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 811-10525
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Nuveen North Carolina Dividend Advantage Municipal Fund 2
------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
Nuveen Investments
333 West Wacker Drive
Chicago, IL 60606
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(Address of principal executive offices) (Zip code)
Jessica R. Droeger
Nuveen Investments
333 West Wacker Drive
Chicago, IL 60606
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(Name and address of agent for service)
Registrant's telephone number, including area code: (312) 917-7700
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Date of fiscal year end: May 31
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Date of reporting period: May 31, 2004
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Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
Nuveen
Municipal Closed-End
Exchange-Traded
Funds
ANNUAL REPORT May 31, 2004
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
Photo of: Man holding up small boy.
Photo of: 2 women with 2 girls looking at seashells.
DEPENDABLE,
TAX-FREE INCOME
BECAUSE
IT'S NOT WHAT YOU EARN,
IT'S WHAT YOU KEEP.(R)
Logo: NUVEEN Investments
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COME FROM YOUR FINANCIAL ADVISOR OR BROKERAGE ACCOUNT,
FOLLOW THE STEPS OUTLINED BELOW:
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Logo: NUVEEN Investments
Timothy R. Schwertfeger
Chairman of the Board
Photo of: Timothy R. Schwertfeger
Sidebar text: WE THINK THAT MUNICIPAL BOND INVESTMENTS LIKE YOUR NUVEEN FUND CAN
BE IMPORTANT BUILDING BLOCKS IN A WELL-BALANCED PORTFOLIO.
Dear
SHAREHOLDER
I am very pleased to report that for the fiscal year ended May 31, 2004, your
Nuveen Fund continued to provide you with attractive monthly tax-free income.
While tax-free income is always welcome, we know that many shareholders are
beginning to wonder whether interest rates will rise significantly, and whether
that possibility should cause them to adjust that portion of their investment
portfolios allocated to tax-free municipal bonds. We believe this is a question
you should consider carefully with the help of a trusted financial advisor. In
many cases, it may be more appropriate to focus on long-term goals and
objectives rather than shorter-term market movements, and this is where a
professional advisor may be able to help keep you focused on the larger
objectives of your investment program.
As you read through this report, please review the inside front cover and
consider receiving future Fund reports and other Fund information by e-mail and
the Internet. Not only will you be able to receive the information faster, but
this also may help lower your Fund's expenses. Sign up is quick and easy.
Since 1898, Nuveen Investments has offered financial products and solutions that
incorporate careful research, diversification and the application of
conservative risk-management principles. We are grateful that you have chosen us
as a partner as you pursue your financial goals. We look forward to continuing
to earn your trust in the months and years ahead.
Sincerely,
/s/ Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
July 15, 2004
1
Nuveen Georgia and North Carolina Municipal Closed-End Exchange-Traded Funds
(NPG, NZX, NKG, NNC, NRB, NNO, NII)
Portfolio Managers'
COMMENTS
Portfolio managers Dan Solender and Cathryn Steeves review the market
environment, key investment strategies and performance of these Nuveen Funds.
Dan, who has 12 years of investment experience, including 8 years with Nuveen,
assumed portfolio management responsibility for the Georgia (NPG, NZX, and NKG)
and North Carolina (NNC, NRB, NNO, NII) Funds in November 2003. In February
2004, he turned over responsibility for the North Carolina Funds to Cathryn, who
has been with Nuveen since 1996.
WHAT FACTORS AFFECTED THE U.S. ECONOMY AND MUNICIPAL MARKET DURING THE 12-MONTH
REPORTING PERIOD ENDED MAY 31, 2004?
During this reporting period, the U.S. economy demonstrated growing evidence of
improvement in such key areas as employment, capital spending and industrial
production. Indeed, during the third quarter of last year, the U.S. gross
domestic product grew at an annualized rate of 8.2%, more than double the second
quarter's performance and the fastest annualized quarterly growth rate in nearly
20 years. Although this rapid pace was not considered sustainable, the economy
continued to turn in steady performance for the rest of the 12-month reporting
period, expanding by an annualized 4.1% in the fourth quarter of 2003 and an
annualized 3.9% in the first three months of 2004.
Inflation also showed some signs of acceleration, driven mainly by higher energy
and transportation costs, with the Consumer Price Index rising at a 5.1% rate
(annualized) during the first five months of 2004. The combination of economic
momentum and growing inflation concerns served as a catalyst for heightened
volatility in the fixed-income markets. Although short-term interest rates
remained at or near historical lows throughout this 12-month period, the
long-term bond markets, including the municipal market, were increasingly driven
by expectations that the Federal Reserve would move to increase interest rates
and by speculation over the timing and extent of those increases. As one
example, the yield on the Bond Buyer 25 Revenue Bond Index, a widely followed
municipal bond index, rose from 4.83% at the beginning of the period to 5.50% by
the middle of August 2003. The index yield then fell steadily over the next
seven months to reach 4.73% by the middle of March 2004, before rising to 5.36%
by the end of the reporting period.
In general, municipal supply nationwide remained strong over the 12-month
reporting period, with $384.8 billion in new bonds coming to market. This
represented an increase of 2% over the preceding 12-month period. However, the
pace of issuance slowed toward the end, with $147.8 billion in new municipal
supply during the first five months of 2004, down 6% from January-May 2003. In
May 2004 alone, volume decreased 9% from one year earlier.
HOW ABOUT ECONOMIC AND MARKET CONDITIONS IN GEORGIA AND NORTH CAROLINA?
Despite the persistent decline in textile, paper and nondurable goods
manufacturing in Georgia, the state's economy has begun to generate positive
employment numbers, with improvements in the services sector, construction, and
leisure and hospitality industries. Atlanta has reemerged as the primary growth
driver for the state, while the expansion of Savannah's port facilities has
triggered new investment there. As of May 2004, unemployment in Georgia was
3.9%, down from 4.8% a year earlier and well below the national average of 5.6%.
During the 12-month reporting period ended May 2004, Georgia issued $6.5 billion
in new municipal bonds, an increase of 20% over the previous 12-month period. As
of May 2004, Georgia's general obligation debt continued to be rated Aaa/AAA,
with a stable outlook, by Moody's and Standard & Poor's, respectively.
2
North Carolina's economy began to emerge from recession in late 2003. The
state's services sector continued to be a major growth driver, while healthcare,
tourism and financial services also added jobs. North Carolina remained an
important high-tech research center, which should continue to attract investment
over the long term. Furniture, apparel and textile manufacturing--which have
been hurt by increasing imports and the shift to overseas production--remained
the primary drag on the state's economy and accounted for the loss of 100,000
jobs since 2000. As of May 2004, unemployment in North Carolina had declined to
5.3% from 6.5% in May 2003. During the recession, the state continued to rely on
nonrecurring sources to fund expenditures, depleting its rainy day fund. Now in
the early stages of recovery, North Carolina has been slowly restoring balance
to its fiscal operations. State issuance of new municipal bonds for the 12
months ended May 2004 totaled $7.0 billion, down 6% from the previous 12 months.
As of May 31, 2004, the state maintained its Aa1/AAA ratings, with stable
outlooks, from Moody's and Standard & Poor's, respectively.
IN THIS ENVIRONMENT, WHAT KEY STRATEGIES WERE USED TO MANAGE THE FUNDS DURING
THE 12 MONTHS ENDED MAY 31, 2004?
As the market continued to anticipate rising interest rates, our major focus
during this reporting period remained on trying to mitigate some of the interest
rate risk inherent in each Fund's portfolio. Interest rate risk is the risk that
the value of a Fund's portfolio will decline if market interest rates rise
(since bond prices move in the opposite direction of interest rates). Since
longer-term bonds often carry more interest rate risk that intermediate-term or
short-term bonds, we concentrated on finding attractive securities with
defensive structures in the long-intermediate part of the yield curve (i.e.,
bonds that mature in 15 to 20 years). In many cases, bonds in this part of the
curve offered yields similar to those of longer-term bonds with less inherent
interest rate risk and greater total return potential.
Finding attractive issues became harder as the period progressed and the pace of
new issuance declined. We focused largely on buying AAA rated bonds because
there was virtually no supply of lower-rated investment-grade securities. Also,
the relatively low supply of BBB rated bonds in Georgia led to increases in
their prices, which often made them less attractive.
In the North Carolina Funds, our overall goal was to reduce the Funds' exposure
to bonds with longer maturities and lower coupons, which we believed would
likely underperform the market in a rising interest rate environment. Among the
issues we sold from NNC were insured Raleigh Durham Airport bonds maturing in
2031. From NRB we sold some University of North Carolina bonds maturing in 2028.
Some of the proceeds from these sales were reinvested in North Carolina general
obligation bonds and in Davidson County COPs.
HOW DID THE FUNDS PERFORM?
Individual results for the Funds, as well as for relevant benchmarks, are
presented in the accompanying table.
TOTAL RETURNS ON NET ASSET VALUE
For periods ended 5/31/04
(Annualized)
1-YEAR 5-YEAR 10-YEAR
--------------------------------------------------------------
NPG -0.23% 6.05% 7.67%
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NZX -1.73% NA NA
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NKG -2.67% NA NA
--------------------------------------------------------------
NNC -0.40% 6.36% 7.64%
--------------------------------------------------------------
NRB -1.08% NA NA
--------------------------------------------------------------
NNO -1.83% NA NA
--------------------------------------------------------------
NII -1.75% NA NA
--------------------------------------------------------------
Lehman Brothers Municipal
Bond Index1 -0.03% 5.49% 6.33%
--------------------------------------------------------------
Lipper Other States
Municipal Debt Funds
average2 -0.99% 5.95% 7.16%
--------------------------------------------------------------
Past performance is not predictive of future results.
For additional information, see the individual Performance Overview for your
Fund in this report.
For the 12 months ended May 31, 2004, the total returns on net asset value (NAV)
for all of the Funds in this report underperformed the return on the unleveraged
Lehman Brothers Municipal Bond Index. NPG and NNC outperformed the Lipper Other
States category average, and NRB performed roughly in line with this measure.
NZX, NKG, NNO and NII underperformed the Lipper average.
1 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.
2 The Lipper Other States Municipal Debt Funds category average is calculated
using the returns of all closed-end exchange-traded funds in this category
for each period as follows: 1 year, (44 funds); 5 years, (19 funds); and 10
years, (17 funds). Fund and Lipper returns assume reinvestment of
dividends.
3
One of the primary factors affecting the 12-month performances of each of these
Funds' compared with that of the unleveraged Lehman index was the Funds' use of
leverage. Leveraging can provide opportunities for additional income and total
return for common shareholders, but it is a strategy that adds volatility to the
Funds' NAVs and share prices, especially when interest rates move significantly.
While each of these Funds was able to generate additional income over this
period through its use of leverage, rising interest rates caused larger declines
in each Fund's NAV than would have been the case had the Fund not used leverage.
This had a direct and negative effect on total returns over this period. NKG and
NII also had a relatively long leverage-adjusted durations (see the inside back
cover for a definition). As bond yields rose and prices fell, especially late in
the period, bonds and funds with longer durations generally tended to
underperform.
Other holdings that generally had a negative impact on the Funds' performances
during this period of rising yields included lower coupon bonds, with relatively
long maturities, which tend to perform poorly in a down market, and insured
bonds, which underperformed the market as a whole during this 12-month period.
NKG, NZX, NNO and NII had larger holdings in these types of bonds.
On the positive side, the Funds' performances were helped by their positions of
lower-rated bonds, which outperformed other credit quality sectors as the
economy improved and investors' demand for lower rated bonds increased. NPG, for
example, benefited from having approximately 3% of its portfolio in bonds rated
BB+ issued by Effingham County for Georgia-Pacific, which contributed 65 basis
points to the Fund's total return.
The Funds' holdings in the housing sector, especially multifamily housing, also
generally made positive contributions to their total returns. Among these seven
Funds, NPG had the heaviest weighting of multifamily housing bonds, at 15% of
its portfolio. In addition, the returns of NPG, NZX, NKG and NII were helped
over this period by their holdings of bonds backed by revenues from the 1998
master tobacco settlement agreement.
All of the North Carolina Funds also saw good performance from their holdings in
the industrial development resource sector, which ranked first in terms of
returns among the Lehman municipal revenue sectors during this period. These
holdings in NRB included bonds issued by Columbus County for International Paper
Company. NNO held bonds issued by North Carolina Municipal Power Agency/Catawba,
and NII owned bonds issued by Martin County for Weyerhaeuser Company.
HOW ABOUT THE FUNDS' DIVIDENDS AND SHARE PRICES?
With short-term interest rates remaining at historically low levels during this
reporting period, the leveraged structures of these seven Funds continued to
support their dividend-paying capabilities. The extent of this benefit is tied
in part to the short-term rates the Funds pay their MuniPreferred(R)
shareholders. During periods of low short-term rates, the Funds generally pay
relatively lower dividends to their MuniPreferred shareholders, which can leave
more earnings to support common share dividends. During this reporting period,
this strategy enabled us to implement two dividend increases in NNO and one
increase in NPG, NZX, NNC and NRB, maintain the dividend levels of NKG and NII.
All of these Funds seek to pay stable dividends at rates that reflect each
Fund's past results and projected future performance. During certain periods,
each Fund may pay dividends at a rate that may be more or less than the amount
of net investment income actually earned by the Fund during the period. If a
Fund has cumulatively earned more than it has paid in dividends, it holds the
excess in reserve as undistributed net investment income (UNII) as part of the
Fund's NAV. Conversely, if a Fund has cumulatively paid dividends in excess of
its earnings, the excess constitutes negative UNII that is likewise reflected in
the Fund's NAV. Each Fund will, over time, pay all of its net investment income
as dividends to shareholders. As of May 31, 2004, NPG, NZX, NNC, NRB and NNO had
positive UNII balances, while NKG and NII had negative UNII balances.
4
NPG, NNC and NRB were trading at premiums to their net asset values as of May
31, 2004. The other four Funds were trading at discounts. As of the end of the
fiscal year, all seven Funds were trading at smaller premiums or greater
discounts than their average premium or discount over the course of the 12-month
period.
HOW WERE THE FUNDS POSITIONED IN TERMS OF CREDIT QUALITY AS OF MAY 31, 2004?
Given the current geopolitical and economic climate, we continued to believe
that maintaining strong credit quality was an important requirement. As of the
end of May 2004, all seven of these Funds continued to offer excellent credit
quality, with allocations of bonds rated AAA/U.S. guaranteed and AA ranging from
93% in NKG to 92% in NII, 85% in NRB, 84% in NNO, 83% in NPG and NZX, and 77% in
NNC.
5
Nuveen Georgia Premium Income Municipal Fund
Performance
OVERVIEW As of May 31, 2004
NPG
Pie Chart:
CREDIT QUALITY
AAA/U.S. Guaranteed 68%
AA 15%
A 10%
BBB 4%
BB or Lower 3%
FUND SNAPSHOT
--------------------------------------------------
Share Price $15.30
--------------------------------------------------
Common Share Net Asset Value $14.42
--------------------------------------------------
Premium/(Discount) to NAV 6.10%
--------------------------------------------------
Market Yield 5.92%
--------------------------------------------------
Taxable-Equivalent Yield1 8.77%
--------------------------------------------------
Net Assets Applicable to
Common Shares ($000) $54,607
--------------------------------------------------
Average Effective Maturity (Years) 19.87
--------------------------------------------------
Leverage-Adjusted Duration2 9.15
--------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN (Inception 5/20/93)
--------------------------------------------------
ON SHARE PRICE ON NAV
--------------------------------------------------
1-Year -4.56% -0.23%
--------------------------------------------------
5-Year 4.45% 6.05%
--------------------------------------------------
10-Year 7.80% 7.67%
--------------------------------------------------
TOP FIVE SECTORS (as a % of total investments)
--------------------------------------------------
Healthcare 21%
--------------------------------------------------
Housing/Multifamily 15%
--------------------------------------------------
Water and Sewer 12%
--------------------------------------------------
Tax Obligation/General 9%
--------------------------------------------------
Education and Civic Organizations 9%
--------------------------------------------------
Bar Chart:
2003-2004 MONTHLY TAX-FREE DIVIDENDS PER SHARE3
Jun 0.073
Jul 0.073
Aug 0.073
Sep 0.0755
Oct 0.0755
Nov 0.0755
Dec 0.0755
Jan 0.0755
Feb 0.0755
Mar 0.0755
Apr 0.0755
May 0.0755
Line Chart:
SHARE PRICE PERFORMANCE
Weekly Closing Price
Past performance is not predictive of future results.
5/31/03 16.95
16.98
16.95
16.55
16.35
16.89
16.88
16.2
15.7
15.42
15.55
15.2
15.37
15.27
15.19
15.2
15.2
15.5
15.36
15.59
15.61
15.69
15.8
16
16.1
16.5
17
17.35
17.08
17.07
17.21
17.34
17.25
17.5
17.5
17.45
17.3
17.14
17.15
17.3
17.25
17
16.26
15.5
15.22
14.81
14.55
14.67
5/31/04 15.3
1 Taxable-equivalent yield represents the yield that must be earned on a
fully taxable investment in order to equal the yield of the Fund on an
after-tax basis. It is based on a combined federal and state income tax
rate of 32.5%. For investments that generate qualified dividend income, the
taxable-equivalent yield is lower.
2 See definition of leverage-adjusted duration on the inside back cover of
this report.
3 The Fund also paid shareholders net ordinary income distribution in
December 2003 of $0.0063 per share.
6
Nuveen Georgia Dividend Advantage Municipal Fund
Performance
OVERVIEW As of May 31, 2004
NZX
Pie Chart:
CREDIT QUALITY
AAA/U.S. Guaranteed 73%
AA 10%
A 5%
BBB 12%
FUND SNAPSHOT
--------------------------------------------------
Share Price $13.95
--------------------------------------------------
Common Share Net Asset Value $14.47
--------------------------------------------------
Premium/(Discount) to NAV -3.59%
--------------------------------------------------
Market Yield 6.28%
--------------------------------------------------
Taxable-Equivalent Yield1 9.30%
--------------------------------------------------
Net Assets Applicable to
Common Shares ($000) $28,348
--------------------------------------------------
Average Effective Maturity (Years) 19.61
--------------------------------------------------
Leverage-Adjusted Duration2 10.90
--------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN (Inception 9/25/01)
--------------------------------------------------
ON SHARE PRICE ON NAV
--------------------------------------------------
1-Year -5.15% -1.73%
--------------------------------------------------
Since Inception 3.01% 6.35%
--------------------------------------------------
TOP FIVE SECTORS (as a % of total investments)
--------------------------------------------------
Education and Civic Organizations 22%
--------------------------------------------------
Healthcare 16%
--------------------------------------------------
Housing/Single Family 11%
--------------------------------------------------
Utilities 10%
--------------------------------------------------
Water and Sewer 8%
--------------------------------------------------
Bar Chart:
2003-2004 MONTHLY TAX-FREE DIVIDENDS PER SHARE3
Jun 0.071
Jul 0.071
Aug 0.071
Sep 0.073
Oct 0.073
Nov 0.073
Dec 0.073
Jan 0.073
Feb 0.073
Mar 0.073
Apr 0.073
May 0.073
Line Chart:
SHARE PRICE PERFORMANCE
Weekly Closing Price
Past performance is not predictive of future results.
5/31/03 15.59
15.88
16.05
15.93
15.61
15.85
15.96
14.9
14.5
14.75
14.3
14.6
14.65
14.75
14.8
14.73
15.09
14.78
14.62
14.91
15.06
14.85
15.05
14.91
15.15
15.35
15.22
15.4
15.86
16.2
15.68
15.69
15.82
16.3
15.95
16.05
15.89
15.94
16.38
16.44
16.08
15.85
15
14.15
14.25
13.45
13.03
13.58
5/31/04 13.95
1 Taxable-equivalent yield represents the yield that must be earned on a
fully taxable investment in order to equal the yield of the Fund on an
after-tax basis. It is based on a combined federal and state income tax
rate of 32.5%. For investments that generate qualified dividend income, the
taxable-equivalent yield is lower.
2 See definition of leverage-adjusted duration on the inside back cover of
this report.
3 The Fund also paid shareholders capital gains distributions in December
2003 of $0.0136 per share.
7
Nuveen Georgia Dividend Advantage Municipal Fund 2
Performance
OVERVIEW As of May 31, 2004
NKG
Pie Chart:
CREDIT QUALITY
AAA/U.S. Guaranteed 79%
AA 14%
A 1%
BBB 6%
FUND SNAPSHOT
--------------------------------------------------
Share Price $13.20
--------------------------------------------------
Common Share Net Asset Value $13.79
--------------------------------------------------
Premium/(Discount) to NAV -4.28%
--------------------------------------------------
Market Yield 6.09%
--------------------------------------------------
Taxable-Equivalent Yield1 9.02%
--------------------------------------------------
Net Assets Applicable to
Common Shares ($000) $62,810
--------------------------------------------------
Average Effective Maturity (Years) 20.22
--------------------------------------------------
Leverage-Adjusted Duration2 12.71
--------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN (Inception 9/25/02)
--------------------------------------------------
ON SHARE PRICE ON NAV
--------------------------------------------------
1-Year -6.57% -2.67%
--------------------------------------------------
Since Inception -2.16% 3.14%
--------------------------------------------------
TOP FIVE SECTORS (as a % of total investments)
--------------------------------------------------
Tax Obligation/Limited 21%
--------------------------------------------------
Healthcare 19%
--------------------------------------------------
Education and Civic Organizations 15%
--------------------------------------------------
Water and Sewer 15%
--------------------------------------------------
Utilities 7%
--------------------------------------------------
Bar Chart:
2003-2004 MONTHLY TAX-FREE DIVIDENDS PER SHARE3
Jun 0.067
Jul 0.067
Aug 0.067
Sep 0.067
Oct 0.067
Nov 0.067
Dec 0.067
Jan 0.067
Feb 0.067
Mar 0.067
Apr 0.067
May 0.067
Line Chart:
SHARE PRICE PERFORMANCE
Weekly Closing Price
Past performance is not predictive of future results.
5/31/03 14.98
14.78
15
14.7
15.15
15.14
14.7
14.41
14.02
13.86
13.5
13.57
13.48
13.9
13.42
13.45
13.9
13.84
13.85
13.68
13.59
13.55
13.59
13.49
13.68
13.52
13.48
13.85
14.22
14.68
14.3
14.31
14.66
14.65
14.85
14.85
15
14.77
14.96
14.83
14.65
14.45
13.8
13.6
13.55
12.6
12.31
12.92
5/31/04 13.2
1 Taxable-equivalent yield represents the yield that must be earned on a
fully taxable investment in order to equal the yield of the Fund on an
after-tax basis. It is based on a combined federal and state income tax
rate of 32.5%. For investments that generate qualified dividend income, the
taxable-equivalent yield is lower.
2 See definition of leverage-adjusted duration on the inside back cover of
this report.
3 The Fund also paid shareholders capital gains distributions in December
2003 of $0.0218 per share.
8
Nuveen North Carolina Premium Income Municipal Fund
Performance
OVERVIEW As of May 31, 2004
NNC
Pie Chart:
CREDIT QUALITY
AAA/U.S. Guaranteed 45%
AA 32%
A 14%
BBB 9%
FUND SNAPSHOT
--------------------------------------------------
Share Price $15.40
--------------------------------------------------
Common Share Net Asset Value $14.55
--------------------------------------------------
Premium/(Discount) to NAV 5.84%
--------------------------------------------------
Market Yield 5.81%
--------------------------------------------------
Taxable-Equivalent Yield1 8.80%
--------------------------------------------------
Net Assets Applicable to
Common Shares ($000) $91,941
--------------------------------------------------
Average Effective Maturity (Years) 16.72
--------------------------------------------------
Leverage-Adjusted Duration2 9.30
--------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN (Inception 5/20/93)
--------------------------------------------------
ON SHARE PRICE ON NAV
--------------------------------------------------
1-Year -4.08% -0.40%
--------------------------------------------------
5-Year 5.13% 6.36%
--------------------------------------------------
10-Year 7.81% 7.64%
--------------------------------------------------
TOP FIVE SECTORS (as a % of total investments)
--------------------------------------------------
Tax Obligation/Limited 17%
--------------------------------------------------
Healthcare 16%
--------------------------------------------------
Education and Civic Organizations 16%
--------------------------------------------------
U.S. Guaranteed 13%
--------------------------------------------------
Tax Obligation/General 9%
--------------------------------------------------
Bar Chart:
2003-2004 MONTHLY TAX-FREE DIVIDENDS PER SHARE
Jun 0.073
Jul 0.073
Aug 0.073
Sep 0.0745
Oct 0.0745
Nov 0.0745
Dec 0.0745
Jan 0.0745
Feb 0.0745
Mar 0.0745
Apr 0.0745
May 0.0745
Line Chart:
SHARE PRICE PERFORMANCE
Weekly Closing Price
Past performance is not predictive of future results.
