UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-21152
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Nuveen Georgia Dividend Advantage Municipal Fund 2
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(Exact name of registrant as specified in charter)
Nuveen Investments
333 West Wacker Drive
Chicago, IL 60606
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(Address of principal executive offices) (Zip code)
Kevin J. McCarthy
Nuveen Investments
333 West Wacker Drive
Chicago, IL 60606
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(Name and address of agent for service)
Registrant's telephone number, including area code: (312) 917-7700
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Date of fiscal year end: May 31
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Date of reporting period: May 31, 2008
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Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
ANNUAL REPORT
May 31, 2008
Nuveen Investments
MUNICIPAL CLOSED-END FUNDS
Photo of: Small child
NUVEEN GEORGIA
PREMIUM INCOME
MUNICIPAL FUND
NPG
NUVEEN GEORGIA
DIVIDEND ADVANTAGE
MUNICIPAL FUND
NZX
NUVEEN GEORGIA
DIVIDEND ADVANTAGE
MUNICIPAL FUND 2
NKG
NUVEEN NORTH
CAROLINA PREMIUM
INCOME
MUNICIPAL FUND
NNC
NUVEEN NORTH
CAROLINA DIVIDEND
ADVANTAGE
MUNICIPAL FUND
NRB
NUVEEN NORTH
CAROLINA DIVIDEND
ADVANTAGE
MUNICIPAL FUND 2
NNO
NUVEEN NORTH
CAROLINA DIVIDEND
ADVANTAGE
MUNICIPAL FUND 3
NII
IT'S NOT WHAT YOU EARN, IT'S WHAT YOU KEEP.(R)
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Chairman's
LETTER TO SHAREHOLDERS
Photo of: Robert P. Bremner
Robert P. Bremner | Chairman of the Board
I'd like to use my initial letter to you to accomplish several things. First, I
want to report that after fourteen years of service on your Fund's Board,
including the last twelve as chairman, Tim Schwertfeger retired from the Board
in June. The Board has elected me to replace him as the chairman, the first time
this role has been filled by someone who is not an employee of Nuveen
Investments. Electing an independent chairman marks a significant milestone in
the management of your Fund, and it aligns us with what is now considered a
"best practice" in the fund industry. Further, it demonstrates the independence
with which your Board has always acted on your behalf.
Following Tim will not be easy. During my eleven previous years on the Nuveen
Fund Board, I found that Tim always set a very high standard by combining
insightful industry and market knowledge and sound, clear judgment. While the
Board will miss his wise counsel, I am certain we will retain the primary
commitment Tim shared with all of us - an unceasing dedication to creating and
retaining value for Nuveen Fund shareholders. This focus on value over time is a
touchstone that I and all the other Board members will continue to use when
making decisions on your behalf.
Second, I also want to report that we are very fortunate to be welcoming two new
Board members to our team. John Amboian, the current chairman and CEO of Nuveen
Investments, has agreed to replace Tim as Nuveen's representative on the Board.
John's presence will allow the independent Board members to benefit not only
from his leadership role at Nuveen but also his broad understanding of the fund
industry and Nuveen's role within it. We also are adding Terry Toth as an
independent director. A former CEO of the Northern Trust Company's asset
management group, Terry will bring extensive experience in the fund industry to
our deliberations.
Third, on behalf of the entire Board, I would like to acknowledge the effort the
whole Nuveen organization is making to resolve the auction rate preferred share
situation in a satisfactory manner. As you know, we are actively pursuing a
number of possible solutions, all with the goal of providing liquidity for
preferred shareholders while preserving the potential benefits of leverage for
common shareholders. We appreciate the patience you have shown as we've worked
through the many details involved.
Finally, I urge you to take the time to review the Portfolio Manager's Comments,
the Common Share Dividend and Share Price Information, and the Performance
Overview sections of this report. All of us are grateful that you have chosen
Nuveen Investments as a partner as you pursue your financial goals, and, on
behalf of myself and the other members of your Fund's Board, let me say we look
forward to continuing to earn your trust in the months and years ahead.
Sincerely,
/s/ Robert P. Bremner
Robert P. Bremner
Chairman of the Board
July 15, 2008
Portfolio Manager's COMMENTS
Nuveen Investments Municipal Closed-End Funds | NPG, NZX, NKG, NNC
NRB, NNO, NII
Portfolio manager Daniel Close reviews economic and municipal market conditions
at both the national and state levels, key investment strategies, and the annual
performance of the Nuveen Georgia and North Carolina Funds. Dan, who joined
Nuveen in 2000, assumed portfolio management responsibility for these seven
Funds in March 2007.
WHAT FACTORS AFFECTED THE U.S. ECONOMIC AND MUNICIPAL MARKET ENVIRONMENTS DURING
THE TWELVE-MONTH REPORTING PERIOD ENDED MAY 31, 2008?
During this period, developments in the credit markets led to increased price
volatility and tightening liquidity, causing a flight to quality. These
developments, which began to take shape last summer, became particularly evident
in August 2007 when market concerns about defaults on sub-prime mortgages
resulted in a liquidity crisis across all fixed income asset classes. In
September 2007, the Federal Reserve (Fed) responded to credit market volatility
by launching a series of interest rate cuts that lowered the fed funds rate by
325 basis points--from 5.25% to 2.00%--in eight months, including reductions of
125 basis points in January 2008 alone.
The Fed's actions also were a response to increased signs of weakness in the
U.S. economy, as evidenced by the slowing growth of the U.S. gross domestic
product (GDP), a closely watched measure of economic performance. While GDP
expanded at 3.8% in the second quarter of 2007 and 4.9% in the third quarter,
this measure dropped sharply to 0.6% in the fourth quarter of 2007 (all GDP
numbers annualized). In the first quarter of 2008, GDP grew at an annual rate of
1.0%, restrained by a 25% decline in residential investment and the weakest
consumer spending since 2001. Driven largely by increased energy and food
prices, the Consumer Price Index (CPI) registered a 4.2% year-over-year gain as
of May 2008. The core CPI (which excludes food and energy prices) rose 2.3%
between June 2007 and May 2008, remaining above the Fed's unofficial target of
2.0% or lower. In the labor markets, January 2008 marked the first decline in
new jobs creation since 2003, breaking the longest string of employment growth
(fifty-two months) in U.S. history. The national unemployment rate for May 2008
was 5.5%, its highest level since October 2004, compared with 4.5% in May 2007.
The 0.5% increase in this rate between April and May 2008 represented the
biggest one-month jump in more than twenty-two years.
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.
4
In the municipal bond market, factors related to the sub-prime mortgage crisis
had an indirect, but important, influence on performance. General concerns about
the credit markets as well as more specific concerns about municipal bond
insurers with exposure to sub-prime mortgages caused some investors to curtail
purchases. As a result, in February 2008, hedge funds and other non-traditional
buyers of municipal bonds were forced to sell holdings of long-maturity bonds
into a market already experiencing a lack of liquidity. Combined with the Fed
rate cuts, this selling produced a sharp steepening of the municipal yield
curve, as longer-term interest rates rose and short-term interest rates
declined. In this environment, bonds with shorter maturities generally
outperformed longer maturity bonds and higher quality bonds tended to outperform
lower quality issues.
Also of note in the municipal market, the U.S. Supreme Court in May 2008 ruled
that individual states could continue to offer their residents special tax
treatment on municipal bonds issued within their borders. The high court's
decision in Department of Revenue of the Commonwealth of Kentucky vs. Davis
preserved tax rules in forty-two states, allowing them to continue to exempt
from taxation the income their residents earn on in-state municipal bonds while
taxing the income earned on municipal bonds issued in other states.
Over the twelve months ended May 2008, municipal bond issuance nationwide
totaled $467.0 billion, an increase of 2% from the previous twelve months. As of
May 31, 2008, insured bonds comprised 25% of new supply, compared with the
recent historical figure of approximately 50%. Despite disruptions in the
markets, new municipal issuance continued to be met with solid demand by
institutional and retail investors as well as non-traditional buyers returning
to the market in the last few months.
HOW WERE ECONOMIC AND MARKET CONDITIONS IN GEORGIA AND NORTH CAROLINA DURING
THIS PERIOD?
As measured by state GDP, Georgia's 2007 economic growth rate of 2.8% ranked
11th in the nation, well ahead of the 2.0% national average. Despite declines in
construction and manufacturing, especially among the state's automakers,
expansion continued to be supported by the transportation, professional and
business services, education and health, and leisure and hospitality sectors.
International ties were expected to provide additional growth, with several
Asian manufacturers committing to site development within Georgia. Further
globalization of the state's economy was evident in port activity, as Savannah
ranked as the nation's fourth busiest container terminal in 2007. However, the
weak housing market continued to create uncertainty, with housing starts in
Georgia declining 24% in 2007. This situation was ameliorated to some degree by
the fact that inflation in Georgia's real estate market had not reached the
levels seen elsewhere. According to the Standard & Poor's/Case-Shiller home
price index of twenty
5
major metropolitan areas, housing prices in Atlanta fell 7.5% between April 2007
and April 2008. This compared with an average decline of 15.3% nationwide, the
steepest drop since the index was established in 2001. Another area of concern
was the state's job market, as unemployment in Georgia rose to 5.8% in May 2008
from 4.4% in May 2007, putting the jobless rate in the state at its highest
level since 1993. As of May 2008, Georgia's general obligation debt continued to
be rated Aaa/AAA by Moody's and Standard & Poor's (S&P). Both rating agencies
listed their outlooks for the state as stable, reflecting the state's
conservative fiscal management. For the twelve months ended May 31, 2008,
municipal issuance in Georgia totaled $10.8 billion, up 14% over the previous
twelve months. According to Moody's, Georgia's debt levels remained moderate in
relation to the state's economic base, although both debt per capita and debt as
a percentage of personal income ranked higher than national medians.
North Carolina's economy continued to be driven by the government (including
military) and manufacturing sectors. In 2007, the state ranked 19th in the
nation in terms of state GDP, as its economy expanded at a rate of 2.2%. With
its once prominent textile and furniture sectors still in decline, North
Carolina continued to transition from old-line manufacturing industries to
services and technology. Despite this, manufacturing accounted for 14% of the
state's employment, compared with the U.S. average of 10%. Increasingly,
however, the list of major employers in North Carolina included private-sector
service jobs among retailers, financial services providers, higher education and
health care. In May 2008, the unemployment rate in North Carolina was 5.8%, up
from 4.8% in May 2007, its highest level in more than four years. Although the
housing market in North Carolina was slower to show the effects of the national
decline, housing prices in Charlotte recorded their first drop in the history of
the S&P/Case-Shiller home price index, albeit a decrease of only 0.1%, for the
twelve months ended April 2008. In November 2007, Moody's confirmed its credit
rating on North Carolina general obligation debt at Aaa, while S&P confirmed its
AAA rating in September 2007. Both agencies maintained stable outlooks for the
state. During the twelve months ended May 31, 2008, $8.3 billion of municipal
debt was issued in North Carolina, a decrease of 9% from the previous twelve
months. Despite ranking 16th among the 50 states in terms of net tax-supported
debt, North Carolina's debt levels remained moderate, with debt per capita and
debt as a percentage of personal income virtually matching Moody's national
medians.
6
WHAT KEY STRATEGIES WERE USED TO MANAGE THESE FUNDS DURING THIS REPORTING
PERIOD?
During this twelve-month period, as the municipal market was characterized by
volatility and a steepening yield curve, we sought to capitalize on the
turbulent environment by continuing to focus on relative value, using a
fundamental approach to find undervalued sectors and individual credits with the
potential to perform well over the long term.
In the Georgia Funds, we focused on high-quality general obligation bonds issued
by the state and counties and essential services revenue bonds, especially
higher-quality water and sewer credits. The North Carolina Funds also added
water and sewer bonds as well as several tax appropriation certificates of
participation.
In addition, all of the Funds added health care bonds, and the Georgia Funds
also purchased higher education bonds, tax increment financing district issues
and solid waste revenue credits. Each of the Georgia and North Carolina Funds
also added exposure to the short end of the yield curve by purchasing small
positions in auction rate bonds. Because of their extremely short durations,
auction rate securities traditionally have been far more popular with money
market fund managers than municipal bond fund managers. But demand for these
issues evaporated when the credit markets became relatively illiquid, and their
yields rose to unprecedented levels. We saw an opportunity to buy these bonds at
attractive prices relative to their income.
To generate cash for purchases, we selectively sold some holdings with shorter
durations,(1) including shorter-dated pre-refunded(2) bonds. Selling shorter
duration bonds and reinvesting further out on the yield curve also helped to
improve the Funds' overall call protection profiles. We also took advantage of
strong bids to sell bonds that were attractive to the retail market. In the
North Carolina Funds, many of these retail sales involved health care bonds. In
addition, some of our new purchases were funded with the proceeds from bond
calls. These holdings were sold early in the reporting period.
(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) 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.
7
As part of our disciplined approach to duration management, we used inverse
floating rate securities,(3) a type of derivative financial instrument, in all
four of the North Carolina Funds throughout the reporting period. In addition,
each of the three Georgia Funds added new inverse floating rate securities
during the latter part of this period. Inverse floaters typically provide the
dual benefit of bringing the Funds' durations closer to our strategic target and
enhancing their income-generation capabilities. NZX used forward interest rate
swaps and NNC and NNO added Treasury futures contracts to lengthen fund
duration. The goal of this strategy was to help us manage the common share net
asset value (NAV) volatility of these Funds without having a negative impact on
their income streams or common share dividends over the short term. As of May
31, 2008, these derivative instruments remained in place for NZX.
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 Common Share Net Asset Value*
For periods ended 5/31/08
1-Year 5-Year 10-Year
Georgia Funds
NPG 2.06% 3.86% 5.45%
NZX 3.33% 3.97% N/A
NKG 0.89% 3.53% N/A
North Carolina Funds
NNC 1.76% 3.45% 5.36%
NRB 3.26% 4.04% N/A
NNO 2.83% 3.66% N/A
NII 2.90% 3.98% N/A
Lipper Other States
Municipal Debt Funds
Average(4) 0.84% 3.75% 5.25%
Lehman Brothers
Municipal Bond Index(5) 3.87% 3.67% 5.06%
* 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) 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 this reporting period, are
further defined within the Notes to Financial Statements and Glossary of
Terms Used in This Report sections of this report.
(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: 1 year, 46; 5 years, 46; and 10 years, 18. Fund and Lipper returns
assume reinvestment of dividends.
(5) 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.
8
For the twelve months ended May 31, 2008, the total returns on common share NAV
for the Georgia and North Carolina Funds underperformed the return on the
national Lehman Brothers Municipal Bond Index. At the same time, all seven of
the Funds in this report exceeded the average return for the Lipper Other States
peer group.
One of the factors impacting the performance of these Funds in relation to that
of the unleveraged Lehman Brothers Municipal Bond Index was the use of financial
leverage. While leverage provides opportunities for additional income and total
returns for common shareholders, the benefits of leveraging are impacted by the
general price movements of the bonds in each Fund's portfolio. During this
period, as the yields on longer-term bonds rose and their prices correspondingly
fell, declining valuations had a negative effect on performance that was
magnified by the use of leverage. In addition, the Funds' borrowing costs
remained relatively high, negatively impacting their total returns.
Other key factors that influenced the Funds' returns included yield curve and
duration positioning, the use of derivatives, credit exposure and sector
allocation and holdings of bonds backed by lower-rated municipal bond insurers.
Bonds in the Lehman Brothers Municipal Bond Index with maturities of less than
eight years, especially those maturing in approximately four to six years,
benefited the most from changes in the interest rate environment. As a result,
these bonds generally outperformed credits with longer maturities. Bonds having
the longest maturities (twenty-two years and longer) posted the worst returns.
Overall, the duration positioning for most of these Funds was a net positive for
performance during this period. Although the Funds were underexposed to the
outperforming shorter maturity categories, this was generally offset by their
heavier allocations to the intermediate part of the yield curve, which performed
relatively well, and lower weightings in the underperforming long part of the
curve. In NKG, the story was generally the same, except this Fund's weighting in
intermediate maturity bonds was more in line with that of the overall municipal
market, which diminished the positive impact of this exposure.
As mentioned earlier, NPG, NZX, NNC and NNO used derivative financial
instruments during this period to synthetically extend their durations and move
them closer to our strategic duration target. Despite the fact that longer
duration municipal bonds generally underperformed those with shorter durations,
the use of these derivatives had a positive impact on NZX's return performance.
This was due to the fact that the derivatives provided exposure to taxable
markets during a period when, in contrast to
9
historical trends, the taxable markets and the municipal market moved in the
opposite directions. As municipal market performance lagged the gains in the
taxable markets, these derivatives performed very well. In NPG, NNC and NNO, the
derivatives were not in place long enough to have a significant impact on their
returns over this period.
The inverse floaters used by the North Carolina Funds throughout the period
generally had a negative impact on their performance. This resulted from the
fact that the inverse floaters effectively increased these Funds' exposure to
longer maturity bonds during a period when shorter maturities were in favor in
the market. All of the inverse floaters benefited these Funds by helping to
support their income streams.
Bonds rated BBB or below generally posted poor returns. The underperformance of
the lower credit quality sectors was largely the result of risk-averse
investors' flight to quality as disruptions in the financial and housing markets
deepened. As of May 31, 2008, NPG, NZX and NKG had allocated approximately 10%
of their portfolios to bonds rated BBB and lower and non-rated credits. Among
the North Carolina Funds, exposures to these lower credit quality categories
ranged from 6% in NNC, 7% in NNO, and 8% in NII to 10% in NRB.
In general, bonds that carried any credit risk, regardless of sector, tended to
perform poorly. Revenue bonds as a whole, and especially the industrial
development and health care (including hospitals and long-term 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. The
housing sector also performed poorly, as did lower-rated bonds backed by the
1998 master tobacco settlement agreement, which comprised approximately 2% of
the portfolios for NPG, NKG and NII as of May 31, 2008. Among the North Carolina
Funds, the performances of NNC, NRB and NNO were negatively impacted by their
holdings of non-rated bonds issued by Gaston County for National Gypsum Company,
as the price performance of these bonds suffered due to the slowdown in housing
and construction.
Sectors of the market that generally contributed positively to the Funds'
performances included general obligation bonds, water and sewer, special tax
issues and education. Exposure to the utilities sector in NPG and NKG and all
four of the North Carolina Funds also was positive for performance, as were the
auction rate securities we added to all seven of these Funds. Pre-refunded bonds
also performed exceptionally well, due primarily to their shorter effective
maturities and higher credit quality. Among these Funds, NZX and NPG held the
heaviest weightings of pre-refunded bonds, while NKG and NNC held the smallest
positions. Some of the Funds also continued to
10
see positive contributions from advance refunding activity, which benefited them
through price appreciation and enhanced credit quality.
Another factor that had an impact on the performance of these Funds was their
position in bonds backed by municipal bond insurers that experienced downgrades
in their credit ratings. As concern increased about the balance sheets of these
insurers, prices on bonds insured by these companies declined, detracting from
the Funds' performance. On the whole, the holdings of all of our Funds continued
to be well diversified not only between insured and uninsured bonds, but also
within the insured bond category.
RECENT DEVELOPMENTS REGARDING BOND INSURANCE COMPANIES
The portfolios of investments reflect the ratings on certain bonds insured by
AMBAC, CIFG, FGIC, MBIA, RAAI and XLCA as of May 31, 2008. During the period
covered by this report, each of these insurers experienced one or more rating
reductions by at least one or more rating agencies. Subsequent to May 31, 2008,
at least one rating agency further reduced their rating and at least one rating
agency had withdrawn their rating for AMBAC-insured and MBIA-insured bonds. At
the time this report was prepared, at least one rating agency has 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 by these rating agencies, it would likely reduce the
effective rating of many of the bonds insured by that insurer or insurers. It is
important to note that municipal bonds historically have had a very low rate of
default.
RECENT DEVELOPMENTS IN THE AUCTION RATE PREFERRED SECURITIES (ARPS) MARKETS
Beginning in February 2008, more shares for sale were submitted in the regularly
scheduled auctions for the preferred shares issued by these Funds than there
were offers to buy. This meant that these auctions "failed to clear'' and that
many or all auction preferred shareholders who wanted to sell their shares in
these auctions were unable to do so. This decline in liquidity in auction
preferred shares did not lower the credit quality of these shares, and auction
preferred shareholders unable to sell their shares received distributions at the
"maximum rate'' applicable to failed auctions as calculated in accordance with
the pre-established terms of the auction preferred shares. At the time this
report was prepared, the Funds' managers could not predict when future auctions
might succeed in attracting sufficient buyers for the shares offered, if ever.
The Funds' managers are working diligently to refund the auction preferred
shares, and have made progress in these efforts, but at present there is no
11
assurance that these efforts will succeed. These developments generally do not
affect the management or investment policies of these Funds. However, one
implication of these auction failures for common shareholders is that the Funds'
cost of leverage will likely be higher, at least temporarily, than it otherwise
would have been had the auctions continued to be successful. As a result, the
Funds' future common share earnings may be lower than they otherwise would have
been.
On June 11, 2008, Nuveen announced the Fund Board's approval of plans to use
tender option bonds (TOBs), also known as floating rate securities, to refinance
a portion of the municipal funds' outstanding ARPS, whose auctions have been
failing for several months, including an initial phase of approximately $1
billion in forty-one funds. On June 26, 2008, thirteen municipal funds (none of
which are included in this shareholder report) issued par redemption notices for
a portion of their auction-rate securities aggregating approximately $580
million.
For current, up-to-date information, please visit the Nuveen CEF Auction Rate
Preferred Resource Center at:
http://www.nuveen.com/ResourceCenter/AuctionRatePreferred.aspx.
12
Common Share
Dividend and Share Price
INFORMATION
As previously noted, all of the Funds in this report use leverage to potentially
enhance opportunities for additional income for common shareholders. While this
strategy continued to provide incremental income, the extent of this benefit was
reduced to some degree by the borrowing costs associated with leverage, which
remained relatively high. Some of 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 than the maturing or called bonds. These factors resulted
in one monthly dividend reduction in NPG, NZX, NRB, and NNO over the
twelve-month period ended May 31, 2008. In NKG, while we were able to increase
the dividend effective August 2007, the factors mentioned above led to a
subsequent dividend cut in March 2008. The common share dividends of NNC and NII
remained stable throughout this reporting period.
Due to normal portfolio activity, common shareholders of the following Funds
received long-term capital gains distributions at the end of December 2007 as
follows:
Long-Term Capital Gains
(per share)
NPG $0.0424
NNC $0.0358
NRB $0.0338
NNO $0.0638
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 common share 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 common share NAV. Each Fund will, over time,
pay all of its net investment income as dividends to shareholders. As of May 31,
2008, all of Funds in this report had positive UNII balances for tax purposes
and negative UNII balances for financial statement purposes.
13
As of May 31, 2008, the Funds' common share prices were trading at premiums or
discounts to their common share NAVs as shown in the accompanying chart:
5/31/08 Twelve-Month Average
Premium/Discount Premium/Discount
NPG -7.33% - 8.18%
NZX -6.91% - 4.41%
NKG -5.32% - 5.43%
NNC -4.86% - 6.53%
NRB +5.23% + 0.43%
NNO -5.60% - 4.94%
NII -0.07% - 2.44%
14
NPG
Performance
OVERVIEW
Nuveen Georgia
Premium Income Municipal Fund
as of May 31, 2008
Pie Chart:
Credit Quality (as a % of total investments)(1)
AAA/U.S. Guaranteed 63%
AA 12%
A 15%
BBB 9%
BB or Lower 1%
Bar Chart:
2007-2008 Monthly Tax-Free Dividends Per Share(3)
Jun 0.053
Jul 0.053
Aug 0.053
Sep 0.05
Oct 0.05
Nov 0.05
Dec 0.05
Jan 0.05
Feb 0.05
Mar 0.05
Apr 0.05
May 0.05
Line Chart:
Share Price Performance -- Weekly Closing Price
6/01/07 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
12.75
12.9
12.8
12.75
12.8
13.32
13.45
13.12
13.38
13.48
13.56
12.87
12.78
12.35
12.69
12.55
12.41
12.7
12.78
12.88
13.09
13
13
12.95
12.99
13.1
13.15
5/31/08 13.15
FUND SNAPSHOT
------------------------------------
Common Share Price $13.15
------------------------------------
Common Share
Net Asset Value $14.19
------------------------------------
Premium/(Discount) to NAV -7.33%
------------------------------------
Market Yield 4.56%
------------------------------------
Taxable-Equivalent Yield(2) 6.74%
------------------------------------
Net Assets Applicable to
Common Shares ($000) $54,011
------------------------------------
Average Effective Maturity
on Securities (Years) 16.18
------------------------------------
Leverage-Adjusted Duration 9.51
------------------------------------
AVERAGE ANNUAL TOTAL RETURN
(Inception 5/20/93)
------------------------------------
ON SHARE PRICE ON NAV
------------------------------------
1-Year -2.17% 2.06%
------------------------------------
5-Year 0.15% 3.86%
------------------------------------
10-Year 4.05% 5.45%
------------------------------------
INDUSTRIES
(as a % of total investments)
------------------------------------
Health Care 17.4%
------------------------------------
U.S. Guaranteed 14.9%
------------------------------------
Water and Sewer 13.8%
------------------------------------
Tax Obligation/Limited 13.4%
------------------------------------
Tax Obligation/General 12.0%
------------------------------------
Education and Civic
Organizations 11.9%
------------------------------------
Utilities 7.4%
------------------------------------
Other 9.2%
------------------------------------
(1) The percentages shown in the foregoing chart may reflect the ratings on
certain bonds insured by AMBAC, CIFG, FGIC, MBIA, RAAI and XLCA as of May
31, 2008. Please see the Portfolio Manager's Commentary for an expanded
discussion of the affect on the Fund of changes to the ratings of certain
bonds in the portfolio resulting from changes to the ratings of the
underlying insurers both during the period and after period end.
(2) Taxable-Equivalent Yield represents the yield that must be earned on a
fully taxable investment in order to equal the yield of the Fund on an
after-tax basis. It is based on a combined federal and state income tax
rate of 32.3%. When comparing this Fund to investments that generate
qualified dividend income, the Taxable-Equivalent Yield is lower.
(3) The Fund paid shareholders a capital gains distribution in December 2007 of
$0.0424 per share.
15
NZX
Performance
OVERVIEW
Nuveen Georgia
Dividend Advantage Municipal Fund
as of May 31, 2008
Pie Chart:
Credit Quality (as a % of total investments)(1)
AAA/U.S. Guaranteed 65%
AA 12%
A 13%
BBB 6%
BB or Lower 1%
N/R 3%
Bar Chart:
2007-2008 Monthly Tax-Free Dividends Per Share
Jun 0.057
Jul 0.057
Aug 0.057
Sep 0.054
Oct 0.054
Nov 0.054
Dec 0.054
Jan 0.054
Feb 0.054
Mar 0.054
Apr 0.054
May 0.054
Line Chart:
Share Price Performance -- Weekly Closing Price
6/01/07 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
13.54
13.77
13.41
13.4799
13.6
14.16
14.14
13.95
13.97
14.03
14.02
13.64
13.95
13
13.25
13.22
13.13
13.31
13.61
13.31
13.39
13.47
13.427
13.58
13.55
13.52
13.47
5/31/08 13.47
FUND SNAPSHOT
------------------------------------
Common Share Price $13.47
------------------------------------
Common Share
Net Asset Value $14.47
------------------------------------
Premium/(Discount) to NAV -6.91%
------------------------------------
Market Yield 4.81%
------------------------------------
Taxable-Equivalent Yield(2) 7.10%
------------------------------------
Net Assets Applicable to
Common Shares ($000) $28,498
------------------------------------
Average Effective Maturity
on Securities (Years) 14.03
------------------------------------
Leverage-Adjusted Duration 9.62
------------------------------------
AVERAGE ANNUAL TOTAL RETURN
(Inception 9/25/01)
------------------------------------
ON SHARE PRICE ON NAV
------------------------------------
1-Year -11.73% 3.33%
------------------------------------
5-Year 2.38% 3.97%
------------------------------------
Since
Inception 3.81% 5.80%
------------------------------------
INDUSTRIES
(as a % of total investments)
------------------------------------
U.S. Guaranteed 20.9%
------------------------------------
Health Care 16.5%
------------------------------------
Education and Civic
Organizations 15.0%
------------------------------------
Water and Sewer 13.4%
------------------------------------
Housing/Single Family 8.4%
------------------------------------
Tax Obligation/General 8.0%
------------------------------------
Tax Obligation/Limited 5.0%
------------------------------------
Other 12.8%
------------------------------------
(1) The percentages shown in the foregoing chart may reflect the ratings on
certain bonds insured by AMBAC, CIFG, FGIC, MBIA, RAAI and XLCA as of May
31, 2008. Please see the Portfolio Manager's Commentary for an expanded
discussion of the affect on the Fund of changes to the ratings of certain
bonds in the portfolio resulting from changes to the ratings of the
underlying insurers both during the period and after period end.
(2) Taxable-Equivalent Yield represents the yield that must be earned on a
fully taxable investment in order to equal the yield of the Fund on an
after-tax basis. It is based on a combined federal and state income tax
rate of 32.3%. When comparing this Fund to investments that generate
qualified dividend income, the Taxable-Equivalent Yield is lower.
16
NKG
Performance
OVERVIEW
Nuveen Georgia
Dividend Advantage Municipal Fund 2
as of May 31, 2008
Pie Chart:
Credit Quality (as a % of total investments)(1)
AAA/U.S. Guaranteed 65%
AA 11%
A 14%
BBB 8%
N/R 2%
Bar Chart:
2007-2008 Monthly Tax-Free Dividends Per Share
Jun 0.053
Jul 0.053
Aug 0.0545
Sep 0.0545
Oct 0.0545
Nov 0.0545
Dec 0.0545
Jan 0.0545
Feb 0.0545
Mar 0.0515
Apr 0.0515
May 0.0515
Line Chart:
Share Price Performance -- Weekly Closing Price
6/01/07 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
13.15
13.11
12.95
12.76
12.8
13.49
14.22
13.29
13.52
13.68
13.72
13.8
13.6
13.15
13.1
13.02
13.18
12.935
13.19
13.13
13.13
13.02
12.95
13.05
13.05
13.18
13.18
5/31/08 13.18
FUND SNAPSHOT
------------------------------------
Common Share Price $13.18
------------------------------------
Common Share
Net Asset Value $13.92
------------------------------------
Premium/(Discount) to NAV -5.32%
------------------------------------
Market Yield 4.69%
------------------------------------
Taxable-Equivalent Yield(2) 6.93%
------------------------------------
Net Assets Applicable to
Common Shares ($000) $63,402
------------------------------------
Average Effective Maturity
on Securities (Years) 16.96
------------------------------------
Leverage-Adjusted Duration 9.43
------------------------------------
AVERAGE ANNUAL TOTAL RETURN
(Inception 9/25/02)
------------------------------------
ON SHARE PRICE ON NAV
------------------------------------
1-Year -4.64% 0.89%
------------------------------------
5-Year 2.65% 3.53%
------------------------------------
Since
Inception 2.89% 4.55%
------------------------------------
INDUSTRIES
(as a % of total investments)
------------------------------------
Water and Sewer 20.7%
------------------------------------
Health Care 15.9%
------------------------------------
Tax Obligation/Limited 13.1%
------------------------------------
Tax Obligation/General 13.1%
------------------------------------
U.S. Guaranteed 9.9%
------------------------------------
Education and Civic
Organizations 9.8%
------------------------------------
Transportation 4.0%
------------------------------------
Other 13.5%
------------------------------------
(1) The percentages shown in the foregoing chart may reflect the ratings on
certain bonds insured by AMBAC, CIFG, FGIC, MBIA, RAAI and XLCA as of May
31, 2008. Please see the Portfolio Manager's Commentary for an expanded
discussion of the affect on the Fund of changes to the ratings of certain
bonds in the portfolio resulting from changes to the ratings of the
underlying insurers both during the period and after period end.
(2) Taxable-Equivalent Yield represents the yield that must be earned on a
fully taxable investment in order to equal the yield of the Fund on an
after-tax basis. It is based on a combined federal and state income tax
rate of 32.3%. When comparing this Fund to investments that generate
qualified dividend income, the Taxable-Equivalent Yield is lower.
