- Quarterly Schedule of Portfolio Holdings of Registered Management Investment Company (N-Q)

 

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 811-22123

 

Nuveen Municipal High Income Opportunity Fund 2

(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:             10/31          

 

Date of reporting period:          1/31/12         

 

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 Municipal High Income Opportunity Fund 2 (NMD)
		January 31, 2012
Principal			Optional Call
Amount (000)		Description (1)	Provisions (2)	Ratings (3)	Value
		Alabama – 1.6% (1.4% of Total Investments)
$ 2,290		Birmingham Special Care Facilities Financing Authority, Alabama, Revenue Bonds, Baptist Health	11/15 at 100.00	Baa2	$ 2,381,394
		System Inc., Series 2005A, 5.250%, 11/15/20
1,000		Phenix City Industrial Development Board, Alabama, Environmental Improvement Revenue Bonds,	5/12 at 100.00	BBB	1,000,770
		MeadWestvaco Corporation, Series 2002A, 6.350%, 5/15/35 (Alternative Minimum Tax)
3,290		Total Alabama			3,382,164
		Arizona – 5.4% (4.7% of Total Investments)
1,000		Estrella Mountain Ranch Community Facilities District, Goodyear, Arizona, General Obligation	7/17 at 100.00	N/R	1,009,610
		Bonds, Series 2007, 6.200%, 7/15/32
70		Pima County Industrial Development Authority, Arizona, Choice Education and Development	No Opt. Call	N/R	69,993
		Charter School Revenue Bonds, Series 2006, 6.000%, 6/01/16
500		Pima County Industrial Development Authority, Arizona, Education Revenue Bonds Legacy	No Opt. Call	N/R	534,730
		Traditional School Project, Series 2009, 8.500%, 7/01/39
1,000		Pima County Industrial Development Authority, Arizona, Education Revenue Bonds, Carden	1/22 at 100.00	BBB–	985,240
		Traditional Schools Project, Series 2012, 7.500%, 1/01/42 (WI/DD, Settling 2/07/12)
825		Pima County Industrial Development Authority, Arizona, Education Revenue Bonds, Paradise	6/19 at 100.00	BBB–	749,141
		Education Center Project, Series 2010, 6.000%, 6/01/40
2,575		Quechan Indian Tribe of the Fort Yuma Reservation, Arizona, Government Project Bonds, Series	12/17 at 102.00	N/R	2,447,126
		2008, 7.000%, 12/01/27
4,825		Salt Verde Financial Corporation, Arizona, Senior Gas Revenue Bonds, Citigroup Energy Inc	No Opt. Call	A–	4,797,305
		Prepay Contract Obligations, Series 2007, 5.000%, 12/01/37
1,000		Yuma County Industrial Development Authority, Arizona, Exempt Revenue Bonds, Far West Water &	12/17 at 100.00	N/R	948,960
		Sewer Inc. Refunding, Series 2007A, 6.375%, 12/01/37 (Alternative Minimum Tax)
11,795		Total Arizona			11,542,105
		California – 19.4% (17.0% of Total Investments)
1,470		Bay Area Toll Authority, California, Revenue Bonds, San Francisco Bay Area Toll Bridge, Tender	No Opt. Call	AA	2,021,191
		Option Bond Trust 2985, 17.656, 4/01/16 (IF)
2,000		California Educational Facilities Authority, Revenue Bonds, Dominican University, Series 2006,	12/16 at 100.00	Baa3	1,925,540
		5.000%, 12/01/36
1,875		California Health Facilities Financing Authority, Refunding Revenue Bonds, Stanford Hospital	11/21 at 100.00	Aa3	2,859,525
		and Clinics, Tender Option Bond Trust 3267, 20.052%, 11/15/40 (IF)
565		California Housing Finance Agency, California, Home Mortgage Revenue Bonds, Series 2008B,	8/17 at 100.00	BBB	540,699
		5.000%, 2/01/28 (Alternative Minimum Tax)
1,000		California Municipal Finance Authority, Mobile Home Park Revenue Bonds, Caritas Projects	8/20 at 100.00	N/R	1,038,900
		Series 2010B, 7.250%, 8/15/45
1,000		California Municipal Finance Authority, Revenue Bonds, Harbor Regional Center Project, Series	11/19 at 100.00	Baa1	1,148,980
		2009, 8.500%, 11/01/39
1,300		California State, General Obligation Bonds, Tender Option Bond Trust 3162, 19.782%, 3/01/18 –	No Opt. Call	AA–	1,938,976
		AGM Insured (IF)
520		California Statewide Communities Development Authority, Revenue Bonds, American Baptist Homes	10/19 at 100.00	BBB+	547,238
		of the West, Series 2010, 6.250%, 10/01/39
1,000		California Statewide Communities Development Authority, Statewide Community Infrastructure	9/21 at 100.00	N/R	1,026,100
		Program Revenue Bonds, Series 2011A, 8.000%, 9/02/41
500		California Statewide Community Development Authority, Revenue Bonds, California Baptist	11/21 at 100.00	N/R	558,215
		University, Series 2011A, 7.500%, 11/01/41
1,825		California Statewide Community Development Authority, Revenue Bonds, Daughters of Charity	7/15 at 100.00	BBB	1,765,231
		Health System, Series 2005A, 5.250%, 7/01/35
500		California Statewide Community Development Authority, Revenue Bonds, Kaiser Permanente System,	4/17 at 100.00	AA+	530,410
		Series 2007A, 5.000%, 4/01/31 – BHAC Insured
2,000		California Statewide Community Development Authority, Revenue Bonds, St. Joseph Health System,	7/18 at 100.00	AA–	2,143,440
		Series 2007C, 5.750%, 7/01/47 – FGIC Insured
		Daly City Housing Development Finance Agency, California, Mobile Home Park Revenue Bonds,
		Franciscan Mobile Home Park Refunding, Series 2007A:
2,000		5.000%, 12/15/37	12/17 at 100.00	A	1,974,160
1,945		6.500%, 12/15/47	12/17 at 100.00	N/R	1,926,114
1,370		Elk Grove Community Facilities District 2005-1, California, Special Tax Bonds, Series 2007,	9/15 at 102.00	N/R	956,644
		5.250%, 9/01/37
