Edgar Filing: NUVEEN PREFERRED CONVERTIBLE INCOME FUND 2

nvq

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: 9/30/2006

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.

TABLE OF CONTENTS


	Item 1. Schedule of Investments
	Item 2. Controls and Procedures
	Item 3. Exhibits
SIGNATURES
Certification

Item 1. Schedule of Investments

Portfolio of Investments (Unaudited)

Nuveen Preferred and Convertible Income Fund 2 (JQC)
September 30, 2006


Shares		Description (1)						Value


		Common Stocks – 9.4% (6.3% of Total Investments)

		Aerospace & Defense – 0.2%

	25,202	Lockheed Martin Corporation						$	2,168,884
	9,050	Orbital Sciences Corporation, (2)							169,869
	7,972	Precision Castparts Corporation							503,512


		Total Aerospace & Defense							2,842,265


		Air Freight & Logistics – 0.2%

	31,192	FedEx Corporation							3,389,947
	16,017	Ryder System Inc.							827,759

		Total Air Freight & Logistics							4,217,706


		Airlines – 0.0%

	26,321	Southwest Airlines Co.							438,508


		Beverages – 0.2%

	37,570	Coca-Cola Company							1,678,628
	49,201	Pepsi Bottling Group Inc.							1,746,636
	11,081	PepsiCo, Inc.							723,146

		Total Beverages							4,148,410


		Biotechnology – 0.2%

	17,838	Genentech, Inc., (2)							1,475,203
	29,607	Gilead Sciences, Inc., (2)							2,034,001

		Total Biotechnology							3,509,204


		Capital Markets – 0.1%

	12,814	Calamos Asset Management, Inc. Class A							375,706
	22,930	Lehman Brothers Holdings Inc.							1,693,610
	4,947	OptionsXpress Holdings Inc.							137,922

		Total Capital Markets							2,207,238


		Chemicals – 0.1%

	24,678	Airgas, Inc.							892,603
	7,000	Sparetech Corporation							187,390

		Total Chemicals							1,079,993


		Commercial Banks – 0.5%

	29,740	Bank of Hawaii Corporation							1,432,278
	19,740	Colonial BancGroup Inc.							483,630
	10,115	Greater Bay Bancorp.							285,344
	14,330	Marshall and Ilsley Corporation							690,419
	12,900	Northern Trust Corporation							753,747
	42,350	PNC Financial Services Group, Inc.							3,067,834
	3,270	Umpqua Holdings Corporation							93,522
	25,796	Washington Mutual, Inc.							1,121,352
	23,432	Whitney Holding Corporation							838,163
	16,047	Zions Bancorporation							1,280,711

		Total Commercial Banks							10,047,000


		Commercial Services & Supplies – 0.4%

	8,450	Administaff, Inc.							284,765
	5,942	American Ecology Corporation							117,295
	6,168	Consolidated Graphics Inc., (2)							371,129
	10,852	Corporate Executive Board Company							975,703
	45,303	Global Payments Inc.							1,993,785
	40,630	Republic Services, Inc.							1,633,732
	42,570	SEI Investments Company							2,392,008

		Total Commercial Services & Supplies							7,768,417


		Communications Equipment – 0.3%

	49,230	Comverse Technology, Inc., (2)							1,055,491
	112,780	Corning Incorporated, (2)							2,752,960
	4,789	Harris Corporation							213,063
	68,770	QUALCOMM Inc.							2,499,790

		Total Communications Equipment							6,521,304


		Computers & Peripherals – 0.3%

	29,060	Apple Computer, Inc., (2)							2,238,492
	51,590	Hewlett-Packard Company							1,892,837
	6,730	Lexmark International, Inc., (2)							388,052
	34,234	Network Appliance Inc., (2)							1,267,000

		Total Computers & Peripherals							5,786,381


		Consumer Finance – 0.3%

	211,336	Americredit Corp., (2)							5,281,287
	17,770	Capital One Financial Corporation							1,397,788

		Total Consumer Finance							6,679,075


		Containers & Packaging – 0.0%

	38,880	Packaging Corp. of America							902,016


		Distributors - 0.0%

	3,136	Keystone Automotive Industries Inc., (2)							119,231


		Diversified Consumer Services – 0.0%

	14,134	Jackson Hewitt Tax Services Inc.							424,161

		Diversified Financial Services – 0.1%
	13,700	CBOT Holdings, Inc. Class A, (2)							1,654,823


		Diversified Telecommunication Services – 0.2%

	34,390	AT&T Inc.							1,119,738
	3,460	Cbeyond Inc., (2)							94,977
	8,110	CT Communications, Inc.							176,149
	127,040	Sprint Nextel Corporation							2,178,736

		Total Diversified Telecommunication Services							3,569,600


		Electric Utilities – 0.4%

	47,290	PG&E Corporation							1,969,629
	82,262	TXU Corporation							5,143,020

		Total Electric Utilities							7,112,649


		Electrical Equipment – 0.2%

	28,232	Emerson Electric Co.							2,367,536
	5,756	Ormat Technologies Inc.							188,336
	8,388	Smith AO Corporation							330,739

		Total Electrical Equipment							2,886,611


		Electronic Equipment & Instruments – 0.2%

	6,434	Itron Inc., (2)							359,017
	12,567	Millipore Corporation, (2)							770,357
	14,655	Parker Hannifin Corporation							1,139,133
	13,951	Plexus Corporation, (2)							267,859
	14,051	Teledyne Technologies Inc., (2)							556,420
	21,485	Waters Corporation, (2)							972,841

		Total Electronic Equipment & Instruments							4,065,627


		Energy Equipment & Services – 0.0%

	9,621	Helix Energy Solutions Group, (2)							321,341
	10,474	Unit Corporation, (2)							481,490

		Total Energy Equipment & Services							802,831


		Food & Staples Retailing – 0.1%

	31,180	Whole Foods Market, Inc.							1,853,027


		Food Products – 0.3%

	106,390	Monsanto Company							5,001,394


		Gas Utilities – 0.2%

	104,653	Energen Corporation							4,381,821


		Health Care Equipment & Supplies – 0.4%

	16,190	American Medical Systems Holdings, Inc., (2)							298,382
	41,140	Baxter International Inc.							1,870,224
	22,014	Dade Behring Holdings Inc.							884,082
	9,564	Express Scripts, Inc., (2)							721,986
	11,470	Hillenbrand Industries							653,561
	64,670	Hospira Inc., (2)							2,474,921
	14,119	Surmodics Inc., (2)							495,859

		Total Health Care Equipment & Supplies							7,399,015


		Health Care Providers & Services – 0.4%

	13,909	Healthways Inc., (2)							620,341
	46,074	Quest Diagnostics Incorporated							2,817,886
	52,586	Sierra Health Services Inc., (2)							1,989,854
	35,953	Wellcare Health Plans Inc., (2)							2,036,018

		Total Health Care Providers & Services							7,464,099


		Hotels, Restaurants & Leisure – 0.1%

	24,016	Choice Hotels International, Inc.							982,254
	8,580	Panera Bread Company, (2)							499,785
	15,337	Starbucks Corporation, (2)							522,225

		Total Hotels, Restaurants & Leisure							2,004,264


		Household Durables – 0.2%

	139,632	Newell Rubbermaid Inc.							3,954,378
	8,600	Snap-on Incorporated							383,130
	6,310	Stanley Works							314,554

		Total Household Durables							4,652,062


		Household Products – 0.2%

	40,300	Colgate-Palmolive Company							2,502,630
	17,987	Kimberly-Clark Corporation							1,175,630

		Total Household Products							3,678,260


		Industrial Conglomerates – 0.1%

	21,710	3M Co.							1,615,658
	28,590	General Electric Company							1,009,227

		Total Industrial Conglomerates							2,624,885


		Insurance – 0.6%

	49,308	AFLAC Incorporated							2,256,334
	3,376	First American Corporation							142,940
	46,894	HCC Insurance Holdings Inc.							1,541,875
	28,084	Philadelphia Consolidated Holding Corporation, (2)							1,117,182
	6,940	Tower Group Inc.							231,449
	173,210	W.R. Berkley Corporation							6,129,902

		Total Insurance							11,419,682


		Internet & Catalog Retail – 0.1%

	18,306	Coldwater Creek Inc., (2)							526,481
	11,689	MSC Industrial Direct Inc., Class A							476,210

		Total Internet & Catalog Retail							1,002,691


		Internet Software & Services – 0.0%

	1,674	Google Inc., Class A, (2)							672,781
	7,018	j2 Global Communications, Inc., (2)							190,679

		Total Internet Software & Services							863,460


		IT Services – 0.0%

	11,836	Websense Inc., (2)							255,776


		Machinery – 0.1%

	7,440	Flow International Corporation, (2)							96,497
	14,210	Flowserve Corporation, (2)							718,884
	2,946	Freightcar America Inc.							156,138
	13,354	Harsco Corporation							1,036,938
	9,645	Joy Global Inc.							362,748
	7,740	Paccar Inc.							441,335
	3,630	Robbins & Myers, Inc.							112,240

		Total Machinery							2,924,780


		Media – 0.6%

	25,810	Cablevision Systems Corporation, (2)							586,145
	12,825	Comcast Corporation, Class A, (2)							472,601
	68,790	DIRECTV Group, Inc., (2)							1,353,787
	26,024	John Wiley and Sons Inc., Class A							937,124
	20,660	Liberty Global Inc, A Shares, (2)							531,788
	20,668	Liberty Global Inc., Class C, (2)							517,940
	7,844	Lodgenet Entertainment Corporation, (2)							148,095
	59,320	McGraw-Hill Companies, Inc.							3,442,340
	181,230	Time Warner Inc.							3,303,823

		Total Media							11,293,643


		Metals & Mining – 0.0%

	7,470	Compass Minerals International, Inc.							211,476
	3,160	Olympic Steel Inc.							78,558
	2,988	Phelps Dodge Corporation							253,084

