maturities) of investments in long-term municipal
securities during the fiscal year ended July 31, 2003, were as follows:
ARIZONA ARIZONA ARIZONA ARIZONA TEXAS
PREMIUM DIVIDEND DIVIDEND DIVIDEND QUALITY
INCOME ADVANTAGE ADVANTAGE 2 ADVANTAGE 3 INCOME
(NAZ) (NFZ) (NKR) (NXE)* (NTX)
----------------------------------------------------------------------------------------------------------
Purchases $15,527,989 $6,858,818 $2,055,180 $73,054,731 $25,577,508
Sales and maturities 22,363,525 7,354,606 3,257,675 9,048,489 24,551,353
==========================================================================================================
* For the period September 26, 2002 (commencement of operations) through July
31, 2003.
4. INCOME TAX INFORMATION
The following information is presented on an income tax basis. Differences
between amounts for financial statement and federal income tax purposes are
primarily due to timing differences in recognizing income on taxable market
discount securities and timing differences in recognizing certain gains and
losses on security transactions.
At July 31, 2003, the cost of investments were as follows:
ARIZONA ARIZONA ARIZONA ARIZONA TEXAS
PREMIUM DIVIDEND DIVIDEND DIVIDEND QUALITY
INCOME ADVANTAGE ADVANTAGE 2 ADVANTAGE 3 INCOME
(NAZ) (NFZ) (NKR) (NXE) (NTX)
-----------------------------------------------------------------------------------------------------------
Cost of investments $80,730,842 $32,886,701 $51,187,715 $63,732,793 $195,991,768
===========================================================================================================
Gross unrealized appreciation and gross unrealized depreciation of investments
at July 31, 2003, were as follows:
ARIZONA ARIZONA ARIZONA ARIZONA TEXAS
PREMIUM DIVIDEND DIVIDEND DIVIDEND QUALITY
INCOME ADVANTAGE ADVANTAGE 2 ADVANTAGE 3 INCOME
(NAZ) (NFZ) (NKR) (NXE) (NTX)
-----------------------------------------------------------------------------------------------------------
Gross unrealized:
Appreciation $ 3,474,366 $ 542,694 $1,116,545 $ 85,004 $ 8,964,835
Depreciation (1,423,939) (312,924) (302,574) (2,043,414) (2,922,425)
-----------------------------------------------------------------------------------------------------------
Net unrealized appreciation
(depreciation)
of investments $ 2,050,427 $ 229,770 $ 813,971 $(1,958,410) $ 6,042,410
===========================================================================================================
36
The tax components of undistributed net investment income and net realized gains
at July 31, 2003, were as follows:
ARIZONA ARIZONA ARIZONA ARIZONA TEXAS
PREMIUM DIVIDEND DIVIDEND DIVIDEND QUALITY
INCOME ADVANTAGE ADVANTAGE 2 ADVANTAGE 3 INCOME
(NAZ) (NFZ) (NKR) (NXE) (NTX)
-------------------------------------------------------------------- -------------------------------------
Undistributed net tax-exempt income $937,435 $325,194 $208,855 $196,735 $2,271,776
Undistributed net ordinary income * 216 68,563 110,761 -- --
Undistributed net long-term capital gains -- -- 5,120 -- --
==========================================================================================================
* Net ordinary income consists of taxable market discount income and net
short-term capital gains, if any.
The tax character of distributions paid during the fiscal years ended July 31,
2003, and July 31, 2002, was designated for purposes of the dividends paid
deduction as follows:
ARIZONA ARIZONA ARIZONA ARIZONA TEXAS
PREMIUM DIVIDEND DIVIDEND DIVIDEND QUALITY
INCOME ADVANTAGE ADVANTAGE 2 ADVANTAGE 3 INCOME
2003 (NAZ) (NFZ) (NKR) (NXE) (NTX)
----------------------------------------------------------------------------------------------------------
Distributions from net tax-exempt income $4,355,548 $1,446,815 $2,277,296 $1,809,880 $9,784,102
Distributions from net ordinary income * -- 2,222 33,393 -- 21,034
Distributions from net long-term
capital gains -- 73,795 -- -- 93,585
==========================================================================================================
ARIZONA ARIZONA ARIZONA TEXAS
PREMIUM DIVIDEND DIVIDEND QUALITY
INCOME ADVANTAGE ADVANTAGE 2 INCOME
2002 (NAZ) (NFZ) (NKR) (NTX)
----------------------------------------------------------------------------------------------------------
Distributions from net tax-exempt income $4,276,629 $1,469,871 $393,659 $9,516,981
Distributions from net ordinary income * -- 25,947 -- --
Distributions from net long-term capital gains 234,981 -- -- 831,773
==========================================================================================================
* Net ordinary income consists of taxable market discount income and net
short-term capital gains, if any.
