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
---------------------
Nuveen Georgia Dividend Advantage Municipal Fund 2
------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
Nuveen Investments
333 West Wacker Drive
Chicago, IL 60606
------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Kevin J. McCarthy
Nuveen Investments
333 West Wacker Drive
Chicago, IL 60606
------------------------------------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: (312) 917-7700
-------------------
Date of fiscal year end: May 31
------------------
Date of reporting period: November 30, 2007
------------------
Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
Semi-Annual Report
November 30, 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)
Logo: NUVEEN Investments
Photo of: Man working on computer
Life is complex.
Nuveen
makes things
e-simple.
--------------------------------------------------------------------------------
It only takes a minute to sign up for e-Reports. Once enrolled, you'll
receive an e-mail as soon as your Nuveen Investments Fund information is
ready--no more waiting for delivery by regular mail. Just click on the link
within the e-mail to see the report and save it on your computer if you
wish.
Free e-Reports right to your e-mail!
www.investordelivery.com
If you receive your Nuveen Fund
dividends and statements from your
financial advisor or brokerage account.
OR
www.nuveen.com/accountaccess
If you receive your Nuveen Fund dividends
and statements directly from Nuveen.
Logo: NUVEEN Investments
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 six-month period covered by
this report your Fund continued to provide you with attractive monthly tax-free
income. For more details about the management strategy and performance of your
Fund, please read the Portfolio Manager's Comments, the Dividend and Share Price
Information, and the Performance Overview sections of this report.
I also wanted to update you on some important news about Nuveen Investments. The
firm recently was acquired by a group led by Madison Dearborn Partners, LLC.
While this affected the corporate structure of Nuveen Investments, it has no
impact on the investment objectives, portfolio management strategies or dividend
policy of your Fund.
With the recent volatility in the stock market, many have begun to wonder which
way the market is headed, and whether they need to adjust their holdings of
investments. No one knows what the future will bring, which is why we think a
well-balanced portfolio that is structured and carefully monitored with the help
of an investment professional is an important component in achieving your long
term financial goals. A well-diversified portfolio may actually help to reduce
your overall investment risk, and we believe that investments like your Nuveen
Investments Fund can be important building blocks in a portfolio crafted to
perform well through a variety of market conditions.
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
January 15, 2008
Portfolio Manager's COMMENTS
Nuveen Investments Municipal Closed-End Funds
NPG, NZX, NKG, NNC,
NRB, NNO, NII
Portfolio manager Daniel Close discusses key investment strategies and the
six-month 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 KEY STRATEGIES WERE USED TO MANAGE THE GEORGIA AND NORTH CAROLINA FUNDS
DURING THE SIX-MONTH REPORTING PERIOD ENDED NOVEMBER 30, 2007?
Over the course of this period, we saw the municipal yield curve steepen, as
interest rates at the short end of the yield curve declined and longer-term
rates generally rose. In this environment, our investment strategies continued
to focus on finding relative value. We looked for undervalued sectors and
credits with the potential to perform well over the long term. The majority of
our purchases were attractively-priced bonds in the intermediate to long part of
the yield curve. These purchases helped to offset the shortening of the Funds'
portfolio duration1 due to bond calls and the natural tendency of bond durations
to shorten as time passes.
Many of our purchases focused on essential services bonds (bonds issued to fund,
for example, roads, schools and water and sewer projects). All three of the
Georgia Funds added general obligation, education and water and sewer bonds as
well as housing credits and tax increment financing (TIF) district issues, which
are used to fund redevelopment and community improvement projects. In the North
Carolina Funds, we added several tax-appropriation certificates of participation
(COPs), a financing arrangement that entitles the certificate holder to receive
a share of a project's lease revenues. When the liquidity crisis in August led
the market to discount lower-quality and higher-yielding bonds, we took
advantage of good opportunities to add lower-rated hospitals to the Georgia and
North Carolina Funds.
To help generate cash for purchases and move the Funds' durations closer to our
strategic range, we selectively sold holdings with shorter durations. Selling
shorter duration bonds and reinvesting further out on the yield curve also
helped to improve the Funds' overall call protection profile. NZX and NKG also
sold positions in pollution control revenue bonds issued by DeKalb County for
General Motors. These holdings, which had represented approximately 1.5% of each
of these Funds, were sold in late July. In the North Carolina Funds, we took
advantage of strong bids to sell sub-5% coupon bonds that were attractive to the
retail market.
We continued to emphasize a disciplined approach to duration management. As part
of our duration strategies, we used inverse floating rate securities,2 a type of
derivative
Discussions of specific investments are for illustrative purposes only and are
not intended as recommendations of individual investments. The views expressed
in this commentary represent those of the portfolio manager as of the date of
this report and are subject to change at any time, based on market conditions
and other factors. The Funds disclaim any obligation to advise shareholders of
such changes.
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.
2 An inverse floating rate security 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 reporting period, are further defined within the Notes to
Financial Statements and Glossary of Terms Used in This Report sections of this
shareholder report.
4
financial instrument, in all four of the North Carolina Funds. The inverse
floaters had the dual benefit of bringing the durations of these Funds closer to
our strategic target and enhancing their income-generation capabilities. Going
into this period, both NZX and NRB used forward interest rate swaps, another
type of derivative instrument. The goal of this strategy was 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. The returns of
NPG, NZX, NNC, NRB, NNO and NII were positively impacted by their use of
leverage, while NKG was negatively impacted. The interest rate swaps on NRB were
removed shortly after the beginning of this reporting period, while the swaps in
NZX remained in place as of November 30, 2007.
HOW DID THE FUNDS PERFORM?
Individual results for these Nuveen Georgia and North Carolina Funds, as well as
relevant index and peer group information, are presented in the accompanying
table.
Total Returns on Net Asset Value*
For periods ended 11/30/07
6-Month 1-Year 5-Year 10-Year
Georgia Funds
NPG 2.50% 1.51% 5.87% 5.97%
NZX 3.35% 2.78% 6.30% NA
NKG 1.37% 0.94% 5.94% NA
North Carolina Funds
NNC 1.80% 0.86% 5.39% 5.84%
NRB 2.49% 1.90% 6.11% NA
NNO 2.43% 1.60% 6.02% NA
NII 2.25% 1.80% 6.05% NA
Lehman Brothers
Municipal Bond Index3 2.40% 2.71% 4.68% 5.30%
Lipper Other States
Municipal Debt Funds
Average4 1.10% 0.46% 5.91% 5.75%
For the six months ended November 30, 2007, the cumulative returns on NAV for
NPG, NZX, NRB and NNO exceeded the return on the national Lehman Brothers
Municipal Bond Index, while NKG, NNC and NII underperformed this measure. All
seven of these Funds outperformed the average return for the Lipper Other States
Municipal Debt Funds 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.
*Six-month returns are cumulative. One-year, five-year and ten- year returns are
annualized.
Past performance is not predictive of future results. Current performance may be
higher or lower than the data shown. Returns do not reflect the deduction of
taxes that shareholders may have to pay on Fund distributions or upon the sale
of Fund shares.
For additional information, see the individual Performance Overview for your
Fund in this report.
3 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.
4 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: 6
months, 46 funds; 1 year, 46 funds; 5 years, 46 funds; and 10 years, 18 funds.
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. Fund and Lipper returns
assume reinvestment of dividends.
5
As previously noted, one of the factors in the six-month performance of these
Funds, especially relative to that of the unleveraged Lehman Brothers Municipal
Bond Index, was the use of financial leverage. Although leveraging provides
opportunities for additional income and total returns for common shareholders,
it can also expose shareholders to additional risk. With the fluctuations in
yields on longer municipal bonds and other market variations during this period,
the impact of valuation changes in the Funds' holdings--both positive and
negative--was magnified by the use of leverage.
Other major factors that influenced the Funds' returns included yield curve and
duration positioning, the use of derivatives, sector allocations and credit
exposure.
During this six-month period, bonds in the Lehman Brothers Municipal Bond Index
with maturities between two and twelve years, especially those maturing in
approximately six to eight years, benefited the most from changes in the
interest rate environment. As a result, these bonds generally outperformed
credits with longer maturities, while bonds having the longest maturities (22
years and longer) posted the worst returns. Although the Funds were underexposed
to the outperforming shorter maturity categories, this was generally offset by
their heavier weightings in the intermediate part of the curve, which performed
well and lower allocations to the underperforming long part of the curve. The
Funds' duration and yield curve positioning was a net positive for performance.
The forward interest rate swaps in place in NZX throughout this period also had
a positive impact on the return performance of this Fund. These derivative
financial instruments provided exposure to taxable markets during a period when,
in contrast to historical trends, the Treasury market and the municipal market
moved in the opposite directions. As municipal market performance lagged the
significant gains made by Treasuries, the forward interest rate swaps performed
very well.
Sectors of the market that generally made positive contributions to the Funds'
performances included water and sewer, transportation, education and utilities.
General obligation credits and pre-refunded bonds, especially those that were
advance refunded5 before longer municipal interest rates began to rise in
mid-2007, also performed very well. All seven of these Funds saw positive
contributions from advance refunding activity, which benefited the Funds through
price appreciation and enhanced credit quality. This was especially true in NZX,
which--in dollar terms--had the most holdings advance refunded, while NKG and
NNC had the lowest weightings of pre-refunded bonds among these Funds.
On the other hand, bonds that carried any credit risk, regardless of sector,
generally tended to perform poorly. Revenue bonds as a whole, and specifically
the industrial development and health care sectors that had ranked among the top
performers in the Lehman Brothers Municipal Bond Index over the past few years
underperformed the general municipal market. Bonds backed by the 1998 master
tobacco settlement agreement also posted poor returns, due to the overall lower
credit quality of the
5 Advance refundings, also known as pre-refundings or refinancings, occur when
an issuer sells new bonds and uses the proceeds to fund principal and interest
payments of older existing bonds. This process often results in lower borrowing
costs for bond issuers.
6
tobacco sector as well as the ample supply of these bonds. The performance of
the North Carolina Funds was also hurt by their positions in housing bonds.
As interest rates on longer municipal bonds rose and credit spreads widened,
lower credit quality bonds also generally underperformed the municipal market as
a whole for the first time in several years. As of November 30, 2007, the
Georgia Funds had weightings of bonds rated BBB or lower and non-rated bonds
ranging from approximately 10% in NPG and NZX to 11% in NKG, while the North
Carolina Funds' allocations totaled approximately 4% in NII, 5% in NNC and NNO,
and 6% in NRB.
Another factor that had a negative impact on the Georgia Funds' performance was
their small position (approximately 2% in NKG and just over 1% in NPG and NZX)
in bonds backed by Radian Asset Assurance (Radian), a municipal bond guarantor.
As concern increased about the company's balance sheet, prices on bonds insured
by Radian declined to levels close to what one would expect for uninsured bonds
from the underlying municipal issuers, detracting from the performance of the
Georgia Funds. The North Carolina Funds did not have any holdings of Radian
insured bonds. It is important to note that none of these Nuveen Municipal
Closed-End Funds had direct exposure to the collateralized debt products that
were at the center of the recent liquidity crisis.
RECENT MARKET EVENTS
Many of the municipal bonds in the portfolios are covered by policies of
insurance, issued by one of several municipal bond insurers, under which the
insurer guarantees the timely payment of interest and principal on the bonds.
Certain of those insurers, including AMBAC, MBIA and FGIC, historically rated
AAA (the highest grade), also insure investment vehicles representing interests
in subprime mortgages, which suffered severe credit deterioration during the
semi-annual period covered by this report. The defaults and/or credit
deterioration of the subprime mortgage investments they insured have caused
losses to the insurers, which has reduced the insurers' capital and called into
question the insurers' continued ability to pay interest and principal on
insured bonds for the life of those bonds. One rating agency has already reduced
the rating for AMBAC-insured bonds to AA, and other rating agencies may follow,
and this rating may fall even further. While the major rating agencies continue
to give the other affected insurers their highest rating, as of the date this
report was written one or more rating agencies have placed each of these
insurers on "negative credit watch", which may presage one or more rating
reductions in the future. The value of the insurance associated with bonds held
by the Funds in this report (a component of the value of the bond/insurance
combination) generally declined during and after the reporting period, and
further credit deterioration or rating downgrades of the insurers could cause
further declines in the value of the insurance component of an insured bond,
although it has not and should not affect the creditworthiness of the municipal
issuer of, and the uninsured value of, the underlying bond.
7
Dividend and Share Price
INFORMATION
As previously noted, these seven Funds use leverage to potentially enhance
opportunities for additional income for common shareholders. The Funds' use of
this strategy continued to provide incremental income, although the extent of
this benefit was somewhat reduced by short-term interest rates that remained
relatively high during most of this period. This, 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 during much of this period. The combination of these factors
resulted in one monthly dividend reduction in NPG, NZX, NRB and NNO over the
six-month period ended November 30, 2007. In NKG, we were able to increase the
dividend effective August 2007, while the dividends of NNC and NII remained
stable throughout this reporting period.
All of the Funds in this report seek to pay stable dividends at rates that
reflect each Fund's past results and projected future performance. During
certain periods, each Fund may pay dividends at a rate that may be more or less
than the amount of net investment income actually earned by the Fund during the
period. If a Fund has cumulatively earned more than it has paid in dividends, it
holds the excess in reserve as undistributed net investment income (UNII) as
part of the Fund's NAV. Conversely, if a Fund has cumulatively paid dividends in
excess of its earnings, the excess constitutes negative UNII that is likewise
reflected in the Fund's NAV. Each Fund will, over time, pay all of its net
investment income as dividends to shareholders. As of November 30, 2007, all of
the Funds in this report had positive UNII balances, based upon our best
estimate, for tax purposes and negative UNII balances for financial statement
purposes.
As of November 30, 2007, the Funds' share prices were trading at premiums or
discounts to their NAVs as shown in the accompanying chart:
11/30/07 Six-Month Average
Discount Premium/Discount
NPG -12.67% -4.75%
NZX -8.51% +2.35%
NKG -8.11% -4.43%
NNC -11.66% -3.50%
NRB -4.73% +4.36%
NNO -10.07% -0.84%
NII -8.07% -1.09%
8
NPG
Performance
OVERVIEW
Nuveen Georgia
Premium Income
Municipal Fund
as of November 30, 2007
Pie Chart:
Credit Quality (as a % of total investments)1
AAA/U.S.
Guaranteed 77%
AA 9%
A 4%
BBB 9%
BB or Lower 1%
Bar Chart:
Monthly Tax-Free Dividends Per Share -- 2006-2007
Dec 0.0555
Jan 0.0555
Feb 0.0555
Mar 0.053
Apr 0.053
May 0.053
Jun 0.053
Jul 0.053
Aug 0.053
Sep 0.05
Oct 0.05
Nov 0.05
Line Chart:
Share Price Performance -- Weekly Closing Price
12/01/06 14.45
14.48
14.41
14.39
14.5601
14.76
14.68
14.88
14.75
14.75
14.73
14.7
14.54
14.59
14.64
14.31
14.4
14.32
14.19
14.25
14.32
14.34
14.39
14.24
14.29
14.2
14.03
13.9
13.55
13.69
13.58
13.5599
13.51
13.55
13.25
13.646
13.38
13.262
13.25
13.31
13.48
13.51
13.25
13.31
13.34
13.15
13.1
13.22
13.1499
12.9
12.5001
12.61
11/30/07 12.75
Fund Snapshot
------------------------------------
Common Share Price $12.75
------------------------------------
Common Share
Net Asset Value $14.60
------------------------------------
Premium/(Discount) to NAV -12.67%
------------------------------------
Market Yield 4.71%
------------------------------------
Taxable-Equivalent Yield2 6.96%
------------------------------------
Net Assets Applicable to
Common Shares ($000) $55,550
------------------------------------
Average Effective Maturity
on Securities (Years) 15.78
------------------------------------
Leverage-Adjusted Duration 8.85
------------------------------------
Average Annual Total Return
(Inception 5/20/93)
------------------------------------
On Share Price On NAV
------------------------------------
6-Month
(Cumulative) -7.59% 2.50%
------------------------------------
1-Year -7.46% 1.51%
------------------------------------
5-Year 0.76% 5.87%
------------------------------------
10-Year 4.36% 5.97%
------------------------------------
Industries
(as a % of total investments)
------------------------------------
Tax Obligation/Limited 19.6%
------------------------------------
U.S. Guaranteed 16.9%
------------------------------------
Health Care 16.7%
------------------------------------
Tax Obligation/General 11.0%
------------------------------------
Education and Civic
Organizations 10.8%
------------------------------------
Water and Sewer 8.5%
------------------------------------
Utilities 7.3%
------------------------------------
Other 9.2%
------------------------------------
1 The percentage of AAA ratings shown in the foregoing chart reflects the AAA
ratings on certain bonds insured by AMBAC, FGIC or MBIA as of November 30,
2007. As explained earlier in the Portfolio Manager's Comments section of
this report, one rating agency has reduced the rating for AMBAC to AA, and
one or more rating agencies have placed each of these insurers on "negative
credit watch", which may presage one or more rating reductions for such
insurer or insurers in the future. If one or more insurers' ratings are
reduced below AAA by these rating agencies, it would likely reduce the
effective rating of many of the bonds insured by that insurer or insurers,
and thereby reduce the percentage of the portfolio rated AAA from the
percentage shown in the foregoing chart.
2 Taxable-Equivalent Yield represents the yield that must be earned on a
fully taxable investment in order to equal the yield of the Fund on an
after-tax basis. It is based on a combined federal and state income tax
rate of 32.3%. When comparing this Fund to investments that generate
qualified dividend income, the Taxable-Equivalent Yield is lower.
9
NZX
Performance
OVERVIEW
Nuveen Georgia
Dividend Advantage
Municipal Fund
as of November 30, 2007
Pie Chart:
Credit Quality (as a % of total investments)1
AAA/U.S.
Guaranteed 78%
AA 7%
A 5%
BBB 6%
BB or Lower 1%
N/R 3%
Bar Chart:
Monthly Tax-Free Dividends Per Share -- 2006-2007
Dec 0.0625
Jan 0.0625
Feb 0.0625
Mar 0.06
Apr 0.06
May 0.06
Jun 0.057
Jul 0.057
Aug 0.057
Sep 0.054
Oct 0.054
Nov 0.054
Line Chart:
Share Price Performance -- Weekly Closing Price
12/01/06 16.14
16.99
16.5
16.8
16.95
16.55
17.14
16.99
16.1
16.3801
16.59
16.3
16.08
16.64
15.94
15.36
15.39
16.04
15.7
15.45
15.67
15.55
16.1
15.85
16.0801
15.91
15.53
15.35
15
14.9
14.73
14.43
14.15
14.1
14.18
14.06
14.04
13.75
14.24
14.31
14.17
14.2
13.77
14.1
13.99
13.9
14.22
14
13.81
13.43
13.22
13.3001
11/30/07 13.54
Fund Snapshot
------------------------------------
Common Share Price $13.54
------------------------------------
Common Share
Net Asset Value $14.80
------------------------------------
Premium/(Discount) to NAV -8.51%
------------------------------------
Market Yield 4.79%
------------------------------------
Taxable-Equivalent Yield2 7.08%
------------------------------------
Net Assets Applicable to
Common Shares ($000) $29,148
------------------------------------
Average Effective Maturity
on Securities (Years) 13.60
------------------------------------
Leverage-Adjusted Duration 9.59
------------------------------------
Average Annual Total Return
(Inception 9/25/01)
------------------------------------
On Share Price On NAV
------------------------------------
6-Month
(Cumulative) -13.35% 3.35%
------------------------------------
1-Year -12.66% 2.78%
------------------------------------
5-Year 3.81% 6.30%
------------------------------------
Since
Inception 3.82% 6.29%
------------------------------------
Industries
(as a % of total investments)
------------------------------------
U.S. Guaranteed 23.3%
------------------------------------
Health Care 16.4%
------------------------------------
Education and Civic
Organizations 16.4%
------------------------------------
Water and Sewer 10.4%
------------------------------------
Housing/Single Family 8.3%
------------------------------------
Tax Obligation/General 7.1%
------------------------------------
Tax Obligation/Limited 4.9%
------------------------------------
Other 13.2%
------------------------------------
1 The percentage of AAA ratings shown in the foregoing chart reflects the AAA
ratings on certain bonds insured by AMBAC, FGIC or MBIA as of November 30,
2007. As explained earlier in the Portfolio Manager's Comments section of
this report, one rating agency has reduced the rating for AMBAC to AA, and
one or more rating agencies have placed each of these insurers on "negative
credit watch", which may presage one or more rating reductions for such
insurer or insurers in the future. If one or more insurers' ratings are
reduced below AAA by these rating agencies, it would likely reduce the
effective rating of many of the bonds insured by that insurer or insurers,
and thereby reduce the percentage of the portfolio rated AAA from the
percentage shown in the foregoing chart.
2 Taxable-Equivalent Yield represents the yield that must be earned on a
fully taxable investment in order to equal the yield of the Fund on an
after-tax basis. It is based on a combined federal and state income tax
rate of 32.3%. When comparing this Fund to investments that generate
qualified dividend income, the Taxable-Equivalent Yield is lower.
10
NKG
Performance
OVERVIEW
Nuveen Georgia
Dividend Advantage
Municipal Fund 2
as of November 30, 2007
Pie Chart:
Credit Quality (as a % of total investments)1
AAA/U.S.
Guaranteed 78%
AA 9%
A 2%
BBB 9%
N/R 2%
Bar Chart:
Monthly Tax-Free Dividends Per Share -- 2006-2007
Dec 0.053
Jan 0.053
Feb 0.053
Mar 0.053
Apr 0.053
May 0.053
Jun 0.053
Jul 0.053
Aug 0.0545
Sep 0.0545
Oct 0.0545
Nov 0.0545
Line Chart:
Share Price Performance -- Weekly Closing Price
12/01/06 13.8909
13.92
13.86
13.61
14.03
14.04
14.11
14.01
14.39
14.18
14.15
13.88
13.9
14.09
14.44
14.11
14.23
14.26
14.36
14.35
14.51
14.54
14.4
14.26
14.51
14.15
14.5
14
13.64
13.6
13.79
13.6299
13.25
13.35
13.52
13.22
13.24
13.05
13.19
13.43
13.6
13.31
13.45
13.45
13.4
13.5
13.5
13.67
13.4899
13.11
13.05
12.99
11/30/07 13.15
Fund Snapshot
------------------------------------
Common Share Price $13.15
------------------------------------
Common Share
Net Asset Value $14.31
------------------------------------
Premium/(Discount) to NAV -8.11
------------------------------------
Market Yield 4.97%
------------------------------------
Taxable-Equivalent Yield2 7.34%
------------------------------------
Net Assets Applicable to
Common Shares ($000) $65,146
------------------------------------
Average Effective Maturity
on Securities (Years) 16.82
------------------------------------
Leverage-Adjusted Duration 8.78
------------------------------------
Average Annual Total Return
(Inception 9/25/02)
------------------------------------
On Share Price On NAV
------------------------------------
6-Month
(Cumulative) -7.10% 1.37%
------------------------------------
1-Year -0.19% 0.94%
------------------------------------
5-Year 3.49% 5.94%
------------------------------------
Since
Inception 2.65% 5.09%
------------------------------------
Industries
(as a % of total investments)
------------------------------------
Water and Sewer 16.6%
------------------------------------
Health Care 15.9%
------------------------------------
Tax Obligation/Limited 13.4%
------------------------------------
Education and Civic
Organizations 12.7%
------------------------------------
Tax Obligation/General 12.1%
------------------------------------
U.S. Guaranteed 9.6%
------------------------------------
Transportation 3.9%
------------------------------------
Utilities 3.2%
------------------------------------
Other 12.6%
------------------------------------
1 The percentage of AAA ratings shown in the foregoing chart reflects the AAA
ratings on certain bonds insured by AMBAC, FGIC or MBIA as of November 30,
2007. As explained earlier in the Portfolio Manager's Comments section of
this report, one rating agency has reduced the rating for AMBAC to AA, and
one or more rating agencies have placed each of these insurers on "negative
credit watch", which may presage one or more rating reductions for such
insurer or insurers in the future. If one or more insurers' ratings are
reduced below AAA by these rating agencies, it would likely reduce the
effective rating of many of the bonds insured by that insurer or insurers,
and thereby reduce the percentage of the portfolio rated AAA from the
percentage shown in the foregoing chart.
2 Taxable-Equivalent Yield represents the yield that must be earned on a
fully taxable investment in order to equal the yield of the Fund on an
after-tax basis. It is based on a combined federal and state income tax
rate of 32.3%. When comparing this Fund to investments that generate
qualified dividend income, the Taxable-Equivalent Yield is lower.
11
NNC
Performance
OVERVIEW
Nuveen North Carolina
Premium Income
Municipal Fund
as of November 30, 2007
Pie Chart:
Credit Quality (as a % of total investments)1
AAA/U.S.
Guaranteed 57%
AA 26%
A 12%
BBB 4%
N/R 1%
Bar Chart:
Monthly Tax-Free Dividends Per Share -- 2006-20073
Dec 0.0545
Jan 0.0545
Feb 0.0545
Mar 0.052
Apr 0.052
May 0.052
Jun 0.049
Jul 0.049
Aug 0.049
Sep 0.049
Oct 0.049
Nov 0.049
Line Chart:
Share Price Performance -- Weekly Closing Price
12/01/06 14.7
14.65
14.26
14.24
14.35
14.5
14.38
14.33
14.29
14.2101
14.31
14.3
14.26
14.7
14.42
14.26
14.59
14.45
14.56
14.44
14.25
14.35
14.44
14.56
14.4
14.29
14.37
14.33
14.2301
13.95
13.92
13.83
13.65
13.47
13.26
13.3
13.07
12.82
12.9692
13.15
13.62
13.5
13.22
13.28
13.15
13.15
13.17
13.12
13.12
12.92
12.91
12.79
11/30/07 12.65
Fund Snapshot
------------------------------------
Common Share Price $12.65
------------------------------------
Common Share
Net Asset Value $14.32
------------------------------------
Premium/(Discount) to NAV -11.66%
------------------------------------
Market Yield 4.65%
------------------------------------
Taxable-Equivalent Yield2 7.02%
------------------------------------
Net Assets Applicable to
Common Shares ($000) $90,959
------------------------------------
Average Effective Maturity
on Securities (Years) 15.68
------------------------------------
Leverage-Adjusted Duration 8.39
------------------------------------
Average Annual Total Return
(Inception 5/20/93)
------------------------------------
On Share Price On NAV
------------------------------------
6-Month
(Cumulative) -9.57% 1.80%
------------------------------------
1-Year -9.85% 0.86%
------------------------------------
5-Year 1.51% 5.39%
------------------------------------
10-Year 4.01% 5.84%
------------------------------------
Industries
(as a % of total investments)
------------------------------------
Tax Obligation/Limited 22.7%
------------------------------------
Health Care 16.3%
------------------------------------
Education and Civic
Organizations 15.6%
------------------------------------
U.S. Guaranteed 9.4%
------------------------------------
Utilities 8.4%
------------------------------------
Tax Obligation/General 7.3%
------------------------------------
Housing/Single Family 5.4%
------------------------------------
Other 14.9%
------------------------------------
1 The percentage of AAA ratings shown in the foregoing chart reflects the AAA
ratings on certain bonds insured by AMBAC, FGIC or MBIA as of November 30,
2007. As explained earlier in the Portfolio Manager's Comments section of
this report, one rating agency has reduced the rating for AMBAC to AA, and
one or more rating agencies have placed each of these insurers on "negative
credit watch", which may presage one or more rating reductions for such
insurer or insurers in the future. If one or more insurers' ratings are
reduced below AAA by these rating agencies, it would likely reduce the
effective rating of many of the bonds insured by that insurer or insurers,
and thereby reduce the percentage of the portfolio rated AAA from the
percentage shown in the foregoing chart.
2 Taxable-Equivalent Yield represents the yield that must be earned on a
fully taxable investment in order to equal the yield of the Fund on an
after-tax basis. It is based on a combined federal and state income tax
rate of 33.8%. When comparing this Fund to investments that generate
qualified dividend income, the Taxable-Equivalent Yield is lower.
3 The Fund paid shareholders capital gains distributions in December 2006 of
$0.0141 per share.
12
NRB
Performance
OVERVIEW
Nuveen North Carolina
Dividend Advantage
Municipal Fund
as of November 30, 2007
Pie Chart:
Credit Quality (as a % of total investments)1
AAA/U.S.
