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 811-21152
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Nuveen Georgia Dividend Advantage Municipal Fund 2
--------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
Nuveen Investments
333 West Wacker Drive
Chicago, IL 60606
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(Address of principal executive offices) (Zip code)
Kevin J. McCarthy
Nuveen Investments
333 West Wacker Drive
Chicago, IL 60606
--------------------------------------------------------------------------------
(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: May 31
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Date of reporting period: May 31, 2007
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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.
ANNUAL REPORT
May 31, 2007
Nuveen Investments
MUNICIPAL CLOSED-END FUNDS
Photo of: Small child
NUVEEN GEORGIA
PREMIUM INCOME
MUNICIPAL FUND
NPG
NUVEEN GEORGIA
DIVIDEND ADVANTAGE
MUNICIPAL FUND
NZX
NUVEEN GEORGIA
DIVIDEND ADVANTAGE
MUNICIPAL FUND 2
NKG
NUVEEN NORTH
CAROLINA PREMIUM
INCOME
MUNICIPAL FUND
NNC
NUVEEN NORTH
CAROLINA DIVIDEND
ADVANTAGE
MUNICIPAL FUND
NRB
NUVEEN NORTH
CAROLINA DIVIDEND
ADVANTAGE
MUNICIPAL FUND 2
NNO
NUVEEN NORTH
CAROLINA DIVIDEND
ADVANTAGE
MUNICIPAL FUND 3
NII
IT'S NOT WHAT YOU EARN, IT'S WHAT YOU KEEP.(R)
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Chairman's
LETTER TO SHAREHOLDERS
Photo of: Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
ONCE AGAIN, I AM PLEASED TO REPORT THAT OVER THE TWELVE-MONTH PERIOD COVERED BY
THIS REPORT YOUR FUND CONTINUED TO PROVIDE YOU WITH ATTRACTIVE MONTHLY TAX-FREE
INCOME. FOR MORE DETAILS ABOUT THE MANAGEMENT STRATEGY AND PERFORMANCE OF YOUR
FUND, PLEASE READ THE PORTFOLIO MANAGER'S COMMENTS, THE DIVIDEND AND SHARE PRICE
INFORMATION, AND THE PERFORMANCE OVERVIEW SECTIONS OF THIS REPORT.
I ALSO WANTED TO TAKE THIS OPPORTUNITY TO REPORT SOME IMPORTANT NEWS ABOUT
NUVEEN INVESTMENTS. WE HAVE AGREED TO A "GROWTH BUYOUT" OFFER FROM A PRIVATE
EQUITY INVESTMENT FIRM. WHILE THIS MAY AFFECT THE CORPORATE STRUCTURE OF NUVEEN
INVESTMENTS, IT WILL HAVE NO IMPACT ON THE INVESTMENT OBJECTIVES OF THE FUNDS,
PORTFOLIO MANAGEMENT STRATEGIES OR THEIR DIVIDEND POLICIES. WE WILL PROVIDE YOU
WITH ADDITIONAL INFORMATION ABOUT THIS TRANSACTION AS MORE DETAILS BECOME
AVAILABLE.
FOR SOME TIME, I'VE USED THESE LETTERS TO REMIND YOU THAT MUNICIPAL BONDS CAN BE
AN IMPORTANT BUILDING BLOCK IN A WELL-BALANCED INVESTMENT PORTFOLIO. IN ADDITION
TO PROVIDING ATTRACTIVE TAX-FREE MONTHLY INCOME, A MUNICIPAL BOND INVESTMENT
LIKE YOUR FUND MAY HELP YOU ACHIEVE AND BENEFIT FROM GREATER PORTFOLIO
DIVERSIFICATION. PORTFOLIO DIVERSIFICATION IS A RECOGNIZED WAY TO TRY TO REDUCE
SOME OF THE RISK THAT COMES WITH INVESTING. FOR MORE INFORMATION ABOUT THIS
IMPORTANT INVESTMENT STRATEGY, I ENCOURAGE YOU TO CONTACT YOUR PERSONAL
FINANCIAL ADVISOR.
WE ALSO ARE PLEASED TO BE ABLE TO OFFER YOU A CHOICE CONCERNING HOW YOU RECEIVE
YOUR SHAREHOLDER REPORTS AND OTHER FUND INFORMATION. AS AN ALTERNATIVE TO MAILED
COPIES, YOU CAN SIGN UP TO RECEIVE FUTURE FUND REPORTS AND OTHER FUND
INFORMATION BY E-MAIL AND THE INTERNET. THE INSIDE FRONT COVER OF THIS REPORT
CONTAINS INFORMATION ON HOW YOU CAN SIGN UP.
WE ARE GRATEFUL THAT YOU HAVE CHOSEN US AS A PARTNER AS YOU PURSUE YOUR
FINANCIAL GOALS AND WE LOOK FORWARD TO CONTINUING TO EARN YOUR TRUST IN THE
MONTHS AND YEARS AHEAD. AT NUVEEN INVESTMENTS, OUR MISSION CONTINUES TO BE TO
ASSIST YOU AND YOUR FINANCIAL ADVISOR BY OFFERING INVESTMENT SERVICES AND
PRODUCTS THAT CAN HELP YOU TO SECURE YOUR FINANCIAL OBJECTIVES.
SINCERELY,
/s/ TIMOTHY R. SCHWERTFEGER
TIMOTHY R. SCHWERTFEGER
CHAIRMAN OF THE BOARD
July 16, 2007
Portfolio Manager's COMMENTS
Nuveen Investments Municipal Closed-End Funds
NPG, NZX, NKG, NNC,
NRB, NNO, NII
Portfolio manager Daniel Close reviews national and state economic and municipal
market environments, key investment strategies, and the annual performance of
the Nuveen Georgia and North Carolina Funds. Dan, who joined Nuveen in 2000,
assumed portfolio management responsibility for these seven Funds in March 2007.
WHAT FACTORS AFFECTED THE U.S. ECONOMIC AND MUNICIPAL MARKET ENVIRONMENTS DURING
THE 12-MONTH REPORTING PERIOD ENDED MAY 31, 2007?
Between June 1, 2006, and May 31, 2007, we saw interest rates at the short end
of the yield curve rise modestly, while longer-term rates generally declined.
After announcing one further rate increase in late June 2006, the Federal
Reserve ended its unprecedented series of 17 consecutive 0.25% rate hikes that
brought the fed funds rate to 5.25% over a two-year span. During the remaining
11 months of this reporting period, the Fed left monetary policy unchanged as it
kept close tabs on inflationary pressures and the pace of economic growth. Over
this same 12-month period, the yield on the benchmark 10-year U.S. Treasury note
dropped 22 basis points to end May 2007 at 4.89%. In the municipal market, the
yield on the Bond Buyer 25 Revenue Bond Index, a widely followed measure of
longer-term municipal market rates, fell to 4.57% at the end of May 2007, a
decline of 65 basis points from the end of May 2006. The municipal bond yield
curve flattened during this period, with short-term interest rates rising
modestly while the yields of many longer-term issues dropped. Longer duration1
bonds generally outperforming those with shorter durations during this period.
Although many market observers had expected the Fed to act on rates in early
2007, slowing economic growth, higher energy prices and a slumping housing
market helped to keep the Fed on the sidelines. The U.S. gross domestic product
(GDP), a closely watched measure of economic growth, operated at below-trend
levels through most of 2006, expanded at a rate of 2.6% in the second quarter of
2006, 2.0% in the third quarter, and 2.5% in the fourth quarter (all GDP numbers
annualized). In the first quarter of 2007, the rate of GDP growth slowed even
further to 0.7%, the weakest rate since 2002. While the Consumer Price Index
(CPI) registered a 2.7% year-over-year gain as of May 2007, the increase in this
inflation gauge for the first five months of 2007 was 5.5%, driven largely by a
36% gain in energy prices. By comparison, the core CPI (which excludes food and
energy prices) rose 2.1% as of May 2007, close to the Fed's unofficial target of
2.0% or lower. The labor market remained tight, with a national unemployment
rate of 4.5% in May 2007, down from 4.6% in May 2006.
1 Duration is a measure of a bond's price sensitivity as interest rates
change, with longer duration bonds displaying more sensitivity to these
changes than bonds with shorter durations.
4
Over the 12 months ended May 2007, municipal bond issuance nationwide totaled
$423.4 billion, up 15% from the previous 12 months. This total reflected a sharp
increase in supply during the first five months of 2007, when $173.7 billion in
new securities came to market, up almost 30% over the same period in 2006. A
major factor in 2007 volume was the 56% increase in advance refundings,2 driven
by attractive borrowing rates for issuers. The strength and diversity of the
demand for municipal bonds were as important as the increase in supply, as the
surge in issuance was easily absorbed by retail investors, institutional
investors such as hedge funds and arbitragers, and overseas investors, all of
whom continued to participate in the market.
HOW WERE ECONOMIC AND MARKET CONDITIONS IN GEORGIA AND NORTH CAROLINA DURING
THIS PERIOD?
During this period, the growth of Georgia's economy generally kept pace with the
national average, driven by housing and transportation. In more recent months,
however, housing foreclosure rates in the state have risen, acting as a drag on
economic growth. In May 2007, Georgia was sixth in the nation in terms of number
of foreclosures filed. Atlanta continued to rank among the fastest growing
metropolitan areas in the nation and population growth statewide remained
exceptionally strong at 14% over the past six years, more than double the
national rate. As of May 2007, Georgia's unemployment rate was 4.3%, down from
4.7% in May 2006. The $18.7 billion fiscal 2007 Georgia state budget provided
pay raises for teachers, prison guards, and other state employees. As of May
2007, Georgia's general obligation (GO) debt continued to be rated Aaa/AAA by
Moody's and Standard & Poor's; both rating agencies listed their outlooks for
the state as stable, reflecting the state's conservative fiscal practices. For
the 12 months ended May 31, 2007, municipal issuance in Georgia totaled $9.0
billion, up 44% over the previous 12 months. During the first five months of
2007, $3.9 billion of new municipal debt was issued in Georgia, an increase of
70% from January-May 2006. According to Moody's, Georgia's debt levels were
moderate in relation to the state's economic base, with both debt per capita and
debt as a percentage of personal income ranking slightly ahead of national
medians.
In terms of GDP by state, North Carolina's economic growth rate ranked 14th in
the nation in 2006. While the state continued to transition from declining
old-line industries such as textiles and furniture to an economy based on
services and technology, manufacturing of all types continued to play an
important role in the state economy, accounting for 15% of jobs, compared with
the national average of 11%. In particular, technology manufacturing, one of
North Carolina's leading exports, demonstrated strong expansion during this
period. Population growth in the state over the past six years was healthy,
outpacing the national average. In May 2007, North Carolina's unemployment rate
was 4.8%, up from 4.7% in May 2006. The $18.9 billion fiscal 2007 state budget
included additional deposits to the state's rainy day fund as well as reductions
in the state's sales and personal income tax rates. The 2008-2009 biennium
budget called for a 6% increase in general fund expenditures, to $20.0 billion,
in fiscal 2008. In January 2007, Moody's upgraded its credit rating on North
Carolina GO debt to Aaa from Aa1, citing improved economic and financial
performance, while Standard
2 Advance refundings, also known as pre-refundings or refinancings, occur
when an issuer sells new bonds and uses the proceeds to fund principal and
interest payments of older existing bonds. This process often results in
lower borrowing costs for bond issuers.
5
& Poor's confirmed its AAA rating in February 2007. During the 12 months ended
May 31, 2007, $8.4 billion of municipal debt was issued in North Carolina, an
increase of 3.5% from the previous 12 months. Municipal supply in the state
during the first five months of 2006 rose 53% compared with the same period in
2006, totaling $3.3 billion. Despite increases in recent years, North Carolina's
debt levels remained moderate, with debt per capita matching the national median
and debt as a percentage of personal income ranking just slightly higher than
the Moody's median.
WHAT KEY STRATEGIES WERE USED TO MANAGE THESE FUNDS DURING THIS REPORTING
PERIOD?
In the municipal bond interest rate environment of the past 12 months, where the
flattening yield curve remained a dominant market factor, we continued to
emphasize a disciplined approach to duration management and yield curve
positioning. As part of this approach, our purchases for the Funds' portfolios
focused mainly on attractively priced bonds maturing in 20 to 25 years, with
some purchases extending out to 30 years. Overall, we believe that the bonds we
purchased during this period represented opportunities to add value, manage
duration, and enhance performance and income.
Our duration management strategies during this period also included the use of
inverse floating rate trusts,3 a type of derivative financial instrument, in all
four of the North Carolina Funds. The inverse floaters had the dual benefit of
increasing the Funds' distributable income and bringing their durations closer
to our preferred strategic target. As discussed in past shareholder reports, we
have also used forward starting interest rate swaps (another type of derivative
instrument) as a duration management tool when we believed this supported our
overall investment performance strategies. The goal of this strategy is to help
us manage net asset value (NAV) volatility without having a negative impact on
the Funds' income streams or common share dividends over the short term. During
this reporting period, we deployed this strategy in NKG, NZX and NRB with the
swaps remaining in place in both NZX and NRB as of May 31, 2007.
During this period, we continued to emphasize individual credit selection. Both
Georgia and North Carolina saw increased supply during this period and steady
new issuance as well as a number of advance refundings provided us with a
variety of bonds and sectors from which to choose. Since Georgia and North
Carolina are high-quality states, much of the new supply was highly rated and/or
insured. However, we also found purchase opportunities among lower credit
quality bonds that we considered attractive.
During this period, the Funds' added to their health care positions (both
hospitals and long-term/continuing care facilities) and single-family housing
bonds (NPG did not add single-family bonds). In the Georgia Funds, we purchased
bonds issued by the education and industrial development sectors while
purchasing tax appropriation issues in North Carolina.
3 An inverse floating rate trust is a financial instrument designed to pay
long-term tax-exempt interest at a rate that varies inversely with a
short-term tax-exempt interest rate index. For the Nuveen Funds, the index
typically used is the Securities Industry and Financial Markets (SIFM)
Municipal Swap Index (previously referred to as the Bond Market Association
Index or BMA). Inverse floaters, including those inverse floating rate
securities in which the Funds invested during the 12-month period, are
further defined within the "Notes to Financial Statements" and "Glossary of
Terms Used in This Report" sections of this shareholder report.
6
To help maintain the Funds' durations within our preferred strategic range and
to generate cash for purchases, we selectively sold some of the Funds' holdings
with shorter durations including pre-refunded bonds and short-dated higher
quality paper.
HOW DID THE FUNDS PERFORM?
Individual results for these Nuveen Georgia and North Carolina Funds, as well as
relevant benchmark and peer group information, are presented in the accompanying
table.
Total Returns on Net Asset Value
For periods ended 5/31/07
Annualized
---------------------------------
1-Year 5-Year 10-Year
Georgia Funds
NPG 4.62% 6.15% 6.48%
NZX 4.75% 6.91% NA
NKG 5.79% NA NA
North Carolina Funds
NNC 4.84% 6.16% 6.51%
NRB 4.98% 6.81% NA
NNO 5.24% 6.72% NA
NII 5.48% NA NA
Lehman Brothers
Municipal Bond Index4 4.84% 4.94% 5.61%
Lipper Other States
Municipal Debt Funds Average5 5.25% 6.68% 6.36%
For the 12 months ended May 31, 2007, the total returns on net asset value for
NKG, NNC, NRB, NNO, and NII exceeded or matched the return on the national
Lehman Brothers Municipal Bond Index, while NPG and NZX trailed this index. NKG
and NII also outperformed the average return for the Lipper Other States
Municipal Debt Funds Average, while NNO performed in line with the Lipper
average, and the remaining four Funds trailed this average. Shareholders should
note that the performance of the Lipper Other States Municipal Debt Funds
Average represents the overall average of returns for funds from 10 different
states with a wide variety of municipal market conditions, making direct
comparisons less meaningful.
Factors that influenced the Funds' returns during this period included yield
curve and duration positioning, exposure to lower-rated credits, individual
security selection and sector allocations, and advance refunding activity.
As shorter-term rates rose while longer term rates declined over the course of
this period, municipal bonds with maturities of 15 years and longer, as measured
by the Lehman Brothers Municipal Bond Index, performed best, generally outpacing
municipal bonds with shorter maturities, especially those with maturities of
less than 5 years.
Past performance is not predictive of future results. Current performance may be
higher or lower than the data shown. Returns do not reflect the deduction of
taxes that shareholders may have to pay on Fund distributions or upon the sale
of Fund shares.
For additional information, see the individual Performance Overview for your
Fund in this report.
4 The Lehman Brothers Municipal Bond Index is an unleveraged, unmanaged
national index comprising a broad range of investment-grade municipal
bonds. Results for the Lehman index do not reflect any expenses.
5 The Lipper Other States Municipal Debt Funds Average is calculated using
the returns of all closed-end funds in this category for each period as
follows: 1 year, 46; 5 years, 27; and 10 years, 18. Fund and Lipper returns
assume reinvestment of dividends.
7
While our strategies during this period included adding longer bonds to our
portfolios, most of these Funds remained slightly short of our strategic target
in terms of their holdings of bonds in the longest part of the yield curve,
which was negative for performance. However, this was offset by the Funds'
heavier exposure to the intermediate part of the curve, which performed well,
and their lower allocations to the shorter part of the curve, which
underperformed the general municipal market. Overall, the Funds' yield curve and
duration positioning during this period was a positive contributor to their
performance.
With bonds rated BBB or lower and non-rated bonds generally outperforming other
credit quality sectors during this period, all of these Funds benefited from
their weightings in lower-quality credits. The outperformance of these credit
sectors was largely the result of investor demand for the higher yields
typically associated with lower-rated bonds, which drove up their value. As
Dividend Advantage Funds, NZX, NKG, NRB, NNO, and NII can invest up to 20% of
their assets in below-investment-grade securities (bonds rated BB or below) or
in non-rated bonds judged to be in the same credit quality category. The
exposure of these five Funds to the subinvestment-grade sector, together with a
fee reimbursement agreement, contributed to the outperformance of these Funds
relative to NPG and NNC.
Among the holdings making positive contributions to both the North Carolina and
Georgia Funds' returns for this period were health care (including hospitals and
long-term care facilities) credits. In addition, the North Carolina Fund's had a
positive contribution from housing bonds. Lower-rated bonds backed by the 1998
master tobacco settlement agreement also performed well. As of May 31, 2007, NPG
and NKG held approximately 1% to 2% of their portfolios in tobacco bonds, while
NII allocated about 2.5% of its portfolio to these credits.
We also continued to see positive contributions from advance refunding activity,
which benefited the Funds through price appreciation and enhanced credit
quality. At the same time, holdings of older, previously pre-refunded bonds
tended to underperform the general municipal market during this period, due
primarily to their shorter effective maturities. In addition, the performance of
NZX was negatively impacted by the unexpected call of a multifamily housing
holding, which had been priced at a premium but which was called at par.
We should also note that all of these Funds continued to use financial leverage
to provide opportunities for additional income and total return for common
shareholders. This strategy can also add volatility to a Fund's NAV and share
price. Over this period, the use of leverage was generally a positive factor in
the Funds' total return performance, especially in relation to that of the
unleveraged Lehman Brothers Municipal Bond Index.
8
Dividend and Share Price
INFORMATION
As previously noted, these seven Funds use leverage to potentially enhance
opportunities for additional income for common shareholders. Although the Funds'
use of this strategy continued to provide incremental income, the extent of this
benefit was somewhat reduced during this period due to high short-term interest
rates that, in turn, kept the Funds' borrowing costs high. The Funds' income
streams were also impacted as the proceeds from older, higher-yielding bonds
that matured or were called were reinvested into bonds currently available in
the market, which generally offered lower yields. The combination of these
factors resulted in one monthly dividend reduction in NRB and NNO and two in
NPG, NZX, and NNC over the 12-month period ended May 31, 2007. In NKG, however,
we were able to increase the dividend effective November 2006, while the
dividend of NII remained stable throughout this reporting period.
Due to normal portfolio activity, common shareholders of the following Funds
received capital gains and net ordinary income distributions at the end of
December 2006 as follows:
Short-Term Capital Gains
Long-Term Capital Gains and/or Ordinary Income
(per share) (per share)
NNC $0.0141 --
NRB $0.0520 $0.0001
NNO $0.0388 $0.0103
All of the Funds in this report seek to pay stable dividends at rates that
reflect each Fund's past results and projected future performance. During
certain periods, each Fund may pay dividends at a rate that may be more or less
than the amount of net investment income actually earned by the Fund during the
period. If a Fund has cumulatively earned more than it has paid in dividends, it
holds the excess in reserve as undistributed net investment income (UNII) as
part of the Fund's NAV. Conversely, if a Fund has cumulatively paid dividends in
excess of its earnings, the excess constitutes negative UNII that is likewise
reflected in the Fund's NAV. Each Fund will, over time, pay all of its net
investment income as dividends to shareholders. As of May 31, 2007, all the
Funds in this report had positive UNII balances for tax purposes and negative
UNII balances for financial statement purposes.
9
As of May 31, 2007, the Funds' share prices were trading at premiums or
discounts to their NAVs as shown in the accompanying chart:
5/31/07 12-Month Average
Premium/Discount Premium/Discount
NPG -2.96% + 0.14%
NZX +9.22% + 8.88%
NKG +0.42% - 5.25%
NNC -0.42% 0.00%
NRB +11.23% +8.45%
NNO +5.01% +1.42%
NII +1.81% -0.57%
10
NPG
Performance
OVERVIEW
Nuveen Georgia Premium Income Municipal Fund
as of 5-31-07
Pie Chart:
Credit Quality (as a % of total investments)
AAA/U.S. Guaranteed 76%
AA 5%
A 8%
BBB 10%
BB or Lower 1%
Bar Chart:
Monthly Tax-Free Dividends Per Share -- 2006-2007
Jun 0.0585
Jul 0.0585
Aug 0.0585
Sep 0.0555
Oct 0.0555
Nov 0.0555
Dec 0.0555
Jan 0.0555
Feb 0.0555
Mar 0.053
Apr 0.053
May 0.053
Line Chart:
SHARE PRICE PERFORMANCE
Weekly Closing Price
Jun 1, 2006 15.22
15.25
15.15
15.03
15.03
14.95
15.03
14.76
14.56
14.53
14.55
14.33
14.1
14.36
14.43
14.5
14.4
14.1
13.96
13.89
13.87
13.995
13.99
14.2
14.3
14.2001
14.7
14.61
14.55
14.44
14.35
14.3001
14.22
14.28
14.28
14.28
14.35
14.31
14.31
14.49
14.35
14.56
14.7
15
15.02
15.35
15.1
15.09
15.3
15.28
15.34
15.45
15.45
15.47
15.47
15.45
15.45
15.51
15.46
15.46
15.51
15.46
15.58
15.58
15.95
15.98
15.94
15.68
15.46
15.57
15.52
15.6
15.5068
15.42
15.39
15.45
15.55
15.65
15.65
15.68
15.6
15.45
15.45
15.42
15.41
15.41
15.4
15.4
15.41
15.34
15.65
15.4
15.4
15.11
15.0201
15.02
14.95
14.94
14.94
14.94
14.94
14.94
14.94
14.85
14.91
14.91
15.25
15.43
15.49
15.64
15.6
15.51
15.41
15.3
15.3
15.18
15.14
15.4
15.5
15.5
15.17
14.91
14.7
14.82
14.67
14.59
14.53
14.49
14.42
14.45
14.32
14.42
14.42
14.43
14.48
14.47
14.58
14.41
14.35
14.41
14.44
14.35
14.39
14.4
14.39
14.3
14.35
14.62
14.5601
14.5601
14.65
14.78
14.76
14.7
14.84
14.68
14.68
14.68
14.69
14.69
14.73
14.88
14.71
14.8
14.65
14.75
14.75
14.76
14.8
14.7
14.85
14.75
14.74
14.63
14.72
14.7
14.73
14.73
14.71
14.7
14.65
14.7
14.69
14.75
14.65
14.54
14.62
14.73
14.65
14.73
14.59
14.61
14.58
14.63
14.64
14.64
14.64
14.43
14.42
14.41
14.31
14.34
14.34
14.44
14.44
14.4
14.48
14.31
14.31
14.33
14.32
14.32
14.21
14.07
14.15
14.19
14.18
14.19
14.16
14.2
14.25
14.28
14.29
14.34
14.32
14.32
14.2601
14.27
14.22
14.23
14.34
14.39
14.31
14.43
14.4
14.39
14.44
14.49
14.4101
14.4
14.24
14.4
14.37
14.3
14.22
14.29
14.21
14.2
14.2
14.2
14.2
14.2
14.11
May 31, 2007 14.12
FUND SNAPSHOT
------------------------------------
Common Share Price $14.12
------------------------------------
Common Share
Net Asset Value $14.55
------------------------------------
Premium/(Discount) to NAV -2.96%
------------------------------------
Market Yield 4.50%
------------------------------------
Taxable-Equivalent Yield1 6.65%
------------------------------------
Net Assets Applicable to
Common Shares ($000) $55,359
------------------------------------
Average Effective Maturity
on Securities (Years) 15.97
------------------------------------
Leverage-Adjusted Duration 7.51
------------------------------------
AVERAGE ANNUAL TOTAL RETURN
(Inception 5/20/93)
------------------------------------
ON SHARE PRICE ON NAV
------------------------------------
1-Year -2.55% 4.62%
------------------------------------
5-Year 3.06% 6.15%
------------------------------------
10-Year 5.71% 6.48%
------------------------------------
INDUSTRIES
(as a % of total investments)
------------------------------------
Health Care 23.7%
------------------------------------
Tax Obligation/Limited 20.8%
------------------------------------
Education and Civic
Organizations 13.1%
------------------------------------
Water and Sewer 10.0%
------------------------------------
U.S. Guaranteed 10.0%
------------------------------------
Utilities 6.1%
------------------------------------
Tax Obligation/General 4.4%
------------------------------------
Other 11.9%
------------------------------------
1 Taxable-Equivalent Yield represents the yield that must be earned on a
fully taxable investment in order to equal the yield of the Fund on an
after-tax basis. It is based on a combined federal and state income tax
rate of 32.3%. When comparing this Fund to investments that generate
qualified dividend income, the Taxable-Equivalent Yield is lower.
11
NZX
Performance
OVERVIEW
Nuveen Georgia Dividend Advantage Municipal Fund
as of 5-31-07
Pie Chart:
Credit Quality (as a % of total investments)
AAA/U.S. Guaranteed 69%
AA 6%
A 7%
BBB 14%
BB or Lower 3%
N-R 1%
Bar Chart:
Monthly Tax-Free Dividends Per Share -- 2006-2007
Jun 0.066
Jul 0.066
Aug 0.066
Sep 0.0625
Oct 0.0625
Nov 0.0625
Dec 0.0625
Jan 0.0625
Feb 0.0625
Mar 0.06
Apr 0.06
May 0.06
Line Chart:
SHARE PRICE PERFORMANCE
Weekly Closing Price
Jun 1, 2006 15.8
15.7
15.6999
15.68
15.38
15.38
15.9
15.71
15.562
15
15.5
15.8
15.7
15.7001
15.9
15.9
16.05
15.99
15.7
16.2
16.46
16.46
17.2
16.5
16.69
16.46
16.51
16.51
16.51
16.52
16.52
16.5
16.5
16.4799
16.41
16.5
16.99
16.99
16.45
16.81
16.55
16.6
16.9
16.75
16.75
16.75
16.6
17.59
17.5
17.35
17.38
16.99
16.99
17
17
16.8
17.2
16.8
16.8
16.76
17.48
16.98
16.8
16.76
16.76
16.5
16.2
15.75
16
15.75
15.8
15.8
15.95
15.95
15.9
15.68
15.79
15.8
15.72
15.75
15.91
15.92
15.92
16.35
16.35
16.35
16.15
16.3
16.18
16.18
15.61
15.6
15.65
15.65
15.65
15.48
15.4201
15.33
15.32
15.41
15.41
15.41
15.15
15.59
16
16.25
16.5
16.5
16.9999
16.9
16.75
16.39
16.35
16.85
16.85
16.85
16.1
16.35
16.2
16.5
16.5
15.73
15.5
15.26
15.26
15.48
16.58
16.77
16.25
16.14
15.93
16.3
16.7
16.7
16.99
16.99
16.8
16.5
16.5
16.5
16.5
16.5899
16.85
16.75
16.8
16.8
16.65
16.95
16.95
16.95
16.61
16.61
16.55
16.55
16.67
16.67
17.14
17.14
17.14
16.75
16.69
16.99
16.84
16.65
16.32
16.1
16.1
16.1
16.45
15.91
15.76
16.3801
16.39
16
16.31
16
16.59
16.34
16.4
16.3
16.3
16.3
16
16.01
16.1
16.08
16.4
16.55
16.63
16.64
16.64
16.06
16.25
16.19
15.92
15.94
15.91
15.7
15.7
15.51
15.36
15.42
15.58
15.57
15.38
15.39
15.4
15.48
15.62
15.86
16.04
16.04
15.92
15.82
15.56
15.7
15.5
15.56
15.38
15.24
15.45
15.47
15.5
15.57
15.8
15.67
15.79
15.56
15.56
15.69
15.55
15.5
15.95
16.1
16.1
16.1
15.95
15.9
15.72
15.85
15.85
15.75
15.85
15.85
16.22
16.0801
16.35
15.9099
15.91
15.91
15.91
16.05
16.05
May 31, 2007 16
FUND SNAPSHOT
------------------------------------
Common Share Price $16.00
------------------------------------
Common Share
Net Asset Value $14.65
------------------------------------
Premium/(Discount) to NAV 9.22%
------------------------------------
Market Yield 4.50%
------------------------------------
Taxable-Equivalent Yield1 6.65%
------------------------------------
Net Assets Applicable to
Common Shares ($000) $28,831
------------------------------------
Average Effective Maturity
on Securities (Years) 13.82
------------------------------------
Leverage-Adjusted Duration 8.13
------------------------------------
AVERAGE ANNUAL TOTAL RETURN
(Inception 9/25/01)
------------------------------------
ON SHARE PRICE ON NAV
------------------------------------
1-Year 8.10% 4.75%
------------------------------------
5-Year 7.48% 6.91%
------------------------------------
Since
Inception 6.81% 6.25%
------------------------------------
INDUSTRIES
(as a % of total investments)
------------------------------------
Health Care 23.3%
------------------------------------
U.S. Guaranteed 18.5%
------------------------------------
Education and Civic
Organizations 15.3%
------------------------------------
Water and Sewer 12.5%
------------------------------------
Housing/Single Family 8.5%
------------------------------------
Tax Obligation/Limited 4.8%
------------------------------------
Tax Obligation/General 2.7%
------------------------------------
Other 14.4%
------------------------------------
1 Taxable-Equivalent Yield represents the yield that must be earned on a
fully taxable investment in order to equal the yield of the Fund on an
after-tax basis. It is based on a combined federal and state income tax
rate of 32.3%. When comparing this Fund to investments that generate
qualified dividend income, the Taxable-Equivalent Yield is lower.
12
NKG
Performance
OVERVIEW
Nuveen Georgia Dividend Advantage Municipal Fund 2
as of 5-31-07
Pie Chart:
Credit Quality (as a % of total investments)
AAA/U.S. Guaranteed 73%
AA 9%
A 2%
BBB 12%
BB or Lower 3%
N-R 1%
Bar Chart:
Monthly Tax-Free Dividends Per Share -- 2006-2007
Jun 0.0515
Jul 0.0515
Aug 0.0515
Sep 0.0515
Oct 0.0515
Nov 0.053
Dec 0.053
Jan 0.053
Feb 0.053
Mar 0.053
Apr 0.053
May 0.053
Line Chart:
SHARE PRICE PERFORMANCE
Weekly Closing Price
Jun 1, 2006 13.47
13.56
13.5
13.3411
13.25
13.15
13.14
13.12
13.09
13
13.1
13.07
13.01
12.99
12.97
12.92
12.85
12.84
12.95
12.95
12.94
13.03
13.12
13.07
13.12
13.1301
13.25
13.25
13.17
13
12.98
12.98
12.97
12.97
12.97
13.09
13.09
13.05
13.07
13.16
13.14
13.26
13.28
13.44
13.65
13.73
13.77
13.6
13.56
13.48
13.34
13.34
13.37
13.55
13.58
13.56
13.56
13.35
13.35
13.38
13.54
13.58
13.52
13.44
13.5
13.5
13.6
13.35
13.45
13.49
13.66
13.65
13.56
13.54
13.51
13.53
13.4101
13.64
13.54
13.55
13.51
13.5
13.5501
13.64
13.63
13.63
13.46
13.54
13.55
13.52
13.5
13.5499
13.55
13.5108
13.4501
13.52
13.56
13.49
13.46
13.4239
13.53
13.53
13.48
13.57
13.49
13.44
13.649
13.75
13.7
13.8
13.74
13.8
13.69
13.69
13.81
13.73
13.72
13.75
13.8
13.7
13.8
13.75
13.56
13.5603
13.5603
13.59
13.5401
13.75
13.8
13.8909
13.95
13.95
13.89
13.89
13.92
13.87
13.88
13.72
13.64
13.86
13.86
13.8
13.81
13.71
13.61
13.61
13.84
14
14.03
14.03
13.911
14.04
14.04
14.05
14.05
14.15
14.14
14.11
14.03
13.98
13.97
14.01
14.07
14.04
14.0497
14.01
14.39
14.16
14.26
14.15
14.08
14.18
14.18
14.2
14.16
14.15
14.15
13.96
13.9
13.9
13.88
13.88
13.83
13.9
13.86
13.9
13.96
13.92
14.09
14.08
14.09
14.135
14.25
14.38
14.38
14.44
14.26
14.12
14.15
14.12
14.11
14.1
14.18
14.23
14.29
14.23
14.19
14.189
14.11
14.22
14.26
14.26
14.37
14.24
14.58
14.36
14.34
14.44
14.28
14.38
14.35
14.35
14.2
14.24
14.35
14.51
14.51
14.4
14.45
14.54
14.54
14.4
14.4
14.35
14.35
14.4
14.6
14.56
14.56
14.5
14.26
14.26
14.22
14.22
14.51
14.51
14.38
14.31
14.16
14.14
14.15
14.55
14.35
May 31, 2007 14.5
FUND SNAPSHOT
------------------------------------
Common Share Price $14.50
------------------------------------
Common Share
Net Asset Value $14.44
------------------------------------
Premium/(Discount) to NAV 0.42%
------------------------------------
Market Yield 4.39%
------------------------------------
Taxable-Equivalent Yield1 6.48%
------------------------------------
Net Assets Applicable to
Common Shares ($000) $65,770
------------------------------------
Average Effective Maturity
on Securities (Years) 16.77
------------------------------------
Leverage-Adjusted Duration 8.03
------------------------------------
AVERAGE ANNUAL TOTAL RETURN
(Inception 9/25/02)
------------------------------------
ON SHARE PRICE ON NAV
------------------------------------
1-Year 14.40% 5.79%
------------------------------------
Since
Inception 4.57% 5.34%
------------------------------------
INDUSTRIES
(as a % of total investments)
------------------------------------
Health Care 17.7%
------------------------------------
Water and Sewer 16.8%
------------------------------------
Tax Obligation/Limited 13.7%
------------------------------------
Education and Civic
Organizations 11.4%
------------------------------------
U.S. Guaranteed 10.8%
------------------------------------
Tax Obligation/General 7.3%
------------------------------------
Transportation 3.9%
------------------------------------
Housing/Multifamily 3.1%
------------------------------------
Housing/Single Family 2.6%
------------------------------------
Other 12.7%
------------------------------------
1 Taxable-Equivalent Yield represents the yield that must be earned on a
fully taxable investment in order to equal the yield of the Fund on an
after-tax basis. It is based on a combined federal and state income tax
rate of 32.3%. When comparing this Fund to investments that generate
qualified dividend income, the Taxable-Equivalent Yield is lower.
13
NNC
Performance
OVERVIEW
Nuveen North Carolina Premium Income Municipal Fund
as of 5-31-07
Pie Chart:
Credit Quality (as a % of total investments)
AAA/U.S. Guaranteed 52%
AA 33%
A 10%
BBB 4%
N-R 1%
Bar Chart:
Monthly Tax-Free Dividends Per Share -- 2006-20072
Jun 0.0575
Jul 0.0575
Aug 0.0575
Sep 0.0545
Oct 0.0545
Nov 0.0545
Dec 0.0545
Jan 0.0545
Feb 0.0545
Mar 0.052
Apr 0.052
May 0.052
Line Chart:
SHARE PRICE PERFORMANCE
Weekly Closing Price
Jun 1, 2006 15.04
15.2
15.2
15.09
15.3
15.11
14.9478
15.24
15.24
15.25
15.3
15.25
15.3
15.25
14.97
14.97
15.19
15.18
15.17
14.95
14.86
14.88
14.97
14.59
14.6851
14.64
14.64
14.73
14.87
14.61
14.51
14.45
14.45
14.45
14.5
14.75
14.84
14.8
14.71
14.7
14.6999
14.6
14.7
14.65
14.46
14.51
14.65
14.556
14.71
14.75
14.65
14.66
14.75
14.85
14.94
14.94
14.8
14.78
14.83
14.8
14.76
14.76
14.8
14.8
14.77
14.76
14.84
14.8
14.74
14.85
14.73
14.7
14.87
14.7501
14.97
14.74
14.7
14.7499
14.65
14.73
14.66
14.5926
14.58
14.47
14.45
14.45
14.4401
14.5
14.43
14.49
14.38
14.29
14.3
14.24
14.3
14.2599
14.26
14.22
14.25
14.25
14.28
14.21
14.26
14.32
14.28
14.35
14.43
14.43
14.42
14.67
14.48
14.4
14.33
14.3199
14.28
14.3
14.26
14.3
14.34
14.36
14.31
14.3499
14.31
14.33
14.31
14.39
14.4399
14.5
14.68
14.7
14.85
14.7
14.75
14.75
14.65
14.4
14.44
14.37
14.29
14.26
14.33
14.33
14.23
14.26
14.24
14.25
14.3
14.37
14.35
14.35
14.4
14.47
14.5
14.38
14.32
14.38
14.28
14.38
14.32
14.38
14.48
14.33
14.34
14.36
14.4699
14.46
14.29
14.26
14.28
14.31
14.28
14.2101
14.25
14.231
14.3
14.33
14.31
14.369
14.2801
14.3401
14.3001
14.3
14.4
14.31
14.27
14.26
14.37
14.33
14.39
14.65
14.7
14.64
14.64
14.64
14.51
14.42
14.44
14.35
14.31
14.33
14.26
14.33
14.49
14.64
14.65
14.59
14.5499
14.52
14.48
14.44
14.45
14.45
14.62
14.6799
14.6799
14.56
14.53
14.54
14.4
14.44
14.44
14.43
14.37
14.34
14.32
14.25
14.35
14.32
14.25
14.34
14.35
14.3899
14.4
14.45
14.28
14.44
14.46
14.46
14.46
14.54
14.56
14.56
14.51
14.4
14.4999
14.4
14.41
14.34
14.38
14.28
14.29
14.28
14.26
May 31, 2007 14.3
FUND SNAPSHOT
------------------------------------
Common Share Price $14.30
------------------------------------
Common Share
Net Asset Value $14.36
------------------------------------
Premium/(Discount) to NAV -0.42%
------------------------------------
Market Yield 4.36%
------------------------------------
Taxable-Equivalent Yield1 6.59%
------------------------------------
Net Assets Applicable to
Common Shares ($000) $91,191
------------------------------------
Average Effective Maturity
on Securities (Years) 15.89
------------------------------------
Leverage-Adjusted Duration 8.60
------------------------------------
AVERAGE ANNUAL TOTAL RETURN
(Inception 5/20/93)
------------------------------------
ON SHARE PRICE ON NAV
------------------------------------
1-Year -.78% 4.84%
------------------------------------
5-Year 2.86% 6.16%
------------------------------------
10-Year 5.21% 6.51%
------------------------------------
INDUSTRIES
(as a % of total investments)
------------------------------------
Tax Obligation/Limited 19.1%
------------------------------------
Health Care 16.3%
------------------------------------
Education and Civic
Organizations 16.0%
------------------------------------
U.S. Guaranteed 10.3%
------------------------------------
Tax Obligation/General 8.5%
------------------------------------
Utilities 8.3%
------------------------------------
Housing/Single Family 6.1%
------------------------------------
Water and Sewer 5.4%
------------------------------------
Other 10.0%
------------------------------------
1 Taxable-Equivalent Yield represents the yield that must be earned on a
fully taxable investment in order to equal the yield of the Fund on an
after-tax basis. It is based on a combined federal and state income tax
rate of 33.8%. When comparing this Fund to investments that generate
qualified dividend income, the Taxable-Equivalent Yield is lower.