5/31/03 16.95
17.35
17.37
17.4
17.13
17.2
16.73
16.33
15.6
15.8
15.73
16
15.79
15.8
15.76
16.09
16.1
16.25
16.02
15.95
16.21
16.47
16.58
16.65
16.63
17
16.85
17.2
17.13
17.01
17.41
17.16
17.18
17.07
17.15
17.1
17.3
16.92
17.47
17.07
16.85
16.17
16.09
15.82
14.85
14.31
14.19
14.85
5/31/04 15.4
1 Taxable-equivalent yield represents the yield that must be earned on a
fully taxable investment in order to equal the yield of the Fund on an
after-tax basis. It is based on a combined federal and state income tax
rate of 34%. For investments that generate qualified dividend income, the
taxable-equivalent yield is lower.
2 See definition of leverage-adjusted duration on the inside back cover of
this report.
9
Nuveen North Carolina Dividend Advantage Municipal Fund
Performance
OVERVIEW As of May 31, 2004
NRB
Pie Chart:
CREDIT QUALITY
AAA/U.S. Guaranteed 51%
AA 34%
A 10%
BBB 5%
FUND SNAPSHOT
--------------------------------------------------
Share Price $15.05
--------------------------------------------------
Common Share Net Asset Value $14.72
--------------------------------------------------
Premium/(Discount) to NAV 2.24%
--------------------------------------------------
Market Yield 6.10%
--------------------------------------------------
Taxable-Equivalent Yield1 9.24%
--------------------------------------------------
Net Assets Applicable to
Common Shares ($000) $33,110
--------------------------------------------------
Average Effective Maturity (Years) 18.52
--------------------------------------------------
Leverage-Adjusted Duration2 8.94
--------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN (Inception 1/25/01)
--------------------------------------------------
ON SHARE PRICE ON NAV
--------------------------------------------------
1-Year -2.76% -1.08%
--------------------------------------------------
Since Inception 6.02% 7.06%
--------------------------------------------------
TOP FIVE SECTORS (as a % of total investments)
--------------------------------------------------
Education and Civic Organizations 19%
--------------------------------------------------
Water and Sewer 16%
--------------------------------------------------
Healthcare 15%
--------------------------------------------------
Tax Obligation/Limited 14%
--------------------------------------------------
Utilities 14%
--------------------------------------------------
Bar Chart:
2003-2004 MONTHLY TAX-FREE DIVIDENDS PER SHARE3
Jun 0.0735
Jul 0.0735
Aug 0.0735
Sep 0.0765
Oct 0.0765
Nov 0.0765
Dec 0.0765
Jan 0.0765
Feb 0.0765
Mar 0.0765
Apr 0.0765
May 0.0765
Line Chart:
SHARE PRICE PERFORMANCE
Weekly Closing Price
Past performance is not predictive of future results.
5/31/03 16.45
16.73
16.85
17.35
16.86
16.9
16.8
16.42
14.9
14.99
15.03
14.5
14.65
14.9
15.23
15.24
15.17
15.41
15.4
15.54
15.68
15.73
16.2
16.16
16.35
16.5
16.64
16.75
16.8
16.8
16.88
16.88
16.77
16.69
16.72
16.8
16.84
16.96
17.02
17.15
16.8
16.7
16.1
15.5
15.54
15.1
14.96
15
5/31/04 15.05
1 Taxable-equivalent yield represents the yield that must be earned on a
fully taxable investment in order to equal the yield of the Fund on an
after-tax basis. It is based on a combined federal and state income tax
rate of 34%. For investments that generate qualified dividend income, the
taxable-equivalent yield is lower.
2 See definition of leverage-adjusted duration on the inside back cover of
this report.
3 The Fund also paid shareholders capital gains distributions in December
2003 of $0.0713 per share.
10
Nuveen North Carolina Dividend Advantage Municipal Fund 2
Performance
OVERVIEW As of May 31, 2004
NNO
Pie Chart:
CREDIT QUALITY
AAA/U.S. Guaranteed 60%
AA 24%
A 8%
BBB 8%
FUND SNAPSHOT
--------------------------------------------------
Share Price $14.80
--------------------------------------------------
Common Share Net Asset Value $14.81
--------------------------------------------------
Premium/(Discount) to NAV -0.07%
--------------------------------------------------
Market Yield 5.84%
--------------------------------------------------
Taxable-Equivalent Yield1 8.85%
--------------------------------------------------
Net Assets Applicable to
Common Shares ($000) $55,311
--------------------------------------------------
Average Effective Maturity (Years) 14.91
--------------------------------------------------
Leverage-Adjusted Duration2 9.91
--------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN (Inception 11/15/01)
--------------------------------------------------
ON SHARE PRICE ON NAV
--------------------------------------------------
1-Year -1.94% -1.83%
--------------------------------------------------
Since Inception 5.19% 7.23%
--------------------------------------------------
TOP FIVE SECTORS (as a % of total investments)
--------------------------------------------------
Healthcare 16%
--------------------------------------------------
Education and Civic Organizations 15%
--------------------------------------------------
Tax Obligation/Limited 13%
--------------------------------------------------
Water and Sewer 12%
--------------------------------------------------
Utilities 11%
--------------------------------------------------
Bar Chart:
2003-2004 MONTHLY TAX-FREE DIVIDENDS PER SHARE3
Jun 0.0695
Jul 0.0695
Aug 0.0695
Sep 0.071
Oct 0.071
Nov 0.071
Dec 0.072
Jan 0.072
Feb 0.072
Mar 0.072
Apr 0.072
May 0.072
Line Chart:
SHARE PRICE PERFORMANCE
Weekly Closing Price
Past performance is not predictive of future results.
5/31/03 15.97
16.02
16.43
16.1
16.15
16.25
16.24
16
14.7
14.85
14.7
14.9
14.91
14.95
15.2
15.05
14.85
15.5
15.4
15.31
15.35
15.4
15.6
15.5
15.7
15.68
15.7
15.95
15.9
16
16.35
16.33
16.22
16.39
16.25
16.18
16.22
16.2
16.35
16.44
16.45
16.05
15.56
15.2
14.95
15.05
14.8
14.5
5/31/04 14.8
1 Taxable-equivalent yield represents the yield that must be earned on a
fully taxable investment in order to equal the yield of the Fund on an
after-tax basis. It is based on a combined federal and state income tax
rate of 34%. For investments that generate qualified dividend income, the
taxable-equivalent yield is lower.
2 See definition of leverage-adjusted duration on the inside back cover of
this report.
3 The Fund also paid shareholders capital gains and net ordinary income
distributions in December 2003 of $0.0285 per share.
11
Nuveen North Carolina Dividend Advantage Municipal Fund 3
Performance
OVERVIEW As of May 31, 2004
NII
Pie Chart:
CREDIT QUALITY
AAA/U.S. Guaranteed 63%
AA 29%
A 2%
BBB 6%
FUND SNAPSHOT
--------------------------------------------------
Share Price $13.68
--------------------------------------------------
Common Share Net Asset Value $13.89
--------------------------------------------------
Premium/(Discount) to NAV -1.51%
--------------------------------------------------
Market Yield 5.88%
--------------------------------------------------
Taxable-Equivalent Yield1 8.91%
--------------------------------------------------
Net Assets Applicable to
Common Shares ($000) $54,482
--------------------------------------------------
Average Effective Maturity (Years) 18.58
--------------------------------------------------
Leverage-Adjusted Duration2 11.14
--------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN (Inception 9/25/02)
--------------------------------------------------
ON SHARE PRICE ON NAV
--------------------------------------------------
1-Year -4.93% -1.75%
--------------------------------------------------
Since Inception -0.35% 3.51%
--------------------------------------------------
TOP FIVE SECTORS (as a % of total investments)
--------------------------------------------------
Tax Obligation/Limited 30%
--------------------------------------------------
Water and Sewer 17%
--------------------------------------------------
Education and Civic Organizations 11%
--------------------------------------------------
Tax Obligation/General 10%
--------------------------------------------------
Utilities 10%
--------------------------------------------------
Bar Chart:
2003-2004 MONTHLY TAX-FREE DIVIDENDS PER SHARE3
Jun 0.067
Jul 0.067
Aug 0.067
Sep 0.067
Oct 0.067
Nov 0.067
Dec 0.067
Jan 0.067
Feb 0.067
Mar 0.067
Apr 0.067
May 0.067
Line Chart:
SHARE PRICE PERFORMANCE
Weekly Closing Price
Past performance is not predictive of future results.
5/31/03 15.2
15.44
15.7
15.9
15.51
15.9
15.61
15.46
14.71
14.57
14.5
14.86
14.82
14.69
14.5
14.39
14.4
14.37
14.38
14.06
14.21
14.15
14.17
14.39
14.65
14.6
14.95
15.2
14.95
15.02
15.17
14.9
15.07
15.2
15.2
15.25
15.41
15.5
15.5
15.3
15.39
14.81
14.65
14.44
13.93
14.17
13.65
13.55
5/31/04 13.68
1 Taxable-equivalent yield represents the yield that must be earned on a
fully taxable investment in order to equal the yield of the Fund on an
after-tax basis. It is based on a combined federal and state income tax
rate of 34%. For investments that generate qualified dividend income, the
taxable-equivalent yield is lower.
2 See definition of leverage-adjusted duration on the inside back cover of
this report.
3 The Fund also paid shareholders capital gains distributions in December
2003 of $0.0071 per share.
12
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 as of May 31, 2004, and the related statements of operations,
changes in net assets and the financial highlights for the periods indicated
therein. These financial statements and financial highlights are the
responsibility of the Funds' management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with 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. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements and financial highlights. Our procedures
included confirmation of securities owned as of May 31, 2004, by correspondence
with the custodian and brokers or by other appropriate auditing procedures where
replies from brokers were not received. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position 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, 2004, and
the results of their operations, changes in their net assets and their financial
highlights for the periods indicated therein in conformity with U.S. generally
accepted accounting principles.
Ernst & Young LLP
CHICAGO, ILLINOIS
JULY 9, 2004
13
Nuveen Georgia Premium Income Municipal Fund (NPG)
Portfolio of
INVESTMENTS May 31, 2004
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT (000) DESCRIPTION(1) PROVISIONS* RATINGS** VALUE
------------------------------------------------------------------------------------------------------------------------------------
CONSUMER STAPLES - 6.8%
$ 2,000 Cartersville Development Authority, Georgia, Sewerage 5/07 at 101.00 A+ $ 2,064,100
Facilities Revenue Refunding Bonds, Anheuser-Busch Project,
Series 1997, 6.125%, 5/01/27 (Alternative Minimum Tax)
2,000 Puerto Rico, The Children's Trust Fund, Tobacco Settlement 5/12 at 100.00 BBB 1,628,680
Asset-Backed Refunding Bonds, Series 2002, 5.500%, 5/15/39
------------------------------------------------------------------------------------------------------------------------------------
EDUCATION AND CIVIC ORGANIZATIONS - 13.4%
1,000 Athens Housing Authority, Georgia, Student Housing Lease 12/12 at 100.00 Aaa 985,570
Revenue Bonds, UGAREF East Campus Housing LLC Project,
Series 2002, 5.000%, 12/01/33 - AMBAC Insured
Atlanta Urban Residential Finance Authority, Georgia, Dormitory
Facility Revenue Refunding Bonds, Morehouse College Project,
Series 1995:
1,210 5.750%, 12/01/20 - MBIA Insured 12/05 at 102.00 AAA 1,286,908
1,375 5.750%, 12/01/25 - MBIA Insured 12/05 at 102.00 AAA 1,457,720
1,550 Bulloch County Development Authority, Georgia, Student 8/14 at 100.00 Aaa 1,608,683
Housing and Athletic Facility Lease Revenue Bonds, Georgia
Southern University, Series 2004, 5.250%, 8/01/21 -
XLCA Insured
395 DeKalb County Development Authority, Georgia, Revenue 10/04 at 102.00 AA 408,604
Bonds, Emory University Project, Series 1994A,
6.000%, 10/01/14
1,550 Private Colleges and Universities Authority, Georgia, Revenue 6/04 at 101.00 AA 1,569,266
Bonds, Agnes Scott College, Series 1993, 5.625%, 6/01/23
------------------------------------------------------------------------------------------------------------------------------------
HEALTHCARE - 31.2%
2,300 Chatham County Hospital Authority, Savannah, Georgia, Hospital 7/11 at 101.00 A- 2,430,387
Revenue Improvement Bonds, Memorial Health University
Medical Center Inc., Series 2001A, 6.125%, 1/01/24
2,000 Clarke County Hospital Authority, Georgia, Hospital Revenue 1/12 at 101.00 AAA 1,994,040
Certificates, Athens Regional Medical Center, Series 2002,
5.125%, 1/01/32 - MBIA Insured
3,000 Floyd County Hospital Authority, Georgia, Revenue Anticipation 7/12 at 101.00 Aaa 3,010,380
Certificates, Floyd Medical Center Project, Series 2002,
5.200%, 7/01/32 - MBIA Insured
1,090 Floyd County Hospital Authority, Georgia, Revenue Anticipation 7/13 at 101.00 Aaa 1,123,201
Certificates, Floyd Medical Center, Series 2003,
5.000%, 7/01/19 - MBIA Insured
1,765 Gainesville, Hall County Hospital Authority, Georgia, Revenue 10/05 at 102.00 AAA 1,873,600
Anticipation Certificates, Northeast Georgia Health Services
Inc. Project, Series 1995, 6.000%, 10/01/25 - MBIA Insured
1,750 Gainesville, Hall County Hospital Authority, Georgia, Revenue 5/11 at 100.00 A- 1,760,500
Anticipation Certificates, Northeast Georgia Health Services
Inc. Project, Series 2001, 5.500%, 5/15/31
3,750 Gwinnett County Hospital Authority, Georgia, Revenue 2/12 at 102.00 AAA 3,806,588
Anticipation Certificates, Gwinnett Hospital System Inc.
Project, Series 1997B, 5.300%, 9/01/27 - MBIA Insured
1,060 Henry County Hospital Authority, Georgia, Revenue Certificates, 7/14 at 101.00 Aaa 1,086,574
Henry Medical Center, Series 2004, 5.000%, 7/01/20 -
MBIA Insured
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/MULTIFAMILY - 22.4%
1,145 Clayton County Housing Authority, Georgia, Multifamily Housing 12/05 at 102.00 AAA 1,174,392
Revenue Bonds, Advantages Project, Series 1995,
5.800%, 12/01/20
3,400 DeKalb County Housing Authority, Georgia, Multifamily Housing 1/05 at 102.00 AAA 3,487,584
Revenue Bonds, Lakes at Indian Creek Apartments Project,
Series 1994, 7.150%, 1/01/25 (Alternative Minimum Tax) -
FSA Insured
930 Decatur Housing Authority, Georgia, FHA-Insured Mortgage 7/04 at 100.00 AAA 930,800
Revenue Refunding Bonds, Section 8 Assisted Park Trace
Apartments Project, Series 1992A, 6.450%, 7/01/25 -
MBIA Insured
2,000 Lawrenceville Housing Authority, Georgia, Multifamily Housing 12/10 at 100.00 AAA 2,038,580
Senior Revenue Bonds, Brisben Green of Hillcrest II,
Series 2000A-1, 5.800%, 12/01/33 (Alternative Minimum Tax) -
AMBAC Insured
3,000 Macon-Bibb County Urban Development Authority, Georgia, 7/04 at 103.00 AAA 3,055,020
Multifamily Housing Revenue Refunding Bonds, Series 1997A,
5.550%, 1/01/24 - MBIA Insured
14
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT (000) DESCRIPTION(1) PROVISIONS* RATINGS** VALUE
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/MULTIFAMILY (continued)
$ 1,500 Marietta Housing Authority, Georgia, GNMA Collateralized 10/06 at 102.00 AAA $ 1,522,095
Multifamily Housing Revenue Bonds, Country Oaks
Apartments, Series 1996, 6.150%, 10/20/26 (Alternative
Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/SINGLE FAMILY - 7.3%
55 Fulton County Housing Authority, Georgia, GNMA 3/05 at 102.00 AAA 55,378
Mortgage-Backed Securities Program Single Family
Mortgage Revenue Bonds, Series 1995A, 6.550%, 3/01/18
(Alternative Minimum Tax)
2,980 Georgia Housing and Finance Authority, Single Family 12/10 at 100.00 AAA 3,024,253
Mortgage Resolution 1 Bonds, Series 2001A-2,
5.700%, 12/01/31 (Alternative Minimum Tax)
900 Georgia Housing and Finance Authority, Single Family 12/11 at 100.00 AAA 917,145
Mortgage Bonds, Series 2002B-2, 5.350%, 12/01/22
(Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
INDUSTRIALS - 0.9%
500 Savannah Economic Development Authority, Georgia, Revenue 7/12 at 100.00 AAA 506,785
Bonds, GTREP Project, Series 2002, 5.000%, 7/01/22 -
MBIA Insured
------------------------------------------------------------------------------------------------------------------------------------
MATERIALS - 7.4%
2,500 Effingham County Industrial Development Authority, Georgia, 6/11 at 101.00 BB+ 2,509,400
Pollution Control Revenue Refunding Bonds, Georgia-Pacific
Project, Series 2001, 6.500%, 6/01/31
1,500 Richmond County Development Authority, Georgia, 2/11 at 101.00 BBB 1,535,100
Environmental Improvement Revenue Bonds, International
Paper Company, Series 2001A, 6.250%, 2/01/25
(Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL - 13.5%
1,805 Forsyth County, Georgia, General Obligation Bonds, No Opt. Call AA 1,983,081
Series 2004, 5.250%, 3/01/13
2,500 Forsyth County School District, Georgia, General Obligation 2/10 at 102.00 Aa2 2,739,575
Bonds, Series 1999, 5.750%, 2/01/19
2,500 Georgia, General Obligation Bonds, Series 2002D, 8/12 at 100.00 AAA 2,643,600
5.000%, 8/01/16
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED - 13.3%
3,000 Cobb-Marietta Coliseum and Exhibit Hall Authority, Georgia, 10/19 at 100.00 AAA 3,265,260
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 2,806,336
Revenue Refunding Bonds, Public Facilities Projects,
Series 2002A, 5.375%, 8/01/17
1,000 Metropolitan Atlanta Rapid Transit Authority, Georgia, Sales No Opt. Call AAA 1,171,210
Tax Revenue Refunding Bonds, Series 1992P,
6.250%, 7/01/20 - AMBAC Insured
------------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION - 2.1%
1,000 Atlanta, Georgia, Airport Facilities Revenue Refunding Bonds, No Opt. Call AAA 1,144,210
Series 1994A, 6.500%, 1/01/09 - AMBAC Insured
------------------------------------------------------------------------------------------------------------------------------------
U.S. GUARANTEED - 2.4%
1,160 DeKalb County Development Authority, Georgia, Revenue 10/04 at 102.00 AA*** 1,201,656
Bonds, Emory University Project, Series 1994A,
6.000%, 10/01/14 (Pre-refunded to 10/01/04)
85 Georgia Municipal Electric Authority, Project One Special No Opt. Call A+*** 96,740
Obligation Bonds, Fifth Crossover Series 1998Y,
6.400%, 1/01/09
------------------------------------------------------------------------------------------------------------------------------------
UTILITIES - 9.0%
885 Coweta County Development Authority, Georgia, Revenue 1/13 at 100.00 Aaa 933,436
Bonds, Newnan Water & Sewer and Light Commission
Project, Series 2002, 5.250%, 1/01/18 - FGIC Insured
1,000 Georgia Municipal Electric Authority, Power Revenue Bonds, No Opt. Call AAA 1,105,210
Series 1993Z, 5.500%, 1/01/20 - FGIC Insured
1,665 Georgia Municipal Electric Authority, Project One Special No Opt. Call A+ 1,871,493
Obligation Bonds, Fifth Crossover Series 1998Y,
6.400%, 1/01/09
1,000 Municipal Electric Authority of Georgia, Project One 1/13 at 100.00 AAA 1,010,740
Subordinated Lien Revenue Bonds, Series 2003A,
5.000%, 1/01/22 - MBIA Insured
15
Nuveen Georgia Premium Income Municipal Fund (NPG) (continued)
Portfolio of INVESTMENTS May 31, 2004
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT (000) DESCRIPTION(1) PROVISIONS* RATINGS** VALUE
------------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER - 18.0%
Augusta, Georgia, Water and Sewerage Revenue Bonds,
Series 2002:
$ 500 5.000%, 10/01/16 - FSA Insured 10/12 at 100.00 AAA $ 524,466
1,990 5.000%, 10/01/17 - FSA Insured 10/12 at 100.00 AAA 2,073,202
3,500 Coweta County Water and Sewer Authority, Georgia, Revenue 6/11 at 102.00 Aaa 3,566,640
Bonds, Series 2001, 5.250%, 6/01/26 - AMBAC Insured
2,500 DeKalb County, Georgia, Water and Sewerage Bonds, 10/10 at 101.00 AA 2,509,225
Series 2000, 5.125%, 10/01/31
1,000 Midgeville, Georgia, Water and Sewerage Revenue Refunding No Opt. Call AAA 1,149,410
Bonds, Series 1996, 6.000%, 12/01/21 - FSA Insured
------------------------------------------------------------------------------------------------------------------------------------
$ 77,895 Total Long-Term Investments (cost $78,241,627) - 147.7% 80,646,823
=============-----------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 3.2% 1,759,772
--------------------------------------------------------------------------------------------------------------------
Preferred Shares, at Liquidation Value - (50.9)% (27,800,000)
--------------------------------------------------------------------------------------------------------------------
Net Assets Applicable to Common Shares - 100% $ 54,606,595
====================================================================================================================
(1) All percentages shown in the Portfolio of Investments
are based on net assets applicable to Common shares.
* Optional Call Provisions (not covered by the report of
independent 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.
** Ratings (not covered by the report of independent
registered public accounting firm): Using the higher of
Standard & Poor's or Moody's rating.
*** Securities are backed by an escrow or trust containing
sufficient U.S. Government or U.S. Government agency
securities which ensures the timely payment of
principal and interest. Such securities are normally
considered to be equivalent to AAA rated securities.
See accompanying notes to financial statements.