17
NNC
Performance
OVERVIEW
Nuveen North Carolina Premium Income Municipal Fund
as of May 31, 2008
Pie Chart:
Credit Quality (as a % of total investments)(1)
AAA/U.S. Guaranteed 46%
AA 31%
A 17%
BBB 5%
N/R 1%
Bar Chart:
2007-2008 Monthly Tax-Free Dividends Per Share(3)
Jun 0.049
Jul 0.049
Aug 0.049
Sep 0.049
Oct 0.049
Nov 0.049
Dec 0.049
Jan 0.049
Feb 0.049
Mar 0.049
Apr 0.049
May 0.049
Line Chart:
Share Price Performance -- Weekly Closing Price
6/01/07 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
12.65
12.81
12.75
12.57
12.55
13.14
13.282
13.3399
13.25
13.48
13.63
12.9
12.84
12.75
12.87
12.7499
12.79
12.9401
12.86
12.85
12.98
13.2
13.05
13.25
12.99
13.03
13.3
5/31/08 13.3
FUND SNAPSHOT
------------------------------------
Common Share Price $13.30
------------------------------------
Common Share
Net Asset Value $13.98
------------------------------------
Premium/(Discount) to NAV -4.86%
------------------------------------
Market Yield 4.42%
------------------------------------
Taxable-Equivalent Yield(2) 6.66%
------------------------------------
Net Assets Applicable to
Common Shares ($000) $88,827
------------------------------------
Average Effective Maturity
on Securities (Years) 15.28
------------------------------------
Leverage-Adjusted Duration 8.25
------------------------------------
AVERAGE ANNUAL TOTAL RETURN
(Inception 5/20/93)
------------------------------------
ON SHARE PRICE ON NAV
------------------------------------
1-Year -2.52% 1.76%
------------------------------------
5-Year 0.36% 3.45%
------------------------------------
10-Year 4.12% 5.36%
------------------------------------
INDUSTRIES
(as a % of total investments)
------------------------------------
Tax Obligation/Limited 24.4%
------------------------------------
Health Care 16.2%
------------------------------------
Education and Civic
Organizations 15.1%
------------------------------------
U.S. Guaranteed 9.1%
------------------------------------
Utilities 8.3%
------------------------------------
Tax Obligation/General 7.2%
------------------------------------
Water and Sewer 5.8%
------------------------------------
Housing/Single Family 5.0%
------------------------------------
Other 8.9%
------------------------------------
(1) The percentages shown in the foregoing chart may reflect the ratings on
certain bonds insured by AMBAC, CIFG, FGIC, MBIA, RAAI and XLCA as of May
31, 2008. Please see the Portfolio Manager's Commentary for an expanded
discussion of the affect on the Fund of changes to the ratings of certain
bonds in the portfolio resulting from changes to the ratings of the
underlying insurers both during the period and after period end.
(2) Taxable-Equivalent Yield represents the yield that must be earned on a
fully taxable investment in order to equal the yield of the Fund on an
after-tax basis. It is based on a combined federal and state income tax
rate of 33.6%. When comparing this Fund to investments that generate
qualified dividend income, the Taxable-Equivalent Yield is lower.
(3) The Fund paid shareholders a capital gains distribution in December 2007 of
$0.0358 per share.
18
NRB
Performance
OVERVIEW
Nuveen North Carolina Dividend Advantage Municipal Fund
as of May 31, 2008
Pie Chart:
Credit Quality (as a % of total investments)(1)
AAA/U.S. Guaranteed 54%
AA 25%
A 11%
BBB 8%
N/R 2%
Bar Chart:
2007-2008 Monthly Tax-Free Dividends Per Share(3)
Jun 0.06
Jul 0.06
Aug 0.06
Sep 0.057
Oct 0.057
Nov 0.057
Dec 0.057
Jan 0.057
Feb 0.057
Mar 0.057
Apr 0.057
May 0.057
Line Chart:
Share Price Performance -- Weekly Closing Price
6/01/07 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
14.0899
13.67
13.8
13.54
13.62
14.65
14.9
14.8
14.63
14.2699
14.5799
14.5
13.8
13.22
14.04
14.55
14.3
14.35
14.23
14.65
14.4
14.4
14.56
15.07
14.7
14.72
15.28
5/31/08 15.28
FUND SNAPSHOT
------------------------------------
Common Share Price $15.28
------------------------------------
Common Share
Net Asset Value $14.52
------------------------------------
Premium/(Discount) to NAV 5.23%
------------------------------------
Market Yield 4.48%
------------------------------------
Taxable-Equivalent Yield(2) 6.75%
------------------------------------
Net Assets Applicable to
Common Shares ($000) $32,868
------------------------------------
Average Effective Maturity
on Securities (Years) 13.47
------------------------------------
Leverage-Adjusted Duration 7.74
------------------------------------
AVERAGE ANNUAL TOTAL RETURN
(Inception 1/25/01)
------------------------------------
ON SHARE PRICE ON NAV
------------------------------------
1-Year -2.28% 3.26%
------------------------------------
5-Year 3.99% 4.04%
------------------------------------
Since
Inception 5.87% 6.13%
------------------------------------
INDUSTRIES
(as a % of total investments)
------------------------------------
Water and Sewer 22.3%
------------------------------------
Tax Obligation/Limited 15.6%
------------------------------------
Utilities 13.3%
------------------------------------
Health Care 12.8%
------------------------------------
Education and Civic
Organizations 11.1%
------------------------------------
U.S. Guaranteed 10.3%
------------------------------------
Tax Obligation/General 5.7%
------------------------------------
Other 8.9%
------------------------------------
(1) The percentages shown in the foregoing chart may reflect the ratings on
certain bonds insured by AMBAC, CIFG, FGIC, MBIA, RAAI and XLCA as of May
31, 2008. Please see the Portfolio Manager's Commentary for an expanded
discussion of the affect on the Fund of changes to the ratings of certain
bonds in the portfolio resulting from changes to the ratings of the
underlying insurers both during the period and after period end.
(2) Taxable-Equivalent Yield represents the yield that must be earned on a
fully taxable investment in order to equal the yield of the Fund on an
after-tax basis. It is based on a combined federal and state income tax
rate of 33.6%. When comparing this Fund to investments that generate
qualified dividend income, the Taxable-Equivalent Yield is lower.
(3) The Fund paid shareholders a capital gains distribution in December 2007 of
$0.0338 per share.
19
NNO
Performance
OVERVIEW
Nuveen North Carolina Dividend Advantage Municipal Fund 2
as of May 31, 2008
Pie Chart:
Credit Quality (as a % of total investments)(1)
AAA/U.S. Guaranteed 56%
AA 23%
A 14%
BBB 5%
N/R 2%
Bar Chart:
2007-2008 Monthly Tax-Free Dividends Per Share(3)
Jun 0.055
Jul 0.055
Aug 0.055
Sep 0.055
Oct 0.0515
Nov 0.0515
Dec 0.0515
Jan 0.0515
Feb 0.0515
Mar 0.0515
Apr 0.0515
May 0.0515
Line Chart:
Share Price Performance -- Weekly Closing Price
6/01/07 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
13.3
13.36
13
13
13.17
13.8
13.83
13.696
13.75
13.72
13.72
13.36
13.45
13.1
13.4
13.2
13.39
13.51
13.55
13.4
13.42
13.55
13.45
13.6
13.35
13.53
13.66
5/31/08 13.66
FUND SNAPSHOT
------------------------------------
Common Share Price $13.66
------------------------------------
Common Share
Net Asset Value $14.47
------------------------------------
Premium/(Discount) to NAV -5.60%
------------------------------------
Market Yield 4.52%
------------------------------------
Taxable-Equivalent Yield(2) 6.81%
------------------------------------
Net Assets Applicable to
Common Shares ($000) $54,240
------------------------------------
Average Effective Maturity
on Securities (Years) 13.00
------------------------------------
Leverage-Adjusted Duration 7.90
------------------------------------
AVERAGE ANNUAL TOTAL RETURN
(Inception 11/15/01)
------------------------------------
ON SHARE PRICE ON NAV
------------------------------------
1-Year -7.33% 2.83%
------------------------------------
5-Year 2.41% 3.66%
------------------------------------
Since
Inception 4.17% 5.90%
------------------------------------
INDUSTRIES
(as a % of total investments)
------------------------------------
Tax Obligation/Limited 22.7%
------------------------------------
Health Care 15.5%
------------------------------------
Water and Sewer 13.8%
------------------------------------
Transportation 10.0%
------------------------------------
U.S. Guaranteed 10.0%
------------------------------------
Education and Civic
Organizations 9.9%
------------------------------------
Utilities 8.7%
------------------------------------
Other 9.4%
------------------------------------
(1) The percentages shown in the foregoing chart may reflect the ratings on
certain bonds insured by AMBAC, CIFG, FGIC, MBIA, RAAI and XLCA as of May
31, 2008. Please see the Portfolio Manager's Commentary for an expanded
discussion of the affect on the Fund of changes to the ratings of certain
bonds in the portfolio resulting from changes to the ratings of the
underlying insurers both during the period and after period end.
(2) Taxable-Equivalent Yield represents the yield that must be earned on a
fully taxable investment in order to equal the yield of the Fund on an
after-tax basis. It is based on a combined federal and state income tax
rate of 33.6%. When comparing this Fund to investments that generate
qualified dividend income, the Taxable-Equivalent Yield is lower.
(3) The Fund paid shareholders a capital gains distribution in December 2007 of
$0.0638 per share.
20
NII
Performance
OVERVIEW
Nuveen North Carolina Dividend Advantage Municipal Fund 3
as of May 31, 2008
Pie Chart:
Credit Quality (as a % of total investments)(1)
AAA/U.S Guaranteed 64%
AA 21%
A 7%
BBB 7%
N/R 1%
Bar Chart:
2007-2008 Monthly Tax-Free Dividends Per Share
Jun 0.0545
Jul 0.0545
Aug 0.0545
Sep 0.0545
Oct 0.0545
Nov 0.0545
Dec 0.0545
Jan 0.0545
Feb 0.0545
Mar 0.0545
Apr 0.0545
May 0.0545
Line Chart:
Share Price Performance -- Weekly Closing Price
6/01/07 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
13.21
13.37
13.47
13.2
13.3799
14.23
13.94
13.96
13.5
13.61
14.05
13.2901
13.36
13.16
13.62
13.568
13.3
13.46
13.55
13.59
13.65
13.8501
13.94
13.95
13.76
14
14.124
5/31/08 14.124
FUND SNAPSHOT
------------------------------------
Common Share Price $14.12
------------------------------------
Common Share
Net Asset Value $14.13
------------------------------------
Premium/(Discount) to NAV -0.07%
------------------------------------
Market Yield 4.63%
------------------------------------
Taxable-Equivalent Yield(2) 6.97%
------------------------------------
Net Assets Applicable to
Common Shares ($000) $55,555
------------------------------------
Average Effective Maturity
on Securities (Years) 14.12
------------------------------------
Leverage-Adjusted Duration 8.02
------------------------------------
AVERAGE ANNUAL TOTAL RETURN
(Inception 9/25/02)
------------------------------------
ON SHARE PRICE ON NAV
------------------------------------
1-Year 1.12% 2.90%
------------------------------------
5-Year 3.60% 3.98%
------------------------------------
Since
Inception 3.97% 4.88%
------------------------------------
INDUSTRIES
(as a % of total investments)
------------------------------------
Tax Obligation/Limited 21.8%
------------------------------------
Water and Sewer 21.6%
------------------------------------
Tax Obligation/General 13.0%
------------------------------------
U.S. Guaranteed 13.0%
------------------------------------
Utilities 9.7%
------------------------------------
Health Care 6.7%
------------------------------------
Transportation 5.5%
------------------------------------
Other 8.7%
------------------------------------
(1) The percentages shown in the foregoing chart may reflect the ratings on
certain bonds insured by AMBAC, CIFG, FGIC, MBIA, RAAI and XLCA as of May
31, 2008. Please see the Portfolio Manager's Commentary for an expanded
discussion of the affect on the Fund of changes to the ratings of certain
bonds in the portfolio resulting from changes to the ratings of the
underlying insurers both during the period and after period end.
(2) Taxable-Equivalent Yield represents the yield that must be earned on a
fully taxable investment in order to equal the yield of the Fund on an
after-tax basis. It is based on a combined federal and state income tax
rate of 33.6%. When comparing this Fund to investments that generate
qualified dividend income, the Taxable-Equivalent Yield is lower.
21
Report of
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
THE BOARD OF TRUSTEES AND SHAREHOLDERS
NUVEEN GEORGIA PREMIUM INCOME MUNICIPAL FUND
NUVEEN GEORGIA DIVIDEND ADVANTAGE MUNICIPAL FUND
NUVEEN GEORGIA DIVIDEND ADVANTAGE MUNICIPAL FUND 2
NUVEEN NORTH CAROLINA PREMIUM INCOME MUNICIPAL FUND
NUVEEN NORTH CAROLINA DIVIDEND ADVANTAGE MUNICIPAL FUND
NUVEEN NORTH CAROLINA DIVIDEND ADVANTAGE MUNICIPAL FUND 2
NUVEEN NORTH CAROLINA DIVIDEND ADVANTAGE MUNICIPAL FUND 3
We have audited the accompanying statements of assets and liabilities, including
the portfolios of investments, of Nuveen Georgia Premium Income Municipal Fund,
Nuveen Georgia Dividend Advantage Municipal Fund, Nuveen Georgia Dividend
Advantage Municipal Fund 2, Nuveen North Carolina Premium Income Municipal Fund,
Nuveen North Carolina Dividend Advantage Municipal Fund, Nuveen North Carolina
Dividend Advantage Municipal Fund 2 and Nuveen North Carolina Dividend Advantage
Municipal Fund 3 (the Funds) as of May 31, 2008, and the related statements of
operations and cash flows (Nuveen North Carolina Dividend Advantage Municipal
Fund and Nuveen North Carolina Dividend Advantage Municipal Fund 3 only) for the
year then ended, the statements of changes in net assets for each of the two
years in the period then ended, and the financial highlights for each of the
five years in the period then ended. These financial statements and financial
highlights are the responsibility of the Funds' management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. We were
not engaged to perform an audit of the Funds' internal control over financial
reporting. Our audits included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Funds' internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights, assessing the accounting principles used
and significant estimates made by management, and evaluating the overall
financial statement presentation. Our procedures included confirmation of
securities owned as of May 31, 2008, by correspondence with the custodian and
brokers or by other appropriate auditing procedures where replies from brokers
were not received. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial positions of
Nuveen Georgia Premium Income Municipal Fund, Nuveen Georgia Dividend Advantage
Municipal Fund, Nuveen Georgia Dividend Advantage Municipal Fund 2, Nuveen North
Carolina Premium Income Municipal Fund, Nuveen North Carolina Dividend Advantage
Municipal Fund, Nuveen North Carolina Dividend Advantage Municipal Fund 2 and
Nuveen North Carolina Dividend Advantage Municipal Fund 3 at May 31, 2008, the
results of their operations and cash flows (Nuveen North Carolina Dividend
Advantage Municipal Fund and Nuveen North Carolina Dividend Advantage Municipal
Fund 3 only) for the year then ended, the changes in their net assets for each
of the two years in the period then ended, and their financial highlights for
each of the five years in the period then ended in conformity with U.S.
generally accepted accounting principles.
/s/ Ernst & Young LLP
Chicago, Illinois
July 21, 2008
22
NPG
Nuveen Georgia Premium Income Municipal Fund
Portfolio of INVESTMENTS
May 31, 2008
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 $ 955,670
Asset-Backed Refunding Bonds, Series 2002, 5.500%, 5/15/39
------------------------------------------------------------------------------------------------------------------------------------
EDUCATION AND CIVIC ORGANIZATIONS - 17.7% (11.9% OF TOTAL INVESTMENTS)
1,000 Athens-Clarke County Unified Government Development Authority, 12/12 at 100.00 AAA 1,056,490
Georgia, Educational Facilities Revenue Bonds, UGAREF CCRC
Building LLC Project, Series 2002, 5.000%, 12/15/16 -
AMBAC Insured
2,000 Atlanta Development Authority, Georgia, Educational Facilities 7/17 at 100.00 A1 1,944,580
Revenue Bonds, Science Park LLC Project, Series 2007,
5.000%, 7/01/39
1,550 Bulloch County Development Authority, Georgia, Student Housing 8/14 at 100.00 A1 1,601,212
and Athletic Facility Lease Revenue Bonds, Georgia Southern
University, Series 2004, 5.250%, 8/01/21 - XLCA Insured
700 Carrollton Payroll Development Authority, Georgia, Student Housing 9/14 at 100.00 A2 708,190
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 1,686,919
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 A2 1,163,952
Bonds, Armstrong Atlantic State University, Compass Point LLC
Project, Series 2005, 5.000%, 7/01/25 - XLCA Insured
1,500 Savannah Economic Development Authority, Georgia, Revenue Bonds, 12/15 at 100.00 A- 1,424,055
Armstrong Center LLC, Series 2005A, 5.000%, 12/01/34 -
XLCA Insured
------------------------------------------------------------------------------------------------------------------------------------
9,465 Total Education and Civic Organizations 9,585,398
------------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE - 25.2% (16.9% OF TOTAL INVESTMENTS)
2,300 Chatham County Hospital Authority, Savannah, Georgia, Hospital 7/11 at 101.00 BBB 2,305,198
Revenue Improvement Bonds, Memorial Health University Medical
Center Inc., Series 2001A, 6.125%, 1/01/24
500 Clark County Hospital Authority, Georgia, Hospital Revenue Bonds, 1/17 at 100.00 AAA 510,125
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 2,021,460
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 834,408
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 3,053,040
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 1,138,854
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 1,108,378
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 896,697
Houston Healthcare Project, Series 2007, 5.250%, 10/01/35
1,000 Savannah Hospital Authority, Georgia, Revenue Bonds, 1/14 at 100.00 AA 1,010,070
St. Joseph's/Candler Health System, Series 2003,
5.250%, 7/01/23 - RAAI Insured
750 Valdosta and Lowndes County Hospital Authority, Georgia, 10/17 at 100.00 A+ 719,280
Revenue Certificates, South Georgia Medical Center, Series 2007,
5.000%, 10/01/33
------------------------------------------------------------------------------------------------------------------------------------
13,500 Total Health Care 13,597,510
------------------------------------------------------------------------------------------------------------------------------------
23
NPG
Nuveen Georgia Premium Income Municipal Fund (continued)
Portfolio of INVESTMENTS May 31, 2008
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/MULTIFAMILY - 1.9% (1.3% OF TOTAL INVESTMENTS)
$ 1,000 Cobb County Development Authority, Georgia, Student Housing 7/17 at 100.00 Aaa $ 1,011,500
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 906,327
Bonds, Series 2002B-2, 5.350%, 12/01/22 (Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
INDUSTRIALS - 0.9% (0.6% OF TOTAL INVESTMENTS)
500 Savannah Economic Development Authority, Georgia, Revenue 7/12 at 100.00 AAA 517,705
Bonds, GTREP Project, Series 2002, 5.000%, 7/01/22 -
MBIA Insured
------------------------------------------------------------------------------------------------------------------------------------
MATERIALS - 3.1% (2.1% OF TOTAL INVESTMENTS)
750 Effingham County Industrial Development Authority, Georgia, 6/11 at 101.00 B2 681,668
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 991,220
Improvement Revenue Bonds, International Paper Company,
Series 2001A, 6.250%, 2/01/25 (Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
1,750 Total Materials 1,672,888
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL - 17.8% (12.0% OF TOTAL INVESTMENTS)
540 Cherokee County Resource Recovery Development Authority, 7/17 at 100.00 AAA 521,516
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 2,296,268
5.000%, 1/01/31 - FSA Insured
100 Georgia State, General Obligation Bonds, Series 2007, 5.000%, 8/01/24 8/17 at 100.00 AAA 106,422
1,000 Georgia, General Obligation Bonds, Series 2002D, 5.000%, 8/01/16 8/12 at 100.00 AAA 1,066,960
1,000 Georgia, General Obligation Bonds, Series 2005B, 5.000%, 7/01/15 No Opt. Call AAA 1,108,610
600 Gwinnett County School District, Georgia, General Obligation 2/18 at 100.00 Aaa 645,600
Bonds, Series 2008, Trust 2868, 10.907%, 2/01/36 (IF)
2,500 Paulding County School District, Georgia, General Obligation Bonds, 2/17 at 100.00 AA+ 2,570,675
Series 2007, 5.000%, 2/01/33
800 Puerto Rico, General Obligation Bonds, Series 2004A, 5.250%, 7/01/22 7/14 at 100.00 BBB- 803,264
500 Wayne County Hospital Authority, Georgia, Hospital Revenue 3/16 at 100.00 A3 505,405
Bonds, Series 2006, 5.000%, 3/01/23 - XLCA Insured
------------------------------------------------------------------------------------------------------------------------------------
9,255 Total Tax Obligation/General 9,624,720
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED - 20.0% (13.4% OF TOTAL INVESTMENTS)
420 Atlanta, Georgia, Tax Allocation Bonds Atlanta Station Project, 12/17 at 100.00 AAA 430,538
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 2,114,240
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 3,758,803
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 2,826,018
Revenue Refunding Bonds, Public Facilities Projects, Series 2002A,
5.375%, 8/01/17
1,000 Metropolitan Atlanta Rapid Transit Authority, Georgia, Sales Tax No Opt. Call AAA 1,163,350
Revenue Refunding Bonds, Series 1992P, 6.250%, 7/01/20 -
AMBAC Insured
500 Puerto Rico Infrastructure Financing Authority, Special Tax Revenue 7/15 at 100.00 BBB- 488,900
Bonds, Series 2005B, 5.000%, 7/01/41
------------------------------------------------------------------------------------------------------------------------------------
9,995 Total Tax Obligation/Limited 10,781,849
------------------------------------------------------------------------------------------------------------------------------------
24
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION - 4.4% (2.9% OF TOTAL INVESTMENTS)
$ 2,290 Atlanta, Georgia, Airport General Revenue Bonds, Series 2004G, 1/15 at 100.00 AAA $ 2,361,127
5.000%, 1/01/26 - FSA Insured
------------------------------------------------------------------------------------------------------------------------------------
U.S. GUARANTEED - 22.2% (14.9% OF TOTAL INVESTMENTS) (4)
735 Coweta County Development Authority, Georgia, Revenue Bonds, 1/13 at 100.00 Baa3 (4) 803,531
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 Aa3 (4) 3,450,356
Bonds, Series 2001, 5.250%, 6/01/26 (Pre-refunded 6/01/11)
500 DeKalb County, Georgia, Water and Sewerage Revenue Bonds, 10/10 at 101.00 AAA 535,665
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) 1,084,730
5.750%, 10/01/20 (Pre-refunded 10/01/10)
1,750 Gainesville and Hall County Hospital Authority, Georgia, Revenue 5/11 at 100.00 A- (4) 1,870,890
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) 87,200
10 6.400%, 1/01/09 (ETM) No Opt. Call A+ (4) 10,259
25 Georgia Municipal Electric Authority, Senior Lien General Power 1/17 at 100.00 A+ (4) 27,788
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 4,122,223
Certificates, Gwinnett Hospital System Inc. Project, Series 1997B,
5.300%, 9/01/27 (Pre-refunded 2/14/12) - MBIA Insured
------------------------------------------------------------------------------------------------------------------------------------
11,020 Total U.S. Guaranteed 11,992,642
------------------------------------------------------------------------------------------------------------------------------------
UTILITIES - 11.1% (7.4% OF TOTAL INVESTMENTS)
1,000 Georgia Municipal Electric Authority, General Power Revenue Bonds, 1/17 at 100.00 AAA 1,030,220
Project 1, Series 2007A, 5.000%, 1/01/25 - MBIA Insured
1,655 Georgia Municipal Electric Authority, Project One Special Obligation No Opt. Call A+ 1,695,399
Bonds, Fifth Crossover Series 1998Y, 6.400%, 1/01/09
975 Georgia Municipal Electric Authority, Senior Lien General Power No Opt. Call A+ 1,055,730
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 1,036,400
Lien Revenue Bonds, Series 2003A, 5.000%, 1/01/22 -
MBIA Insured
1,200 Virgin Islands Water and Power Authority, Electric System Revenue 7/17 at 100.00 BBB- 1,156,968
Bonds, Series 2007B, 5.000%, 7/01/31
------------------------------------------------------------------------------------------------------------------------------------
5,830 Total Utilities 5,974,717
------------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER - 20.7% (13.8% 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 1,268,451
500 5.000%, 11/01/37 - FSA Insured 11/14 at 100.00 AAA 508,485
2,490 Cherokee County Water and Sewerage Authority, Georgia, Revenue 8/18 at 100.00 AAA 2,565,945
Bonds, Series 2001, 5.000%, 8/01/35 - FSA Insured
335 Coweta County Water and Sewer Authority, Georgia, Revenue Bonds, 6/11 at 102.00 Aa3 352,082
Series 2001, 5.250%, 6/01/26
Coweta County Water and Sewer Authority, Georgia, Revenue Bonds,
Series 2007:
500 5.000%, 6/01/32 6/18 at 100.00 Aa3 513,870
150 5.000%, 6/01/37 6/18 at 100.00 Aa3 153,678
890 Douglasville-Douglas County Water and Sewer Authority, Georgia, 6/17 at 100.00 AAA 913,363
Water and Sewer Revenue Bonds, Series 2007, 5.000%, 6/01/37 -
MBIA Insured
25
NPG
Nuveen Georgia Premium Income Municipal Fund (continued)
Portfolio of INVESTMENTS May 31, 2008
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER (continued)
$ 750 Forsyth County Water and Sewerage Authority, Georgia, Revenue 4/17 at 100.00 AAA $ 769,343
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 AA- 2,027,864
Series 2004, 5.000%, 1/01/22 - FGIC Insured
1,000 Midgeville, Georgia, Water and Sewerage Revenue Refunding Bonds, No Opt. Call AAA 1,170,520
Series 1996, 6.000%, 12/01/21 - FSA Insured
890 Walton County Water and Sewerage Authority, Georgia, Revenue 2/18 at 100.00 Aaa 913,986
Bonds, The Oconee-Hard Creek Resevoir Project, Series 2008,
5.000%, 2/01/38 - FSA Insured
------------------------------------------------------------------------------------------------------------------------------------
10,680 Total Water and Sewer 11,157,587
------------------------------------------------------------------------------------------------------------------------------------
$ 77,185 Total Long-Term Investments (cost $78,403,710) - 148.4% 80,139,640
=============-----------------------------------------------------------------------------------------------------------------------
SHORT-TERM-INVESTMENTS -- 0.7% (0.5% OF TOTAL INVESTMENTS)
$ 400 Gwinnett County Hospital Authority, Georgia, Revenue Anticipation N/R 400,000
Certificates, Gwinnett Hospital System Inc. Project, Variable Rate
Demand Obligations, Series 2007F, 3.000%, 7/01/42 -
FSA Insured (5)
==============----------------------------------------------------------------------------------------------------------------------
Total Short-Term Investments (cost $400,000) 400,000
--------------------------------------------------------------------------------------------------------------------
Total Investments (cost $78,803,710) - 149.1% 80,539,640
--------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 2.4% 1,270,966
--------------------------------------------------------------------------------------------------------------------
Preferred Shares, at Liquidation Value - (51.5)% (6) (27,800,000)
--------------------------------------------------------------------------------------------------------------------
Net Assets Applicable to Common Shares - 100% $54,010,606
====================================================================================================================
(1) All percentages shown in the Portfolio of Investments are
based on net assets applicable to Common shares unless
otherwise noted.
(2) Optional Call Provisions (not covered by the report of
independent registered public accounting firm): Dates (month
and year) and prices of the earliest optional call or
redemption. There may be other call provisions at varying
prices at later dates. Certain mortgage-backed securities
may be subject to periodic principal paydowns.
(3) Ratings (not covered by the report of independent registered
public accounting firm): Using the higher of Standard &
Poor's Group ("Standard & Poor's") or Moody's Investor
Service, Inc. ("Moody's") rating. Ratings below BBB by
Standard & Poor's or Baa by Moody's are considered to be
below investment grade.
The Portfolio of Investments may reflect the ratings on
certain bonds insured by AMBAC, CIFG, FGIC, MBIA, RAAI and
XLCA as of May 31, 2008. Please see the Portfolio Manager's
Commentary for an expanded discussion of the affect on the
Fund of changes to the ratings of certain bonds in the
portfolio resulting from changes to the ratings of the
underlying insurers both during the period and after period
end.
(4) Backed by an escrow or trust containing sufficient U.S.
Government or U.S. Government agency securities which ensure
the timely payment of principal and interest. Such
investments are normally considered to be equivalent to AAA
rated securities.
(5) Investment has a maturity of more than one year, but has
variable rate and demand features which qualify it as a
short-term investment. The rate disclosed is that in effect
at the end of the reporting period. This rate changes
periodically based on market conditions or a specified
market index.
(6) Preferred Shares, at Liquidation Value as a percentage of
total investments is (34.5)%.
N/R Not rated.
(ETM) Escrowed to maturity.
(IF) Inverse floating rate investment.
See accompanying notes to financial statements.
