N-Q 1 nq.htm NKR Form 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         811-10553         

        Nuveen Arizona Dividend Advantage Municipal Fund 2         
(Exact name of registrant as specified in charter)


        333 West Wacker Drive, Chicago, Illinois 60606         
(Address of principal executive offices) (Zip code)


Jessica R. Droeger—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:            07/31          

Date of reporting period:          04/30/05         

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 Arizona Dividend Advantage Municipal Fund 2 (NKR)                     
                           April 30, 2005                     
 
 
 
 
Principal            Optional Call        Market 
Amount (000)        Description(1)        Provisions*    Ratings**    Value 
 
            Education and Civic Organizations - 8.1% (5.4% of Total Investments)                     
 
$    1,250        Glendale Industrial Development Authority, Arizona, Revenue Bonds, Midwestern University, Series            5/11 at 101.00    A-    $ 1,345,138 
            2001A, 5.875%, 5/15/31                     
 
    320        Puerto Rico Industrial, Tourist, Educational, Medical and Environmental Control Facilities            2/09 at 101.00    BBB    332,822 
            Financing Authority, Higher Education Revenue Bonds, Ana G. Mendez University System, Series 1999,                     
            5.375%, 2/01/19                     
 
            University of Arizona, Certificates of Participation, Series 2002A:                     
    750        5.500%, 6/01/18 - AMBAC Insured            6/12 at 100.00    AAA    832,740 
    500        5.125%, 6/01/22 - AMBAC Insured            6/12 at 100.00    AAA    535,040 
 
            Healthcare - 18.6% (12.5% of Total Investments)                     
 
    735        Arizona Health Facilities Authority, Hospital System Revenue Bonds, Phoenix Children's Hospital,            2/12 at 101.00    Ba2    753,573 
            Series 2002A, 6.250%, 2/15/21                     
 
    400        Arizona Health Facilities Authority, Hospital Revenue Bonds, Catholic Healthcare West, Series            7/10 at 101.00    A-    446,588 
            1999A, 6.625%, 7/01/20                     
 
    600        Arizona Health Facilities Authority, Revenue Bonds, Blood Systems Inc., Series 2004, 5.000%,            4/14 at 100.00    A-    618,486 
            4/01/20                     
 
    1,375        Maricopa County Industrial Development Authority, Arizona, Health Facility Revenue Bonds, Catholic            7/14 at 100.00    A-    1,449,181 
            Healthcare West, Series 2004A, 5.375%, 7/01/23                     
 
    500        Maricopa County Industrial Development Authority, Arizona, Hospital Revenue Bonds, Mayo Clinic            5/08 at 101.00    AA    528,360 
            Hospital, Series 1998, 5.250%, 11/15/37                     
 
    1,000        Mesa Industrial Development Authority, Arizona, Revenue Bonds, Discovery Health System, Series            1/10 at 101.00    AAA    1,088,020 
            1999A, 5.625%, 1/01/29 - MBIA Insured                     
 
    1,000        Scottsdale Industrial Development Authority, Arizona, Hospital Revenue Bonds, Scottsdale        12/11 at 101.00    A3    1,074,140 
            Healthcare, Series 2001, 5.800%, 12/01/31                     
 
    1,000        Yavapai County Industrial Development Authority, Arizona, Hospital Revenue Bonds, Yavapai Regional            8/13 at 100.00    Baa2    1,059,590 
            Medical Center, Series 2003A, 6.000%, 8/01/33                     
 
            Housing/Multifamily - 7.8% (5.2% of Total Investments)                     
 
    1,000        Maricopa County Industrial Development Authority, Arizona, GNMA Collateralized Multifamily Housing        10/11 at 105.00    AAA    1,066,690 
            Revenue Refunding Bonds, Pine Ridge, Cambridge Court, Cove on 44th and Fountain Place Apartments,                     
            Series 2001A-1, 6.000%, 10/20/31                     
 
    1,425        Phoenix Industrial Development Authority, Arizona, GNMA Collateralized Multifamily Housing Revenue            7/12 at 105.00    AAA    1,548,419 
            Bonds, Summit Apartments, Series 2002, 6.450%, 7/20/32                     
 
    325        Phoenix Industrial Development Authority, Arizona, GNMA Collateralized Multifamily Housing Revenue            4/15 at 100.00    Aaa    328,396 
            Bonds, Park Lee Apartments, Series 2004A, 5.050%, 10/20/44 (Alternative Minimum Tax)                     
 