2 The Fund paid shareholders capital gains distributions in December 2006 of
$0.0141 per share.
14
NRB
Performance
OVERVIEW
Nuveen North Carolina Dividend Advantage Municipal Fund
as of 5-31-07
Pie Chart:
Credit Quality (as a % of total investments)
AAA/U.S. Guaranteed 59%
AA 26%
A 8%
BBB 4%
N-R 3%
Bar Chart:
Monthly Tax-Free Dividends Per Share -- 2006-20072
Jun 0.0665
Jul 0.0665
Aug 0.0665
Sep 0.0635
Oct 0.0635
Nov 0.0635
Dec 0.0635
Jan 0.0635
Feb 0.0635
Mar 0.0635
Apr 0.0635
May 0.0635
Line Chart:
SHARE PRICE PERFORMANCE
Weekly Closing Price
Jun 1, 2006 17.75
17.75
17.75
17.26
17.26
17.26
17.26
17.26
17.26
17.26
17.26
17.26
17.04
17.04
17.3
17.4
17.55
17.41
17.41
17.41
17.6
17.76
17.9
17.71
17.7
17.7
17.21
17.23
17.07
17.12
17
16.66
16.5
16.69
16.25
16.25
16.25
16.1
16.1
16.09
15.9
15.98
15.91
16
15.86
16
16
16.01
16.01
16.01
16.05
15.96
16.15
16.15
16.25
16.25
16.25
16.25
16.1
16.24
16.05
16.06
16.09
16.27
16.45
16.48
16.33
16.22
16.22
16.71
16.24
16.45
16.25
16.16
16.38
16.34
16.84
16.7
17
16.65
16.65
16.16
16.02
16.06
16.07
16.07
16.2
16.37
16.37
16.26
16.26
16.26
16.25
16.25
16.07
16.09
15.94
15.92
15.99
16
15.99
15.81
15.61
15.71
15.45
15.55
15.55
15.55
15.8
15.87
15.71
16.09
16.14
16.19
16.01
16.0101
15.94
15.99
15.94
15.94
15.94
15.93
15.85
15.86
15.86
16.15
16.13
16
15.69
15.97
15.78
15.9
15.62
15.7
15.62
15.68
15.69
15.6299
15.63
15.8
15.62
15.81
15.58
15.45
15.59
15.42
15.63
15.48
15.4806
15.4806
15.37
15.39
15.36
15.34
15.15
15.25
15.27
15.2501
15.24
15.29
15.35
15.36
15.35
15.38
15.45
15.63
15.45
15.69
15.69
15.58
15.7
15.6
15.65
15.55
15.97
15.98
16.1
15.79
16
16.16
16.28
16.28
16.3
16.1
16.16
16.16
16.19
16.2
16.48
16.61
16.42
16.42
16.42
16.4
16.4
16.17
16.42
16.446
16.49
16.49
16.49
16.85
16.63
16.27
16.12
15.9699
15.83
16.02
16.49
16.5
16.5
16.5
16.92
16.83
16.33
16.23
15.89
16.28
16.4
16.54
16.54
16.31
16.43
16.4
16.33
16.25
16.27
16.27
16.27
16.27
16.27
16.2
16.3
16.45
16.5
16.78
16.93
16.43
16.51
16.55
16.81
16.81
16.59
16.8
16.78
16.8
16.8
16.44
16.45
16.4
16.36
16.5
16.5
May 31, 2007 16.44
FUND SNAPSHOT
------------------------------------
Common Share Price $16.44
------------------------------------
Common Share
Net Asset Value $14.78
------------------------------------
Premium/(Discount) to NAV 11.23%
------------------------------------
Market Yield 4.64%
------------------------------------
Taxable-Equivalent Yield1 7.01%
------------------------------------
Net Assets Applicable to
Common Shares ($000) $33,409
------------------------------------
Average Effective Maturity
on Securities (Years) 14.33
------------------------------------
Leverage-Adjusted Duration 7.86
------------------------------------
AVERAGE ANNUAL TOTAL RETURN
(Inception 1/25/01)
------------------------------------
ON SHARE PRICE ON NAV
------------------------------------
1-Year -2.26% 4.98%
------------------------------------
5-Year 7.15% 6.81%
------------------------------------
Since
Inception 7.22% 6.59%
------------------------------------
INDUSTRIES
(as a % of total investments)
------------------------------------
Water and Sewer 22.6%
------------------------------------
Tax Obligation/Limited 13.9%
------------------------------------
Utilities 13.7%
------------------------------------
Health Care 11.9%
------------------------------------
Education and Civic
Organizations 11.6%
------------------------------------
U.S. Guaranteed 9.5%
------------------------------------
Tax Obligation/General 5.7%
------------------------------------
Other 11.1%
------------------------------------
1 Taxable-Equivalent Yield represents the yield that must be earned on a
fully taxable investment in order to equal the yield of the Fund on an
after-tax basis. It is based on a combined federal and state income tax
rate of 33.8%. When comparing this Fund to investments that generate
qualified dividend income, the Taxable-Equivalent Yield is lower.
2 The Fund paid shareholders capital gains and net ordinary income
distributions in December 2006 of $0.0521 per share.
15
NNO
Performance
OVERVIEW
Nuveen North Carolina Dividend Advantage Municipal Fund 2
as of 5-31-07
Pie Chart:
Credit Quality (as a % of total investments)
AAA/U.S. Guaranteed 68%
AA 17%
A 10%
BBB 2%
N-R 3%
Bar Chart:
Monthly Tax-Free Dividends Per Share -- 2006-20072
Jun 0.0615
Jul 0.0615
Aug 0.0615
Sep 0.058
Oct 0.058
Nov 0.058
Dec 0.058
Jan 0.058
Feb 0.058
Mar 0.058
Apr 0.058
May 0.058
Line Chart:
SHARE PRICE PERFORMANCE
Weekly Closing Price
Jun 1, 2006 15.29
15.3
15.3
15.59
15.6
15.6499
15.6
15.65
15.85
16
16
15.95
15.88
15.8
15.8
15.8
15.86
15.86
15.68
15.562
15.45
15.45
15.4
15.23
14.9
14.98
15.13
15.15
14.99
14.96
14.9
14.88
14.88
15
15
15
15
15
14.9101
15.1
14.65
14.8
14.9
14.94
14.8899
14.91
14.91
14.85
14.85
14.82
14.88
14.88
14.88
14.94
14.98
14.97
15.05
15.09
15.26
15.18
15.18
15.18
15.11
15.08
15.23
15.23
15.2
15.02
15.12
15.17
15.25
15.25
15.16
15.2
15.1701
15.24
15.15
15.09
15.09
15.16
15.24
15.24
15.24
15.24
15.2
15.2
15.08
15.23
15.23
15.21
15.3006
15.2101
15.35
15.38
15.25
15.25
15.2
15.3
15.08
15.06
15.12
15.01
15.03
15
15.0899
15.02
15.04
15.16
15.17
15.24
15.14
15.1
15.05
15.09
15.03
15.02
14.92
15.0199
15.01
15.01
14.93
14.86
14.89
14.91
14.91
14.9
14.927
14.8201
14.93
14.95
15.09
14.87
14.9501
14.74
14.88
14.88
14.98
14.68
14.67
14.7
14.66
14.6
14.6
14.68
14.77
14.78
14.7801
14.84
14.87
14.87
14.77
14.79
14.81
14.76
14.7699
14.76
14.7
14.6799
14.82
14.85
14.95
14.94
14.8514
15.09
15.11
15.24
14.93
14.97
14.83
14.91
14.939
15.05
14.9701
15
14.85
15.05
15.05
15
14.75
14.8399
14.94
14.81
14.91
14.75
14.75
14.85
14.75
14.86
14.99
14.96
15.07
15.1
15.2
15.2
15.1
15.041
15.23
15.25
15.25
15.25
15.3
15.25
15.4
15.3766
15.43
15.44
15.64
15.81
15.75
15.77
15.81
15.81
15.81
15.51
15.45
15.57
15.56
15.666
15.77
15.72
15.55
15.59
15.67
15.76
15.8
15.8
15.8
15.55
15.47
15.31
15.16
15.14
15.17
15.1741
15.25
15.35
15.44
15.39
15.4
15.4
15.2
15.21
15.38
15.25
15.37
15.2
15.25
15.15
15.35
15.15
15.2
15.55
15.511
May 31, 2007 15.5
FUND SNAPSHOT
------------------------------------
Common Share Price $15.50
------------------------------------
Common Share
Net Asset Value $14.76
------------------------------------
Premium/(Discount) to NAV 5.01%
------------------------------------
Market Yield 4.49%
------------------------------------
Taxable-Equivalent Yield1 6.78%
------------------------------------
Net Assets Applicable to
Common Shares ($000) $55,349
------------------------------------
Average Effective Maturity
on Securities (Years) 13.63
------------------------------------
Leverage-Adjusted Duration 8.13
------------------------------------
AVERAGE ANNUAL TOTAL RETURN
(Inception 11/15/01)
------------------------------------
ON SHARE PRICE ON NAV
------------------------------------
1-Year 6.64% 5.24%
------------------------------------
5-Year 6.76% 6.72%
------------------------------------
Since
Inception 6.39% 6.47%
------------------------------------
INDUSTRIES
(as a % of total investments)
------------------------------------
Tax Obligation/Limited 18.7%
------------------------------------
Health Care 14.9%
------------------------------------
Water and Sewer 13.1%
------------------------------------
U.S. Guaranteed 10.7%
------------------------------------
Transportation 10.7%
------------------------------------
Education and Civic
Organizations 10.1%
------------------------------------
Utilities 8.7%
------------------------------------
Other 13.1%
------------------------------------
1 Taxable-Equivalent Yield represents the yield that must be earned on a
fully taxable investment in order to equal the yield of the Fund on an
after-tax basis. It is based on a combined federal and state income tax
rate of 33.8%. When comparing this Fund to investments that generate
qualified dividend income, the Taxable-Equivalent Yield is lower.
2 The Fund paid shareholders capital gains and net ordinary income
distributions in December 2006 of $0.0491 per share.
16
NII
Performance
OVERVIEW
Nuveen North Carolina Dividend Advantage Municipal Fund 3
as of 5-31-07
Pie Chart:
Credit Quality (as a % of total investments)
AAA/U.S. Guaranteed 73%
AA 21%
A 2%
BBB 3%
N-R 1%
Bar Chart:
Monthly Tax-Free Dividends Per Share -- 2006-2007
Jun 0.0545
Jul 0.0545
Aug 0.0545
Sep 0.0545
Oct 0.0545
Nov 0.0545
Dec 0.0545
Jan 0.0545
Feb 0.0545
Mar 0.0545
Apr 0.0545
May 0.0545
Line Chart:
SHARE PRICE PERFORMANCE
Weekly Closing Price
Jun 1, 2006 14.77
14.7
14.55
14.76
14.98
14.88
14.75
14.8
14.8
14.66
14.66
14.72
14.68
14.79
14.69
14.4
14.4
14.71
14.72
14.67
14.49
14.42
14.5
14.3
14.28
14.31
14.27
14.31
14.1
14.05
14.15
14.15
14.19
14.19
14.15
14.02
14.04
14.02
14.1
14.1
14.1
14.25
14.36
14.8999
14.67
14.66
14.5
14.4
14.24
14.25
14.4
14.3
14.27
14.27
14.2
14.2201
14.25
14.2
14.29
14.18
14.22
14.25
14.26
14.3
14.35
14.39
14.4
14.15
14.24
14.35
14.65
14.55
14.45
14.32
14.42
14.39
14.35
14.36
14.54
14.3601
14.5
14.54
14.65
14.6881
14.46
14.46
14.49
14.4
14.35
14.3499
14.3
14.18
14.22
14.21
14.21
14.21
14.21
14.27
14.31
14.27
14.38
14.25
14.18
14.36
14.19
14.18
14.2
14.22
14.34
14.45
14.24
14.2252
14.2
14.2
14.13
14.23
14.1
14
14
14.21
14.3976
14.8
14.36
14.43
14.43
14.21
14.25
14.19
14.2
14.2401
14.18
14.22
14.22
14.3
14.49
14.49
14.46
14.31
14.19
14.14
14.14
14.19
14.25
13.93
13.99
14.04
14.05
14.04
14.05
14.05
14.21
14.36
14.3799
14.3
14.25
14.2299
14.1
14.2
14.24
14.2899
14.1
14.21
14.24
14.2
14.24
14.25
14.23
14.15
14.29
14.29
14.2302
14.24
14.37
14.3101
14.3101
14.3
14.36
14.3199
14.17
14.17
14.2299
14.24
14.23
14.22
14.25
14.1801
14.25
14.3199
14.49
14.49
14.48
14.62
14.77
14.5
14.3899
14.35
14.4
14.43
14.27
14.31
14.28
14.37
14.57
14.58
14.71
14.77
14.75
14.75
14.82
14.88
14.78
14.78
15.1
14.71
14.79
15
14.83
15
14.74
14.81
14.68
14.81
14.63
14.71
14.95
15.2
14.81
14.85
14.73
14.77
14.65
14.85
14.69
14.75
14.89
14.94
15.2
15.2
14.8
14.8
14.81
14.81
14.82
14.65
14.59
14.8
14.49
14.4
14.4
14.6
14.6
14.69
14.643
May 31, 2007 14.64
FUND SNAPSHOT
------------------------------------
Common Share Price $14.64
------------------------------------
Common Share
Net Asset Value $14.38
------------------------------------
Premium/(Discount) to NAV 1.81%
------------------------------------
Market Yield 4.47%
------------------------------------
Taxable-Equivalent Yield1 6.75%
------------------------------------
Net Assets Applicable to
Common Shares ($000) $56,511
------------------------------------
Average Effective Maturity
on Securities (Years) 14.67
------------------------------------
Leverage-Adjusted Duration 8.37
------------------------------------
AVERAGE ANNUAL TOTAL RETURN
(Inception 9/25/02)
------------------------------------
ON SHARE PRICE ON NAV
------------------------------------
1-Year 6.23% 5.48%
------------------------------------
Since
Inception 4.60% 5.31%
------------------------------------
INDUSTRIES
(as a % of total investments)
------------------------------------
Water and Sewer 19.6%
------------------------------------
Tax Obligation/Limited 18.0%
------------------------------------
U.S. Guaranteed 13.9%
------------------------------------
Tax Obligation/General 13.0%
------------------------------------
Utilities 9.6%
------------------------------------
Health Care 9.6%
------------------------------------
Transportation 5.5%
------------------------------------
Other 10.8%
------------------------------------
1 Taxable-Equivalent Yield represents the yield that must be earned on a
fully taxable investment in order to equal the yield of the Fund on an
after-tax basis. It is based on a combined federal and state income tax
rate of 33.8%. When comparing this Fund to investments that generate
qualified dividend income, the Taxable-Equivalent Yield is lower.
17
Report of
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
THE BOARD OF TRUSTEES AND SHAREHOLDERS
NUVEEN GEORGIA PREMIUM INCOME MUNICIPAL FUND
NUVEEN GEORGIA DIVIDEND ADVANTAGE MUNICIPAL FUND
NUVEEN GEORGIA DIVIDEND ADVANTAGE MUNICIPAL FUND 2
NUVEEN NORTH CAROLINA PREMIUM INCOME MUNICIPAL FUND
NUVEEN NORTH CAROLINA DIVIDEND ADVANTAGE MUNICIPAL FUND
NUVEEN NORTH CAROLINA DIVIDEND ADVANTAGE MUNICIPAL FUND 2
NUVEEN NORTH CAROLINA DIVIDEND ADVANTAGE MUNICIPAL FUND 3
We have audited the accompanying statements of assets and liabilities, including
the portfolios of investments, of Nuveen Georgia Premium Income Municipal Fund,
Nuveen Georgia Dividend Advantage Municipal Fund, Nuveen Georgia Dividend
Advantage Municipal Fund 2, Nuveen North Carolina Premium Income Municipal Fund,
Nuveen North Carolina Dividend Advantage Municipal Fund, Nuveen North Carolina
Dividend Advantage Municipal Fund 2 and Nuveen North Carolina Dividend Advantage
Municipal Fund 3 (the Funds) as of May 31, 2007, and the related statements of
operations and cash flows (Nuveen North Carolina Dividend Advantage Municipal
Fund only) for the year then ended, the statements of changes in net assets for
each of the two years in the period then ended, and the financial highlights for
each of 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 the standards of the Public Company
Accounting Oversight Board (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. We were
not engaged to perform an audit of the Funds' internal control over financial
reporting. Our audits included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Funds' internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights, assessing the accounting principles used
and significant estimates made by management, and evaluating the overall
financial statement presentation. Our procedures included confirmation of
securities owned as of May 31, 2007, by correspondence with the custodian and
brokers or by other appropriate auditing procedures where replies from brokers
were not received. 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 Georgia Premium Income Municipal Fund, Nuveen Georgia Dividend Advantage
Municipal Fund, Nuveen Georgia Dividend Advantage Municipal Fund 2, Nuveen North
Carolina Premium Income Municipal Fund, Nuveen North Carolina Dividend Advantage
Municipal Fund, Nuveen North Carolina Dividend Advantage Municipal Fund 2 and
Nuveen North Carolina Dividend Advantage Municipal Fund 3 at May 31, 2007, the
results of their operations and cash flows (Nuveen North Carolina Dividend
Advantage Municipal Fund only) for the year then ended, the changes in their net
assets for each of the two years in the period then ended, and their financial
highlights for each of the periods indicated therein in conformity with U.S.
generally accepted accounting principles.
/s/ Ernst & Young LLP
Chicago, Illinois
July 19, 2007
18
NPG
Nuveen Georgia Premium Income Municipal Fund
Portfolio of INVESTMENTS
as of 5-31-07
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
CONSUMER STAPLES - 5.5% (3.8% OF TOTAL INVESTMENTS)
$ 2,000 Cartersville Development Authority, Georgia, Water and Wastewater 11/07 at 101.00 A1 $ 2,023,020
Facilities Revenue Refunding Bonds, Anheuser Busch Companies
Inc., Series 1997, 6.125%, 5/01/27 (Alternative Minimum Tax)
1,000 Puerto Rico, The Children's Trust Fund, Tobacco Settlement 5/12 at 100.00 BBB 1,048,390
Asset-Backed Refunding Bonds, Series 2002, 5.500%, 5/15/39
------------------------------------------------------------------------------------------------------------------------------------
3,000 Total Consumer Staples 3,071,410
------------------------------------------------------------------------------------------------------------------------------------
EDUCATION AND CIVIC ORGANIZATIONS - 19.0% (13.1% OF TOTAL INVESTMENTS)
1,000 Athens-Clarke County Unified Government Development Authority, 12/12 at 100.00 AAA 1,053,290
Georgia, Educational Facilities Revenue Bonds, UGAREF CCRC
Building LLC Project, Series 2002, 5.000%, 12/15/16 -
AMBAC Insured
Atlanta Urban Residential Finance Authority, Georgia, Dormitory
Facility Revenue Refunding Bonds, Morehouse College Project,
Series 1995:
1,210 5.750%, 12/01/20 - MBIA Insured 6/07 at 101.00 AAA 1,221,906
1,375 5.750%, 12/01/25 - MBIA Insured 6/07 at 101.00 AAA 1,387,953
1,550 Bulloch County Development Authority, Georgia, Student Housing 8/14 at 100.00 Aaa 1,653,184
and Athletic Facility Lease Revenue Bonds, Georgia Southern
University, Series 2004, 5.250%, 8/01/21 - XLCA Insured
700 Carrollton Payroll Development Authority, Georgia, Student Housing 9/14 at 100.00 Aaa 729,974
Revenue Bonds, University of West Georgia, Series 2004A,
5.000%, 9/01/21 - XLCA Insured
1,535 Fulton County Development Authority, Georgia, Revenue Bonds, 5/14 at 100.00 AAA 1,654,500
Georgia Tech Molecular Science Building, Series 2004,
5.250%, 5/01/15 - MBIA Insured
1,180 Savannah Economic Development Authority, Georgia, Revenue 7/15 at 100.00 AAA 1,235,448
Bonds, Armstrong Atlantic State University, Compass Point LLC
Project, Series 2005, 5.000%, 7/01/25 - XLCA Insured
1,500 Savannah Economic Development Authority, Georgia, Revenue 12/15 at 100.00 AAA 1,561,635
Bonds, Armstrong Center LLC, Series 2005A, 5.000%, 12/01/34 -
XLCA Insured
------------------------------------------------------------------------------------------------------------------------------------
10,050 Total Education and Civic Organizations 10,497,890
------------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE - 34.3% (23.7% OF TOTAL INVESTMENTS)
2,300 Chatham County Hospital Authority, Savannah, Georgia, Hospital 7/11 at 101.00 BBB+ 2,451,754
Revenue Improvement Bonds, Memorial Health University
Medical Center Inc., Series 2001A, 6.125%, 1/01/24
500 Clark County Hospital Authority, Georgia, Hospital Revenue Bonds, 1/17 at 100.00 AAA 525,030
Athens Regional Medical Center, Series 2007, 5.000%, 1/01/27 -
MBIA Insured
2,000 Clarke County Hospital Authority, Georgia, Hospital Revenue 1/12 at 101.00 AAA 2,073,520
Certificates, Athens Regional Medical Center, Series 2002,
5.125%, 1/01/32 - MBIA Insured
900 Coffee County Hospital Authority, Georgia, Revenue Bonds, 12/14 at 100.00 BBB+ 930,123
Coffee County Regional Medical Center, Series 2004,
5.250%, 12/01/22
3,000 Floyd County Hospital Authority, Georgia, Revenue Anticipation 7/12 at 101.00 Aaa 3,142,380
Certificates, Floyd Medical Center Project, Series 2002,
5.200%, 7/01/32 - MBIA Insured
1,090 Floyd County Hospital Authority, Georgia, Revenue Anticipation 7/13 at 101.00 Aaa 1,146,615
Certificates, Floyd Medical Center, Series 2003,
5.000%, 7/01/19 - MBIA Insured
1,750 Gainesville and Hall County Hospital Authority, Georgia, 5/11 at 100.00 A- 1,806,963
Revenue Anticipation Certificates, Northeast Georgia Health
Services Inc., Series 2001, 5.500%, 5/15/31
3,750 Gwinnett County Hospital Authority, Georgia, Revenue Anticipation 2/12 at 102.00 AAA 3,980,700
Certificates, Gwinnett Hospital System Inc. Project, Series 1997B,
5.300%, 9/01/27 - MBIA Insured
19
NPG
Nuveen Georgia Premium Income Municipal Fund (continued)
Portfolio of INVESTMENTS as of 5-31-07
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE (continued)
$ 1,060 Henry County Hospital Authority, Georgia, Revenue Certificates, 7/14 at 101.00 Aaa $ 1,119,021
Henry Medical Center, Series 2004, 5.000%, 7/01/20 -
MBIA Insured
1,000 Savannah Hospital Authority, Georgia, Revenue Bonds, 1/14 at 100.00 AA 1,053,640
St. Joseph's/Candler Health System, Series 2003,
5.250%, 7/01/23 - RAAI Insured
750 Valdosta and Lowndes County Hospital Authority, Georgia, 10/17 at 100.00 A+ 766,350
Revenue Certificates, South Georgia Medical Center,
Series 2007, 5.000%, 10/01/33
------------------------------------------------------------------------------------------------------------------------------------
18,100 Total Health Care 18,996,096
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/SINGLE FAMILY - 1.7% (1.2% OF TOTAL INVESTMENTS)
900 Georgia Housing and Finance Authority, Single Family Mortgage 12/11 at 100.00 AAA 924,327
Bonds, Series 2002B-2, 5.350%, 12/01/22 (Alternative
Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
INDUSTRIALS - 1.0% (0.6% OF TOTAL INVESTMENTS)
500 Savannah Economic Development Authority, Georgia, Revenue 7/12 at 100.00 AAA 519,515
Bonds, GTREP Project, Series 2002, 5.000%, 7/01/22 -
MBIA Insured
------------------------------------------------------------------------------------------------------------------------------------
MATERIALS - 3.4% (2.3% OF TOTAL INVESTMENTS)
750 Effingham County Industrial Development Authority, Georgia, 6/11 at 101.00 B2 790,830
Pollution Control Revenue Refunding Bonds, Georgia-Pacific
Project, Series 2001, 6.500%, 6/01/31
1,000 Richmond County Development Authority, Georgia, Environmental 2/11 at 101.00 BBB 1,060,870
Improvement Revenue Bonds, International Paper Company,
Series 2001A, 6.250%, 2/01/25 (Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
1,750 Total Materials 1,851,700
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL - 6.3% (4.4% OF TOTAL INVESTMENTS)
1,000 Georgia, General Obligation Bonds, Series 2002D, 5.000%, 8/01/16 8/12 at 100.00 AAA 1,053,080
1,000 Georgia, General Obligation Bonds, Series 2005B, 5.000%, 7/01/15 No Opt. Call AAA 1,078,120
800 Puerto Rico, General Obligation and Public Improvement Bonds, 7/14 at 100.00 BBB- 844,704
Series 2004A, 5.250%, 7/01/22
500 Wayne County Hospital Authority, Georgia, Hospital Revenue Bonds, 3/16 at 100.00 Aaa 521,745
Series 2006, 5.000%, 3/01/23 - XLCA Insured
------------------------------------------------------------------------------------------------------------------------------------
3,300 Total Tax Obligation/General 3,497,649
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED - 30.1% (20.8% OF TOTAL INVESTMENTS)
5,000 Atlanta and Fulton County Recreation Authority, Georgia, 12/15 at 100.00 AAA 5,245,198
Guaranteed Revenue Bonds, Park Improvement, Series 2005A,
5.000%, 12/01/30 - MBIA Insured
2,000 Cobb-Marietta Coliseum and Exhibit Hall Authority, Cobb County, 1/14 at 100.00 AAA 2,106,400
Georgia, Revenue Bonds, Performing Arts Center, Series 2004,
5.000%, 1/01/22
3,475 Cobb-Marietta Coliseum and Exhibit Hall Authority, Georgia, 10/19 at 100.00 AAA 4,009,837
Revenue Refunding Bonds, Series 1993, 5.625%, 10/01/26 -
MBIA Insured
2,600 Macon-Bibb County Urban Development Authority, Georgia, 8/12 at 101.00 AA 2,784,418
Revenue Refunding Bonds, Public Facilities Projects,
Series 2002A, 5.375%, 8/01/17
725 Metropolitan Atlanta Rapid Transit Authority, Georgia, Sales Tax No Opt. Call AAA 823,404
Revenue Bonds, Series 2007, 5.250%, 7/01/32 - FGIC Insured
1,000 Metropolitan Atlanta Rapid Transit Authority, Georgia, Sales Tax No Opt. Call AAA 1,155,460
Revenue Refunding Bonds, Series 1992P, 6.250%, 7/01/20 -
AMBAC Insured
500 Puerto Rico Infrastructure Financing Authority, Special Tax Revenue 7/15 at 100.00 BBB- 512,505
Bonds, Series 2005B, 5.000%, 7/01/41
------------------------------------------------------------------------------------------------------------------------------------
15,300 Total Tax Obligation/Limited 16,637,222
------------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION - 4.3% (3.0% OF TOTAL INVESTMENTS)
2,290 Atlanta, Georgia, Airport General Revenue Bonds, Series 2004G, 1/15 at 100.00 AAA 2,387,440
5.000%, 1/01/26 - FSA Insured
------------------------------------------------------------------------------------------------------------------------------------
20
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
U.S. GUARANTEED - 14.4% (10.0% OF TOTAL INVESTMENTS) (4)
$ 735 Coweta County Development Authority, Georgia, Revenue Bonds, 1/13 at 100.00 Aaa $ 784,142
Newnan Water and Sewer, and Light Commission Project,
Series 2002, 5.250%, 1/01/18 (Pre-refunded 1/01/13) -
FGIC Insured
3,165 Coweta County Water and Sewer Authority, Georgia, Revenue 6/11 at 102.00 Aaa 3,375,473
Bonds, Series 2001, 5.250%, 6/01/26 (Pre-refunded 6/01/11)
2,500 DeKalb County, Georgia, Water and Sewerage Revenue Bonds, 10/10 at 101.00 AAA 2,623,500
Series 2000, 5.125%, 10/01/31 (Pre-refunded 10/01/10)
1,000 Fairburn, Georgia, Combined Utility Revenue Bonds, Series 2000, 10/10 at 101.00 BBB (4) 1,065,870
5.750%, 10/01/20 (Pre-refunded 10/01/10)
Georgia Municipal Electric Authority, Project One Special Obligation
Bonds, Fifth Crossover Series 1998Y:
85 6.400%, 1/01/09 (ETM) No Opt. Call A+ (4) 88,408
10 6.400%, 1/01/09 (ETM) No Opt. Call A+ (4) 10,401
25 Georgia Municipal Electric Authority, Senior Lien General Power 1/17 at 100.00 AAA 27,206
Revenue Bonds, Series 1993Z, 5.500%, 1/01/20 (Pre-refunded
1/01/17) - FGIC Insured
------------------------------------------------------------------------------------------------------------------------------------
7,520 Total U.S. Guaranteed 7,975,000
------------------------------------------------------------------------------------------------------------------------------------
UTILITIES - 8.8% (6.1% OF TOTAL INVESTMENTS)
1,000 Georgia Municipal Electric Authority, General Power Revenue 1/17 at 100.00 AAA 1,054,870
Bonds, Project 1, Series 2007A, 5.000%, 1/01/25 -
MBIA Insured
1,655 Georgia Municipal Electric Authority, Project One Special No Opt. Call A+ 1,719,495
Obligation Bonds, Fifth Crossover Series 1998Y, 6.400%, 1/01/09
975 Georgia Municipal Electric Authority, Senior Lien General Power No Opt. Call AAA 1,068,054
Revenue Bonds, Series 1993Z, 5.500%, 1/01/20 - FGIC Insured
1,000 Municipal Electric Authority of Georgia, Project One Subordinated 1/13 at 100.00 AAA 1,039,410
Lien Revenue Bonds, Series 2003A, 5.000%, 1/01/22 -
MBIA Insured
------------------------------------------------------------------------------------------------------------------------------------
4,630 Total Utilities 4,881,829
------------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER - 14.3% (10.0% OF TOTAL INVESTMENTS)
Atlanta, Georgia, Water and Wastewater Revenue Bonds, Series 2004:
1,225 5.000%, 11/01/24 - FSA Insured 11/14 at 100.00 AAA 1,282,477
500 5.000%, 11/01/37 - FSA Insured 11/14 at 100.00 AAA 520,235
Augusta, Georgia, Water and Sewerage Revenue Bonds, Series 2002:
500 5.000%, 10/01/16 - FSA Insured 10/12 at 100.00 AAA 525,785
1,990 5.000%, 10/01/17 - FSA Insured 10/12 at 100.00 AAA 2,081,898
335 Coweta County Water and Sewer Authority, Georgia, Revenue 6/11 at 102.00 Aaa 353,629
Bonds, Series 2001, 5.250%, 6/01/26
1,950 Fulton County, Georgia, Water and Sewerage Revenue Bonds, 1/14 at 100.00 AAA 2,046,857
Series 2004, 5.000%, 1/01/22 - FGIC Insured
1,000 Midgeville, Georgia, Water and Sewerage Revenue Refunding No Opt. Call AAA 1,172,410
Bonds, Series 1996, 6.000%, 12/01/21 - FSA Insured
------------------------------------------------------------------------------------------------------------------------------------
7,500 Total Water and Sewer 7,983,291
------------------------------------------------------------------------------------------------------------------------------------
$ 74,840 Total Long-Term Investments (cost $76,244,910) - 143.1% 79,223,369
=============-----------------------------------------------------------------------------------------------------------------------
21
NPG
Nuveen Georgia Premium Income Municipal Fund (continued)
Portfolio of INVESTMENTS as of 5-31-07
PRINCIPAL
AMOUNT (000) DESCRIPTION (1) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 1.5% (1.0% OF TOTAL INVESTMENTS)
$ 800 Puerto Rico Government Development Bank, Adjustable Refunding A-1+ $ 800,000
Bonds, Variable Rate Demand Obligations, Series 1985,
3.610%, 12/01/15 - MBIA Insured (5)
=============-----------------------------------------------------------------------------------------------------------------------
Total Short-Term Investments (cost $800,000) 800,000
--------------------------------------------------------------------------------------------------------------------
Total Investments (cost $77,044,910) - 144.6% 80,023,369
--------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 5.6% 3,136,082
--------------------------------------------------------------------------------------------------------------------
Preferred Shares, at Liquidation Value - (50.2)% (27,800,000)
--------------------------------------------------------------------------------------------------------------------
Net Assets Applicable to Common Shares - 100% $ 55,359,451
====================================================================================================================
(1) All percentages shown in the Portfolio of Investments
are based on net assets applicable to Common shares
unless otherwise noted.
(2) Optional Call Provisions (not covered by the report of
independent registered public accounting firm): Dates
(month and year) and prices of the earliest optional
call or redemption. There may be other call provisions
at varying prices at later dates. Certain
mortgage-backed securities may be subject to periodic
principal paydowns.
(3) Ratings (not covered by the report of independent
registered public accounting firm): Using the higher of
Standard & Poor's or Moody's rating. Ratings below BBB
by Standard & Poor's Group or Baa by Moody's Investor
Service, Inc. are considered to be below investment
grade.
(4) Backed by an escrow or trust containing sufficient U.S.
Government or U.S. Government agency securities which
ensure the timely payment of principal and interest.
Such investments are normally considered to be
equivalent to AAA rated securities.
(5) Investment has a maturity of more than one year, but
has variable rate and demand features which qualify it
as a short-term investment. The rate disclosed is that
in effect at the end of the reporting period. This rate
changes periodically based on market conditions or a
specified market index.
(ETM) Escrowed to maturity.
See accompanying notes to financial statements.
