Fund			Fixed Rate			Unrealized
	Notional	Pay/Receive	Floating Rate	Fixed Rate	Payment	Effective	Termination	Appreciation
Counterparty	Amount	Floating Rate	Index	(Annualized)	Frequency	Date (9)	Date (Depreciation)
Barclays Bank PLC	$15,000,000	Receive	3-Month USD-LIBOR	4.675%	Semi-Annually	7/23/10	7/23/39	$ (364,500)
JPMorgan	5,000,000	Receive	3-Month USD-LIBOR	3.413	Semi-Annually	4/09/10	4/09/39	862,000
Royal Bank of Canada	3,000,000	Receive	3-Month USD-LIBOR	3.327	Semi-Annually	4/23/10	4/23/39	563,700
								$ 1,061,200

 

In determining the value of the Fund’s investments, various inputs are used. These inputs are 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 methodology 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, 2010:

 

	Level 1	Level 2	Level 3	Total
Investments:
Municipal Bonds	$ —	$393,276,959	$ —	$393,276,959
Derivatives:
Forward Swaps*	—	1,061,200	—	1,061,200
Total	$ —	$394,338,159	$ —	$394,338,159
* Represents net unrealized appreciation (depreciation).

 

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 considered to be non-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, 2010, 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	Forward Swaps	Unrealized appreciation on		Unrealized depreciation on
		forward swaps*	$1,425,700	forward swaps*	$364,500
* Represents cumulative appreciation (depreciation) of forward swap contracts as reported on the
Portfolio of Investments.

 

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, 2010, the cost of investments was $400,069,717.

 

Gross unrealized appreciation and gross unrealized depreciation of investments at January 31, 2010, were as follows:

 

Gross unrealized:
Appreciation	$  27,765,300
Depreciation	(44,858,447)
Net unrealized appreciation (depreciation) of investments	$(17,093,147)

(1)	All percentages shown in the Portfolio of Investments are based on net assets applicable to Common
	shares unless otherwise noted.
(2)	Optional Call Provisions: Dates (month and year) and prices of the earliest optional call or redemption.
	There may be other call provisions at varying prices at later dates. Certain mortgage-backed securities
	may be subject to periodic principal paydowns.
(3)	Ratings: Using the higher of Standard & Poor’s Group (“Standard & Poor’s”) or Moody’s Investor Service,

 

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.