Guaranteed 64%
AA 21%
A 9%
BBB 4%
N/R 2%
Bar Chart:
Monthly Tax-Free Dividends Per Share -- 2006-20073
Dec 0.0635
Jan 0.0635
Feb 0.0635
Mar 0.0635
Apr 0.0635
May 0.0635
Jun 0.06
Jul 0.06
Aug 0.06
Sep 0.057
Oct 0.057
Nov 0.057
Line Chart:
Share Price Performance -- Weekly Closing Price
12/01/06 15.97
15.62
15.8
15.59
15.4806
15.36
15.2501
15.36
15.45
15.6
16.1
16.28
16.16
16.42
16.17
16.49
15.9699
16.5
16.23
16.54
16.25
16.27
16.78
16.81
16.8
16.36
16.51
15.93
15.42
15.3
15.36
15.4
15.05
15.45
15.1
15.42
15.3
15.0799
15.15
15.14
14.93
14.48
14.5
14.96
14.56
14.44
14.3
14.39
14.27
14.03
13.79
13.52
11/30/07 14.0899
Fund Snapshot
------------------------------------
Common Share Price $14.09
------------------------------------
Common Share
Net Asset Value $14.79
------------------------------------
Premium/(Discount) to NAV -4.73%
------------------------------------
Market Yield 4.85%
------------------------------------
Taxable-Equivalent Yield2 7.33%
------------------------------------
Net Assets Applicable to
Common Shares ($000) $33,475
------------------------------------
Average Effective Maturity
on Securities (Years) 13.93
------------------------------------
Leverage-Adjusted Duration 8.13
------------------------------------
Average Annual Total Return
(Inception 1/25/01)
------------------------------------
On Share Price On NAV
------------------------------------
6-Month
(Cumulative) -12.20% 2.49%
------------------------------------
1-Year -5.45% 1.90%
------------------------------------
5-Year 3.81% 6.11%
------------------------------------
Since
Inception 4.67% 6.47%
------------------------------------
Industries
(as a % of total investments)
------------------------------------
Water and Sewer 22.4%
------------------------------------
Tax Obligation/Limited 14.9%
------------------------------------
Utilities 13.4%
------------------------------------
Health Care 12.2%
------------------------------------
Education and Civic
Organizations 11.6%
------------------------------------
U.S. Guaranteed 10.2%
------------------------------------
Tax Obligation/General 5.7%
------------------------------------
Other 9.6%
------------------------------------
1 The percentage of AAA ratings shown in the foregoing chart reflects the AAA
ratings on certain bonds insured by AMBAC, FGIC or MBIA as of November 30,
2007. As explained earlier in the Portfolio Manager's Comments section of
this report, one rating agency has reduced the rating for AMBAC to AA, and
one or more rating agencies have placed each of these insurers on "negative
credit watch", which may presage one or more rating reductions for such
insurer or insurers in the future. If one or more insurers' ratings are
reduced below AAA by these rating agencies, it would likely reduce the
effective rating of many of the bonds insured by that insurer or insurers,
and thereby reduce the percentage of the portfolio rated AAA from the
percentage shown in the foregoing chart.
2 Taxable-Equivalent Yield represents the yield that must be earned on a
fully taxable investment in order to equal the yield of the Fund on an
after-tax basis. It is based on a combined federal and state income tax
rate of 33.8%. When comparing this Fund to investments that generate
qualified dividend income, the Taxable-Equivalent Yield is lower.
3 The Fund paid shareholders capital gains and net ordinary income
distributions in December 2006 of $0.0521 per share.
13
NNO
Performance
OVERVIEW
Nuveen North Carolina
Dividend Advantage
Municipal Fund 2
as of November 30, 2007
Pie Chart:
Credit Quality (as a % of total investments)1
AAA/U.S.
Guaranteed 69%
AA 15%
A 11%
BBB 3%
N/R 2%
Bar Chart:
Monthly Tax-Free Dividends Per Share -- 2006-20073
Dec 0.058
Jan 0.058
Feb 0.058
Mar 0.058
Apr 0.058
May 0.058
Jun 0.055
Jul 0.055
Aug 0.055
Sep 0.055
Oct 0.0515
Nov 0.0515
Line Chart:
Share Price Performance -- Weekly Closing Price
12/01/06 14.95
14.88
14.7
14.77
14.87
14.81
14.6799
14.94
14.93
15.05
15.05
14.81
14.85
15.07
15.041
15.3
15.44
15.81
15.57
15.55
15.8
15.16
15.35
15.2
15.2
15.2
15.55
15.55
14.91
14.55
14.5499
14.37
14.63
14.65
14.6
14.7
14.31
13.9
14.11
14
14.25
14.5
13.98
14.43
13.7775
13.86
13.74
13.9
13.8
13.5
13.26
13.15
11/30/07 13.3
Fund Snapshot
------------------------------------
Common Share Price $13.30
------------------------------------
Common Share
Net Asset Value $14.79
------------------------------------
Premium/(Discount) to NAV -10.07%
------------------------------------
Market Yield 4.65%
------------------------------------
Taxable-Equivalent Yield2 7.02%
------------------------------------
Net Assets Applicable to
Common Shares ($000) $55,470
------------------------------------
Average Effective Maturity
on Securities (Years) 13.50
------------------------------------
Leverage-Adjusted Duration 8.10
------------------------------------
Average Annual Total Return
(Inception 11/15/01)
------------------------------------
On Share Price On NAV
------------------------------------
6-Month
(Cumulative) -12.21% 2.43%
------------------------------------
1-Year -6.40% 1.60%
------------------------------------
5-Year 3.47% 6.02%
------------------------------------
Since
Inception 3.60% 6.34%
------------------------------------
Industries
(as a % of total investments)
------------------------------------
Tax Obligation/Limited 21.9%
------------------------------------
Health Care 15.4%
------------------------------------
Water and Sewer 13.2%
------------------------------------
Education and Civic
Organizations 10.2%
------------------------------------
Transportation 10.2%
------------------------------------
U.S. Guaranteed 9.8%
------------------------------------
Utilities 8.7%
------------------------------------
Other 10.6%
------------------------------------
1 The percentage of AAA ratings shown in the foregoing chart reflects the AAA
ratings on certain bonds insured by AMBAC, FGIC or MBIA as of November 30,
2007. As explained earlier in the Portfolio Manager's Comments section of
this report, one rating agency has reduced the rating for AMBAC to AA, and
one or more rating agencies have placed each of these insurers on "negative
credit watch", which may presage one or more rating reductions for such
insurer or insurers in the future. If one or more insurers' ratings are
reduced below AAA by these rating agencies, it would likely reduce the
effective rating of many of the bonds insured by that insurer or insurers,
and thereby reduce the percentage of the portfolio rated AAA from the
percentage shown in the foregoing chart.
2 Taxable-Equivalent Yield represents the yield that must be earned on a
fully taxable investment in order to equal the yield of the Fund on an
after-tax basis. It is based on a combined federal and state income tax
rate of 33.8%. When comparing this Fund to investments that generate
qualified dividend income, the Taxable-Equivalent Yield is lower.
3 The Fund paid shareholders capital gains and net ordinary income
distributions in December 2006 of $0.0491 per share.
14
NII
Performance
OVERVIEW
Nuveen North Carolina
Dividend Advantage
Municipal Fund 3
as of November 30, 2007
Pie Chart:
Credit Quality (as a % of total investments)1
AAA/U.S
Guaranteed 81%
AA 12%
A 3%
BBB 3%
N/R 1%
Bar Chart:
Monthly Tax-Free Dividends Per Share -- 2006-2007
Dec 0.0545
Jan 0.0545
Feb 0.0545
Mar 0.0545
Apr 0.0545
May 0.0545
Jun 0.0545
Jul 0.0545
Aug 0.0545
Sep 0.0545
Oct 0.0545
Nov 0.0545
Line Chart:
Share Price Performance -- Weekly Closing Price
12/01/06 14.2401
14.49
14.14
13.99
14.05
14.3799
14.2
14.21
14.23
14.24
14.36
14.24
14.1801
14.48
14.35
14.28
14.77
14.78
15
14.68
15.2
14.65
14.94
14.81
14.8
14.6
14.8
14.42
14.35
14.31
14.26
14.3101
14.26
14.11
14.1
14.35
14.15
13.95
13.73
14.05
13.9
14
13.71
14.2
14.08
13.8199
13.8299
13.8
13.73
14
12.95
12.898
11/30/07 13.21
Fund Snapshot
------------------------------------
Common Share Price $13.21
------------------------------------
Common Share
Net Asset Value $14.37
------------------------------------
Premium/(Discount) to NAV -8.07%
------------------------------------
Market Yield 4.95%
------------------------------------
Taxable-Equivalent Yield2 7.48%
------------------------------------
Net Assets Applicable to
Common Shares ($000) $56,518
------------------------------------
Average Effective Maturity
on Securities (Years) 14.26
------------------------------------
Leverage-Adjusted Duration 7.75
------------------------------------
Average Annual Total Return
(Inception 9/25/02)
------------------------------------
On Share Price On NAV
------------------------------------
6-Month
(Cumulative) -7.64% 2.25%
------------------------------------
1-Year -2.59% 1.80%
------------------------------------
5-Year 3.12% 6.05%
------------------------------------
Since
Inception 2.56% 5.23%
------------------------------------
Industries
(as a % of total investments)
------------------------------------
Tax Obligation/Limited 20.8%
------------------------------------
Water and Sewer 20.3%
------------------------------------
Tax Obligation/General 13.6%
------------------------------------
U.S. Guaranteed 13.4%
------------------------------------
Utilities 10.1%
------------------------------------
Health Care 6.0%
------------------------------------
Transportation 5.8%
------------------------------------
Other 10.0%
------------------------------------
1 The percentage of AAA ratings shown in the foregoing chart reflects the AAA
ratings on certain bonds insured by AMBAC, FGIC or MBIA as of November 30,
2007. As explained earlier in the Portfolio Manager's Comments section of
this report, one rating agency has reduced the rating for AMBAC to AA, and
one or more rating agencies have placed each of these insurers on "negative
credit watch", which may presage one or more rating reductions for such
insurer or insurers in the future. If one or more insurers' ratings are
reduced below AAA by these rating agencies, it would likely reduce the
effective rating of many of the bonds insured by that insurer or insurers,
and thereby reduce the percentage of the portfolio rated AAA from the
percentage shown in the foregoing chart.
2 Taxable-Equivalent Yield represents the yield that must be earned on a
fully taxable investment in order to equal the yield of the Fund on an
after-tax basis. It is based on a combined federal and state income tax
rate of 33.8%. When comparing this Fund to investments that generate
qualified dividend income, the Taxable-Equivalent Yield is lower.
15
NPG
NZX
NKG
Shareholder MEETING REPORT
The annual meeting of shareholders was held in the offices of Nuveen Investments
on October 12, 2007.
NPG NZX NKG
------------------------------------------------------------------------------------------------------------------------------------
TO APPROVE A NEW INVESTMENT
MANAGEMENT AGREEMENT:
Common and Common and Common and
MuniPreferred MuniPreferred MuniPreferred MuniPreferred MuniPreferred MuniPreferred
shares voting shares voting shares voting shares voting shares voting shares voting
together together together together together together
as a class as a class as a class as a class as a class as a class
====================================================================================================================================
For 2,030,867 -- 1,018,900 -- 2,505,067 --
Against 76,933 -- 21,811 -- 97,342 --
Abstain 71,215 -- 18,036 -- 49,161 --
Broker Non-Votes 532,732 -- 367,292 -- 900,680 --
------------------------------------------------------------------------------------------------------------------------------------
Total 2,711,747 -- 1,426,039 -- 3,552,250 --
====================================================================================================================================
APPROVAL OF THE BOARD MEMBERS
WAS REACHED AS FOLLOWS:
William J. Schneider
For -- 865 -- 511 -- 1,257
Withhold -- -- -- -- -- --
------------------------------------------------------------------------------------------------------------------------------------
Total -- 865 -- 511 -- 1,257
====================================================================================================================================
Timothy R. Schwertfeger
For -- 865 -- 511 -- 1,257
Withhold -- -- -- -- -- --
------------------------------------------------------------------------------------------------------------------------------------
Total -- 865 -- 511 -- 1,257
====================================================================================================================================
Judith M. Stockdale
For 2,629,503 -- 1,374,125 -- 3,472,440 --
Withhold 82,244 -- 51,914 -- 79,810 --
------------------------------------------------------------------------------------------------------------------------------------
Total 2,711,747 -- 1,426,039 -- 3,552,250 --
====================================================================================================================================
Carole E. Stone
For 2,633,003 -- 1,377,125 -- 3,472,440 --
Withhold 78,744 -- 48,914 -- 79,810 --
------------------------------------------------------------------------------------------------------------------------------------
Total 2,711,747 -- 1,426,039 -- 3,552,250 --
====================================================================================================================================
TO RATIFY THE SELECTION OF ERNST & YOUNG LLP
AS THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM FOR THE CURRENT FISCAL YEAR:
For 2,676,709 -- 1,391,332 -- 3,509,903 --
Against 7,692 -- 14,314 -- 18,508 --
Abstain 27,346 -- 20,393 -- 23,839 --
------------------------------------------------------------------------------------------------------------------------------------
Total 2,711,747 -- 1,426,039 -- 3,552,250 --
====================================================================================================================================
16
NNC
NRB
NNO
NNC NRB NNO
------------------------------------------------------------------------------------------------------------------------------------
TO APPROVE A NEW INVESTMENT
MANAGEMENT AGREEMENT:
Common and Common and Common and
MuniPreferred MuniPreferred MuniPreferred MuniPreferred MuniPreferred MuniPreferred
shares voting shares voting shares voting shares voting shares voting shares voting
together together together together together together
as a class as a class as a class as a class as a class as a class
====================================================================================================================================
For 3,727,292 -- 1,253,524 -- 2,089,521 --
Against 80,947 -- 40,817 -- 59,337 --
Abstain 129,909 -- 58,031 -- 64,451 --
Broker Non-Votes 1,257,232 -- 422,640 -- 760,790 --
------------------------------------------------------------------------------------------------------------------------------------
Total 5,195,380 -- 1,775,012 -- 2,974,099 --
====================================================================================================================================
APPROVAL OF THE BOARD MEMBERS
WAS REACHED AS FOLLOWS:
William J. Schneider
For -- 1,588 -- 608 -- 919
Withhold -- 3 -- 3 -- 5
------------------------------------------------------------------------------------------------------------------------------------
Total -- 1,591 -- 611 -- 924
====================================================================================================================================
Timothy R. Schwertfeger
For -- 1,588 -- 608 -- 919
Withhold -- 3 -- 3 -- 5
------------------------------------------------------------------------------------------------------------------------------------
Total -- 1,591 -- 611 -- 924
====================================================================================================================================
Judith M. Stockdale
For 5,074,598 -- 1,713,758 -- 2,900,256 --
Withhold 120,782 -- 61,254 -- 73,843 --
------------------------------------------------------------------------------------------------------------------------------------
Total 5,195,380 -- 1,775,012 -- 2,974,099 --
====================================================================================================================================
Carole E. Stone
For 5,075,024 -- 1,713,764 -- 2,900,256 --
Withhold 120,356 -- 61,248 -- 73,843 --
------------------------------------------------------------------------------------------------------------------------------------
Total 5,195,380 -- 1,775,012 -- 2,974,099 --
====================================================================================================================================
TO RATIFY THE SELECTION OF ERNST & YOUNG LLP
AS THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM FOR THE CURRENT FISCAL YEAR:
For 5,080,640 -- 1,739,123 -- 2,916,733 --
Against 39,984 -- 16,964 -- 24,604 --
Abstain 74,756 -- 18,925 -- 32,762 --
------------------------------------------------------------------------------------------------------------------------------------
Total 5,195,380 -- 1,775,012 -- 2,974,099 --
====================================================================================================================================
17
NII
Shareholder MEETING REPORT (continued)
NII
------------------------------------------------------------------------------------------------------------------------------------
TO APPROVE A NEW INVESTMENT
MANAGEMENT AGREEMENT:
Common and
MuniPreferred MuniPreferred
shares voting shares voting
together together
as a class as a class
====================================================================================================================================
For 2,198,316 --
Against 85,707 --
Abstain 65,943 --
Broker Non-Votes 979,935 --
------------------------------------------------------------------------------------------------------------------------------------
Total 3,329,901 --
====================================================================================================================================
APPROVAL OF THE BOARD MEMBERS
WAS REACHED AS FOLLOWS:
William J. Schneider
For -- 1,036
Withhold -- 12
------------------------------------------------------------------------------------------------------------------------------------
Total -- 1,048
====================================================================================================================================
Timothy R. Schwertfeger
For -- 1,036
Withhold -- 12
------------------------------------------------------------------------------------------------------------------------------------
Total -- 1,048
====================================================================================================================================
Judith M. Stockdale
For 3,234,535 --
Withhold 95,366 --
------------------------------------------------------------------------------------------------------------------------------------
Total 3,329,901 --
====================================================================================================================================
Carole E. Stone
For 3,239,055 --
Withhold 90,846 --
------------------------------------------------------------------------------------------------------------------------------------
Total 3,329,901 --
====================================================================================================================================
TO RATIFY THE SELECTION OF ERNST & YOUNG LLP
AS THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM FOR THE CURRENT FISCAL YEAR:
For 3,244,569 --
Against 48,461 --
Abstain 36,871 --
------------------------------------------------------------------------------------------------------------------------------------
Total 3,329,901 --
====================================================================================================================================
18
NPG
Nuveen Georgia Premium Income Municipal Fund
Portfolio of INVESTMENTS
November 30, 2007 (Unaudited)
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
CONSUMER STAPLES - 1.8% (1.2% OF TOTAL INVESTMENTS)
$ 1,000 Puerto Rico, The Children's Trust Fund, Tobacco Settlement 5/12 at 100.00 BBB $ 978,740
Asset-Backed Refunding Bonds, Series 2002, 5.500%, 5/15/39
------------------------------------------------------------------------------------------------------------------------------------
EDUCATION AND CIVIC ORGANIZATIONS - 16.2% (10.8% OF TOTAL INVESTMENTS)
1,000 Athens-Clarke County Unified Government Development Authority, 12/12 at 100.00 AAA 1,069,720
Georgia, Educational Facilities Revenue Bonds, UGAREF CCRC
Building LLC Project, Series 2002, 5.000%, 12/15/16 -
AMBAC Insured
1,550 Bulloch County Development Authority, Georgia, Student Housing 8/14 at 100.00 Aaa 1,652,548
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 9/14 at 100.00 Aaa 732,795
Housing 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 1,683,772
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 1,225,583
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, 12/15 at 100.00 AAA 1,550,445
Revenue Bonds, Armstrong Center LLC, Series 2005A,
5.000%, 12/01/34 - XLCA Insured
South Regional Joint Development Authority, Georgia, Revenue
Bonds, Valdosta State University Parking and Health, Series
2007:
355 4.250%, 8/01/25 (WI/DD, Settling 12/19/07) - XLCA Insured 2/18 at 100.00 Aaa 337,211
375 4.500%, 8/01/26 (WI/DD, Settling 12/19/07) - XLCA Insured 2/18 at 100.00 Aaa 364,834
400 4.500%, 8/01/27 (WI/DD, Settling 12/19/07) - XLCA Insured 2/18 at 100.00 Aaa 386,812
------------------------------------------------------------------------------------------------------------------------------------
8,595 Total Education and Civic Organizations 9,003,720
------------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE - 25.0% (16.7% OF TOTAL INVESTMENTS)
2,300 Chatham County Hospital Authority, Savannah, Georgia, 7/11 at 101.00 BBB+ 2,373,393
Hospital Revenue Improvement Bonds, Memorial Health
University Medical Center Inc., Series 2001A, 6.125%, 1/01/24
500 Clark County Hospital Authority, Georgia, Hospital Revenue 1/17 at 100.00 AAA 516,760
Bonds, 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 2,039,340
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 912,888
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 3,086,550
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 1,145,230
Certificates, Floyd Medical Center, Series 2003,
5.000%, 7/01/19 - MBIA Insured
1,060 Henry County Hospital Authority, Georgia, Revenue Certificates, 7/14 at 101.00 Aaa 1,116,689
Henry Medical Center, Series 2004, 5.000%, 7/01/20 -
MBIA Insured
900 Houston County Hospital Authority, Georgia, Revenue Bonds, 10/17 at 100.00 A2 914,805
Houston Healthcare Project, Series 2007, 5.250%, 10/01/35
1,000 Savannah Hospital Authority, Georgia, Revenue Bonds, 1/14 at 100.00 AA 1,012,410
St. Joseph's/Candler Health System, Series 2003,
5.250%, 7/01/23 - RAAI Insured
19
NPG
Nuveen Georgia Premium Income Municipal Fund (continued)
Portfolio of INVESTMENTS November 30, (2007) (Unaudited)
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE (continued)
$ 750 Valdosta and Lowndes County Hospital Authority, Georgia, 10/17 at 100.00 A+ $ 748,328
Revenue Certificates, South Georgia Medical Center,
Series 2007, 5.000%, 10/01/33
------------------------------------------------------------------------------------------------------------------------------------
13,500 Total Health Care 13,866,393
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/MULTIFAMILY - 1.9% (1.3% OF TOTAL INVESTMENTS)
1,000 Cobb County Development Authority, Georgia, Student Housing 7/17 at 100.00 Aaa 1,054,410
Revenue Bonds, KSU Village II Real Estate Foundation LLC
Project, Series 2007A, 5.250%, 7/15/38 - AMBAC Insured
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/SINGLE FAMILY - 1.6% (1.1% OF TOTAL INVESTMENTS)
900 Georgia Housing and Finance Authority, Single Family Mortgage 12/11 at 100.00 AAA 913,482
Bonds, Series 2002B-2, 5.350%, 12/01/22
(Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
INDUSTRIALS - 0.9% (0.7% OF TOTAL INVESTMENTS)
500 Savannah Economic Development Authority, Georgia, Revenue 7/12 at 100.00 AAA 521,595
Bonds, GTREP Project, Series 2002, 5.000%, 7/01/22 -
MBIA Insured
------------------------------------------------------------------------------------------------------------------------------------
MATERIALS - 3.2% (2.1% OF TOTAL INVESTMENTS)
750 Effingham County Industrial Development Authority, Georgia, 6/11 at 101.00 B2 755,798
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 1,030,600
Improvement Revenue Bonds, International Paper Company,
Series 2001A, 6.250%, 2/01/25 (Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
1,750 Total Materials 1,786,398
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL - 16.4% (11.0% OF TOTAL INVESTMENTS)
540 Cherokee County Resource Recovery Development Authority, 7/17 at 100.00 AAA 539,978
Georgia, Solid Waste Disposal Revenue Bonds, Ball Ground
Recycling LLC Project, Series 2007A, 5.000%, 7/01/37 -
AMBAC Insured (Alternative Minimum Tax)
2,215 Decatur, Georgia, General Obligation Bonds, Series 2007, 1/17 at 100.00 AAA 2,334,787
5.000%, 1/01/31 - FSA Insured
100 Georgia State, General Obligation Bonds, Series 2007, 8/17 at 100.00 AAA 107,492
5.000%, 8/01/24
1,000 Georgia, General Obligation Bonds, Series 2002D, 5.000%, 8/01/16 8/12 at 100.00 AAA 1,067,610
1,000 Georgia, General Obligation Bonds, Series 2005B, 5.000%, 7/01/15 No Opt. Call AAA 1,103,710
2,500 Paulding County School District, Georgia, General Obligation 2/17 at 100.00 AA+ 2,616,825
Bonds, Series 2007, 5.000%, 2/01/33
800 Puerto Rico, General Obligation Bonds, Series 2004A, 7/14 at 100.00 BBB- 822,136
5.250%, 7/01/22
500 Wayne County Hospital Authority, Georgia, Hospital Revenue 3/16 at 100.00 Aaa 519,665
Bonds, Series 2006, 5.000%, 3/01/23 - XLCA Insured
------------------------------------------------------------------------------------------------------------------------------------
8,655 Total Tax Obligation/General 9,112,203
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED - 29.3% (19.6% OF TOTAL INVESTMENTS)
5,000 Atlanta and Fulton County Recreation Authority, Georgia, 12/15 at 100.00 AAA 5,222,799
Guaranteed Revenue Bonds, Park Improvement, Series 2005A,
5.000%, 12/01/30 - MBIA Insured
420 Atlanta, Georgia, Tax Allocation Bonds Atlanta Station Project, 12/17 at 100.00 AAA 440,735
Series 2007, 5.000%, 12/01/23 - AGC Insured
2,000 Cobb-Marietta Coliseum and Exhibit Hall Authority, Cobb County, 1/14 at 100.00 AAA 2,125,000
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 3,989,404
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 2,822,118
Revenue Refunding Bonds, Public Facilities Projects,
Series 2002A, 5.375%, 8/01/17
20
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED (continued)
$ 1,000 Metropolitan Atlanta Rapid Transit Authority, Georgia, Sales Tax No Opt. Call AAA $ 1,172,520
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- 488,445
Revenue Bonds, Series 2005B, 5.000%, 7/01/41
------------------------------------------------------------------------------------------------------------------------------------
14,995 Total Tax Obligation/Limited 16,261,021
------------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION - 4.3% (2.8% OF TOTAL INVESTMENTS)
2,290 Atlanta, Georgia, Airport General Revenue Bonds, Series 2004G, 1/15 at 100.00 AAA 2,367,860
5.000%, 1/01/26 - FSA Insured
------------------------------------------------------------------------------------------------------------------------------------
U.S. GUARANTEED - 25.3% (16.9% OF TOTAL INVESTMENTS) (4)
1,500 Augusta, Georgia, Water and Sewerage Revenue Bonds, 10/12 at 100.00 AAA 1,614,795
Series 2002, 5.000%, 10/01/17 (Pre-refunded 10/01/12) -
FSA Insured
735 Coweta County Development Authority, Georgia, Revenue Bonds, 1/13 at 100.00 Aaa 799,607
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 3,423,486
Bonds, Series 2001, 5.250%, 6/01/26 (Pre-refunded 6/01/11)
1,000 DeKalb County, Georgia, Water and Sewerage Revenue Bonds, 10/10 at 101.00 AAA 1,059,630
Series 2000, 5.125%, 10/01/31 (Pre-refunded 10/01/10) -
MBIA Insured
1,000 Fairburn, Georgia, Combined Utility Revenue Bonds, Series 2000, 10/10 at 101.00 A- (4) 1,075,580
5.750%, 10/01/20 (Pre-refunded 10/01/10)
1,750 Gainesville and Hall County Hospital Authority, Georgia, 5/11 at 100.00 A- (4) 1,869,228
Revenue Anticipation Certificates, Northeast Georgia Health
Services Inc., Series 2001, 5.500%, 5/15/31
(Pre-refunded 5/15/11)
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) 87,799
10 6.400%, 1/01/09 (ETM) No Opt. Call A+ (4) 10,329
25 Georgia Municipal Electric Authority, Senior Lien General Power 1/17 at 100.00 AAA 27,792
Revenue Bonds, Series 1993Z, 5.500%, 1/01/20
(Pre-refunded 1/01/17) - FGIC Insured
3,750 Gwinnett County Hospital Authority, Georgia, Revenue Anticipation 2/12 at 102.00 AAA 4,108,200
Certificates, Gwinnett Hospital System Inc. Project,
Series 1997B, 5.300%, 9/01/27 (Pre-refunded 2/14/12) -
MBIA Insured
------------------------------------------------------------------------------------------------------------------------------------
13,020 Total U.S. Guaranteed 14,076,446
------------------------------------------------------------------------------------------------------------------------------------
UTILITIES - 10.9% (7.3% OF TOTAL INVESTMENTS)
1,000 Georgia Municipal Electric Authority, General Power Revenue 1/17 at 100.00 AAA 1,054,080
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+ 1,707,497
Obligation Bonds, Fifth Crossover Series 1998Y,
6.400%, 1/01/09
975 Georgia Municipal Electric Authority, Senior Lien General No Opt. Call AAA 1,079,881
Power 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 1,045,110
Lien Revenue Bonds, Series 2003A, 5.000%, 1/01/22 -
MBIA Insured
1,200 Virgin Islands Water and Power Authority, Electric System 7/17 at 100.00 BBB- 1,178,748
Revenue Bonds, Series 2007B, 5.000%, 7/01/31
------------------------------------------------------------------------------------------------------------------------------------
5,830 Total Utilities 6,065,316
------------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER - 12.8% (8.5% 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 1,279,170
500 5.000%, 11/01/37 - FSA Insured 11/14 at 100.00 AAA 515,755
21
NPG
Nuveen Georgia Premium Income Municipal Fund (continued)
Portfolio of INVESTMENTS November 30, (2007) (Unaudited)
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER (continued)
$ 335 Coweta County Water and Sewer Authority, Georgia, Revenue 6/11 at 102.00 Aaa $ 354,708
Bonds, Series 2001, 5.250%, 6/01/26
890 Douglasville-Douglas County Water and Sewer Authority, Georgia, 6/17 at 100.00 AAA 930,753
Water and Sewer Revenue Bonds, Series 2007,
5.000%, 6/01/37 - MBIA Insured
750 Forsyth County Water and Sewerage Authority, Georgia, 4/17 at 100.00 AAA 783,810
Revenue Bonds, Series 2007, 5.000%, 4/01/37 - FSA Insured
1,950 Fulton County, Georgia, Water and Sewerage Revenue Bonds, 1/14 at 100.00 AAA 2,059,200
Series 2004, 5.000%, 1/01/22 - FGIC Insured
1,000 Midgeville, Georgia, Water and Sewerage Revenue Refunding No Opt. Call AAA 1,180,810
Bonds, Series 1996, 6.000%, 12/01/21 - FSA Insured
------------------------------------------------------------------------------------------------------------------------------------
6,650 Total Water and Sewer 7,104,206
------------------------------------------------------------------------------------------------------------------------------------
$ 78,685 Total Investments (cost $80,098,516) - 149.6% 83,111,790
=============-----------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 0.4% 238,054
--------------------------------------------------------------------------------------------------------------------
Preferred Shares, at Liquidation Value - (50.0)% (27,800,000)
--------------------------------------------------------------------------------------------------------------------
Net Assets Applicable to Common Shares - 100% $ 55,549,844
====================================================================================================================
(1) All percentages shown in the Portfolio of Investments are
based on net assets applicable to Common shares unless
otherwise noted.
(2) Optional Call Provisions: Dates (month and year) and prices
of the earliest optional call or redemption. There may be
other call provisions at varying prices at later dates.
Certain mortgage-backed securities may be subject to
periodic principal paydowns.
(3) Ratings: Using the higher of Standard & Poor's Group
("Standard & Poor's") or Moody's Investor Service, Inc.
("Moody's") rating. Ratings below BBB by Standard & Poor's
or Baa by Moody's are considered to be below investment
grade.