16
Nuveen Georgia Dividend Advantage Municipal Fund (NZX)
Portfolio of
INVESTMENTS May 31, 2004
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT (000) DESCRIPTION(1) PROVISIONS* RATINGS** VALUE
------------------------------------------------------------------------------------------------------------------------------------
CONSUMER DISCRETIONARY - 2.7%
$ 750 DeKalb County Development Authority, Georgia, Pollution 12/12 at 101.00 Baa1 $ 757,838
Control Revenue Refunding Bonds, General Motors
Corporation Projects, Series 2002, 6.000%, 3/15/21
------------------------------------------------------------------------------------------------------------------------------------
CONSUMER STAPLES - 6.5%
1,000 Cartersville Development Authority, Georgia, Waste and 2/12 at 100.00 A+ 1,025,510
Wastewater Facilities Revenue Refunding Bonds, Anheuser
Busch, Inc. Project, Series 2002, 5.950%, 2/01/32
(Alternative Minimum Tax)
1,000 Puerto Rico, The Children's Trust Fund, Tobacco Settlement 5/12 at 100.00 BBB 814,340
Asset-Backed Refunding Bonds, Series 2002, 5.500%, 5/15/39
------------------------------------------------------------------------------------------------------------------------------------
EDUCATION AND CIVIC ORGANIZATIONS - 33.3%
1,000 Athens Housing Authority, Georgia, Student Housing Lease 12/12 at 100.00 Aaa 1,037,850
Revenue Bonds, UGAREF East Campus Housing LLC Project,
Series 2002, 5.250%, 12/01/21 - AMBAC Insured
1,200 Atlanta Development Authority, Georgia, Revenue Bonds, 1/12 at 100.00 AAA 1,203,828
Yamacraw Design Center Project, Series 2001A,
5.125%, 1/01/27 - MBIA Insured
1,475 Bulloch County Development Authority, Georgia, Student 8/14 at 100.00 Aaa 1,539,310
Housing and Athletic Facility Lease Revenue Bonds,
Georgia Southern University, Series 2004, 5.250%, 8/01/20 -
XLCA Insured
1,620 Bulloch County Development Authority, Georgia, Student 8/12 at 100.00 Aaa 1,657,535
Housing Lease Revenue Bonds, Georgia Southern University
Project, Series 2002, 5.000%, 8/01/20 - AMBAC Insured
1,485 Fulton County Development Authority, Georgia, Revenue Bonds, 4/12 at 100.00 AAA 1,518,249
Georgia Tech Athletic Association, Series 2001,
5.000%, 10/01/20 - AMBAC Insured
1,225 Private Colleges and Universities Authority, Georgia, Revenue 9/11 at 100.00 AA 1,213,203
Bonds, Emory University, Series 2001A, 5.000%, 9/01/31
1,250 Private Colleges and Universities Authority, Georgia, Revenue 10/11 at 102.00 Baa1 1,274,775
Bonds, Mercer University, Series 2001, 5.750%, 10/01/31
------------------------------------------------------------------------------------------------------------------------------------
HEALTHCARE - 23.9%
1,000 Clarke County Hospital Authority, Georgia, Hospital Revenue 1/12 at 101.00 AAA 1,049,740
Certificates, Athens Regional Medical Center, Series 2002,
5.375%, 1/01/19 - MBIA Insured
1,250 Gainesville, Hall County Hospital Authority, Georgia, Revenue 5/11 at 100.00 A- 1,257,500
Anticipation Certificates, Northeast Georgia Health Services
Inc. Project, Series 2001, 5.500%, 5/15/31
1,900 Gwinnett County Hospital Authority, Georgia, Revenue 2/12 at 102.00 AAA 1,928,671
Anticipation Certificates, Gwinnett Hospital System Inc.
Project, Series 1997B, 5.300%, 9/01/27 - MBIA Insured
500 Henry County Hospital Authority, Georgia, Revenue 7/14 at 101.00 Aaa 512,535
Certificates, Henry Medical Center, Series 2004,
5.000%, 7/01/20 - MBIA Insured
2,000 Valdosta and Lowndes County Hospital Authority, Georgia, 10/12 at 101.00 AAA 2,021,040
Revenue Certificates, South Georgia Medical Center,
Series 2002, 5.250%, 10/01/27 - AMBAC Insured
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/MULTIFAMILY - 12.0%
990 DeKalb County Housing Authority, Georgia, GNMA Collateralized 8/11 at 103.00 Aaa 998,663
Multifamily Housing Revenue Bonds, Castaways Apartments
Project, Series 2001A, 5.400%, 2/20/29
995 De Kalb County Housing Authority, Georgia, GNMA Collateralized 12/11 at 103.00 Aaa 1,009,696
Multifamily Housing Revenue Bonds, Snapwoods Apartments
Project, Series 2001A, 5.500%, 12/20/32
1,385 Savannah Housing Authority, Georgia, FNMA Multifamily 8/16 at 100.00 Aaa 1,393,615
Housing Revenue Refunding Bonds, Chatham Gardens,
Series 2001, 5.625%, 8/01/31 (Alternative Minimum Tax)
(Mandatory put 2/01/19)
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/SINGLE FAMILY - 16.7%
2,000 Georgia Housing and Finance Authority, Single Family Mortgage 12/11 at 100.00 AAA 2,042,700
Resolution 1 Bonds, Series 2002A-2, 5.450%, 12/01/22
(Alternative Minimum Tax)
17
Nuveen Georgia Dividend Advantage Municipal Fund (NZX) (continued)
Portfolio of INVESTMENTS May 31, 2004
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT (000) DESCRIPTION(1) PROVISIONS* RATINGS** VALUE
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/SINGLE FAMILY (continued)
$ 650 Georgia Housing and Finance Authority, Single Family Mortgage 12/11 at 100.00 AAA $ 662,383
Bonds, Series 2002B-2, 5.350%, 12/01/22 (Alternative
Minimum Tax)
2,025 Georgia Housing and Finance Authority, Single Family Mortgage 12/12 at 100.00 AAA 2,026,903
Bonds, Series 2002C-2, 5.300%, 6/01/33 (Alternative
Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
INDUSTRIALS - 2.7%
750 Savannah Economic Development Authority, Georgia, Revenue 7/12 at 100.00 AAA 771,323
Bonds, GTREP Project, Series 2002, 5.000%, 7/01/19 -
MBIA Insured
------------------------------------------------------------------------------------------------------------------------------------
MATERIALS - 3.5%
1,000 Richmond County Development Authority, Georgia, 2/12 at 101.00 BBB 1,004,530
Environmental Improvement Revenue Refunding Bonds,
International Paper Company, Series 2002A, 6.000%, 2/01/25
(Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL - 7.4%
2,000 Georgia, General Obligation Bonds, Series 2002D, 8/12 at 100.00 AAA 2,091,740
5.000%, 8/01/18
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED - 9.4%
1,525 Macon-Bibb County Urban Development Authority, Georgia, 8/12 at 101.00 AA 1,638,521
Revenue Refunding Bonds, Public Facilities Projects,
Series 2002A, 5.000%, 8/01/14
1,000 Rockdale County Water and Sewerage Authority, Georgia, 1/10 at 101.00 AAA 1,021,630
Revenue Bonds, Series 1999A, 5.375%, 7/01/29 -
MBIA Insured
------------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION - 3.7%
1,000 Atlanta, Georgia, Airport General Revenue Refunding Bonds, 1/10 at 101.00 AAA 1,062,310
Series 2000A, 5.400%, 1/01/15 - FGIC Insured
------------------------------------------------------------------------------------------------------------------------------------
UTILITIES - 14.5%
1,500 Coweta County Development Authority, Georgia, Revenue 1/13 at 100.00 Aaa 1,582,095
Bonds, Newnan Water & Sewer and Light Commission
Project, Series 2002, 5.250%, 1/01/18 - FGIC Insured
1,250 Municipal Electric Authority of Georgia, Combustion Turbine 11/12 at 100.00 AAA 1,305,725
Revenue Bonds, Series 2002A, 5.250%, 11/01/20 -
MBIA Insured
1,200 Summerville, Georgia, Combined Public Utility, Revenue 1/12 at 101.00 Baa3 1,210,848
Refunding and Improvement Bonds, Series 2002,
5.750%, 1/01/26
------------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER - 12.6%
2,065 Augusta, Georgia, Water and Sewerage Revenue Bonds, 10/12 at 100.00 AAA 2,166,040
Series 2002, 5.000%, 10/01/16 - FSA Insured
1,395 Macon Water Authority, Georgia, Water and Sewer Revenue 10/11 at 101.00 AA- 1,419,189
Bonds, Series 2001B, 5.000%, 10/01/21
------------------------------------------------------------------------------------------------------------------------------------
$ 41,385 Total Long-Term Investments (cost $41,953,209) - 148.9% 42,219,835
=============-----------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 4.0% 1,128,106
--------------------------------------------------------------------------------------------------------------------
Preferred Shares, at Liquidation Value - (52.9)% (15,000,000)
--------------------------------------------------------------------------------------------------------------------
Net Assets Applicable to Common Shares - 100% $ 28,347,941
====================================================================================================================
(1) All percentages shown in the Portfolio of Investments
are based on net assets applicable to Common shares.
* Optional Call Provisions (not covered by the report of
independent 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.
** Ratings (not covered by the report of independent
registered public accounting firm): Using the higher of
Standard & Poor's or Moody's rating.
See accompanying notes to financial statements.
18
Nuveen Georgia Dividend Advantage Municipal Fund 2 (NKG)
Portfolio of
INVESTMENTS May 31, 2004
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT (000) DESCRIPTION(1) PROVISIONS* RATINGS** VALUE
------------------------------------------------------------------------------------------------------------------------------------
CONSUMER DISCRETIONARY - 2.8%
$ 1,750 DeKalb County Development Authority, Georgia, Pollution 12/12 at 101.00 Baa1 $ 1,768,288
Control Revenue Refunding Bonds, General Motors
Corporation Projects, Series 2002, 6.000%, 3/15/21
------------------------------------------------------------------------------------------------------------------------------------
CONSUMER STAPLES - 2.6%
2,000 Puerto Rico, The Children's Trust Fund, Tobacco Settlement 5/12 at 100.00 BBB 1,628,680
Asset-Backed Refunding Bonds, Series 2002, 5.500%, 5/15/39
------------------------------------------------------------------------------------------------------------------------------------
EDUCATION AND CIVIC ORGANIZATIONS - 22.5%
Athens-Clarke County Unified Government Development Authority,
Georgia, Educational Facilities Revenue Bonds, UGAREF CCRC
Building LLC Project, Series 2002:
1,225 5.000%, 12/15/18 - AMBAC Insured 12/12 at 100.00 AAA 1,268,475
1,240 5.000%, 12/15/19 - AMBAC Insured 12/12 at 100.00 AAA 1,276,902
Athens Housing Authority, Georgia, Student Housing Lease Revenue
Bonds, UGAREF East Campus Housing LLC Project, Series 2002:
3,500 5.000%, 12/01/27 - AMBAC Insured 12/12 at 100.00 Aaa 3,467,030
2,500 5.000%, 12/01/33 - AMBAC Insured 12/12 at 100.00 Aaa 2,463,925
1,050 Fulton County Development Authority, Georgia, Revenue 2/12 at 100.00 AAA 1,036,172
Bonds, TUFF Morehouse Project, Series 2002A,
5.000%, 2/01/34 - AMBAC Insured
2,000 Fulton County Development Authority, Georgia, Revenue 11/13 at 100.00 AAA 2,021,640
Bonds, Georgia Tech - Klaus Parking and Family Housing
Projects, Series 2003, 5.000%, 11/01/23 - MBIA Insured
1,315 Private Colleges and Universities Authority, Georgia, Revenue 9/11 at 100.00 AA 1,319,800
Bonds, Emory University, Series 2001A, 5.125%, 9/01/33
1,250 Private Colleges and Universities Authority, Georgia, Revenue 10/11 at 102.00 Baa1 1,274,775
Bonds, Mercer University, Series 2001, 5.750%, 10/01/31
------------------------------------------------------------------------------------------------------------------------------------
HEALTHCARE - 28.3%
Floyd County Hospital Authority, Georgia, Revenue Anticipation
Certificates, Floyd Medical Center Project, Series 2002:
1,480 5.000%, 7/01/22 - MBIA Insured 7/12 at 101.00 Aaa 1,487,504
1,000 5.200%, 7/01/32 - MBIA Insured 7/12 at 101.00 Aaa 1,003,460
1,145 Floyd County Hospital Authority, Georgia, Revenue Anticipation 7/13 at 101.00 Aaa 1,171,896
Certificates, Floyd Medical Center, Series 2003,
5.000%, 7/01/20 - MBIA Insured
1,250 Gainesville, Hall County Hospital Authority, Georgia, Revenue 5/11 at 100.00 A- 1,257,500
Anticipation Certificates, Northeast Georgia Health Services
Inc. Project, Series 2001, 5.500%, 5/15/31
3,000 Glynn-Brunswick Memorial Hospital Authority, Georgia, 8/06 at 102.00 AAA 3,203,790
Revenue Bonds, Southeast Georgia Health Systems Project,
Series 1996, 5.250%, 8/01/13 - MBIA Insured
Newnan Hospital Authority, Georgia, Revenue Anticipation
Certificates, Newnan Hospital Inc., Series 2002:
2,260 5.500%, 1/01/19 - MBIA Insured 1/13 at 100.00 Aaa 2,413,657
3,020 5.500%, 1/01/20 - MBIA Insured 1/13 at 100.00 Aaa 3,212,072
2,000 Savannah Hospital Authority, Georgia, Revenue Bonds, 1/14 at 100.00 AA 2,008,120
St. Joseph's/Candler Health System, Series 2003,
5.250%, 7/01/23 - RAAI Insured
1,945 Tift County Hospital Authority, Georgia, Revenue Anticipation 12/12 at 101.00 Aaa 2,025,504
Bonds, Tift Regional Medical Center, Series 2002,
5.250%, 12/01/19 - AMBAC Insured
19
Nuveen Georgia Dividend Advantage Municipal Fund 2 (NKG) (continued)
Portfolio of INVESTMENTS May 31, 2004
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT (000) DESCRIPTION(1) PROVISIONS* RATINGS** VALUE
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/MULTIFAMILY - 4.6%
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 $ 497,870
980 5.200%, 11/20/27 (Alternative Minimum Tax) 11/12 at 102.00 AAA 963,036
1,465 5.250%, 11/20/32 (Alternative Minimum Tax) 11/12 at 102.00 AAA 1,437,385
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/SINGLE FAMILY - 5.9%
1,980 Georgia Housing and Finance Authority, Single Family Mortgage 6/11 at 100.00 AAA 1,992,830
Resolution 1 Bonds, Series 2001B-2, 5.400%, 12/01/31
(Alternative Minimum Tax)
1,700 Georgia Housing and Finance Authority, Single Family Mortgage 12/12 at 100.00 AAA 1,715,878
Bonds, Series 2002C-2, 5.100%, 12/01/22 (Alternative
Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
MATERIALS - 1.6%
1,000 Richmond County Development Authority, Georgia, Environmental 2/11 at 101.00 BBB 1,023,400
Improvement Revenue Bonds, International Paper Company,
Series 2001A, 6.250%, 2/01/25 (Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL - 9.5%
1,000 Cherokee County School System, Georgia, General Obligation 8/13 at 100.00 AAA 1,053,710
Bonds, Series 2003, 5.000%, 8/01/16 - MBIA Insured
1,000 Forsyth County, Georgia, General Obligation Bonds, Series 2004, 3/14 at 101.00 AA 1,059,390
5.250%, 3/01/19
750 Georgia, General Obligation Bonds, Series 1998D, No Opt. Call AAA 827,205
5.250%, 10/01/15
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 1,499,027
1,470 5.250%, 1/01/26 - AMBAC Insured 1/13 at 101.00 Aaa 1,499,341
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED - 31.9%
1,405 Clayton County Development Authority, Georgia, Revenue 7/12 at 100.00 AAA 1,456,929
Bonds, TUFF Archives LLC Project, Series 2001A,
5.250%, 7/01/21 - MBIA Insured
4,000 Forsyth County Water and Sewerage Authority, Georgia, 4/13 at 100.00 AA 3,967,040
Revenue Bonds, Series 2002, 5.000%, 4/01/32
750 Georgia Municipal Association Inc., Certificates of Participation, 6/12 at 101.00 AAA 769,695
Atlanta Court Project, Series 2002, 5.125%, 12/01/21 -
AMBAC Insured
2,500 Metropolitan Atlanta Rapid Transit Authority, Georgia, Sales No Opt. Call AAA 2,928,025
Tax Revenue Refunding Bonds, Series 1992P, 6.250%, 7/01/20 -
AMBAC Insured
2,000 Puerto Rico Highway and Transportation Authority, Highway 7/16 at 100.00 AAA 2,126,460
Revenue Bonds, Series 1996Y, 5.500%, 7/01/36 - FSA Insured
5,000 Puerto Rico Public Buildings Authority, Guaranteed Government No Opt. Call AAA 5,390,800
Facilities Revenue Refunding Bonds, Series 2002F,
5.250%, 7/01/21 - CIFG Insured
Puerto Rico Municipal Finance Agency, Series 2002A:
800 5.250%, 8/01/21 - FSA Insured 8/12 at 100.00 AAA 848,640
2,500 5.000%, 8/01/27 - FSA Insured 8/12 at 100.00 AAA 2,506,975
------------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION - 6.1%
3,650 Atlanta, Georgia, Airport General Revenue Refunding Bonds, 1/10 at 101.00 AAA 3,844,946
Series 2000A, 5.500%, 1/01/21 - FGIC Insured
------------------------------------------------------------------------------------------------------------------------------------
U.S. GUARANTEED - 0.9%
525 Atlanta, Georgia, Water and Wastewater Revenue Bonds, 5/09 at 101.00 AAA 573,778
Series 1999A, 5.000%, 11/01/38 (Pre-refunded
to 5/01/09) - FGIC Insured
------------------------------------------------------------------------------------------------------------------------------------
UTILITIES - 11.2%
1,000 Elberton, Georgia, Combined Utility System Revenue Refunding 1/12 at 100.00 Aaa 1,012,870
and Improvement Bonds, Series 2001, 5.000%, 1/01/22 -
AMBAC Insured
2,000 Georgia Municipal Electric Authority, General Power Revenue 1/13 at 100.00 AAA 2,075,580
Bonds, Series 2002A, 5.000%, 1/01/17 - FSA Insured
1,000 Monroe County Development Authority, Georgia, Pollution No Opt. Call AAA 1,031,570
Control Revenue Bonds, Georgia Power Company - Scherer
Plant, Series 2001, 4.200%, 1/01/12 (Mandatory put
12/01/08) - AMBAC Insured
20
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT (000) DESCRIPTION(1) PROVISIONS* RATINGS** VALUE
------------------------------------------------------------------------------------------------------------------------------------
UTILITIES (continued)
$ 1,000 Municipal Electric Authority of Georgia, Project One 1/13 at 100.00 AAA $ 1,010,740
Subordinated Lien Revenue Bonds, Series 2003A,
5.000%, 1/01/22 - MBIA Insured
1,775 Puerto Rico Electric Power Authority, Power Revenue Bonds, 7/12 at 101.00 AAA 1,912,332
Series 2002II, 5.375%, 7/01/19 - MBIA Insured
------------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER - 21.8%
Augusta, Georgia, Water and Sewerage Revenue Bonds,
Series 2002:
1,000 5.250%, 10/01/22 - FSA Insured 10/12 at 100.00 AAA 1,035,780
3,500 5.000%, 10/01/27 - FSA Insured 10/12 at 100.00 AAA 3,492,125
DeKalb County, Georgia, Water and Sewerage Bonds,
Series 2000:
2,500 5.125%, 10/01/31 10/10 at 101.00 AA 2,509,225
2,500 5.375%, 10/01/35 10/10 at 101.00 AA 2,552,675
950 Fulton County, Georgia, Water and Sewerage Revenue Bonds, 7/08 at 101.00 AAA 982,794
Series 1998, 5.000%, 1/01/16 - FGIC Insured
3,100 Harris County, Georgia, Water System Revenue Bonds, 12/12 at 100.00 Aaa 3,148,298
Series 2002, 5.000%, 12/01/22 - AMBAC Insured
------------------------------------------------------------------------------------------------------------------------------------
$ 91,640 Total Long-Term Investments (cost $95,262,131) - 149.7% 94,055,539
=============-----------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 2.8% 1,754,276
--------------------------------------------------------------------------------------------------------------------
Preferred Shares, at Liquidation Value - (52.5)% (33,000,000)
--------------------------------------------------------------------------------------------------------------------
Net Assets Applicable to Common Shares - 100% $ 62,809,815
====================================================================================================================
(1) All percentages shown in the Portfolio of Investments
are based on net assets applicable to Common shares.
* Optional Call Provisions (not covered by the report of
independent 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.
** Ratings (not covered by the report of independent
registered public accounting firm): Using the higher of
Standard & Poor's or Moody's rating.
See accompanying notes to financial statements.