1,000		Fontana, California, Special Tax Bonds, Community Facilities District 31 Citrus Heights North	9/14 at 102.00	N/R	906,370
		Special Tax Bonds, Series 2006, 5.000%, 9/01/26
		Golden State Tobacco Securitization Corporation, California, Enhanced Tobacco Settlement
		Asset-Backed Revenue Bonds, Tender Option Bond Trust 1011:
1,500		17.301%, 6/01/29 – AMBAC Insured (IF) (4)	6/12 at 100.00	A2	1,513,020
250		17.301%, 6/01/38 – FGIC Insured (IF) (4)	6/15 at 100.00	A2	253,430
500		17.280%, 6/01/45 (IF) (4)	6/15 at 100.00	A2	506,850
		Golden State Tobacco Securitization Corporation, California, Tobacco Settlement Asset-Backed
		Bonds, Series 2007A-1:
4,500		5.000%, 6/01/33	6/17 at 100.00	B–	3,371,215
1,000		5.750%, 6/01/47	6/17 at 100.00	B–	756,070
2,500		5.125%, 6/01/47	6/17 at 100.00	B–	1,703,025
1,000		Hercules Redevelopment Agency, California, Tax Allocation Bonds, Merged Project Area, Series	8/15 at 100.00	CC	698,760
		2005, 5.000%, 8/01/25 – AMBAC Insured
1,000		Lathrop Financing Authority, California, Revenue Bonds, Water Supply Project Series 2003,	6/13 at 100.00	N/R	1,004,090
		6.000%, 6/01/35
850		Los Angeles County, California, Community Development Commission Headquarters Office Building,	9/21 at 100.00	Aa3	1,105,162
		Lease Revenue Bonds, Community Development Properties Los ANgeles County Inc., Tender
		Option Bond Trust Series 2011-23B, 19.108%, 9/01/42 (IF) (4)
700		Los Angeles Department of Airports, California, Revenue Bonds, Los Angeles International	5/20 at 100.00	AA	1,000,832
		Airport, Tender Option Bond Trust 10-27B, 18.745%, 5/15/40 (IF) (4)
1,000		Los Angeles Regional Airports Improvement Corporation, California, Sublease Revenue Bonds, Los	12/12 at 102.00	N/R	901,580
		Angeles International Airport, American Airlines Inc. Terminal 4 Project, Series 2002C,
		7.500%, 12/01/24 (Alternative Minimum Tax)
500		March Joint Powers Redevelopment Agency, California, March Air Force Base Redevelopment	8/21 at 100.00	BBB+	579,255
		Project Tax Allocation Revenue Bonds, Series 2011A, 7.500%, 8/01/41
625		Palomar Pomerado Health Care District, California, Certificates of Participation, Series 2010,	11/20 at 100.00	Baa3	683,125
		5.250%, 11/01/21
2,500		San Bernardino Community College District, California, General Obligation Bonds, Tender Option	8/16 at 100.00	Aa2	3,597,400
		Bond Trust 11780-1, 17.876%, 2/01/27 – AGM Insured (IF)
40,295		Total California			41,481,547
		Colorado – 8.1% (7.1% of Total Investments)
1,500		Arista Metropolitan District, Colorado, Special Revenue Bonds, Series 2008, 9.250%, 12/01/37	12/15 at 100.00	N/R	1,132,185
1,975		Colorado Educational and Cultural Facilities Authority, Charter School Revenue Bonds, Windsor	5/17 at 100.00	BBB–	1,793,636
		Academy, Series 2007A, 5.700%, 5/01/37
1,950		Colorado Educational and Cultural Facilities Authority, Revenue Bonds, Pikes Peak School of	6/18 at 102.00	N/R	1,878,669
		Expeditionary Learning Charter School, Series 2008, 6.625%, 6/01/38
750		Colorado Health Facilities Authority, Health Facilities Revenue Bonds, Sisters of Charity of	No Opt. Call	AA	1,076,280
		Leavenworth Health Services Corporation, Tender Option Bond Trust 3702, 19.231%, 1/01/18 (IF) (4)
1,000		Colorado Health Facilities Authority, Revenue Bonds, Evangelical Lutheran Good Samaritan	6/16 at 100.00	A–	1,014,420
		Society, Series 2006, 5.250%, 6/01/36
		Colorado Housing and Finance Authority, Revenue Bonds, Confluence Energy LLC Project,
		Series 2007:
218		0.000%, 4/21/14 (Alternative Minimum Tax) (5), (7)	No Opt. Call	N/R	261,409
5,045		6.750%, 4/01/27 (Alternative Minimum Tax) (5), (6), (7)	4/17 at 100.00	N/R	2,078,540
993		Colorado Housing and Finance Authority, Revenue Bonds, Confluence Energy LLC Project, Series	No Opt. Call	N/R	99,300
		2007, 0.000%, 4/21/14 (Alternative Minimum Tax) (5), (7)
1,000		Confluence Metropolitan District, Colorado, General Obligation Limited Tax Bonds, Series 2007,	12/17 at 100.00	N/R	821,790
		5.400%, 12/01/27
1,070		Fitzsimons Village Metropolitan District 1, Aurora, Arapahoe County, Colorado, Tax Increment	3/20 at 100.00	N/R	1,122,676
		Public Improvement Fee Supported Revenue Bonds, Series 2010A, 7.500%, 3/01/40
5		Maher Ranch Metropolitan District 4, Colorado, General Obligation Limited Tax Bonds, Series	12/17 at 100.00	N/R	4,213
		2007, 5.250%, 12/01/36 – RAAI Insured
500		Pinery West Metropolitan District 2, Colorado, General Obligation Limited Tax Bonds, Series	12/17 at 100.00	N/R	474,775
		2007, 5.000%, 12/01/27 – RAAI Insured
1,000		Plaza Metropolitan District 1, Lakewood, Colorado, Tax Increment Revenue Bonds, Series 2003,	6/14 at 101.00	N/R	1,034,340
		8.000%, 12/01/25
1,700		Public Authority for Colorado Energy, Natural Gas Purchase Revenue Bonds, Colorado Springs	No Opt. Call	A–	2,105,722
		Utilities, Series 2008, 6.500%, 11/15/38
		Regional Transportation District, Colorado, Denver Transit Partners Eagle P3 Project Private
		Activity Bonds, Series 2010:
500		6.500%, 1/15/30	7/20 at 100.00	Baa3	561,445
1,000		6.000%, 1/15/41	7/20 at 100.00	Baa3	1,067,530
815		Three Springs Metropolitan District 3, Durango, La Plata County, Colorado, Property Tax	12/20 at 100.00	N/R	834,348
		Supported Revenue Bonds, Series 2010, 7.750%, 12/01/39
21,021		Total Colorado			17,361,278
		Connecticut – 0.8% (0.7% of Total Investments)
