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         811-21333         

        Nuveen Preferred and Convertible Income 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:            12/31          

Date of reporting period:          09/30/05         

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

  Nuveen Preferred and Convertible Income Fund 2 (JQC)
Portfolio of Investments (Unaudited)
September 30, 2005

                    Market 
Shares    Description(1)                Value 
    COMMON STOCKS - 0.2% (0.2% of Total Investments)                 
    Software - 0.2%                 
172,555    Computer Associates International Inc.              $  4,798,755 
    Total Common Stocks (cost $5,081,308)                4,798,755 
                     
Ratings* 
 
Market 
Shares    Description(1)    Coupon     Moody's    S&P    Value 
    $25 PAR (or similar ) SECURITIES - 50.9% (34.8% of Total Investments)                 
    Automobiles - 0.0%                 
3,000    DaimlerChrysler AG (CORTS)    7.875 %    A3    BBB    75,510 
2,200    DaimlerChrysler Corp. (PPLUS)    7.250 %    A3    BBB    55,440 
    Capital Markets - 4.3%                 
113,300    Bear Stearns Capital Trust III    7.800 %    A2    BBB    2,917,475 
27,000    BNY Capital Trust IV, Series E    6.875 %    A1    A-    684,720 
306,984    BNY Capital Trust V, Series F    5.950 %    A1    A-    7,613,203 
205,500    Compass Capital Trust III    7.350 %    A3    BBB-    5,260,800 
31,600    CSFB USA, Series 2002-10 (SATURNS)    7.000 %    Aa3    A+    825,076 
49,000    First Union Capital II, Series II (CORTS)    7.500 %    A1    A-    1,254,400 
22,600    First Union Institutional Capital II (CORTS)    8.200 %    A1    A-    633,591 
18,800    First Union Institutional Capital II, Series III (CORTS)    7.500 %    A1    A-    473,854 
12,300    Goldman Sachs Group Incorporated, Series 2003-06 (SATURNS)    6.000 %    Aa3    A+    300,120 
2,300    Goldman Sachs Group Incorporated, Series 2004-04 (SATURNS)    6.000 %    A1    A-    56,925 
198,350    Lehman Brothers Holdings Inc., Series C (a)    5.940 %    N/R    BBB+    9,897,665 
96,800    Lehman Brothers Holdings Inc., Series D (a)    5.670 %    A3    BBB+    4,956,160 
425,000    Lehman Brothers Holdings Inc., Series F (a)    6.500 %    A3    BBB+    11,173,250 
247,500    Merrill Lynch Capital Trust    7.000 %    A1    A-    6,407,775 
71,500    Merrill Lynch Capital Trust II    8.000 %    A1    A-    1,880,450 
47,800    Merrill Lynch Preferred Capital Trust    7.750 %    A1    A-    1,235,152 
188,800    Merrill Lynch Preferred Capital Trust IV    7.120 %    A1    A-    4,946,560 
283,400    Merrill Lynch Preferred Capital Trust V    7.280 %    A1    A-    7,453,420 
117,780    Morgan Stanley (PPLUS)    7.050 %    Aa3    A+    3,010,457 
211,850    Morgan Stanley Capital Trust II    7.250 %    A1    A-    5,436,071 
203,200    Morgan Stanley Capital Trust III    6.250 %    A1    A-    5,088,128 
137,900    Morgan Stanley Capital Trust IV    6.250 %    A1    A-    3,440,605 
13,400    UBS Preferred Funding Trust III    7.250 %    A1    AA-    343,576 
48,000    Washington Mutual Capital Trust I, Series 2001-22, Class A-1 (CORTS)    7.650 %    Baa1    BBB    1,239,840 
    Commercial Banks - 11.0%                 
301,600    Abbey National plc    7.375 %    A2    A-    7,859,696 
53,700    Abbey National plc, Series B    7.250 %    A1    A-    1,376,868 
36,000    Abbey National plc, Series B    7.375 %    A2    A    961,200 
863,770    ABN AMRO Capital Fund Trust V    5.900 %    A2    A    21,110,539 
79,779    ABN AMRO Capital Fund Trust VI    6.250 %    A2    A    2,020,004 
17,021    ABN AMRO Capital Trust Fund VII    6.080 %    A2    A    424,334 
114,100    ASBC Capital I    7.625 %    Baa1    BBB-    2,978,010 
203,410    BAC Capital Trust I    7.000 %    Aa3    A    5,213,398 
560,200    BAC Capital Trust II    7.000 %    Aa3    A    14,464,364 
163,900    BAC Capital Trust III    7.000 %    Aa3    A    4,241,732 
1,010,000    Banco Santander    6.410 %    A2    BBB+    26,058,000 
71,750    Banco Totta & Acores Finance, Series A    8.875 %    A3    N/R    1,847,563 
1,700    BancorpSouth Capital Trust I    8.150 %    Baa2    BB+    44,200 
20,400    BancWest Capital I    9.500 %    A3    A-    517,140 
13,400    Banesto Holdings, Series A, 144A    10.500 %    A2    N/R    405,769 
167,700    Bank One Capital Trust VI    7.200 %    A1    A-    4,340,076 
52,800    BankNorth Capital Trust II    8.000 %    A3    BB+    1,378,080 
13,800    BBVA Preferred Capital Ltd., Series B    7.750 %    A1    A-    352,866 
145,400    Chittenden Capital Trust I    8.000 %    Baa1    BB+    3,853,100 
146,500    Cobank ABC, 144A (a)    7.000 %    N/R    N/R    7,565,993 
110,200    Comerica Capital Trust I    7.600 %    A3    BBB+    2,806,794 
17,400    Fleet Capital Trust II (CORTS)    8.000 %    Aa3    A    451,878 
512,200    Fleet Capital Trust VII    7.200 %    Aa3    A    13,061,100 
430,300    Fleet Capital Trust VIII    7.200 %    Aa3    A    11,037,195 
62,400    HSBC Finance Corporation    6.875 %    A1    A    1,633,008 
36,000    KeyCorp (PCARS)    7.500 %    A3    N/R    940,320 
105,400    KeyCorp Capital Trust V    5.875 %    A3    BBB    2,599,164 
29,600    KeyCorp, Series 2001-7 (CORTS)    7.750 %    A3    BBB    762,052 
34,500    KeyCorp, Series B (CORTS)    8.250 %    A3    BBB    891,825 
86,100    National Commerce Capital Trust II    7.700 %    A1    A-    2,220,519 
63,900    National Westminster Bank plc, Series A    7.875 %    Aa2    A+    1,667,151 
21,700    ONB Capital Trust II    8.000 %    Baa2    BB+    568,974 
54,200    PNC Capital Trust    6.125 %    A3    BBB    1,349,038 
26,000    Regions Finance Trust I    8.000 %    A2    BBB+    659,360 
270,700    Royal Bank of Scotland Group plc, Series L    5.750 %    A1    A    6,550,940 
124,740    Royal Bank of Scotland Group plc, Series N    6.350 %    A1    A    3,169,643 
156,100    SunTrust Capital Trust IV    7.125 %    A1    A-    3,999,282 
109,100    SunTrust Capital Trust V    7.050 %    A1    A-    2,786,414 
664,800    USB Capital Trust III    7.750 %    Aa3    A-    17,065,416 
337,800    USB Capital Trust IV    7.350 %    Aa3    A-    8,732,130 
298,600    USB Capital Trust V    7.250 %    Aa3    A-    7,679,992 
39,100    VNB Capital Trust I    7.750 %    Baa1    BBB    1,009,171 
40,000    Wells Fargo Capital Trust IV    7.000 %    Aa2    A    1,023,600 
480,300    Wells Fargo Capital Trust V    7.000 %    Aa2    A    12,238,044 
112,800    Wells Fargo Capital Trust VI    6.950 %    Aa2    A-    2,886,552 
236,550    Wells Fargo Capital Trust VII    5.850 %    Aa2    A    5,819,130 
117,800    Zions Capital Trust B    8.000 %    Baa1    BBB-    3,127,590 
    Computers & Peripherals - 0.1%                 
17,000    IBM Inc. (CORTS)    7.125 %    A1    A+    437,240 
28,200    IBM Inc., Series 2001-1 (SATURNS)    7.125 %    A1    A+    727,842 
12,700    IBM Trust II (CORTS)    7.125 %    A1    A+    327,406 
5,500    IBM Trust III (CORTS)    7.200 %    A1    A+    142,670 
18,600    IBM Trust IV (CORTS)    7.000 %    A1    A+    488,994 
    Consumer Finance - 0.7%                 
40,900    Household Capital Trust VI    8.250 %    A2    BBB+    1,046,631 
98,900    Household Capital Trust VII    7.500 %    A2    BBB+    2,551,620 
18,500    SLM Corporation    6.000 %    A2    A    457,320 
174,000    SLM Corporation, Series A (a)    6.970 %    Baa1    BBB+    9,430,800 
    Diversified Financial Services - 5.4%                 
27,700    CIT Group Incorporated (CORTS)    7.750 %    A3    BBB+    739,313 
236,500    CIT Group Incorporated, Series A (a)    6.350 %    Baa1    BBB+    6,000,005 
268,800    Citigroup Capital Trust IX    6.000 %    Aa2    A    6,720,000 
193,600    Citigroup Capital Trust VII    7.125 %    Aa2    A    4,948,416 
1,083,622    Citigroup Capital Trust VIII    6.950 %    Aa2    A    27,523,999 
24,000    Citigroup Inc., Series H (a)    6.231 %    Aa3    N/R    1,254,000 
3,200    Citigroup, Series CIT (CORTS)    6.750 %    A3    BBB+    81,664 
56,100    General Electric Capital Corporation    5.875 %    N/R    AAA    1,408,110 