22
NZX
Nuveen Georgia Dividend Advantage Municipal Fund
Portfolio of INVESTMENTS
as of 5-31-07
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
CONSUMER DISCRETIONARY - 2.7% (1.8% OF TOTAL INVESTMENTS)
$ 750 DeKalb County Development Authority, Georgia, Pollution Control 12/12 at 101.00 B- $ 772,328
Revenue Refunding Bonds, General Motors Corporation Projects,
Series 2002, 6.000%, 3/15/21
------------------------------------------------------------------------------------------------------------------------------------
CONSUMER STAPLES - 3.7% (2.5% OF TOTAL INVESTMENTS)
1,000 Cartersville Development Authority, Georgia, Waste and 2/12 at 100.00 A1 1,070,820
Wastewater Facilities Revenue Refunding Bonds, Anheuser
Busch Cos. Inc. Project, Series 2002, 5.950%, 2/01/32
(Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
EDUCATION AND CIVIC ORGANIZATIONS - 22.9% (15.3% OF TOTAL INVESTMENTS)
1,000 Athens Housing Authority, Georgia, Student Housing Lease Revenue 12/12 at 100.00 Aaa 1,051,840
Bonds, UGAREF East Campus Housing LLC Project, Series 2002,
5.250%, 12/01/21 - AMBAC Insured
1,475 Bulloch County Development Authority, Georgia, Student Housing 8/14 at 100.00 Aaa 1,574,135
and Athletic Facility Lease Revenue Bonds, Georgia Southern
University, Series 2004, 5.250%, 8/01/20 - XLCA Insured
1,620 Bulloch County Development Authority, Georgia, Student Housing 8/12 at 100.00 Aaa 1,689,854
Lease Revenue Bonds, Georgia Southern University,
Series 2002, 5.000%, 8/01/20 - AMBAC Insured
500 Carrollton Payroll Development Authority, Georgia, Student 9/14 at 100.00 Aaa 521,410
Housing Revenue Bonds, University of West Georgia,
Series 2004A, 5.000%, 9/01/21 - XLCA Insured
1,000 Fulton County Development Authority, Georgia, Revenue Bonds, 4/12 at 100.00 AAA 1,040,600
Georgia Tech Athletic Association, Series 2001, 5.000%, 10/01/20 -
AMBAC Insured
200 Gainesville Redevelopment Authority, Georgia, Educational 3/17 at 100.00 N/R 203,208
Facilities Revenue Bonds, Riverside Military Academy Project,
Series 2007, 5.125%, 3/01/37
500 Savannah Economic Development Authority, Georgia, Revenue 12/15 at 100.00 AAA 520,545
Bonds, Armstrong Center LLC, Series 2005A, 5.000%, 12/01/34 -
XLCA Insured
------------------------------------------------------------------------------------------------------------------------------------
6,295 Total Education and Civic Organizations 6,601,592
------------------------------------------------------------------------------------------------------------------------------------
ENERGY - 2.3% (1.5% OF TOTAL INVESTMENTS)
650 Virgin Islands Public Finance Authority, Revenue Bonds, Refinery 1/15 at 100.00 BBB 649,487
Project Hovensa LLC, Series 2007, 4.700%, 7/01/22
(Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE - 35.0% (23.3% OF TOTAL INVESTMENTS)
150 Baldwin County Hospital Authority, Georgia, Revenue Bonds, 12/07 at 102.00 BB+ 150,039
Oconee Regional Medical Center, Series 1997,
5.250%, 12/01/12
190 Baldwin County Hospital Authority, Georgia, Revenue Bonds, 12/08 at 102.00 BB+ 188,566
Oconee Regional Medical Center, Series 1998, 5.375%, 12/01/28
380 Chatham County Hospital Authority, Savannah, Georgia, Hospital 7/11 at 101.00 BBB+ 405,072
Revenue Improvement Bonds, Memorial Health University
Medical Center Inc., Series 2001A, 6.125%, 1/01/24
500 Clark County Hospital Authority, Georgia, Hospital Revenue Bonds, 1/17 at 100.00 AAA 525,030
Athens Regional Medical Center, Series 2007, 5.000%, 1/01/27 -
MBIA Insured
1,000 Clarke County Hospital Authority, Georgia, Hospital Revenue 1/12 at 101.00 AAA 1,058,260
Certificates, Athens Regional Medical Center, Series 2002,
5.375%, 1/01/19 - MBIA Insured
500 Coffee County Hospital Authority, Georgia, Revenue Bonds, 12/14 at 100.00 BBB+ 516,735
Coffee County Regional Medical Center, Series 2004,
5.250%, 12/01/22
1,250 Gainesville and Hall County Hospital Authority, Georgia, Revenue 5/11 at 100.00 A- 1,290,688
Anticipation Certificates, Northeast Georgia Health Services Inc.,
Series 2001, 5.500%, 5/15/31
23
NZX
Nuveen Georgia Dividend Advantage Municipal Fund (continued)
Portfolio of INVESTMENTS as of 5-31-07
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE (continued)
$ 1,900 Gwinnett County Hospital Authority, Georgia, Revenue Anticipation 2/12 at 102.00 AAA $ 2,016,888
Certificates, Gwinnett Hospital System Inc. Project, Series 1997B,
5.300%, 9/01/27 - MBIA Insured
500 Henry County Hospital Authority, Georgia, Revenue Certificates, 7/14 at 101.00 Aaa 527,840
Henry Medical Center, Series 2004, 5.000%, 7/01/20 -
MBIA Insured
500 Savannah Hospital Authority, Georgia, Revenue Bonds, 1/14 at 100.00 AA 526,820
St. Joseph's/Candler Health System, Series 2003,
5.250%, 7/01/23 - RAAI Insured
2,000 Valdosta and Lowndes County Hospital Authority, Georgia, 10/12 at 101.00 AAA 2,109,340
Revenue Certificates, South Georgia Medical Center,
Series 2002, 5.250%, 10/01/27 - AMBAC Insured
750 Valdosta and Lowndes County Hospital Authority, Georgia, 10/17 at 100.00 A+ 766,350
Revenue Certificates, South Georgia Medical Center,
Series 2007, 5.000%, 10/01/33
------------------------------------------------------------------------------------------------------------------------------------
9,620 Total Health Care 10,081,628
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/SINGLE FAMILY - 12.7% (8.5% OF TOTAL INVESTMENTS)
650 Georgia Housing and Finance Authority, Single Family Mortgage 12/11 at 100.00 AAA 667,570
Bonds, Series 2002B-2, 5.350%, 12/01/22
(Alternative Minimum Tax)
1,000 Georgia Housing and Finance Authority, Single Family Mortgage 12/15 at 100.00 AAA 956,730
Bonds, Series 2006C-2, 4.500%, 12/01/27
(Alternative Minimum Tax)
2,000 Georgia Housing and Finance Authority, Single Family Mortgage 12/11 at 100.00 AAA 2,048,080
Resolution 1 Bonds, Series 2002A-2, 5.450%, 12/01/22
(Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
3,650 Total Housing/Single Family 3,672,380
------------------------------------------------------------------------------------------------------------------------------------
INDUSTRIALS - 2.7% (1.8% OF TOTAL INVESTMENTS)
750 Savannah Economic Development Authority, Georgia, Revenue 7/12 at 100.00 AAA 782,235
Bonds, GTREP Project, Series 2002, 5.000%, 7/01/19 -
MBIA Insured
------------------------------------------------------------------------------------------------------------------------------------
LONG-TERM CARE - 2.6% (1.7% OF TOTAL INVESTMENTS)
500 Fulton County Residential Care Facilities Authority, Georgia, 7/17 at 100.00 N/R 503,700
Revenue Bonds, Elderly Care, Lenbrook Square Project,
Series 2006A, 5.125%, 7/01/42
250 Medical Center Hospital Authority, Georgia, Revenue Bonds, No Opt. Call N/R 253,073
Spring Harbor at Green Island, Series 2007, 5.000%, 7/01/11
------------------------------------------------------------------------------------------------------------------------------------
750 Total Long-Term Care 756,773
------------------------------------------------------------------------------------------------------------------------------------
MATERIALS - 2.3% (1.5% OF TOTAL INVESTMENTS)
20 Richmond County Development Authority, Georgia, Environmental 11/13 at 100.00 BBB 21,055
Improvement Revenue Bonds, International Paper Company,
Series 2003A, 5.750%, 11/01/27 (Alternative Minimum Tax)
600 Richmond County Development Authority, Georgia, Environmental 2/12 at 101.00 BBB 638,040
Improvement Revenue Refunding Bonds, International Paper
Company, Series 2002A, 6.000%, 2/01/25
(Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
620 Total Materials 659,095
------------------------------------------------------------------------------------------------------------------------------------
24
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL - 4.0% (2.7% OF TOTAL INVESTMENTS)
$ 500 Georgia, General Obligation Bonds, Series 2005B, 5.000%, 7/01/15 No Opt. Call AAA $ 539,060
595 Puerto Rico, General Obligation and Public Improvement Bonds, 7/14 at 100.00 BBB- 628,249
Series 2004A, 5.250%, 7/01/22
------------------------------------------------------------------------------------------------------------------------------------
1,095 Total Tax Obligation/General 1,167,309
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED - 7.3% (4.8% OF TOTAL INVESTMENTS)
1,525 Macon-Bibb County Urban Development Authority, Georgia, 8/12 at 101.00 AA 1,614,716
Revenue Refunding Bonds, Public Facilities Projects,
Series 2002A, 5.000%, 8/01/14
425 Metropolitan Atlanta Rapid Transit Authority, Georgia, Sales Tax No Opt. Call AAA 482,685
Revenue Bonds, Series 2007, 5.250%, 7/01/32 - FGIC Insured
------------------------------------------------------------------------------------------------------------------------------------
1,950 Total Tax Obligation/Limited 2,097,401
------------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION - 3.6% (2.4% OF TOTAL INVESTMENTS)
1,000 Atlanta, Georgia, Airport General Revenue Refunding Bonds, 1/10 at 101.00 AAA 1,043,780
Series 2000A, 5.400%, 1/01/15 - FGIC Insured
------------------------------------------------------------------------------------------------------------------------------------
U.S. GUARANTEED - 27.7% (18.5% OF TOTAL INVESTMENTS) (4)
600 Atlanta Development Authority, Georgia, Revenue Bonds, Yamacraw 1/12 at 100.00 AAA 629,400
Design Center Project, Series 2001A, 5.125%, 1/01/27
(Pre-refunded 1/01/12) - MBIA Insured
1,500 Coweta County Development Authority, Georgia, Revenue Bonds, 1/13 at 100.00 Aaa 1,600,290
Newnan Water and Sewer, and Light Commission Project,
Series 2002, 5.250%, 1/01/18 (Pre-refunded 1/01/13) -
FGIC Insured
2,000 Georgia, General Obligation Bonds, Series 2002D, 8/12 at 100.00 AAA 2,106,240
5.000%, 8/01/18 (Pre-refunded 8/01/12)
1,200 Private Colleges and Universities Authority, Georgia, Revenue 10/11 at 102.00 Baa2 (4) 1,306,200
Bonds, Mercer University, Series 2001, 5.750%, 10/01/31
(Pre-refunded 10/01/11)
1,000 Rockdale County Water and Sewerage Authority, Georgia, Revenue 1/10 at 101.00 AAA 1,047,070
Bonds, Series 1999A, 5.375%, 7/01/29 (Pre-refunded 1/01/10) -
MBIA Insured
1,200 Summerville, Georgia, Combined Public Utility System Revenue 1/12 at 101.00 Baa3 (4) 1,298,952
Refunding and Improvement Bonds, Series 2002,
5.750%, 1/01/26 (Pre-refunded 1/01/12)
------------------------------------------------------------------------------------------------------------------------------------
7,500 Total U.S. Guaranteed 7,988,152
------------------------------------------------------------------------------------------------------------------------------------
UTILITIES - 1.8% (1.2% OF TOTAL INVESTMENTS)
500 Municipal Electric Authority of Georgia, Combustion Turbine 11/13 at 100.00 AAA 536,510
Revenue Bonds, Series 2003A, 5.250%, 11/01/15 -
MBIA Insured
------------------------------------------------------------------------------------------------------------------------------------
25
NZX
Nuveen Georgia Dividend Advantage Municipal Fund (continued)
Portfolio of INVESTMENTS as of 5-31-07
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER - 18.8% (12.5% OF TOTAL INVESTMENTS)
$ 1,200 Atlanta, Georgia, Water and Wastewater Revenue Bonds, 11/14 at 100.00 AAA $ 1,256,304
Series 2004, 5.000%, 11/01/24 - FSA Insured
2,065 Augusta, Georgia, Water and Sewerage Revenue Bonds, 10/12 at 100.00 AAA 2,171,489
Series 2002, 5.000%, 10/01/16 - FSA Insured
500 Fulton County, Georgia, Water and Sewerage Revenue Bonds, 1/14 at 100.00 AAA 524,835
Series 2004, 5.000%, 1/01/22 - FGIC Insured
1,395 Macon Water Authority, Georgia, Water and Sewer Revenue Bonds, 10/11 at 101.00 AA- 1,456,896
Series 2001B, 5.000%, 10/01/21
------------------------------------------------------------------------------------------------------------------------------------
5,160 Total Water and Sewer 5,409,524
------------------------------------------------------------------------------------------------------------------------------------
$ 41,290 Total Investments (cost $42,020,135) - 150.1% 43,289,014
=============-----------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 1.9% 542,146
--------------------------------------------------------------------------------------------------------------------
Preferred Shares, at Liquidation Value - (52.0)% (15,000,000)
--------------------------------------------------------------------------------------------------------------------
Net Assets Applicable to Common Shares - 100% $ 28,831,160
====================================================================================================================
FORWARD SWAPS OUTSTANDING AT MAY 31, 2007:
FUND FIXED RATE UNREALIZED
NOTIONAL PAY/RECEIVE FLOATING RATE FIXED RATE PAYMENT EFFECTIVE TERMINATION APPRECIATION
COUNTERPARTY AMOUNT FLOATING RATE INDEX (ANNUALIZED) FREQUENCY DATE (5) DATE (DEPRECIATION)
------------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs $1,000,000 Pay 3-Month USD-LIBOR 5.375% Semi-Annually 4/23/08 4/23/30 $(29,585)
====================================================================================================================================
USD-LIBOR (United States Dollar-London Inter-Bank Offered Rate)
(1) All percentages shown in the Portfolio of Investments
are based on net assets applicable to Common shares
unless otherwise noted.
(2) Optional Call Provisions (not covered by the report of
independent registered public accounting firm): Dates
(month and year) and prices of the earliest optional
call or redemption. There may be other call provisions
at varying prices at later dates. Certain
mortgage-backed securities may be subject to periodic
principal paydowns.
(3) Ratings (not covered by the report of independent
registered public accounting firm): Using the higher of
Standard & Poor's or Moody's rating. Ratings below BBB
by Standard & Poor's Group or Baa by Moody's Investor
Service, Inc. are considered to be below investment
grade.
(4) Backed by an escrow or trust containing sufficient U.S.
Government or U.S. Government agency securities which
ensure the timely payment of principal and interest.
Such investments are normally considered to be
equivalent to AAA rated securities.
(5) Effective date represents the date on which both the
Fund and counterparty commence interest payment
accruals on each forward swap contract.
N/R Not rated.
See accompanying notes to financial statements.
26
NKG
Nuveen Georgia Dividend Advantage Municipal Fund 2
Portfolio of INVESTMENTS
as of 5-31-07
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
CONSUMER DISCRETIONARY - 2.7% (1.9% OF TOTAL INVESTMENTS)
$ 1,750 DeKalb County Development Authority, Georgia, Pollution Control 12/12 at 101.00 B- $ 1,802,098
Revenue Refunding Bonds, General Motors Corporation
Projects, Series 2002, 6.000%, 3/15/21
------------------------------------------------------------------------------------------------------------------------------------
CONSUMER STAPLES - 3.2% (2.2% OF TOTAL INVESTMENTS)
2,000 Puerto Rico, The Children's Trust Fund, Tobacco Settlement 5/12 at 100.00 BBB 2,096,780
Asset-Backed Refunding Bonds, Series 2002, 5.500%, 5/15/39
------------------------------------------------------------------------------------------------------------------------------------
EDUCATION AND CIVIC ORGANIZATIONS - 17.0% (11.4% OF TOTAL INVESTMENTS)
Athens Housing Authority, Georgia, Student Housing Lease Revenue
Bonds, UGAREF East Campus Housing LLC Project, Series 2002:
3,500 5.000%, 12/01/27 - AMBAC Insured 12/12 at 100.00 Aaa 3,611,090
2,500 5.000%, 12/01/33 - AMBAC Insured 12/12 at 100.00 Aaa 2,571,950
1,225 Athens-Clarke County Unified Government Development 12/12 at 100.00 AAA 1,283,751
Authority, Georgia, Educational Facilities Revenue Bonds,
UGAREF CCRC Building LLC Project, Series 2002,
5.000%, 12/15/18 - AMBAC Insured
2,000 Fulton County Development Authority, Georgia, Revenue Bonds, 11/13 at 100.00 AAA 2,089,120
Georgia Tech - Klaus Parking and Family Housing, Series 2003,
5.000%, 11/01/23 - MBIA Insured
1,050 Fulton County Development Authority, Georgia, Revenue Bonds, 2/12 at 100.00 AAA 1,084,304
TUFF Morehouse Project, Series 2002A, 5.000%, 2/01/34 -
AMBAC Insured
500 Gainesville Redevelopment Authority, Georgia, Educational 3/17 at 100.00 N/R 508,020
Facilities Revenue Bonds, Riverside Military Academy Project,
Series 2007, 5.125%, 3/01/37
------------------------------------------------------------------------------------------------------------------------------------
10,775 Total Education and Civic Organizations 11,148,235
------------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE - 26.1% (17.7% OF TOTAL INVESTMENTS)
150 Baldwin County Hospital Authority, Georgia, Revenue Bonds, 12/07 at 102.00 BB+ 150,039
Oconee Regional Medical Center, Series 1997, 5.250%, 12/01/12
Baldwin County Hospital Authority, Georgia, Revenue Bonds,
Oconee Regional Medical Center, Series 1998:
40 5.250%, 12/01/22 12/08 at 102.00 BB+ 39,256
265 5.375%, 12/01/28 12/08 at 102.00 BB+ 262,999
1,000 Chatham County Hospital Authority, Savannah, Georgia, Hospital 1/14 at 100.00 BBB+ 1,036,940
Revenue Bonds, Memorial Health University Medical Center Inc.,
Series 2004A, 5.375%, 1/01/26
Coffee County Hospital Authority, Georgia, Revenue Bonds, Coffee
County Regional Medical Center, Series 2004:
165 5.000%, 12/01/19 12/14 at 100.00 BBB+ 168,234
1,000 5.250%, 12/01/22 12/14 at 100.00 BBB+ 1,033,470
Floyd County Hospital Authority, Georgia, Revenue Anticipation
Certificates, Floyd Medical Center Project, Series 2002:
1,480 5.000%, 7/01/22 - MBIA Insured 7/12 at 101.00 Aaa 1,538,386
1,000 5.200%, 7/01/32 - MBIA Insured 7/12 at 101.00 Aaa 1,047,460
1,305 Gainesville and Hall County Hospital Authority, Georgia, 5/11 at 100.00 A- 1,347,478
Revenue Anticipation Certificates, Northeast Georgia Health
Services Inc., Series 2001, 5.500%, 5/15/31
Newnan Hospital Authority, Georgia, Revenue Anticipation
Certificates, Newnan Hospital Inc., Series 2002:
2,260 5.500%, 1/01/19 - MBIA Insured 1/13 at 100.00 Aaa 2,413,477
3,020 5.500%, 1/01/20 - MBIA Insured 1/13 at 100.00 Aaa 3,223,548
27
NKG
Nuveen Georgia Dividend Advantage Municipal Fund 2 (continued)
Portfolio of INVESTMENTS as of 5-31-07
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE (continued)
$ 2,000 Savannah Hospital Authority, Georgia, Revenue Bonds, 1/14 at 100.00 AA $ 2,107,280
St. Joseph's/Candler Health System, Series 2003,
5.250%, 7/01/23 - RAAI Insured
1,945 Tift County Hospital Authority, Georgia, Revenue Anticipation 12/12 at 101.00 Aaa 2,055,145
Bonds, Tift Regional Medical Center, Series 2002,
5.250%, 12/01/19 - AMBAC Insured
750 Valdosta and Lowndes County Hospital Authority, Georgia, 10/17 at 100.00 A+ 766,350
Revenue Certificates, South Georgia Medical Center,
Series 2007, 5.000%, 10/01/33
------------------------------------------------------------------------------------------------------------------------------------
16,380 Total Health Care 17,190,062
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/MULTIFAMILY - 4.6% (3.1% OF TOTAL INVESTMENTS)
Savannah Economic Development Authority, Georgia, GNMA
Collateralized Multifamily Housing Revenue Bonds, Snap I-II-III
Apartments, Series 2002A:
500 5.150%, 11/20/22 (Alternative Minimum Tax) 11/12 at 102.00 AAA 512,380
980 5.200%, 11/20/27 (Alternative Minimum Tax) 11/12 at 102.00 AAA 998,679
1,465 5.250%, 11/20/32 (Alternative Minimum Tax) 11/12 at 102.00 AAA 1,496,263
------------------------------------------------------------------------------------------------------------------------------------
2,945 Total Housing/Multifamily 3,007,322
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/SINGLE FAMILY - 3.9% (2.6% OF TOTAL INVESTMENTS)
1,700 Georgia Housing and Finance Authority, Single Family Mortgage 12/12 at 100.00 AAA 1,736,346
Bonds, Series 2002C-2, 5.100%, 12/01/22 (Alternative
Minimum Tax)
170 Georgia Housing and Finance Authority, Single Family Mortgage 12/15 at 100.00 AAA 161,730
Bonds, Series 2006C-2, 4.550%, 12/01/31 (Alternative
Minimum Tax)
660 Georgia Housing and Finance Authority, Single Family Mortgage 6/11 at 100.00 AAA 665,254
Resolution 1 Bonds, Series 2001B-2, 5.400%, 12/01/31
(Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
2,530 Total Housing/Single Family 2,563,330
------------------------------------------------------------------------------------------------------------------------------------
INDUSTRIALS - 3.4% (2.3% OF TOTAL INVESTMENTS)
2,190 Cobb County Development Authority, Georgia, Solid Waste Disposal 4/16 at 101.00 BBB 2,205,352
Revenue Bonds, Georgia Waste Management Project,
Series 2004A, 5.000%, 4/01/33 (Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
LONG-TERM CARE - 1.9% (1.3% OF TOTAL INVESTMENTS)
1,000 Fulton County Residential Care Facilities Authority, Georgia, 7/17 at 100.00 N/R 1,007,400
Revenue Bonds, Elderly Care, Lenbrook Square Project,
Series 2006A, 5.125%, 7/01/42
250 Medical Center Hospital Authority, Georgia, Revenue Bonds, No Opt. Call N/R 253,073
Spring Harbor at Green Island, Series 2007, 5.000%, 7/01/11
------------------------------------------------------------------------------------------------------------------------------------
1,250 Total Long-Term Care 1,260,473
------------------------------------------------------------------------------------------------------------------------------------
MATERIALS - 2.6% (1.8% OF TOTAL INVESTMENTS)
1,000 Richmond County Development Authority, Georgia, 2/11 at 101.00 BBB 1,060,870
Environmental Improvement Revenue Bonds, International
Paper Company, Series 2001A, 6.250%, 2/01/25
(Alternative Minimum Tax)
250 Richmond County Development Authority, Georgia, Environmental 2/12 at 101.00 BBB 265,850
Improvement Revenue Refunding Bonds, International Paper
Company, Series 2002A, 6.000%, 2/01/25 (Alternative
Minimum Tax)
370 Savannah Economic Development Authority, Georgia, Pollution No Opt. Call Baa3 414,652
Control Revenue Bonds, Union Camp Corporation, Series 1995,
6.150%, 3/01/17
------------------------------------------------------------------------------------------------------------------------------------
1,620 Total Materials 1,741,372
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL - 10.8% (7.3% OF TOTAL INVESTMENTS)
1,000 Forsyth County, Georgia, General Obligation Bonds, Series 2004, 3/14 at 101.00 AA 1,078,250
5.250%, 3/01/19
750 Georgia, General Obligation Bonds, Series 1998D, 5.250%, 10/01/15 No Opt. Call AAA 823,088
1,000 Georgia, General Obligation Bonds, Series 2005B, 5.000%, 7/01/15 No Opt. Call AAA 1,078,120
28
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL (continued)
Oconee County, Georgia, General Obligation Bonds, Recreation
Project, Series 2003:
$ 1,410 5.500%, 1/01/23 - AMBAC Insured 1/13 at 101.00 Aaa $ 1,522,476
1,470 5.250%, 1/01/26 - AMBAC Insured 1/13 at 101.00 Aaa 1,565,271
1,000 Wayne County Hospital Authority, Georgia, Hospital Revenue 3/16 at 100.00 Aaa 1,043,490
Bonds, Series 2006, 5.000%, 3/01/23 - XLCA Insured
------------------------------------------------------------------------------------------------------------------------------------
6,630 Total Tax Obligation/General 7,110,695
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED - 20.2% (13.7% OF TOTAL INVESTMENTS)
750 Georgia Municipal Association Inc., Certificates of Participation, 6/12 at 101.00 AAA 786,863
Atlanta Court Project, Series 2002, 5.125%, 12/01/21 -
AMBAC Insured
855 Metropolitan Atlanta Rapid Transit Authority, Georgia, Sales Tax No Opt. Call AAA 971,049
Revenue Bonds, Series 2007, 5.250%, 7/01/32 - FGIC Insured
2,500 Metropolitan Atlanta Rapid Transit Authority, Georgia, Sales Tax No Opt. Call AAA 2,888,650
Revenue Refunding Bonds, Series 1992P, 6.250%, 7/01/20 -
AMBAC Insured
500 Puerto Rico Infrastructure Financing Authority, Special Tax 7/15 at 100.00 BBB- 512,505
Revenue Bonds, Series 2005B, 5.000%, 7/01/41
2,500 Puerto Rico Municipal Finance Agency, Series 2002A, 8/12 at 100.00 AAA 2,589,525
5.000%, 8/01/27 - FSA Insured
5,000 Puerto Rico Public Buildings Authority, Guaranteed Government No Opt. Call AAA 5,567,796
Facilities Revenue Refunding Bonds, Series 2002F,
5.250%, 7/01/21 - CIFG Insured
------------------------------------------------------------------------------------------------------------------------------------
12,105 Total Tax Obligation/Limited 13,316,388
------------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION - 5.8% (3.9% OF TOTAL INVESTMENTS)
3,650 Atlanta, Georgia, Airport General Revenue Refunding Bonds, 1/10 at 101.00 AAA 3,810,454
Series 2000A, 5.500%, 1/01/21 - FGIC Insured
------------------------------------------------------------------------------------------------------------------------------------
U.S. GUARANTEED - 16.0% (10.8% OF TOTAL INVESTMENTS) (4)
1,000 Cherokee County School System, Georgia, General Obligation 8/13 at 100.00 AAA 1,059,440
Bonds, Series 2003, 5.000%, 8/01/16 (Pre-refunded 8/01/13) -
MBIA Insured
DeKalb County, Georgia, Water and Sewerage Revenue Bonds,
Series 2000:
2,500 5.125%, 10/01/31 (Pre-refunded 10/01/10) 10/10 at 101.00 AAA 2,623,500
2,500 5.375%, 10/01/35 (Pre-refunded 10/01/10) 10/10 at 101.00 AAA 2,642,900
1,300 Fairburn, Georgia, Combined Utility Revenue Bonds, Series 2000, 10/10 at 101.00 BBB (4) 1,385,631
5.750%, 10/01/20 (Pre-refunded 10/01/10)
1,000 Private Colleges and Universities Authority, Georgia, Revenue 9/11 at 100.00 AA (4) 1,049,810
Bonds, Emory University, Series 2001A, 5.125%, 9/01/33
(Pre-refunded 9/01/11)
1,100 Private Colleges and Universities Authority, Georgia, Revenue 10/11 at 102.00 Baa2 (4) 1,197,350
Bonds, Mercer University, Series 2001, 5.750%, 10/01/31
(Pre-refunded 10/01/11)
500 Puerto Rico, Highway Revenue Bonds, Highway and Transportation 7/16 at 100.00 AAA 560,070
Authority, Series 1996Y, 5.500%, 7/01/36 (Pre-refunded 7/01/16) -
FSA Insured
------------------------------------------------------------------------------------------------------------------------------------
9,900 Total U.S. Guaranteed 10,518,701
------------------------------------------------------------------------------------------------------------------------------------
UTILITIES - 4.8% (3.2% OF TOTAL INVESTMENTS)
1,000 Elberton, Georgia, Combined Utility System Revenue Refunding 1/12 at 100.00 Aaa 1,035,530
and Improvement Bonds, Series 2001, 5.000%, 1/01/22 -
AMBAC Insured
1,000 Georgia Municipal Electric Authority, General Power Revenue 1/17 at 100.00 AAA 1,054,870
Bonds, Project 1, Series 2007A, 5.000%, 1/01/25 -
MBIA Insured
1,000 Municipal Electric Authority of Georgia, Project One Subordinated 1/13 at 100.00 AAA 1,039,410
Lien Revenue Bonds, Series 2003A, 5.000%, 1/01/22 -
MBIA Insured
------------------------------------------------------------------------------------------------------------------------------------
3,000 Total Utilities 3,129,810
------------------------------------------------------------------------------------------------------------------------------------
29
NKG
Nuveen Georgia Dividend Advantage Municipal Fund 2 (continued)
Portfolio of INVESTMENTS as of 5-31-07
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER - 24.9% (16.8% OF TOTAL INVESTMENTS)
Atlanta, Georgia, Water and Wastewater Revenue Bonds, Series 2004:
$ 500 5.250%, 11/01/15 - FSA Insured 11/14 at 100.00 AAA $ 540,020
1,700 5.000%, 11/01/37 - FSA Insured 11/14 at 100.00 AAA 1,768,799
Augusta, Georgia, Water and Sewerage Revenue Bonds, Series 2002:
1,000 5.250%, 10/01/22 - FSA Insured 10/12 at 100.00 AAA 1,057,480
3,500 5.000%, 10/01/27 - FSA Insured 10/12 at 100.00 AAA 3,625,580
1,000 Douglasville-Douglas County Water and Sewer Authority, Georgia, 12/15 at 100.00 AAA 1,046,860
Water and Sewer Revenue Bonds, Series 2005, 5.000%, 6/01/29 -
MBIA Insured
4,000 Forsyth County Water and Sewerage Authority, Georgia, Revenue 4/13 at 100.00 AA 4,149,160
Bonds, Series 2002, 5.000%, 4/01/32
950 Fulton County, Georgia, Water and Sewerage Revenue Bonds, 7/08 at 101.00 AAA 971,489
Series 1998, 5.000%, 1/01/16 - FGIC Insured
3,100 Harris County, Georgia, Water System Revenue Bonds, 12/12 at 100.00 Aaa 3,229,952
Series 2002, 5.000%, 12/01/22 - AMBAC Insured
------------------------------------------------------------------------------------------------------------------------------------
15,750 Total Water and Sewer 16,389,340
------------------------------------------------------------------------------------------------------------------------------------
$ 92,475 Total Investments (cost $95,056,371) - 147.9% 97,290,412
=============-----------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 2.3% 1,479,150
--------------------------------------------------------------------------------------------------------------------
Preferred Shares, at Liquidation Value - (50.2)% (33,000,000)
--------------------------------------------------------------------------------------------------------------------
Net Assets Applicable to Common Shares - 100% $ 65,769,562
====================================================================================================================
(1) All percentages shown in the Portfolio of Investments
are based on net assets applicable to Common shares
unless otherwise noted.
(2) Optional Call Provisions (not covered by the report of
independent registered public accounting firm): Dates
(month and year) and prices of the earliest optional
call or redemption. There may be other call provisions
at varying prices at later dates. Certain
mortgage-backed securities may be subject to periodic
principal paydowns.
(3) Ratings (not covered by the report of independent
registered public accounting firm): Using the higher of
Standard & Poor's or Moody's rating. Ratings below BBB
by Standard & Poor's Group or Baa by Moody's Investor
Service, Inc. are considered to be below investment
grade.
(4) Backed by an escrow or trust containing sufficient U.S.
Government or U.S. Government agency securities which
ensure the timely payment of principal and interest.
Such investments are normally considered to be
equivalent to AAA rated securities.
N/R Not rated.
See accompanying notes to financial statements.
30
NNC
Nuveen North Carolina Premium Income Municipal Fund
Portfolio of INVESTMENTS
as of 5-31-07
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
EDUCATION AND CIVIC ORGANIZATIONS - 24.9% (16.0% OF TOTAL INVESTMENTS)
$ 1,000 North Carolina Capital Facilities Financing Agency, Housing 6/13 at 100.00 AAA $ 1,039,350
Revenue Bonds, Elizabeth City State University, Series 2003A,
5.000%, 6/01/28 - AMBAC Insured
2,500 North Carolina Capital Facilities Financing Agency, Revenue 10/15 at 100.00 AA+ 2,588,550
Bonds, Duke University, Series 2005A, 5.000%, 10/01/41
970 North Carolina Capital Facilities Financing Agency, Revenue 4/13 at 100.00 AAA 1,022,923
Bonds, Johnson and Wales University, Series 2003A,
5.250%, 4/01/23 - XLCA Insured
3,285 North Carolina State University at Raleigh, General Revenue 10/13 at 100.00 AA 3,474,545
Bonds, Series 2003A, 5.000%, 10/01/15
1,530 University of North Carolina System, Pooled Revenue Bonds, No Opt. Call AAA 1,638,309
Series 2005A, 5.000%, 4/01/15 - AMBAC Insured
580 University of North Carolina System, Pooled Revenue Refunding 10/12 at 100.00 AAA 616,784
Bonds, Series 2002A, 5.375%, 4/01/22 - AMBAC Insured
University of North Carolina Wilmington, Certificates of
Participation, Student Housing Project Revenue Bonds, Series 2006:
1,430 5.000%, 6/01/23 - FGIC Insured 6/16 at 100.00 AAA 1,507,878
1,505 5.000%, 6/01/24 - FGIC Insured 6/16 at 100.00 AAA 1,584,660
500 5.000%, 6/01/37 - FGIC Insured 6/16 at 100.00 AAA 521,155
University of North Carolina, Chapel Hill, System Net Revenue
Bonds, Series 2003:
2,380 5.000%, 12/01/19 12/13 at 100.00 AA+ 2,518,540
2,725 5.000%, 12/01/21 12/13 at 100.00 AA+ 2,862,122
1,500 5.000%, 12/01/23 12/13 at 100.00 AA+ 1,571,115
1,675 University of North Carolina, Wilmington, General Revenue Bonds, 1/12 at 101.00 Aaa 1,744,395
Series 2002A, 5.000%, 1/01/23 - AMBAC Insured
------------------------------------------------------------------------------------------------------------------------------------
21,580 Total Education and Civic Organizations 22,690,326
------------------------------------------------------------------------------------------------------------------------------------
ENERGY - 1.8% (1.1% OF TOTAL INVESTMENTS)
1,500 Virgin Islands Public Finance Authority, Revenue Bonds, Refinery 1/14 at 100.00 BBB 1,637,040
Project - Hovensa LLC, Series 2003, 6.125%, 7/01/22
(Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE - 25.4% (16.3% OF TOTAL INVESTMENTS)
250 Charlotte-Mecklenburg Hospital Authority, North Carolina, 1/15 at 100.00 AA 254,665
Healthcare System Revenue Bonds, DBA Carolinas Healthcare
System, Series 2005A, 5.000%, 1/15/45
1,500 North Carolina Medical Care Commission, Health System Revenue 10/17 at 100.00 AA 1,453,515
Bonds, Mission St. Joseph's Health System, Series 2007,
4.500%, 10/01/31
2,000 North Carolina Medical Care Commission, Healthcare Facilities 11/13 at 100.00 AA- 2,064,920
Revenue Bonds, Novant Health Obligated Group, Series 2003A,
5.000%, 11/01/19
2,000 North Carolina Medical Care Commission, Healthcare Facilities 10/09 at 101.00 A- 2,105,280
Revenue Bonds, Stanly Memorial Hospital, Series 1999,
6.375%, 10/01/29
North Carolina Medical Care Commission, Healthcare Facilities
Revenue Bonds, Union Regional Medical Center, Series 2002A:
1,000 5.500%, 1/01/19 1/12 at 100.00 A 1,039,700
550 5.500%, 1/01/20 1/12 at 100.00 A 571,142
1,750 5.375%, 1/01/32 1/12 at 100.00 A 1,801,030
1,615 North Carolina Medical Care Commission, Hospital Revenue 10/08 at 101.00 AA 1,616,131
Bonds, FirstHealth of the Carolinas Inc., Series 1998,
4.750%, 10/01/26
31
NNC
Nuveen North Carolina Premium Income Municipal Fund (continued)
Portfolio of INVESTMENTS as of 5-31-07
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE (continued)
$ 3,000 North Carolina Medical Care Commission, Hospital Revenue Bonds, 6/12 at 101.00 A $ 3,111,150
Southeastern Regional Medical Center, Series 2002,
5.375%, 6/01/32
2,645 North Carolina Medical Care Commission, Revenue Bonds, 1/15 at 100.00 AAA 2,747,150
Blue Ridge Healthcare System, Series 2005, 5.000%, 1/01/33 -
FGIC Insured
North Carolina Medical Care Commission, Revenue Bonds,
Cleveland County Healthcare System, Series 2004A:
600 5.250%, 7/01/20 - AMBAC Insured 7/14 at 100.00 AAA 638,424
500 5.250%, 7/01/22 - AMBAC Insured 7/14 at 100.00 AAA 530,760
735 North Carolina Medical Care Commission, Revenue Bonds, 11/14 at 100.00 AA 756,293
Northeast Medical Center, Series 2004, 5.000%, 11/01/24
375 North Carolina Medical Care Commission, Revenue Bonds, 1/16 at 100.00 N/R 380,209
Pines at Davidson, Series 2006A, 5.000%, 1/01/36
Onslow County Hospital Authority, North Carolina, FHA Insured
Mortgage Revenue Bonds, Onslow Memorial Hospital Project, Series 2006:
685 5.000%, 4/01/31 - MBIA Insured 10/16 at 100.00 AAA 715,873
3,210 5.000%, 10/01/34 - MBIA Insured 10/16 at 100.00 AAA 3,349,699
------------------------------------------------------------------------------------------------------------------------------------
22,415 Total Health Care 23,135,941
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/MULTIFAMILY - 3.7% (2.4% OF TOTAL INVESTMENTS)
1,000 Asheville Housing Authority, North Carolina, GNMA-Collateralized 11/07 at 102.00 AA 1,015,130
Multifamily Housing Revenue Bonds, Woodridge Apartments,
Series 1997, 5.800%, 11/20/39 (Alternative Minimum Tax)
2,290 Mecklenburg County, North Carolina, FNMA Multifamily Housing 7/13 at 105.00 AAA 2,384,073
Revenue Bonds, Little Rock Apartments, Series 2003,
5.375%, 1/01/36 (Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
3,290 Total Housing/Multifamily 3,399,203
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/SINGLE FAMILY - 9.5% (6.1% OF TOTAL INVESTMENTS)
1,105 North Carolina Housing Finance Agency, Home Ownership Revenue 7/10 at 100.00 AAA 1,121,873
Bonds, 1998 Trust Agreement, Series 10A, 5.400%, 7/01/32 -
AMBAC Insured (Alternative Minimum Tax)
3,640 North Carolina Housing Finance Agency, Home Ownership 7/09 at 100.00 AA 3,751,712
Revenue Bonds, 1998 Trust Agreement, Series 6A,
6.200%, 1/01/29 (Alternative Minimum Tax)
1,400 North Carolina Housing Finance Agency, Home Ownership Revenue 1/17 at 100.00 AA 1,386,574
Bonds, Series 2007-29A, 4.800%, 7/01/33
(WI/DD, Settling 6/13/07) (Alternative Minimum Tax)
835 North Carolina Housing Finance Agency, Home Ownership Revenue 7/16 at 100.00 AA 831,710
Bonds, Series 25-A, 4.900%, 7/01/37 (Alternative Minimum Tax)
1,525 North Carolina Housing Finance Agency, Single Family Revenue 9/07 at 101.00 AA 1,552,618
Bonds, Series 1996HH, 6.300%, 3/01/26 (Alternative
Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
8,505 Total Housing/Single Family 8,644,487
------------------------------------------------------------------------------------------------------------------------------------
INDUSTRIALS - 1.5% (1.0% OF TOTAL INVESTMENTS)
1,400 North Carolina Capital Facilities Financing Agency, Exempt No Opt. Call BBB 1,398,642
Facilities Revenue Bonds, Waste Management Inc.,
Series 2001, 3.750%, 8/01/14 (Mandatory put 8/01/07)
(Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
MATERIALS - 1.6% (1.0% OF TOTAL INVESTMENTS)
1,425 Gaston County Industrial Facilities and Pollution Control Financing 8/15 at 100.00 N/R 1,497,219
Authority, North Carolina, National Gypsum Company Project
Exempt Facilities Revenue Bonds, Series 2005, 5.750%, 8/01/35
(Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL - 13.2% (8.5% OF TOTAL INVESTMENTS)
1,890 Craven County, North Carolina, General Obligation Bonds, 5/12 at 101.00 AAA 1,977,488
Series 2002, 5.000%, 5/01/21 - AMBAC Insured
4,285 Durham County, North Carolina, General Obligation Bonds, 4/12 at 100.00 AAA 4,494,065
Series 2002B, 5.000%, 4/01/16
2,820 Durham, North Carolina, General Obligation Bonds, Series 2007, 4/17 at 100.00 AAA 3,031,810
5.000%, 4/01/21
32
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL (continued)
$ 500 North Carolina, General Obligation Bonds, Series 2004A, 3/14 at 100.00 AAA $ 527,175
5.000%, 3/01/22
1,950 Sampson County, North Carolina, Certificates of Participation, 6/17 at 100.00 AAA 2,043,035
Series 2006, 5.000%, 6/01/34 - FSA Insured (UB)
------------------------------------------------------------------------------------------------------------------------------------
11,445 Total Tax Obligation/General 12,073,573
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED - 29.7% (19.1% OF TOTAL INVESTMENTS)
1,330 Cabarrus County, North Carolina, Certificates of Participation, 2/13 at 100.00 AA- 1,406,768
Series 2002, 5.250%, 2/01/17
1,800 Catawba County, North Carolina, Certificates of Participation, 6/14 at 100.00 Aaa 1,918,656
Series 2004, 5.250%, 6/01/21 - MBIA Insured
1,700 Charlotte, North Carolina, Certificates of Participation, 6/13 at 100.00 AA+ 1,803,581
Governmental Facilities Projects, Series 2003G,
5.375%, 6/01/26
1,500 Charlotte, North Carolina, Certificates of Participation, Transit 6/13 at 100.00 AA+ 1,545,810
Projects, Series 2003A, 5.000%, 6/01/33
Charlotte, North Carolina, Storm Water Fee Revenue Bonds,
Series 2002:
1,050 5.250%, 6/01/20 6/12 at 101.00 AAA 1,119,479
1,750 5.000%, 6/01/25 6/12 at 101.00 AAA 1,823,570
1,000 Davidson County, North Carolina, Certificates of Participation, No Opt. Call AAA 1,076,740
Series 2004, 5.250%, 6/01/14 - AMBAC Insured
Lee County, North Carolina, Certificates of Participation, Public
Schools and Community College, Series 2004:
1,715 5.250%, 4/01/18 - FSA Insured 4/14 at 100.00 AAA 1,828,567
500 5.250%, 4/01/20 - FSA Insured 4/14 at 100.00 AAA 531,945
1,000 5.250%, 4/01/22 - FSA Insured 4/14 at 100.00 AAA 1,062,060
2,600 North Carolina Infrastructure Finance Corporation, Certificates 2/15 at 100.00 AA+ 2,740,920
of Participation, Capital Improvements, Series 2005A,
5.000%, 2/01/19
1,500 North Carolina Infrastructure Finance Corporation, Certificates of 2/14 at 100.00 AA+ 1,562,415
Participation, Correctional Facilities, Series 2004A,
5.000%, 2/01/23
1,500 North Carolina, Certificates of Participation, Repair and Renovation 6/14 at 100.00 AA+ 1,564,275
Project, Series 2004B, 5.000%, 6/01/20
North Carolina, Certificates of Participation, Series 2003:
1,130 5.250%, 6/01/21 6/13 at 100.00 AA+ 1,188,376
1,000 5.250%, 6/01/23 6/13 at 100.00 AA+ 1,050,040
2,000 Puerto Rico Highway and Transportation Authority, Grant 3/14 at 100.00 AAA 2,108,040
Anticipation Revenue Bonds, Series 2004, 5.000%, 9/15/21 -
MBIA Insured
1,000 Puerto Rico Public Buildings Authority, Guaranteed Government No Opt. Call AAA 1,089,540
Facilities Revenue Bonds, Series 2003H, 5.250%, 7/01/15 -
FGIC Insured
1,000 Randolph County, North Carolina, Certificates of Participation, 6/14 at 102.00 AAA 1,059,060
Series 2004, 5.000%, 6/01/20 - FSA Insured
540 Wilson, North Carolina, Certificates of Participation, Public 5/17 at 100.00 AAA 564,246
Facilities, Series 2007A, 5.000%, 5/01/29 - AGC Insured
------------------------------------------------------------------------------------------------------------------------------------
25,615 Total Tax Obligation/Limited 27,044,088
------------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION - 6.9% (4.5% OF TOTAL INVESTMENTS)
Charlotte, North Carolina, Airport Revenue Bonds, Series 2004A:
600 5.250%, 7/01/24 - MBIA Insured 7/14 at 100.00 AAA 636,534
2,710 5.000%, 7/01/29 - MBIA Insured 7/14 at 100.00 AAA 2,813,793
500 Piedmont Triad Airport Authority, North Carolina, Airport Revenue 7/15 at 100.00 AAA 527,685
Bonds, Series 2005A, 5.000%, 7/01/20 - XLCA Insured
33
NNC
Nuveen North Carolina Premium Income Municipal Fund (continued)
Portfolio of INVESTMENTS as of 5-31-07
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION (continued)
$ 2,250 Raleigh Durham Airport Authority, North Carolina, Airport Revenue 5/11 at 101.00 Aaa $ 2,362,365
Bonds, Series 2001A, 5.250%, 11/01/16 - FGIC Insured
------------------------------------------------------------------------------------------------------------------------------------
6,060 Total Transportation 6,340,377
------------------------------------------------------------------------------------------------------------------------------------
U.S. GUARANTEED - 16.0% (10.3% OF TOTAL INVESTMENTS) (4)
750 Johnston County Finance Corporation, North Carolina, Installment 8/09 at 101.00 AAA 780,323
Payment Revenue Bonds, School and Museum Projects,
Series 1999, 5.250%, 8/01/21 (Pre-refunded 8/01/09) -
FSA Insured
4,030 North Carolina Medical Care Commission, Health System Revenue 10/11 at 101.00 AA (4) 4,281,351
Bonds, Mission St. Joseph's Health System, Series 2001,
5.250%, 10/01/31 (Pre-refunded 10/01/11)
1,165 North Carolina Municipal Power Agency 1, Catawba Electric No Opt. Call AAA 1,280,533
Revenue Bonds, Series 1980, 10.500%, 1/01/10 (ETM)
4,260 North Carolina Municipal Power Agency 1, Catawba Electric No Opt. Call AAA 4,614,602
Revenue Bonds, Series 1986, 5.000%, 1/01/20 (ETM)
1,000 North Carolina, General Obligation Bonds, Series 2000A, 9/10 at 102.00 AAA 1,057,510
5.100%, 9/01/16 (Pre-refunded 9/01/10)
420 University of North Carolina System, Pooled Revenue Refunding 10/12 at 100.00 Aaa 450,278
Bonds, Series 2002A, 5.375%, 4/01/22 (Pre-refunded 10/01/12) -
AMBAC Insured
2,000 Winston-Salem, North Carolina, Water and Sewerage System 6/12 at 100.00 AAA 2,102,320
Revenue Bonds, Series 2002A, 5.000%, 6/01/18
(Pre-refunded 6/01/12)
------------------------------------------------------------------------------------------------------------------------------------
13,625 Total U.S. Guaranteed 14,566,917
------------------------------------------------------------------------------------------------------------------------------------
UTILITIES - 12.9% (8.3% OF TOTAL INVESTMENTS)
3,000 North Carolina Eastern Municipal Power Agency, Power System 1/13 at 100.00 BBB 3,189,120
Revenue Bonds, Series 2003F, 5.500%, 1/01/15
1,000 North Carolina Eastern Municipal Power Agency, Power System 1/16 at 100.00 AAA 1,079,090
Revenue Bonds, Series 2005, 5.250%, 1/01/20 - AMBAC Insured
4,000 North Carolina Municipal Power Agency 1, Catawba Electric 1/10 at 101.00 A3 4,274,479
Revenue Bonds, Series 1999B, 6.500%, 1/01/20
2,000 North Carolina Municipal Power Agency 1, Catawba Electric 1/13 at 100.00 AAA 2,129,059
Revenue Bonds, Series 2003A, 5.250%, 1/01/15 - AMBAC Insured
1,000 Wake County Industrial Facilities and Pollution Control Financing 2/12 at 101.00 A3 1,053,539
Authority, North Carolina, Revenue Refunding Bonds, Carolina
Power and Light Company, Series 2002, 5.375%, 2/01/17
------------------------------------------------------------------------------------------------------------------------------------
11,000 Total Utilities 11,725,290
------------------------------------------------------------------------------------------------------------------------------------
34
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER - 8.4% (5.4% OF TOTAL INVESTMENTS)
$ 1,605 Broad River Water Authority, North Carolina, Water System Revenue 6/15 at 100.00 Aaa $ 1,693,163
Bonds, Series 2005, 5.000%, 6/01/20 - XLCA Insured
1,295 Greensboro, North Carolina, Combined Enterprise System Revenue 6/15 at 100.00 AA+ 1,361,627
Bonds, Series 2005A, 5.000%, 6/01/26
500 Onslow County, North Carolina, Combined Enterprise System 6/14 at 100.00 AAA 522,344
Revenue Bonds, Series 2004B, 5.000%, 6/01/23 - XLCA Insured
3,865 Winstom-Salem, North Carolina, Water and Sewer System Revenue 6/17 at 100.00 AAA 4,063,776
Bonds, Series 2007A, 5.000%, 6/01/37 (UB)
------------------------------------------------------------------------------------------------------------------------------------
7,265 Total Water and Sewer 7,640,910
------------------------------------------------------------------------------------------------------------------------------------
$ 135,125 Total Investments (cost $138,519,215) - 155.5% 141,794,013
=============-----------------------------------------------------------------------------------------------------------------------
Floating Rate Obligations - (4.3)% (3,870,000)
--------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 0.1% 67,273
--------------------------------------------------------------------------------------------------------------------
Preferred Shares, at Liquidation Value - (51.3)% (46,800,000)
--------------------------------------------------------------------------------------------------------------------
Net Assets Applicable to Common Shares - 100% $ 91,191,286
====================================================================================================================
(1) All percentages shown in the Portfolio of Investments
are based on net assets applicable to Common shares
unless otherwise noted.