1,000		Harbor Point Infrastructure Improvement District, Connecticut, Special Obligation Revenue	4/20 at 100.00	N/R	1,110,200
		Bonds, Harbor Point Project, Series 2010A, 7.875%, 4/01/39
500		Stamford, Connecticut, Special Obligation Revenue Bonds, Mill River Corridor Project, Series	4/21 at 100.00	N/R	516,305
		2011aA, 7.000%, 4/01/41
1,500		Total Connecticut			1,626,505
		District of Columbia – 1.7% (1.5% of Total Investments)
2,500		District of Columbia, Revenue Bonds, Howard University, Tender Option Bond Trust 1006,	4/21 at 100.00	A–	3,681,100
		23.243%, 10/01/37 (IF) (4)
		Florida – 9.7% (8.5% of Total Investments)
965		Ave Maria Stewardship Community Development District, Florida, Capital Improvement Revenue	5/16 at 100.00	N/R	807,309
		Bonds, Series 2006A, 5.125%, 5/01/38
1,000		Beacon Lakes Community Development District, Florida, Special Assessment Bonds, Series 2003A,	5/13 at 101.00	N/R	1,017,500
		6.900%, 5/01/35
995		Beeline Community Development District, Palm Beach County, Florida, Special Assessment Bonds,	5/18 at 100.00	N/R	1,038,213
		Series 2008A, 7.000%, 5/01/37
970		Colonial Country Club Community Development District, Florida, Capital Improvement Revenue	5/13 at 101.00	A	1,005,395
		Bonds, Series 2003, 6.400%, 5/01/33
2,000		Escambia County, Florida, Environmental Improvement Revenue Bonds, International Paper Company	2/12 at 100.00	BBB	1,999,920
		Projects, Series 2006B, 5.000%, 8/01/26 (Alternative Minimum Tax)
1,000		Martin County Industrial Development Authority, Florida, Industrial Development Revenue Bonds,	6/12 at 100.00	BB+	1,003,500
		Indiantown Cogeneration LP, Series 1994A, 7.875%, 12/15/25 (Alternative Minimum Tax)
2,320		Old Palm Community Development District, Florida, Special Assessment Bonds, Palm Beach	5/15 at 101.00	N/R	2,265,294
		Gardens, Series 2004A, 5.900%, 5/01/35
1,140		Pine Island Community Development District, Florida, Special Assessment Bonds, Bella Collina,	5/12 at 101.00	N/R	862,262
		Series 2004, 5.750%, 5/01/35
995		Poinciana West Community Development District, Florida, Special Assessment Bonds, Series 2007,	5/17 at 100.00	N/R	940,972
		6.000%, 5/01/37
1,000		Port Saint Lucie, Florida, Special Assessment Revenue Bonds, Southwest Annexation District 1B,	7/17 at 100.00	BBB	1,023,280
		Series 2007, 5.000%, 7/01/33 – NPFG Insured
490		South Village Community Development District, Clay County, Florida, Capital Improvement	5/13 at 100.00	N/R	416,823
		Revenue Bonds, Series 2005A, 5.700%, 5/01/35
1,345		Stoneybrook Venice Community Development District, Florida, Capital Improvement Revenue Bonds,	5/18 at 100.00	N/R	1,379,876
		Series 2007, 6.750%, 5/01/38
2,810		Tolomato Community Development District, Florida, Special Assessment Bonds, Series 2006,	5/14 at 101.00	BB	2,339,831
		5.400%, 5/01/37
5,820		Tolomato Community Development District, Florida, Special Assessment Bonds, Series 2007,	No Opt. Call	N/R	2,480,193
		5.250%, 5/01/39 (6)
		Westchester Community Development District 1, Florida, Special Assessment Bonds, Series 2003:
475		6.000%, 5/01/23	5/13 at 101.00	N/R	469,903
1,750		6.125%, 5/01/35	5/13 at 101.00	N/R	1,687,875
25,075		Total Florida			20,738,146
		Georgia – 1.8% (1.6% of Total Investments)
990		Atlanta, Georgia, Tax Allocation Bonds, Beltline Project Series 2008A. Remarketed,	1/19 at 100.00	N/R	1,105,592
		7.500%, 1/01/31
1,250		Clayton County Development Authority, Georgia, Special Facilities Revenue Bonds, Delta Air Lines,	6/20 at 100.00	CCC+	1,449,538
		Inc. Project, Series 2009A, 8.750%, 6/01/29
1,170		Clayton County Development Authority, Georgia, Special Facilities Revenue Bonds, Delta Air Lines,	6/15 at 100.00	CCC+	1,257,668
		Inc. Project, Series 2009B, 9.000%, 6/01/35 (Alternative Minimum Tax)
3,410		Total Georgia			3,812,798
		Illinois – 12.7% (11.1% of Total Investments)
1,000		Bolingbrook, DuPage & Will Counties, Illinois, Special Tax Revenue Bonds, Special Service Areas	4/21 at 100.00	BBB	900,660
		2001-1, 2001-2, 2001-3, and 2002-1, Refunding Series 2007, 4.500%, 3/01/32 – NPFG Insured
1,000		Cook County, Illinois, Recovery Zone Facility Revenue Bonds, Navistar International Corporation	10/20 at 100.00	BB–	1,064,430
		Project, Series 2010, 6.500%, 10/15/40
1,180		Evanston, Illinois, Educational Facility Revenue Bonds, Roycemore School Project, Series 2011,	7/21 at 100.00	N/R	1,240,534
		8.250%, 7/01/41
1,100		Hillside, Cook County, Illinois, Senior Lien Tax Increment Revenue Bonds, Mannheim	1/18 at 102.00	N/R	1,062,127
		Redevelopment Project, Series 2008, 7.000%, 1/01/28
1,000		Illinois Finance Authority Revenue Bonds, Christian Homes, Inc., Refunding Series 2010,	5/15 at 100.00	N/R	1,030,710
		5.500%, 5/15/23
3,370		Illinois Finance Authority, Charter School Revenue Bonds, Chicago Charter School Foundation,	No Opt. Call	BBB+	3,299,365
		Series 2007, 5.000%, 12/01/36
500		Illinois Finance Authority, Revenue Bonds, Admiral at Lake Project, Series 2010A,	5/20 at 100.00	N/R	505,380
		7.750%, 5/15/30
500		Illinois Finance Authority, Revenue Bonds, Admiral at Lake Project, Temps 75 Series 2010D-1,	11/12 at 100.00	N/R	500,455
		7.000%, 5/15/18
1,250		Illinois Finance Authority, Revenue Bonds, OSF Healthcare System, Tender Option Bond Trust	11/17 at 100.00	A	1,696,500