40,100    General Electric Capital Corporation    6.625 %    Aaa    AAA    1,030,570 
1,900    General Electric Capital Corporation (CORTS)    6.000 %    Aaa    AAA    47,500 
755,475    ING Group NV    7.050 %    N/R    A    19,566,803 
584,220    ING Group NV    7.200 %    A2    A    15,253,984 
43,200    JPM Capital Trust (CORTS)    7.200 %    A2    A-    1,103,760 
9,900    JPM Capital Trust I, Series 2001-1, Class A-1 (CORTS)    7.850 %    A1    A-    253,044 
71,965    JPMorgan Chase & Company (PCARS)    7.125 %    A2    A-    1,852,379 
22,000    JPMorgan Chase Capital Trust IX, Series I    7.500 %    A1    A-    564,740 
712,420    JPMorgan Chase Capital Trust X    7.000 %    A1    N/R    18,316,318 
32,200    JPMorgan Chase Capital Trust XVI    6.350 %    A1    A-    809,508 
73,600    JPMorgan Chase Trust, Series 2002-6, Class A (SATURNS)    7.125 %    A1    A-    1,895,568 
    Diversified Telecommunication Services - 0.6%                 
37,900    BellSouth Capital Funding (CORTS)    7.100 %    A1    A    969,103 
26,200    BellSouth Corporation (CORTS)    7.000 %    Aa3    A    673,340 
49,400    BellSouth Corporation, Series 2001-3 (SATURNS)    7.125 %    A2    A    1,265,134 
32,200    BellSouth Inc. (CORTS)    7.000 %    A2    A    840,420 
71,000    BellSouth Telecommunications (PPLUS)    7.300 %    Aa3    A    1,838,190 
60,600    Deutsche Telekom International Finance B.V., Series 2001-24, Class A-1 (CORTS)    7.875 %    A3    A-    1,574,085 
59,500    SBC Communications Inc.    7.000 %    A2    A    1,507,730 
27,300    Verizon Communications (CORTS)    7.625 %    A2    A+    723,587 
48,100    Verizon Communications (CORTS)    7.375 %    A2    A+    1,279,460 
50,700    Verizon New England Inc., Series B    7.000 %    A2    N/R    1,306,539 
30,300    Verizon South Inc., Series F    7.000 %    A2    A+    772,953 
    Electric Utilities - 0.8%                 
5,000    Consolidated Edison Company    7.250 %    A2    A-    128,350 
16,300    Consolidated Edison Company of New York Inc.    7.500 %    A1    A    415,161 
21,100    DTE Energy Trust I    7.800 %    Baa3    BB+    555,985 
27,400    Entergy Louisiana Inc.    7.600 %    Baa1    A-    696,508 
7,300    Entergy Mississippi Inc.    7.250 %    Baa2    A-    187,245 
3,000    Georgia Power Capital Trust V    7.125 %    A3    BBB+    77,280 
130,000    Interstate Power and Light Company (a)    7.100 %    Baa3    BBB-    3,542,500 
11,300    Mississippi Power Capital Trust II    7.200 %    A2    BBB+    290,467 
4,500    National Rural Utilities Cooperative Finance Corporation    7.600 %    A3    BBB+    114,750 
41,200    National Rural Utilities Cooperative Finance Corporation    6.100 %    A3    BBB+    1,027,528 
138,200    National Rural Utilities Cooperative Finance Corporation    5.950 %    A3    BBB+    3,374,844 
33,600    Northern States Power Company    8.000 %    A3    BBB-    879,648 
33,100    Southern Company Capital Trust I (CORTS)    7.375 %    Baa1    BBB+    846,698 
14,700    Southern Company Capital Trust I (CORTS)    8.190 %    Baa1    BBB+    398,885 
13,100    Southern Company Capital Trust VI    7.125 %    Baa1    BBB+    337,587 
3,400    Tennessee Valley Authority, Series A    3.490 %    Aaa    AAA    85,340 
122,500    Virginia Power Capital Trust    7.375 %    Baa1    BBB-    3,199,700 
    Food Products - 0.4%                 
75,000    Dairy Farmers of America Inc., 144A (a)    7.875 %    Ba1    BBB-    7,771,875 
    Gas Utilities - 0.1%                 
75,300    AGL Capital Trust II    8.000 %    Baa2    BBB    1,923,915 
    Health Care Providers & Services - 0.7%                 
587,500    Aetna Incorporated    8.500 %    Baa1    BBB+    15,163,375 
    Industrial Conglomerates - 0.0%                 
4,600    General Electric Company (CORTS)    6.800 %    Aaa    AAA    119,416 
    Insurance - 11.4%                 
155,500    ACE Capital Trust I, Series 1999    8.875 %    Baa1    BBB-    3,979,245 
1,127,233    Ace Ltd., Series C    7.800 %    Baa2    BBB-    29,702,590 
1,398,400    Aegon NV    6.375 %    A3    A-    35,645,216 
6,100    Allstate Corporation (PCARS)    7.150 %    A2    A-    155,001 
1,100    AMBAC Financial Group Inc.    7.000 %    Aa2    AA    28,072 
89,800    AMBAC Financial Group Inc.    5.950 %    Aa2    AA    2,194,712 
675,701    Delphi Financial Group Inc.    8.000 %    Baa3    BBB    17,912,834 
196,956    EverestRe Capital Trust II    6.200 %    Baa1    BBB    4,587,105 
94,500    EverestRe Group Limited    7.850 %    Baa1    BBB    2,461,725 
12,600    Financial Security Assurance Holdings    6.875 %    Aa2    AA    321,804 
285,600    Hartford Capital Trust III, Series C    7.450 %    Baa1    BBB    7,274,232 
45,700    Hartford Life Capital Trust II, Series B    7.625 %    Baa1    BBB    1,171,291 
56,500    Lincoln National Capital Trust V, Series E    7.650 %    Baa1    BBB    1,453,745 
1,404,000    Lincoln National Capital Trust VI    6.750 %    Baa1    BBB    36,124,920 
827,600    MetLife Inc., Series B (a)    6.500 %    Baa1    BBB    20,979,660 
82,700    PartnerRe Limited    7.900 %    A3    BBB+    2,114,639 
903,702    PartnerRe Limited, Series C    6.750 %    Baa1    BBB+    22,655,809 
80,400    PLC Capital Trust III    7.500 %    Baa1    BBB+    2,067,888 
67,900    PLC Capital Trust IV    7.250 %    Baa1    BBB+    1,762,005 
15,800    PLC Capital Trust V    6.125 %    Baa1    BBB+    389,470 
38,800    Prudential plc    6.750 %    Baa1    A    998,712 
115,800    RenaissanceRe Holdings Ltd., Series A    8.100 %    Baa2    BBB+    2,929,740 
124,700    RenaissanceRe Holdings Ltd., Series B    7.300 %    Baa2    BBB+    3,149,922 
3,400    RenaissanceRe Holdings Ltd., Series C    6.080 %    Baa2    BBB+    76,330 
25,400    Safeco Capital Trust I (CORTS)    8.700 %    Baa2    BBB-    658,876 
21,900    Safeco Capital Trust I (CORTS)    8.750 %    Baa2    BBB-    648,569 
21,600    Safeco Capital Trust I, Series 2001-4 (CORTS)    8.750 %    Baa2    BBB-    554,256 
46,900    Safeco Capital Trust III (CORTS)    8.072 %    Baa2    BBB-    1,225,966 
16,800    Safeco Capital Trust IV (CORTS)    8.375 %    Baa2    BBB-    447,048 
38,700    Safeco Corporation, Series 2001-7 (SATURNS)    8.250 %    Baa2    BBB-    1,024,776 
39,500    Safeco Corporation, Series 2002-5 (SATURNS)    8.250 %    Baa2    BBB-    1,038,850 
61,600    Torchmark Capital Trust I    7.750 %    Baa1    A-    1,601,600 
119,400    W.R. Berkley Capital Trust, Series 2002-1, (CBTCS)    8.125 %    Baa3    BBB-    1,256,685 
683,400    W.R. Berkley Corporation    6.750 %    Baa3    BBB-    16,845,810 
68,800    XL Capital Ltd, Series A    8.000 %    Baa1    BBB+    1,795,680 
103,900    XL Capital Ltd, Series B    7.625 %    Baa1    BBB+    2,670,230 
    Media - 0.1%                 
52,700    Viacom Inc.    7.300 %    A3    BBB+    1,332,256 
    Multi-Utilities - 0.2%                 
52,400    Dominion CNG Capital Trust I    7.800 %    Baa1    BBB-    1,360,828 
30,700    Dominion Resources Capital Trust II    8.400 %    Baa2    BBB-    786,534 
85,700    Energy East Capital Trust I    8.250 %    Baa3    BBB-    2,219,630 
    Oil, Gas & Consumable Fuels - 0.9%                 
685,000    Nexen Inc.    7.350 %    Baa3    BB+    17,953,850 
    Pharmaceuticals - 0.1%                 
50,000    Bristol Myers Squibb Company (CORTS)    6.250 %    A1    A+    1,273,000 
    Real Estate - 11.3%                 
250,264    AMB Property Corporation, Series L    6.500 %    Baa2    BBB-    6,331,679 
77,100    AvalonBay Communities, Inc., Series H    8.700 %    Baa2    BBB    2,141,838 
220,400    BRE Properties, Series B    8.080 %    Baa3    BBB-    5,735,910 
111,466    BRE Properties, Series D    6.750 %    Baa3    BBB-    2,786,650 
670,964    CarrAmerica Realty Corporation, Series E    7.500 %    Baa3    BBB-    17,357,839 
104,100    Developers Diversified Realty Corporation, Series G    8.000 %    Ba1    BBB-    2,698,272 
1,264,845    Developers Diversified Realty Corporation, Series H    7.375 %    Ba1    BBB-    32,127,063 
124,800    Duke Realty Corporation, Series L    6.600 %    Baa2    BBB    3,127,488 
98,000    Duke-Weeks Realty Corporation    6.625 %    Baa2    BBB    2,453,920 