26
NZX
Nuveen Georgia Dividend Advantage Municipal Fund
Portfolio of INVESTMENTS
May 31, 2008
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
EDUCATION AND CIVIC ORGANIZATIONS - 22.5% (15.0% OF TOTAL INVESTMENTS)
$ 1,000 Athens Housing Authority, Georgia, Student Housing Lease Revenue 12/12 at 100.00 Aaa $ 1,043,960
Bonds, UGAREF East Campus Housing LLC Project, Series 2002,
5.250%, 12/01/21 - AMBAC Insured
1,000 Atlanta Development Authority, Georgia, Educational Facilities 7/17 at 100.00 A1 972,290
Revenue Bonds, Science Park LLC Project, Series 2007,
5.000%, 7/01/39
1,475 Bulloch County Development Authority, Georgia, Student Housing 8/14 at 100.00 A1 1,529,988
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 1,669,134
Lease Revenue Bonds, Georgia Southern University, Series 2002,
5.000%, 8/01/20 - AMBAC Insured
1,000 Fulton County Development Authority, Georgia, Revenue Bonds, 4/12 at 100.00 AAA 1,039,690
Georgia Tech Athletic Association, Series 2001, 5.000%, 10/01/20 -
AMBAC Insured
200 Gainesville Redevelopment Authority, Georgia, Educational Facilities 3/17 at 100.00 N/R 169,530
Revenue Bonds, Riverside Military Academy Project, Series 2007,
5.125%, 3/01/37
------------------------------------------------------------------------------------------------------------------------------------
6,295 Total Education and Civic Organizations 6,424,592
------------------------------------------------------------------------------------------------------------------------------------
ENERGY - 2.0% (1.3% OF TOTAL INVESTMENTS)
650 Virgin Islands Public Finance Authority, Revenue Bonds, Refinery 1/15 at 100.00 BBB 562,062
Project Hovensa LLC, Series 2007, 4.700%, 7/01/22
(Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE - 24.8% (16.5% OF TOTAL INVESTMENTS)
150 Baldwin County Hospital Authority, Georgia, Revenue Bonds, 12/09 at 100.00 BB+ 149,171
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+ 174,629
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 440,994
Revenue Improvement Bonds, Memorial Health University
Medical Center Inc., Series 2001A, 6.125%, 1/01/24
500 Clark County Hospital Authority, Georgia, Hospital Revenue Bonds, 1/17 at 100.00 AAA 510,125
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 1,048,000
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 463,560
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 522,820
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 498,165
Houston Healthcare Project, Series 2007, 5.250%, 10/01/35
500 Savannah Hospital Authority, Georgia, Revenue Bonds, 1/14 at 100.00 AA 505,035
St. Joseph's/Candler Health System, Series 2003, 5.250%, 7/01/23 -
RAAI Insured
27
NZX
Nuveen Georgia Dividend Advantage Municipal Fund (continued)
Portfolio of INVESTMENTS May 31, 2008
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE (continued)
$ 2,000 Valdosta and Lowndes County Hospital Authority, Georgia, 10/12 at 101.00 AAA $ 2,037,079
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+ 719,280
Revenue Certificates, South Georgia Medical Center, Series 2007,
5.000%, 10/01/33
------------------------------------------------------------------------------------------------------------------------------------
7,030 Total Health Care 7,068,858
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/MULTIFAMILY - 1.2% (0.8% OF TOTAL INVESTMENTS)
350 Cobb County Development Authority, Georgia, Student Housing 7/17 at 100.00 Aaa 354,025
Revenue Bonds, KSU Village II Real Estate Foundation LLC Project,
Series 2007A, 5.250%, 7/15/38 - AMBAC Insured
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/SINGLE FAMILY - 12.7% (8.4% OF TOTAL INVESTMENTS)
650 Georgia Housing and Finance Authority, Single Family Mortgage 12/11 at 100.00 AAA 654,570
Bonds, Series 2002B-2, 5.350%, 12/01/22
(Alternative Minimum Tax)
1,000 Georgia Housing and Finance Authority, Single Family Mortgage 12/15 at 100.00 AAA 900,100
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 2,051,239
Resolution 1 Bonds, Series 2002A-2, 5.450%, 12/01/22
(Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
3,650 Total Housing/Single Family 3,605,909
------------------------------------------------------------------------------------------------------------------------------------
INDUSTRIALS - 6.3% (4.2% OF TOTAL INVESTMENTS)
1,000 Cartersville Development Authority, Georgia, Waste and Wastewater 2/12 at 100.00 A 1,010,550
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 781,868
Bonds, GTREP Project, Series 2002, 5.000%, 7/01/19 -
MBIA Insured
------------------------------------------------------------------------------------------------------------------------------------
1,750 Total Industrials 1,792,418
------------------------------------------------------------------------------------------------------------------------------------
LONG-TERM CARE - 2.3% (1.5% OF TOTAL INVESTMENTS)
500 Fulton County Residential Care Facilities Authority, Georgia, 7/17 at 100.00 N/R 396,250
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 249,953
Spring Harbor at Green Island, Series 2007, 5.000%, 7/01/11
------------------------------------------------------------------------------------------------------------------------------------
750 Total Long-Term Care 646,203
------------------------------------------------------------------------------------------------------------------------------------
MATERIALS - 2.1% (1.4% OF TOTAL INVESTMENTS)
20 Richmond County Development Authority, Georgia, Environmental 11/13 at 100.00 BBB 18,513
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 577,044
Improvement Revenue Refunding Bonds, International Paper
Company, Series 2002A, 6.000%, 2/01/25 (Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
620 Total Materials 595,557
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL - 12.0% (8.0% OF TOTAL INVESTMENTS)
360 Cherokee County Resource Recovery Development Authority, 7/17 at 100.00 AAA 347,677
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 207,338
5.000%, 1/01/31 - FSA Insured
700 Georgia State, General Obligation Bonds, Series 2007, 5.000%, 8/01/24 8/17 at 100.00 AAA 744,954
500 Georgia, General Obligation Bonds, Series 2005B, 5.000%, 7/01/15 No Opt. Call AAA 554,305
28
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL (continued)
$ 335 Gwinnett County School District, Georgia, General Obligation Bonds, 2/18 at 100.00 Aaa $ 360,460
Series 2008, Trust 2868, 10.907%, 2/01/36 (IF)
600 Paulding County School District, Georgia, General Obligation Bonds, 2/17 at 100.00 AA+ 616,962
Series 2007, 5.000%, 2/01/33
595 Puerto Rico, General Obligation Bonds, Series 2004A, 5.250%, 7/01/22 7/14 at 100.00 BBB- 597,428
------------------------------------------------------------------------------------------------------------------------------------
3,290 Total Tax Obligation/General 3,429,124
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED - 7.6% (5.0% OF TOTAL INVESTMENTS)
40 Atlanta, Georgia, Tax Allocation Bonds Atlanta Station Project, 12/17 at 100.00 AAA 41,004
Series 2007, 5.000%, 12/01/23 - AGC Insured
250 Atlanta, Georgia, Tax Allocation Bonds, Eastside Project, 7/15 at 100.00 N/R 240,108
Series 2005B, 5.400%, 1/01/20
250 Atlanta, Georgia, Tax Allocation Bonds, Princeton Lakes Project, 1/16 at 100.00 N/R 226,478
Series 2006, 5.500%, 1/01/31
1,525 Macon-Bibb County Urban Development Authority, Georgia, 8/12 at 101.00 AA 1,646,191
Revenue Refunding Bonds, Public Facilities Projects,
Series 2002A, 5.000%, 8/01/14
------------------------------------------------------------------------------------------------------------------------------------
2,065 Total Tax Obligation/Limited 2,153,781
------------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION - 3.6% (2.4% OF TOTAL INVESTMENTS)
1,000 Atlanta, Georgia, Airport General Revenue Refunding Bonds, 1/10 at 101.00 A+ 1,030,660
Series 2000A, 5.400%, 1/01/15 - FGIC Insured
------------------------------------------------------------------------------------------------------------------------------------
U.S. GUARANTEED - 31.4% (20.9% OF TOTAL INVESTMENTS) (4)
565 Augusta, Georgia, Water and Sewerage Revenue Bonds, 10/12 at 100.00 AAA 611,200
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 Baa3 (4) 1,639,860
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, Revenue 5/11 at 100.00 A- (4) 1,336,350
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, 5.000%, 8/01/18 8/12 at 100.00 AAA 896,666
(Pre-refunded 8/01/12)
1,900 Gwinnett County Hospital Authority, Georgia, Revenue Anticipation 2/12 at 102.00 Aaa 2,088,592
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 Bonds, 10/11 at 102.00 Baa2 (4) 1,333,212
Mercer University, Series 2001, 5.750%, 10/01/31
(Pre-refunded 10/01/11)
1,000 Rockdale County Water and Sewerage Authority, Georgia, Revenue 1/10 at 101.00 AAA 1,058,300
Bonds, Series 1999A, 5.375%, 7/01/29 (Pre-refunded 1/01/10) -
MBIA Insured
------------------------------------------------------------------------------------------------------------------------------------
8,245 Total U.S. Guaranteed 8,964,180
------------------------------------------------------------------------------------------------------------------------------------
UTILITIES - 1.9% (1.2% OF TOTAL INVESTMENTS)
500 Municipal Electric Authority of Georgia, Combustion Turbine 11/13 at 100.00 AAA 539,715
Revenue Bonds, Series 2003A, 5.250%, 11/01/15 - MBIA Insured
------------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER - 20.2% (13.4% OF TOTAL INVESTMENTS)
1,200 Atlanta, Georgia, Water and Wastewater Revenue Bonds, 11/14 at 100.00 AAA 1,242,564
Series 2004, 5.000%, 11/01/24 - FSA Insured
625 Cherokee County Water and Sewerage Authority, Georgia, 8/18 at 100.00 AAA 644,063
Revenue Bonds, Series 2001, 5.000%, 8/01/35 - FSA Insured
29
NZX
Nuveen Georgia Dividend Advantage Municipal Fund (continued)
Portfolio of INVESTMENTS May 31, 2008
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER (continued)
$ 350 Coweta County Water and Sewer Authority, Georgia, Revenue 6/18 at 100.00 Aa3 $ 358,582
Bonds, Series 2007, 5.000%, 6/01/37
890 Douglasville-Douglas County Water and Sewer Authority, Georgia, 6/17 at 100.00 AAA 913,363
Water and Sewer Revenue Bonds, Series 2007, 5.000%, 6/01/37 -
MBIA Insured
375 Forsyth County Water and Sewerage Authority, Georgia, Revenue 4/17 at 100.00 AAA 384,671
Bonds, Series 2007, 5.000%, 4/01/37 - FSA Insured
500 Fulton County, Georgia, Water and Sewerage Revenue Bonds, 1/14 at 100.00 AA- 519,965
Series 2004, 5.000%, 1/01/22 - FGIC Insured
1,395 Macon Water Authority, Georgia, Water and Sewer Revenue Bonds, 10/11 at 101.00 AA- 1,462,532
Series 2001B, 5.000%, 10/01/21
230 Walton County Water and Sewerage Authority, Georgia, Revenue 2/18 at 100.00 Aaa 236,199
Bonds, The Oconee-Hard Creek Resevoir Project, Series 2008,
5.000%, 2/01/38 - FSA Insured
------------------------------------------------------------------------------------------------------------------------------------
5,565 Total Water and Sewer 5,761,939
------------------------------------------------------------------------------------------------------------------------------------
$ 41,760 Total Investments (cost $42,370,100) - 150.6% 42,929,023
=============-----------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 2.0% 568,984
--------------------------------------------------------------------------------------------------------------------
Preferred Shares, at Liquidation Value - (52.6)% (5) (15,000,000)
--------------------------------------------------------------------------------------------------------------------
Net Assets Applicable to Common Shares - 100% $28,498,007
====================================================================================================================
FORWARD SWAPS OUTSTANDING AT MAY 31, 2008:
FUND FIXED RATE UNREALIZED
NOTIONAL PAY/RECEIVE FLOATING RATE FIXED RATE PAYMENT EFFECTIVE TERMINATION APPRECIATION
COUNTERPARTY AMOUNT FLOATING RATE INDEX (ANNUALIZED) FREQUENCY DATE (6) DATE (DEPRECIATION)
------------------------------------------------------------------------------------------------------------------------------------
Royal Bank
of Canada $2,200,000 Pay SIFM 4.335% Quarterly 8/06/08 8/06/37 $139,708
====================================================================================================================================
SIFM-The daily arithmetic average of the weekly Securities Industry and
Financial Markets (SIFM) Municipal Swap Index, previously referred to as the
Bond Market Association or BMA.
(1) All percentages shown in the Portfolio of Investments are
based on net assets applicable to Common shares unless
otherwise noted.
(2) Optional Call Provisions (not covered by the report of
independent registered public accounting firm): Dates (month
and year) and prices of the earliest optional call or
redemption. There may be other call provisions at varying
prices at later dates. Certain mortgage-backed securities
may be subject to periodic principal paydowns.
(3) Ratings (not covered by the report of independent registered
public accounting firm): Using the higher of Standard &
Poor's Group ("Standard & Poor's") or Moody's Investor
Service, Inc. ("Moody's") rating. Ratings below BBB by
Standard & Poor's or Baa by Moody's are considered to be
below investment grade.
The Portfolio of Investments may reflect the ratings on
certain bonds insured by AMBAC, CIFG, FGIC, MBIA, RAAI and
XLCA as of May 31, 2008. Please see the Portfolio Manager's
Commentary for an expanded discussion of the affect on the
Fund of changes to the ratings of certain bonds in the
portfolio resulting from changes to the ratings of the
underlying insurers both during the period and after period
end.
(4) 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) Preferred Shares, at Liquidation Value as a percentage of
total investments is (34.9)%.
(6) 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.
(IF) Inverse floating rate investment.
See accompanying notes to financial statements.
30
NKG
Nuveen Georgia Dividend Advantage Municipal Fund 2
Portfolio of INVESTMENTS
May 31, 2008
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 $ 1,911,340
Asset-Backed Refunding Bonds, Series 2002, 5.500%, 5/15/39
------------------------------------------------------------------------------------------------------------------------------------
EDUCATION AND CIVIC ORGANIZATIONS - 14.7% (9.8% OF TOTAL INVESTMENTS)
2,500 Athens Housing Authority, Georgia, Student Housing Lease Revenue 12/12 at 100.00 Aaa 2,535,175
Bonds, UGAREF East Campus Housing LLC Project, Series 2002,
5.000%, 12/01/33 - AMBAC Insured
1,225 Athens-Clarke County Unified Government Development Authority, 12/12 at 100.00 AAA 1,279,794
Georgia, Educational Facilities Revenue Bonds, UGAREF CCRC
Building LLC Project, Series 2002, 5.000%, 12/15/18 -
AMBAC Insured
2,000 Atlanta Development Authority, Georgia, Educational Facilities 7/17 at 100.00 A1 1,944,580
Revenue Bonds, Science Park LLC Project, Series 2007,
5.000%, 7/01/39
2,000 Fulton County Development Authority, Georgia, Revenue Bonds, 11/13 at 100.00 AAA 2,070,400
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 1,052,720
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 423,825
Facilities Revenue Bonds, Riverside Military Academy Project,
Series 2007, 5.125%, 3/01/37
------------------------------------------------------------------------------------------------------------------------------------
9,275 Total Education and Civic Organizations 9,306,494
------------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE - 23.9% (15.9% OF TOTAL INVESTMENTS)
150 Baldwin County Hospital Authority, Georgia, Revenue Bonds, 12/09 at 100.00 BB+ 149,171
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+ 37,378
315 5.375%, 12/01/28 12/08 at 102.00 BB+ 289,517
1,000 Chatham County Hospital Authority, Savannah, Georgia, Hospital 1/14 at 100.00 BBB 905,590
Revenue Bonds, Memorial Health University Medical Center Inc.,
Series 2004A, 5.375%, 1/01/26
240 Chatham County Hospital Authority, Savannah, Georgia, Hospital 7/11 at 101.00 BBB 240,542
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 153,181
1,000 5.250%, 12/01/22 12/14 at 100.00 BBB 927,120
1,000 Floyd County Hospital Authority, Georgia, Revenue Anticipation 7/12 at 101.00 Aaa 1,017,680
Certificates, Floyd Medical Center Project, Series 2002,
5.200%, 7/01/32 - MBIA Insured
1,100 Houston County Hospital Authority, Georgia, Revenue Bonds, 10/17 at 100.00 A2 1,095,963
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 2,383,238
3,020 5.500%, 1/01/20 - MBIA Insured 1/13 at 100.00 Aaa 3,171,815
31
NKG
Nuveen Georgia Dividend Advantage Municipal Fund 2 (continued)
Portfolio of INVESTMENTS May 31, 2008
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE (continued)
$ 2,000 Savannah Hospital Authority, Georgia, Revenue Bonds, St. Joseph's/ 1/14 at 100.00 AA $ 2,020,140
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 2,021,361
Bonds, Tift Regional Medical Center, Series 2002,
5.250%, 12/01/19 - AMBAC Insured
750 Valdosta and Lowndes County Hospital Authority, Georgia, Revenue 10/17 at 100.00 A+ 719,280
Certificates, South Georgia Medical Center, Series 2007,
5.000%, 10/01/33
------------------------------------------------------------------------------------------------------------------------------------
14,985 Total Health Care 15,131,976
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/MULTIFAMILY - 4.6% (3.1% OF TOTAL INVESTMENTS)
25 Cobb County Development Authority, Georgia, Student Housing 7/17 at 100.00 Aaa 25,288
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 500,320
980 5.200%, 11/20/27 (Alternative Minimum Tax) 11/12 at 102.00 AAA 969,338
1,465 5.250%, 11/20/32 (Alternative Minimum Tax) 11/12 at 102.00 AAA 1,439,231
------------------------------------------------------------------------------------------------------------------------------------
2,970 Total Housing/Multifamily 2,934,177
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/SINGLE FAMILY - 1.0% (0.6% OF TOTAL INVESTMENTS)
170 Georgia Housing and Finance Authority, Single Family Mortgage 12/15 at 100.00 AAA 150,683
Bonds, Series 2006C-2, 4.550%, 12/01/31
(Alternative Minimum Tax)
465 Georgia Housing and Finance Authority, Single Family Mortgage 6/11 at 100.00 AAA 469,236
Resolution 1 Bonds, Series 2001B-2, 5.400%, 12/01/31
(Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
635 Total Housing/Single Family 619,919
------------------------------------------------------------------------------------------------------------------------------------
INDUSTRIALS - 2.8% (1.9% OF TOTAL INVESTMENTS)
2,190 Cobb County Development Authority, Georgia, Solid Waste Disposal 4/16 at 101.00 BBB 1,784,149
Revenue Bonds, Georgia Waste Management Project, Series 2004A,
5.000%, 4/01/33 (Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
LONG-TERM CARE - 1.6% (1.0% OF TOTAL INVESTMENTS)
1,000 Fulton County Residential Care Facilities Authority, Georgia, Revenue 7/17 at 100.00 N/R 792,500
Bonds, Elderly Care, Lenbrook Square Project, Series 2006A,
5.125%, 7/01/42
250 Medical Center Hospital Authority, Georgia, Revenue Bonds, Spring No Opt. Call N/R 249,953
Harbor at Green Island, Series 2007, 5.000%, 7/01/11
------------------------------------------------------------------------------------------------------------------------------------
1,250 Total Long-Term Care 1,042,453
------------------------------------------------------------------------------------------------------------------------------------
MATERIALS - 2.6% (1.6% OF TOTAL INVESTMENTS)
1,000 Richmond County Development Authority, Georgia, Environmental 2/11 at 101.00 BBB 991,220
Improvement Revenue Bonds, International Paper Company,
Series 2001A, 6.250%, 2/01/25 (Alternative Minimum Tax)
250 Richmond County Development Authority, Georgia, Environmental 2/12 at 101.00 BBB 240,435
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 387,568
Control Revenue Bonds, Union Camp Corporation, Series 1995,
6.150%, 3/01/17
------------------------------------------------------------------------------------------------------------------------------------
1,620 Total Materials 1,619,223
------------------------------------------------------------------------------------------------------------------------------------
32
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL - 19.6% (13.1% OF TOTAL INVESTMENTS)
$ 600 Cherokee County Resource Recovery Development Authority, 7/17 at 100.00 AAA $ 579,462
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 933,021
5.000%, 1/01/31 - FSA Insured
1,000 Forsyth County, Georgia, General Obligation Bonds, Series 2004, 3/14 at 101.00 AA+ 1,086,230
5.250%, 3/01/19
1,700 Georgia State, General Obligation Bonds, Series 2007, 5.000%, 8/01/24 8/17 at 100.00 AAA 1,809,174
750 Georgia, General Obligation Bonds, Series 1998D, 5.250%, 10/01/15 No Opt. Call AAA 845,348
1,000 Georgia, General Obligation Bonds, Series 2005B, 5.000%, 7/01/15 No Opt. Call AAA 1,108,610
700 Gwinnett County School District, Georgia, General Obligation Bonds, 2/18 at 100.00 Aaa 753,200
Series 2008, Trust 2868, 10.907%, 2/01/36 (IF)
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 1,534,630
1,470 5.250%, 1/01/26 - AMBAC Insured 1/13 at 101.00 Aaa 1,549,777
1,200 Paulding County School District, Georgia, General Obligation 2/17 at 100.00 AA+ 1,233,924
Bonds, Series 2007, 5.000%, 2/01/33
1,000 Wayne County Hospital Authority, Georgia, Hospital Revenue Bonds, 3/16 at 100.00 A3 1,010,810
Series 2006, 5.000%, 3/01/23 - XLCA Insured
------------------------------------------------------------------------------------------------------------------------------------
11,730 Total Tax Obligation/General 12,444,186
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED - 19.7% (13.1% OF TOTAL INVESTMENTS)
120 Atlanta, Georgia, Tax Allocation Bonds Atlanta Station Project, 12/17 at 100.00 AAA 123,011
Series 2007, 5.000%, 12/01/23 - AGC Insured
250 Atlanta, Georgia, Tax Allocation Bonds, Eastside Project, 7/15 at 100.00 N/R 240,108
Series 2005B, 5.400%, 1/01/20
395 Atlanta, Georgia, Tax Allocation Bonds, Princeton Lakes Project, 1/16 at 100.00 N/R 357,834
Series 2006, 5.500%, 1/01/31
750 Georgia Municipal Association Inc., Certificates of Participation, 6/12 at 101.00 AAA 759,128
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 2,908,375
Revenue Refunding Bonds, Series 1992P, 6.250%, 7/01/20 -
AMBAC Insured
500 Puerto Rico Infrastructure Financing Authority, Special Tax Revenue 7/15 at 100.00 BBB- 488,900
Bonds, Series 2005B, 5.000%, 7/01/41
2,500 Puerto Rico Municipal Finance Agency, Series 2002A, 8/12 at 100.00 AAA 2,538,350
5.000%, 8/01/27 - FSA Insured
5,000 Puerto Rico Public Buildings Authority, Guaranteed Government No Opt. Call A+ 5,068,346
Facilities Revenue Refunding Bonds, Series 2002F,
5.250%, 7/01/21 - CIFG Insured
------------------------------------------------------------------------------------------------------------------------------------
12,015 Total Tax Obligation/Limited 12,484,052
------------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION - 5.9% (4.0% OF TOTAL INVESTMENTS)
3,650 Atlanta, Georgia, Airport General Revenue Refunding Bonds, 1/10 at 101.00 A+ 3,769,757
Series 2000A, 5.500%, 1/01/21 - FGIC Insured
------------------------------------------------------------------------------------------------------------------------------------
U.S. GUARANTEED - 14.9% (9.9% OF TOTAL INVESTMENTS) (4)
1,000 Augusta, Georgia, Water and Sewerage Revenue Bonds, 10/12 at 100.00 AAA 1,091,870
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 1,089,670
Bonds, Series 2003, 5.000%, 8/01/16 (Pre-refunded 8/01/13) -
MBIA Insured
33
NKG
Nuveen Georgia Dividend Advantage Municipal Fund 2 (continued)
Portfolio of INVESTMENTS May 31, 2008
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
U.S. GUARANTEED (4) (continued)
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 $ 1,071,330
2,000 5.375%, 10/01/35 (Pre-refunded 10/01/10) 10/10 at 101.00 AAA 2,153,940
1,300 Fairburn, Georgia, Combined Utility Revenue Bonds, Series 2000, 10/10 at 101.00 A- (4) 1,410,149
5.750%, 10/01/20 (Pre-refunded 10/01/10)
1,305 Gainesville and Hall County Hospital Authority, Georgia, Revenue 5/11 at 100.00 A- (4) 1,395,149
Anticipation Certificates, Northeast Georgia Health Services Inc.,
Series 2001, 5.500%, 5/15/31 (Pre-refunded 5/15/11)
1,100 Private Colleges and Universities Authority, Georgia, Revenue 10/11 at 102.00 Baa2 (4) 1,222,111
Bonds, Mercer University, Series 2001, 5.750%, 10/01/31
(Pre-refunded 10/01/11)
------------------------------------------------------------------------------------------------------------------------------------
8,705 Total U.S. Guaranteed 9,434,219
------------------------------------------------------------------------------------------------------------------------------------
UTILITIES - 4.9% (3.3% OF TOTAL INVESTMENTS)
1,000 Elberton, Georgia, Combined Utility System Revenue Refunding 1/12 at 100.00 Aaa 1,032,050
and Improvement Bonds, Series 2001, 5.000%, 1/01/22 -
AMBAC Insured
1,000 Georgia Municipal Electric Authority, General Power Revenue Bonds, 1/17 at 100.00 AAA 1,030,220
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 1,036,400
Lien Revenue Bonds, Series 2003A, 5.000%, 1/01/22 -
MBIA Insured
------------------------------------------------------------------------------------------------------------------------------------
3,000 Total Utilities 3,098,670
------------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER - 31.2% (20.7% 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 550,600
1,700 5.000%, 11/01/37 - FSA Insured 11/14 at 100.00 AAA 1,728,849
3,500 Augusta, Georgia, Water and Sewerage Revenue Bonds, Series 2002, 10/12 at 100.00 AAA 3,580,500
5.000%, 10/01/27 - FSA Insured
1,990 Cherokee County Water and Sewerage Authority, Georgia, Revenue 8/18 at 100.00 AAA 2,050,695
Bonds, Series 2001, 5.000%, 8/01/35 - FSA Insured
Coweta County Water and Sewer Authority, Georgia, Revenue Bonds,
Series 2007:
500 5.000%, 6/01/32 6/18 at 100.00 Aa3 513,870
500 5.000%, 6/01/37 6/18 at 100.00 Aa3 512,260
1,000 Douglasville-Douglas County Water and Sewer Authority, Georgia, 12/15 at 100.00 AAA 1,030,250
Water and Sewer Revenue Bonds, Series 2005, 5.000%, 6/01/29 -
MBIA Insured
445 Douglasville-Douglas County Water and Sewer Authority, Georgia, 6/17 at 100.00 AAA 456,681
Water and Sewer Revenue Bonds, Series 2007, 5.000%, 6/01/37 -
MBIA Insured
4,000 Forsyth County Water and Sewerage Authority, Georgia, Revenue 4/13 at 100.00 AA+ 4,068,440
Bonds, Series 2002, 5.000%, 4/01/32
375 Forsyth County Water and Sewerage Authority, Georgia, Revenue 4/17 at 100.00 AAA 384,671
Bonds, Series 2007, 5.000%, 4/01/37 - FSA Insured
950 Fulton County, Georgia, Water and Sewerage Revenue Bonds, 7/08 at 101.00 AA- 960,944
Series 1998, 5.000%, 1/01/16 - FGIC Insured
34
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER (continued)
$ 3,100 Harris County, Georgia, Water System Revenue Bonds, Series 2002, 12/12 at 100.00 Aaa $ 3,217,397
5.000%, 12/01/22 - AMBAC Insured
685 Walton County Water and Sewerage Authority, Georgia, Revenue 2/18 at 100.00 Aaa 703,461
Bonds, The Oconee-Hard Creek Resevoir Project, Series 2008,
5.000%, 2/01/38 - FSA Insured
------------------------------------------------------------------------------------------------------------------------------------
19,245 Total Water and Sewer 19,758,618
------------------------------------------------------------------------------------------------------------------------------------
$ 93,270 Total Investments (cost $95,472,262) - 150.4% 95,339,233
=============-----------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 1.6% 1,062,358
--------------------------------------------------------------------------------------------------------------------
Preferred Shares, at Liquidation Value - (52.0)% (5) (33,000,000)
--------------------------------------------------------------------------------------------------------------------
Net Assets Applicable to Common Shares - 100% $63,401,591
====================================================================================================================
(1) All percentages shown in the Portfolio of Investments are
based on net assets applicable to Common shares unless
otherwise noted.
(2) Optional Call Provisions (not covered by the report of
independent registered public accounting firm): Dates (month
and year) and prices of the earliest optional call or
redemption. There may be other call provisions at varying
prices at later dates. Certain mortgage-backed securities
may be subject to periodic principal paydowns.
(3) Ratings (not covered by the report of independent registered
public accounting firm): Using the higher of Standard &
Poor's Group ("Standard & Poor's") or Moody's Investor
Service, Inc. ("Moody's") rating. Ratings below BBB by
Standard & Poor's or Baa by Moody's are considered to be
below investment grade.
The Portfolio of Investments may reflect the ratings on
certain bonds insured by AMBAC, CIFG, FGIC, MBIA, RAAI and
XLCA as of May 31, 2008. Please see the Portfolio Manager's
Commentary for an expanded discussion of the affect on the
Fund of changes to the ratings of certain bonds in the
portfolio resulting from changes to the ratings of the
underlying insurers both during the period and after period
end.
(4) 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) Preferred Shares, at Liquidation Value as a percentage of
total investments is (34.6)%.
N/R Not rated.
(IF) Inverse floating rate investment.
See accompanying notes to financial statements.
35
NNC
Nuveen North Carolina Premium Income Municipal Fund
Portfolio of INVESTMENTS
May 31, 2008
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
EDUCATION AND CIVIC ORGANIZATIONS - 23.6% (15.1% OF TOTAL INVESTMENTS)
$ 1,000 North Carolina Capital Facilities Financing Agency, Housing 6/13 at 100.00 AAA $ 1,019,040
Revenue Bonds, Elizabeth City State University, Series 2003A,
5.000%, 6/01/28 - AMBAC Insured
2,500 North Carolina Capital Facilities Financing Agency, Revenue Bonds, 10/15 at 100.00 AA+ 2,561,525
Duke University, Series 2005A, 5.000%, 10/01/41
970 North Carolina Capital Facilities Financing Agency, Revenue Bonds, 4/13 at 100.00 A- 986,063
Johnson and Wales University, Series 2003A, 5.250%, 4/01/23 -
XLCA Insured
2,285 North Carolina State University at Raleigh, General Revenue Bonds, 10/13 at 100.00 AA 2,468,531
Series 2003A, 5.000%, 10/01/15
1,530 University of North Carolina System, Pooled Revenue Bonds, No Opt. Call AAA 1,648,896
Series 2005A, 5.000%, 4/01/15 - AMBAC Insured
580 University of North Carolina System, Pooled Revenue Refunding 10/12 at 100.00 AAA 608,838
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 A- 1,460,245
1,505 5.000%, 6/01/24 - FGIC Insured 6/16 at 100.00 A- 1,531,804
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+ 2,532,153
2,725 5.000%, 12/01/21 12/13 at 100.00 AA+ 2,861,141
1,500 5.000%, 12/01/23 12/13 at 100.00 AA+ 1,574,940
1,675 University of North Carolina, Wilmington, General Revenue Bonds, 1/12 at 101.00 Aaa 1,714,162
Series 2002A, 5.000%, 1/01/23 - AMBAC Insured
------------------------------------------------------------------------------------------------------------------------------------
20,080 Total Education and Civic Organizations 20,967,338
------------------------------------------------------------------------------------------------------------------------------------
ENERGY - 1.7% (1.1% OF TOTAL INVESTMENTS)
1,500 Virgin Islands Public Finance Authority, Revenue Bonds, Refinery 1/14 at 100.00 BBB 1,502,356
Project - Hovensa LLC, Series 2003, 6.125%, 7/01/22
(Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE - 21.9% (14.0% OF TOTAL INVESTMENTS)
1,145 Albemarle Hospital Authority, North Carolina, Health Care Facilities 10/17 at 100.00 BBB- 1,103,173
Revenue Bonds, Series 2007, 5.250%, 10/01/27
1,000 Johnston Memorial Hospital Authority, North Carolina, Mortgage 4/18 at 100.00 AAA 1,030,930
Revenue Bonds, Johnston Memorial Hospital Project, Series 2008,
5.250%, 10/01/36 (WI/DD, Settling 6/11/08) - FSA Insured
2,000 North Carolina Medical Care Commission, Healthcare Facilities 11/13 at 100.00 AA- 2,077,060
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- 2,051,320
Revenue Bonds, Stanly Memorial Hospital, Series 1999,
6.375%, 10/01/29
36
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE (continued)
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 $ 1,022,430
550 5.500%, 1/01/20 1/12 at 100.00 A 561,974
1,750 5.375%, 1/01/32 1/12 at 100.00 A 1,750,753
1,615 North Carolina Medical Care Commission, Hospital Revenue Bonds, 10/08 at 101.00 AA 1,585,817
FirstHealth of the Carolinas Inc., Series 1998, 4.750%, 10/01/26
3,000 North Carolina Medical Care Commission, Hospital Revenue Bonds, 6/12 at 101.00 A 3,001,950
Southeastern Regional Medical Center, Series 2002,
5.375%, 6/01/32
1,500 North Carolina Medical Care Commission, Hospital Revenue Bonds, 11/17 at 100.00 A- 1,479,765
Wilson Medical Center, Series 2007, 5.000%, 11/01/27
1,645 North Carolina Medical Care Commission, Revenue Bonds, 1/15 at 100.00 A+ 1,626,560
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 625,482
500 5.250%, 7/01/22 - AMBAC Insured 7/14 at 100.00 AAA 517,330
300 Northern Hospital District of Surry County, North Carolina, 4/18 at 100.00 BBB 304,146
Health Care Facilities Revenue Bonds, Series 2008,
6.250%, 10/01/38
685 Onslow County Hospital Authority, North Carolina, FHA Insured 10/16 at 100.00 AAA 691,932
Mortgage Revenue Bonds, Onslow Memorial Hospital Project,
Series 2006, 5.000%, 4/01/31 - MBIA Insured
------------------------------------------------------------------------------------------------------------------------------------
19,290 Total Health Care 19,430,622
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/MULTIFAMILY - 3.7% (2.3% OF TOTAL INVESTMENTS)
1,000 Asheville Housing Authority, North Carolina, GNMA-Collateralized 11/08 at 101.00 AA- 1,000,950
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 2,254,276
Revenue Bonds, Little Rock Apartments, Series 2003,
5.375%, 1/01/36 (Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
3,290 Total Housing/Multifamily 3,255,226
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/SINGLE FAMILY - 7.8% (5.0% OF TOTAL INVESTMENTS)
1,080 North Carolina Housing Finance Agency, Home Ownership 7/10 at 100.00 AAA 1,079,222
Revenue Bonds, 1998 Trust Agreement, Series 10A,
5.400%, 7/01/32 - AMBAC Insured (Alternative Minimum Tax)
2,735 North Carolina Housing Finance Agency, Home Ownership Revenue 7/09 at 100.00 AA 2,798,561
Bonds, 1998 Trust Agreement, Series 6A, 6.200%, 1/01/29
(Alternative Minimum Tax)
1,000 North Carolina Housing Finance Agency, Home Ownership Revenue 1/17 at 100.00 AA 916,490
Bonds, Series 2007-29A, 4.800%, 7/01/33 (Alternative Minimum Tax)
835 North Carolina Housing Finance Agency, Home Ownership Revenue 7/16 at 100.00 AA 769,469
Bonds, Series 25-A, 4.900%, 7/01/37 (Alternative Minimum Tax)
1,370 North Carolina Housing Finance Agency, Single Family Revenue 9/08 at 100.00 AA 1,407,031
Bonds, Series 1996HH, 6.300%, 3/01/26 (Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
7,020 Total Housing/Single Family 6,970,773
------------------------------------------------------------------------------------------------------------------------------------
LONG-TERM CARE - 0.4% (0.2% OF TOTAL INVESTMENTS)
375 North Carolina Medical Care Commission, Revenue Bonds, 1/16 at 100.00 N/R 340,631
Pines at Davidson, Series 2006A, 5.000%, 1/01/36
------------------------------------------------------------------------------------------------------------------------------------
37
NNC
Nuveen North Carolina Premium Income Municipal Fund (continued)
Portfolio of INVESTMENTS May 31, 2008
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
MATERIALS - 1.3% (0.8% OF TOTAL INVESTMENTS)
$ 1,425 Gaston County Industrial Facilities and Pollution Control Financing 8/15 at 100.00 N/R $ 1,138,133
Authority, North Carolina, National Gypsum Company Project
Exempt Facilities Revenue Bonds, Series 2005, 5.750%, 8/01/35
(Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL - 11.3% (7.2% OF TOTAL INVESTMENTS)
1,890 Craven County, North Carolina, General Obligation Bonds, 5/12 at 101.00 AAA 1,957,360
Series 2002, 5.000%, 5/01/21 - AMBAC Insured
4,285 Durham County, North Carolina, General Obligation Bonds, 4/12 at 100.00 AAA 4,547,328
Series 2002B, 5.000%, 4/01/16
2,820 Durham, North Carolina, General Obligation Bonds, 4/17 at 100.00 AAA 3,040,637
Series 2007, 5.000%, 4/01/21 (4)
500 North Carolina, General Obligation Bonds, Series 2004A, 3/14 at 100.00 AAA 528,810
5.000%, 3/01/22
------------------------------------------------------------------------------------------------------------------------------------
9,495 Total Tax Obligation/General 10,074,135
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED - 38.2% (24.4% OF TOTAL INVESTMENTS)
1,330 Cabarrus County, North Carolina, Certificates of Participation, 2/13 at 100.00 AA- 1,407,991
Series 2002, 5.250%, 2/01/17
1,800 Catawba County, North Carolina, Certificates of Participation, 6/14 at 100.00 Aaa 1,873,980
Series 2004, 5.250%, 6/01/21 - MBIA Insured
1,700 Charlotte, North Carolina, Certificates of Participation, Governmental 6/13 at 100.00 AA+ 1,760,588
Facilities Projects, Series 2003G, 5.375%, 6/01/26
950 Charlotte, North Carolina, Certificates of Participation, Transit 6/18 at 100.00 AA+ 973,294
Projects Phase 2, Series 2008A, 5.000%, 6/01/33
(WI/DD, Settling 6/04/08)
1,500 Charlotte, North Carolina, Certificates of Participation, Transit 6/13 at 100.00 AA+ 1,513,200
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 1,124,162
1,750 5.000%, 6/01/25 6/12 at 101.00 AAA 1,809,220
1,400 Craven County, North Carolina, Certificates of Participation, 6/17 at 100.00 AAA 1,437,786
Series 2007, 5.000%, 6/01/27 - MBIA Insured
1,000 Davidson County, North Carolina, Certificates of Participation, No Opt. Call AAA 1,087,180
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 1,843,042
500 5.250%, 4/01/20 - FSA Insured 4/14 at 100.00 AAA 531,630
1,000 5.250%, 4/01/22 - FSA Insured 4/14 at 100.00 AAA 1,053,790
2,600 North Carolina Infrastructure Finance Corporation, Certificates 2/15 at 100.00 AA+ 2,753,556
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+ 1,548,435
of Participation, Correctional Facilities, Series 2004A,
5.000%, 2/01/23
1,500 North Carolina, Certificates of Participation, Repair and Renovation 6/14 at 100.00 AA+ 1,559,535
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+ 1,177,856
1,000 5.250%, 6/01/23 6/13 at 100.00 AA+ 1,033,260
2,000 Puerto Rico Highway and Transportation Authority, Grant Anticipation 3/14 at 100.00 AAA 2,058,880
Revenue Bonds, Series 2004, 5.000%, 9/15/21 - MBIA Insured
1,000 Puerto Rico Public Buildings Authority, Guaranteed Government No Opt. Call BBB- 1,035,220
Facilities Revenue Bonds, Series 2003H, 5.250%, 7/01/15 -
FGIC Insured
285 Raleigh, North Carolina, Certificates of Participation, Series 2007, 2/17 at 100.00 AA+ 293,881
5.000%, 2/01/27
38
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED (continued)
$ 1,000 Randolph County, North Carolina, Certificates of Participation, 6/14 at 102.00 AAA $ 1,066,210
Series 2004, 5.000%, 6/01/20 - FSA Insured
1,000 Rutherford County, North Carolina, Certificates of Participation, 12/17 at 100.00 AAA 1,043,820
Series 2007, 5.000%, 12/01/27 - FSA Insured
1,950 Sampson County, North Carolina, Certificates of Participation, 6/17 at 100.00 Aaa 2,005,536
Series 2006, 5.000%, 6/01/34 - FSA Insured (UB)
1,200 Wilmington, North Carolina, Certificates of Participation, 6/18 at 100.00 AA 1,230,396
Series 2008A, 5.000%, 6/01/29
700 Wilson County, North Carolina, Certificates of Participation, 4/17 at 100.00 AAA 716,527
School Facilities Project, Series 2007, 5.000%, 4/01/25 -
AMBAC Insured
------------------------------------------------------------------------------------------------------------------------------------
32,560 Total Tax Obligation/Limited 33,938,975
------------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION - 7.0% (4.5% OF TOTAL INVESTMENTS)
Charlotte, North Carolina, Airport Revenue Bonds, Series 2004A:
600 5.250%, 7/01/24 - MBIA Insured 7/14 at 100.00 AAA 630,216
2,710 5.000%, 7/01/29 - MBIA Insured 7/14 at 100.00 AAA 2,735,339
500 Piedmont Triad Airport Authority, North Carolina, Airport Revenue 7/15 at 100.00 A2 510,290
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 Aa3 2,335,883
Bonds, Series 2001A, 5.250%, 11/01/16 - FGIC Insured
------------------------------------------------------------------------------------------------------------------------------------
6,060 Total Transportation 6,211,728
------------------------------------------------------------------------------------------------------------------------------------
U.S. GUARANTEED - 14.3% (9.1% OF TOTAL INVESTMENTS) (5)
250 Charlotte-Mecklenburg Hospital Authority, North Carolina, 1/15 at 100.00 AA- (5) 272,040
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 785,295
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 Revenue 10/11 at 101.00 AA (5) 1,661,213
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 (5) 808,875
Northeast Medical Center, Series 2004, 5.000%, 11/01/24
(Pre-refunded 11/01/14)
810 North Carolina Municipal Power Agency 1, Catawba Electric No Opt. Call AAA 880,089
Revenue Bonds, Series 1980, 10.500%, 1/01/10 (ETM)
4,260 North Carolina Municipal Power Agency 1, Catawba Electric No Opt. Call AAA 4,643,098
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 1,079,050
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 461,063
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 2,154,660
Revenue Bonds, Series 2002A, 5.000%, 6/01/18
(Pre-refunded 6/01/12)
------------------------------------------------------------------------------------------------------------------------------------
11,755 Total U.S. Guaranteed 12,745,383
------------------------------------------------------------------------------------------------------------------------------------
UTILITIES - 13.0% (8.3% OF TOTAL INVESTMENTS)
3,000 North Carolina Eastern Municipal Power Agency, Power System 1/13 at 100.00 Baa1 3,150,810
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 1,049,680
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 A2 4,195,920
Revenue Bonds, Series 1999B, 6.500%, 1/01/20
39
NNC
Nuveen North Carolina Premium Income Municipal Fund (continued)
Portfolio of INVESTMENTS May 31, 2008
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
UTILITIES (continued)
$ 2,000 North Carolina Municipal Power Agency 1, Catawba Electric 1/13 at 100.00 AAA $ 2,140,040
Revenue Bonds, Series 2003A, 5.250%, 1/01/15 - AMBAC Insured
1,000 Wake County Industrial Facilities and Pollution Control Financing 2/12 at 101.00 A2 1,037,720
Authority, North Carolina, Revenue Refunding Bonds, Carolina
Power and Light Company, Series 2002, 5.375%, 2/01/17
------------------------------------------------------------------------------------------------------------------------------------
11,000 Total Utilities 11,574,170
------------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER - 9.1% (5.8% OF TOTAL INVESTMENTS)
1,605 Broad River Water Authority, North Carolina, Water System Revenue 6/15 at 100.00 A3 1,624,758
Bonds, Series 2005, 5.000%, 6/01/20 - XLCA Insured
500 Brunswick County, North Carolina, Enterprise System Revenue 4/18 at 100.00 AAA 516,050
Bonds, Series 2008A, 5.000%, 4/01/31 - FSA Insured
50 Charlotte, North Carolina, Water and Sewerage System Revenue 6/11 at 101.00 AAA 51,599
Bonds, Series 2001, 5.125%, 6/01/26
1,295 Greensboro, North Carolina, Combined Enterprise System Revenue 6/15 at 100.00 AAA 1,349,312
Bonds, Series 2005A, 5.000%, 6/01/26
500 Onslow County, North Carolina, Combined Enterprise System Revenue 6/14 at 100.00 A 508,025
Bonds, Series 2004B, 5.000%, 6/01/23 - XLCA Insured
3,865 Winston-Salem, North Carolina, Water and Sewer System Revenue 6/17 at 100.00 AAA 3,995,212
Bonds, Series 2007A, 5.000%, 6/01/37 (UB)
------------------------------------------------------------------------------------------------------------------------------------
7,815 Total Water and Sewer 8,044,956
------------------------------------------------------------------------------------------------------------------------------------
$ 131,665 Total Long-Term Investments (cost $134,800,184) - 153.3% 136,194,426
=============-----------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 3.5% (2.2% OF TOTAL INVESTMENTS)
$ 3,125 North Carolina Medical Care Commission, Revenue Bonds, Aa3 3,125,000
North Carolina Baptist Hospitals Inc., Variable Rate Demand
Obligations, Series 2002, 2.700%, 6/01/34 - MBIA Insured (6)
=============-----------------------------------------------------------------------------------------------------------------------
Total Short-Term Investments (cost $3,125,000) 3,125,000
--------------------------------------------------------------------------------------------------------------------
Total Investments (cost $137,925,184) - 156.8% 139,319,426
--------------------------------------------------------------------------------------------------------------------
Floating Rate Obligations - (4.4)% (3,870,000)
--------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 0.3% 177,304
--------------------------------------------------------------------------------------------------------------------
Preferred Shares, at Liquidation Value - (52.7)% (7) (46,800,000)
--------------------------------------------------------------------------------------------------------------------
Net Assets Applicable to Common Shares - 100% $88,826,730
====================================================================================================================
40
FUTURES CONTRACTS OUTSTANDING AT MAY 31, 2008:
UNREALIZED
CONTRACT NUMBER OF CONTRACT VALUE AT APPRECIATION
TYPE POSITION CONTRACTS EXPIRATION MAY 31, 2008 (DEPRECIATION)
-----------------------------------------------------------------------------------------------------------------------
U.S. Treasury Bond Long 16 9/08 $1,816,000 $(5,056)
=======================================================================================================================
(1) All percentages shown in the Portfolio of Investments are
based on net assets applicable to Common shares unless
otherwise noted.