		4702, 20.219%, 11/15/37 (IF) (4)
1,900		Illinois Finance Authority, Revenue Bonds, Provena Health, Series 2009A, 7.750%, 8/15/34	8/19 at 100.00	BBB+	2,314,808
1,770		Illinois Finance Authority, Revenue Bonds, Sherman Health Systems, Series 2007A,	8/17 at 100.00	BBB	1,797,223
		5.500%, 8/01/37
2,000		Illinois Finance Authority, Revenue Bonds, Silver Cross Hospital and Medical Centers, Series 2009,	8/19 at 100.00	BBB+	2,229,100
		6.875%, 8/15/38
500		Illinois Finance Authority, Revenue Bonds, Southern Illinois Healthcare Enterprises, Inc.,	3/20 at 100.00	AA–	556,105
		Series 2005 Remarketed, 5.250%, 3/01/30 – AGM Insured
500		Illinois Health Facilities Authority, Revenue Refunding Bonds, Elmhurst Memorial Healthcare,	1/13 at 100.00	A–	529,535
		Series 2002, 5.500%, 1/01/22
2,000		Lombard Public Facilities Corporation, Illinois, First Tier Conference Center and Hotel	1/16 at 100.00	CCC	1,215,120
		Revenue Bonds, Series 2005A-2, 5.500%, 1/01/36 – ACA Insured
		Lombard Public Facilities Corporation, Illinois, Second Tier Conference Center and Hotel
		Revenue Bonds, Series 2005B:
285		5.250%, 1/01/25	1/16 at 100.00	CCC	178,108
175		5.250%, 1/01/36	1/16 at 100.00	CCC	107,671
800		Railsplitter Tobacco Settlement Authority, Illinois, Tobacco Settlement Revenue Bonds, Series	No Opt. Call	A–	898,688
		2010, 6.000%, 6/01/28
		Southwestern Illinois Development Authority, Illinois, Saint Clair County Comprehensive Mental
		Health Center, Series 2007:
1,170		6.200%, 6/01/17	No Opt. Call	N/R	1,198,092
3,020		6.625%, 6/01/37	6/17 at 103.00	N/R	3,043,254
1,000		Southwestern Illinois Development Authority, Local Government Program Revenue Bonds, Granite	3/14 at 100.00	N/R	1,024,200
		City Project, Series 2009B, 7.750%, 3/01/22
750		Springfield, Sangamon County, Illinois, Special Service Area, Legacy Pointe, Special	3/17 at 102.00	N/R	799,538
		Assessment Bonds, Series 2009, 7.875%, 3/01/32
26,770		Total Illinois			27,191,603
		Indiana – 3.2% (2.8% of Total Investments)
3,100		Hospital Authority of Delaware County, Indiana, Hospital Revenue Bonds, Cardinal Health System,	8/16 at 100.00	Baa2	3,141,974
		Series 2006, 5.125%, 8/01/29
1,250		Indiana Bond Bank, Special Program Gas Revenue Bonds, JP Morgan Ventures Energy Corporation	No Opt. Call	Aa3	1,811,350
		Guaranteed, Series 2007A, 18.510%, 4/15/17 (IF)
		Vigo County Hospital Authority, Indiana, Revenue Bonds, Union Hospital, Series 2007:
250		5.700%, 9/01/37	9/17 at 100.00	N/R	227,455
1,800		5.800%, 9/01/47	9/17 at 100.00	N/R	1,630,980
6,400		Total Indiana			6,811,759
		Kentucky – 0.5% (0.4% of Total Investments)
		Kentucky Economic Development Finance Authority, Hospital Facilities Revenue Bonds, Owensboro
		Medical Health System, Series 2010A:
500		6.000%, 6/01/30	6/20 at 100.00	BBB+	558,785
500		6.500%, 3/01/45	No Opt. Call	Baa2	557,595
1,000		Total Kentucky			1,116,380
		Louisiana – 3.7% (3.2% of Total Investments)
1,000		Louisana Public Facilities Authority, Revenue Bonds, Lake Charles Charter Academy Foundation	12/21 at 100.00	N/R	1,023,380
		Project, Series 2011A, 7.750%, 12/15/31
500		Louisiana Local Government Environment Facilities and Community Development Authority, Revenue	11/20 at 100.00	BBB–	547,535
		Bonds, Westlake Chemical Corporation Projects, Series 2010A-1, 6.500%, 11/01/35
3,500		Louisiana Local Government Environmental Facilities & Community Development Authority, Revenue	11/17 at 100.00	BBB–	3,786,125
		Bonds, Westlake Chemical Corporation Project, Series 2007, 6.750%, 11/01/32
4,000		Louisiana Local Government Environmental Facilities and Community Development Authority,	12/17 at 100.00	N/R	1,900,120
		Revenue Bonds, Southgate Suites Hotel LLC Project, Series 2007A, 6.750%, 12/15/37 (5), (6), (7)
555		Tobacco Settlement Financing Corporation, Louisiana, Tobacco Settlement Asset-Backed Bonds,	5/12 at 100.00	A–	560,106
		Series 2001B, 5.875%, 5/15/39
9,555		Total Louisiana			7,817,266
		Maryland – 0.3% (0.3% of Total Investments)
100		Baltimore, Maryland, Senior Lien Convention Center Hotel Revenue Bonds, Series 2006A, 5.250%,	9/16 at 100.00	BB+	93,644
		9/01/39 – SYNCORA GTY Insured
1,000		Maryland Economic Development Corporation, Revenue Bonds, Chesapeake Bay Hyatt Conference	12/16 at 100.00	N/R	648,350
		Center, Series 2006A, 5.000%, 12/01/31
1,100		Total Maryland			741,994
		Massachusetts – 0.0% (0.0% of Total Investments)
90		Boston Industrial Development Financing Authority, Massachusetts, Senior Revenue Bonds,	9/12 at 102.00	Caa3	66,969
		Crosstown Center Project, Series 2002, 6.500%, 9/01/35 (Alternative Minimum Tax)
		Michigan – 1.3% (1.2% of Total Investments)
1,750		Michigan Public Educational Facilities Authority, Charter School Revenue Bonds, American	12/17 at 100.00	N/R	1,607,008
		Montessori Academy, Series 2007, 6.500%, 12/01/37
980		Michigan Public Educational Facilities Authority, Limited Obligation Revenue Bonds, David Ellis	6/17 at 100.00	N/R	836,636
		Academy-West Charter School Project, Series 2007, 5.875%, 6/01/37
500		Summit Academy North, Michigan, Revenue Bonds, Public School Academy Series 2005,	11/15 at 100.00	BB+	406,795
		5.500%, 11/01/35
3,230		Total Michigan			2,850,439
		Minnesota – 1.4% (1.2% of Total Investments)