25,000    Duke-Weeks Realty Corporation, Series B    7.990 %    Baa2    BBB    1,268,750 
5,400    Duke-Weeks Realty Corporation, Series I    8.450 %    Baa2    BBB    136,404 
192,100    Equity Office Properties Trust, Series G    7.750 %    Baa3    BBB    5,065,677 
3,200    Equity Residential Properties Trust, Series C    9.125 %    Baa2    BBB    82,656 
15,400    Equity Residential Properties Trust, Series D    8.600 %    Baa2    BBB    411,180 
348,622    Equity Residential Properties Trust, Series N    6.480 %    Baa2    BBB    8,677,202 
140,000    Federal Realty Investment Trust    8.500 %    Baa3    BBB-    3,645,600 
10,400    First Industrial Realty Trust Inc., Series C    8.625 %    Baa3    BBB-    278,668 
426,229    HRPT Properties Trust, Series A    9.875 %    Baa3    BBB-    10,962,610 
458,800    HRPT Properties Trust, Series B    8.750 %    Baa3    BBB-    12,162,788 
99,800    New Plan Excel Realty Trust, Series E    7.625 %    N/R    BBB-    2,654,680 
3,997    Prologis Trust, Series C    8.540 %    Baa2    BBB    234,074 
96,275    Prologis Trust, Series G    6.750 %    Baa2    BBB    2,429,018 
299,600    PS Business Parks Inc.    7.000 %    Ba1    BBB-    7,445,060 
700    PS Business Parks Inc., Series K    7.950 %    Ba1    BBB-    18,340 
243,000    PS Business Parks Inc., Series L    7.600 %    Ba1    BBB-    6,211,080 
149,000    Public Storage, Inc., Series E    6.750 %    Baa2    BBB+    3,754,800 
31,400    Public Storage, Inc., Series Q    8.600 %    Baa2    BBB+    793,164 
150,550    Public Storage, Inc., Series R    8.000 %    Baa2    BBB+    3,848,058 
55,860    Public Storage, Inc., Series S    7.875 %    Baa2    BBB+    1,435,043 
45,000    Public Storage, Inc., Series T    7.625 %    Baa2    BBB+    1,153,800 
174,000    Public Storage, Inc., Series U    7.625 %    Baa2    BBB+    4,517,040 
31,500    Public Storage, Inc., Series V    7.500 %    Baa2    BBB+    820,575 
166,100    Regency Centers Corporation    7.450 %    Baa3    BBB-    4,252,160 
20,500    Simon Property Group, Inc., Series F    8.750 %    Baa2    BBB-    529,105 
20,650    Simon Property Group, Inc., Series G    7.890 %    Baa2    BBB    1,081,028 
30,000    Vornado Realty Trust, Series E    7.000 %    Baa3    BBB-    762,300 
165,000    Vornado Realty Trust, Series G    6.625 %    Baa3    BBB-    3,999,600 
183,000    Vornado Realty Trust, Series H    6.750 %    Baa3    BBB-    4,483,500 
71,276    Vornado Realty Trust, Series I    6.625 %    Baa3    BBB-    1,716,326 
1,987,734    Wachovia Preferred Funding Corporation    7.250 %    A2    BBB+    56,054,099 
130,100    Weingarten Realty Trust, Series E    6.950 %    Baa1    A-    3,357,881 
    Specialty Retail - 0.0%                 
28,100    Sherwin Williams Company, Series III (CORTS)    7.250 %    A2    A    729,476 
    Thrifts & Mortgage Finance - 1.0%                 
80,600    Countrywide Capital Trust II, Series II (CORTS)    8.000 %    Baa1    BBB+    2,110,108 
69,800    Countrywide Capital Trust III (PPLUS)    8.050 %    Baa1    BBB+    1,875,177 
666,900    Countrywide Capital Trust IV    6.750 %    Baa1    BBB+    16,945,929 
    U.S. Agency - 1.0%                 
15,600    Fannie Mae (a)    0.000 %    Aa3    AA-    858,975 
6,700    Fannie Mae (a)    4.750 %    Aa3    AA-    264,201 
23,100    Fannie Mae (a)    5.125 %    Aa3    AA-    978,285 
44,300    Fannie Mae (a)    5.560 %    Aa3    AA-    2,223,860 
30,000    Fannie Mae (a)    5.810 %    Aa3    AA-    1,455,000 
8,100    Fannie Mae (a)    5.100 %    Aa3    AA-    345,010 
61,800    Federal Home Loan Mortgage Corporation (a)    6.000 %    Aa3    AA-    3,114,720 
108,000    Federal Home Loan Mortgage Corporation (a)    6.140 %    Aa3    N/R    5,416,200 
48,300    Federal Home Loan Mortgage Corporation (a)    5.100 %    Aa3    AA-    2,126,166 
34,700    Federal Home Loan Mortgage Corporation (a)    5.000 %    Aa3    AA-    1,474,750 
40,000    Federal Home Loan Mortgage Corporation (a)    5.100 %    Aa3    AA-    1,751,252 
23,000    Federal Home Loan Mortgage Corporation (a)    5.300 %    Aa3    AA-    1,019,907 
    Wireless Telecommunication Services - 0.8%                 
28,000    AT&T Wireless Services Equity, Series 2002-B (SATURNS)    9.250 %    Baa2    A    750,400 
58,700    AT&T Wireless, Series 2002-7 (CORTS)    8.000 %    Baa2    A    1,520,330 
117,300    Telephone and Data Systems Inc.    7.600 %    Baa2    A-    2,997,015 
50,600    United States Cellular Corporation    8.750 %    Baa2    A-    1,398,078 
343,500    United States Cellular Corporation    7.500 %    Baa2    A-    9,034,050 
    Total $25 Par (or similar) Securities (cost $1,035,900,369)                1,031,500,164 
    CONVERTIBLE PREFERRED SECURITIES - 13.5% (9.3% of Total Investments)                 
    Automobiles - 0.6%                 
327,225    Ford Motor Company Capital Trust II    6.500 %    Ba2    B+    11,927,351 
    Capital Markets - 0.6%                 
29,725    State Street Corporation    6.750 %    N/R    BB+    6,402,765 
115,725    Washington Mutual Inc., Unit 1 Trust    5.375 %    Baa1    BBB    6,030,430 
    Chemicals - 0.6%                 
179,435    Celanese Corporation    4.250 %    N/R    N/R    4,737,084 
152,195    Huntsman Corporation    5.000 %    N/R    N/R    6,768,112 
    Commercial Banks - 1.9%                 
12,090,000    Fortis Insurance NV, 144A    7.750 %    A1    A+    13,571,025 
130,500    HSBC Finance Corporation    8.875 %    A1    A    5,115,600 
273,600    National Australia Bank Limited    7.875 %    N/R    N/R    11,217,600 
217,375    Sovereign Capital Trust IV, Convertible Security    4.375 %    Ba1    BB    9,646,016 
    Construction Materials - 0.4%                 
161,900    TXI Capital Trust I    6.500 %    B2    B-    8,904,500 
    Electric Utilities - 1.2%                 
260,000    Centerpoint Energy Inc.    2.000 %    Ba1    BBB-    9,154,340 
154,500    FPL Group Inc.    8.000 %    N/R    A-    10,992,675 
76,430    PNM Resources Inc.    6.750 %    Baa3    N/R    3,980,474 
  Gas Utilities - 0.1%                   
30,150   Southern Union Company, Series B    5.750 %      Baa3    N/R    2,372,956 
  Health Care Equipment & Supplies - 0.3%                   
124,000   Baxter International Inc.    7.000 %      Baa1    N/R    7,068,000 
  Health Care Providers & Services - 0.4%                   
109,300   Omnicare Capital Trust II, Series B    4.000 %      Ba3    BB    7,978,900 
  Household Durables - 0.4%                   
187,325   Newell Financial Trust I    5.250 %      Baa3    BBB-    8,265,716 
  Insurance - 2.8%                   
543,600   Genworth Financial Inc.    6.000 %      A2    A    19,515,240 
570,475   MetLife Inc., Convertible, Series B    6.375 %      N/R    BBB+    16,013,233 
167,000   Reinsurance Group of America Inc.    5.750 %      Baa2    BBB    9,832,125 
147,000   The Chubb Corporation    7.000 %      N/R    A    4,805,430 
340,650   XL Capital Ltd    6.500 %      A2    A    7,777,040 
  Media - 0.4%                   
137,000   Emmis Communications Corporation, Series A    6.250 %      Caa1    CCC+    5,956,075 
70,350   Interpublic Group Companies Inc., Series A    5.375 %      N/R    N/R    3,021,533 
  Multi-Utilities - 1.1%                   
181,625   Dominion Resources Inc.    8.750 %      Baa1    BBB+    10,325,381 
151,300   Public Service Enterprise Group    10.250 %      Baa3    BBB-    12,255,300 
  Oil, Gas & Consumable Fuels - 1.4%                   
34,725   Amerada Hess Corporation    7.000 %      Ba3    BB    4,066,298 
91,900   Chesapeake Energy Corporation    4.500 %      N/R    B+    10,258,338 
1,375   Chesapeake Energy Corporation, 144A    4.125 %      N/R    N/R    3,161,984 
222,100   Teekay Shipping Corporation    7.250 %      N/R    BB-    10,938,425 
  Pharmaceuticals - 0.6%                   
217,875   Schering-Plough Corporation    6.000 %      Baa3    BBB    11,815,361 
  Thrifts & Mortgage Finance - 0.7%                   
111   Fannie Mae    5.375 %      Aa3    AA-    10,195,337 
140,000   PMI Group Inc.    5.875 %      A1    A    3,469,200 
  Total Convertible Preferred Securities (cost $255,823,616)                  277,539,844 
                       
