UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM N-Q

QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED MANAGEMENT INVESTMENT COMPANY
 
Investment Company Act file number 811-21158
 
Nuveen North Carolina Dividend Advantage Municipal Fund 3
(Exact name of registrant as specified in charter)
 
Nuveen Investments
        333 West Wacker Drive, Chicago, Illinois 60606         
(Address of principal executive offices) (Zip code)
 

Kevin J. McCarthy
Vice President and Secretary
        333 West Wacker Drive, Chicago, Illinois 60606         
(Name and address of agent for service)
 
Registrant's telephone number, including area code:         312-917-7700        
 
Date of fiscal year end:             5/31          
 
Date of reporting period:          2/28/11         
 
Form N-Q is to be used by management investment companies, other than small business investment companies registered on Form N-5 (§§ 239.24 and 274.5 of this chapter), to file reports with the Commission, not later than 60 days after the close of the first and third fiscal quarters, pursuant to rule 30b1-5 under the Investment Company Act of 1940 (17 CFR 270.30b1-5). The Commission may use the information provided on Form N-Q in its regulatory, disclosure review, inspection, and policymaking roles.
 
A registrant is required to disclose the information specified by Form N-Q, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-Q 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 the 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. § 3507.

 
 
 
 
Item 1. Schedule of Investments
 
 

           
   
Portfolio of Investments (Unaudited)  
     
   
Nuveen North Carolina Dividend Advantage Municipal Fund 3 (NII)  
     
   
February 28, 2011  
     
Principal  
   
Optional Call  
   
Amount (000)  
 
Description (1)  
Provisions (2)  
Ratings (3)  
Value  
   
Consumer Staples – 3.2% (2.0% of Total Investments)  
     
$    2,000  
 
Puerto Rico, The Children’s Trust Fund, Tobacco Settlement Asset-Backed Refunding Bonds,  
5/12 at 100.00  
BBB  
$ 1,735,800  
   
Series 2002, 5.500%, 5/15/39  
     
   
Education and Civic Organizations – 3.3% (2.1% of Total Investments)  
     
   
North Carolina Capital Facilities Financing Agency, Revenue Bonds, Duke University,  
     
   
Series 2001A:  
     
330  
 
5.125%, 10/01/26  
10/11 at 100.00  
AA+  
331,993  
95  
 
5.125%, 10/01/41  
10/11 at 100.00  
AA+  
94,631  
200  
 
North Carolina Capital Facilities Financing Agency, Revenue Bonds, Johnson and Wales  
4/13 at 100.00  
N/R  
177,362  
   
University, Series 2003A, 5.000%, 4/01/33 – SYNCORA GTY Insured  
     
705  
 
University of North Carolina System, Pooled Revenue Refunding Bonds, Series 2002A, 5.000%,  
10/12 at 100.00  
A+  
706,889  
   
4/01/27 – AMBAC Insured  
     
500  
 
University of North Carolina Wilmington, Certificates of Participation, Student Housing  
6/16 at 100.00  
A–  
527,885  
   
Project Revenue Bonds, Series 2006, 5.000%, 6/01/21 – FGIC Insured  
     
1,830  
 
Total Education and Civic Organizations  
   
1,838,760  
   
Health Care – 18.9% (11.9% of Total Investments)  
     
695  
 
Albemarle Hospital Authority, North Carolina, Health Care Facilities Revenue Bonds, Series  
10/17 at 100.00  
N/R  
576,683  
   
2007, 5.250%, 10/01/27  
     
1,200  
 
Charlotte-Mecklenberg Hospital Authority, North Carolina, Carolinas HealthCare System Revenue  
1/18 at 100.00  
AA–  
1,087,368  
   
Bonds, Series 2008A, 5.000%, 1/15/47  
     
500  
 
Charlotte-Mecklenberg Hospital Authority, North Carolina, Health Care Refunding Revenue Bonds,  
1/19 at 100.00  
AA–  
483,630  
   
Carolinas HealthCare System, Series 2009A, 5.250%, 1/15/39  
     
580  
 
Charlotte-Mecklenburg Hospital Authority, North Carolina, Healthcare System Revenue Bonds,  
1/12 at 100.00  
AA–  
548,518  
   