The AAA ratings shown in the Portfolio of Investments
reflects the AAA ratings on certain bonds insured by AMBAC,
FGIC or MBIA as of November 30, 2007. As explained earlier
in the Portfolio Manager's Comments section of this report,
one rating agency has reduced the rating for AMBAC to AA,
and one or more rating agencies have placed each of these
insurers on "negative credit watch", which may presage one
or more rating reductions for such insurer or insurers in
the future. If one or more insurers' ratings are reduced
below AAA by these rating agencies, it would likely reduce
the effective rating of many of the bonds insured by that
insurer or insurers.
(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.
WI/DD Purchased on a when-issued or delayed delivery basis.
(ETM) Escrowed to maturity.
See accompanying notes to financial statements.
22
NZX
Nuveen Georgia Dividend Advantage Municipal Fund
Portfolio of INVESTMENTS
November 30, 2007 (Unaudited)
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
EDUCATION AND CIVIC ORGANIZATIONS - 24.7% (16.4% OF TOTAL INVESTMENTS)
$ 1,000 Athens Housing Authority, Georgia, Student Housing Lease 12/12 at 100.00 Aaa $ 1,053,160
Revenue Bonds, UGAREF East Campus Housing LLC Project,
Series 2002, 5.250%, 12/01/21 - AMBAC Insured
1,475 Bulloch County Development Authority, Georgia, Student 8/14 at 100.00 Aaa 1,577,911
Housing 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 1,702,020
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 523,425
Housing Revenue Bonds, University of West Georgia,
Series 2004A, 5.000%, 9/01/21 - XLCA Insured
1,000 Fulton County Development Authority, Georgia, Revenue 4/12 at 100.00 AAA 1,047,300
Bonds, 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 186,798
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 516,815
Bonds, Armstrong Center LLC, Series 2005A,
5.000%, 12/01/34 - XLCA Insured
South Regional Joint Development Authority, Georgia, Revenue
Bonds, Valdosta State University Parking and Health, Series
2007:
195 4.250%, 8/01/25 (WI/DD, Settling 12/19/07) - XLCA Insured 2/18 at 100.00 Aaa 185,229
210 4.500%, 8/01/26 (WI/DD, Settling 12/19/07) - XLCA Insured 2/18 at 100.00 Aaa 204,307
220 4.500%, 8/01/27 (WI/DD, Settling 12/19/07) - XLCA Insured 2/18 at 100.00 Aaa 212,747
------------------------------------------------------------------------------------------------------------------------------------
6,920 Total Education and Civic Organizations 7,209,712
------------------------------------------------------------------------------------------------------------------------------------
ENERGY - 2.1% (1.4% OF TOTAL INVESTMENTS)
650 Virgin Islands Public Finance Authority, Revenue Bonds, 1/15 at 100.00 BBB 602,030
Refinery Project Hovensa LLC, Series 2007, 4.700%, 7/01/22
(Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE - 24.7% (16.4% OF TOTAL INVESTMENTS)
150 Baldwin County Hospital Authority, Georgia, Revenue Bonds, 12/07 at 102.00 BB+ 147,545
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+ 177,861
Oconee Regional Medical Center, Series 1998, 5.375%, 12/01/28
440 Chatham County Hospital Authority, Savannah, Georgia, Hospital 7/11 at 101.00 BBB+ 454,040
Revenue Improvement Bonds, Memorial Health University
Medical Center Inc., Series 2001A, 6.125%, 1/01/24
500 Clark County Hospital Authority, Georgia, Hospital Revenue 1/17 at 100.00 AAA 516,760
Bonds, 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 1,055,370
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 507,160
Coffee County Regional Medical Center, Series 2004,
5.250%, 12/01/22
500 Henry County Hospital Authority, Georgia, Revenue Certificates, 7/14 at 101.00 Aaa 526,740
Henry Medical Center, Series 2004, 5.000%, 7/01/20 -
MBIA Insured
500 Houston County Hospital Authority, Georgia, Revenue Bonds, 10/17 at 100.00 A2 508,225
Houston Healthcare Project, Series 2007, 5.250%, 10/01/35
23
NZX
Nuveen Georgia Dividend Advantage Municipal Fund (continued)
Portfolio of INVESTMENTS November 30, (2007) (Unaudited)
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE (continued)
$ 500 Savannah Hospital Authority, Georgia, Revenue Bonds, 1/14 at 100.00 AA $ 506,205
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 2,064,199
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+ 748,328
Revenue Certificates, South Georgia Medical Center,
Series 2007, 5.000%, 10/01/33
------------------------------------------------------------------------------------------------------------------------------------
7,030 Total Health Care 7,212,433
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/MULTIFAMILY - 1.2% (0.9% OF TOTAL INVESTMENTS)
350 Cobb County Development Authority, Georgia, Student Housing 7/17 at 100.00 Aaa 369,044
Revenue Bonds, KSU Village II Real Estate Foundation LLC
Project, Series 2007A, 5.250%, 7/15/38 - AMBAC Insured
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/SINGLE FAMILY - 12.6% (8.3% OF TOTAL INVESTMENTS)
650 Georgia Housing and Finance Authority, Single Family Mortgage 12/11 at 100.00 AAA 659,737
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 931,850
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 2,076,379
Resolution 1 Bonds, Series 2002A-2, 5.450%, 12/01/22
(Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
3,650 Total Housing/Single Family 3,667,966
------------------------------------------------------------------------------------------------------------------------------------
INDUSTRIALS - 6.3% (4.2% OF TOTAL INVESTMENTS)
1,000 Cartersville Development Authority, Georgia, Waste and 2/12 at 100.00 A 1,061,630
Wastewater Facilities Revenue Refunding Bonds, Anheuser
Busch Cos. Inc. Project, Series 2002, 5.950%, 2/01/32
(Alternative Minimum Tax)
750 Savannah Economic Development Authority, Georgia, Revenue 7/12 at 100.00 AAA 787,365
Bonds, GTREP Project, Series 2002, 5.000%, 7/01/19 -
MBIA Insured
------------------------------------------------------------------------------------------------------------------------------------
1,750 Total Industrials 1,848,995
------------------------------------------------------------------------------------------------------------------------------------
LONG-TERM CARE - 2.4% (1.6% OF TOTAL INVESTMENTS)
500 Fulton County Residential Care Facilities Authority, Georgia, 7/17 at 100.00 N/R 439,110
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 247,088
Spring Harbor at Green Island, Series 2007, 5.000%, 7/01/11
------------------------------------------------------------------------------------------------------------------------------------
750 Total Long-Term Care 686,198
------------------------------------------------------------------------------------------------------------------------------------
MATERIALS - 2.2% (1.4% OF TOTAL INVESTMENTS)
20 Richmond County Development Authority, Georgia, Environmental 11/13 at 100.00 BBB 20,173
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 612,882
Improvement Revenue Refunding Bonds, International Paper
Company, Series 2002A, 6.000%, 2/01/25
(Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
620 Total Materials 633,055
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL - 10.7% (7.1% OF TOTAL INVESTMENTS)
360 Cherokee County Resource Recovery Development Authority, 7/17 at 100.00 AAA 359,986
Georgia, Solid Waste Disposal Revenue Bonds, Ball Ground
Recycling LLC Project, Series 2007A, 5.000%, 7/01/37 -
AMBAC Insured (Alternative Minimum Tax)
200 Decatur, Georgia, General Obligation Bonds, Series 2007, 1/17 at 100.00 AAA 210,816
5.000%, 1/01/31 - FSA Insured
700 Georgia State, General Obligation Bonds, Series 2007, 8/17 at 100.00 AAA 752,444
5.000%, 8/01/24
500 Georgia, General Obligation Bonds, Series 2005B, 5.000%, 7/01/15 No Opt. Call AAA 551,855
24
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL (continued)
$ 600 Paulding County School District, Georgia, General Obligation 2/17 at 100.00 AA+ $ 628,038
Bonds, Series 2007, 5.000%, 2/01/33
595 Puerto Rico, General Obligation Bonds, Series 2004A, 7/14 at 100.00 BBB- 611,464
5.250%, 7/01/22
------------------------------------------------------------------------------------------------------------------------------------
2,955 Total Tax Obligation/General 3,114,603
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED - 7.4% (4.9% OF TOTAL INVESTMENTS)
40 Atlanta, Georgia, Tax Allocation Bonds Atlanta Station Project, 12/17 at 100.00 AAA 41,975
Series 2007, 5.000%, 12/01/23 - AGC Insured
250 Atlanta, Georgia, Tax Allocation Bonds, Eastside Project, 7/15 at 100.00 N/R 245,530
Series 2005B, 5.400%, 1/01/20
250 Atlanta, Georgia, Tax Allocation Bonds, Princeton Lakes Project, 1/16 at 100.00 N/R 240,663
Series 2006, 5.500%, 1/01/31
1,525 Macon-Bibb County Urban Development Authority, Georgia, 8/12 at 101.00 AA 1,642,699
Revenue Refunding Bonds, Public Facilities Projects,
Series 2002A, 5.000%, 8/01/14
------------------------------------------------------------------------------------------------------------------------------------
2,065 Total Tax Obligation/Limited 2,170,867
------------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION - 3.6% (2.4% OF TOTAL INVESTMENTS)
1,000 Atlanta, Georgia, Airport General Revenue Refunding Bonds, 1/10 at 101.00 AAA 1,050,270
Series 2000A, 5.400%, 1/01/15 - FGIC Insured
------------------------------------------------------------------------------------------------------------------------------------
U.S. GUARANTEED - 35.2% (23.3% OF TOTAL INVESTMENTS) (4)
565 Augusta, Georgia, Water and Sewerage Revenue Bonds, 10/12 at 100.00 AAA 608,239
Series 2002, 5.000%, 10/01/16 (Pre-refunded 10/01/12) -
FSA Insured
1,500 Coweta County Development Authority, Georgia, Revenue Bonds, 1/13 at 100.00 Aaa 1,631,850
Newnan Water and Sewer, and Light Commission Project,
Series 2002, 5.250%, 1/01/18 (Pre-refunded 1/01/13) -
FGIC Insured
1,250 Gainesville and Hall County Hospital Authority, Georgia, 5/11 at 100.00 A- (4) 1,335,163
Revenue Anticipation Certificates, Northeast Georgia Health
Services Inc., Series 2001, 5.500%, 5/15/31
(Pre-refunded 5/15/11)
830 Georgia, General Obligation Bonds, Series 2002D, 8/12 at 100.00 AAA 893,354
5.000%, 8/01/18 (Pre-refunded 8/01/12)
1,900 Gwinnett County Hospital Authority, Georgia, Revenue 2/12 at 102.00 AAA 2,081,487
Anticipation Certificates, Gwinnett Hospital System Inc.
Project, Series 1997B, 5.300%, 9/01/27 (Pre-refunded 2/14/12) -
MBIA Insured
1,200 Private Colleges and Universities Authority, Georgia, Revenue 10/11 at 102.00 Baa2 (4) 1,326,000
Bonds, Mercer University, Series 2001, 5.750%, 10/01/31
(Pre-refunded 10/01/11)
1,000 Rockdale County Water and Sewerage Authority, Georgia, 1/10 at 101.00 AAA 1,051,950
Revenue Bonds, Series 1999A, 5.375%, 7/01/29
(Pre-refunded 1/01/10) - MBIA Insured
1,200 Summerville, Georgia, Combined Public Utility System 1/12 at 101.00 Baa3 (4) 1,319,328
Revenue Refunding and Improvement Bonds, Series 2002,
5.750%, 1/01/26 (Pre-refunded 1/01/12)
------------------------------------------------------------------------------------------------------------------------------------
9,445 Total U.S. Guaranteed 10,247,371
------------------------------------------------------------------------------------------------------------------------------------
UTILITIES - 1.9% (1.3% OF TOTAL INVESTMENTS)
500 Municipal Electric Authority of Georgia, Combustion Turbine 11/13 at 100.00 AAA 546,125
Revenue Bonds, Series 2003A, 5.250%, 11/01/15 -
MBIA Insured
------------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER - 15.7% (10.4% OF TOTAL INVESTMENTS)
1,200 Atlanta, Georgia, Water and Wastewater Revenue Bonds, 11/14 at 100.00 AAA 1,253,064
Series 2004, 5.000%, 11/01/24 - FSA Insured
890 Douglasville-Douglas County Water and Sewer Authority, 6/17 at 100.00 AAA 930,753
Georgia, Water and Sewer Revenue Bonds, Series 2007,
5.000%, 6/01/37 - MBIA Insured
25
NZX
Nuveen Georgia Dividend Advantage Municipal Fund (continued)
Portfolio of INVESTMENTS November 30, (2007) (Unaudited)
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER (continued)
$ 375 Forsyth County Water and Sewerage Authority, Georgia, 4/17 at 100.00 AAA $ 391,905
Revenue Bonds, Series 2007, 5.000%, 4/01/37 - FSA Insured
500 Fulton County, Georgia, Water and Sewerage Revenue Bonds, 1/14 at 100.00 AAA 528,000
Series 2004, 5.000%, 1/01/22 - FGIC Insured
1,395 Macon Water Authority, Georgia, Water and Sewer Revenue 10/11 at 101.00 AA- 1,467,610
Bonds, Series 2001B, 5.000%, 10/01/21
------------------------------------------------------------------------------------------------------------------------------------
4,360 Total Water and Sewer 4,571,332
------------------------------------------------------------------------------------------------------------------------------------
$ 42,045 Total Investments (cost $42,681,182) - 150.7% 43,930,001
=============-----------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 0.8% 217,848
--------------------------------------------------------------------------------------------------------------------
Preferred Shares, at Liquidation Value - (51.5)% (15,000,000)
--------------------------------------------------------------------------------------------------------------------
Net Assets Applicable to Common Shares - 100% $ 29,147,849
====================================================================================================================
FORWARD SWAPS OUTSTANDING AT NOVEMBER 30, 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 $ 400,000 Pay 3-Month USD-LIBOR 5.375% Semi-Annually 4/23/08 4/23/30 $ 25,273
Royal Bank
of Canada 2,200,000 Pay SIFM 4.335 Quarterly 8/06/08 8/06/37 188,736
------------------------------------------------------------------------------------------------------------------------------------
$214,009
====================================================================================================================================
USD-LIBOR (United States Dollar-London Inter-Bank Offered Rate)
SIFM-The daily arithmetic average of the weekly SIFM (Securities Industry and
Financial Markets) Municipal Swap Index.
(1) All percentages shown in the Portfolio of Investments are
based on net assets applicable to Common shares unless
otherwise noted.
(2) Optional Call Provisions: Dates (month and year) and prices
of the earliest optional call or redemption. There may be
other call provisions at varying prices at later dates.
Certain mortgage-backed securities may be subject to
periodic principal paydowns.
(3) Ratings: Using the higher of Standard & Poor's Group
("Standard & Poor's") or Moody's Investor Service, Inc.
("Moody's") rating. Ratings below BBB by Standard & Poor's
or Baa by Moody's are considered to be below investment
grade.
The AAA ratings shown in the Portfolio of Investments
reflects the AAA ratings on certain bonds insured by AMBAC,
FGIC or MBIA as of November 30, 2007. As explained earlier
in the Portfolio Manager's Comments section of this report,
one rating agency has reduced the rating for AMBAC to AA,
and one or more rating agencies have placed each of these
insurers on "negative credit watch", which may presage one
or more rating reductions for such insurer or insurers in
the future. If one or more insurers' ratings are reduced
below AAA by these rating agencies, it would likely reduce
the effective rating of many of the bonds insured by that
insurer or insurers.
(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.
See accompanying notes to financial statements.
26
NKG
Nuveen Georgia Dividend Advantage Municipal Fund 2
Portfolio of INVESTMENTS
November 30, 2007 (Unaudited)
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
CONSUMER STAPLES - 3.0% (2.0% OF TOTAL INVESTMENTS)
$ 2,000 Puerto Rico, The Children's Trust Fund, Tobacco Settlement 5/12 at 100.00 BBB $ 1,957,480
Asset-Backed Refunding Bonds, Series 2002, 5.500%, 5/15/39
------------------------------------------------------------------------------------------------------------------------------------
EDUCATION AND CIVIC ORGANIZATIONS - 19.1% (12.7% 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 3,597,335
2,500 5.000%, 12/01/33 - AMBAC Insured 12/12 at 100.00 Aaa 2,561,625
1,225 Athens-Clarke County Unified Government Development 12/12 at 100.00 AAA 1,291,567
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 2,094,020
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 1,075,505
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 466,995
Facilities Revenue Bonds, Riverside Military Academy Project,
Series 2007, 5.125%, 3/01/37
South Regional Joint Development Authority, Georgia, Revenue
Bonds, Valdosta State University Parking and Health, Series
2007:
435 4.250%, 8/01/25 (WI/DD, Settling 12/19/07) - XLCA Insured 2/18 at 100.00 Aaa 413,202
460 4.500%, 8/01/26 (WI/DD, Settling 12/19/07) - XLCA Insured 2/18 at 100.00 Aaa 447,529
485 4.500%, 8/01/27 (WI/DD, Settling 12/19/07) - XLCA Insured 2/18 at 100.00 Aaa 469,010
------------------------------------------------------------------------------------------------------------------------------------
12,155 Total Education and Civic Organizations 12,416,788
------------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE - 23.7% (15.9% OF TOTAL INVESTMENTS)
150 Baldwin County Hospital Authority, Georgia, Revenue Bonds, 12/07 at 102.00 BB+ 147,545
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+ 37,969
315 5.375%, 12/01/28 12/08 at 102.00 BB+ 294,875
1,000 Chatham County Hospital Authority, Savannah, Georgia, 1/14 at 100.00 BBB+ 971,800
Hospital Revenue Bonds, Memorial Health University Medical
Center Inc., Series 2004A, 5.375%, 1/01/26
240 Chatham County Hospital Authority, Savannah, Georgia, 7/11 at 101.00 BBB+ 247,658
Hospital Revenue Improvement Bonds, Memorial Health
University Medical Center Inc., Series 2001A, 6.125%, 1/01/24
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 166,503
1,000 5.250%, 12/01/22 12/14 at 100.00 BBB 1,014,320
1,000 Floyd County Hospital Authority, Georgia, Revenue Anticipation 7/12 at 101.00 Aaa 1,028,850
Certificates, Floyd Medical Center Project, Series 2002,
5.200%, 7/01/32 - MBIA Insured
27
NKG
Nuveen Georgia Dividend Advantage Municipal Fund 2 (continued)
Portfolio of INVESTMENTS November 30, (2007) (Unaudited)
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE (continued)
$ 1,100 Houston County Hospital Authority, Georgia, Revenue Bonds, 10/17 at 100.00 A2 $ 1,118,095
Houston Healthcare Project, Series 2007, 5.250%, 10/01/35
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 2,404,369
3,020 5.500%, 1/01/20 - MBIA Insured 1/13 at 100.00 Aaa 3,208,659
2,000 Savannah Hospital Authority, Georgia, Revenue Bonds, 1/14 at 100.00 AA 2,024,820
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 2,051,644
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+ 748,328
Revenue Certificates, South Georgia Medical Center,
Series 2007, 5.000%, 10/01/33
------------------------------------------------------------------------------------------------------------------------------------
14,985 Total Health Care 15,465,435
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/MULTIFAMILY - 4.6% (3.1% OF TOTAL INVESTMENTS)
25 Cobb County Development Authority, Georgia, Student Housing 7/17 at 100.00 Aaa 26,360
Revenue Bonds, KSU Village II Real Estate Foundation LLC
Project, Series 2007A, 5.250%, 7/15/38 - AMBAC Insured
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 508,035
980 5.200%, 11/20/27 (Alternative Minimum Tax) 11/12 at 102.00 AAA 989,967
1,465 5.250%, 11/20/32 (Alternative Minimum Tax) 11/12 at 102.00 AAA 1,476,456
------------------------------------------------------------------------------------------------------------------------------------
2,970 Total Housing/Multifamily 3,000,818
------------------------------------------------------------------------------------------------------------------------------------
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 1,717,544
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 156,631
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 666,996
Resolution 1 Bonds, Series 2001B-2, 5.400%, 12/01/31
(Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
2,530 Total Housing/Single Family 2,541,171
------------------------------------------------------------------------------------------------------------------------------------
INDUSTRIALS - 3.0% (2.0% OF TOTAL INVESTMENTS)
2,190 Cobb County Development Authority, Georgia, Solid Waste 4/16 at 101.00 BBB 1,973,453
Disposal Revenue Bonds, Georgia Waste Management
Project, Series 2004A, 5.000%, 4/01/33 (Alternative
Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
LONG-TERM CARE - 1.8% (1.2% OF TOTAL INVESTMENTS)
1,000 Fulton County Residential Care Facilities Authority, Georgia, 7/17 at 100.00 N/R 878,220
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 247,088
Spring Harbor at Green Island, Series 2007, 5.000%, 7/01/11
------------------------------------------------------------------------------------------------------------------------------------
1,250 Total Long-Term Care 1,125,308
------------------------------------------------------------------------------------------------------------------------------------
MATERIALS - 2.6% (1.7% OF TOTAL INVESTMENTS)
1,000 Richmond County Development Authority, Georgia, 2/11 at 101.00 BBB 1,030,600
Environmental Improvement Revenue Bonds, International
Paper Company, Series 2001A, 6.250%, 2/01/25
(Alternative Minimum Tax)
250 Richmond County Development Authority, Georgia, 2/12 at 101.00 BBB 255,368
Environmental 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 406,382
Control Revenue Bonds, Union Camp Corporation,
Series 1995, 6.150%, 3/01/17
------------------------------------------------------------------------------------------------------------------------------------
1,620 Total Materials 1,692,350
------------------------------------------------------------------------------------------------------------------------------------
28
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL - 18.1% (12.1% OF TOTAL INVESTMENTS)
$ 600 Cherokee County Resource Recovery Development Authority, 7/17 at 100.00 AAA $ 599,976
Georgia, Solid Waste Disposal Revenue Bonds, Ball Ground
Recycling LLC Project, Series 2007A, 5.000%, 7/01/37 -
AMBAC Insured (Alternative Minimum Tax)
900 Decatur, Georgia, General Obligation Bonds, Series 2007, 1/17 at 100.00 AAA 948,672
5.000%, 1/01/31 - FSA Insured
1,000 Forsyth County, Georgia, General Obligation Bonds, Series 2004, 3/14 at 101.00 AA+ 1,086,700
5.250%, 3/01/19
1,700 Georgia State, General Obligation Bonds, Series 2007, 8/17 at 100.00 AAA 1,827,364
5.000%, 8/01/24
750 Georgia, General Obligation Bonds, Series 1998D, 5.250%, 10/01/15 No Opt. Call AAA 842,790
1,000 Georgia, General Obligation Bonds, Series 2005B, 5.000%, 7/01/15 No Opt. Call AAA 1,103,710
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 1,533,544
1,470 5.250%, 1/01/26 - AMBAC Insured 1/13 at 101.00 Aaa 1,570,960
1,200 Paulding County School District, Georgia, General Obligation 2/17 at 100.00 AA+ 1,256,076
Bonds, Series 2007, 5.000%, 2/01/33
1,000 Wayne County Hospital Authority, Georgia, Hospital Revenue 3/16 at 100.00 Aaa 1,039,330
Bonds, Series 2006, 5.000%, 3/01/23 - XLCA Insured
------------------------------------------------------------------------------------------------------------------------------------
11,030 Total Tax Obligation/General 11,809,122
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED - 20.0% (13.4% OF TOTAL INVESTMENTS)
120 Atlanta, Georgia, Tax Allocation Bonds Atlanta Station Project, 12/17 at 100.00 AAA 125,924
Series 2007, 5.000%, 12/01/23 - AGC Insured
250 Atlanta, Georgia, Tax Allocation Bonds, Eastside Project, 7/15 at 100.00 N/R 245,530
Series 2005B, 5.400%, 1/01/20
400 Atlanta, Georgia, Tax Allocation Bonds, Princeton Lakes Project, 1/16 at 100.00 N/R 385,060
Series 2006, 5.500%, 1/01/31
750 Georgia Municipal Association Inc., Certificates of Participation, 6/12 at 101.00 AAA 790,440
Atlanta Court Project, Series 2002, 5.125%, 12/01/21 -
AMBAC Insured
2,500 Metropolitan Atlanta Rapid Transit Authority, Georgia, Sales Tax No Opt. Call AAA 2,931,300
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- 488,445
Revenue Bonds, Series 2005B, 5.000%, 7/01/41
2,500 Puerto Rico Municipal Finance Agency, Series 2002A, 8/12 at 100.00 AAA 2,597,625
5.000%, 8/01/27 - FSA Insured
5,000 Puerto Rico Public Buildings Authority, Guaranteed Government No Opt. Call AAA 5,471,247
Facilities Revenue Refunding Bonds, Series 2002F,
5.250%, 7/01/21 - CIFG Insured
------------------------------------------------------------------------------------------------------------------------------------
12,020 Total Tax Obligation/Limited 13,035,571
------------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION - 5.8% (3.9% OF TOTAL INVESTMENTS)
3,650 Atlanta, Georgia, Airport General Revenue Refunding Bonds, 1/10 at 101.00 AAA 3,798,701
Series 2000A, 5.500%, 1/01/21 - FGIC Insured
------------------------------------------------------------------------------------------------------------------------------------
U.S. GUARANTEED - 14.4% (9.6% OF TOTAL INVESTMENTS) (4)
1,000 Augusta, Georgia, Water and Sewerage Revenue Bonds, 10/12 at 100.00 AAA 1,087,630
Series 2002, 5.250%, 10/01/22 (Pre-refunded 10/01/12) -
FSA Insured
1,000 Cherokee County School System, Georgia, General Obligation 8/13 at 100.00 AAA 1,083,710
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:
1,000 5.125%, 10/01/31 (Pre-refunded 10/01/10) - MBIA Insured 10/10 at 101.00 AAA 1,059,630
2,000 5.375%, 10/01/35 (Pre-refunded 10/01/10) 10/10 at 101.00 AAA 2,132,700
1,300 Fairburn, Georgia, Combined Utility Revenue Bonds, 10/10 at 101.00 A- (4) 1,398,254
Series 2000, 5.750%, 10/01/20 (Pre-refunded 10/01/10)
1,305 Gainesville and Hall County Hospital Authority, Georgia, 5/11 at 100.00 A- (4) 1,393,910
Revenue Anticipation Certificates, Northeast Georgia Health
Services Inc., Series 2001, 5.500%, 5/15/31
(Pre-refunded 5/15/11)
29
NKG
Nuveen Georgia Dividend Advantage Municipal Fund 2 (continued)
Portfolio of INVESTMENTS November 30, (2007) (Unaudited)
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
U.S. GUARANTEED (4) (continued)
$ 1,100 Private Colleges and Universities Authority, Georgia, Revenue 10/11 at 102.00 Baa2 (4) $ 1,215,500
Bonds, Mercer University, Series 2001, 5.750%, 10/01/31
(Pre-refunded 10/01/11)
------------------------------------------------------------------------------------------------------------------------------------
8,705 Total U.S. Guaranteed 9,371,334
------------------------------------------------------------------------------------------------------------------------------------
UTILITIES - 4.8% (3.2% OF TOTAL INVESTMENTS)
1,000 Elberton, Georgia, Combined Utility System Revenue Refunding 1/12 at 100.00 Aaa 1,038,080
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 1,054,080
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 1,045,110
Lien Revenue Bonds, Series 2003A, 5.000%, 1/01/22 -
MBIA Insured
------------------------------------------------------------------------------------------------------------------------------------
3,000 Total Utilities 3,137,270
------------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER - 24.8% (16.6% 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 550,375
1,700 5.000%, 11/01/37 - FSA Insured 11/14 at 100.00 AAA 1,753,567
3,500 Augusta, Georgia, Water and Sewerage Revenue Bonds, 10/12 at 100.00 AAA 3,628,170
Series 2002, 5.000%, 10/01/27 - FSA Insured
1,000 Douglasville-Douglas County Water and Sewer Authority, 12/15 at 100.00 AAA 1,045,530
Georgia, Water and Sewer Revenue Bonds, Series 2005,
5.000%, 6/01/29 - MBIA Insured
445 Douglasville-Douglas County Water and Sewer Authority, 6/17 at 100.00 AAA 465,377
Georgia, Water and Sewer Revenue Bonds, Series 2007,
5.000%, 6/01/37 - MBIA Insured
4,000 Forsyth County Water and Sewerage Authority, Georgia, 4/13 at 100.00 AA+ 4,117,800
Revenue Bonds, Series 2002, 5.000%, 4/01/32
375 Forsyth County Water and Sewerage Authority, Georgia, 4/17 at 100.00 AAA 391,905
Revenue Bonds, Series 2007, 5.000%, 4/01/37 - FSA Insured
950 Fulton County, Georgia, Water and Sewerage Revenue Bonds, 7/08 at 101.00 AAA 967,870
Series 1998, 5.000%, 1/01/16 - FGIC Insured
3,100 Harris County, Georgia, Water System Revenue Bonds, 12/12 at 100.00 Aaa 3,242,166
Series 2002, 5.000%, 12/01/22 - AMBAC Insured
------------------------------------------------------------------------------------------------------------------------------------
15,570 Total Water and Sewer 16,162,760
------------------------------------------------------------------------------------------------------------------------------------
$ 93,675 Total Investments (cost $95,947,393) - 149.6% 97,487,561
=============-----------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 1.1% 658,852
--------------------------------------------------------------------------------------------------------------------
Preferred Shares, at Liquidation Value - (50.7)% (33,000,000)
--------------------------------------------------------------------------------------------------------------------
Net Assets Applicable to Common Shares - 100% $ 65,146,413
====================================================================================================================
(1) All percentages shown in the Portfolio of Investments are
based on net assets applicable to Common shares unless
otherwise noted.