		Total Metals & Mining							543,118


		Multiline Retail – 0.2%

	13,670	Big Lots Inc., (2)							270,803
	8,937	Casey’s General Stores, Inc.							199,027
	41,020	Dollar Tree Stores Inc., (2)							1,269,979
	47,060	Kohl’s Corporation, (2)							3,055,135

		Total Multiline Retail							4,794,944


		Oil, Gas & Consumable Fuels – 0.4%

	9,320	Cabot Oil & Gas Corporation							446,708
	33,180	EOG Resources, Inc.							2,158,359
	5,138	Frontier Oil Corporation							136,568
	6,142	Houston Exploration Company, (2)							338,731
	6,756	Parallel Petroleum Corporation, (2)							135,525
	10,177	Pioneer Drilling Company, (2)							130,673
	27,571	Sunoco, Inc.							1,714,640
	15,522	Valero Energy Corporation							798,917
	48,872	W&T Offshore Inc.							1,427,551

		Total Oil, Gas & Consumable Fuels							7,287,672


		Paper & Forest Products – 0.0%

	25,150	Plum Creek Timber Company							856,106


		Pharmaceuticals – 0.1%

	13,437	Allergan Inc.							1,513,141
	9,894	Alpharma Inc.							231,421
	5,370	New River Pharmaceuticals Inc., (2)							138,170

		Total Pharmaceuticals							1,882,732


		Real Estate – 0.3%

	4,123	American Home Mortgage Investment Corp.							143,769
	7,880	Camden Property Trust							598,959
	12,443	Equity Inns Inc.							198,093
	11,070	Health Care Property Investors Inc.							343,724
	26,920	Host Marriott Corporation							617,276
	8,597	LaSalle Hotel Properties							372,594
	11,081	Public Storage, Inc.							952,855
	8,074	SL Green Realty Corporation							901,866
	18,567	Tanger Factory Outlet Centers							661,357
	2,614	Taubman Centers Inc.							116,114
	13,134	United Dominion Realty Trust							396,647

		Total Real Estate							5,303,254


		Semiconductors & Equipment – 0.2%

	30,390	Advanced Micro Devices, Inc., (2)							755,192
	30,247	Entegris Inc., (2)							329,995
	34,020	Micron Technology, Inc., (2)							591,948
	93,220	National Semiconductor Corporation							2,193,467
	3,876	Netlogic Microsystems Inc., (2)							98,334
	40,610	QLogic Corporation, (2)							767,529
	3,950	Trident Microsystems Inc., (2)							91,877

		Total Semiconductors & Equipment							4,828,342


		Software – 0.4%

	10,955	Aspen Technology Inc., (2)							119,629
	45,871	Autodesk, Inc., (2)							1,595,393
	11,444	Blackbaud, Inc.							251,654
	90,490	BMC Software Inc., (2)							2,463,138
	47,360	Intuit Inc., (2)							1,519,782
	66,651	Salesforce.com, Inc., (2)							2,391,438

		Total Software							8,341,034


		Specialty Retail – 0.3%

	60,376	Ann Taylor Stores Corporation, (2)							2,527,339
	7,114	Build-A-Bear-Workshop, Inc., (2)							161,986
	5,313	Childrens Place Retail Stores Inc., (2)							340,191
	35,907	Circuit City Stores, Inc.							901,625
	16,851	Claire’s Stores, Inc.							491,375
	4,420	Gymboree Corporation, (2)							186,436
	24,758	Select Comfort Corporation, (2)							541,705
	34,161	Staples, Inc.							831,137

		Total Specialty Retail							5,981,794


		Textile, Apparel & Luxury Goods – 0.0%

	14,249	Guess Inc., (2)							691,504


		Thrifts & Mortgage Finance – 0.0%

	19,420	Washington Federal Inc.							435,785


		Tobacco – 0.2%

	11,470	Loews Corp — Carolina Group							635,323
	12,900	UST Inc.							707,307

		Total Tobacco							1,342,630


		Trading Companies & Distributors – 0.0%

	7,154	GATX Corporation							295,961

		Total Common Stocks (cost $182,379,887)							186,186,785


Shares		Description (1)	Coupon			Ratings (3)		Value


		Convertible Preferred Securities – 9.0% (6.0% of Total Investments)

		Automobiles – 1.2%
	374,450	Ford Motor Company Capital Trust II		6.500	%	Caa2		$	12,577,776
	351,700	General Motors Corporation, Convertible Notes, Senior Debentures, Series B		5.250	%		B-		7,076,204
	214,800	General Motors Corporation		6.250	%		B-		4,933,956

		Total Automobiles							24,587,936


		Capital Markets – 0.2%

	72,000	Affiliated Managers Group Inc.		5.100	%	BB			3,744,000


		Chemicals – 0.3%

	217,275	Celanese Corporation		4.250	%		N/R		6,014,172


		Commercial Banks – 0.7%

	9,800,000	Fortis Insurance NV, 144A		7.750	%		A+		13,729,800


		Consumer Finance – 0.7%

	13,400,000	SLM Corporation		5.435	%		A		13,499,160


		Electric Utilities – 0.5%

	108,860	Entergy Corporation		7.625	%	BBB			5,924,161
	76,430	PNM Resources Inc.		6.750	%	Baa3			3,824,557

		Total Electric Utilities							9,748,718


		Energy Equipment & Services – 0.2%

	54,050	Bristow Group Inc., Preferred Stock, Convertible		5.500	%		N/R		2,651,153


		Gas Utilities – 0.1%

	37,500	Southern Union Company		5.000	%	BBB			1,976,250


		Independent Power Producers & Energy Traders – 0.1%

	5,500	NRG Energy Inc., Preferred Convertible		5.750	%		B2		1,298,275


		Insurance – 2.6%

	71,500	Aspen Insurance Holdings Limited		5.625	%	BBB-			3,744,813
	503,775	Genworth Financial Inc.		6.000	%		A		19,042,695
	85,000	Hartford Financial Services Group, Inc.		6.000	%		A2		6,465,950
	470,000	MetLife Inc., Convertible, Series B		6.375	%	BBB+			13,963,700
	357,270	Travelers Property Casualty Corporation, Subordinate Notes		4.500	%	Baa1			8,795,987

		Total Insurance							52,013,145


		Media – 0.8%

	274,810	Comcast Corporation		2.000	%	BBB			11,129,805
	135,700	Interpublic Group Companies Inc., Series A		5.375	%		N/R		5,046,683

		Total Media							16,176,488


		Metals & Mining – 0.3%

	5,010	Freeport McMoran Copper & Gold, Inc.		5.500	%		B-		6,306,338


		Oil, Gas & Consumable Fuels – 0.2%

	46,600	Chesapeake Energy Corporation		5.000	%		B+		4,805,625


		Pharmaceuticals – 0.7%

	253,450	Schering-Plough Corporation (WI/DD, Settling 10/02/06)		6.000	%	BBB			14,089,286


		U.S. Agency – 0.4%

	74	Federal National Mortgage Association		5.375	%	AA-			7,142,665

		Total Convertible Preferred Securities (cost $161,230,015)							177,783,011


Shares		Description (1)	Coupon					Ratings (3)		Value


		$25 Par (or similar) Preferred Securities – 44.8% (30.1% of Total Investments)

		Automobiles - 0.0%

	3,000	DaimlerChrysler AG (CORTS)		7.875	%			Baa1		$	75,390
	2,200	DaimlerChrysler Corp. (PPLUS)		7.250	%				A3		54,780

		Total Automobiles									130,170


		Capital Markets – 3.1%

	269,511	BNY Capital Trust V, Series F		5.950	%				A1		6,495,215
	219,600	Compass Capital Trust III		7.350	%				A3		5,505,372
	31,600	CSFB USA, Series 2002-10 (SATURNS)		7.000	%			AA-			810,540
	22,600	First Union Institutional Capital II (CORTS)		8.200	%				A1		615,850
	5,300	Goldman Sachs Capital I (CORTS)		6.000	%				A1		125,398
	4,900	Goldman Sachs Capital I, Series A (CORTS)		6.000	%				A1		113,925
	4,800	Goldman Sachs Group Inc., Series 2004-04 (SATURNS)		6.000	%				A1		113,472
	2,100	Goldman Sachs Group Inc., Series 2004-06 (SATURNS)		6.000	%				A1		48,552
	11,800	Goldman Sachs Group Inc., Series GSC-3 (PPLUS)		6.000	%				A1		273,996
	1,800	Goldman Sachs Group Inc., Series GSG-1 (PPLUS)		6.000	%			Aa3			42,264
	71,500	Merrill Lynch Capital Trust II		8.000	%				A1		1,838,265
	423,200	Merrill Lynch Preferred Capital Trust III		7.000	%				A1		10,732,352
	189,600	Merrill Lynch Preferred Capital Trust IV		7.120	%				A1		4,831,008
	283,400	Merrill Lynch Preferred Capital Trust V		7.280	%				A1		7,263,542
	48,400	Merrill Lynch Preferred Capital Trust		7.750	%				A1		1,225,972
	211,850	Morgan Stanley Capital Trust II		7.250	%				A1		5,380,990
	185,370	Morgan Stanley Capital Trust III		6.250	%				A1		4,571,224
	138,400	Morgan Stanley Capital Trust IV		6.250	%				A1		3,390,800
	14,100	Morgan Stanley Capital Trust V		5.750	%				A+		328,248
	310,300	Morgan Stanley Capital Trust VI		6.600	%				A1		7,844,384

