Theholes are made with YOs which is the 'yfrn' and 'yon' and there's 4 of them on Row 2 - K20, P2, YON, SL 1, K2TOG, PSSO, YFRN, P2, K31, P2, YON, SL 1, K2TOG, PSSO, YFRN, P2, K20 .
So maybe you're not doing them right. The YONs go from a purl to a knit dec, you just lay the yarn over the top of the needle instead of moving it between the needles. The YRFNs go from the knit dec to a purl, so you wrap the yarn as for a regular YO, then bring the yarn through the needle tips to the front for the purl st.
sue- knitting heretic