At July 31, 2003, 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 TEXAS
PREMIUM QUALITY
INCOME INCOME
(NAZ) (NTX)
----------------------------------------------------------------------------------------------------------
Expiration year:
2010 $ 2,164 $ --
2011 1,436,486 855,431
----------------------------------------------------------------------------------------------------------
Total $1,438,650 $855,431
==========================================================================================================
The following Funds have elected to defer net realized losses from investments
incurred from November 1, 2002 through July 31, 2003 ("post-October losses") in
accordance with Federal income tax regulations. The following post-October
losses are treated as having arisen in the following year:
ARIZONA ARIZONA ARIZONA TEXAS
PREMIUM DIVIDEND DIVIDEND QUALITY
INCOME ADVANTAGE ADVANTAGE 3 INCOME
(NAZ) (NFZ) (NXE) (NTX)
----------------------------------------------------------------------------------------------------------
$2,273,974 $32,396 $71,776 $2,981,841
==========================================================================================================
37
Notes to
FINANCIAL STATEMENTS (continued)
5. MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Under Arizona Premium Income's (NAZ), and Texas Quality Income's (NTX)
investment management agreements with the Adviser, each Fund pays an annual
management fee, payable monthly, at the rates set forth below, which are based
upon the average daily net assets (including net assets attributable to
Preferred shares) of each Fund as follows:
AVERAGE DAILY NET ASSETS (INCLUDING NET ASSETS
ATTRIBUTABLE TO PREFERRED SHARES) MANAGEMENT FEE
--------------------------------------------------------------------------------
For the first $125 million .6500%
For the next $125 million .6375
For the next $250 million .6250
For the next $500 million .6125
For the next $1 billion .6000
For the next $3 billion .5875
For net assets over $5 billion .5750
================================================================================
Under Arizona Dividend Advantage's (NFZ), Arizona Dividend Advantage 2's (NKR),
and Arizona Dividend Advantage 3's (NXE) investment management agreements with
the Adviser, each Fund pays an annual management fee, payable monthly, at the
rates set forth below, which are based upon the average daily net assets
(including net assets attributable to Preferred shares) of each Fund as follows:
AVERAGE DAILY NET ASSETS (INCLUDING NET ASSETS
ATTRIBUTABLE TO PREFERRED SHARES) MANAGEMENT FEE
--------------------------------------------------------------------------------
For the first $125 million .6500%
For the next $125 million .6375
For the next $250 million .6250
For the next $500 million .6125
For the next $1 billion .6000
For net assets over $2 billion .5750
================================================================================
The management fee compensates the Adviser for overall investment advisory and
administrative services and general office facilities. The Funds pay no
compensation directly to those of its Directors/Trustees who are affiliated with
the Adviser or to their officers, all of whom receive remuneration for their
services to the Funds from the Adviser.
38
For the first ten years of Arizona Dividend Advantage's (NFZ) operations, the
Adviser has agreed to reimburse the Fund, as a percentage of average daily net
assets (including net assets attributable to Preferred shares), for fees and
expenses in the amounts, and for the time periods set forth below:
YEAR ENDING YEAR ENDING
JANUARY 31, JANUARY 31,
--------------------------------------------------------------------------------
2001* .30% 2007 .25%
2002 .30 2008 .20
2003 .30 2009 .15
2004 .30 2010 .10
2005 .30 2011 .05
2006 .30
================================================================================
* From the commencement of operations.
The Adviser has not agreed to reimburse Arizona Dividend Advantage (NFZ) for any
portion of its fees and expenses beyond January 31, 2011.
For the first ten years of Arizona Dividend Advantage 2's (NKR) operations, the
Adviser has agreed to reimburse the Fund, as a percentage of average daily net
assets (including net assets attributable to Preferred shares), for fees and
expenses in the amounts, and for the time periods set forth below:
YEAR ENDING YEAR ENDING
MARCH 31, MARCH 31,
--------------------------------------------------------------------------------
2002* .30% 2008 .25%
2003 .30 2009 .20
2004 .30 2010 .15
2005 .30 2011 .10
2006 .30 2012 .05
2007 .30
================================================================================
* From the commencement of operations.
The Adviser has not agreed to reimburse Arizona Dividend Advantage 2 (NKR) for
any portion of its fees and expenses beyond March 31, 2012.
For the first eight years of Arizona Dividend Advantage 3's (NXE) operations,
the Adviser has agreed to reimburse the Fund, as a percentage of average daily
net assets (including net assets attributable to Preferred shares), for fees and
expenses in the amounts, and for the time periods set forth below:
YEAR ENDING YEAR ENDING
SEPTEMBER 30, SEPTEMBER 30,
--------------------------------------------------------------------------------
2002* .32% 2007 .32%
2003 .32 2008 .24
2004 .32 2009 .16
2005 .32 2010 .08
2006 .32
================================================================================
* From the commencement of operations.
The Adviser has not agreed to reimburse Arizona Dividend Advantage 3 (NXE) for
any portion of its fees and expenses beyond September 30, 2010.
39
Notes to
FINANCIAL STATEMENTS (continued)
6. SUBSEQUENT EVENT - DISTRIBUTIONS TO COMMON SHAREHOLDERS
The Funds declared Common share dividend distributions from their tax-exempt net
investment income which were paid on September 2, 2003, to shareholders of