		Total Capital Markets									61,551,369


		Commercial Banks – 9.8%

	36,200	Abbey National PLC, Series B		7.375	%				A		949,888
	40,000	Abbey National PLC, Series B		7.250	%				A1		1,010,000
	303,200	Abbey National PLC, Series C		7.375	%				A2		7,731,600
	730,000	ABN AMRO Capital Fund Trust V		5.900	%				A		17,374,000
	35,179	ABN AMRO Capital Fund Trust VI		6.250	%				A		880,882
	17,021	ABN AMRO Capital Trust Fund VII		6.080	%				A		417,355
	115,200	ASBC Capital I		7.625	%			Baa1			2,911,104
	128,410	BAC Capital Trust I		7.000	%			Aa3			3,232,080
	565,500	BAC Capital Trust II		7.000	%			Aa3			14,352,390
	151,300	BAC Capital Trust III		7.000	%			Aa3			3,849,072
	888,611	Banco Santander		6.410	%				A2		22,748,442
	71,750	Banco Totta & Acores Finance, Series A		8.875	%				A3		1,791,511
	6,700	BancorpSouth Capital Trust I		8.150	%			Baa2			168,639
	28,800	Banesto Holdings, Series A, 144A		10.500	%				A2		885,600
	553,100	Bank of America Corporation, Series D		6.204	%				A1		14,115,112
	167,700	Bank One Capital Trust VI		7.200	%				A1		4,259,580
	51,900	BankNorth Capital Trust II		8.000	%				A3		1,312,551
	86,042	Barclays Bank PLC		6.625	%			Aa3			2,229,348
	166,100	Chittenden Capital Trust I		8.000	%			Baa1			4,235,550
	129,600	Citizens Funding Trust I		7.500	%			Baa2			3,263,328
	146,500	Cobank ABC, 144A, (6)		7.000	%				N/R		8,010,913
	119,100	Comerica Capital Trust I		7.600	%				A3		2,991,792
	430,300	Fleet Capital Trust VIII		7.200	%			Aa3			10,860,772
	62,400	HSBC Finance Corporation		6.875	%			AA-			1,600,560
	38,200	KeyCorp (PCARS)		7.500	%				A3		978,302
	87,267	KeyCorp Capital Trust V		5.875	%				A3		2,050,775
	3,400	Keycorp Capital VIII		7.000	%				A3		87,295
	92,600	National Commerce Capital Trust II		7.700	%				A1		2,327,964
	21,700	ONB Capital Trust II		8.000	%			Baa2			555,737
	27,300	PNC Capital Trust		6.125	%				A3		662,025
	180,674	Royal Bank of Scotland Group PLC, Series L		5.750	%				A1		4,328,949
	124,740	Royal Bank of Scotland Group PLC, Series N		6.350	%				A1		3,155,922
	160,600	SunTrust Capital Trust IV		7.125	%				A1		4,039,090
	110,300	SunTrust Capital Trust V		7.050	%				A1		2,774,045
	356,700	USB Capital Trust IV		7.350	%			Aa3			9,042,345
	301,200	USB Capital Trust V		7.250	%			Aa3			7,581,204
	31,800	USB Capital Trust VI		5.750	%			Aa3			729,174
	40,100	USB Capital Trust VII		5.875	%			Aa3			937,137
	39,300	VNB Capital Trust I		7.750	%			Baa1			988,788
	40,000	Wells Fargo Capital Trust IV		7.000	%			Aa2			1,011,600
	11,000	Wells Fargo Capital Trust IX		5.625	%			Aa2			252,560
	483,400	Wells Fargo Capital Trust V		7.000	%			Aa2			12,181,680
	114,700	Wells Fargo Capital Trust VI		6.950	%			Aa2			2,884,705
	129,309	Wells Fargo Capital Trust VII		5.850	%			Aa2			3,091,778
	117,800	Zions Capital Trust B		8.000	%			Baa1			3,032,172

		Total Commercial Banks									193,875,316


		Computers & Peripherals – 0.1%

	29,900	IBM Inc., Series 2001-1 (SATURNS)		7.125	%				A+		765,291
	14,000	IBM Trust II (CORTS)		7.125	%				A+		358,680
	8,000	IBM Trust III (CORTS)		7.200	%				A+		204,560
	23,200	IBM Trust IV (CORTS)		7.000	%				A+		603,432

		Total Computers & Peripherals									1,931,963


		Consumer Finance – 0.1%

	99,400	Household Capital Trust VII		7.500	%				A1		2,512,832
	14,200	SLM Corporation		6.000	%				A		342,504

		Total Consumer Finance									2,855,336


		Diversified Financial Services – 3.8%

	75,000	BAC Capital Trust XII		6.875	%			Aa3			1,934,250
	27,700	CIT Group Incorporated (CORTS)		7.750	%				A3		726,987
	108,880	Citigroup Capital Trust IX		6.000	%			Aa2			2,653,406
	197,400	Citigroup Capital Trust VII		7.125	%			Aa2			4,986,324
	754,422	Citigroup Capital Trust VIII		6.950	%			Aa2			18,951,081
	10,000	Citigroup Capital XIV		6.875	%			Aa2			256,600
	195,150	Citigroup Capital XV		6.500	%			Aa3			4,976,325
	6,100	Citigroup, Series CIT (CORTS)		6.750	%				A3		151,890
	1,400	General Electric Capital Corporation (CORTS)		6.000	%			AAA			33,810
	40,500	General Electric Capital Corporation		6.625	%			AAA			1,024,650
	592,320	ING Group N.V.		7.200	%				A		15,198,931
	755,475	ING Group N.V.		7.050	%				A		19,173,956
	43,200	JPM Capital Trust (CORTS)		7.200	%				A1		1,101,168
	71,965	JPMorgan Chase & Company (PCARS)		7.125	%				A2		1,830,790
	73,600	JPMorgan Chase Trust, Series 2002-6, Class A (SATURNS)		7.125	%				A1		1,861,344
	47,000	Royal Bank of Scotland Public Limited Company, Series 2006Q		6.750	%				A1		1,229,050

		Total Diversified Financial Services									76,090,562


		Diversified Telecommunication Services – 0.5%

	38,500	BellSouth Capital Funding (CORTS)		7.100	%				A		968,275
	29,900	BellSouth Corporation (CORTS)		7.000	%			Aa3			757,367
	50,600	BellSouth Corporation, Series 2001-3 (SATURNS)		7.125	%				A		1,271,831
	32,600	BellSouth Inc. (CORTS)		7.000	%				A		827,062
	80,800	BellSouth Telecommunications (PPLUS)		7.300	%				A		2,048,280
	27,300	Verizon Communications (CORTS)		7.625	%				A		709,800
	48,100	Verizon Communications (CORTS)		7.375	%				A		1,233,284
	50,700	Verizon New England Inc., Series B		7.000	%				A3		1,288,287
	30,400	Verizon South Inc., Series F		7.000	%				A		770,336

		Total Diversified Telecommunication Services									9,874,522


		Electric Utilities – 0.4%

	16,300	Consolidated Edison Company of New York Inc.		7.500	%				A1		408,152
	6,000	Consolidated Edison, Inc.		7.250	%				A2		151,800
	21,100	DTE Energy Trust I		7.800	%			Baa3			537,839
	28,900	Entergy Louisiana LLC		7.600	%				A-		729,725
	8,300	Entergy Mississippi Inc.		7.250	%				A-		211,692
	3,000	Georgia Power Capital Trust V		7.125	%				A3		75,600
	11,700	Mississippi Power Capital Trust II		7.200	%				A2		295,425
	5,200	National Rural Utilities Cooperative Finance Corporation		7.400	%				A3		131,820
	1,500	National Rural Utilities Cooperative Finance Corporation		6.100	%				A3		36,600
	1,600	National Rural Utilities Cooperative Finance Corporation		5.950	%				A3		37,056
	33,600	Northern States Power Company		8.000	%				A3		857,136
	1,500	PPL Energy Supply LLC		7.000	%			BBB			38,578
	15,400	Southern Company Capital Trust I (CORTS)		8.190	%			BBB+			407,638
	35,700	Southern Company Capital Trust I (CORTS)		7.375	%			BBB+			903,924
	13,100	Southern Company Capital Trust VI		7.125	%			BBB+			332,216
	122,500	Virginia Power Capital Trust		7.375	%			Baa2			3,123,750