(2) Optional Call Provisions (not covered by the report of
independent registered public accounting firm): Dates (month
and year) and prices of the earliest optional call or
redemption. There may be other call provisions at varying
prices at later dates. Certain mortgage-backed securities
may be subject to periodic principal paydowns.
(3) Ratings (not covered by the report of independent registered
public accounting firm): Using the higher of Standard &
Poor's Group ("Standard & Poor's") or Moody's Investor
Service, Inc. ("Moody's") rating. Ratings below BBB by
Standard & Poor's or Baa by Moody's are considered to be
below investment grade.
The Portfolio of Investments may reflect the ratings on
certain bonds insured by AMBAC, CIFG, FGIC, MBIA, RAAI and
XLCA as of May 31, 2008. Please see the Portfolio Manager's
Commentary for an expanded discussion of the affect on the
Fund of changes to the ratings of certain bonds in the
portfolio resulting from changes to the ratings of the
underlying insurers both during the period and after period
end.
(4) Portion of investment, with an aggregate market value of
$32,347, has been pledged to collateralize the net payment
obligations under futures contracts.
(5) Backed by an escrow or trust containing sufficient U.S.
Government or U.S. Government agency securities which ensure
the timely payment of principal and interest. Such
investments are normally considered to be equivalent to AAA
rated securities.
(6) Investment has a maturity of more than one year, but has
variable rate and demand features which qualify it as a
short-term investment. The rate disclosed is that in effect
at the end of the reporting period. This rate changes
periodically based on market conditions or a specified
market index.
(7) Preferred Shares, at Liquidation Value as a percentage of
total investments is (33.6)%.
N/R Not rated.
WI/DD Purchased on a when-issued or delayed delivery basis.
(ETM) Escrowed to maturity.
(UB) Underlying bond of an inverse floating rate trust reflected
as a financing transaction pursuant to the provisions of
SFAS No. 140.
See accompanying notes to financial statements.
41
NRB
Nuveen North Carolina Dividend Advantage Municipal Fund
Portfolio of INVESTMENTS
May 31, 2008
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
EDUCATION AND CIVIC ORGANIZATIONS - 18.9% (11.1% OF TOTAL INVESTMENTS)
$ 380 North Carolina Capital Facilities Financing Agency, Revenue Bonds, 10/11 at 100.00 AA+ $ 393,327
Duke University, Series 2001A, 5.125%, 10/01/26
500 North Carolina Capital Facilities Financing Agency, Revenue Bonds, 9/11 at 101.00 Baa2 501,555
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 1,533,189
Bonds, Series 2002A, 5.375%, 4/01/17 - AMBAC Insured
1,750 University of North Carolina, Chapel Hill, System Net Revenue 6/11 at 100.00 AA+ 1,811,583
Bonds, Series 2001A, 5.000%, 12/01/25 - MBIA Insured
1,845 University of North Carolina, Chapel Hill, System Net Revenue No Opt. Call AA+ 1,986,567
Bonds, Series 2002B, 5.000%, 12/01/11
------------------------------------------------------------------------------------------------------------------------------------
5,905 Total Education and Civic Organizations 6,226,221
------------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE - 20.8% (12.2% OF TOTAL INVESTMENTS)
555 Albemarle Hospital Authority, North Carolina, Health Care Facilities 10/17 at 100.00 BBB- 507,930
Revenue Bonds, Series 2007, 5.250%, 10/01/38
250 Johnston Memorial Hospital Authority, North Carolina, Mortgage 4/18 at 100.00 AAA 257,733
Revenue Bonds, Johnston Memorial Hospital Project, Series 2008,
5.250%, 10/01/36 (WI/DD, Settling 6/11/08) - FSA Insured
1,110 North Carolina Medical Care Commission, Healthcare Facilities 1/12 at 100.00 A 1,146,896
Revenue Bonds, Union Regional Medical Center, Series 2002A,
5.250%, 1/01/15
2,500 North Carolina Medical Care Commission, Healthcare Revenue 11/08 at 100.00 AA- 2,502,596
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 1,519,725
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- 506,350
Bonds, Wilson Medical Center, Series 2007, 5.000%, 11/01/20
250 North Carolina Medical Care Commission, Revenue Bonds, 1/15 at 100.00 A+ 247,198
Blue Ridge Healthcare System, Series 2005, 5.000%, 1/01/33 -
FGIC Insured
150 Northern Hospital District of Surry County, North Carolina, 4/18 at 100.00 BBB 152,073
Health Care Facilities Revenue Bonds, Series 2008,
6.250%, 10/01/38
------------------------------------------------------------------------------------------------------------------------------------
6,815 Total Health Care 6,840,501
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/SINGLE FAMILY - 5.2% (3.0% OF TOTAL INVESTMENTS)
430 North Carolina Housing Finance Agency, Home Ownership Revenue 7/10 at 100.00 AAA 429,690
Bonds, 1998 Trust Agreement, Series 10A, 5.400%, 7/01/32 -
AMBAC Insured (Alternative Minimum Tax)
730 North Carolina Housing Finance Agency, Home Ownership Revenue 7/09 at 100.00 AA 731,526
Bonds, 1998 Trust Agreement, Series 5A, 5.625%, 7/01/30
(Alternative Minimum Tax)
250 North Carolina Housing Finance Agency, Home Ownership Revenue 1/17 at 100.00 AA 229,123
Bonds, Series 2007-29A, 4.800%, 7/01/33 (Alternative Minimum Tax)
330 North Carolina Housing Finance Agency, Home Ownership Revenue 7/16 at 100.00 AA 304,102
Bonds, Series 25-A, 4.900%, 7/01/37 (Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
1,740 Total Housing/Single Family 1,694,441
------------------------------------------------------------------------------------------------------------------------------------
42
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 $ 298,695
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 195,966
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 136,253
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 228,618
United Church Homes and Services, Series 2005A, 5.250%, 9/01/21
------------------------------------------------------------------------------------------------------------------------------------
900 Total Long-Term Care 859,532
------------------------------------------------------------------------------------------------------------------------------------
MATERIALS - 1.3% (0.7% OF TOTAL INVESTMENTS)
515 Gaston County Industrial Facilities and Pollution Control Financing 8/15 at 100.00 N/R 411,325
Authority, North Carolina, National Gypsum Company Project
Exempt Facilities Revenue Bonds, Series 2005, 5.750%, 8/01/35
(Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL - 9.8% (5.7% OF TOTAL INVESTMENTS)
1,000 Durham, North Carolina, General Obligation Bonds, Series 2007, 4/17 at 100.00 AAA 1,078,240
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 1,073,180
1,000 5.000%, 3/01/22 3/14 at 100.00 AAA 1,057,620
------------------------------------------------------------------------------------------------------------------------------------
3,000 Total Tax Obligation/General 3,209,040
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED - 26.5% (15.6% OF TOTAL INVESTMENTS)
1,400 Charlotte, North Carolina, Certificates of Participation, 6/13 at 100.00 AA+ 1,449,896
Governmental Facilities Projects, Series 2003G,
5.375%, 6/01/26
305 Charlotte, North Carolina, Certificates of Participation, Transit 6/18 at 100.00 AA+ 312,479
Projects Phase 2, Series 2008A, 5.000%, 6/01/33
(WI/DD, Settling 6/04/08)
160 Craven County, North Carolina, Certificates of Participation, 6/17 at 100.00 AAA 166,830
Series 2007, 5.000%, 6/01/23 - MBIA Insured
1,870 Dare County, North Carolina, Certificates of Participation, 12/12 at 100.00 AAA 1,998,170
Series 2002, 5.250%, 6/01/15 - AMBAC Insured
1,250 Davidson County, North Carolina, Certificates of Participation, 6/14 at 100.00 AAA 1,304,050
Series 2004, 5.250%, 6/01/21 - AMBAC Insured
1,390 Durham, North Carolina, Certificates of Participation, Series 2005B, 6/15 at 100.00 AA+ 1,427,989
5.000%, 6/01/25
470 Raleigh, North Carolina, Certificates of Participation, Downtown 6/14 at 100.00 AA+ 490,426
Improvement Project, Series 2004B, 5.000%, 6/01/20
170 Raleigh, North Carolina, Certificates of Participation, Series 2007, 2/17 at 100.00 AA+ 175,297
5.000%, 2/01/27
150 Rutherford County, North Carolina, Certificates of Participation, 12/17 at 100.00 AAA 156,573
Series 2007, 5.000%, 12/01/27 - FSA Insured
700 Sampson County, North Carolina, Certificates of Participation, 6/17 at 100.00 Aaa 719,936
Series 2006, 5.000%, 6/01/34 - FSA Insured (UB)
250 Wilmington, North Carolina, Certificates of Participation, 6/18 at 100.00 AA 256,333
Series 2008A, 5.000%, 6/01/29
250 Wilson County, North Carolina, Certificates of Participation, 4/17 at 100.00 AAA 255,903
School Facilities Project, Series 2007, 5.000%, 4/01/25 -
AMBAC Insured
------------------------------------------------------------------------------------------------------------------------------------
8,365 Total Tax Obligation/Limited 8,713,882
------------------------------------------------------------------------------------------------------------------------------------
43
NRB
Nuveen North Carolina Dividend Advantage Municipal Fund (continued)
Portfolio of INVESTMENTS May 31, 2008
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION - 6.2% (3.7% OF TOTAL INVESTMENTS)
$ 450 Piedmont Triad Airport Authority, North Carolina, Airport Revenue 7/15 at 100.00 A2 $ 459,261
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 Aa3 1,591,873
Bonds, Series 2001A, 5.250%, 11/01/18 - FGIC Insured
------------------------------------------------------------------------------------------------------------------------------------
1,980 Total Transportation 2,051,134
------------------------------------------------------------------------------------------------------------------------------------
U.S. GUARANTEED - 17.6% (10.3% OF TOTAL INVESTMENTS) (4)
1,000 Broad River Water Authority, North Carolina, Water System Revenue 6/10 at 101.00 Aaa 1,069,570
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) 108,816
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 Revenue 6/11 at 101.00 AAA 540,040
Bonds, Series 2001A, 5.125%, 6/01/21 (Pre-refunded 6/01/11)
1,620 North Carolina Capital Facilities Financing Agency, Revenue Bonds, 10/11 at 100.00 AAA 1,743,120
Duke University, Series 2001A, 5.125%, 10/01/26
(Pre-refunded 10/01/11)
800 North Carolina Medical Care Commission, Health System Revenue 10/11 at 101.00 AA (4) 868,608
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) 330,153
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 1,119,725
Bonds, Series 2002A, 5.375%, 4/01/17 (Pre-refunded 10/01/12) -
AMBAC Insured
------------------------------------------------------------------------------------------------------------------------------------
5,340 Total U.S. Guaranteed 5,780,032
------------------------------------------------------------------------------------------------------------------------------------
UTILITIES - 22.7% (13.3% 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 1,061,220
500 5.250%, 9/01/21 - FSA Insured 9/11 at 101.00 AAA 528,110
500 North Carolina Eastern Municipal Power Agency, Power System 1/16 at 100.00 AAA 524,840
Revenue Bonds, Series 2005, 5.250%, 1/01/20 - AMBAC Insured
2,500 North Carolina Eastern Municipal Power Agency, Power System 7/08 at 100.00 Baa1 2,501,850
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 1,026,670
Revenue Refunding Bonds, Series 1999B, 5.650%, 1/01/16
250 Puerto Rico Electric Power Authority, Power Revenue Bonds, 7/15 at 100.00 A3 246,998
Series 2005RR, 5.000%, 7/01/24 - FGIC Insured
1,500 Wake County Industrial Facilities and Pollution Control Financing 2/12 at 101.00 A2 1,556,580
Authority, North Carolina,Revenue Refunding Bonds, Carolina
Power and Light Company, Series 2002, 5.375%, 2/01/17
------------------------------------------------------------------------------------------------------------------------------------
7,250 Total Utilities 7,446,268
------------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER - 37.9% (22.3% OF TOTAL INVESTMENTS)
100 Brunswick County, North Carolina, Enterprise System Revenue 4/18 at 100.00 AAA 103,210
Bonds, Series 2008A, 5.000%, 4/01/31 - FSA Insured
2,250 Charlotte, North Carolina, Water and Sewerage System Revenue 6/11 at 101.00 AAA 2,321,932
Bonds, Series 2001, 5.125%, 6/01/26
500 Greensboro, North Carolina, Combined Enterprise System Revenue 6/15 at 100.00 AAA 522,510
Bonds, Series 2005A, 5.000%, 6/01/25
44
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER (continued)
$ 400 Onslow County, North Carolina, Combined Enterprise System 6/14 at 100.00 A $ 406,420
Revenue Bonds, Series 2004B, 5.000%, 6/01/23 - XLCA Insured
Raleigh, North Carolina, Combined Enterprise System Revenue
Bonds, Series 2006A:
4,440 5.000%, 3/01/31 (UB) 3/16 at 100.00 AAA 4,589,539
3,000 5.000%, 3/01/36 (UB) 3/16 at 100.00 AAA 3,091,110
5 Raleigh, North Carolina, Combined Enterprise System Revenue 3/16 at 100.00 AAA 5,456
Bonds, Series 2006A, Residuals Series II-R-645-2,
11.360%, 3/01/36 (IF)
1,385 Winston-Salem, North Carolina, Water and Sewer System Revenue 6/17 at 100.00 AAA 1,431,661
Bonds, Series 2007A, 5.000%, 6/01/37 (UB)
------------------------------------------------------------------------------------------------------------------------------------
12,080 Total Water and Sewer 12,471,838
------------------------------------------------------------------------------------------------------------------------------------
$ 53,890 Total Long-Term Investments (cost $54,825,825) - 169.5% 55,704,214
=============-----------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 1.0% (0.6% OF TOTAL INVESTMENTS)
$ 325 North Carolina Medical Care Commission, Revenue Bonds, Aa3 325,000
North Carolina Baptist Hospitals Inc., Variable Rate Demand
Obligations, Series 2002, 2.700%, 6/01/34 - MBIA Insured (5)
=============-----------------------------------------------------------------------------------------------------------------------
Total Short-Term Investments (cost $325,000) 325,000
--------------------------------------------------------------------------------------------------------------------
TotaI Investments (cost $55,150,825) - 170.5% 56,029,214
--------------------------------------------------------------------------------------------------------------------
Floating Rate Obligations - (19.3)% (6,350,000)
--------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 0.5% 188,327
--------------------------------------------------------------------------------------------------------------------
Preferred Shares, at Liquidation Value - (51.7)% (6) (17,000,000)
--------------------------------------------------------------------------------------------------------------------
Net Assets Applicable to Common Shares - 100% $32,867,541
====================================================================================================================
(1) All percentages shown in the Portfolio of Investments are
based on net assets applicable to Common shares unless
otherwise noted.
(2) Optional Call Provisions (not covered by the report of
independent registered public accounting firm): Dates (month
and year) and prices of the earliest optional call or
redemption. There may be other call provisions at varying
prices at later dates. Certain mortgage-backed securities
may be subject to periodic principal paydowns.
(3) Ratings (not covered by the report of independent registered
public accounting firm): Using the higher of Standard &
Poor's Group ("Standard & Poor's") or Moody's Investor
Service, Inc. ("Moody's") rating. Ratings below BBB by
Standard & Poor's or Baa by Moody's are considered to be
below investment grade.
The Portfolio of Investments may reflect the ratings on
certain bonds insured by AMBAC, CIFG, FGIC, MBIA, RAAI and
XLCA as of May 31, 2008. Please see the Portfolio Manager's
Commentary for an expanded discussion of the affect on the
Fund of changes to the ratings of certain bonds in the
portfolio resulting from changes to the ratings of the
underlying insurers both during the period and after period
end.
(4) Backed by an escrow or trust containing sufficient U.S.
Government or U.S. Government agency securities which ensure
the timely payment of principal and interest. Such
investments are normally considered to be equivalent to AAA
rated securities.
(5) Investment has a maturity of more than one year, but has
variable rate and demand features which qualify it as a
short-term investment. The rate disclosed is that in effect
at the end of the reporting period. This rate changes
periodically based on market conditions or a specified
market index.
(6) Preferred Shares, at Liquidation Value as a percentage of
total investments is (30.3)%.
N/R Not rated.
WI/DD Purchased on a when-issued or delayed delivery basis.
(IF) Inverse floating rate investment.
(UB) Underlying bond of an inverse floating rate trust reflected
as a financing transaction pursuant to the provisions of
SFAS No. 140.
See accompanying notes to financial statements.
45
NNO
Nuveen North Carolina Dividend Advantage Municipal Fund 2
Portfolio of INVESTMENTS
May 31, 2008
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
EDUCATION AND CIVIC ORGANIZATIONS - 15.9% (9.9% 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 $ 622,374
200 5.125%, 7/15/27 - MBIA Insured 1/11 at 101.00 Aaa 204,234
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 1,100,174
1,000 5.000%, 7/15/15 - MBIA Insured 7/12 at 100.00 Aaa 1,057,390
North Carolina Capital Facilities Financing Agency, Revenue Bonds,
Duke University, Series 2001A:
715 5.125%, 10/01/26 10/11 at 100.00 AA+ 740,075
380 5.125%, 10/01/41 10/11 at 100.00 AA+ 384,780
1,000 University of North Carolina System, Pooled Revenue Bonds, 4/15 at 100.00 AAA 1,038,020
Series 2005A, 5.000%, 4/01/22 - AMBAC Insured
635 University of North Carolina System, Pooled Revenue Refunding 10/12 at 100.00 AAA 671,868
Bonds, Series 2002A, 5.375%, 4/01/19 - AMBAC Insured
500 University of North Carolina Wilmington, Certificates of 6/16 at 100.00 A- 515,220
Participation, Student Housing Project Revenue Bonds,
Series 2006, 5.000%, 6/01/21 - FGIC Insured
1,500 University of North Carolina, Chapel Hill, System Net Revenue No Opt. Call AA+ 1,615,095
Bonds, Series 2002B, 5.000%, 12/01/11
250 University of North Carolina, Charlotte, Certificates of 3/15 at 100.00 AAA 258,885
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 428,488
Refunding Bonds, Series 2002B, 5.375%, 4/01/17 -
FSA Insured
------------------------------------------------------------------------------------------------------------------------------------
8,220 Total Education and Civic Organizations 8,636,603
------------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE - 23.5% (14.7% OF TOTAL INVESTMENTS)
945 Albemarle Hospital Authority, North Carolina, Health Care Facilities 10/17 at 100.00 BBB- 864,855
Revenue Bonds, Series 2007, 5.250%, 10/01/38
1,640 Charlotte-Mecklenburg Hospital Authority, North Carolina, Healthcare 1/11 at 101.00 AA- 1,642,050
System Revenue Bonds, Carolinas Healthcare System,
Series 2001A, 5.000%, 1/15/31
500 Johnston Memorial Hospital Authority, North Carolina, Mortgage 4/18 at 100.00 AAA 515,465
Revenue Bonds, Johnston Memorial Hospital Project, Series 2008,
5.250%, 10/01/36 (WI/DD, Settling 6/11/08) - FSA Insured
2,000 North Carolina Medical Care Commission, Healthcare Facilities 11/13 at 100.00 AA- 2,063,260
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 1,047,572
Revenue Bonds, Union Regional Medical Center, Series 2002A,
5.250%, 1/01/13
North Carolina Medical Care Commission, Hospital Revenue Bonds,
Southeastern Regional Medical Center, Series 2002:
1,000 5.500%, 6/01/15 6/12 at 101.00 A 1,054,390
2,100 5.250%, 6/01/22 6/12 at 101.00 A 2,127,615
46
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE (continued)
$ 925 North Carolina Medical Care Commission, Hospital Revenue Bonds, 11/17 at 100.00 A- $ 912,522
Wilson Medical Center, Series 2007, 5.000%, 11/01/27
1,250 North Carolina Medical Care Commission, Revenue Bonds, 1/15 at 100.00 A+ 1,235,988
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 620,270
500 5.250%, 7/01/22 - AMBAC Insured 7/14 at 100.00 AAA 517,330
150 Northern Hospital District of Surry County, North Carolina, 4/18 at 100.00 BBB 152,073
Health Care Facilities Revenue Bonds, Series 2008,
6.250%, 10/01/38
------------------------------------------------------------------------------------------------------------------------------------
12,610 Total Health Care 12,753,390
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/SINGLE FAMILY - 4.3% (2.7% OF TOTAL INVESTMENTS)
370 North Carolina Housing Finance Agency, Home Ownership 7/10 at 100.00 AAA 369,734
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 749,729
740 4.850%, 7/01/13 (Alternative Minimum Tax) 7/11 at 100.00 AA 750,271
510 North Carolina Housing Finance Agency, Home Ownership 7/16 at 100.00 AA 469,975
Revenue Bonds, Series 25-A, 4.900%, 7/01/37
(Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
2,355 Total Housing/Single Family 2,339,709
------------------------------------------------------------------------------------------------------------------------------------
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 597,390
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 244,958
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 168,045
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 228,618
United Church Homes and Services, Series 2005A,
5.250%, 9/01/21
------------------------------------------------------------------------------------------------------------------------------------
1,285 Total Long-Term Care 1,239,011
------------------------------------------------------------------------------------------------------------------------------------
MATERIALS - 3.3% (2.0% OF TOTAL INVESTMENTS)
865 Gaston County Industrial Facilities and Pollution Control Financing 8/15 at 100.00 N/R 690,867
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 1,083,841
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 1,774,708
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL - 5.4% (3.3% OF TOTAL INVESTMENTS)
250 Durham County, North Carolina, General Obligation Bonds, 5/10 at 102.00 AAA 268,193
Series 2000, 5.600%, 5/01/15
1,475 Durham, North Carolina, General Obligation Bonds, Series 2007, 4/17 at 100.00 AAA 1,581,539
5.000%, 4/01/22
1,000 North Carolina, General Obligation Bonds, Series 2004A, 3/14 at 100.00 AAA 1,057,620
5.000%, 3/01/22
------------------------------------------------------------------------------------------------------------------------------------
2,725 Total Tax Obligation/General 2,907,352
------------------------------------------------------------------------------------------------------------------------------------
47
NNO
Nuveen North Carolina Dividend Advantage Municipal Fund 2 (continued)
Portfolio of INVESTMENTS May 31, 2008
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED - 36.4% (22.7% OF TOTAL INVESTMENTS)
$ 30 Cabarrus County, North Carolina, Certificates of Participation, 2/13 at 100.00 AA- $ 31,929
Series 2002, 5.250%, 2/01/16
1,750 Charlotte, North Carolina, Certificates of Participation, 6/13 at 100.00 AA+ 1,775,498
Governmental Facilities Projects, Series 2003G, 5.000%, 6/01/28
575 Charlotte, North Carolina, Certificates of Participation, Transit 6/18 at 100.00 AA+ 589,099
Projects Phase 2, Series 2008A, 5.000%, 6/01/33
(WI/DD, Settling 6/04/08)
1,850 Charlotte, North Carolina, Storm Water Fee Revenue Bonds, 6/12 at 101.00 AAA 1,980,666
Series 2002, 5.250%, 6/01/18
800 Craven County, North Carolina, Certificates of Participation, 6/17 at 100.00 AAA 821,592
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 1,083,570
2,025 5.375%, 12/01/16 - FSA Insured 12/12 at 101.00 AAA 2,216,241
715 Lee County, North Carolina, Certificates of Participation, 4/14 at 100.00 AAA 760,231
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 1,410,843
Series 2004, 5.000%, 6/01/25 - MBIA Insured
2,070 Pitt County, North Carolina, Certificates of Participation, 4/14 at 100.00 AAA 2,085,484
School Facilities Project, Series 2004B, 5.000%, 4/01/29 -
AMBAC Insured
1,270 Puerto Rico Infrastructure Financing Authority, Special Tax No Opt. Call AAA 1,376,718
Revenue Bonds, Series 2005C, 5.500%, 7/01/16 -
AMBAC Insured
Raleigh, North Carolina, Certificates of Participation, Downtown
Improvement Project, Series 2004B:
805 5.000%, 6/01/20 6/14 at 100.00 AA+ 839,985
1,310 5.000%, 6/01/21 6/14 at 100.00 AA+ 1,359,885
115 Raleigh, North Carolina, Certificates of Participation, Series 2007, 2/17 at 100.00 AA+ 118,583
5.000%, 2/01/27
1,000 Randolph County, North Carolina, Certificates of Participation, 6/14 at 102.00 AAA 1,066,210
Series 2004, 5.000%, 6/01/20 - FSA Insured
100 Rutherford County, North Carolina, Certificates of Participation, 12/17 at 100.00 AAA 104,382
Series 2007, 5.000%, 12/01/27 - FSA Insured
1,150 Sampson County, North Carolina, Certificates of Participation, 6/17 at 100.00 Aaa 1,182,752
Series 2006, 5.000%, 6/01/34 - FSA Insured (UB)
500 Wilmington, North Carolina, Certificates of Participation, 6/18 at 100.00 AA 512,665
Series 2008A, 5.000%, 6/01/29
400 Wilson County, North Carolina, Certificates of Participation, 4/17 at 100.00 AAA 409,444
School Facilities Project, Series 2007, 5.000%, 4/01/25 -
AMBAC Insured
------------------------------------------------------------------------------------------------------------------------------------
18,845 Total Tax Obligation/Limited 19,725,777
------------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION - 16.0% (10.0% OF TOTAL INVESTMENTS)
2,035 Charlotte, North Carolina, Airport Revenue Bonds, Series 2004A, 7/14 at 100.00 AAA 2,047,637
5.000%, 7/01/34 - MBIA Insured
590 Piedmont Triad Airport Authority, North Carolina, Airport Revenue 7/15 at 100.00 A2 602,142
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 Aa3 1,041,810
2,320 5.250%, 11/01/16 - FGIC Insured 5/11 at 101.00 Aa3 2,408,554
2,230 5.250%, 11/01/17 - FGIC Insured 5/11 at 101.00 Aa3 2,305,419
270 University of North Carolina, Charlotte, Parking System Revenue 1/12 at 101.00 Aaa 279,896
Bonds, Series 2002, 5.000%, 1/01/20 - MBIA Insured
------------------------------------------------------------------------------------------------------------------------------------
8,445 Total Transportation 8,685,458
------------------------------------------------------------------------------------------------------------------------------------
48
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
U.S. GUARANTEED - 16.0% (10.0% OF TOTAL INVESTMENTS) (4)
$ 490 Charlotte-Mecklenburg Hospital Authority, North Carolina, 1/11 at 101.00 Aa3 (4) $ 521,590
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) 217,632
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 Bonds, 10/11 at 100.00 AAA 538,000
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) 401,731
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) 550,255
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 1,094,840
1,750 5.000%, 3/01/22 (Pre-refunded 3/01/14) 3/14 at 100.00 AAA 1,915,970
3,200 Wake County, North Carolina, General Obligation School Bonds, 2/10 at 101.50 AAA 3,411,357
Series 2000, 5.400%, 2/01/13 (Pre-refunded 2/01/10)
------------------------------------------------------------------------------------------------------------------------------------
8,010 Total U.S. Guaranteed 8,651,375
------------------------------------------------------------------------------------------------------------------------------------
UTILITIES - 13.9% (8.7% OF TOTAL INVESTMENTS)
500 North Carolina Eastern Municipal Power Agency, Power System 1/16 at 100.00 AAA 524,840
Revenue Bonds, Series 2005, 5.250%, 1/01/20 - AMBAC Insured
2,500 North Carolina Eastern Municipal Power Agency, Power System 7/08 at 100.00 Baa1 2,501,850
Revenue Refunding Bonds, Series 1993B, 5.500%, 1/01/17 -
FGIC Insured (5)
1,500 North Carolina Municipal Power Agency 1, Catawba Electric 1/10 at 101.00 A2 1,573,470
Revenue Bonds, Series 1999B, 6.500%, 1/01/20
250 Puerto Rico Electric Power Authority, Power Revenue Bonds, 7/15 at 100.00 A3 246,998
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 2,698,072
Authority, North Carolina, Revenue Refunding Bonds, Carolina
Power and Light Company, Series 2002, 5.375%, 2/01/17
------------------------------------------------------------------------------------------------------------------------------------
7,350 Total Utilities 7,545,230
------------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER - 22.1% (13.8% OF TOTAL INVESTMENTS)
500 Brunswick County, North Carolina, Enterprise System Revenue 4/18 at 100.00 AAA 516,050
Bonds, Series 2008A, 5.000%, 4/01/31 - FSA Insured
2,520 Charlotte, North Carolina, Water and Sewerage System Revenue No Opt. Call AAA 2,783,039
Bonds, Series 2002A, 5.250%,7/01/13
1,000 Durham County, North Carolina, Enterprise System Revenue Bonds, 6/13 at 100.00 AAA 1,034,480
Series 2002, 5.000%, 6/01/23 - MBIA Insured
49
NNO
Nuveen North Carolina Dividend Advantage Municipal Fund 2 (continued)
Portfolio of INVESTMENTS May 31, 2008
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:
$ 3,095 5.000%, 3/01/31 (UB) 3/16 at 100.00 AAA $ 3,199,240
975 5.000%, 3/01/36 (UB) 3/16 at 100.00 AAA 1,004,611
40 Raleigh, North Carolina, Combined Enterprise System Revenue 3/16 at 100.00 AAA 44,041
Bonds, Series 2006A, Residuals Series II-R-645-1,
11.365%, 3/01/31 (IF)
1,000 Wilmington, North Carolina, Water and Sewer Revenue Bonds, 6/15 at 100.00 AAA 1,043,780
Series 2005, 5.000%, 6/01/25 - FSA Insured
2,275 Winston-Salem, North Carolina, Water and Sewer System Revenue 6/17 at 100.00 AAA 2,351,645
Bonds, Series 2007A, 5.000%, 6/01/37 (UB)
------------------------------------------------------------------------------------------------------------------------------------
11,405 Total Water and Sewer 11,976,886
------------------------------------------------------------------------------------------------------------------------------------
$ 83,215 Total Long-Term Investments (cost $84,981,624) - 159.0% 86,235,499
=============-----------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS 1.3% (0.8% OF TOTAL INVESTMENTS)
$ 700 North Carolina Medical Care Commission, Revenue Bonds, Aa3 700,000
North Carolina Baptist Hospitals Inc., Variable Rate Demand
Obligations, Series 2002, 2.700%, 6/01/34 - MBIA Insured (6)
=============----------------------------------------------------------------------------------------------------------------------
Total Short-Term Investments (cost $700,000) 700,000
--------------------------------------------------------------------------------------------------------------------
Total Investments (cost $85,681,624) - 160.3% 86,935,499
--------------------------------------------------------------------------------------------------------------------
Floating Rate Obligations - (9.2)% (4,995,000)
--------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 0.5% 299,239
--------------------------------------------------------------------------------------------------------------------
Preferred Shares, at Liquidation Value - (51.6)% (7) (28,000,000)
--------------------------------------------------------------------------------------------------------------------
Net Assets Applicable to Common Shares - 100% $54,239,738
====================================================================================================================
FUTURES CONTRACTS OUTSTANDING AT MAY 31, 2008:
UNREALIZED
CONTRACT NUMBER OF CONTRACT VALUE AT APPRECIATION
TYPE POSITION CONTRACTS EXPIRATION MAY 31, 2008 (DEPRECIATION)
-----------------------------------------------------------------------------------------------------------------------
U.S. Treasury Bond Long 17 9/08 $1,929,500 $(5,332)
=======================================================================================================================
(1) All percentages shown in the Portfolio of Investments are
based on net assets applicable to Common shares unless
otherwise noted.