21
Nuveen North Carolina Premium Income Municipal Fund (NNC)
Portfolio of
INVESTMENTS May 31, 2004
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT (000) DESCRIPTION(1) PROVISIONS* RATINGS** VALUE
------------------------------------------------------------------------------------------------------------------------------------
EDUCATION AND CIVIC ORGANIZATIONS - 23.0%
$ 970 North Carolina Capital Facilities Financing Agency, Revenue 4/13 at 100.00 AAA $ 994,405
Bonds, Johnson and Wales University, Series 2003A,
5.250%, 4/01/23 - XLCA Insured
1,000 North Carolina Capital Facilities Financing Agency, Housing 6/13 at 100.00 AAA 994,050
Revenue Bonds, Elizabeth City State University, Series 2003A,
5.000%, 6/01/28 - AMBAC Insured
North Carolina Education Assistance Authority, Subordinate Lien
Guaranteed Student Loan Revenue Bonds, Series 1995A:
1,000 6.050%, 7/01/10 (Alternative Minimum Tax) 7/05 at 102.00 A2 1,037,920
2,400 6.300%, 7/01/15 (Alternative Minimum Tax) 7/05 at 102.00 A2 2,480,952
5,875 North Carolina Education Assistance Authority, Subordinate 7/06 at 102.00 A2 6,144,663
Lien Guaranteed Student Loan Revenue Bonds, Series 1996C,
6.350%, 7/01/16 (Alternative Minimum Tax)
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+ 2,462,848
2,725 5.000%, 12/01/21 12/13 at 100.00 AA+ 2,788,138
1,500 5.000%, 12/01/23 12/13 at 100.00 AA+ 1,517,535
1,000 University of North Carolina System, Pooled Revenue Refunding 10/12 at 100.00 AAA 1,057,030
Bonds, Series 2002A, 5.375%, 4/01/22 - AMBAC Insured
1,675 University of North Carolina, Wilmington, General Revenue 1/12 at 101.00 Aaa 1,702,420
Bonds, Series 2002A, 5.000%, 1/01/23 - AMBAC Insured
------------------------------------------------------------------------------------------------------------------------------------
ENERGY - 1.7%
1,500 Virgin Islands Public Finance Authority, Refinery Revenue 1/14 at 100.00 BBB- 1,547,625
Bonds, Hovensa LLC, Series 2003, 6.125%, 7/01/22
(Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
HEALTHCARE - 24.3%
3,630 Charlotte-Mecklenburg Hospital Authority, North Carolina, 1/11 at 101.00 AA 3,507,959
Healthcare System Revenue Bonds, Carolinas Healthcare
System, Series 2001A, 5.000%, 1/15/31
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 1,041,150
550 5.500%, 1/01/20 1/12 at 100.00 A 569,102
1,750 5.375%, 1/01/32 1/12 at 100.00 A 1,737,453
2,000 North Carolina Medical Care Commission, Healthcare Facilities 11/13 at 100.00 AA- 2,026,180
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- 2,118,140
Revenue Bonds, Stanly Memorial Hospital, Series 1999,
6.375%, 10/01/29
3,615 North Carolina Medical Care Commission, Hospital Revenue 10/08 at 101.00 AA 3,403,559
Bonds, FirstHealth of the Carolinas, Series 1998,
4.750%, 10/01/26
3,000 North Carolina Medical Care Commission, Hospital Revenue 6/12 at 101.00 A 2,948,820
Bonds, Southeastern Regional Medical Center, Series 2002,
5.375%, 6/01/32
5,000 North Carolina Medical Care Commission, Health System 10/11 at 101.00 AA 5,004,650
Revenue Bonds, Mission-St. Joseph's Health System,
Series 2001, 5.250%, 10/01/31
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/MULTIFAMILY - 8.8%
1,000 Asheville Housing Authority, North Carolina, GNMA-Collateralized 11/07 at 102.00 AAA 1,009,210
Multifamily Housing Revenue Bonds, Woodridge Apartments,
Series 1997, 5.800%, 11/20/39 (Alternative Minimum Tax)
1,000 Charlotte, North Carolina, FHA-Insured Mortgage Revenue 7/04 at 104.00 AAA 1,022,290
Refunding Bonds, Tryon Hills Apartments, Series 1993A,
5.875%, 1/01/25 - MBIA Insured
3,000 Mecklenburg County, North Carolina, FNMA Multifamily 1/12 at 102.00 AAA 3,060,480
Housing Revenue Bonds, Sycamore Green Apartments,
Series 2001, 5.500%, 1/15/35 (Alternative Minimum Tax) -
FGIC Insured
22
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT (000) DESCRIPTION(1) PROVISIONS* RATINGS** VALUE
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/MULTIFAMILY (continued)
$ 2,290 Mecklenburg County, North Carolina, FNMA Multifamily 7/13 at 105.00 AAA $ 2,294,374
Housing Revenue Bonds, Little Rock Apartments, Series 2003,
5.375%, 1/01/36 (Alternative Minimum Tax)
North Carolina Housing Finance Agency, FHA-Insured Multifamily
Revenue Bonds, Series 1993:
270 5.800%, 7/01/14 7/04 at 101.00 AA 271,868
435 5.900%, 7/01/26 7/04 at 101.00 AA 436,749
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/SINGLE FAMILY - 10.3%
5,595 North Carolina Housing Finance Agency, Home Ownership 7/09 at 100.00 AA 5,781,090
Revenue Bonds, 1998 Trust Agreement, Series 6A,
6.200%, 1/01/29 (Alternative Minimum Tax)
2,340 North Carolina Housing Finance Agency, Single Family Revenue 3/06 at 102.00 AA 2,391,082
Bonds, Series 1996HH, 6.300%, 3/01/26 (Alternative
Minimum Tax)
1,305 North Carolina Housing Finance Agency, Home Ownership 7/10 at 100.00 AAA 1,312,465
Revenue Bonds, 1998 Trust Agreement, Series 10A,
5.400%, 7/01/32 (Alternative Minimum Tax) -
AMBAC Insured
------------------------------------------------------------------------------------------------------------------------------------
MATERIALS - 4.5%
2,100 Haywood County Industrial Facilities and Pollution Control 12/05 at 102.00 BBB 2,064,384
Financing Authority, North Carolina, Environmental
Improvement Revenue Bonds, Champion International
Corporation Project, Series 1995A, 5.750%, 12/01/25
(Alternative Minimum Tax)
2,000 Haywood County Industrial Facilities and Pollution Control 3/06 at 102.00 Baa2 2,092,280
Financing Authority, North Carolina, Pollution Control Revenue
Refunding Bonds, Champion International Corporation Project,
Series 1995, 6.000%, 3/01/20
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL - 13.9%
1,890 Craven County, North Carolina, General Obligation Bonds, 5/12 at 101.00 AAA 1,939,896
Series 2002, 5.000%, 5/01/21 - AMBAC Insured
4,285 Durham County, North Carolina, General Obligation Public 4/12 at 100.00 AAA 4,525,860
Improvement Bonds, Series 2002B, 5.000%, 4/01/16
1,000 Johnston County, North Carolina, General Obligation Bonds, 6/11 at 102.00 AAA 1,058,370
Series 2001, 5.000%, 6/01/16 - FGIC Insured
4,500 North Carolina, General Obligation Bonds, Series 2000A, 9/10 at 102.00 AAA 4,774,590
5.100%, 9/01/16
500 North Carolina, General Obligation Bonds, Series 2004A, 3/14 at 100.00 AAA 513,370
5.000%, 3/01/22 (DD, settling 6/01/04)
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED - 24.7%
1,330 Cabarrus County, North Carolina, Certificates of Participation, 2/13 at 100.00 AA- 1,405,305
Series 2002, 5.250%, 2/01/17
Charlotte, North Carolina, Certificates of Participation,
Governmental Facilities Projects, Series 2003G:
1,145 5.000%, 6/01/18 6/13 at 100.00 AA+ 1,178,892
1,700 5.375%, 6/01/26 6/13 at 100.00 AA+ 1,743,911
Charlotte, North Carolina, Storm Water Fee Revenue Bonds,
Series 2002:
1,050 5.250%, 6/01/20 6/12 at 101.00 AA+ 1,101,839
1,750 5.000%, 6/01/25 6/12 at 101.00 AA+ 1,754,393
2,180 Concord, North Carolina, Certificates of Participation, 6/06 at 102.00 AAA 2,360,984
Series 1996A, 6.125%, 6/01/21 - MBIA Insured
1,000 Davidson County, North Carolina, Certificates of Participation, No Opt. Call AAA 1,093,710
Series 2004, 5.250%, 6/01/14 - AMBAC Insured
750 Johnston County Finance Corporation, North Carolina, 8/09 at 101.00 AAA 781,913
Installment Payment Revenue Bonds, School and Museum
Projects, Series 1999, 5.250%, 8/01/21 - FSA 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 1,812,772
1,000 5.250%, 4/01/22 - FSA Insured 4/14 at 100.00 AAA 1,034,510
North Carolina Infrastructure Finance Corporation, Certificates
of Participation, Correctional Facilities, Series 2004A:
1,000 5.000%, 2/01/19 2/14 at 100.00 AA+ 1,028,130
1,500 5.000%, 2/01/23 2/14 at 100.00 AA+ 1,509,615
23
Nuveen North Carolina Premium Income Municipal Fund (NNC) (continued)
Portfolio of INVESTMENTS May 31, 2004
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT (000) DESCRIPTION(1) PROVISIONS* RATINGS** VALUE
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED (continued)
North Carolina, Certificates of Participation, Series 2003:
$ 1,130 5.250%, 6/01/21 6/13 at 100.00 AA+ $ 1,161,425
1,000 5.250%, 6/01/23 6/13 at 100.00 AA+ 1,018,310
1,500 North Carolina, Certificates of Participation, Repair and 6/14 at 100.00 AA+ 1,533,795
Renovation Project, Series 2004B, 5.000%, 6/01/20
2,000 Puerto Rico Highway and Transportation Authority, Grant 3/14 at 100.00 AAA 2,064,780
Anticipation Revenue Bonds, Series 2004, 5.000%, 9/15/21 -
MBIA Insured
------------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION - 4.0%
Raleigh Durham Airport Authority, North Carolina, Airport
Revenue Bonds, Series 2001A:
2,250 5.250%, 11/01/16 - FGIC Insured 5/11 at 101.00 Aaa 2,363,670
1,320 5.000%, 11/01/31 - FGIC Insured 5/11 at 101.00 Aaa 1,299,606
------------------------------------------------------------------------------------------------------------------------------------
U.S. GUARANTEED - 19.9%
4,000 Charlotte, North Carolina, Water and Sewer System Revenue 6/10 at 101.00 AAA 4,449,040
Bonds, Series 2000, 5.250%, 6/01/25 (Pre-refunded
to 6/01/10)
2,000 Charlotte, North Carolina, Storm Water Fee Revenue Bonds, 6/10 at 101.00 AA+*** 2,303,240
Series 2000, 6.000%, 6/01/25 (Pre-refunded to 6/01/10)
2,900 Fayetteville Public Works Commission, North Carolina, 3/07 at 101.00 AAA 3,130,173
Revenue Bonds, Series 1997, 5.125%, 3/01/24
(Pre-refunded to 3/01/07) - FSA Insured
2,035 North Carolina Municipal Power Agency 1, Catawba Electric No Opt. Call AAA 2,497,128
Revenue Bonds, Series 1980, 10.500%, 1/01/10
2,180 Union County, North Carolina, Enterprise System Revenue 6/06 at 102.00 AAA 2,368,090
Bonds, Series 1996, 5.500%, 6/01/21 (Pre-refunded
to 6/01/06) - MBIA Insured
3,340 University of North Carolina, Chapel Hill, Revenue Bonds, 2/06 at 102.00 AA*** 3,585,253
Hospital System, Series 1996, 5.250%, 2/15/26
(Pre-refunded to 2/15/06)
------------------------------------------------------------------------------------------------------------------------------------
UTILITIES - 11.0%
2,600 North Carolina Eastern Municipal Power Agency, Power System 7/04 at 101.00 BBB 2,611,492
Revenue Bonds, Series 1993D, 5.600%, 1/01/16
(Pre-refunded to 7/01/04)
4,000 North Carolina Municipal Power Agency 1, Catawba Electric 1/10 at 101.00 BBB+ 4,353,320
Revenue Bonds, Series 1999B, 6.500%, 1/01/20
2,000 North Carolina Municipal Power Agency 1, Catawba Electric 1/13 at 100.00 AAA 2,147,840
Revenue Bonds, Series 2003A, 5.250%, 1/01/15 -
AMBAC Insured
1,000 Wake County Industrial Facilities and Pollution Control 2/12 at 101.00 A3 1,045,720
Financing Authority, North Carolina, Revenue Refunding
Bonds, Carolina Power and Light Company, Series 2002,
5.375%, 2/01/17
------------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER - 2.3%
2,000 Winston-Salem, North Carolina, Water and Sewerage System 6/12 at 100.00 AAA 2,072,740
Revenue Bonds, Series 2002A, 5.000%, 6/01/18
------------------------------------------------------------------------------------------------------------------------------------
$ 131,455 Total Long-Term Investments (cost $131,989,999) - 148.4% 136,444,553
=============-----------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 2.5% 2,296,335
--------------------------------------------------------------------------------------------------------------------
Preferred Shares, at Liquidation Value - (50.9)% (46,800,000)
--------------------------------------------------------------------------------------------------------------------
Net Assets Applicable to Common Shares - 100% $ 91,940,888
====================================================================================================================
(1) All percentages shown in the Portfolio of Investments
are based on net assets applicable to Common shares.
* Optional Call Provisions (not covered by the report of
independent 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.
** Ratings (not covered by the report of independent
registered public accounting firm): Using the higher of
Standard & Poor's or Moody's rating.
*** Securities are backed by an escrow or trust containing
sufficient U.S. Government or U.S. Government agency
securities which ensures the timely payment of
principal and interest. Such securities are normally
considered to be equivalent to AAA rated securities.
(DD) Security purchased on a delayed delivery basis.
See accompanying notes to financial statements.
24
Nuveen North Carolina Dividend Advantage Municipal Fund (NRB)
Portfolio of
INVESTMENTS May 31, 2004
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT (000) DESCRIPTION(1) PROVISIONS* RATINGS** VALUE
------------------------------------------------------------------------------------------------------------------------------------
EDUCATION AND CIVIC ORGANIZATIONS - 27.7%
$ 500 North Carolina Capital Facilities Financing Agency, Revenue 9/11 at 101.00 A3 $ 509,935
Bonds, High Point University, Series 2001, 5.125%, 9/01/18
2,250 North Carolina Capital Facilities Financing Agency, Revenue 10/11 at 100.00 AA+ 2,266,538
Bonds, Duke University, Series 2001A, 5.125%, 10/01/26
1,750 University of North Carolina, Chapel Hill, System Net Revenue 6/11 at 100.00 AA+ 1,753,588
Bonds, Series 2001A, 5.000%, 12/01/25
1,845 University of North Carolina, Chapel Hill, System Net Revenue No Opt. Call AA+ 2,011,585
Bonds, Series 2002B, 5.000%, 12/01/11
2,450 University of North Carolina System, Pooled Revenue Refunding 10/12 at 100.00 AAA 2,633,554
Bonds, Series 2002A, 5.375%, 4/01/17 - AMBAC Insured
------------------------------------------------------------------------------------------------------------------------------------
HEALTHCARE - 21.6%
1,110 North Carolina Medical Care Commission, Healthcare Facilities 1/12 at 100.00 A 1,155,388
Revenue Bonds, Union Regional Medical Center,
Series 2002A, 5.250%, 1/01/15
2,500 North Carolina Medical Care Commission, Healthcare Revenue 5/07 at 100.00 AA- 2,508,950
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 1,501,590
Bonds, Southeastern Regional Medical Center, Series 2002,
5.250%, 6/01/22
2,000 North Carolina Medical Care Commission, Health System 10/11 at 101.00 AA 2,001,860
Revenue Bonds, Mission-St. Joseph's Health System,
Series 2001, 5.250%, 10/01/31
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/MULTIFAMILY - 14.6%
2,250 Durham Housing Authority, North Carolina, FNMA Guaranteed 6/11 at 100.00 AAA 2,277,697
Multifamily Housing Revenue Bonds, Naples Terrace
Apartments, Series 2001A, 5.700%, 6/01/33 (Alternative
Minimum Tax)
2,500 Mecklenburg County, North Carolina, FNMA Multifamily Housing 1/12 at 102.00 AAA 2,550,400
Revenue Bonds, Sycamore Green Apartments, Series 2001,
5.500%, 1/15/35 (Alternative Minimum Tax) - FGIC Insured
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/SINGLE FAMILY - 5.9%
1,390 North Carolina Housing Finance Agency, Home Ownership 7/09 at 100.00 AA 1,411,086
Revenue Bonds, 1998 Trust Agreement, Series 5A,
5.625%, 7/01/30 (Alternative Minimum Tax)
525 North Carolina Housing Finance Agency, Home Ownership 7/10 at 100.00 AAA 528,003
Revenue Bonds, 1998 Trust Agreement, Series 10A,
5.400%, 7/01/32 (Alternative Minimum Tax) - AMBAC Insured
------------------------------------------------------------------------------------------------------------------------------------
MATERIALS - 4.6%
750 Columbus County Industrial Facilities and Pollution Control 4/07 at 102.00 BBB 764,985
Financing Authority, North Carolina, Environmental
Improvement Revenue Bonds, International Paper Company
Project, Series 1997A, 6.150%, 4/01/21 (Alternative
Minimum Tax)
750 Columbus County Industrial Facilities and Pollution Control 12/07 at 102.00 BBB 762,698
Financing Authority, North Carolina, Solid Waste Disposal
Revenue Refunding Bonds, International Paper Company
Project, Series 1996A, 5.800%, 12/01/16 (Alternative
Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL - 3.1%
1,000 North Carolina, General Obligation Bonds, Series 2004A, 3/14 at 100.00 AAA 1,026,740
5.000%, 3/01/22
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED - 21.0%
1,330 Cabarrus County, North Carolina, Certificates of Participation, 2/13 at 100.00 AA- 1,427,077
Series 2002, 5.250%, 2/01/15
Charlotte, North Carolina, Certificates of Participation,
Governmental Facilities Projects, Series 2003G:
1,400 5.375%, 6/01/26 6/13 at 100.00 AA+ 1,436,162
790 5.000%, 6/01/33 6/13 at 100.00 AA+ 771,672
25
Nuveen North Carolina Dividend Advantage Municipal Fund (NRB) (continued)
Portfolio of INVESTMENTS May 31, 2004
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT (000) DESCRIPTION(1) PROVISIONS* RATINGS** VALUE
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED (continued)
$ 1,870 Dare County, North Carolina, Certificates of Participation, 12/12 at 100.00 AAA $ 2,007,875
Series 2002, 5.250%, 6/01/15 - AMBAC Insured
1,250 Davidson County, North Carolina, Certificates of Participation, 6/14 at 100.00 AAA 1,300,837
Series 2004, 5.250%, 6/01/21 - AMBAC Insured
------------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION - 4.8%
1,530 Raleigh Durham Airport Authority, North Carolina, Airport 5/11 at 101.00 Aaa 1,588,675
Revenue Bonds, Series 2001A, 5.250%, 11/01/18 -
FGIC Insured
------------------------------------------------------------------------------------------------------------------------------------
UTILITIES - 20.2%
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 1,043,120
500 5.250%, 9/01/21 - FSA Insured 9/11 at 101.00 AAA 519,820
2,500 North Carolina Eastern Municipal Power Agency, Power 7/04 at 100.00 AAA 2,506,375
System Revenue Refunding Bonds, Series 1993B,
5.500%, 1/01/17 - FGIC Insured
1,000 North Carolina Eastern Municipal Power Agency, Power 1/09 at 102.00 BBB 1,046,180
System Revenue Refunding Bonds, Series 1999B,
5.650%, 1/01/16
1,500 Wake County Industrial Facilities and Pollution Control 2/12 at 101.00 A3 1,568,580
Financing Authority, North Carolina, Revenue Refunding
Bonds, Carolina Power and Light Company, Series 2002,
5.375%, 2/01/17
------------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER - 24.2%
2,290 Broad River Water Authority, North Carolina, Water System 6/10 at 101.00 Aaa 2,354,464
Revenue Bonds, Series 2000, 5.375%, 6/01/26 - MBIA Insured
2,250 Charlotte, North Carolina, Water and Sewer System Revenue 6/11 at 101.00 AAA 2,275,470
Bonds, Series 2001, 5.125%, 6/01/26
Greensboro, North Carolina, Combined Enterprise System
Revenue Bonds, Series 2001A:
500 5.125%, 6/01/20 6/11 at 101.00 AA+ 515,625
500 5.125%, 6/01/21 6/11 at 101.00 AA+ 513,270
2,275 Winston-Salem, North Carolina, Water and Sewerage System 6/12 at 100.00 AAA 2,370,186
Revenue Bonds, Series 2002A, 5.000%, 6/01/17
------------------------------------------------------------------------------------------------------------------------------------
$ 47,555 Total Long-Term Investments (cost $48,008,419) - 147.7% 48,909,985
=============-----------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 3.6% 1,200,505
--------------------------------------------------------------------------------------------------------------------
Preferred Shares, at Liquidation Value - (51.3)% (17,000,000)
--------------------------------------------------------------------------------------------------------------------
Net Assets Applicable to Common Shares - 100% $ 33,110,490
====================================================================================================================
(1) All percentages shown in the Portfolio of Investments
are based on net assets applicable to Common shares.
* Optional Call Provisions (not covered by the report of
independent 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.
** Ratings (not covered by the report of independent
registered public accounting firm): Using the higher of
Standard & Poor's or Moody's rating.
See accompanying notes to financial statements.
26
Nuveen North Carolina Dividend Advantage Municipal Fund 2 (NNO)
Portfolio of
INVESTMENTS May 31, 2004
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT (000) DESCRIPTION(1) PROVISIONS* RATINGS** VALUE
------------------------------------------------------------------------------------------------------------------------------------
EDUCATION AND CIVIC ORGANIZATIONS - 21.9%
Appalachian State University, North Carolina, Housing and
Student Center System Revenue Refunding Bonds, Series 2001:
$ 600 5.125%, 7/15/24 1/11 at 101.00 Aaa $ 609,120
200 5.125%, 7/15/27 1/11 at 101.00 Aaa 201,382
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 1,106,331
1,000 5.000%, 7/15/15 - MBIA Insured 7/12 at 100.00 Aaa 1,050,700
500 East Carolina University, North Carolina, General Revenue 5/13 at 100.00 Aaa 515,780
Bonds, Series 2003A, 5.000%, 5/01/19 - AMBAC Insured
3,750 North Carolina Capital Facilities Financing Agency, Revenue 10/11 at 100.00 AA+ 3,777,563
Bonds, Duke University, Series 2001A, 5.125%, 10/01/26
1,840 University of North Carolina, Chapel Hill, System Net Revenue No Opt. Call AA+ 2,006,134
Bonds, Series 2002B, 5.000%, 12/01/11
400 University of North Carolina, Greensboro, General Revenue 4/11 at 101.00 AAA 426,012
Refunding Bonds, Series 2002B, 5.375%, 4/01/17 -
FSA Insured
University of North Carolina System, Pooled Revenue Refunding
Bonds, Series 2002A:
1,155 5.375%, 4/01/16 - AMBAC Insured 10/12 at 100.00 AAA 1,247,492
1,100 5.375%, 4/01/19 - AMBAC Insured 10/12 at 100.00 AAA 1,171,687
------------------------------------------------------------------------------------------------------------------------------------
HEALTHCARE - 23.9%
4,000 Charlotte-Mecklenburg Hospital Authority, North Carolina, 1/11 at 101.00 AA 3,865,520
Healthcare System Revenue Bonds, Carolinas Healthcare
System, Series 2001A, 5.000%, 1/15/31
2,225 New Hanover County, North Carolina, Hospital Revenue Bonds, 10/04 at 101.00 AAA 2,182,102
New Hanover Regional Medical Center, Series 1993,
4.750%, 10/01/23 - AMBAC Insured
1,005 North Carolina Medical Care Commission, Healthcare Facilities 1/12 at 100.00 A 1,069,250
Revenue Bonds, Union Regional Medical Center, Series 2002A,
5.250%, 1/01/13
2,000 North Carolina Medical Care Commission, Healthcare Facilities 11/13 at 100.00 AA- 2,014,120
Revenue Bonds, Novant Health Obligated Group, Series 2003A,
5.000%, 11/01/20
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 1,062,350
2,000 5.250%, 6/01/22 6/12 at 101.00 A 2,002,120
1,000 North Carolina Medical Care Commission, Health System 10/11 at 101.00 AA 1,000,930
Revenue Bonds, Mission-St. Joseph's Health System,
Series 2001, 5.250%, 10/01/31
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/MULTIFAMILY - 6.5%
3,500 Mecklenburg County, North Carolina, FNMA Multifamily 1/12 at 102.00 AAA 3,570,560
Housing Revenue Bonds, Sycamore Green Apartments,
Series 2001, 5.500%, 1/15/35 (Alternative Minimum Tax) -
FGIC Insured
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/SINGLE FAMILY - 4.2%
445 North Carolina Housing Finance Agency, Home Ownership 7/10 at 100.00 AAA 447,545
Revenue Bonds, 1998 Trust Agreement, Series 10A,
5.400%, 7/01/32 (Alternative Minimum Tax) - AMBAC Insured
North Carolina Housing Finance Agency, Home Ownership
Revenue Bonds, Series 13A:
925 4.700%, 7/01/12 (Alternative Minimum Tax) 7/11 at 100.00 AA 952,676
925 4.850%, 7/01/13 (Alternative Minimum Tax) 7/11 at 100.00 AA 949,975
27
Nuveen North Carolina Dividend Advantage Municipal Fund 2 (NNO) (continued)
Portfolio of INVESTMENTS May 31, 2004
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT (000) DESCRIPTION(1) PROVISIONS* RATINGS** VALUE
------------------------------------------------------------------------------------------------------------------------------------
MATERIALS - 4.5%
$ 1,400 Haywood County Industrial Facilities and Pollution Control 10/04 at 101.50 BBB $ 1,386,210
Financing Authority, North Carolina, Solid Waste Disposal
Revenue Bonds, Champion International Corporation Project,
Series 1993, 5.500%, 10/01/18 (Alternative Minimum Tax)
1,100 Northhampton County Industrial Facilities and Pollution 2/11 at 101.00 BBB 1,122,044
Control Financing Authority, North Carolina, Environmental
Improvement Revenue Bonds, International Paper Company,
Series 2001A, 6.200%, 2/01/25 (Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL - 14.5%
250 Durham County, North Carolina, General Obligation Bonds, 5/10 at 102.00 AAA 275,393
Series 2000, 5.600%, 5/01/15
3,000 North Carolina, General Obligation Bonds, Series 2000A, 9/10 at 102.00 AAA 3,183,060
5.100%, 9/01/16
1,000 North Carolina, General Obligation Bonds, Series 2004A, 3/14 at 100.00 AAA 1,026,740
5.000%, 3/01/22 (DD, settling 6/01/04)
3,200 Wake County, North Carolina, General Obligation School Bonds, 2/10 at 101.50 AAA 3,538,048
Series 2000, 5.400%, 2/01/13
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED - 19.9%
1,330 Cabarrus County, North Carolina, Certificates of Participation, 2/13 at 100.00 AA- 1,415,147
Series 2002, 5.250%, 2/01/16
Charlotte, North Carolina, Storm Water Fee Revenue Bonds,
Series 2002:
1,850 5.250%, 6/01/18 6/12 at 101.00 AA+ 1,963,794
400 5.250%, 6/01/19 6/12 at 101.00 AA+ 422,168
1,325 Dare County, North Carolina, Certificates of Participation, 12/12 at 100.00 AAA 1,406,527
Series 2002, 5.250%, 6/01/17 - AMBAC 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 1,080,370
2,025 5.375%, 12/01/16 - FSA Insured 12/12 at 101.00 AAA 2,189,086
825 5.000%, 12/01/18 - FSA Insured 12/12 at 101.00 AAA 853,718
1,615 Lee County, North Carolina, Certificates of Participation, 4/14 at 100.00 AAA 1,693,602
Public Schools and Community College, Series 2004,
5.000%, 4/01/16 - FSA Insured
------------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION - 12.6%
Raleigh Durham Airport Authority, North Carolina, Airport
Revenue Bonds, Series 2001A:
1,000 5.250%, 11/01/15 - FGIC Insured 5/11 at 101.00 Aaa 1,058,030
2,320 5.250%, 11/01/16 - FGIC Insured 5/11 at 101.00 Aaa 2,437,206
2,230 5.250%, 11/01/17 - FGIC Insured 5/11 at 101.00 Aaa 2,326,024
University of North Carolina, Charlotte, Parking System
Revenue Bonds, Series 2002:
360 5.000%, 1/01/17 - MBIA Insured 1/12 at 101.00 Aaa 375,433
270 5.000%, 1/01/20 - MBIA Insured 1/12 at 101.00 Aaa 276,907
500 5.125%, 1/01/27 - MBIA Insured 1/12 at 101.00 Aaa 504,195
------------------------------------------------------------------------------------------------------------------------------------
U.S. GUARANTEED - 5.9%
3,000 Fayetteville Public Works Commission, North Carolina, 3/07 at 101.00 AAA 3,238,110
Revenue Bonds, Series 1997, 5.125%, 3/01/24 (Pre-refunded
to 3/01/07) - FSA Insured
------------------------------------------------------------------------------------------------------------------------------------
UTILITIES - 16.8%
2,500 North Carolina Eastern Municipal Power Agency, Power System 7/04 at 100.00 AAA 2,506,375
Revenue Refunding Bonds, Series 1993B, 5.500%, 1/01/17 -
FGIC Insured
2,400 North Carolina Eastern Municipal Power Agency, Power 7/04 at 101.00 BBB 2,410,608
System Revenue Bonds, Series 1993D, 5.600%, 1/01/16
(Pre-refunded to 7/01/04)
1,500 North Carolina Municipal Power Agency 1, Catawba Electric 1/10 at 101.00 BBB+ 1,632,495
Revenue Bonds, Series 1999B, 6.500%, 1/01/20
2,600 Wake County Industrial Facilities and Pollution Control 2/12 at 101.00 A3 2,718,872
Financing Authority, North Carolina, Revenue Refunding
Bonds, Carolina Power and Light Company, Series 2002,
5.375%, 2/01/17
28
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT (000) DESCRIPTION(1) PROVISIONS* RATINGS** VALUE
------------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER - 18.6%
$ 3,520 Charlotte, North Carolina, Water and Sewer System Revenue No Opt. Call AAA $ 3,899,174
Bonds, Series 2002, 5.250%, 7/01/13
1,000 Durham County, North Carolina, Enterprise System Revenue 6/13 at 100.00 AAA 1,011,200
Bonds, Series 2002, 5.000%, 6/01/23 - MBIA Insured
1,465 Orange Water and Sewer Authority, North Carolina, Water and 7/11 at 101.00 AA+ 1,502,665
Sewerage System Revenue Bonds, Series 2001,
5.000%, 7/01/20
850 Raleigh, North Carolina, Combined Enterprise System Revenue 3/09 at 101.00 AAA 830,237
Bonds, Series 1999, 4.750%, 3/01/24
Raleigh, North Carolina, Combined Enterprise System Revenue
Bonds, Series 2004:
1,000 5.000%, 3/01/21 3/14 at 100.00 AAA 1,024,370
2,000 5.000%, 3/01/22 3/14 at 100.00 AAA 2,037,760
------------------------------------------------------------------------------------------------------------------------------------
$ 79,445 Total Long-Term Investments (cost $80,593,061) - 149.3% 82,574,917
=============-----------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 1.3% 736,302
--------------------------------------------------------------------------------------------------------------------
Preferred Shares, at Liquidation Value - (50.6)% (28,000,000)
--------------------------------------------------------------------------------------------------------------------
Net Assets Applicable to Common Shares - 100% $ 55,311,219
====================================================================================================================
(1) All percentages shown in the Portfolio of Investments
are based on net assets applicable to Common shares.