(2) Optional Call Provisions: Dates (month and year) and prices
of the earliest optional call or redemption. There may be
other call provisions at varying prices at later dates.
Certain mortgage-backed securities may be subject to
periodic principal paydowns.
(3) Ratings: Using the higher of Standard & Poor's Group
("Standard & Poor's") or Moody's Investor Service, Inc.
("Moody's") rating. Ratings below BBB by Standard & Poor's
or Baa by Moody's are considered to be below investment
grade.
The AAA ratings shown in the Portfolio of Investments
reflects the AAA ratings on certain bonds insured by AMBAC,
FGIC or MBIA as of November 30, 2007. As explained earlier
in the Portfolio Manager's Comments section of this report,
one rating agency has reduced the rating for AMBAC to AA,
and one or more rating agencies have placed each of these
insurers on "negative credit watch", which may presage one
or more rating reductions for such insurer or insurers in
the future. If one or more insurers' ratings are reduced
below AAA by these rating agencies, it would likely reduce
the effective rating of many of the bonds insured by that
insurer or insurers.
(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.
See accompanying notes to financial statements.
30
NNC
Nuveen North Carolina Premium Income Municipal Fund
Portfolio of INVESTMENTS
November 30, 2007 (Unaudited)
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
EDUCATION AND CIVIC ORGANIZATIONS - 23.9% (15.6% OF TOTAL INVESTMENTS)
$ 1,000 North Carolina Capital Facilities Financing Agency, Housing 6/13 at 100.00 AAA $ 1,030,860
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+ 2,600,875
Bonds, Duke University, Series 2005A, 5.000%, 10/01/41
970 North Carolina Capital Facilities Financing Agency, Revenue 4/13 at 100.00 AAA 1,017,947
Bonds, Johnson and Wales University, Series 2003A,
5.250%, 4/01/23 - XLCA Insured
2,285 North Carolina State University at Raleigh, General Revenue 10/13 at 100.00 AA 2,461,905
Bonds, Series 2003A, 5.000%, 10/01/15
1,530 University of North Carolina System, Pooled Revenue Bonds, No Opt. Call AAA 1,669,521
Series 2005A, 5.000%, 4/01/15 - AMBAC Insured
580 University of North Carolina System, Pooled Revenue Refunding 10/12 at 100.00 AAA 618,129
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 1,504,303
1,505 5.000%, 6/01/24 - FGIC Insured 6/16 at 100.00 AAA 1,577,722
500 5.000%, 6/01/37 - FGIC Insured 6/16 at 100.00 AAA 516,965
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+ 2,531,344
2,725 5.000%, 12/01/21 12/13 at 100.00 AA+ 2,873,594
1,500 5.000%, 12/01/23 12/13 at 100.00 AA+ 1,577,790
1,675 University of North Carolina, Wilmington, General Revenue 1/12 at 101.00 Aaa 1,753,692
Bonds, Series 2002A, 5.000%, 1/01/23 - AMBAC Insured
------------------------------------------------------------------------------------------------------------------------------------
20,580 Total Education and Civic Organizations 21,734,647
------------------------------------------------------------------------------------------------------------------------------------
ENERGY - 1.7% (1.1% OF TOTAL INVESTMENTS)
1,500 Virgin Islands Public Finance Authority, Revenue Bonds, Refinery 1/14 at 100.00 BBB 1,536,180
Project - Hovensa LLC, Series 2003, 6.125%, 7/01/22
(Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE - 24.9% (16.3% OF TOTAL INVESTMENTS)
1,145 Albemarle Hospital Authority, North Carolina, Health Care 10/17 at 100.00 BBB 1,134,477
Facilities Revenue Bonds, Series 2007, 5.250%, 10/01/27
2,000 North Carolina Medical Care Commission, Healthcare Facilities 11/13 at 100.00 AA- 2,065,560
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- 2,067,020
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 1,037,090
550 5.500%, 1/01/20 1/12 at 100.00 A 569,366
1,750 5.375%, 1/01/32 1/12 at 100.00 A 1,775,515
1,615 North Carolina Medical Care Commission, Hospital Revenue 10/08 at 101.00 AA 1,603,970
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 November 30, (2007) (Unaudited)
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE (continued)
$ 3,000 North Carolina Medical Care Commission, Hospital Revenue 6/12 at 101.00 A $ 3,057,150
Bonds, Southeastern Regional Medical Center, Series 2002,
5.375%, 6/01/32
1,500 North Carolina Medical Care Commission, Hospital Revenue 11/17 at 100.00 A- 1,506,930
Bonds, Wilson Medical Center, Series 2007, 5.000%, 11/01/27
2,645 North Carolina Medical Care Commission, Revenue Bonds, 1/15 at 100.00 AAA 2,680,311
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 633,954
500 5.250%, 7/01/22 - AMBAC Insured 7/14 at 100.00 AAA 524,490
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 700,919
3,210 5.000%, 10/01/34 - MBIA Insured 10/16 at 100.00 AAA 3,270,637
------------------------------------------------------------------------------------------------------------------------------------
22,200 Total Health Care 22,627,389
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/MULTIFAMILY - 3.7% (2.4% OF TOTAL INVESTMENTS)
1,000 Asheville Housing Authority, North Carolina, GNMA-Collateralized 5/08 at 102.00 AA 1,007,830
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 2,326,663
Revenue Bonds, Little Rock Apartments, Series 2003,
5.375%, 1/01/36 (Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
3,290 Total Housing/Multifamily 3,334,493
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/SINGLE FAMILY - 8.3% (5.4% OF TOTAL INVESTMENTS)
1,080 North Carolina Housing Finance Agency, Home Ownership 7/10 at 100.00 AAA 1,086,664
Revenue Bonds, 1998 Trust Agreement, Series 10A,
5.400%, 7/01/32 - AMBAC Insured (Alternative Minimum Tax)
2,790 North Carolina Housing Finance Agency, Home Ownership 7/09 at 100.00 AA 2,870,352
Revenue Bonds, 1998 Trust Agreement, Series 6A,
6.200%, 1/01/29 (Alternative Minimum Tax)
1,400 North Carolina Housing Finance Agency, Home Ownership 1/17 at 100.00 AA 1,336,244
Revenue Bonds, Series 2007-29A, 4.800%, 7/01/33
(Alternative Minimum Tax)
835 North Carolina Housing Finance Agency, Home Ownership 7/16 at 100.00 AA 800,381
Revenue Bonds, Series 25-A, 4.900%, 7/01/37
(Alternative Minimum Tax)
1,445 North Carolina Housing Finance Agency, Single Family Revenue 3/08 at 100.00 AA 1,476,414
Bonds, Series 1996HH, 6.300%, 3/01/26
(Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
7,550 Total Housing/Single Family 7,570,055
------------------------------------------------------------------------------------------------------------------------------------
LONG-TERM CARE - 0.3% (0.3% OF TOTAL INVESTMENTS)
375 North Carolina Medical Care Commission, Revenue Bonds, 1/16 at 100.00 N/R 358,376
Pines at Davidson, Series 2006A, 5.000%, 1/01/36
------------------------------------------------------------------------------------------------------------------------------------
MATERIALS - 1.5% (1.0% OF TOTAL INVESTMENTS)
1,425 Gaston County Industrial Facilities and Pollution Control 8/15 at 100.00 N/R 1,386,368
Financing Authority, North Carolina, National Gypsum
Company Project Exempt Facilities Revenue Bonds,
Series 2005, 5.750%, 8/01/35 (Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL - 11.1% (7.3% OF TOTAL INVESTMENTS)
1,890 Craven County, North Carolina, General Obligation Bonds, 5/12 at 101.00 AAA 1,984,028
Series 2002, 5.000%, 5/01/21 - AMBAC Insured
4,285 Durham County, North Carolina, General Obligation Bonds, 4/12 at 100.00 AAA 4,551,956
Series 2002B, 5.000%, 4/01/16
32
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL (continued)
$ 2,820 Durham, North Carolina, General Obligation Bonds, 4/17 at 100.00 AAA $ 3,064,099
Series 2007, 5.000%, 4/01/21
500 North Carolina, General Obligation Bonds, Series 2004A, 3/14 at 100.00 AAA 532,055
5.000%, 3/01/22
------------------------------------------------------------------------------------------------------------------------------------
9,495 Total Tax Obligation/General 10,132,138
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED - 34.8% (22.7% OF TOTAL INVESTMENTS)
1,330 Cabarrus County, North Carolina, Certificates of Participation, 2/13 at 100.00 AA- 1,411,596
Series 2002, 5.250%, 2/01/17
1,800 Catawba County, North Carolina, Certificates of Participation, 6/14 at 100.00 Aaa 1,919,754
Series 2004, 5.250%, 6/01/21 - MBIA Insured
1,700 Charlotte, North Carolina, Certificates of Participation, 6/13 at 100.00 AA+ 1,780,648
Governmental Facilities Projects, Series 2003G, 5.375%, 6/01/26
1,500 Charlotte, North Carolina, Certificates of Participation, 6/13 at 100.00 AA+ 1,524,135
Transit 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 1,128,330
1,750 5.000%, 6/01/25 6/12 at 101.00 AAA 1,822,415
1,400 Craven County, North Carolina, Certificates of Participation, 6/17 at 100.00 AAA 1,463,000
Series 2007, 5.000%, 6/01/27 - MBIA Insured
1,000 Davidson County, North Carolina, Certificates of Participation, No Opt. Call AAA 1,095,390
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 1,839,097
500 5.250%, 4/01/20 - FSA Insured 4/14 at 100.00 AAA 533,065
1,000 5.250%, 4/01/22 - FSA Insured 4/14 at 100.00 AAA 1,059,820
2,600 North Carolina Infrastructure Finance Corporation, Certificates 2/15 at 100.00 AA+ 2,754,700
of Participation, Capital Improvements, Series 2005A,
5.000%, 2/01/19
1,500 North Carolina Infrastructure Finance Corporation, Certificates 2/14 at 100.00 AA+ 1,559,160
of Participation, Correctional Facilities, Series 2004A,
5.000%, 2/01/23
1,500 North Carolina, Certificates of Participation, Repair and 6/14 at 100.00 AA+ 1,568,970
Renovation 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+ 1,187,472
1,000 5.250%, 6/01/23 6/13 at 100.00 AA+ 1,042,880
2,000 Puerto Rico Highway and Transportation Authority, Grant 3/14 at 100.00 AAA 2,135,960
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 1,086,170
Facilities Revenue Bonds, Series 2003H, 5.250%, 7/01/15 -
FGIC Insured
285 Raleigh, North Carolina, Certificates of Participation, 2/17 at 100.00 AA+ 297,443
Series 2007, 5.000%, 2/01/27
1,000 Randolph County, North Carolina, Certificates of Participation, 6/14 at 102.00 AAA 1,064,430
Series 2004, 5.000%, 6/01/20 - FSA Insured
1,950 Sampson County, North Carolina, Certificates of Participation, 6/17 at 100.00 AAA 2,025,465
Series 2006, 5.000%, 6/01/34 - FSA Insured (UB)
700 Wilson County, North Carolina, Certificates of Participation, 4/17 at 100.00 AAA 738,136
School Facilities Project, Series 2007, 5.000%, 4/01/25 -
AMBAC Insured
540 Wilson, North Carolina, Certificates of Particiation, 5/17 at 100.00 AAA 563,263
Public Facilities, Series 2007A, 5.000%, 5/01/29 - AGC Insured
------------------------------------------------------------------------------------------------------------------------------------
29,950 Total Tax Obligation/Limited 31,601,299
------------------------------------------------------------------------------------------------------------------------------------
33
NNC
Nuveen North Carolina Premium Income Municipal Fund (continued)
Portfolio of INVESTMENTS November 30, (2007) (Unaudited)
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION - 7.0% (4.6% 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 $ 632,544
2,710 5.000%, 7/01/29 - MBIA Insured 7/14 at 100.00 AAA 2,787,154
500 Piedmont Triad Airport Authority, North Carolina, Airport Revenue 7/15 at 100.00 AAA 527,565
Bonds, Series 2005A, 5.000%, 7/01/20 - XLCA Insured
2,250 Raleigh Durham Airport Authority, North Carolina, Airport Revenue 5/11 at 101.00 Aaa 2,389,028
Bonds, Series 2001A, 5.250%, 11/01/16 - FGIC Insured
------------------------------------------------------------------------------------------------------------------------------------
6,060 Total Transportation 6,336,291
------------------------------------------------------------------------------------------------------------------------------------
U.S. GUARANTEED - 14.4% (9.4% OF TOTAL INVESTMENTS) (4)
250 Charlotte-Mecklenburg Hospital Authority, North Carolina, 1/15 at 100.00 AA- (4) 272,880
Healthcare System Revenue Bonds, DBA Carolinas Healthcare
System, Series 2005A, 5.000%, 1/15/45 (Pre-refunded 1/15/15)
750 Johnston County Finance Corporation, North Carolina, Installment 8/09 at 101.00 AAA 781,440
Payment Revenue Bonds, School and Museum Projects,
Series 1999, 5.250%, 8/01/21 (Pre-refunded 8/01/09) -
FSA Insured
1,530 North Carolina Medical Care Commission, Health System 10/11 at 101.00 AA (4) 1,653,838
Revenue Bonds, Mission St. Joseph's Health System,
Series 2001, 5.250%, 10/01/31 (Pre-refunded 10/01/11)
735 North Carolina Medical Care Commission, Revenue Bonds, 11/14 at 100.00 AA (4) 804,810
Northeast Medical Center, Series 2004, 5.000%, 11/01/24
(Pre-refunded 11/01/14)
1,165 North Carolina Municipal Power Agency 1, Catawba Electric No Opt. Call AAA 1,253,319
Revenue Bonds, Series 1980, 10.500%, 1/01/10 (ETM)
4,260 North Carolina Municipal Power Agency 1, Catawba Electric No Opt. Call AAA 4,692,046
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 1,067,000
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 459,329
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 2,144,220
Revenue Bonds, Series 2002A, 5.000%, 6/01/18
(Pre-refunded 6/01/12)
------------------------------------------------------------------------------------------------------------------------------------
12,110 Total U.S. Guaranteed 13,128,882
------------------------------------------------------------------------------------------------------------------------------------
UTILITIES - 12.9% (8.4% OF TOTAL INVESTMENTS)
3,000 North Carolina Eastern Municipal Power Agency, Power System 1/13 at 100.00 Baa1 3,181,050
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 1,081,650
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 4,233,640
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 2,150,140
Revenue Bonds, Series 2003A, 5.250%, 1/01/15 -
AMBAC Insured
1,000 Wake County Industrial Facilities and Pollution Control 2/12 at 101.00 A2 1,049,730
Financing Authority, North Carolina, Revenue Refunding
Bonds, Carolina Power and Light Company, Series 2002,
5.375%, 2/01/17
------------------------------------------------------------------------------------------------------------------------------------
11,000 Total Utilities 11,696,210
------------------------------------------------------------------------------------------------------------------------------------
34
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER - 8.5% (5.5% OF TOTAL INVESTMENTS)
$ 1,605 Broad River Water Authority, North Carolina, Water System 6/15 at 100.00 Aaa $ 1,705,473
Revenue Bonds, Series 2005, 5.000%, 6/01/20 - XLCA Insured
50 Charlotte, North Carolina, Water and Sewerage System 6/11 at 101.00 AAA 52,084
Revenue Bonds, Series 2001, 5.125%, 6/01/26
1,295 Greensboro, North Carolina, Combined Enterprise System 6/15 at 100.00 AAA 1,361,511
Revenue Bonds, Series 2005A, 5.000%, 6/01/26
500 Onslow County, North Carolina, Combined Enterprise System 6/14 at 100.00 AAA 522,410
Revenue Bonds, Series 2004B, 5.000%, 6/01/23 - XLCA Insured
3,865 Winstom-Salem, North Carolina, Water and Sewer System 6/17 at 100.00 AAA 4,075,758
Revenue Bonds, Series 2007A, 5.000%, 6/01/37 (UB)
------------------------------------------------------------------------------------------------------------------------------------
7,315 Total Water and Sewer 7,717,236
------------------------------------------------------------------------------------------------------------------------------------
$ 132,850 Total Investments (cost $136,217,517) - 153.0% 139,159,564
=============-----------------------------------------------------------------------------------------------------------------------
Floating Rate Obligations - (4.3)% (3,870,000)
--------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 2.8% 2,469,217
--------------------------------------------------------------------------------------------------------------------
Preferred Shares, at Liquidation Value - (51.5)% (46,800,000)
--------------------------------------------------------------------------------------------------------------------
Net Assets Applicable to Common Shares - 100% $ 90,958,781
====================================================================================================================
(1) All percentages shown in the Portfolio of Investments are
based on net assets applicable to Common shares unless
otherwise noted.
(2) Optional Call Provisions: Dates (month and year) and prices
of the earliest optional call or redemption. There may be
other call provisions at varying prices at later dates.
Certain mortgage-backed securities may be subject to
periodic principal paydowns.
(3) Ratings: Using the higher of Standard & Poor's Group
("Standard & Poor's") or Moody's Investor Service, Inc.
("Moody's") rating. Ratings below BBB by Standard & Poor's
or Baa by Moody's are considered to be below investment
grade.
The AAA ratings shown in the Portfolio of Investments
reflects the AAA ratings on certain bonds insured by AMBAC,
FGIC or MBIA as of November 30, 2007. As explained earlier
in the Portfolio Manager's Comments section of this report,
one rating agency has reduced the rating for AMBAC to AA,
and one or more rating agencies have placed each of these
insurers on "negative credit watch", which may presage one
or more rating reductions for such insurer or insurers in
the future. If one or more insurers' ratings are reduced
below AAA by these rating agencies, it would likely reduce
the effective rating of many of the bonds insured by that
insurer or insurers.
(4) Backed by an escrow or trust containing sufficient U.S.
Government or U.S. Government agency securities which ensure
the timely payment of principal and interest. Such
investments are normally considered to be equivalent to AAA
rated securities.
N/R Not rated.
(ETM) Escrowed to maturity.
(UB) Underlying bond of an inverse floating rate trust reflected
as a financing transaction pursuant to the provisions of
SFAS No. 140.
See accompanying notes to financial statements.
35
NRB
Nuveen North Carolina Dividend Advantage Municipal Fund
Portfolio of INVESTMENTS
November 30, 2007 (Unaudited)
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
EDUCATION AND CIVIC ORGANIZATIONS - 19.4% (11.6% OF TOTAL INVESTMENTS)
$ 380 North Carolina Capital Facilities Financing Agency, Revenue 10/11 at 100.00 AA+ $ 395,455
Bonds, Duke University, Series 2001A, 5.125%, 10/01/26
500 North Carolina Capital Facilities Financing Agency, Revenue 9/11 at 101.00 Baa2 509,935
Bonds, 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 1,543,642
Bonds, Series 2002A, 5.375%, 4/01/17 - AMBAC Insured
250 University of North Carolina Wilmington, Certificates of 6/16 at 100.00 AAA 258,483
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+ 1,810,725
Bonds, Series 2001A, 5.000%, 12/01/25
1,845 University of North Carolina, Chapel Hill, System Net Revenue No Opt. Call AA+ 1,968,486
Bonds, Series 2002B, 5.000%, 12/01/11
------------------------------------------------------------------------------------------------------------------------------------
6,155 Total Education and Civic Organizations 6,486,726
------------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE - 20.4% (12.2% OF TOTAL INVESTMENTS)
555 Albemarle Hospital Authority, North Carolina, Health Care 10/17 at 100.00 BBB 535,819
Facilities Revenue Bonds, Series 2007, 5.250%, 10/01/38
1,110 North Carolina Medical Care Commission, Healthcare Facilities 1/12 at 100.00 A 1,155,210
Revenue Bonds, Union Regional Medical Center, Series 2002A,
5.250%, 1/01/15
2,500 North Carolina Medical Care Commission, Healthcare Revenue 5/08 at 100.00 AA- 2,502,325
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 1,542,885
Bonds, Southeastern Regional Medical Center, Series 2002,
5.250%, 6/01/22
500 North Carolina Medical Care Commission, Hospital Revenue 11/17 at 100.00 A- 514,565
Bonds, Wilson Medical Center, Series 2007, 5.000%, 11/01/20
300 North Carolina Medical Care Commission, Revenue Bonds, 1/15 at 100.00 AAA 304,005
Blue Ridge Healthcare System, Series 2005, 5.000%, 1/01/33 -
FGIC Insured
255 Onslow County Hospital Authority, North Carolina, FHA Insured 10/16 at 100.00 AAA 260,926
Mortgage Revenue Bonds, Onslow Memorial Hospital Project,
Series 2006, 5.000%, 4/01/31 - MBIA Insured
------------------------------------------------------------------------------------------------------------------------------------
6,720 Total Health Care 6,815,735
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/SINGLE FAMILY - 5.9% (3.5% OF TOTAL INVESTMENTS)
430 North Carolina Housing Finance Agency, Home Ownership 7/10 at 100.00 AAA 432,653
Revenue Bonds, 1998 Trust Agreement, Series 10A,
5.400%, 7/01/32 - AMBAC Insured (Alternative Minimum Tax)
755 North Carolina Housing Finance Agency, Home Ownership 7/09 at 100.00 AA 762,165
Revenue Bonds, 1998 Trust Agreement, Series 5A,
5.625%, 7/01/30 (Alternative Minimum Tax)
500 North Carolina Housing Finance Agency, Home Ownership 1/17 at 100.00 AA 477,230
Revenue Bonds, Series 2007-29A, 4.800%, 7/01/33
(Alternative Minimum Tax)
330 North Carolina Housing Finance Agency, Home Ownership 7/16 at 100.00 AA 316,318
Revenue Bonds, Series 25-A, 4.900%, 7/01/37
(Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
2,015 Total Housing/Single Family 1,988,366
------------------------------------------------------------------------------------------------------------------------------------
36
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
LONG-TERM CARE - 2.6% (1.5% OF TOTAL INVESTMENTS)
$ 300 North Carolina Medical Care Commission, Health Care Facilities 10/16 at 100.00 N/R $ 286,581
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 195,698
Revenue Bonds, Presbyterian Homes, Series 2006,
5.400%, 10/01/27
150 North Carolina Medical Care Commission, Revenue Bonds, 1/16 at 100.00 N/R 143,351
Pines at Davidson, Series 2006A, 5.000%, 1/01/36
250 North Carolina Medical Care Commission, Revenue Bonds, 9/15 at 100.00 N/R 240,043
United Church Homes and Services, Series 2005A,
5.250%, 9/01/21
------------------------------------------------------------------------------------------------------------------------------------
900 Total Long-Term Care 865,673
------------------------------------------------------------------------------------------------------------------------------------
MATERIALS - 1.4% (0.9% OF TOTAL INVESTMENTS)
515 Gaston County Industrial Facilities and Pollution Control 8/15 at 100.00 N/R 501,038
Financing 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, 4/17 at 100.00 AAA 1,086,560
Series 2007, 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 1,068,470
1,000 5.000%, 3/01/22 3/14 at 100.00 AAA 1,064,110
------------------------------------------------------------------------------------------------------------------------------------
3,000 Total Tax Obligation/General 3,219,140
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED - 24.8% (14.9% OF TOTAL INVESTMENTS)
1,400 Charlotte, North Carolina, Certificates of Participation, 6/13 at 100.00 AA+ 1,466,416
Governmental Facilities Projects, Series 2003G,
5.375%, 6/01/26
160 Craven County, North Carolina, Certificates of Participation, 6/17 at 100.00 AAA 169,109
Series 2007, 5.000%, 6/01/23 - MBIA Insured
1,870 Dare County, North Carolina, Certificates of Participation, 12/12 at 100.00 AAA 2,021,657
Series 2002, 5.250%, 6/01/15 - AMBAC Insured
1,250 Davidson County, North Carolina, Certificates of Participation, 6/14 at 100.00 AAA 1,330,225
Series 2004, 5.250%, 6/01/21 - AMBAC Insured
1,390 Durham, North Carolina, Certificates of Participation, 6/15 at 100.00 AA+ 1,436,079
Series 2005B, 5.000%, 6/01/25
470 Raleigh, North Carolina, Certificates of Participation, Downtown 6/14 at 100.00 AA+ 494,069
Improvement Project, Series 2004B, 5.000%, 6/01/20
170 Raleigh, North Carolina, Certificates of Participation, 2/17 at 100.00 AA+ 177,422
Series 2007, 5.000%, 2/01/27
700 Sampson County, North Carolina, Certificates of Participation, 6/17 at 100.00 AAA 727,090
Series 2006, 5.000%, 6/01/34 - FSA Insured (UB)
250 Wilson County, North Carolina, Certificates of Participation, 4/17 at 100.00 AAA 263,620
School Facilities Project, Series 2007, 5.000%, 4/01/25 -
AMBAC Insured
195 Wilson, North Carolina, Certificates of Particiation, Public 5/17 at 100.00 AAA 203,401
Facilities, Series 2007A, 5.000%, 5/01/29 - AGC Insured
------------------------------------------------------------------------------------------------------------------------------------
7,855 Total Tax Obligation/Limited 8,289,088
------------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION - 6.3% (3.7% OF TOTAL INVESTMENTS)
450 Piedmont Triad Airport Authority, North Carolina, Airport Revenue 7/15 at 100.00 AAA 474,809
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 1,618,709
Bonds, Series 2001A, 5.250%, 11/01/18 - FGIC Insured
------------------------------------------------------------------------------------------------------------------------------------
1,980 Total Transportation 2,093,518
------------------------------------------------------------------------------------------------------------------------------------
37
NRB
Nuveen North Carolina Dividend Advantage Municipal Fund (continued)
Portfolio of INVESTMENTS November 30, (2007) (Unaudited)
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
U.S. GUARANTEED - 17.2% (10.2% OF TOTAL INVESTMENTS) (4)
$ 1,000 Broad River Water Authority, North Carolina, Water System 6/10 at 101.00 Aaa $ 1,060,280
Revenue Bonds, Series 2000, 5.375%, 6/01/26
(Pre-refunded 6/01/10) - MBIA Insured
100 Charlotte-Mecklenburg Hospital Authority, North Carolina, 1/15 at 100.00 AA- (4) 109,152
Healthcare System Revenue Bonds, DBA Carolinas Healthcare
System, Series 2005A, 5.000%, 1/15/45 (Pre-refunded 1/15/15)
500 Greensboro, North Carolina, Combined Enterprise System 6/11 at 101.00 AAA 536,040
Revenue Bonds, Series 2001A, 5.125%, 6/01/21
(Pre-refunded 6/01/11)
1,620 North Carolina Capital Facilities Financing Agency, Revenue 10/11 at 100.00 Aaa 1,730,759
Bonds, Duke University, Series 2001A, 5.125%, 10/01/26
(Pre-refunded 10/01/11)
800 North Carolina Medical Care Commission, Health System 10/11 at 101.00 AA (4) 864,752
Revenue Bonds, Mission St. Joseph's Health System,
Series 2001, 5.250%, 10/01/31 (Pre-refunded 10/01/11)
300 North Carolina Medical Care Commission, Revenue Bonds, 11/14 at 100.00 AA (4) 328,494
Northeast Medical Center, Series 2004, 5.000%, 11/01/24
(Pre-refunded 11/01/14)
1,020 University of North Carolina System, Pooled Revenue Refunding 10/12 at 100.00 Aaa 1,115,513
Bonds, Series 2002A, 5.375%, 4/01/17
(Pre-refunded 10/01/12) - AMBAC Insured
------------------------------------------------------------------------------------------------------------------------------------
5,340 Total U.S. Guaranteed 5,744,990
------------------------------------------------------------------------------------------------------------------------------------
UTILITIES - 22.4% (13.4% 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 1,062,320
500 5.250%, 9/01/21 - FSA Insured 9/11 at 101.00 AAA 528,365
500 North Carolina Eastern Municipal Power Agency, Power System 1/16 at 100.00 AAA 540,825
Revenue Bonds, Series 2005, 5.250%, 1/01/20 - AMBAC Insured
2,500 North Carolina Eastern Municipal Power Agency, Power System 1/08 at 100.00 AAA 2,503,848
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 Baa1 1,033,990
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 257,220
Series 2005RR, 5.000%, 7/01/24 - FGIC Insured
1,500 Wake County Industrial Facilities and Pollution Control 2/12 at 101.00 A2 1,574,595
Financing Authority, North Carolina, Revenue Refunding
Bonds, Carolina Power and Light Company, Series 2002,
5.375%, 2/01/17
------------------------------------------------------------------------------------------------------------------------------------
7,250 Total Utilities 7,501,163
------------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER - 37.5% (22.4% OF TOTAL INVESTMENTS)
2,250 Charlotte, North Carolina, Water and Sewerage System 6/11 at 101.00 AAA 2,343,758
Revenue Bonds, Series 2001, 5.125%, 6/01/26
500 Greensboro, North Carolina, Combined Enterprise System 6/15 at 100.00 AAA 526,995
Revenue Bonds, Series 2005A, 5.000%, 6/01/25
400 Onslow County, North Carolina, Combined Enterprise System 6/14 at 100.00 AAA 417,928
Revenue Bonds, Series 2004B, 5.000%, 6/01/23 -
XLCA Insured
38
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER (continued)
Raleigh, North Carolina, Combined Enterprise System Revenue
Bonds, Series 2006A:
$ 4,440 5.000%, 3/01/31 (UB) 3/16 at 100.00 AAA $ 4,667,861
3,000 5.000%, 3/01/36 (UB) 3/16 at 100.00 AAA 3,145,470
5 Raleigh, North Carolina, Combined Enterprise System Revenue 3/16 at 100.00 AAA 5,727
Bonds, Series 2006A, Residuals Series II-R-645-1,
7.284%, 3/01/36 (IF)
1,385 Winstom-Salem, North Carolina, Water and Sewer System 6/17 at 100.00 AAA 1,460,524
Revenue Bonds, Series 2007A, 5.000%, 6/01/37 (UB)
------------------------------------------------------------------------------------------------------------------------------------
11,980 Total Water and Sewer 12,568,263
------------------------------------------------------------------------------------------------------------------------------------
$ 53,710 Total Investments (cost $54,703,163) - 167.5% 56,073,700
=============-----------------------------------------------------------------------------------------------------------------------
Floating Rate Obligations - (19.0)% (6,350,000)
--------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 2.3% 751,035
--------------------------------------------------------------------------------------------------------------------
Preferred Shares, at Liquidation Value - (50.8)% (17,000,000)
--------------------------------------------------------------------------------------------------------------------
Net Assets Applicable to Common Shares - 100% $ 33,474,735
====================================================================================================================
(1) All percentages shown in the Portfolio of Investments are
based on net assets applicable to Common shares unless
otherwise noted.