(2) Optional Call Provisions (not covered by the report of
independent registered public accounting firm): Dates (month
and year) and prices of the earliest optional call or
redemption. There may be other call provisions at varying
prices at later dates. Certain mortgage-backed securities
may be subject to periodic principal paydowns.
(3) Ratings (not covered by the report of independent registered
public accounting firm): Using the higher of Standard &
Poor's Group ("Standard & Poor's") or Moody's Investor
Service, Inc. ("Moody's") rating. Ratings below BBB by
Standard & Poor's or Baa by Moody's are considered to be
below investment grade.
The Portfolio of Investments may reflect the ratings on
certain bonds insured by AMBAC, CIFG, FGIC, MBIA, RAAI and
XLCA as of May 31, 2008. Please see the Portfolio Manager's
Commentary for an expanded discussion of the affect on the
Fund of changes to the ratings of certain bonds in the
portfolio resulting from changes to the ratings of the
underlying insurers both during the period and after period
end.
(4) 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) Portion of investment, with an aggregate market value of
$30,022, has been pledged to collateralize the net payment
obligations under futures contracts.
(6) Investment has a maturity of more than one year, but has
variable rate and demand features which qualify it as a
short-term investment. The rate disclosed is that in effect
at the end of the reporting period. This rate changes
periodically based on market conditions or a specified
market index.
(7) Preferred Shares, at Liquidation Value as a percentage of
total investments is (32.2)%.
N/R Not rated.
WI/DD Purchased on a when-issued or delayed delivery basis.
(IF) Inverse floating rate investment.
(UB) Underlying bond of an inverse floating rate trust reflected
as a financing transaction pursuant to the provisions of
SFAS No. 140.
See accompanying notes to financial statements.
50
NII
Nuveen North Carolina Dividend Advantage Municipal Fund 3
Portfolio of INVESTMENTS
May 31, 2008
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
CONSUMER STAPLES - 3.4% (2.1% OF TOTAL INVESTMENTS)
$ 2,000 Puerto Rico, The Children's Trust Fund, Tobacco Settlement 5/12 at 100.00 BBB $ 1,911,340
Asset-Backed Refunding Bonds, Series 2002, 5.500%, 5/15/39
------------------------------------------------------------------------------------------------------------------------------------
EDUCATION AND CIVIC ORGANIZATIONS - 4.1% (2.5% OF TOTAL INVESTMENTS)
North Carolina Capital Facilities Financing Agency, Revenue Bonds,
Duke University, Series 2001A:
330 5.125%, 10/01/26 10/11 at 100.00 AA+ 341,573
95 5.125%, 10/01/41 10/11 at 100.00 AA+ 96,195
1,290 University of North Carolina System, Pooled Revenue Refunding 10/12 at 100.00 AAA 1,309,492
Bonds, Series 2002A, 5.000%, 4/01/27 - AMBAC Insured
500 University of North Carolina Wilmington, Certificates of 6/16 at 100.00 A- 515,220
Participation, Student Housing Project Revenue Bonds,
Series 2006, 5.000%, 6/01/21 - FGIC Insured
------------------------------------------------------------------------------------------------------------------------------------
2,215 Total Education and Civic Organizations 2,262,480
------------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE - 9.5% (5.8% OF TOTAL INVESTMENTS)
695 Albemarle Hospital Authority, North Carolina, Health Care Facilities 10/17 at 100.00 BBB- 669,612
Revenue Bonds, Series 2007, 5.250%, 10/01/27
580 Charlotte-Mecklenburg Hospital Authority, North Carolina, 1/11 at 101.00 AA- 580,725
Healthcare System Revenue Bonds, Carolinas Healthcare System,
Series 2001A, 5.000%, 1/15/31
500 Johnston Memorial Hospital Authority, North Carolina, Mortgage 4/18 at 100.00 AAA 515,465
Revenue Bonds, Johnston Memorial Hospital Project,
Series 2008, 5.250%, 10/01/36 (WI/DD, Settling 6/11/08) -
FSA Insured
2,000 North Carolina Medical Care Commission, Healthcare Facilities 11/13 at 100.00 AA- 2,086,120
Revenue Bonds, Novant Health Obligated Group, Series 2003A,
5.000%, 11/01/18
1,000 North Carolina Medical Care Commission, Hospital Revenue Bonds, 11/17 at 100.00 A- 986,510
Wilson Medical Center, Series 2007, 5.000%, 11/01/27
300 North Carolina Medical Care Commission, Revenue Bonds, 1/15 at 100.00 A+ 296,637
Blue Ridge Healthcare System, Series 2005, 5.000%, 1/01/33 -
FGIC Insured
150 Northern Hospital District of Surry County, North Carolina, 4/18 at 100.00 BBB 152,073
Health Care Facilities Revenue Bonds, Series 2008,
6.250%, 10/01/38
------------------------------------------------------------------------------------------------------------------------------------
5,225 Total Health Care 5,287,142
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/MULTIFAMILY - 1.8% (1.1% OF TOTAL INVESTMENTS)
1,000 Mecklenburg County, North Carolina, FNMA Multifamily Housing 7/13 at 105.00 AAA 1,002,290
Revenue Bonds, Little Rock Apartments, Series 2003,
5.150%, 1/01/22 (Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/SINGLE FAMILY - 3.0% (1.8% OF TOTAL INVESTMENTS)
730 North Carolina Housing Finance Agency, Home Ownership Revenue 7/09 at 100.00 AA 731,526
Bonds, 1998 Trust Agreement, Series 5A, 5.625%, 7/01/30
(Alternative Minimum Tax)
500 North Carolina Housing Finance Agency, Home Ownership Revenue 1/17 at 100.00 AA 458,245
Bonds, Series 2007-29A, 4.800%, 7/01/33
(Alternative Minimum Tax)
510 North Carolina Housing Finance Agency, Home Ownership Revenue 7/16 at 100.00 AA 469,975
Bonds, Series 25-A, 4.900%, 7/01/37 (Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
1,740 Total Housing/Single Family 1,659,746
------------------------------------------------------------------------------------------------------------------------------------
51
NII
Nuveen North Carolina Dividend Advantage Municipal Fund 3 (continued)
Portfolio of INVESTMENTS May 31, 2008
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
LONG-TERM CARE - 1.8% (1.2% OF TOTAL INVESTMENTS)
$ 600 North Carolina Medical Care Commission, Health Care Facilities 10/16 at 100.00 N/R $ 597,390
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 244,958
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 172,587
Pines at Davidson, Series 2006A, 5.000%, 1/01/36
------------------------------------------------------------------------------------------------------------------------------------
1,040 Total Long-Term Care 1,014,935
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL - 21.4% (13.0% OF TOTAL INVESTMENTS)
3,900 Cary, North Carolina, General Obligation Water and Sewer Bonds, 3/11 at 102.00 AAA 4,130,876
Series 2001, 5.000%, 3/01/20
1,500 Durham, North Carolina, General Obligation Bonds, Series 2007, 4/17 at 100.00 AAA 1,608,345
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 A 882,921
900 5.000%, 6/01/20 - FGIC Insured 6/12 at 101.00 A 930,339
1,050 5.000%, 6/01/21 - FGIC Insured 6/12 at 101.00 A 1,089,942
500 North Carolina, General Obligation Bonds, Series 2004A, 3/14 at 100.00 AAA 528,810
5.000%, 3/01/22
2,000 Puerto Rico, General Obligation and Public Improvement Refunding No Opt. Call AAA 2,295,160
Bonds, Series 1997, 6.500%, 7/01/15 - MBIA Insured
400 Raleigh, North Carolina, General Obligation Bonds, Series 2002, 6/12 at 100.00 AAA 417,516
5.000%, 6/01/21
------------------------------------------------------------------------------------------------------------------------------------
11,100 Total Tax Obligation/General 11,883,909
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED - 35.9% (21.8% OF TOTAL INVESTMENTS)
1,800 Catawba County, North Carolina, Certificates of Participation, 6/14 at 100.00 Aaa 1,867,446
Series 2004, 5.250%, 6/01/22 - MBIA Insured
1,500 Centennial Authority, North Carolina, Hotel Tax Revenue Bonds, 9/08 at 101.00 AAA 1,532,175
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+ 2,774,200
Governmental Facilities Projects, Series 2003G, 5.000%, 6/01/33
575 Charlotte, North Carolina, Certificates of Participation, Transit 6/18 at 100.00 AA+ 589,099
Projects Phase 2, Series 2008A, 5.000%, 6/01/33
(WI/DD, Settling 6/04/08)
800 Craven County, North Carolina, Certificates of Participation, 6/17 at 100.00 AAA 821,592
Series 2007, 5.000%, 6/01/27 - MBIA Insured
3,000 Dare County, North Carolina, Certificates of Participation, 12/12 at 100.00 AAA 3,069,120
Series 2002, 5.000%, 6/01/23 - AMBAC Insured
500 Lee County, North Carolina, Certificates of Participation, 4/14 at 100.00 AAA 531,630
Public Schools and Community College, Series 2004,
5.250%, 4/01/20 - FSA Insured
1,000 North Carolina, Certificates of Participation, Repair and Renovation 6/14 at 100.00 AA+ 1,039,690
Project, Series 2004B, 5.000%, 6/01/20
565 Raleigh, North Carolina, Certificates of Participation, Series 2007, 2/17 at 100.00 AA+ 582,605
5.000%, 2/01/27
2,000 Rutherford County, North Carolina, Certificates of Participation, 9/12 at 101.00 AAA 2,056,080
Series 2002, 5.000%, 9/01/21 - AMBAC Insured
1,000 Rutherford County, North Carolina, Certificates of Participation, 12/17 at 100.00 AAA 1,043,820
Series 2007, 5.000%, 12/01/27 - FSA Insured
1,200 Sampson County, North Carolina, Certificates of Participation, 6/17 at 100.00 Aaa 1,234,176
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 1,867,860
Series 2003, 5.000%, 6/01/20 - AMBAC Insured
500 Wilmington, North Carolina, Certificates of Participation, 6/18 at 100.00 AA 512,665
Series 2008A, 5.000%, 6/01/29
400 Wilson County, North Carolina, Certificates of Participation, 4/17 at 100.00 AAA 409,444
School Facilities Project, Series 2007, 5.000%, 4/01/25 -
AMBAC Insured
------------------------------------------------------------------------------------------------------------------------------------
19,375 Total Tax Obligation/Limited 19,931,602
------------------------------------------------------------------------------------------------------------------------------------
52
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION - 9.0% (5.5% OF TOTAL INVESTMENTS)
Raleigh Durham Airport Authority, North Carolina, Airport Revenue
Bonds, Series 2001A:
$ 1,780 5.250%, 11/01/15 - FGIC Insured 5/11 at 101.00 Aa3 $ 1,854,422
3,100 5.000%, 11/01/20 - FGIC Insured 5/11 at 101.00 Aa3 3,165,627
------------------------------------------------------------------------------------------------------------------------------------
4,880 Total Transportation 5,020,049
------------------------------------------------------------------------------------------------------------------------------------
U.S. GUARANTEED - 21.4% (13.0% OF TOTAL INVESTMENTS) (4)
500 Broad River Water Authority, North Carolina, Water System Revenue 6/10 at 101.00 Aaa 534,785
Bonds, Series 2000, 5.375%, 6/01/26 (Pre-refunded 6/01/10) -
MBIA Insured
170 Charlotte-Mecklenburg Hospital Authority, North Carolina, Healthcare 1/11 at 101.00 Aa3 (4) 180,960
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) 217,632
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) 52,424
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) 1,454,227
770 5.250%, 1/01/19 (Pre-refunded 1/01/13) 1/13 at 101.00 AA+ (4) 849,195
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 1,527,920
405 5.125%, 10/01/41 (Pre-refunded 10/01/11) 10/11 at 100.00 AAA 435,780
3,000 North Carolina Capital Facilities Financing Agency, Revenue Bonds, 10/12 at 100.00 AAA 3,259,170
Duke University, Series 2002A, 5.125%, 7/01/42
(Pre-refunded 10/01/12)
500 North Carolina Medical Care Commission, Health System Revenue 10/11 at 101.00 AA (4) 542,880
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) 550,255
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 660,398
Bonds, Series 2002A, 5.000%, 4/01/27 (Pre-refunded 10/01/12) -
AMBAC Insured
1,500 Winston-Salem, North Carolina, Water and Sewerage System 6/12 at 100.00 AAA 1,615,995
Revenue Bonds, Series 2002A, 5.000%, 6/01/19
(Pre-refunded 6/01/12)
------------------------------------------------------------------------------------------------------------------------------------
10,950 Total U.S. Guaranteed 11,881,621
------------------------------------------------------------------------------------------------------------------------------------
UTILITIES - 15.9% (9.7% OF TOTAL INVESTMENTS)
500 North Carolina Eastern Municipal Power Agency, Power System 1/16 at 100.00 AAA 524,840
Revenue Bonds, Series 2005, 5.250%, 1/01/20 - AMBAC Insured
4,000 North Carolina Eastern Municipal Power Agency, Power System 7/08 at 100.00 Baa1 4,002,960
Revenue Refunding Bonds, Series 1993B, 5.500%, 1/01/17 -
FGIC Insured
2,665 North Carolina Municipal Power Agency 1, Catawba Electric Revenue 1/13 at 100.00 AAA 2,851,603
Bonds, Series 2003A, 5.250%, 1/01/15 - AMBAC Insured
1,400 Wake County Industrial Facilities and Pollution Control Financing 2/12 at 101.00 A2 1,452,808
Authority, North Carolina, Revenue Refunding Bonds, Carolina
Power and Light Company, Series 2002, 5.375%, 2/01/17
------------------------------------------------------------------------------------------------------------------------------------
8,565 Total Utilities 8,832,211
------------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER - 35.5% (21.6% OF TOTAL INVESTMENTS)
2,000 Brunswick County, North Carolina, Enterprise System Revenue 4/18 at 100.00 AAA 2,064,200
Bonds, Series 2008A, 5.000%, 4/01/31 - FSA Insured
Charlotte, North Carolina, Water and Sewerage System Revenue
Bonds, Series 2001:
750 5.125%, 6/01/26 6/11 at 101.00 AAA 773,978
1,780 5.125%, 6/01/26 - FGIC Insured 6/11 at 101.00 Aa1 1,829,520
300 Durham County, North Carolina, Enterprise System Revenue Bonds, 6/13 at 100.00 AAA 315,216
Series 2002, 5.000%, 6/01/18 - MBIA Insured
53
NII
Nuveen North Carolina Dividend Advantage Municipal Fund 3 (continued)
Portfolio of INVESTMENTS May 31, 2008
PRINCIPAL OPTIONAL CALL
AMOUNT (000) DESCRIPTION (1) PROVISIONS (2) RATINGS (3) VALUE
------------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER (continued)
$ 2,500 Kannapolis, North Carolina, Water and Sewerage System Revenue 2/12 at 101.00 AAA $ 2,525,550
Bonds, Series 2001B, 5.250%, 2/01/26 - FSA Insured
(Alternative Minimum Tax)
500 Onslow County, North Carolina, Combined Enterprise System Revenue 6/14 at 100.00 A 508,026
Bonds, Series 2004B, 5.000%, 6/01/23 - XLCA Insured
1,000 Orange Water and Sewerage Authority, North Carolina, Water and 7/11 at 101.00 AA+ 1,021,800
Sewerage System Revenue Bonds, Series 2001, 5.000%, 7/01/26 -
MBIA Insured
Raleigh, North Carolina, Combined Enterprise System Revenue Bonds,
Series 2006A:
4,950 5.000%, 3/01/31 (UB) 3/16 at 100.00 AAA 5,116,716
3,000 5.000%, 3/01/36 (UB) 3/16 at 100.00 AAA 3,091,110
5 Raleigh, North Carolina, Combined Enterprise System Revenue 3/16 at 100.00 AAA 5,456
Bonds, Series 2006A, Residuals Series II-R-645-2,
11.360%, 3/01/36 (IF)
2,375 Winston-Salem, North Carolina, Water and Sewer System Revenue 6/17 at 100.00 AAA 2,455,014
Bonds, Series 2007A, 5.000%, 6/01/37 (UB)
------------------------------------------------------------------------------------------------------------------------------------
19,160 Total Water and Sewer 19,706,586
------------------------------------------------------------------------------------------------------------------------------------
$ 87,250 Total Long-Term Investments (cost $89,343,407) - 162.7% 90,393,911
=============-----------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 1.5% (0.9% OF TOTAL INVESTMENTS)
$ 850 North Carolina Medical Care Commission, Revenue Bonds, Aa3 850,000
North Carolina Baptist Hospitals Inc., Variable Rate Demand
Obligations, Series 2002, 2.700%, 6/01/34 - MBIA Insured (5)
=============-----------------------------------------------------------------------------------------------------------------------
Total Short-Term Investments (cost $850,000) 850,000
--------------------------------------------------------------------------------------------------------------------
Total Investments (cost $90,193,407) - 164.2% 91,243,911
--------------------------------------------------------------------------------------------------------------------
Floating Rate Obligations - (13.8)% (7,680,000)
--------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 0.0% (9,346)
--------------------------------------------------------------------------------------------------------------------
Preferred Shares, at Liquidation Value - (50.4)% (6) (28,000,000)
--------------------------------------------------------------------------------------------------------------------
Net Assets Applicable to Common Shares - 100% $55,554,565
====================================================================================================================
(1) All percentages shown in the Portfolio of Investments are
based on net assets applicable to Common shares unless
otherwise noted.
(2) Optional Call Provisions (not covered by the report of
independent registered public accounting firm): Dates (month
and year) and prices of the earliest optional call or
redemption. There may be other call provisions at varying
prices at later dates. Certain mortgage-backed securities
may be subject to periodic principal paydowns.
(3) Ratings (not covered by the report of independent registered
public accounting firm): Using the higher of Standard &
Poor's Group ("Standard & Poor's") or Moody's Investor
Service, Inc. ("Moody's") rating. Ratings below BBB by
Standard & Poor's or Baa by Moody's are considered to be
below investment grade.
The Portfolio of Investments may reflect the ratings on
certain bonds insured by AMBAC, CIFG, FGIC, MBIA, RAAI and
XLCA as of May 31, 2008. Please see the Portfolio Manager's
Commentary for an expanded discussion of the affect on the
Fund of changes to the ratings of certain bonds in the
portfolio resulting from changes to the ratings of the
underlying insurers both during the period and after period
end.
(4) Backed by an escrow or trust containing sufficient U.S.
Government or U.S. Government agency securities which ensure
the timely payment of principal and interest. Such
investments are normally considered to be equivalent to AAA
rated securities.
(5) Investment has a maturity of more than one year, but has
variable rate and demand features which qualify it as a
short-term investment. The rate disclosed is that in effect
at the end of the reporting period. This rate changes
periodically based on market conditions or a specified
market index.
(6) Preferred Shares, at Liquidation Value as a percentage of
total investments is (30.7)%.
N/R Not rated.
WI/DD Purchased on a when-issued or delayed delivery basis.
(IF) Inverse floating rate investment.
(UB) Underlying bond of an inverse floating rate trust reflected
as a financing transaction pursuant to the provisions of
SFAS No. 140.
See accompanying notes to financial statements.
54
Statement of
ASSETS & LIABILITIES
May 31, 2008
GEORGIA GEORGIA GEORGIA
PREMIUM DIVIDEND DIVIDEND
INCOME ADVANTAGE ADVANTAGE 2
(NPG) (NZX) (NKG)
------------------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments, at value (cost $78,803,710, $42,370,100
and $95,472,262, respectively) $80,539,640 $42,929,023 $95,339,233
Cash 114,168 -- --
Unrealized appreciation on forward swaps -- 139,708 --
Receivables:
Interest 1,400,901 711,081 1,536,644
Variation margin on futures contracts -- -- --
Other assets 2,954 4,432 4,688
------------------------------------------------------------------------------------------------------------------------------------
Total assets 82,057,663 43,784,244 96,880,565
------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Cash overdraft -- 146,707 182,928
Floating rate obligations -- -- --
Payable for investments purchased -- -- --
Accrued expenses:
Management fees 44,087 16,064 32,262
Other 24,110 16,311 26,237
Common share dividends payable 175,079 101,836 225,843
Preferred share dividends payable 3,781 5,319 11,704
------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 247,057 286,237 478,974
------------------------------------------------------------------------------------------------------------------------------------
Preferred shares, at liquidation value 27,800,000 15,000,000 33,000,000
------------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common shares $54,010,606 $28,498,007 $63,401,591
====================================================================================================================================
Common shares outstanding 3,805,652 1,969,350 4,554,375
===================================================================================================================================
Net asset value per Common share outstanding
(net assets applicable to Common shares,
divided by Common shares outstanding) $ 14.19 $ 14.47 $ 13.92
====================================================================================================================================
NET ASSETS APPLICABLE TO COMMON SHARES CONSIST OF:
------------------------------------------------------------------------------------------------------------------------------------
Common shares, $.01 par value per share $ 38,057 $ 19,694 $ 45,544
Paid-in surplus 52,378,108 27,902,247 64,267,727
Undistributed (Over-distribution of) net investment income (69,752) (76,806) (186,282)
Accumulated net realized gain (loss) from investments
and derivative transactions (71,737) (45,759) (592,369)
Net unrealized appreciation (depreciation) of investments
and derivative transactions 1,735,930 698,631 (133,029)
------------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common shares $54,010,606 $28,498,007 $63,401,591
====================================================================================================================================
Authorized shares:
Common Unlimited Unlimited Unlimited
Preferred Unlimited Unlimited Unlimited
====================================================================================================================================
See accompanying notes to financial statements.
55
Statement of
ASSETS & LIABILITIES (continued)
May 31, 2008
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 $137,925,184, $55,150,825,
$85,681,624 and $90,193,407, respectively) $139,319,426 $56,029,214 $86,935,499 $91,243,911
Cash 208,706 31,854 237,445 --
Unrealized appreciation on forward swaps -- -- -- --
Receivables:
Interest 2,357,296 887,068 1,405,469 1,369,157
Variation margin on futures contracts 8,250 -- 8,766 --
Other assets 8,067 7,769 6,282 4,631
------------------------------------------------------------------------------------------------------------------------------------
Total assets 141,901,745 56,955,905 88,593,461 92,617,699
------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Cash overdraft -- -- -- 8,256
Floating rate obligations 3,870,000 6,350,000 4,995,000 7,680,000
Payable for investments purchased 2,006,574 571,069 1,106,139 1,106,139
Accrued expenses:
Management fees 72,935 20,511 30,356 28,005
Other 35,588 18,157 25,204 24,863
Common share dividends payable 283,554 123,806 187,093 209,981
Preferred share dividends payable 6,364 4,821 9,931 5,890
------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 6,275,015 7,088,364 6,353,723 9,063,134
------------------------------------------------------------------------------------------------------------------------------------
Preferred shares, at liquidation value 46,800,000 17,000,000 28,000,000 28,000,000
------------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common shares $ 88,826,730 $32,867,541 $54,239,738 $55,554,565
====================================================================================================================================
Common shares outstanding 6,351,838 2,263,454 3,749,642 3,932,298
====================================================================================================================================
Net asset value per Common share outstanding
(net assets applicable to Common shares,
divided by Common shares outstanding) $ 13.98 $ 14.52 $ 14.47 $ 14.13
====================================================================================================================================
NET ASSETS APPLICABLE TO COMMON SHARES CONSIST OF:
------------------------------------------------------------------------------------------------------------------------------------
Common shares, $.01 par value per share $ 63,518 $ 22,635 $ 37,496 $ 39,323
Paid-in surplus 87,829,648 32,097,665 53,194,711 55,488,151
Undistributed (Over-distribution of) net investment income (79,132) (35,767) (90,533) (126,596)
Accumulated net realized gain (loss) from investments
and derivative transactions (376,490) (95,381) (150,479) (896,817)
Net unrealized appreciation (depreciation) of investments
and derivative transactions 1,389,186 878,389 1,248,543 1,050,504
------------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common shares $ 88,826,730 $32,867,541 $54,239,738 $55,554,565
====================================================================================================================================
Authorized shares:
Common Unlimited Unlimited Unlimited Unlimited
Preferred Unlimited Unlimited Unlimited Unlimited
====================================================================================================================================
See accompanying notes to financial statements.
56
Statement of
OPERATIONS
Year Ended May 31, 2008
GEORGIA GEORGIA GEORGIA
PREMIUM DIVIDEND DIVIDEND
INCOME ADVANTAGE ADVANTAGE 2
(NPG) (NZX) (NKG)
------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME $3,884,623 $2,058,962 $ 4,535,565
------------------------------------------------------------------------------------------------------------------------------------
EXPENSES
Management fees 523,100 277,090 617,485
Preferred shares - auction fees 69,595 37,552 82,614
Preferred shares - dividend disbursing agent fees 10,007 10,011 10,011
Shareholders' servicing agent fees and expenses 4,635 458 550
Interest expense on floating rate obligations -- -- --
Custodian's fees and expenses 21,477 14,610 24,332
Trustees' fees and expenses 1,911 1,037 2,157
Professional fees 11,848 9,945 12,763
Shareholders' reports - printing and mailing expenses 19,260 11,238 20,383
Stock exchange listing fees 413 214 495
Investor relations expense 7,560 4,294 8,772
Other expenses 13,067 11,654 13,386
------------------------------------------------------------------------------------------------------------------------------------
Total expenses before custodian fee credit and expense reimbursement 682,873 378,103 792,948
Custodian fee credit (12,691) (5,874) (12,496)
Expense reimbursement -- (94,574) (259,557)
------------------------------------------------------------------------------------------------------------------------------------
Net expenses 670,182 277,655 520,895
------------------------------------------------------------------------------------------------------------------------------------
Net investment income 3,214,441 1,781,307 4,014,670
------------------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) from:
Investments 107,414 193,600 63,300
Forward swaps 23,130 26,220 --
Futures -- -- --
Change in net unrealized appreciation (depreciation) of:
Investments (1,242,529) (709,956) (2,367,070)
Forward swaps -- 169,293 --
Futures -- -- --
------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) (1,111,985) (320,843) (2,303,770)
------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO PREFERRED SHAREHOLDERS
From net investment income (916,555) (512,754) (1,165,015)
From accumulated net realized gains (55,745) -- --
------------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets applicable to Common shares from
distributions to Preferred shareholders (972,300) (512,754) (1,165,015)
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets applicable to Common shares
from operations $1,130,156 $ 947,710 $ 545,885
====================================================================================================================================
See accompanying notes to financial statements.