Carolinas Healthcare System, Series 2001A, 5.000%, 1/15/31  
     
520  
 
Johnston Memorial Hospital Authority, North Carolina, Mortgage Revenue Bonds, Johnston  
4/18 at 100.00  
AA+  
510,281  
   
Memorial Hospital Project, Series 2008, 5.250%, 10/01/36 – AGM Insured  
     
180  
 
New Hanover County, North Carolina, Hospital Revenue Bonds, New Hanover Regional Medical  
10/19 at 100.00  
AA+  
178,409  
   
Center, Series 2006B, 5.125%, 10/01/31 – AGM Insured  
     
2,000  
 
North Carolina Medical Care Commission Health Care Facilities Revenue Bonds Novant Health  
11/20 at 100.00  
A+  
1,888,080  
   
Inc., Series 2010A, 5.250%, 11/01/40  
     
1,000  
 
North Carolina Medical Care Commission, Health Care Facilities Revenue Bonds, Appalchian  
7/21 at 100.00  
BBB+  
1,011,890  
   
Regional HealthCare System, Series 2011A, 6.500%, 7/01/31  
     
545  
 
North Carolina Medical Care Commission, Health Care Facilities Revenue Bonds, WakeMed, Series  
10/14 at 100.00  
AA+  
549,365  
   
2009A, 5.625%, 10/01/38 – AGC Insured  
     
2,000  
 
North Carolina Medical Care Commission, Healthcare Facilities Revenue Bonds, Novant Health  
11/13 at 100.00  
A+  
2,078,620  
   
Obligated Group, Series 2003A, 5.000%, 11/01/18  
     
1,000  
 
North Carolina Medical Care Commission, Hospital Revenue Bonds, Wilson Medical Center, Series  
11/17 at 100.00  
A–  
932,360  
   
2007, 5.000%, 11/01/27  
     
400  
 
North Carolina Medical Care Commission, Revenue Bonds, Blue Ridge Healthcare System, Series  
1/15 at 100.00  
A  
378,612  
   
2005, 5.000%, 1/01/33 – FGIC Insured  
     
150  
 
Northern Hospital District of Surry County, North Carolina, Health Care Facilities Revenue  
4/18 at 100.00  
BBB  
146,901  
   
Bonds, Series 2008, 6.250%, 10/01/38  
     
10,770  
 
Total Health Care  
   
10,370,717  
   
Housing/Multifamily – 1.9% (1.2% of Total Investments)  
     
1,000  
 
Mecklenburg County, North Carolina, FNMA Multifamily Housing Revenue Bonds, Little Rock  
7/13 at 105.00  
AAA  
1,028,540  
   
Apartments, Series 2003, 5.150%, 1/01/22 (Alternative Minimum Tax)  
     
   
Housing/Single Family – 2.7% (1.7% of Total Investments)  
     
580  
 
North Carolina Housing Finance Agency, Home Ownership Revenue Bonds, 1998 Trust Agreement,  
7/11 at 100.00  
AA  
580,017  
   
Series 5A, 5.625%, 7/01/30 (Alternative Minimum Tax)  
     
500  
 
North Carolina Housing Finance Agency, Home Ownership Revenue Bonds, Series 2007-29A, 4.800%,  
1/17 at 100.00  
AA  
456,460  
   
7/01/33 (Alternative Minimum Tax)  
     
505  
 
North Carolina Housing Finance Agency, Home Ownership Revenue Bonds, Series 25-A, 4.900%,  
7/16 at 100.00  
AA  
459,156  
   
7/01/37 (Alternative Minimum Tax)  
     
1,585  
 
Total Housing/Single Family  
   
1,495,633  
   
Long-Term Care – 1.6% (1.0% of Total Investments)  
     
   
North Carolina Medical Care Commission, Healthcare Facilities Revenue Bonds, Presbyterian  
     
   
Homes, Series 2006:  
     
250  
 
5.400%, 10/01/27  
10/16 at 100.00  
N/R  
217,730  
600  
 
5.500%, 10/01/31  
10/16 at 100.00  
N/R  
505,440  
190  
 
North Carolina Medical Care Commission, Revenue Bonds, Pines at Davidson, Series 2006A,  
1/16 at 100.00  
N/R  
162,346  
   