            Housing/Single Family - 0.2% (0.2% of Total Investments)                     
 
    80        Pima County Industrial Development Authority, Arizona, FNMA/GNMA Single Family Mortgage Revenue        11/10 at 101.00    AAA    82,960 
            Bonds, Series 2001A-1, 5.350%, 11/01/24 (Alternative Minimum Tax)                     
 
            Industrials - 2.2% (1.5% of Total Investments)                     
 
    810        Yavapai County Industrial Development Authority, Arizona, Solid Waste Disposal Revenue Bonds, Waste            No Opt. Call    BBB    819,258 
            Management Inc. Project, Series 2003B, 4.450%, 3/01/28 (Alternative Minimum Tax) (Mandatory put                     
            3/01/08)                     
 
            Tax Obligation/General - 37.6% (25.3% of Total Investments)                     
 
    1,725        Chandler, Arizona, General Obligation Bonds, Series 2002, 5.000%, 7/01/17            7/12 at 100.00    AA+    1,855,479 
 
    1,000        Gilbert, Arizona, General Obligation Bonds, Series 2002A, 5.000%, 7/01/18 - AMBAC Insured            7/11 at 100.00    AAA    1,072,530 
 
            Maricopa County School District 6, Arizona, General Obligation Refunding Bonds, Washington                     
            Elementary School, Series 2002A:                     
    1,000        5.375%, 7/01/15 - FSA Insured            No Opt. Call    AAA    1,144,060 
    1,000        5.375%, 7/01/16 - FSA Insured            No Opt. Call    AAA    1,145,680 
 
    1,165        Maricopa County Unified School District 69, Paradise Valley, Arizona, General Obligation Refunding            No Opt. Call    AAA    1,315,425 
            Bonds, Series 2002A, 5.250%, 7/01/14 - FGIC Insured                     
 
    1,000        Mesa, Arizona, General Obligation Bonds, Series 2000, 6.500%, 7/01/11 - FGIC Insured            No Opt. Call    AAA    1,177,620 
 
    1,405        Mesa, Arizona, General Obligation Bonds, Series 2002, 5.375%, 7/01/15 - FGIC Insured            No Opt. Call    AAA    1,607,404 
 
            Phoenix, Arizona, Various Purpose General Obligation Bonds, Series 2002B:                     
    1,700        5.000%, 7/01/22            7/12 at 100.00    AA+    1,812,642 
    500        5.000%, 7/01/27            7/12 at 100.00    AA+    524,365 
 
    1,000        Pinal County Unified School District 43, Apache Junction, Arizona, General Obligation Refunding            No Opt. Call    AAA    1,169,170 
            Bonds, Series 2001, 5.750%, 7/01/15 - FGIC Insured                     
 
    510        Scottsdale, Arizona, General Obligation Bonds, Series 2002, 5.000%, 7/01/24            7/11 at 100.00    N/R    542,380 
 
    790        Tucson, Arizona, General Obligation Bonds, Series 2005, 5.000%, 7/01/20 - FGIC Insured            No Opt. Call    AAA    857,853 
 
            Tax Obligation/Limited - 44.3% (29.8% of Total Investments)                     
 
            Arizona State, Certificates of Participation, Series 2002A:                     
    750        5.000%, 11/01/17 - MBIA Insured            5/12 at 100.00    AAA    803,708 
    1,000        5.000%, 11/01/18 - MBIA Insured            5/12 at 100.00    AAA    1,070,340 
    500        5.000%, 11/01/20 - MBIA Insured            5/12 at 100.00    AAA    529,345 
 
    1,000        Arizona State Transportation Board, Highway Revenue Bonds, Series 2002B, 5.250%, 7/01/21            7/12 at 100.00    AAA    1,085,650 
 
    322        Estrella Mountain Ranch Community Facilities District, Goodyear, Arizona, Special Assessment Lien            7/10 at 102.00    N/R    356,393 
            Bonds, Series 2001A, 7.875%, 7/01/25                     
 
    670        Goodyear Community Facilities Utility District 1, Arizona, General Obligation Bonds, Series 2003,            7/13 at 100.00    A    692,874 
            5.350%, 7/15/28 - ACA Insured                     
 
    1,000        Maricopa County Public Finance Authority, Arizona, Lease Revenue Bonds, Series 2001, 5.500%,            7/11 at 100.00    Aaa    1,109,810 
            7/01/15 - AMBAC Insured                     
 