57
Statement of
OPERATIONS (continued)
Year Ended May 31, 2008
NORTH NORTH NORTH NORTH
CAROLINA CAROLINA CAROLINA CAROLINA
PREMIUM DIVIDEND DIVIDEND DIVIDEND
INCOME ADVANTAGE ADVANTAGE 2 ADVANTAGE 3
(NNC) (NRB) (NNO) (NII)
------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME $ 6,574,677 $2,636,828 $ 4,051,312 $4,171,144
------------------------------------------------------------------------------------------------------------------------------------
EXPENSES
Management fees 864,524 317,435 524,604 531,914
Preferred shares - auction fees 117,160 42,558 70,096 70,096
Preferred shares - dividend disbursing agent fees 10,007 10,000 10,016 10,011
Shareholders' servicing agent fees and expenses 9,253 353 708 732
Interest expense on floating rate obligations 124,373 205,061 161,068 247,873
Custodian's fees and expenses 31,414 13,306 22,725 21,308
Trustees' fees and expenses 3,134 1,113 1,828 1,805
Professional fees 14,701 10,221 11,779 11,899
Shareholders' reports - printing and mailing expenses 33,499 14,494 20,112 22,215
Stock exchange listing fees 9,499 245 407 1,460
Investor relations expense 12,497 4,943 7,923 8,249
Other expenses 14,640 11,863 12,968 12,927
------------------------------------------------------------------------------------------------------------------------------------
Total expenses before custodian fee credit and expense reimbursement 1,244,701 631,592 844,234 940,489
Custodian fee credit (20,936) (6,783) (8,594) (12,055)
Expense reimbursement -- (91,816) (186,021) (223,451)
------------------------------------------------------------------------------------------------------------------------------------
Net expenses 1,223,765 532,993 649,619 704,983
------------------------------------------------------------------------------------------------------------------------------------
Net investment income 5,350,912 2,103,835 3,401,693 3,466,161
------------------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) from:
Investments (291,586) (66,369) (69,239) (212,152)
Forward swaps -- (24,224) -- --
Futures (13,472) -- (12,248) --
Change in net unrealized appreciation (depreciation) of:
Investments (1,880,556) (402,449) (822,034) (750,196)
Forward swaps -- 17,297 -- --
Futures (5,056) -- (5,332) --
------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) (2,190,670) (475,745) (908,853) (962,348)
------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO PREFERRED SHAREHOLDERS
From net investment income (1,480,115) (541,052) (922,943) (907,982)
From accumulated net realized gains (82,405) (22,406) (79,654) --
------------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets applicable to Common shares from
distributions to Preferred shareholders (1,562,520) (563,458) (1,002,597) (907,982)
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets applicable to Common shares
from operations $ 1,597,722 $1,064,632 $ 1,490,243 $1,595,831
====================================================================================================================================
See accompanying notes to financial statements.
58
Statement of
CHANGES in NET ASSETS
GEORGIA GEORGIA GEORGIA
PREMIUM INCOME (NPG) DIVIDEND ADVANTAGE (NZX) DIVIDEND ADVANTAGE 2 (NKG)
----------------------------- ---------------------------- -----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
5/31/08 5/31/07 5/31/08 5/31/07 5/31/08 5/31/07
------------------------------------------------------------------------------------------------------------------------------------
OPERATIONS
Net investment income $ 3,214,441 $ 3,284,935 $ 1,781,307 $ 1,802,562 $ 4,014,670 $ 4,055,059
Net realized gain (loss) from:
Investments 107,414 81,348 193,600 69,122 63,300 270,177
Forward swaps 23,130 -- 26,220 -- -- 46,944
Futures -- -- -- -- -- --
Change in net unrealized
appreciation
(depreciation) of:
Investments (1,242,529) 43,450 (709,956) (14,277) (2,367,070) 628,166
Forward swaps -- -- 169,293 (29,585) -- (197,717)
Futures -- -- -- -- -- --
Distributions to
Preferred Shareholders:
From net investment income (916,555) (869,692) (512,754) (481,666) (1,165,015) (1,072,522)
From accumulated net
realized gains (55,745) -- -- -- -- --
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
applicable to Common shares
from operations 1,130,156 2,540,041 947,710 1,346,156 545,885 3,730,107
------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO COMMON SHAREHOLDERS
From net investment income (2,317,641) (2,539,683) (1,293,795) (1,481,082) (2,923,728) (2,861,975)
From accumulated net
realized gains (161,360) -- -- -- -- -
------------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets applicable to
Common shares from distributions
to Common shareholders (2,479,001) (2,539,683) (1,293,795) (1,481,082) (2,923,728) (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 9,872 --
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
applicable to Common shares from
capital share transactions -- 40,850 12,932 53,889 9,872 --
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets
applicable to
Common shares (1,348,845) 41,208 (333,153) (81,037) (2,367,971) 868,132
Net assets applicable to
Common shares at
the beginning of year 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 year $54,010,606 $55,359,451 $28,498,007 $28,831,160 $63,401,591 $65,769,562
====================================================================================================================================
Undistributed (Over-distribution of)
net investment income at the
end of year $ (69,752) $ (49,719) $ (76,806) $ (51,564) $ (186,282) $ (112,208)
====================================================================================================================================
See accompanying notes to financial statements.
59
Statement of
CHANGES in NET ASSETS (continued)
NORTH CAROLINA NORTH CAROLINA
PREMIUM INCOME (NNC) DIVIDEND ADVANTAGE (NRB)
---------------------------- -----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
5/31/08 5/31/07 5/31/08 5/31/07
------------------------------------------------------------------------------------------------------------------------------------
OPERATIONS
Net investment income $ 5,350,912 $ 5,395,346 $ 2,103,835 $ 2,098,534
Net realized gain (loss) from:
Investments (291,586) 368,361 (66,369) 229,088
Forward swaps -- -- (24,224) --
Futures (13,472) -- -- 21,833
Change in net unrealized appreciation (depreciation) of:
Investments (1,880,556) 98,311 (402,449) (153,016)
Forward swaps -- -- 17,297 (17,297)
Futures (5,056) -- -- --
Distributions to Preferred Shareholders:
From net investment income (1,480,115) (1,481,763) (541,052) (500,664)
From accumulated net realized gains (82,405) (19,120) (22,406) (25,847)
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
applicable to Common shares
from operations 1,597,722 4,361,135 1,064,632 1,652,631
------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO COMMON SHAREHOLDERS
From net investment income (3,734,882) (4,163,346) (1,567,958) (1,741,404)
From accumulated net realized gains (227,396) (89,554) (76,483) (117,562)
------------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets applicable to
Common shares from distributions
to Common shareholders (3,962,278) (4,252,900) (1,644,441) (1,858,966)
------------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
Net proceeds from Common shares
issued to shareholders due to
reinvestment of distributions -- 50,016 38,805 78,190
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
applicable to Common shares from
capital share transactions -- 50,016 38,805 78,190
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
applicable to Common shares (2,364,556) 158,251 (541,004) (128,145)
Net assets applicable to Common
shares at the beginning of year 91,191,286 91,033,035 33,408,545 33,536,690
------------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common
shares at the end of year $88,826,730 $91,191,286 $32,867,541 $33,408,545
====================================================================================================================================
Undistributed (Over-distribution of)
net investment income at the
end of year $ (79,132) $ (214,814) $ (35,767) $ (30,449)
====================================================================================================================================
See accompanying notes to financial statements.
60
NORTH CAROLINA NORTH CAROLINA
DIVIDEND ADVANTAGE 2 (NNO) DIVIDEND ADVANTAGE 3 (NII)
---------------------------- -----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
5/31/08 5/31/07 5/31/08 5/31/07
------------------------------------------------------------------------------------------------------------------------------------
OPERATIONS
Net investment income $ 3,401,693 $ 3,419,247 $ 3,466,161 $ 3,485,635
Net realized gain (loss) from:
Investments (69,239) 406,698 (212,152) 229,821
Forward swaps -- -- -- --
Futures (12,248) -- -- --
Change in net unrealized appreciation (depreciation) of:
Investments (822,034) (28,954) (750,196) 189,979
Forward swaps -- -- -- --
Futures (5,332) -- -- --
Distributions to Preferred Shareholders:
From net investment income (922,943) (878,117) (907,982) (890,568)
From accumulated net realized gains (79,654) (39,705) -- --
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
applicable to Common shares
from operations 1,490,243 2,879,169 1,595,831 3,014,867
------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO COMMON SHAREHOLDERS
From net investment income (2,369,741) (2,647,748) (2,571,479) (2,570,459)
From accumulated net realized gains (239,227) (184,018) -- --
------------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets applicable to
Common shares from distributions
to Common shareholders (2,608,968) (2,831,766) (2,571,479) (2,570,459)
------------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
Net proceeds from Common shares
issued to shareholders due to
reinvestment of distributions 9,816 49,760 18,864 17,530
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
applicable to Common shares from
capital share transactions 9,816 49,760 18,864 17,530
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
applicable to Common shares (1,108,909) 97,163 (956,784) 461,938
Net assets applicable to Common
shares at the beginning of year 55,348,647 55,251,484 56,511,349 56,049,411
------------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common
shares at the end of year $54,239,738 $55,348,647 $55,554,565 $56,511,349
====================================================================================================================================
Undistributed (Over-distribution of)
net investment income at the
end of year $ (90,533) $ (195,865) $ (126,596) $ (113,265)
====================================================================================================================================
See accompanying notes to financial statements.
61
Statement of
CASH FLOWS
Year Ended May 31, 2008
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 $ 1,064,632 $ 1,595,831
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 (4,270,586) (13,616,382)
Proceeds from sales and maturities of investments 3,263,368 13,869,203
Proceeds from (Purchase of) short-term investments, net (325,000) (850,000)
Cash settlement of forward swaps (24,224) --
Amortization (Accretion) of premiums and discounts, net 137,629 272,425
(Increase) Decrease in receivable for interest (61,315) (35,007)
(Increase) Decrease in other assets (75) (120)
Increase (Decrease) in payable for investments purchased 74,759 262,412
Increase (Decrease) in accrued management fees 1,899 5,451
Increase (Decrease) in accrued other liabilities 1,427 1,840
Increase (Decrease) in Preferred share dividends payable 1,914 3,818
Net realized (gain) loss from investments 66,369 212,152
Net realized (gain) loss from forward swaps 24,224 --
Change in net unrealized (appreciation) depreciation of investments 402,449 750,196
Change in net unrealized (appreciation) depreciation of forward swaps (17,297) --
Taxes paid on undistributed capital gains (151) --
------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities 340,022 2,471,819
------------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (Decrease) in cash overdraft balance -- (129,185)
Cash distributions paid to Common shareholders (1,481,830) (2,342,634)
------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities (1,481,830) (2,471,819)
------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH (1,141,808) --
Cash at the beginning of year 1,173,662 --
------------------------------------------------------------------------------------------------------------------------------------
CASH AT THE END OF YEAR $ 31,854 $ --
====================================================================================================================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest on floating rate obligations was $205,061 and $247,873
for North Carolina Dividend Advantage (NRB) and North Carolina Dividend
Advantage 3 (NII), respectively. Non-cash financing activities not included
herein consist of reinvestments of Common share distributions of $38,805 and
$18,864 for North Carolina Dividend Advantage (NRB) and North Carolina Dividend
Advantage 3 (NII), respectively.
See accompanying notes to financial statements.
62
Notes to
FINANCIAL STATEMENTS
1. GENERAL INFORMATION AND SIGNIFICANT ACCOUNTING POLICIES
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) (collectively, the "Funds").
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 certain U.S. territories.
The following is a summary of significant accounting policies followed by the
Funds in the preparation of their financial statements in accordance with U.S.
generally accepted accounting principles.
Investment Valuation
The prices of municipal bonds in each Fund's investment portfolio are provided
by a pricing service approved by the Fund's Board of Trustees. When market price
quotes are not readily available (which is usually the case for municipal
securities), the pricing service may establish fair value based on yields or
prices of municipal bonds of comparable quality, type of issue, coupon, maturity
and rating, indications of value from securities dealers, evaluations of
anticipated cash flows or collateral and general market conditions. Prices of
forward swap contracts are also provided by an independent pricing service
approved by each Fund's Board of Trustees. Futures contracts are valued using
the closing settlement price, or, in the absence of such a price, at the mean of
the bid and asked prices. If the pricing service is unable to supply a price for
a municipal bond, forward swap or futures contract, each Fund may use market
quotes provided by major broker/dealers in such investments. If it is determined
that the market price for an investment or derivative instrument is unavailable
or inappropriate, the Board of Trustees of the Funds, or its designee, may
establish fair value in accordance with procedures established in good faith by
the Board of Trustees. Temporary investments in securities that have variable
rate and demand features qualifying them as short-term investments are valued at
amortized cost, which approximates market value.
Investment Transactions
Investment transactions are recorded on a trade date basis. Realized gains and
losses from transactions are determined on the specific identification method.
Investments purchased on a when-issued/delayed delivery basis may have extended
settlement periods. Any investments so purchased are subject to market
fluctuation during this period. The Funds have instructed the custodian to
segregate assets with a current value at least equal to the amount of the
when-issued/delayed delivery purchase commitments. At May 31, 2008, North
Carolina Premium Income (NNC), North Carolina Dividend Advantage (NRB), North
Carolina Dividend Advantage 2 (NNO) and North Carolina Dividend Advantage 3
(NII) each had outstanding when-issued/delayed-delivery purchase commitments of
$2,006,574, $571,069, $1,106,139 and $1,106,139, respectively. There were no
such outstanding purchase commitments in any Georgia Premium Income (NPG),
Georgia Dividend Advantage (NZX) or Georgia Dividend Advantage 2 (NKG).
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.
63
Notes to
FINANCIAL STATEMENTS (continued)
Income Taxes
Each Fund is a separate taxpayer for federal income tax purposes. Each Fund
intends to distribute substantially all of its net investment income and net
capital gains to shareholders and to otherwise comply with the requirements of
Subchapter M of the Internal Revenue Code applicable to regulated investment
companies. Therefore, no federal income tax provision is required. Furthermore,
each Fund intends to satisfy conditions which will enable interest from
municipal securities, which is exempt from regular federal and designated state
income taxes, to retain such tax-exempt status when distributed to shareholders
of the Funds. Net realized capital gains and ordinary income distributions paid
by the Funds are subject to federal taxation.
Effective November 30, 2007, the Funds adopted Financial Accounting Standards
Board (FASB) Interpretation No. 48 "Accounting for Uncertainty in Income Taxes"
(FIN 48). FIN 48 provides guidance for how uncertain tax positions should be
recognized, measured, presented and disclosed in the financial statements. FIN
48 requires the affirmative evaluation of tax positions taken or expected to be
taken in the course of preparing the Funds' tax returns to determine whether it
is "more-likely-than-not" (i.e., a greater than 50-percent likelihood) of being
sustained by the applicable tax authority. Tax positions not deemed to meet the
more-likely-than-not threshold may result in a tax benefit or expense in the
current year.
Implementation of FIN 48 required management of the Funds to analyze all open
tax years, as defined by the statute of limitations, for all major
jurisdictions, which includes federal and certain states. Open tax years are
those that are open for examination by taxing authorities (i.e., generally the
last four tax year ends and the interim tax period since then). The Funds have
no examinations in progress.
For all open tax years and all major taxing jurisdictions through the end of the
reporting period, management of the Funds has reviewed all tax positions taken
or expected to be taken in the preparation of the Funds' tax returns and
concluded the adoption of FIN 48 resulted in no impact to the Funds' net assets
or results of operations as of and during the fiscal year ended May 31, 2008.
The Funds are also not aware of any tax positions for which it is reasonably
possible that the total amounts of unrecognized tax benefits will significantly
change in the next twelve months.
Dividends and Distributions to Common Shareholders
Dividends from tax-exempt net investment income are declared monthly. Net
realized capital gains and/or market discount from investment transactions, if
any, are distributed to shareholders at least annually. Furthermore, capital
gains are distributed only to the extent they exceed available capital loss
carryforwards.
Distributions to Common shareholders of tax-exempt net investment income, net
realized capital gains and/or market discount, if any, are recorded on the
ex-dividend date. The amount and timing of distributions are determined in
accordance with federal income tax regulations, which may differ from 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
64
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 --
==================================================================================================================
Beginning in February 2008, more shares for sale were submitted in the regularly
scheduled auctions for the Preferred shares issued by the Funds than there were
offers to buy. This meant that these auctions "failed to clear,'' and that many
Preferred shareholders who wanted to sell their shares in these auctions were
unable to do so. Preferred shareholders unable to sell their shares received
distributions at the "maximum rate'' applicable to failed auctions as calculated
in accordance with the pre-established terms of the Preferred shares.
These developments generally do not affect the management or investment policies
of the Funds. However, one implication of these auction failures for Common
shareholders is that the Funds' cost of leverage will likely be higher, at least
temporarily, than it otherwise would have been had the auctions continued to be
successful. As a result, the Funds' future Common share earnings may be lower
than they otherwise would have been.
Inverse Floating Rate Securities
Each Fund is authorized to invest in inverse floating rate securities. An
inverse floating rate security is created by depositing a municipal bond,
typically with a fixed interest rate, into a special purpose trust created by a
broker-dealer. In turn, this trust (a) issues floating rate certificates, in
face amounts equal to some fraction of the deposited bond's par amount or market
value, that typically pay short-term tax-exempt interest rates to third parties,
and (b) issues to a long-term investor (such as one of the Funds) an inverse
floating rate certificate (sometimes referred to as an "inverse floater") that
represents all remaining or residual interest in the trust. The income received
by the inverse floater holder varies inversely with the short-term rate paid to
the floating rate certificates' holders, and in most circumstances the inverse
floater holder bears substantially all of the underlying bond's downside
investment risk and also benefits disproportionately from any potential
appreciation of the underlying bond's value. The price of an inverse floating
rate security will be more volatile than that of the underlying bond because the
interest rate is dependent on not only the fixed coupon rate of the underlying
bond but also on the short-term interest paid on the floating rate certificates,
and because the inverse floating rate security essentially bears the risk of
loss of the greater face value of the underlying bond.
A Fund may purchase an inverse floating rate security in a secondary market
transaction without first owning the underlying bond (referred to as an
"externally-deposited inverse floater"), or instead by first selling a
fixed-rate bond to a broker-dealer for deposit into the special purpose trust
and receiving in turn the residual interest in the trust (referred to as a
"self-deposited inverse floater"). 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.
65
Notes to
FINANCIAL STATEMENTS (continued)
During the fiscal year ended May 31, 2008, each Fund invested in externally
deposited inverse floaters and/or self-deposited inverse floaters.
The average floating rate obligations outstanding and average annual interest
rate and fees related to self-deposited inverse floaters during the fiscal year
ended May 31, 2008, 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 3.21% 3.23% 3.22% 3.23%
==================================================================================================================
Forward Swap Transactions
Each Fund is 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 Premium Income
(NPG), Georgia Dividend Advantage (NZX) and North Carolina Dividend Advantage
(NRB) were the only Funds to invest in forward interest rate swap transactions
during the fiscal year ended May 31, 2008.
Futures Contracts
Each Fund is authorized to invest in futures contracts. Upon entering into a
futures contract, a Fund is required to deposit with the broker an amount of
cash or liquid securities equal to a specified percentage of the contract
amount. This is known as the "initial margin." Subsequent payments ("variation
margin") are made or received by a Fund each day, depending on the daily
fluctuation of the value of the contract.
66
During the period the futures contract is open, changes in the value of the
contract are recognized as an unrealized gain or loss by "marking-to-market" on
a daily basis to reflect the changes in market value of the contract. When the
contract is closed or expired, a Fund records a realized gain or loss equal to
the difference between the value of the contract on the closing date and value
of the contract when originally entered into. Cash held by the broker to cover
initial margin requirements on open futures contracts, if any, is recognized in
the Statement of Assets and Liabilities. Additionally, the Statement of Assets
and Liabilities reflects a receivable or payable for the variation margin when
applicable. North Carolina Premium Income (NNC) and North Carolina Dividend
Advantage 2 (NNO) were the only Funds to invest in futures contracts during the
fiscal year ended May 31, 2008.
Risks of investments in futures contracts include the possible adverse movement
of the securities or indices underlying the contracts, the possibility that
there may not be a liquid secondary market for the contracts and/or that a
change in the value of the contract may not correlate with a change in the value
of the underlying securities or indices.
Zero Coupon Securities
Each Fund is authorized to invest in zero coupon securities. A zero coupon
security does not pay a regular interest coupon to its holders during the life
of the security. Tax-exempt income to the holder of the security comes from
accretion of the difference between the original purchase price of the security
at issuance and the par value of the security at maturity and is effectively
paid at maturity. Such securities are included in the Portfolios of Investments
with a 0.000% coupon rate in their description. The market prices of zero coupon
securities generally are more volatile than the market prices of securities that
pay interest periodically.
Custodian Fee Credit
Each Fund has an arrangement with the custodian bank whereby certain custodian
fees and expenses are reduced by net credits earned on each Fund's cash on
deposit with the bank. Such deposit arrangements are an alternative to overnight
investments. Credits for cash balances may be offset by charges for any days on
which a Fund overdraws its account at the custodian bank.
Indemnifications
Under the Funds' organizational documents, their Officers and Trustees are
indemnified against certain liabilities arising out of the performance of their
duties to the Funds. In addition, in the normal course of business, the Funds
enter into contracts that provide general indemnifications to other parties. The
Funds' maximum exposure under these arrangements is unknown as this would
involve future claims that may be made against the Funds that have not yet
occurred. However, the Funds have not had prior claims or losses pursuant to
these contracts and expect the risk of loss to be remote.
Use of Estimates
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of increases and
decreases in net assets applicable to Common shares from operations during the
reporting period. Actual results may differ from those estimates.
2. FUND SHARES
Transactions in Common shares were as follows:
GEORGIA GEORGIA DIVIDEND GEORGIA DIVIDEND
PREMIUM INCOME (NPG) ADVANTAGE (NZX) ADVANTAGE 2 (NKG)
------------------------ ----------------------- -----------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
5/31/08 5/31/07 5/31/08 5/31/07 5/31/08 5/31/07
-------------------------------------------------------------------------------------------------------------------
Common shares issued to shareholders
due to reinvestment of distributions -- 2,656 888 3,317 715 --
===================================================================================================================
NORTH CAROLINA NORTH CAROLINA
PREMIUM INCOME (NNC) DIVIDEND ADVANTAGE (NRB)
----------------------- ------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
5/31/08 5/31/07 5/31/08 5/31/07
-------------------------------------------------------------------------------------------------------------------
Common shares issued to shareholders
due to reinvestment of distributions -- 3,363 2,628 4,827
===================================================================================================================
NORTH CAROLINA NORTH CAROLINA
DIVIDEND DIVIDEND
ADVANTAGE 2 (NNO) ADVANTAGE 3 (NII)
----------------------- ------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
5/31/08 5/31/07 5/31/08 5/31/07
-------------------------------------------------------------------------------------------------------------------
Common shares issued to shareholders
due to reinvestment of distributions 667 3,293 1,326 1,207
===================================================================================================================
67
Notes to
FINANCIAL STATEMENTS (continued)
3. INVESTMENT TRANSACTIONS
Purchases and sales (including maturities but excluding short-term investments
and derivative transactions) during the fiscal year ended May 31, 2008, were as
follows:
GEORGIA GEORGIA GEORGIA
PREMIUM DIVIDEND DIVIDEND
INCOME ADVANTAGE ADVANTAGE 2
(NPG) (NZX) (NKG)
--------------------------------------------------------------------------------
Purchases $27,272,810 $9,769,211 $22,606,510
Sales and maturities 25,012,560 9,509,082 21,933,175
================================================================================
NORTH NORTH NORTH NORTH
CAROLINA CAROLINA CAROLINA CAROLINA
PREMIUM DIVIDEND DIVIDEND DIVIDEND
INCOME ADVANTAGE ADVANTAGE 2 ADVANTAGE 3
(NNC) (NRB) (NNO) (NII)
--------------------------------------------------------------------------------
Purchases $16,978,856 $4,270,586 $7,273,405 $13,616,382
Sales and maturities 19,971,505 3,263,368 7,839,140 13,869,203
================================================================================
4. INCOME TAX INFORMATION
The following information is presented on an income tax basis. Differences
between amounts for financial statement and federal income tax purposes are
primarily due to timing differences in recognizing 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 May 31, 2008, the cost of investments was as follows:
GEORGIA GEORGIA GEORGIA
PREMIUM DIVIDEND DIVIDEND
INCOME ADVANTAGE ADVANTAGE 2
(NPG) (NZX) (NKG)
--------------------------------------------------------------------------------
Cost of investments $78,791,458 $42,369,940 $95,470,689
================================================================================
NORTH NORTH NORTH NORTH
CAROLINA CAROLINA CAROLINA CAROLINA
PREMIUM DIVIDEND DIVIDEND DIVIDEND
INCOME ADVANTAGE ADVANTAGE 2 ADVANTAGE 3
(NNC) (NRB) (NNO) (NII)
--------------------------------------------------------------------------------
Cost of investments $134,045,153 $48,798,332 $80,684,037 $82,513,652
================================================================================
68
Gross unrealized appreciation and gross unrealized depreciation of investments
at May 31, 2008, were as follows:
GEORGIA GEORGIA GEORGIA
PREMIUM DIVIDEND DIVIDEND
INCOME ADVANTAGE ADVANTAGE 2
(NPG) (NZX) (NKG)
-------------------------------------------------------------------------------
Gross unrealized:
Appreciation $2,461,162 $1,164,866 $ 1,408,099
Depreciation (712,980) (605,783) (1,539,555)
--------------------------------------------------------------------------------
Net unrealized appreciation
(depreciation)
of investments $1,748,182 $ 559,083 $ (131,456)
================================================================================
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 $ 2,625,920 $1,389,835 $2,017,016 $1,673,120
Depreciation (1,220,980) (508,996) (760,427) (622,545)
--------------------------------------------------------------------------------
Net unrealized appreciation
(depreciation)
of investments $ 1,404,940 $ 880,839 $1,256,589 $1,050,575
================================================================================
The tax components of undistributed net tax-exempt income, net ordinary income
and net long-term capital gains at May 31, 2008, the Funds' tax year end, were
as follows:
GEORGIA GEORGIA GEORGIA
PREMIUM DIVIDEND DIVIDEND
INCOME ADVANTAGE ADVANTAGE 2
(NPG) (NZX) (NKG)
-------------------------------------------------------------------------------
Undistributed net tax-exempt income * $112,057 $34,694 $58,395
Undistributed net ordinary income ** -- -- --
Undistributed 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)
-------------------------------------------------------------------------------
Undistributed net
tax-exempt income * $227,772 $95,621 $109,793 $93,533
Undistributed net
ordinary income ** -- -- -- --
Undistributed net
long-term capital gains -- -- -- --
================================================================================
* Undistributed net tax-exempt income (on a tax basis) has not been reduced
for the dividend declared on May 1, 2008, paid on June 2, 2008.
** Net ordinary income consists of taxable market discount income and net
short-term capital gains, if any.
69
Notes to
FINANCIAL STATEMENTS (continued)
The tax character of distributions paid during the Funds' tax years ended May
31, 2008 and May 31, 2007, was designated for purposes of the dividends paid
deduction as follows:
GEORGIA GEORGIA GEORGIA
PREMIUM DIVIDEND DIVIDEND
INCOME ADVANTAGE ADVANTAGE 2
2008 (NPG) (NZX) (NKG)
------------------------------------------------------------------------------------------------------------------
Distributions from net tax-exempt income*** $3,261,414 $1,816,938 $4,091,700
Distributions from net ordinary income ** -- -- --
Distributions from net long-term capital gains**** 216,827 -- --
==================================================================================================================
NORTH NORTH NORTH NORTH
CAROLINA CAROLINA CAROLINA CAROLINA
PREMIUM DIVIDEND DIVIDEND DIVIDEND
INCOME ADVANTAGE ADVANTAGE 2 ADVANTAGE 3
2008 (NNC) (NRB) (NNO) (NII)
------------------------------------------------------------------------------------------------------------------
Distributions from net tax-exempt income*** $5,252,559 $2,121,763 $3,313,278 $3,475,571
Distributions from net ordinary income ** -- -- -- --
Distributions from net long-term capital gains**** 309,603 98,768 318,627 --
==================================================================================================================
GEORGIA GEORGIA GEORGIA
PREMIUM DIVIDEND DIVIDEND
INCOME ADVANTAGE ADVANTAGE 2
2007 (NPG) (NZX) (NKG)
------------------------------------------------------------------------------------------------------------------
Distributions from net tax-exempt income $3,438,850 $1,980,068 $3,945,298
Distributions from net ordinary income ** -- -- --
Distributions from net long-term capital gains -- -- --
==================================================================================================================
NORTH NORTH NORTH NORTH
CAROLINA CAROLINA CAROLINA CAROLINA
PREMIUM DIVIDEND DIVIDEND DIVIDEND
INCOME ADVANTAGE ADVANTAGE 2 ADVANTAGE 3
2007 (NNC) (NRB) (NNO) (NII)
------------------------------------------------------------------------------------------------------------------
Distributions from net tax-exempt income $5,698,177 $2,254,608 $3,550,052 $3,487,248
Distributions from net ordinary income ** -- 133 12 --
Distributions from net long-term capital gains 108,674 143,410 223,711 --
==================================================================================================================
** Net ordinary income consists of taxable market discount income and net
short-term capital gains, if any.
*** The Funds hereby designate these amounts paid during the fiscal year ended
May 31, 2008, as Exempt Interest Dividends.
**** The Funds designated as a long-term capital gain dividend, pursuant to the
Internal Revenue Code Section 852(b)(3), the amount necessary to reduce
earnings and profits of the Funds related to net capital gain to zero for
the tax year ended May 31, 2008.
70
At May 31, 2008, the Funds' 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 NORTH
GEORGIA GEORGIA CAROLINA CAROLINA
DIVIDEND DIVIDEND DIVIDEND DIVIDEND
ADVANTAGE ADVANTAGE 2 ADVANTAGE ADVANTAGE 3
(NZX) (NKG) (NRB) (NII)
--------------------------------------------------------------------------------
Expiration:
May 31, 2012 $ -- $ -- $ -- $119,458
May 31, 2013 -- 102,004 -- 36,008
May 31, 2014 28,172 287,093 -- 474,910
May 31, 2015 17,587 -- -- --
May 31, 2016 -- -- 38,847 115,010
--------------------------------------------------------------------------------
Total $45,759 $389,097 $38,847 $745,386
================================================================================
The following Funds have elected to defer net realized losses from investments
incurred from November 1, 2007 through May 31, 2008, the Funds' tax year end,
("post-October losses") in accordance with federal income tax regulations.
Post-October losses are treated as having arisen on the first day of the
following fiscal year:
NORTH NORTH NORTH NORTH
GEORGIA GEORGIA CAROLINA CAROLINA CAROLINA CAROLINA
PREMIUM DIVIDEND PREMIUM DIVIDEND DIVIDEND DIVIDEND
INCOME ADVANTAGE 2 INCOME ADVANTAGE ADVANTAGE 2 ADVANTAGE 3
(NPG) (NKG) (NNC) (NRB) (NNO) (NII)
-----------------------------------------------------------------------------------------------------------
$71,737 $203,274 $381,548 $56,537 $155,810 $151,433
===========================================================================================================
5. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Each Fund's management fee is separated into two components - a complex-level
component, based on the aggregate amount of all fund assets managed by Nuveen
Asset Management (the "Adviser"), a wholly owned subsidiary of Nuveen
Investments, Inc. ("Nuveen"), and a specific fund-level component, based only on
the amount of assets within each individual Fund. This pricing structure enables
Nuveen fund shareholders to benefit from growth in the assets within each
individual fund as well as from growth in the amount of complex-wide assets
managed by the Adviser.
The annual fund-level fee, payable monthly, for each Fund is based upon the
average daily net assets (including net assets attributable to Preferred shares)
of each Fund as follows:
AVERAGE DAILY NET ASSETS GEORGIA PREMIUM INCOME (NPG)
(INCLUDING NET ASSETS NORTH CAROLINA PREMIUM INCOME (NNC)
ATTRIBUTABLE TO PREFERRED SHARES) FUND-LEVEL FEE RATE
--------------------------------------------------------------------------------
For the first $125 million . .4500%
For the next $125 million .4375
For the next $250 million .4250
For the next $500 million .4125
For the next $1 billion .4000
For the next $3 billion .3875
For net assets over $5 billion .3750
================================================================================
GEORGIA DIVIDEND ADVANTAGE (NZX)
GEORGIA DIVIDEND ADVANTAGE 2 (NKG)
NORTH CAROLINA DIVIDEND ADVANTAGE (NRB)
AVERAGE DAILY NET ASSETS NORTH CAROLINA DIVIDEND ADVANTAGE 2 (NNO)
(INCLUDING NET ASSETS NORTH CAROLINA DIVIDEND ADVANTAGE 3 (NII)
ATTRIBUTABLE TO PREFERRED SHARES) FUND-LEVEL FEE RATE
--------------------------------------------------------------------------------
For the first $125 million .4500%
For the next $125 million .4375
For the next $250 million .4250
For the next $500 million .4125
For the next $1 billion .4000
For net assets over $2 billion .3750
================================================================================
71
Notes to
FINANCIAL STATEMENTS (continued)
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 tables below. As
of May 31, 2008, the complex-level fee rate was .1851%.
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 .2000%
$56 billion .1996
$57 billion .1989
$60 billion .1961
$63 billion .1931
$66 billion .1900
$71 billion .1851
$76 billion .1806
$80 billion .1773
$91 billion .1691
$125 billion .1599
$200 billion .1505
$250 billion .1469
$300 billion .1445
================================================================================
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 .2000%
$56 billion .1996
$57 billion .1989
$60 billion .1961
$63 billion .1931
$66 billion .1900
$71 billion .1851
$76 billion .1806
$80 billion .1773
$91 billion .1698
$125 billion .1617
$200 billion .1536
$250 billion .1509
$300 billion .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.
72
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.
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.
73
Notes to
FINANCIAL STATEMENTS (continued)
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
on the same terms as the previous agreements. Each new ongoing investment
management agreement, was approved by the shareholders of each Fund and took
effect on November 13, 2007.