5.000%, 1/01/36  
     
1,040  
 
Total Long-Term Care  
   
885,516  
   
Materials – 0.3% (0.2% of Total Investments)  
     
200  
 
Columbus County Industrial Facilities and Pollution Control Financing Authority, North  
3/17 at 100.00  
BBB  
174,192  
   
Carolina, Environmental Improvement Revenue Bonds, International Paper Company Project,  
     
   
Series 2007A, 4.625%, 3/01/27  
     
   
Tax Obligation/General – 1.6% (1.0% of Total Investments)  
     
300  
 
North Carolina, General Obligation Bonds, Series 2004A, 5.000%, 3/01/22  
3/14 at 100.00  
AAA  
323,142  
550  
 
Wake County, North Carolina, Limited Obligation Bonds, Series 2010, 5.000%, 1/01/37  
1/20 at 100.00  
AA+  
550,550  
850  
 
Total Tax Obligation/General  
   
873,692  
   
Tax Obligation/Limited – 36.0% (22.8% of Total Investments)  
     
1,800  
 
Catawba County, North Carolina, Certificates of Participation, Series 2004, 5.250%, 6/01/22 –  
6/14 at 100.00  
Aa2  
1,865,484  
   
NPFG Insured  
     
2,750  
 
Charlotte, North Carolina, Certificates of Participation, Governmental Facilities Projects,  
6/13 at 100.00  
AA+  
2,761,715  
   
Series 2003G, 5.000%, 6/01/33  
     
600  
 
Charlotte, North Carolina, Certificates of Participation, Nascar Hall of Fame, Series 2009C,  
6/19 at 100.00  
AA+  
592,350  
   
5.000%, 6/01/39  
     
575  
 
Charlotte, North Carolina, Certificates of Participation, Transit Projects Phase 2, Series  
6/18 at 100.00  
AA+  
577,559  
   
2008A, 5.000%, 6/01/33  
     
800  
 
Craven County, North Carolina, Certificates of Participation, Series 2007, 5.000%, 6/01/27 –  
6/17 at 100.00  
AA–  
815,432  
   
NPFG Insured  
     
3,000  
 
Dare County, North Carolina, Certificates of Participation, Series 2002, 5.000%, 6/01/23 –  
12/12 at 100.00  
AA–  
3,042,510  
   
AMBAC Insured  
     
200  
 
Harnett County, North Carolina, Certificates of Participation, Series 2009, 5.000%, 6/01/28 –  
6/19 at 100.00  
AA+  
201,128  
   
AGC Insured  
     
500  
 
Lee County, North Carolina, Certificates of Participation, Public Schools and Community  
4/14 at 100.00  
AA+  
527,065  
   
College, Series 2004, 5.250%, 4/01/20 – AGM Insured  
     
200  
 
Mecklenburg County, North Carolina, Certificates of Participation, Series 2009A,  
No Opt. Call  
AA+  
205,456  
   
5.000%, 2/01/27  
     
1,000  
 
North Carolina, Certificates of Participation, Repair and Renovation Project, Series 2004B,  
6/14 at 100.00  
AA+  
1,052,910  
   
5.000%, 6/01/20  
     
2,625  
 
Puerto Rico Sales Tax Financing Corporation, Sales Tax Revenue Bonds, Series 2010A,  
No Opt. Call  
A+  
531,116  
   
0.000%, 8/01/35  
     
565  
 
Raleigh, North Carolina, Certificates of Participation, Series 2007, 5.000%, 2/01/27  
2/17 at 100.00  
AA+  
580,566  
2,000  
 
Rutherford County, North Carolina, Certificates of Participation, Series 2002, 5.000%,  
9/12 at 101.00  
A1  
2,019,680  
   
9/01/21 – AMBAC Insured  
     
1,000  
 
Rutherford County, North Carolina, Certificates of Participation, Series 2007, 5.000%,  
12/17 at 100.00  
AA+  
1,021,480  
   