(2) Optional Call Provisions (not covered by the report of
independent registered public accounting firm): Dates
(month and year) and prices of the earliest optional
call or redemption. There may be other call provisions
at varying prices at later dates. Certain
mortgage-backed securities may be subject to periodic
principal paydowns.
(3) Ratings (not covered by the report of independent
registered public accounting firm): Using the higher of
Standard & Poor's or Moody's rating. Ratings below BBB
by Standard & Poor's Group or Baa by Moody's Investor
Service, Inc. are considered to be below investment
grade.
(4) Backed by an escrow or trust containing sufficient U.S.
Government or U.S. Government agency securities which
ensure the timely payment of principal and interest.
Such investments are normally considered to be
equivalent to AAA rated securities.
N/R Not rated.
WI/DD Purchased on a when-issued or delayed delivery basis.
(ETM) Escrowed to maturity.
(UB) Underlying bond of an inverse floating rate trust
reflected as a financing transaction pursuant to the
provision of SFAS No. 140.
See accompanying notes to financial statements.
35
NRB
Nuveen North Carolina Dividend Advantage Municipal Fund
Portfolio of INVESTMENTS
as of 5-31-07
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
EDUCATION AND CIVIC ORGANIZATIONS - 19.3% (11.6% OF TOTAL INVESTMENTS)
$ 380 North Carolina Capital Facilities Financing Agency, Revenue Bonds, 10/11 at 100.00 AA+ $ 393,619
Duke University, Series 2001A, 5.125%, 10/01/26
500 North Carolina Capital Facilities Financing Agency, Revenue Bonds, 9/11 at 101.00 Baa2 518,625
High Point University, Series 2001, 5.125%, 9/01/18
1,430 University of North Carolina System, Pooled Revenue Refunding 10/12 at 100.00 AAA 1,522,249
Bonds, Series 2002A, 5.375%, 4/01/17 - AMBAC Insured
250 University of North Carolina Wilmington, Certificates of 6/16 at 100.00 AAA 260,578
Participation, Student Housing Project Revenue Bonds,
Series 2006, 5.000%, 6/01/37 - FGIC Insured
1,750 University of North Carolina, Chapel Hill, System Net Revenue 6/11 at 100.00 AA+ 1,808,223
Bonds, Series 2001A, 5.000%, 12/01/25
1,845 University of North Carolina, Chapel Hill, System Net Revenue No Opt. Call AA+ 1,936,180
Bonds, Series 2002B, 5.000%, 12/01/11
------------------------------------------------------------------------------------------------------------------------------------
6,155 Total Education and Civic Organizations 6,439,474
------------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE - 19.6% (11.9% OF TOTAL INVESTMENTS)
100 Charlotte-Mecklenburg Hospital Authority, North Carolina, 1/15 at 100.00 AA 101,866
Healthcare System Revenue Bonds, DBA Carolinas Healthcare
System, Series 2005A, 5.000%, 1/15/45
250 North Carolina Medical Care Commission, Health System Revenue 10/17 at 100.00 AA 242,253
Bonds, Mission St. Joseph's Health System, Series 2007,
4.500%, 10/01/31
1,110 North Carolina Medical Care Commission, Healthcare Facilities 1/12 at 100.00 A 1,149,205
Revenue Bonds, Union Regional Medical Center, Series 2002A,
5.250%, 1/01/15
2,500 North Carolina Medical Care Commission, Healthcare Revenue 11/07 at 100.00 AA- 2,502,275
Bonds, Carolina Medicorp, Series 1996, 5.250%, 5/01/26
1,500 North Carolina Medical Care Commission, Hospital Revenue 6/12 at 101.00 A 1,549,830
Bonds, Southeastern Regional Medical Center, Series 2002,
5.250%, 6/01/22
300 North Carolina Medical Care Commission, Revenue Bonds, 1/15 at 100.00 AAA 311,586
Blue Ridge Healthcare System, Series 2005, 5.000%, 1/01/33 -
FGIC Insured
300 North Carolina Medical Care Commission, Revenue Bonds, 11/14 at 100.00 AA 308,691
Northeast Medical Center, Series 2004, 5.000%, 11/01/24
150 North Carolina Medical Care Commission, Revenue Bonds, 1/16 at 100.00 N/R 152,084
Pines at Davidson, Series 2006A, 5.000%, 1/01/36
255 Onslow County Hospital Authority, North Carolina, FHA Insured 10/16 at 100.00 AAA 266,493
Mortgage Revenue Bonds, Onslow Memorial Hospital Project,
Series 2006, 5.000%, 4/01/31 - MBIA Insured
------------------------------------------------------------------------------------------------------------------------------------
6,465 Total Health Care 6,584,283
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/SINGLE FAMILY - 6.6% (4.0% OF TOTAL INVESTMENTS)
440 North Carolina Housing Finance Agency, Home Ownership Revenue 7/10 at 100.00 AAA 446,719
Bonds, 1998 Trust Agreement, Series 10A, 5.400%, 7/01/32 -
AMBAC Insured (Alternative Minimum Tax)
930 North Carolina Housing Finance Agency, Home Ownership Revenue 7/09 at 100.00 AA 942,146
Bonds, 1998 Trust Agreement, Series 5A, 5.625%, 7/01/30
(Alternative Minimum Tax)
500 North Carolina Housing Finance Agency, Home Ownership Revenue 1/17 at 100.00 AA 495,205
Bonds, Series 2007-29A, 4.800%, 7/01/33 (WI/DD, Settling
6/13/07) (Alternative Minimum Tax)
36
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/SINGLE FAMILY (continued)
$ 330 North Carolina Housing Finance Agency, Home Ownership Revenue 7/16 at 100.00 AA $ 328,700
Bonds, Series 25-A, 4.900%, 7/01/37 (Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
2,200 Total Housing/Single Family 2,212,770
------------------------------------------------------------------------------------------------------------------------------------
INDUSTRIALS - 1.5% (0.9% OF TOTAL INVESTMENTS)
500 North Carolina Capital Facilities Financing Agency, Exempt No Opt. Call BBB 499,515
Facilities Revenue Bonds, Waste Management Inc., Series 2001,
3.750%, 8/01/14 (Mandatory put 8/01/07) (Alternative
Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
LONG-TERM CARE - 2.3% (1.5% OF TOTAL INVESTMENTS)
300 North Carolina Medical Care Commission, Health Care Facilities 10/16 at 100.00 N/R 305,667
Revenue Bonds, Presbyterian Homes, Series 2006B,
5.200%, 10/01/21
200 North Carolina Medical Care Commission, Healthcare Facilities 10/16 at 100.00 N/R 207,102
Revenue Bonds, Presbyterian Homes, Series 2006,
5.400%, 10/01/27
250 North Carolina Medical Care Commission, Revenue Bonds, 9/15 at 100.00 N/R 255,230
United Church Homes and Services, Series 2005A,
5.250%, 9/01/21
------------------------------------------------------------------------------------------------------------------------------------
750 Total Long-Term Care 767,999
------------------------------------------------------------------------------------------------------------------------------------
MATERIALS - 1.6% (1.0% OF TOTAL INVESTMENTS)
515 Gaston County Industrial Facilities and Pollution Control Financing 8/15 at 100.00 N/R 541,100
Authority, North Carolina, National Gypsum Company Project
Exempt Facilities Revenue Bonds, Series 2005, 5.750%, 8/01/35
(Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL - 9.6% (5.7% OF TOTAL INVESTMENTS)
1,000 Durham, North Carolina, General Obligation Bonds, Series 2007, 4/17 at 100.00 AAA 1,075,110
5.000%, 4/01/21
North Carolina, General Obligation Bonds, Series 2004A:
1,000 5.000%, 3/01/18 3/14 at 100.00 AAA 1,059,800
1,000 5.000%, 3/01/22 3/14 at 100.00 AAA 1,054,350
------------------------------------------------------------------------------------------------------------------------------------
3,000 Total Tax Obligation/General 3,189,260
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED - 23.0% (13.9% OF TOTAL INVESTMENTS)
1,400 Charlotte, North Carolina, Certificates of Participation, 6/13 at 100.00 AA+ 1,485,302
Governmental Facilities Projects, Series 2003G,
5.375%, 6/01/26
1,870 Dare County, North Carolina, Certificates of Participation, 12/12 at 100.00 AAA 1,992,074
Series 2002, 5.250%, 6/01/15 - AMBAC Insured
1,250 Davidson County, North Carolina, Certificates of Participation, 6/14 at 100.00 AAA 1,330,838
Series 2004, 5.250%, 6/01/21 - AMBAC Insured
1,390 Durham, North Carolina, Certificates of Participation, Series 2005B, 6/15 at 100.00 AA+ 1,446,212
5.000%, 6/01/25
470 Raleigh, North Carolina, Certificates of Participation, Downtown 6/14 at 100.00 AA+ 490,140
Improvement Project, Series 2004B, 5.000%, 6/01/20
700 Sampson County, North Carolina, Certificates of Participation, 6/17 at 100.00 AAA 733,397
Series 2006, 5.000%, 6/01/34 - FSA Insured (UB)
195 Wilson, North Carolina, Certificates of Particiation, Public 5/17 at 100.00 AAA 203,756
Facilities, Series 2007A, 5.000%, 5/01/29 - AGC Insured
------------------------------------------------------------------------------------------------------------------------------------
7,275 Total Tax Obligation/Limited 7,681,719
------------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION - 6.2% (3.7% OF TOTAL INVESTMENTS)
450 Piedmont Triad Airport Authority, North Carolina, Airport Revenue 7/15 at 100.00 AAA 474,917
Bonds, Series 2005A, 5.000%, 7/01/20 - XLCA Insured
1,530 Raleigh Durham Airport Authority, North Carolina, Airport Revenue 5/11 at 101.00 Aaa 1,610,325
Bonds, Series 2001A, 5.250%, 11/01/18 - FGIC Insured
------------------------------------------------------------------------------------------------------------------------------------
1,980 Total Transportation 2,085,242
------------------------------------------------------------------------------------------------------------------------------------
37
NRB
Nuveen North Carolina Dividend Advantage Municipal Fund (continued)
Portfolio of INVESTMENTS as of 5-31-07
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
U.S. GUARANTEED - 15.7% (9.5% OF TOTAL INVESTMENTS) (4)
$ 1,000 Broad River Water Authority, North Carolina, Water System Revenue 6/10 at 101.00 Aaa $ 1,053,050
Bonds, Series 2000, 5.375%, 6/01/26 (Pre-refunded 6/01/10) -
MBIA Insured
500 Greensboro, North Carolina, Combined Enterprise System Revenue 6/11 at 101.00 AA+ (4) 528,005
Bonds, Series 2001A, 5.125%, 6/01/21 (Pre-refunded 6/01/11)
1,620 North Carolina Capital Facilities Financing Agency, Revenue Bonds, 10/11 at 100.00 Aaa 1,701,956
Duke University, Series 2001A, 5.125%, 10/01/26
(Pre-refunded 10/01/11)
800 North Carolina Medical Care Commission, Health System Revenue 10/11 at 101.00 AA (4) 849,896
Bonds, Mission St. Joseph's Health System, Series 2001,
5.250%, 10/01/31 (Pre-refunded 10/01/11)
1,020 University of North Carolina System, Pooled Revenue Refunding 10/12 at 100.00 Aaa 1,093,532
Bonds, Series 2002A, 5.375%, 4/01/17 (Pre-refunded 10/01/12) -
AMBAC Insured
------------------------------------------------------------------------------------------------------------------------------------
4,940 Total U.S. Guaranteed 5,226,439
------------------------------------------------------------------------------------------------------------------------------------
UTILITIES - 22.5% (13.7% OF TOTAL INVESTMENTS)
Greenville, North Carolina, Combined Enterprise System Revenue
Bonds, Series 2001:
1,000 5.250%, 9/01/20 - FSA Insured 9/11 at 101.00 AAA 1,055,710
500 5.250%, 9/01/21 - FSA Insured 9/11 at 101.00 AAA 527,195
500 North Carolina Eastern Municipal Power Agency, Power System 1/16 at 100.00 AAA 539,545
Revenue Bonds, Series 2005, 5.250%, 1/01/20 - AMBAC Insured
2,500 North Carolina Eastern Municipal Power Agency, Power System 7/07 at 100.00 AAA 2,503,125
Revenue Refunding Bonds, Series 1993B, 5.500%, 1/01/17 -
FGIC Insured
1,000 North Carolina Eastern Municipal Power Agency, Power System 1/09 at 102.00 BBB 1,042,560
Revenue Refunding Bonds, Series 1999B, 5.650%, 1/01/16
250 Puerto Rico Electric Power Authority, Power Revenue Bonds, 7/15 at 100.00 AAA 263,493
Series 2005RR, 5.000%, 7/01/24 - FGIC Insured
1,500 Wake County Industrial Facilities and Pollution Control Financing 2/12 at 101.00 A3 1,580,310
Authority, North Carolina, Revenue Refunding Bonds, Carolina
Power and Light Company, Series 2002, 5.375%, 2/01/17
------------------------------------------------------------------------------------------------------------------------------------
7,250 Total Utilities 7,511,938
------------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER - 37.6% (22.6% OF TOTAL INVESTMENTS)
2,250 Charlotte, North Carolina, Water and Sewerage System Revenue 6/11 at 101.00 AAA 2,350,101
Bonds, Series 2001, 5.125%, 6/01/26
500 Greensboro, North Carolina, Combined Enterprise System Revenue 6/15 at 100.00 AA+ 526,073
Bonds, Series 2005A, 5.000%, 6/01/25
400 Onslow County, North Carolina, Combined Enterprise System 6/14 at 100.00 AAA 417,874
Revenue Bonds, Series 2004B, 5.000%, 6/01/23 - XLCA Insured
Raleigh, North Carolina, Combined Enterprise System Revenue
Bonds, Series 2006A:
4,440 5.000%, 3/01/31 (UB) 3/16 at 100.00 AAA 4,665,996
3,000 5.000%, 3/01/36 (UB) 3/16 at 100.00 AAA 3,141,570
38
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER (continued)
$ 5 Raleigh, North Carolina, Combined Enterprise System Revenue 3/16 at 100.00 AAA $ 5,708
Bonds, Series 2006A, Residuals Series II-R-645-1,
6.806%, 3/01/36 (IF)
1,385 Winstom-Salem, North Carolina, Water and Sewer System 6/17 at 100.00 AAA 1,456,231
Revenue Bonds, Series 2007A, 5.000%, 6/01/37 (UB)
------------------------------------------------------------------------------------------------------------------------------------
11,980 Total Water and Sewer 12,563,553
------------------------------------------------------------------------------------------------------------------------------------
$ 53,010 Total Investments (cost $54,022,454) - 165.5% 55,303,292
=============-----------------------------------------------------------------------------------------------------------------------
Floating Rate Obligations - (19.0)% (6,350,000)
--------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 4.4% 1,455,253
--------------------------------------------------------------------------------------------------------------------
Preferred Shares, at Liquidation Value - (50.9)% (17,000,000)
--------------------------------------------------------------------------------------------------------------------
Net Assets Applicable to Common Shares - 100% $ 33,408,545
====================================================================================================================
FORWARD SWAPS OUTSTANDING AT MAY 31, 2007:
FUND FIXED RATE UNREALIZED
NOTIONAL PAY/RECEIVE FLOATING RATE FIXED RATE PAYMENT EFFECTIVE TERMINATION APPRECIATION
COUNTERPARTY AMOUNT FLOATING RATE INDEX (ANNUALIZED) FREQUENCY DATE (5) DATE (DEPRECIATION)
------------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs $2,700,000 Pay 3-Month USD-LIBOR 5.682% Semi-Annually 7/10/07 7/10/12 $(38,891)
Goldman Sachs 800,000 Pay 3-Month USD-LIBOR 5.803 Semi-Annually 7/10/07 7/10/37 21,594
------------------------------------------------------------------------------------------------------------------------------------
$(17,297)
====================================================================================================================================
USD-LIBOR (United States Dollar-London Inter-Bank Offered Rate)
(1) All percentages shown in the Portfolio of Investments
are based on net assets applicable to Common shares
unless otherwise noted.
(2) Optional Call Provisions (not covered by the report of
independent registered public accounting firm): Dates
(month and year) and prices of the earliest optional
call or redemption. There may be other call provisions
at varying prices at later dates. Certain
mortgage-backed securities may be subject to periodic
principal paydowns.
(3) Ratings (not covered by the report of independent
registered public accounting firm): Using the higher of
Standard & Poor's or Moody's rating. Ratings below BBB
by Standard & Poor's Group or Baa by Moody's Investor
Service, Inc. are considered to be below investment
grade.
(4) Backed by an escrow or trust containing sufficient U.S.
Government or U.S. Government agency securities which
ensure the timely payment of principal and interest.
Such investments are normally considered to be
equivalent to AAA rated securities.
(5) Effective date represents the date on which both the
Fund and counterparty commence interest payment
accruals on each forward swap contract.
N/R Not rated.
WI/DD Purchased on a when-issued or delayed delivery basis.
(IF) Inverse floating rate investment.
(UB) Underlying bond of an inverse floating rate trust
reflected as a financing transaction pursuant to the
provision of SFAS No. 140.
See accompanying notes to financial statements.
39
NNO
Nuveen North Carolina Dividend Advantage Municipal Fund 2
Portfolio of INVESTMENTS
as of 5-31-07
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
EDUCATION AND CIVIC ORGANIZATIONS - 16.1% (10.1% OF TOTAL INVESTMENTS)
Appalachian State University, North Carolina, Housing and Student
Center System Revenue Refunding Bonds, Series 2001:
$ 600 5.125%, 7/15/24 - MBIA Insured 1/11 at 101.00 Aaa $ 625,626
200 5.125%, 7/15/27 - MBIA Insured 1/11 at 101.00 Aaa 207,774
Appalachian State University, North Carolina, Housing and Student
Center System Revenue Refunding Bonds, Series 2002:
1,040 5.000%, 7/15/14 - MBIA Insured 7/12 at 100.00 Aaa 1,093,352
1,000 5.000%, 7/15/15 - MBIA Insured 7/12 at 100.00 Aaa 1,045,100
North Carolina Capital Facilities Financing Agency, Revenue
Bonds, Duke University, Series 2001A:
715 5.125%, 10/01/26 10/11 at 100.00 AA+ 740,626
380 5.125%, 10/01/41 10/11 at 100.00 AA+ 393,619
1,000 University of North Carolina System, Pooled Revenue Bonds, 4/15 at 100.00 AAA 1,053,560
Series 2005A, 5.000%, 4/01/22 - AMBAC Insured
635 University of North Carolina System, Pooled Revenue Refunding 10/12 at 100.00 AAA 676,999
Bonds, Series 2002A, 5.375%, 4/01/19 - AMBAC Insured
University of North Carolina Wilmington, Certificates of
Participation, Student Housing Project Revenue Bonds, Series
2006:
500 5.000%, 6/01/21 - FGIC Insured 6/16 at 100.00 AAA 528,760
250 5.000%, 6/01/37 - FGIC Insured 6/16 at 100.00 AAA 260,578
1,500 University of North Carolina, Chapel Hill, System Net Revenue No Opt. Call AA+ 1,574,130
Bonds, Series 2002B, 5.000%, 12/01/11
250 University of North Carolina, Charlotte, Certificates of 3/15 at 100.00 AAA 263,013
Participation, Student Housing Project, Series 2005,
5.000%, 3/01/21 - AMBAC Insured
400 University of North Carolina, Greensboro, General Revenue 4/11 at 101.00 AAA 424,540
Refunding Bonds, Series 2002B, 5.375%, 4/01/17 - FSA Insured
------------------------------------------------------------------------------------------------------------------------------------
8,470 Total Education and Civic Organizations 8,887,677
------------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE - 23.8% (14.9% OF TOTAL INVESTMENTS)
2,130 Charlotte-Mecklenburg Hospital Authority, North Carolina, 1/11 at 101.00 AA 2,175,220
Healthcare System Revenue Bonds, Carolinas Healthcare
System, Series 2001A, 5.000%, 1/15/31
200 Charlotte-Mecklenburg Hospital Authority, North Carolina, 1/15 at 100.00 AA 203,732
Healthcare System Revenue Bonds, DBA Carolinas Healthcare
System, Series 2005A, 5.000%, 1/15/45
150 North Carolina Medical Care Commission, Health System Revenue 10/17 at 100.00 AA 145,352
Bonds, Mission St. Joseph's Health System, Series 2007,
4.500%, 10/01/31
2,000 North Carolina Medical Care Commission, Healthcare Facilities 11/13 at 100.00 AA- 2,060,180
Revenue Bonds, Novant Health Obligated Group, Series 2003A,
5.000%, 11/01/20
1,005 North Carolina Medical Care Commission, Healthcare Facilities 1/12 at 100.00 A 1,045,572
Revenue Bonds, Union Regional Medical Center, Series 2002A,
5.250%, 1/01/13
North Carolina Medical Care Commission, Hospital Revenue Bonds,
Southeastern Regional Medical Center, Series 2002:
1,000 5.500%, 6/01/15 6/12 at 101.00 A 1,058,320
2,000 5.250%, 6/01/22 6/12 at 101.00 A 2,066,440
40
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE (continued)
$ 2,000 North Carolina Medical Care Commission, Revenue Bonds, 1/15 at 100.00 AAA $ 2,077,240
Blue Ridge Healthcare System, Series 2005, 5.000%, 1/01/33 -
FGIC Insured
North Carolina Medical Care Commission, Revenue Bonds,
Cleveland County Healthcare System, Series 2004A:
595 5.250%, 7/01/20 - AMBAC Insured 7/14 at 100.00 AAA 633,104
500 5.250%, 7/01/22 - AMBAC Insured 7/14 at 100.00 AAA 530,760
500 North Carolina Medical Care Commission, Revenue Bonds, 11/14 at 100.00 AA 514,485
Northeast Medical Center, Series 2004, 5.000%, 11/01/24
185 North Carolina Medical Care Commission, Revenue Bonds, 1/16 at 100.00 N/R 187,570
Pines at Davidson, Series 2006A, 5.000%, 1/01/36
430 Onslow County Hospital Authority, North Carolina, FHA Insured 10/16 at 100.00 AAA 449,380
Mortgage Revenue Bonds, Onslow Memorial Hospital Project,
Series 2006, 5.000%, 4/01/31 - MBIA Insured
------------------------------------------------------------------------------------------------------------------------------------
12,695 Total Health Care 13,147,355
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/SINGLE FAMILY - 6.2% (3.9% OF TOTAL INVESTMENTS)
375 North Carolina Housing Finance Agency, Home Ownership Revenue 7/10 at 100.00 AAA 380,726
Bonds, 1998 Trust Agreement, Series 10A, 5.400%, 7/01/32 -
AMBAC Insured (Alternative Minimum Tax)
North Carolina Housing Finance Agency, Home Ownership Revenue
Bonds, Series 13A:
830 4.700%, 7/01/12 (Alternative Minimum Tax) 7/11 at 100.00 AA 844,152
835 4.850%, 7/01/13 (Alternative Minimum Tax) 7/11 at 100.00 AA 851,591
850 North Carolina Housing Finance Agency, Home Ownership Revenue 1/17 at 100.00 AA 841,849
Bonds, Series 2007-29A, 4.800%, 7/01/33
(WI/DD, Settling 6/13/07) (Alternative Minimum Tax)
510 North Carolina Housing Finance Agency, Home Ownership 7/16 at 100.00 AA 507,991
Revenue Bonds, Series 25-A, 4.900%, 7/01/37
(Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
3,400 Total Housing/Single Family 3,426,309
------------------------------------------------------------------------------------------------------------------------------------
INDUSTRIALS - 1.4% (0.9% OF TOTAL INVESTMENTS)
800 North Carolina Capital Facilities Financing Agency, Exempt No Opt. Call BBB 799,224
Facilities Revenue Bonds, Waste Management Inc., Series 2001,
3.750%, 8/01/14 (Mandatory put 8/01/07)
(Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
LONG-TERM CARE - 2.0% (1.3% OF TOTAL INVESTMENTS)
600 North Carolina Medical Care Commission, Health Care Facilities 10/16 at 100.00 N/R 611,334
Revenue Bonds, Presbyterian Homes, Series 2006B,
5.200%, 10/01/21
250 North Carolina Medical Care Commission, Healthcare Facilities 10/16 at 100.00 N/R 258,878
Revenue Bonds, Presbyterian Homes, Series 2006,
5.400%, 10/01/27
250 North Carolina Medical Care Commission, Revenue Bonds, 9/15 at 100.00 N/R 255,230
United Church Homes and Services, Series 2005A,
5.250%, 9/01/21
------------------------------------------------------------------------------------------------------------------------------------
1,100 Total Long-Term Care 1,125,442
------------------------------------------------------------------------------------------------------------------------------------
MATERIALS - 3.8% (2.3% OF TOTAL INVESTMENTS)
865 Gaston County Industrial Facilities and Pollution Control Financing 8/15 at 100.00 N/R 908,838
Authority, North Carolina, National Gypsum Company Project
Exempt Facilities Revenue Bonds, Series 2005, 5.750%, 8/01/35
(Alternative Minimum Tax)
1,100 Northampton County Industrial Facilities and Pollution Control 2/11 at 101.00 BBB 1,164,823
Financing Authority, North Carolina, Environmental Improvement
Revenue Bonds, International Paper Company, Series 2001A,
6.200%, 2/01/25 (Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
1,965 Total Materials 2,073,661
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL - 7.4% (4.7% OF TOTAL INVESTMENTS)
250 Durham County, North Carolina, General Obligation Bonds, 5/10 at 102.00 AAA 266,705
Series 2000, 5.600%, 5/01/15
1,475 Durham, North Carolina, General Obligation Bonds, Series 2007, 4/17 at 100.00 AAA 1,582,085
5.000%, 4/01/22
41
NNO
Nuveen North Carolina Dividend Advantage Municipal Fund 2 (continued)
Portfolio of INVESTMENTS as of 5-31-07
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL (continued)
$ 1,000 North Carolina, General Obligation Bonds, Series 2004A, 3/14 at 100.00 AAA $ 1,054,350
5.000%, 3/01/22
1,150 Sampson County, North Carolina, Certificates of Participation, 6/17 at 100.00 AAA 1,204,867
Series 2006, 5.000%, 6/01/34 - FSA Insured (UB)
------------------------------------------------------------------------------------------------------------------------------------
3,875 Total Tax Obligation/General 4,108,007
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED - 29.7% (18.7% OF TOTAL INVESTMENTS)
30 Cabarrus County, North Carolina, Certificates of Participation, 2/13 at 100.00 AA- 31,810
Series 2002, 5.250%, 2/01/16
1,750 Charlotte, North Carolina, Certificates of Participation, 6/13 at 100.00 AA+ 1,807,173
Governmental Facilities Projects, Series 2003G,
5.000%, 6/01/28
1,850 Charlotte, North Carolina, Storm Water Fee Revenue Bonds, 6/12 at 101.00 AAA 1,972,415
Series 2002, 5.250%, 6/01/18
Hartnett County, North Carolina, Certificates of Participation,
Series 2002:
1,000 5.250%, 12/01/15 - FSA Insured 12/12 at 101.00 AAA 1,064,880
2,025 5.375%, 12/01/16 - FSA Insured 12/12 at 101.00 AAA 2,187,020
715 Lee County, North Carolina, Certificates of Participation, 4/14 at 100.00 AAA 760,681
Public Schools and Community College, Series 2004,
5.250%, 4/01/20 - FSA Insured
1,380 Pasquotank County, North Carolina, Certificates of Participation, 6/14 at 100.00 AAA 1,436,594
Series 2004, 5.000%, 6/01/25 - MBIA Insured
2,070 Pitt County, North Carolina, Certificates of Participation, School 4/14 at 100.00 AAA 2,146,818
Facilities Project, Series 2004B, 5.000%, 4/01/29 -
AMBAC Insured
1,270 Puerto Rico Infrastructure Financing Authority, Special Tax No Opt. Call AAA 1,415,390
Revenue Bonds, Series 2005C, 5.500%, 7/01/16 -
AMBAC Insured
Raleigh, North Carolina, Certificates of Participation, Downtown
Improvement Project, Series 2004B:
805 5.000%, 6/01/20 6/14 at 100.00 AA+ 839,494
1,310 5.000%, 6/01/21 6/14 at 100.00 AA+ 1,363,723
1,000 Randolph County, North Carolina, Certificates of Participation, 6/14 at 102.00 AAA 1,059,060
Series 2004, 5.000%, 6/01/20 - FSA Insured
325 Wilson, North Carolina, Certificates of Particiation, Public 5/17 at 100.00 AAA 339,593
Facilities, Series 2007A, 5.000%, 5/01/29 - AGC Insured
------------------------------------------------------------------------------------------------------------------------------------
15,530 Total Tax Obligation/Limited 16,424,651
------------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION - 16.9% (10.7% OF TOTAL INVESTMENTS)
2,035 Charlotte, North Carolina, Airport Revenue Bonds, Series 2004A, 7/14 at 100.00 AAA 2,110,417
5.000%, 7/01/34 - MBIA Insured
590 Piedmont Triad Airport Authority, North Carolina, Airport Revenue 7/15 at 100.00 AAA 622,668
Bonds, Series 2005A, 5.000%, 7/01/20 - XLCA Insured
Raleigh Durham Airport Authority, North Carolina, Airport Revenue
Bonds, Series 2001A:
1,000 5.250%, 11/01/15 - FGIC Insured 5/11 at 101.00 Aaa 1,051,200
2,320 5.250%, 11/01/16 - FGIC Insured 5/11 at 101.00 Aaa 2,435,861
2,230 5.250%, 11/01/17 - FGIC Insured 5/11 at 101.00 Aaa 2,348,324
University of North Carolina, Charlotte, Parking System Revenue
Bonds, Series 2002:
270 5.000%, 1/01/20 - MBIA Insured 1/12 at 101.00 Aaa 282,077
500 5.125%, 1/01/27 - MBIA Insured 1/12 at 101.00 Aaa 522,280
------------------------------------------------------------------------------------------------------------------------------------
8,945 Total Transportation 9,372,827
------------------------------------------------------------------------------------------------------------------------------------
42
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
U.S. GUARANTEED - 17.0% (10.7% OF TOTAL INVESTMENTS) (4)
North Carolina Capital Facilities Financing Agency, Revenue Bonds,
Duke University, Series 2001A:
$ 500 5.125%, 10/01/26 (Pre-refunded 10/01/11) 10/11 at 100.00 Aaa $ 525,295
1,620 5.125%, 10/01/41 (Pre-refunded 10/01/11) 10/11 at 100.00 Aaa 1,701,956
370 North Carolina Medical Care Commission, Health System Revenue 10/11 at 101.00 AA (4) 393,077
Bonds, Mission St. Joseph's Health System, Series 2001,
5.250%, 10/01/31 (Pre-refunded 10/01/11)
Raleigh, North Carolina, Combined Enterprise System Revenue
Bonds, Series 2004:
1,000 5.000%, 3/01/21 (Pre-refunded 3/01/14) 3/14 at 100.00 AAA 1,063,750
1,750 5.000%, 3/01/22 (Pre-refunded 3/01/14) 3/14 at 100.00 AAA 1,861,563
465 University of North Carolina System, Pooled Revenue Refunding 10/12 at 100.00 Aaa 498,522
Bonds, Series 2002A, 5.375%, 4/01/19 (Pre-refunded 10/01/12) -
AMBAC Insured
3,200 Wake County, North Carolina, General Obligation School Bonds, 2/10 at 101.50 AAA 3,371,488
Series 2000, 5.400%, 2/01/13 (Pre-refunded 2/01/10)
------------------------------------------------------------------------------------------------------------------------------------
8,905 Total U.S. Guaranteed 9,415,651
------------------------------------------------------------------------------------------------------------------------------------
UTILITIES - 13.8% (8.7% OF TOTAL INVESTMENTS)
500 North Carolina Eastern Municipal Power Agency, Power System 1/16 at 100.00 AAA 539,545
Revenue Bonds, Series 2005, 5.250%, 1/01/20 - AMBAC Insured
2,500 North Carolina Eastern Municipal Power Agency, Power System 7/07 at 100.00 AAA 2,503,125
Revenue Refunding Bonds, Series 1993B, 5.500%, 1/01/17 -
FGIC Insured
1,500 North Carolina Municipal Power Agency 1, Catawba Electric 1/10 at 101.00 A3 1,602,930
Revenue Bonds, Series 1999B, 6.500%, 1/01/20
250 Puerto Rico Electric Power Authority, Power Revenue Bonds, 7/15 at 100.00 AAA 263,493
Series 2005RR, 5.000%, 7/01/24 - FGIC Insured
2,600 Wake County Industrial Facilities and Pollution Control Financing 2/12 at 101.00 A3 2,739,204
Authority, North Carolina, Revenue Refunding Bonds, Carolina
Power and Light Company, Series 2002, 5.375%, 2/01/17
------------------------------------------------------------------------------------------------------------------------------------
7,350 Total Utilities 7,648,297
------------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER - 20.8% (13.1% OF TOTAL INVESTMENTS)
2,520 Charlotte, North Carolina, Water and Sewerage System Revenue No Opt. Call AAA 2,710,329
Bonds, Series 2002A, 5.250%, 7/01/13
1,000 Durham County, North Carolina, Enterprise System Revenue Bonds, 6/13 at 100.00 AAA 1,042,040
Series 2002, 5.000%, 6/01/23 - MBIA Insured
Raleigh, North Carolina, Combined Enterprise System Revenue
Bonds, Series 2006A:
3,095 5.000%, 3/01/31 (UB) 3/16 at 100.00 AAA 3,252,536
975 5.000%, 3/01/36 (UB) 3/16 at 100.00 AAA 1,021,010
43
NNO
Nuveen North Carolina Dividend Advantage Municipal Fund 2 (continued)
Portfolio of INVESTMENTS as of 5-31-07
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER (continued)
$ 40 Raleigh, North Carolina, Combined Enterprise System Revenue 3/16 at 100.00 AAA $ 46,109
Bonds, Series 2006A, Residuals Series II-R-645-1,
6.807%, 3/01/31 (IF)
1,000 Wilmington, North Carolina, Water and Sewer Revenue Bonds, 6/15 at 100.00 AAA 1,052,150
Series 2005, 5.000%, 6/01/25 - FSA Insured
2,275 Winstom-Salem, North Carolina, Water and Sewer System Revenue 6/17 at 100.00 AAA 2,392,003
Bonds, Series 2007A, 5.000%, 6/01/37 (UB)
------------------------------------------------------------------------------------------------------------------------------------
10,905 Total Water and Sewer 11,516,176
------------------------------------------------------------------------------------------------------------------------------------
$ 83,940 Total Investments (cost $85,869,368) - 158.9% 87,945,277
=============-----------------------------------------------------------------------------------------------------------------------
Floating Rate Obligations - (9.0)% (4,995,000)
--------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 0.7% 398,370
--------------------------------------------------------------------------------------------------------------------
Preferred Shares, at Liquidation Value - (50.6)% (28,000,000)
--------------------------------------------------------------------------------------------------------------------
Net Assets Applicable to Common Shares - 100% $ 55,348,647
====================================================================================================================
(1) All percentages shown in the Portfolio of Investments
are based on net assets applicable to Common shares
unless otherwise noted.