The investors led by Madison Dearborn includes 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 Statement of Financial Accounting
Standards No. 157
In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements." This
standard establishes a single authoritative definition of fair value, sets out a
framework for measuring fair value and requires additional disclosures about
fair value measurements. SFAS No. 157 applies to fair value measurements already
required or permitted by existing standards. SFAS No. 157 is effective for
financial statements issued for fiscal years beginning after November 15, 2007,
and interim periods within those fiscal years. The changes to current generally
accepted accounting principles from the application of this standard relate to
the definition of fair value, the methods used to measure fair value, and the
expanded disclosures about fair value measurements. As of May 31, 2008,
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.
74
Financial Accounting Standards Board Statement of Financial Accounting
Standards No. 161
In March 2008, the FASB issued SFAS No. 161, "Disclosures about Derivative
Instruments and Hedging Activities." This standard is intended to enhance
financial statement disclosures for derivative instruments and hedging
activities and enable investors to understand: a) how and why a fund uses
derivative instruments, b) how derivative instruments and related hedge items
are accounted for, and c) how derivative instruments and related hedge items
affect a fund's financial position, results of operations and cash flows. SFAS
No. 161 is effective for financial statements issued for fiscal years and
interim periods beginning after November 15, 2008. As of May 31, 2008,
management does not believe the adoption of SFAS No. 161 will impact the
financial statement amounts; however, additional footnote disclosures may be
required about the use of derivative instruments and hedging items.
7. SUBSEQUENT EVENTS
Distributions to Common Shareholders
The Funds declared Common share dividend distributions from their tax-exempt net
investment income which were paid on July 1, 2008, to shareholders of record on
June 15, 2008, 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 $.0515 $.0490 $.0570 $.0515 $.0545
==================================================================================================================
Auction Rate Preferred Shares (ARPS)
On June 11, 2008, Nuveen announced the Fund Board's approval of plans to use
tender option bonds (TOBs), also known as floating rate securities, to refinance
a portion of the municipal funds' outstanding ARPS, whose auctions have been
failing for several months, including an initial phase of approximately $1
billion in forty-one funds. On June 26, 2008, thirteen municipal funds (none of
which are included in this shareholder report) issued par redemption notices for
a portion of their auction-rate securities aggregating approximately $580
million.
75
Financial
HIGHLIGHTS
Selected data for a Common share outstanding throughout each period:
Investment Operations Less Distributions
---------------------------------------------------------------- -----------------------------
Distributions Distributions
from Net from Net
Beginning Investment Capital Investment Capital
Common Net Income to Gains to Income to Gains to
Share Net Realized/ Preferred Preferred Common Common
Net Asset Investment Unrealized Share- Share- Share- Share-
Value Income Gain (Loss) holders+ holders+ Total holders holders Total
============================================================================================================================
GEORGIA PREMIUM INCOME (NPG)
----------------------------------------------------------------------------------------------------------------------------
Year Ended 5/31:
2008 $14.55 $.84 $ (.30) $(.24) $(.01) $ .29 $(.61) $(.04) $(.65)
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)
GEORGIA DIVIDEND ADVANTAGE (NZX)
----------------------------------------------------------------------------------------------------------------------------
Year Ended 5/31:
2008 14.65 .90 (.16) (.26) -- .48 (.66) -- (.66)
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)
============================================================================================================================
Total Returns
---------------------
Offering Based
Costs and Ending on
Preferred Common Based Common
Share Share Ending on Share Net
Underwriting Asset Market Market Asset
Discounts Value Value Value* Value*
============================================================================
GEORGIA PREMIUM INCOME (NPG)
----------------------------------------------------------------------------
Year Ended 5/31:
2008 $ -- $14.19 13.15 (2.17)% 2.06%
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)
GEORGIA DIVIDEND ADVANTAGE (NZX)
----------------------------------------------------------------------------
Year Ended 5/31:
2008 -- 14.47 13.47 (11.73) 3.33
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)
============================================================================
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 $54,011 1.25% 1.25% 5.86% 1.23% 1.23% 5.88% 31%
2007 55,359 1.25 1.25 5.84 1.23 1.23 5.86 4
2006 55,318 1.25 1.25 5.87 1.22 1.22 5.90 15
2005 57,687 1.25 1.25 6.15 1.23 1.23 6.17 18
2004 54,607 1.23 1.23 6.54 1.22 1.22 6.55 12
GEORGIA DIVIDEND ADVANTAGE (NZX)
----------------------------------------------------------------------------------------------------------------------------------
Year Ended 5/31:
2008 28,498 1.32 1.32 5.86 .97 .97 6.21 22
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
==================================================================================================================================
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 $27,800 $25,000 $73,571 $ -- $ --
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 -- --
GEORGIA DIVIDEND ADVANTAGE (NZX)
--------------------------------------------------------------------------------
Year Ended 5/31:
2008 15,000 25,000 72,497 $ -- $ --
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 -- --
================================================================================
* 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 may take place
over several days, and in some instances may not be based on the market
price, so the actual reinvestment price may be different from the price
used in the calculation. Total returns are not annualized.
Total Return on Common Share Net Asset Value is the combination of changes
in Common share net asset value, reinvested dividend income at net asset
value and reinvested capital gains distributions at net asset value, if
any. The last dividend declared in the period, which is typically paid on
the first business day of the following month, is assumed to be reinvested
at the ending net asset value. The actual reinvest price for the last
dividend declared in the period may often be based on the Fund's market
price (and not its net asset value), and therefore may be different from
the price used in the calculation. Total returns are not annualized.
** After custodian fee credit and expense reimbursement, where applicable.
+ The amounts shown are based on Common share equivalents.
++ Ratios do not reflect the effect of dividend payments to Preferred
shareholders; income ratios reflect income earned on assets attributable to
Preferred shares.
(a) Interest expense arises from the application of SFAS No. 140 to certain
inverse floating rate transactions entered into by the Fund as more fully
described in Footnote 1 - Inverse Floating Rate Securities.
See accompanying notes to financial statements.
76-77 spread
Financial
HIGHLIGHTS (continued)
Selected data for a Common share outstanding throughout each period:
Investment Operations Less Distributions
---------------------------------------------------------------- -----------------------------
Distributions Distributions
from Net from Net
Beginning Investment Capital Investment Capital
Common Net Income to Gains to Income to Gains to
Share Net Realized/ Preferred Preferred Common Common
Net Asset Investment Unrealized Share- Share- Share- Share-
Value Income Gain (Loss) holders+ holders+ Total holders holders Total
============================================================================================================================
GEORGIA DIVIDEND ADVANTAGE 2 (NKG)
----------------------------------------------------------------------------------------------------------------------------
Year Ended 5/31:
2008 $14.44 $.88 $ (.50) $(.26) $ -- $ .12 $(.64) $ -- $(.64)
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)
============================================================================================================================
Total Returns
---------------------
Offering Based
Costs and Ending on
Preferred Common Based Common
Share Share Ending on Share Net
Underwriting Asset Market Market Asset
Discounts Value Value Value* Value*
=============================================================================
GEORGIA DIVIDEND ADVANTAGE 2 (NKG)
-----------------------------------------------------------------------------
Year Ended 5/31:
2008 $ -- $13.92 $13.18 (4.64)% .89%
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)
=============================================================================
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 $63,402 1.23% 1.23% 5.82% .81% .81% 6.24% 23%
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
====================================================================================================================================
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 $33,000 $25,000 $73,032 $ -- $ --
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 -- --
================================================================================
* 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 may take place
over several days, and in some instances may not be based on the market
price, so the actual reinvestment price may be different from the price
used in the calculation. Total returns are not annualized.
Total Return on Common Share Net Asset Value is the combination of changes
in Common share net asset value, reinvested dividend income at net asset
value and reinvested capital gains distributions at net asset value, if
any. The last dividend declared in the period, which is typically paid on
the first business day of the following month, is assumed to be reinvested
at the ending net asset value. The actual reinvest price for the last
dividend declared in the period may often be based on the Fund's market
price (and not its net asset value), and therefore may be different from
the price used in the calculation. Total returns are not annualized.
** After custodian fee credit and expense reimbursement, where applicable.
+ The amounts shown are based on Common share equivalents.
++ Ratios do not reflect the effect of dividend payments to Preferred
shareholders; income ratios reflect income earned on assets attributable to
Preferred shares.
(a) Interest expense arises from the application of SFAS No. 140 to certain
inverse floating rate transactions entered into by the Fund as more fully
described in Footnote 1 - Inverse Floating Rate Securities.
See accompanying notes to financial statements.
78-79 spread
Financial
HIGHLIGHTS (continued)
Selected data for a Common share outstanding throughout each period:
Investment Operations Less Distributions
---------------------------------------------------------------- -----------------------------
Distributions Distributions
from Net from Net
Beginning Investment Capital Investment Capital
Common Net Income to Gains to Income to Gains to
Share Net Realized/ Preferred Preferred Common Common
Net Asset Investment Unrealized Share- Share- Share- Share-
Value Income Gain (Loss) holders+ holders+ Total holders holders Total
============================================================================================================================
NORTH CAROLINA PREMIUM INCOME (NNC)
----------------------------------------------------------------------------------------------------------------------------
Year Ended 5/31:
2008 $14.36 $.84 $ (.35) $(.23) $(.01) $ .25 $(.59) $(.04) $(.63)
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)
NORTH CAROLINA DIVIDEND ADVANTAGE (NRB)
----------------------------------------------------------------------------------------------------------------------------
Year Ended 5/31:
2008 14.78 .93 (.22) (.24) (.01) .46 (.69) (.03) (.72)
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)
============================================================================================================================
Total Returns
---------------------
Offering Based
Costs and Ending on
Preferred Common Based Common
Share Share Ending on Share Net
Underwriting Asset Market Market Asset
Discounts Value Value Value** Value**
===============================================================================
NORTH CAROLINA PREMIUM INCOME (NNC)
-------------------------------------------------------------------------------
Year Ended 5/31:
2008 $ -- $13.98 $13.30 (2.52)% 1.76%
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)
NORTH CAROLINA DIVIDEND ADVANTAGE (NRB)
-------------------------------------------------------------------------------
Year Ended 5/31:
2008 -- 14.52 15.28 (2.28) 3.26
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)
===============================================================================
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 $88,827 1.39% 1.25% 5.94% 1.36% 1.23% 5.97% 12%
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
NORTH CAROLINA DIVIDEND ADVANTAGE (NRB)
------------------------------------------------------------------------------------------------------------------------------------
Year Ended 5/31:
2008 32,868 1.91 1.29 6.07 1.61 .99 6.37 6
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
====================================================================================================================================
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 $46,800 $25,000 $72,450 $3,870 $36,046
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 -- --
NORTH CAROLINA DIVIDEND ADVANTAGE (NRB)
--------------------------------------------------------------------------------
Year Ended 5/31:
2008 17,000 25,000 73,335 6,350 8,853
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 -- --
================================================================================
* 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 may take place
over several days, and in some instances may not be based on the market
price, so the actual reinvestment price may be different from the price
used in the calculation. Total returns are not annualized.
Total Return on Common Share Net Asset Value is the combination of changes
in Common share net asset value, reinvested dividend income at net asset
value and reinvested capital gains distributions at net asset value, if
any. The last dividend declared in the period, which is typically paid on
the first business day of the following month, is assumed to be reinvested
at the ending net asset value. The actual reinvest price for the last
dividend declared in the period may often be based on the Fund's market
price (and not its net asset value), and therefore may be different from
the price used in the calculation. Total returns are not annualized.
*** After custodian fee credit and expense reimbursement, where applicable.
+ The amounts shown are based on Common share equivalents.
++ Ratios do not reflect the effect of dividend payments to Preferred
shareholders; income ratios reflect income earned on assets attributable to
Preferred shares.
(a) Interest expense arises from the application of SFAS No. 140 to certain
inverse floating rate transactions entered into by the Fund as more fully
described in Footnote 1 - Inverse Floating Rate Securities.
See accompanying notes to financial statements.
80-81 spread
Financial
HIGHLIGHTS (continued)
Selected data for a Common share outstanding throughout each period:
Investment Operations Less Distributions
---------------------------------------------------------------- -----------------------------
Distributions Distributions
from Net from Net
Beginning Investment Capital Investment Capital
Common Net Income to Gains to Income to Gains to
Share Net Realized/ Preferred Preferred Common Common
Net Asset Investment Unrealized Share- Share- Share- Share-
Value Income Gain (Loss) holders+ holders+ Total holders holders Total
============================================================================================================================
NORTH CAROLINA DIVIDEND ADVANTAGE 2 (NNO)
----------------------------------------------------------------------------------------------------------------------------
Year Ended 5/31:
2008 $14.76 $.91 $ (.24) $(.25) $(.02) $ .40 $(.63) $(.06) $(.69)
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)
NORTH CAROLINA DIVIDEND ADVANTAGE 3 (NII)
----------------------------------------------------------------------------------------------------------------------------
Year Ended 5/31:
2008 14.38 .88 (.25) (.23) -- .40 (.65) -- (.65)
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)
============================================================================================================================
Total Returns
---------------------
Offering Based
Costs and Ending on
Preferred Common Based Common
Share Share Ending on Share Net
Underwriting Asset Market Market Asset
Discounts Value Value Value* Value*
===========================================================================
NORTH CAROLINA DIVIDEND ADVANTAGE 2 (NNO)
---------------------------------------------------------------------------
Year Ended 5/31:
2008 $ -- $14.47 $13.66 (7.33)% 2.83%
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)
NORTH CAROLINA DIVIDEND ADVANTAGE 3 (NII)
---------------------------------------------------------------------------
Year Ended 5/31:
2008 -- 14.13 14.12 1.12 2.90
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)
===========================================================================
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 $54,240 1.54% 1.25% 5.87% 1.19% .89% 6.22% 8%
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
NORTH CAROLINA DIVIDEND ADVANTAGE 3 (NII)
---------------------------------------------------------------------------------------------------------------------------------
Year Ended 5/31:
2008 55,555 1.68 1.24 5.79 1.26 .82 6.21 15
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
=================================================================================================================================
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 $28,000 $25,000 $73,428 $4,995 $17,464
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 -- --
NORTH CAROLINA DIVIDEND ADVANTAGE 3 (NII)
--------------------------------------------------------------------------------
Year Ended 5/31:
2008 28,000 25,000 74,602 7,680 11,880
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 -- --
================================================================================
* 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 may take place
over several days, and in some instances may not be based on the market
price, so the actual reinvestment price may be different from the price
used in the calculation. Total returns are not annualized.
Total Return on Common Share Net Asset Value is the combination of changes
in Common share net asset value, reinvested dividend income at net asset
value and reinvested capital gains distributions at net asset value, if
any. The last dividend declared in the period, which is typically paid on
the first business day of the following month, is assumed to be reinvested
at the ending net asset value. The actual reinvest price for the last
dividend declared in the period may often be based on the Fund's market
price (and not its net asset value), and therefore may be different from
the price used in the calculation. Total returns are not annualized.
** After custodian fee credit and expense reimbursement, where applicable.
+ The amounts shown are based on Common share equivalents.
++ Ratios do not reflect the effect of dividend payments to Preferred
shareholders; income ratios reflect income earned on assets attributable to
Preferred shares.
(a) Interest expense arises from the application of SFAS No. 140 to certain
inverse floating rate transactions entered into by the Fund as more fully
described in Footnote 1 - Inverse Floating Rate Securities.
See accompanying notes to financial statements.
82-83 spread
Board Members & Officers
The management of the Funds, including general supervision of the duties
performed for the Funds by the Adviser, is the responsibility of the Board
Members of the Funds. The number of board members of the Fund is currently set
at nine. None of the board members who are not "interested" persons of the Funds
(referred to herein as "independent board members") has ever been a director or
employee of, or consultant to, Nuveen or its affiliates. The names and business
addresses of the board members and officers of the Funds, their principal
occupations and other affiliations during the past five years, the number of
portfolios each oversees and other directorships they hold are set forth below.
NAME, POSITION(S) HELD YEAR FIRST NUMBER PRINCIPAL
BIRTHDATE WITH THE FUNDS ELECTED OR OF PORTFOLIOS OCCUPATION(S)
& ADDRESS APPOINTED IN FUND COMPLEX INCLUDING OTHER
AND TERM(1) OVERSEEN BY DIRECTORSHIPS
BOARD MEMBER DURING PAST 5 YEARS
INDEPENDENT BOARD MEMBERS:
[] ROBERT P. BREMNER Private Investor and Management Consultant.
8/22/40 Chairman of 1997
333 W. Wacker Drive the Board CLASS III 186
Chicago, IL 60606 and Board member
[] JACK B. EVANS President, The Hall-Perrine Foundation, a
10/22/48 1999 private philanthropic corporation (since
333 W. Wacker Drive Board member CLASS III 186 1996); Director and Vice Chairman, United
Chicago, IL 60606 Fire Group, a publicly held company;
Member of the Board of Regents for the
State of Iowa University System;
Director, Gazette Companies; Life Trustee
of Coe College and Iowa College
Foundation; Member of the Advisory
Council of the Department of Finance in
the Tippie College of Business,
University of Iowa; formerly, Director,
Alliant Energy; formerly, Director,
Federal Reserve Bank of Chicago;
formerly, President and Chief Operating
Officer, SCI Financial Group, Inc., a
regional financial services firm.
[] WILLIAM C. HUNTER Dean, Tippie College of Business,
3/6/48 2004 University of Iowa (since July 2006);
333 W. Wacker Drive Board member ANNUAL 186 formerly, Dean and Distinguished
Chicago, IL 60606 Professor of Finance, School of Business
at the University of Connecticut
(2003-2006); previously, Senior Vice
President and Director of Research at the
Federal Reserve Bank of Chicago
(1995-2003); Director (since 1997),
Credit Research Center at Georgetown
University; Director (since 2004) of
Xerox Corporation; Director (since 2005),
Beta Gamma Sigma International Honor
Society; Director, SS&C Technologies,
Inc. (May 2005-October 2005).
[] DAVID J. KUNDERT Director, Northwestern Mutual Wealth
10/28/42 2005 Management Company; Retired (since 2004)
333 W. Wacker Drive Board member CLASS II 186 as Chairman, JPMorgan Fleming Asset
Chicago, IL 60606 Management, President and CEO, Banc One
Investment Advisors Corporation, and
President, One Group Mutual Funds; prior
thereto, Executive Vice President, Banc
One Corporation and Chairman and CEO,
Banc One Investment Management Group;
Member, Board of Regents, Luther College;
member of the Wisconsin Bar Association;
member of Board of Directors, Friends of
Boerner Botanical Gardens; member of
Investment Committee, Greater Milwaukee
Foundation.
[] WILLIAM J. SCHNEIDER Chairman, formerly, Senior Partner and
9/24/44 1997 Chief Operating Officer (retired, 2004)
333 W. Wacker Drive Board member ANNUAL 186 of Miller-Valentine Partners Ltd., a real
Chicago, IL 60606 estate investment company; Director,
Dayton Development Coalition; formerly,
member, Business Advisory Council,
Cleveland Federal Reserve Bank.
84
NAME, POSITION(S) HELD YEAR FIRST NUMBER PRINCIPAL
BIRTHDATE WITH THE FUNDS ELECTED OR OF PORTFOLIOS OCCUPATION(S)
& ADDRESS APPOINTED IN FUND COMPLEX INCLUDING OTHER
AND TERM(1) OVERSEEN BY DIRECTORSHIPS
BOARD MEMBER DURING PAST 5 YEARS
INDEPENDENT BOARD MEMBERS:
[] JUDITH M. STOCKDALE Executive Director, Gaylord and Dorothy
12/29/47 1997 Donnelley Foundation (since 1994); prior
333 W. Wacker Drive Board member CLASS I 186 thereto, Executive Director, Great Lakes
Chicago, IL 60606 Protection Fund (from 1990 to 1994).
[] CAROLE E. STONE Director, Chicago Board Options Exchange
6/28/47 2007 (since 2006); Chair New York Racing
333 W. Wacker Drive Board member CLASS I 186 Association Oversight Board (since 2005);
Chicago, IL 60606 Commissioner, New York State Commission
on Public Authority Reform (since 2005);
formerly Director, New York State
Division of the Budget (2000-2004),
Chair, Public Authorities Control Board
(2000-2004) and Director, Local
Government Assistance Corporation
(2000-2004).
[] TERENCE J. TOTH(2)
9/29/59 2008 Private Investor (since 2007); CEO and
333 W. Wacker Drive Board Member CLASS II 174(4) President, Northern Trust Investments
Chicago, IL 60606 (2004-2007); Executive Vice President,
Quantitative Management & Securities
Lending (2007-2004); prior thereto,
various positions with Northern Trust
Company (since 1994); Member: Goodman
Theatre Board (Since 2004); Chicago
Fellowship Boards (since 2005),
University of Illinois Leadership Council
Board (since 2007) and Catalyst Schools
of Chicago Board (since 2008); formerly
Member: Northern Trust Mutual Funds Board
(2005-2007), Northern Trust Japan Board
(2004-2007), Northern Trust Securities
Inc. Board (2003-2007) and Northern Trust
Hong Kong Board (1997-2004).
INTERESTED BOARD MEMBER:
[] JOHN P. AMBOIAN(2)(3) Chief Executive Officer (since July 2007)
6/14/61 2008 and Director (since 1999) of Nuveen
333 W. Wacker Drive Board Member CLASS II 174(4) Investments, Inc.; Chief Executive
Chicago, IL 60606 Officer (since 2007) of Nuveen Asset
Management, Rittenhouse Asset Management,
Nuveen Investments Advisors, Inc.
formerly, President (1999-2004) of Nuveen
Advisory Corp. and Nuveen Institutional
Advisory Corp.
OFFICERS OF THE FUND:
[] GIFFORD R. ZIMMERMAN Managing Director (since 2002), Assistant
9/9/56 Chief Secretary and Associate General Counsel,
333 W. Wacker Drive Administrative 1988 186 formerly, Vice President and Assistant
Chicago, IL 60606 Officer General Counsel, of Nuveen Investments,
LLC; Managing Director (since 2002),
Associate General Counsel and Assistant
Secretary, of Nuveen Asset Management;
Vice President and Assistant Secretary of
NWQ Investment Management Company, LLC.
(since 2002), Nuveen Investments Advisers
Inc. (since 2002), Symphony Asset
Management LLC, and NWQ Investment
Management Company, LLC (since 2003),
Tradewinds Global Investors, LLC, and
Santa Barbara Asset Management, LLC
(since 2006); Nuveen HydePark Group LLC
and Richards & Tierney, Inc. (since
2007); Managing Director, Associate
General Counsel and Assistant Secretary
of Rittenhouse Asset Management, Inc.
(since 2003); Managing Director (since
2004) and Assistant Secretary (since
1994) of Nuveen Investments, Inc.;
formerly, Managing Director (2002-2004),
General Counsel (1998-2004) and Assistant
Secretary of Nuveen Advisory Corp. and
Nuveen Institutional Advisory Corp.(5);
Chartered Financial Analyst.
[] WILLIAM ADAMS IV Executive Vice President, U.S. Structured
6/9/55 Products of Nuveen Investments, LLC,
333 W. Wacker Drive Vice President 2007 120 (since 1999), prior thereto, Managing
Chicago, IL 60606 Director of Structured Investments.
85
NAME, POSITION(S) HELD YEAR FIRST NUMBER PRINCIPAL
BIRTHDATE WITH THE FUNDS ELECTED OR OF PORTFOLIOS OCCUPATION(S)
AND ADDRESS APPOINTED(6) IN FUND COMPLEX DURING PAST 5 YEARS
OVERSEEN
BY OFFICER
OFFICERS OF THE FUND:
[] CEDRIC H. ANTOSIEWICZ
1/11/62 Managing Director, (since 2004)
333 W. Wacker Drive Vice President 2007 120 previously, Vice President (1993-2004) of
Chicago, IL 60606 Nuveen Investments, LLC.
[] MICHAEL T. ATKINSON Vice President (since 2002) of Nuveen
2/3/66 Vice President Investments, LLC.
333 W. Wacker Drive and Assistant 2000 186
Chicago, IL 60606 Secretary
[] LORNA C. FERGUSON Managing Director (since 2004), formerly,
10/24/45 Vice President of Nuveen Investments,
333 W. Wacker Drive Vice President 1998 186 LLC, Managing Director (2004) formerly,
Chicago, IL 60606 Vice President (1998-2004) of Nuveen
Advisory Corp. and Nuveen Institutional
Advisory Corp.(5); Managing Director
(since 2005) of Nuveen Asset Management.
[] STEPHEN D. FOY Vice President (since 1993) and Funds
5/31/54 Vice President Controller (since 1998) of Nuveen
333 W. Wacker Drive and Controller 1998 186 Investments, LLC; formerly, Vice
Chicago, IL 60606 President and Funds Controller
(1998-2004) of Nuveen Investments, Inc.;
Certified Public Accountant.
[] WALTER M. KELLY Senior Vice President (since 2008), Vice
2/24/70 Chief Compliance President (2006-2008) formerly, Assistant
333 W. Wacker Drive Officer and 2003 186 Vice President and Assistant General
Chicago, IL 60606 Vice President Counsel (2003-2006) of Nuveen
Investments, LLC; Vice President (since
2006) and Assistant Secretary (since
2008) of Nuveen Asset Management.
[] DAVID J. LAMB Vice President (since 2000) of Nuveen
3/22/63 Investments, LLC; Certified Public
333 W. Wacker Drive Vice President 2000 186 Accountant.
Chicago, IL 60606
[] TINA M. LAZAR Vice President of Nuveen Investments, LLC
8/27/61 (since 1999).
333 W. Wacker Drive Vice President 2002 186
Chicago, IL 60606
[] LARRY W. MARTIN Vice President, Assistant Secretary and
7/27/51 Vice President Assistant General Counsel of Nuveen
333 W. Wacker Drive and Assistant 1988 186 Investments, LLC; Vice President (since
Chicago, IL 60606 Secretary 2005) and Assistant Secretary of Nuveen
Investments, Inc.; Vice President (since
2005) and Assistant Secretary (since
1997) of Nuveen Asset Management; Vice
President (since 2000), Assistant
Secretary and Assistant General Counsel
(since 1998) of Rittenhouse Asset
Management, Inc.; Vice President and
Assistant Secretary of Nuveen Investments
Advisers Inc. (since 2002); NWQ
Investment Management Company, LLC (since
2002), Symphony Asset Management LLC
(since 2003), Tradewinds Global
Investors, LLC, Santa Barbara Asset
Management LLC (since 2006) and of Nuveen
HydePark Group, LLC and Richards
& Tierney, Inc. (since 2007); formerly,
Vice President and Assistant Secretary of
Nuveen Advisory Corp. and Nuveen
Institutional Advisory Corp.(5)
86
NAME, POSITION(S) HELD YEAR FIRST NUMBER PRINCIPAL
BIRTHDATE WITH THE FUNDS ELECTED OR OF PORTFOLIOS OCCUPATION(S)
AND ADDRESS APPOINTED(6) IN FUND COMPLEX DURING PAST 5 YEARS
OVERSEEN
BY OFFICER
OFFICERS OF THE FUND:
[] KEVIN J. MCCARTHY Managing Director (since 2008), formerly,
3/26/66 Vice President Vice President (2007-2008), Nuveen
333 W. Wacker Drive and Secretary 2007 186 Investments, LLC; Vice President, and
Chicago, IL 60606 Assistant Secretary, Nuveen Asset
Management, Rittenhouse Asset Management,
Inc., Nuveen Investment Advisers Inc.,
Nuveen Investment Institutional Services
Group LLC, NWQ Investment Management
Company, LLC, Tradewinds Global Investors
LLC, NWQ Holdings, LLC, Symphony Asset
Management LLC, Santa Barbara Asset
Management LLC, Nuveen HydePark Group,
LLC and Richards & Tierney, Inc. (since
2007); Managing Director (since 2008),
formerly, Vice President (2007-2008) and
Assistant General Counsel, Nuveen
Investments, Inc. prior thereto, Partner,
Bell, Boyd & Lloyd LLP (1997-2007).
[] JOHN V. MILLER Managing Director (since 2007), formerly,
4/10/67 Vice President Vice President (2002-2007) of Nuveen
333 W. Wacker Drive and Assistant 2007 186 Investments, LLC; Chartered Financial
Chicago, IL 60606 Analyst.
[] CHRISTOPHER M. ROHRBACHER Vice President, Nuveen Investments, LLC
8/1/71 Vice President (since 2008); Vice President and
333 W. Wacker Drive and Assistant 2008 186 Assistant Secretary, Nuveen Asset
Chicago, IL 60606 Secretary Management (since 2008); Vice President
and Assistant General Counsel, Nuveen
Investment, Inc. (since 2008); prior
thereto, Associate, Skadden, Arps, Slate
Meagher & Flom LLP (2002-2008).
[] JAMES F. RUANE Vice President, Nuveen Investments since
7/3/62 Vice President 2007; prior thereto, Partner, Deloitte &
333 W. Wacker Drive and Assistant 2007 186 Touche USA LLP (since 2005), formerly,
Chicago, IL 60606 Secretary senior tax manager (since 2002);
Certified Public Accountant.
[] MARK L. WINGET Vice President, Nuveen Investments, LLC
12/21/68 Vice President (since 2008); Vice President and
333 W. Wacker Drive and Assistant 2008 186 Assistant Secretary, Nuveen Asset
Chicago, IL 60606 Secretary Management (since 2008); Vice President
and Assistant General Counsel, Nuveen
Investments Inc. (since 2008); prior
thereto, Counsel, Vedder Price P.C.
(1997-2007).
(1) Board Members serve three year terms, except for two board members who are
elected by the holders of Preferred Shares. The Board of Trustees is
divided into three classes, Class I, Class II, and Class III, with each
being elected to serve until the third succeeding annual shareholders'
meeting subsequent to its election or thereafter in each case when its
respective successors are duly elected or appointed, except two board
members are elected by the holders of Preferred Shares to serve until the
next annual shareholders' meeting subsequent to its election or thereafter
in each case when its respective successors are duly elected or appointed.
The first year elected or appointed represents the year in which the board
member was first elected or appointed to any fund in the Nuveen Complex.
(2) Mr. Amboian and Mr. Toth were appointed to the Board of Trustees of certain
Nuveen Funds, effective July 1, 2008. In connection with the appointment of
Mr. Amboian as trustee, Timothy R. Schwertfeger, an interested trustee,
resigned from the Board of Trustees, effective July 1, 2008.
(3) Mr. Amboian is an interested trustee because of his position with Nuveen
Investments, Inc. and certain of its subsidiaries, which are affiliates of
the Nuveen Funds.
(4) Mr. Amboian and Mr. Toth are standing for election to the Boards of twelve
Nuveen closed-end funds whose annual meeting on June 30, 2008 was adjourned
to July 29, 2008.
(5) Nuveen Advisory Corp. and Nuveen Institutional Advisory Corp. were
reorganized into Nuveen Asset Management, effective January 1, 2005.
(6) Officers serve one year terms through July of each year. The year first
elected or appointed represents the year in which the Officer was first
elected or appointed to any fund in the Nuveen Complex.
87
Annual Investment
Management Agreement
APPROVAL PROCESS
The Investment Company Act of 1940, as amended (the "1940 Act"), provides, in
substance, that each investment advisory agreement between a fund and its
investment adviser will continue in effect from year to year only if its
continuance is approved at least annually by the fund's board members, including
by a vote of a majority of the board members who are not parties to the advisory
agreement or "interested persons" of any parties (the "Independent Board
Members"), cast in person at a meeting called for the purpose of considering
such approval. In connection with such approvals, the fund's board members must
request and evaluate, and the investment adviser is required to furnish, such
information as may be reasonably necessary to evaluate the terms of the advisory
agreement. Accordingly, at a meeting held on May 28-29, 2008 (the "May
Meeting"), the Boards of Trustees or Directors (as the case may be)(each a
"Board" and each Trustee or Director, a "Board Member") of the Funds, including
a majority of the Independent Board Members, considered and approved the
continuation of the advisory agreement (each, an "Advisory Agreement") between
each Fund and Nuveen Asset Management ("NAM") for an additional one-year period.
In preparation for their considerations at the May Meeting, the Board also held
a separate meeting on April 23, 2008 (the "April Meeting"). Accordingly, the
factors considered and determinations made regarding the renewals by the
Independent Board Members include those made at the April Meeting.
In addition, in evaluating the Advisory Agreements, as described in further
detail below, the Independent Board Members reviewed a broad range of
information relating to the Funds and NAM, including absolute performance, fee
and expense information for the Funds as well as comparative performance, fee
and expense information for a comparable peer group of funds, the performance
information of recognized benchmarks (as applicable), the profitability of
Nuveen for its advisory activities (which includes its wholly owned
subsidiaries), and other information regarding the organization, personnel, and
services provided by NAM. The Independent Board Members also met quarterly as
well as at other times as the need arose during the year and took into account
the information provided at such meetings and the knowledge gained therefrom.
Prior to approving the renewal of the Advisory Agreements, the Independent Board
Members reviewed the foregoing information with their independent legal counsel
and with management, reviewed materials from independent legal counsel
describing applicable law and their duties in reviewing advisory contracts, and
met with independent legal counsel in private sessions without management
present. The Independent Board Members considered the legal advice provided by
independent legal counsel and relied upon their knowledge of NAM, its services
and the Funds resulting from their meetings and other interactions throughout
the year and their own business judgment in determining the factors to be
considered in evaluating the Advisory Agreements. Each Board Member may have
accorded different weight to the various factors in reaching his or her
conclusions with respect to a Fund's Advisory Agreement. The Independent Board
Members did not identify any single factor as all-important or controlling. The
Independent Board Members considerations were instead based on a comprehensive
consideration of all the information presented. The principal factors considered
by the Board and its conclusions are described below.