3,000		St. Paul Housing and Redevelopment Authority, Minnesota, Revenue Bonds, Healtheast Inc.,	11/15 at 100.00	BB+	3,016,800
		Series 2005, 6.000%, 11/15/35
		Mississippi – 0.4% (0.3% of Total Investments)
975		Mississippi Business Finance Corporation, Gulf Opportunity Zone Revenue Bonds, Roberts Hotel	2/21 at 102.00	NA	754,884
		of Jackson, LLC Project, Series 2010, 8.500%, 2/01/30 (6)
		Missouri – 3.1% (2.7% of Total Investments)
1,000		Hanley Road Corridor Transportation Development District, Brentwood and Maplewood, Missouri,	10/19 at 100.00	A–	1,089,270
		Transportation Sales Revenue Bonds, Refunding Series 2009A, 5.875%, 10/01/36
1,000		Missouri Development Finance Board. Infrastructure Facilities Revenue Bonds, City of	4/14 at 100.00	A–	1,050,330
		Independence, Missouri – Events Center Project, Series 2009F, 6.250%, 4/01/38
990		Orpheum Theater Community Improvement District, Saint Louis, Missouri, Property and Sales Tax	No Opt. Call	N/R	748,381
		Revenue Bonds, Series 2009, 9.000%, 3/01/29
1,100		Saint Louis Industrial Development Authority, Missouri, Confluence Academy Project, Series	6/15 at 103.00	N/R	958,166
		2007A, 5.350%, 6/15/32
1,000		Saint Louis Land Clearance for Redevelopment Authority, Missouri, Tax-Exempt Recovery Zone	9/20 at 100.00	N/R	1,012,500
		Facilities Improvement, Special Revenue Bonds, Kiel Opera House Project, Series 2010B,
		7.000%, 9/01/35
1,894		Saint Louis, Missouri, Tax Increment Financing Revenue Bonds, Fashion Square Redevelopment	3/12 at 100.00	N/R	1,710,093
		Project, Series 2008A, 6.300%, 8/22/26
6,984		Total Missouri			6,568,740
		Nevada – 2.0% (1.7% of Total Investments)
2,500		Clark County, Nevada, General Obligation Bank Bonds, Southern Nevada Water Authority Loan,	No Opt. Call	AA+	3,277,300
		Tender Option Bond Trust Series 2010-11836, 17.975%, 6/01/16 (IF)
950		Sparks Tourism Improvement District 1, Legends at Sparks Marina, Nevada, Senior Sales Tax	6/18 at 100.00	B2	952,850
		Revenue Bonds Series 2008A, 6.500%, 6/15/20
3,450		Total Nevada			4,230,150
		New Jersey – 3.0% (2.6% of Total Investments)
2,000		New Jersey Economic Development Authority, Special Facilities Revenue Bonds, Continental	3/12 at 100.00	B	1,999,860
		Airlines Inc., Series 1999, 6.250%, 9/15/19 (Alternative Minimum Tax)
25		New Jersey Economic Development Authority, Special Facilities Revenue Bonds, Continental	5/12 at 100.00	B	25,002
		Airlines Inc., Series 2000, 7.000%, 11/15/30 (Alternative Minimum Tax)
3,200		New Jersey Health Care Facilities Financing Authority, New Jersey, Revenue Bonds, Saint Peters	7/18 at 100.00	BBB–	3,331,104
		University Hospital, Series 2007, 5.750%, 7/01/37
1,000		New Jersey Health Care Facilities Financing Authority, Revenue Bonds, Saint Joseph’s	No Opt. Call	BBB–	1,071,250
		Healthcare System Obligated Group Issue, Series 2008, 6.000%, 7/01/18
6,225		Total New Jersey			6,427,216
		New Mexico – 0.7% (0.6% of Total Investments)
485		Montecito Estates Public Improvement District, New Mexico, Special Levee Revenue Bonds, Series	10/17 at 100.00	N/R	456,957
		2007, 7.000%, 10/01/37
965		New Mexico Hospital Equipment Loan Council, First Mortgage Revenue Bonds, La Vida LLena	7/20 at 100.00	N/R	1,013,597
		Project, Series 2010A, 5.875%, 7/01/30
1,450		Total New Mexico			1,470,554
		New York – 3.0% (2.6% of Total Investments)
		New York City Industrial Development Agency, New York, American Airlines-JFK International
		Airport Special Facility Revenue Bonds, Series 2005:
1,000		7.500%, 8/01/16 (Alternative Minimum Tax)	No Opt. Call	N/R	901,980
1,000		7.625%, 8/01/25 (Alternative Minimum Tax)	8/16 at 101.00	N/R	903,710
1,000		8.000%, 8/01/28	No Opt. Call	N/R	903,970
		New York City Industrial Development Agency, New York, Civic Facility Revenue Bonds, Bronx
		Parking Development Company, LLC Project, Series 2007:
500		5.750%, 10/01/37	10/17 at 100.00	N/R	253,350
2,000		5.875%, 10/01/46	10/17 at 102.00	N/R	1,013,180
1,030		New York City Industrial Development Agency, New York, Civic Facility Revenue Bonds, Special	7/16 at 101.00	N/R	963,864
		Needs Facilities Pooled Program, Series 2008A-1, 5.800%, 7/01/23
		New York Liberty Development Corporation, Second Priority Liberty Revenue Refunding Bonds,
		Bank of America Tower at One Bryant Park Project, Tender Option Bond Trust PT4704:
250		18.341%, 1/15/44 (IF) (4)	1/20 at 100.00	AA	320,720
625		18.341%, 1/15/44 (IF) (4)	1/20 at 100.00	AA	801,800
265		Port Authority of New York and New Jersey, Special Project Bonds, JFK International Air	12/20 at 100.00	BBB–	286,664
		Terminal LLC Project, Eighth Series 2010, 6.000%, 12/01/42
7,670		Total New York			6,349,238
		North Carolina – 1.8% (1.6% of Total Investments)
1,970		Albemarle Hospital Authority, North Carolina, Health Care Facilities Revenue Bonds, Series 2007,	10/17 at 100.00	N/R	1,734,191
		5.250%, 10/01/38
		North Carolina Capital Facilities Financing Agency, Educational Facilities Revenue Bond, Meredith
		College, Series 2008A:
1,000		6.000%, 6/01/31	6/18 at 100.00	BBB	1,099,410
1,000		6.125%, 6/01/35	6/18 at 100.00	BBB	1,088,330
3,970		Total North Carolina			3,921,931
		Ohio – 2.0% (1.7% of Total Investments)
500		Buckeye Tobacco Settlement Financing Authority, Ohio, Tobacco Settlement Asset-Backed Revenue	6/17 at 100.00	B+	372,315