12/01/27 – AGM Insured  
     
1,200  
 
Sampson County, North Carolina, Certificates of Participation, Series 2006, 5.000%, 6/01/34 –  
6/17 at 100.00  
AA+  
1,163,796  
   
AGM Insured (UB)  
     
1,785  
 
Union County, North Carolina, Certificates of Participation, Series 2003, 5.000%, 6/01/20 –  
6/13 at 101.00  
Aa2  
1,887,691  
   
AMBAC Insured  
     
500  
 
Wilmington, North Carolina, Certificates of Participation, Series 2008A, 5.000%, 6/01/29  
6/18 at 100.00  
AA  
510,485  
400  
 
Wilson County, North Carolina, Certificates of Participation, School Facilities Project,  
4/17 at 100.00  
Aa3  
404,796  
   
Series 2007, 5.000%, 4/01/25 – AMBAC Insured  
     
21,500  
 
Total Tax Obligation/Limited  
   
19,761,219  
   
Transportation – 7.2% (4.6% of Total Investments)  
     
500  
 
Charlotte, North Carolina, Airport Revenue Bonds, Charlotte Douglas International Refunding  
7/20 at 100.00  
A+  
471,110  
   
Series 2010A, 5.000%, 7/01/39  
     
660  
 
North Carolina State Ports Authority, Port Facilities Revenue Bonds, Senior Lien Series 2010A,  
2/20 at 100.00  
A3  
624,723  
   
5.250%, 2/01/40  
     
   
North Carolina Turnpike Authority, Triangle Expressway System Revenue Bonds, Series 2009A:  
     
225  
 
5.500%, 1/01/29 – AGC Insured  
1/19 at 100.00  
AA+  
232,724  
955  
 
5.750%, 1/01/39 – AGC Insured  
1/19 at 100.00  
AA+  
966,021  
   
North Carolina Turnpike Authority, Triangle Expressway System Senior Lien Revenue Bonds,  
     
   
Series 2009B:  
     
2,295  
 
0.000%, 1/01/35 – AGC Insured  
No Opt. Call  
AA+  
527,896  
100  
 
0.000%, 1/01/37 – AGC Insured  
No Opt. Call  
AA+  
19,980  
300  
 
0.000%, 1/01/38 – AGC Insured  
No Opt. Call  
AA+  
55,881  
1,100  
 
Raleigh Durham Airport Authority, North Carolina, Airport Revenue Bonds, Refunding Series  
No Opt. Call  
Aa3  
1,078,308  
   
2010A, 5.000%, 5/01/36  
     
6,135  
 
Total Transportation  
   
3,976,643  
   
U.S. Guaranteed – 30.9% (19.5% of Total Investments) (4)  
     
200  
 
Charlotte-Mecklenburg Hospital Authority, North Carolina, Healthcare System Revenue Bonds, DBA  
1/15 at 100.00  
AAA  
227,034  
   
Carolinas Healthcare System, Series 2005A, 5.000%, 1/15/45 (Pre-refunded 1/15/15)  
     
   
Forsyth County, North Carolina, Certificates of Participation, Public Facilities and Equipment  
     
   
Project, Series 2002:  
     
1,325  
 
5.125%, 1/01/16 (Pre-refunded 1/01/13)  
1/13 at 101.00  
AA+ (4)  
1,442,726  
770  
 
5.250%, 1/01/19 (Pre-refunded 1/01/13)  
1/13 at 101.00  
AA+ (4)  
840,170  
   
Lincoln County, North Carolina, General Obligation Bonds, Series 2002A:  
     
850  
 
5.000%, 6/01/19 (Pre-refunded 6/01/12) – FGIC Insured  
6/12 at 101.00  
AA– (4)  
906,559  
900  
 
5.000%, 6/01/20 (Pre-refunded 6/01/12) – FGIC Insured  
6/12 at 101.00  
AA– (4)  
959,886  
1,050  
 
5.000%, 6/01/21 (Pre-refunded 6/01/12) – FGIC Insured  
6/12 at 101.00  
AA– (4)  
1,119,867  
920  
 
North Carolina Capital Facilities Financing Agency, Revenue Bonds, Duke University, Series  
10/11 at 100.00  
AAA  
945,852  
   