(2) Optional Call Provisions (not covered by the report of
independent registered public accounting firm): Dates
(month and year) and prices of the earliest optional
call or redemption. There may be other call provisions
at varying prices at later dates. Certain
mortgage-backed securities may be subject to periodic
principal paydowns.
(3) Ratings (not covered by the report of independent
registered public accounting firm): Using the higher of
Standard & Poor's or Moody's rating. Ratings below BBB
by Standard & Poor's Group or Baa by Moody's Investor
Service, Inc. are considered to be below investment
grade.
(4) Backed by an escrow or trust containing sufficient U.S.
Government or U.S. Government agency securities which
ensure the timely payment of principal and interest.
Such investments are normally considered to be
equivalent to AAA rated securities.
N/R Not rated.
WI/DD Purchased on a when-issued or delayed delivery basis.
(IF) Inverse floating rate investment.
(UB) Underlying bond of an inverse floating rate trust
reflected as a financing transaction pursuant to the
provision of SFAS No. 140.
See accompanying notes to financial statements.
44
NII
Nuveen North Carolina Dividend Advantage Municipal Fund 3
Portfolio of INVESTMENTS
as of 5-31-07
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
CONSUMER STAPLES - 3.7% (2.3% OF TOTAL INVESTMENTS)
$ 2,000 Puerto Rico, The Children's Trust Fund, Tobacco Settlement 5/12 at 100.00 BBB $ 2,096,780
Asset-Backed Refunding Bonds, Series 2002, 5.500%, 5/15/39
------------------------------------------------------------------------------------------------------------------------------------
EDUCATION AND CIVIC ORGANIZATIONS - 5.0% (3.1% OF TOTAL INVESTMENTS)
North Carolina Capital Facilities Financing Agency, Revenue Bonds,
Duke University, Series 2001A:
330 5.125%, 10/01/26 10/11 at 100.00 AA+ 341,827
95 5.125%, 10/01/41 10/11 at 100.00 AA+ 98,405
1,290 University of North Carolina System, Pooled Revenue Refunding 10/12 at 100.00 AAA 1,337,537
Bonds, Series 2002A, 5.000%, 4/01/27 - AMBAC Insured
University of North Carolina Wilmington, Certificates of
Participation, Student Housing Project Revenue Bonds,
Series 2006:
500 5.000%, 6/01/21 - FGIC Insured 6/16 at 100.00 AAA 528,760
500 5.000%, 6/01/37 - FGIC Insured 6/16 at 100.00 AAA 521,155
------------------------------------------------------------------------------------------------------------------------------------
2,715 Total Education and Civic Organizations 2,827,684
------------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE - 15.6% (9.6% OF TOTAL INVESTMENTS)
750 Charlotte-Mecklenburg Hospital Authority, North Carolina, 1/11 at 101.00 AA 765,923
Healthcare System Revenue Bonds, Carolinas Healthcare
System, Series 2001A, 5.000%, 1/15/31
2,000 Charlotte-Mecklenburg Hospital Authority, North Carolina, 7/07 at 102.00 AA 2,028,000
Healthcare System Revenue Bonds, DBA Carolina Healthcare
System, Series 1997A, 5.125%, 1/15/22
200 Charlotte-Mecklenburg Hospital Authority, North Carolina, 1/15 at 100.00 AA 203,732
Healthcare System Revenue Bonds, DBA Carolinas Healthcare
System, Series 2005A, 5.000%, 1/15/45
2,100 North Carolina Medical Care Commission, Health System Revenue 10/17 at 100.00 AA 2,034,921
Bonds, Mission St. Joseph's Health System, Series 2007,
4.500%, 10/01/31
2,000 North Carolina Medical Care Commission, Healthcare Facilities 11/13 at 100.00 AA- 2,071,700
Revenue Bonds, Novant Health Obligated Group, Series 2003A,
5.000%, 11/01/18
500 North Carolina Medical Care Commission, Revenue Bonds, 1/15 at 100.00 AAA 519,310
Blue Ridge Healthcare System, Series 2005, 5.000%, 1/01/33 -
FGIC Insured
500 North Carolina Medical Care Commission, Revenue Bonds, 11/14 at 100.00 AA 514,485
Northeast Medical Center, Series 2004, 5.000%, 11/01/24
190 North Carolina Medical Care Commission, Revenue Bonds, 1/16 at 100.00 N/R 192,639
Pines at Davidson, Series 2006A, 5.000%, 1/01/36
430 Onslow County Hospital Authority, North Carolina, FHA Insured 10/16 at 100.00 AAA 449,380
Mortgage Revenue Bonds, Onslow Memorial Hospital Project,
Series 2006, 5.000%, 4/01/31 - MBIA Insured
------------------------------------------------------------------------------------------------------------------------------------
8,670 Total Health Care 8,780,090
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/MULTIFAMILY - 1.8% (1.1% OF TOTAL INVESTMENTS)
1,000 Mecklenburg County, North Carolina, FNMA Multifamily Housing 7/13 at 105.00 AAA 1,034,820
Revenue Bonds, Little Rock Apartments, Series 2003,
5.150%, 1/01/22 (Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/SINGLE FAMILY - 4.1% (2.5% OF TOTAL INVESTMENTS)
940 North Carolina Housing Finance Agency, Home Ownership Revenue 7/09 at 100.00 AA 952,276
Bonds, 1998 Trust Agreement, Series 5A, 5.625%, 7/01/30
(Alternative Minimum Tax)
45
NII
Nuveen North Carolina Dividend Advantage Municipal Fund 3 (continued)
Portfolio of INVESTMENTS as of 5-31-07
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/SINGLE FAMILY (continued)
$ 850 North Carolina Housing Finance Agency, Home Ownership Revenue 1/17 at 100.00 AA $ 841,849
Bonds, Series 2007-29A, 4.800%, 7/01/33 (WI/DD, Settling 6/13/07)
(Alternative Minimum Tax)
510 North Carolina Housing Finance Agency, Home Ownership Revenue 7/16 at 100.00 AA 507,991
Bonds, Series 25-A, 4.900%, 7/01/37 (Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
2,300 Total Housing/Single Family 2,302,116
------------------------------------------------------------------------------------------------------------------------------------
INDUSTRIALS - 1.4% (0.9% OF TOTAL INVESTMENTS)
800 North Carolina Capital Facilities Financing Agency, Exempt No Opt. Call BBB 799,224
Facilities Revenue Bonds, Waste Management Inc., Series 2001,
3.750%, 8/01/14 (Mandatory put 8/01/07) (Alternative
Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
LONG-TERM CARE - 1.5% (0.9% OF TOTAL INVESTMENTS)
600 North Carolina Medical Care Commission, Health Care Facilities 10/16 at 100.00 N/R 611,334
Revenue Bonds, Presbyterian Homes, Series 2006B,
5.200%, 10/01/21
250 North Carolina Medical Care Commission, Healthcare Facilities 10/16 at 100.00 N/R 258,878
Revenue Bonds, Presbyterian Homes, Series 2006,
5.400%, 10/01/27
------------------------------------------------------------------------------------------------------------------------------------
850 Total Long-Term Care 870,212
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL - 21.1% (13.0% OF TOTAL INVESTMENTS)
3,900 Cary, North Carolina, General Obligation Water and Sewer Bonds, 3/11 at 102.00 AAA 4,105,062
Series 2001, 5.000%, 3/01/20
1,500 Durham, North Carolina, General Obligation Bonds, Series 2007, 4/17 at 100.00 AAA 1,608,900
5.000%, 4/01/22
Lincoln County, North Carolina, General Obligation Bonds,
Series 2002A:
850 5.000%, 6/01/19 - FGIC Insured 6/12 at 101.00 AAA 895,178
900 5.000%, 6/01/20 - FGIC Insured 6/12 at 101.00 AAA 946,854
1,050 5.000%, 6/01/21 - FGIC Insured 6/12 at 101.00 AAA 1,099,245
500 North Carolina, General Obligation Bonds, Series 2004A, 3/14 at 100.00 AAA 527,175
5.000%, 3/01/22
2,000 Puerto Rico, General Obligation and Public Improvement Refunding No Opt. Call AAA 2,349,140
Bonds, Series 1997, 6.500%, 7/01/15 - MBIA Insured
400 Raleigh, North Carolina, General Obligation Bonds, Series 2002, 6/12 at 100.00 AAA 417,044
5.000%, 6/01/21
------------------------------------------------------------------------------------------------------------------------------------
11,100 Total Tax Obligation/General 11,948,598
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED - 29.3% (18.0% OF TOTAL INVESTMENTS)
1,800 Catawba County, North Carolina, Certificates of Participation, 6/14 at 100.00 Aaa 1,916,406
Series 2004, 5.250%, 6/01/22 - MBIA Insured
1,500 Centennial Authority, North Carolina, Hotel Tax Revenue Bonds, 9/07 at 102.00 AAA 1,534,395
Arena Project, Series 1997, 5.125%, 9/01/19 - FSA Insured
2,750 Charlotte, North Carolina, Certificates of Participation, 6/13 at 100.00 AA+ 2,833,985
Governmental Facilities Projects, Series 2003G, 5.000%, 6/01/33
3,000 Dare County, North Carolina, Certificates of Participation, 12/12 at 100.00 AAA 3,119,760
Series 2002, 5.000%, 6/01/23 - AMBAC Insured
500 Lee County, North Carolina, Certificates of Participation, 4/14 at 100.00 AAA 531,945
Public Schools and Community College, Series 2004,
5.250%, 4/01/20 - FSA Insured
1,000 North Carolina, Certificates of Participation, Repair and Renovation 6/14 at 100.00 AA+ 1,042,850
Project, Series 2004B, 5.000%, 6/01/20
2,000 Rutherford County, North Carolina, Certificates of Participation, 9/12 at 101.00 AAA 2,095,420
Series 2002, 5.000%, 9/01/21 - AMBAC Insured
1,200 Sampson County, North Carolina, Certificates of Participation, 6/17 at 100.00 AAA 1,257,252
Series 2006, 5.000%, 6/01/34 - FSA Insured (UB)
46
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED (continued)
$ 1,785 Union County, North Carolina, Certificates of Participation, 6/13 at 101.00 AAA $ 1,882,211
Series 2003, 5.000%, 6/01/20 - AMBAC Insured
325 Wilson, North Carolina, Certificates of Particiation, 5/17 at 100.00 AAA 339,593
Public Facilities, Series 2007A, 5.000%, 5/01/29 - AGC Insured
------------------------------------------------------------------------------------------------------------------------------------
15,860 Total Tax Obligation/Limited 16,553,817
------------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION - 9.0% (5.5% OF TOTAL INVESTMENTS)
Raleigh Durham Airport Authority, North Carolina, Airport Revenue
Bonds, Series 2001A:
1,780 5.250%, 11/01/15 - FGIC Insured 5/11 at 101.00 Aaa 1,871,136
3,100 5.000%, 11/01/20 - FGIC Insured 5/11 at 101.00 Aaa 3,225,085
------------------------------------------------------------------------------------------------------------------------------------
4,880 Total Transportation 5,096,221
------------------------------------------------------------------------------------------------------------------------------------
U.S. GUARANTEED - 22.6% (13.9% OF TOTAL INVESTMENTS) (4)
500 Broad River Water Authority, North Carolina, Water System Revenue 6/10 at 101.00 Aaa 526,525
Bonds, Series 2000, 5.375%, 6/01/26 (Pre-refunded 6/01/10) -
MBIA Insured
50 Cumberland County, North Carolina, Hospital Facility Revenue 10/09 at 101.00 A- (4) 52,065
Bonds, Cumberland County Hospital System Inc., Cape Fear
Valley Health System, Series 1999, 5.250%, 10/01/29
(Pre-refunded 10/01/09)
Forsyth County, North Carolina, Certificates of Participation,
Public Facilities and Equipment Project, Series 2002:
1,325 5.125%, 1/01/16 (Pre-refunded 1/01/13) 1/13 at 101.00 AA+ (4) 1,416,717
770 5.250%, 1/01/19 (Pre-refunded 1/01/13) 1/13 at 101.00 AA+ (4) 828,081
1,235 5.250%, 1/01/23 (Pre-refunded 1/01/13) 1/13 at 101.00 AA+ (4) 1,328,156
North Carolina Capital Facilities Financing Agency, Revenue Bonds,
Duke University, Series 2001A:
1,420 5.125%, 10/01/26 (Pre-refunded 10/01/11) 10/11 at 100.00 Aaa 1,491,838
405 5.125%, 10/01/41 (Pre-refunded 10/01/11) 10/11 at 100.00 Aaa 425,489
3,000 North Carolina Capital Facilities Financing Agency, Revenue Bonds, 10/12 at 100.00 AAA 3,174,510
Duke University, Series 2002A, 5.125%, 7/01/42
(Pre-refunded 10/01/12)
500 North Carolina Medical Care Commission, Health System Revenue 10/11 at 101.00 AA (4) 531,185
Bonds, Mission St. Joseph's Health System, Series 2001,
5.250%, 10/01/31 (Pre-refunded 10/01/11)
610 University of North Carolina System, Pooled Revenue Refunding 10/12 at 100.00 Aaa 643,050
Bonds, Series 2002A, 5.000%, 4/01/27 (Pre-refunded 10/01/12) -
AMBAC Insured
2,215 Winston-Salem, North Carolina, Water and Sewerage System 6/12 at 100.00 AAA 2,328,319
Revenue Bonds, Series 2002A, 5.000%, 6/01/19
(Pre-refunded 6/01/12)
------------------------------------------------------------------------------------------------------------------------------------
12,030 Total U.S. Guaranteed 12,745,935
------------------------------------------------------------------------------------------------------------------------------------
UTILITIES - 15.7% (9.6% OF TOTAL INVESTMENTS)
500 North Carolina Eastern Municipal Power Agency, Power System 1/16 at 100.00 AAA 539,545
Revenue Bonds, Series 2005, 5.250%, 1/01/20 - AMBAC Insured
4,000 North Carolina Eastern Municipal Power Agency, Power System 7/07 at 100.00 AAA 4,005,000
Revenue Refunding Bonds, Series 1993B, 5.500%, 1/01/17 -
FGIC Insured
2,665 North Carolina Municipal Power Agency 1, Catawba Electric 1/13 at 100.00 AAA 2,836,972
Revenue Bonds, Series 2003A, 5.250%, 1/01/15 - AMBAC Insured
1,400 Wake County Industrial Facilities and Pollution Control Financing 2/12 at 101.00 A3 1,474,956
Authority, North Carolina, Revenue Refunding Bonds, Carolina
Power and Light Company, Series 2002, 5.375%, 2/01/17
------------------------------------------------------------------------------------------------------------------------------------
8,565 Total Utilities 8,856,473
------------------------------------------------------------------------------------------------------------------------------------
47
NII
Nuveen North Carolina Dividend Advantage Municipal Fund 3 (continued)
Portfolio of INVESTMENTS as of 5-31-07
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER - 31.8% (19.6% OF TOTAL INVESTMENTS)
Charlotte, North Carolina, Water and Sewerage System Revenue
Bonds, Series 2001:
$ 750 5.125%, 6/01/26 6/11 at 101.00 AAA $ 783,368
1,780 5.125%, 6/01/26 - FGIC Insured 6/11 at 101.00 AAA 1,860,100
300 Durham County, North Carolina, Enterprise System Revenue Bonds, 6/13 at 100.00 AAA 315,456
Series 2002, 5.000%, 6/01/18 - MBIA Insured
2,500 Kannapolis, North Carolina, Water and Sewerage System Revenue 2/12 at 101.00 AAA 2,610,500
Bonds, Series 2001B, 5.250%, 2/01/26 - FSA Insured
(Alternative Minimum Tax)
500 Onslow County, North Carolina, Combined Enterprise System 6/14 at 100.00 AAA 522,345
Revenue Bonds, Series 2004B, 5.000%, 6/01/23 - XLCA Insured
1,000 Orange Water and Sewerage Authority, North Carolina, Water and 7/11 at 101.00 AA+ 1,031,390
Sewerage System Revenue Bonds, Series 2001, 5.000%, 7/01/26
Raleigh, North Carolina, Combined Enterprise System Revenue
Bonds, Series 2006A,
4,950 5.000%, 3/01/31 (UB) 3/16 at 100.00 AAA 5,201,954
3,000 5.000%, 3/01/36 (UB) 3/16 at 100.00 AAA 3,141,569
5 Raleigh, North Carolina, Combined Enterprise System Revenue 3/16 at 100.00 AAA 5,708
Bonds, Series 2006A, Residuals Series II-R-645-1,
6.806%, 3/01/36 (IF)
2,375 Winstom-Salem, North Carolina, Water and Sewer System Revenue 6/17 at 100.00 AAA 2,497,145
Bonds, Series 2007A, 5.000%, 6/01/37 (UB)
------------------------------------------------------------------------------------------------------------------------------------
17,160 Total Water and Sewer 17,969,535
------------------------------------------------------------------------------------------------------------------------------------
$ 87,930 Total Investments (cost $90,080,805) - 162.6% 91,881,505
=============-----------------------------------------------------------------------------------------------------------------------
Floating Rate Obligations - (13.6)% (7,680,000)
--------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 0.6% 309,844
--------------------------------------------------------------------------------------------------------------------
Preferred Shares, at Liquidation Value - (49.6)% (28,000,000)
--------------------------------------------------------------------------------------------------------------------
Net Assets Applicable to Common Shares - 100% $ 56,511,349
====================================================================================================================
(1) All percentages shown in the Portfolio of Investments
are based on net assets applicable to Common shares
unless otherwise noted.
(2) Optional Call Provisions (not covered by the report of
independent registered public accounting firm): Dates
(month and year) and prices of the earliest optional
call or redemption. There may be other call provisions
at varying prices at later dates. Certain
mortgage-backed securities may be subject to periodic
principal paydowns.
(3) Ratings (not covered by the report of independent
registered public accounting firm): Using the higher of
Standard & Poor's or Moody's rating. Ratings below BBB
by Standard & Poor's Group or Baa by Moody's Investor
Service, Inc. are considered to be below investment
grade.
(4) Backed by an escrow or trust containing sufficient U.S.
Government or U.S. Government agency securities which
ensure the timely payment of principal and interest.
Such investments are normally considered to be
equivalent to AAA rated securities.
N/R Not rated.
WI/DD Purchased on a when-issued or delayed delivery basis.
(IF) Inverse floating rate investment.
(UB) Underlying bond of an inverse floating rate trust
reflected as a financing transaction pursuant to the
provision of SFAS No. 140.
See accompanying notes to financial statements.
48
Statement of
ASSETS & LIABILITIES
May 31, 2007
GEORGIA GEORGIA GEORGIA
PREMIUM DIVIDEND DIVIDEND
INCOME ADVANTAGE ADVANTAGE 2
(NPG) (NZX) (NKG)
------------------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments, at value (cost $77,044,910, $42,020,135
and $95,056,371, respectively) $80,023,369 $43,289,014 $97,290,412
Cash 436,474 -- --
Receivables:
Interest 1,408,360 691,488 1,586,850
Investments sold 1,380,000 -- 135,000
Other assets 2,833 4,380 4,548
------------------------------------------------------------------------------------------------------------------------------------
Total assets 83,251,036 43,984,882 99,016,810
------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Cash overdraft -- 89,352 185,845
Payable for investments purchased -- -- --
Floating rate obligations -- -- --
Unrealized depreciation on forward swaps -- 29,585 --
Accrued expenses:
Management fees 44,901 14,321 26,330
Other 27,380 16,520 27,206
Preferred share dividends payable 19,304 3,944 7,867
------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 91,585 153,722 247,248
------------------------------------------------------------------------------------------------------------------------------------
Preferred shares, at liquidation value 27,800,000 15,000,000 33,000,000
------------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common shares $55,359,451 $28,831,160 $65,769,562
====================================================================================================================================
Common shares outstanding 3,805,652 1,968,462 4,553,660
====================================================================================================================================
Net asset value per Common share outstanding
(net assets applicable to Common shares,
divided by Common shares outstanding) $ 14.55 $ 14.65 $ 14.44
====================================================================================================================================
NET ASSETS APPLICABLE TO COMMON SHARES CONSIST OF:
------------------------------------------------------------------------------------------------------------------------------------
Common shares, $.01 par value per share $ 38,057 $ 19,685 $ 45,537
Paid-in surplus 52,378,108 27,889,324 64,257,862
Undistributed (Over-distribution of) net investment income (49,719) (51,564) (112,208)
Accumulated net realized gain (loss) from investments
and derivative transactions 14,546 (265,579) (655,670)
Net unrealized appreciation (depreciation) of investments
and derivative transactions 2,978,459 1,239,294 2,234,041
------------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common shares $55,359,451 $28,831,160 $65,769,562
====================================================================================================================================
Authorized shares:
Common Unlimited Unlimited Unlimited
Preferred Unlimited Unlimited Unlimited
====================================================================================================================================
See accompanying notes to financial statements.
49
Statement of
ASSETS & LIABILITIES (continued)
May 31, 2007
NORTH NORTH NORTH NORTH
CAROLINA CAROLINA CAROLINA CAROLINA
PREMIUM DIVIDEND DIVIDEND DIVIDEND
INCOME ADVANTAGE ADVANTAGE 2 ADVANTAGE 3
(NNC) (NRB) (NNO) (NII)
------------------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments, at value (cost $138,519,215, $54,022,454,
$85,869,368, $90,080,805, respectively) $141,794,013 $55,303,292 $87,945,277 $91,881,505
Cash -- 1,173,662 -- --
Receivables:
Interest 2,308,902 825,753 1,361,767 1,334,150
Investments sold -- -- -- --
Other assets 8,350 7,694 6,174 4,511
------------------------------------------------------------------------------------------------------------------------------------
Total assets 144,111,265 57,310,401 89,313,218 93,220,166
------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Cash overdraft 725,625 -- 69,504 137,441
Payable for investments purchased 1,389,668 496,310 843,727 843,727
Floating rate obligations 3,870,000 6,350,000 4,995,000 7,680,000
Unrealized depreciation on forward swaps -- 17,297 -- --
Accrued expenses:
Management fees 74,388 18,612 27,220 22,554
Other 35,625 16,730 23,184 23,023
Preferred share dividends payable 24,673 2,907 5,936 2,072
------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 6,119,979 6,901,856 5,964,571 8,708,817
------------------------------------------------------------------------------------------------------------------------------------
Preferred shares, at liquidation value 46,800,000 17,000,000 28,000,000 28,000,000
------------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common shares $ 91,191,286 $33,408,545 $55,348,647 $56,511,349
====================================================================================================================================
Common shares outstanding 6,351,838 2,260,826 3,748,975 3,930,972
====================================================================================================================================
Net asset value per Common share outstanding
(net assets applicable to Common shares,
divided by Common shares outstanding) $ 14.36 $ 14.78 $ 14.76 $ 14.38
====================================================================================================================================
NET ASSETS APPLICABLE TO COMMON SHARES CONSIST OF:
------------------------------------------------------------------------------------------------------------------------------------
Common shares, $.01 par value per share $ 63,518 $ 22,608 $ 37,490 $ 39,310
Paid-in surplus 87,829,648 32,058,032 53,184,901 55,469,300
Undistributed (Over-distribution of) net investment income (214,814) (30,449) (195,865) (113,265)
Accumulated net realized gain (loss) from investments
and derivative transactions 238,136 94,813 246,212 (684,696)
Net unrealized appreciation (depreciation) of investments
and derivative transactions 3,274,798 1,263,541 2,075,909 1,800,700
------------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common shares $ 91,191,286 $33,408,545 $55,348,647 $56,511,349
====================================================================================================================================
Authorized shares:
Common Unlimited Unlimited Unlimited Unlimited
Preferred Unlimited Unlimited Unlimited Unlimited
====================================================================================================================================
See accompanying notes to financial statements.
50
Statement of
OPERATIONS
Year Ended May 31, 2007
GEORGIA GEORGIA GEORGIA
PREMIUM DIVIDEND DIVIDEND
INCOME ADVANTAGE ADVANTAGE 2
(NPG) (NZX) (NKG)
------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME $3,973,420 $2,071,800 $ 4,547,821
------------------------------------------------------------------------------------------------------------------------------------
EXPENSES
Management fees 532,562 281,000 630,122
Preferred shares - auction fees 69,500 37,500 82,501
Preferred shares - dividend disbursing agent fees 10,000 20,000 10,000
Shareholders' servicing agent fees and expenses 4,980 334 580
Floating rate obligations interest expense and fees -- -- --
Custodian's fees and expenses 26,638 15,417 39,569
Trustees' fees and expenses 1,973 1,121 2,360
Professional fees 12,581 11,156 13,232
Shareholders' reports - printing and mailing expenses 15,172 9,086 15,399
Stock exchange listing fees 323 167 387
Investor relations expense 11,359 5,782 12,385
Other expenses 13,232 12,077 13,386
------------------------------------------------------------------------------------------------------------------------------------
Total expenses before custodian fee credit and expense reimbursement 698,320 393,640 819,921
Custodian fee credit (9,835) (6,447) (9,711)
Expense reimbursement -- (117,955) (317,448)
------------------------------------------------------------------------------------------------------------------------------------
Net expenses 688,485 269,238 492,762
------------------------------------------------------------------------------------------------------------------------------------
Net investment income 3,284,935 1,802,562 4,055,059
------------------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) from investments 81,348 69,122 270,177
Net realized gain (loss) from forward swaps -- -- 46,944
Net realized gain (loss) from futures -- -- --
Change in net unrealized appreciation (depreciation) of investments 43,450 (14,277) 628,166
Change in net unrealized appreciation (depreciation) of forward swaps -- (29,585) (197,717)
------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) 124,798 25,260 747,570
------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO PREFERRED SHAREHOLDERS
From net investment income (869,692) (481,666) (1,072,522)
From accumulated net realized gains -- -- --
------------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets applicable to Common shares from
distributions to Preferred shareholders (869,692) (481,666) (1,072,522)
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets applicable to Common shares
from operations $2,540,041 $1,346,156 $ 3,730,107
====================================================================================================================================
See accompanying notes to financial statements.
51
Statement of
OPERATIONS (continued)
Year Ended May 31, 2007
NORTH NORTH NORTH NORTH
CAROLINA CAROLINA CAROLINA CAROLINA
PREMIUM DIVIDEND DIVIDEND DIVIDEND
INCOME ADVANTAGE ADVANTAGE 2 ADVANTAGE 3
(NNC) (NRB) (NNO) (NII)
------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME $ 6,546,473 $2,541,540 $3,959,116 $4,053,344
------------------------------------------------------------------------------------------------------------------------------------
EXPENSES
Management fees 882,150 323,088 533,695 540,003
Preferred shares - auction fees 117,001 42,501 70,000 70,000
Preferred shares - dividend disbursing agent fees 10,000 10,000 10,000 10,000
Shareholders' servicing agent fees and expenses 9,932 271 632 690
Floating rate obligations interest expense and fees 27,570 131,716 82,924 147,167
Custodian's fees and expenses 36,418 19,973 24,947 26,981
Trustees' fees and expenses 3,390 1,311 1,964 2,183
Professional fees 14,729 11,432 12,753 12,760
Shareholders' reports - printing and mailing expenses 24,682 10,142 16,179 15,358
Stock exchange listing fees 9,785 192 318 334
Investor relations expense 19,278 6,760 10,936 11,359
Other expenses 16,380 12,897 14,087 12,699
------------------------------------------------------------------------------------------------------------------------------------
Total expenses before custodian fee credit and expense reimbursement 1,171,315 570,283 778,435 849,534
Custodian fee credit (20,188) (8,478) (7,505) (9,778)
Expense reimbursement -- (118,799) (231,061) (272,047)
------------------------------------------------------------------------------------------------------------------------------------
Net expenses 1,151,127 443,006 539,869 567,709
------------------------------------------------------------------------------------------------------------------------------------
Net investment income 5,395,346 2,098,534 3,419,247 3,485,635
------------------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) from investments 368,361 229,088 406,698 229,821
Net realized gain (loss) from forward swaps -- -- -- --
Net realized gain (loss) from futures -- 21,833 -- --
Change in net unrealized appreciation (depreciation) of investments 98,311 (153,016) (28,954) 189,979
Change in net unrealized appreciation (depreciation) of forward swaps -- (17,297) -- --
------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) 466,672 80,608 377,744 419,800
------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO PREFERRED SHAREHOLDERS
------------------------------------------------------------------------------------------------------------------------------------
From net investment income (1,481,763) (500,664) (878,117) (890,568)
From accumulated net realized gains (19,120) (25,847) (39,705) --
------------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets applicable to Common shares from
distributions to Preferred shareholders (1,500,883) (526,511) (917,822) (890,568)
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets applicable to Common shares
from operations $ 4,361,135 $1,652,631 $2,879,169 $3,014,867
====================================================================================================================================
See accompanying notes to financial statements.
52
Statement of
CHANGES in NET ASSETS
GEORGIA GEORGIA GEORGIA
PREMIUM INCOME (NPG) DIVIDEND ADVANTAGE (NZX) DIVIDEND ADVANTAGE 2 (NKG)
---------------------------- --------------------------- ----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
5/31/07 5/31/06 5/31/07 5/31/06 5/31/07 5/31/06
------------------------------------------------------------------------------------------------------------------------------------
OPERATIONS
Net investment income $ 3,284,935 $ 3,319,942 $ 1,802,562 $ 1,845,409 $ 4,055,059 $ 4,021,017
Net realized gain (loss)
from investments 81,348 463,246 69,122 15,105 270,177 (56,044)
Net realized gain (loss)
from forward swaps -- -- -- (19,734) 46,944 (13,236)
Net realized gain (loss)
from futures -- -- -- -- -- --
Change in net unrealized
appreciation (depreciation)
of investments 43,450 (2,358,498) (14,277) (994,754) 628,166 (2,417,797)
Change in net unrealized
appreciation (depreciation)
of forward swaps -- -- (29,585) 67,410 (197,717) 436,491
Distributions to
Preferred Shareholders:
From net investment income (869,692) (645,442) (481,666) (368,644) (1,072,522) (859,541)
From accumulated net
realized gains -- (29,168) -- -- -- --
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
applicable to Common shares
from operations 2,540,041 750,080 1,346,156 544,792 3,730,107 1,110,890
------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO COMMON SHAREHOLDERS
From net investment income (2,539,683) (2,967,320) (1,481,082) (1,699,327) (2,861,975) (3,183,008)
From accumulated net
realized gains -- (251,264) -- -- -- --
------------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets applicable to
Common shares from distributions
to Common shareholders (2,539,683) (3,218,584) (1,481,082) (1,699,327) (2,861,975) (3,183,008)
------------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
Common Shares:
Offering costs adjustments -- -- -- -- -- --
Net proceeds from shares
issued to shareholders due to
reinvestment of distributions 40,850 99,552 53,889 59,258 -- --
Preferred shares offering
costs adjustments -- -- -- -- -- --
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
applicable to Common shares from
capital share transactions 40,850 99,552 53,889 59,258 -- --
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
applicable to Common shares 41,208 (2,368,952) (81,037) (1,095,277) 868,132 (2,072,118)
Net assets applicable to Common
shares at the beginning
of year 55,318,243 57,687,195 28,912,197 30,007,474 64,901,430 66,973,548
------------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common
shares at the end of year $55,359,451 $55,318,243 $28,831,160 $28,912,197 $65,769,562 $64,901,430
====================================================================================================================================
Undistributed (Over-distribution of)
net investment income at the
end of year $ (49,719) $ 74,721 $ (51,564) $ 108,622 $ (112,208) $ (232,770)
====================================================================================================================================
See accompanying notes to financial statements.
53
Statement of
CHANGES in NET ASSETS (continued)
NORTH CAROLINA NORTH CAROLINA
PREMIUM INCOME (NNC) DIVIDEND ADVANTAGE (NRB)
---------------------------- -----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
5/31/07 5/31/06 5/31/07 5/31/06
------------------------------------------------------------------------------------------------------------------------------------
OPERATIONS
Net investment income $ 5,395,346 $ 5,594,531 $ 2,098,534 $ 2,130,270
Net realized gain (loss) from investments 368,361 406,707 229,088 95,322
Net realized gain (loss) from forward swaps -- -- -- --
Net realized gain (loss) from futures -- -- 21,833 --
Change in net unrealized appreciation
(depreciation) of investments 98,311 (4,033,853) (153,016) (1,195,026)
Change in net unrealized appreciation
(depreciation) of forward swaps -- -- (17,297) --
Distributions to Preferred Shareholders:
From net investment income (1,481,763) (1,024,654) (500,664) (384,276)
From accumulated net realized gains (19,120) (136,337) (25,847) --
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
applicable to Common shares
from operations 4,361,135 806,394 1,652,631 646,290
------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO COMMON SHAREHOLDERS
From net investment income (4,163,346) (4,996,624) (1,741,404) (1,984,988)
From accumulated net realized gains (89,554) (1,010,708) (117,562) --
------------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets applicable to
Common shares from distributions
to Common shareholders (4,252,900) (6,007,332) (1,858,966) (1,984,988)
------------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
Common Shares:
Offering costs adjustments -- -- -- --
Net proceeds from Common shares
issued to shareholders due to
reinvestment of distributions 50,016 226,109 78,190 55,870
Preferred shares offering costs adjustments -- -- -- --
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
applicable to Common shares from
capital share transactions 50,016 226,109 78,190 55,870
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
applicable to Common shares 158,251 (4,974,829) (128,145) (1,282,828)
Net assets applicable to Common
shares at the beginning of year 91,033,035 96,007,864 33,536,690 34,819,518
------------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common
shares at the end of year $91,191,286 $91,033,035 $33,408,545 $33,536,690
====================================================================================================================================
Undistributed (Over-distribution of)
net investment income at the
end of year $ (214,814) $ 34,949 $ (30,449) $ 113,085
====================================================================================================================================
See accompanying notes to financial statements.
54
NORTH CAROLINA NORTH CAROLINA
DIVIDEND ADVANTAGE 2 (NNO) DIVIDEND ADVANTAGE 3 (NII)
---------------------------- -----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
5/31/07 5/31/06 5/31/07 5/31/06
------------------------------------------------------------------------------------------------------------------------------------
OPERATIONS
Net investment income $ 3,419,247 $ 3,445,695 $ 3,485,635 $ 3,459,061
Net realized gain (loss) from investments 406,698 144,400 229,821 11,352
Net realized gain (loss) from forward swaps -- (83,226) -- (165,393)
Net realized gain (loss) from futures -- -- -- --
Change in net unrealized appreciation
(depreciation) of investments (28,954) (2,445,879) 189,979 (2,071,239)
Change in net unrealized appreciation
(depreciation) of forward swaps -- 172,011 -- 258,425
Distributions to Preferred Shareholders:
From net investment income (878,117) (652,732) (890,568) (695,922)
From accumulated net realized gains (39,705) (46,077) -- --
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
applicable to Common shares
from operations 2,879,169 534,192 3,014,867 796,284
------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO COMMON SHAREHOLDERS
From net investment income (2,647,748) (3,076,672) (2,570,459) (2,840,173)
From accumulated net realized gains (184,018) (463,738) -- --
------------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets applicable to
Common shares from distributions
to Common shareholders (2,831,766) (3,540,410) (2,570,459) (2,840,173)
------------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
Common Shares:
Offering costs adjustments -- 6,568 -- --
Net proceeds from shares
issued to shareholders due to
reinvestment of distributions 49,760 89,225 17,530 58,742
Preferred shares offering costs adjustments -- 6,694 -- --
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
applicable to Common shares from
capital share transactions 49,760 102,487 17,530 58,742
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
applicable to Common shares 97,163 (2,903,731) 461,938 (1,985,147)
Net assets applicable to Common
shares at the beginning of year 55,251,484 58,155,215 56,049,411 58,034,558
------------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common
shares at the end of year $55,348,647 $55,251,484 $56,511,349 $56,049,411
====================================================================================================================================
Undistributed (Over-distribution of)
net investment income at the
end of year $ (195,865) $ (87,058) $ (113,265) $ (137,873)
====================================================================================================================================
See accompanying notes to financial statements.