		Total Electric Utilities									8,278,951


		Food Products – 0.3%

	54,200	Dairy Farmers of America Inc., 144A, (6)		7.875	%			BBB-			5,379,350


		Household Durables – 0.1%

	72,700	Pulte Homes Inc.		7.375	%			BBB			1,879,295


		Industrial Conglomerates – 0.0%

	5,000	General Electric Company, Series GE (CORTS)		6.800	%			AAA			126,300


		Insurance – 11.6%

	1,210,933	Ace Ltd., Series C		7.800	%			Baa2			31,423,711
	2,100	Aegon N.V.		6.875	%				A-		54,222
	1,398,400	Aegon N.V.		6.375	%				A-		35,365,536
	6,500	Allstate Corporation (PCARS)		7.150	%				A2		163,670
	36,700	AMBAC Financial Group Inc.		5.950	%			AA			888,874
	236,713	Arch Capital Group Limited, Series B		7.785	%			Baa3			6,119,031
	389,973	Arch Capital Group Limited		8.000	%			Baa3			10,373,282
	676,401	Delphi Financial Group, Inc.		8.000	%			BBB			17,718,324
	200,456	EverestRe Capital Trust II		6.200	%			Baa1			4,542,333
	97,100	EverestRe Group Limited		7.850	%			Baa1			2,499,354
	339,100	Hartford Capital Trust III, Series C		7.450	%				A3		8,491,064
	56,500	Lincoln National Capital Trust V, Series E		7.650	%				A-		1,422,670
	1,401,100	Lincoln National Capital Trust VI		6.750	%				A-		35,517,885
	109,100	Markel Corporation		7.500	%			BBB-			2,778,777
	903,702	PartnerRe Limited, Series C		6.750	%			BBB+			22,719,068
	82,700	PartnerRe Limited		7.900	%				A3		2,073,289
	80,900	PLC Capital Trust III		7.500	%			BBB+			2,047,579
	70,800	PLC Capital Trust IV		7.250	%			BBB+			1,784,868
	24,200	PLC Capital Trust V		6.125	%			BBB+			573,540
	17,500	Protective Life Corporation		7.250	%			BBB			450,625
	38,800	Prudential PLC		6.750	%				A		988,236
	115,800	RenaissanceRe Holdings Limited, Series A		8.100	%			BBB+			2,925,108
	124,700	RenaissanceRe Holdings Limited, Series B		7.300	%			BBB			3,149,922
	3,400	RenaissanceRe Holdings Limited, Series C		6.080	%			BBB+			75,548
	24,600	Safeco Capital Trust I (CORTS)		8.750	%			Baa2			712,539
	48,300	Safeco Capital Trust III (CORTS)		8.072	%			Baa2			1,236,722
	17,400	Safeco Capital Trust IV (CORTS)		8.375	%			Baa2			482,850
	40,200	Safeco Corporation, Series 2001-7 (SATURNS)		8.250	%			Baa2			1,033,542
	38,800	Safeco Corporation, Series 2002-5 (SATURNS)		8.250	%			Baa2			1,002,010
	97,100	Saint Paul Capital Trust I		7.600	%			Baa1			2,469,253
	61,600	Torchmark Capital Trust I		7.750	%				A-		1,540,000
	142,800	W.R. Berkley Capital Trust, Series 2002-1 (CBTCS)		8.125	%			BBB-			1,459,416
	709,600	W.R. Berkley Corporation		6.750	%			BBB-			17,590,984
	68,800	XL Capital Ltd, Series A		8.000	%			Baa1			1,751,648
	248,540	XL Capital Ltd, Series B		7.625	%			Baa1			6,352,682

		Total Insurance									229,778,162


		IT Services – 0.0%

	2,500	Vertex Industries Inc. (PPLUS)		7.625	%				A		64,075


		Media – 1.4%

	52,700	CBS Corporation		7.250	%			BBB			1,322,770
	1,022,400	Comcast Corporation		7.000	%			BBB+			26,007,300
	5,400	Walt Disney Company (CORTS)		6.875	%				A-		135,648
	6,300	Walt Disney Company		7.000	%				A-		159,894

		Total Media									27,625,612


		Multi-Utilities – 0.1%

	52,400	Dominion CNG Capital Trust I		7.800	%			Baa2			1,332,532
	27,500	Dominion Resources Capital Trust II		8.400	%			Baa3			697,400

		Total Multi-Utilities									2,029,932


		Oil, Gas & Consumable Fuels – 0.9%

	678,700	Nexen Inc.		7.350	%			Baa3			17,442,590


		Pharmaceuticals – 0.1%

	50,800	Bristol Myers Squibb Company (CORTS)		6.250	%				A+		1,248,156


		Real Estate – 10.8%

	77,100	AvalonBay Communities, Inc., Series H		8.700	%			BBB			2,111,769
	166,283	BRE Properties, Series B		8.080	%			BBB-			4,266,822
	3,900	Developers Diversified Realty Corporation, Series F		8.600	%			BBB-			99,177
	104,300	Developers Diversified Realty Corporation, Series G		8.000	%			BBB-			2,675,295
	1,264,845	Developers Diversified Realty Corporation, Series H		7.375	%			BBB-			32,051,172
	125,600	Duke Realty Corporation, Series L		6.600	%			BBB			3,140,000
	31,700	Duke Realty Corporation, Series N		7.250	%			BBB			824,200
	25,000	Duke-Weeks Realty Corporation, Series B		7.990	%			BBB			1,246,875
	82,800	Duke-Weeks Realty Corporation		6.950	%			BBB			2,109,744
	96,000	Duke-Weeks Realty Corporation		6.625	%			BBB			2,374,080
	196,800	Equity Office Properties Trust, Series G		7.750	%			BBB-			4,998,720
	15,400	Equity Residential Properties Trust, Series D		8.600	%			BBB			391,622
	347,922	Equity Residential Properties Trust, Series N		6.480	%			BBB			8,677,175
	140,000	Federal Realty Investment Trust		8.500	%			BBB-			3,563,000
	4,900	First Industrial Realty Trust, Inc., Series C		8.625	%			BBB-			128,968
	688,600	HRPT Properties Trust, Series B		8.750	%			BBB-			17,834,740
	532,700	HRPT Properties Trust, Series C		7.125	%			BBB-			13,615,812
	99,800	New Plan Excel Realty Trust, Series E		7.625	%			BBB-			2,548,892
	3,997	Prologis Trust, Series C		8.540	%			BBB			230,452
	96,275	Prologis Trust, Series G		6.750	%			BBB			2,406,875
	2,000	PS Business Parks, Inc., Series F		8.750	%			BBB-			50,640
	700	PS Business Parks, Inc., Series K		7.950	%			BBB-			18,340
	243,000	PS Business Parks, Inc., Series L		7.600	%			BBB-			6,231,735
	130,700	PS Business Parks, Inc., Series O		7.375	%			BBB-			3,353,278
	299,600	PS Business Parks, Inc.		7.000	%			BBB-			7,490,000
	12,500	Public Storage, Inc., Series I		7.250	%			BBB+			324,000
	149,000	Public Storage, Inc., Series E		6.750	%			BBB+			3,748,840
	18,400	Public Storage, Inc., Series F		6.450	%			BBB+			448,040
	197,600	Public Storage, Inc., Series H		6.950	%			BBB+			5,005,208
	32,800	Public Storage, Inc., Series K		7.250	%			BBB+			854,850
	55,860	Public Storage, Inc., Series S		7.875	%			BBB+			1,399,293
	45,000	Public Storage, Inc., Series T		7.625	%			BBB+			1,131,300
	174,500	Public Storage, Inc., Series U		7.625	%			BBB+			4,399,145
	31,500	Public Storage, Inc., Series V		7.500	%			BBB+			799,785
	166,100	Regency Centers Corporation		7.450	%			BBB-			4,265,448
	20,500	Simon Property Group, Inc., Series F		8.750	%			Baa2			512,500
	20,650	Simon Property Group, Inc., Series G		7.890	%			BBB			1,065,540
	2,600	United Dominion Realty Trust		8.600	%			BBB-			66,820
	30,000	Vornado Realty Trust, Series E		7.000	%			BBB-			767,100
	1,200	Vornado Realty Trust, Series F		6.750	%			BBB-			29,652
	165,000	Vornado Realty Trust, Series G		6.625	%			BBB-			4,009,500
	183,000	Vornado Realty Trust, Series H		6.750	%			BBB-			4,531,080
	1,987,734	Wachovia Preferred Funding Corporation		7.250	%				A2		55,517,411
	130,300	Weingarten Realty Trust, Series E		6.950	%				A-		3,322,650

		Total Real Estate									214,637,545


		Thrifts & Mortgage Finance – 1.1%

	83,600	Countrywide Capital Trust II, Series II (CORTS)		8.000	%			BBB+			2,135,980
	70,800	Countrywide Capital Trust III (PPLUS)		8.050	%			BBB+			1,875,846
	733,343	Countrywide Capital Trust IV		6.750	%			BBB+			18,399,576
	8,200	Countrywide Financial Corporation Capital Trust I (CORTS)		8.000	%			BBB+			209,674

		Total Thrifts & Mortgage Finance									22,621,076


		Wireless Telecommunication Services – 0.6%

	60,200	AT&T Wireless (CORTS)		8.000	%				A		1,527,575
	24,200	AT&T Wireless, Series 2002-B (SATURNS)		9.250	%				A		649,770
	50,600	United States Cellular Corporation		8.750	%				A-		1,350,514
	344,100	United States Cellular Corporation		7.500	%				A-		8,874,339

		Total Wireless Telecommunication Services									12,402,198

		Total $25 Par (or similar) Preferred Securities (cost $896,865,859)									889,822,480


Principal
Amount (000)		Description (1)	Coupon			Maturity (4)		Ratings (3)		Value


		Variable Rate Senior Loan Interests – 0.5% (0.4% of Total Investments) (5)

		Building Products – 0.1%

$	1,000	Textron Inc. Term Loan		8.921	%		8/01/13		B2	$	1,007,500


		Hotels, Restaurants & Leisure – 0.1%

	998	Cedar Fair LP, Term Loan, WI/DD		TBD			TBD	BB-			1,003,824


		Media – 0.1%

	1,000	Charter Communications Inc., Term Loan B		8.125	%		4/28/13		B		1,005,332
	2,000	Neilsen Finance LLC, Term Loan B		8.190	%		8/09/13	B+			1,995,556
	1,521	Panamsat Corporation, Term Loan		8.008	%		1/03/14		B1		1,533,042
	998	Philadelphia Newspapers, Term Loan		8.120	%		6/29/13		N/R		1,003,111

	5,519	Total Media									5,537,041


		Paper & Forest Products – 0.1%

	345	Bluegrass Container Company, LLC, Delayed Draw Term Loan		7.601	%		6/30/13	BB-			347,283
	1,155	Bluegrass Container Company, LLC, Term Loan B		7.580	%		6/30/13	BB-			1,163,565
	997	Georgia-Pacific Corporation, Term Loan B		7.390	%		12/20/12	BB-			1,000,570

	2,497	Total Paper & Forest Products									2,511,418


		Real Estate Management & Development – 0.1%

	1,000	LNR Property Corporation, Term Loan B		8.220	%		7/12/11		B2		1,007,625

$	11,014	Total Variable Rate Senior Loan Interests (cost $11,017,865)									11,067,408


Principal
Amount (000)		Description (1)	Coupon			Maturity			Ratings (3)		Value


		Convertible Bonds – 34.6% (23.2% of Total Investments)