2001A, 5.125%, 10/01/26 (Pre-refunded 10/01/11)  
     
1,600  
 
North Carolina Capital Facilities Financing Agency, Revenue Bonds, Duke University, Series  
10/12 at 100.00  
AAA  
1,714,912  
   
2002A, 5.125%, 7/01/42 (Pre-refunded 10/01/12)  
     
500  
 
North Carolina Medical Care Commission, Health System Revenue Bonds, Mission St. Joseph’s  
10/11 at 101.00  
AA (4)  
519,410  
   
Health System, Series 2001, 5.250%, 10/01/31 (Pre-refunded 10/01/11)  
     
500  
 
North Carolina Medical Care Commission, Revenue Bonds, Northeast Medical Center, Series 2004,  
11/14 at 100.00  
Aa3 (4)  
570,250  
   
5.000%, 11/01/24 (Pre-refunded 11/01/14)  
     
1,000  
 
Orange Water and Sewerage Authority, North Carolina, Water and Sewerage System Revenue Bonds,  
7/11 at 101.00  
AA+ (4)  
1,026,010  
   
Series 2001, 5.000%, 7/01/26 (Pre-refunded 7/01/11)  
     
   
Raleigh Durham Airport Authority, North Carolina, Airport Revenue Bonds, Series 2001A:  
     
1,780  
 
5.250%, 11/01/15 (Pre-refunded 5/01/11) – FGIC Insured  
5/11 at 101.00  
Aa3 (4)  
1,813,304  
3,100  
 
5.000%, 11/01/20 (Pre-refunded 5/01/11) – FGIC Insured  
5/11 at 101.00  
Aa3 (4)  
3,156,637  
400  
 
Raleigh, North Carolina, General Obligation Bonds, Series 2002, 5.000%, 6/01/21  
6/12 at 100.00  
AAA  
422,640  
   
(Pre-refunded 6/01/12)  
     
   
University of North Carolina System, Pooled Revenue Refunding Bonds, Series 2002A:  
     
610  
 
5.000%, 4/01/27 (Pre-refunded 10/01/12) – AMBAC Insured  
10/12 at 100.00  
N/R (4)  
653,109  
585  
 
5.000%, 4/01/27 (Pre-refunded 10/01/12) – AMBAC Insured  
10/12 at 100.00  
N/R (4)  
625,856  
16,090  
 
Total U.S. Guaranteed  
   
16,944,222  
   
Utilities – 14.8% (9.4% of Total Investments)  
     
150  
 
North Carolina Eastern Municipal Power Agency, Power System Revenue Bonds, Series 2003F,  
1/13 at 100.00  
A–  
158,603  
   
5.500%, 1/01/16  
     
500  
 
North Carolina Eastern Municipal Power Agency, Power System Revenue Bonds, Series 2005,  
1/16 at 100.00  
A–  
541,785  
   
5.250%, 1/01/20 – AMBAC Insured  
     
1,400  
 
North Carolina Eastern Municipal Power Agency, Power System Revenue Bonds, Series 2009B,  
1/19 at 100.00  
A–  
1,381,156  
   
5.000%, 1/01/26  
     
1,210  
 
North Carolina Eastern Municipal Power Agency, Power System Revenue Refunding Bonds, Series  
5/11 at 100.00  
Baa1  
1,212,287  
   
1993B, 5.500%, 1/01/17 – FGIC Insured  
     
275  
 
North Carolina Municipal Power Agency 1, Catawba Electric Revenue Bonds, Refunding Series  
1/19 at 100.00  
A  
278,003  
   
2009A, 5.000%, 1/01/30  
     
2,665  
 
North Carolina Municipal Power Agency 1, Catawba Electric Revenue Bonds, Series 2003A, 5.250%,  
1/13 at 100.00  
A  
2,830,763  
   
1/01/15 – AMBAC Insured  
     
250  
 
North Carolina Municipal Power Agency 1, Catawba Electric Revenue Bonds, Series 2008A,  
1/18 at 100.00  
A  
277,043  
   
5.250%, 1/01/20  
     
1,400  
 
Wake County Industrial Facilities and Pollution Control Financing Authority, North Carolina,  
2/12 at 101.00  
A1  
1,464,050  
   