55
Statement of
CASH FLOWS
Year Ended May 31, 2007
NORTH
CAROLINA
DIVIDEND
ADVANTAGE
(NRB)
--------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCREASE (DECREASE) IN NET ASSETS APPLICABLE TO COMMON SHARES
FROM OPERATIONS $ 1,652,631
Adjustments to reconcile the net increase (decrease) in
net assets applicable to Common shares from operations
to net cash provided by (used in) operating activities:
Purchases of investments (13,438,175)
Proceeds from sales and maturities of investments 7,910,843
Proceeds from sales of futures 21,833
Amortization/(Accretion) of premiums and discounts, net 107,833
(Increase) Decrease in receivable for interest 93,097
Increase (Decrease) in payable for investments purchased 496,310
Increase (Decrease) in accrued management fees 1,953
Increase (Decrease) in accrued other liabilities 1,922
Increase (Decrease) in Preferred shares dividends payable 1,683
Net realized (gain) loss from investments (229,088)
Net realized (gain) loss from futures (21,833)
Change in net unrealized (appreciation)
depreciation of investments 153,016
Change in net unrealized (appreciation) depreciation
of forward swaps 17,297
--------------------------------------------------------------------------------
Net cash provided by (used in) operating activities (3,230,678)
--------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in floating rate obligations 6,350,000
Cash distributions paid to Common shareholders (1,780,776)
--------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 4,569,224
--------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH 1,338,546
Cash at the beginning of period (164,884)
--------------------------------------------------------------------------------
CASH AT THE END OF PERIOD $ 1,173,662
================================================================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Non-cash financing activities not included herein consist of reinvestments of
Common share distributions of $78,190.
See accompanying notes to financial statements.
56
Notes to
FINANCIAL STATEMENTS
1. GENERAL INFORMATION AND SIGNIFICANT ACCOUNTING POLICIES
The funds (the "Funds") covered in this report and their corresponding Common
share stock exchange symbols are Nuveen Georgia Premium Income Municipal Fund
(NPG), Nuveen Georgia Dividend Advantage Municipal Fund (NZX), Nuveen Georgia
Dividend Advantage Municipal Fund 2 (NKG), Nuveen North Carolina Premium Income
Municipal Fund (NNC), Nuveen North Carolina Dividend Advantage Municipal Fund
(NRB), Nuveen North Carolina Dividend Advantage Municipal Fund 2 (NNO) and
Nuveen North Carolina Dividend Advantage Municipal Fund 3 (NII). Common shares
of Georgia Premium Income (NPG), Georgia Dividend Advantage (NZX), Georgia
Dividend Advantage 2 (NKG), North Carolina Dividend Advantage (NRB), North
Carolina Dividend Advantage 2 (NNO) and North Carolina Dividend Advantage 3
(NII) are traded on the American Stock Exchange while Common shares of North
Carolina Premium Income (NNC) are traded on the New York Stock Exchange. The
Funds are registered under the Investment Company Act of 1940, as amended, as
closed-end management investment companies.
Each Fund seeks to provide current income exempt from both regular federal and
designated state income taxes by investing primarily in a diversified portfolio
of municipal obligations issued by state and local government authorities within
a single state or certain U.S. territories.
The following is a summary of significant accounting policies followed by the
Funds in the preparation of their financial statements in accordance with U.S.
generally accepted accounting principles.
Investment Valuation
The prices of municipal bonds in each Fund's investment portfolio are provided
by a pricing service approved by the Fund's Board of Trustees. When market price
quotes are not readily available (which is usually the case for municipal
securities), the pricing service may establish fair value based on yields or
prices of municipal bonds of comparable quality, type of issue, coupon, maturity
and rating, indications of value from securities dealers, evaluations of
anticipated cash flows or collateral and general market conditions. Prices of
forward swap contracts are also provided by an independent pricing service
approved by each Fund's Board of Trustees. Futures contracts are valued using
the closing settlement price, or, in the absence of such a price, at the mean of
the bid and asked prices. If the pricing service is unable to supply a price for
a municipal bond, forward swap contract or futures contract, each Fund may use a
market price or fair market value quote provided by a major broker/dealer in
such investments. If it is determined that the market price or fair market value
for an investment is unavailable or inappropriate, the Board of Trustees of the
Funds, or its designee, may establish a fair value for the investment. Temporary
investments in securities that have variable rate and demand features qualifying
them as short-term investments are valued at amortized cost, which approximates
market value.
Investment Transactions
Investment transactions are recorded on a trade date basis. Realized gains and
losses from transactions are determined on the specific identification method.
Investments purchased on a when-issued/delayed delivery basis may have extended
settlement periods. Any investments so purchased are subject to market
fluctuation during this period. The Funds have instructed the custodian to
segregate assets with a current value at least equal to the amount of the
when-issued/delayed delivery purchase commitments. At May 31, 2007, North
Carolina Premium Income (NNC), North Carolina Dividend Advantage (NRB), North
Carolina Dividend Advantage 2 (NNO) and North Carolina Dividend Advantage 3
(NII) each had outstanding when-issued/delayed delivery purchase commitments of
$1,389,668, $496,310, $843,727 and $843,727, respectively. There were no such
outstanding purchase commitments in any of the other Funds.
Investment Income
Interest income, which includes the amortization of premiums and accretion of
discounts for financial reporting purposes, is recorded on an accrual basis.
Investment income also includes paydown gains and losses, if any.
57
Income Taxes
Each Fund is a separate taxpayer for federal income tax purposes. Each Fund
intends to distribute substantially all net investment income and net capital
gains to shareholders and to otherwise comply with the requirements of
Subchapter M of the Internal Revenue Code applicable to regulated investment
companies. Therefore, no federal income tax provision is required. Furthermore,
each Fund intends to satisfy conditions which will enable interest from
municipal securities, which is exempt from regular federal and designated state
income taxes, to retain such tax-exempt status when distributed to shareholders
of the Funds. Net realized capital gains and ordinary income distributions paid
by the Funds are subject to federal taxation.
Dividends and Distributions to Common Shareholders
Dividends from tax-exempt net investment income are declared monthly. Net
realized capital gains and/or market discount from investment transactions, if
any, are distributed to shareholders not less frequently than annually.
Furthermore, capital gains are distributed only to the extent they exceed
available capital loss carryforwards.
Distributions to Common shareholders of tax-exempt net investment income, net
realized capital gains and/or market discount, if any, are recorded on the
ex-dividend date. The amount and timing of distributions are determined in
accordance with federal income tax regulations, which may differ from U.S.
generally accepted accounting principles.
Preferred Shares
The Funds have issued and outstanding Preferred shares, $25,000 stated value per
share, as a means of effecting financial leverage. Each Fund's Preferred shares
are issued in one Series. The dividend rate paid by the Funds on each Series is
determined every seven days, pursuant to a dutch auction process overseen by the
auction agent, and is payable at the end of each rate period. The number of
Preferred shares outstanding for each Fund is as follows:
NORTH NORTH NORTH NORTH
GEORGIA GEORGIA GEORGIA CAROLINA CAROLINA CAROLINA CAROLINA
PREMIUM DIVIDEND DIVIDEND PREMIUM DIVIDEND DIVIDEND DIVIDEND
INCOME ADVANTAGE ADVANTAGE 2 INCOME ADVANTAGE ADVANTAGE 2 ADVANTAGE 3
(NPG) (NZX) (NKG) (NNC) (NRB) (NNO) (NII)
===================================================================================================================
Number of shares:
Series M -- 600 -- -- -- -- --
Series T -- -- -- -- 680 -- --
Series W -- -- -- -- -- -- 1,120
Series TH 1,112 -- -- 1,872 -- -- --
Series F -- -- 1,320 -- -- 1,120 --
===================================================================================================================
Inverse Floating Rate Securities
Each Fund may invest in inverse floating rate securities. An inverse floating
rate security is created by depositing a municipal bond, typically with a fixed
interest rate, into a special purpose trust created by a broker-dealer. In turn,
this trust (a) issues floating rate certificates, in face amounts equal to some
fraction of the deposited bond's par amount or market value, that typically pay
short-term tax-exempt interest rates to third parties, and (b) issues to a
long-term investor (such as one of the Funds) an inverse floating rate
certificate (sometimes referred to as an "inverse floater") that represents all
remaining or residual interest in the trust. The income received by the inverse
floater holder varies inversely with the short-term rate paid to the floating
rate certificates' holders, and in most circumstances the inverse floater holder
bears substantially all of the underlying bond's downside investment risk and
also benefits disproportionately from any potential appreciation of the
underlying bond's value. The price of an inverse floating rate security will be
more volatile than that of the underlying bond because the interest rate is
dependent on not only the fixed coupon rate of the underlying bond but also on
the short-term interest paid on the floating rate certificates, and because the
inverse floating rate security essentially bears the risk of loss of the greater
face value of the underlying bond.
A Fund may purchase an inverse floating rate security in a secondary market
transaction without first owning the underlying bond (referred to as an
"externally-deposited inverse floater"), or instead by first selling a
fixed-rate bond to a broker-dealer for deposit into the special purpose trust
and receiving in turn the residual interest in the trust (referred to as a
"self-deposited inverse floater"). An investment in an externally-deposited
inverse floater is identified in the Portfolio of Investments as an "Inverse
floating rate investment". An investment in a self-deposited inverse floater is
accounted for as a financing transaction in accordance with Statement of
Financial Accounting Standards (SFAS) No. 140 "Accounting for Transfers and
Servicing of Financial Assets and Extinguishment of Liabilities". In such
instances, a fixed-rate bond deposited into a special purpose trust is
identified in the Portfolio of Investments as an "Underlying bond of an inverse
floating rate trust", with the Fund accounting for the short-term floating rate
certificates issued by the trust as "Floating rate obligations" on the Statement
of Assets and Liabilities. In addition, the Fund reflects in Investment Income
the entire earnings of the underlying bond and accounts for the related interest
paid to the
58
holders of the short-term floating rate certificates as "Floating rate
obligations interest expense and fees" in the Statement of Operations.
During the fiscal year ended May 31, 2007, North Carolina Premium Income (NNC),
North Carolina Dividend Advantage (NRB), North Carolina Dividend Advantage 2
(NNO) and North Carolina Dividend Advantage 3 (NII) invested in externally
deposited inverse floaters and/or self-deposited inverse floaters. Georgia
Premium Income (NPG), Georgia Dividend Advantage (NZX) and Georgia Dividend
Advantage 2 (NKG) did not invest in any such instruments during the fiscal year
ended May 31, 2007.
The average floating rate obligations outstanding and average annual interest
rate related to self-deposited inverse floaters during the fiscal year ended May
31, 2007, were as follows:
NORTH NORTH NORTH NORTH
CAROLINA CAROLINA CAROLINA CAROLINA
PREMIUM DIVIDEND DIVIDEND DIVIDEND
INCOME ADVANTAGE ADVANTAGE 2 ADVANTAGE 3
(NNC) (NRB) (NNO) (NII)
====================================================================================================================================
Average floating rate obligations 708,110 3,406,068 2,142,452 3,804,493
Average annual interest rate and fees 3.89% 3.87% 3.87% 3.87%
====================================================================================================================================
Forward Swap Transactions
The Funds are authorized to invest in certain derivative financial instruments.
The Funds' use of forward interest rate swap transactions is intended to help
the Fund manage its overall interest rate sensitivity, either shorter or longer,
generally to more closely align the Fund's interest rate sensitivity with that
of the broader municipal market. Forward interest rate swap transactions involve
each Fund's agreement with a counterparty to pay, in the future, a fixed or
variable rate payment in exchange for the counterparty paying the Fund a
variable or fixed rate payment, the accruals for which would begin at a
specified date in the future (the "effective date"). The amount of the payment
obligation is based on the notional amount of the forward swap contract and the
termination date of the swap (which is akin to a bond's maturity). The value of
the Fund's swap commitment would increase or decrease based primarily on the
extent to which long-term interest rates for bonds having a maturity of the
swap's termination date increases or decreases. The Funds may terminate a swap
contract prior to the effective date, at which point a realized gain or loss is
recognized. When a forward swap is terminated, it ordinarily does not involve
the delivery of securities or other underlying assets or principal, but rather
is settled in cash on a net basis. Each Fund intends, but is not obligated, to
terminate its forward swaps before the effective date. Accordingly, the risk of
loss with respect to the swap counterparty on such transactions is limited to
the credit risk associated with a counterparty failing to honor its commitment
to pay any realized gain to the Fund upon termination. To reduce such credit
risk, all counterparties are required to pledge collateral daily (based on the
daily valuation of each swap) on behalf of each Fund with a value approximately
equal to the amount of any unrealized gain above a pre-determined threshold.
Reciprocally, when any of the Funds have an unrealized loss on a swap contract,
the Funds have instructed the custodian to pledge assets of the Funds as
collateral with a value approximately equal to the amount of the unrealized loss
above a pre-determined threshold. Collateral pledges are monitored and
subsequently adjusted if and when the swap valuations fluctuate, either up or
down, by at least the predetermined threshold amount.
Futures Contracts
The Funds are authorized to invest in futures contracts. Upon entering into a
futures contract, a Fund is required to deposit with the broker an amount of
cash or liquid securities equal to a specified percentage of the contract
amount. This is known as the "initial margin." Subsequent payments ("variation
margin") are made or received by a Fund each day, depending on the daily
fluctuation of the value of the contract.
During the period the futures contract is open, changes in the value of the
contract are recognized as an unrealized gain or loss by "marking-to-market" on
a daily basis to reflect the changes in market value of the contract. When the
contract is closed or expired, a Fund records a realized gain or loss equal to
the difference between the value of the contract on the closing date and value
of the contract when originally entered into. Cash held by the broker to cover
initial margin requirements on open futures contracts, if any, is recognized in
the Statement of Assets and Liabilities. Additionally, the Statement of Assets
and Liabilities reflects a receivable or payable for the variation margin when
applicable. North Carolina Dividend Advantage (NRB) was the only Fund to invest
in futures contracts during the fiscal year ended May 31, 2007.
Risks of investments in futures contracts include the possible adverse movement
of the securities or indices underlying the contracts, the possibility that
there may not be a liquid secondary market for the contracts and/or that a
change in the value of the contract may not correlate with a change in the value
of the underlying securities or indices.
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.
59
Indemnifications
Under the Funds' organizational documents, their Officers and Trustees are
indemnified against certain liabilities arising out of the performance of their
duties to the Funds. In addition, in the normal course of business, the Funds
enter into contracts that provide general indemnifications to other parties. The
Funds' maximum exposure under these arrangements is unknown as this would
involve future claims that may be made against the Funds that have not yet
occurred. However, the Funds have not had prior claims or losses pursuant to
these contracts and expect the risk of loss to be remote.
Use of Estimates
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of increases and
decreases in net assets applicable to Common shares from operations during the
reporting period. Actual results may differ from those estimates.
2. FUND SHARES
Transactions in Common shares were as follows:
GEORGIA GEORGIA DIVIDEND GEORGIA DIVIDEND
PREMIUM INCOME (NPG) ADVANTAGE (NZX) ADVANTAGE 2 (NKG)
------------------------ ----------------------- -----------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
5/31/07 5/31/06 5/31/07 5/31/06 5/31/07 5/31/06
==================================================================================================================
Common shares issued to shareholders
due to reinvestment of distributions 2,656 6,229 3,317 3,662 -- --
==================================================================================================================
NORTH CAROLINA NORTH CAROLINA
PREMIUM INCOME (NNC) DIVIDEND ADVANTAGE (NRB)
----------------------- -----------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
5/31/07 5/31/06 5/31/07 5/31/06
==================================================================================================================
Common shares issued to shareholders
due to reinvestment of distributions 3,363 14,230 4,827 3,276
==================================================================================================================
NORTH CAROLINA NORTH CAROLINA
DIVIDEND DIVIDEND
ADVANTAGE 2 (NNO) ADVANTAGE 3 (NII)
----------------------- -----------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
5/31/07 5/31/06 5/31/07 5/31/06
==================================================================================================================
Common shares issued to shareholders
due to reinvestment of distributions 3,293 5,637 1,207 3,940
==================================================================================================================
3. INVESTMENT TRANSACTIONS
Purchases and sales (including maturities but excluding short-term investments
and derivative transactions) during the fiscal year ended May 31, 2007, were as
follows:
GEORGIA GEORGIA GEORGIA
PREMIUM DIVIDEND DIVIDEND
INCOME ADVANTAGE ADVANTAGE 2
(NPG) (NZX) (NKG)
==================================================================================================================
Purchases $3,646,909 $4,949,558 $6,804,001
Sales and maturities 6,422,431 4,818,645 6,774,856
==================================================================================================================
NORTH NORTH NORTH NORTH
CAROLINA CAROLINA CAROLINA CAROLINA
PREMIUM DIVIDEND DIVIDEND DIVIDEND
INCOME ADVANTAGE ADVANTAGE 2 ADVANTAGE 3
(NNC) (NRB) (NNO) (NII)
==================================================================================================================
Purchases $25,866,712 $13,438,175 $12,946,036 $19,169,779
Sales and maturities 18,236,590 7,910,843 7,381,840 10,875,459
==================================================================================================================
4. INCOME TAX INFORMATION
The following information is presented on an income tax basis. Differences
between amounts for financial statement and federal income tax purposes are
primarily due to the treatment of paydown gains and losses, timing differences
in recognizing taxable market discount, timing differences in recognizing
certain gains and losses on investment transactions and the treatment of
investments in inverse floating rate transactions subject to SFAS No.140. To the
extent that differences arise that are permanent in nature, such amounts are
reclassified within the capital accounts on the Statement of Assets and
Liabilities presented in the
60
annual report, based on their Federal tax basis treatment; temporary differences
do not require reclassification. Temporary and permanent differences do not
impact the net asset values of the Funds.
At May 31, 2007, the cost of investments was as follows:
GEORGIA GEORGIA GEORGIA
PREMIUM DIVIDEND DIVIDEND
INCOME ADVANTAGE ADVANTAGE 2
(NPG) (NZX) (NKG)
==================================================================================================================
Cost of investments $77,035,094 $42,101,774 $95,228,270
==================================================================================================================
NORTH NORTH NORTH NORTH
CAROLINA CAROLINA CAROLINA CAROLINA
PREMIUM DIVIDEND DIVIDEND DIVIDEND
INCOME ADVANTAGE ADVANTAGE 2 ADVANTAGE 3
(NNC) (NRB) (NNO) (NII)
==================================================================================================================
Cost of investments $134,645,726 $47,677,144 $80,872,625 $82,458,648
==================================================================================================================
Gross unrealized appreciation and gross unrealized depreciation of investments
at May 31, 2007, were as follows:
GEORGIA GEORGIA GEORGIA
PREMIUM DIVIDEND DIVIDEND
INCOME ADVANTAGE ADVANTAGE 2
(NPG) (NZX) (NKG)
==================================================================================================================
Gross unrealized:
Appreciation $3,068,919 $1,357,570 $2,471,494
Depreciation (80,644) (170,330) (409,352)
------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investments $2,988,275 $1,187,240 $2,062,142
==================================================================================================================
NORTH NORTH NORTH NORTH
CAROLINA CAROLINA CAROLINA CAROLINA
PREMIUM DIVIDEND DIVIDEND DIVIDEND
INCOME ADVANTAGE ADVANTAGE 2 ADVANTAGE 3
(NNC) (NRB) (NNO) (NII)
==================================================================================================================
Gross unrealized:
Appreciation $3,555,092 $1,377,844 $2,211,298 $2,012,988
Depreciation (270,934) (99,965) (130,542) (266,610)
------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investments $3,284,158 $1,277,879 $2,080,756 $1,746,378
==================================================================================================================
The tax components of undistributed net tax-exempt income, net ordinary income
and net long-term capital gains at May 31, 2007, the Funds' tax year end, were
as follows:
GEORGIA GEORGIA GEORGIA
PREMIUM DIVIDEND DIVIDEND
INCOME ADVANTAGE ADVANTAGE 2
(NPG) (NZX) (NKG)
==================================================================================================================
Undistributed net tax-exempt income * $161,466 $70,485 $136,084
Undistributed net ordinary income ** -- -- --
Undistributed net long-term capital gains 14,546 -- --
==================================================================================================================
NORTH NORTH NORTH NORTH
CAROLINA CAROLINA CAROLINA CAROLINA
PREMIUM DIVIDEND DIVIDEND DIVIDEND
INCOME ADVANTAGE ADVANTAGE 2 ADVANTAGE 3
(NNC) (NRB) (NNO) (NII)
==================================================================================================================
Undistributed net tax-exempt income * $130,792 $114,016 $ 22,668 $103,045
Undistributed net ordinary income ** -- 1,006 -- --
Undistributed net long-term capital gains 238,136 98,768 246,212 --
==================================================================================================================
* Undistributed net tax-exempt income (on a tax basis) has not been reduced
for the dividend declared on May 1, 2007, paid on June 1, 2007.
** Net ordinary income consists of taxable market discount income and net
short-term capital gains, if any.
61
The tax character of distributions paid during the tax years ended May 31, 2007
and May 31, 2006, was designated for purposes of the dividends paid deduction as
follows:
GEORGIA GEORGIA GEORGIA
PREMIUM DIVIDEND DIVIDEND
INCOME ADVANTAGE ADVANTAGE 2
2007 (NPG) (NZX) (NKG)
==================================================================================================================
Distributions from net tax-exempt income*** $3,438,850 $1,980,068 $3,945,298
Distributions from net ordinary income ** -- -- --
Distributions from net long-term capital gains**** -- -- --
==================================================================================================================
NORTH NORTH NORTH NORTH
CAROLINA CAROLINA CAROLINA CAROLINA
PREMIUM DIVIDEND DIVIDEND DIVIDEND
INCOME ADVANTAGE ADVANTAGE 2 ADVANTAGE 3
2007 (NNC) (NRB) (NNO) (NII)
==================================================================================================================
Distributions from net tax-exempt income*** $5,698,177 $2,254,608 $3,550,052 $3,487,248
Distributions from net ordinary income ** -- 133 12 --
Distributions from net long-term capital gains**** 108,674 143,410 223,711 --
==================================================================================================================
GEORGIA GEORGIA GEORGIA
PREMIUM DIVIDEND DIVIDEND
INCOME ADVANTAGE ADVANTAGE 2
2006 (NPG) (NZX) (NKG)
------------------------------------------------------------------------------------------------------------------
Distributions from net tax-exempt income $3,641,791 $2,072,610 $4,067,314
Distributions from net ordinary income ** 3,242 -- --
Distributions from net long-term capital gains 280,565 -- --
==================================================================================================================
NORTH NORTH NORTH NORTH
CAROLINA CAROLINA CAROLINA CAROLINA
PREMIUM DIVIDEND DIVIDEND DIVIDEND
INCOME ADVANTAGE ADVANTAGE 2 ADVANTAGE 3
2006 (NNC) (NRB) (NNO) (NII)
==================================================================================================================
Distributions from net tax-exempt income $6,057,580 $2,388,973 $3,738,500 $3,554,484
Distributions from net ordinary income ** 24,591 -- 123,149 --
Distributions from net long-term capital gains 1,146,601 -- 400,823 --
==================================================================================================================
** Net ordinary income consists of taxable market discount income and net
short-term capital gains, if any.
*** The Funds hereby designate these amounts paid during the fiscal year ended
May 31, 2007, as Exempt Interest Dividends.
**** The Funds hereby designate these amounts paid during the fiscal year ended
May 31, 2007, as long-term capital gain dividends pursuant to Internal
Revenue Code Section 852(b)(3).
At May 31, 2007, 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:
NORTH
GEORGIA GEORGIA CAROLINA
DIVIDEND DIVIDEND DIVIDEND
ADVANTAGE ADVANTAGE 2 ADVANTAGE 3
(NZX) (NKG) (NII)
================================================================================
Expiration year:
2012 $ -- $ 18,158 $119,458
2013 52,813 177,608 36,008
2014 113,538 287,093 474,910
2015 17,587 -- --
--------------------------------------------------------------------------------
Total $183,938 $482,859 $630,376
================================================================================
62
5. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Each fund's management fee is separated into two components - a complex-level
component, based on the aggregate amount of all fund assets managed by Nuveen
Asset Management (the "Adviser"), a wholly owned subsidiary of Nuveen
Investments, Inc. ("Nuveen"), and a specific fund-level component, based only on
the amount of assets within each individual fund. This pricing structure enables
Nuveen fund shareholders to benefit from growth in the assets within each
individual fund as well as from growth in the amount of complex-wide assets
managed by the Adviser.
The annual fund-level fee, payable monthly, for each Fund is based upon the
average daily net assets (including net assets attributable to Preferred shares)
of each Fund as follows:
AVERAGE DAILY NET ASSETS GEORGIA PREMIUM INCOME (NPG)
(INCLUDING NET ASSETS NORTH CAROLINA PREMIUM INCOME (NNC)
ATTRIBUTABLE TO PREFERRED SHARES) FUND-LEVEL FEE RATE
================================================================================
For the first $125 million . 4500%
For the next $125 million .4375
For the next $250 million .4250
For the next $500 million .4125
For the next $1 billion .4000
For the next $3 billion .3875
For net assets over $5 billion .3750
================================================================================
GEORGIA DIVIDEND ADVANTAGE (NZX)
GEORGIA DIVIDEND ADVANTAGE 2 (NKG)
NORTH CAROLINA DIVIDEND ADVANTAGE (NRB)
AVERAGE DAILY NET ASSETS NORTH CAROLINA DIVIDEND ADVANTAGE 2 (NNO)
(INCLUDING NET ASSETS NORTH CAROLINA DIVIDEND ADVANTAGE 3 (NII)
ATTRIBUTABLE TO PREFERRED SHARES) FUND-LEVEL FEE RATE
================================================================================
For the first $125 million .4500%
For the next $125 million .4375
For the next $250 million .4250
For the next $500 million .4125
For the next $1 billion .4000
For net assets over $2 billion .3750
================================================================================
The annual complex-level fee, payable monthly, which is
additive to the fund-level fee, for all Nuveen sponsored funds
in the U.S., is based on the aggregate amount of total fund
assets managed as stated in the table below. As of May 31,
2007, the complex-level fee rate was .1824%.
COMPLEX-LEVEL ASSETS(1) COMPLEX-LEVEL FEE RATE
================================================================================
For the first $55 billion .2000%
For the next $1 billion .1800
For the next $1 billion .1600
For the next $3 billion .1425
For the next $3 billion .1325
For the next $3 billion .1250
For the next $5 billion .1200
For the next $5 billion .1175
For the next $15 billion .1150
For Managed Assets over $91 billion (2) .1400
================================================================================
(1) The complex-level fee component of the management fee for the funds is
calculated based upon the aggregate Managed Assets ("Managed Assets" means
the average daily net assets of each fund including assets attributable to
preferred stock issued by or borrowings by the Nuveen funds) of
Nuveen-sponsored funds in the U.S.
(2) With respect to the complex-wide Managed Assets over $91 billion, the fee
rate or rates that will apply to such assets will be determined at a later
date. In the unlikely event that complex-wide Managed Assets reach $91
billion prior to a determination of the complex-level fee rate or rates to
be applied to Managed Assets in excess of $91 billion, the complex-level
fee rate for such complex-wide Managed Assets shall be .1400% until such
time as a different rate or rates is determined.
63
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 Trustees who are affiliated with the
Adviser or to its Officers, all of whom receive remuneration for their services
to the Funds from the Adviser or its affiliates. The Board of Trustees has
adopted a deferred compensation plan for independent Trustees that enables
Trustees to elect to defer receipt of all or a portion of the annual
compensation they are entitled to receive from certain Nuveen advised Funds.
Under the plan, deferred amounts are treated as though equal dollar amounts had
been invested in shares of select Nuveen advised funds.
For the first ten years of Georgia Dividend Advantage's (NZX) 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,
================================================================================
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 Georgia Dividend Advantage (NZX) for any
portion of its fees and expenses beyond September 30, 2011.
For the first eight years of Georgia Dividend Advantage 2's (NKG) and North
Carolina Dividend Advantage 3's (NII) operations, the Adviser has agreed to
reimburse the Funds, 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 Georgia Dividend Advantage 2 (NKG) and
North Carolina Dividend Advantage 3 (NII) for any portion of its fees and
expenses beyond September 30, 2010.
For the first ten years of North Carolina Dividend Advantage's (NRB) 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 North Carolina Dividend Advantage (NRB)
for any portion of its fees and expenses beyond January 31, 2011.
64
For the first ten years of North Carolina Dividend Advantage 2's (NNO)
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
NOVEMBER 30, NOVEMBER 30,
================================================================================
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 North Carolina Dividend Advantage 2
(NNO) for any portion of its fees and expenses beyond November 30, 2011.
6. NEW ACCOUNTING PRONOUNCEMENTS
Financial Accounting Standards Board Interpretation No. 48 On July 13, 2006, the
Financial Accounting Standards Board (FASB) released FASB Interpretation No. 48,
"Accounting for Uncertainty in Income Taxes" (FIN 48). FIN 48 provides guidance
for how uncertain tax positions should be recognized, measured, presented and
disclosed in the financial statements. FIN 48 requires the evaluation of tax
positions taken or expected to be taken in the course of preparing the Funds'
tax returns to determine whether the tax positions are "more-likely-than-not" of
being sustained by the applicable tax authority. Tax positions not deemed to
meet the more-likely-than-not threshold would be recorded as a tax benefit or
expense in the current year. Adoption of FIN 48 is required for fiscal years
beginning after December 15, 2006, and is to be applied to all open tax years as
of the effective date. Recent SEC guidance allows funds to delay implementing
FIN 48 into NAV calculations until the fund's last NAV calculation in the first
required financial statement reporting period. As a result, the Funds must begin
to incorporate FIN 48 into their NAV calculations by November 30, 2007. At this
time, management is continuing to evaluate the implications of FIN 48 and does
not expect the adoption of FIN 48 will have a significant impact on the net
assets or results of operations of the Funds.
Financial Accounting Standards Board Statement of Financial Accounting Standards
No. 157 In September 2006, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards (SFAS) No. 157, "Fair Value
Measurements." This standard establishes a single authoritative definition of
fair value, sets out a framework for measuring fair value and requires
additional disclosures about fair value measurements. SFAS No. 157 applies to
fair value measurements already required or permitted by existing standards.
SFAS No. 157 is effective for financial statements issued for fiscal years
beginning after November 15, 2007, and interim periods within those fiscal
years. The changes to current generally accepted accounting principles from the
application of this standard relate to the definition of fair value, the methods
used to measure fair value, and the expanded disclosures about fair value
measurements. As of May 31, 2007, the Funds do not believe the adoption of SFAS
No. 157 will impact the financial statement amounts; however, additional
disclosures may be required about the inputs used to develop the measurements
and the effect of certain of the measurements included within the Statement of
Operations for the period.
65
7. SUBSEQUENT EVENTS
Distributions to Common Shareholders
The Funds declared Common share dividend distributions from their tax-exempt net
investment income which were paid on July 2, 2007, to shareholders of record on
June 15, 2007, as follows:
NORTH NORTH NORTH NORTH
GEORGIA GEORGIA GEORGIA CAROLINA CAROLINA CAROLINA CAROLINA
PREMIUM DIVIDEND DIVIDEND PREMIUM DIVIDEND DIVIDEND DIVIDEND
INCOME ADVANTAGE ADVANTAGE 2 INCOME ADVANTAGE ADVANTAGE 2 ADVANTAGE 3
(NPG) (NZX) (NKG) (NNC) (NRB) (NNO) (NII)
==================================================================================================================
Dividend per share $.0530 $.0570 $.0530 $.0490 $.0600 $.0550 $.0545
==================================================================================================================
Agreement and Plan of Merger
On June 20, 2007, Nuveen Investments announced that it had entered into a
definitive Agreement and Plan of Merger ("Merger Agreement") with an investor
group majority-led by Madison Dearborn Partners, LLC. Madison Dearborn Partners,
LLC is a private equity investment firm based in Chicago, Illinois. The investor
group includes affiliates of Merrill Lynch, Wachovia, Citigroup, Deutsche Bank
and Morgan Stanley. It is anticipated that Merrill Lynch and its affiliates will
be indirect "affiliated persons" (as that term is defined in the Investment
Company Act of 1940) of the Funds. Under the terms of the merger, each
outstanding share of Nuveen Investments' common stock (other than dissenting
shares) will be converted into the right to receive a specified amount of cash,
without interest. The merger is expected to be completed by the end of the year,
subject to customary conditions, including obtaining the approval of Nuveen
Investments shareholders, obtaining necessary fund and client consents
sufficient to satisfy the terms of the Merger Agreement, and expiration of
certain regulatory waiting periods. The obligations of Madison Dearborn
Partners, LLC to consummate the merger are not conditioned on its obtaining
financing. The Merger Agreement includes a "go shop" provision through July 19,
2007, during which Nuveen Investments may actively solicit and negotiate
competing takeover proposals.
The consummation of the merger will be deemed to be an "assignment" (as defined
in the 1940 Act) of the investment management agreement between each Fund and
the Adviser, and will result in the automatic termination of each Fund's
agreement. Prior to the consummation of the merger, it is anticipated that the
Board of Trustees of each Fund will consider a new investment management
agreement with the Adviser. If approved by the Board, the new agreement would be
presented to the Fund's shareholders for approval, and, if so approved by
shareholders, would take effect upon consummation of the merger. There can be no
assurance that the merger described above will be consummated as contemplated or
that necessary shareholder approvals will be obtained.
66
Financial
HIGHLIGHTS
67
Financial
HIGHLIGHTS
Selected data for a Common share outstanding throughout each period:
Investment Operations Less Distributions
----------------------------------------------------------------- ----------------------------------
Distributions Distributions
from Net from Net
Beginning Investment Capital Investment Capital
Common Net Income to Gains to Income to Gains to
Share Net Realized/ Preferred Preferred Common Common
Net Asset Investment Unrealized Share- Share- Share- Share-
Value Income Gain (Loss) holders+ holders+ Total holders holders Total
====================================================================================================================================
GEORGIA PREMIUM
INCOME (NPG)
------------------------------------------------------------------------------------------------------------------------------------
Year Ended 5/31:
2007 $14.55 $ .86 $ .04 $(.23) $ -- $ .67 $(.67) $ -- $(.67)
2006 15.19 .87 (.48) (.17) (.01) .21 (.78) (.07) (.85)
2005 14.42 .92 .84 (.09) -- 1.67 (.90) -- (.90)
2004 15.36 .97 (.96) (.05) -- (.04) (.90) -- (.90)
2003 14.31 .96 1.02 (.07) -- 1.91 (.86) -- (.86)
GEORGIA DIVIDEND
ADVANTAGE (NZX)
------------------------------------------------------------------------------------------------------------------------------------
Year Ended 5/31:
2007 14.71 .92 .02 (.25) -- .69 (.75) -- (.75)
2006 15.30 .94 (.47) (.19) -- .28 (.87) -- (.87)
2005 14.47 .96 .85 (.10) -- 1.71 (.88) (.01) (.89)
2004 15.62 .97 (1.18) (.06) -- (.27) (.87) (.01) (.88)
2003 14.00 .96 1.65 (.06) (.02) 2.53 (.81) (.13) (.94)
====================================================================================================================================
Total Returns
----------------------
Offering Based
Costs and Ending on
Preferred Common Based Common
Share Share Ending on Share Net
Underwriting Net Asset Market Market Asset
Discounts Value Value Value* Value*
========================================================================================
GEORGIA PREMIUM
INCOME (NPG)
----------------------------------------------------------------------------------------
Year Ended 5/31:
2007 $ -- $14.55 $14.12 (2.55)% 4.62%
2006 -- 14.55 15.16 (4.12) 1.42
2005 -- 15.19 16.70 15.46 11.88
2004 -- 14.42 15.30 (4.56) (.23)
2003 -- 15.36 16.95 12.92 13.78
GEORGIA DIVIDEND
ADVANTAGE (NZX)
----------------------------------------------------------------------------------------
Year Ended 5/31:
2007 -- 14.65 16.00 8.10 4.75
2006 -- 14.71 15.50 2.91 1.87
2005 .01 15.30 15.89 20.74 12.10
2004 -- 14.47 13.95 (5.15) (1.73)
2003 .03 15.62 15.59 12.56 18.82
========================================================================================
Ratios/Supplemental Data
-------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets Ratios to Average Net Assets
Applicable to Common Shares Applicable to Common Shares
Before Credit/Reimbursement After Credit/Reimbursement**
-------------------------------------------- -------------------------------------------
Ending
Net
Assets
Applicable Expenses Expenses Net Expenses Expenses Net Portfolio
to Common Including Excluding Investment Including Excluding Investment Turnover
Shares (000) Interest++(a) Interest++(a) Income++ Interest++(a) Interest++(a) Income++ Rate
====================================================================================================================================
GEORGIA PREMIUM
INCOME (NPG)
------------------------------------------------------------------------------------------------------------------------------------
Year Ended 5/31:
2007 $55,359 1.25% 1.25% 5.84% 1.23% 1.23% 5.86% 4%
2006 55,318 1.25 1.25 5.87 1.22 1.22 5.90 15
2005 57,687 1.25 1.25 6.15 1.23 1.23 6.17 18
2004 54,607 1.23 1.23 6.54 1.22 1.22 6.55 12
2003 58,050 1.29 1.29 6.53 1.26 1.26 6.55 22
GEORGIA DIVIDEND
ADVANTAGE (NZX)
------------------------------------------------------------------------------------------------------------------------------------
Year Ended 5/31:
2007 28,831 1.35 1.35 5.74 .92 .92 6.16 11
2006 28,912 1.31 1.31 5.82 .85 .85 6.28 5
2005 30,007 1.27 1.27 5.93 .80 .80 6.39 12
2004 28,348 1.27 1.27 6.03 .81 .81 6.49 5
2003 30,576 1.31 1.31 6.00 .83 .83 6.49 48
====================================================================================================================================
Floating Rate Obligations
Preferred Shares at End of Period at End of Period
-------------------------------------- --------------------------
Aggregate Liquidation Aggregate
Amount and Market Asset Amount Asset
Outstanding Value Coverage Outstanding Coverage
(000) Per Share Per Share (000) Per $1,000
================================================================================
GEORGIA PREMIUM
INCOME (NPG)
--------------------------------------------------------------------------------
Year Ended 5/31:
2007 $27,800 $25,000 $74,784 $ -- $ --
2006 27,800 25,000 74,747 -- --
2005 27,800 25,000 76,877 -- --
2004 27,800 25,000 74,107 -- --
2003 27,800 25,000 77,203 -- --
GEORGIA DIVIDEND
ADVANTAGE (NZX)
--------------------------------------------------------------------------------
Year Ended 5/31:
2007 15,000 25,000 73,052 -- --
2006 15,000 25,000 73,187 -- --
2005 15,000 25,000 75,012 -- --
2004 15,000 25,000 72,247 -- --
2003 15,000 25,000 75,961 -- --
================================================================================
* Total Return on Market Value is the combination of changes in the market
price per share and the effect of reinvested dividend income and reinvested
capital gains distributions, if any, at the average price paid per share at
the time of reinvestment. Total Return on Common Share Net Asset Value is
the combination of changes in Common share net asset value, reinvested
dividend income at net asset value and reinvested capital gains
distributions at net asset value, if any. Total returns are not annualized.