* Optional Call Provisions (not covered by the report of
independent 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.
** Ratings (not covered by the report of independent
registered public accounting firm): Using the higher of
Standard & Poor's or Moody's rating.
(DD) Security purchased on a delayed delivery basis.
See accompanying notes to financial statements.
29
Nuveen North Carolina Dividend Advantage Municipal Fund 3 (NII)
Portfolio of
INVESTMENTS May 31, 2004
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT (000) DESCRIPTION(1) PROVISIONS* RATINGS** VALUE
------------------------------------------------------------------------------------------------------------------------------------
CONSUMER STAPLES - 3.0%
$ 2,000 Puerto Rico, The Children's Trust Fund, Tobacco Settlement 5/12 at 100.00 BBB $ 1,628,680
Asset-Backed Refunding Bonds, Series 2002, 5.500%, 5/15/39
------------------------------------------------------------------------------------------------------------------------------------
EDUCATION AND CIVIC ORGANIZATIONS - 16.8%
500 East Carolina University, North Carolina, General Revenue 5/13 at 100.00 Aaa 515,780
Bonds, Series 2003A, 5.000%, 5/01/19 - AMBAC Insured
North Carolina Capital Facilities Financing Agency, Revenue
Bonds, Duke University, Series 2001A:
1,750 5.125%, 10/01/26 10/11 at 100.00 AA+ 1,762,863
2,000 5.125%, 10/01/41 10/11 at 100.00 AA+ 1,986,680
3,000 North Carolina Capital Facilities Financing Agency, Revenue 10/12 at 100.00 AA+ 2,960,250
Bonds, Duke University, Series 2002A, 5.125%, 7/01/42
1,900 University of North Carolina System, Pooled Revenue Refunding 10/12 at 100.00 AAA 1,902,451
Bonds, Series 2002A, 5.000%, 4/01/27 - AMBAC Insured
------------------------------------------------------------------------------------------------------------------------------------
HEALTHCARE - 8.8%
2,000 Charlotte-Mecklenburg Hospital Authority, North Carolina, 1/07 at 102.00 AA 2,014,200
Healthcare System Revenue Bonds, DBA Carolina Healthcare
System, Series 1997A, 5.125%, 1/15/22
750 Charlotte-Mecklenburg Hospital Authority, North Carolina, 1/11 at 101.00 AA 724,785
Healthcare System Revenue Bonds, Carolinas Healthcare
System, Series 2001A, 5.000%, 1/15/31
2,000 North Carolina Medical Care Commission, Healthcare Facilities 11/13 at 100.00 AA- 2,038,320
Revenue Bonds, Novant Health Obligated Group, Series 2003A,
5.000%, 11/01/18
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/MULTIFAMILY - 1.8%
1,000 Mecklenburg County, North Carolina, FNMA Multifamily 7/13 at 105.00 AAA 1,003,340
Housing Revenue Bonds, Little Rock Apartments, Series 2003,
5.150%, 1/01/22 (Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/SINGLE FAMILY - 2.6%
1,410 North Carolina Housing Finance Agency, Home Ownership 7/09 at 100.00 AA 1,431,390
Revenue Bonds, 1998 Trust Agreement, Series 5A,
5.625%, 7/01/30 (Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
MATERIALS - 5.3%
1,400 Haywood County Industrial Facilities and Pollution Control 12/05 at 102.00 BBB 1,376,256
Financing Authority, North Carolina, Environmental
Improvement Revenue Bonds, Champion International
Corporation Project, Series 1995A, 5.750%, 12/01/25
(Alternative Minimum Tax)
1,500 Martin County Industrial Facilities and Pollution Control 9/04 at 100.00 BBB 1,513,770
Financing Authority, North Carolina, Solid Waste Disposal
Revenue Bonds, Weyerhaeuser Company, Series 1991,
7.250%, 9/01/14 (Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL - 15.4%
Lincoln County, North Carolina, General Obligation Bonds,
Series 2002A:
850 5.000%, 6/01/19 - FGIC Insured 6/12 at 101.00 AAA 883,422
900 5.000%, 6/01/20 - FGIC Insured 6/12 at 101.00 AAA 929,322
1,050 5.000%, 6/01/21 - FGIC Insured 6/12 at 101.00 AAA 1,077,962
1,000 Mecklenburg County, North Carolina, General Obligation 4/10 at 101.50 AAA 1,069,000
Public Improvement Bonds, Series 2000D, 5.000%, 4/01/13
1,000 North Carolina, General Obligation Bonds, Series 2000A, 9/10 at 102.00 AAA 1,061,020
5.100%, 9/01/16
500 North Carolina, General Obligation Bonds, Series 2004A, 3/14 at 100.00 AAA 513,370
5.000%, 3/01/22 (DD, settling 6/01/04)
2,000 Puerto Rico, Public Improvement General Obligation Refunding No Opt. Call AAA 2,419,280
Bonds, Series 1997, 6.500%, 7/01/15 - MBIA Insured
400 Raleigh, North Carolina, General Obligation Bonds, 6/12 at 100.00 AAA 412,128
Series 2002, 5.000%, 6/01/21
30
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT (000) DESCRIPTION(1) PROVISIONS* RATINGS** VALUE
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED - 45.2%
$ 3,900 Cary, North Carolina, General Obligation Water and Sewer 3/11 at 102.00 AAA $ 4,064,190
Bonds, Series 2001, 5.000%, 3/01/20
1,550 Cary, North Carolina, Certificates of Participation, Public 12/12 at 100.00 AA+ 1,611,504
Improvement Projects, Series 2002A, 5.000%, 12/01/17
1,500 Centennial Authority, North Carolina, Hotel Tax Revenue Bonds, 9/07 at 102.00 AAA 1,547,040
Arena Project, Series 1997, 5.125%, 9/01/19 - FSA Insured
3,750 Charlotte, North Carolina, Certificates of Participation, 6/13 at 100.00 AA+ 3,663,000
Governmental Facilities Projects, Series 2003G, 5.000%, 6/01/33
3,000 Dare County, North Carolina, Certificates of Participation, 12/12 at 100.00 AAA 3,021,690
Series 2002, 5.000%, 6/01/23 - AMBAC Insured
360 Duplin County, North Carolina, Refunding Certificates of No Opt. Call AAA 389,056
Participation, Series 2002, 5.000%, 9/01/12 - AMBAC Insured
Forsyth County, North Carolina, Certificates of Participation,
Public Facilities and Equipment Project, Series 2002:
1,325 5.125%, 1/01/16 1/13 at 101.00 AA+ 1,407,561
770 5.250%, 1/01/19 1/13 at 101.00 AA+ 812,404
1,235 5.250%, 1/01/23 1/13 at 101.00 AA+ 1,275,829
1,000 North Carolina, Certificates of Participation, Repair and 6/14 at 100.00 AA+ 1,022,530
Renovation Project, Series 2004B, 5.000%, 6/01/20
2,000 Puerto Rico Municipal Finance Agency, Series 2002A, 8/12 at 100.00 AAA 2,005,580
5.000%, 8/01/27 - FSA Insured
2,000 Rutherford County, North Carolina, Certificates of Participation, 9/12 at 101.00 AAA 2,034,700
Series 2002, 5.000%, 9/01/21 - AMBAC Insured
1,785 Union County, North Carolina, Certificates of Participation, 6/13 at 101.00 AAA 1,831,374
Series 2003, 5.000%, 6/01/20 - AMBAC Insured
------------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION - 9.3%
Raleigh Durham Airport Authority, North Carolina, Airport
Revenue Bonds, Series 2001A:
1,780 5.250%, 11/01/15 - FGIC Insured 5/11 at 101.00 Aaa 1,883,293
3,100 5.000%, 11/01/20 - FGIC Insured 5/11 at 101.00 Aaa 3,165,968
------------------------------------------------------------------------------------------------------------------------------------
UTILITIES - 15.3%
4,000 North Carolina Eastern Municipal Power Agency, Power System 7/04 at 100.00 AAA 4,010,200
Revenue Refunding Bonds, Series 1993B, 5.500%, 1/01/17 -
FGIC Insured
2,665 North Carolina Municipal Power Agency 1, Catawba Electric 1/13 at 100.00 AAA 2,861,997
Revenue Bonds, Series 2003A, 5.250%, 1/01/15 -
AMBAC Insured
1,400 Wake County Industrial Facilities and Pollution Control 2/12 at 101.00 A3 1,464,008
Financing Authority, North Carolina, Revenue Refunding
Bonds, Carolina Power and Light Company, Series 2002,
5.375%, 2/01/17
------------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER - 25.7%
750 Broad River Water Authority, North Carolina, Water System 6/10 at 101.00 Aaa 771,113
Revenue Bonds, Series 2000, 5.375%, 6/01/26 - MBIA Insured
Charlotte, North Carolina, Water and Sewer System Revenue
Bonds, Series 2001:
750 5.125%, 6/01/26 6/11 at 101.00 AAA 758,490
1,780 5.125%, 6/01/26 - FGIC Insured 6/11 at 101.00 AAA 1,800,150
Durham County, North Carolina, Enterprise System Revenue
Bonds, Series 2002:
680 5.000%, 6/01/16 - MBIA Insured 6/13 at 100.00 AAA 716,020
710 5.000%, 6/01/17 - MBIA Insured 6/13 at 100.00 AAA 742,206
300 5.000%, 6/01/18 - MBIA Insured 6/13 at 100.00 AAA 311,796
2,500 Kannapolis, North Carolina, Water and Sewerage System 2/12 at 101.00 AAA 2,512,775
Revenue Bonds, Series 2001B, 5.250%, 2/01/26 (Alternative
Minimum Tax) - FSA Insured
1,000 Orange Water and Sewer Authority, North Carolina, Water 7/11 at 101.00 AA+ 1,000,280
and Sewerage System Revenue Bonds, Series 2001,
5.000%, 7/01/26
31
Nuveen North Carolina Dividend Advantage Municipal Fund 3 (NII) (continued)
Portfolio of INVESTMENTS May 31, 2004
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT (000) DESCRIPTION(1) PROVISIONS* RATINGS** VALUE
------------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER (continued)
Winston-Salem, North Carolina, Water and Sewerage System
Revenue Bonds, Series 2002A:
$ 500 5.000%, 6/01/17 6/12 at 100.00 AAA $ 520,920
4,715 5.000%, 6/01/19 6/12 at 100.00 AAA 4,860,832
------------------------------------------------------------------------------------------------------------------------------------
$ 79,715 Total Long-Term Investments (cost $81,826,378) - 149.2% 81,290,775
=============-----------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 2.2% 1,190,730
--------------------------------------------------------------------------------------------------------------------
Preferred Shares, at Liquidation Value - (51.4)% (28,000,000)
--------------------------------------------------------------------------------------------------------------------
Net Assets Applicable to Common Shares - 100% $ 54,481,505
====================================================================================================================
(1) All percentages shown in the Portfolio of Investments
are based on net assets applicable to Common shares.
* Optional Call Provisions (not covered by the report of
independent 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.
** Ratings (not covered by the report of independent
registered public accounting firm): Using the higher of
Standard & Poor's or Moody's rating.
(DD) Security purchased on a delayed delivery basis.
See accompanying notes to financial statements.
32
Statement of
ASSETS AND LIABILITIES May 31, 2004
GEORGIA GEORGIA GEORGIA
PREMIUM DIVIDEND DIVIDEND
INCOME ADVANTAGE ADVANTAGE 2
(NPG) (NZX) (NKG)
------------------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments, at market value (cost $78,241,627, $41,953,209
and $95,262,131, respectively) 80,646,823 $42,219,835 $94,055,539
Cash 327,957 496,535 131,101
Receivables:
Interest 1,493,399 662,385 1,667,922
Investments sold -- -- --
Other assets 2,250 286 4,322
------------------------------------------------------------------------------------------------------------------------------------
Total assets 82,470,429 43,379,041 95,858,884
------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Payable for investments purchased -- -- --
Accrued expenses:
Management fees 45,275 12,819 26,680
Other 17,186 15,263 17,109
Preferred share dividends payable 1,373 3,018 5,280
------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 63,834 31,100 49,069
------------------------------------------------------------------------------------------------------------------------------------
Preferred shares, at liquidation value 27,800,000 15,000,000 33,000,000
------------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common shares $54,606,595 $28,347,941 $62,809,815
====================================================================================================================================
Common shares outstanding 3,788,040 1,959,759 4,553,660
====================================================================================================================================
Net asset value per Common share outstanding
(net assets applicable to Common shares,
divided by Common shares outstanding) $ 14.42 $ 14.47 $ 13.79
====================================================================================================================================
NET ASSETS APPLICABLE TO COMMON SHARES CONSIST OF:
------------------------------------------------------------------------------------------------------------------------------------
Common shares, $.01 par value per share $ 37,880 $ 19,598 $ 45,537
Paid-in surplus 52,105,543 27,735,924 64,257,762
Undistributed (Over-distribution of) net investment income 652,523 360,398 (131,217)
Accumulated net realized gain (loss) from investments (594,547) (34,605) (155,675)
Net unrealized appreciation (depreciation) of investments 2,405,196 266,626 (1,206,592)
------------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common shares $54,606,595 $28,347,941 $62,809,815
====================================================================================================================================
Authorized shares:
Common Unlimited Unlimited Unlimited
Preferred Unlimited Unlimited Unlimited
====================================================================================================================================
See accompanying notes to financial statements.
33
Statement of
ASSETS AND LIABILITIES May 31, 2004 (continued)
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 market value (cost $131,989,999, $48,008,419,
$80,593,061 and $81,826,378, respectively) $136,444,553 $48,909,985 $82,574,917 $81,290,775
Cash 366,442 321,546 483,699 339,854
Receivables:
Interest 2,562,373 902,935 1,327,731 1,401,627
Investments sold 1,037,003 -- -- --
Other assets 8,258 8,793 217 4,313
------------------------------------------------------------------------------------------------------------------------------------
Total assets 140,418,629 50,143,259 84,386,564 83,036,569
------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Payable for investments purchased 1,568,836 -- 1,027,070 513,535
Accrued expenses:
Management fees 76,006 14,800 24,572 22,975
Other 28,032 15,061 18,797 14,530
Preferred share dividends payable 4,867 2,908 4,906 4,024
------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 1,677,741 32,769 1,075,345 555,064
------------------------------------------------------------------------------------------------------------------------------------
Preferred shares, at liquidation value 46,800,000 17,000,000 28,000,000 28,000,000
------------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common shares $ 91,940,888 $33,110,490 $55,311,219 $54,481,505
====================================================================================================================================
Common shares outstanding 6,321,074 2,249,045 3,735,591 3,922,225
====================================================================================================================================
Net asset value per Common share outstanding
(net assets applicable to Common shares,
divided by Common shares outstanding) $ 14.55 $ 14.72 $ 14.81 $ 13.89
====================================================================================================================================
NET ASSETS APPLICABLE TO COMMON SHARES CONSIST OF:
------------------------------------------------------------------------------------------------------------------------------------
Common shares, $.01 par value per share $ 63,211 $ 22,490 $ 37,356 $ 39,222
Paid-in surplus 87,337,797 31,865,056 52,962,322 55,339,395
Undistributed (Over-distribution of) net investment income 996,809 441,273 300,170 (6,154)
Accumulated net realized gain (loss) from investments (911,483) (119,895) 29,515 (355,355)
Net unrealized appreciation (depreciation) of investments 4,454,554 901,566 1,981,856 (535,603)
------------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common shares $ 91,940,888 $33,110,490 $55,311,219 $54,481,505
====================================================================================================================================
Authorized shares:
Common Unlimited Unlimited Unlimited Unlimited
Preferred Unlimited Unlimited Unlimited Unlimited
====================================================================================================================================
See accompanying notes to financial statements.
34
Statement of
OPERATIONS Year Ended May 31, 2004
GEORGIA GEORGIA GEORGIA
PREMIUM DIVIDEND DIVIDEND
INCOME ADVANTAGE ADVANTAGE 2
(NPG) (NZX) (NKG)
------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME $4,376,443 $2,143,230 $4,471,696
------------------------------------------------------------------------------------------------------------------------------------
EXPENSES
Management fees 546,917 288,570 639,024
Preferred shares - auction fees 69,765 37,643 82,966
Preferred shares - dividend disbursing agent fees 10,028 10,028 10,028
Shareholders' servicing agent fees and expenses 6,778 884 235
Custodian's fees and expenses 18,416 9,047 22,587
Trustees' fees and expenses 1,971 1,020 1,707
Professional fees 11,301 9,871 12,115
Shareholders' reports - printing and mailing expenses 12,320 3,516 9,688
Stock exchange listing fees 231 124 577
Investor relations expense 4,171 1,911 9,082
Other expenses 11,308 9,862 9,138
------------------------------------------------------------------------------------------------------------------------------------
Total expenses before custodian fee credit and expense reimbursement 693,206 372,476 797,147
Custodian fee credit (3,588) (2,281) (5,019)
Expense reimbursement -- (133,186) (314,597)
------------------------------------------------------------------------------------------------------------------------------------
Net expenses 689,618 237,009 477,531
------------------------------------------------------------------------------------------------------------------------------------
Net investment income 3,686,825 1,906,221 3,994,165
------------------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENTS
Net realized gain (loss) from investments (142,352) (34,604) (155,715)
Change in net unrealized appreciation (depreciation) of investments (3,536,134) (2,293,885) (5,355,917)
------------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) from investments (3,678,486) (2,328,489) (5,511,632)
------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO PREFERRED SHAREHOLDERS
From net investment income (189,236) (108,936) (250,342)
From accumulated net realized gains from investments -- (1,918) (10,400)
------------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets applicable to Common shares from
distributions to Preferred shareholders (189,236) (110,854) (260,742)
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets applicable to Common shares
from operations $ (180,897) $ (533,122) $(1,778,209)
====================================================================================================================================
See accompanying notes to financial statements.
35
Statement of
OPERATIONS Year Ended May 31, 2004 (continued)
NORTH NORTH NORTH NORTH
CAROLINA CAROLINA CAROLINA CAROLINA
PREMIUM DIVIDEND DIVIDEND DIVIDEND
INCOME ADVANTAGE ADVANTAGE 2 ADVANTAGE 3
(NNC) (NRB) (NNO) (NII)
------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME $ 7,190,590 $ 2,464,255 $ 3,965,881 $ 3,930,574
------------------------------------------------------------------------------------------------------------------------------------
EXPENSES
Management fees 919,034 333,057 554,241 548,714
Preferred shares - auction fees 117,447 42,662 70,395 70,267
Preferred shares - dividend disbursing agent fees 10,028 10,028 10,028 10,028
Shareholders' servicing agent fees and expenses 14,334 610 603 810
Custodian's fees and expenses 33,136 11,424 20,806 18,836
Trustees' fees and expenses 3,123 1,000 2,084 1,899
Professional fees 13,656 9,757 10,953 12,097
Shareholders' reports - printing and mailing expenses 20,844 3,578 11,604 10,072
Stock exchange listing fees 11,073 132 204 497
Investor relations expense 6,827 2,404 8,220 8,148
Other expenses 13,040 9,130 10,389 7,908
------------------------------------------------------------------------------------------------------------------------------------
Total expenses before custodian fee credit and expense reimbursement 1,162,542 423,782 699,527 689,276
Custodian fee credit (8,821) (4,270) (2,355) (4,850)
Expense reimbursement -- (153,719) (255,803) (270,136)
------------------------------------------------------------------------------------------------------------------------------------
Net expenses 1,153,721 265,793 441,369 414,290
------------------------------------------------------------------------------------------------------------------------------------
Net investment income 6,036,869 2,198,462 3,524,512 3,516,284
------------------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENTS
Net realized gain (loss) from investments 1,150,011 (112,796) 29,594 (355,355)
Change in net unrealized appreciation (depreciation) of investments (7,239,557) (2,363,263) (4,418,430) (3,908,003)
------------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) from investments (6,089,546) (2,476,059) (4,388,836) (4,263,358)
------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO PREFERRED SHAREHOLDERS
From net investment income (386,028) (107,525) (219,210) (258,138)
From accumulated net realized gains from investments -- (9,400) (6,486) (3,015)
------------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets applicable to Common shares from
distributions to Preferred shareholders (386,028) (116,925) (225,696) (261,153)
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets applicable to Common shares
from operations $ (438,705) $ (394,522) $(1,090,020) $(1,008,227)
====================================================================================================================================
See accompanying notes to financial statements.