(2) Optional Call Provisions: Dates (month and year) and prices
of the earliest optional call or redemption. There may be
other call provisions at varying prices at later dates.
Certain mortgage-backed securities may be subject to
periodic principal paydowns.
(3) Ratings: Using the higher of Standard & Poor's Group
("Standard & Poor's") or Moody's Investor Service, Inc.
("Moody's") rating. Ratings below BBB by Standard & Poor's
or Baa by Moody's are considered to be below investment
grade.
The AAA ratings shown in the Portfolio of Investments
reflects the AAA ratings on certain bonds insured by AMBAC,
FGIC or MBIA as of November 30, 2007. As explained earlier
in the Portfolio Manager's Comments section of this report,
one rating agency has reduced the rating for AMBAC to AA,
and one or more rating agencies have placed each of these
insurers on "negative credit watch", which may presage one
or more rating reductions for such insurer or insurers in
the future. If one or more insurers' ratings are reduced
below AAA by these rating agencies, it would likely reduce
the effective rating of many of the bonds insured by that
insurer or insurers.
(4) Backed by an escrow or trust containing sufficient U.S.
Government or U.S. Government agency securities which ensure
the timely payment of principal and interest. Such
investments are normally considered to be equivalent to AAA
rated securities.
N/R Not rated.
(IF) Inverse floating rate investment.
(UB) Underlying bond of an inverse floating rate trust reflected
as a financing transaction pursuant to the provisions of
SFAS No. 140.
See accompanying notes to financial statements.
39
NNO
Nuveen North Carolina Dividend Advantage Municipal Fund 2
Portfolio of INVESTMENTS
November 30, 2007 (Unaudited)
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
EDUCATION AND CIVIC ORGANIZATIONS - 16.2% (10.2% 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 $ 626,178
200 5.125%, 7/15/27 - MBIA Insured 1/11 at 101.00 Aaa 208,282
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 1,108,786
1,000 5.000%, 7/15/15 - MBIA Insured 7/12 at 100.00 Aaa 1,058,850
North Carolina Capital Facilities Financing Agency, Revenue
Bonds, Duke University, Series 2001A:
715 5.125%, 10/01/26 10/11 at 100.00 AA+ 744,079
380 5.125%, 10/01/41 10/11 at 100.00 AA+ 392,449
1,000 University of North Carolina System, Pooled Revenue Bonds, 4/15 at 100.00 AAA 1,057,960
Series 2005A, 5.000%, 4/01/22 - AMBAC Insured
635 University of North Carolina System, Pooled Revenue Refunding 10/12 at 100.00 AAA 682,981
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 530,005
250 5.000%, 6/01/37 - FGIC Insured 6/16 at 100.00 AAA 258,483
1,500 University of North Carolina, Chapel Hill, System Net Revenue No Opt. Call AA+ 1,600,395
Bonds, Series 2002B, 5.000%, 12/01/11
250 University of North Carolina, Charlotte, Certificates of 3/15 at 100.00 AAA 264,380
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 428,536
Refunding Bonds, Series 2002B, 5.375%, 4/01/17 -
FSA Insured
------------------------------------------------------------------------------------------------------------------------------------
8,470 Total Education and Civic Organizations 8,961,364
------------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE - 24.2% (15.4% OF TOTAL INVESTMENTS)
945 Albemarle Hospital Authority, North Carolina, Health Care 10/17 at 100.00 BBB 912,341
Facilities Revenue Bonds, Series 2007, 5.250%, 10/01/38
1,640 Charlotte-Mecklenburg Hospital Authority, North Carolina, 1/11 at 101.00 AA- 1,648,708
Healthcare System Revenue Bonds, Carolinas Healthcare
System, Series 2001A, 5.000%, 1/15/31
2,000 North Carolina Medical Care Commission, Healthcare Facilities 11/13 at 100.00 AA- 2,058,200
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 1,051,310
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 1,063,030
2,100 5.250%, 6/01/22 6/12 at 101.00 A 2,160,039
40
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE (continued)
$ 925 North Carolina Medical Care Commission, Hospital Revenue 11/17 at 100.00 A- $ 929,274
Bonds, Wilson Medical Center, Series 2007, 5.000%, 11/01/27
2,000 North Carolina Medical Care Commission, Revenue Bonds, 1/15 at 100.00 AAA 2,026,700
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 628,671
500 5.250%, 7/01/22 - AMBAC Insured 7/14 at 100.00 AAA 524,490
430 Onslow County Hospital Authority, North Carolina, FHA Insured 10/16 at 100.00 AAA 439,993
Mortgage Revenue Bonds, Onslow Memorial Hospital Project,
Series 2006, 5.000%, 4/01/31 - MBIA Insured
------------------------------------------------------------------------------------------------------------------------------------
13,140 Total Health Care 13,442,756
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/SINGLE FAMILY - 5.7% (3.6% OF TOTAL INVESTMENTS)
370 North Carolina Housing Finance Agency, Home Ownership 7/10 at 100.00 AAA 372,283
Revenue 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:
735 4.700%, 7/01/12 (Alternative Minimum Tax) 7/11 at 100.00 AA 752,081
740 4.850%, 7/01/13 (Alternative Minimum Tax) 7/11 at 100.00 AA 757,368
850 North Carolina Housing Finance Agency, Home Ownership 1/17 at 100.00 AA 811,291
Revenue Bonds, Series 2007-29A, 4.800%, 7/01/33
(Alternative Minimum Tax)
510 North Carolina Housing Finance Agency, Home Ownership 7/16 at 100.00 AA 488,855
Revenue Bonds, Series 25-A, 4.900%, 7/01/37
(Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
3,205 Total Housing/Single Family 3,181,878
------------------------------------------------------------------------------------------------------------------------------------
LONG-TERM CARE - 2.2% (1.4% OF TOTAL INVESTMENTS)
600 North Carolina Medical Care Commission, Health Care Facilities 10/16 at 100.00 N/R 573,162
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 244,623
Revenue Bonds, Presbyterian Homes, Series 2006,
5.400%, 10/01/27
185 North Carolina Medical Care Commission, Revenue Bonds, 1/16 at 100.00 N/R 176,799
Pines at Davidson, Series 2006A, 5.000%, 1/01/36
250 North Carolina Medical Care Commission, Revenue Bonds, 9/15 at 100.00 N/R 240,043
United Church Homes and Services, Series 2005A,
5.250%, 9/01/21
------------------------------------------------------------------------------------------------------------------------------------
1,285 Total Long-Term Care 1,234,627
------------------------------------------------------------------------------------------------------------------------------------
MATERIALS - 3.6% (2.3% OF TOTAL INVESTMENTS)
865 Gaston County Industrial Facilities and Pollution Control Financing 8/15 at 100.00 N/R 841,550
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 1,131,823
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 1,973,373
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL - 5.3% (3.3% OF TOTAL INVESTMENTS)
250 Durham County, North Carolina, General Obligation Bonds, 5/10 at 102.00 AAA 267,878
Series 2000, 5.600%, 5/01/15
1,475 Durham, North Carolina, General Obligation Bonds, Series 2007, 4/17 at 100.00 AAA 1,594,269
5.000%, 4/01/22
1,000 North Carolina, General Obligation Bonds, Series 2004A, 3/14 at 100.00 AAA 1,064,110
5.000%, 3/01/22
------------------------------------------------------------------------------------------------------------------------------------
2,725 Total Tax Obligation/General 2,926,257
------------------------------------------------------------------------------------------------------------------------------------
41
NNO
Nuveen North Carolina Dividend Advantage Municipal Fund 2 (continued)
Portfolio of INVESTMENTS November 30, (2007) (Unaudited)
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED - 34.4% (21.9% OF TOTAL INVESTMENTS)
$ 30 Cabarrus County, North Carolina, Certificates of Participation, 2/13 at 100.00 AA- $ 31,984
Series 2002, 5.250%, 2/01/16
1,750 Charlotte, North Carolina, Certificates of Participation, 6/13 at 100.00 AA+ 1,788,378
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 1,988,010
Series 2002, 5.250%, 6/01/18
800 Craven County, North Carolina, Certificates of Participation, 6/17 at 100.00 AAA 836,000
Series 2007, 5.000%, 6/01/27 - MBIA Insured
Hartnett County, North Carolina, Certificates of Participation,
Series 2002:
1,000 5.250%, 12/01/15 - FSA Insured 12/12 at 101.00 AAA 1,081,860
2,025 5.375%, 12/01/16 - FSA Insured 12/12 at 101.00 AAA 2,218,793
715 Lee County, North Carolina, Certificates of Participation, 4/14 at 100.00 AAA 762,283
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 1,429,942
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 2,133,860
Facilities Project, Series 2004B, 5.000%, 4/01/29 - AMBAC Insured
1,270 Puerto Rico Infrastructure Financing Authority, Special Tax No Opt. Call AAA 1,416,520
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+ 846,224
1,310 5.000%, 6/01/21 6/14 at 100.00 AA+ 1,372,513
115 Raleigh, North Carolina, Certificates of Participation, 2/17 at 100.00 AA+ 120,021
Series 2007, 5.000%, 2/01/27
1,000 Randolph County, North Carolina, Certificates of Participation, 6/14 at 102.00 AAA 1,064,430
Series 2004, 5.000%, 6/01/20 - FSA Insured
1,150 Sampson County, North Carolina, Certificates of Participation, 6/17 at 100.00 AAA 1,194,505
Series 2006, 5.000%, 6/01/34 - FSA Insured (UB)
400 Wilson County, North Carolina, Certificates of Participation, 4/17 at 100.00 AAA 421,792
School Facilities Project, Series 2007, 5.000%, 4/01/25 -
AMBAC Insured
325 Wilson, North Carolina, Certificates of Particiation, Public 5/17 at 100.00 AAA 339,001
Facilities, Series 2007A, 5.000%, 5/01/29 - AGC Insured
------------------------------------------------------------------------------------------------------------------------------------
17,995 Total Tax Obligation/Limited 19,046,116
------------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION - 16.0% (10.2% OF TOTAL INVESTMENTS)
2,035 Charlotte, North Carolina, Airport Revenue Bonds, Series 2004A, 7/14 at 100.00 AAA 2,084,776
5.000%, 7/01/34 - MBIA Insured
590 Piedmont Triad Airport Authority, North Carolina, Airport Revenue 7/15 at 100.00 AAA 622,527
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 1,062,790
2,320 5.250%, 11/01/16 - FGIC Insured 5/11 at 101.00 Aaa 2,463,352
2,230 5.250%, 11/01/17 - FGIC Insured 5/11 at 101.00 Aaa 2,373,746
270 University of North Carolina, Charlotte, Parking System Revenue 1/12 at 101.00 Aaa 283,708
Bonds, Series 2002, 5.000%, 1/01/20 - MBIA Insured
------------------------------------------------------------------------------------------------------------------------------------
8,445 Total Transportation 8,890,899
------------------------------------------------------------------------------------------------------------------------------------
42
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
U.S. GUARANTEED - 15.5% (9.8% OF TOTAL INVESTMENTS) (4)
$ 490 Charlotte-Mecklenburg Hospital Authority, North Carolina, 1/11 at 101.00 Aa3 (4) $ 519,366
Healthcare System Revenue Bonds, Carolinas Healthcare
System, Series 2001A, 5.000%, 1/15/31 (Pre-refunded 1/15/11)
200 Charlotte-Mecklenburg Hospital Authority, North Carolina, 1/15 at 100.00 AA- (4) 218,304
Healthcare System Revenue Bonds, DBA Carolinas Healthcare
System, Series 2005A, 5.000%, 1/15/45 (Pre-refunded 1/15/15)
500 North Carolina Capital Facilities Financing Agency, Revenue 10/11 at 100.00 Aaa 534,185
Bonds, Duke University, Series 2001A, 5.125%, 10/01/26
(Pre-refunded 10/01/11)
370 North Carolina Medical Care Commission, Health System 10/11 at 101.00 AA (4) 399,948
Revenue Bonds, Mission St. Joseph's Health System,
Series 2001, 5.250%, 10/01/31 (Pre-refunded 10/01/11)
500 North Carolina Medical Care Commission, Revenue Bonds, 11/14 at 100.00 AA (4) 547,490
Northeast Medical Center, Series 2004, 5.000%, 11/01/24
(Pre-refunded 11/01/14)
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 1,087,920
1,750 5.000%, 3/01/22 (Pre-refunded 3/01/14) 3/14 at 100.00 AAA 1,903,860
3,200 Wake County, North Carolina, General Obligation School Bonds, 2/10 at 101.50 AAA 3,388,637
Series 2000, 5.400%, 2/01/13 (Pre-refunded 2/01/10)
------------------------------------------------------------------------------------------------------------------------------------
8,010 Total U.S. Guaranteed 8,599,710
------------------------------------------------------------------------------------------------------------------------------------
UTILITIES - 13.7% (8.7% OF TOTAL INVESTMENTS)
500 North Carolina Eastern Municipal Power Agency, Power System 1/16 at 100.00 AAA 540,825
Revenue Bonds, Series 2005, 5.250%, 1/01/20 - AMBAC Insured
2,500 North Carolina Eastern Municipal Power Agency, Power System 1/08 at 100.00 AAA 2,503,849
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 1,587,615
Revenue Bonds, Series 1999B, 6.500%, 1/01/20
250 Puerto Rico Electric Power Authority, Power Revenue Bonds, 7/15 at 100.00 AAA 257,220
Series 2005RR, 5.000%, 7/01/24 - FGIC Insured
2,600 Wake County Industrial Facilities and Pollution Control Financing 2/12 at 101.00 A2 2,729,297
Authority, North Carolina, Revenue Refunding Bonds, Carolina
Power and Light Company, Series 2002, 5.375%, 2/01/17
------------------------------------------------------------------------------------------------------------------------------------
7,350 Total Utilities 7,618,806
------------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER - 20.9% (13.2% OF TOTAL INVESTMENTS)
2,520 Charlotte, North Carolina, Water and Sewerage System Revenue No Opt. Call AAA 2,764,036
Bonds, Series 2002A, 5.250%, 7/01/13
1,000 Durham County, North Carolina, Enterprise System Revenue 6/13 at 100.00 AAA 1,046,140
Bonds, 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 3,253,835
975 5.000%, 3/01/36 (UB) 3/16 at 100.00 AAA 1,022,278
40 Raleigh, North Carolina, Combined Enterprise System Revenue 3/16 at 100.00 AAA 46,159
Bonds, Series 2006A, Residuals Series II-R-645-1,
7.286%, 3/01/31 (IF)
43
NNO
Nuveen North Carolina Dividend Advantage Municipal Fund 2 (continued)
Portfolio of INVESTMENTS November 30, (2007) (Unaudited)
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER (continued)
$ 1,000 Wilmington, North Carolina, Water and Sewer Revenue Bonds, 6/15 at 100.00 AAA $ 1,052,021
Series 2005, 5.000%, 6/01/25 - FSA Insured
2,275 Winstom-Salem, North Carolina, Water and Sewer System 6/17 at 100.00 AAA 2,399,056
Revenue Bonds, Series 2007A, 5.000%, 6/01/37 (UB)
------------------------------------------------------------------------------------------------------------------------------------
10,905 Total Water and Sewer 11,583,525
------------------------------------------------------------------------------------------------------------------------------------
$ 83,495 Total Investments (cost $85,361,133) - 157.7% 87,459,311
=============-----------------------------------------------------------------------------------------------------------------------
Floating Rate Obligations - (9.0)% (4,995,000)
--------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 1.8% 1,005,749
--------------------------------------------------------------------------------------------------------------------
Preferred Shares, at Liquidation Value - (50.5)% (28,000,000)
--------------------------------------------------------------------------------------------------------------------
Net Assets Applicable to Common Shares - 100% $ 55,470,060
====================================================================================================================
(1) All percentages shown in the Portfolio of Investments are
based on net assets applicable to Common shares unless
otherwise noted.
(2) Optional Call Provisions: Dates (month and year) and prices
of the earliest optional call or redemption. There may be
other call provisions at varying prices at later dates.
Certain mortgage-backed securities may be subject to
periodic principal paydowns.
(3) Ratings: Using the higher of Standard & Poor's Group
("Standard & Poor's") or Moody's Investor Service, Inc.
("Moody's") rating. Ratings below BBB by Standard & Poor's
or Baa by Moody's are considered to be below investment
grade.
The AAA ratings shown in the Portfolio of Investments
reflects the AAA ratings on certain bonds insured by AMBAC,
FGIC or MBIA as of November 30, 2007. As explained earlier
in the Portfolio Manager's Comments section of this report,
one rating agency has reduced the rating for AMBAC to AA,
and one or more rating agencies have placed each of these
insurers on "negative credit watch", which may presage one
or more rating reductions for such insurer or insurers in
the future. If one or more insurers' ratings are reduced
below AAA by these rating agencies, it would likely reduce
the effective rating of many of the bonds insured by that
insurer or insurers.
(4) Backed by an escrow or trust containing sufficient U.S.
Government or U.S. Government agency securities which ensure
the timely payment of principal and interest. Such
investments are normally considered to be equivalent to AAA
rated securities.
N/R Not rated.
(IF) Inverse floating rate investment.
(UB) Underlying bond of an inverse floating rate trust reflected
as a financing transaction pursuant to the provisions of
SFAS No. 140.
See accompanying notes to financial statements.
44
NII
Nuveen North Carolina Dividend Advantage Municipal Fund 3
Portfolio of INVESTMENTS
November 30, 2007 (Unaudited)
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
CONSUMER STAPLES - 3.5% (2.2% OF TOTAL INVESTMENTS)
$ 2,000 Puerto Rico, The Children's Trust Fund, Tobacco Settlement 5/12 at 100.00 BBB $ 1,957,480
Asset-Backed Refunding Bonds, Series 2002, 5.500%, 5/15/39
------------------------------------------------------------------------------------------------------------------------------------
EDUCATION AND CIVIC ORGANIZATIONS - 5.0% (3.2% 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+ 343,421
95 5.125%, 10/01/41 10/11 at 100.00 AA+ 98,112
1,290 University of North Carolina System, Pooled Revenue Refunding 10/12 at 100.00 AAA 1,333,241
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 530,005
500 5.000%, 6/01/37 - FGIC Insured 6/16 at 100.00 AAA 516,965
------------------------------------------------------------------------------------------------------------------------------------
2,715 Total Education and Civic Organizations 2,821,744
------------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE - 9.4% (6.0% OF TOTAL INVESTMENTS)
695 Albemarle Hospital Authority, North Carolina, Health Care 10/17 at 100.00 BBB 688,613
Facilities Revenue Bonds, Series 2007, 5.250%, 10/01/27
580 Charlotte-Mecklenburg Hospital Authority, North Carolina, 1/11 at 101.00 AA- 583,080
Healthcare System Revenue Bonds, Carolinas Healthcare
System, Series 2001A, 5.000%, 1/15/31
2,000 North Carolina Medical Care Commission, Healthcare Facilities 11/13 at 100.00 AA- 2,074,000
Revenue Bonds, Novant Health Obligated Group, Series 2003A,
5.000%, 11/01/18
1,000 North Carolina Medical Care Commission, Hospital Revenue 11/17 at 100.00 A- 1,004,620
Bonds, Wilson Medical Center, Series 2007, 5.000%, 11/01/27
500 North Carolina Medical Care Commission, Revenue Bonds, 1/15 at 100.00 AAA 506,675
Blue Ridge Healthcare System, Series 2005, 5.000%, 1/01/33 -
FGIC Insured
430 Onslow County Hospital Authority, North Carolina, FHA Insured 10/16 at 100.00 AAA 439,993
Mortgage Revenue Bonds, Onslow Memorial Hospital Project,
Series 2006, 5.000%, 4/01/31 - MBIA Insured
------------------------------------------------------------------------------------------------------------------------------------
5,205 Total Health Care 5,296,981
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/MULTIFAMILY - 1.8% (1.2% OF TOTAL INVESTMENTS)
1,000 Mecklenburg County, North Carolina, FNMA Multifamily Housing 7/13 at 105.00 AAA 1,021,660
Revenue Bonds, Little Rock Apartments, Series 2003,
5.150%, 1/01/22 (Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/SINGLE FAMILY - 3.7% (2.3% OF TOTAL INVESTMENTS)
760 North Carolina Housing Finance Agency, Home Ownership 7/09 at 100.00 AA 767,212
Revenue Bonds, 1998 Trust Agreement, Series 5A,
5.625%, 7/01/30 (Alternative Minimum Tax)
850 North Carolina Housing Finance Agency, Home Ownership 1/17 at 100.00 AA 811,291
Revenue Bonds, Series 2007-29A, 4.800%, 7/01/33
(Alternative Minimum Tax)
510 North Carolina Housing Finance Agency, Home Ownership 7/16 at 100.00 AA 488,855
Revenue Bonds, Series 25-A, 4.900%, 7/01/37
(Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
2,120 Total Housing/Single Family 2,067,358
------------------------------------------------------------------------------------------------------------------------------------
45
NII
Nuveen North Carolina Dividend Advantage Municipal Fund 3 (continued)
Portfolio of INVESTMENTS November 30, (2007) (Unaudited)
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
LONG-TERM CARE - 1.7% (1.1% OF TOTAL INVESTMENTS)
$ 600 North Carolina Medical Care Commission, Health Care Facilities 10/16 at 100.00 N/R $ 573,162
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 244,623
Revenue Bonds, Presbyterian Homes, Series 2006,
5.400%, 10/01/27
190 North Carolina Medical Care Commission, Revenue Bonds, 1/16 at 100.00 N/R 181,577
Pines at Davidson, Series 2006A, 5.000%, 1/01/36
------------------------------------------------------------------------------------------------------------------------------------
1,040 Total Long-Term Care 999,362
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL - 21.3% (13.6% OF TOTAL INVESTMENTS)
3,900 Cary, North Carolina, General Obligation Water and Sewer Bonds, 3/11 at 102.00 AAA 4,122,416
Series 2001, 5.000%, 3/01/20
1,500 Durham, North Carolina, General Obligation Bonds, Series 2007, 4/17 at 100.00 AAA 1,621,290
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 898,952
900 5.000%, 6/01/20 - FGIC Insured 6/12 at 101.00 AAA 952,749
1,050 5.000%, 6/01/21 - FGIC Insured 6/12 at 101.00 AAA 1,102,994
500 North Carolina, General Obligation Bonds, Series 2004A, 3/14 at 100.00 AAA 532,055
5.000%, 3/01/22
2,000 Puerto Rico, General Obligation and Public Improvement No Opt. Call AAA 2,375,400
Refunding 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 418,684
5.000%, 6/01/21
------------------------------------------------------------------------------------------------------------------------------------
11,100 Total Tax Obligation/General 12,024,540
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED - 32.5% (20.8% OF TOTAL INVESTMENTS)
1,800 Catawba County, North Carolina, Certificates of Participation, 6/14 at 100.00 Aaa 1,914,462
Series 2004, 5.250%, 6/01/22 - MBIA Insured
1,500 Centennial Authority, North Carolina, Hotel Tax Revenue Bonds, 3/08 at 102.00 AAA 1,531,605
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+ 2,794,248
Governmental Facilities Projects, Series 2003G, 5.000%, 6/01/33
800 Craven County, North Carolina, Certificates of Participation, 6/17 at 100.00 AAA 836,000
Series 2007, 5.000%, 6/01/27 - MBIA Insured
3,000 Dare County, North Carolina, Certificates of Participation, 12/12 at 100.00 AAA 3,124,590
Series 2002, 5.000%, 6/01/23 - AMBAC Insured
500 Lee County, North Carolina, Certificates of Participation, 4/14 at 100.00 AAA 533,065
Public Schools and Community College, Series 2004,
5.250%, 4/01/20 - FSA Insured
1,000 North Carolina, Certificates of Participation, Repair and 6/14 at 100.00 AA+ 1,045,980
Renovation Project, Series 2004B, 5.000%, 6/01/20
565 Raleigh, North Carolina, Certificates of Participation, 2/17 at 100.00 AA+ 589,668
Series 2007, 5.000%, 2/01/27
2,000 Rutherford County, North Carolina, Certificates of Participation, 9/12 at 101.00 AAA 2,111,300
Series 2002, 5.000%, 9/01/21 - AMBAC Insured
1,200 Sampson County, North Carolina, Certificates of Participation, 6/17 at 100.00 AAA 1,246,440
Series 2006, 5.000%, 6/01/34 - FSA Insured (UB)
1,785 Union County, North Carolina, Certificates of Participation, 6/13 at 101.00 AAA 1,892,921
Series 2003, 5.000%, 6/01/20 - AMBAC Insured
400 Wilson County, North Carolina, Certificates of Participation, 4/17 at 100.00 AAA 421,792
School Facilities Project, Series 2007, 5.000%, 4/01/25 -
AMBAC Insured
325 Wilson, North Carolina, Certificates of Particiation, 5/17 at 100.00 AAA 339,001
Public Facilities, Series 2007A, 5.000%, 5/01/29 - AGC Insured
------------------------------------------------------------------------------------------------------------------------------------
17,625 Total Tax Obligation/Limited 18,381,072
------------------------------------------------------------------------------------------------------------------------------------
46
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION - 9.1% (5.8% 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 $ 1,891,766
3,100 5.000%, 11/01/20 - FGIC Insured 5/11 at 101.00 Aaa 3,246,103
------------------------------------------------------------------------------------------------------------------------------------
4,880 Total Transportation 5,137,869
------------------------------------------------------------------------------------------------------------------------------------
U.S. GUARANTEED - 20.9% (13.4% OF TOTAL INVESTMENTS) (4)
500 Broad River Water Authority, North Carolina, Water System 6/10 at 101.00 Aaa 530,140
Revenue Bonds, Series 2000, 5.375%, 6/01/26
(Pre-refunded 6/01/10) - MBIA Insured
170 Charlotte-Mecklenburg Hospital Authority, North Carolina, 1/11 at 101.00 Aa3 (4) 180,188
Healthcare System Revenue Bonds, Carolinas Healthcare System,
Series 2001A, 5.000%, 1/15/31 (Pre-refunded 1/15/11)
200 Charlotte-Mecklenburg Hospital Authority, North Carolina, 1/15 at 100.00 AA- (4) 218,304
Healthcare System Revenue Bonds, DBA Carolinas Healthcare
System, Series 2005A, 5.000%, 1/15/45 (Pre-refunded 1/15/15)
50 Cumberland County, North Carolina, Hospital Facility Revenue 10/09 at 101.00 A3 (4) 52,197
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) 1,445,628
770 5.250%, 1/01/19 (Pre-refunded 1/01/13) 1/13 at 101.00 AA+ (4) 844,567
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 1,517,085
405 5.125%, 10/01/41 (Pre-refunded 10/01/11) 10/11 at 100.00 Aaa 432,690
3,000 North Carolina Capital Facilities Financing Agency, Revenue 10/12 at 100.00 AAA 3,244,830
Bonds, Duke University, Series 2002A, 5.125%, 7/01/42
(Pre-refunded 10/01/12)
500 North Carolina Medical Care Commission, Health System 10/11 at 101.00 AA (4) 540,470
Revenue Bonds, Mission St. Joseph's Health System,
Series 2001, 5.250%, 10/01/31 (Pre-refunded 10/01/11)
500 North Carolina Medical Care Commission, Revenue Bonds, 11/14 at 100.00 AA (4) 547,490
Northeast Medical Center, Series 2004, 5.000%, 11/01/24
(Pre-refunded 11/01/14)
610 University of North Carolina System, Pooled Revenue Refunding 10/12 at 100.00 Aaa 656,964
Bonds, Series 2002A, 5.000%, 4/01/27
(Pre-refunded 10/01/12) - AMBAC Insured
1,500 Winston-Salem, North Carolina, Water and Sewerage 6/12 at 100.00 AAA 1,608,165
System Revenue Bonds, Series 2002A, 5.000%, 6/01/19
(Pre-refunded 6/01/12)
------------------------------------------------------------------------------------------------------------------------------------
10,950 Total U.S. Guaranteed 11,818,718
------------------------------------------------------------------------------------------------------------------------------------
UTILITIES - 15.7% (10.1% OF TOTAL INVESTMENTS)
500 North Carolina Eastern Municipal Power Agency, Power System 1/16 at 100.00 AAA 540,825
Revenue Bonds, Series 2005, 5.250%, 1/01/20 - AMBAC Insured
4,000 North Carolina Eastern Municipal Power Agency, Power System 1/08 at 100.00 AAA 4,006,160
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 2,865,062
Revenue Bonds, Series 2003A, 5.250%, 1/01/15 -
AMBAC Insured
1,400 Wake County Industrial Facilities and Pollution Control 2/12 at 101.00 A2 1,469,622
Financing Authority, North Carolina, Revenue Refunding
Bonds, Carolina Power and Light Company, Series 2002,
5.375%, 2/01/17
------------------------------------------------------------------------------------------------------------------------------------
8,565 Total Utilities 8,881,669
------------------------------------------------------------------------------------------------------------------------------------
47
NII
Nuveen North Carolina Dividend Advantage Municipal Fund 3 (continued)
Portfolio of INVESTMENTS November 30, (2007) (Unaudited)
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER - 31.7% (20.3% 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 $ 781,253
1,780 5.125%, 6/01/26 - FGIC Insured 6/11 at 101.00 Aaa 1,859,975
300 Durham County, North Carolina, Enterprise System Revenue 6/13 at 100.00 AAA 316,428
Bonds, Series 2002, 5.000%, 6/01/18 - MBIA Insured
2,500 Kannapolis, North Carolina, Water and Sewerage System 2/12 at 101.00 AAA 2,566,900
Revenue 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 522,410
Revenue Bonds, Series 2004B, 5.000%, 6/01/23 - XLCA Insured
1,000 Orange Water and Sewerage Authority, North Carolina, 7/11 at 101.00 AA+ 1,029,030
Water and 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 5,204,034
3,000 5.000%, 3/01/36 (UB) 3/16 at 100.00 AAA 3,145,470
5 Raleigh, North Carolina, Combined Enterprise System Revenue 3/16 at 100.00 AAA 5,727
Bonds, Series 2006A, Residuals Series II-R-645-1,
7.284%, 3/01/36 (IF)
2,375 Winstom-Salem, North Carolina, Water and Sewer System 6/17 at 100.00 AAA 2,504,509
Revenue Bonds, Series 2007A, 5.000%, 6/01/37 (UB)
------------------------------------------------------------------------------------------------------------------------------------
17,160 Total Water and Sewer 17,935,736
------------------------------------------------------------------------------------------------------------------------------------
$ 84,360 Total Investments (cost $86,420,312) - 156.3% 88,344,189
=============-----------------------------------------------------------------------------------------------------------------------
Floating Rate Obligations - (13.6)% (7,680,000)
--------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 6.8% 3,853,971
--------------------------------------------------------------------------------------------------------------------
Preferred Shares, at Liquidation Value - (49.5)% (28,000,000)
--------------------------------------------------------------------------------------------------------------------
Net Assets Applicable to Common Shares - 100% $ 56,518,160
====================================================================================================================
(1) All percentages shown in the Portfolio of Investments are
based on net assets applicable to Common shares unless
otherwise noted.