record on August 15, 2003, as follows:
ARIZONA ARIZONA ARIZONA ARIZONA TEXAS
PREMIUM DIVIDEND DIVIDEND DIVIDEND QUALITY
INCOME ADVANTAGE ADVANTAGE 2 ADVANTAGE 3 INCOME
(NAZ) (NFZ) (NKR) (NXE) (NTX)
---------------------------------------------------------------------------------------------------------
Dividend per share $.0765 $.0755 $.0720 $.0670 $0.800
=========================================================================================================
40
Financial
HIGHLIGHTS
41
Financial
HIGHLIGHTS
Selected data for a Common share outstanding throughout each period:
Investment Operations Less Distributions
----------------------------------------------------------------- -------------------------------
Distributions Distributions
from Net from Net
Beginning Net Investment Capital Investment Capital
Common Realized/ Income to Gains to Income to Gains to
Share Net Unrealized Preferred Preferred Common Common
Net Asset Investment Investment Share- Share- Share- Share-
Value Income Gain (Loss) holders+ holders+ Total holders holders Total
==================================================================================================================================
ARIZONA PREMIUM
INCOME (NAZ)
----------------------------------------------------------------------------------------------------------------------------------
Year Ended 7/31:
2003 $14.25 $ .97 $(.57) $(.07) $ -- $ .33 $(.92) $ -- $ (.92)
2002 14.77 1.07 (.57) (.09) (.01) .40 (.88) (.04) (.92)
2001 14.25 1.09 .50 (.23) -- 1.36 (.83) (.01) (.84)
2000 14.90 1.06 (.61) (.25) -- .20 (.85) -- (.85)
1999 15.43 1.07 (.55) (.21) -- .31 (.84) -- (.84)
ARIZONA DIVIDEND
ADVANTAGE (NFZ)
----------------------------------------------------------------------------------------------------------------------------------
Year Ended 7/31:
2003 14.81 1.00 (.38) (.07) (.01) .54 (.88) (.04) (.92)
2002 14.37 1.04 .36 (.11) -- 1.29 (.84) (.01) (.85)
2001(a) 14.33 .44 .23 (.08) -- .59 (.35) -- (.35)
ARIZONA DIVIDEND
ADVANTAGE 2 (NKR)
----------------------------------------------------------------------------------------------------------------------------------
Year Ended 7/31:
2003 14.88 .96 (.31) (.08) -- .57 (.86) (.01) (.87)
2002(b) 14.33 .24 .71 (.02) -- .93 (.22) -- (.22)
ARIZONA DIVIDEND
ADVANTAGE 3 (NXE)
----------------------------------------------------------------------------------------------------------------------------------
Year Ended 7/31:
2003(c) 14.33 .66 (.67) (.05) -- (.06) (.61) -- (.61)
TEXAS QUALITY
INCOME (NTX)
----------------------------------------------------------------------------------------------------------------------------------
Year Ended 7/31:
2003 15.14 1.05 (.58) (.08) -- .39 (.95) (.01) (.96)
2002 15.16 1.11 (.02) (.10) (.02) .97 (.92) (.07) (.99)
2001 14.26 1.16 .88 (.27) -- 1.77 (.87) -- (.87)
2000 15.13 1.16 (.74) (.27) (.02) .13 (.91) (.09) (1.00)
1999 15.90 1.16 (.72) (.22) (.02) .20 (.90) (.07) (.97)
==================================================================================================================================
Total Returns
-------------------
Based
Offering on
Costs and Ending Common
Preferred Common Based Share
Share Share Ending on Net
Underwriting Net Asset Market Market Asset
Discounts Value Value Value** Value**
=========================================================================================
ARIZONA PREMIUM
INCOME (NAZ)
-----------------------------------------------------------------------------------------
Year Ended 7/31:
2003 $-- $13.66 $15.0000 (5.98)% 2.21%
2002 -- 14.25 16.9000 9.63 2.88
2001 -- 14.77 16.3200 17.77 9.74
2000 -- 14.25 14.6250 (8.80) 1.61
1999 -- 14.90 17.0000 8.67 1.92
ARIZONA DIVIDEND
ADVANTAGE (NFZ)
-----------------------------------------------------------------------------------------
Year Ended 7/31:
2003 .02 14.45 15.3000 3.06 3.67
2002 -- 14.81 15.7500 6.38 9.32
2001(a) (.20) 14.37 15.6500 6.76 2.81
ARIZONA DIVIDEND
ADVANTAGE 2 (NKR)
-----------------------------------------------------------------------------------------
Year Ended 7/31:
2003 (.01) 14.57 14.4000 (3.53) 3.67
2002(b) (.16) 14.88 15.8000 6.81 5.38
ARIZONA DIVIDEND
ADVANTAGE 3 (NXE)
-----------------------------------------------------------------------------------------
Year Ended 7/31:
2003(c) (.21) 13.45 13.9700 (2.76) (2.05)
TEXAS QUALITY
INCOME (NTX)
-----------------------------------------------------------------------------------------
Year Ended 7/31:
2003 -- 14.57 14.7100 4.14 2.54
2002 -- 15.14 15.0700 9.29 6.61
2001 -- 15.16 14.7300 21.16 12.74
2000 -- 14.26 12.9375 (7.93) 1.15
1999 -- 15.13 15.1875 2.97 1.21
=========================================================================================
Ratios/Supplemental Data
-------------------------------------------------------------------------------------------
Before Credit/Reimbursement After Credit/Reimbursement***
------------------------------ ------------------------------
Ratio of Net Ratio of Net
Ratio of Investment Ratio of Investment
Ending Expenses Income to Expenses Income to
Net to Average Average to Average Average
Assets Net Assets Net Assets Net Assets Net Assets
Applicable Applicable Applicable Applicable Applicable Portfolio
to Common to Common to Common to Common to Common Turnover
Shares (000) Shares++ Shares++ Shares++ Shares++ Rate
===============================================================================================================
ARIZONA PREMIUM
INCOME (NAZ)
---------------------------------------------------------------------------------------------------------------
Year Ended 7/31:
2003 $ 60,547 1.25% 6.81% 1.24% 6.82% 17%
2002 62,876 1.28 7.45 1.26 7.47 19
2001 64,859 1.28 7.47 1.27 7.48 18
2000 62,287 1.26 7.58 1.25 7.59 33
1999 64,775 1.29 6.88 1.29 6.88 6
ARIZONA DIVIDEND
ADVANTAGE (NFZ)
---------------------------------------------------------------------------------------------------------------