            Maricopa County Stadium District, Arizona, Revenue Refunding Bonds, Series 2002:                     
    840        5.375%, 6/01/18 - AMBAC Insured            6/12 at 100.00    Aaa    925,621 
    2,645        5.375%, 6/01/19 - AMBAC Insured            6/12 at 100.00    Aaa    2,914,605 
 
    1,500        Phoenix Industrial Development Authority, Arizona, Government Bonds, Capitol Mall LLC II Project,            3/12 at 100.00    AAA    1,641,405 
            Series 2001, 5.250%, 9/15/16 - AMBAC Insured                     
 
    460        Pima County Industrial Development Authority, Arizona, Charter School Revenue Bonds, Noah Webster        12/14 at 100.00    BBB-    470,934 
            Basic Schools Inc., Series 2004, 6.000%, 12/15/24                     
 
    1,070        Pinal County Industrial Development Authority, Arizona, Correctional Facilities Contract Revenue            No Opt. Call    A    1,104,764 
            Bonds, Florence West Prison LLC, Series 2002A, 5.000%, 10/01/18 - ACA Insured                     
 
    1,000        Puerto Rico Public Buildings Authority, Guaranteed Government Facilities Revenue Refunding Bonds,            7/12 at 100.00    A-    1,052,920 
            Series 2002D, 5.125%, 7/01/24                     
 
    480        Tucson Industrial Development Authority, Arizona, Charter School Revenue Bonds, Arizona            9/14 at 100.00    BBB-    488,486 
            Agribusiness and Equine Center Charter School, Series 2004A, 6.125%, 9/01/34                     
 
    1,000        Tucson, Arizona, Junior Lien Street and Highway User Revenue Bonds, Series 2000E, 5.000%,            7/10 at 100.00    AAA    1,068,650 
            7/01/18 - FGIC Insured                     
 
    750        Vistancia Community Facilities District, Arizona, Restricted General Obligation Bonds, Series            7/15 at 100.00    N/R    762,375 
            2005, 5.750%, 7/15/24                     
 
    640        Yuma Municipal Property Corporation, Arizona, Municipal Facilities Tax Revenue Bonds, Series 2001,            7/10 at 100.00    AAA    678,496 
            5.000%, 7/01/21 - AMBAC Insured                     
 
            Transportation - 5.5% (3.7% of Total Investments)                     
 
    1,000        Phoenix Civic Improvement Corporation, Arizona, Senior Lien Airport Revenue Bonds, Series 1998A,            7/08 at 101.00    AAA    1,031,930 
            5.000%, 7/01/25 - FSA Insured                     
 
    1,000        Phoenix, Arizona, Civic Improvement Corporation, Senior Lien Airport Revenue Bonds, Series 2002B,            7/12 at 100.00    AAA    1,047,970 
            5.250%, 7/01/27 (Alternative Minimum Tax) - FGIC Insured                     
 
            U.S. Guaranteed *** - 8.9% (6.0% of Total Investments)                     
 
    715        Arizona State University, System Revenue Bonds, Series 2002, 5.750%, 7/01/27 (Pre-refunded to            7/12 at 100.00    AAA    822,829 
            7/01/12) - FGIC Insured                     
 
    300        Maricopa County Unified School District 89, Dysart, Arizona, General Obligation Bonds, Series            7/14 at 100.00    AAA    338,988 
            2004B, 5.250%, 7/01/20 (Pre-refunded to 7/01/14) - FSA Insured                     
 
    1,000        Mesa, Arizona, Street and Highway User Tax Revenue Bonds, Series 2004, 5.125%, 7/01/23            7/14 at 100.00    AAA    1,120,250 
            (Pre-refunded to 7/01/14) - FSA Insured                     
 
    990        Scottsdale, Arizona, General Obligation Bonds, Series 2002, 5.000%, 7/01/23 (Pre-refunded to            7/11 at 100.00    AAA    1,087,010 
            7/01/11)                     
 
            Utilities - 7.0% (4.7% of Total Investments)                     
 
    1,115        Arizona Power Authority, Special Obligation Power Resource Revenue Refunding Crossover Bonds,            No Opt. Call    AA    1,252,524 
            Hoover Project, Series 2001, 5.250%, 10/01/15                     
 