(2) Optional Call Provisions: Dates (month and year) and prices
of the earliest optional call or redemption. There may be
other call provisions at varying prices at later dates.
Certain mortgage-backed securities may be subject to
periodic principal paydowns.
(3) Ratings: Using the higher of Standard & Poor's Group
("Standard & Poor's") or Moody's Investor Service, Inc.
("Moody's") rating. Ratings below BBB by Standard & Poor's
or Baa by Moody's are considered to be below investment
grade.
The AAA ratings shown in the Portfolio of Investments
reflects the AAA ratings on certain bonds insured by AMBAC,
FGIC or MBIA as of November 30, 2007. As explained earlier
in the Portfolio Manager's Comments section of this report,
one rating agency has reduced the rating for AMBAC to AA,
and one or more rating agencies have placed each of these
insurers on "negative credit watch", which may presage one
or more rating reductions for such insurer or insurers in
the future. If one or more insurers' ratings are reduced
below AAA by these rating agencies, it would likely reduce
the effective rating of many of the bonds insured by that
insurer or insurers.
(4) Backed by an escrow or trust containing sufficient U.S.
Government or U.S. Government agency securities which ensure
the timely payment of principal and interest. Such
investments are normally considered to be equivalent to AAA
rated securities.
N/R Not rated.
(IF) Inverse floating rate investment.
(UB) Underlying bond of an inverse floating rate trust reflected
as a financing transaction pursuant to the provisions of
SFAS No. 140.
See accompanying notes to financial statements.
48
Statement of
ASSETS & LIABILITIES
November 30, 2007 (Unaudited)
GEORGIA GEORGIA GEORGIA
PREMIUM DIVIDEND DIVIDEND
INCOME ADVANTAGE ADVANTAGE 2
(NPG) (NZX) (NKG)
------------------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments, at value (cost $80,098,516, $42,681,182
and $95,947,393, respectively) $83,111,790 $43,930,001 $97,487,561
Cash 124,694 41,849 719,687
Unrealized appreciation on forward swaps -- 214,009 --
Interest receivable 1,426,809 693,700 1,572,098
Other assets 8,196 529 694
------------------------------------------------------------------------------------------------------------------------------------
Total assets 84,671,489 44,880,088 99,780,040
------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Cash overdraft -- -- --
Floating rate obligations -- -- --
Payable for investments purchased 1,088,857 602,282 1,329,741
Accrued expenses:
Management fees 43,085 15,602 31,587
Other 11,565 5,956 14,175
Common share dividends payable 174,710 101,494 238,683
Preferred share dividends payable 3,428 6,905 19,441
------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 1,321,645 732,239 1,633,627
------------------------------------------------------------------------------------------------------------------------------------
Preferred shares, at liquidation value 27,800,000 15,000,000 33,000,000
------------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common shares $55,549,844 $29,147,849 $65,146,413
====================================================================================================================================
Common shares outstanding 3,805,652 1,969,350 4,554,005
====================================================================================================================================
Net asset value per Common share outstanding
(net assets applicable to Common shares,
divided by Common shares outstanding) $ 14.60 $ 14.80 $ 14.31
====================================================================================================================================
NET ASSETS APPLICABLE TO COMMON SHARES CONSIST OF:
------------------------------------------------------------------------------------------------------------------------------------
Common shares, $.01 par value per share $ 38,057 $ 19,694 $ 45,540
Paid-in surplus 52,378,108 27,902,247 64,262,835
Undistributed (Over-distribution of) net investment income (96,421) (66,999) (140,223)
Accumulated net realized gain (loss) from investments
and derivative transactions 216,826 (169,921) (561,907)
Net unrealized appreciation (depreciation) of investments
and derivative transactions 3,013,274 1,462,828 1,540,168
------------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common shares $55,549,844 $29,147,849 $65,146,413
====================================================================================================================================
Authorized shares:
Common Unlimited Unlimited Unlimited
Preferred Unlimited Unlimited Unlimited
====================================================================================================================================
See accompanying notes to financial statements.
49
Statement of
ASSETS & LIABILITIES (continued)
November 30, 2007 (Unaudited)
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 $136,217,517, $54,703,163,
$85,361,133 and $86,420,312, respectively) $139,159,564 $56,073,700 $87,459,311 $88,344,189
Cash 497,306 42,083 -- 2,814,169
Unrealized appreciation on forward swaps -- -- -- --
Interest receivable 2,342,110 857,233 1,390,835 1,293,317
Other assets 9,100 3,070 1,538 690
------------------------------------------------------------------------------------------------------------------------------------
Total assets 142,008,080 56,976,086 88,851,684 92,452,365
------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Cash overdraft -- -- 150,603 --
Floating rate obligations 3,870,000 6,350,000 4,995,000 7,680,000
Payable for investments purchased -- -- -- --
Accrued expenses:
Management fees 71,131 17,859 26,148 27,158
Other 20,725 6,241 10,909 12,899
Common share dividends payable 283,726 122,781 186,692 209,239
Preferred share dividends payable 3,717 4,470 12,272 4,909
------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 4,249,299 6,501,351 5,381,624 7,934,205
------------------------------------------------------------------------------------------------------------------------------------
Preferred shares, at liquidation value 46,800,000 17,000,000 28,000,000 28,000,000
------------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common shares $ 90,958,781 $33,474,735 $55,470,060 $56,518,160
====================================================================================================================================
Common shares outstanding 6,351,838 2,262,819 3,749,642 3,932,096
====================================================================================================================================
Net asset value per Common share outstanding
(net assets applicable to Common shares,
divided by Common shares outstanding) $ 14.32 $ 14.79 $ 14.79 $ 14.37
====================================================================================================================================
NET ASSETS APPLICABLE TO COMMON SHARES CONSIST OF:
------------------------------------------------------------------------------------------------------------------------------------
Common shares, $.01 par value per share $ 63,518 $ 22,628 $ 37,496 $ 39,321
Paid-in surplus 87,829,648 32,087,679 53,194,712 55,485,293
Undistributed (Over-distribution of) net investment income (186,037) (62,075) (175,602) (130,626)
Accumulated net realized gain (loss) from investments
and derivative transactions 309,605 55,966 315,276 (799,705)
Net unrealized appreciation (depreciation) of investments
and derivative transactions 2,942,047 1,370,537 2,098,178 1,923,877
------------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common shares $ 90,958,781 $33,474,735 $55,470,060 $56,518,160
====================================================================================================================================
Authorized shares:
Common Unlimited Unlimited Unlimited Unlimited
Preferred Unlimited Unlimited Unlimited Unlimited
====================================================================================================================================
See accompanying notes to financial statements.
50
Statement of
OPERATIONS
Six Months Ended November 30, 2007 (Unaudited)
GEORGIA GEORGIA GEORGIA
PREMIUM DIVIDEND DIVIDEND
INCOME ADVANTAGE ADVANTAGE 2
(NPG) (NZX) (NKG)
------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME $1,935,471 $1,028,035 $2,266,271
------------------------------------------------------------------------------------------------------------------------------------
EXPENSES
Management fees 261,864 138,211 309,788
Preferred shares - auction fees 34,845 18,801 41,363
Preferred shares - dividend disbursing agent fees 5,014 5,014 5,014
Shareholders' servicing agent fees and expenses 2,309 206 271
Interest expense on floating rate obligations -- -- --
Custodian's fees and expenses 10,698 6,958 12,806
Trustees' fees and expenses 1,010 573 1,196
Professional fees 5,007 4,068 5,469
Shareholders' reports - printing and mailing expenses 9,260 5,272 10,268
Stock exchange listing fees 162 84 194
Investor relations expense 4,079 2,391 4,679
Other expenses 5,929 6,302 7,006
------------------------------------------------------------------------------------------------------------------------------------
Total expenses before custodian fee credit and expense reimbursement 340,177 187,880 398,054
Custodian fee credit (7,165) (3,629) (6,418)
Expense reimbursement -- (50,861) (143,337)
------------------------------------------------------------------------------------------------------------------------------------
Net expenses 333,012 133,390 248,299
------------------------------------------------------------------------------------------------------------------------------------
Net investment income 1,602,459 894,645 2,017,972
------------------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) from:
Investments 179,150 102,772 93,763
Forward swaps 23,130 (7,114) --
Change in net unrealized appreciation (depreciation) of:
Investments 34,815 (20,060) (693,873)
Forward swaps -- 243,594 --
------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) 237,095 319,192 (600,110)
------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO PREFERRED SHAREHOLDERS
From net investment income (473,215) (254,355) (570,489)
From accumulated net realized gains -- -- --
------------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets applicable to Common shares from
distributions to Preferred shareholders (473,215) (254,355) (570,489)
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets applicable to Common shares
from operations $1,366,339 $ 959,482 $ 847,373
====================================================================================================================================
See accompanying notes to financial statements.
51
Statement of
OPERATIONS (continued) (Unaudited)
NORTH NORTH NORTH NORTH
CAROLINA CAROLINA CAROLINA CAROLINA
PREMIUM DIVIDEND DIVIDEND DIVIDEND
INCOME ADVANTAGE ADVANTAGE 2 ADVANTAGE 3
(NNC) (NRB) (NNO) (NII)
------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME $3,280,299 $1,315,095 $2,018,949 $2,078,047
------------------------------------------------------------------------------------------------------------------------------------
EXPENSES
Management fees 432,566 158,497 262,219 265,480
Preferred shares - auction fees 58,661 21,309 35,096 35,096
Preferred shares - dividend disbursing agent fees 5,014 5,014 5,014 5,014
Shareholders' servicing agent fees and expenses 4,655 138 299 364
Interest expense on floating rate obligations 74,018 121,944 95,805 147,415
Custodian's fees and expenses 17,464 6,933 12,961 12,395
Trustees' fees and expenses 1,756 528 1,022 1,013
Professional fees 6,453 4,156 3,774 5,044
Shareholders' reports - printing and mailing expenses 16,883 7,019 9,511 10,959
Stock exchange listing fees 4,849 96 160 1,201
Investor relations expense 6,726 2,759 4,372 4,678
Other expenses 6,869 6,385 6,946 6,752
------------------------------------------------------------------------------------------------------------------------------------
Total expenses before custodian fee credit and expense reimbursement 635,914 334,778 437,179 495,411
Custodian fee credit (12,959) (4,281) (6,444) (6,562)
Expense reimbursement -- (50,016) (103,433) (122,816)
------------------------------------------------------------------------------------------------------------------------------------
Net expenses 622,955 280,481 327,302 366,033
------------------------------------------------------------------------------------------------------------------------------------
Net investment income 2,657,344 1,034,614 1,691,647 1,712,014
------------------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) from:
Investments 71,469 (14,623) 69,064 (115,009)
Forward swaps -- (24,224) -- --
Change in net unrealized appreciation (depreciation) of:
Investments (332,751) 89,699 22,269 123,177
Forward swaps -- 17,297 -- --
------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) (261,282) 68,149 91,333 8,168
------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO PREFERRED SHAREHOLDERS
From net investment income (761,128) (272,223) (460,283) (443,702)
From accumulated net realized gains -- -- -- --
------------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets applicable to Common shares from
distributions to Preferred shareholders (761,128) (272,223) (460,283) (443,702)
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets applicable to Common shares
from operations $1,634,934 $ 830,540 $1,322,697 $1,276,480
====================================================================================================================================
See accompanying notes to financial statements.
52
Statement of
CHANGES in NET ASSETS (Unaudited)
GEORGIA GEORGIA GEORGIA
PREMIUM INCOME (NPG) DIVIDEND ADVANTAGE (NZX) DIVIDEND ADVANTAGE 2 (NKG)
----------------------------- --------------------------- -----------------------------
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED ENDED YEAR ENDED
11/30/07 5/31/07 11/30/07 5/31/07 11/30/07 5/31/07
------------------------------------------------------------------------------------------------------------------------------------
OPERATIONS
Net investment income $ 1,602,459 $ 3,284,935 $ 894,645 $ 1,802,562 $ 2,017,972 $ 4,055,059
Net realized gain (loss) from:
Investments 179,150 81,348 102,772 69,122 93,763 270,177
Forward swaps 23,130 -- (7,114) -- -- 46,944
Futures -- -- -- -- -- --
Change in net unrealized appreciation
(depreciation) of:
Investments 34,815 43,450 (20,060) (14,277) (693,873) 628,166
Forward swaps -- -- 243,594 (29,585) -- (197,717)
Distributions to
Preferred Shareholders:
From net investment income (473,215) (869,692) (254,355) (481,666) (570,489) (1,072,522)
From accumulated net
realized gains -- -- -- -- -- --
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
applicable to Common shares
from operations 1,366,339 2,540,041 959,482 1,346,156 847,373 3,730,107
------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO COMMON SHAREHOLDERS
From net investment income (1,175,946) (2,539,683) (655,725) (1,481,082) (1,475,498) (2,861,975)
From accumulated net realized gains -- -- -- -- -- --
------------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets applicable to
Common shares from distributions
to Common shareholders (1,175,946) (2,539,683) (655,725) (1,481,082) (1,475,498) (2,861,975)
------------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
Net proceeds from Common shares
issued to shareholders due to
reinvestment of distributions -- 40,850 12,932 53,889 4,976 --
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
applicable to Common shares from
capital share transactions -- 40,850 12,932 53,889 4,976 --
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
applicable to Common shares 190,393 41,208 316,689 (81,037) (623,149) 868,132
Net assets applicable to Common
shares at the beginning
of period 55,359,451 55,318,243 28,831,160 28,912,197 65,769,562 64,901,430
------------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common
shares at the end of period $55,549,844 $55,359,451 $29,147,849 $28,831,160 $65,146,413 $65,769,562
====================================================================================================================================
Undistributed (Over-distribution of)
net investment income at the
end of period $ (96,421) $ (49,719) $ (66,999) $ (51,564) $ (140,223) $ (112,208)
====================================================================================================================================
See accompanying notes to financial statements.
53
Statement of
CHANGES in NET ASSETS (continued) (Unaudited)
NORTH CAROLINA NORTH CAROLINA
PREMIUM INCOME (NNC) DIVIDEND ADVANTAGE (NRB)
---------------------------- -----------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED
11/30/07 5/31/07 11/30/07 5/31/07
------------------------------------------------------------------------------------------------------------------------------------
OPERATIONS
Net investment income $ 2,657,344 $ 5,395,346 $ 1,034,614 $ 2,098,534
Net realized gain (loss) from:
Investments 71,469 368,361 (14,623) 229,088
Forward swaps -- -- (24,224) --
Futures -- -- -- 21,833
Change in net unrealized appreciation (depreciation) of:
Investments (332,751) 98,311 89,699 (153,016)
Forward swaps -- -- 17,297 (17,297)
Distributions to Preferred Shareholders:
From net investment income (761,128) (1,481,763) (272,223) (500,664)
From accumulated net realized gains -- (19,120) -- (25,847)
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
applicable to Common shares
from operations 1,634,934 4,361,135 830,540 1,652,631
------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO COMMON SHAREHOLDERS
From net investment income (1,867,439) (4,163,346) (794,017) (1,741,404)
From accumulated net realized gains -- (89,554) -- (117,562)
------------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets applicable to
Common shares from distributions
to Common shareholders (1,867,439) (4,252,900) (794,017) (1,858,966)
------------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
Net proceeds from Common shares
issued to shareholders due to
reinvestment of distributions -- 50,016 29,667 78,190
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
applicable to Common shares from
capital share transactions -- 50,016 29,667 78,190
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
applicable to Common shares (232,505) 158,251 66,190 (128,145)
Net assets applicable to Common
shares at the beginning of period 91,191,286 91,033,035 33,408,545 33,536,690
------------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common
shares at the end of period $90,958,781 $91,191,286 $33,474,735 $33,408,545
====================================================================================================================================
Undistributed (Over-distribution of)
net investment income at the
end of period $ (186,037) $ (214,814) $ (62,075) $ (30,449)
====================================================================================================================================
See accompanying notes to financial statements.
54
NORTH CAROLINA NORTH CAROLINA
DIVIDEND ADVANTAGE 2 (NNO) DIVIDEND ADVANTAGE 3 (NII)
---------------------------- -----------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED
11/30/07 5/31/07 11/30/07 5/31/07
------------------------------------------------------------------------------------------------------------------------------------
OPERATIONS
Net investment income $ 1,691,647 $ 3,419,247 $ 1,712,014 $ 3,485,635
Net realized gain (loss) from:
Investments 69,064 406,698 (115,009) 229,821
Forward swaps -- -- -- --
Futures -- -- -- --
Change in net unrealized appreciation (depreciation) of:
Investments 22,269 (28,954) 123,177 189,979
Forward swaps -- -- -- --
Distributions to Preferred Shareholders:
From net investment income (460,283) (878,117) (443,702) (890,568)
From accumulated net realized gains -- (39,705) -- --
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
applicable to Common shares
from operations 1,322,697 2,879,169 1,276,480 3,014,867
------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO COMMON SHAREHOLDERS
From net investment income (1,211,101) (2,647,748) (1,285,673) (2,570,459)
From accumulated net realized gains -- (184,018) -- --
------------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets applicable to
Common shares from distributions
to Common shareholders (1,211,101) (2,831,766) (1,285,673) (2,570,459)
------------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
Net proceeds from Common shares
issued to shareholders due to
reinvestment of distributions 9,817 49,760 16,004 17,530
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
applicable to Common shares from
capital share transactions 9,817 49,760 16,004 17,530
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
applicable to Common shares 121,413 97,163 6,811 461,938
Net assets applicable to Common
shares at the beginning of period 55,348,647 55,251,484 56,511,349 56,049,411
------------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common
shares at the end of period $55,470,060 $55,348,647 $56,518,160 $56,511,349
====================================================================================================================================
Undistributed (Over-distribution of)
net investment income at the
end of period $ (175,602) $ (195,865) $ (130,626) $ (113,265)
====================================================================================================================================
See accompanying notes to financial statements.
55
Statement of
CASH FLOWS
Six Months Ended November 30, 2007 (Unaudited)
NORTH NORTH
CAROLINA CAROLINA
DIVIDEND DIVIDEND
ADVANTAGE ADVANTAGE 3
(NRB) (NII)
------------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCREASE (DECREASE) IN NET ASSETS APPLICABLE TO COMMON SHARES FROM OPERATIONS $ 830,540 $ 1,276,480
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 (1,682,140) (3,554,645)
Proceeds from sales and maturities of investments 919,970 6,965,728
Proceeds from sales of forward swaps (24,224) --
Amortization/(Accretion) of premiums and discounts, net 66,838 134,401
(Increase) Decrease in receivable for interest (31,480) 40,833
(Increase) Decrease in other assets 4,624 3,821
Increase (Decrease) in payable for investments purchased (496,310) (843,727)
Increase (Decrease) in accrued management fees (753) 4,604
Increase (Decrease) in accrued other liabilities (10,489) (10,124)
Increase (Decrease) in Preferred shares dividends payable 1,563 2,837
Net realized (gain) loss from investments 14,624 115,009
Net realized (gain) loss from forward swaps 24,224 --
Change in net unrealized (appreciation) depreciation of investments (89,700) (123,177)
Change in net unrealized (appreciation) depreciation of forward swaps (17,297) --
------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities (490,010) 4,012,040
------------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in floating rate obligations -- --
Cash distributions paid to Common shareholders (641,569) (1,060,430)
------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities (641,569) (1,060,430)
------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH (1,131,579) 2,951,610
Cash at the beginning of period 1,173,662 (137,441)
------------------------------------------------------------------------------------------------------------------------------------
CASH AT THE END OF PERIOD $ 42,083 $ 2,814,169
====================================================================================================================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Non-cash financing activities not included herein consist of reinvestments of
Common share distributions of $29,667 and $16,004 for North Carolina Dividend
Advantage (NRB) and North Carolina Dividend Advantage 3 (NII).
See accompanying notes to financial statements.
56
Notes to
FINANCIAL STATEMENTS (Unaudited)
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 establishes 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 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 or derivative instrument 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 November 30, 2007, Georgia
Premium Income (NPG), Georgia Dividend Advantage (NZX) and Georgia Dividend
Advantage 2 (NKG) each had outstanding when-issued/delayed-delivery purchase
commitments of $1,088,857, $602,282 and $1,329,741, 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
Notes to
FINANCIAL STATEMENTS (continued) (Unaudited)
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.
58
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"). A Fund may also enter into shortfall and
forbearance agreements (sometimes referred to as a "recourse trust" or "credit
recovery swap") with a broker-dealer by which a Fund agrees to reimburse the
broker-dealer, in certain circumstances, for the difference between the
liquidation value of the fixed-rate bond held by the trust and the liquidation
value of the floating rate certificates, as well as any shortfalls in interest
cash flows. The inverse floater held by a Fund gives the Fund the right (a) to
cause the holders of the floating rate certificates to tender their notes at
par, and (b) to have the broker transfer the fixed-rate bond held by the trust
to the Fund, thereby collapsing the trust. An investment in an
externally-deposited inverse floater is identified in the Portfolio of
Investments as an "Inverse floating rate investment". An investment in a
self-deposited inverse floater, recourse trust or credit recovery swap is
accounted for as a financing transaction in accordance with Statement of
Financial Accounting Standards (SFAS) No. 140 "Accounting for Transfers and
Servicing of Financial Assets and Extinguishment of Liabilities". In such
instances, a fixed-rate bond deposited into a special purpose trust is
identified in the Portfolio of Investments as an "Underlying bond of an inverse
floating rate trust", with the Fund accounting for the short-term floating rate
certificates issued by the trust as "Floating rate obligations" on the Statement
of Assets and Liabilities. In addition, the Fund reflects in Investment Income
the entire earnings of the underlying bond and accounts for the related interest
paid to the holders of the short-term floating rate certificates as "Interest
expense on floating rate obligations" in the Statement of Operations.
During the six months ended November 30, 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 six
months ended November 30, 2007.
The average floating rate obligations outstanding and average annual interest
rate and fees related to self-deposited inverse floaters during the six months
ended November 30, 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 $3,870,000 $6,350,000 $4,995,000 $7,680,000
Average annual interest rate and fees 3.81% 3.83% 3.83% 3.83%
==================================================================================================================
Forward Swap Transactions
The Funds are authorized to invest in forward interest rate swap transactions.
Each Fund's 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. Georgia Dividend Advantage
(NZX) was the only Fund to invest in forward interest rate swap transactions
during the six months ended November 30, 2007.
59
Notes to
FINANCIAL STATEMENTS (continued) (Unaudited)
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. None of the Funds invested in futures contracts during the six
months ended November 30, 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 net credits earned on each Fund's cash on
deposit with the bank. Such deposit arrangements are an alternative to overnight
investments. Credits for cash balances may be offset by charges for any days on
which the Fund overdraws its account at the custodian bank.
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)
------------------------ ----------------------- ------------------------
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED ENDED YEAR ENDED
11/30/07 5/31/07 11/30/07 5/31/07 11/30/07 5/31/07
-----------------------------------------------------------------------------------------------------------------
Common shares issued
to shareholders due
to reinvestment of distributions -- 2,656 888 3,317 345 --
==================================================================================================================
60
NORTH CAROLINA NORTH CAROLINA
PREMIUM INCOME (NNC) DIVIDEND ADVANTAGE (NRB)
----------------------- ------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED
11/30/07 5/31/07 11/30/07 5/31/07
------------------------------------------------------------------------------------------------------------------
Common shares issued to shareholders
due to reinvestment of distributions -- 3,363 1,993 4,827
==================================================================================================================
NORTH CAROLINA NORTH CAROLINA
DIVIDEND DIVIDEND
ADVANTAGE 2 (NNO) ADVANTAGE 3 (NII)
----------------------- ------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED
11/30/07 5/31/07 11/30/07 5/31/07
------------------------------------------------------------------------------------------------------------------
Common shares issued to shareholders
due to reinvestment of distributions 667 3,293 1,124 1,207
==================================================================================================================
3. INVESTMENT TRANSACTIONS
Purchases and sales (including maturities but excluding short-term investments
and derivative transactions) during the six months ended November 30, 2007, were
as follows:
GEORGIA GEORGIA GEORGIA
PREMIUM DIVIDEND DIVIDEND
INCOME ADVANTAGE ADVANTAGE 2
(NPG) (NZX) (NKG)
------------------------------------------------------------------------------------------------------------------
Purchases $11,827,428 $5,285,537 $8,906,030
Sales and maturities 8,045,560 4,675,665 7,949,586
==================================================================================================================
NORTH NORTH NORTH NORTH
CAROLINA CAROLINA CAROLINA CAROLINA
PREMIUM DIVIDEND DIVIDEND DIVIDEND
INCOME ADVANTAGE ADVANTAGE 2 ADVANTAGE 3
(NNC) (NRB) (NNO) (NII)
------------------------------------------------------------------------------------------------------------------
Purchases $5,220,048 $1,682,140 $3,367,492 $3,554,645
Sales and maturities 7,378,656 919,970 3,821,675 6,965,728
==================================================================================================================
4. INCOME TAX INFORMATION
The following information is presented on an income tax basis. Differences
between amounts for financial statement and federal income tax purposes are
primarily due to the treatment of paydown gains and losses, timing differences
in recognizing taxable market discount, timing differences in recognizing
certain gains and losses on investment transactions and the treatment of
investments in inverse floating rate transactions subject to SFAS No.140. To the
extent that differences arise that are permanent in nature, such amounts are
reclassified within the capital accounts on the Statement of Assets and
Liabilities presented in the annual report, based on their federal tax basis
treatment; temporary differences do not require reclassification. Temporary and
permanent differences do not impact the net asset values of the Funds.
At November 30, 2007, the cost of investments was as follows:
GEORGIA GEORGIA GEORGIA
PREMIUM DIVIDEND DIVIDEND
INCOME ADVANTAGE ADVANTAGE 2
(NPG) (NZX) (NKG)
------------------------------------------------------------------------------------------------------------------
Cost of investments $80,087,502 $42,762,789 $96,119,037
==================================================================================================================
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 $132,338,603 $48,355,849 $80,364,243 $78,795,179
==================================================================================================================
61
Notes to
FINANCIAL STATEMENTS (continued) (Unaudited)
Gross unrealized appreciation and gross unrealized depreciation of investments
at November 30, 2007, were as follows:
GEORGIA GEORGIA GEORGIA
PREMIUM DIVIDEND DIVIDEND
INCOME ADVANTAGE ADVANTAGE 2
(NPG) (NZX) (NKG)
------------------------------------------------------------------------------------------------------------------
Gross unrealized:
Appreciation $3,166,151 $1,536,044 $2,141,422
Depreciation (141,863) (368,832) (772,898)
------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investments $3,024,288 $1,167,212 $1,368,524
==================================================================================================================
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 $3,353,807 $1,548,034 $2,399,626 $2,169,407
Depreciation (401,716) (180,219) (299,305) (299,795)
------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investments $2,952,091 $1,367,815 $2,100,321 $1,869,612
==================================================================================================================
The tax components of undistributed net tax-exempt income, net ordinary income
and net long-term capital gains at May 31, 2007, the Funds' last 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.