** After custodian fee credit and expense reimbursement, where applicable.
+ The amounts shown are based on Common share equivalents.
++ Ratios do not reflect the effect of dividend payments to Preferred
shareholders; income ratios reflect income earned on assets attributable to
Preferred shares.
(a) Interest expense arises from the application of SFAS No. 140 to certain
inverse floating rate transactions entered into by the Fund as more fully
described in Footnote 1 - Inverse Floating Rate Securities.
See accompanying notes to financial statements.
68-69 spread
Financial
HIGHLIGHTS (continued)
Selected data for a Common share outstanding throughout each period:
Investment Operations Less Distributions
----------------------------------------------------------------- ----------------------------------
Distributions Distributions
from Net from Net
Beginning Investment Capital Investment Capital
Common Net Income to Gains to Income to Gains to
Share Net Realized/ Preferred Preferred Common Common
Net Asset Investment Unrealized Share- Share- Share- Share-
Value Income Gain (Loss) holders+ holders+ Total holders holders Total
====================================================================================================================================
GEORGIA DIVIDEND
ADVANTAGE 2 (NKG)
------------------------------------------------------------------------------------------------------------------------------------
Year Ended 5/31:
2007 $14.25 $.89 $ .17 $(.24) $ -- $ .82 $(.63) $ -- $(.63)
2006 14.71 .88 (.45) (.19) -- .24 (.70) -- (.70)
2005 13.79 .87 .94 (.11) -- 1.70 (.78) -- (.78)
2004 15.01 .88 (1.23) (.05) -- (.40) (.80) (.02) (.82)
2003(a) 14.33 .47 .92 (.04) -- 1.35 (.47) -- (.47)
====================================================================================================================================
Total Returns
----------------------
Offering Based
Costs and Ending on
Preferred Common Based Common
Share Share Ending on Share Net
Underwriting Net Asset Market Market Asset
Discounts Value Value Value** Value**
=============================================================================================
GEORGIA DIVIDEND
ADVANTAGE 2 (NKG)
---------------------------------------------------------------------------------------------
Year Ended 5/31:
2007 $ -- $14.44 $14.50 14.40% 5.79%
2006 -- 14.25 13.26 (1.61) 1.68
2005 -- 14.71 14.18 13.61 12.61
2004 -- 13.79 13.20 (6.57) (2.67)
2003(a) (.20) 15.01 14.98 3.16 8.22
=============================================================================================
Ratios/Supplemental Data
-------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets Ratios to Average Net Assets
Applicable to Common Shares Applicable to Common Shares
Before Credit/Reimbursement After Credit/Reimbursement***
-------------------------------------------- ------------------------------------------
Ending
Net
Assets
Applicable Expenses Expenses Net Expenses Expenses Net Portfolio
to Common Including Excluding Investment Including Excluding Investment Turnover
Shares (000) Interest++(a) Interest++(a) Income++ Interest++(a) Interest++(a) Income++ Rate
====================================================================================================================================
GEORGIA DIVIDEND
ADVANTAGE 2 (NKG)
------------------------------------------------------------------------------------------------------------------------------------
Year Ended
5/31:
2007 $65,770 1.24% 1.24% 5.63% .74% .74% 6.12% 7%
2006 64,901 1.24 1.24 5.63 .75 .75 6.12 7
2005 66,974 1.23 1.23 5.58 .74 .74 6.07 5
2004 62,810 1.22 1.22 5.63 .73 .73 6.12 12
2003(a) 68,325 1.16* 1.16* 4.36* .69* .69* 4.84* 17
====================================================================================================================================
Floating Rate Obligations
Preferred Shares at End of Period at End of Period
-------------------------------------- --------------------------
Aggregate Liquidation Aggregate
Amount and Market Asset Amount Asset
Outstanding Value Coverage Outstanding Coverage
(000) Per Share Per Share (000) Per $1,000
================================================================================
GEORGIA DIVIDEND
ADVANTAGE 2 (NKG)
--------------------------------------------------------------------------------
Year Ended 5/31:
2007 $33,000 $25,000 $74,825 $ -- $ --
2006 33,000 25,000 74,168 -- --
2005 33,000 25,000 75,738 -- --
2004 33,000 25,000 72,583 -- --
2003(a) 33,000 25,000 76,761 -- --
================================================================================
* Annualized.
** Total Return on Market Value is the combination of changes in the market
price per share and the effect of reinvested dividend income and reinvested
capital gains distributions, if any, at the average price paid per share at
the time of reinvestment. Total Return on Common Share Net Asset Value is
the combination of changes in Common share net asset value, reinvested
dividend income at net asset value and reinvested capital gains
distributions at net asset value, if any. Total returns are not annualized.
*** After custodian fee credit and expense reimbursement, where applicable.
+ The amounts shown are based on Common share equivalents.
++ Ratios do not reflect the effect of dividend payments to Preferred
shareholders; income ratios reflect income earned on assets attributable to
Preferred shares.
(a) For the period September 25, 2002 (commencement of operations) through May
31, 2003.
(b) Interest expense arises from the application of SFAS No. 140 to certain
inverse floating rate transactions entered into by the Fund as more fully
described in Footnote 1 - Inverse Floating Rate Securities.
See accompanying notes to financial statements.
70-71 spread
Financial
HIGHLIGHTS (continued)
Selected data for a Common share outstanding throughout each period:
Investment Operations Less Distributions
----------------------------------------------------------------- ----------------------------------
Distributions Distributions
from Net from Net
Beginning Investment Capital Investment Capital
Common Net Income to Gains to Income to Gains to
Share Net Realized/ Preferred Preferred Common Common
Net Asset Investment Unrealized Share- Share- Share- Share-
Value Income Gain (Loss) holders+ holders+ Total holders holders Total
====================================================================================================================================
NORTH CAROLINA
PREMIUM INCOME (NNC)
------------------------------------------------------------------------------------------------------------------------------------
Year Ended 5/31:
2007 $14.34 $ .85 $ .07 $(.23) $ --* $ .69 $(.66) $(.01) $(.67)
2006 15.16 .88 (.57) (.16) (.02) .13 (.79) (.16) (.95)
2005 14.55 .91 .70 (.11) -- 1.50 (.89) -- (.89)
2004 15.50 .95 (.95) (.06) -- (.06) (.89) -- (.89)
2003 14.18 .98 1.27 (.07) -- 2.18 (.86) -- (.86)
NORTH CAROLINA
DIVIDEND ADVANTAGE (NRB)
------------------------------------------------------------------------------------------------------------------------------------
Year Ended 5/31:
2007 14.87 .93 .03 (.22) (.01) .73 (.77) (.05) (.82)
2006 15.46 .94 (.48) (.17) -- .29 (.88) -- (.88)
2005 14.72 .97 .78 (.09) -- 1.66 (.92) -- (.92)
2004 15.87 .98 (1.10) (.05) -- (.17) (.91) (.07) (.98)
2003 14.39 1.00 1.54 (.06) (.02) 2.46 (.86) (.13) (.99)
====================================================================================================================================
Total Returns
----------------------
Offering Based
Costs and Ending on
Preferred Common Based Common
Share Share Ending on Share Net
Underwriting Net Asset Market Market Asset
Discounts Value Value Value** Value**
===========================================================================================
NORTH CAROLINA
PREMIUM INCOME
(NNC)
-------------------------------------------------------------------------------------------
Year Ended 5/31:
2007 $ -- $14.36 $14.30 (.78)% 4.84%
2006 -- 14.34 15.09 (6.84) .87
2005 -- 15.16 17.20 17.79 10.52
2004 -- 14.55 15.40 (4.08) (.40)
2003 -- 15.50 16.95 10.27 15.80
NORTH CAROLINA
DIVIDEND ADVANTAGE
(NRB)
-------------------------------------------------------------------------------------------
Year Ended 5/31:
2007 -- 14.78 16.44 (2.26) 4.98
2006 -- 14.87 17.70 8.03 1.93
2005 -- 15.46 17.25 21.19 11.53
2004 -- 14.72 15.05 (2.76) (1.08)
2003 .01 15.87 16.45 13.52 17.75
===========================================================================================
Ratios/Supplemental Data
------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets Ratios to Average Net Assets
Applicable to Common Shares Applicable to Common Shares
Before Credit/Reimbursement After Credit/Reimbursement***
------------------------------------------- ------------------------------------------
Ending
Net
Assets
Applicable Expenses Expenses Net Expenses Expenses Net Portfolio
to Common Including Excluding Investment Including Excluding Investment Turnover
Shares (000) Interest++(a) Interest++(a) Income++ Interest++(a) Interest++(a) Income++ Rate
====================================================================================================================================
NORTH CAROLINA
PREMIUM INCOME (NNC)
------------------------------------------------------------------------------------------------------------------------------------
Year Ended 5/31:
2007 $91,191 1.27% 1.24% 5.82% 1.25% 1.22% 5.84% 13%
2006 91,033 1.25 1.25 5.98 1.24 1.24 5.99 16
2005 96,008 1.23 1.23 6.09 1.22 1.22 6.10 19
2004 91,941 1.23 1.23 6.35 1.22 1.22 6.36 20
2003 97,785 1.27 1.27 6.60 1.25 1.25 6.62 16
NORTH CAROLINA
DIVIDEND ADVANTAGE (NRB)
------------------------------------------------------------------------------------------------------------------------------------
Year Ended 5/31:
2007 33,409 1.68 1.29 5.82 1.31 .92 6.20 15
2006 33,537 1.29 1.29 5.79 .84 .84 6.24 4
2005 34,820 1.27 1.27 5.90 .81 .81 6.35 11
2004 33,110 1.24 1.24 5.96 .78 .78 6.42 15
2003 35,591 1.30 1.30 6.16 .83 .83 6.62 39
====================================================================================================================================
Floating Rate Obligations
Preferred Shares at End of Period at End of Period
-------------------------------------- --------------------------
Aggregate Liquidation Aggregate
Amount and Market Asset Amount Asset
Outstanding Value Coverage Outstanding Coverage
(000) Per Share Per Share (000) Per $1,000
================================================================================
NORTH CAROLINA
PREMIUM INCOME (NNC)
--------------------------------------------------------------------------------
Year Ended 5/31:
2007 $46,800 $25,000 $73,713 $3,870 $36,657
2006 46,800 25,000 73,629 -- --
2005 46,800 25,000 76,286 -- --
2004 46,800 25,000 74,114 -- --
2003 46,800 25,000 77,236 -- --
NORTH CAROLINA
DIVIDEND ADVANTAGE (NRB)
--------------------------------------------------------------------------------
Year Ended 5/31:
2007 17,000 25,000 74,130 6,350 8,938
2006 17,000 25,000 74,319 -- --
2005 17,000 25,000 76,205 -- --
2004 17,000 25,000 73,692 -- --
2003 17,000 25,000 77,340 -- --
================================================================================
* Per share Distributions from Capital Gains to Preferred Shareholders rounds
to less than $.01 per share.
** Total Return on Market Value is the combination of changes in the market
price per share and the effect of reinvested dividend income and reinvested
capital gains distributions, if any, at the average price paid per share at
the time of reinvestment. Total Return on Common Share Net Asset Value is
the combination of changes in Common share net asset value, reinvested
dividend income at net asset value and reinvested capital gains
distributions at net asset value, if any. Total returns are not annualized.
*** After custodian fee credit and expense reimbursement, where applicable.
+ The amounts shown are based on Common share equivalents.
++ Ratios do not reflect the effect of dividend payments to Preferred
shareholders; income ratios reflect income earned on assets attributable to
Preferred shares.
(a) Interest expense arises from the application of SFAS No. 140 to certain
inverse floating rate transactions entered into by the Fund as more fully
described in Footnote 1 - Inverse Floating Rate Securities.
See accompanying notes to financial statements.
72-73 spread
Financial
HIGHLIGHTS (continued)
Selected data for a Common share outstanding throughout each period:
Investment Operations Less Distributions
----------------------------------------------------------------- ----------------------------------
Distributions Distributions
from Net from Net
Beginning Investment Capital Investment Capital
Common Net Income to Gains to Income to Gains to
Share Net Realized/ Preferred Preferred Common Common
Net Asset Investment Unrealized Share- Share- Share- Share-
Value Income Gain (Loss) holders+ holders+ Total holders holders Total
====================================================================================================================================
NORTH CAROLINA
DIVIDEND
ADVANTAGE 2 (NNO)
------------------------------------------------------------------------------------------------------------------------------------
Year Ended 5/31:
2007 $14.75 $ .91 $ .10 $(.23) $(.01) $ .77 $(.71) $(.05) $(.76)
2006 15.55 .92 (.60) (.17) (.01) .14 (.82) (.12) (.94)
2005 14.81 .94 .83 (.10) -- 1.67 (.86) (.07) (.93)
2004 15.98 .94 (1.17) (.06) -- (.29) (.85) (.03) (.88)
2003 14.30 .94 1.78 (.07) (.02) 2.63 (.82) (.13) (.95)
NORTH CAROLINA
DIVIDEND
ADVANTAGE 3 (NII)
------------------------------------------------------------------------------------------------------------------------------------
Year Ended 5/31:
2007 14.26 .89 .11 (.23) -- .77 (.65) -- (.65)
2006 14.78 .88 (.50) (.18) -- .20 (.72) -- (.72)
2005 13.89 .89 .91 (.11) -- 1.69 (.80) -- (.80)
2004 14.96 .90 (1.09) (.07) -- (.26) (.80) (.01) (.81)
2003(a) 14.33 .49 .87 (.05) -- 1.31 (.47) -- (.47)
====================================================================================================================================
Total Returns
----------------------
Offering Based
Costs and Ending on
Preferred Common Based Common
Share Share Ending on Share Net
Underwriting Net Asset Market Market Asset
Discounts Value Value Value** Value**
==========================================================================================
NORTH CAROLINA
DIVIDEND
ADVANTAGE 2 (NNO)
------------------------------------------------------------------------------------------
Year Ended 5/31:
2007 $ -- $14.76 $15.50 6.64% 5.24%
2006 -- 14.75 15.28 (.18) .97
2005 -- 15.55 16.25 16.46 11.56
2004 -- 14.81 14.80 (1.94) (1.83)
2003 -- 15.98 15.97 14.10 18.98
NORTH CAROLINA
DIVIDEND
ADVANTAGE 3 (NII)
------------------------------------------------------------------------------------------
Year Ended 5/31:
2007 -- 14.38 14.64 6.23 5.48
2006 -- 14.26 14.42 (1.59) 1.41
2005 -- 14.78 15.40 18.78 12.39
2004 -- 13.89 13.68 (4.93) (1.75)
2003(a) (.21) 14.96 15.20 4.56 7.86
==========================================================================================
Ratios/Supplemental Data
------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets Ratios to Average Net Assets
Applicable to Common Shares Applicable to Common Shares
Before Credit/Reimbursement After Credit/Reimbursement***
--------------------------------------------- --------------------------------------------
Ending
Net
Assets
Applicable Expenses Expenses Net Expenses Expenses Net Portfolio
to Common Including Excluding Investment Including Excluding Investment Turnover
Shares (000) Interest++(a) Interest++(a) Income++ Interest++(a) Interest++(a) Income++ Rate
====================================================================================================================================
NORTH CAROLINA
DIVIDEND ADVANTAGE 2 (NNO)
------------------------------------------------------------------------------------------------------------------------------------
Year Ended 5/31:
2007 $55,349 1.39% 1.24% 5.68% .96% .82% 6.10% 9%
2006 55,251 1.24 1.24 5.62 .77 .77 6.09 9
2005 58,155 1.23 1.23 5.64 .77 .77 6.10 26
2004 55,311 1.22 1.22 5.71 .77 .77 6.16 13
2003 59,642 1.24 1.24 5.80 .76 .76 6.27 22
NORTH CAROLINA
DIVIDEND ADVANTAGE 3 (NII)
------------------------------------------------------------------------------------------------------------------------------------
Year Ended 5/31:
2007 56,511 1.49 1.23 5.62 1.00 .74 6.11 12
2006 56,049 1.23 1.23 5.58 .75 .75 6.07 2
2005 58,035 1.24 1.24 5.65 .76 .76 6.14 8
2004 54,482 1.22 1.22 5.75 .73 .73 6.23 14
2003(a) 58,653 1.18* 1.18* 4.61* .71* .71* 5.08* 3
====================================================================================================================================
Floating Rate Obligations
Preferred Shares at End of Period at End of Period
-------------------------------------- --------------------------
Aggregate Liquidation Aggregate
Amount and Market Asset Amount Asset
Outstanding Value Coverage Outstanding Coverage
(000) Per Share Per Share (000) Per $1,000
================================================================================
NORTH CAROLINA
DIVIDEND ADVANTAGE 2 (NNO)
--------------------------------------------------------------------------------
Year Ended 5/31:
2007 $28,000 $25,000 $74,418 $4,995 $17,686
2006 28,000 25,000 74,332 -- --
2005 28,000 25,000 76,924 -- --
2004 28,000 25,000 74,385 -- --
2003 28,000 25,000 78,252 -- --
NORTH CAROLINA
DIVIDEND ADVANTAGE 3 (NII)
--------------------------------------------------------------------------------
Year Ended 5/31:
2007 28,000 25,000 75,457 7,680 12,004
2006 28,000 25,000 75,044 -- --
2005 28,000 25,000 76,817 -- --
2004 28,000 25,000 73,644 -- --
2003(a) 28,000 25,000 77,369 -- --
================================================================================
* Annualized.
** Total Return on Market Value is the combination of changes in the market
price per share and the effect of reinvested dividend income and reinvested
capital gains distributions, if any, at the average price paid per share at
the time of reinvestment. Total Return on Common Share Net Asset Value is
the combination of changes in Common share net asset value, reinvested
dividend income at net asset value and reinvested capital gains
distributions at net asset value, if any. Total returns are not annualized.
*** After custodian fee credit and expense reimbursement, where applicable. +
The amounts shown are based on Common share equivalents.
++ Ratios do not reflect the effect of dividend payments to Preferred
shareholders; income ratios reflect income earned on assets attributable to
Preferred shares.
(a) For the period September 25, 2002 (commencement of operations) through May
31, 2003.
(b) Interest expense arises from the application of SFAS No. 140 to certain
inverse floating rate transactions entered into by the Fund as more fully
described in Footnote 1 - Inverse Floating Rate Securities.
See accompanying notes to financial statements.
74-75 spread
Board Members & 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
Members of the Funds. The number of board members of the Fund is currently set
at nine. None of the board members 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 board members 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.
NAME, POSITION(S) HELD YEAR FIRST NUMBER PRINCIPAL
BIRTHDATE WITH THE FUNDS ELECTED OR OF PORTFOLIOS OCCUPATION(S)
& ADDRESS APPOINTED IN FUND COMPLEX INCLUDING OTHER
AND TERM(2) OVERSEEN BY DIRECTORSHIPS
BOARD MEMBER DURING PAST 5 YEARS
BOARD MEMBER WHO IS AN INTERESTED PERSON OF THE FUNDS:
o TIMOTHY R. SCHWERTFEGER(1) Director (since 1996) and Non-executive
3/28/49 Chairman of 1994 Chairman (since July 1, 2007) formerly,
333 W. Wacker Drive the Board ANNUAL 176 Chairman (1996-June 30, 2007) of Nuveen
Chicago, IL 60606 and Board Member Investments, Inc., Nuveen Investments, LLC;
Chairman and Director (since 1997) of Nuveen
Asset Management; Chairman and Director of
Rittenhouse Asset Management, Inc. (since
1999); Chairman of Nuveen Investments
Advisers Inc. (since 2002); formerly,
Chairman and Director (1996-2004) Nuveen
Advisory Corp. and Nuveen Institutional
Advisory Corp.(3); formerly, Director
(1996-2006) of Institutional Capital
Corporation.
BOARD MEMBERS WHO ARE NOT INTERESTED PERSONS OF THE FUNDS:
o ROBERT P. BREMNER Private Investor and Management Consultant.
8/22/40 Lead 1997
333 W. Wacker Drive Independent CLASS III 176
Chicago, IL 60606 Board member
o JACK B. EVANS President, The Hall-Perrine Foundation, a
10/22/48 1999 private philanthropic corporation (since
333 W. Wacker Drive Board member CLASS III 176 1996); Director and Vice Chairman, United
Chicago, IL 60606 Fire Group, a publicly held company; Member
of the Board of Regents for the State of
Iowa University System; Director, Gazette
Companies; Life Trustee of Coe College and
Iowa College Foundation; Member of the
Advisory Council of the Department of
Finance in the Tippie College of Business,
University of Iowa; formerly, Director,
Alliant Energy; formerly, Director, Federal
Reserve Bank of Chicago; formerly, President
and Chief Operating Officer, SCI Financial
Group, Inc., a regional financial services
firm.
o WILLIAM C. HUNTER Dean, Tippie College of Business, University
3/6/48 2004 of Iowa (since July 2006); formerly, Dean
333 W. Wacker Drive Board member CLASS II 176 and Distinguished Professor of Finance,
Chicago, IL 60606 School of Business at the University of
Connecticut (2003-2006); previously, Senior
Vice President and Director of Research at
the Federal Reserve Bank of Chicago
(1995-2003); Director (since 1997), Credit
Research Center at Georgetown University;
Director (since 2004) of Xerox Corporation;
Director, SS&C Technologies, Inc. (May
2005-October 2005).
76
NAME, POSITION(S) HELD YEAR FIRST NUMBER PRINCIPAL
BIRTHDATE WITH THE FUNDS ELECTED OR OF PORTFOLIOS OCCUPATION(S)
& ADDRESS APPOINTED IN FUND COMPLEX INCLUDING OTHER
AND TERM(2) OVERSEEN BY DIRECTORSHIPS
BOARD MEMBER DURING PAST 5 YEARS
BOARD MEMBERS WHO ARE NOT INTERESTED PERSONS OF THE FUNDS:
o DAVID J. KUNDERT Director, Northwestern Mutual Wealth
10/28/42 2005 Management Company; Retired (since 2004) as
333 W. Wacker Drive Board member CLASS II 174 Chairman, JPMorgan Fleming Asset Management,
Chicago, IL 60606 President and CEO, Banc One Investment
Advisors Corporation, and President, One
Group Mutual Funds; prior thereto, Executive
Vice President, Banc One Corporation and
Chairman and CEO, Banc One Investment
Management Group; Board of Regents, Luther
College; member of the Wisconsin Bar
Association; member of Board of Directors,
Friends of Boerner Botanical Gardens; member
of Board of Directors, Milwaukee Repertory
Theater.
o WILLIAM J. SCHNEIDER Chairman of Miller-Valentine Partners Ltd.,
9/24/44 1997 a real estate investment company; formerly,
333 W. Wacker Drive Board member ANNUAL 176 Senior Partner and Chief Operating Officer
Chicago, IL 60606 (retired, 2004) of Miller-Valentine Group;
formerly, Vice President, Miller-Valentine
Realty; Board Member, Chair of the Finance
Committee and member of the Audit Committee
of Premier Health Partners, the
not-for-profit company of Miami Valley
Hospital; Vice President, Dayton
Philharmonic Orchestra Association; Board
Member, Regional Leaders Forum, which
promotes cooperation on economic development
issues; Director, Dayton Development
Coalition; formerly, Member, Community
Advisory Board, National City Bank, Dayton,
Ohio and Business Advisory Council,
Cleveland Federal Reserve Bank.
o JUDITH M. STOCKDALE Executive Director, Gaylord and Dorothy
12/29/47 1997 Donnelley Foundation (since 1994); prior
333 W. Wacker Drive Board member CLASS I 176 thereto, Executive Director, Great Lakes
Chicago, IL 60606 Protection Fund (from 1990 to 1994).
o CAROLE E. STONE Director, Chicago Board Options Exchange
6/28/47 2007 (since 2006); Chair New York Racing
333 West Wacker Drive Board member CLASS I 176 Association Oversight Board (since 2005);
Chicago, IL 60606 Commissioner, New York State Commission on
Public Authority Reform (since 2005);
formerly Director, New York State Division
of the Budget (2000-2004), Chair, Public
Authorities Control Board (2000-2004) and
Director, Local Government Assistance
Corporation (2000-2004).
o EUGENE S. SUNSHINE Senior Vice President for Business and
1/22/50 2005 Finance, Northwestern University (since
333 W. Wacker Drive Board member CLASS II 176 1997); Director (since 2003), Chicago Board
Chicago, IL 60606 Options Exchange; Chairman (since 1997),
Board of Directors, Rubicon, a pure captive
insurance company owned by Northwestern
University; Director (since 1997), Evanston
Chamber of Commerce and Evanston Inventure,
a business development organization;
Director (since 2006), Pathways, a provider
of therapy and related information for
physically disabled infants and young
children; formerly, Director (2003-2006),
National Mentor Holdings, a privately-held,
national provider of home and
community-based services.
77
NAME, POSITION(S) HELD YEAR FIRST NUMBER PRINCIPAL
BIRTHDATE WITH THE FUNDS ELECTED OR OF PORTFOLIOS OCCUPATION(S)
AND ADDRESS APPOINTED(4) IN FUND COMPLEX DURING PAST 5 YEARS
OVERSEEN
BY OFFICER
OFFICERS OF THE FUND:
o GIFFORD R. ZIMMERMAN Managing Director (since 2002), Assistant
9/9/56 Chief Secretary and Associate General Counsel,
333 W. Wacker Drive Administrative 1988 176 formerly, Vice President and Assistant
Chicago, IL 60606 Officer General Counsel, of Nuveen Investments, LLC;
Managing Director (since 2002) and Assistant
Secretary and Associate General Counsel,
formerly, Vice President (since 1997), of
Nuveen Asset Management; Managing Director
(since 2004) and Assistant Secretary (since
1994) of Nuveen Investments, Inc.; 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
Assistant Secretary of Rittenhouse Asset
Management, Inc., Symphony Asset Management
LLC (since 2003), Tradewinds Global
Investors, LLC and Santa Barbara Asset
Management, LLC; (since 2006); formerly,
Managing Director (2002-2004), General
Counsel (1998-2004) and Assistant Secretary,
formerly, Vice President of Nuveen Advisory
Corp. and Nuveen Institutional Advisory
Corp.(3); Chartered Financial Analyst.
o WILLIAMS ADAMS IV Executive Vice President, U.S. Structured
6/9/55 Products of Nuveen Investments, LLC, (since
333 West Wacker Drive Vice President 2007 119 1999), prior thereto, Managing Director of
Chicago, IL 60606 Structured Investments.
o JULIA L. ANTONATOS Managing Director (since 2005), formerly
9/22/63 Vice President (since 2002) of Nuveen
333 W. Wacker Drive Vice President 2004 176 Investments, LLC; Chartered Financial
Chicago, IL 60606 Analyst.
o CEDRIC H. ANTOSIEWICZ Managing Director, (since 2004) previously,
1/11/62 Vice President (1993-2004) of Nuveen
333 W. Wacker Drive Vice President 2007 119 Investments, LLC.
Chicago, IL 60606
o MICHAEL T. ATKINSON Vice President (since 2002) of Nuveen
2/3/66 Vice President Investments, LLC.
333 W. Wacker Drive and Assistant 2000 176
Chicago, IL 60606 Secretary
o PETER H. D'ARRIGO Vice President and Treasurer of Nuveen
11/28/67 Investments, LLC and of Nuveen Investments,
333 W. Wacker Drive Vice President 1999 176 Inc. (since 1999); Vice President and
Chicago, IL 60606 Treasurer of Nuveen Asset Management (since
2002) and of Nuveen Investments Advisers
Inc. (since 2002); Assistant Treasurer of
NWQ Investment Management Company, LLC.
(since 2002); Vice President and Treasurer
of Nuveen Rittenhouse Asset Management, Inc.
(since 2003); Treasurer of Symphony Asset
Management LLC (since 2003) and Santa
Barbara Asset Management, LLC (since 2006);
Assistant Treasurer, Tradewinds Global
Investors, LLC (since 2006); formerly, Vice
President and Treasurer (1999-2004) of
Nuveen Advisory Corp. and Nuveen
Institutional Advisory Corp.(3); Chartered
Financial Analyst.
o LORNA C. FERGUSON Managing Director (since 2004), formerly,
10/24/45 Vice President of Nuveen Investments, LLC,
333 W. Wacker Drive Vice President 1998 176 Managing Director (2004) formerly, Vice
Chicago, IL 60606 President (1998-2004) of Nuveen Advisory
Corp. and Nuveen Institutional Advisory
Corp.(3); Managing Director (since 2005) of
Nuveen Asset Management.
78
NAME, POSITION(S) HELD YEAR FIRST NUMBER PRINCIPAL
BIRTHDATE WITH THE FUNDS ELECTED OR OF PORTFOLIOS OCCUPATION(S)
AND ADDRESS APPOINTED(4) IN FUND COMPLEX DURING PAST 5 YEARS
OVERSEEN
BY OFFICER
OFFICERS OF THE FUND:
o WILLIAM M. FITZGERALD Managing Director (since 2002), formerly,
3/2/64 Vice President of Nuveen Investments, LLC;
333 W. Wacker Drive Vice President 1995 176 Managing Director (1997-2004) of Nuveen
Chicago, IL 60606 Advisory Corp. and Nuveen Institutional
Advisory Corp.(3); Managing Director (since
2001) of Nuveen Asset Management; Vice
President (since 2002) of Nuveen Investments
Advisers Inc.; Chartered Financial Analyst.
o STEPHEN D. FOY Vice President (since 1993) and Funds
5/31/54 Vice President Controller (since 1998) of Nuveen
333 W. Wacker Drive and Controller 1998 176 Investments, LLC; formerly, Vice President
Chicago, IL 60606 and Funds Controller (1998-2004) of Nuveen
Investments, Inc.; Certified Public
Accountant.
o WALTER M. KELLY Assistant Vice President and Assistant
2/24/70 Chief Compliance Secretary of the Nuveen Funds (2003-2006);
333 West Wacker Drive Officer and 2003 176 Vice President (since 2006) formerly,
Chicago, IL 60606 Vice President Assistant Vice President and Assistant
General Counsel (2003-2006) of Nuveen
Investments, LLC; previously, Associate
(2001-2003) at the law firm of Vedder,
Price, Kaufman & Kammholz.
o DAVID J. LAMB Vice President (since 2000) of Nuveen
3/22/63 Investments, LLC; Certified Public
333 W. Wacker Drive Vice President 2000 176 Accountant.
Chicago, IL 60606
o TINA M. LAZAR Vice President of Nuveen Investments, LLC
8/27/61 (since 1999).
333 W. Wacker Drive Vice President 2002 176
Chicago, IL 60606
o LARRY W. MARTIN Vice President, Assistant Secretary and
7/27/51 Vice President Assistant General Counsel of Nuveen
333 W. Wacker Drive and Assistant 1988 176 Investments, LLC; formerly, Vice President
Chicago, IL 60606 Secretary and Assistant Secretary of Nuveen Advisory
Corp. and Nuveen Institutional Advisory
Corp.(3); Vice President (since 2005) and
Assistant Secretary of Nuveen Investments,
Inc.; Vice President (since 2005) and
Assistant Secretary (since 1997) of Nuveen
Asset Management; 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), Symphony Asset
Management LLC (since 2003) and Tradewinds
Global Investors, LLC and Santa Barbara
Asset Management, LLC (since 2006).
o KEVIN J. MCCARTHY Vice President and Assistant General
3/26/66 Vice President Counsel, Nuveen Investments, LLC (since
333 W. Wacker Drive and Secretary 2007 176 2007); prior thereto, Partner, Bell, Boyd &
Chicago, IL 60606 Lloyd LLP (1997-2007)
o JOHN V. MILLER Managing Director (since 2007), formerly,
4/10/67 Vice President (2002-2007) of Nuveen
333 W. Wacker Drive Vice President 2007 176 Investments, LLC; Chartered Financial
Chicago, IL 60606 Analyst.
(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 board member
of the Adviser.
(2) Board Members serve three year terms, except for two board members who are
elected by the holders of Preferred Shares. The Board of Trustees is
divided into three classes, Class I, Class II, and Class III, with each
being elected to serve until the third succeeding annual shareholders'
meeting subsequent to its election or thereafter in each case when its
respective successors are duly elected or appointed, except two board
members are elected by the holders of Preferred Shares to serve until the
next annual shareholders' meeting subsequent to its election or thereafter
in each case when its respective successors are duly elected or appointed.
The first year elected or appointed represents the year in which the board
member was first elected or appointed to any fund in the Nuveen Complex.
(3) Nuveen Advisory Corp. and Nuveen Institutional Advisory Corp. were
reorganized into Nuveen Asset Management, effective January 1, 2005.
(4) Officers serve one year terms 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.
79
Annual Investment
Management Agreement
APPROVAL PROCESS
The Board of Trustees is responsible for overseeing the performance of the
investment adviser to the Funds and determining whether to continue the advisory
arrangements. At a meeting held on May 21-23, 2007 (the "May Meeting"), the
Board of Trustees of the Funds, including the independent Trustees, unanimously
approved the continuance of the Investment Management Agreement between each
Fund and NAM (the "Fund Adviser").
THE APPROVAL PROCESS
During the course of the year, the Board received a wide variety of materials
relating to the services provided by the Fund Adviser and the performance of the
Funds. At each of its quarterly meetings, the Board reviews investment
performance and various matters relating to the respective Fund's operations,
including the Fund's compliance program, shareholder services, valuation,
custody, distribution and other information relating to the nature, extent and
quality of services provided by the Fund Adviser. Between the regularly
scheduled quarterly meetings, the Trustees received information on particular
matters as the need arose. In considering whether to renew the respective
advisory contract with the Fund Adviser at the May Meeting, the independent
Trustees also received extensive materials well in advance of their meeting
which outlined, among other things:
o the nature, extent and quality of services provided by the Fund Adviser;
o the organization and business operations of the Fund Adviser, including the
responsibilities of various departments and key personnel;
o the Fund's past performance as well as the Fund's performance compared to
funds with similar investment objectives based on data and information
provided by an independent third party and to customized benchmarks;
o the profitability of the Fund Adviser and certain industry profitability
analyses for unaffiliated advisers;
o the expenses of the Fund Adviser in providing the various services;
o the advisory fees and total expense ratios of the Fund, including
comparisons of such fees and expenses with those of comparable,
unaffiliated funds based on information and data provided by an independent
third party (the "Peer Universe") as well as compared to a subset of funds
within the Peer Universe (the "Peer Group") of the respective Fund (as
applicable);
o the advisory fees the Fund Adviser assesses to other types of investment
products or clients;
o the soft dollar practices of the Fund Adviser, if any; and
o from independent legal counsel, a legal memorandum describing among other
things, applicable laws, regulations and duties in reviewing and approving
advisory contracts.
At the May Meeting, the Fund Adviser made a presentation to and responded to
questions from the Board.
Prior to and after the presentations and reviewing the written materials, the
independent Trustees met privately with their legal counsel to review the
Board's duties in reviewing advisory contracts and consider the renewal of the
advisory contracts. The independent Trustees, in consultation with independent
counsel, reviewed the factors set out in judicial decisions and SEC directives
relating to the renewal of advisory contracts. As outlined in more detail below,
the Trustees considered all factors they believed relevant with respect to each
Fund, including, but not limited to, the following: (a) the nature, extent and
quality of the services to be provided by the Fund Adviser; (b) the investment
performance of the Fund and the Fund Adviser; (c) the costs of the services to
be provided and profits to be realized by the Fund Adviser and its affiliates;
(d) the extent to which economies of scale would be realized; and (e) whether
fee levels reflect these economies of scale for the benefit of Fund investors.
In addition, as noted, the Trustees met regularly throughout the year to oversee
the Funds. In evaluating the advisory contracts, the Trustees also relied upon
80
their knowledge resulting from their meetings and other interactions throughout
the year of the Fund Adviser, its services and the Funds. It is with this
background that the Trustees considered each advisory contract.
A. NATURE, EXTENT AND QUALITY OF SERVICES
In reviewing the Fund Adviser, the Trustees considered the nature, extent and
quality of the Fund Adviser's services. The Trustees reviewed materials
outlining, among other things, the Fund Adviser's organization and business; the
types of services that the Fund Adviser or its affiliates provide and are
expected to provide to the Funds; the performance record of the applicable Fund
(as described in further detail below); and any initiatives Nuveen has taken for
the municipal fund product line. As noted, the Trustees are already familiar
with the organization, operations and personnel of the Fund Adviser due to the
Trustees' experience in governing the respective Fund and working with NAM on
matters relating to the Funds. With respect to personnel, the Trustees
recognized NAM's investment in additional qualified personnel throughout the
various groups in the organization and recommended to NAM that it continue to
review staffing needs as necessary. In addition, with respect to the municipal
funds advised by NAM, the Trustees reviewed materials describing the current
status and, in particular, the developments in 2006 with respect to NAM's
investment process, investment strategies (including additional tools used in
executing such strategies), personnel (including portfolio management and
research teams), trading process, hedging team, risk management team (e.g.,
reviewing credit quality, duration limits, derivative use, as applicable), and
investment operations (such as, enhancements to trading procedures, pricing
procedures, and client services). The Trustees recognized NAM's investment of
resources and efforts to continue to enhance and refine its investment process.
In addition to advisory services, the independent Trustees considered the
quality of any administrative or non-advisory services provided. With respect to
NAM, NAM provides the Funds with a wide variety of services and officers and
other personnel as are necessary for the operations of the respective Fund,
including,
o product management;
o fund administration;
o oversight of shareholder services and other fund service providers;
o administration of Board relations;
o regulatory and portfolio compliance; and
o legal support services.
As the Funds operate in a highly regulated industry and given the importance of
compliance, the Trustees considered, in particular, NAM's compliance activities
for the Funds and enhancements thereto. In this regard, the Trustees recognized
the quality of NAM's compliance team. The Trustees further noted NAM's
negotiations with other service providers and the corresponding reduction in
certain service providers' fees.
With respect to closed-end funds, in addition to the foregoing services, the
Trustees also noted the additional services that NAM or its affiliates provide
to closed-end funds, including, in particular, its secondary market support
activities. The Trustees recognized Nuveen's continued commitment to supporting
the secondary market for the common shares of its closed-end funds through a
variety of programs designed to raise investor and analyst awareness and
understanding of closed-end funds. These efforts include:
o maintaining shareholder communications;
o providing advertising for closed-end funds;
o maintaining its closed-end fund website;
o continual contact with financial advisers;
o providing educational symposia;
o conducting research with investors and financial analysis regarding
closed-end funds; and
o evaluating secondary market performance.
81
With respect to Funds that utilize leverage through the issuance of preferred
shares, the Trustees noted Nuveen's continued support for the preferred shares
by, among other things:
o maintaining an in-house trading desk;
o maintaining a product manager for the preferred shares;
o developing distribution for preferred shares with new market participants;
o maintaining an orderly auction process;
o managing leverage and risk management of leverage; and
o maintaining systems necessary to test compliance with rating agency
criteria.