36
Statement of
CHANGES IN NET ASSETS
GEORGIA
GEORGIA GEORGIA DIVIDEND
PREMIUM INCOME (NPG) DIVIDEND ADVANTAGE (NZX) ADVANTAGE 2 (NKG)
---------------------------- --------------------------- ------------------------------
FOR THE
PERIOD 9/25/02
(COMMENCEMENT
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED OF OPERATIONS)
5/31/04 5/31/03 5/31/04 5/31/03 5/31/04 THROUGH 5/31/03
------------------------------------------------------------------------------------------------------------------------------------
OPERATIONS
Net investment income $ 3,686,825 $ 3,638,676 $ 1,906,221 $ 1,870,728 $ 3,994,165 $ 2,114,510
Net realized gain (loss) from
investments (142,352) 920,606 (34,604) 660,108 (155,715) 109,478
Change in net unrealized
appreciation (depreciation)
of investments (3,536,134) 2,936,582 (2,293,885) 2,587,026 (5,355,917) 4,149,325
Distributions to Preferred
Shareholders:
From net investment income (189,236) (258,111) (108,936) (127,078) (250,342) (195,435)
From accumulated net realized gains
from investments -- -- (1,918) (35,847) (10,400) --
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
applicable to Common shares
from operations (180,897) 7,237,753 (533,122) 4,954,937 (1,778,209) 6,177,878
------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO COMMON SHAREHOLDERS
From net investment income (3,423,438) (3,254,832) (1,704,122) (1,579,528) (3,660,472) (2,133,603)
From accumulated net realized gains
from investment transactions -- -- (26,640) (250,165) (99,254) --
------------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets applicable to
Common shares from distributions
to Common shareholders (3,423,438) (3,254,832) (1,730,762) (1,829,693) (3,759,726) (2,133,603)
------------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
Common shares:
Net proceeds from sale of shares -- -- 3,771 -- -- 64,899,300
Net proceeds from shares
issued to shareholders due to
reinvestment of distributions 160,945 157,705 33,434 15,101 32,954 63,231
Preferred shares offering costs -- -- (1,870) 54,759 (10,285) (782,000)
------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets applicable
to Common shares from capital
share transactions 160,945 157,705 35,335 69,860 22,669 64,180,531
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
applicable to Common shares (3,443,390) 4,140,626 (2,228,549) 3,195,104 (5,515,266) 68,224,806
Net assets applicable to Common
shares at the beginning
of period 58,049,985 53,909,359 30,576,490 27,381,386 68,325,081 100,275
------------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common
shares at the end of period $54,606,595 $58,049,985 $28,347,941 $30,576,490 $62,809,815 $68,325,081
====================================================================================================================================
Undistributed (Over-distribution of)
net investment income at the
end of period $ 652,523 $ 596,770 $ 360,398 $ 267,235 $ (131,217) $ (214,528)
====================================================================================================================================
See accompanying notes to financial statements.
37
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
5/31/04 5/31/03 5/31/04 5/31/03
------------------------------------------------------------------------------------------------------------------------------------
OPERATIONS
Net investment income $ 6,036,869 $ 6,171,387 $ 2,198,462 $ 2,230,155
Net realized gain (loss) from investments 1,150,011 900,218 (112,796) 554,560
Change in net unrealized appreciation
(depreciation) of investments (7,239,557) 7,102,237 (2,363,263) 2,922,001
Distributions to Preferred Shareholders:
From net investment income (386,028) (455,407) (107,525) (137,647)
From accumulated net realized gains
from investments -- -- (9,400) (39,141)
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
applicable to Common shares
from operations (438,705) 13,718,435 (394,522) 5,529,928
------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO COMMON SHAREHOLDERS
From net investment income (5,617,376) (5,417,766) (2,041,238) (1,930,686)
From accumulated net realized gains
from investment transactions -- -- (160,089) (293,381)
------------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets applicable to
Common shares from distributions
to Common shareholders (5,617,376) (5,417,766) (2,201,327) (2,224,067)
------------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
Common shares:
Net proceeds from sale of shares -- -- 1,664 --
Net proceeds from shares
issued to shareholders due to
reinvestment of distributions 211,834 198,718 113,571 112,298
Preferred shares offering costs -- -- -- 24,922
------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets applicable
to Common shares from capital
share transactions 211,834 198,718 115,235 137,220
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
applicable to Common shares (5,844,247) 8,499,387 (2,480,614) 3,443,081
Net assets applicable to Common
shares at the beginning of period 97,785,135 89,285,748 35,591,104 32,148,023
------------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common
shares at the end of period $91,940,888 $97,785,135 $33,110,490 $35,591,104
====================================================================================================================================
Undistributed (Over-distribution of)
net investment income at the
end of period $ 996,809 $ 1,032,400 $ 441,273 $ 391,574
====================================================================================================================================
See accompanying notes to financial statements.
38
NORTH CAROLINA NORTH CAROLINA
DIVIDEND ADVANTAGE 2 (NNO) DIVIDEND ADVANTAGE 3 (NII)
--------------------------- ------------------------------
FOR THE
PERIOD 9/25/02
(COMMENCEMENT
YEAR ENDED YEAR ENDED YEAR ENDED OF OPERATIONS)
5/31/04 5/31/03 5/31/04 THROUGH 5/31/03
------------------------------------------------------------------------------------------------------------------------------------
OPERATIONS
Net investment income $ 3,524,512 $ 3,526,406 $ 3,516,284 $ 1,900,802
Net realized gain (loss) from investments 29,594 713,547 (355,355) 30,673
Change in net unrealized appreciation
(depreciation) of investments (4,418,430) 5,899,711 (3,908,003) 3,372,400
Distributions to Preferred Shareholders:
From net investment income (219,210) (273,894) (258,138) (174,006)
From accumulated net realized gains
from investments (6,486) (71,543) (3,015) --
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
applicable to Common shares
from operations (1,090,020) 9,794,227 (1,008,227) 5,129,869
------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO COMMON SHAREHOLDERS
From net investment income (3,186,908) (3,067,763) (3,152,705) (1,838,391)
From accumulated net realized gains
from investment transactions (106,264) (482,556) (27,839) --
------------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets applicable
to Common shares from distributions
to Common shareholders (3,293,172) (3,550,319) (3,180,544) (1,838,391)
------------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
Common shares:
Net proceeds from sale of shares 2,456 -- -- 55,929,188
Net proceeds from shares
issued to shareholders due to
reinvestment of distributions 50,055 4,123 30,033 10,977
Preferred shares offering costs -- 10,548 (13,175) (678,500)
------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets applicable
to Common shares from capital
share transactions 52,511 14,671 16,858 55,261,665
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
applicable to Common shares (4,330,681) 6,258,579 (4,171,913) 58,553,143
Net assets applicable to Common
shares at the beginning of period 59,641,900 53,383,321 58,653,418 100,275
------------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common
shares at the end of period $55,311,219 $59,641,900 $54,481,505 $58,653,418
====================================================================================================================================
Undistributed (Over-distribution of)
net investment income at the
end of period $ 300,170 $ 181,840 $ (6,154) $ (111,595)
====================================================================================================================================
See accompanying notes to financial statements.
39
Notes to
FINANCIAL STATEMENTS
1. GENERAL INFORMATION AND SIGNIFICANT ACCOUNTING POLICIES
The state Funds (the "Funds") covered in this report and their corresponding
Common share stock exchange symbols are Nuveen Georgia Premium Income Municipal
Fund (NPG), Nuveen Georgia Dividend Advantage Municipal Fund (NZX), Nuveen
Georgia Dividend Advantage Municipal Fund 2 (NKG), Nuveen North Carolina Premium
Income Municipal Fund (NNC), Nuveen North Carolina Dividend Advantage Municipal
Fund (NRB), Nuveen North Carolina Dividend Advantage Municipal Fund 2 (NNO) and
Nuveen North Carolina Dividend Advantage Municipal Fund 3 (NII). Common shares
of Georgia Premium Income (NPG), Georgia Dividend Advantage (NZX), Georgia
Dividend Advantage 2 (NKG), North Carolina Dividend Advantage (NRB), North
Carolina Dividend Advantage 2 (NNO) and North Carolina Dividend Advantage 3
(NII) are traded on the American Stock Exchange while Common shares of North
Carolina Premium Income (NNC) is 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.
Prior to the commencement of operations of Georgia Dividend Advantage 2 (NKG)
and North Carolina Dividend Advantage 3 (NII), each Fund had no operations other
than those related to organizational matters, the initial capital contribution
of $100,275 per Fund by Nuveen Advisory Corp. (the "Adviser"), a wholly owned
subsidiary of Nuveen Investments, Inc., and the recording of the organization
expenses ($11,500 per Fund) and their reimbursement by Nuveen Investments, LLC,
also a wholly owned subsidiary of Nuveen Investments, Inc.
Each Fund seeks to provide current income exempt from both regular federal and
designated state income taxes by investing primarily in a diversified portfolio
of municipal obligations issued by state and local government authorities within
a single state.
The following is a summary of significant accounting policies followed by the
Funds in the preparation of their financial statements in accordance with U.S.
generally accepted accounting principles.
Securities 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 price quotes
are not readily available (which is usually the case for municipal securities),
the pricing service establishes fair market value based on yields or prices of
municipal bonds of comparable quality, type of issue, coupon, maturity and
rating, indications of value from securities dealers, evaluations of anticipated
cash flows or collateral and general market conditions. If it is determined that
market prices for a security are unavailable or inappropriate, the Board of
Trustees of the Funds, or its designee, may establish a fair value for the
security. Temporary investments in securities that have variable rate and demand
features qualifying them as short-term securities are valued at amortized cost,
which approximates market value.
Securities Transactions
Securities transactions are recorded on a trade date basis. Realized gains and
losses from such transactions are determined on the specific identification
method. Securities purchased or sold on a when-issued or delayed delivery basis
may have extended settlement periods. The securities so purchased are subject to
market fluctuation during this period. The Funds have instructed the custodian
to segregate assets with a current value at least equal to the amount of the
when-issued and delayed delivery purchase commitments. At May 31, 2004, North
Carolina Premium Income (NNC), North Carolina Dividend Advantage 2 (NNO) and
North Carolina Dividend Advantage 3 (NII) had outstanding delayed delivery
purchase commitments of $513,535, $1,027,070 and $513,535, respectively. There
were no such outstanding purchase commitments in any of the other Funds.
Investment Income
Interest income, which includes the amortization of premiums and accretion of
discounts for financial reporting purposes, is recorded on an accrual basis.
Income Taxes
Each Fund is a separate taxpayer for federal income tax purposes. Each Fund
intends to comply with the requirements of the Internal Revenue Code applicable
to regulated investment companies and to distribute all of its net investment
income to its shareholders. 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. All monthly tax-exempt income dividends paid
during the fiscal year ended May 31, 2004, have been designated Exempt Interest
Dividends.
40
Dividends and Distributions to Common Shareholders
Dividends from tax-exempt net investment income are declared monthly. Net
realized capital gains and/or market discount from investment transactions, if
any, are distributed to shareholders not less frequently than annually.
Furthermore, capital gains are distributed only to the extent they exceed
available capital loss carryforwards.
Distributions to Common shareholders of tax-exempt net investment income, net
realized capital gains and/or market discount, if any, are recorded on the
ex-dividend date. The amount and timing of distributions are determined in
accordance with federal income tax regulations, which may differ from U.S.
generally accepted accounting principles.
Preferred Shares
The Funds have issued and outstanding $25,000 stated value Preferred shares.
Each Fund's Preferred shares are issued in one Series. The dividend rate on each
Series may change every seven days, as set pursuant to a dutch auction process
by the auction agent, and is payable at or near the end of each rate period. The
number of Preferred shares outstanding for each Fund is as follows:
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 --
=========================================================================================================
Effective November 15, 2002, Georgia Dividend Advantage 2 (NKG) issued 1,320
Series F, $25,000 stated value Preferred shares.
Effective November 15, 2002, North Carolina Dividend Advantage 3 (NII) issued
1,120 Series W, $25,000 stated value Preferred shares.
Derivative Financial Instruments
The Funds may invest in certain derivative financial instruments including
futures, forward, swap and option contracts, and other financial instruments
with similar characteristics. Although the Funds are authorized to invest in
such financial instruments, and may do so in the future, they did not make any
such investments during the fiscal year ended May 31, 2004.
Custodian Fee Credit
Each Fund has an arrangement with the custodian bank whereby certain custodian
fees and expenses are reduced by credits earned on each Fund's cash on deposit
with the bank. Such deposit arrangements are an alternative to overnight
investments.
Offering Costs
Nuveen Investments, LLC has agreed to pay all Common share offering costs (other
than the sales load) that exceed $.03 per Common share for Georgia Dividend
Advantage 2 (NKG) and North Carolina Dividend Advantage 3 (NII). Georgia
Dividend Advantage 2's (NKG) and North Carolina Dividend Advantage 3's (NII)
share of Common share offering costs ($136,200 and $117,375, respectively) were
recorded as a reduction of the proceeds from the sale of Common shares.
Costs incurred by Georgia Dividend Advantage 2 (NKG) and North Carolina Dividend
Advantage 3 (NII) in connection with their offering of Preferred shares
($792,285 and $691,675, respectively) were recorded as a reduction to paid-in
surplus.
Indemnifications
Under the Funds' organizational documents, its 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.
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.
41
Notes to
FINANCIAL STATEMENTS (continued)
2. FUND SHARES
Transactions in Common and Preferred shares were as follows:
GEORGIA GEORGIA DIVIDEND GEORGIA DIVIDEND
PREMIUM INCOME (NPG) ADVANTAGE (NZX) ADVANTAGE 2 (NKG)
----------------------- ---------------------- -----------------------------
FOR THE
PERIOD 9/25/02
(COMMENCEMENT
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED OF OPERATIONS)
5/31/04 5/31/03 5/31/04 5/31/03 5/31/04 THROUGH 5/31/03
--------------------------------------------------------------------------------------------------------------
Common shares:
Shares sold -- -- -- -- -- 4,540,000
Shares issued to shareholders
due to reinvestment of
distributions 9,866 9,788 2,157 1,266 2,243 4,417
--------------------------------------------------------------------------------------------------------------
9,866 9,788 2,157 1,266 2,243 4,544,417
==============================================================================================================
Preferred shares sold -- -- -- -- -- 1,320
==============================================================================================================
NORTH CAROLINA NORTH CAROLINA
PREMIUM INCOME (NNC) DIVIDEND ADVANTAGE (NRB)
---------------------- -------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
5/31/04 5/31/03 5/31/04 5/31/03
--------------------------------------------------------------------------------------------------------------
Common shares:
Shares sold -- -- -- --
Shares issued to shareholders
due to reinvestment of
distributions 12,801 12,357 6,918 7,322
--------------------------------------------------------------------------------------------------------------
12,801 12,357 6,918 7,322
==============================================================================================================
Preferred shares sold -- -- -- --
==============================================================================================================
NORTH CAROLINA NORTH CAROLINA
DIVIDEND DIVIDEND
ADVANTAGE 2 (NNO) ADVANTAGE 3 (NII)
---------------------- ----------------------------
FOR THE
PERIOD 9/25/02
(COMMENCEMENT
YEAR ENDED YEAR ENDED YEAR ENDED OF OPERATIONS)
5/31/04 5/31/03 5/31/04 THROUGH 5/31/03
--------------------------------------------------------------------------------------------------------------
Common shares:
Shares sold -- -- -- 3,912,500
Shares issued to shareholders
due to reinvestment of
distributions 3,167 424 1,990 735
--------------------------------------------------------------------------------------------------------------
3,167 424 1,990 3,913,235
==============================================================================================================
Preferred shares sold -- -- -- 1,120
==============================================================================================================
42
3. SECURITIES TRANSACTIONS
Purchases and sales (including maturities) of investments in long-term municipal
securities for the fiscal year ended May 31, 2004, were as follows:
GEORGIA GEORGIA GEORGIA
PREMIUM DIVIDEND DIVIDEND
INCOME ADVANTAGE ADVANTAGE 2
(NPG) (NZX) (NKG)
---------------------------------------------------------------------------------------------------------
Purchases $10,571,972 $2,075,474 $12,533,037
Sales and maturities 10,283,187 2,212,268 11,546,981
=========================================================================================================
NORTH NORTH NORTH NORTH
CAROLINA CAROLINA CAROLINA CAROLINA
PREMIUM DIVIDEND DIVIDEND DIVIDEND
INCOME ADVANTAGE ADVANTAGE 2 ADVANTAGE 3
(NNC) (NRB) (NNO) (NII)
---------------------------------------------------------------------------------------------------------
Purchases $29,400,270 $7,361,174 $12,493,616 $12,054,018
Sales and maturities 27,402,158 7,367,253 11,335,434 11,872,943
=========================================================================================================
4. INCOME TAX INFORMATION
The following information is presented on an income tax basis. Differences
between amounts for financial statement and federal income tax purposes are
primarily due to timing differences in recognizing income on taxable market
discount securities and timing differences in recognizing certain gains and
losses on security transactions.
At May 31, 2004, the cost of investments were as follows:
GEORGIA GEORGIA GEORGIA
PREMIUM DIVIDEND DIVIDEND
INCOME ADVANTAGE ADVANTAGE 2
(NPG) (NZX) (NKG)
----------------------------------------------------------------------------------------------------------
Cost of investments $78,211,020 $41,953,209 $95,261,977
==========================================================================================================
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 $131,930,226 $48,007,526 $80,586,527 $81,826,378
==========================================================================================================
Gross unrealized appreciation and gross unrealized depreciation of investments
at May 31, 2004, were as follows:
GEORGIA GEORGIA GEORGIA
PREMIUM DIVIDEND DIVIDEND
INCOME ADVANTAGE ADVANTAGE 2
(NPG) (NZX) (NKG)
-----------------------------------------------------------------------------------------------------------
Gross unrealized:
Appreciation $2,912,724 $538,884 $ 284,772
Depreciation (476,921) (272,258) (1,491,210)
-----------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investments $2,435,803 $266,626 $(1,206,438)
===========================================================================================================
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 $5,182,619 $919,209 $2,060,022 $ 412,252
Depreciation (668,292) (16,750) (71,632) (947,855)
-----------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation)
of investments $4,514,327 $902,459 $1,988,390 $(535,603)
===========================================================================================================
43
Notes to
FINANCIAL STATEMENTS (continued)
The tax components of undistributed net investment income and net realized gains
at May 31, 2004, were as follows:
GEORGIA GEORGIA GEORGIA
PREMIUM DIVIDEND DIVIDEND
INCOME ADVANTAGE ADVANTAGE 2
(NPG) (NZX) (NKG)
---------------------------------------------------------------------------------------------------------
Undistributed net tax-exempt income $909,304 $506,476 $179,001
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 $1,412,820 $615,342 $567,505 $260,661
Undistributed net ordinary income * -- -- -- --
Undistributed net long-term capital gains -- -- 29,515 --
=========================================================================================================
* Net ordinary income consists of taxable market discount income and net
short-term capital gains, if any.
The tax character of distributions paid during the fiscal years ended May 31,
2004 and May 31, 2003, was designated for purposes of the dividends paid
deduction as follows:
GEORGIA GEORGIA GEORGIA
PREMIUM DIVIDEND DIVIDEND
INCOME ADVANTAGE ADVANTAGE 2
2004 (NPG) (NZX) (NKG)
---------------------------------------------------------------------------------------------------------
Distributions from net tax-exempt income $3,576,247 $1,804,473 $3,908,774
Distributions from net ordinary income * 25,456 -- 109,478
Distributions from net long-term capital gains -- 28,503 --
=========================================================================================================
NORTH NORTH NORTH NORTH
CAROLINA CAROLINA CAROLINA CAROLINA
PREMIUM DIVIDEND DIVIDEND DIVIDEND
INCOME ADVANTAGE ADVANTAGE 2 ADVANTAGE 3
2004 (NNC) (NRB) (NNO) (NII)
---------------------------------------------------------------------------------------------------------
Distributions from net tax-exempt income $5,990,683 $2,139,529 $3,390,258 $3,408,983
Distributions from net ordinary income * -- 66,536 76,010 30,673
Distributions from net long-term capital gains -- 102,835 36,895 --
=========================================================================================================
44
GEORGIA GEORGIA GEORGIA
PREMIUM DIVIDEND DIVIDEND
INCOME ADVANTAGE ADVANTAGE 2
2003 (NPG) (NZX) (NKG)
---------------------------------------------------------------------------------------------------------
Distributions from net tax-exempt income $3,506,728 $1,701,839 $2,020,705
Distributions from net ordinary income * -- 212,091 --
Distributions from net long-term capital gains -- 73,921 --
=========================================================================================================
NORTH NORTH NORTH NORTH
CAROLINA CAROLINA CAROLINA CAROLINA
PREMIUM DIVIDEND DIVIDEND DIVIDEND
INCOME ADVANTAGE ADVANTAGE 2 ADVANTAGE 3
2003 (NNC) (NRB) (NNO) (NII)
---------------------------------------------------------------------------------------------------------
Distributions from net tax-exempt income $5,826,633 $2,058,342 $3,348,540 $1,747,442
Distributions from net ordinary income * 22,385 -- 554,099 --
Distributions from net long-term capital gains -- 332,522 -- --
=========================================================================================================
* Net ordinary income consists of taxable market discount income and net
short-term capital gains, if any.