62
The tax character of distributions paid during the Funds' last tax year ended
May 31, 2007, was designated for purposes of the dividends paid deduction as
follows:
GEORGIA GEORGIA GEORGIA
PREMIUM DIVIDEND DIVIDEND
INCOME ADVANTAGE ADVANTAGE 2
(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
(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 --
==================================================================================================================
** Net ordinary income consists of taxable market discount income and net
short-term capital gains, if any.
At May 31, 2007, the Funds' last tax year end, the following Funds had unused
capital loss carryforwards available for federal income tax purposes to be
applied against future capital gains, if any. If not applied, the carryforwards
will expire as follows:
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
================================================================================
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
================================================================================
63
Notes to
FINANCIAL STATEMENTS (continued) (Unaudited)
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 November 30, 2007, the complex-level fee rate was .1837%.
Effective August 20, 2007, the complex-level fee schedule is as follows:
COMPLEX-LEVEL ASSET BREAKPOINT LEVEL (1) EFFECTIVE RATE AT BREAKPOINT LEVEL
--------------------------------------------------------------------------------
$55 billion 0.2000%
$56 billion 0.1996
$57 billion 0.1989
$60 billion 0.1961
$63 billion 0.1931
$66 billion 0.1900
$71 billion 0.1851
$76 billion 0.1806
$80 billion 0.1773
$91 billion 0.1691
$125 billion 0.1599
$200 billion 0.1505
$250 billion 0.1469
$300 billion 0.1445
================================================================================
64
Prior to August 20, 2007, the complex-level fee schedule was as follows:
COMPLEX-LEVEL ASSET BREAKPOINT LEVEL (1) EFFECTIVE RATE AT BREAKPOINT LEVEL
--------------------------------------------------------------------------------
$55 billion 0.2000%
$56 billion 0.1996
$57 billion 0.1989
$60 billion 0.1961
$63 billion 0.1931
$66 billion 0.1900
$71 billion 0.1851
$76 billion 0.1806
$80 billion 0.1773
$91 billion 0.1698
$125 billion 0.1617
$200 billion 0.1536
$250 billion 0.1509
$300 billion 0.1490
================================================================================
(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.
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 their fees and
expenses beyond September 30, 2010.
65
Notes to
FINANCIAL STATEMENTS (continued) (Unaudited)
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.
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.
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 Windy City
Investments, Inc. ("Windy City"), a corporation formed by investors led by
Madison Dearborn Partners, LLC ("Madison Dearborn"), pursuant to which Windy
City would acquire Nuveen Investments. Madison Dearborn is a private equity
investment firm based in Chicago, Illinois. The merger was consummated on
November 13, 2007.
The consummation of the merger was deemed to be an "assignment" (as that term is
defined in the Investment Company Act of 1940) of the investment management
agreement between each Fund and the Adviser, and resulted in the automatic
termination of each Fund's agreement. The Board of Trustees of each Fund
considered and approved a new investment management agreement with the Adviser
at the same fee rate. The new ongoing agreement was approved by the shareholders
of each Fund and took effect on November 13, 2007.
66
The investors led by Madison Dearborn include an affiliate of Merrill Lynch. As
a result, Merrill Lynch is an indirect "affiliated person" (as that term is
defined in the Investment Company Act of 1940) of each Fund. Certain conflicts
of interest may arise as a result of such indirect affiliation. For example, the
Funds are generally prohibited from entering into principal transactions with
Merrill Lynch and its affiliates. The Adviser does not believe that any such
prohibitions or limitations as a result of Merrill Lynch's affiliation will
significantly impact the ability of the Funds to pursue their investment
objectives and policies.
6. NEW ACCOUNTING PRONOUNCEMENTS
Financial Accounting Standards Board Interpretation No. 48
Effective November 30, 2007, the Funds adopted Financial Accounting Standards
Board Interpretation No. 48, "Accounting for Uncertainty in Income Taxes" (FIN
48). FIN 48 provides guidance regarding 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. Management of
the Funds has concluded that there are no significant uncertain tax positions
that require recognition in the Funds' financial statements. Consequently, the
adoption of FIN 48 had no 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 November 30, 2007, management does not believe the adoption
of SFAS No. 157 will impact the financial statement amounts; however, additional
disclosures may be required about the inputs used to develop the measurements
and the effect of certain of the measurements included within the Statement of
Operations for the period.
7. SUBSEQUENT EVENTS
Distributions to Common Shareholders
The Funds declared Common share dividend distributions from their tax-exempt net
investment income which were paid on December 31, 2007, to shareholders of
record on December 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 $.0500 $.0540 $.0545 $.0490 $.0570 $.0515 $.0545
==================================================================================================================
At the same time, the following Funds declared capital gains distributions as
follows:
NORTH NORTH NORTH
GEORGIA CAROLINA CAROLINA CAROLINA
PREMIUM PREMIUM DIVIDEND DIVIDEND
INCOME INCOME ADVANTAGE ADVANTAGE 2
(NPG) (NNC) (NRB) (NNO)
------------------------------------------------------------------------------------------------------------------
Capital gains distribution per share $.0424 $.0358 $.0338 $.0638
==================================================================================================================
67
Financial
HIGHLIGHTS (Unaudited)
Selected data for a Common share outstanding throughout each period:
Investment Operations Less Distributions
-------------------------------------------------------------- -----------------------------
Distributions Distributions
from Net from Net
Beginning Investment Capital Investment Capital
Common Net Income to Gains to Income to Gains to
Share Net Realized/ Preferred Preferred Common Common
Net Asset Investment Unrealized Share- Share- Share- Share-
Value Income Gain (Loss) holders+ holders+ Total holders holders Total
=========================================================================================================================
GEORGIA PREMIUM INCOME (NPG)
-------------------------------------------------------------------------------------------------------------------------
Year Ended 5/31:
2008(b) $14.55 $ .42 $ .06 $(.12) $ -- $ .36 $(.31) $ -- $(.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:
2008(b) 14.65 .45 .16 (.13) -- .48 (.33) -- (.33)
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:
2008(b) $ -- $14.60 $12.75 (7.59)% 2.50%
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:
2008(b) -- 14.80 13.54 (13.35) 3.35
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:
2008(b) $55,550 1.24%*** 1.24%*** 5.80%*** 1.21%*** 1.21%*** 5.83%*** 10%
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:
2008(b) 29,148 1.31*** 1.31*** 5.85*** .93*** .93*** 6.23*** 11
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:
2008(b) $27,800 $25,000 $74,955 $ -- $ --
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:
2008(b) 15,000 25,000 73,580 $ -- $ --
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. The last dividend declared in the period, which
is typically paid on the first business day of the following month, is
assumed to be reinvested at the ending market price. The actual
reinvestment for the last dividend declared in the period takes place over
several days, and in some instances may not be based on the market price,
so the actual reinvestment price may be different from the price used in
the calculation. Total returns are not annualized.
Total Return on Common Share Net Asset Value is the combination of changes
in Common share net asset value, reinvested dividend income at net asset
value and reinvested capital gains distributions at net asset value, if
any. The last dividend declared in the period, which is typically paid on
the first business day of the following month, is assumed to be reinvested
at the ending net asset value. The actual reinvest price for the last
dividend declared in the period may often be based on the Fund's market
price (and not its net asset value), and therefore may be different from
the price used in the calculation. Total returns are not annualized.
** After custodian fee credit and expense reimbursement, where applicable.
*** Annualized.
+ The amounts shown are based on Common share equivalents.
++ Ratios do not reflect the effect of dividend payments to Preferred
shareholders; income ratios reflect income earned on assets attributable to
Preferred shares.
(a) Interest expense arises from the application of SFAS No. 140 to certain
inverse floating rate transactions entered into by the Fund as more fully
described in Footnote 1 - Inverse Floating Rate Securities.
(b) For the six months ended November 30, 2007.
See accompanying notes to financial statements.
68-69 spread
Financial
HIGHLIGHTS (continued) (Unaudited)
Selected data for a Common share outstanding throughout each period:
Investment Operations Less Distributions
-------------------------------------------------------------- -----------------------------
Distributions Distributions
from Net from Net
Beginning Investment Capital Investment Capital
Common Net Income to Gains to Income to Gains to
Share Net Realized/ Preferred Preferred Common Common
Net Asset Investment Unrealized Share- Share- Share- Share-
Value Income Gain (Loss) holders+ holders+ Total holders holders Total
=========================================================================================================================
GEORGIA DIVIDEND ADVANTAGE 2 (NKG)
-------------------------------------------------------------------------------------------------------------------------
Year Ended 5/31:
2008(b) $14.44 $.44 $ (.12) $(.13) $ -- $ .19 $(.32) $ -- $(.32)
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(c) 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:
2008(b) $ -- $14.31 $13.15 (7.10)% 1.37%
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(c) (.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:
2008(b) $65,146 1.23%*** 1.23%*** 5.75%*** .76%*** .76%*** 6.21%*** 8%
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(c) 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:
2008(b) $33,000 $25,000 $74,353 $ -- $ --
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(c) 33,000 25,000 76,761 -- --
===============================================================================
* 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. The last dividend declared in the period, which
is typically paid on the first business day of the following month, is
assumed to be reinvested at the ending market price. The actual
reinvestment for the last dividend declared in the period takes place over
several days, and in some instances may not be based on the market price,
so the actual reinvestment price may be different from the price used in
the calculation. Total returns are not annualized.
Total Return on Common Share Net Asset Value is the combination of changes
in Common share net asset value, reinvested dividend income at net asset
value and reinvested capital gains distributions at net asset value, if
any. The last dividend declared in the period, which is typically paid on
the first business day of the following month, is assumed to be reinvested
at the ending net asset value. The actual reinvest price for the last
dividend declared in the period may often be based on the Fund's market
price (and not its net asset value), and therefore may be different from
the price used in the calculation. Total returns are not annualized.
** After custodian fee credit and expense reimbursement, where applicable.
*** Annualized.
+ The amounts shown are based on Common share equivalents.
++ Ratios do not reflect the effect of dividend payments to Preferred
shareholders; income ratios reflect income earned on assets attributable to
Preferred shares.
(a) Interest expense arises from the application of SFAS No. 140 to certain
inverse floating rate transactions entered into by the Fund as more fully
described in Footnote 1 - Inverse Floating Rate Securities.
(b) For the six months ended November 30, 2007.
(c) For the period September 25, 2002 (commencement of operations) through May
31, 2003.
See accompanying notes to financial statements.
70-71 spread
Financial
HIGHLIGHTS (continued) (Unaudited)
Selected data for a Common share outstanding throughout each period:
Investment Operations Less Distributions
-------------------------------------------------------------- -----------------------------
Distributions Distributions
from Net from Net
Beginning Investment Capital Investment Capital
Common Net Income to Gains to Income to Gains to
Share Net Realized/ Preferred Preferred Common Common
Net Asset Investment Unrealized Share- Share- Share- Share-
Value Income Gain (Loss) holders+ holders+ Total holders holders Total
=========================================================================================================================
NORTH CAROLINA
PREMIUM INCOME
(NNC)
-------------------------------------------------------------------------------------------------------------------------
Year Ended 5/31:
2008(b) $14.36 $ .42 $ (.05) $(.12) $ -- $ .25 $(.29) $ -- $(.29)
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:
2008(b) 14.78 .46 .02 (.12) -- .36 (.35) -- (.35)
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:
2008(b) $ -- $14.32 $12.65 (9.57)% 1.80%
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:
2008(b) -- 14.79 14.09 (12.20) 2.49
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:
2008(b) $90,959 1.41%**** 1.25%**** 5.86%**** 1.38%**** 1.22%**** 5.89%**** 4%
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:
2008(b) 33,475 2.02*** 1.29**** 5.92**** 1.69**** .96**** 6.25**** 2
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:
2008(b) $46,800 $25,000 $73,589 $3,870 $36,597
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:
2008(b) 17,000 25,000 74,228 6,350 8,949
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. The last dividend declared in the period, which
is typically paid on the first business day of the following month, is
assumed to be reinvested at the ending market price. The actual
reinvestment for the last dividend declared in the period takes place over
several days, and in some instances may not be based on the market price,
so the actual reinvestment price may be different from the price used in
the calculation. Total returns are not annualized.
Total Return on Common Share Net Asset Value is the combination of changes
in Common share net asset value, reinvested dividend income at net asset
value and reinvested capital gains distributions at net asset value, if
any. The last dividend declared in the period, which is typically paid on
the first business day of the following month, is assumed to be reinvested
at the ending net asset value. The actual reinvest price for the last
dividend declared in the period may often be based on the Fund's market
price (and not its net asset value), and therefore may be different from
the price used in the calculation. Total returns are not annualized.
*** After custodian fee credit and expense reimbursement, where applicable.
**** Annualized.
+ The amounts shown are based on Common share equivalents.
++ Ratios do not reflect the effect of dividend payments to Preferred
shareholders; income ratios reflect income earned on assets attributable to
Preferred shares.
(a) Interest expense arises from the application of SFAS No. 140 to certain
inverse floating rate transactions entered into by the Fund as more fully
described in Footnote 1 - Inverse Floating Rate Securities.
(b) For the six months ended November 30, 2007.
See accompanying notes to financial statements.
72-73 spread
Financial
HIGHLIGHTS (continued) (Unaudited)
Selected data for a Common share outstanding throughout each period:
Investment Operations Less Distributions
-------------------------------------------------------------- -----------------------------
Distributions Distributions
from Net from Net
Beginning Investment Capital Investment Capital
Common Net Income to Gains to Income to Gains to
Share Net Realized/ Preferred Preferred Common Common
Net Asset Investment Unrealized Share- Share- Share- Share-
Value Income Gain (Loss) holders+ holders+ Total holders holders Total
=========================================================================================================================
NORTH CAROLINA
DIVIDEND
ADVANTAGE 2 (NNO)
-------------------------------------------------------------------------------------------------------------------------
Year Ended 5/31:
2008(b) $14.76 $.45 $ .02 $(.12) $ -- $ .35 $(.32) $ -- $(.32)
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:
2008(b) 14.38 .44 (.01) (.11) -- .32 (.33) -- (.33)
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(c) 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:
2008(b) $ -- $14.79 $13.30 (12.21)% 2.43%
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:
2008(b) -- 14.37 13.21 (7.64) 2.25
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(c) (.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:
2008(b) $55,470 1.59%*** 1.24%*** 5.76%*** 1.19%*** .84%*** 6.16%*** 4%
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:
2008(b) 56,518 1.77*** 1.24*** 5.66*** 1.31*** .78*** 6.12*** 4
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(c) 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:
2008(b) $28,000 $25,000 $74,527 $4,995 $17,711
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:
2008(b) 28,000 25,000 75,463 7,680 12,005
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(c) 28,000 25,000 77,369 -- --
===============================================================================
* 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. The last dividend declared in the period, which
is typically paid on the first business day of the following month, is
assumed to be reinvested at the ending market price. The actual
reinvestment for the last dividend declared in the period takes place over
several days, and in some instances may not be based on the market price,
so the actual reinvestment price may be different from the price used in
the calculation. Total returns are not annualized.
Total Return on Common Share Net Asset Value is the combination of changes
in Common share net asset value, reinvested dividend income at net asset
value and reinvested capital gains distributions at net asset value, if
any. The last dividend declared in the period, which is typically paid on
the first business day of the following month, is assumed to be reinvested
at the ending net asset value. The actual reinvest price for the last
dividend declared in the period may often be based on the Fund's market
price (and not its net asset value), and therefore may be different from
the price used in the calculation. Total returns are not annualized.
** After custodian fee credit and expense reimbursement, where applicable.
*** Annualized.
+ The amounts shown are based on Common share equivalents.
++ Ratios do not reflect the effect of dividend payments to Preferred
shareholders; income ratios reflect income earned on assets attributable to
Preferred shares.
(a) Interest expense arises from the application of SFAS No. 140 to certain
inverse floating rate transactions entered into by the Fund as more fully
described in Footnote 1 - Inverse Floating Rate Securities.
(b) For the six months ended November 30, 2007.
(c) For the period September 25, 2002 (commencement of operations) through May
31, 2003.
See accompanying notes to financial statements.
74-75 spread
Annual Investment
Management Agreement
Approval PROCESS
The Board Members are responsible for overseeing the performance of the
investment adviser to the Funds and determining whether to continue the advisory
arrangements. At the annual review meeting held on May 21, 2007 (the "May
Meeting"), the Board Members of the Funds, including the Independent Board
Members, unanimously approved the continuance of the Investment Management
Agreement between each Fund (each, a "Fund") and Nuveen Asset Management
("NAM"). The foregoing Investment Management Agreements with NAM are hereafter
referred to as the "Original Investment Management Agreements."
Subsequent to the May Meeting, Nuveen Investments, Inc. ("Nuveen"), the parent
company of NAM, entered into a merger agreement providing for the acquisition of
Nuveen by Windy City Investments, Inc., a corporation formed by investors led by
Madison Dearborn Partners, LLC ("MDP"), a private equity investment firm (the
"Transaction"). Each Original Investment Management Agreement, as required by
Section 15 of the Investment Company Act of 1940 (the "1940 Act"), provides for
its automatic termination in the event of its "assignment" (as defined in the
1940 Act). Any change in control of the adviser is deemed to be an assignment.
The consummation of the Transaction will result in a change of control of NAM as
well as its affiliated sub-advisers and therefore cause the automatic
termination of each Original Investment Management Agreement, as required by the
1940 Act. Accordingly, in anticipation of the Transaction, at a meeting held on
July 31, 2007 (the "July Meeting"), the Board Members, including the Independent
Board Members, unanimously approved new Investment Management Agreements (the
"New Investment Management Agreements") with NAM on behalf of each Fund to take
effect immediately after the Transaction or shareholder approval of the new
advisory contracts, whichever is later. The 1940 Act also requires that each New
Investment Management Agreement be approved by the respective Fund's
shareholders in order for it to become effective. Accordingly, to ensure
continuity of advisory services, the Board Members, including the Independent
Board Members, unanimously approved Interim Investment Management Agreements to
take effect upon the closing of the Transaction if shareholders have not yet
approved the New Investment Management Agreements.
Because the information provided and considerations made at the annual review
continue to be relevant with respect to the evaluation of the New Investment
Management Agreements, the Board considered the foregoing as part of its
deliberations of the New Investment Management Agreements. Accordingly, as
indicated, the discussions immediately below outline the materials and
information presented to the Board in connection with the Board's prior annual
review and the analysis undertaken and the conclusions reached by Board Members
when determining to continue the Original Investment Management Agreements.
I. APPROVAL OF THE ORIGINAL INVESTMENT MANAGEMENT AGREEMENTS
During the course of the year, the Board received a wide variety of materials
relating to the services provided by NAM and the performance of the Funds. At
each of its quarterly meetings, the Board reviewed investment performance and
various matters relating to the operations of the Funds and other Nuveen funds,
including the compliance program, shareholder services, valuation, custody,
distribution and other information relating to the nature, extent and quality of
services provided by NAM. Between the regularly scheduled quarterly meetings,
the Board Members received information on particular matters as the need arose.
In preparation for their considerations at the May Meeting, the Independent
Board Members received extensive materials, well in advance of the meeting,
which outlined or are related to, among other things:
[] the nature, extent and quality of services provided by NAM;
[] the organization and business operations of NAM, including the
responsibilities of various departments and key personnel;
76
[] each 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;
[] the profitability of Nuveen and certain industry profitability analyses for
unaffiliated advisers;
[] the expenses of Nuveen in providing the various services;
[] the advisory fees and total expense ratios of each 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);
[] the advisory fees NAM assesses to other types of investment products or
clients;
[] the soft dollar practices of NAM, if any; and
[] 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, NAM made a presentation to, and responded to questions from,
the Board. Prior to and after the presentations and reviewing the written
materials, the Independent Board Members met privately with their legal counsel
to review the Boardduties in reviewing advisory contracts and considering the
renewal of the advisory contracts. The Independent Board Members, in
consultation with independent counsel, reviewed the factors set out in judicial
decisions and Securities and Exchange Commission ("SEC") directives relating to
the renewal of advisory contracts. As outlined in more detail below, the Board
Members 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 NAM; (b) the investment performance of the
Fund and NAM; (c) the costs of the services to be provided and profits to be
realized by Nuveen and its affiliates; (d) the extent to which economies of
scale would be realized; and (e) whether fee levels reflect those economies of
scale for the benefit of the Fund's investors. In addition, as noted, the Board
Members met regularly throughout the year to oversee the Funds. In evaluating
the Original Investment Management Agreements, the Board Members also relied
upon their knowledge of NAM, its services and the Funds resulting from their
meetings and other interactions throughout the year. It is with this background
that the Board Members considered each Original Investment Management Agreement.
A. NATURE, EXTENT AND QUALITY OF SERVICES
In considering the renewal of the Original Investment Management Agreements, the
Board Members considered the nature, extent and quality of NAM's services. The
Board Members reviewed materials outlining, among other things, Nuveen's
organization and business; the types of services that NAM 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 had taken for the municipal fund product line. As noted, at the annual
review, the Board Members were already familiar with the organization,
operations and personnel of NAM due to the Board Members' experience in
governing the respective Funds and working with NAM on matters relating to the
Funds. With respect to personnel, the Board Members 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, the Board Members 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 activities, risk management operations
(e.g., reviewing credit quality, duration limits, and derivatives use, as
applicable), and investment operations (such as enhancements to trading
procedures, pricing procedures, and client services). The Board Members
recognized NAM's investment of resources and efforts to continue to enhance and
refine its investment process.
77
ANNUAL INVESTMENT MANAGEMENT AGREEMENT
APPROVAL PROCESS (continued)
In addition to advisory services, the Independent Board Members considered the
quality of administrative and non-advisory services provided by NAM and noted
that NAM and its affiliates provide the Funds with a wide variety of services
and officers and other personnel as are necessary for the operations of the
Funds, including:
[] product management;
[] fund administration;
[] oversight by shareholder services and other fund service providers;
[] administration of Board relations;
[] regulatory and portfolio compliance; and
[] legal support.
As the Funds operate in a highly regulated industry and given the importance of
compliance, the Board Members considered, in particular, Nuveen's compliance
activities for the Funds and enhancements thereto. In this regard, the Board
Members recognized the quality of Nuveen's compliance team. The Board Members
further noted Nuveen's negotiations with other service providers and the
corresponding reduction in certain service providers' fees at the May Meeting.
In addition to the foregoing services, the Board Members also noted the
additional services that NAM or its affiliates provide to Nuveen's closed-end
funds, including, in particular, its secondary market support activities. The
Board Members 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:
[] maintaining shareholder communications;
[] providing advertising for the Nuveen closed-end funds;
[] maintaining its closed-end fund website;
[] maintaining continual contact with financial advisers;
[] providing educational symposia;
[] conducting research with investors and financial analysis regarding
closed-end funds; and
[] evaluating secondary market performance.
With respect to the Nuveen closed-end funds that utilize leverage through the
issuance of preferred shares ("Preferred Shares"), the Board Members noted
Nuveen's continued support for the holders of Preferred Shares by, among other
things:
[] maintaining an in-house trading desk;
[] maintaining a product manager for the Preferred Shares;
[] developing distribution for Preferred Shares with new market participants;
[] maintaining an orderly auction process;
[] managing leverage and risk management of leverage; and
[] maintaining systems necessary to test compliance with rating agency
criteria.
Based on their review, the Board Members found that, overall, the nature, extent
and quality of services provided (and expected to be provided) to the respective
Funds under the Original Investment Management Agreements were satisfactory.
B. THE INVESTMENT PERFORMANCE OF THE FUNDS AND NAM
At the May Meeting, 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). The
78
Board Members also reviewed the respective Fund's portfolio level performance
(which does not reflect fund level fees and expenses, and leverage) against
customized benchmarks, described in further detail below.
In evaluating the performance information during the annual review at the May
Meeting, in certain instances, the Board Members 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 Board Members also
recognized that certain 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, funds that do not have corresponding state-specific
Performance Peer Groups are from states other than New York, California,
Florida, New Jersey, Michigan and Pennsylvania. However, with respect to funds
based in 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).
The Board Members 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 Board Members also reviewed the Fund's portfolio level performance
(which does not reflect fund level fees and expenses, and leverage) compared to
customized portfolio level benchmarks for the one- and three-year periods ending
December 31, 2006 (as applicable). The analysis was used to assess the efficacy
of investment decisions against appropriate measures of risk and total return,
within specific market segments. This information supplemented the Fund
performance information provided to the Board at each of its quarterly meetings.
Based on their review, the Board Members determined that each Fund's investment
performance over time had been satisfactory, subject to the following. With
respect to various municipal closed-end funds, the Board Members noted relative
total return underperformance in recent years compared to peers. The Board
Members reviewed materials and discussed with NAM the factors contributing to
the shift in performance including, among other things, the degree of risk
undertaken by peers compared to the municipal closed-end funds (such as through
the increased use of leverage or taking concentrated positions in high risk
credits). In addition, the Board Members also considered a fund's dividend
performance and the extent of any secondary market discounts. The Board Members
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 concluded that they were satisfied with the steps being taken.
C. FEES, EXPENSES AND PROFITABILITY
1. FEES AND EXPENSES
During the annual review, 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 Board Members 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 Board Members
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 had significant overlap
or even consisted entirely of the same unaffiliated funds. In reviewing the
comparisons of fee and expense information, the Board Members 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
impacting the comparisons thereby limited some of the usefulness of the
comparative data. The Board Members also considered the differences in the
use of leverage. Based on their review of the fee and expense information
provided, the Board Members determined that each Fund's net total expense
ratio was within an acceptable range compared to peers.
79
ANNUAL INVESTMENT MANAGEMENT AGREEMENT
APPROVAL PROCESS (continued)
2. COMPARISONS WITH THE FEES OF OTHER CLIENTS
At the annual review, the Board Members further reviewed data comparing the
advisory fees of NAM with fees NAM charges to other clients. With respect
to municipal funds, such clients include NAM's municipal separately managed
accounts. In general, the advisory fees charged for separate accounts are
somewhat lower than the advisory fees assessed to the Funds. The Board
Members considered the differences in the product types, including, but not
limited to, the services provided, the structure and operations, product
distribution and costs thereof, portfolio investment policies, investor
profiles, account sizes and regulatory requirements. The Board Members
noted, in particular, that the range of services provided to the Funds (as
discussed above) is much more extensive than that provided to separately
managed accounts. As described in further detail above, such additional
services include, but are not limited to: product management, fund
administration, oversight of third party service providers, administration
of Board relations, and legal support. The Board Members noted that the
Funds operate in a highly regulated industry requiring extensive compliance
functions compared to other investment products. Given the inherent
differences in the products, particularly the extensive services provided
to the Funds, the Board Members believe such facts justify the different
levels of fees.
3. PROFITABILITY OF NUVEEN
In conjunction with its review of fees, the Board Members also considered
the profitability of Nuveen for its advisory activities (which incorporated
Nuveen's wholly-owned affiliated sub-advisers) and its financial condition.
At the annual review, the Board Members 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 Board Members noted this information
supplemented the profitability information requested and received during
the year to help keep them apprised of developments affecting profitability
(such as changes in fee waivers and expense reimbursement commitments). In
this regard, the Board Members 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 Board
Members 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 Board Members recognized the subjective
nature of determining profitability which may be affected by numerous
factors, including the allocation of expenses. Further, the Board Members
recognized the difficulties in making comparisons as the profitability of
other advisers generally is not publicly available and the profitability
information that is available for certain advisers or management firms may
not be representative of the industry and may be affected by, among other
things, the adviser's particular business mix, capital costs, types of
funds managed and expense allocations.
Notwithstanding the foregoing, the Board Members reviewed Nuveen's methodology
and assumptions for allocating expenses across product lines to determine
profitability. Last year, the Board Members also designated an Independent Board
Member as a point person for the Board to review the methodology determinations
during the year and any refinements thereto, which relevant information produced
from such process was reported to the full Board. In reviewing profitability,
the Board Members recognized Nuveen's increased investment in its fund business.
Based on its review, the Board Members concluded 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 Board Members also
considered other amounts paid to NAM by the Funds as well as any indirect
benefits (such as soft dollar arrangements, if any) NAM and its affiliates
receive, or are expected to receive, that are directly attributable to the
management of the Funds, if any. See Section E below for additional information
on indirect benefits NAM may receive as a result of its relationship with the
Funds. Based on their review of the overall fee arrangements of each Fund, the
Board Members determined that the advisory fees and expenses of the Funds were
reasonable.
80
D. ECONOMIES OF SCALE AND WHETHER FEE LEVELS REFLECT THESE ECONOMIES OF SCALE
With respect to economies of scale, the Board Members 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 Board Members
reviewed and considered the breakpoints in the advisory fee schedules that
reduce advisory fees. In addition to advisory fee breakpoints, the Board also
approved a complex-wide fee arrangement in 2004. 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 Board Members noted that the
last complex-wide asset level breakpoint for the complex-wide fee schedule was
at $91 billion and that the Board Members anticipated further review and/or
negotiations prior to the assets of the Nuveen complex reaching such threshold.
Based on their review, the Board Members concluded that the breakpoint schedule
and complex-wide fee arrangement were 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. See Section
II, Paragraph D - "Approval of the New Investment Management Agreements -
Economies of Scale and Whether Fee Levels Reflect These Economies of Scale" for
information regarding subsequent modifications to the complex-wide fee.