		Aerospace & Defense – 1.7%

$	6,275	AAR Corporation, 144A (7)		1.750	%			2/01/26	BB		$	6,502,469
	3,025	Armor Holdings Inc.		2.000	%			11/01/24		B+		3,754,781
	4,455	L-3 Communications Corporation, Convertible Bond		3.000	%			8/01/35	BB+			4,555,238
	4,670	L-3 Communications Corporation, Series 144A		3.000	%			8/01/35	BB+			4,775,075
	8,815	Lockheed Martin Corporation		5.155	%			8/15/33	BBB+			11,204,747
	3,050	Triumph Group Inc, Convertible Bond		2.625	%			10/01/26		N/R		3,172,000

	30,290	Total Aerospace & Defense										33,964,310


		Airlines – 0.3%

	1,700	AMR Corporation, Convertible Bonds		4.500	%			2/15/24	CCC+			2,152,625
	1,400	Continental Airlines, Inc.		5.000	%			6/15/23	CCC+			2,278,500
	2,845	UAL Corporation, Convertible Bond, 144A		4.500	%			6/30/21		N/R		2,968,188

	5,945	Total Airlines										7,399,313


		Biotechnology – 3.0%

	10,850	Amgen Inc., 144A		0.125	%			2/01/11		A+		11,012,750
	12,350	Amgen Inc., 144A		0.375	%			2/01/13		A+		12,550,688
	6,165	Cephalon, Inc.		0.000	%			6/15/33		B-		7,405,706
	12,775	Genzyme Corporation		1.250	%			12/01/23	BBB			14,052,500
	13,450	Gilead Sciences Inc., 144A		0.625	%			5/01/13		N/R		14,425,125

	55,590	Total Biotechnology										59,446,769


		Capital Markets – 0.5%

	9,300	Goldman Sachs Group, Inc.		0.125	%			6/28/11	Aa3			9,821,730


		Commercial Banks – 0.5%

	9,300	Wells Fargo & Company, Convertible Bond		5.718	%			5/01/33	Aa1			9,442,290


		Communications Equipment – 2.4%

	9,200	Ciena Corporation		3.750	%			2/01/08		B		8,924,000
	5,150	CommScope Inc.		1.000	%			3/15/24		B+		8,162,750
	7,800	Comverse Technology, Inc.		0.000	%			5/15/23	BB-			10,062,000
	1,360	Finisar Corporation, Series 144A		2.500	%			10/15/10		N/R		1,720,400
	9,150	Lucent Technologies Inc., Series B		2.750	%			6/15/25		B1		9,172,875
	9,200	Lucent Technologies Inc.		2.750	%			6/15/23		B1		9,142,500

	41,860	Total Communications Equipment										47,184,525


		Computers & Peripherals – 0.7%

	13,750	Sandisk Corporation, Convertible Bond		1.000	%			5/15/13	BB-			13,165,625


		Construction & Engineering – 0.4%

	4,545	Quanta Services Inc., Series 144A		3.750	%			4/30/26		N/R		4,732,481
	3,500	Quanta Services Incorporated		4.000	%			7/01/07		B		3,465,000

	8,045	Total Construction & Engineering										8,197,481


		Consumer Finance – 0.7%

	13,475	American Express Company, Convertible Bond		1.850	%			12/01/33		A+		13,693,969


		Diversified Financial Services – 1.5%

	3,500	CapitalSource Inc.		3.500	%			7/15/34	BBB-			3,766,875
	14,900	Citigroup Funding Inc, Convertible Bond		0.125	%			9/07/11	Aa1			14,062,620
	2,650	JMH Finance Limited		4.750	%			9/06/07		N/R		2,696,264
	8,025	Merrill Lynch & Co. Inc., Convertible Bond		0.000	%			3/13/32	Aa3			9,418,140

	29,075	Total Diversified Financial Services										29,943,899


		Diversified Telecommunication Services – 0.8%

	3,690	CenturyTel Inc.		4.750	%			8/01/32	BBB			3,911,400
	3,065	Level 3 Communications Inc., Convertible Bond		2.875	%			7/15/10	Caa2			3,107,144
	2,200	Qwest Communications International Inc., Convertible Bond		3.500	%			11/15/25		B		3,591,500
	4,210	Time Warner Telecom Inc.		2.375	%			4/01/26	CCC+			5,230,925

	13,165	Total Diversified Telecommunication Services										15,840,969


		Electric Utilities – 0.1%

	1,015	PPL Energy Supply LLC, Convertible Bond		2.625	%			5/15/23	BBB			1,346,144


		Electronic Equipment & Instruments – 1.0%

	5,925	Coherent Inc., 144A		2.750	%			3/01/11		N/R		6,702,656
	17,940	Roper Industries Inc.		1.481	%			1/15/34	BB-			10,651,875
	2,000	SCI Systems Inc.		3.000	%			3/15/07		B1		1,970,000

	25,865	Total Electronic Equipment & Instruments										19,324,531


		Energy Equipment & Services – 2.0%

	8,950	Cameron International Corporation, 144A Convertible Bonds		2.500	%			6/15/26	BBB+			9,330,375
	500	Halliburton Company, Convertible Bond		3.125	%			7/15/23	BBB+			790,000
	4,375	Hanover Compressor Company		4.750	%			1/15/14		B		6,125,000
	13,415	Nabors Industries Inc., Convertible Bond Series 144A		0.940	%			5/15/11		A-		12,844,863
	4,350	Nabors Industries Inc.		0.000	%			6/15/23	N/R			4,556,625
	3,325	Schlumberger Limited		2.125	%			6/01/23		A+		5,411,438

	34,915	Total Energy Equipment & Services										39,058,301


		Health Care Equipment & Supplies – 1.4%

	4,025	American Medical Systems Holdings, Convertible Bond		3.250	%			7/01/36		B		4,719,313
	23,350	Medtronic Inc., Convertible Bond		1.500	%			4/15/11	AA-			22,970,563
	250	Medtronic, Inc.		1.500	%			4/15/11	AA-			245,938

	27,625	Total Health Care Equipment & Supplies										27,935,814


		Health Care Providers & Services – 1.1%

	250	Health Management Associates Inc.		1.500	%			8/01/23	BBB			255,937
	5,050	Laboratory Corporation of America Holdings		0.000	%			9/11/21	BBB-			4,494,500
	500	LifePoint Hospitals Inc., Convertible Bond		3.250	%			8/15/25		B+		455,000
	3,700	Manor Care, Inc.		2.125	%			8/01/35	BBB			4,555,625
	455	Polymedica Corporation, Convertible Bond, 144A		1.000	%			9/15/11	N/R			470,072
	3,550	PSS World Medical Inc., Convertible Bond (WI/DD, Settling 10/02/06)		2.250	%			3/15/24		B+		4,512,938
	8,510	Roche Holdings Inc., 144A		0.000	%			7/25/21		N/R		7,868,346

	22,015	Total Health Care Providers & Services										22,612,418


		Hotels, Restaurants & Leisure – 1.3%

	6,185	Caesars Entertainment Inc.		5.510	%			4/15/24	Baa3			7,425,711
	7,970	Carnival Corporation		2.000	%			4/15/21		A-		9,902,725
	2,170	Four Seasons Hotel Inc.		1.875	%			7/30/24	BBB-			2,416,838
	3,600	Hilton Hotels Corporation		3.375	%			4/15/23	BB			4,725,000
	1,500	Scientific Games Corporation		0.750	%			12/01/24		B+		1,796,250

	21,425	Total Hotels, Restaurants & Leisure										26,266,524


		Insurance – 1.2%

	20	Alleghany Corporation, Convertible Bond		5.750	%			6/15/09	BBB-			5,844,173
	6,925	American Financial Group Inc.		1.486	%			6/02/33	BBB			3,834,719
	14,200	Prudential Financial Inc.		2.666	%			11/15/35		A		14,148,880

	21,145	Total Insurance										23,827,772


		Internet & Catalog Retail – 0.1%

	2,380	Priceline.com Inc., Convertible Bond 144A		0.500	%			9/30/11		B		2,549,575


		IT Services – 0.3%

	2,090	Digital River Inc.		1.250	%			1/01/24		N/R		2,740,513
	3,500	DST Systems Inc.		4.125	%			8/15/23		N/R		4,838,750

	5,590	Total IT Services										7,579,263


		Leisure Equipment & Products – 0.1%

	1,165	K2 Corporation, Convertible Notes, 144A		5.000	%			6/15/10		N/R		1,255,288


		Media – 3.4%

	5,200	Grey Global Group Inc.		5.000	%			10/15/33		N/R		6,558,500
	14,725	Liberty Media Corporation, Senior Debentures Exchangeable for Motorola Common Stock		3.500	%			1/15/31	BB+			16,326,344
	21,800	Liberty Media Corporation, Senior Debentures, Exchangeable for PCS Common Stock, Series 1		4.000	%			11/15/29	BB+			14,578,750
	2,240	Liberty Media Corporation		0.750	%			3/30/23	BB+			2,478,000
	2,395	Lions Gate Entertainment Corporation, 144A		2.938	%			10/15/24		N/R		2,505,769
	3,300	Lions Gate Entertainment Corporation, 144A		3.625	%			3/15/25		N/R		3,196,875
	4,660	Omnicom Group Inc.		0.000	%			7/01/38		A-		4,759,025
	1,525	Shuffle Master Inc.		1.250	%			4/15/24		N/R		1,717,531
	3,155	Sirius Satellite Radio Inc.		3.250	%			10/15/11	CCC			3,261,481
	10,250	Walt Disney Company, Convertible Senior Notes		2.125	%			4/15/23		A-		11,582,500

	69,250	Total Media										66,964,775


		Metals & Mining – 0.2%

	700	Coeur d’Alene Mines Corporation, Convertible Bond		1.250	%			1/15/24		B-		654,500
	3,375	Placer Dome Inc.		2.750	%			10/15/23		A-		4,674,375