A. NATURE, EXTENT AND QUALITY OF SERVICES
In considering renewal of the Advisory Agreements, the Independent Board Members
considered the nature, extent and quality of NAM's services, including advisory
services and administrative services. The Independent Board Members reviewed
materials outlining, among other things, NAM's organization and business; the
types of services that NAM or its affiliates provide and are expected to provide
to the Funds;
88
the performance record of the applicable Fund (as described in further detail
below); and any initiatives Nuveen had taken for the applicable fund product
line. With respect to personnel, the Independent Board Members evaluated the
background, experience and track record of NAM's investment personnel. In this
regard, the Independent Board Members considered the additional investment in
personnel to support Nuveen fund advisory activities, including in operations,
product management and marketing as well as related fund support functions,
including sales, executive, finance, human resources and information technology.
The Independent Board Members also reviewed information regarding portfolio
manager compensation arrangements to evaluate NAM's ability to attract and
retain high quality investment personnel.
In evaluating the services of NAM, the Independent Board Members also considered
NAM's ability to supervise the Fund's other service providers and given the
importance of compliance, NAM's compliance program. Among other things, the
Independent Board Members considered the report of the chief compliance officer
regarding the Funds' compliance policies and procedures.
In addition to advisory services, the Independent Board Members considered the
quality of administrative services provided by NAM and its affiliates including
product management, fund administration, oversight of service providers,
shareholder services, administration of Board relations, regulatory and
portfolio compliance and legal support.
In addition to the foregoing services, the Independent Board Members also noted
the additional services that NAM or its affiliates provide to closed-end funds,
including, in particular, its secondary market support activities and the costs
of such activities. The Independent 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 an investor relations program to timely provide information and
education to financial advisers and investors; providing advertising and
marketing for the closed-end funds; maintaining its closed-end fund website; and
providing educational seminars. With respect to closed-end funds that utilize
leverage through the issuance of auction rate preferred securities ("ARPS"), the
Board has recognized the unprecedented market conditions in the auction rate
market industry with the failure of the auction process. The Independent Board
Members noted Nuveen's efforts and the resources and personnel employed to
analyze the situation, explore potential alternatives and develop and implement
solutions that serve the interests of the respective Fund and all of its
shareholders. The Independent Board Members further noted Nuveen's commitment
and efforts to keep investors and financial advisers informed as to its progress
in addressing the ARPS situation through, among other things, conference calls,
press releases, and information posted on its website as well as its refinancing
activities. The Independent Board Members also noted Nuveen's continued support
for holders of preferred shares of its closed-end funds by, among other things,
seeking distribution for preferred shares with new market participants, managing
relations with remarketing agents and the broker community, maintaining the
leverage and risk management of leverage and maintaining systems necessary to
test compliance with rating agency criteria.
Based on their review, the Independent Board Members found that, overall, the
nature, extent and quality of services provided (and expected to be provided) to
the respective Funds under the Advisory Agreements were satisfactory.
B. THE INVESTMENT PERFORMANCE OF THE FUNDS AND NAM
The Board considered the investment performance of 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 Independent
Board Members also reviewed portfolio level performance (which does not reflect
fund level fees, expenses and leverage), as described in further detail below.
89
ANNUAL INVESTMENT MANAGEMENT AGREEMENT
APPROVAL PROCESS (continued)
In evaluating the performance information, the Board considered whether the Fund
has operated within its investment objectives and parameters and the impact that
the investment mandates may have had on performance. In addition, in comparing a
Fund's performance with that of its Performance Peer Group, the Independent
Board Members took into account that the closest Performance Peer Group in
certain instances may not adequately reflect the respective Fund's investment
objectives and strategies thereby hindering a meaningful comparison of the
Fund's performance with that of the Performance Peer Group.
With respect to state specific municipal funds, the Independent Board Members
also recognized that certain funds lack comparable peers in which case their
performance is measured against a more general municipal category for various
states. The closed-end municipal 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.
With respect to municipal funds, the Independent Board Members reviewed
performance information including, among other things, total return information
compared with the Fund's Performance Peer Group and recognized benchmarks for
the one-, three- and five-year periods (as applicable) ending December 31, 2007
and with the Performance Peer Group for the quarter and same yearly periods
ending March 31, 2008. The Independent Board Members also reviewed the Fund's
portfolio level performance (which does not reflect fund level fees and expenses
(and leverage for closed-end funds)) compared to recognized benchmarks for the
one- three, and five-year periods ending December 31, 2007 (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 Independent
Board Members determined that each Fund's investment performance over time had
been satisfactory.
C. FEES, EXPENSES AND PROFITABILITY
1. FEES AND EXPENSES
The Board evaluated the management fees and expenses of each Fund
reviewing, among other things, such Fund's gross management fees (which
take into account breakpoints), net management fees (which take into
account fee waivers or reimbursements) and total expense ratios (before and
after expense reimbursements and/or waivers) in absolute terms as well as
compared to the gross management fees, net management fees (after waivers
and/or reimbursements) and total expense ratios (before and after waivers)
of a comparable universe of unaffiliated funds based on data provided by an
independent data provider (the "Peer Universe") and/or a more focused
subset of funds therein (the "Peer Group"). The Independent 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 reviewing the comparisons of fee and expense
information, the Independent Board Members took into account that in
certain instances various factors such as the size of the Fund relative to
peers, the size and particular composition of the Peer Group, the
investment objectives of the peers, expense anomalies, and the timing of
information used may impact the comparative data, thereby limiting the
ability to make a meaningful comparison. With respect to closed-end funds,
the Independent Board Members also considered, among other things, the
differences in the use of leverage and with respect to municipal funds, the
Independent Board Members considered the differences in the use of
insurance as well as the states reflected in a respective Peer Group for
the state municipal funds (such as the use of a general "other states"
category for closed-end state funds (other than New York and California)).
In reviewing the fee schedule for a Fund, the Independent Board Members
also considered the fund-level and complex-wide breakpoint schedules
(described in further detail below) and any fee waivers and reimbursements
provided by Nuveen (applicable, in particular, for certain closed-end funds
launched
90
since 1999). Based on their review of the fee and expense information
provided, the Independent Board Members determined that each Fund's
management fees and net total expense ratio were reasonable in light of the
nature, extent and quality of services provided to the Fund.
2. COMPARISONS WITH THE FEES OF OTHER CLIENTS
The Independent Board Members further reviewed information regarding the
nature of services and fee rates offered by NAM to other clients. With
respect to municipal funds, such other clients include NAM's municipal
separately managed accounts. In evaluating the comparisons of fees, the
Independent Board Members noted that the fee rates charged to the Funds and
other clients vary, among other things, because of the different services
involved and the additional regulatory and compliance requirements
associated with registered investment companies, such as the Funds.
Accordingly, the Independent Board Members considered the differences in
the product types, including, but not limited to, the services provided,
the structure and operations, product distribution and costs thereof,
portfolio investment policies, investor profiles, account sizes and
regulatory requirements. The Independent Board Members noted, in
particular, that the range of services provided to the Funds (as discussed
above) is much more extensive than that provided to separately managed
accounts. Given the inherent differences in the products, particularly the
extensive services provided to the Funds, the Independent Board Members
believe such facts justify the different levels of fees.
3. PROFITABILITY OF NUVEEN
In conjunction with its review of fees, the Independent 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. The Independent Board Members reviewed the revenues
and expenses of Nuveen's advisory activities for the last two years and the
allocation methodology used in preparing the profitability data. The
Independent Board Members noted this information supplemented the
profitability information requested and received during the year to help
keep them apprised of developments affecting profitability (such as changes
in fee waivers and expense reimbursement commitments). In this regard, the
Independent Board Members noted that they had also appointed an Independent
Board Member as a point person to review and keep them apprised of changes
to the profitability analysis and/or methodologies during the year. The
Independent Board Members considered Nuveen's profitability compared with
other fund sponsors prepared by two 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 Independent Board Members recognized the
subjective nature of determining profitability which may be affected by
numerous factors including the allocation of expenses. Further, the
Independent Board Members recognized the difficulties in making comparisons
as the profitability of other advisers generally is not publicly available
and the profitability information that is available for certain advisers or
management firms may not be representative of the industry and may be
affected by, among other things, the adviser's particular business mix,
capital costs, types of funds managed and expense allocations.
Notwithstanding the foregoing, the Independent Board Members reviewed Nuveen's
methodology and assumptions for allocating expenses across product lines to
determine profitability. In reviewing profitability, the Independent Board
Members recognized Nuveeninvestment in its fund business.
Based on its review, the Independent 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 Independent 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
91
ANNUAL INVESTMENT MANAGEMENT AGREEMENT
APPROVAL PROCESS (continued)
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
Independent Board Members determined that the advisory fees and expenses of the
respective Fund were reasonable.
D. ECONOMIES OF SCALE AND WHETHER FEE LEVELS REFLECT THESE ECONOMIES OF SCALE
With respect to economies of scale, the Independent Board Members recognized the
potential benefits resulting from the costs of a Fund being spread over a larger
asset base. The Independent Board Members therefore considered whether the Funds
have appropriately benefited from any economies of scale and whether there is
potential realization of any further economies of scale. In considering
economies of scale, the Independent Board Members have recognized that economies
of scale are difficult to measure and predict with precision, particularly on a
fund-by-fund basis. Notwithstanding the foregoing, one method to help ensure the
shareholders share in these benefits is to include breakpoints in the advisory
fee schedule. Accordingly, the Independent Board Members reviewed and considered
the fund-level breakpoints in the advisory fee schedules that reduce advisory
fees. In this regard, given that the Funds are closed-end funds, the Independent
Board Members recognized that although the Funds may from time to time make
additional share offerings, the growth in their assets will occur primarily
through appreciation of such Fund's investment portfolio.
In addition to fund-level advisory fee breakpoints, the Board also considered
the Funds' complex-wide fee arrangement. Pursuant to the complex-wide fee
arrangement, the fees of the funds in the Nuveen complex, including the Funds,
are reduced as the assets in the fund complex reach certain levels. In
evaluating the complex-wide fee arrangement, the Independent Board Members
recognized that the complex-wide fee schedule was recently revised in 2007 to
provide for additional fee savings to shareholders and considered the amended
schedule. The Independent Board Members further considered that the complex-wide
fee arrangement seeks to provide the benefits of economies of scale to fund
shareholders when total fund complex assets increase, even if assets of a
particular Fund are unchanged or have decreased. The approach reflects the
notion that some of Nuveen's costs are attributable to services provided to all
its Funds in the complex and therefore all Funds benefit if these costs are
spread over a larger asset base. Based on their review, the Independent 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.
E. INDIRECT BENEFITS
In evaluating fees, the Independent Board Members received and considered
information regarding potential "fall out" or ancillary benefits NAM or its
affiliates may receive as a result of its relationship with each Fund. In this
regard, the Independent Board Members considered revenues received by affiliates
of NAM for serving as agent at Nuveen's preferred trading desk and for serving
as a co-manager in the initial public offering of new closed-end exchange traded
funds.
In addition to the above, the Independent 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. The
Independent 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.
92
Based on their review, the Independent 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 Independent Board Members did not identify any single factor discussed
previously as all-important or controlling. The Board Members, including the
Independent Board Members, unanimously concluded that the terms of the Advisory
Agreements are fair and reasonable, that NAM's fees are reasonable in light of
the services provided to each Fund and that the Advisory Agreements be renewed.
93
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.
94
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.
95
NOTES
96
NOTES
97
Glossary of
TERMS USED in this REPORT
[] AUCTION RATE BOND: An auction rate bond is a security whose interest
payments are adjusted periodically through an auction process, which
process typically also serves as a means for buying and selling the bond.
Auctions that fail to attract enough buyers for all the shares offered for
sale are deemed to have "failed", with current holders receiving a
formula-based interest rate until the next scheduled auction.
[] AVERAGE ANNUAL TOTAL RETURN: This is a commonly used method to express an
investment's performance over a particular, usually multi-year time period.
It expresses the return that would have been necessary each year to equal
the investment's actual cumulative performance (including change in common
share 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 common share dividend divided by its
current common share 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 Preferred 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.
98
Other Useful INFORMATION
QUARTERLY PORTFOLIO OF INVESTMENTS AND PROXY VOTING INFORMATION
You may obtain (i) each Fund's quarterly portfolio of investments, (ii)
information regarding how the Funds voted proxies relating to portfolio
securities held during the twelve-month period ended June 30, 2007, and (iii) a
description of the policies and procedures that the Funds used to determine how
to vote proxies relating to portfolio securities without charge, upon request,
by calling Nuveen Investments toll-free at (800) 257-8787 or on Nuveen's website
at www.nuveen.com.
You may also obtain this and other Fund information directly from the Securities
and Exchange Commission ("SEC"). The SEC may charge a copying fee for this
information. Visit the SEC on-line at http://www.sec.gov or in person at the
SEC's Public Reference Room in Washington, D.C. Call the SEC at (202) 942-8090
for room hours and operation. You may also request Fund information by sending
an e-mail request to publicinfo@sec.gov or by writing to the SEC's Public
References Section at 100 F Street NE, Washington, D.C. 20549.
CEO CERTIFICATION DISCLOSURE
Each Fund's Chief Executive Officer has submitted to the New York Stock Exchange
(NYSE) the annual CEO certification as required by Section 303A.12(a) of the
NYSE Listed Company Manual.
Each Fund has filed with the Securities and Exchange Commission the
certification of its Chief Executive Officer and Chief Financial Officer
required by Section 302 of the Sarbanes-Oxley Act.
BOARD OF TRUSTEES
John P. Amboian
Robert P. Bremner
Jack B. Evans
William C. Hunter
David J. Kundert
William J. Schneider
Judith M. Stockdale
Carole E. Stone
Terence J. Toth
FUND MANAGER
Nuveen Asset Management
333 West Wacker Drive
Chicago, IL 60606
CUSTODIAN
State Street Bank & Trust Company
Boston, MA
TRANSFER AGENT AND
SHAREHOLDER SERVICES
State Street Bank & Trust Company
Nuveen Funds
P.O. Box 43071
Providence, RI 02940-3071
(800) 257-8787
LEGAL COUNSEL
Chapman and Cutler LLP
Chicago, IL
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Ernst & Young LLP
Chicago, IL
Each Fund intends to repurchase shares of its own common or preferred stock in
the future at such times and in such amounts as is deemed advisable. No shares
were repurchased during the period covered by this report. Any future
repurchases will be reported to shareholders in the next annual or semi-annual
report.
99
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 $153 billion in assets, as of March 31, 2008, 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
EAN-C-0508D
ITEM 2. CODE OF ETHICS.
As of the end of the period covered by this report, the registrant has adopted a
code of ethics that applies to the registrant's principal executive officer,
principal financial officer, principal accounting officer or controller, or
persons performing similar functions. There were no amendments to or waivers
from the Code during the period covered by this report. The registrant has
posted the code of ethics on its website at www.nuveen.com/etf. (To view the
code, click on the Shareholder Resources drop down menu box, click on Fund
Governance and then click on Code of Conduct.)
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The registrant's Board of Directors or Trustees determined that the registrant
has at least one "audit committee financial expert" (as defined in Item 3 of
Form N-CSR) serving on its Audit Committee. The registrant's audit committee
financial expert is Jack B. Evans, who is "independent" for purposes of Item 3
of Form N-CSR.
Mr. Evans was formerly President and Chief Operating Officer of SCI Financial
Group, Inc., a full service registered broker-dealer and registered investment
adviser ("SCI"). As part of his role as President and Chief Operating Officer,
Mr. Evans actively supervised the Chief Financial Officer (the "CFO") and
actively supervised the CFO's preparation of financial statements and other
filings with various regulatory authorities. In such capacity, Mr. Evans was
actively involved in the preparation of SCI's financial statements and the
resolution of issues raised in connection therewith. Mr. Evans has also served
on the audit committee of various reporting companies. At such companies, Mr.
Evans was involved in the oversight of audits, audit plans, and the preparation
of financial statements. Mr. Evans also formerly chaired the audit committee of
the Federal Reserve Bank of Chicago.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Nuveen Georgia Dividend Advantage Municipal Fund 2
The following tables show the amount of fees that Ernst & Young LLP, the Fund's
auditor, billed to the Fund during the Fund's last two full fiscal years. For
engagements with Ernst & Young LLP the Audit Committee approved in advance all
audit services and non-audit services that Ernst & Young LLP provided to the
Fund, except for those non-audit services that were subject to the pre-approval
exception under Rule 2-01 of Regulation S-X (the "pre-approval exception"). The
pre-approval exception for services provided directly to the Fund waives the
pre-approval requirement for services other than audit, review or attest
services if: (A) the aggregate amount of all such services provided constitutes
no more than 5% of the total amount of revenues paid by the Fund to its
accountant during the fiscal year in which the services are provided; (B) the
Fund did not recognize the services as non-audit services at the time of the
engagement; and (C) the services are promptly brought to the Audit Committee's
attention, and the Committee (or its delegate) approves the services before the
audit is completed.
The Audit Committee has delegated certain pre-approval responsibilities to its
Chairman (or, in his absence, any other member of the Audit Committee).
SERVICES THAT THE FUND'S AUDITOR BILLED TO THE FUND
AUDIT FEES BILLED AUDIT-RELATED FEES TAX FEES ALL OTHER FEES
FISCAL YEAR ENDED TO FUND (1) BILLED TO FUND (2) BILLED TO FUND (3) BILLED TO FUND (4)
--------------------------------------------------------------------------------------------------------------------------------
May 30, 2008 $ 10,173 $ 0 $ 500 $ 800
--------------------------------------------------------------------------------------------------------------------------------
Percentage approved 0% 0% 0% 0%
pursuant to
pre-approval
exception
--------------------------------------------------------------------------------------------------------------------------------
May 31, 2007 $ 8,973 $ 0 $ 0 $ 2,250
--------------------------------------------------------------------------------------------------------------------------------
Percentage approved 0% 0% 0% 0%
pursuant to
pre-approval
exception
--------------------------------------------------------------------------------------------------------------------------------
(1) "Audit Fees" are the aggregate fees billed for professional services for
the audit of the Fund's annual financial statements and services provided
in connection with statutory and regulatory filings or engagements.
(2) "Audit Related Fees" are the aggregate fees billed for assurance and
related services reasonably related to the performance of the audit or
review of financial statements and are not reported under "Audit Fees".
(3) "Tax Fees" are the aggregate fees billed for professional services for tax
advice, tax compliance, and tax planning.
(4) "All Other Fees" are the aggregate fees billed for products and services
for agreed upon procedures engagements performed for leveraged funds.
SERVICES THAT THE FUND'S AUDITOR BILLED TO THE
ADVISER AND AFFILIATED FUND SERVICE PROVIDERS
The following tables show the amount of fees billed by Ernst & Young LLP to
Nuveen Asset Management ("NAM" or the "Adviser"), and any entity controlling,
controlled by or under common control with NAM ("Control Affiliate") that
provides ongoing services to the Fund ("Affiliated Fund Service Provider"), for
engagements directly related to the Fund's operations and financial reporting,
during the Fund's last two full fiscal years.
The tables also show the percentage of fees subject to the pre-approval
exception. The pre-approval exception for services provided to the Adviser and
any Affiliated Fund Service Provider (other than audit, review or attest
services) waives the pre-approval requirement if: (A) the aggregate amount of
all such services provided constitutes no more than 5% of the total amount of
revenues paid to Ernst & Young LLP by the Fund, the Adviser and Affiliated Fund
Service Providers during the fiscal year in which the services are provided that
would have to be pre-approved by the Audit Committee; (B) the Fund did not
recognize the services as non-audit services at the time of the engagement; and
(C) the services are promptly brought to the Audit Committee's attention, and
the Committee (or its delegate) approves the services before the Fund's audit is
completed.
FISCAL YEAR ENDED AUDIT-RELATED FEES TAX FEES BILLED TO ALL OTHER FEES
BILLED TO ADVISER AND ADVISER AND BILLED TO ADVISER
AFFILIATED FUND AFFILIATED FUND AND AFFILIATED FUND
SERVICE PROVIDERS SERVICE PROVIDERS SERVICE PROVIDERS
--------------------------------------------------------------------------------------------------------------
May 30, 2008 $ 0 $ 0 $ 0
--------------------------------------------------------------------------------------------------------------
Percentage approved 0% 0% 0%
pursuant to
pre-approval
exception
--------------------------------------------------------------------------------------------------------------
May 31, 2007 $ 0 $ 0 $ 0
--------------------------------------------------------------------------------------------------------------
Percentage approved 0% 0% 0%
pursuant to
pre-approval
exception
--------------------------------------------------------------------------------------------------------------
NON-AUDIT SERVICES
The following table shows the amount of fees that Ernst & Young LLP billed
during the Fund's last two full fiscal years for non-audit services. The Audit
Committee is required to pre-approve non-audit services that Ernst & Young LLP
provides to the Adviser and any Affiliated Fund Services Provider, if the
engagement related directly to the Fund's operations and financial reporting
(except for those subject to the de minimis exception described above). The
Audit Committee requested and received information from Ernst & Young LLP about
any non-audit services that Ernst & Young LLP rendered during the Fund's last
fiscal year to the Adviser and any Affiliated Fund Service Provider. The
Committee considered this information in evaluating Ernst & Young LLP's
independence.
FISCAL YEAR ENDED TOTAL NON-AUDIT FEES
BILLED TO ADVISER AND
AFFILIATED FUND SERVICE TOTAL NON-AUDIT FEES
PROVIDERS (ENGAGEMENTS BILLED TO ADVISER AND
RELATED DIRECTLY TO THE AFFILIATED FUND SERVICE
TOTAL NON-AUDIT FEES OPERATIONS AND FINANCIAL PROVIDERS (ALL OTHER
BILLED TO FUND REPORTING OF THE FUND) ENGAGEMENTS) TOTAL
-----------------------------------------------------------------------------------------------------------------------------
May 30, 2008 $ 1,300 $ 0 $ 0 $ 1,300
May 31, 2007 $ 2,250 $ 0 $ 0 $ 2,250
"Non-Audit Fees billed to Adviser" for both fiscal year ends represent "Tax
Fees" billed to Adviser in their respective amounts from the previous table.
Audit Committee Pre-Approval Policies and Procedures. Generally, the Audit
Committee must approve (i) all non-audit services to be performed for the Fund
by the Fund's independent accountants and (ii) all audit and non-audit services
to be performed by the Fund's independent accountants for the Affiliated Fund
Service Providers with respect to operations and financial reporting of the
Fund. Regarding tax and research projects conducted by the independent
accountants for the Fund and Affiliated Fund Service Providers (with respect to
operations and financial reports of the Fund) such engagements will be (i)
pre-approved by the Audit Committee if they are expected to be for amounts
greater than $10,000; (ii) reported to the Audit Committee chairman for his
verbal approval prior to engagement if they are expected to be for amounts under
$10,000 but greater than $5,000; and (iii) reported to the Audit Committee at
the next Audit Committee meeting if they are expected to be for an amount under
$5,000.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
The registrant's Board of Directors or Trustees has a separately designated
Audit Committee established in accordance with Section 3(a)(58)(A) of the
Securities Exchange Act of 1934, as amended (15 U.S.C. 78c(a)(58)(A)). As of
May 31, 2008, the members of the audit committee are Robert P. Bremner, Jack
B. Evans, William J. Schneider and David J. Kundert.
ITEM 6. SCHEDULE OF INVESTMENTS.
See Portfolio of Investments in Item 1.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
The registrant invests its assets primarily in municipal bonds and cash
management securities. On rare occasions the registrant may acquire, directly or
through a special purpose vehicle, equity securities of a municipal bond issuer
whose bonds the registrant already owns when such bonds have deteriorated or are
expected shortly to deteriorate significantly in credit quality. The purpose of
acquiring equity securities generally will be to acquire control of the
municipal bond issuer and to seek to prevent the credit deterioration or
facilitate the liquidation or other workout of the distressed issuer's credit
problem. In the course of exercising control of a distressed municipal issuer,
NAM may pursue the registrant's interests in a variety of ways, which may entail
negotiating and executing consents, agreements and other arrangements, and
otherwise influencing the management of the issuer. NAM does not consider such
activities proxy voting for purposes of Rule 206(4)-6 under the 1940 Act, but
nevertheless provides reports to the registrant's Board of Trustees on its
control activities on a quarterly basis.
In the rare event that a municipal issuer were to issue a proxy or that the
registrant were to receive a proxy issued by a cash management security, NAM
would either engage an independent third party to determine how the proxy should
be voted or vote the proxy with the consent, or based on the instructions, of
the registrant's Board of Trustees or its representative. A member of NAM's
legal department would oversee the administration of the voting, and ensure that
records were maintained in accordance with Rule 206(4)-6, reports were filed
with the SEC on Form N-PX, and the results provided to the registrant's Board of
Trustees and made available to shareholders as required by applicable rules.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
THE PORTFOLIO MANAGER
The following individual has primary responsibility for the day-to-day
implementation of the registrant's investment strategies:
NAME FUND
Daniel J. Close Nuveen Georgia Dividend Advantage Municipal Fund 2
Other Accounts Managed. In addition to managing the registrant, the portfolio
manager is also primarily responsible for the day-to-day portfolio management of
the following accounts:
TYPE OF ACCOUNT NUMBER OF
PORTFOLIO MANAGER MANAGED ACCOUNTS ASSETS
--------------------------------------------------------------------------------
Daniel J. Close Registered Investment Company 26 $ 5.092 billion
Other Pooled Investment Vehicles 1 $.50 million
Other Accounts 3 $.16 million
* Assets are as of May 31, 2008. None of the assets in these accounts are
subject to an advisory fee based on performance.
Compensation. Each portfolio manager's compensation consists of three basic
elements--base salary, cash bonus and long-term incentive compensation. The
compensation strategy is to annually compare overall compensation to the market
in order to create a compensation structure that is competitive and consistent
with similar financial services companies. As discussed below, several factors
are considered in determining each portfolio manager's total compensation. In
any year these factors may include, among others, the effectiveness of the
investment strategies recommended by the portfolio manager's investment team,
the investment performance of the accounts managed by the portfolio manager, and
the overall performance of Nuveen Investments, Inc. (the parent company of NAM).
Although investment performance is a factor in determining the portfolio
manager's compensation, it is not necessarily a decisive factor. The portfolio
manager's performance is evaluated in part by comparing manager's performance
against a specified investment benchmark. This fund-specific benchmark is a
customized subset (limited to bonds in each Fund's specific state and with
certain maturity parameters) of the S&P/Investortools Municipal Bond index, an
index comprised of bonds held by managed municipal bond fund customers of
Standard & Poor's Securities Pricing, Inc. that are priced daily and whose fund
holdings aggregate at least $2 million. As of June 30, 2008, the
S&P/Investortools Municipal Bond index was comprised of 52,385 securities with
an aggregate current market value of $1,052 billion.
Base salary. Each portfolio manager is paid a base salary that is set at a level
determined by NAM in accordance with its overall compensation strategy discussed
above. NAM is not under any current contractual obligation to increase a
portfolio manager's base salary.
Cash bonus. Each portfolio manager is also eligible to receive an annual cash
bonus. The level of this bonus is based upon evaluations and determinations made
by each portfolio manager's supervisors, along with reviews submitted by his
peers. These reviews and evaluations often take into account a number of
factors, including the effectiveness of the investment strategies recommended to
the NAM's investment team, the performance of the accounts for which he serves
as portfolio manager relative to any benchmarks established for those accounts,
his effectiveness in communicating investment performance to stockholders and
their representatives, and his contribution to the NAM's investment process and
to the execution of investment strategies. The cash bonus component is also
impacted by the overall performance of Nuveen Investments, Inc. in achieving its
business objectives.
Long-term incentive compensation. In connection with the acquisition of Nuveen
Investments, Inc., by a group of investors lead by Madison Dearborn Partners in
November 2007, certain employees, including portfolio managers, received profit
interests in Nuveen's parent. These profit interests entitle the holders to
participate in the appreciation in the value of Nuveen beyond the issue date and
vest over five to seven years, or earlier in the case of a liquidity event.
Material Conflicts of Interest. Each portfolio manager's simultaneous management
of the registrant and the other accounts noted above may present actual or
apparent conflicts of interest with respect to the allocation and aggregation of
securities orders placed on behalf of the Registrant and the other account. NAM,
however, believes that such potential conflicts are mitigated by the fact that
the NAM has adopted several policies that address potential conflicts of
interest, including best execution and trade allocation policies that are
designed to ensure (1) that portfolio management is seeking the best price for
portfolio securities under the circumstances, (2) fair and equitable allocation
of investment opportunities among accounts over time and (3) compliance with
applicable regulatory requirements. All accounts are to be treated in a
non-preferential manner, such that allocations are not based upon account
performance, fee structure or preference of the portfolio manager, although the
allocation procedures may provide allocation preferences to funds with special
characteristics (such as favoring state funds versus national funds for
allocations of in-state bonds). In addition, NAM has adopted a Code of Conduct
that sets forth policies regarding conflicts of interest.
Beneficial Ownership of Securities. As of May 31, 2008, the portfolio manager
beneficially owned the following dollar range of equity securities issued by the
Registrant and other Nuveen Funds managed by NAM's municipal investment team.
DOLLAR RANGE OF
EQUITY SECURITIES
DOLLAR RANGE OF BENEFICIALLY OWNED
EQUITY IN THE REMAINDER OF
SECURITIES NUVEEN FUNDS MANAGED
BENEFICIALLY BY NAM'S MUNICIPAL
NAME OF PORTFOLIO MANAGER FUND OWNED IN FUND INVESTMENT TEAM
------------------------------------------------------------------------------------------------------------------
Daniel J. Close Nuveen Georgia Dividend Advantage Municipal $0 $1--$10,000
Fund 2
PORTFOLIO MANAGER BIO:
Daniel J. Close, CFA, Assistant Vice President, Nuveen Asset Management. Mr.
Close joined Nuveen Investments in 2000 as a member of Nuveen's product
management and development team, where he was responsible for the oversight and
development of Nuveen's mutual fund product line. He then served as a research
analyst for Nuveen's municipal investing team, covering corporate-backed,
energy, transportation and utility credits. He received his BS in Business from
Miami University, and his MBA from Northwestern University's Kellogg School of
Management.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures by which shareholders may
recommend nominees to the registrants Board implemented after the registrant
last provided disclosure in response to this item.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive and principal financial officers,
or persons performing similar functions, have concluded that the
registrant's disclosure controls and procedures (as defined in Rule
30a-3(c) under the Investment Company Act of 1940, as amended (the
"1940 Act") (17 CFR 270.30a-3(c))) are effective, as of a date within
90 days of the filing date of this report that includes the disclosure
required by this paragraph, based on their evaluation of the controls
and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR
270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")
(17 CFR 240.13a-15(b) or 240.15d-15(b)).
(b) There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the 1940 Act
(17 CFR 270.30a-3(d)) that occurred during the second fiscal quarter
of the period covered by this report that has materially affected, or
is reasonably likely to materially affect, the registrant's internal
control over financial reporting.
ITEM 12. EXHIBITS.
File the exhibits listed below as part of this Form. Letter or number the
exhibits in the sequence indicated.
(a)(1) Any code of ethics, or amendment thereto, that is the subject of the
disclosure required by Item 2, to the extent that the registrant intends to
satisfy the Item 2 requirements through filing of an exhibit: Not applicable
because the code is posted on registrant's website at www.nuveen.com/etf and
there were no amendments during the period covered by this report. (To view the
code, click on the Investor Resources drop down menu box, click on Fund
Governance and then Code of Conduct.)
(a)(2) A separate certification for each principal executive officer and
principal financial officer of the registrant as required by Rule 30a-2(a) under
the 1940 Act (17 CFR 270.30a-2(a)) in the exact form set forth below: Ex-99.CERT
Attached hereto.
(a)(3) Any written solicitation to purchase securities under Rule 23c-1 under
the 1940 Act (17 CFR 270.23c-1) sent or given during the period covered by the
report by or on behalf of the registrant to 10 or more persons. Not applicable.
(b) If the report is filed under Section 13(a) or 15(d) of the Exchange Act,
provide the certifications required by Rule 30a-2(b) under the 1940 Act (17 CFR
270.30a-2(b)); Rule 13a-14(b) or Rule 15d-14(b) under the Exchange Act (17 CFR
240.13a-14(b) or 240.15d-14(b)), and Section 1350 of Chapter 63 of Title 18 of
the United States Code (18 U.S.C. 1350) as an exhibit. A certification furnished
pursuant to this paragraph will not be deemed "filed" for purposes of Section 18
of the Exchange Act (15 U.S.C. 78r), or otherwise subject to the liability of
that section. Such certification will not be deemed to be incorporated by
reference into any filing under the Securities Act of 1933 or the Exchange Act,
except to the extent that the registrant specifically incorporates it by
reference. Ex-99.906 CERT attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Nuveen Georgia Dividend Advantage Municipal Fund 2
-----------------------------------------------------------
By (Signature and Title) /s/ Kevin J. McCarthy
----------------------------------------------
Kevin J. McCarthy
Vice President and Secretary
Date: August 7, 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: August 7, 2008
-------------------------------------------------------------------
By (Signature and Title) /s/ Stephen D. Foy
----------------------------------------------
Stephen D. Foy
Vice President and Controller
(principal financial officer)
Date: August 7, 2008
-------------------------------------------------------------------