E. INDIRECT BENEFITS
In evaluating fees, the Board Members also considered any indirect benefits or
profits NAM or its affiliates may receive as a result of its relationship with
each Fund. With respect to closed-end funds, the Board Members considered the
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 Board Members considered whether NAM 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
NAM in managing the assets of the Funds and other clients. With respect to NAM,
the Board Members 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.
Based on their review, the Board Members concluded that any indirect benefits
received by NAM as a result of its relationship with the Funds were reasonable
and within acceptable parameters.
F. OTHER CONSIDERATIONS
The Board Members did not identify any single factor discussed previously as
all-important or controlling in their considerations to continue an advisory
contract. The Board Members, including the Independent Board Members,
unanimously concluded that the terms of the Original Investment Management
Agreements are fair and reasonable, that NAM's fees are reasonable in light of
the services provided to each Fund and that the renewal of the Original
Investment Management Agreements be approved.
II. APPROVAL OF THE NEW INVESTMENT MANAGEMENT AGREEMENTS
Following the May Meeting, the Board Members were advised of the potential
Transaction. As noted above, the completion of the Transaction would terminate
each of the Original Investment Management Agreements. Accordingly, at the July
Meeting, the Board of each Fund, including the Independent Board Members,
unanimously approved the New Investment Management Agreements on behalf of the
respective Funds. Leading up to the July Meeting, the Board Members had several
meetings and deliberations with and without Nuveen management present, and with
the advice of legal counsel, regarding the proposed Transaction as outlined
below.
On June 8, 2007, the Board Members held a special telephonic meeting to discuss
the proposed Transaction. At that meeting, the Board Members established a
special ad hoc committee comprised solely of Independent Board Members to focus
on the Transaction and to keep the Independent Board Members updated with
developments regarding the Transaction. On June 15, 2007, the ad hoc committee
discussed with representatives of NAM the Transaction and modifications to the
complex-wide fee schedule that
81
ANNUAL INVESTMENT MANAGEMENT AGREEMENT
APPROVAL PROCESS (continued)
would generate additional fee savings at specified levels of complex-wide asset
growth. Following the foregoing meetings and several subsequent telephonic
conferences among Independent Board Members and independent counsel, and between
Independent Board Members and representatives of Nuveen, the Board met on June
18, 2007 to further discuss the proposed Transaction. Immediately prior to and
then again during the June 18, 2007 meeting, the Independent Board Members met
privately with their independent legal counsel. At that meeting, the Board met
with representatives of MDP, of Goldman Sachs, Nuveen's financial adviser in the
Transaction, and of the Nuveen Board to discuss, among other things, the history
and structure of MDP, the terms of the proposed Transaction (including the
financing terms), and MDP's general plans and intentions with respect to Nuveen
(including with respect to management, employees, and future growth prospects).
On July 9, 2007, the Board also met to be updated on the Transaction as part of
a special telephonic Board meeting. The Board Members were further updated at a
special in-person Board meeting held on July 19, 2007 (one Independent Board
Member participated telephonically). Subsequently, on July 27, 2007, the ad hoc
committee held a telephonic conference with representatives of Nuveen and MDP to
further discuss, among other things, the Transaction, the financing of the
Transaction, retention and incentive plans for key employees, the effect of
regulatory restrictions on transactions with affiliates after the Transaction,
and current volatile market conditions and their impact on the Transaction.
In connection with their review of the New Investment Management Agreements, the
Independent Board Members, through their independent legal counsel, also
requested in writing and received additional information regarding the proposed
Transaction and its impact on the provision of services by NAM and its
affiliates.
The Independent Board Members received, well in advance of the July Meeting,
materials which outlined, among other things:
[] the structure and terms of the Transaction, including MDP's co-investor
entities and their expected ownership interests, and the financing
arrangements that will exist for Nuveen following the closing of the
Transaction;
[] the strategic plan for Nuveen following the Transaction;
[] the governance structure for Nuveen following the Transaction;
[] any anticipated changes in the operations of the Nuveen funds following the
Transaction, including changes to NAM's and Nuveen's day-to-day management,
infrastructure and ability to provide advisory, distribution or other
applicable services to the Funds;
[] any changes to senior management or key personnel who work on Fund related
matters (including portfolio management, investment oversight, and
legal/compliance) and any retention or incentive arrangements for such
persons;
[] any anticipated effect on each Fund's expense ratio (including advisory
fees) following the Transaction;
[] any benefits or undue burdens imposed on the Funds as a result of the
Transaction;
[] any legal issues for the Funds as a result of the Transaction;
[] the nature, quality and extent of services expected to be provided to the
Funds following the Transaction, changes to any existing services and
policies affecting the Funds, and cost-cutting efforts, if any, that may
impact such services or policies;
[] any conflicts of interest that may arise for Nuveen or MDP with respect to
the Funds;
[] the costs associated with obtaining necessary shareholder approvals and who
would bear those costs; and
[] from legal counsel, a memorandum describing the applicable laws,
regulations and duties in approving advisory contracts, including, in
particular, with respect to a change of control.
Immediately preceding the July Meeting, representatives of MDP met with the
Board to further respond to questions regarding the Transaction. After the
meeting with MDP, the Independent Board Members met with independent legal
counsel in executive session. At the July Meeting, Nuveen also made a
presentation and
82
responded to questions. Following the presentations and discussions of the
materials presented to the Board, the Independent Board Members met again in
executive session with their counsel. As outlined in more detail below, the
Independent Board Members considered all factors they believed relevant with
respect to each Fund, including the impact that the Transaction could be
expected to have on the following: (a) the nature, extent and quality of
services to be provided; (b) the investment performance of the Funds; (c) the
costs of the services and profits to be realized by Nuveen and its affiliates;
(d) the extent to which economies of scale would be realized; and (e) whether
fee levels reflect those economies of scale for the benefit of investors. As
noted above, the Board Members had completed their annual review of the
respective Original Investment Management Agreements at the May Meeting and many
of the factors considered at the annual review were applicable to their
evaluation of the New Investment Management Agreements. Accordingly, in
evaluating the New Investment Management Agreements, the Board Members relied
upon their knowledge and experience with NAM and considered the information
received and their evaluations and conclusions drawn at the annual review. While
the Board reviewed many Nuveen funds at the July Meeting, the Independent Board
Members evaluated all information available to them on a fund-by-fund basis, and
their determinations were made separately in respect of each Fund.
A. NATURE, EXTENT AND QUALITY OF SERVICES
In evaluating the nature, quality and extent of the services expected to be
provided by NAM under the New Investment Management Agreements, the Independent
Board Members considered, among other things, the expected impact, if any, of
the Transaction on the operations, facilities, organization and personnel of
NAM; the potential implications of regulatory restrictions on the Funds
following the Transaction; the ability of NAM and its affiliates to perform
their duties after the Transaction; and any anticipated changes to the current
investment and other practices of the Funds.
The Board noted that the terms of each New Investment Management Agreement,
including the fees payable thereunder, are substantially identical to those of
the Original Investment Management Agreement relating to the same Fund (with
both reflecting reductions to fee levels in the complex-wide fee schedule for
complex-wide assets in excess of $80 billion that have an effective date of
August 20, 2007). The Board considered that the services to be provided and the
standard of care under the New Investment Management Agreements are the same as
the Original Investment Management Agreements. The Board Members further noted
that key personnel who have responsibility for the Funds in each area, including
portfolio management, investment oversight, fund management, fund operations,
product management, legal/compliance and board support functions, are expected
to be the same following the Transaction. The Board Members considered and are
familiar with the qualifications, skills and experience of such personnel. The
Board also considered certain information regarding anticipated retention or
incentive plans designed to retain key personnel. Further, the Board Members
noted that no changes to Nuveen's infrastructure or operations as a result of
the Transaction were anticipated other than potential enhancements as a result
of an expected increase in the level of investment in such infrastructure and
personnel. The Board noted MDP's representations that it does not plan to have a
direct role in the management of Nuveen, appointing new management personnel, or
directly impacting individual staffing decisions. The Board Members also noted
that there were not any planned "cost cutting" measures that could be expected
to reduce the nature, extent or quality of services. After consideration of the
foregoing, the Board Members concluded that no diminution in the nature, quality
and extent of services provided to the Funds and their shareholders is expected.
In addition to the above, the Board Members considered potential changes in the
operations of each Fund. In this regard, the Board Members considered the
potential effect of regulatory restrictions on the Funds' transactions with
future affiliated persons. During their deliberations, it was noted that, after
the Transaction, a subsidiary of Merrill Lynch is expected to have an ownership
interest in Nuveen at a level that will make Merrill Lynch an affiliated person
of Nuveen. The Board Members recognized that applicable law would generally
prohibit the Funds from engaging in securities transactions with Merrill Lynch
as principal, and would also impose restrictions on using Merrill Lynch for
agency transactions. They recognized that having MDP and Merrill Lynch as
affiliates may restrict the Nuveen funds' ability to invest in securities of
issuers controlled by MDP or issued by Merrill Lynch and its affiliates even if
not bought directly from MDP or Merrill Lynch as principal. They also recognized
that various regulations may require the Nuveen funds to apply investment
limitations on a combined basis with affiliates of Merrill Lynch. The Board
Members considered information provided by NAM regarding the potential impact on
the Nuveen funds' operations as a result of
83
ANNUAL INVESTMENT MANAGEMENT AGREEMENT
APPROVAL PROCESS (continued)
these regulatory restrictions. The Board Members considered, in particular, the
Nuveen funds that may be impacted most by the restricted access to Merrill
Lynch, including: municipal funds (particularly certain state-specific funds),
senior loan funds, taxable fixed income funds, preferred security funds and
funds that heavily use derivatives. The Board Members considered such funds'
historic use of Merrill Lynch as principal in their transactions and information
provided by NAM regarding the expected impact resulting from Merrill Lynch's
affiliation with Nuveen and available measures that could be taken to minimize
such impact. NAM informed the Board Members that, although difficult to
determine with certainty, its management did not believe that MDP's or Merrill
Lynch's status as an affiliate of Nuveen would have a material adverse effect on
any Nuveen fund's ability to pursue its investment objectives and policies.
In addition to the regulatory restrictions considered by the Board, the Board
Members also considered potential conflicts of interest that could arise between
the Nuveen funds and various parties to the Transaction and discussed possible
ways of addressing such conflicts.
Based on its review along with its considerations regarding services at the
annual review, the Board concluded that the Transaction was not expected to
adversely affect the nature, quality or extent of services provided by NAM and
that the expected nature, quality and extent of such services supported approval
of the New Investment Management Agreements.
B. PERFORMANCE OF THE FUNDS
With respect to the performance of the Funds, the Board considered that the
portfolio management personnel responsible for the management of the Funds'
portfolios were expected to continue to manage the portfolios following the
completion of the Transaction.
In addition, the Board Members recently reviewed Fund performance at the May
Meeting, as described above, and determined that Fund performance was
satisfactory or better, subject to the following. With respect to certain
municipal closed-end funds with relative short-term underperformance, the Board
Members concluded NAM was taking steps to evaluate the factors affecting
performance and those steps would continue following the Transaction. Further,
the investment policies and strategies were not expected to change as a result
of the Transaction.
In light of the foregoing factors, along with the prior findings regarding
performance at the annual review, the Board concluded that its findings with
respect to performance supported approval of the New Investment Management
Agreements.
C. FEES, EXPENSES AND PROFITABILITY
As described in more detail above, during the annual review, the Board Members
considered, among other things, the management fees and expenses of the Funds,
the breakpoint schedules, and comparisons of such fees and expenses with peers.
At the annual review, the Board Members determined that the respective Fund's
advisory fees and expenses were reasonable. In evaluating the costs of services
to be provided by NAM under the New Investment Management Agreements and the
profitability of Nuveen for its advisory activities, the Board Members
considered their prior conclusions at the annual review and whether the
management fees or other expenses would change as a result of the Transaction.
As described above, the investment management fee is composed of two
components--a fund-level component and complex-wide level component. The fee
schedule under the New Investment Management Agreements to be paid to NAM is
identical to that under the Original Investment Management Agreements, including
the modified complex-wide fee schedule. As noted above, the Board recently
approved a modified complex-wide fee schedule that would generate additional fee
savings on complex-wide assets above $80 billion. The modifications have an
effective date of August 20, 2007 and are part of the Original Investment
Management Agreements. Accordingly, the terms of the complex-wide component
under the New Investment Management Agreements are the same as under the
Original Investment Management Agreements. The Board Members also noted that
Nuveen has committed for a period of two years from the date of closing of the
Transaction that it will not increase gross management fees for any Nuveen fund
and will not reduce voluntary expense reimbursement levels for any Nuveen fund
from their currently scheduled
84
prospective levels. Based on the information provided, the Board Members did not
expect that overall Fund expenses would increase as a result of the Transaction.
In addition, the Board Members considered that additional fund launches were
anticipated after the Transaction which would result in an increase in total
assets under management in the complex and a corresponding decrease in overall
management fees under the complex-wide fee schedule. Taking into consideration
the Board's prior evaluation of fees and expenses at the annual renewal, and the
modification to the complex-wide fee schedule, the Board determined that the
management fees and expenses were reasonable.
While it is difficult to predict with any degree of certainty the impact of the
Transaction on Nuveen's profitability, at the recent annual review, the Board
Members were satisfied that Nuveen's level of profitability for its advisory
activities was reasonable. During the year, the Board Members had noted the
enhanced dialogue regarding profitability and the appointment of an Independent
Board Member as a point person to review methodology determinations and
refinements in calculating profitability. Given their considerations at the
annual review and the modifications to the complex-wide fee schedule, the Board
Members were satisfied that Nuveen's level of profitability for its advisory
activities continues to be reasonable.
D. ECONOMIES OF SCALE AND WHETHER FEE LEVELS REFLECT THESE ECONOMIES OF SCALE
The Board Members have been cognizant of economies of scale and the potential
benefits resulting from the costs of a Fund being spread over a larger asset
base. To help ensure that shareholders share in the benefits derived from
economies of scale, the Board adopted the complex-wide fee arrangement in 2004.
At the May Meeting, the Board Members reviewed the complex-wide fee arrangements
and noted that additional negotiations may be necessary or appropriate as the
assets in the complex approached the $91 billion threshold. In light of this
assessment coupled with the upcoming Transaction, at the June 15, 2007 meeting,
the ad hoc committee met with representatives of Nuveen to further discuss
modifications to the complex-wide fee schedule that would generate additional
savings for shareholders as the assets of the complex grow. The proposed terms
for the complex-wide fee schedule are expressed in terms of targeted cumulative
savings at specified levels of complex-wide assets, rather than in terms of
targeted marginal complex-wide fee rates. Under the modified schedule, the
schedule would generate additional fee savings beginning at complex-wide assets
of $80 billion in order to achieve targeted cumulative annual savings at $91
billion of $28 million on a complex-wide level (approximately $0.6 million
higher than those generated under the then current schedule) and generate
additional fee savings for asset growth above complex-wide assets of $91 billion
in order to achieve targeted annual savings at $125 billion of assets of
approximately $50 million on a complex-wide level (approximately $2.2 million
higher annually than that generated under the then current schedule). At the
July Meeting, the Board approved the modified complex-wide fee schedule for the
Original Investment Management Agreements and these same terms will apply to the
New Investment Management Agreements. Accordingly, the Board Members believe
that the breakpoint schedules and revised complex-wide fee schedule are
appropriate and desirable in ensuring that shareholders participate in the
benefits derived from economies of scale.
E. INDIRECT BENEFITS
During their recent annual review, the Board Members considered any indirect
benefits that NAM may receive as a result of its relationship with the Funds, as
described above. As the policies and operations of Nuveen are not anticipated to
change significantly after the Transaction, such indirect benefits should remain
after the Transaction. The Board Members further considered any additional
indirect benefits to be received by NAM or its affiliates after the Transaction.
The Board Members noted that other than benefits from its ownership interest in
Nuveen and indirect benefits from fee revenues paid by the Funds under the
management agreements and other Board-approved relationships, it was currently
not expected that MDP or its affiliates would derive any benefit from the Funds
as a result of the Transaction or transact any business with or on behalf of the
Funds (other than perhaps potential Fund acquisitions, in secondary market
transactions, of securities issued by MDP portfolio companies); or that Merrill
Lynch or its affiliates would derive any benefits from the Funds as a result of
the Transaction (noting that, indeed, Merrill Lynch would stand to experience
the discontinuation of principal transaction activity with the Nuveen funds and
likely would experience a noticeable reduction in the volume of agency
transactions with the Nuveen funds).
85
ANNUAL INVESTMENT MANAGEMENT AGREEMENT
APPROVAL PROCESS (continued)
F. OTHER CONSIDERATIONS
In addition to the factors above, the Board Members also considered the
following with respect to the Funds:
[] Nuveen would rely on the provisions of Section 15(f) of the 1940 Act.
Section 15(f) provides, in substance, that when a sale of a controlling
interest in an investment adviser occurs, the investment adviser or any of
its affiliated persons may receive any amount or benefit in connection with
the sale so long as (i) during the three-year period following the
consummation of a transaction, at least 75% of the investment company's
board of directors must not be "interested persons" (as defined in the 1940
Act) of the investment adviser or predecessor adviser and (ii) an "unfair
burden" (as defined in the 1940 Act, including any interpretations or
no-action letters of the SEC) must not be imposed on the investment company
as a result of the transaction relating to the sale of such interest, or
any express or implied terms, conditions or understanding applicable
thereto. In this regard, to help ensure that an unfair burden is not
imposed on the Nuveen funds, Nuveen has committed for a period of two years
from the date of the closing of the Transaction (i) not to increase gross
management fees for any Nuveen fund; (ii) not to reduce voluntary expense
reimbursement levels for any Nuveen fund from their currently scheduled
prospective levels during that period; (iii) that no Nuveen fund whose
portfolio is managed by a Nuveen affiliate shall use Merrill Lynch as a
broker with respect to portfolio transactions done on an agency basis,
except as may be approved in the future by the Compliance Committee of the
Board; and (iv) that NAM shall not cause the Funds and other municipal
funds that NAM manages, as a whole, to enter into portfolio transactions
with or through the other minority owners of Nuveen, on either a principal
or an agency basis, to a significantly greater extent than both what one
would expect an investment team to use such firm in the normal course of
business, and what NAM has historically done, without prior Board or
Compliance Committee approval (excluding the impact of proportionally
increasing the use of such other "minority owners" to fill the void
necessitated by not being able to use Merrill Lynch).
[] The Funds would not incur any costs in seeking the necessary shareholder
approvals for the New Investment Management Agreements (except for any
costs attributed to seeking shareholder approvals of Fund specific matters
unrelated to the Transaction, such as approval of Board Members, in which
case a portion of such costs will be borne by the applicable Funds).
[] The reputation, financial strength and resources of MDP.
[] The long-term investment philosophy of MDP and anticipated plans to grow
Nuveen's business to the benefit of the Nuveen funds.
[] The benefits to the Nuveen funds as a result of the Transaction including:
(i) as a private company, Nuveen may have more flexibility in making
additional investments in its business; (ii) as a private company, Nuveen
may be better able to structure compensation packages to attract and retain
talented personnel; (iii) as certain of Nuveen's distribution partners are
expected to be equity or debt investors in Nuveen, Nuveen may be able to
take advantage of new or enhanced distribution arrangements with such
partners; and (iv) MDP's experience, capabilities and resources that may
help Nuveen identify and acquire investment teams or firms and finance such
acquisitions.
[] The historic premium and discount levels at which the shares of the Nuveen
funds have traded at specified dates with particular focus on the premiums
and discounts after the announcement of the Transaction, taking into
consideration recent volatile market conditions and steps or initiatives
considered or undertaken by NAM to address discount levels.
86
G. CONCLUSION
The Board Members did not identify any single factor discussed previously as
all-important or controlling. The Board Members, including the Independent Board
Members, unanimously concluded that the terms of the New Investment Management
Agreements are fair and reasonable, that the fees therein are reasonable in
light of the services to be provided to each Fund and that the New Investment
Management Agreements should be approved and recommended to shareholders.
III. APPROVAL OF INTERIM CONTRACTS
As noted above, at the July Meeting, the Board Members, including the
Independent Board Members, unanimously approved the Interim Investment
Management Agreements. If necessary to assure continuity of advisory services,
the Interim Investment Management Agreements will take effect upon the closing
of the Transaction if shareholders have not yet approved the New Investment
Management Agreements. The terms of each Interim Investment Management Agreement
are substantially identical to those of the corresponding Original Investment
Management Agreement and New Investment Management Agreement, respectively,
except for certain term and escrow provisions. In light of the foregoing, the
Board Members, including the Independent Board Members, unanimously determined
that the scope and quality of services to be provided to the Funds under the
respective Interim Investment Management Agreement are at least equivalent to
the scope and quality of services provided under the applicable Original
Investment Management Agreement.
87
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.
88
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.
89
Glossary of
TERMS USED in this REPORT
[] AVERAGE ANNUAL TOTAL RETURN: This is a commonly used method to express an
investment's performance over a particular, usually multi-year time period.
It expresses the return that would have been necessary each year to equal
the investment's actual cumulative performance (including change in NAV or
market price and reinvested dividends and capital gains distributions, if
any) over the time period being considered.
[] AVERAGE EFFECTIVE MATURITY: The average of the number of years to maturity
of the bonds in a Fund's portfolio, computed by weighting each bond's time
to maturity (the date the security comes due) by the market value of the
security. This figure does not account for the likelihood of prepayments or
the exercise of call provisions unless an escrow account has been
established to redeem the bond before maturity. The market value weighting
for an investment in an inverse floating rate security is the value of the
portfolio's residual interest in the inverse floating rate trust, and does
not include the value of the floating rate securities issued by the trust.
[] INVERSE FLOATERS: Inverse floating rate securities are created by
depositing a municipal bond, typically with a fixed interest rate, into a
special purpose trust created by a broker-dealer. This trust, in turn, (a)
issues floating rate certificates typically paying short-term tax-exempt
interest rates to third parties in amounts equal to some fraction of the
deposited bond's par amount or market value, and (b) issues an inverse
floating rate certificate (sometimes referred to as an "inverse floater")
to an investor (such as a Fund) interested in gaining investment exposure
to a long-term municipal bond. The income received by the holder of the
inverse floater varies inversely with the short-term rate paid to the
floating rate certificates' holders, and in most circumstances the holder
of the inverse floater bears substantially all of the underlying bond's
downside investment risk. The holder of the inverse floater typically also
benefits disproportionately from any potential appreciation of the
underlying bond's value. Hence, an inverse floater essentially represents
an investment in the underlying bond on a leveraged basis.
[] LEVERAGE-ADJUSTED DURATION: Duration is a measure of the expected period
over which a bond's principal and interest will be paid, and consequently
is a measure of the sensitivity of a bond's or bond Fund's value to changes
when market interest rates change. Generally, the longer a bond's or Fund's
duration, the more the price of the bond or Fund will change as interest
rates change. Leverage-adjusted duration takes into account the leveraging
process for a Fund and therefore is longer than the duration of the Fund's
portfolio of bonds.
[] MARKET YIELD (ALSO KNOWN AS DIVIDEND YIELD OR CURRENT YIELD): An
investment's current annualized dividend divided by its current market
price.
[] NET ASSET VALUE (NAV): A Fund's common share NAV per share is calculated by
subtracting the liabilities of the Fund (including any MuniPreferred shares
issued in order to leverage the Fund) from its total assets and then
dividing the remainder by the number of shares outstanding. Fund NAVs are
calculated at the end of each business day.
[] TAXABLE-EQUIVALENT YIELD: The yield necessary from a fully taxable
investment to equal, on an after-tax basis, the yield of a municipal bond
investment.
[] ZERO COUPON BOND: A zero coupon bond does not pay a regular interest coupon
to its holders during the life of the bond. Tax-exempt income to the holder
of the bond comes from accretion of the difference between the original
purchase price of the bond at issuance and the par value of the bond at
maturity and is effectively paid at maturity. The market prices of zero
coupon bonds generally are more volatile than the market prices of bonds
that pay interest periodically.
90
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
twelve-month period ended June 30, 2007, and (iii) a description of the policies
and procedures that the Funds used to determine how to vote proxies relating to
portfolio securities are available without charge, upon request, by calling
Nuveen Investments toll-free at (800) 257-8787 or on Nuveen's website at
www.nuveen.com.
You may also obtain this and other Fund information directly from the Securities
and Exchange Commission ("SEC"). The SEC may charge a copying fee for this
information. Visit the SEC on-line at http://www.sec.gov or in person at the
SEC's Public Reference Room in Washington, D.C. Call the SEC at 1-202-942-8090
for room hours and operation. You may also request Fund information by sending
an e-mail request to publicinfo@sec.gov or by writing to the SEC's Public
References Section at 450 Fifth Street NW, Washington, D.C. 20549.
CEO Certification Disclosure
Each Fund's Chief Executive Officer has submitted to the 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 Changes
In May 2007, the Funds' Board of Trustees voted to permit the Funds' to make
loans from Fund assets to certain bond issuers. The amounts of these loans are
subject to strict limits. This policy is designed to enhance the Funds' ability
to meet their Funds'investment objectives by providing for increased portfolio
management flexibility, greater diversification potential, and opportunities for
increased capital appreciation over time.
Board of Trustees
Robert P. Bremner
Jack B. Evans
William C. Hunter
David J. Kundert
William J. Schneider
Timothy R. Schwertfeger
Judith M. Stockdale
Carole E. Stone
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 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 semi-annual report.
91
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 $170 billion in assets, as of September 30, 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: Nuveen, a leader in fixed-income investments; NWQ, a leader
in value-style equities; Rittenhouse, a leader in growth-style equities;
Symphony, a leading institutional manager of market-neutral alternative
investment portfolios; Santa Barbara, a leader in growth equities; and
Tradewinds, a leader in global equities.
Find out how we can help you reach your financial goals.
To learn more about the products and services Nuveen Investments offers, talk to
your financial advisor, or call us at (800) 257-8787. Please read the
information provided carefully before you invest. Be sure to obtain a
prospectus, where applicable. Investors should consider the investment objective
and policies, risk considerations, charges and expenses of the Fund carefully
before investing. The prospectus contains this and other information relevant to
an investment in the Fund. For a prospectus, please contact your securities
representative or Nuveen Investments, 333 W. Wacker Dr., Chicago, IL 60606.
Please read the prospectus carefully before you invest or send money.
Learn more about Nuveen Funds at: www.nuveen.com/etf
Share prices
Fund details
Daily financial news
Investor education
Interactive planning tools
ESA-C-1107D
ITEM 2. CODE OF ETHICS.
Not applicable to this filing.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable to this filing.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable to this filing.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable to this filing.
ITEM 6. SCHEDULE OF INVESTMENTS.
See Portfolio of Investments in Item 1.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable to this filing.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable to this filing.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures by which shareholders may
recommend nominees to the registrant's Board implemented after the registrant
last provided disclosure in response to this Item.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive and principal financial officers,
or persons performing similar functions, have concluded that the
registrant's disclosure controls and procedures (as defined in Rule
30a-3(c) under the Investment Company Act of 1940, as amended (the
"1940 Act") (17 CFR 270.30a-3(c))) are effective, as of a date within
90 days of the filing date of this report that includes the disclosure
required by this paragraph, based on their evaluation of the controls
and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR
270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")(17 CFR
240.13a-15(b) or 240.15d-15(b)).
(b) There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the 1940 Act
(17 CFR 270.30a-3(d)) that occurred during the second fiscal quarter
of the period covered by this report that has materially affected, or
is reasonably likely to materially affect, the registrant's internal
control over financial reporting.
ITEM 12. EXHIBITS.
File the exhibits listed below as part of this Form.
(a)(1) Any code of ethics, or amendment thereto, that is the subject of the
disclosure required by Item 2, to the extent that the registrant intends to
satisfy the Item 2 requirements through filing of an exhibit: Not applicable to
this filing.
(a)(2) A separate certification for each principal executive officer and
principal financial officer of the registrant as required by Rule 30a-2(a) under
the 1940 Act (17 CFR 270.30a-2(a)) in the exact form set forth below: Ex-99.CERT
attached hereto.
(a)(3) Any written solicitation to purchase securities under Rule 23c-1 under
the 1940 Act (17 CFR 270.23c-1) sent or given during the period covered by the
report by or on behalf of the registrant to 10 or more persons: Not applicable.
(b) If the report is filed under Section 13(a) or 15(d) of the Exchange Act,
provide the certifications required by Rule 30a-2(b) under the 1940 Act (17 CFR
270.30a-2(b)); Rule 13a-14(b) or Rule 15d-14(b) under the Exchange Act (17 CFR
240.13a-14(b) or 240.15d-14(b)), and Section 1350 of Chapter 63 of Title 18 of
the United States Code (18 U.S.C. 1350) as an exhibit. A certification furnished
pursuant to this paragraph will not be deemed "filed" for purposes of Section 18
of the Exchange Act (15 U.S.C. 78r), or otherwise subject to the liability of
that section. Such certification will not be deemed to be incorporated by
reference into any filing under the Securities Act of 1933 or the Exchange Act,
except to the extent that the registrant specifically incorporates it by
reference. Ex-99.906 CERT attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Nuveen Georgia Dividend Advantage Municipal Fund 2
-----------------------------------------------------------
By (Signature and Title)* /s/ Kevin J. McCarthy
----------------------------------------------
Kevin J. McCarthy
(Vice President and Secretary)
Date: February 8, 2008
-------------------------------------------------------------------
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: February 8, 2008
-------------------------------------------------------------------
By (Signature and Title)* /s/ Stephen D. Foy
----------------------------------------------
Stephen D. Foy
Vice President and Controller
(principal financial officer)
Date: February 8, 2008
-------------------------------------------------------------------
* Print the name and title of each signing officer under his or her signature.