Year Ended 7/31:
2003 22,290 1.35 6.11 .91 6.55 20
2002 22,791 1.41 6.72 .93 7.20 40
2001(a) 22,072 1.43* 5.80* .95* 6.28* 21
ARIZONA DIVIDEND
ADVANTAGE 2 (NKR)
---------------------------------------------------------------------------------------------------------------
Year Ended 7/31:
2003 35,237 1.27 5.78 .82 6.23 4
2002(b) 35,913 1.19* 4.43* .77* 4.85* 1
ARIZONA DIVIDEND
ADVANTAGE 3 (NXE)
---------------------------------------------------------------------------------------------------------------
Year Ended 7/31:
2003(c) 41,247 1.19* 5.05* .73* 5.52* 16
TEXAS QUALITY
INCOME (NTX)
---------------------------------------------------------------------------------------------------------------
Year Ended 7/31:
2003 137,975 1.20 6.93 1.19 6.94 12
2002 143,305 1.23 7.40 1.22 7.42 22
2001 143,127 1.21 7.87 1.19 7.88 24
2000 134,637 1.27 8.18 1.26 8.19 32
1999 142,784 1.23 7.31 1.23 7.32 19
===============================================================================================================
Preferred Shares at End of Period
-------------------------------------------
Aggregate Liquidation
Amount and Market Asset
Outstanding Value Coverage
(000) Per Share Per Share
====================================================================
ARIZONA PREMIUM
INCOME (NAZ)
--------------------------------------------------------------------
Year Ended 7/31:
2003 $30,000 $25,000 $75,456
2002 30,000 25,000 77,397
2001 30,000 25,000 79,049
2000 30,000 25,000 76,906
1999 30,000 25,000 78,979
ARIZONA DIVIDEND
ADVANTAGE (NFZ)
--------------------------------------------------------------------
Year Ended 7/31:
2003 12,000 25,000 71,438
2002 12,000 25,000 72,480
2001(a) 12,000 25,000 70,984
ARIZONA DIVIDEND
ADVANTAGE 2 (NKR)
--------------------------------------------------------------------
Year Ended 7/31:
2003 18,500 25,000 72,618
2002(b) 18,500 25,000 73,531
ARIZONA DIVIDEND
ADVANTAGE 3 (NXE)
--------------------------------------------------------------------
Year Ended 7/31:
2003(c) 22,000 25,000 71,872
TEXAS QUALITY
INCOME (NTX)
--------------------------------------------------------------------
Year Ended 7/31:
2003 69,000 25,000 74,991
2002 69,000 25,000 76,922
2001 69,000 25,000 76,858
2000 69,000 25,000 73,782
1999 69,000 25,000 76,733
====================================================================
* Annualized.
** Total Investment Return on Market Value is the combination of reinvested
dividend income, reinvested capital gains distributions, if any, and
changes in stock price per share. Total Return on Common Share Net Asset
Value is the combination of reinvested dividend income, reinvested capital
gains distributions, if any, and changes in Common share net asset value
per share. Total returns are not annualized.
*** After custodian fee credit and expense reimbursement, where applicable.
+ The amounts shown are based on Common share equivalents.
++ Ratios do not reflect the effect of dividend payments to Preferred
shareholders; income ratios reflect income earned on assets attributable to
Preferred shares.
(a) For the period January 31, 2001 (commencement of operations) through July
31, 2001.
(b) For the period March 26, 2002 (commencement of operations) through July 31,
2002.
(c) For the period September 26, 2002 (commencement of operations) through July
31, 2003.
42-43 SPREAD
See accompanying notes to financial statements.
Directors/Trustees
AND OFFICERS
The management of the Funds, including general supervision of the duties
performed for the Funds by the Adviser, is the responsibility of the Board of
Directors/ Trustees of the Funds. The number of directors/trustees of the Funds
is currently set at eight. None of the directors/trustees who are not
"interested" persons of the Funds has ever been a director or employee of, or
consultant to, Nuveen or its affiliates. The names and business addresses of the
directors/trustees and officers of the Funds, their principal occupations and
other affiliations during the past five years, the number of portfolios each
oversees and other directorships they hold are set forth below.
NUMBER OF
PORTFOLIOS
IN FUND
COMPLEX
YEAR FIRST PRINCIPAL OCCUPATION(S) OVERSEEN
NAME, BIRTHDATE POSITION(S) HELD ELECTED OR INCLUDING OTHER DIRECTORSHIPS BY DIRECTOR/
AND ADDRESS WITH THE FUNDS APPOINTED(2) DURING PAST 5 YEARS TRUSTEE
------------------------------------------------------------------------------------------------------------------------------------
DIRECTOR/TRUSTEE WHO IS AN INTERESTED PERSON OF THE FUNDS:
------------------------------------------------------------------------------------------------------------------------------------
Timothy R. Schwertfeger (1) Chairman of the 1994 Chairman and Director (since 1996) of Nuveen 140
3/28/49 Board and Investments, Inc. and Nuveen Investments, LLC;
333 W. Wacker Drive Director/Trustee Director (since 1992) and Chairman (since 1996) of
Chicago, IL 60606 Nuveen Advisory Corp. and Nuveen Institutional
Advisory Corp.; Chairman and Director (since 1997)
of Nuveen Asset Management, Inc.; Director (since 1996)
of Institutional Capital Corporation; Chairman and
Director (since 1999) of Rittenhouse Asset Management,
Inc.; Chairman of Nuveen Investments Advisers Inc.
(since 2002).
DIRECTORS/TRUSTEES WHO ARE NOT INTERESTED PERSONS OF THE FUNDS:
------------------------------------------------------------------------------------------------------------------------------------
William E. Bennett Director/Trustee 2001 Private Investor; previously, President and Chief 140
10/16/46 Executive Officer, Draper & Kramer, Inc., a private
333 W. Wacker Drive company that handles mortgage banking, real estate
Chicago, IL 60606 development, pension advisory and real estate management
(1995-1998). Prior thereto, Executive Vice President and
Chief Credit Officer of First Chicago Corporation and
its principal subsidiary, The First National Bank
of Chicago.