	4,075	Total Metals & Mining										5,328,875


		Multi-Utilities – 0.6%

	1,700	Centerpoint Energy Inc., Convertible Bond		2.875	%			1/15/24	BBB-			1,952,875
	8,625	Dominion Resources Inc., Series C		2.125	%			12/15/23	BBB			9,196,406

	10,325	Total Multi-Utilities										11,149,281


		Oil, Gas & Consumable Fuels – 0.6%

	2,250	Chesapeake Energy Corporation, 144A		2.750	%			11/15/35	BB			2,311,875
	6,825	Devon Energy Corporation		4.900	%			8/15/08	BBB			8,608,031

	9,075	Total Oil, Gas & Consumable Fuels										10,919,906


		Pharmaceuticals – 1.8%

	11,960	Allergan Inc., Convertible Bond, 144A		1.500	%			4/01/26		A		12,647,700
	5,140	Allergan Inc., Convertible Bond		1.500	%			4/01/26		A		5,435,550
	4,780	Teva Pharmaceutical Finance, Series A		0.500	%			2/01/24	BBB			5,060,825
	2,100	Teva Pharmaceutical Finance, Series B		0.250	%			2/01/24	BBB			2,286,375
	8,500	Wyeth, 144A		5.109	%			1/15/24		A		9,302,400

	32,480	Total Pharmaceuticals										34,732,850


		Real Estate – 0.9%

	7,765	Archstone-Smith Trust, Corporate Bond Convertible		4.000	%			7/15/36	BBB+			8,095,013
	7,465	Vornado Realty, Convertible Bond		3.875	%			4/15/25	BBB			9,424,563

	15,230	Total Real Estate										17,519,576


		Real Estate Management & Development – 0.7%

	12,975	EOP Operating LP, Convertible Bond 144A		4.000	%			7/15/26	BBB			13,899,469


		Semiconductors & Equipment – 2.0%

	11,310	Cypress Semiconductor Corporation, Convertible Notes, Series 144A		1.250	%			6/15/08		B-		14,646,450
	5,650	Intel Corporation, 144A		2.950	%			12/15/35		A-		5,077,938
	9,985	Intel Corporation, Convertible Bond		2.950	%			12/15/35		A-		8,974,019
	2,500	Photronics Inc., Convertible Notes		2.250	%			4/15/08		B		2,721,875
	2,165	PMC-Sierra Inc., Convertible Subordinate Notes		2.250	%			10/15/25		N/R		2,213,713
	4,250	RF Micro Devices, Inc.		1.500	%			7/01/10		B-		4,935,313
	500	Teradyne Inc., Convertible Senior Notes		3.750	%			10/15/06		B+		501,250

	36,360	Total Semiconductors & Equipment										39,070,558


		Software – 2.0%

	4,275	Amdocs Limited		0.500	%			3/15/24	BBB-			4,568,906
	4,170	Cadence Design Systems, Inc.		0.000	%			8/15/23		N/R		4,800,713
	1,535	Computer Associates International Inc., Convertible Bond, Series 144A		1.625	%			12/15/09	Ba1			1,920,669
	4,725	Informatica Corporation, 144A		3.000	%			3/15/26		N/R		4,837,219
	1,220	Macrovision Corporation, Convertible Bonds, 144A		2.625	%			8/15/11		N/R		1,346,575
	3,990	Red Hat Inc., Convertible Bond		0.500	%			1/15/24		B+		4,194,488
	3,220	Sybase, Inc.		1.750	%			2/22/25		N/R		3,574,200
	12,375	Symantec Corporation, Convertible Bond, 144A		0.750	%			6/15/11		N/R		15,112,969

	35,510	Total Software										40,355,739


		Specialty Retail – 1.0%

	6,450	Lowes Companies, Inc.		0.861	%			10/19/21		A+		6,369,375
	2,665	Sonic Automotive Inc., Convertible Senior Subordinated Notes		5.250	%			5/07/09		B		2,528,419
	11,975	TJX Companies, Inc.		0.000	%			2/13/21		A-		11,226,563

	21,090	Total Specialty Retail										20,124,357


		Wireless Telecommunication Services – 0.3%

	1,275	American Tower Corporation		3.000	%			8/15/12	BB-			2,397,000
	3,515	NII Holdings Inc., 144A		2.750	%			8/15/25		N/R		4,986,906

	4,790	Total Wireless Telecommunication Services										7,383,906

$	644,095	Total Convertible Bonds (cost $650,958,740)										687,305,802


Principal
Amount (000)		Description (1)	Coupon				Maturity		Ratings (3)		Value


		Corporate Bonds – 12.9% (8.6% of Total Investments)

		Aerospace & Defense – 0.2%

$	1,000	Hexcel Corporation, Term Loan		6.750	%			2/01/15		B	$	960,000
	2,500	K&F Acquisition Inc.		7.750	%			11/15/14		B-		2,518,750

	3,500	Total Aerospace & Defense										3,478,750


		Auto Components – 0.2%

	1,950	Affinia Group Inc.		9.000	%			11/30/14	CCC+			1,828,125
	1,300	Keystone Automotive Operations Inc.		9.750	%			11/01/13		B-		1,228,500

	3,250	Total Auto Components										3,056,625


		Building Products – 0.2%

	4,000	Jacuzzi Brands, Inc.		9.625	%			7/01/10		B		4,260,000


		Chemicals – 0.7%

	3,000	Ineos Group Holdings PLC, 144A		8.500	%			2/15/16		B2		2,872,500
	2,000	Nell AF Sarl		8.375	%			8/15/15		B2		1,995,000
	6,500	OM Group Inc.		9.250	%			12/15/11		B-		6,792,500
	3,000	Rockwood Specialties Group Inc., Series WI		7.500	%			11/15/14		B-		2,970,000

	14,500	Total Chemicals										14,630,000


		Commercial Services & Supplies – 0.0%

	900	Williams Scotsman Inc.		8.500	%			10/01/15		B+		924,750


		Computers & Peripherals – 0.1%

	1,000	GSC Holdings Corporation, 144A		8.000	%			10/01/12		B+		1,035,000


		Containers & Packaging – 0.5%

	3,450	MDP Acquisitions PLC, Senior Notes		9.625	%			10/01/12		B-		3,657,000
	3,000	Owens-Brockway Glass Containers, Guaranteed Senior Note		8.250	%			5/15/13		B		3,090,000
	3,000	Owens-Illinois Inc.		7.500	%			5/15/10		B		3,015,000

	9,450	Total Containers & Packaging										9,762,000


		Diversified Consumer Services – 0.1%

	2,000	Service Corporation International		7.700	%			4/15/09	BB-			2,062,500


		Diversified Telecommunication Services – 0.1%

	2,000	Intelsat Subsidiary Holding Company Limited		8.500	%			1/15/13		B+		2,035,000
	750	Syniverse Technologies Inc., Series B		7.750	%			8/15/13		B1		725,625

	2,750	Total Diversified Telecommunication Services										2,760,625


		Electric Utilities – 0.2%

	2,000	Midwest Generation LLC		8.750	%			5/01/34	Ba2			2,145,000
	500	Mirant North America LLC		7.375	%			12/31/13		B2		503,125
	1,000	Sierra Pacific Resources, Series 2006		6.750	%			8/15/17		B1		1,005,422

	3,500	Total Electric Utilities										3,653,547


		Energy Equipment & Services – 0.2%

	1,800	Hanover Compressor Company		7.500	%			4/15/13		B		1,809,000
	2,500	Pride International Inc.		7.375	%			7/15/14	Ba2			2,587,500

	4,300	Total Energy Equipment & Services										4,396,500


		Food & Staples Retailing – 0.1%

	3,000	Stater Brothers Holdings Inc.		8.125	%			6/15/12		B+		3,030,000


		Food Products – 0.4%

	4,610	Del Monte Corporation		8.625	%			12/15/12		B		4,857,788
	1,096	Dole Foods Company		8.625	%			5/01/09		B		1,076,820
	2,700	Dole Foods Company		7.875	%			7/15/13		B		2,538,000

	8,406	Total Food Products										8,472,608


		Health Care Equipment & Supplies – 0.0%

	700	Select Medical Corporation		7.625	%			2/01/15		B2		593,250


		Health Care Providers & Services – 0.2%

	3,000	US Oncology Inc.		10.750	%			8/15/14		B-		3,300,000


		Hotels, Restaurants & Leisure – 1.7%

	5,190	Aztar Corporation		9.000	%			8/15/11	Ba3			5,443,013
	2,345	Boyd Gaming Corporation		8.750	%			4/15/12	Ba3			2,473,975
	4,075	Boyd Gaming Corporation		7.750	%			12/15/12	Ba3			4,202,344
	1,500	Herbst Gaming Inc.		7.000	%			11/15/14		B-		1,462,500
	4,100	Intrawest Corporation		7.500	%			10/15/13		B+		4,422,875
	800	Jacob’s Entertainment Inc., 144A		9.750	%			6/15/14		B-		796,000
	2,000	Landry’s Restaurants Inc., Series B		7.500	%			12/15/14		B1		1,925,000
	2,000	MGM Mirage, Inc.		6.750	%			8/01/07	BB			2,020,000
	1,000	Park Place Entertainment		9.375	%			2/15/07	Ba1			1,012,500
	1,000	Park Place Entertainment		7.875	%			3/15/10	Ba1			1,045,000
	2,000	Pinnacle Entertainment Inc.		8.250	%			3/15/12		B-		2,035,000
	3,000	Pinnacle Entertainment Inc.		8.750	%			10/01/13		B-		3,198,750
	4,000	Universal City Development Partners		11.750	%			4/01/10		B2		4,330,000