		Bonds, Senior Lien, Series 2007A-2, 5.750%, 6/01/34
1,700		Lorain County Port Authority, Ohio, Recovery Zone Facility Economic Development Revenue Bonds,	12/20 at 100.00	BB	1,791,018
		United State Steel Corporation Project, Series 2010, 6.750%, 12/01/40
1,250		Ohio State, Hospital Facility Revenue Refunding Bonds, Cleveland Clinic Health System Obligated	No Opt. Call	Aa2	1,732,300
		Group, Tender Option Bond Trust 3551, 20.402%, 1/01/17 (IF)
2,000		Western Reserve Port Authority, Ohio, Solid Waste Facility Revenue Bonds, Central Waste Inc.,	7/17 at 102.00	N/R	280,020
		Series 2007A, 6.350%, 7/01/27 (Alternative Minimum Tax) (6)
5,450		Total Ohio			4,175,653
		Oklahoma – 0.7% (0.6% of Total Investments)
1,000		Fort Sill Apache Tribe of Oklahoma Economic Development Authority, Gaming Enterprise Revenue	8/21 at 100.00	N/R	1,013,910
		Bonds, Fort Sill Apache Casino, Series 2011A, 8.500%, 8/25/26
45		Tulsa Municipal Airport Trust, Oklahoma, Revenue Bonds, American Airlines Inc., Series 1995,	6/12 at 100.00	N/R	33,914
		6.250%, 6/01/20
500		Tulsa Municipal Airport Trust, Oklahoma, Revenue Refunding Bonds, American Airlines Inc.,	No Opt. Call	N/R	383,635
		Series 2004A, 7.750%, 6/01/35 (Mandatory put 12/01/14)
1,545		Total Oklahoma			1,431,459
		Pennsylvania – 2.4% (2.1% of Total Investments)
500		Allegheny Country Industrial Development Authority, Pennsylvania, Environmental Improvement	No Opt. Call	BB	542,955
		Revenue Bonds, United States Steel Corporation Project, Refunding Series 2009, 6.750%, 11/01/24
1,010		Chester County Industrial Development Authority, Pennsylvania, Avon Grove Charter School	12/17 at 100.00	BB+	977,630
		Revenue Bonds, Series 2007A, 6.375%, 12/15/37
185		Montgomery County Industrial Development Authority, Pennsylvania, FHA Insured Mortgage Revenue	8/20 at 100.00	AA	254,641
		Bonds, New Regional Medical Center Project, Tender Option Bond Trust 62B, 19.806%, 8/01/38 (IF) (4)
2,115		Pennsylvania Economic Development Finance Authority, Solid Waste Disposal Revenue Bonds (USG	6/12 at 100.00	B–	1,673,282
		Corporation Project) Series 1999, 6.000%, 6/01/31 (Alternative Minimum Tax)
1,000		Pennsylvania Housing Finance Agency, Single Family Mortgage Revenue Bonds, Tender Option Bond	4/19 at 100.00	AA+	1,166,880
		Trust 4657, 16.274%, 10/01/29 (IF) (4)
395		Philadelphia Hospitals and Higher Education Facilities Authority, Pennsylvania, Health System	5/20 at 100.00	AA	422,753
		Revenue Bonds, Jefferson Health System, Series 2010B, 5.000%, 5/15/40
5,205		Total Pennsylvania			5,038,141
		Puerto Rico – 0.0% (0.0% of Total Investments)
20		Puerto Rico Ports Authority, Special Facilities Revenue Bonds, American Airlines Inc., Series	6/12 at 100.00	N/R	5,313
		1996A, 6.250%, 6/01/26 (Alternative Minimum Tax) (6)
		Rhode Island – 0.2% (0.2% of Total Investments)
500		Rhode Island Tobacco Settlement Financing Corporation, Tobacco Settlement Asset-Backed Bonds,	6/12 at 100.00	Ba1	500,000
		Series 2002A, 6.250%, 6/01/42
		South Carolina – 1.2% (1.0% of Total Investments)
3,477		Lancaster County, South Carolina, Special Assessment Bonds, Edgewater II Improvement District,	No Opt. Call	N/R	1,742,359
		Series 2007B, 7.700%, 11/01/17 (6), (7)
625		South Carolina Jobs-Economic Development Authority, Hospital Revenue Bonds, Palmetto Health,	8/21 at 100.00	AA–	729,456
		Refunding Series 2011A, 6.500%, 8/01/39 – AGM Insured
4,102		Total South Carolina			2,471,815
		Tennessee – 1.2% (1.1% of Total Investments)
500		Johnson City Health and Educational Facilities Board, Tennessee, Hospital Revenue Bonds,	7/20 at 100.00	BBB+	562,870
		Mountain States Health Alliance, Refunding Series 2010A, 6.500%, 7/01/38
		Sumner County Health, Educational, and Housing Facilities Board, Tennessee, Revenue Refunding
		Bonds, Sumner Regional Health System Inc., Series 2007:
1,500		5.500%, 11/01/37 (6), (7)	11/17 at 100.00	N/R	110,865
1,000		5.500%, 11/01/46 (6), (7)	11/17 at 100.00	N/R	73,910
1,824		The Tennessee Energy Acquisition Corporation, Gas Revenue Bonds, Series 2006B, 5.625%, 9/01/26	No Opt. Call	N/R	1,839,814
4,824		Total Tennessee			2,587,459
		Texas – 6.9% (6.0% of Total Investments)
1,000		Alliance Airport Authority, Texas, Special Facilities Revenue Bonds, American Airlines Inc.,	6/12 at 100.00	N/R	260,510
		Series 2007, 5.750%, 12/01/29 (Alternative Minimum Tax) (6)
250		Central Texas Regional Mobility Authority, Senior Lien Revenue Bonds, Series 2011,	1/21 at 100.00	BBB–	268,540
		6.000%, 1/01/41
2,100		Clifton Higher Education Finance Corporation, Texas, Education Revenue Bonds, Tejano Center for	No Opt. Call	BBB–	2,380,350
		Community Concerns, Inc.-Raul Yzaguirre School for Success, Refunding Series 2009A,
		8.750%, 2/15/28
10		Dallas-Ft. Worth International Airport Facility Improvement Corporation, Texas, Revenue Bonds,	5/12 at 100.00	N/R	2,630
		American Airlines Inc., Series 1999, 6.375%, 5/01/35 (Alternative Minimum Tax) (6)
2,955		Danbury Higher Education Authority Inc., Texas, Golden Rule Charter School Revenue Bonds,	2/18 at 100.00	BB+	2,787,954
		Series 2008A, 6.500%, 8/15/38
970		Hidalgo Willacy Housing Finance Corporation, Texas, Multifamily Housing Revenue Bonds,	1/14 at 102.00	N/R	975,839
		Heritage Square Apartments Project, Series 2003A, 7.000%, 1/01/39