------------------------------------------------------------------------------------------------------------------------------------
Robert P. Bremner Director/Trustee 1997 Private Investor and Management Consultant. 134
8/22/40
333 W. Wacker Drive
Chicago, IL 60606
------------------------------------------------------------------------------------------------------------------------------------
Lawrence H. Brown Director/Trustee 1993 Retired (since 1989) as Senior Vice President of The 134
7/29/34 Northern Trust Company; Director of the United Way of
333 W. Wacker Drive Highland Park-Highwood (since 2002).
Chicago, IL 60606
------------------------------------------------------------------------------------------------------------------------------------
Anne E. Impellizzeri Director/Trustee 1994 Retired, formerly, Executive Director (since 1998) 134
1/26/33 of Manitoga/The Russel Wright Design Center; prior
333 W. Wacker Drive thereto, President and Chief Executive Officer of
Chicago, IL 60606 Blanton-Peale Institute (since 1990); prior thereto,
Vice President, Metropolitan Life Insurance Co.
------------------------------------------------------------------------------------------------------------------------------------
Peter R. Sawers Director/Trustee 1991 Adjunct Professor of Business and Economics, 134
4/3/33 University of Dubuque, Iowa; formerly (1991-2000)
333 W. Wacker Drive Adjunct Professor, Lake Forest Graduate School of
Chicago, IL 60606 Management, Lake Forest, Illinois; prior thereto,
Executive Director, Towers Perrin Australia, a
management consulting firm; Chartered Financial
Analyst; Certified Management Consultant; Director,
Executive Service Corps of Chicago, a not-for-profit
organization.
------------------------------------------------------------------------------------------------------------------------------------
William J. Schneider Director/Trustee 1997 Senior Partner and Chief Operating Officer, 134
9/24/44 Miller-Valentine Group, Vice President,
333 W. Wacker Drive Miller-Valentine Realty, a development and contract
Chicago, IL 60606 company; Chair, MiamiValley Hospital; Chair, Miami
Valley Economic Development Coalition; formerly,
Member, Community Advisory Board, National City Bank,
Dayton, Ohio and Business Advisory Council, Cleveland
Federal Reserve Bank.
------------------------------------------------------------------------------------------------------------------------------------
Judith M. Stockdale Director/Trustee 1997 Executive Director, Gaylord and Dorothy Donnelley 134
12/29/47 Foundation (since 1994); prior thereto, Executive
333 W. Wacker Drive Director, Great Lakes Protection Fund (from 1990
Chicago, IL 60606 to 1994).
44
NUMBER OF
PORTFOLIOS
IN FUND
YEAR FIRST COMPLEX
NAME, BIRTHDATE POSITION(S) HELD ELECTED OR PRINCIPAL OCCUPATION(S) OVERSEEN
AND ADDRESS WITH THE FUNDS APPOINTED(3) DURING PAST 5 YEARS BY OFFICER
------------------------------------------------------------------------------------------------------------------------------------
OFFICERS OF THE FUNDS:
------------------------------------------------------------------------------------------------------------------------------------
Gifford R. Zimmerman Chief 1988 Managing Director (since 2002), Assistant Secretary 140
9/9/56 Administrative and Associate General Counsel, formerly, Vice
333 W. Wacker Drive Officer President and Assistant General Counsel of Nuveen
Chicago, IL 60606 Investments, LLC; Managing Director (since 2002),
General Counsel and Assistant Secretary, formerly,
Vice President of Nuveen Advisory Corp. and Nuveen
Institutional Advisory Corp.; Managing Director
(since 2002), Assistant Secretary and Associate
General Counsel, formerly, Vice President (since
2000), of Nuveen Asset Management, Inc.; Assistant
Secretary of Nuveen Investments, Inc. (since 1994);
Assistant Secretary of NWQ Investment Management
Company, LLC (since 2002); Vice President and
Assistant Secretary of Nuveen Investments Advisers Inc.
(since 2002); Managing Director, Associate General
Counsel and Assistant Secretary of Rittenhouse Asset
Management, Inc. (since May 2003); Chartered
Financial Analyst.
------------------------------------------------------------------------------------------------------------------------------------
Michael T. Atkinson Vice President 2000 Vice President (since 2002), formerly, Assistant 140
2/3/66 and Assistant Vice President (since 2000), previously, Associate of
333 W. Wacker Drive Secretary Nuveen Investments, LLC.
Chicago, IL 60606
------------------------------------------------------------------------------------------------------------------------------------
Paul L. Brennan Vice President 1999 Vice President (since 2002), formerly, Assistant 122
11/10/66 Vice President (since 1997), of Nuveen Advisory Corp.;
333 W. Wacker Drive prior thereto, portfolio manager of Flagship Financial
Chicago, IL 60606 Inc.; Chartered Financial Analyst and Certified
Public Accountant.
------------------------------------------------------------------------------------------------------------------------------------
Peter H. D'Arrigo Vice President 1999 Vice President of Nuveen Investments, LLC (since 140
11/28/67 and Treasurer 1999), prior thereto, Assistant Vice President (since
333 W. Wacker Drive 1997); Vice President and Treasurer of Nuveen
Chicago, IL 60606 Investments, Inc. (since 1999); Vice President and
Treasurer of Nuveen Advisory Corp. and Nuveen
Institutional Advisory Corp. (since 1999); Vice
President and Treasurer of Nuveen Asset Management,
Inc. (since 2002) and of Nuveen Investments Advisers
Inc. (since 2002); Assistant Treasurer of NWQ
Investment Management Company, LLC (since 2002);
Chartered Financial Analyst.
------------------------------------------------------------------------------------------------------------------------------------
Susan M. DeSanto Vice President 2001 Vice President of Nuveen Advisory Corp. (since 2001); 140
9/8/54 previously, Vice President of Van Kampen Investment
333 W. Wacker Drive Advisory Corp. (since 1998); Vice President of Nuveen
Chicago, IL 60606 Institutional Advisory Corp. (since 2002); prior
thereto, Assistant Vice President of Van Kampen
Investment Advisory Corp. (since 1994).