Revenue Refunding Bonds, Carolina Power and Light Company, Series 2002, 5.375%, 2/01/17  
     
7,850  
 
Total Utilities  
   
8,143,690  
   
Water and Sewer – 35.7% (22.6% of Total Investments)  
     
2,000  
 
Brunswick County, North Carolina, Enterprise System Revenue Bonds, Series 2008A, 5.000%,  
4/18 at 100.00  
AA+  
2,009,980  
   
4/01/31 – AGM Insured  
     
425  
 
Cape Fear Public Utility Authority, North Carolina, Water & Sewer System Revenue Bonds, Series  
8/18 at 100.00  
AA  
440,309  
   
2008, 5.000%, 8/01/28  
     
   
Charlotte, North Carolina, Water and Sewerage System Revenue Bonds, Series 2001:  
     
750  
 
5.125%, 6/01/26  
6/11 at 101.00  
AAA  
762,923  
1,780  
 
5.125%, 6/01/26 – FGIC Insured  
6/11 at 101.00  
Aaa  
1,782,759  
500  
 
Dare County, North Carolina, Utilities System Revenue Bonds, Series 2011, 5.000%, 2/01/41  
2/21 at 100.00  
AA  
497,290  
300  
 
Durham County, North Carolina, Enterprise System Revenue Bonds, Series 2002, 5.000%, 6/01/18 –  
6/13 at 100.00  
AA  
318,534  
   
NPFG Insured  
     
2,500  
 
Kannapolis, North Carolina, Water and Sewerage System Revenue Bonds, Series 2001B, 5.250%,  
2/12 at 101.00  
AA+  
2,341,275  
   
2/01/26 – AGM Insured (Alternative Minimum Tax)  
     
   
Oak Island, North Carolina, Enterprise System Revenue Bonds, Series 2009A:  
     
50  
 
6.000%, 6/01/34 – AGC Insured  
6/19 at 100.00  
AA+  
51,603  
20  
 
6.000%, 6/01/36 – AGC Insured  
6/19 at 100.00  
AA+  
20,508  
300  
 
Oak Island, North Carolina, Enterprise System Revenue Bonds, Series 2011, 5.750%, 6/01/36 –  
6/21 at 100.00  
AA+  
301,818  
   
AGC Insured  
     
500  
 
Onslow County, North Carolina, Combined Enterprise System Revenue Bonds, Series 2004B, 5.000%,  
6/14 at 100.00  
A  
517,110  
   
6/01/23 – SYNCORA GTY Insured  
     
   
Raleigh, North Carolina, Combined Enterprise System Revenue Bonds, Series 2006A:  
     
4,950  
 
5.000%, 3/01/31 (UB)  
3/16 at 100.00  
AAA  
5,103,500  
3,000  
 
5.000%, 3/01/36 (UB)  
3/16 at 100.00  
AAA  
3,043,080  
5  
 
Raleigh, North Carolina, Combined Enterprise System Revenue Bonds Series 2006A, Residuals  
No Opt. Call  
AAA  
5,215  
   
Series II-R-645-2, 13.840%, 3/01/14 (IF)  
     
2,375  
 
Winston-Salem, North Carolina, Water and Sewer System Revenue Bonds, Series 2007A, 5.000%,  
6/17 at 100.00  
AAA  
2,394,499  
   
6/01/37 (UB)  
     
19,455  
 
Total Water and Sewer  
   
19,590,403  
$ 90,305  
 
Total Investments (cost $86,999,376) – 158.1%  
   
86,819,027  
   
Floating Rate Obligations – (13.6)%  
   
(7,480,000)  
   
MuniFund Term Preferred Shares, at Liquidation Value – (52.3)% (5)  
   
(28,725,000)  
   
Other Assets Less Liabilities – 7.8%  
   
4,291,118  
   
Net Assets Applicable to Common Shares – 100%  
   
$ 54,905,145  
 
 
 
 
 
 
 
 
 
 
Fair Value Measurements
 
 
Fair value is defined as the price that the Fund would receive upon selling an investment or transferring a liability in an orderly transaction to an independent buyer in the principal or most advantageous market of the investment. A three-tier hierarchy is used to maximize the use of observable market data and minimize the use of unobservable inputs and to establish classification of fair value measurements for disclosure purposes. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability. Observable inputs are based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability. Unobservable inputs are based on the best information available in the circumstances. The three-tier hierarchy of inputs is summarized in the three broad levels listed below:
 
 
Level 1 – Quoted prices in active markets for identical securities.
 