1,330		La Vernia Higher Education Financing Corporation, Texas, Education Revenue Bonds, Amigos Por	2/16 at 100.00	N/R	1,236,089
		Vida Friends For Life Public Charter School, Series 2008, 6.375%, 2/15/37
335		North Texas Tollway Authority, Second Tier System Revenue Refunding Bonds, Series 2008F,	1/18 at 100.00	A3	362,396
		5.750%, 1/01/38
2,000		Sabine River Authority, Texas, Pollution Control Revenue Refunding Bonds, TXU Energy Company	8/13 at 101.00	CC	320,760
		LLC Project, Series 2003B, 6.150%, 8/01/22
250		Texas Municipal Gas Acquisition and Supply Corporation I, Gas Supply Revenue Bonds, Senior	No Opt. Call	A–	291,490
		Lien Series 2008D, 6.250%, 12/15/26
1,000		Texas Private Activity Bond Surface Transporation Corporation, Senior Lien Revenue Bonds, NTE	12/19 at 100.00	Baa2	1,115,060
		Mobility Partners LLC North Tarrant Express Managed Lanes Project, Series 2009,
		6.875%, 12/31/39
1,000		Texas Private Activity Bond Surface Transportation Corporation, Senior Lien Revenue Bonds, LBJ	6/20 at 100.00	Baa3	1,133,040
		Infrastructure Group LLC IH-635 Managed Lanes Project, Series 2010, 7.000%, 6/30/34
955		Texas Public Finance Authority, Charter School Revenue Bonds, School of Excellence Charter	12/14 at 100.00	BB+	955,353
		School, Series 2004A, 7.000%, 12/01/34
2,000		Texas Turnpike Authority, Central Texas Turnpike System Revenue Bonds, First Tier Series	8/12 at 100.00	BBB+	2,037,520
		2002A, 5.750%, 8/15/38 – AMBAC Insured
550		Travis County Health Facilities Development Corporation, Texas, Revenue Bonds, Westminster	No Opt. Call	BB+	600,639
		Manor, Series 2010, 7.000%, 11/01/30
16,705		Total Texas			14,728,170
		Utah – 3.3% (2.9% of Total Investments)
		Utah State Charter School Finance Authority, Charter School Revenue Bonds, Noah Webster
		Academy, Series 2008A:
500		6.250%, 6/15/28	6/17 at 100.00	N/R	478,265
1,430		6.500%, 6/15/38	6/17 at 100.00	N/R	1,347,618
5,550		Utah State Charter School Finance Authority, Revenue Bonds, Summit Academy Project, Series	12/17 at 100.00	BBB–	5,161,278
		2007A, 5.800%, 6/15/38
7,480		Total Utah			6,987,161
		Virgin Islands – 0.9% (0.8% of Total Investments)
1,000		Virgin Islands Public Finance Authority, Revenue Bonds, Refinery Project – Hovensa LLC, Series	1/14 at 100.00	Ba2	1,000,920
		2003, 6.125%, 7/01/22 (Alternative Minimum Tax)
1,000		Virgin Islands Public Finance Authority, Revenue Bonds, Refinery Project Hovensa LLC, Series	1/15 at 100.00	Ba2	1,001,550
		2007, 4.700%, 7/01/22 (Alternative Minimum Tax)
2,000		Total Virgin Islands			2,002,470
		Virginia – 1.4% (1.2% of Total Investments)
3,000		Tobacco Settlement Financing Corporation of Virginia, Tobacco Settlement Asset Backed Bonds,	6/17 at 100.00	B2	1,926,930
		Series 2007B1, 5.000%, 6/01/47
1,000		Virginia Small Business Financing Authority, Revenue Bonds Hampton Roads Proton Beam Therapy	7/14 at 102.00	N/R	1,062,890
		Institute at Hampton University, LLC Project, Series 2009, 9.000%, 7/01/39
4,000		Total Virginia			2,989,820
		Washington – 6.1% (5.4% of Total Investments)
2,415		FYI Properties, Washington, Lease Revenue Bonds, Washington State Department of Information	6/19 at 100.00	AA	3,604,726
		Services Project, Tender Option Bond Trust 2009-14A&B, 20.277%, 6/01/34 (IF) (4)
3,600		Kalispel Indian Tribe, Washington, Priority Distribution Bonds, Series 2008, 6.750%, 1/01/38	No Opt. Call	N/R	3,016,008
7,000		Washington State Health Care Facilities Authority, Revenue Bonds, Northwest Hospital and	No Opt. Call	N/R	6,454,840
		Medical Center of Seattle, Series 2007, 5.700%, 12/01/32
15		Washington State Health Care Facilities Authority, Revenue Bonds, Virginia Mason Medical	8/17 at 100.00	BBB	15,520
		Center, Series 2007B, 5.750%, 8/15/37 – ACA Insured
13,030		Total Washington			13,091,094
		West Virginia – 0.2% (0.2% of Total Investments)
400		Ohio County Commission, West Virginia, Special District Excise Tax Revenue Bonds, Fort Henry	3/16 at 100.00	BBB	417,584
		Economic Development, Series 2006B, 5.625%, 3/01/36
		Wisconsin – 2.2% (2.0% of Total Investments)
30		Green Bay Redevelopment Authority, Wisconsin, Industrial Development Revenue Bonds, Fort James	No Opt. Call	N/R	31,220
		Project, Series 1999, 5.600%, 5/01/19 (Alternative Minimum Tax)
1,000		Lac Courte Oreilles Band of Lake Superior Chippewa Indians, Wisconsin, Revenue Bonds, Series	12/18 at 102.00	N/R	926,040
		2006, 7.000%, 12/01/26
1,000		Wisconsin Health and Educational Facilities Authority, Revenue Bonds, Froedtert Community	No Opt. Call	AA–	1,263,760
		Health, Inc. Obligated Group, Tender Option Bond Trust 3592, 19.125%, 4/01/17 (IF) (4)
1,000		Wisconsin Health and Educational Facilities Authority, Revenue Bonds, Ministry Health Care,	2/12 at 101.00	A+	1,034,280
		Inc., Tender Option Bond Trust 1019, 17.724%, 2/15/32 – NPFG Insured (IF) (4)
1,500		Wisconsin Health and Educational Facilities Authority, Revenue Bonds, Wheaton Franciscan	8/16 at 100.00	A–	1,532,280
		Healthcare System, Series 2006, Trust 2187, 14.781%, 8/15/34 (IF)
4,530		Total Wisconsin			4,787,580
$ 260,546		Total Investments (cost $239,937,192) – 114.3%			244,175,285
		Borrowings – (16.4)% (8), (9)			(35,000,000)
		Other Assets Less Liabilities – 2.1% (10)			4,374,484
		Net Assets Applicable to Common Shares – 100%			$ 213,549,769