------------------------------------------------------------------------------------------------------------------------------------
Jessica R. Droeger Vice President 2000 Vice President (since 2002) and Assistant General 140
9/24/64 and Secretary Counsel (since 1998); formerly, Assistant Vice
333 W. Wacker Drive President (since 1998) of Nuveen Investments, LLC;
Chicago, IL 60606 Vice President (since 2002) and Assistant Secretary
(since 1998), formerly Assistant Vice President
of Nuveen Advisory Corp. and Nuveen Institutional
Advisory Corp.
45
Trustees
AND OFFICERS (CONTINUED)
NUMBER OF
PORTFOLIOS
IN FUND
YEAR FIRST COMPLEX
NAME, BIRTHDATE POSITION(S) HELD ELECTED OR PRINCIPAL OCCUPATION(S) OVERSEEN
AND ADDRESS WITH THE FUNDS APPOINTED(3) DURING PAST 5 YEARS BY OFFICER
------------------------------------------------------------------------------------------------------------------------------------
OFFICERS OF THE FUNDS (CONTINUED):
------------------------------------------------------------------------------------------------------------------------------------
Lorna C. Ferguson Vice President 1998 Vice President of Nuveen Investments, LLC; Vice 140
10/24/45 President (since 1998) of Nuveen Advisory Corp. and
333 W. Wacker Drive Nuveen Institutional Advisory Corp.
Chicago, IL 60606
------------------------------------------------------------------------------------------------------------------------------------
William M. Fitzgerald Vice President 1995 Managing Director (since 2002) of Nuveen Investments, 140
3/2/64 LLC; Managing Director (since 2001), formerly Vice
333 W. Wacker Drive President of Nuveen Advisory Corp. and Nuveen
Chicago, IL 60606 Institutional Advisory Corp. (since 1995); Managing
Director of Nuveen Asset Management, Inc. (since 2001);
Vice President of Nuveen Investment Advisers Inc.
(since 2002); Chartered Financial Analyst.
------------------------------------------------------------------------------------------------------------------------------------
Stephen D. Foy Vice President 1998 Vice President (since 1993) and Funds Controller 140
5/31/54 and Controller (since 1998) of Nuveen Investments, LLC and Vice
333 W. Wacker Drive President and Funds Controller (since 1998) of Nuveen
Chicago, IL 60606 Investments, Inc.; Certified Public Accountant.
------------------------------------------------------------------------------------------------------------------------------------
J. Thomas Futrell Vice President 1988 Vice President of Nuveen Advisory Corp.; 122
7/5/55 Chartered Financial Analyst.
333 W. Wacker Drive
Chicago, IL 60606
------------------------------------------------------------------------------------------------------------------------------------
Richard A. Huber Vice President 1997 Vice President of Nuveen Institutional Advisory Corp. 122
3/26/63 (since 1998) and Nuveen Advisory Corp. (since 1997);
333 W. Wacker Drive prior thereto, Vice President and Portfolio Manager of
Chicago, IL 60606 Flagship Financial, Inc.
------------------------------------------------------------------------------------------------------------------------------------
Steven J. Krupa Vice President 1990 Vice President of Nuveen Advisory Corp. 122
8/21/57
333 W. Wacker Drive
Chicago, IL 60606
------------------------------------------------------------------------------------------------------------------------------------
David J. Lamb Vice President 2000 Vice President (since 2000) of Nuveen Investments, 140
3/22/63 LLC, previously Assistant Vice President (since
333 W. Wacker Drive 1999); prior thereto, Associate of Nuveen Investments,
Chicago, IL 60606 LLC; Certified Public Accountant.
------------------------------------------------------------------------------------------------------------------------------------
Tina M. Lazar Vice President 2002 Vice President (since 1999), previously, Assistant 140
8/27/61 Vice President (since 1993) of Nuveen Investments, LLC.
333 W. Wacker Drive
Chicago, IL 60606
------------------------------------------------------------------------------------------------------------------------------------
Larry W. Martin Vice President 1988 Vice President, Assistant Secretary and Assistant 140
7/27/51 and Assistant General Counsel of Nuveen Investments, LLC; Vice
333 W. Wacker Drive Secretary President and Assistant Secretary of Nuveen Advisory
Chicago, IL 60606 Corp. and Nuveen Institutional Advisory Corp.;
Assistant Secretary of Nuveen Investments,
Inc. and (since 1997) Nuveen Asset Management,
Inc.; Vice President (since 2000), Assistant
Secretary and Assistant General Counsel (since
1998) of Rittenhouse Asset Management, Inc.;
Vice President and Assistant Secretary of
Nuveen Investments Advisers Inc. (since 2002);
Assistant Secretary of NWQ Investment Management
Company, LLC (since 2002).
46
NUMBER OF
PORTFOLIOS
IN FUND
YEAR FIRST COMPLEX
NAME, BIRTHDATE POSITION(S) HELD ELECTED OR PRINCIPAL OCCUPATION(S) OVERSEEN
AND ADDRESS WITH THE FUNDS APPOINTED(3) DURING PAST 5 YEARS BY OFFICER
------------------------------------------------------------------------------------------------------------------------------------
OFFICERS OF THE FUNDS (CONTINUED):
------------------------------------------------------------------------------------------------------------------------------------
Edward F. Neild, IV Vice President 1996 Managing Director (since 2002) of Nuveen Investments, 140
7/7/65 LLC; Managing Director (since 1997), formerly Vice
333 W. Wacker Drive President (since 1996) of Nuveen Advisory Corp. and
Chicago, IL 60606 Nuveen Institutional Advisory Corp.; Managing Director
of Nuveen Asset Management, Inc. (since 1999).
Chartered Financial Analyst.