                     
Ratings*
 Principal        
Amount (000)/ Market 
Shares   Description(1)    Coupon   Maturity    Moody's    S&P    Value 
  CONVERTIBLE BONDS - 32.2% (22.0% of Total Investments)                   
  Aerospace & Defense - 0.9%                   
3,860   AAR Corporation, 144A    2.875 %  2/01/24    B2    BB-    4,072,300 
4,900   EDO Corporation, Convertible Subordinate Note    5.250 %  4/15/07    N/R    N/R    5,040,875 
9,450   L-3 Communications Corporation, 144A    3.000 %  8/01/35    Ba3    BB+    9,709,875 
  Airlines - 0.2%                   
3,735   Continental Airlines Inc.    5.000 %  6/15/23    Caa2    CCC+    2,581,819 
1,045   JetBlue Airways Corporation    3.750 %  3/15/35    B2    B    986,219 
    Automobiles - 0.1%                   
1,025    Fleetwood Enterprises Inc., 144A    5.000 %  12/15/23    B2    B-    1,301,750 
    Biotechnology - 1.7%                   
11,800    Amgen Inc.    0.000 %  3/01/32    A2    A+    9,395,750 
5,000    Cephalon Inc.    0.000 %  6/15/33    N/R    B-    4,668,750 
1,780    CV Therapeutics Inc.    2.750 %  5/16/12    N/R    N/R    2,876,925 
2,250    CV Therapeutics Inc.    3.250 %  8/16/13    N/R    N/R    2,680,313 
12,400    Genzyme Corporation    1.250 %  12/01/23    N/R    BBB    14,275,500 
    Commercial Banks - 0.2%                   
4,000    U.S. Bancorp, 144A    2.110 %  8/21/35    Aa2    A+    3,965,000 
    Commercial Services & Supplies - 0.7%                   
5,500    DST Systems Inc.    4.125 %  8/15/23    N/R    N/R    6,936,875 
7,000    Electronic Data Systems, Convertible Senior Notes, 144A    3.875 %  7/15/23    Ba1    BBB-    6,938,750 
    Communications Equipment - 1.3%                   
9,265    JDS Uniphase Corporation    0.000 %  11/15/10    N/R    N/R    7,875,250 
5,595    Lucent Technologies Inc.    2.750 %  6/15/23    B1    B    6,420,263 
3,905    Nortel Networks Corp    4.250 %  9/01/08    B3    B-    3,695,106 
4,475    Powerwave Technologies Inc.    1.825 %  11/15/24    N/R    N/R    5,907,000 
1,700    Powerwave Technologies Inc.    1.875 %  11/15/24    N/R    N/R    2,244,000 
    Computers & Peripherals - 0.3%                   
3,840    Maxtor Corporation, 144A    2.375 %  8/15/12    N/R    N/R    3,480,000 
3,250    Mercury Computer Systems Inc., 144A    2.000 %  5/01/24    N/R    N/R    3,420,625 
    Construction & Engineering - 0.4%                   
8,500    Quanta Services Incorporated    4.000 %  7/01/07    N/R    B    8,266,250 
    Containers & Packaging - 0.4%                   
9,200    Sealed Air Corporation, 144A    3.000 %  6/30/33    Baa3    BBB    8,889,500 
    Diversified Financial Services - 0.6%                   
10,325    CapitalSource Inc.    3.500 %  7/15/34    N/R    BBB-    9,744,219 
2,650    JMH Finance Limited    4.750 %  9/06/07    N/R    N/R    2,644,234 
    Diversified Telecommunication Services - 0.2%                   
3,325    CenturyTel Inc.    4.750 %  8/01/32    Baa2    BBB+    3,482,938 
    Electric Utilities - 0.4%                   
2,630    PG&E Corporation    9.500 %  6/30/10    N/R    N/R    7,774,938 
1,035    Unisource Energy Corporation, Convertible Bonds, 144A    4.500 %  3/01/35    N/R    N/R    1,089,338 
    Electronic Equipment & Instruments - 0.8%                   
17,940    Roper Industries Inc.    1.481 %  1/15/34    B1    BB-    9,889,425 
7,020    Vishay Intertechnology Inc.    3.625 %  8/01/23    B3    B+    6,774,300 
    Energy Equipment & Services - 2.0%                   
3,495    Cal Dive International Inc.    3.250 %  12/15/25    N/R    N/R    4,416,806 
4,200    Diamond Offshore Drilling Inc.    1.500 %  4/15/31    N/R    A-    5,544,000 
8,500    Maverick Tube Corporation    4.000 %  6/15/33    N/R    N/R    10,476,250 
3,185    Oil States International Inc., 144A    2.375 %  7/01/25    N/R    N/R    4,247,994 
7,115    Pride International Inc.    3.250 %  5/01/33    Ba2    BB-    8,982,688 
5,550    Schlumberger Limited    2.125 %  6/01/23    A1    A+    6,569,813 
625    Willbros Group Inc., 144A    2.750 %  3/15/24    N/R    N/R    614,063 
    Health Care Equipment & Supplies - 1.6%                   
5,745    Advanced Medical Optics    2.500 %  7/15/24    B3    B    5,630,100 
8,195    Fisher Scientific International Inc.    3.250 %  3/01/24    Ba3    BB+    8,358,900 
18,695    Medtronic Inc.    1.250 %  9/15/21    A1    AA-    18,765,106 
    Health Care Providers & Services - 0.5%                   
4,200    Health Management Associates Inc.    1.500 %  8/01/23    Baa3    BBB+    4,357,500 
8,510    Roche Holdings Inc., 144A    0.000 %  7/25/21    N/R    N/R    6,434,411 
    Hotels, Restaurants & Leisure - 3.1%                   
5,505    Caesars Entertainment Inc.    3.550 %  4/15/24    Baa3    BBB-    6,655,270 
18,205    Carnival Corporation    1.132 %  4/29/33    A3    A-    13,608,238 
8,535    Hilton Hotels Corporation    3.375 %  4/15/23    Baa3    BBB-    9,783,244 
7,125    Kerzner International Limited, 144A    2.375 %  4/15/24    B2    B    7,828,594 
11,858    Royal Caribbean Cruises Limited, Senior Convertible Zero Coupon Liquid Yield Option Notes    0.000 %  2/02/21    Ba1    BB+    6,225,450 
8,475    Scientific Games Corporation    0.750 %  12/01/24    B2    B+    9,968,719 
3,385    Six Flags Inc.    4.500 %  5/15/15    Caa1    CCC    4,286,256 
3,875    Starwood Hotels and Resorts Worldwide Inc.    3.500 %  5/16/23    Ba1    BB+    4,577,344 
    Industrial Conglomerates - 0.8%                   
7,200    Tyco International Group SA    3.125 %  1/15/23    Baa3    BBB+    9,567,000 
4,650    Tyco International Group SA, Convertible Notes, 144A    3.125 %  1/15/23    Ba1    BBB+    6,178,688 
    Insurance - 0.4%                   
6,925    American Equity Investment Life Holding Company    5.250 %  12/06/24    N/R    BB+    7,539,594 
    Internet Software & Services - 0.6%                   
7,885    Open Solutions Inc., 144A    1.467 %  2/02/35    N/R    N/R    4,159,338 
9,000    WebMD Corporation, 144A    3.125 %  9/01/25    N/R    N/R    8,763,750 
    IT Services - 0.4%                   
7,100    Digital River Inc., 144A    1.250 %  1/01/24    N/R    N/R    7,401,750 
    Leisure Equipment & Products - 0.3%                   
575    Collegiate Pacific Inc.    5.750 %  12/01/09    N/R    N/R    594,406 
4,285    Eastman Kodak Company    3.375 %  10/15/33    Ba3    B+    4,210,013 
1,165    K2 Corporation, Convertible Notes, 144A    5.000 %  6/15/10    N/R    N/R    1,306,256 
    Machinery - 0.3%                   
5,635    AGCO Corporation, Series B    1.750 %  12/31/33    B1    BB-    5,994,231 
    Media - 4.4%                   
415,000    Comcast Corporation    2.000 %  10/15/29    Ba1    BBB    16,745,250 
4,500    Interpublic Group Companies Inc.    4.500 %  3/15/23    Ba1    B+    5,270,625 
8,480    Liberty Media Corporation    0.750 %  3/30/23    Ba1    BB+    9,455,200 
11,000    Liberty Media Corporation, Senior Debentures, Exchangeable for Class B Viacom Common Stock    3.250 %  3/15/31    Ba1    BB+    8,580,000 