 

 

 

 

 

---

 

 

 

 

Investments in Derivatives at January 31, 2012:

Swaps outstanding:

Fund

Fixed Rate

Unrealized

Notional

Pay/Receive

Floating Rate

Fixed Rate

Payment

Effective

Termination

Appreciation

Counterparty

Amount

Floating Rate

Index

(Annualized)

Frequency

Date (11)

Date

(Depreciation)

Barclays Bank PLC

$

35,000,000

Receive

1-Month USD-LIBOR

1.333

%

Monthly

4/25/11

4/25/14

$

(775,303

)

Morgan Stanley

7,000,000

Receive

3-Month USD-LIBOR

2.788

Semi-Annually

1/16/13

1/16/41

(86,787

)

$

(862,090

)

 

 

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 for 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 January 31, 2012:

 

		Level 1				Level 2				Level 3				Total
Investments:
Municipal Bonds		$	—			$	237,908,782			$	6,266,503			$	244,175,285
Derivatives:
Swaps*			—				(862,090	)			—				(862,090	)
Total		$	—			$	237,046,692			$	6,266,503			$	243,313,195
* Represents net unrealized appreciation (depreciation) as reported in the Fund’s Portfolio of Investments.

 

 

The following is a reconciliation of the Fund’s Level 3 investments held at the beginning and end of the measurement period:

 

	Level 3
	Municipal Bonds
Balance at the beginning of period	$6,622,263
Gains (losses):
Net realized gains (losses)	—
Net change in unrealized appreciation (depreciation)	15,030
Purchases at cost	—
Sales at proceeds	(90,770)
Net discounts (premiums)	—
Transfers in to	—
Transfers out of	(280,020)
Balance at the end of period	$6,266,503

 

 

During the period ended January 31, 2012, the Fund recognized no significant transfers to or from Level 1 or Level 2. Transfers in and/or out of Level 3 are shown using end of period values.

 

Derivative Instruments and Hedging Activities

 

The Fund records derivative instruments at fair value, with changes in fair value recognized on the Statement of Operations, when applicable. Even though the Fund’s investments in derivatives may represent economic hedges, they are not considered to be hedge transactions for financial reporting purposes.

 

The following table presents the fair value of all derivative instruments held by the Fund as of January 31, 2012, the location of these instruments on the Statement of Assets and Liabilities, and the primary underlying risk exposure.

 

 

 

		Location on the Statement of Assets and Liabilities
Underlying	Derivative	Asset Derivatives		Liability Derivatives
Risk Exposure	Instrument	Location	Value	Location	Value
Interest Rate	Swaps	Unrealized appreciation on swaps*	$ —	Unrealized depreciation on swaps*	$862,090
* Value represents cumulative gross unrealized appreciation (depreciation) of swap contracts as reported in the Fund’s Portfolio of Investments.

 

 

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 January 31, 2012, the cost of investments (excluding investments in derivatives) was $242,455,577.

 

Gross unrealized appreciation and gross unrealized depreciation of investments at (excluding investments in derivatives) January 31, 2012, were as follows:

 

Gross unrealized:
Appreciation		$	23,899,171
Depreciation			(22,179,463	)
Net unrealized appreciation (depreciation) of investments		$	1,719,708

 

 

(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 Investors 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)		Investment, or portion of investment, has been pledged to collateralize the net payment obligations for
		investments in derivatives and/or inverse floating rate transactions.
(5)		Investment valued at fair value using methods determined in good faith by, or at the discretion of, the
		Board of Trustees.
(6)		At or subsequent to the end of the reporting period, this security is non-income producing. Non-income
		producing security, in the case of a bond, generally denotes that the issuer has (1) defaulted on the
		payment of principal or interest, (2) is under the protection of the Federal Bankruptcy Court or (3) the Fund’s
		Adviser has concluded that the issue is not likely to meet its future interest payment obligations and has
		directed the Fund’s custodian to cease accruing additional income on the Fund’s records.
(7)		For fair value measurement disclosure purposes, investment categorized as Level 3.
(8)		Borrowings as a percentage of Total Investments is 14.3%.
(9)		The Fund segregates 100% of its eligible investments in the Portfolio of Investents as collateral
		for Borrowings.
(10)		Other Assets Less Liabilities includes the net Unrealized Appreciation (Depreciation) of derivative
		instruments as noted within Investments in Derivatives at January 31, 2012.
(11)		Effective date represents the date on which both the Fund and Counterparty commence interest payment
		accruals on each swap contract.
N/R		Not rated.
WI/DD		Purchased on a when-issued or delayed delivery basis.
(IF)		Inverse floating rate investment.
USD-LIBOR		United States Dollar-London Inter-Bank Offered Rate

 

 

 

 

 

 

---

 

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 Municipal High Income Opportunity Fund 2 

 

By (Signature and Title)     /s/ Kevin J. McCarthy                    

                                                   Kevin J. McCarthy

                                                   Vice President and Secretary

 

Date          March 30, 2012        

 

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          March 30, 2012        

 

By (Signature and Title)     /s/ Stephen D. Foy                              

                                                   Stephen D. Foy

                                                  Vice President and Controller (principal financial officer) 

 

Date          March 30, 2012