	33,010	Total Hotels, Restaurants & Leisure										34,366,957


		Household Durables – 0.5%

	4,500	K. Hovnanian Enterprises Inc., Senior Subordinated Notes		8.875	%			4/01/12	Ba2			4,432,500
	5,000	KB Home		8.625	%			12/15/08	Ba2			5,149,350

	9,500	Total Household Durables										9,581,850


		Independent Power Producers & Energy Traders – 0.1%

	600	NRG Energy Inc.		7.250	%			2/01/14		B1		597,000
	600	NRG Energy Inc.		7.375	%			2/01/16		B1		597,750

	1,200	Total Independent Power Producers & Energy Traders										1,194,750


		IT Services – 0.4%

	1,950	Global Cash Access LLC		8.750	%			3/15/12		B-		2,057,250
	4,750	Sungard Data Systems Inc.		9.125	%			8/15/13		B-		4,940,000

	6,700	Total IT Services										6,997,250


		Machinery – 0.3%

	3,000	Greenbrier Companies, Inc.		8.375	%			5/15/15		B+		3,060,000
	3,000	Terex Corporation, Senior Subordinated Notes		9.250	%			7/15/11		B+		3,176,250

	6,000	Total Machinery										6,236,250


		Media – 3.3%

	6,900	Allbritton Communications Company, Series B		7.750	%			12/15/12		B1		6,986,250
	2,000	AMC Entertainment Inc.		8.000	%			3/01/14		B3		1,890,000
	4,200	American Media Operations Inc., Series B		10.250	%			5/01/09	Caa2			3,927,000
	1,345	American Media Operations Inc.		8.875	%			1/15/11	Caa2			1,186,963
	5,000	Cablevision Systems Corporation, Series B		8.125	%			8/15/09		B+		5,206,250
	3,000	Cablevision Systems Corporation		7.250	%			7/15/08		B+		3,045,000
	2,000	Cablevision Systems Corporation		8.125	%			7/15/09		B+		2,080,000
	2,000	Charter Communications Operating LLC, 144A		8.000	%			4/30/12		B-		2,025,000
	6,000	Cinemark USA Inc.		9.000	%			2/01/13		B2		6,255,000
	1,000	Dex Media West LLC		8.500	%			8/15/10		B1		1,037,500
	2,198	Dex Media West LLC		9.875	%			8/15/13		B		2,384,830
	4,000	Medianews Group Inc.		6.375	%			4/01/14		B		3,550,000
	1,950	Panamsat Corporation		9.000	%			8/15/14		B		2,023,125
	7,000	Primedia Inc., Senior Notes		8.875	%			5/15/11		B		6,877,500
	2,000	R. H. Donnelley Finance Corp 1		10.875	%			12/15/12		B		2,210,000
	2,000	Sun Media Corporation		7.625	%			2/15/13	Ba2			2,030,000
	6,200	Vertis Inc.		9.750	%			4/01/09		B1		6,285,250
	5,500	Young Broadcasting Inc., Senior Subordinated Note		10.000	%			3/01/11	Caa1			5,163,125
	2,000	Young Broadcasting Inc.		8.750	%			1/15/14	Caa1			1,710,000

	66,293	Total Media										65,872,793


		Metals & Mining – 0.3%

	3,000	Chaparral Steel Company		10.000	%			7/15/13		B		3,360,000
	1,682	United States Steel Corporation		9.750	%			5/15/10	Ba1			1,803,945

	4,682	Total Metals & Mining										5,163,945


		Multi-Utilities – 0.3%

	3,600	Bon-Ton Department Stores Inc.		10.250	%			3/15/14		B-		3,519,000
	2,400	Dynegy Holdings Inc., 144A		8.375	%			5/01/16		B2		2,454,000
	500	Northwestern Corporation		5.875	%			11/01/14	BBB-			494,352

	6,500	Total Multi-Utilities										6,467,352


		Oil, Gas & Consumable Fuels – 0.7%

	600	Chaparral Energy Inc.		8.500	%			12/01/15		B3		598,500
	4,345	Chesapeake Energy Corporation		7.750	%			1/15/15	BB			4,453,625
	300	Copano Energy LLC		8.125	%			3/01/16		B		305,250
	2,000	Hilcorp Energy I LP/Hilcorp Finance Company, Series 144A		7.750	%			11/01/15		B		1,945,000
	2,000	Premcor Refining Group Inc.		7.500	%			6/15/15	BBB-			2,091,826
	3,000	SemGroup LP, 144A		8.750	%			11/15/15		B1		3,041,250
	1,500	Whiting Petroleum Corporation		7.000	%			2/01/14		B1		1,470,000

	13,745	Total Oil, Gas & Consumable Fuels										13,905,451


		Paper & Forest Products – 0.4%

	2,000	Georgia Pacific Corporation, Debentures		7.700	%			6/15/15		B		2,000,000
	5,000	Georgia Pacific Corporation, Notes		8.125	%			5/15/11		B		5,150,000

	7,000	Total Paper & Forest Products										7,150,000


		Personal Products – 0.1%

	1,600	Prestige Brands Inc.		9.250	%			4/15/12		B-		1,616,000


		Pharmaceuticals – 0.3%

	4,675	Wyeth, Convertible Bond		5.109	%			1/15/24		A		5,116,320


		Real Estate – 0.1%

	900	Saxon Capital Inc., 144A		12.000	%			5/01/14		B		1,252,463
	1,000	Trustreet Properties, Inc.		7.500	%			4/01/15		B+		997,500
	500	Ventas Realty LP, Series WI		7.125	%			6/01/15	BB+			516,875

	2,400	Total Real Estate										2,766,838


		Semiconductors & Equipment – 0.1%

	2,400	Avago Technologies Finance Pte. Ltd., Floating Rate Note, 5.500% plus three-month LIBOR, 144A		10.125	%			12/01/13		B		2,556,000


		Specialty Retail – 0.8%

	6,000	Asbury Automotive Group Inc.		9.000	%			6/15/12		B		6,172,500
	1,000	Quiksilver Inc.		6.875	%			4/15/15	BB-			952,500
	8,000	Warnaco Inc., Senior Notes		8.875	%			6/15/13		B+		8,320,000

	15,000	Total Specialty Retail										15,445,000


		Textiles, Apparel & Luxury Goods – 0.2%

	4,000	Jostens IH Corporation		7.625	%			10/01/12		B2		4,040,000


		Trading Companies & Distributors – 0.1%

	2,000	United Rentals North America Inc.		6.500	%			2/15/12		B+		1,940,000

$	250,961	Total Corporate Bonds (cost $258,991,426)										255,832,911


Principal
Amount (000)/
Shares		Description (1)	Coupon			Maturity		Ratings (3)		Value


		Capital Preferred Securities – 32.5% (21.8% of Total Investments)

		Capital Markets – 5.5%

	6,273	BT Capital Trust, Series B1		7.900	%		1/15/27		A2	$	6,519,623
	15,000	BT Institutional Capital Trust A, 144A		8.090	%		12/01/26		A2		15,656,565
	2,000	BT Institutional Capital Trust B, 144A		7.750	%		12/01/26		A2		2,082,958
	1,250	C.A. Preferred Fund Trust II		7.000	%		10/30/49		A1		1,267,896
	32,750	C.A. Preferred Funding Trust		7.000	%		1/30/49		A1		33,134,190
	3,000	Compass Trust I, Series A		8.230	%		1/15/27		A3		3,140,079
	2,000	First Hawaiian Capital Trust I, Series B		8.343	%		7/01/27		A-		2,111,550
	3,500	First Union Capital Trust II, Series A		7.950	%		11/15/29		A1		4,270,931
	15,500	Mellon Capital Trust I, Series A		7.720	%		12/01/26		A2		16,141,467
	2,200	MUFG Capital Finance 2		4.850	%		7/25/56	BBB			2,742,897
	9,000	State Street Institutional Capital Trust, 144A		8.035	%		3/15/27		A1		9,439,479
	12,419	Washington Mutual Capital Trust I		8.375	%		6/01/27	Baa1			13,097,885