------------------------------------------------------------------------------------------------------------------------------------
Thomas J. O'Shaughnessy Vice President 1999 Vice President (since 2002), formerly, Assistant 122
9/4/60 Vice President (since 1998), of Nuveen Advisory Corp.;
333 W. Wacker Drive prior thereto, portfolio manager.
Chicago, IL 60606
------------------------------------------------------------------------------------------------------------------------------------
Thomas C. Spalding Vice President 1982 Vice President of Nuveen Advisory Corp. and Nuveen 122
7/31/51 Institutional Advisory Corp.; Chartered Financial
333 W. Wacker Drive Analyst.
Chicago, IL 60606
(1) Mr. Schwertfeger is an "interested person" of the Funds, as defined in the
Investment Company Act of 1940, because he is an officer and trustee of the
Adviser.
(2) Directors/Trustees serve a one-year term until his/her successor is
elected. The year first elected or appointed represents the year in which
the Directors/Trustee was first elected or appointed to any fund in the
Nuveen Complex.
(3) Officers serve a one-year term through July of each year. The year first
elected or appointed represents the year in which the Officer was first
elected or appointed to any fund in the Nuveen Complex.
47
Build Your Wealth
AUTOMATICALLY
Sidebar text: NUVEEN MAKES REINVESTING EASY. A PHONE CALL IS ALL IT TAKES TO SET
UP YOUR REINVESTMENT ACCOUNT.
NUVEEN CLOSED-END EXCHANGE-TRADED FUNDS DIVIDEND REINVESTMENT PLAN
Your Nuveen Closed-End Exchange-Traded Fund allows you to conveniently reinvest
dividends and/or capital gains distributions in additional fund shares.
By choosing to reinvest, you'll be able to invest money regularly and
automatically, and watch your investment grow through the power of tax-free
compounding. Just like dividends or distributions in cash, there may be times
when income or capital gains taxes may be payable on dividends or distributions
that are reinvested.
It is important to note that an automatic reinvestment plan does not ensure a
profit, nor does it protect you against loss in a declining market.
EASY AND CONVENIENT
To make recordkeeping easy and convenient, each month you'll receive a statement
showing your total dividends and distributions, the date of investment, the
shares acquired and the price per share, and the total number of shares you own.
HOW SHARES ARE PURCHASED
The shares you acquire by reinvesting will either be purchased on the open
market or newly issued by the Fund. If the shares are trading at or above net
asset value at the time of valuation, the Fund will issue new shares at the
then-current market price. If the shares are trading at less than net asset
value, shares for your account will be purchased on the open market. Dividends
and distributions received to purchase shares in the open market will normally
be invested shortly after the dividend payment date. No interest will be paid on
dividends and distributions awaiting reinvestment. Because the market price of
shares may increase before purchases are completed, the average purchase price
per share may exceed the market price at the time of valuation, resulting in the
acquisition of fewer shares than if the dividend or distribution had been paid
in shares issued by the Fund. A pro rata portion of any applicable brokerage
commissions on open market purchases will be paid by Plan participants. These
commissions usually will be lower than those charged on individual transactions.
FLEXIBILITY
You may change your distribution option or withdraw from the Plan at any time,
should your needs or situation change. Should you withdraw, you can receive a
certificate for all whole shares credited to your reinvestment account and cash
payment for fractional shares, or cash payment for all reinvestment account
shares, less brokerage commissions and a $2.50 service fee.
You can reinvest whether your shares are registered in your name, or in the name
of a brokerage firm, bank, or other nominee. Ask your investment advisor if his
or her firm will participate on your behalf. Participants whose shares are
registered in the name of one firm may not be able to transfer the shares to
another firm and continue to participate in the Plan.
The Fund reserves the right to amend or terminate the Plan at any time. Although
the Fund reserves the right to amend the Plan to include a service charge
payable by the participants, there is no direct service charge to participants
in the Plan at this time.
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.
48
Fund
INFORMATION
BOARD OF DIRECTORS/TRUSTEES
William E. Bennett
Robert P. Bremner
Lawrence H. Brown
Anne E. Impellizzeri
Peter R. Sawers
William J. Schneider
Timothy R. Schwertfeger
Judith M. Stockdale
FUND MANAGER
Nuveen Advisory Corp.
333 West Wacker Drive
Chicago, IL 60606
CUSTODIAN
State Street Bank & Trust
Boston, MA
TRANSFER AGENT AND
SHAREHOLDER SERVICES
State Street Bank & Trust
Nuveen Funds
P.O. Box 43071
Providence, RI 02940-3071
(800) 257-8787
LEGAL COUNSEL
Chapman and Cutler LLP
Chicago, IL
INDEPENDENT AUDITORS
Ernst & Young LLP
Chicago, IL
POLICY CHANGE
On November 14, 2002, the Board adopted a policy that allows these Funds, in
addition to investments in municipal bonds, to invest up to 5% of its net assets
(including assets attributable to preferred shares, if any) in tax-exempt or
taxable fixed-income securities or equity securities for the purpose of
acquiring control of an issuer whose municipal bonds (a) the Fund already owns
and (b) have deteriorated or are expected shortly to deteriorate significantly
in credit quality, provided Nuveen Advisory determines that such investment
should enable the Fund to better maximize the value of its existing investment
in such issuer. This policy is a non-fundamental policy of each Fund which means
that it can be changed at any time by the Board of Trustees without vote of the
shareholders.
GLOSSARY OF TERMS USED IN THIS REPORT
Average Annual Total Return: This is a commonly used method to express an
investment's performance over a particular, usually multi-year time period. It
expresses the return (including change in NAV and reinvested dividends) that
would have been necessary on an annual basis to equal the investment's actual
performance over the time period being considered.