26,800    Liberty Media Corporation, Senior Debentures, Exchangeable for PCS Common Stock, Series 1    4.000 %  11/15/29    Ba1    BB+    16,683,000 
14,725    Liberty Media Corporation, Senior Debentures Exchangeable for Motorola Common Stock    3.500 %  1/15/31    Ba1    BB+    14,669,781 
2,395    Lions Gate Entertainment Corporation, 144A    2.938 %  10/15/24    N/R    N/R    2,475,831 
3,300    Lions Gate Entertainment Corporation, 144A    3.625 %  3/15/25    N/R    N/R    3,180,375 
3,500    Sirius Satellite Radio Inc.    3.250 %  10/15/11    N/R    CCC    4,952,500 
8,050    The Walt Disney Company, Convertible Senior Notes    2.125 %  4/15/23    Baa1    A-    8,221,063 
    Oil, Gas & Consumable Fuels - 1.1%                   
15,415    Devon Energy Corporation    4.900 %  8/15/08    Baa2    BBB    19,037,525 
1,720    McMoran Exploration Corporation, Notes, 144A    6.000 %  7/02/08    N/R    N/R    2,541,300 
    Pharmaceuticals - 2.7%                   
4,580    Alexion Pharmaceuticals Inc., 144A    1.375 %  2/01/12    N/R    N/R    4,820,450 
13,055    Allergan Inc., Convertible Senior Notes    0.000 %  11/06/22    A3    A    13,838,300 
1,255    Atherogenics, Inc., 144A    4.500 %  9/01/08    N/R    N/R    1,559,338 
4,400    Sepracor Inc.    0.000 %  10/15/24    N/R    CCC+    4,493,500 
3,250    Teva Pharmaceutical Finance B.V    0.375 %  11/15/22    N/R    BBB    5,082,188 
9,450    Teva Pharmaceutical Finance, Series B    0.250 %  2/01/24    N/R    BBB    9,792,563 
4,350    Valeant Pharmaceuticals International, 144A    3.000 %  8/16/10    N/R    B    3,974,813 
2,545    Valeant Pharmaceuticals International, 144A    4.000 %  11/15/13    N/R    B    2,319,131 
8,500    Wyeth, 144A    1.000 %  1/15/24    Baa1    A    8,812,290 
    Real Estate - 0.2%                   
3,625    Avatar Holdings Inc., 144A    4.500 %  4/01/24    N/R    N/R    4,381,719 
    Road & Rail - 0.5%                   
10,500    CSX Corporation    0.000 %  10/30/21    Baa2    BBB    9,620,625 
    Semiconductors & Semiconductor Equipment - 1.8%                   
8,325    Agere Systems Inc.    6.500 %  12/15/09    B3    B    8,366,625 
7,850    ASM International NV    4.250 %  12/06/11    N/R    B-    7,329,938 
5,500    ASM Lithography Holding NV    5.750 %  10/15/06    B2    N/R    5,871,250 
9,220    LSI Logic Corporation    4.000 %  5/15/10    Ba3    B    9,773,200 
4,590    Micron Technology Inc.    2.500 %  2/01/10    B2    B-    5,404,725 
    Software - 0.7%                   
7,100    Mentor Graphics Corporation, Convertible Subordinated Notes    6.875 %  6/15/07    N/R    N/R    7,091,125 
1,530    Sybase Inc.    1.750 %  2/22/25    N/R    N/R    1,658,138 
4,525    Sybase Inc., 144A    1.750 %  2/22/25    N/R    N/R    4,903,969 
    Specialty Retail - 1.9%                   
7,820    Charming Shoppes Inc.    4.750 %  6/01/12    B2    BB-    9,569,725 
6,130    Dick's Sporting Goods Inc.    1.606 %  2/18/24    N/R    B    4,199,050 
9,170    Lowes Companies Inc.    0.861 %  10/19/21    A2    A+    10,419,413 
5,135    Sonic Automotive Inc., Convertible Senior Subordinated Notes    5.250 %  5/07/09    B3    B    5,051,556 
11,975    The TJX Companies, Inc.    0.000 %  2/13/21    Baa1    A-    9,220,750 
    Wireless Telecommunication Services - 0.7%                   
4,755    American Tower Corporation    3.000 %  8/15/12    B1    BB-    6,431,138 
4,100    NII Holdings Inc., 144A    2.875 %  2/01/34    N/R    N/R    6,918,750 
    Total Convertible Bonds (cost $623,808,598)                  652,790,578 
    CORPORATE BONDS - 15.2% (10.5% of Total Investments)                   
    Aerospace & Defense - 0.2%                   
3,500    K&F Acquisition Inc.    7.750 %  11/15/14    Caa1    B-    3,552,500 
    Auto Components - 0.2%                   
1,950    Affinia Group Inc.    9.000 %  11/30/14    Caa1    CCC+    1,530,750 
3,000    Tenneco Auto, Inc.    10.250 %  7/15/13    B2    B-    3,367,500 
    Automobiles - 1.0%                   
5,570    Ford Motor Company, Debentures    7.700 %  5/15/97    Ba1    BB+    4,038,250 
17,095    Ford Motor Company, Debentures    9.980 %  2/15/47    Ba1    BB+    15,513,713 
1,300    Keystone Automotive Operations Inc.    9.750 %  11/01/13    B3    B-    1,300,000 
    Building Products - 0.2%                   
4,000    Jacuzzi Brands Inc.    9.625 %  7/01/10    B3    B    4,260,000 
    Chemicals - 0.7%                   
2,000    Nell AF Sarl    8.375 %  8/15/15    B2    B-    1,965,000 
6,500    OM Group Inc.    9.250 %  12/15/11    Caa1    B-    6,646,250 
3,500    Resolution Performance Products LLC    8.000 %  12/15/09    B2    B+    3,622,500 
3,000    Rockwood Specialties Group    7.500 %  11/15/14    B3    B-    2,925,000 
    Commercial Services & Supplies - 0.1%                   
2,000    National Mentor Inc., 144A    9.625 %  12/01/12    B3    B-    2,100,000 
    Communications Equipment - 0.4%                   
9,200    Ciena Corporation    3.750 %  2/01/08    B2    B    8,452,500 
    Containers & Packaging - 0.6%                   
2,000    Berry Plastics Corporation    10.750 %  7/15/12    B3    B-    2,160,000 
3,450    MDP Acquisitions plc, Senior Notes    9.625 %  10/01/12    B3    B-    3,484,500 
3,000    Owens-Brockway Glass Containers, Guaranteed Senior Note    8.250 %  5/15/13    B2    B    3,135,000 
3,000    Owens-Illinois Inc.    7.500 %  5/15/10    B3    B    3,060,000 
    Diversified Telecommunication Services - 0.1%                   
2,000    INTELSAT Bermuda Limited, 144A    8.250 %  1/15/13    B2    B+    2,022,500 
750    Syniverse Technologies Inc., 144A    7.750 %  8/15/13    B2    B    759,375 
    Electric Utilities - 0.2%                   
2,000    Midwest Generation LLC    8.750 %  5/01/34    B1    B    2,237,500 
1,000    Sierra Pacific Resources, 144A    6.750 %  8/15/17    B1    B-    1,007,500 
    Energy Equipment & Services - 0.1%                   
2,500    Pride International Inc.    7.375 %  7/15/14    Ba2    BB-    2,728,125 
    Food & Staples Retailing - 0.1%                   
3,000    Stater Brothers Holdings Inc.    8.125 %  6/15/12    B1    BB-    2,977,500 
    Food Products - 0.8%                   
7,610    Del Monte Corporation    8.625 %  12/15/12    B2    B    8,218,800 
7,000    Dole Foods Company    7.875 %  7/15/13    B2    B+    7,525,000 
1,096    Dole Foods Company    8.625 %  5/01/09    B2    B+    1,150,800 
    Healthcare Providers & Services - 0.5%                   
3,000    Quintiles Transnational Corporation    10.000 %  10/01/13    B3    B    3,390,000 
700    Select Medical Corporation    7.625 %  2/01/15    B3    B-    673,750 
2,000    Service Corporation International    7.700 %  4/15/09    Ba3    BB    2,110,000 
3,000    US Oncology Inc.    10.750 %  8/15/14    B3    B-    3,375,000 
    Hotels, Restaurants & Leisure - 2.3%                   
5,190    Aztar Corporation    9.000 %  8/15/11    Ba3    B+    5,540,325 
2,345    Boyd Gaming Corporation    8.750 %  4/15/12    B1    B+    2,538,463 