At May 31, 2004, 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 GEORGIA CAROLINA CAROLINA
PREMIUM DIVIDEND DIVIDEND PREMIUM DIVIDEND
INCOME ADVANTAGE ADVANTAGE 2 INCOME ADVANTAGE 3
(NPG) (NZX) (NKG) (NNC) (NII)
-----------------------------------------------------------------------------------------------------------
Expiration year:
2005 $340,685 $ -- $ -- $ 71,954 $ --
2006 -- -- -- -- --
2007 -- -- -- -- --
2008 129,908 -- -- 108,131 --
2009 -- -- -- 731,398 --
2010 -- -- -- -- --
2011 -- -- -- -- --
2012 123,954 70 155,675 -- 339,128
-----------------------------------------------------------------------------------------------------------
Total $594,547 $ 70 $155,675 $911,483 $339,128
===========================================================================================================
The following Funds have elected to defer net realized losses from investments
incurred from November 1, 2003 through May 31, 2004 ("post-October losses") in
accordance with Federal income tax regulations. The following post-October
losses are treated as having arisen in the following fiscal year:
NORTH NORTH
GEORGIA CAROLINA CAROLINA
DIVIDEND DIVIDEND DIVIDEND
ADVANTAGE ADVANTAGE ADVANTAGE 3
(NZX) (NRB) (NII)
--------------------------------------------------------------------------------
$34,535 $119,895 $16,228
================================================================================
5. MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Under Georgia Premium Income's (NPG) and North Carolina Premium Income's (NNC)
investment management agreements with the Adviser, each Fund pays an annual
management fee, payable monthly, at the rates set forth below, which are based
upon the average daily net assets (including net assets attributable to
Preferred shares) of each Fund as follows:
AVERAGE DAILY NET ASSETS (INCLUDING NET ASSETS
ATTRIBUTABLE TO PREFERRED SHARES) MANAGEMENT FEE
--------------------------------------------------------------------------------
For the first $125 million .6500%
For the next $125 million .6375
For the next $250 million .6250
For the next $500 million .6125
For the next $1 billion .6000
For the next $3 billion .5875
For net assets over $5 billion .5750
================================================================================
45
Notes to
FINANCIAL STATEMENTS (continued)
Under Georgia Dividend Advantage's (NZX), Georgia Dividend Advantage 2's (NKG),
North Carolina Dividend Advantage's (NRB), North Carolina Dividend Advantage 2's
(NNO) and North Carolina Dividend Advantage 3's (NII) investment management
agreements with the Adviser, each Fund pays an annual management fee, payable
monthly, at the rates set forth below, which are based upon the average daily
net assets (including net assets attributable to Preferred shares) of each Fund
as follows:
AVERAGE DAILY NET ASSETS (INCLUDING NET ASSETS
ATTRIBUTABLE TO PREFERRED SHARES) MANAGEMENT FEE
--------------------------------------------------------------------------------
For the first $125 million .6500%
For the next $125 million .6375
For the next $250 million .6250
For the next $500 million .6125
For the next $1 billion .6000
For net assets over $2 billion .5750
================================================================================
The management fee compensates the Adviser for overall investment advisory and
administrative services and general office facilities. The Funds pay no
compensation directly to those of its Trustees who are affiliated with the
Adviser or to their officers, all of whom receive remuneration for their
services to the Funds from the Adviser 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.
As approved by the Board of Trustees, a complex-wide fee schedule for all Funds
managed by the Adviser and its affiliates will go into effect on August 1, 2004.
The implementation of this complex-wide fee schedule is expected to result in a
marginal immediate decrease in the rate at which management fees are to be paid
by the Funds. As assets in the Nuveen Fund complex, grow, the management fee
rates to be paid by the Funds will decrease further. Under no circumstances will
the complex-wide fee schedule result in an increase in the rate at which
management fees would be paid by the Funds if the complex-wide fee schedule were
not implemented.
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.
46
The Adviser has not agreed to reimburse Georgia Dividend Advantage 2 (NKG) and
North Carolina Dividend Advantage 3 (NII) for any portion of its fees and
expenses beyond September 30, 2010.
For the first ten years of North Carolina Dividend Advantage's (NRB) operations,
the Adviser has agreed to reimburse the Fund, as a percentage of average daily
net assets (including net assets attributable to Preferred shares), for fees and
expenses in the amounts and for the time periods set forth below:
YEAR ENDING YEAR ENDING
JANUARY 31, JANUARY 31,
--------------------------------------------------------------------------------
2001* .30% 2007 .25%
2002 .30 2008 .20
2003 .30 2009 .15
2004 .30 2010 .10
2005 .30 2011 .05
2006 .30
================================================================================
* From the commencement of operations.
The Adviser has not agreed to reimburse North Carolina Dividend Advantage (NRB)
for any portion of its fees and expenses beyond January 31, 2011.
For the first ten years of North Carolina Dividend Advantage 2's (NNO)
operations, the Adviser has agreed to reimburse the Fund, as a percentage of
average daily net assets (including net assets attributable to Preferred
shares), for fees and expenses in the amounts and for the time periods set forth
below:
YEAR ENDING YEAR ENDING
NOVEMBER 30, NOVEMBER 30,
--------------------------------------------------------------------------------
2001* .30% 2007 .25%
2002 .30 2008 .20
2003 .30 2009 .15
2004 .30 2010 .10
2005 .30 2011 .05
2006 .30
================================================================================
* From the commencement of operations.
The Adviser has not agreed to reimburse North Carolina Dividend Advantage 2
(NNO) for any portion of its fees and expenses beyond November 30, 2011.
6. SUBSEQUENT EVENT
Distributions to Common Shareholders
The Funds declared Common share dividend distributions from their tax-exempt net
investment income which were paid on July 1, 2004, to shareholders of record on
June 15, 2004, 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 $.0755 $.0730 $.0670 $.0745 $.0765 $.0720 $.0670
=========================================================================================================
Swap Transactions
The following Funds entered into forward starting swap transactions for the
purpose of hedging their portfolio duration. The swap transactions will be
marked to market daily with the corresponding unrealized gain or loss reflected
in the Fund's NAV. The Funds entered into the forward starting swap transactions
on the dates and in the notational amounts as follows:
NORTH
CAROLINA
DIVIDEND
GEORGIA DIVIDEND GEORGIA DIVIDEND ADVANTAGE 3
ADVANTAGE (NZX) ADVANTAGE 2 (NKG) (NII)
---------------------------------------------------------------------------------------------------------------
Trade Date July 1, 2004 July 15, 2004 July 1, 2004 July 15, 2004 July 1, 2004
---------------------------------------------------------------------------------------------------------------
Notional Amount $51,500,000 $40,000,000 $51,500,000 $40,000,000 $51,500,000
===============================================================================================================
47
Financial
HIGHLIGHTS
Selected data for a Common share outstanding throughout each period:
Investment Operations Less Distributions
----------------------------------------------------------------- --------------------------------
Distributions Distributions
from Net from Net
Beginning Net Investment Capital Investment Capital
Common Realized/ Income to Gains to Income to Gains to
Share Net Unrealized Preferred Preferred Common Common
Net Asset Investment Investment Share- Share- Share- Share-
Value Income Gain (Loss) holders+ holders+ Total holders holders Total
====================================================================================================================================
GEORGIA PREMIUM
INCOME (NPG)
------------------------------------------------------------------------------------------------------------------------------------
2004 $15.36 $ .97 $ (.96) $(.05) $ -- $ (.04) $(.90) $ -- $(.90)
2003 14.31 .96 1.02 (.07) -- 1.91 (.86) -- (.86)
2002 14.15 1.02 .11 (.12) -- 1.01 (.85) -- (.85)
2001 12.80 1.06 1.35 (.26) -- 2.15 (.80) -- (.80)
2000 14.45 1.03 (1.65) (.23) -- (.85) (.80) -- (.80)
GEORGIA DIVIDEND
ADVANTAGE (NZX)
------------------------------------------------------------------------------------------------------------------------------------
Year Ended 5/31:
2004 15.62 .97 (1.18) (.06) -- (.27) (.87) (.01) (.88)
2003 14.00 .96 1.65 (.06) (.02) 2.53 (.81) (.13) (.94)
2002(a) 14.33 .58 (.19) (.06) -- .33 (.47) -- (.47)
GEORGIA DIVIDEND
ADVANTAGE 2 (NKG)
------------------------------------------------------------------------------------------------------------------------------------
Year Ended 5/31:
2004 15.01 .88 (1.23) (.05) -- (.40) (.80) (.02) (.82)
2003(b) 14.33 .47 .92 (.04) -- 1.35 (.47) -- (.47)
====================================================================================================================================
Total Returns
--------------------
Based
Offering on
Costs and Ending Common
Preferred Common Based Share
Share Share Ending on Net
Underwriting Net Asset Market Market Asset
Discounts Value Value Value** Value**
=====================================================================================
GEORGIA PREMIUM
INCOME (NPG)
-------------------------------------------------------------------------------------
2004 $ -- $14.42 $15.3000 (4.56)% (.23)%
2003 -- 15.36 16.9500 12.92 13.78
2002 -- 14.31 15.8300 8.98 7.32
2001 -- 14.15 15.3500 30.41 16.98
2000 -- 12.80 12.4375 (18.84) (5.87)
GEORGIA DIVIDEND
ADVANTAGE (NZX)
-------------------------------------------------------------------------------------
Year Ended 5/31:
2004 -- 14.47 13.9500 (5.15) (1.73)
2003 .03 15.62 15.5900 12.56 18.82
2002(a) (.19) 14.00 14.7400 1.42 1.02
GEORGIA DIVIDEND
ADVANTAGE 2 (NKG)
-------------------------------------------------------------------------------------
Year Ended 5/31:
2004 -- 13.79 13.2000 (6.57) (2.67)
2003(b) (.20) 15.01 14.9800 3.16 8.22
=====================================================================================
Ratios/Supplemental Data
------------------------------------------------------------------------------------------------
Before Credit/Reimbursement After Credit/Reimbursement***
------------------------------- -----------------------------
Ratio of Net Ratio of Net
Ratio of Investment Ratio of Investment
Ending Expenses Income to Expenses Income to
Net to Average Average to Average Average
Assets Net Assets Net Assets Net Assets Net Assets
Applicable Applicable Applicable Applicable Applicable Portfolio
to Common to Common to Common to Common to Common Turnover
Shares (000) Shares++ Shares++ Shares++ Shares++ Rate
=======================================================================================================================
GEORGIA PREMIUM
INCOME (NPG)
-----------------------------------------------------------------------------------------------------------------------
2004 $54,607 1.23% 6.54% 1.22% 6.55% 12%
2003 58,050 1.29 6.53 1.26 6.55 22
2002 53,909 1.37 7.12 1.35 7.13 37
2001 53,168 1.41 7.67 1.40 7.68 15
2000 47,991 1.43 7.73 1.40 7.76 17
GEORGIA DIVIDEND
ADVANTAGE (NZX)
-----------------------------------------------------------------------------------------------------------------------
Year Ended 5/31:
2004 28,348 1.27 6.03 .81 6.49 5
2003 30,576 1.31 6.00 .83 6.49 48
2002(a) 27,381 1.37* 5.70* .92* 6.16* 60
GEORGIA DIVIDEND
ADVANTAGE 2 (NKG)
-----------------------------------------------------------------------------------------------------------------------
Year Ended 5/31:
2004 62,810 1.22 5.63 .73 6.12 12
2003(b) 68,325 1.16* 4.36* .69* 4.84* 17
=======================================================================================================================
Preferred Shares at End of Period
-----------------------------------------
Aggregate Liquidation
Amount and Market Asset
Outstanding Value Coverage
(000) Per Share Per Share
=================================================================
GEORGIA PREMIUM
INCOME (NPG)
-----------------------------------------------------------------
2004 $27,800 $25,000 $74,107
2003 27,800 25,000 77,203
2002 27,800 25,000 73,480
2001 27,800 25,000 72,813
2000 27,800 25,000 68,157
GEORGIA DIVIDEND
ADVANTAGE (NZX)
-----------------------------------------------------------------
Year Ended 5/31:
2004 15,000 25,000 72,247
2003 15,000 25,000 75,961
2002(a) 15,000 25,000 70,636
GEORGIA DIVIDEND
ADVANTAGE 2 (NKG)
-----------------------------------------------------------------
Year Ended 5/31:
2004 33,000 25,000 72,583
2003(b) 33,000 25,000 76,761
=================================================================
* Annualized.
** Total Investment Return on Market Value is the combination of reinvested
dividend income, reinvested capital gains distributions, if any, and
changes in stock price per share. Total Return on Common Share Net Asset
Value is the combination of reinvested dividend income at net asset value,
reinvested capital gains distributions at net asset value, if any, and
changes in Common share net asset value per share. Total returns are not
annualized.
*** After custodian fee credit and expense reimbursement, where applicable.
+ The amounts shown are based on Common share equivalents.
++ Ratios do not reflect the effect of dividend payments to Preferred
shareholders; income ratios reflect income earned on assets attributable to
Preferred shares.
(a) For the period September 25, 2001 (commencement of operations) through May
31, 2002.
(b) For the period September 25, 2002 (commencement of operations) through May
31, 2003.
See accompanying notes to financial statements.
48-49 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 Net Investment Capital Investment Capital
Common Realized/ Income to Gains to Income to Gains to
Share Net Unrealized Preferred Preferred Common Common
Net Asset Investment Investment Share- Share- Share- Share-
Value Income Gain (Loss) holders+ holders+ Total holders holders Total
====================================================================================================================================
NORTH CAROLINA
PREMIUM INCOME (NNC)
------------------------------------------------------------------------------------------------------------------------------------
Year Ended 5/31:
2004 $15.50 $ .95 $ (.95) $(.06) $ -- $ (.06) $(.89) $ -- $(.89)
2003 14.18 .98 1.27 (.07) -- 2.18 (.86) -- (.86)
2002 13.94 1.02 .15 (.13) -- 1.04 (.80) -- (.80)
2001 12.62 1.03 1.31 (.27) -- 2.07 (.75) -- (.75)
2000 14.28 1.02 (1.61) (.26) -- (.85) (.81) -- (.81)
NORTH CAROLINA
DIVIDEND ADVANTAGE (NRB)
------------------------------------------------------------------------------------------------------------------------------------
Year Ended 5/31:
2004 15.87 .98 (1.10) (.05) -- (.17) (.91) (.07) (.98)
2003 14.39 1.00 1.54 (.06) (.02) 2.46 (.86) (.13) (.99)
2002 13.90 1.06 .38 (.13) -- 1.31 (.82) -- (.82)
2001(a) 14.33 .25 (.26) (.05) -- (.06) (.20) -- (.20)
NORTH CAROLINA
DIVIDEND ADVANTAGE 2 (NNO)
------------------------------------------------------------------------------------------------------------------------------------
Year Ended 5/31:
2004 15.98 .94 (1.17) (.06) -- (.29) (.85) (.03) (.88)
2003 14.30 .94 1.78 (.07) (.02) 2.63 (.82) (.13) (.95)
2002(b) 14.33 .38 .11 (.04) -- .45 (.34) -- (.34)
NORTH CAROLINA
DIVIDEND ADVANTAGE 3 (NII)
------------------------------------------------------------------------------------------------------------------------------------
Year Ended 5/31:
2004 14.96 .90 (1.09) (.07) -- (.26) (.80) (.01) (.81)
2003(c) 14.33 .49 .87 (.05) -- 1.31 (.47) -- (.47)
====================================================================================================================================
Total Returns
--------------------
Based
Offering on
Costs and Ending Common
Preferred Common Based Share
Share Share Ending on Net
Underwriting Net Asset Market Market Asset
Discounts Value Value Value** Value**
=============================================================================================
NORTH CAROLINA
PREMIUM INCOME (NNC)
---------------------------------------------------------------------------------------------
Year Ended 5/31:
2004 $ -- $14.55 $15.4000 (4.08)% (.40)%
2003 -- 15.50 16.9500 10.27 15.80
2002 -- 14.18 16.2100 15.44 7.62
2001 -- 13.94 14.8000 14.03 16.65
2000 -- 12.62 13.6875 (7.76) (5.98)
NORTH CAROLINA
DIVIDEND ADVANTAGE (NRB)
---------------------------------------------------------------------------------------------
Year Ended 5/31:
2004 -- 14.72 15.0500 (2.76) (1.08)
2003 .01 15.87 16.4500 13.52 17.75
2002 -- 14.39 15.4400 7.54 9.58
2001(a) (.17) 13.90 15.1500 2.42 (1.57)
NORTH CAROLINA
DIVIDEND ADVANTAGE 2 (NNO)
---------------------------------------------------------------------------------------------
Year Ended 5/31:
2004 -- 14.81 14.8000 (1.94) (1.83)
2003 -- 15.98 15.9700 14.10 18.98
2002(b) (.14) 14.30 14.9000 1.64 2.22
NORTH CAROLINA
DIVIDEND ADVANTAGE 3 (NII)
---------------------------------------------------------------------------------------------
Year Ended 5/31:
2004 -- 13.89 13.6800 (4.93) (1.75)
2003(c) (.21) 14.96 15.2000 4.56 7.86
=============================================================================================
Ratios/Supplemental Data
------------------------------------------------------------------------------------------------
Before Credit/Reimbursement After Credit/Reimbursement***
------------------------------- -----------------------------
Ratio of Net Ratio of Net
Ratio of Investment Ratio of Investment
Ending Expenses Income to Expenses Income to
Net to Average Average to Average Average
Assets Net Assets Net Assets Net Assets Net Assets
Applicable Applicable Applicable Applicable Applicable Portfolio
to Common to Common to Common to Common to Common Turnover
Shares (000) Shares++ Shares++ Shares++ Shares++ Rate
==============================================================================================================================
NORTH CAROLINA
PREMIUM INCOME (NNC)
------------------------------------------------------------------------------------------------------------------------------
Year Ended 5/31:
2004 $91,941 1.23% 6.35% 1.22% 6.36% 20%
2003 97,785 1.27 6.60 1.25 6.62 16
2002 89,286 1.33 7.17 1.32 7.18 22
2001 87,614 1.34 7.47 1.30 7.51 19
2000 79,167 1.37 7.81 1.35 7.83 25
NORTH CAROLINA
DIVIDEND ADVANTAGE (NRB)
------------------------------------------------------------------------------------------------------------------------------
Year Ended 5/31:
2004 33,110 1.24 5.96 .78 6.42 15
2003 35,591 1.30 6.16 .83 6.62 39
2002 32,148 1.44 6.86 .90 7.40 37
2001(a) 31,015 1.31* 5.02* .85* 5.48* 29
NORTH CAROLINA
DIVIDEND ADVANTAGE 2 (NNO)
------------------------------------------------------------------------------------------------------------------------------
Year Ended 5/31:
2004 55,311 1.22 5.71 .77 6.16 13
2003 59,642 1.24 5.80 .76 6.27 22
2002(b) 53,383 1.19* 4.70* .74* 5.15* 43
NORTH CAROLINA
DIVIDEND ADVANTAGE 3 (NII)
------------------------------------------------------------------------------------------------------------------------------
Year Ended 5/31:
2004 54,482 1.22 5.75 .73 6.23 14
2003(c) 58,653 1.18* 4.61* .71* 5.08* 3
==============================================================================================================================
Preferred Shares at End of Period
-----------------------------------------
Aggregate Liquidation
Amount and Market Asset
Outstanding Value Coverage
(000) Per Share Per Share
=======================================================================
NORTH CAROLINA
PREMIUM INCOME (NNC)
-----------------------------------------------------------------------
Year Ended 5/31:
2004 $46,800 $25,000 $74,114
2003 46,800 25,000 77,236
2002 46,800 25,000 72,695
2001 46,800 25,000 71,802
2000 46,800 25,000 67,290
NORTH CAROLINA
DIVIDEND ADVANTAGE (NRB)
-----------------------------------------------------------------------
Year Ended 5/31:
2004 17,000 25,000 73,692
2003 17,000 25,000 77,340
2002 17,000 25,000 72,277
2001(a) 17,000 25,000 70,610
NORTH CAROLINA
DIVIDEND ADVANTAGE 2 (NNO)
-----------------------------------------------------------------------
Year Ended 5/31:
2004 28,000 25,000 74,385
2003 28,000 25,000 78,252
2002(b) 28,000 25,000 72,664
NORTH CAROLINA
DIVIDEND ADVANTAGE 3 (NII)
-----------------------------------------------------------------------
Year Ended 5/31:
2004 28,000 25,000 73,644
2003(c) 28,000 25,000 77,369
=======================================================================
* Annualized.
** Total Investment Return on Market Value is the combination of reinvested
dividend income, reinvested capital gains distributions, if any, and
changes in stock price per share. Total Return on Common Share Net Asset
Value is the combination of reinvested dividend income at net asset value,
reinvested capital gains distributions at net asset value, if any, and
changes in Common share net asset value per share. Total returns are not
annualized.
*** After custodian fee credit and expense reimbursement, where applicable.
+ The amounts shown are based on Common share equivalents.
++ Ratios do not reflect the effect of dividend payments to Preferred
shareholders; income ratios reflect income earned on assets attributable to
Preferred shares.
(a) For the period January 25, 2001 (commencement of operations) through May
31, 2001.
(b) For the period November 15, 2001 (commencement of operations) through May
31, 2002.
(c) For the period September 25, 2002 (commencement of operations) through May
31, 2003.
See accompanying notes to financial statements.
50-51 SPREAD
Trustees
AND OFFICERS
The management of the Funds, including general supervision of the duties
performed for the Funds by the Adviser, is the responsibility of the Board of
Trustees of the Funds. The number of trustees of the Funds is currently set at
seven. None of the trustees who are not "interested" persons of the Funds has
ever been a director or employee of, or consultant to, Nuveen or its affiliates.
The names and business addresses of the trustees and officers of the Funds,
their principal occupations and other affiliations during the past five years,
the number of portfolios each oversees and other directorships they hold are set
forth below.
NUMBER OF
POSITION(S) YEAR FIRST PRINCIPAL OCCUPATION(S) PORTFOLIOS IN
NAME, BIRTHDATE HELD WITH ELECTED OR INCLUDING OTHER DIRECTORSHIPS FUND COMPLEX
AND ADDRESS THE FUNDS APPOINTED(2) DURING PAST 5 YEARS OVERSEEN BY TRUSTEE
------------------------------------------------------------------------------------------------------------------------------------
TRUSTEE WHO IS AN INTERESTED PERSON OF THE FUNDS:
------------------------------------------------------------------------------------------------------------------------------------
Timothy R. Schwertfeger (1) Chairman of 1994 Chairman and Director (since 1996) of Nuveen Investments, 144
3/28/49 the Board Inc. and Nuveen Investments, LLC; Director (since 1992) and
333 W. Wacker Drive and Trustee Chairman (since 1996) of Nuveen Advisory Corp. and Nuveen
Chicago, IL 60606 Institutional Advisory Corp.; Chairman and Director (since
1997) of Nuveen Asset Management, Inc.; Director (since
1996) of Institutional Capital Corporation; Chairman and
Director (since 1999) of Rittenhouse Asset Management, Inc.;
Chairman of Nuveen Investments Advisers Inc. (since 2002).
TRUSTEES WHO ARE NOT INTERESTED PERSONS OF THE FUNDS:
------------------------------------------------------------------------------------------------------------------------------------
Robert P. Bremner Trustee 1997 Private Investor and Management Consultant. 144
8/22/40
333 W. Wacker Drive
Chicago, IL 60606
------------------------------------------------------------------------------------------------------------------------------------
Lawrence H. Brown Trustee 1993 Retired (1989) as Senior Vice President of The Northern 144
7/29/34 Trust Company; Director, Community Advisory Board for
333 W. Wacker Drive Highland Park and Highwood, United Way of the North
Chicago, IL 60606 Shore (since 2002).
------------------------------------------------------------------------------------------------------------------------------------
Jack B. Evans Trustee 1999 President, The Hall-Perrine Foundation, a private philanthropic 144
10/22/48 corporation (since 1996); Director, Alliant Energy; Director and
333 W. Wacker Drive Vice Chairman, United Fire & Casualty Company; formerly
Chicago, IL 60606 Director, Federal Reserve Bank of Chicago; formerly, President
and Chief Operating Officer, SCI Financial Group, Inc., a
regional financial services firm.
------------------------------------------------------------------------------------------------------------------------------------
William C. Hunter Trustee 2004 Dean and Distinguished Professor of Finance, School of 144
3/6/48 Business at the University of Connecticut; previously Senior
333 W. Wacker Drive Vice President and Director of Research at the Federal
Chicago, IL 60606 Reserve Bank of Chicago (1995-2003); Director, Credit
Research Center at Georgetown University; Director of
Xerox Corporation (since 2004).
------------------------------------------------------------------------------------------------------------------------------------
52
NUMBER OF
POSITION(S) YEAR FIRST PRINCIPAL OCCUPATION(S) PORTFOLIOS IN
NAME, BIRTHDATE HELD WITH ELECTED OR INCLUDING OTHER DIRECTORSHIPS FUND COMPLEX
AND ADDRESS THE FUNDS APPOINTED(2) DURING PAST 5 YEARS OVERSEEN BY TRUSTEE
------------------------------------------------------------------------------------------------------------------------------------
TRUSTEES WHO ARE NOT INTERESTED PERSONS OF THE FUNDS (CONTINUED):
------------------------------------------------------------------------------------------------------------------------------------
William J. Schneider Trustee 1997 Senior Partner and Chief Operating Officer, Miller-Valentine 144
9/24/44 Group, Vice President, Miller-Valentine Realty, a construction
333 W. Wacker Drive company; Chair, Miami Valley Hospital; Chair, Dayton
Chicago, IL 60606 Development Coalition; formerly, Member, Community
Advisory Board, National City Bank, Dayton, Ohio and
Business Advisory Council, Cleveland Federal Reserve Bank.