    1,000        Mesa, Arizona, Utility System Revenue Bonds, Series 2002, 5.000%, 7/01/20 - FGIC Insured            7/11 at 100.00    AAA    1,062,030 
 
    320        Salt River Project Agricultural Improvement and Power District, Arizona, Electric System Revenue            1/13 at 100.00    AA    343,328 
            Bonds, Series 2002B, 5.000%, 1/01/22                     
 
            Water and Sewer - 8.5% (5.7% of Total Investments)                     
 
    500        Maricopa County Industrial Development Authority, Arizona, Water System Improvement Revenue Bonds,        12/07 at 102.00    AAA    530,070 
            Chaparral City Water Company, Series 1997A, 5.400%, 12/01/22 (Alternative Minimum Tax) - AMBAC                     
            Insured                     
 
    360        Oro Valley Municipal Property Corporation, Arizona, Senior Lien Water Revenue Bonds, Series 2003,            7/13 at 100.00    AAA    385,464 
            5.000%, 7/01/23 - MBIA Insured                     
 
    1,000        Phoenix Civic Improvement Corporation, Arizona, Junior Lien Water System Revenue Refunding Bonds,            No Opt. Call    AAA    1,174,710 
            Series 2001, 5.500%, 7/01/22 - FGIC Insured                     
 
    1,000        Tucson, Arizona, Water System Revenue Refunding Bonds, Series 2002, 5.500%, 7/01/18 - FGIC Insured            7/12 at 102.00    AAA    1,125,641 
 
$    51,792        Total Long-Term Investments (cost $52,959,988) - 148.7%                    56,213,129 
 
            Other Assets Less Liabilities - 0.2%                    98,108 
 
            Preferred Shares, at Liquidation Value - (48.9)%                    (18,500,000) 
 
            Net Assets Applicable to Common Shares - 100%                    $37,811,237 
 
 
            Forward Swap Contracts outstanding at April 30, 2005:                     
                                Unrealized 
                Notional    Effective    Termination    Appreciation 
                Amount    Date(2)        Date    (Depreciation) 
 
            Agreement with Goldman Sachs dated December 6, 2004, to pay                     
            semi-annually the notional amount multiplied by 5.324% (annualized)                     
            and receive quarterly the notional amount multiplied by the three-month                     
            USD-LIBOR (United States Dollar-London Inter-Bank Offered Rates).    $800,000    7/11/05        7/11/25    $(36,841) 
 
            Agreement with JP Morgan Chase dated Janurary 11, 2005, to pay                     
            semi-annually the notional amount multiplied by 5.235% (annualized)                     
            and receive quarterly the notional amount multiplied by the three-month                     
            USD-LIBOR (United States Dollar-London Inter-Bank Offered Rates).    750,000    8/17/05        8/17/25    (24,709) 
 
            Agreement with Merrill Lynch dated Feburary 14, 2005, to pay semi-                     
            annually the notional amount multiplied by 4.886% (annualized)                     
            and receive quarterly the notional amount multiplied by the three-month                     
            USD-LIBOR (United States Dollar-London Inter-Bank Offered Rates).    800,000    8/24/05        8/24/25    9,110 
 
                                $(52,440) 
 
 
 
        (1)    All percentages shown in the Portfolio of Investments are based on net assets applicable to Common shares                 
            unless otherwise noted.                     
        (2)    Effective date represents the date on which both the Fund and counterparty commence interest payment                 
            accruals on each forward swap contract.                     
        *    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.                     
        **    Ratings: 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.                     
        N/R    Investment is not rated.                     
 
            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 April 30, 2005, the cost of investments was $52,959,101.                     
 
            Gross unrealized appreciation and gross unrealized depreciation of investments at April 30, 2005, were as                 
            follows:                     
 
            Gross unrealized:                     
             Appreciation                    $3,295,261 
             Depreciation                    (41,233) 
 
            Net unrealized appreciation of investments                    $3,254,028 

Item 2. Controls and Procedures.

  1. 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)).
  2. 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: 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 Arizona Dividend Advantage Municipal Fund 2        

By (Signature and Title)*          /s/ Jessica R. Droeger--Vice President and Secretary        

Date         06/29/05        

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--Chief Administrative Officer (principal executive officer)        

Date         06/29/05        

By (Signature and Title)*         /s/ Stephen D. Foy--Vice President and Controller (principal financial officer)        

Date         06/29/05        

* Print the name and title of each signing officer under his or her signature.