4,075    Boyd Gaming Corporation    7.750 %  12/15/12    B1    B+    4,304,219 
3,172    Dominos Inc.    8.250 %  7/01/11    B2    B-    3,346,460 
1,500    Herbst Gaming Inc.    7.000 %  11/15/14    B3    B-    1,505,625 
4,100    Intrawest Corporation    7.500 %  10/15/13    B1    B+    4,217,875 
2,000    Landry's Restaurants Inc., Series B    7.500 %  12/15/14    B2    B    1,910,000 
2,000    MGM Mirage, Inc.    6.750 %  8/01/07    Ba2    BB    2,045,000 
3,500    Park Place Entertainment    7.875 %  12/15/05    Ba1    BB+    3,530,625 
1,000    Park Place Entertainment    9.375 %  2/15/07    Ba1    BB+    1,057,500 
1,000    Park Place Entertainment    7.875 %  3/15/10    Ba1    BB+    1,092,500 
4,000    Penn National Gaming Inc., Senior Subordinated Notes    8.875 %  3/15/10    B2    B    4,240,000 
3,000    Pinnacle Entertainment Inc.    8.750 %  10/01/13    Caa1    B-    3,105,000 
2,000    Pinnacle Entertainment Inc.    8.250 %  3/15/12    Caa1    B-    2,010,000 
4,000    Universal City Development Partners    11.750 %  4/01/10    B2    B-    4,540,000 
    Household Durables - 0.5%                   
4,500    K. Hovnanian Enterprises Inc., Senior Subordinated Notes    8.875 %  4/01/12    Ba2    B+    4,770,000 
5,000    KB Home    8.625 %  12/15/08    Ba2    BB-    5,339,720 
    Independent Power Producers & Energy Traders - 0.1%                   
1,239    NRG Energy Inc., Series WI    8.000 %  12/15/13    B1    B    1,325,730 
    Insurance - 0.1%                   
2,500    Fairfax Financial Holdings Ltd    7.750 %  4/26/12    Ba3    BB    2,412,500 
    IT Services - 0.4%                   
3,000    Global Cash Access LLC    8.750 %  3/15/12    Caa1    B-    3,240,000 
4,750    SunGuard Data Systems Inc., 144A    9.125 %  8/15/13    B3    B-    4,945,938 
    Machinery - 0.3%                   
3,000    Terex Corporation, Senior Subordinated Notes    10.375 %  4/01/11    Caa1    B    3,225,000 
3,000    Terex Corporation, Senior Subordinated Notes    9.250 %  7/15/11    Caa1    B    3,240,000 
    Media - 3.7%                   
6,900    Allbritton Communications Company, Series B    7.750 %  12/15/12    B3    B-    6,882,750 
2,000    AMC Entertainment Inc.    8.000 %  3/01/14    B3    CCC+    1,770,000 
1,345    American Media Operations Inc.    8.875 %  1/15/11    Caa1    CCC+    1,197,050 
6,000    American Media Operations Inc., Series B    10.250 %  5/01/09    Caa1    CCC+    5,865,000 
3,000    Cablevision Systems Corporation    7.250 %  7/15/08    B1    BB-    3,026,250 
2,000    Cablevision Systems Corporation    8.125 %  7/15/09    B1    BB-    2,025,000 
5,000    Cablevision Systems Corporation, Series B    8.125 %  8/15/09    B1    BB-    5,062,500 
2,000    Charter Communications Operating LLC, 144A    8.000 %  4/30/12    B2    B-    2,025,000 
6,000    Cinemark USA Inc.    9.000 %  2/01/13    B3    B-    6,225,000 
1,000    Dex Media West LLC    8.500 %  8/15/10    B1    B    1,062,500 
2,198    Dex Media West LLC    9.875 %  8/15/13    B2    B    2,437,033 
3,000    Loews Cineplex Entertainment Corporation, 144A    9.000 %  8/01/14    B3    CCC+    2,932,500 
3,855    Mail-Well I Corporation, Senior Unsecured Note, 144A    9.625 %  3/15/12    B1    B+    4,153,763 
4,000    Medianews Group Inc.    6.375 %  4/01/14    B2    B+    3,860,000 
1,950    Panamsat Corporation    9.000 %  8/15/14    B1    B+    2,067,000 
7,000    Primedia Inc., Senior Notes    8.875 %  5/15/11    B2    B    7,367,500 
2,000    R. H. Donnelley Finance Corp 1    10.875 %  12/15/12    B2    B+    2,255,000 
2,000    Sun Media Corporation    7.625 %  2/15/13    Ba3    B    2,102,500 
6,200    Vertis Inc.    9.750 %  4/01/09    B3    CCC    6,432,500 
2,000    Young Broadcasting Inc.    8.750 %  1/15/14    Caa1    CCC    1,785,000 
5,500    Young Broadcasting Inc., Senior Subordinated Note    10.000 %  3/01/11    Caa1    CCC    5,225,000 
    Metals & Mining - 0.2%                   
3,000    Chaparral Steel Company, 144A    10.000 %  7/15/13    B1    B    3,180,000 
1,682    United States Steel Corporation    9.750 %  5/15/10    Ba2    BB    1,854,405 
    Multi-Utilities - 0.0%                   
500    Northwestern Corporation    5.875 %  11/01/14    Ba1    BB+    507,619 
    Oil, Gas & Consumable Fuels - 0.3%                   
2,345    Chesapeake Energy Corporation    7.750 %  1/15/15    Ba2    BB    2,509,150 
2,000    Premcor Refining Group Inc.    7.500 %  6/15/15    Baa3    BBB-    2,150,000 
1,000    Tesoro Petroleum Corporation    8.000 %  4/15/08    Ba2    BBB-    1,047,500 
1,000    Tesoro Petroleum Corporation, Senior Subordinated Notes, Series B    9.625 %  11/01/08    B2    BB-    1,051,750 
250    Whiting Petroleum Corporation, 144A    7.000 %  2/01/14    B2    B-    254,688 
    Paper & Forest Products - 0.4%                   
2,000    Georgia Pacific Corporation, Debentures    7.700 %  6/15/15    Ba2    BB+    2,217,500 
5,000    Georgia Pacific Corporation, Notes    8.125 %  5/15/11    Ba2    BB+    5,550,000 
    Personal Products - 0.1%                   
1,600    Prestige Brands Inc.    9.250 %  4/15/12    B3    B-    1,648,000 
    Pharmaceuticals - 0.1%                   
2,000    Alpharma Inc., 144A    8.625 %  5/01/11    B3    B-    2,070,000 
    Real Estate - 0.1%                   
1,000    TruStreet Properties Inc., 144A    7.500 %  4/01/15    B1    B+    1,027,500 
500    Ventas Realty LP, 144A    7.125 %  6/01/15    Ba3    BB    520,000 
    Road & Rail - 0.1%                   
1,000    Greenbrier Companies, Inc., 144A    8.375 %  5/15/15    B1    B+    1,045,000 
    Specialty Retail - 0.8%                   
6,000    Asbury Automotive Group Inc.    9.000 %  6/15/12    B3    B    6,060,000 
1,660    Movie Gallery Inc., 144A    11.000 %  5/01/12    B3    CCC+    1,477,400 
1,000    Quicksilver Inc., 144A    6.875 %  4/15/15    B1    BB-    965,000 
8,000    Warnaco Inc., Senior Notes    8.875 %  6/15/13    B1    BB-    8,680,000 
    Textiles, Apparel & Luxury Goods - 0.2%                   
4,000    Jostens IH Corporation    7.625 %  10/01/12    B3    B-    4,060,000 
    Trading Companies & Distributors - 0.1%                   
2,000    United Rentals North America Inc.    6.500 %  2/15/12    B3    BB-    1,940,000 
    Wireless Telecommunication Services - 0.2%                   
4,000    Nextel Communications, Inc., Series D    7.375 %  8/01/15    Baa2    A-    4,285,828 
    Total Corporate Bonds (cost $316,249,357)                  312,631,979 
    CAPITAL PREFERRED SECURITIES - 32.6% (22.3% of Total Investments)                   
    Capital Markets - 5.6%                   
6,273    BT Capital Trust, Series B1    7.900 %  1/15/27    A2    A-    6,685,782 
15,000    BT Institutional Capital Trust A, 144A    8.090 %  12/01/26    A2    A-    16,066,725 
2,000    BT Institutional Capital Trust B, 144A    7.750 %  12/01/26    A2    A-    2,131,496 
1,250    C.A. Preferred Fund Trust II    7.000 %  10/30/49    A1    A    1,302,496 