------------------------------------------------------------------------------------------------------------------------------------
Judith M. Stockdale Trustee 1997 Executive Director, Gaylord and Dorothy Donnelley 144
12/29/47 Foundation (since 1994); prior thereto, Executive Director,
333 W. Wacker Drive Great Lakes Protection Fund (from 1990 to 1994)
Chicago, IL 60606
NUMBER OF
POSITION(S) YEAR FIRST PORTFOLIOS IN
NAME, BIRTHDATE HELD WITH ELECTED OR PRINCIPAL OCCUPATION(S) FUND COMPLEX
AND ADDRESS THE FUNDS APPOINTED(3) DURING PAST 5 YEARS OVERSEEN BY OFFICER
------------------------------------------------------------------------------------------------------------------------------------
OFFICERS OF THE FUNDS:
------------------------------------------------------------------------------------------------------------------------------------
Gifford R. Zimmerman Chief 1988 Managing Director (since 2002), Assistant Secretary and 144
9/9/56 Administrative Associate General Counsel, formerly, Vice President and
333 W. Wacker Drive Officer Assistant General Counsel of Nuveen Investments, LLC;
Chicago, IL 60606 Managing Director (since 2002), General Counsel and
Assistant Secretary, formerly, Vice President of Nuveen
Advisory Corp. and Nuveen Institutional Advisory Corp.;
Managing Director (since 2002), Assistant Secretary and
Associate General Counsel, formerly, Vice President (since
2000), of Nuveen Asset Management, Inc. Assistant
Secretary of Nuveen Investments, Inc. (since 1994); Assistant
Secretary of NWQ Investment Management Company, LLC
(since 2002); Vice President and Assistant Secretary of
Nuveen Investments Advisers Inc. (since 2002); Managing
Director, Associate General Counsel and Assistant Secretary
of Rittenhouse Asset Management, Inc. (since 2003);
Chartered Financial Analyst.
------------------------------------------------------------------------------------------------------------------------------------
Michael T. Atkinson Vice President 2000 Vice President (since 2002), formerly, Assistant Vice 144
2/3/66 and Assistant President (since 2000), previously, Associate of Nuveen
333 W. Wacker Drive Secretary Investments, LLC.
Chicago, IL 60606
53
Trustees
AND OFFICERS (CONTINUED)
NUMBER OF
POSITION(S) YEAR FIRST PORTFOLIOS IN
NAME, BIRTHDATE HELD WITH ELECTED OR PRINCIPAL OCCUPATION(S) FUND COMPLEX
AND ADDRESS THE FUNDS APPOINTED(3) DURING PAST 5 YEARS OVERSEEN BY OFFICER
------------------------------------------------------------------------------------------------------------------------------------
OFFICERS OF THE FUNDS (CONTINUED):
------------------------------------------------------------------------------------------------------------------------------------
Paul L. Brennan Vice President 1999 Vice President (since 2002), formerly, Assistant Vice 128
11/10/66 President (since 1997), of Nuveen Advisory Corp.; prior
333 W. Wacker Drive thereto, portfolio manager of Flagship Financial Inc.;
Chicago, IL 60606 Chartered Financial Analyst and Certified Public Accountant.
------------------------------------------------------------------------------------------------------------------------------------
Peter H. D'Arrigo Vice President 1999 Vice President of Nuveen Investments, LLC (since 1999), 144
11/28/67 and Treasurer prior thereto, Assistant Vice President (since 1997); Vice
333 W. Wacker Drive President and Treasurer of Nuveen Investments, Inc. (since
Chicago, IL 60606 1999); Vice President and Treasurer of Nuveen Advisory Corp.
and Nuveen Institutional Advisory Corp (since 1999); Vice
President and Treasurer of Nuveen Asset Management, Inc.
(since 2002) and of Nuveen Investments Advisers Inc. (since
2002); Assistant Treasurer of NWQ Investment Management
Company, LLC (since 2002); Vice President and Treasurer of
Nuveen Rittenhouse Asset Management, Inc. (since 2003);
Chartered Financial Analyst.
------------------------------------------------------------------------------------------------------------------------------------
Jessica R. Droeger Vice President 2000 Vice President (since 2002) and Assistant General Counsel 144
9/24/64 and Secretary (since 1998); formerly, Assistant Vice President (since 1998)
333 W. Wacker Drive of Nuveen Investments, LLC; Vice President (since 2002)
Chicago, IL 60606 and Assistant Secretary (since 1998), formerly Assistant
Vice President of Nuveen Advisory Corp. and Nuveen
Institutional Advisory Corp.
------------------------------------------------------------------------------------------------------------------------------------
Lorna C. Ferguson Vice President 1998 Managing Director (since 2004) formerly, Vice President of 144
10/24/45 Nuveen Investments, LLC; Managing Director (since 2004)
333 W. Wacker Drive formerly, Vice President (since 1998) of Nuveen Advisory
Chicago, IL 60606 Corp. and Nuveen Institutional Advisory Corp.
------------------------------------------------------------------------------------------------------------------------------------
William M. Fitzgerald Vice President 1995 Managing Director (since 2002) of Nuveen Investments, 144
3/2/64 LLC; Managing Director (since 2001), formerly Vice President
333 W. Wacker Drive of Nuveen Advisory Corp. and Nuveen Institutional Advisory
Chicago, IL 60606 Corp. (since 1995); Managing Director of Nuveen Asset
Management, Inc. (since 2001); Vice President of Nuveen
Investment Advisers Inc. (since 2002); Chartered Financial Analyst.
------------------------------------------------------------------------------------------------------------------------------------
Stephen D. Foy Vice President 1998 Vice President (since 1993) and Funds Controller (since 1998) 144
5/31/54 and Controller of Nuveen Investments, LLC and Vice President and Funds
333 W. Wacker Drive Controller (since 1998) of Nuveen Investments, Inc.;
Chicago, IL 60606 Certified Public Accountant.
------------------------------------------------------------------------------------------------------------------------------------
J. Thomas Futrell Vice President 1988 Vice President of Nuveen Advisory Corp.; Chartered 128
7/5/55 Financial Analyst.
333 W. Wacker Drive
Chicago, IL 60606
54
NUMBER OF
POSITION(S) YEAR FIRST PORTFOLIOS IN
NAME, BIRTHDATE HELD WITH ELECTED OR PRINCIPAL OCCUPATION(S) FUND COMPLEX
AND ADDRESS THE FUNDS APPOINTED(3) DURING PAST 5 YEARS OVERSEEN BY OFFICER
------------------------------------------------------------------------------------------------------------------------------------
OFFICERS OF THE FUNDS (CONTINUED):
------------------------------------------------------------------------------------------------------------------------------------
Steven J. Krupa Vice President 1990 Vice President of Nuveen Advisory Corp. 128
8/21/57
333 W. Wacker Drive
Chicago, IL 60606
------------------------------------------------------------------------------------------------------------------------------------
David J. Lamb Vice President 2000 Vice President (since 2000) of Nuveen Investments, 144
3/22/63 LLC, previously Assistant Vice President (since 1999);
333 W. Wacker Drive prior thereto, Associate of Nuveen Investments, LLC;
Chicago, IL 60606 Certified Public Accountant.
------------------------------------------------------------------------------------------------------------------------------------
Tina M. Lazar Vice President 2002 Vice President (since 1999), previously, Assistant Vice 144
8/27/61 President (since 1993) of Nuveen Investments, LLC.
333 W. Wacker Drive
Chicago, IL 60606
------------------------------------------------------------------------------------------------------------------------------------
Larry W. Martin Vice President 1988 Vice President, Assistant Secretary and Assistant General 144
7/27/51 and Assistant Counsel of Nuveen Investments, LLC; Vice President and
333 W. Wacker Drive Secretary Assistant Secretary of Nuveen Advisory Corp.and Nuveen
Chicago, IL 60606 Institutional Advisory Corp.; Assistant Secretary of Nuveen
Investments, Inc. and (since 1997) Nuveen Asset Management,
Inc.; Vice President (since 2000), Assistant Secretary and
Assistant General Counsel (since 1998) of Rittenhouse Asset
Management, Inc.; Vice President and Assistant Secretary of
Nuveen Investments Advisers Inc. (since 2002); Assistant
Secretary of NWQ Investment Management Company, LLC
(since 2002).
------------------------------------------------------------------------------------------------------------------------------------
John V. Miller Vice President 2003 Vice President (since 2003) previously, Assistant Vice President 128
4/10/67 (since 1999), prior thereto, credit analyst (since 1996) of Nuveen
333 W. Wacker Drive Advisory Corp.; Chartered Financial Analyst.
Chicago, IL 60606
------------------------------------------------------------------------------------------------------------------------------------
Edward F. Neild, IV Vice President 1996 Managing Director (since 2002) of Nuveen Investments, LLC; 144
7/7/65 Managing Director (since 1997), formerly Vice President
333 W. Wacker Drive (since 1996) of Nuveen Advisory Corp. and Nuveen Institutional
Chicago, IL 60606 Advisory Corp.; Managing Director of Nuveen Asset Management,
Inc. (since 1999). Chartered Financial Analyst.
------------------------------------------------------------------------------------------------------------------------------------
Daniel S. Solender Vice President 2003 Vice President of Nuveen Advisory Corp. (since 2003); previously, 128
10/27/65 Principal and portfolio manager with The Vanguard Group
333 W. Wacker Drive (1999-2003); prior thereto, Assistant Vice President of the
Chicago, IL 60606 Nuveen Advisory Corp.; Chartered Financial Analyst.
------------------------------------------------------------------------------------------------------------------------------------
Thomas C. Spalding Vice President 1982 Vice President of Nuveen Advisory Corp. and Nuveen 128
7/31/51 Institutional Advisory Corp.; Chartered Financial Analyst.
333 W. Wacker Drive
Chicago, IL 60606
(1) Mr. Schwertfeger is an "interested person" of the Funds, as defined in the
Investment Company Act of 1940, because he is an officer and trustee of the
Adviser.
(2) Trustees serve an indefinite term until his/her successor is elected. The
year first elected or appointed represents the year in which the Trustee
was first elected or appointed to any fund in the Nuveen Complex.
(3) 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.
55
Build Your Wealth
AUTOMATICALLY
Sidebar text: NUVEEN MAKES REINVESTING EASY. A PHONE CALL IS ALL IT TAKES TO SET
UP YOUR REINVESTMENT ACCOUNT.
NUVEEN CLOSED-END EXCHANGE-TRADED FUNDS DIVIDEND REINVESTMENT PLAN
Your Nuveen Closed-End Exchange-Traded Fund allows you to conveniently reinvest
dividends and/or capital gains distributions in additional fund shares.
By choosing to reinvest, you'll be able to invest money regularly and
automatically, and watch your investment grow through the power of tax-free
compounding. Just like dividends or distributions in cash, there may be times
when income or capital gains taxes may be payable on dividends or distributions
that are reinvested.
It is important to note that an automatic reinvestment plan does not ensure a
profit, nor does it protect you against loss in a declining market.
EASY AND CONVENIENT
To make recordkeeping easy and convenient, each month you'll receive a statement
showing your total dividends and distributions, the date of investment, the
shares acquired and the price per share, and the total number of shares you own.
HOW SHARES ARE PURCHASED
The shares you acquire by reinvesting will either be purchased on the open
market or newly issued by the Fund. If the shares are trading at or above net
asset value at the time of valuation, the Fund will issue new shares at the
then-current market price. If the shares are trading at less than net asset
value, shares for your account will be purchased on the open market. Dividends
and distributions received to purchase shares in the open market will normally
be invested shortly after the dividend payment date. No interest will be paid on
dividends and distributions awaiting reinvestment. Because the market price of
shares may increase before purchases are completed, the average purchase price
per share may exceed the market price at the time of valuation, resulting in the
acquisition of fewer shares than if the dividend or distribution had been paid
in shares issued by the Fund. A pro rata portion of any applicable brokerage
commissions on open market purchases will be paid by Plan participants. These
commissions usually will be lower than those charged on individual transactions.
FLEXIBILITY
You may change your distribution option or withdraw from the Plan at any time,
should your needs or situation change. Should you withdraw, you can receive a
certificate for all whole shares credited to your reinvestment account and cash
payment for fractional shares, or cash payment for all reinvestment account
shares, less brokerage commissions and a $2.50 service fee.
You can reinvest whether your shares are registered in your name, or in the name
of a brokerage firm, bank, or other nominee. Ask your investment advisor if his
or her firm will participate on your behalf. Participants whose shares are
registered in the name of one firm may not be able to transfer the shares to
another firm and continue to participate in the Plan.
The Fund reserves the right to amend or terminate the Plan at any time. Although
the Fund reserves the right to amend the Plan to include a service charge
payable by the participants, there is no direct service charge to participants
in the Plan at this time.
For more information on the Nuveen Automatic Reinvestment Plan or to enroll in
or withdraw from the Plan, speak with your financial advisor or call us at (800)
257-8787.
56
Fund
INFORMATION
BOARD OF TRUSTEES
Robert P. Bremner
Lawrence H. Brown
Jack B. Evans
William C. Hunter
William J. Schneider
Timothy R. Schwertfeger
Judith M. Stockdale
FUND MANAGER
Nuveen Advisory Corp.
333 West Wacker Drive
Chicago, IL 60606
CUSTODIAN
State Street Bank & Trust
Boston, MA
TRANSFER AGENT AND
SHAREHOLDER SERVICES
State Street Bank & Trust
Nuveen Funds
P.O. Box 43071
Providence, RI 02940-3071
(800) 257-8787
LEGAL COUNSEL
Chapman and Cutler LLP
Chicago, IL
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Ernst & Young LLP
Chicago, IL
PROXY VOTING POLICIES AND PROCEDURES
A description of the policies and procedures that the Funds use to determine how
to vote proxies relating to portfolio securities is available (i) without
charge, upon request, by calling Nuveen Investments at (800) 257-8787; and (ii)
on the Commission's website at http://www.sec.gov.
GLOSSARY OF TERMS USED IN THIS REPORT
Average Annual Total Return: This is a commonly used method to express an
investment's performance over a particular, usually multi-year time period. It
expresses the return (including change in NAV and reinvested dividends) that
would have been necessary on an annual basis to equal the investment's actual
performance over the time period being considered.
Average Effective Maturity: The average of all the maturities of the bonds in a
fund's portfolio, computed by weighting each maturity date (the date the
security comes due) by the market value of the security. This figure does not
account for the likelihood of prepayments or the exercise of call provisions.
Leverage-Adjusted Duration: Duration is a measure of a bond or bond fund's
sensitivity to changes in interest rates. Generally, the longer a bond or fund's
duration, the more the price of the bond or fund will change as interest rates
change. Leverage-adjusted duration takes into account the leveraging process for
a Fund and therefore is generally longer than the duration of the actual
portfolio of individual bonds that make up the Fund.
Market Yield (also known as Dividend Yield or Current Yield): An investment's
current annualized dividend divided by its current market price.
Net Asset Value (NAV): A fund's NAV is calculated by subtracting the liabilities
of the fund from its total assets and then dividing the remainder by the number
of shares outstanding. Fund NAVs are calculated at the end of each business day.
Taxable-Equivalent Yield: The yield necessary from a fully taxable investment to
equal, on an after-tax basis, the yield of a municipal bond investment.
---------
Each Fund intends to repurchase shares of its own common or preferred stock in
the future at such times and in such amounts as is deemed advisable. No shares
were repurchased during the fiscal year ended May 31, 2004. Any future
repurchases will be reported to shareholders in the next annual or semiannual
report.
57
Serving Investors
FOR GENERATIONS
Since 1898, financial advisors and their clients have relied on Nuveen
Investments to provide dependable investment solutions. For the past century,
Nuveen Investments has adhered to the belief that the best approach to investing
is to apply conservative risk-management principles to help minimize volatility.
Building on this tradition, we today offer a range of high quality equity and
fixed-income solutions that are integral to a well-diversified core portfolio.
Our clients have come to appreciate this diversity, as well as our continued
adherence to proven, long-term investing principles.
Managing $90 billion in assets, Nuveen Investments offers access to a number of
different asset classes and investing solutions through a variety of products.
Nuveen Investments markets its capabilities under four distinct brands: Nuveen,
a leader in tax-free investments; NWQ, a leader in value-style equities;
Rittenhouse, a leader in growth-style equities; and Symphony, a leading
institutional manager of market-neutral alternative investment portfolios.
To learn more about the products and services Nuveen Investments offers and for
a prospectus, where applicable, talk to your financial advisor, or call us at
(800) 257-8787. Please read the information carefully before you invest.
Distributed by
NUVEEN INVESTMENTS, LLC | 333 West Wacker Drive | Chicago, Illinois 60606
| www.nuveen.com
EAN-C-0504D
ITEM 2. CODE OF ETHICS.
As of the end of the period covered by this report, the registrant has adopted
a code of ethics that applies to the registrant's principal executive officer,
principal financial officer, principal accounting officer or controller, or
persons performing similar functions. The registrant has posted such code of
ethics on its website at www.nuveen.com/etf.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
During the reporting period, the registrant's board of directors determined that
the registrant had 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 for the reporting period was William E. Bennett, who
was "independent" for purposes of Item 3 of Form N-CSR.
Although Mr. Bennett served as the audit committee financial expert for part of
reporting period, he unexpectedly resigned from the Board effective April 30,
2004. Since that time, the Audit Committee determined that Jack B. Evans, the
Chairman of the Audit Committee, qualifies as an audit committee financial
expert and recommended to the full Board that he be designated as such. On July
26, 2004, the full Board voted to so designate Mr. Evans.
Mr. Bennett was formerly Executive Vice President and Chief Credit Officer of
First Chicago Corporation and its principal subsidiary, The First National Bank
of Chicago. As part of his role as Chief Credit Officer, Mr. Bennett set policy
as to accrual of assets/loans; designated performing/non-performing assets; set
the level of reserves against the credit portfolo; and determined the carrying
value of credit related assets and exposure. Among other things, Mr. Bennett was
also responsible for the oversight of the internal analysis function including
setting ground rules for the review and preparation of financial analysis and
financial statements for use in making credit and risk decisions for financial
analysis and financial statements for use in making credit and risk decisions
for clients. Mr. Bennett has significant experience reviewing, analyzing and
evaluating financial statements of domestic and international companies in a
variety of industries with complex accounting issues.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
NUVEEN NORTH CAROLINA DIVIDEND ADVANTAGE MUNICIPAL FUND 2
FORM N-CSR DISCLOSURE RE: AUDIT FEES
The following table shows 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 entered into on or after May 6, 2003, 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 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 BILLED TO FUND BILLED TO FUND BILLED TO FUND
------------------------------------------------------------------------------------------------------------------------------------
May 31, 2004 $ 7,299 $ 0 $ 857 $ 2,450
------------------------------------------------------------------------------------------------------------------------------------
Percentage approved N/A 0% 0% 0%
pursuant to
pre-approval
exception
------------------------------------------------------------------------------------------------------------------------------------
May 31, 2003 $ 6,635 $ 0 $ 353 $ 2,250
------------------------------------------------------------------------------------------------------------------------------------
Percentage approved N/A 0% 0% 0%
pursuant to
pre-approval
exception
------------------------------------------------------------------------------------------------------------------------------------
The above "Tax Fees" were billed for professional services for tax advice, tax
compliance and tax planning.
SERVICES THAT THE FUND'S AUDITOR BILLED TO THE
ADVISER AND AFFILIATED FUND SERVICE PROVIDERS
The following table shows the amount of fees billed by Ernst & Young LLP to
Nuveen Advisory Corp. ("NAC" or the "Adviser"), and any entity controlling,
controlled by or under common control with NAC ("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 table also shows 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 31, 2004 $ 0 $ 0 $ 0
------------------------------------------------------------------------------------------------------------------------------------
Percentage approved 0% 0% 0%
pursuant to
pre-approval
exception
------------------------------------------------------------------------------------------------------------------------------------
May 31, 2003 $ 0 $ 0 $ 0
------------------------------------------------------------------------------------------------------------------------------------
Percentage approved N/A N/A N/A
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. For
engagements entered into on or after May 6, 2003, 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 independence.
FISCAL YEAR ENDED TOTAL NON-AUDIT FEES
BILLED TO ADVISER AND
AFFILIATED FUND SERVICE TOTAL NON-AUDIT FEES
PROVIDERS (ENGAGEMENTS BILLED TO ADVISER AND
RELATED DIRECTLY TO THE AFFILIATED FUND SERVICE
TOTAL NON-AUDIT FEES OPERATIONS AND FINANCIAL PROVIDERS (ALL OTHER
BILLED TO FUND REPORTING OF THE FUND) ENGAGEMENTS) TOTAL
------------------------------------------------------------------------------------------------------------------------------------
May 31, 2004 $ 3,307 $ 0 $ 0 $ 3,307
May 31, 2003 $ 2,603 $ 0 $ 0 $ 2,603
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.
Not applicable at this time.
ITEM 6. SCHEDULE OF INVESTMENTS.
Not applicable at this time.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
In the rare event that a municipal issuer held by the Fund were to issue a proxy
or that the Fund were to receive a proxy issued by a cash management security,
NAC would either engage an independent third party to determine how the proxy
should be voted or vote the proxy with the consent, or based on the
instructions, of the Fund's Board of Directors or Trustees or its
representative. In the case of a conflict of interest, the proxy would be
submitted to the applicable Fund's Board to determine how the proxy should be
voted. A member of the Adviser's legal department would oversee the
administration of the voting, and ensure that records were maintained in
accordance with Rule 204-2(c)(2) under the Investment Advisers Act of 1940 (17
CFR 275.204-2(c)(2)), reports were filed with the SEC on Form N-PX, and the
results were provided to the Board of Directors or Trustees and made available
to shareholders as required by applicable rules.
ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable at this time.
ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
In the event of a vacancy on the Board, the nominating and governance committee
receives suggestions from various sources, including shareholders, as to
suitable candidates. Suggestions should be sent in writing to Lorna Ferguson,
Vice President for Board Relations, Nuveen Investments, 333 West Wacker Drive,
Chicago, IL 60606. The nominating and governance committee sets appropriate
standards and requirements for nominations for new directors and reserves the
right to interview all candidates and to make the final selection of any new
directors.
ITEM 10. 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 registrant's last
fiscal half-year (the registrant's second fiscal half-year in the case
of an annual report) that has materially affected, or is reasonably
likely to materially affect, the registrant's internal control over
financial reporting.
ITEM 11. EXHIBITS.
File the exhibits listed below as part of this Form. Letter or number the
exhibits in the sequence indicated.
(a)(1) Any code of ethics, or amendment thereto, that is the subject of the
disclosure required by Item 2, to the extent that the registrant intends to
satisfy the Item 2 requirements through filing of an exhibit: Not applicable
because posted on registrant's website at www.nuveen.com/etf.
(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
at this time.
(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 North Carolina Dividend Advantage Municipal Fund 2
-----------------------------------------------------------
By (Signature and Title)* /s/ Jessica R. Droeger
----------------------------------------------
Jessica R. Droeger
Vice President and Secretary
Date: August 6, 2004
-------------------------------------------------------------------
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 6, 2004
-------------------------------------------------------------------
By (Signature and Title)* /s/ Stephen D. Foy
----------------------------------------------
Stephen D. Foy
Vice President and Controller
(Principal Financial Officer)
Date: August 6, 2004
-------------------------------------------------------------------
* Print the name and title of each signing officer under his or her signature.