Average Effective Maturity: The average of all the maturities of the bonds in a
fund's portfolio, computed by weighting each maturity date (the date the
security comes due) by the market value of the security. This figure does not
account for the likelihood of prepayments or the exercise of call provisions.
Leverage-Adjusted Duration: Duration is a measure of a bond or bond fund's
sensitivity to changes in interest rates. Generally, the longer a bond or fund's
duration, the more the price of the bond or fund will change as interest rates
change. Leverage-adjusted duration takes into account the leveraging process for
a Fund and therefore is generally longer than the duration of the actual
portfolio of individual bonds that make up the Fund.
Market Yield (also known as Dividend Yield or Current Yield): An investment's
current annualized dividend divided by its current market price.
Net Asset Value (NAV): A fund's NAV is calculated by subtracting the liabilities
of the fund from its total assets and then dividing the remainder by the number
of shares outstanding. Fund NAVs are calculated at the end of each business day.
Taxable-Equivalent Yield: The yield necessary from a fully taxable investment to
equal, on an after-tax basis, the yield of a municipal bond investment.
---------
Each Fund intends to repurchase shares of its own common or preferred stock in
the future at such times and in such amounts as is deemed advisable. No shares
were repurchased during the fiscal year ended July 31, 2003. Any future
repurchases will be reported to shareholders in the next annual or semiannual
report.
49
Serving Investors
FOR GENERATIONS
Since 1898, financial advisors and their clients have relied on Nuveen
Investments to provide dependable investment solutions. For the past century,
Nuveen Investments has adhered to the belief that the best approach to investing
is to apply conservative risk-management principles to help minimize volatility.
Building on this tradition, we today offer a range of high quality equity and
fixed-income solutions that are integral to a well-diversified core portfolio.
Our clients have come to appreciate this diversity, as well as our continued
adherence to proven, long-term investing principles.
Managing $80 billion in assets, Nuveen Investments offers access to
a number of different asset classes and investing solutions through a variety of
products. Nuveen Investments markets its capabilities under four distinct
brands: Nuveen, a leader in tax-free investments; NWQ, a leader in value-style
equities; Rittenhouse, a leader in growth-style equities; and Symphony, a
leading institutional manager of market-neutral alternative investment
portfolios.
To learn more about the products and services Nuveen Investments offers and for
a prospectus, where applicable, talk to your financial advisor, or call us at
(800) 257-8787. Please read the information carefully before you invest.
Distributed by
NUVEEN INVESTMENTS, LLC | 333 West Wacker Drive | Chicago, Illinois 60606
| www.nuveen.com
EAN-A-0703D
ITEM 2. CODE OF ETHICS.
As of the end of the period covered by this report, the registrant has adopted
a code of ethics that applies to the registrant's principal executive officer,
principal financial officer, principal accounting officer or controller, or
persons performing similar functions. The registrant has posted such code of
ethics on its website at www.nuveen.com/etf.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The registrant's board of directors has determined that the registrant has
at least one "audit committee financial expert" (as defined in Item 3 of
Form N-CSR) serving on its audit committee. The registrant's audit committee
financial expert is William E. Bennett, who is "independent" for purposes of
Item 3 of Form N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable at this time.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable at this time.
ITEM 6. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES
In the rare event that a municipal issuer held by the Fund were to issue a proxy
or that the Fund were to receive a proxy issued by a cash management security,
Nuveen Advisory Corp. (the "Adviser") would either engage an independent third
party to determine how the proxy should be voted or vote the proxy with the
consent, or based on the instructions, of the Fund's Board of Directors or
Trustees or its representative. A member of the Adviser's legal department would
oversee the administration of the voting, and ensure that records were
maintained in accordance with Rule 206(4)-6, reports were filed with the SEC on
Form N-PX, and the results provided to the Board of Directors or Trustees and
made available to shareholders as required by applicable rules.
ITEM 8. [RESERVED]
ITEM 9. 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 these
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
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 registrant's last
fiscal half-year (the registrant's second fiscal half-year in the case
of an annual report) that has materially affected, or is reasonably
likely to materially affect, the registrant's internal control over
financial reporting.
ITEM 10. EXHIBITS.
File the exhibits listed below as part of this Form. Letter or number the
exhibits in the sequence indicated.
(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
because posted on registrant's website.
(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 Act (17 CFR 270.30a-2(a)) in the exact form set forth below: Ex-99.CERT
Attached hereto.
(b) If the report is filed under Section 13(a) or 15(d) of the Exchange Act,
provide the certification required by Rule 30a-2(b) under the Act (17 CFR
270.30a-2(b), Rule 13a-14(b) or Rule 15d-14(b) under the Exchange Act (17 CFR
240.13a-14(b) or 240.15d-14(b)), and Section 1350 of Chapter 63 of Title 18 of
the United States Code (18 U.S.C. 1350) as an exhibit. A certification furnished
pursuant to this paragraph will not be deemed "filed" for purposes of Section 18
of the Exchange Act (15 U.S.C. 78r), or otherwise subject to the liability of
that section. Such certification will not be deemed to be incorporated by
reference into any filing under the Securities Act of 1933 or the Exchange Act,
except to the extent that the registrant specifically incorporates it by
reference. Ex-99.906 CERT attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Nuveen Arizona Premium Income Municipal Fund, Inc.
-----------------------------------------------------------
By (Signature and Title)* /s/ Jessica R. Droeger
----------------------------------------------
Jessica R. Droeger
Vice President and Secretary
Date: October 8, 2003
-------------------------------------------------------------------
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: October 8, 2003
-------------------------------------------------------------------
By (Signature and Title)* /s/ Stephen D. Foy
----------------------------------------------
Stephen D. Foy
Vice President and Controller
(Principal Financial Officer)
Date: October 8, 2003
-------------------------------------------------------------------
* Print the name and title of each signing officer under his or her signature.