32,750    C.A. Preferred Funding Trust    7.000 %  1/30/49    A1    A    33,998,234 
3,000    Compass Trust I, Series A    8.230 %  1/15/27    A3    BBB-    3,196,221 
3,500    First Union Capital Trust II, Series A    7.950 %  11/15/29    A1    A-    4,446,432 
500    First Union Institutional Capital II    7.850 %  1/01/27    A1    A-    534,684 
2,000    First Union Institutional Capital Securities I    8.040 %  12/01/26    A1    A-    2,140,293 
19,335    Mellon Capital Trust I, Series A    7.720 %  12/01/26    A2    A-    20,659,680 
9,000    State Street Institutional Capital Trust, 144A    8.035 %  3/15/27    A1    A    9,696,204 
12,419    Washington Mutual Capital Trust I    8.375 %  6/01/27    Baa1    BBB    13,384,379 
    Commercial Banks - 18.0%                   
2,000    AB Svensk Exportkredit, 144A    6.375 %  10/27/49    Aa3    AA-    2,051,782 
8,000    Abbey National Capital Trust I    8.963 %  12/30/49    A2    A-    11,174,272 
43,100    AgFirst Farm Credit Bank    7.300 %  12/15/53    N/R    N/R    43,293,735 
12,120    Bank One Capital III    8.750 %  9/01/30    A1    A-    16,411,353 
1,974    BankAmerica Capital II, Series 2    8.000 %  12/15/26    Aa3    A    2,115,546 
2,600    BankAmerica Institutional Capital Trust, Series B, 144A    7.700 %  12/31/26    Aa3    A    2,772,944 
5,000    BankAmerica Institutional Trust, 144A    8.070 %  12/31/26    Aa3    A    5,370,860 
2,000    BankBoston Capital Trust I, Series B    8.250 %  12/15/26    Aa3    A    2,150,360 
1,000    BanPonce Trust I, Series A    8.327 %  2/01/27    Baa1    BBB-    1,069,318 
4,000    Barclays Bank plc, 144A    8.550 %  6/15/49    Aa3    A+    4,693,604 
4,500    Barclays Bank plc, 144A    6.278 %  12/15/49    Aa3    A+    4,434,750 
500    Barnett Capital I    8.060 %  12/01/26    Aa3    A    535,498 
2,200    DBS Capital Funding Corporation, 144A    7.657 %  3/15/49    A1    A-    2,464,900 
4,315    First Chicago NBD Institutional Capital Trust, Series B, 144A    7.750 %  12/01/26    A1    N/R    4,594,733 
6,000    First Chicago NBD Institutional Capital, 144A    7.950 %  12/01/26    A1    N/R    6,402,840 
5,750    First Empire Capital Trust I    8.234 %  2/01/27    Baa1    BBB    6,165,472 
11,550    First Empire Capital Trust II    8.277 %  6/01/27    Baa1    BBB    12,481,577 
4,250    First Midwest Bancorp Inc.    6.950 %  12/01/33    Baa2    BBB-    4,736,370 
43,150    HBOS Capital Funding LP, Notes    6.850 %  3/23/49    A1    A    44,420,034 
4,000    HBOS Public Limited Company, 144A    6.413 %  9/29/49    A1    A    3,999,148 
12,838    HSBC Capital Funding LP, 144A    9.547 %  12/31/49    A1    A-    15,241,800 
14,000    HSBC Capital Funding LP, Debt    10.176 %  6/30/50    A1    A-    21,751,128 
19,605    KBC Bank Fund Trust III, 144A    9.860 %  11/02/49    A2    A-    23,062,420 
4,000    KeyCorp Capital III    7.750 %  7/15/29    A3    BBB    4,842,868 
15,000    KeyCorp Institutional Capital Trust A    7.826 %  12/01/26    A3    BBB    16,003,680 
17,000    Lloyds TSB Bank plc, Subordinated Note    6.900 %  11/22/49    Aa2    A+    17,539,036 
1,000    Nordbanken AB, 144A    8.950 %  11/29/49    A2    A-    1,143,262 
18,500    North Fork Capital Trust II    8.000 %  12/15/27    A3    BBB-    20,208,642 
500    PNC Institutional Capital Securities, 144A    7.950 %  12/15/26    A3    BBB+    534,675 
2,000    Popular North American Capital Trust I    6.564 %  9/15/34    Baa1    BBB-    2,104,502 
16,750    RBS Capital Trust B    6.800 %  12/31/49    A1    A    17,092,789 
2,000    Reliance Capital Trust I, Series B    8.170 %  5/01/28    N/R    N/R    2,201,274 
1,202    Republic New York Capital II, Capital Securities    7.530 %  12/04/26    A1    A-    1,277,484 
6,200    Royal Bank of Scotland Group plc    9.118 %  3/31/49    A1    A    7,214,915 
4,000    SocGen Real Estate Company LLC, 144A    7.640 %  12/29/49    A1    A    4,212,428 
4,472    St. George Funding Company LLC, 144A    8.485 %  6/30/47    Baa1    N/R    4,909,013 
2,250    Swedbank ForeningsSparbanken AB, 144A    9.000 %  12/29/49    A2    BBB+    2,600,307 
13,330    Unicredito Italiano Capital Trust, 144A    9.200 %  10/05/49    A1    A    15,683,985 
3,800    Union Planters Capital Trust A    8.200 %  12/15/26    A2    BBB+    4,050,716 
2,000    Zions Institutional Capital Trust, Series A    8.536 %  12/15/26    Baa1    BBB    2,157,161 
    Diversified Financial Services - 3.0%                   
15,750    BNP Paribas Capital Trust    7.200 %  12/31/49    A1    A+    16,248,267 
900    Chase Capital Trust I, Series A    7.670 %  12/01/26    A1    A-    957,560 
1,000    Citigroup Capital III    7.625 %  12/01/36    Aa2    A    1,259,134 
10,000    ING Capital Funding Trust III    8.439 %  12/30/49    A2    A    11,521,680 
2,150    JPM Capital Trust I    7.540 %  1/15/27    A1    A-    2,288,606 
3,000    JPM Capital Trust II    7.950 %  2/01/27    A1    A-    3,225,844 
23,600    Old Mutual Capital Funding, Notes    8.000 %  6/22/53    Baa2    N/R    24,711,395 
    Diversified Telecommunication Services - 1.2%                   
19,080    Centaur Funding Corporation, Series B, 144A    9.080 %  4/21/20    Baa1    BBB+    24,935,175 
    Insurance - 3.9%                   
987    Allstate Financing II    7.830 %  12/01/45    A2    A-    1,049,434 
10,000    American General Capital II    8.500 %  7/01/30    Aa3    A+    13,499,220 
4,980    American General Institutional Capital, 144A    8.125 %  3/15/46    Aa3    A+    6,465,021 
612    Berkeley Capital Trust    8.197 %  12/15/45    Baa3    BBB-    628,490 
14,250    Mangrove Bay, Class 3, 144A    6.102 %  7/15/33    Baa1    BBB+    14,297,666 
3,750    Prudential plc    6.500 %  6/29/49    Baa1    A    3,782,774 
13,500    Sun Life Canada Capital Trust, Capital Securities, 144A    8.526 %  5/06/47    A1    A+    14,691,848 
23,000    Zurich Capital Trust I, 144A    8.376 %  6/01/37    Baa2    A-    24,646,409 
    Oil, Gas & Consumable Fuels - 0.7%                   
12,355    KN Capital Trust III    7.630 %  4/15/28    Baa3    BB+    14,003,651 
    Thrifts & Mortgage Finance - 0.2%                   
500    Countrywide Capital Trust I    8.000 %  12/15/26    Baa1    BBB+    513,802 
3,365    Great Western Financial Trust II, Series A    8.206 %  2/01/27    Baa1    BBB    3,624,882 
    Total Capital Preferred Securities (cost $669,521,614)                  661,764,665 
Principal                      Market 
Amount (000)    Description(1)                  Value 
    REPURCHASE AGREEMENTS - 1.4% (0.9% of Total Investments)                   
$ 27,874    State Street Bank, 3.150%, dated 9/30/05, due 10/03/05, repurchase price                  27,874,271 
$27,881,588, collateralized by $14,745,000 U.S. Treasury Bonds, 8.875%,
due 2/15/19, value $21,343,388, $4,840,000 U.S. Treasury Bonds,
  8.125%, due 8/15/19, value $6,682,225, and $315,000 U.S. Treasury Bonds,         
  7.125%, due 2/15/23, value $413,241         
  Total Repurchase Agreements (cost $27,874,271)          27,874,271
 