 
Level 2 – Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.).
 
 
Level 3 – Significant unobservable inputs (including management’s assumptions in determining the fair value of investments).
 
 
The inputs or methodologies used for valuing securities are not an indication of the risk associated with investing in those securities. The following is a summary of the Fund’s fair value measurements as of February 28, 2011:
 
         
 
Level 1  
Level 2  
Level 3  
Total  
Investments:  
       
Municipal Bonds  
$ —  
$86,819,027  
$ —  
$86,819,027  
During the period ended February 28, 2011, the Fund recognized no significant transfers to/from Level 1,  
 
Level 2 or Level 3.  
       
 
 
Income Tax Information
 
 
The following information is presented on an income tax basis. Differences between amounts for financial statement and federal income tax purposes are primarily due to timing differences in recognizing taxable market discount, timing differences in recognizing certain gains and losses on investment transactions and the treatment of investments in inverse floating rate securities reflected as financing transactions, if any. To the extent that differences arise that are permanent in nature, such amounts are reclassified within the capital accounts on the Statement of Assets and Liabilities presented in the annual report, based on their federal tax basis treatment; temporary differences do not require reclassification. Temporary and permanent differences do not impact the net asset value of the Fund.
 
 
At February 28, 2011, the cost of investments was $79,513,309.
 
 
Gross unrealized appreciation and gross unrealized depreciation of investments at February 28, 2011, were as follows:
 
   
Gross unrealized:  
 
  Appreciation  
$ 1,622,940  
  Depreciation  
(1,797,141)
Net unrealized appreciation (depreciation) of investments  
$   (174,201)
 
     
(1)  
 
All percentages shown in the Portfolio of Investments are based on net assets applicable to Common  
   
shares unless otherwise noted.  
(2)  
 
Optional Call Provisions: Dates (month and year) and prices of the earliest optional call or redemption.  
   
There may be other call provisions at varying prices at later dates. Certain mortgage-backed securities  
   
may be subject to periodic principal paydowns.  
(3)  
 
Ratings: Using the highest of Standard & Poor’s Group (“Standard & Poor’s”), Moody’s Investor Service,  
   
Inc. (“Moody’s”) or Fitch, Inc. (“Fitch”) rating. Ratings below BBB by Standard & Poor’s, Baa by Moody’s or  
   
BBB by Fitch are considered to be below investment grade. Holdings designated N/R are not rated by  
   
any of these national rating agencies.  
(4)  
 
Backed by an escrow or trust containing sufficient U.S. Government or U.S. Government agency securities,  
   
which ensure the timely payment of principal and interest. Such investments are normally considered to  
   
be equivalent to AAA rated securities.  
(5)  
 
MuniFund Term Preferred Shares, at Liquidation Value as a percentage of Total Investment is 33.1%.  
N/R  
 
Not rated.  
(IF)  
 
Inverse floating rate investment.  
(UB)  
 
Underlying bond of an inverse floating rate trust reflected as a financing transaction.  
 
 
 
 
 
 
Item 2. 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 Rule 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934 (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 quarter that have materially affected, or are reasonably likely to materially affect, the registrant's internal control over financial reporting.
 
Item 3. Exhibits.

File as exhibits as part of this Form 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)), exactly as set forth below: See EX-99 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 3 
 
By (Signature and Title)     /s/ Kevin J. McCarthy                    
                                                   Kevin J. McCarthy
                                                   Vice President and Secretary
 
Date          April 29, 2011        
 
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          April 29, 2011        
 
By (Signature and Title)     /s/ Stephen D. Foy                              
                                                   Stephen D. Foy
                                                  Vice President and Controller (principal financial officer) 
 
Date          April 29, 2011        
 

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