Based on their review, the Trustees found that, overall, the nature, extent and
quality of services provided (and expected to be provided) to the respective
Funds under the Investment Management Agreements were satisfactory.
B. THE INVESTMENT PERFORMANCE OF THE FUNDS AND FUND ADVISER
The Board considered the investment performance for each Fund, including the
Fund's historic performance as well as its performance compared to funds with
similar investment objectives (the "Performance Peer Group") based on data
provided by an independent third party (as described below). With respect to
municipal funds, the Trustees reviewed portfolio level performance against
customized benchmarks, as described in further detail below.
In evaluating the performance information, in certain instances, the Trustees
noted that the closest Performance Peer Group for a Fund may not adequately
reflect such Fund's investment objectives and strategies, thereby limiting the
usefulness of the comparisons of such Fund's performance with that of the
Performance Peer Group.
With respect to state specific municipal funds, the Trustees also recognized
that certain state municipal funds do not have a corresponding state specific
Performance Peer Group in which case their performance is measured against a
more general municipal category for various states. With respect to municipal
closed-end funds, municipal funds that do not have corresponding state-specific
Performance Peer Groups are from all states other than New York, California,
Florida, New Jersey, Michigan, and Pennsylvania. However, with respect to Funds
based on Florida, New Jersey, Michigan and Pennsylvania, the peer group may be
so small or the Nuveen Funds may dominate the category to such an extent that
performance information for such Funds was also compared to the more general
category for all states (other than New York and California).
With respect to municipal funds, the Trustees reviewed performance information
including, among other things, total return information compared with the Fund's
Performance Peer Group for the one-, three- and five-year periods (as
applicable) ending December 31, 2006. The Trustees also reviewed the Fund's
portfolio level performance (which does not reflect fund level fees and
expenses) compared to customized portfolio-level benchmarks for the one- and
three-year periods ending December 31, 2006 (as applicable). This analysis is
designed to assess the efficacy of investment decisions against appropriate
measures of risk and total return, within specific market segments. This
information supplements the Fund performance information provided to the Board
at each of its quarterly meetings. Based on their review, the Trustees
determined that the respective Fund's absolute and relative investment
performance over time had been satisfactory, subject to the following. With
respect to various municipal closed-end funds, the Trustees have noted the
relative total return underperformance in recent years compared to peers. The
Trustees reviewed materials and discussed with the Fund Adviser the factors
contributing to the shift in performance including, among other things, the
degree of risk undertaken by peers compared to the Funds (such as through the
increased use of leverage or taking concentrated positions in high risk
credits). In addition, the Trustees also considered a Fund's dividend
performance and the extent of any secondary market discounts. The Trustees noted
NAM's efforts to evaluate the factors affecting performance and determine
whether modification to a Fund's investment strategy is necessary or appropriate
and are satisfied with the steps being taken.
82
C. FEES, EXPENSES AND PROFITABILITY
1. FEES AND EXPENSES
In evaluating the management fees and expenses of a Fund, the Board
reviewed, among other things, the Fund's advisory fees (net and gross
management fees) and total expense ratios (before and after expense
reimbursements and/or waivers) in absolute terms as well as comparisons to
the gross management fees (before waivers), net management fees (after
waivers) and total expense ratios (before and after waivers) of comparable
funds in the Peer Universe and the Peer Group. In reviewing the fee
schedule for a Fund, the Trustees considered the fund-level and
complex-wide breakpoint schedules (described in further detail below) and
any fee waivers and reimbursements provided by Nuveen (applicable, in
particular, for certain Funds launched since 1999). The Trustees further
reviewed data regarding the construction of Peer Groups as well as the
methods of measurement for the fee and expense analysis and the performance
analysis. In certain cases, due to the small number of peers in the Peer
Universe, the Peer Universe and Peer Group may be the same. In reviewing
the comparison of fee and expense information, the Trustees recognized that
in certain cases, the Fund size relative to peers, the small size and odd
composition of the Peer Group (including differences in objectives and
strategies), expense anomalies, timing of information used or other factors
impact the comparisons thereby limiting some of their usefulness. With
respect to municipal closed-end funds, the Trustees also considered the
differences in the use of leverage. Based on their review of the fee and
expense information provided, the Trustees determined that each Fund's net
total expense ratio was within an acceptable range compared to peers.
2. COMPARISONS WITH THE FEES OF OTHER CLIENTS
The Trustees further reviewed data comparing the advisory fees of NAM with
fees NAM charges to other clients. With respect to municipal funds, such
other clients include municipal managed accounts. In general, the advisory
fees charged for separate accounts are somewhat lower than the advisory
fees assessed to the Funds. The Trustees considered the differences in the
product types, including, but not limited to, the services provided, the
structure and operations, product distribution and costs thereof, portfolio
investment policies, investor profiles, account sizes and regulatory
requirements. The Trustees noted, in particular, that the range of services
provided to the Funds (as discussed above) is more extensive than that
provided to separately managed accounts. As described in further detail
above, such additional services include, but are not limited to, providing:
product management, fund administration, oversight of third party service
providers, administration of Board relations, and legal support. Funds
further operate in a highly regulated industry requiring extensive
compliance functions compared to the other investment products. Given the
inherent differences in the products, particularly the extensive services
provided to the Funds, the Trustees believe such facts justify the
different levels of fees.
3. PROFITABILITY OF FUND ADVISERS
In conjunction with its review of fees, the Trustees also considered the
profitability of Nuveen for its advisory activities (which incorporated
Nuveen's wholly-owned affiliated sub-advisers) and its financial condition.
The Trustees reviewed the revenues and expenses of Nuveen's advisory
activities for the last three years, the allocation methodology used in
preparing the profitability data as well as the 2006 Annual Report for
Nuveen. The Trustees noted this information supplements the profitability
information requested and received during the year to help keep them
apprised of developments affecting profitability (such as changes in fee
waivers and expense reimbursement commitments). In this regard, the
Trustees noted the enhanced dialogue and information regarding
profitability with NAM during the year, including more frequent meetings
and updates from Nuveen's corporate finance group. The Trustees also
reviewed data comparing Nuveen's profitability with other fund sponsors
prepared by three independent third party service providers as well as
comparisons of the revenues, expenses and profit margins of various
unaffiliated management firms with similar amounts of assets under
management prepared by Nuveen.
In reviewing profitability, the Trustees have recognized the subjective
nature in determining profitability which may be affected by numerous
factors, including, the allocation of expenses. Further, the Trustees
83
have recognized the difficulties in making comparisons as the profitability
of other advisers generally is not publicly available and the profitability
information that is available for certain advisers or management firms may
not be representative of the industry and may be affected by, among other
things, the adviser's particular business mix, capital costs, types of
funds managed and expense allocations.
Notwithstanding the foregoing, the Trustees reviewed Nuveen's methodology and
assumptions for allocating expenses across product lines to determine
profitability. Last year, the Trustees also designated an independent Trustee as
a point person for the Board to review the methodology determinations during the
year and any refinements thereto and report back to them. The Trustees also
reviewed the comparisons of Nuveen's profitability margins (including pre- and
post-marketing profit margins) with the profitability of various unaffiliated
management firms. In reviewing profitability, the Trustees recognized Nuveen's
increased investment into its fund business. Based on its review, the Trustees
concluded that they were satisfied that Nuveen's level of profitability for its
advisory activities was reasonable in light of the services provided.
In evaluating the reasonableness of the compensation, the Trustees also
considered any other revenues paid to the Fund Adviser as well as any indirect
benefits (such as soft dollar arrangements, if any) the Fund Adviser and its
affiliates are expected to receive that are directly attributable to their
management of the Funds, if any. See Section E below for additional information.
Based on their review of the overall fee arrangements of the applicable Fund,
the Trustees determined that the advisory fees and expenses of the respective
Fund were reasonable.
D. ECONOMIES OF SCALE AND WHETHER FEE LEVELS REFLECT THESE ECONOMIES OF SCALE
With respect to economies of scale, the Trustees recognized the potential
benefits resulting from the costs of a Fund being spread over a larger asset
base. To help ensure the shareholders share in these benefits, the Trustees have
reviewed and considered the breakpoints in the advisory fee schedules that
reduce advisory fees. In addition to advisory fee breakpoints, the Board also
approved in 2004 a complex-wide fee arrangement. Pursuant to the complex-wide
fee arrangement, the fees of the funds in the Nuveen complex, including the
Funds, are reduced as the assets in the fund complex reach certain levels. In
evaluating the complex-wide fee arrangement, the Trustees noted that the last
breakpoint for the complex-wide fee schedule is at the $91 billion level and
anticipate further review and/or negotiations prior to the assets of the Nuveen
complex reaching such threshold. Based on their review, the Trustees concluded
that the breakpoint schedule and complex-wide fee arrangement currently was
acceptable and desirable in providing benefits from economies of scale to
shareholders subject to further evaluation of the complex-wide fee schedule as
assets in the complex increase.
E. INDIRECT BENEFITS
In evaluating fees, the Trustees also considered any indirect benefits or
profits the Fund Adviser or its affiliates may receive as a result of its
relationship with each Fund. With respect to closed-end funds, the Trustees
considered revenues received by affiliates of NAM for serving as agent at
Nuveen's preferred trading desk and for serving as a co-manager in the initial
public offering of new closed-end exchange traded funds.
In addition to the above, the Trustees considered whether the Fund Adviser
received any benefits from soft dollar arrangements whereby a portion of the
commissions paid by a Fund for brokerage may be used to acquire research that
may be useful to the Fund Adviser in managing the assets of the Fund and other
clients. With respect to NAM, the Trustees noted that NAM does not currently
have any soft dollar arrangements; however, to the extent certain bona fide
agency transactions that occur on markets that traditionally trade on a
principal basis and riskless principal transactions are considered as generating
"commissions," NAM intends to comply with the applicable safe harbor provisions.
F. OTHER CONSIDERATIONS
The Trustees did not identify any single factor discussed previously as
all-important or controlling. The Trustees, including the independent Trustees,
unanimously concluded that the terms of the NAM Investment Management Agreements
are fair and reasonable, that the Fund Adviser's fees are reasonable in light of
the services provided to each Fund and that the renewal of the NAM Investment
Management Agreements should be approved.
84
Reinvest Automatically
EASILY and CONVENIENTLY
Nuveen makes reinvesting easy. A phone call is all it takes to set up your
reinvestment account.
NUVEEN CLOSED-END FUNDS DIVIDEND REINVESTMENT PLAN
Your Nuveen Closed-End Fund allows you to conveniently reinvest dividends and/or
capital gains distributions in additional Fund shares.
By choosing to reinvest, you'll be able to invest money regularly and
automatically, and watch your investment grow through the power of tax-free
compounding. Just like dividends or distributions in cash, there may be times
when income or capital gains taxes may be payable on dividends or distributions
that are reinvested.
It is important to note that an automatic reinvestment plan does not ensure a
profit, nor does it protect you against loss in a declining market.
EASY AND CONVENIENT
To make recordkeeping easy and convenient, each month you'll receive a statement
showing your total dividends and distributions, the date of investment, the
shares acquired and the price per share, and the total number of shares you own.
HOW SHARES ARE PURCHASED
The shares you acquire by reinvesting will either be purchased on the open
market or newly issued by the Fund. If the shares are trading at or above net
asset value at the time of valuation, the Fund will issue new shares at the
greater of the net asset value or 95% of the then-current market price. If the
shares are trading at less than net asset value, shares for your account will be
purchased on the open market. If the Plan Agent begins purchasing Fund shares on
the open market while shares are trading below net asset value, but the Fund's
shares subsequently trade at or above their net asset value before the Plan
Agent is able to complete its purchases, the Plan Agent may cease open-market
purchases and may invest the uninvested portion of the distribution in
newly-issued Fund shares at a price equal to the greater of the shares' net
asset value or 95% of the shares' market value on the last business day
immediately prior to the purchase date. Dividends and distributions received to
purchase shares in the open market will normally be invested shortly after the
dividend payment date. No interest will be paid on dividends and distributions
awaiting reinvestment. Because the market price of the shares may increase
before purchases are completed, the average purchase price per share may exceed
the market price at the time of valuation, resulting in the acquisition of fewer
shares than if the dividend or distribution had been paid in shares issued by
the Fund. A pro rata portion of any applicable brokerage commissions on open
market purchases will be paid by Plan participants. These commissions usually
will be lower than those charged on individual transactions.
85
FLEXIBLE
You may change your distribution option or withdraw from the Plan at any time,
should your needs or situation change. Should you withdraw, you can receive a
certificate for all whole shares credited to your reinvestment account and cash
payment for fractional shares, or cash payment for all reinvestment account
shares, less brokerage commissions and a $2.50 service fee.
You can reinvest whether your shares are registered in your name, or in the name
of a brokerage firm, bank, or other nominee. Ask your investment advisor if his
or her firm will participate on your behalf. Participants whose shares are
registered in the name of one firm may not be able to transfer the shares to
another firm and continue to participate in the Plan.
The Fund reserves the right to amend or terminate the Plan at any time. Although
the Fund reserves the right to amend the Plan to include a service charge
payable by the participants, there is no direct service charge to participants
in the Plan at this time.
CALL TODAY TO START REINVESTING DIVIDENDS AND/OR DISTRIBUTIONS
For more information on the Nuveen Automatic Reinvestment Plan or to enroll in
or withdraw from the Plan, speak with your financial advisor or call us at (800)
257-8787.
86
Other Useful INFORMATION
QUARTERLY PORTFOLIO OF INVESTMENTS AND PROXY VOTING INFORMATION
Each Fund's (i) quarterly portfolio of investments, (ii) information regarding
how the Funds voted proxies relating to portfolio securities held during the
12-month period ended June 30, 2006, and (iii) a description of the policies and
procedures that the Funds used to determine how to vote proxies relating to
portfolio securities are available without charge, upon request, by calling
Nuveen Investments toll-free at (800) 257-8787 or on Nuveen's website at
www.nuveen.com.
You may also obtain this and other Fund information directly from the Securities
and Exchange Commission ("SEC"). The SEC may charge a copying fee for this
information. Visit the SEC on-line at http://www.sec.gov or in person at the
SEC's Public Reference Room in Washington, D.C. Call the SEC at 1-202-942-8090
for room hours and operation. You may also request Fund information by sending
an e-mail request to publicinfo@sec.gov or by writing to the SEC's Public
References Section at 450 Fifth Street NW, Washington, D.C. 20549.
CEO CERTIFICATION DISCLOSURE
For Funds listed on the New York Stock Exchange, each Fund's Chief Executive
Officer has submitted to the Exchange the annual CEO certification as required
by Section 303A.12(a) of the NYSE Listed Company Manual.
Each Fund has filed with the Securities and Exchange Commission the
certification of its Chief Executive Officer and Chief Financial Officer
required by Section 302 of the Sarbanes-Oxley Act.
INVESTMENT POLICY CHANGE
In February 2007, the Board of Trustees voted to remove investment policy
restrictions that limited the territorial bond holdings of these Funds to a
maximum of 10 percent of net assets. This change will give the Funds' portfolio
managers greater flexibility to achieve its investment objectives.
GLOSSARY OF TERMS USED IN THIS REPORT
o Average Annual Total Return: This is a commonly used method to express an
investment's performance over a particular, usually multi-year time period.
It expresses the return that would have been necessary each year to equal
the investment's actual cumulative performance (including change in NAV or
market price and reinvested dividends and capital gains distributions, if
any) over the time period being considered.
o Average Effective Maturity: The average of the number of years to maturity
of the bonds in a Fund's portfolio, computed by weighting each bond's time
to maturity (the date the security comes due) by the market value of the
security. This figure does not account for the likelihood of prepayments or
the exercise of call provisions unless an escrow account has been
established to redeem the bond before maturity. The market value weighting
for an investment in an inverse floating rate security is the value of the
portfolio's residual interest in the inverse floating rate trust, and does
not include the value of the floating rate securities issued by the trust.
o Inverse Floaters: Inverse floating rate securities are created by
depositing a municipal bond, typically with a fixed interest rate, into a
special purpose trust created by a broker-dealer. This trust, in turn, (a)
issues floating rate certificates typically paying short-term tax-exempt
interest rates to third parties in amounts equal to some fraction of the
deposited bond's par amount or market value, and (b) issues an inverse
floating rate certificate (sometimes referred to as an "inverse floater")
to an investor (such as a Fund) interested in gaining investment exposure
to a long-term municipal bond. The income received by the holder of the
inverse floater varies inversely with the short-term rate paid to the
floating rate certificates' holders, and in most circumstances the holder
of the inverse floater bears substantially all of the underlying bond's
downside investment risk. The holder of the inverse floater typically also
benefits disproportionately from any potential appreciation of the
underlying bond's value. Hence, an inverse floater essentially represents
an investment in the underlying bond on a leveraged basis.
o Leverage-Adjusted Duration: Duration is a measure of the expected period
over which a bond's principal and interest will be paid, and consequently
is a measure of the sensitivity of a bond's or bond Fund's value to changes
when market interest rates change. Generally, the longer a bond's or Fund's
duration, the more the price of the bond or Fund will change as interest
rates change. Leverage-adjusted duration takes into account the leveraging
process for a Fund and therefore is longer than the duration of the Fund's
portfolio of bonds.
o Market Yield (also known as Dividend Yield or Current Yield): An
investment's current annualized dividend divided by its current market
price.
o Net Asset Value (NAV): A Fund's common share NAV per share is calculated by
subtracting the liabilities of the Fund (including any MuniPreferred shares
issued in order to leverage the Fund) from its total assets and then
dividing the remainder by the number of shares outstanding. Fund NAVs are
calculated at the end of each business day.
o Taxable-Equivalent Yield: The yield necessary from a fully taxable
investment to equal, on an after-tax basis, the yield of a municipal bond
investment.
BOARD OF TRUSTEES
Robert P. Bremner
Jack B. Evans
William C. Hunter
David J. Kundert
William J. Schneider
Timothy R. Schwertfeger
Judith M. Stockdale
Carol E. Stone
Eugene S. Sunshine
FUND MANAGER
Nuveen Asset Management
333 West Wacker Drive
Chicago, IL 60606
CUSTODIAN
State Street Bank & Trust Company
Boston, MA
TRANSFER AGENT AND
SHAREHOLDER SERVICES
State Street Bank & Trust Company
Nuveen Funds
P.O. Box 43071
Providence, RI 02940-3071
(800) 257-8787
LEGAL COUNSEL
Chapman and Cutler LLP
Chicago, IL
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Ernst & Young LLP
Chicago, IL
Each Fund intends to repurchase shares of its own common or preferred stock in
the future at such times and in such amounts as is deemed advisable. No shares
were repurchased during the period covered by this report. Any future
repurchases will be reported to shareholders in the next annual or semiannual
report.
87
Nuveen Investments:
-------------------
SERVING INVESTORS FOR GENERATIONS
Since 1898, financial advisors and their clients have relied on Nuveen
Investments to provide dependable investment solutions. For the past century,
Nuveen Investments has adhered to the belief that the best approach to investing
is to apply conservative risk-management principles to help minimize volatility.
Building on this tradition, we today offer a range of high quality equity and
fixed-income solutions that are integral to a well-diversified core portfolio.
Our clients have come to appreciate this diversity, as well as our continued
adherence to proven, long-term investing principles.
WE OFFER MANY DIFFERENT INVESTING SOLUTIONS FOR OUR CLIENTS' DIFFERENT NEEDS.
Managing $166 billion in assets, as of March 31, 2007, Nuveen Investments offers
access to a number of different asset classes and investing solutions through a
variety of products. Nuveen Investments markets its capabilities under six
distinct brands: NWQ, specializing in value-style equities; Nuveen, managing
fixed-income investments; Santa Barbara, committed to growth equities;
Tradewinds, specializing in global value equities; Rittenhouse, focused on
"blue-chip" growth equities; and Symphony, with expertise in alternative
investments as well as equity and income portfolios.
FIND OUT HOW WE CAN HELP YOU REACH YOUR FINANCIAL GOALS.
To learn more about the products and services Nuveen Investments offers, talk to
your financial advisor, or call us at (800) 257-8787. Please read the
information provided carefully before you invest. Be sure to obtain a
prospectus, where applicable. Investors should consider the investment objective
and policies, risk considerations, charges and expenses of the Fund carefully
before investing. The prospectus contains this and other information relevant to
an investment in the Fund. For a prospectus, please contact your securities
representative or NUVEEN INVESTMENTS, 333 W. WACKER DR., CHICAGO, IL 60606.
Please read the prospectus carefully before you invest or send money.
Learn more about Nuveen Funds at: WWW.NUVEEN.COM/ETF
SHARE PRICES
FUND DETAILS
DAILY FINANCIAL NEWS
INVESTOR EDUCATION
INTERACTIVE PLANNING TOOLS
EAN-C-0507D
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. There were no amendments to or waivers
from the Code during the period covered by this report. The registrant has
posted the code of ethics on its website at www.nuveen.com/etf. (To view the
code, click on the Investor Resources drop down menu box, click on Fund
Governance and then click on Code of Conduct.)
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The registrant's Board of Directors or Trustees 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 Jack B. Evans, Chairman of the Audit Committee, who is
"independent" for purposes of Item 3 of Form N-CSR.
Mr. Evans was formerly President and Chief Operating Officer of SCI Financial
Group, Inc., a full service registered broker-dealer and registered investment
adviser ("SCI"). As part of his role as President and Chief Operating Officer,
Mr. Evans actively supervised the Chief Financial Officer (the "CFO") and
actively supervised the CFO's preparation of financial statements and other
filings with various regulatory authorities. In such capacity, Mr. Evans was
actively involved in the preparation of SCI's financial statements and the
resolution of issues raised in connection therewith. Mr. Evans has also served
on the audit committee of various reporting companies. At such companies, Mr.
Evans was involved in the oversight of audits, audit plans, and the preparation
of financial statements. Mr. Evans also formerly chaired the audit committee of
the Federal Reserve Bank of Chicago.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Nuveen Georgia Dividend Advantage Municipal Fund 2
The following tables show the amount of fees that Ernst & Young LLP, the Fund's
auditor, billed to the Fund during the Fund's last two full fiscal years. For
engagements with Ernst & Young LLP the Audit Committee approved in advance all
audit services and non-audit services that Ernst & Young LLP provided to the
Fund, except for those non-audit services that were subject to the pre-approval
exception under Rule 2-01 of Regulation S-X (the "pre-approval exception"). The
pre-approval exception for services provided directly to the Fund waives the
pre-approval requirement for services other than audit, review or attest
services if: (A) the aggregate amount of all such services provided constitutes
no more than 5% of the total amount of revenues paid by the Fund to its
accountant during the fiscal year in which the services are provided; (B) the
Fund did not recognize the services as non-audit services at the time of the
engagement; and (C) the services are promptly brought to the Audit Committee's
attention, and the Committee (or its delegate) approves the services before the
audit is completed.
The Audit Committee has delegated certain pre-approval responsibilities to its
Chairman (or, in his absence, any other member of the Audit Committee).
SERVICES THAT THE FUND'S AUDITOR BILLED TO THE FUND
AUDIT FEES BILLED AUDIT-RELATED FEES TAX FEES ALL OTHER FEES
FISCAL YEAR ENDED TO FUND (1) BILLED TO FUND (2) BILLED TO FUND (3) BILLED TO FUND (4)
--------------------------------------------------------------------------------------------------------------------------
May 31, 2007 $ 8,973 $ 0 $ 0 $ 2,250
--------------------------------------------------------------------------------------------------------------------------
Percentage approved 0% 0% 0% 0%
pursuant to
pre-approval
exception
--------------------------------------------------------------------------------------------------------------------------
May 31, 2006 $ 8,495 $ 0 $504 $ 2,850
--------------------------------------------------------------------------------------------------------------------------
Percentage approved 0% 0% 0% 0%
pursuant to
pre-approval
exception
--------------------------------------------------------------------------------------------------------------------------
(1) "Audit Fees" are the aggregate fees billed for professional services for
the audit of the Fund's annual financial statements and services provided
in connection with statutory and regulatory filings or engagements.
(2) "Audit Related Fees" are the aggregate fees billed for assurance and
related services reasonably related to the performance of the audit or
review of financial statements and are not reported under "Audit Fees".
(3) "Tax Fees" are the aggregate fees billed for professional services for tax
advice, tax compliance, and tax planning.
(4) "All Other Fees" are the aggregate fees billed for products and services
other than "Audit Fees", "Audit Related Fees", and "Tax Fees".
SERVICES THAT THE FUND'S AUDITOR BILLED TO THE
ADVISER AND AFFILIATED FUND SERVICE PROVIDERS
The following tables show the amount of fees billed by Ernst & Young LLP to
Nuveen Asset Management ("NAM" or the "Adviser"), and any entity controlling,
controlled by or under common control with NAM ("Control Affiliate") that
provides ongoing services to the Fund ("Affiliated Fund Service Provider"), for
engagements directly related to the Fund's operations and financial reporting,
during the Fund's last two full fiscal years.
The tables also show the percentage of fees subject to the pre-approval
exception. The pre-approval exception for services provided to the Adviser and
any Affiliated Fund Service Provider (other than audit, review or attest
services) waives the pre-approval requirement if: (A) the aggregate amount of
all such services provided constitutes no more than 5% of the total amount of
revenues paid to Ernst & Young LLP by the Fund, the Adviser and Affiliated Fund
Service Providers during the fiscal year in which the services are provided that
would have to be pre-approved by the Audit Committee; (B) the Fund did not
recognize the services as non-audit services at the time of the engagement; and
(C) the services are promptly brought to the Audit Committee's attention, and
the Committee (or its delegate) approves the services before the Fund's audit is
completed.
FISCAL YEAR ENDED AUDIT-RELATED FEES TAX FEES BILLED TO ALL OTHER FEES
BILLED TO ADVISER AND ADVISER AND BILLED TO ADVISER
AFFILIATED FUND AFFILIATED FUND AND AFFILIATED FUND
SERVICE PROVIDERS SERVICE PROVIDERS (1) SERVICE PROVIDERS
--------------------------------------------------------------------------------------------------------------
May 31, 2007 $ 0 $ 0 $ 0
--------------------------------------------------------------------------------------------------------------
Percentage approved 0% 0% 0%
pursuant to
pre-approval
exception
--------------------------------------------------------------------------------------------------------------
May 31, 2006 $ 0 $ 2,400 $ 0
--------------------------------------------------------------------------------------------------------------
Percentage approved 0% 0% 0%
pursuant to
pre-approval
exception
--------------------------------------------------------------------------------------------------------------
(1) The amounts reported for the Fund under the column heading "Tax Fees"
represents amounts billed to the Adviser exclusively for the preparation
for the Fund's tax return, the cost of which is borne by the Adviser. In
the aggregate, for all Nuveen funds for which Ernst & Young LLP serves as
independent registered public accounting firm, these fees amounted to
$161,400 in 2006. Beginning with fund fiscal years ending August 31, 2006,
Ernst & Young LLP will no longer prepare the fund tax returns.
NON-AUDIT SERVICES
The following table shows the amount of fees that Ernst & Young LLP billed
during the Fund's last two full fiscal years for non-audit services. The Audit
Committee is required to pre-approve non-audit services that Ernst & Young LLP
provides to the Adviser and any Affiliated Fund Services Provider, if the
engagement related directly to the Fund's operations and financial reporting
(except for those subject to the de minimis exception described above). The
Audit Committee requested and received information from Ernst & Young LLP about
any non-audit services that Ernst & Young LLP rendered during the Fund's last
fiscal year to the Adviser and any Affiliated Fund Service Provider. The
Committee considered this information in evaluating Ernst & Young LLP's
independence.
FISCAL YEAR ENDED TOTAL NON-AUDIT FEES
BILLED TO ADVISER AND
AFFILIATED FUND SERVICE TOTAL NON-AUDIT FEES
PROVIDERS (ENGAGEMENTS BILLED TO ADVISER AND
RELATED DIRECTLY TO THE AFFILIATED FUND SERVICE
TOTAL NON-AUDIT FEES OPERATIONS AND FINANCIAL PROVIDERS (ALL OTHER
BILLED TO FUND REPORTING OF THE FUND) ENGAGEMENTS) TOTAL
------------------------------------------------------------------------------------------------------------------------------------
May 31, 2007 $ 2,250 $ 0 $ 0 $ 2,250
May 31, 2006 $ 3,354 $ 2,400 $ 0 $ 5,754
"Non-Audit Fees billed to Adviser" for both fiscal year ends represent "Tax
Fees" billed to Adviser in their respective amounts from the previous table.
Audit Committee Pre-Approval Policies and Procedures. Generally, the Audit
Committee must approve (i) all non-audit services to be performed for the Fund
by the Fund's independent accountants and (ii) all audit and non-audit services
to be performed by the Fund's independent accountants for the Affiliated Fund
Service Providers with respect to operations and financial reporting of the
Fund. Regarding tax and research projects conducted by the independent
accountants for the Fund and Affiliated Fund Service Providers (with respect to
operations and financial reports of the Fund) such engagements will be (i)
pre-approved by the Audit Committee if they are expected to be for amounts
greater than $10,000; (ii) reported to the Audit Committee chairman for his
verbal approval prior to engagement if they are expected to be for amounts under
$10,000 but greater than $5,000; and (iii) reported to the Audit Committee at
the next Audit Committee meeting if they are expected to be for an amount under
$5,000.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
The registrant's Board of Directors or Trustees has a separately designated
Audit Committee established in accordance with Section 3(a)(58)(A) of the
Securities Exchange Act of 1934, as amended (15 U.S.C. 78c(a)(58)(A)). The
members of the audit committee are Robert P. Bremner, Jack B. Evans, William J.
Schneider, Eugene S. Sunshine and David J. Kundert.
ITEM 6. SCHEDULE OF INVESTMENTS.
See Portfolio of Investments in Item 1.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
The registrant invests its assets primarily in municipal bonds and cash
management securities. On rare occasions the registrant may acquire, directly or
through a special purpose vehicle, equity securities of a municipal bond issuer
whose bonds the registrant already owns when such bonds have deteriorated or are
expected shortly to deteriorate significantly in credit quality. The purpose of
acquiring equity securities generally will be to acquire control of the
municipal bond issuer and to seek to prevent the credit deterioration or
facilitate the liquidation or other workout of the distressed issuer's credit
problem. In the course of exercising control of a distressed municipal issuer,
NAM may pursue the registrant's interests in a variety of ways, which may entail
negotiating and executing consents, agreements and other arrangements, and
otherwise influencing the management of the issuer. NAM does not consider such
activities proxy voting for purposes of Rule 206(4)-6 under the 1940 Act, but
nevertheless provides reports to the registrant's Board of Trustees on its
control activities on a quarterly basis.
In the rare event that a municipal issuer were to issue a proxy or that the
registrant were to receive a proxy issued by a cash management security, NAM
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 registrant's Board of Trustees or its representative. A member of NAM'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 registrant's Board of
Trustees and made available to shareholders as required by applicable rules.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
THE PORTFOLIO MANAGER
The following individual has primary responsibility for the day-to-day
implementation of the registrant's investment strategies:
NAME FUND
Daniel J. Close Nuveen Georgia Dividend Advantage Municipal Fund 2
Other Accounts Managed. In addition to managing the registrant, the
portfolio manager is also primarily responsible for the day-to-day portfolio
management of the following accounts:
TYPE OF ACCOUNT NUMBER OF
PORTFOLIO MANAGER MANAGED ACCOUNTS ASSETS*
---------------------------------------------------------------------------------------------------------------------------
Daniel J. Close Registered Investment Company 26 $ 5.148 billion
Other Pooled Investment Vehicles 0 $ 0
Other Accounts 2 $ .18 million
* Assets are as of May 31, 2007. None of the assets in these accounts are
subject to an advisory fee based on performance.
Compensation. Each portfolio manager's compensation consists of three basic
elements--base salary, cash bonus and long-term incentive compensation. The
compensation strategy is to annually compare overall compensation, including
these three elements, to the market in order to create a compensation structure
that is competitive and consistent with similar financial services companies. As
discussed below, several factors are considered in determining each portfolio
manager's total compensation. In any year these factors may include, among
others, the effectiveness of the investment strategies recommended by the
portfolio manager's investment team, the investment performance of the accounts
managed by the portfolio manager, and the overall performance of Nuveen
Investments, Inc. (the parent company of NAM). Although investment performance
is a factor in determining the portfolio manager's compensation, it is not
necessarily a decisive factor. The portfolio manager's performance is evaluated
in part by comparing manager's performance against a specified investment
benchmark. This fund-specific benchmark is a customized subset (limited to bonds
in each Fund's specific state and with certain maturity parameters) of the
S&P/Investortools Municipal Bond index, an index comprised of bonds held by
managed municipal bond fund customers of Standard & Poor's Securities Pricing,
Inc. that are priced daily and whose fund holdings aggregate at least $2
million. As of April 30, 2007, the S&P/Investortools Municipal Bond index was
comprised of 50,300 securities with an aggregate current market value of $
985.260 billion.
Base salary. Each portfolio manager is paid a base salary that is set at a
level determined by NAM in accordance with its overall compensation strategy
discussed above. NAM is not under any current contractual obligation to increase
a portfolio manager's base salary.
Cash bonus. Each portfolio manager is also eligible to receive an annual
cash bonus. The level of this bonus is based upon evaluations and determinations
made by each portfolio manager's supervisors, along with reviews submitted by
his peers. These reviews and evaluations often take into account a number of
factors, including the effectiveness of the investment strategies recommended to
the NAM's investment team, the performance of the accounts for which he/she
serves as portfolio manager relative to any benchmarks established for those
accounts, his/her effectiveness in communicating investment performance to
stockholders and their representatives, and his/her contribution to the NAM
investment process and to the execution of investment strategies. The cash bonus
component is also impacted by the overall performance of Nuveen Investments,
Inc. in achieving its business objectives.
Long-term incentive compensation. Each portfolio manager is eligible to
receive bonus compensation in the form of equity-based awards issued in
securities issued by Nuveen Investments, Inc. The amount of such compensation is
dependent upon the same factors articulated for cash bonus awards but also
factors in his long-term potential with the firm.
Material Conflicts of Interest. Each portfolio manager's simultaneous
management of the registrant and the other accounts noted above may present
actual or apparent conflicts of interest with respect to the allocation and
aggregation of securities orders placed on behalf of the Registrant and the
other account. NAM, however, believes that such potential conflicts are
mitigated by the fact that the NAM has adopted several policies that address
potential conflicts of interest, including best execution and trade allocation
policies that are designed to ensure (1) that portfolio management is seeking
the best price for portfolio securities under the circumstances, (2) fair and
equitable allocation of investment opportunities among accounts over time and
(3) compliance with applicable regulatory requirements. All accounts are to be
treated in a non-preferential manner, such that allocations are not based upon
account performance, fee structure or preference of the portfolio manager,
although the allocation procedures may provide allocation preferences to funds
with special characteristics (such as favoring state funds versus national funds
for allocations of in-state bonds). In addition, NAM has adopted a Code of
Conduct that sets forth policies regarding conflicts of interest.
Beneficial Ownership of Securities. As of the May 31, 2007, the portfolio
manager beneficially owned the following dollar range of equity securities
issued by the Registrant and other Nuveen Funds managed by NAM's municipal
investment team.
-------------------- ------------------------------------------------------------- ------------- ---------------------
DOLLAR RANGE OF
DOLLAR EQUITY SECURITIES
RANGE OF BENEFICIALLY OWNED
EQUITY IN THE REMAINDER OF
SECURITIES NUVEEN FUNDS
BENEFICIALLY MANAGED BY NAM'S
NAME OF PORTFOLIO OWNED IN MUNICIPAL
MANAGER FUND FUND INVESTMENT TEAM
-------------------- ------------------------------------------------------------- ------------- ---------------------
Daniel J. Close Nuveen Georgia Dividend Advantage Municipal Fund 2 $ 0 $0
-------------------- ------------------------------------------------------------- ------------- ---------------------
PORTFOLIO MANAGER BIO:
Daniel J. Close, CFA, Assistant Vice President, Nuveen Asset Management.
Mr. Close joined Nuveen Investments in 2000 as a member of Nuveen's product
management and development team, where he was responsible for the oversight and
development of Nuveen's mutual fund product line. He then served as a research
analyst for Nuveen's municipal investing team, covering corporate-backed,
energy, transportation and utility credits. He received his BS in Business from
Miami University, and his MBA from Northwestern University's Kellogg School of
Management.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures by which shareholders may
recommend nominees to the registrants Board implemented after the registrant
last provided disclosure in response to this item.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive and principal financial officers,
or persons performing similar functions, have concluded that the
registrant's disclosure controls and procedures (as defined in Rule
30a-3(c) under the Investment Company Act of 1940, as amended (the
"1940 Act") (17 CFR 270.30a-3(c))) are effective, as of a date within
90 days of the filing date of this report that includes the disclosure
required by this paragraph, based on their evaluation of the controls
and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR
270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")
(17 CFR 240.13a-15(b) or 240.15d-15(b)).
(b) There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the 1940 Act
(17 CFR 270.30a-3(d)) that occurred during the second fiscal quarter
of the period covered by this report that has materially affected, or
is reasonably likely to materially affect, the registrant's internal
control over financial reporting.
ITEM 12. EXHIBITS.
File the exhibits listed below as part of this Form. 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 the code is posted on registrant's website at www.nuveen.com/etf and
there were no amendments during the period covered by this report. (To view the
code, click on the Investor Resources drop down menu box, click on Fund
Governance and then Code of Conduct.)
(a)(2) A separate certification for each principal executive officer and
principal financial officer of the registrant as required by Rule 30a-2(a) under
the 1940 Act (17 CFR 270.30a-2(a)) in the exact form set forth below: Ex-99.CERT
Attached hereto.
(a)(3) Any written solicitation to purchase securities under Rule 23c-1 under
the 1940 Act (17 CFR 270.23c-1) sent or given during the period covered by the
report by or on behalf of the registrant to 10 or more persons. Not applicable.
(b) If the report is filed under Section 13(a) or 15(d) of the Exchange Act,
provide the certifications required by Rule 30a-2(b) under the 1940 Act (17 CFR
270.30a-2(b)); Rule 13a-14(b) or Rule 15d-14(b) under the Exchange Act (17 CFR
240.13a-14(b) or 240.15d-14(b)), and Section 1350 of Chapter 63 of Title 18 of
the United States Code (18 U.S.C. 1350) as an exhibit. A certification furnished
pursuant to this paragraph will not be deemed "filed" for purposes of Section 18
of the Exchange Act (15 U.S.C. 78r), or otherwise subject to the liability of
that section. Such certification will not be deemed to be incorporated by
reference into any filing under the Securities Act of 1933 or the Exchange Act,
except to the extent that the registrant specifically incorporates it by
reference. Ex-99.906 CERT attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Nuveen Georgia Dividend Advantage Municipal Fund 2
-----------------------------------------------------------
By (Signature and Title)* /s/ Kevin J. McCarthy
----------------------------------------------
Kevin J. McCarthy
Vice President and Secretary
Date: August 8, 2007
-------------------------------------------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* /s/ Gifford R. Zimmerman
----------------------------------------------
Gifford R. Zimmerman
Chief Administrative Officer
(principal executive officer)
Date: August 8, 2007
-------------------------------------------------------------------
By (Signature and Title)* /s/ Stephen D. Foy
----------------------------------------------
Stephen D. Foy
Vice President and Controller
(principal financial officer)
Date: August 8, 2007
-------------------------------------------------------------------
* Print the name and title of each signing officer under his or her signature.