  Total Investments (cost $2,934,259,133) - 146.0%          2,968,900,256
 
  Other Assets Less Liabilities - 1.4%          29,963,677
 
  FundPreferred Shares, at Liquidation Value - (47.4)%          (965,000,000)
 
  Net Assets Applicable to Common Shares - 100%          $ 2,033,863,933

Interest Rate Swaps outstanding at September 30, 2005:                   
      Notional            Termination      Unrealized 
 Counterparty      Amount    Fixed Rate     Floating Rate**     Date      Appreciation 
 JPMorgan    $   97,000,000    3.3950 %    3.5588 %    7/06/06    $   695,950 
 JPMorgan      97,000,000    3.3595     3.8300     1/23/09      3,613,880 
 Morgan Stanley      97,000,000    2.0250     3.8300     1/23/06      674,152 
 Morgan Stanley      97,000,000    3.0480     3.8300     1/23/08      3,196,867 
 Royal Bank of Canada      97,000,000    2.6790     3.8300     1/23/07      2,231,669 
                      $   10,412,518 

(1 )    All percentages shown in the Portfolio of Investments are based on net assets applicable to Common shares 
    unless otherwise noted. 
*     Ratings below Baa by Moody’s Investor Service, Inc. or BBB by Standard & Poor’s Group are considered to 
    be below investment grade. 
**     Based on LIBOR (London Interbank Offered Rate) 
(a)     Security is eligible for the Dividends Received Deduction. 
144 A    144A securities are those which are exempt from registration under Rule 144A of the Securities Act of 1933, 
    as amended. These securities may only be resold in transactions exempt from registration which are normally 
    those transactions with qualified institutional buyers. 
(CBTCS)     Corporate Backed Trust Certificates. 
(CORTS)     Corporate Backed Trust Securities. 
(PCARS)     Public Credit and Repackaged Securities. 
(PPLUS)     PreferredPlus Trust. 
(SATURNS)     Structured Asset Trust Unit Repackaging. 
N/R     Security is not rated. 

Income Tax Information

The following information is presented on an income tax basis based on information currently available to the Fund. Differences between amounts for financial statement and federal income tax purposes are primarily due to the recognition of income on certain securities which are treated as debt securities for income tax purposes and equity securities for financial statement purposes.

At September 30, 2005, the cost of investments was $2,964,920,391.

Gross unrealized appreciation and gross unrealized depreciation of investments at September 30, 2005, were as follows:
Gross unrealized:       
   Appreciation    $   91,041,386  
   Depreciation      (87,061,521 ) 
Net unrealized appreciation of investments    $   3,979,865  

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 Preferred and Convertible Income Fund 2        

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

Date         11/29/05        

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                    
                                                   Gifford R. Zimmerman
                                                   Chief Administrative Officer (principal executive officer) 

Date         11/29/05        

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

Date         11/29/05        

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