		Total Capital Markets									109,605,520


		Commercial Banks – 18.0%

	2,000	AB Svensk Exportkredit, 144A		6.375	%		10/27/49	AA-			1,990,276
	8,000	Abbey National Capital Trust I		8.963	%		6/30/50		A		10,603,408
	43,100	AgFirst Farm Credit Bank		7.300	%		12/15/53		N/R		44,034,537
	12,120	Bank One Capital III		8.750	%		9/01/30		A1		15,906,967
	2,600	BankAmerica Institutional Capital Trust, Series B, 144A		7.700	%		12/31/26	Aa3			2,706,018
	1,900	BankBoston Capital Trust I, Series B		8.250	%		12/15/26	Aa3			1,985,422
	1,000	BanPonce Trust I, Series A		8.327	%		2/01/27	Baa1			1,046,836
	4,000	Barclays Bank PLC, 144A		8.550	%		6/15/49	Aa3			4,500,348
	700	Barclays Bank PLC		6.278	%		12/15/55	Aa3			668,500
	15,200	BOI Capital Funding 3, 144A		6.107	%		8/04/56		A2		14,860,295
	2,200	DBS Capital Funding Corporation, 144A		7.657	%		3/15/49		A1		2,386,729
	4,315	First Chicago NBD Institutional Capital Trust, Series B, 144A		7.750	%		12/01/26		A1		4,490,543
	5,000	First Chicago NBD Institutional Capital, 144A		7.950	%		12/01/26		A1		5,205,220
	5,750	First Empire Capital Trust I		8.234	%		2/01/27	Baa1			6,021,642
	11,000	First Empire Capital Trust II		8.277	%		6/01/27	Baa1			11,597,652
	4,250	First Midwest Bancorp Inc.		6.950	%		12/01/33	Baa2			4,508,290
	29,350	HBOS Capital Funding LP, Notes		6.850	%		3/23/49		A1		29,436,641
	6,000	HBOS PLC, Series 144A		6.413	%		9/29/49		A1		5,809,530
	12,838	HSBC Capital Funding LP, 144A		9.547	%		12/31/49		A1		14,582,440
	14,000	HSBC Capital Funding LP, Debt		10.176	%		6/30/50		A1		20,632,752
	19,605	KBC Bank Fund Trust III, 144A		9.860	%		5/02/50		A2		21,939,681
	4,000	KeyCorp Capital III		7.750	%		7/15/29		A3		4,657,740
	15,000	KeyCorp Institutional Capital Trust A		7.826	%		12/01/26		A3		15,629,565
	17,000	Lloyds TSB Bank PLC, Subordinated Note		6.900	%		11/22/49	Aa2			17,088,706
	1,000	Nordbanken AB, 144A		8.950	%		11/29/49		A		1,096,468
	10,000	North Fork Capital Trust II		8.000	%		12/15/27		A3		10,619,090
	2,000	Popular North American Capital Trust I		6.564	%		9/15/34	Baa1			1,950,710
	14,750	RBS Capital Trust B		6.800	%		12/31/49		A1		14,810,209
	2,000	Reliance Capital Trust I, Series B		8.170	%		5/01/28		N/R		2,142,936
	1,202	Republic New York Capital II, Capital Securities		7.530	%		12/04/26		A1		1,249,938
	6,200	Royal Bank of Scotland Group PLC		9.118	%		3/31/49		A1		6,925,350
	4,472	St. George Funding Company LLC, 144A		8.485	%		12/31/47		A3		4,717,517
	2,250	Swedbank ForeningsSparbanken AB, 144A		9.000	%		9/17/50		A2		2,492,757
	13,330	Unicredito Italiano Capital Trust, 144A		9.200	%		4/05/51		A-		15,068,299
	3,800	Union Planters Capital Trust A		8.200	%		12/15/26		A2		3,960,976
	21,300	Washington Mutual Preferred Funding Cayman, Series A-1, 144A		7.250	%		3/15/49	BBB			21,369,949
	7,200	Washington Mutual Preferred Funding Delaware, Series A-1, 144A		6.534	%		3/15/49	BBB			7,098,444
	2,000	Zions Institutional Capital Trust, Series A		8.536	%		12/15/26	Baa1			2,093,588

		Total Commercial Banks									357,885,969


		Consumer Finance – 0.1%

	1,500	American Express Company		6.800	%		9/01/66		A		1,586,484


		Diversified Financial Services – 2.9%

	6,200	BNP Paribas Capital Trust		7.200	%		12/31/49		A+		6,247,393
	1,000	Citigroup Capital III		7.625	%		12/01/36	Aa2			1,210,488
	2,500	Fulton Capital Trust I		6.290	%		2/01/36		A3		2,412,000
	3,000	JPM Capital Trust II		7.950	%		2/01/27		A1		3,130,209
	18,600	JPMorgan Chase Capital Trust XVIII		6.950	%		8/17/36		A2		19,820,830
	23,600	Old Mutual Capital Funding, Notes		8.000	%		6/22/53	Baa2			24,643,663

		Total Diversified Financial Services									57,464,583


		Diversified Telecommunication Services – 1.1%

	19,080	Centaur Funding Corporation, Series B, 144A		9.080	%		4/21/20	BBB			22,144,725


		Household Durables – 0.1%

	2,600	Stanley Works Capital Trust I		5.902	%		12/01/45	Baa1			2,444,424


		Insurance – 3.9%

	10,000	American General Capital II		8.500	%		7/01/30	Aa3			12,895,950
	4,980	American General Institutional Capital, 144A		8.125	%		3/15/46	Aa3			6,261,394
	1,000	Great West Life and Annuity Insurance Company		7.153	%		5/16/46		A-		1,040,399
	14,250	Mangrove Bay, Class 3, 144A		6.102	%		7/15/33	BBB+			13,811,798
	5,000	Oil Insurance Limited, 144A		7.550	%		12/30/49	Baa1			5,127,065
	3,750	Prudential PLC		6.500	%		6/29/49		A		3,660,094
	13,500	Sun Life Canada Capital Trust, Capital Securities, 144A		8.526	%		5/06/47	AA-			14,266,233
	18,859	Zurich Capital Trust I, 144A		8.376	%		6/01/37		A-		19,848,683

		Total Insurance									76,911,616


		Oil, Gas & Consumable Fuels – 0.6%

	12,355	KN Capital Trust III		7.630	%		4/15/28	Baa3			11,599,418


		Real Estate – 0.0%

	3,000	PS Business Parks Inc., Series M		7.200	%		3/30/55	BBB-			76,200


		Thrifts & Mortgage Finance – 0.3%

	2,000	Caisse Nationale Des Caisses d’Epargne et de Prevoyance		6.750	%		1/27/49		A+		1,985,078
	3,365	Great Western Financial Trust II, Series A		8.206	%		2/01/27	Baa1			3,527,109

		Total Thrifts & Mortgage Finance									5,512,187

		Total Capital Preferred Securities (cost $667,487,362)									645,231,126


Shares		Description (1)								Value


		Investment Companies – 1.2% (0.8% of Total Investments)

	275,139	Flaherty and Crumrine/Claymore Preferred Securities Income Fund Inc.								$	5,687,123
	144,634	Flaherty and Crumrine/Claymore Total Return Fund Inc.									2,923,053
	307,548	John Hancock Preferred Income Fund III									6,639,961
	99,306	Preferred and Corporate Strategies Fund Inc.									2,030,808
	281,648	Preferred Income Strategies Fund Inc.									5,632,938

		Total Investment Companies (cost $21,700,416)									22,913,883


Principal
Amount (000)		Description (1)	Coupon			Maturity				Value


		Short-Term Investments – 4.2% (2.8% of Total Investments)

$	83,382	Repurchase Agreement with State Street Bank, dated 9/29/06, repurchase price $83,415,605, collateralized by: $60,410,000 U.S. Treasury Bonds, 7.250%, due 8/15/22, value $76,944,761 $6,135,000 U.S. Treasury Bonds, 7.875%, due 2/15/21, value $8,105,869,		4.800	%		10/02/06			$	83,382,252


		Total Short-Term Investments (cost $83,382,252)									83,382,252

		Total Investments (cost $2,934,013,822) – 149.1%									2,959,525,658

		Other Assets Less Liabilities – (0.5)%									(9,806,262	)

		Preferred Shares, at Liquidation Value – (48.6)%									(965,000,000	)

		Net Assets Applicable to Common Shares – 100%								$	1,984,719,396


		Interest Rate Swaps outstanding at September 30, 2006:

Fixed Rate

Paid

Fixed Rate

Floating Rate

Unrealized

Notional

by the Fund

Payment

Received

Payment

Termination

Appreciation

Counterparty

Amount

(annualized)

Frequency

by the Fund (8)

Frequency

Date

(Depreciation)

JPMorgan Chase

97,000,000

3.360

Monthly

5.330

Monthly

1/23/09

3,594,555

Morgan Stanley

97,000,000

3.048

Monthly

5.330

Monthly

1/23/08

2,592,167

Royal Bank of Canada

97,000,000

2.679

Monthly

5.330

Monthly

1/23/07

850,488

7,037,210


		(1)	All percentages shown in the Portfolio of Investments are based on net assets applicable to Common shares unless otherwise noted.

		(2)	Non-income producing.

		(3)	Ratings: Using the higher of Standard & Poor’s or Moody’s rating. Ratings below BBB by Standard & Poor’s Group or Baa by Moody’s Investor Service, Inc. are considered to be below investment grade.

		(4)	Senior Loans in the Fund’s portfolio generally are subject to mandatory and/or optional prepayment. Because of these mandatory prepayment conditions and because there may be significant economic incentives for a Borrower to prepay, prepayments of Senior Loans in the Fund’s portfolio may occur. As a result, the actual remaining maturity of Senior Loans held in the Fund’s portfolio may be substantially less than the stated maturities shown.

		(5)	Senior Loans in which the Fund invests generally pay interest at rates which are periodically adjusted by reference to a base short-term, floating lending rate plus an assigned fixed rate. These floating lending rates are generally (i) the lending rate referenced by the London Inter-Bank Offered Rate (“LIBOR”), or (ii) the prime rate offered by one or more major United States banks. Senior Loans may be considered restricted in that the Fund ordinarily is contractually obligated to receive approval from the Agent Bank and/or Borrower prior to the disposition of a Senior Loan.

		(6)	Investment is eligible for the Dividends Received Deduction.

		(7)	Non-income producing security, in the case of a bond, generally denotes that the issuer has defaulted on the payment of principal or interest or has filed for bankruptcy.

		(8)	Based on USD-LIBOR (United States Dollar-London Interbank Offered Rate).

	N/R		Not rated.

	WI/DD		Purchased on a when-issued or delayed delivery basis.

	144A		Investment is exempt from registration under Rule 144A of the Securities Act of 1933, as amended. These investments 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.

TBD			Senior Loan purchased on a when-issued or delayed-delivery basis. Certain details associated with this purchase are not known prior to the settlement date of the transaction. In addition, Senior Loans typically trade without accrued interest and therefore a weighted average coupon rate is not available prior to settlement. At settlement, if still unknown, the borrower or counterparty will provide the Fund with the final weighted average coupon rate and maturity date.

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 the recognition of income and timing differences in recognizing certain gains and losses on investment transactions.

At September 30, 2006, the cost of investments was $2,963,361,536.

Gross unrealized appreciation and gross unrealized depreciation of investments at September 30, 2006, were as follows:




Gross unrealized:
Appreciation	$	84,516,636
Depreciation		(88,352,514	)



Net unrealized appreciation (depreciation) of investments	$	(3,835,878	)

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: 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 November 28, 2006

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 November 28, 2006



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

Date November 28, 2006


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

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents