UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-21293
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Nuveen Preferred and Convertible Income Fund
------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
Nuveen Investments
333 West Wacker Drive
Chicago, IL 60606
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(Address of principal executive offices) (Zip code)
Jessica R. Droeger
Nuveen Investments
333 West Wacker Drive
Chicago, IL 60606
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(Name and address of agent for service)
Registrant's telephone number, including area code: (312) 917-7700
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Date of fiscal year end: December 31
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Date of reporting period: December 31, 2004
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Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
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 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. ss. 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
Annual Report December 31, 2004
Nuveen Investments
Closed-End
Exchange-Traded
Funds
NUVEEN PREFERRED
AND CONVERTIBLE
INCOME FUND
JPC
Photo of: Man and woman sitting on porch.
Photo of: 2 children sitting in the grass.
NUVEEN PREFERRED
AND CONVERTIBLE
INCOME FUND 2
JQC
HIGH CURRENT INCOME
FROM A PORTFOLIO OF
PREFERRED AND
CONVERTIBLE SECURITIES
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Photo of: Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
Chairman's
Letter to Shareholders
I am pleased to report that for the year ended December 31, 2004, your
Fund continued to provide you with attractive monthly income from a
diversified portfolio of quality preferred securities, convertible
securities and high-yield debt. The date of this report represents a
change that aligns your Fund's fiscal year with the calendar year. We
believe this change in your Fund's shareholder reporting cycle will lead
to greater efficiencies and other benefits in the management and operation
of your Fund.
"We continue to believe that your Fund provides a valuable source of regular
monthly income, and that it also may provide an opportunity to reduce the
overall risk of your entire investment portfolio."
As you'll see as you review this report, there has been no change in the
objectives or management of your Fund. We continue to believe that your
Fund provides a valuable source of regular monthly income, and that it
also may provide an opportunity to reduce the overall risk of your entire
investment portfolio. This is because the price of your Fund's shares may
move differently than the prices of other investments that you may own.
Your financial advisor can explain the advantages of portfolio
diversification in more detail. I urge you to contact him or her soon for
more information on this important investment strategy.
I also urge you to consider receiving future Fund reports and other Fund
information faster by using e-mail and the Internet. Sign up is quick and
easy - see the inside front cover of this report for instructions.
For more than 100 years, Nuveen has specialized in offering quality
investments such as your Fund to those seeking to accumulate and preserve
wealth. Our mission continues to be to assist you and your financial
advisor by offering the investment solutions and services that can help
you secure your long-term financial goals. We thank you for choosing us as
a partner as you work toward that objective.
Sincerely,
/s/ Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
February 15, 2005
Nuveen Preferred and Convertible Income Funds (JPC, JQC)
Portfolio Managers'
Perspective
These Funds are subadvised by a team of specialists from Spectrum Asset
Management, Inc., Froley, Revy Investment Co., Inc., and Symphony Asset
Management, LLC.
Spectrum, an affiliate of Principal Capital(SM), manages the preferred
securities portion of each Fund's portfolio. Mark Lieb, Bernie Sussman and Phil
Jacoby, who have more than 50 years of combined experience in the preferred
securities markets, lead the team.
Froley, Revy, one of the oldest firms specializing in convertible securities,
manages that portion of each Fund's portfolio. Their investment team is led by
Andrea Revy O'Connell and Michael Revy, who each have more than 10 years'
experience in convertible securities investing.
The Symphony team managing the high yield securities and other debt instruments
in both Funds is led by Gunther Stein and Lenny Mason. Gunther and Lenny have
more than 25 years of combined investment management experience, much of it in
evaluating and purchasing senior corporate loans and other high-yield debt.
Here representatives from Spectrum, Froley, Revy and Symphony talk about general
economic conditions, their management strategies and the performance of both
Funds for the 12-month period ended December 31, 2004.
What were the conditions in the fixed-income markets generally, and the
preferred securities, convertible securities and high yield debt markets in
particular, during the 12-month period December 31, 2004?
Generally, the U.S. economy presented a slowly improving picture in 2004. The
Gross Domestic Product (GDP) grew at a preliminary estimate of 4.4% over the
course of the full year. Inflation remained largely in check, as the Consumer
Price Index rose 3.3% due primarily to increased energy costs. Corporate profits
grew by an average of about 20%, and there was an increase of approximately 2
million jobs with the unemployment rate dropping to 5.4% at the end of 2004 from
5.7% at the beginning of the year. The fourth quarter stock market rally seemed
to reflect a belief by some that the economic recovery had become more
self-sustaining.
In the fixed-income markets, the Federal Reserve raised the fed funds rate five
times between June 30 and December 14. At the close of the year, this benchmark
rate stood at 2.25%, compared with 1.00% one year earlier. (On February 2, 2005,
after the close of this reporting period, the Federal Reserve raised the fed
funds rate by another 0.25% to 2.50%.) At the same time, rates remained
essentially unchanged at the long end of the yield curve, with the yield on
10-year U.S. Treasuries standing at 4.22% on December 31, 2004, compared with
4.26% at the beginning of the year.
4
Despite this significant flattening of the yield curve, longer duration
investments such as preferred securities continued to enjoy generally wide yield
spreads over money market funds and other short-term instruments. The Merrill
Lynch Preferred Stock Hybrid Securities Index returned 5.51% during 2004, one
reason why individual investors remained aggressive buyers throughout the year
in the $25 par sector of the market. Within the $1000 par capital securities
sector, buying interest also was strong throughout the year as U.S. and European
insurance companies joined other institutional investors who sought to garner
incremental yield. Encouraging this demand was the continued improvement in the
general credit quality of many issuers, especially among the financial-oriented
companies that make up a large proportion of the holdings of these Funds. The
ratio of upgrades to downgrades was more favorable over this one-year period
than at any time since the Funds' inceptions.
The Merrill Lynch All U.S. Convertible Index returned 9.61% in 2004. The strong
performance of the asset class was due in large part to double digit returns
from the underlying equities into which the convertibles potentially convert.
Convertibles that were more balanced or more yield sensitive (sensitive to
interest rates or to the credit quality of a stable issuer) also performed
solidly but did not offer quite as much upside return. In addition, convertible
performance was influenced by interest rate movements, the volatilities and
dividend policies of the underlying equities, and merger and acquisition
activity. Interest rates were a modest negative influence on returns this year
as the yield curve flattened. Equity volatilities also were a drag on
convertible valuations as short-term volatilities contracted sharply to
multi-year lows. Longer-term volatilities, which are more important for
convertible valuations, fell more modestly but still had a negative effect on
performance.
The CSFB High Yield Index returned 11.96% for the year, aided by an impressive
performance during the fourth quarter of 2004. Investor sentiment generally
remained upbeat, sustained by a steady flow of positive macroeconomic data.
Lower-rated bonds tended to outperform the middle and upper ratings tiers due to
the healthier economic environment and some investors' increased tolerance for
risk. As the credit markets improved, default rates continued to drop. The
12-month rolling default rate reached 1.27% at the end of
5
2004, declining from 2.92% as of year end 2003. New issue volume was in-line
with 2003 levels, totaling $131.0 billion for the year.
What was your overall management strategy for the 12-month period ended December
31, 2004?
In the preferred securities portion of both Funds' portfolios, we continued to
maintain a balance between the two major preferred sectors - the $25 par and the
$1000 par capital securities. While both sectors presented attractive investment
opportunities at particular points in time, by the end of 2004 the relative
weighting between the two in each Fund was relatively unchanged from the
beginning of the period. Over the course of 2004, our investment focus centered
on buying high quality, higher coupon preferred issues that usually traded on
the basis of their yield-to-call rather than their yield-to-maturity.
Within the $25 par sector, this meant seeking securities with coupons of 7.00%
or more and call dates two or three years in the future. In the $1000 par
capital securities sector, much of our investment focus was on "Yankee step-up"
securities. These are $US-denominated preferreds issued primarily by
highly-rated European financial institutions. They pay a fixed rate for a period
of time and then move to a wide spread above LIBOR (London Interbank Offered
Rate) if the issuer does not call the security. This step-up feature makes the
exercise of the call option more likely and creates a shorter duration, less
interest rate sensitive investment vehicle.
For the convertible securities portion of both portfolios, our overall strategy
was to seek yield opportunities while investing in what we thought were
undervalued or fairly-valued securities from stable issuers. In practice, this
meant trying to find securities having market prices or characteristics that, in
our opinion, did not reflect their true value. For instance, we did not find
many utility company convertibles particularly attractive during this period.
Since the high correlation of many utilities' equity performance with interest
rates movements, utility-issued convertible bonds often will move in the same
direction as interest rates both from a fixed-income perspective and from an
equity perspective. To us, this reduces their attractiveness as convertibles. At
the same time, we did invest in utility issues that were mandatory convertible
preferreds. These securities tended to
6
offer much higher yields than more traditional utility convertibles with only
modestly more risk.
For the high yield debt portion of both portfolios, we continued to employ a
value-oriented strategy, focusing on relatively higher-quality credits with
strong fundamental business models, diversified revenue streams, and relatively
low earnings volatility. Investing our assets across a variety of industry
sectors and rating tiers also remained a priority. We continued to evaluate the
entire group of holdings, eliminating positions that we believed had escalating
credit issues, limited upside potential or significant downside risk.
How did the Funds perform over this period?
Each of the Funds performed well during the 12 months ended December 31, 2004.
Their performance, as well as the performance of several widely followed market
indexes, is shown in the nearby chart.
Total Return on Net Asset Value
For 12 months ended December 31, 2004
JPC 9.98%
--------------------------------------------------------------------------------
JQC 10.31%
--------------------------------------------------------------------------------
Comparative Benchmark(1) 7.77%
--------------------------------------------------------------------------------
Past performance does not guarantee future results. Returns do not reflect the
deduction of taxes that a shareholder may have to pay on Fund distributions or
upon the sale of Fund shares.
For more information, please see the individual Performance Overview pages in
this report.
For the 12 months ended December 31, 2004, both Funds outperformed their
comparative benchmarks. One of the primary factors benefiting the performance of
these Funds relative to that of the benchmark was the Funds' use of financial
leverage. While leveraging can add volatility to a Fund's NAV and share price,
especially during periods of rising interest rates, this strategy can also
provide opportunities for additional income and total returns for common
shareholders when short-term interest rates remain relatively low and long-term
rates fall or remain relatively constant, as they did during this reporting
period.
(1) The Comparative Benchmark performance is a blend consisting: 1) 60% of the
return of the Merrill Lynch Preferred Stock Hybrid Securities Index, an
unmanaged index of investment-grade, exchange-traded preferred stocks with
outstanding market values of at least $30 million and at least one year to
maturity; 2) 30% of the return of the Merrill Lynch All U.S. Convertibles
Index, which consists of approximately 575 securities with par value
greater than $50 million that were issued by U.S. companies or non-U.S.
based issuers that have a significant business presence in the U.S.; and
3) 10% of the return of the CSFB High Yield Index, which includes
approximately $375 billion of $US-denominated high yield debt with a
minimum of $75 million in par value and at least one rating below
investment-grade.
7
Within the preferred securities portions of both Funds' portfolios, individual
security selection also played a prominent role in each Fund's strong relative
performance for the year. Highly-rated preferreds issued by financial
institutions, especially banks, were the mainstays. Over the course of the year,
these securities often performed better than lower-rated securities. This was
especially true for some of the securities issued by non-US companies that we
were able to purchase at attractive yields relative to similarly rated
preferreds from U.S. issuers.
Seasoned "repackaged preferreds" also provided some good returns for the Funds.
These securities are created when an investment bank buys a specific tranche of
bonds or $1000 par preferred securities of a particular issuer, places them in a
trust, and then issues $25 par preferreds backed by this trust. The repackaged
preferreds are often not widely followed in the secondary market, which can
produce some very attractive pricing and yields. In addition to their attractive
return potential, they also provided the Funds with exposure to some issuers who
have little or no other preferreds outstanding, such as IBM, BellSouth and
Safeco. This helped improve the overall diversification of each portfolio.
Within the $1000 par capital securities sector, our increased focus on
$US-denominated preferreds from foreign issuers and on preferreds that trade in
the "Euro listed" sector provided good returns to the portfolios as these two
areas were among the best performing sectors in the overall corporate market.
Other actions that positively impacted Fund performance over this period
included our participation in a tender offer for Safeco preferreds,
opportunistic buying of some insurance company securities that we believed was
unfairly discounted because of the ongoing investigations of the industry, and
the year end purchase of a very attractively priced Fannie Mae floating rate
preferred stock that appreciated 12% in two days.
While it was generally a very good year from a credit standpoint, there were a
few blemishes in the preferred securities sleeves that hurt overall Fund
performance. While we limited the Funds' exposure to the auto sector (and
actually reduced it as the year went on), the prices on Ford and GM preferreds
and bonds tended to weaken over the period, given concerns over eroding market
share and unfunded pension and health care
8
obligations. Another position that negatively impacted performance was
Converium. The Swiss reinsurance company surprised the markets with a large
addition to reserves due to losses in their U.S. operations, and the company was
subsequently downgraded to below investment grade. While we liquidated the
entire position, the prices we were able to obtain were well below our costs.
In the convertible securities portions of both Funds, the Consumer Discretionary
and Telecommunications sectors provided the greatest positive contribution to
performance. Both of these areas performed well generally, and the Funds had
higher weightings in them over this period than the Merrill Lynch index. In
addition, the specific securities we held performed better than their sectors as
a whole. Specific standouts from the Consumer Discretionary sector were Carnival
Corporation and Royal Caribbean Cruises Ltd. Hotels as a group also performed
very well. In the Telecommunications sector, the issues exchangeable into PCS
shares were strong contributors to performance. NII Holdings (formerly Nextel
International Holdings) and Alltel also performed well.
Other convertible securities which contributed positively to performance of JQC
were Comcast into PCS, Lion's Gate Films, and Carnival Corp. In JPC, solid
performers included Genenetech, Comcast into PCS, and Lion's Gate Films.
At the same time, both Funds were relatively underweighted in energy
convertibles at the beginning of the year relative to the Merrill index. As a
result, we missed a good portion of the upward stock movements that resulted
from the surge in oil prices seen throughout the year. While we increased our
energy weightings as the year went along, the lack of earlier participation cost
the Funds some return potential.
As noted earlier, we found many Utility sector convertible bonds to be
relatively unattractive. Nevertheless, this sector performed well in 2004. While
the utility securities we did hold performed well, they did not do as well as
the sector as a whole.
Individual convertible securities that hurt performance over this period were
General Motors, Nortel and Nextel in JQC, and Allied Waste, Nortel and Delta
Airlines in JPC.
9
Among each Fund's high yield holdings, strong performance came from the Consumer
Products, Housing, and Food/Tobacco sectors. These sectors all outperformed the
CSFB Index, posting 12-month returns of 14.73%, 12.80%, and 12.41%,
respectively.
Over this twelve-month period, distressed and CCC-rated debt significantly
outperformed all other rating tiers. Consequently, industries with many low
credit-quality companies, such as the Metals/Minerals, Chemicals, and Utilities
sectors, were among the top performing sectors in 2004. The JPC and JQC
portfolios had minimal exposure to these volatile industries and negligible
exposure to distressed and CCC-rated debt. As a result, the Fund's did not
benefit as much from this performance as the CSFB index.
What about dividends and share price?
Both of these Funds use financial leverage in an effort to enhance their
dividend-paying capabilities. While this strategy adds volatility to a Fund's
net asset value and share price, it generally enhances the amount of income the
Fund has to distribute to its common shareholders. The extent of this benefit is
tied in part to the short-term rates these Funds pay their FundPreferred(TM)
shareholders. Even though short-term rates rose through the second half of this
12-month period, the Funds continued to benefit from their leveraging strategy.
This is one reason why both Funds were able to maintain stable monthly dividends
through the course of 2004.
Both Funds seek to pay stable dividends at rates that reflect each Fund's past
results and projected future performance. During certain periods, each Fund may
pay dividends at a rate that may be more or less than the amount of net
investment income actually earned by the Fund during the period. If a Fund has
cumulatively earned more than it has paid in dividends, it holds the excess in
reserve as undistributed net investment income (UNII) as part of the Fund's NAV.
Conversely, if a Fund has cumulatively paid dividends in excess of its earnings,
the excess constitutes negative UNII that is likewise reflected in the Fund's
NAV. Each Fund will, over time, pay all of its net investment income as
dividends to shareholders. As of December 31, 2004, both Funds had negative UNII
balances for financial statement purposes and positive UNII balances for tax
purposes.
10
As of December 31, 2004, JPC was trading at a -6.46% discount to its net asset
value, compared with a -4.82% average discount for the entire 12-month period.
JQC was trading at an -8.63% discount, compared with an average discount of
-5.41% for the full year.
11
Nuveen Preferred and Convertible Income Fund
JPC
Performance
Overview As of December 31, 2004
Pie Chart:
PORTFOLIO ALLOCATION1
(as a % of total investments)
$25 Par (or similar) Securities 32.6%
Capital Preferred Securities 22.1%
Convertible Bonds 19.3%
Convertible Preferred Securities 12.8%
Corporate Bonds 12.1%
Common Stocks 0.6%
Repurchase Agreements 0.5%
Bar Chart:
2004 MONTHLY DIVIDENDS PER SHARE2
Jan 0.1005
Feb 0.1005
Mar 0.1005
Apr 0.1005
May 0.1005
Jun 0.1005
Jul 0.1005
Aug 0.1005
Sep 0.1005
Oct 0.1005
Nov 0.1005
Dec 0.1005
Line Chart:
SHARE PRICE PERFORMANCE
Weekly Closing Price
Past performance is not predictive of future results.
1/1/04 15.52
15.55
15.8
15.77
15.57
15.52
15.56
15.48
15.57
15.4
15.4
15.2
15.15
15.25
15.36
15.28
15.24
15.33
15.35
15.49
15.49
15.47
15.51
15.48
15.55
15.58
15.6
15.56
15.38
15.31
15.3
15.36
15.41
15.37
15.28
15.06
14.92
15.11
15.23
15.33
15.33
15.45
15.48
15.49
15.45
15.59
15.73
15.66
15.63
15.4
15.42
15.37
15.4
15.53
15.54
15.55
15.55
15.48
15.41
15.41
15.47
15.45
15.5
15.65
15.72
15.26
14.89
14.94
15.14
15.03
14.87
14.23
13.85
14.01
14.3
14.47
14.18
13.92
13.94
13.4
13.32
13.58
13.91
14.01
14.08
13.97
13.89
13.8
13.51
12.9
12.32
13.02
13.04
13.01
13.1
13.15
13.34
13.46
13.4
13.39
13.09
13.14
13.13
13.21
13.39
13.39
13.4
13.47
13.42
13.3
13.23
13.25
13.24
13.3
12.95
13.01
13.06
12.97
12.94
12.92
12.88
12.92
12.96
13.11
13.07
13.06
13.3
13.49
13.6
13.66
13.65
13.7
13.69
13.78
13.77
13.68
13.89
13.88
13.9
13.91
13.86
13.91
13.83
13.69
13.62
13.8
13.94
13.95
13.95
14.07
14.19
14.12
14.05
14.01
14
14.15
14.01
14.13
14.21
14.09
14.01
14.03
14.1
14.16
14.2
14.24
14.39
14.47
14.56
14.53
14.56
14.52
14.44
14.54
14.55
14.59
14.59
14.69
14.55
14.36
14.31
14.45
14.41
14.46
14.49
14.53
14.54
14.56
14.65
14.69
14.6
14.57
14.6
14.65
14.7
14.72
14.67
14.75
14.76
14.76
14.62
14.56
14.54
14.54
14.49
14.44
14.39
14.4
14.34
14.38
14.57
14.65
14.73
14.73
14.85
14.91
14.98
14.96
14.54
14.36
14.46
14.51
14.49
14.53
14.61
14.55
14.54
14.56
14.56
14.48
14.46
14.49
14.52
14.37
14.26
14.25
14.16
14.29
14.43
14.48
14.45
14.46
14.47
14.38
14.19
14.07
14.04
13.97
13.86
13.99
14.06
14.02
13.82
13.89
14.07
14.19
12/31/04 14.33
Portfolio Statistics
--------------------------------------------------------------------------------
Share Price $14.33
--------------------------------------------------------------------------------
Common Share
Net Asset Value $15.32
--------------------------------------------------------------------------------
Premium/Discount to NAV -6.46%
--------------------------------------------------------------------------------
Latest Dividend $.1005
--------------------------------------------------------------------------------
Market Yield 8.42%
--------------------------------------------------------------------------------
Net Assets Applicable to
Common Shares ($000) $1,533,722
--------------------------------------------------------------------------------
Top Industries(1)
(as a % of total investments)
--------------------------------------------------------------------------------
Commercial Banks 18.6%
--------------------------------------------------------------------------------
Insurance 10.9%
--------------------------------------------------------------------------------
Capital Markets 7.7%
--------------------------------------------------------------------------------
Diversified Financial Services 7.4%
--------------------------------------------------------------------------------
Real Estate 7.1%
--------------------------------------------------------------------------------
Media 6.4%
--------------------------------------------------------------------------------
Hotels Restaurants & Leisure 4.6%
--------------------------------------------------------------------------------
Automobiles 3.8%
--------------------------------------------------------------------------------
Thrifts & Mortgage Finance 3.7%
--------------------------------------------------------------------------------
Electric Utilities 2.1%
--------------------------------------------------------------------------------
Communications Equipment 2.0%
--------------------------------------------------------------------------------
Oil & Gas 2.0%
--------------------------------------------------------------------------------
Repurchase Agreements 0.5%
--------------------------------------------------------------------------------
Other 23.2%
--------------------------------------------------------------------------------
Top Five Issuers(1)
(excluding repurchase agreements)
(as a % of total investments)
--------------------------------------------------------------------------------
Wachovia Corporation 2.1%
--------------------------------------------------------------------------------
Ford Motor Company 1.8%
--------------------------------------------------------------------------------
General Motors Corporation 1.8%
--------------------------------------------------------------------------------
PartnerRe Limited 1.7%
--------------------------------------------------------------------------------
Citigroup 1.7%
--------------------------------------------------------------------------------
Annualized Total Return
(Inception 3/26/03)
--------------------------------------------------------------------------------
On Share Price On NAV
--------------------------------------------------------------------------------
1-Year 0.94% 9.98%
--------------------------------------------------------------------------------
Since Inception 6.50% 13.17%
--------------------------------------------------------------------------------
(1) Excluding common stocks sold short.
(2) The Fund also paid shareholders capital gains and net ordinary income
distributions in December 2004 of $0.2336 per share.
12
Nuveen Preferred and Convertible Income Fund 2
JQC
Performance
Overview As of December 31, 2004
Pie Chart:
PORTFOLIO ALLOCATION1
(as a % of total investments)
$25 Par (or similar) Securities 31.5%
Capital Preferred Securities 23.9%
Convertible Bonds 19.6%
Convertible Preferred Securities 12.4%
Corporate Bonds 11.7%
Repurchase Agreements 0.5%
Common Stocks 0.4%
Bar Chart:
2004 MONTHLY DIVIDENDS PER SHARE2
Jan 0.0975
Feb 0.0975
Mar 0.0975
Apr 0.0975
May 0.0975
Jun 0.0975
Jul 0.0975
Aug 0.0975
Sep 0.0975
Oct 0.0975
Nov 0.0975
Dec 0.0975
Line Chart:
SHARE PRICE PERFORMANCE
Weekly Closing Price
Past performance is not predictive of future results.
1/1/04 14.68
14.77
14.84
14.83
14.95
14.97
14.99
14.9
14.9
14.88
14.83
14.8
14.7
14.87
14.89
14.81
14.82
14.87
14.85
14.89
14.89
14.92
14.91
14.97
14.97
14.99
14.97
14.96
14.82
14.78
14.83
14.83
14.81
14.75
14.76
14.73
14.57
14.63
14.72
14.89
14.89
14.99
14.93
14.84
14.84
14.92
14.99
15
14.98
14.92
14.99
14.93
14.96
15
14.99
15
15
14.99
15
14.97
15.02
15.06
15.07
15.12
15.17
14.91
14.46
14.65
14.84
14.9
14.69
14.03
13.77
13.9
14.03
14.15
13.75
13.41
13.43
12.99
12.85
12.85
13.22
13.36
13.53
13.49
13.5
13.51
13.14
12.55
12.05
12.5
12.54
12.64
12.82
12.76
12.9
13.06
13
12.97
12.86
12.93
13
13.05
13.11
13.11
13.27
13.09
12.86
13
12.96
12.96
12.9
13.01
12.71
12.61
12.68
12.75
12.69
12.64
12.65
12.65
12.7
12.8
12.73
12.73
12.9
13.06
13.21
13.23
13.27
13.36
13.35
13.44
13.19
13.19
13.26
13.43
13.43
13.42
13.29
13.29
13.3
13.2
13.13
13.31
13.43
13.54
13.54
13.6
13.65
13.68
13.62
13.68
13.63
13.77
13.71
13.7
13.71
13.6
13.53
13.56
13.63
13.73
13.62
13.67
13.75
13.83
13.9
13.94
14.01
14.08
14.02
14.05
14.03
14.11
14.19
14.26
14.18
14.16
14.09
14.08
14.11
14.13
14.13
14.2
14.21
14.17
14.13
14.22
14.18
14.11
14.16
14.24
14.32
14.27
14.26
14.33
14.38
14.35
14.22
14.15
14.18
14.07
14.12
14.1
14
13.93
13.98
14.02
14.11
14.17
14.23
14.23
14.29
14.31
14.45
14.49
14.07
13.82
13.99
14.01
14.03
14.04
14.05
14.05
14.16
14.22
14.09
14.03
14.04
14.04
14.05
13.94
13.83
13.82
13.71
13.81
13.98
14.04
14.03
13.99
13.98
13.84
13.69
13.62
13.57
13.52
13.57
13.77
13.7
13.65
13.56
13.5
13.7
13.81
12/31/04 13.87
Portfolio Statistics
--------------------------------------------------------------------------------
Share Price $13.87
--------------------------------------------------------------------------------
Common Share
Net Asset Value $15.18
--------------------------------------------------------------------------------
Premium/Discount to NAV -8.63%
--------------------------------------------------------------------------------
Latest Dividend $.0975
--------------------------------------------------------------------------------
Market Yield 8.44%
--------------------------------------------------------------------------------
Net Assets Applicable to
Common Shares ($000) $2,140,563
--------------------------------------------------------------------------------
Top Industries(1)
(as a % of total investments)
--------------------------------------------------------------------------------
Commercial Banks 22.5%
--------------------------------------------------------------------------------
Insurance 10.1%
--------------------------------------------------------------------------------
Diversified Financial Services 7.8%
--------------------------------------------------------------------------------
Capital Markets 7.4%
--------------------------------------------------------------------------------
Media 6.7%
--------------------------------------------------------------------------------
Real Estate 6.5%
--------------------------------------------------------------------------------
Hotels Restaurants & Leisure 3.9%
--------------------------------------------------------------------------------
Oil & Gas 2.8%
--------------------------------------------------------------------------------
Automobiles 2.6%
--------------------------------------------------------------------------------
Pharmaceuticals 2.1%
--------------------------------------------------------------------------------
Communications Equipment 1.6%
--------------------------------------------------------------------------------
Specialty Retail 1.6%
--------------------------------------------------------------------------------
Repurchase Agreements 0.5%
--------------------------------------------------------------------------------
Other 23.9%
--------------------------------------------------------------------------------
Top Five Issuers(1)
(excluding repurchase agreements)
(as a % of total investments)
--------------------------------------------------------------------------------
Wachovia Corporation 2.1%
--------------------------------------------------------------------------------
Citigroup 1.7%
--------------------------------------------------------------------------------
HBOS Public Limited Company 1.7%
--------------------------------------------------------------------------------
ING Groep NV 1.5%
--------------------------------------------------------------------------------
HSBC Holdings Public
Limited Company 1.5%
--------------------------------------------------------------------------------
Average Annual Total Return
(Inception 6/25/03)
On Share Price On NAV
--------------------------------------------------------------------------------
1-Year 3.36% 10.31%
--------------------------------------------------------------------------------
Since Inception 2.67% 11.96%
--------------------------------------------------------------------------------
(1) Excluding common stocks sold short.
(2) The Fund also paid shareholders capital gains and net ordinary income
distributions in December 2004 of $0.0197 per share.
13
Shareholder
Meeting Report
The Shareholder Meeting was held in the Embassy Room of the Mandarin Oriental
Hotel, 222 Sansome Street, San Francisco, California on November 17, 2004.
JPC JQC
---------------------------------------------------------------------------------------------------
Approval of the board members was reached as follows:
Common and Common and
FundPreferred FundPreferred FundPreferred FundPreferred
shares voting shares voting shares voting shares voting
together together together together
as a class as a class as a class as a class
===================================================================================================
Robert P. Bremner
For 97,807,886 -- 137,051,727 --
Withhold 566,558 -- 971,623 --
---------------------------------------------------------------------------------------------------
Total 98,374,444 -- 138,023,350 --
===================================================================================================
Lawrence H. Brown
For 97,781,747 -- 137,038,732 --
Withhold 592,697 -- 984,618 --
---------------------------------------------------------------------------------------------------
Total 98,374,444 -- 138,023,350 --
===================================================================================================
Jack B. Evans
For 97,788,502 -- 137,036,565 --
Withhold 585,942 -- 986,785 --
---------------------------------------------------------------------------------------------------
Total 98,374,444 -- 138,023,350 --
===================================================================================================
William C. Hunter
For 97,799,632 -- 137,045,015 --
Withhold 574,812 -- 978,335 --
---------------------------------------------------------------------------------------------------
Total 98,374,444 -- 138,023,350 --
===================================================================================================
William J. Schneider
For -- 20,627 -- 33,574
Withhold -- 50 -- 152
---------------------------------------------------------------------------------------------------
Total -- 20,677 -- 33,726
===================================================================================================
Timothy R. Schwertfeger
For -- 20,627 -- 33,583
Withhold -- 50 -- 143
---------------------------------------------------------------------------------------------------
Total -- 20,677 -- 33,726
===================================================================================================
Judith M. Stockdale
For 97,782,841 -- 137,032,407 --
Withhold 591,603 -- 990,943 --
---------------------------------------------------------------------------------------------------
Total 98,374,444 -- 138,023,350 --
===================================================================================================
14
Report of
Independent Registered
Public Accounting Firm
To the Shareholders and Board of Trustees of
Nuveen Preferred and Convertible Income Fund
Nuveen Preferred and Convertible Income Fund 2
We have audited the accompanying statements of assets and liabilities of Nuveen
Preferred and Convertible Income Fund and Nuveen Preferred and Convertible
Income Fund 2 (the "Funds"), including the portfolios of investments, as of
December 31, 2004, and the related statements of operations and changes in net
assets, and the financial highlights for the periods indicated therein. These
financial statements and financial highlights are the responsibility of the
Funds' management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes consideration of internal control over financial reporting as a basis
for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the Funds'
internal control over financial reporting. Accordingly, we express no such
opinion. An audit also includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements and financial
highlights, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
Our procedures included confirmation of securities owned as of December 31,
2004, by correspondence with the custodian and brokers or by other appropriate
auditing procedures where replies from brokers were not received. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Nuveen
Preferred and Convertible Income Fund and Nuveen Preferred and Convertible
Income Fund 2 at December 31, 2004, the results of their operations, the changes
in their net assets and the financial highlights for the periods indicated
therein, in conformity with U.S. generally accepted accounting principles.
/s/ Ernst & Young LLP
Chicago, Illinois
February 17, 2005
15
Nuveen Preferred and Convertible Income Fund (JPC)
Portfolio of
Investments December 31, 2004
Market
Shares Description(1) Value
--------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - 0.9% (0.6% of Total Investments)
Commercial Services & Supplies - 0.3%
181,397 Cendant Corporation $ 4,241,062
--------------------------------------------------------------------------------------------------------------------------------
Media - 0.3%
240,000 Cablevision Systems Corporation 5,976,000
--------------------------------------------------------------------------------------------------------------------------------
Office Electronics - 0.3%
227,800 Xerox Corporation 3,874,878
--------------------------------------------------------------------------------------------------------------------------------
Total Common Stocks (cost $11,425,280) 14,091,940
--------------------------------------------------------------------------------------------------------------
Ratings*
--------------- Market
Shares Description(1) Coupon Moody's S&P Value
--------------------------------------------------------------------------------------------------------------------------------
$25 PAR (or similar) SECURITIES - 47.7% (32.6%
of Total Investments)
Auto Components - 0.6%
364,303 Delphi Trust I 8.250% Baa3 BB 9,074,788
--------------------------------------------------------------------------------------------------------------------------------
Automobiles - 0.9%
331,800 Ford Motor Company (CORTS) 8.000% Baa1 BBB- 8,892,240
131,400 Ford Motor Company, Series F (CORTS) 8.000% Baa1 BBB- 3,509,694
28,600 General Motors Corporation 7.375% Baa2 NA 722,722
--------------------------------------------------------------------------------------------------------------------------------
Capital Markets - 4.7%
22,600 BCH Capital Ltd., Series B 9.430% A2 BBB+ 600,595
17,900 Bear Stearns Capital Trust III 7.800% A2 BBB 474,350
500 BNY Capital Trust IV, Series E 6.875% A1 A- 12,640
300,000 BNY Capital Trust V, Series F 5.950% A1 A- 7,563,000
80,850 BSCH Finance Ltd., Series Q 8.625% A2 BBB+ 2,114,228
129,800 Compass Capital Trust III 7.350% A3 BBB- 3,412,442
9,500 CSFB USA, Series 2002-10 (SATURNS) 7.000% Aa3 A+ 245,100
26,500 First Union Capital II, Series II (CORTS) 7.500% A1 BBB+ 712,850
41,500 First Union Institutional Capital II (CORTS) 8.200% A1 BBB+ 1,174,450
13,100 Goldman Sachs Group Inc., Series 2003-06 (SATURNS) 6.000% Aa3 A+ 322,915
526,388 Lehman Brothers Holdings Capital Trust III, Series K 6.375% A2 BBB+ 13,449,213
100,000 Merrill Lynch Capital Trust 7.000% A1 A- 2,682,000
113,600 Merrill Lynch Preferred Capital Trust IV 7.120% A1 A- 3,054,704
225,000 Merrill Lynch Preferred Capital Trust V 7.280% A1 A- 6,108,750
29,000 Merrill Lynch Preferred Capital Trust 7.750% A1 A- 775,750
66,100 Morgan Stanley Capital Trust II 7.250% A1 A- 1,749,006
365,739 Morgan Stanley Capital Trust III 6.250% A1 A- 9,300,743
717,800 Morgan Stanley Capital Trust IV 6.250% A1 A- 18,181,874
23,300 Morgan Stanley (PPLUS) 7.050% Aa3 A+ 617,683
--------------------------------------------------------------------------------------------------------------------------------
Commercial Banks - 9.2%
170,000 Abbey National plc 7.375% A2 A- 4,598,500
2,000 Abbey National plc, Series B 7.375% A2 A 55,000
37,900 ABN AMRO Capital Fund Trust V 5.900% A2 A 928,550
69,300 ASBC Capital I 7.625% Baa1 BBB- 1,860,705
65,185 BAC Capital Trust I 7.000% Aa3 A- 1,716,973
135,755 BAC Capital Trust II 7.000% Aa3 A- 3,627,374
284,700 BAC Capital Trust III 7.000% Aa3 A- 7,644,195
63,400 Banco Totta & Acores Finance, Series A 8.875% A3 NA 1,729,634
186,114 Banesto Holdings, Series A, 144A 10.500% A2 NA 5,798,624
16
Ratings*
--------------- Market
Shares Description(1) Coupon Moody's S&P Value
--------------------------------------------------------------------------------------------------------------------------------
Commercial Banks (continued)
81,700 Bank One Capital Trust VI 7.200% A1 A- $ 2,169,952
22,800 Bank One Capital V 8.000% A1 A- 601,692
34,600 BankNorth Capital Trust II 8.000% Baa1 BB+ 926,934
62,200 Chittenden Capital Trust I 8.000% Baa1 BB+ 1,686,242
59,300 Citigroup Inc., Series H (a) 6.231% Aa3 NA 3,194,788
107,000 Cobank ABC, 144A (a) 7.000% NA NA 5,683,840
80,100 Comerica Capital Trust I 7.600% A3 BBB+ 2,105,028
292,579 Fleet Capital Trust VII 7.200% Aa3 A- 7,767,972
337,000 Fleet Capital Trust VIII 7.200% Aa3 A- 8,964,200
15,500 KeyCorp, Series 2001-7 (CORTS) 7.750% A3 BBB 417,725
25,200 KeyCorp, Series B (CORTS) 8.250% A3 BBB 657,720
153,200 National Commerce Capital Trust II 7.700% A1 A- 4,105,760
32,900 National Westminster Bank plc, Series A 7.875% Aa2 A+ 850,794
32,200 PNC Capital Trust 6.125% A3 BBB 808,864
19,400 Regions Finance Trust I 8.000% A2 BBB+ 506,534
175,000 Royal Bank of Scotland Group plc, Series L 5.750% A1 A 4,289,250
74,800 SunTrust Capital Trust IV 7.125% A1 A- 1,967,988
54,300 SunTrust Capital Trust V 7.050% A1 A- 1,434,606
69,800 USB Capital Trust III 7.750% Aa3 A- 1,853,888
186,900 USB Capital Trust IV 7.350% Aa3 A- 4,973,409
67,700 USB Capital Trust V 7.250% Aa3 A- 1,794,727
33,400 VNB Capital Trust I 7.750% Baa1 BBB 889,108
1,607,345 Wachovia Preferred Funding Corporation 7.250% A2 BBB+ 45,616,451
19,600 Washington Mutual Capital Trust I, Series 7.650% Baa1 BBB 511,756
2001-22, Class A-1 (CORTS)
9,100 Wells Fargo Capital Trust IV 7.000% Aa2 A 242,060
60,935 Wells Fargo Capital Trust V 7.000% Aa2 A 1,601,372
14,700 Wells Fargo Capital Trust VI 6.950% Aa2 A- 391,461
225,000 Wells Fargo Capital Trust VII 5.850% Aa2 A 5,607,000
3,800 Wells Fargo Capital Trust VIII 5.625% Aa2 A 93,860
79,600 Zions Capital Trust B 8.000% Baa1 BB+ 2,181,040
--------------------------------------------------------------------------------------------------------------------------------
Computers & Peripherals - 0.1%
13,100 IBM Inc. (CORTS) 7.125% A1 A+ 342,172
18,900 IBM Inc., Series 2001-1 (SATURNS) 7.125% A1 A+ 492,534
--------------------------------------------------------------------------------------------------------------------------------
Consumer Finance - 1.5%
6,900 Household Capital Trust V, Series X 10.000% A2 BBB+ 177,537
26,900 Household Capital Trust VI 8.250% A2 BBB+ 713,926
39,200 Household Capital Trust VII 7.500% A2 BBB+ 1,048,992
773,900 HSBC Finance Corporation 6.875% A1 A 21,026,863
--------------------------------------------------------------------------------------------------------------------------------
Diversified Financial Services - 5.0%
15,100 BBVA Preferred Capital Ltd., Series B 7.750% A1 A- 400,754
14,200 CIT Group Incorporated (CORTS) 7.750% A3 BBB+ 390,145
51,600 Citigroup Capital Trust VII 7.125% Aa2 A 1,362,240
331,300 Citigroup Capital Trust VIII 6.950% Aa2 A 8,693,312
194,900 Citigroup Capital Trust IX 6.000% Aa2 A 4,911,480
33,200 Citigroup Inc., Series F (a) 6.365% Aa3 A 1,772,216
94,000 Citigroup Inc., Series G (a) 6.213% Aa3 A 5,061,900
67,970 Citigroup Inc., Series M (a) 5.864% Aa3 A 3,602,410
33,100 General Electric Capital Corporation 6.625% Aaa AAA 885,425
756,975 ING Group NV 7.050% NA A- 20,362,628
511,518 ING Group NV 7.200% A2 A- 13,897,944
16,900 ING Group NV 6.200% A2 A- 428,753
29,500 JPM Capital Trust (CORTS) 7.200% A2 A- 782,340
52,000 JPMorgan Chase & Company (PCARS) 7.125% A2 A- 1,346,020
395,067 JPMorgan Chase Capital Trust X 7.000% A1 NA 10,560,141
47,200 JPMorgan Chase Trust, Series 2002-6, Class A (SATURNS) 7.125% A1 A- 1,261,184
26,900 Merrill Lynch Capital Trust II 8.000% A1 A- 732,218
17
Nuveen Preferred and Convertible Income Fund (JPC) (continued)
Portfolio of Investments December 31, 2004
Ratings*
--------------- Market
Shares Description(1) Coupon Moody's S&P Value
--------------------------------------------------------------------------------------------------------------------------------
Diversified Telecommunication Services - 0.4%
29,000 BellSouth Corporation, Series 2001-3 (SATURNS) 7.125% A2 A $ 754,870
3,200 BellSouth Corporation 7.125% Aa2 A 82,912
9,200 BellSouth Inc. (CORTS) 7.000% A2 A 241,960
15,700 BellSouth Telecommunications (PPLUS) 7.300% Aa3 A 405,845
44,750 Deutsche Telekom International Finance B.V., 7.875% Baa1 BBB+ 1,177,820
Series 2001-24, Class A-1 (CORTS)
15,900 SBC Communications Inc. 7.000% A2 A 417,852
15,500 Verizon Communications (CORTS) 7.625% A2 A+ 416,950
19,900 Verizon Communications (CORTS) 7.375% A2 A+ 533,022
11,900 Verizon New England Inc., Series B 7.000% A2 NA 317,730
40,955 Verizon South Inc., Series F 7.000% A2 A+ 1,085,308
--------------------------------------------------------------------------------------------------------------------------------
Electric Utilities - 1.1%
7,000 Consolidated Edison Company of New York Inc. 7.500% A1 A 185,080
10,000 Consolidated Edison Company 7.250% A2 A- 268,100
4,400 Detroit Edison Company 7.375% Baa2 BB+ 110,880
22,200 DTE Energy Trust I 7.800% Baa3 BB+ 594,516
33,470 Entergy Louisiana Inc. 7.600% Baa1 A- 894,653
43,570 Georgia Power Capital Trust V 7.125% A3 BBB+ 1,169,855
227,000 Georgia Power Company 5.900% A2 A 5,720,400
80,000 National Rural Utilities Cooperative Finance Corporation 6.100% A3 BBB+ 2,005,600
113,432 Tennessee Valley Authority, Series D 6.750% Aaa AAA 2,835,800
128,000 Virginia Power Capital Trust 7.375% Baa1 BBB- 3,449,600
--------------------------------------------------------------------------------------------------------------------------------
Food Products - 0.4%
60,000 Dairy Farmers of America Inc., 144A (a) 7.875% Baa3 BBB- 6,262,500
--------------------------------------------------------------------------------------------------------------------------------
Gas Utilities - 0.0%
23,000 AGL Capital Trust II 8.000% Baa2 BBB 610,190
--------------------------------------------------------------------------------------------------------------------------------
Insurance - 9.1%
5,500 ACE Capital Trust I, Series 1999 8.875% Baa1 BBB- 138,985
538,010 Ace Ltd., Series C 7.800% Baa2 BBB- 14,354,107
273,500 Aetna Incorporated 8.500% Baa2 BBB+ 7,327,065
52,700 AMBAC Financial Group Inc. 5.950% Aa2 AA 1,324,878
1,216,100 Delphi Financial Group Inc. 8.000% Baa3 BBB 33,138,725
132,305 EverestRe Capital Trust II 6.200% Baa1 BBB 3,101,229
94,600 EverestRe Group Limited 7.850% Baa1 BBB 2,616,636
7,600 Financial Security Assurance Holdings 6.875% Aa2 AA 200,640
18,300 Financial Security Assurance Holdings 6.250% Aa2 AA 469,029
188,900 Hartford Capital Trust III, Series C 7.450% Baa1 BBB 4,952,958
31,600 Hartford Life Capital Trust II, Series B 7.625% Baa1 BBB 836,452
36,800 Lincoln National Capital Trust V, Series E 7.650% Baa1 BBB 975,936
1,300 MBIA Inc. 8.000% Aa2 AA 34,125
1,428,000 PartnerRe Limited, Series C 6.750% Baa1 BBB+ 37,042,320
72,000 PartnerRe Limited 7.900% A3 BBB+ 1,915,200
81,100 PLC Capital Trust III 7.500% Baa1 BBB+ 2,142,662
33,300 PLC Capital Trust IV 7.250% Baa1 BBB+ 885,780
5,900 PLC Capital Trust V 6.125% Baa1 BBB+ 145,140
37,400 Prudential plc 6.750% Baa1 A 969,782
89,000 RenaissanceRe Holdings Ltd., Series A 8.100% Baa2 BBB+ 2,374,520
325,310 RenaissanceRe Holdings Ltd., Series B 7.300% Baa2 BBB+ 8,731,320
14,000 Safeco Capital Trust I (CORTS) 8.750% Baa2 BBB- 427,700
22,500 Safeco Capital Trust I (CORTS) 8.700% Baa2 BBB- 613,800
9,000 Safeco Capital Trust I, Series 2001-4 (CORTS) 8.750% Baa2 BBB- 243,000
33,700 Safeco Capital Trust III (CORTS) 8.072% Baa2 BBB- 925,065
12,800 Safeco Capital Trust IV (CORTS) 8.375% Baa2 BBB- 359,616
46,200 Safeco Corporation, Series 2001-7 (SATURNS) 8.250% Baa2 BBB- 1,222,914
38,000 Safeco Corporation, Series 2002-5 (SATURNS) 8.250% Baa2 BBB- 1,031,130
30,800 Torchmark Capital Trust I 7.750% Baa1 A- 826,210
73,900 W.R. Berkley Capital Trust, Series 2002-1 (CBTCS) 8.125% Baa3 BBB- 789,991
86,700 XL Capital Ltd., Series A 8.000% Baa1 BBB+ 2,367,777
287,500 XL Capital Ltd., Series B 7.625% Baa1 BBB+ 7,742,375
18
Ratings*
--------------- Market
Shares Description(1) Coupon Moody's S&P Value
--------------------------------------------------------------------------------------------------------------------------------
Media - 0.1%
41,100 Viacom Inc. 7.300% A3 A- $ 1,076,820
--------------------------------------------------------------------------------------------------------------------------------
Multi-Utilities & Unregulated Power - 0.2%
49,100 Dominion CNG Capital Trust I 7.800% Baa1 BBB- 1,314,898
56,100 Energy East Capital Trust I 8.250% Baa3 BBB- 1,505,163
--------------------------------------------------------------------------------------------------------------------------------
Oil & Gas - 0.7%
406,200 Nexen Inc. 7.350% Baa3 BB+ 10,938,966
1,000 TransCanada Pipeline 8.250% A3 BBB 25,840
--------------------------------------------------------------------------------------------------------------------------------
Real Estate - 9.1%
10,700 AvalonBay Communities, Inc., Series H 8.700% Baa2 BBB 301,954
3,000 BRE Properties, Series B 8.080% Baa3 BBB- 80,550
347,125 CarrAmerica Realty Corporation, Series E 7.500% Baa3 BBB- 9,219,640
20,600 Developers Diversified Realty Corporation, Series F 8.600% Ba1 BBB- 553,522
656,785 Developers Diversified Realty Corporation, Series G 8.000% Ba1 BBB- 17,568,999
72,000 Developers Diversified Realty Corporation, Series H 7.375% Ba1 BBB- 1,865,520
6,100 Equity Residential Properties Trust 9.125% Baa2 BBB 157,929
18,700 Equity Residential Properties Trust, Series C 9.125% Baa2 BBB 502,843
9,900 Equity Residential Properties Trust, Series D 8.600% Baa2 BBB 271,062
110,681 Equity Office Properties Trust, Series G 7.750% Baa3 BBB 2,988,387
610,800 Equity Residential Properties Trust, Series N 6.480% Baa2 BBB 15,483,780
127,408 Gables Residential Trust, Series D 7.500% Baa3 BBB- 3,287,126
303,600 HRPT Properties Trust, Series B 8.750% Baa3 BBB- 8,396,058
755,483 Kimco Realty Corporation, Series F 6.650% Baa2 BBB+ 19,521,681
13,693 New Plan Excel Realty Trust, Series D 7.800% Baa3 BBB- 697,060
972,775 New Plan Excel Realty Trust, Series E 7.625% NA BBB- 25,622,894
32,982 Prologis Trust, Series C 8.540% Baa2 BBB 1,984,075
13,600 Prologis Trust, Series G 6.750% Baa2 BBB 343,128
159,800 Public Storage Inc., Series R 8.000% Baa2 BBB+ 4,213,926
28,900 Public Storage Inc., Series S 7.875% Baa2 BBB+ 760,937
28,200 Public Storage Inc., Series T 7.625% Baa2 BBB+ 741,096
27,500 Public Storage Inc., Series U 7.625% Baa2 BBB+ 732,600
32,000 Public Storage Inc., Series V 7.500% Baa2 BBB+ 848,000
186,500 Regency Centers Corporation 7.450% Baa3 BBB- 4,971,158
7,000 Simon Property Group, Inc., Series G 7.890% Baa2 BBB 372,540
13,800 Vornado Realty Trust 6.625% Baa3 BBB- 340,860
707,700 Weingarten Realty Trust, Preferred Securities 6.750% Baa1 A- 18,456,816
--------------------------------------------------------------------------------------------------------------------------------
Specialty Retail - 0.0%
11,900 Sherwin Williams Company, Series III (CORTS) 7.250% A2 A 321,895
--------------------------------------------------------------------------------------------------------------------------------
Thrifts & Mortgage Finance - 3.9%
95,700 Countrywide Capital III (PPLUS) 8.050% Baa1 BBB+ 2,595,384
1,200,200 Countrywide Capital Trust IV 6.750% Baa1 BBB+ 30,857,142
158,800 Fannie Mae (a) 5.125% Aa3 AA- 6,791,876
312,400 Fannie Mae 0.000% Aa3 AA- 17,689,650
24,000 Federal Home Loan Mortgage Corporation (a) 5.100% Aa3 AA- 1,046,400
10,000 Federal Home Loan Mortgage Corporation (a) 5.000% Aa3 AA- 430,000
--------------------------------------------------------------------------------------------------------------------------------
Wireless Telecommunication Services - 0.7%
17,400 AT&T Wireless Services Equity, Series 2002-B (SATURNS) 9.250% Baa2 A 490,680
28,600 AT&T Wireless, Series 2002-7 (CORTS) 8.000% Baa2 A 779,064
73,100 Telephone and Data Systems Inc. 7.600% Baa1 A- 1,928,378
34,300 United States Cellular Corporation 8.750% Baa1 A- 959,714
254,800 United States Cellular Corporation 7.500% Baa1 A- 6,905,080
--------------------------------------------------------------------------------------------------------------------------------
Total $25 Par (or similar) Securities (cost
$712,640,262) 732,570,048
--------------------------------------------------------------------------------------------------------------
19
Nuveen Preferred and Convertible Income Fund (JPC) (continued)
Portfolio of Investments December 31, 2004
Ratings*
--------------- Market
Shares Description(1) Coupon Moody's S&P Value
--------------------------------------------------------------------------------------------------------------------------------
CONVERTIBLE PREFERRED SECURITIES - 18.8% (12.8%
of Total Investments)
Automobiles - 0.9%
155,000 Ford Motor Company Capital Trust II 6.500% Baa2 BB $ 8,182,450
204,000 General Motors Corporation 6.250% Baa2 BBB- 5,438,640
--------------------------------------------------------------------------------------------------------------------------------
Capital Markets - 1.0%
296,250 Goldmand Sachs Group Inc., Series EMC 6.125% Aa3 NA 3,911,685
53,200 State Street Corporation 6.750% NA BB+ 11,916,800
--------------------------------------------------------------------------------------------------------------------------------
Commercial Banks - 1.2%
97,950 HSBC Finance Corporation 8.875% A1 A 4,574,265
164,000 Sovereign Capital Trust IV, Convertible Security 4.375% Ba1 BB- 8,036,000
105,800 Washington Mutual Inc., Unit 1 Trust 5.375% Baa1 BBB 5,966,697
--------------------------------------------------------------------------------------------------------------------------------
Commercial Services & Supplies - 0.3%
97,375 Allied Waste Industries Inc. 6.250% Caa3 B 5,132,636
--------------------------------------------------------------------------------------------------------------------------------
Communications Equipment - 0.8%
6,010 Lucent Technologies Capital Trust I 7.750% Caa1 CCC- 7,149,256
88 Nortel Networks Corp. 7.000% NA NA 5,426,723
--------------------------------------------------------------------------------------------------------------------------------
Construction Materials - 0.3%
85,800 TXI Capital Trust I 6.500% B3 B- 4,345,770
--------------------------------------------------------------------------------------------------------------------------------
Consumer Finance - 0.3%
73,000 Capital One Financial Corporation 6.250% Baa3 BBB- 4,120,120
--------------------------------------------------------------------------------------------------------------------------------
Containers & Packaging - 0.4%
112,500 Temple Inland Inc. 7.500% Baa3 BBB 6,333,750
--------------------------------------------------------------------------------------------------------------------------------
Diversified Financial Services - 0.9%
217,900 Citigroup Global Markets 2.000% Aa1 AA- 10,246,312
154,000 Gabelli Asset Management Inc. 6.950% Baa2 NA 4,124,120
--------------------------------------------------------------------------------------------------------------------------------
Diversified Telecommunication Services - 0.5%
131,000 Alltel Corporation 7.750% A2 NA 6,928,590
--------------------------------------------------------------------------------------------------------------------------------
Electric Utilities - 1.8%
344,500 DTE Energy Company 8.750% Baa2 BBB- 8,981,115
217,900 FPL Group Inc. 8.000% NA A- 13,126,296
1,835,000 PG&E Corporation 9.500% NA NA 4,904,038
--------------------------------------------------------------------------------------------------------------------------------
Electrical Equipment - 0.2%
46,475 General Cable Corporation, 144A 5.750% NA NA 3,688,953
--------------------------------------------------------------------------------------------------------------------------------
Electronic Equipment & Instruments - 0.6%
175,000 Pioneer-Standard Financial Trust 6.750% B2 NA 9,821,875
--------------------------------------------------------------------------------------------------------------------------------
Energy Equipment & Services - 0.1%
25,000 Hanover Compressor Capital Trust 7.250% Caa1 B- 1,306,250
--------------------------------------------------------------------------------------------------------------------------------
Food & Staples Retailing - 0.3%
178,925 Albertsons Inc. 7.250% Baa2 BBB 4,544,695
--------------------------------------------------------------------------------------------------------------------------------
Gas Utilities - 0.2%
39,750 Southern Union Company, Series B 5.750% Baa3 NA 2,897,775
--------------------------------------------------------------------------------------------------------------------------------
Hotels Restaurants & Leisure - 0.9%
250,000 Host Marriott Financial Trust 6.750% B2 CCC+ 14,093,750
--------------------------------------------------------------------------------------------------------------------------------
Household Durables - 0.3%
106,675 Newell Financial Trust I 5.250% Baa3 BBB- 5,027,059
--------------------------------------------------------------------------------------------------------------------------------
Insurance - 3.0%
100,000 Chubb Corporation 7.000% NA A 2,959,000
381,000 Genworth Financial Inc. 6.000% A2 A 12,348,210
86,200 Hartford Financial Services Group, Inc. 7.000% NA A- 5,684,890
20
Ratings*
--------------- Market
Shares Description(1) Coupon Moody's S&P Value
--------------------------------------------------------------------------------------------------------------------------------
Insurance (continued)
90,000 Phoenix Companies Inc. 7.000% NA NA $ 3,195,000
206,000 Reinsurance Group of America Inc. 5.750% Baa2 BBB 12,669,000
65,000 UnumProvident Corporation 8.250% Ba1 BB+ 2,344,550
256,250 XL Capital Limited 6.500% A2 A 6,521,563
--------------------------------------------------------------------------------------------------------------------------------
Media - 0.8%
185,000 Emmis Communications Corporation, Series A 6.250% Caa1 CCC+ 8,519,250
53,375 Interpublic Group, Series A 5.375% NA NA 2,615,375
10,000 Sinclair Broadcast Group Inc., Series D 6.000% Caa1 B- 434,900
--------------------------------------------------------------------------------------------------------------------------------
Metals & Mining - 0.9%
84,700 United States Steel Corporation, Series B 7.000% NA B 14,132,195
--------------------------------------------------------------------------------------------------------------------------------
Multi-Utilities & Unregulated Power - 0.9%
64,400 Aquila Inc. 6.750% B2 B- 2,231,460
144,800 Dominion Resources Inc. 8.750% Baa1 BBB+ 7,990,064
139,500 Sempra Energy 8.500% NA BBB+ 4,341,240
--------------------------------------------------------------------------------------------------------------------------------
Oil & Gas - 0.5%
6,725 Chesapeake Energy Corporation, 144A 4.125% NA NA 7,826,219
--------------------------------------------------------------------------------------------------------------------------------
Pharmaceuticals - 0.5%
126,150 Schering-Plough Corporation 6.000% Baa3 BBB 7,077,015
--------------------------------------------------------------------------------------------------------------------------------
Real Estate - 0.6%
165,000 Equity Office Properties Trust, Series B 5.250% Baa2 BBB 8,474,400
--------------------------------------------------------------------------------------------------------------------------------
Thrifts & Mortgage Finance - 0.6%
59 Fannie Mae 5.375% Aa3 AA- 6,254,000
87,475 PMI Group Inc. 5.875% A1 A 2,312,839
--------------------------------------------------------------------------------------------------------------------------------
Total Convertible Preferred Securities (cost $245,707,021) 288,156,790
--------------------------------------------------------------------------------------------------------------
Principal Ratings*
Amount (000)/ --------------- Market
Shares Description(1) Coupon Maturity Moody's S&P Value
--------------------------------------------------------------------------------------------------------------------------------
CONVERTIBLE BONDS - 28.4% (19.3% of Total
Investments)
Aerospace & Defense - 0.4%
2,900 AAR Corporation, 144A 2.875% 2/01/24 B2 BB- 2,809,375
2,500 EDO Corporation, Convertible Subordinate Note 5.250% 4/15/07 NA NA 2,737,500
--------------------------------------------------------------------------------------------------------------------------------
Airlines - 0.2%
2,765 Northwest Airlines Corporation Convertible Notes, 6.625% 5/15/23 Caa1 CCC+ 2,737,350
144A
--------------------------------------------------------------------------------------------------------------------------------
Auto Components - 0.2%
4,865 Lear Corporation 0.000% 2/20/22 Baa3 BBB- 2,535,881
--------------------------------------------------------------------------------------------------------------------------------
Automobiles - 0.8%
2,750 Fleetwood Enterprises Inc., 144A 5.000% 12/15/23 B2 B 3,935,938
185,250 General Motors Corporation, Convertible Notes,
Senior Debentures, Series A 4.500% 3/06/32 Baa2 BBB- 4,647,923
185,100 General Motors Corporation, Series B 5.250% 3/03/32 Baa2 BBB- 4,270,257
--------------------------------------------------------------------------------------------------------------------------------
Biotechnology - 0.9%
2,850 Imclone Systems Inc., 144A 1.375% 5/15/24 NA NA 2,643,375
4,500 Ivax Corporation, Convertible Note, 144A 1.500% 3/01/24 NA NA 4,376,250
6,500 Ivax Corporation, Convertible Senior Subordinated 4.500% 5/15/08 NA NA 6,532,500
Notes
--------------------------------------------------------------------------------------------------------------------------------
Capital Markets - 0.2%
89,675 Lehman Brothers Holdings Inc., Series GIS 6.250% 10/15/07 NA NA 2,421,225
--------------------------------------------------------------------------------------------------------------------------------
Chemicals - 0.4%
52,800 The Mosaic Company 7.500% 7/01/06 Caa1 NA 5,794,800
21
Nuveen Preferred and Convertible Income Fund (JPC) (continued)
Portfolio of Investments December 31, 2004
Principal Ratings*
Amount (000)/ --------------- Market
Shares Description(1) Coupon Maturity Moody's S&P Value
--------------------------------------------------------------------------------------------------------------------------------
Commercial Services & Supplies - 0.4%
6,435 Electronic Data Systems, Convertible Senior 3.875% 7/15/23 Ba1 BBB- $ 6,829,144
Notes, 144A
--------------------------------------------------------------------------------------------------------------------------------
Communications Equipment - 2.2%
7,057 Ciena Corporation 3.750% 2/01/08 B2 B 6,298,373
5,565 Converse Technology Inc., 144A 0.000% 5/15/23 NA BB- 8,208,375
3,920 Corning Inc. 3.500% 11/01/08 Ba2 BB+ 4,777,500
2,850 Lucent Technologies Inc. 2.750% 6/15/23 B2 B 3,936,563
3,355 Powerwave Technologies Inc. 1.825% 11/15/24 NA NA 3,451,456
5,475 Skyworks Solutions Inc. 4.750% 11/15/07 NA NA 6,720,563
--------------------------------------------------------------------------------------------------------------------------------
Computers & Peripherals - 0.7%
13,215 Hewlett-Packard Company 0.000% 10/14/17 Baa1 BBB+ 7,549,069
2,500 Mercury Computer Systems Inc., 144A 2.000% 5/01/24 NA NA 2,975,000
--------------------------------------------------------------------------------------------------------------------------------
Consumer Finance - 0.5%
6,900 Providian Financial Corporation, Convertible 3.250% 8/15/05 B2 B 6,925,875
Senior Notes
--------------------------------------------------------------------------------------------------------------------------------
Diversified Financial Services - 0.7%
3,100 Leucadia National Corporation, 144A 3.750% 4/15/14 Ba3 B+ 3,847,875
6,400 The Bisys Group Inc. 4.000% 3/15/06 NA NA 6,392,000
--------------------------------------------------------------------------------------------------------------------------------
Electronic Equipment & Instruments - 0.5%
7,700 Celestica Inc. 0.000% 8/01/20 Ba3 B 4,292,750
2,720 Vishay Intertechnology Inc. 3.625% 8/01/23 B3 B+ 3,063,400
--------------------------------------------------------------------------------------------------------------------------------
Energy Equipment & Services - 1.0%
6,275 Diamond Offshore Drillling Inc. 1.500% 4/15/31 NA A- 6,682,875
7,000 Schlumberger Limited 2.125% 6/01/23 A1 A+ 7,595,000
985 Willbros Group Inc., 144A 2.750% 3/15/24 NA NA 1,270,650
--------------------------------------------------------------------------------------------------------------------------------
Healthcare Equipment & Supplies - 1.0%
4,315 Advanced Medical Optics 2.500% 7/15/24 B3 B 4,714,138
8,835 Fisher Scientific International Inc. 3.250% 3/01/24 Ba3 BB+ 9,950,419
--------------------------------------------------------------------------------------------------------------------------------
Hotels Restaurants & Leisure - 2.9%
10,500 Carnival Corporation 0.000% 10/24/21 A3 A- 10,145,625
2,550 Hilton Hotels Corporation 3.375% 4/15/23 Baa3 BBB- 3,063,188
5,400 Kerzner International Limited, 144A 2.375% 4/15/24 B2 B 6,594,750
15,500 Royal Caribbean Cruises Limited, Senior 0.000% 2/02/21 Ba2 BB+ 9,978,125
Convertible Liquid Yield Option Notes
3,745 Scientific Games Corporation 0.750% 12/01/24 B2 B+ 3,918,206
3,525 Six Flags Inc. 4.500% 5/15/15 Caa1 CCC 3,983,250
5,830 Starwood Hotels and Resorts Worldwide Inc. 3.500% 5/16/23 Ba1 BB+ 7,258,350
--------------------------------------------------------------------------------------------------------------------------------
Industrial Conglomerates - 0.4%
3,350 Tyco International Group Limited, Convertible
Notes, 144A 3.125% 1/15/23 Ba1 BBB 5,644,750
--------------------------------------------------------------------------------------------------------------------------------
Insurance - 0.1%
2,300 American International Group Inc. 0.500% 5/15/07 Aaa AAA 2,179,250
--------------------------------------------------------------------------------------------------------------------------------
Internet & Catalog Retail - 0.1%
1,795 Overstock.com Inc. 3.750% 12/01/11 NA NA 2,232,531
--------------------------------------------------------------------------------------------------------------------------------
IT Services - 0.8%
2,090 Acxiom Corporation 3.750% 2/15/09 Ba3 BB- 3,048,788
1,110 BearingPoint Inc. 2.500% 12/15/24 Ba3 BB- 1,172,438
1,110 BearingPoint Inc. 2.750% 12/15/24 Ba3 BB- 1,176,600
5,390 Digital River Inc., 144A 1.250% 1/01/24 NA NA 6,373,675
800 Euronet Worldwide Inc. 1.625% 12/15/24 NA NA 855,000
--------------------------------------------------------------------------------------------------------------------------------
Leisure Equipment & Products - 1.2%
3,675 Collegiate Pacific Inc. 5.750% 12/01/09 NA NA 4,180,313
5,300 Hasbro Inc. 2.750% 12/01/21 Baa3 BB+ 5,737,250
6,195 K2 Corporation, Convertible Notes, 144A 5.000% 6/15/10 NA NA 8,920,800
22
Principal Ratings*
Amount (000)/ --------------- Market
Shares Description(1) Coupon Maturity Moody's S&P Value
--------------------------------------------------------------------------------------------------------------------------------
Media - 4.8%
2,425 Charter Communications Inc. 5.875% 11/16/09 Ca CCC- $ 2,743,281
325,000 Comcast Corporation 2.000% 10/15/29 Ba2 BBB- 14,459,250
4,000 Echostar Communications Corporation, 5.750% 5/15/08 B2 B 4,115,000
Convertible Subordinated Notes
3,400 Interpublic Group Companies Inc. 4.500% 3/15/23 Baa3 BB+ 4,471,000
5,275 Liberty Media Corporation 0.750% 3/30/23 Baa3 BBB- 6,376,156
7,925 Liberty Media Corporation, Senior Debentures, 3.500% 1/15/31 Baa3 BBB- 7,518,844
Exchangeable for Motorola Common Stock
8,250 Liberty Media Corporation, Senior Debentures, 3.250% 3/15/31 Baa3 BBB- 8,136,563
Exchangeable for Class B Viacom Common Stock
2,880 Lions Gate Entertainment Corporation, Convertible 4.875% 12/15/10 NA NA 5,907,600
Bond, 144A
2,625 Lions Gate Entertainment Corporation, 144A 2.938% 10/15/24 NA NA 3,123,750
3,425 Sinclair Broadcast Group, Convertible Senior 4.875% 7/15/18 B3 B 3,300,844
Subordinated Note, 144A
96,000 Tribune Company, Exchangeable Subordinated 2.000% 5/15/29 Baa1 A- 8,721,600
Debentures
6,100 Walt Disney Company, Convertible Senior Notes 2.125% 4/15/23 Baa1 BBB+ 6,816,750
--------------------------------------------------------------------------------------------------------------------------------
Metals & Mining - 0.2%
3,355 Trizec Hahn Corporation 3.000% 1/29/21 Ba1 NA 2,738,519
--------------------------------------------------------------------------------------------------------------------------------
Oil & Gas - 0.5%
5,065 McMoran Exploration Corporation, Notes, 144A 6.000% 7/02/08 NA NA 7,679,806
--------------------------------------------------------------------------------------------------------------------------------
Pharmaceuticals - 2.3%
1,380 Abgenix Inc., Senior Convertible Notes, 144A 1.750% 12/15/11 NA NA 1,499,025
1,825 Alexion Pharmaceuticals Inc. 5.750% 3/15/07 NA NA 1,852,375
7,125 Allergan Inc., Convertible Zero Coupon Senior Notes 0.000% 11/06/22 A3 A 7,000,313
7,050 Alza Corporation 0.000% 7/28/20 Aa1 AAA 6,177,563
1,950 OSI Pharmaceuticals Inc. 3.250% 9/08/23 NA NA 3,356,438
3,400 Teva Pharmaceutical Finance, Series B 0.250% 2/01/24 NA BBB 3,468,000
3,295 Valeant Pharmaceuticals International, 144A 3.000% 8/16/10 NA B 3,645,094
1,940 Valeant Pharmaceuticals International, 144A 4.000% 11/15/13 NA B 2,141,275
6,400 Wyeth, 144A 1.000% 1/15/24 Baa1 A 6,592,064
--------------------------------------------------------------------------------------------------------------------------------
Real Estate - 0.2%
2,725 Avatar Holdings Inc., 144A 4.500% 4/01/24 NA NA 3,086,063
--------------------------------------------------------------------------------------------------------------------------------
Road & Rail - 0.1%
585 Yellow Corporation, 144A 3.375% 11/25/23 Ba1 BBB- 876,038
--------------------------------------------------------------------------------------------------------------------------------
Semiconductors & Equipment - 1.7%
4,620 Advanced Micro Devices Inc. 4.750% 2/01/22 B3 B- 5,330,325
3,100 Agere Systems Inc. 6.500% 12/15/09 B3 B 3,293,750
4,800 ASM International NV 4.250% 12/06/11 NA B- 5,082,000
4,890 ASM Lithography Holding NV 5.750% 10/15/06 B2 NA 5,562,375
4,000 FEI Company, Convertible Notes 5.500% 8/15/08 NA B- 4,060,000
2,500 LSI Logic Corporation 4.000% 5/15/10 Ba3 B 2,359,375
--------------------------------------------------------------------------------------------------------------------------------
Software - 0.9%
2,500 Computer Associates International Inc. 5.000% 3/15/07 Ba1 BBB- 3,240,625
6,600 Mentor Graphics Corporation, Convertible 6.875% 6/15/07 NA NA 6,971,250
Subordinate Notes
3,875 Novell Inc., 144A 0.500% 7/15/24 NA NA 3,705,469
--------------------------------------------------------------------------------------------------------------------------------
Specialty Retail - 1.3%
7,500 Lowes Companies Inc. 0.861% 10/19/21 A2 A+ 7,931,250
6,000 Sonic Automotive Inc., Convertible Senior 5.250% 5/07/09 B3 B+ 6,000,000
Subordinated Notes
6,000 TJX Companies Inc. 0.000% 2/13/21 Baa1 A- 5,295,000
--------------------------------------------------------------------------------------------------------------------------------
Textiles & Apparel - 0.3%
4,575 Reebok International Ltd. 2.000% 5/01/24 Baa3 BBB 4,998,188
23
Nuveen Preferred and Convertible Income Fund (JPC) (continued)
Portfolio of Investments December 31, 2004
Principal Ratings*
Amount (000)/ --------------- Market
Shares Description(1) Coupon Maturity Moody's S&P Value
--------------------------------------------------------------------------------------------------------------------------------
Wireless Telecommunication Services - 0.5%
2,225 NII Holdings Inc., 144A 3.500% 9/15/33 NA NA $ 4,305,375
3,125 NII Holdings Inc., 144A 2.875% 2/01/34 NA NA 3,617,188
--------------------------------------------------------------------------------------------------------------------------------
Total Convertible Bonds (cost $385,658,679) 434,941,669
--------------------------------------------------------------------------------------------------------------
CORPORATE BONDS 17.7% (12.1% of Total Investments)
Aerospace & Defense - 0.2%
3,500 K&F Aquisition Inc. 7.750% 11/15/14 Caa1 B- 3,631,250
--------------------------------------------------------------------------------------------------------------------------------
Auto Components - 0.3%
3,500 Tenneco Auto, Inc. 10.250% 7/15/13 B2 B- 4,147,500
--------------------------------------------------------------------------------------------------------------------------------
Automobiles - 3.0%
3,500 Ford Motor Company 8.900% 1/15/32 Baa1 BBB- 3,989,927
10,000 Ford Motor Company, Debentures 7.700% 5/15/97 Baa1 BBB- 9,690,340
5,590 Ford Motor Company, Debentures 9.980% 2/15/47 Baa1 BBB- 6,967,041
20,500 General Motors Acceptance Corporation, Notes 8.000% 11/01/31 Baa1 BBB- 21,130,621
3,560 General Motors Corporation, Senior Debentures 8.375% 7/15/33 Baa2 BBB- 3,698,669
--------------------------------------------------------------------------------------------------------------------------------
Chemicals - 0.4%
1,335 OM Group Inc. 9.250% 12/15/11 Caa1 B- 1,428,450
3,000 Resolution Performance Products LLC 8.000% 12/15/09 B2 B 3,240,000
1,500 Rockwood Specialties Group 7.500% 11/15/14 B3 B- 1,563,750
--------------------------------------------------------------------------------------------------------------------------------
Commercial Banks - 0.1%
1,500 Washington Mutual Bank FA 5.125% 1/15/15 A3 A- 1,492,701
--------------------------------------------------------------------------------------------------------------------------------
Commercial Services & Supplies - 0.4%
1,000 Allied Waste North America 7.875% 4/15/13 B2 BB- 1,030,000
1,000 Allied Waste North America, Series B 9.250% 9/01/12 B2 BB- 1,087,500
3,547 Allied Waste North America, Series B 10.000% 8/01/09 Caa2 B+ 3,742,085
--------------------------------------------------------------------------------------------------------------------------------
Construction Materials - 0.2%
2,500 Texas Industries Inc. 10.250% 6/15/11 B1 BB- 2,937,500
--------------------------------------------------------------------------------------------------------------------------------
Containers & Packaging - 0.5%
1,520 Berry Plastics Corporation 10.750% 7/15/12 B3 B- 1,748,000
2,000 MDP Acquisitions plc, Senior Notes 9.625% 10/01/12 B3 B- 2,240,000
2,000 Owens-Brockway Glass Containers, Guaranteed 8.250% 5/15/13 B2 B 2,210,000
Senior Notes
2,000 Owens-Illinois Inc. 7.800% 5/15/18 B3 B 2,090,000
--------------------------------------------------------------------------------------------------------------------------------
Electric Utilities - 0.2%
3,000 Midwest Generation LLC 8.750% 5/01/34 B1 B- 3,420,000
--------------------------------------------------------------------------------------------------------------------------------
Food & Staples Retailing - 0.1%
2,000 Stater Brothers Holdings Inc. 8.125% 6/15/12 B1 BB- 2,125,000
--------------------------------------------------------------------------------------------------------------------------------
Food Products - 0.7%
5,943 Dole Foods Company 7.875% 7/15/13 B2 B+ 6,671,018
1,000 Dole Food Inc. 8.875% 3/15/11 B2 B+ 1,092,500
3,000 Seminis Vegetable Seeds Inc. 10.250% 10/01/13 B3 B- 3,390,000
--------------------------------------------------------------------------------------------------------------------------------
Healthcare Equipment & Supplies - 0.1%
2,000 Fisher Scientific International Inc. 8.000% 9/01/13 Ba3 BB+ 2,280,000
--------------------------------------------------------------------------------------------------------------------------------
Healthcare Providers & Services - 0.4%
1,500 Quintiles Transitional Corporation 10.000% 10/01/13 B3 B 1,687,500
1,000 US Oncology Inc., 144A 9.000% 8/15/12 B2 B- 1,122,500
2,500 US Oncology Inc., 144A 10.750% 8/15/14 B3 B- 2,906,250
24
Principal Ratings*
Amount (000)/ --------------- Market
Shares Description(1) Coupon Maturity Moody's S&P Value
--------------------------------------------------------------------------------------------------------------------------------
Hotels Restaurants & Leisure - 2.9%
3,000 Affinia Group Inc. 9.000% 11/30/14 Caa1 B $ 3,142,500
2,000 Boyd Gaming Corporation 8.750% 4/15/12 B1 B+ 2,235,000
2,000 Boyd Gaming Corporation 7.750% 12/15/12 B1 B+ 2,192,500
2,552 Dominos Inc. 8.250% 7/01/11 B2 B- 2,800,820
1,500 Herbst Gaming Inc. 7.000% 11/15/14 B3 B- 1,526,250
2,900 Intrawest Corporation 7.500% 10/15/13 B1 B+ 3,099,375
3,000 Las Vegas Sands Inc., Venetian Casino Resorts, 11.000% 6/15/10 B2 B 3,438,750
LLC Mortgage Notes
1,600 Park Place Entertainment 8.125% 5/15/11 Ba2 BB- 1,856,000
2,500 Park Place Entertainment 7.000% 4/15/13 Ba1 BB+ 2,768,750
4,040 Park Place Entertainment 7.875% 12/15/05 Ba2 BB- 4,201,600
7,000 Penn National Gaming Inc., Senior Subordinated Notes 8.875% 3/15/10 B2 B 7,673,750
750 Pinnacle Entertainment Inc. 8.750% 10/01/13 Caa1 B- 815,625
2,000 Pinnacle Entertainment Inc. 8.250% 3/15/12 Caa1 B- 2,135,000
2,000 Town Sports International Inc. 9.625% 4/15/11 B2 B- 2,115,000
4,000 Universal City Development Partners 11.750% 4/01/10 B2 B- 4,745,000
--------------------------------------------------------------------------------------------------------------------------------
Household Durables - 0.7%
2,000 K. Hovnanian Enterprises Inc., Senior Subordinate 8.875% 4/01/12 Ba3 B+ 2,220,000
Notes
3,000 KB Home 8.625% 12/15/08 Ba2 BB- 3,405,000
5,175 Technical Olympic USA Inc., Senior Subordinate 10.375% 7/01/12 B2 B- 5,821,875
Notes
--------------------------------------------------------------------------------------------------------------------------------
Insurance - 0.1%
2,000 Fairfax Financial Holdings Ltd. 7.750% 4/26/12 Ba3 BB 2,050,000
--------------------------------------------------------------------------------------------------------------------------------
IT Services - 0.2%
2,500 Global Cash Access LLC 8.750% 3/15/12 Caa1 B- 2,706,250
--------------------------------------------------------------------------------------------------------------------------------
Machinery - 0.5%
1,220 Terex Corporation, Senior Subordinated Notes 10.375% 4/01/11 B3 B 1,372,500
6,095 Terex Corporation, Senior Subordinated Notes 9.250% 7/15/11 B3 B 6,872,113
--------------------------------------------------------------------------------------------------------------------------------
Media - 3.3%
500 Advertising Directory Solution, Inc. 9.250% 11/15/12 Caa1 B- 527,500
4,000 Allbritton Communications Company, Series B 7.750% 12/15/12 B3 B- 4,160,000
2,000 American Media Operations Inc. 8.875% 1/15/11 B3 B- 2,137,500
4,180 American Media Operations Inc., Series B 10.250% 5/01/09 B3 B- 4,425,575
1,000 Cablevision Systems Corporation, Series B 8.125% 8/15/09 B1 BB- 1,098,750
5,000 Cablevision Systems Corporation 7.250% 7/15/08 B1 BB- 5,300,000
2,750 Canwest Media Incorporated 7.625% 4/15/13 Ba3 B- 3,007,813
2,000 Charter Communications Operating LLC, 144A 8.000% 4/30/12 B2 B- 2,090,000
1,500 Loews Cineplex Entertainment Corporation, 144A 9.000% 8/01/14 B3 CCC+ 1,631,250
5,800 Mail-Well I Corporation, Senior Unsecured Notes, 144A 9.625% 3/15/12 B1 B+ 6,394,500
6,000 Primedia Inc., Senior Notes 8.875% 5/15/11 B3 B 6,375,000
6,750 Vertis Inc. 9.750% 4/01/09 B2 B- 7,357,500
4,000 Young Broadcasting Inc., Senior Subordinate Notes 10.000% 3/01/11 Caa1 CCC+ 4,290,000
--------------------------------------------------------------------------------------------------------------------------------
Multiline Retail - 0.3%
500 Saks Inc. 7.375% 2/15/19 Ba3 BB 497,500
1,195 Saks Inc. 7.000% 12/01/13 Ba3 BB 1,226,369
2,000 Saks Inc., Notes 9.875% 10/01/11 Ba3 BB 2,380,000
--------------------------------------------------------------------------------------------------------------------------------
Oil & Gas - 0.6%
2,400 Baytex Energy Ltd. 9.625% 7/15/10 B3 B- 2,580,000
1,000 Chesapeake Energy Corporation 9.000% 8/15/12 Ba3 BB- 1,147,500
2,345 Chesapeake Energy Corporation 7.750% 1/15/15 Ba3 BB- 2,561,913
250 Tesoro Petroleum Corporation 8.000% 4/15/08 Ba2 BBB- 273,125
2,000 Tesoro Petroleum Corporation, Senior 9.625% 11/01/08 B2 BB- 2,190,000
Subordinate Notes, Series B
25
Nuveen Preferred and Convertible Income Fund (JPC) (continued)
Portfolio of Investments December 31, 2004
Principal Ratings*
Amount (000)/ --------------- Market
Shares Description(1) Coupon Maturity Moody's S&P Value
--------------------------------------------------------------------------------------------------------------------------------
Paper & Forest Products - 0.5%
2,000 Georgia Pacific Corporation, Debentures 7.700% 6/15/15 Ba3 BB+ $ 2,295,000
5,000 Georgia Pacific Corporation, Notes 8.125% 5/15/11 Ba3 BB+ 5,775,000
--------------------------------------------------------------------------------------------------------------------------------
Real Estate - 0.5%
1,625 CB Richard Ellis Services Inc. 9.750% 5/15/10 B1 B+ 1,860,625
4,425 LNR Property Corporation 7.625% 7/15/13 Caa1 CCC+ 5,044,500
--------------------------------------------------------------------------------------------------------------------------------
Road & Rail - 0.2%
3,000 Laidlaw International Inc. 10.750% 6/15/11 B2 B+ 3,517,500
--------------------------------------------------------------------------------------------------------------------------------
Specialty Retail - 0.8%
4,100 Asbury Automotive Group Inc. 9.000% 6/15/12 B3 B 4,325,500
1,650 Central Garden & Pet Company 9.125% 2/01/13 B2 B+ 1,831,500
5,000 Warnaco Inc., Senior Notes 8.875% 6/15/13 B1 B 5,525,000
--------------------------------------------------------------------------------------------------------------------------------
Textiles & Apparel - 0.2%
3,000 Jostens IH Corporation, 144A 7.625% 10/01/12 B3 B- 3,135,000
--------------------------------------------------------------------------------------------------------------------------------
Trading Companies & Distributors - 0.3%
2,575 Keystone Automotive Operations Inc. 9.750% 11/01/13 B3 B- 2,768,125
2,000 United Rentals North America Inc. 6.500% 2/15/12 B1 BB- 1,960,000
--------------------------------------------------------------------------------------------------------------------------------
Total Corporate Bonds (cost $256,572,268) 271,643,305
--------------------------------------------------------------------------------------------------------------
CAPITAL PREFERRED SECURITIES - 32.5% (22.1% of
Total Investments)
Capital Markets - 5.1%
2,500 ABN AMRO North America, 144A Series L (a) 6.460% 6/15/47 A3 NA 2,645,313
2,500 Ahmanson Capital Trust I, 144A 8.360% 12/01/26 Baa1 BBB 2,743,855
1,000 BT Capital Trust, Series B1 7.900% 1/15/27 A2 A- 1,118,606
4,850 BT Institutional Capital Trust A, 144A 8.090% 12/01/26 A2 A- 5,527,278
3,000 BT Institutional Capital Trust B, 144A 7.750% 12/01/26 A2 A- 3,322,320
1,250 C.A. Preferred Fund Trust II 7.000% 10/30/49 A1 A 1,309,445
27,500 C.A. Preferred Funding Trust 7.000% 1/30/49 A1 A 28,678,045
1,000 Mellon Capital II, Series B 7.995% 1/15/27 A2 A- 1,104,991
20,000 M&I Capital Trust A 7.650% 12/01/26 A2 BBB+ 21,563,740
8,300 UBS Preferred Funding Trust I 8.622% 10/29/49 A1 AA- 9,988,353
--------------------------------------------------------------------------------------------------------------------------------
Commercial Banks - 16.9%
3,000 AB Svensk Exportkredit, 144A 6.375% 10/27/49 Aa3 AA- 3,039,639
13,000 Abbey National Capital Trust I 8.963% 12/30/49 A2 A- 18,173,493
6,800 AgFirst Farm Credit Bank 7.300% 12/15/53 NA NA 6,869,999
2,600 ANZ Capital Trust I, 144A 5.360% 12/29/49 A2 A- 2,642,008
3,000 Bank One Capital III 8.750% 9/01/30 A1 A- 4,073,352
1,000 BankAmerica Capital II, Series 2 8.000% 12/15/26 Aa3 A- 1,099,391
6,000 BankBoston Capital Trust I, Series B 8.250% 12/15/26 Aa3 A- 6,584,226
2,000 BanPonce Trust I, Series A 8.327% 2/01/27 Baa1 BBB- 2,200,196
13,030 Barclays Bank plc, 144A 8.550% 6/15/49 Aa3 A+ 15,886,710
15 BBVA Privanza International Gibraltar, 144A (b) 7.764% 9/30/47 A1 NA 15,900,000
3,000 Centura Capital Trust I, 144A 8.845% 6/01/27 A2 BBB+ 3,470,808
1,500 DBS Capital Funding Corporation, 144A 7.657% 3/15/49 A1 A- 1,736,714
3,000 Farm Credit Bank of Texas 7.561% 11/05/49 NA NA 3,091,242
1,000 First Chicago NBD Institutional Capital, 144A 7.950% 12/01/26 A1 NA 1,087,886
6,200 First Empire Capital Trust I 8.234% 2/01/27 Baa1 BBB 6,866,928
2,000 First Midwest Bancorp Inc. 6.950% 12/01/33 Baa2 BBB- 2,186,308
2,400 HSBC Capital Funding LP, 144A 9.547% 12/31/49 A1 A- 2,993,369
5,750 HSBC Capital Funding LP, Debt 10.176% 6/30/50 A1 A- 8,928,980
11,000 KBC Bank Fund Trust III, 144A 9.860% 11/02/49 A2 A- 13,508,924
6,300 KeyCorp Institutional Capital Trust A 7.826% 12/01/26 A3 BBB 6,841,529
18,600 Lloyds TSB Bank plc, Subordinate Note 6.900% 11/22/49 Aa2 A+ 19,523,453
5,000 NB Capital Trust IV 8.250% 4/15/27 Aa3 A- 5,578,045
1,000 North Fork Capital Trust I, Capital Securities 8.700% 12/15/26 A3 BBB- 1,110,862
12,000 North Fork Capital Trust II 8.000% 12/15/27 A3 BBB- 13,287,828
26
Principal Ratings*
Amount (000)/ --------------- Market
Shares Description(1) Coupon Maturity Moody's S&P Value
--------------------------------------------------------------------------------------------------------------------------------
Commercial Banks (continued)
1,000 Popular North American Capital Trust I 6.564% 9/15/34 Baa1 BBB- $ 1,056,198
16,500 RBS Capital Trust B 6.800% 12/31/49 A1 A 17,067,584
100 Reliance Capital Trust I, Series B 8.170% 5/01/28 NA NA 112,105
6,350 Royal Bank of Scotland Group plc 7.648% 8/31/49 A1 A 7,755,134
2,365 SocGen Real Estate Company LLC, 144A 7.640% 12/29/49 A1 A 2,595,774
8,000 Sparebanken Rogaland, Notes, 144A 6.443% 5/01/49 Baa1 NA 8,160,400
10,500 St. George Funding Company LLC 8.485% 6/30/17 Baa1 NA 12,025,871
2,000 Unicredito Italiano Capital Trust, 144A 9.200% 10/05/49 A1 A 2,459,726
300 Union Planters Preferred Fund, 144A 7.750% 7/15/53 A2 BBB- 32,953,140
100 Wachovia Capital Trust I, Capital Securities, 144A 7.640% 1/15/27 A1 BBB+ 111,373
2,500 Washington Mutual Capital Trust I 8.375% 6/01/27 Baa1 BBB 2,779,463
5,000 Zions Institutional Capital Trust, Series A 8.536% 12/15/26 Baa1 BBB- 5,671,270
--------------------------------------------------------------------------------------------------------------------------------
Diversified Financial Services - 5.4%
7,750 BNP Paribas Capital Trust 7.200% 12/31/49 A1 A+ 8,207,886
18,125 Chase Capital Trust I, Series A 7.670% 12/01/26 A1 A- 19,539,783
36,000 HBOS Capital Funding LP, Notes 6.850% 3/01/49 A1 A 37,099,944
2,800 Old Mutual Capital Funding, Notes 8.000% 6/22/53 Baa2 NA 2,962,733
10,957 Centaur Funding Corporation, Series B, 144A 9.080% 4/21/20 Baa1 BBB+ 14,459,821
--------------------------------------------------------------------------------------------------------------------------------
Insurance - 3.5%
250 Allstate Financing II 7.830% 12/01/45 A2 A- 270,672
2,300 American General Capital II 8.500% 7/01/30 Aa1 AA 3,102,606
18,596 Berkeley Capital Trust 8.197% 12/15/45 Baa3 BBB- 19,742,890
4,000 Mangrove Bay, Class 3, 144A 6.102% 7/15/33 Baa1 BBB+ 3,982,352
1,000 MIC Financing Trust I 8.375% 2/01/27 A1 A+ 1,060,111
7,250 Prudential plc 6.500% 6/29/49 Baa1 A 7,295,131
9,500 Sun Life Canada Capital Trust, Capital 8.526% 5/06/47 A1 A+ 10,549,817
Securities, 144A
7,250 Zurich Capital Trust I, 144A 8.376% 6/01/37 Baa2 A- 8,164,617
--------------------------------------------------------------------------------------------------------------------------------
Oil & Gas - 0.6%
1,200 KN Capital Trust I, Preferred Securities 8.560% 4/15/27 Baa3 BB+ 1,336,616
7,110 KN Capital Trust III 7.630% 4/15/28 Baa3 BB+ 7,974,676
--------------------------------------------------------------------------------------------------------------------------------
Thrifts & Mortgage Finance - 1.0%
12,250 Dime Capital Trust I, Series A 9.330% 5/06/27 Baa1 BBB 13,932,308
1,000 Great Western Financial Trust II, Series A 8.206% 2/01/27 Baa1 BBB 1,092,813
--------------------------------------------------------------------------------------------------------------------------------
Total Capital Preferred Securities (cost $494,477,944) 498,206,650
--------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS - 0.8% (0.5% of Total
Investments)
$ 11,749 State Street Bank, 1.000%, dated 12/31/04, due
============== 1/03/05, repurchase price $11,749,759,
collateralized by $10,975,000 U.S. Treasury
Notes, 7.000%, due 7/15/06, value $11,984,590 11,748,780
--------------------------------------------------------------------------------------------------------------
Total Repurchase Agreements (cost $11,748,780) 11,748,780
--------------------------------------------------------------------------------------------------------------
Total Investments (cost $2,118,230,234) - 146.8% $ 2,251,359,182
==============================================================================================================
27
Nuveen Preferred and Convertible Income Fund (JPC) (continued)
Portfolio of Investments December 31, 2004
Market
Shares Description(1) Value
--------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS SOLD SHORT - (3.9)%
Automobiles - (0.2)%
(64,235) General Motors Corporation $ (2,573,254)
--------------------------------------------------------------------------------------------------------------------------------
Chemicals - (0.4)%
(335,240) The Mosaic Company (5,471,117)
--------------------------------------------------------------------------------------------------------------------------------
Consumer Finance - (0.2)%
(34,878) Capital One Financial Corporation (2,937,076)
--------------------------------------------------------------------------------------------------------------------------------
Electric Utilities - (0.1)%
(39,110) PG&E Corporation (1,301,581)
--------------------------------------------------------------------------------------------------------------------------------
Food & Staples Retailing - (0.1)%
(54,040) Albertsons, Inc. (1,290,475)
--------------------------------------------------------------------------------------------------------------------------------
Food Products - (0.1)%
(31,010) General Mills Inc. (1,541,507)
--------------------------------------------------------------------------------------------------------------------------------
Gas Utilities - (0.2)%
(99,375) Southern Union Company (2,383,013)
--------------------------------------------------------------------------------------------------------------------------------
Insurance - (0.9)%
(27,735) Chubb Corporation (2,132,822)
(142,950) Genworth Financial Inc. (3,859,650)
(60,725) Hartford Financial Services Group, Inc. (4,208,850)
(60,900) Hilb, Roga and Hamilton Companies (2,207,016)
(108,245) UnumProvident Corporation (1,941,915)
--------------------------------------------------------------------------------------------------------------------------------
Leisure Equipment & Products - (0.1)%
(50,389) K2 Inc. (800,177)
--------------------------------------------------------------------------------------------------------------------------------
Media - (0.3)%
(479,775) Lions Gate Entertainment Corporation, Equity (5,095,211)
--------------------------------------------------------------------------------------------------------------------------------
Metals & Mining - (0.8)%
(262,868) United States Steel Corporation (13,471,985)
--------------------------------------------------------------------------------------------------------------------------------
Multi-Utilities & Unregulated Power - (0.3)%
(504,845) Aquila Inc. (1,862,878)
(94,900) Sempra Energy (3,480,932)
--------------------------------------------------------------------------------------------------------------------------------
Pharmaceuticals - (0.1)%
(102,810) Schering-Plough Corporation (2,146,672)
--------------------------------------------------------------------------------------------------------------------------------
Thrifts & Mortgage Finance - (0.1)%
(33,461) PMI Group Inc. (1,396,997)
--------------------------------------------------------------------------------------------------------------------------------
Total Common Stocks Sold Short (proceeds
$43,543,883) (60,103,128)
--------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 3.3% 50,465,719
--------------------------------------------------------------------------------------------------------------
FundPreferred Shares, at Liquidation Value - (46.2)% (708,000,000)
--------------------------------------------------------------------------------------------------------------
Net Assets Applicable to Common Shares - 100% $ 1,533,721,773
==============================================================================================================
28
Interest Rate Swap Contracts outstanding at December 31, 2004:
Notional Termination Unrealized
Counterparty Amount Fixed Rate Floating Rate** Date Appreciation
------------------------------------------------------------------------------------------------------------------------------------
Royal Bank of Canada $71,000,000 1.4300% 2.4131% 1/22/05 $ 64,903
JPMorgan 71,000,000 1.9735 2.4131 1/22/06 853,294
Morgan Stanley 71,000,000 2.5670 2.4131 1/22/07 1,214,815
JPMorgan 71,000,000 2.9935 2.4131 1/22/08 1,329,940
Morgan Stanley 71,000,000 3.4060 2.4131 1/22/09 1,120,891
------------------------------------------------------------------------------------------------------------------------------------
$ 4,583,843
====================================================================================================================================
Futures Contracts outstanding at December 31, 2004:
Unrealized
Number of Contract Original Value at Appreciation
Type Contracts Expiration Value December 31, 2004 (Depreciation)
------------------------------------------------------------------------------------------------------------------------------------
U.S. Treasury Bonds 226 3/05 $ 25,099,125 $ 25,425,000 $ (325,875)
====================================================================================================================================
(1) All percentages shown in the Portfolio of Investments are based on
net assets applicable to Common shares unless otherwise noted.
* Ratings (not covered by the report of independent registered public
accounting firm): Below Baa by Moody's Investor Service, Inc. or BBB
by Standard and Poor's Group are considered to be below investment
grade.
** Based on LIBOR (London Inter-bank Offered Rate).
(a) Security is eligible for the Dividends Received Deduction.
(b) Security valued at fair value using methods determined in good faith
by or at the direction of the Board of Trustees.
144A 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.
NA Security is not rated.
See accompanying notes to financial statements.
29
Nuveen Preferred and Convertible Income Fund 2 (JQC)
Portfolio of
Investments December 31, 2004
Market
Shares Description(1) Value
---------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - 0.6% (0.4% of Total Investments)
Insurance - 0.4%
130,440 PartnerRe Limited $ 8,110,759
---------------------------------------------------------------------------------------------------------------------------------
Office Electronics - 0.2%
295,561 Xerox Corporation 5,027,493
---------------------------------------------------------------------------------------------------------------------------------
Total Common Stocks (cost $12,212,709) 13,138,252
---------------------------------------------------------------------------------------------------------------
Ratings*
--------------- Market
Shares Description(1) Coupon Moody's S&P Value
---------------------------------------------------------------------------------------------------------------------------------
$25 Par (or similar) SECURITIES - 45.6% (31.5% of
Total Investments)
Auto Components - 0.6%
505,913 Delphi Trust I 8.250% Baa3 BB 12,602,293
---------------------------------------------------------------------------------------------------------------------------------
Capital Markets - 4.3%
1,700 BCH Capital Ltd., Series B 9.430% A2 BBB+ 45,178
112,800 Bear Stearns Capital Trust III 7.800% A2 BBB 2,989,200
107,600 Bear Stearns Companies, Series G (a) 5.490% A3 BBB 5,468,770
27,000 BNY Capital Trust IV, Series E 6.875% A1 A- 682,560
306,984 BNY Capital Trust V, Series F 5.950% A1 A- 7,739,067
56,300 BSCH Finance Ltd., Series Q 8.625% A2 BBB+ 1,472,245
196,300 Compass Capital Trust III 7.350% A3 BBB- 5,160,727
31,000 CSFB USA, Series 2002-10 (SATURNS) 7.000% Aa3 A+ 799,800
49,000 First Union Capital II, Series II (CORTS) 7.500% A1 BBB+ 1,318,100
22,600 First Union Institutional Capital II (CORTS) 8.200% A1 BBB+ 639,580
18,800 First Union Institutional Capital II, Series III (CORTS) 7.500% A1 BBB+ 489,552
12,300 Goldman Sachs Group Inc., Series 2003-06 (SATURNS) 6.000% Aa3 A+ 303,195
22,000 JPMorgan Chase Capital Trust IX, Series I 7.500% A1 A- 581,680
198,350 Lehman Brothers Holdings Inc., Series C (a) 5.940% NA BBB+ 10,145,603
96,800 Lehman Brothers Holdings Inc., Series D (a) 5.670% A3 BBB+ 4,985,200
425,000 Lehman Brothers Holdings Inc., Series F (a) 6.500% A3 BBB+ 11,534,500
231,000 Merrill Lynch Capital Trust 7.000% A1 A- 6,195,420
47,800 Merrill Lynch Preferred Capital Trust 7.750% A1 A- 1,278,650
186,200 Merrill Lynch Preferred Capital Trust IV 7.120% A1 A- 5,006,918
278,400 Merrill Lynch Preferred Capital Trust V 7.280% A1 A- 7,558,560
211,850 Morgan Stanley Capital Trust II 7.250% A1 A- 5,605,551
203,200 Morgan Stanley Capital Trust III 6.250% A1 A- 5,167,376
137,900 Morgan Stanley Capital Trust IV 6.250% A1 A- 3,493,007
117,580 Morgan Stanley (PPLUS) 7.050% Aa3 A+ 3,117,046
13,600 UBS Preferred Funding Trust III 7.250% A1 AA- 357,544
---------------------------------------------------------------------------------------------------------------------------------
Commercial Banks - 10.5%
301,600 Abbey National plc 7.375% A2 A- 8,158,280
53,700 Abbey National plc, Series B 7.250% A1 A- 1,415,532
34,200 Abbey National plc, Series B 7.375% A2 A 940,500
863,770 ABN AMRO Capital Fund Trust V 5.900% A2 A 21,162,365
96,400 ABN AMRO Capital Fund Trust VI 6.250% A2 A 2,462,056
111,600 ASBC Capital I 7.625% Baa1 BBB- 2,996,460
203,410 BAC Capital Trust I 7.000% Aa3 A- 5,357,819
560,200 BAC Capital Trust II 7.000% Aa3 A- 14,968,544
163,900 BAC Capital Trust III 7.000% Aa3 A- 4,400,715
1,010,000 Banco Santander 6.410% A2 BBB+ 26,032,750
71,750 Banco Totta & Acores Finance, Series A 8.875% A3 NA 1,957,433
30
Ratings*
--------------- Market
Shares Description(1) Coupon Moody's S&P Value
---------------------------------------------------------------------------------------------------------------------------------
Commercial Banks (continued)
19,000 BancWest Capital I 9.500% A3 A- $ 502,550
15,700 Bank One Capital II 8.500% A1 A- 407,101
167,700 Bank One Capital Trust VI 7.200% A1 A- 4,454,112
32,200 Bank One Capital V 8.000% A1 A- 849,758
51,900 BankNorth Capital Trust II 8.000% Baa1 BB+ 1,390,401
145,800 Chittenden Capital Trust I 8.000% Baa1 BB+ 3,952,638
24,000 Citigroup Inc., Series H (a) 6.231% Aa3 NA 1,293,000
146,500 Cobank ABC, 144A (a) 7.000% NA NA 7,782,080
110,200 Comerica Capital Trust I 7.600% A3 BBB+ 2,896,056
18,900 Fleet Capital Trust II (CORTS) 8.000% Aa3 A- 500,472
4,400 Fleet Capital Trust VI 8.800% Aa3 A- 112,992
512,200 Fleet Capital Trust VII 7.200% Aa3 A- 13,598,910
430,300 Fleet Capital Trust VIII 7.200% Aa3 A- 11,445,980
35,000 KeyCorp (PCARS) 7.500% A3 NA 921,900
103,500 KeyCorp Capital Trust V 5.875% A3 BBB 2,565,765
28,400 KeyCorp, Series 2001-7 (CORTS) 7.750% A3 BBB 765,380
34,300 KeyCorp, Series B (CORTS) 8.250% A3 BBB 895,230
84,900 National Commerce Capital Trust II 7.700% A1 A- 2,275,320
63,900 National Westminster Bank plc, Series A 7.875% Aa2 A+ 1,652,454
21,700 ONB Capital Trust II 8.000% Baa2 BB+ 585,900
53,300 PNC Capital Trust 6.125% A3 BBB 1,338,896
26,000 Regions Finance Trust I 8.000% A2 BBB+ 678,860
300,700 Royal Bank of Scotland Group plc, Series L 5.750% A1 A 7,370,157
139,200 SunTrust Capital Trust IV 7.125% A1 A- 3,662,352
108,900 SunTrust Capital Trust V 7.050% A1 A- 2,877,138
662,100 USB Capital Trust III 7.750% Aa3 A- 17,585,376
328,500 USB Capital Trust IV 7.350% Aa3 A- 8,741,385
288,700 USB Capital Trust V 7.250% Aa3 A- 7,653,437
39,100 VNB Capital Trust I 7.750% Baa1 BBB 1,040,842
45,800 Washington Mutual Capital Trust I, Series 2001-22, 7.650% Baa1 BBB 1,195,838
Class A-1 (CORTS)
40,000 Wells Fargo Capital Trust IV 7.000% Aa2 A 1,064,000
420,800 Wells Fargo Capital Trust V 7.000% Aa2 A 11,058,624
109,000 Wells Fargo Capital Trust VI 6.950% Aa2 A- 2,902,670
236,550 Wells Fargo Capital Trust VII 5.850% Aa2 A 5,894,826
117,300 Zions Capital Trust B 8.000% Baa1 BB+ 3,214,020
---------------------------------------------------------------------------------------------------------------------------------
Computers & Peripherals - 0.1%
16,400 IBM Inc. (CORTS) 7.125% A1 A+ 428,368
27,700 IBM Inc., Series 2001-1 (SATURNS) 7.125% A1 A+ 721,862
10,500 IBM Trust II (CORTS) 7.125% A1 A+ 273,000
18,300 IBM Trust IV (CORTS) 7.000% A1 A+ 488,610
---------------------------------------------------------------------------------------------------------------------------------
Consumer Finance - 0.7%
10,800 Household Capital Trust V, Series X 10.000% A2 BBB+ 277,884
40,900 Household Capital Trust VI 8.250% A2 BBB+ 1,085,486
98,100 Household Capital Trust VII 7.500% A2 BBB+ 2,625,156
53,000 HSBC Finance Corporation 6.875% A1 A 1,440,010
15,200 SLM Corporation 6.000% A2 A 380,304
174,000 SLM Corporation, Series A (a) 6.970% Baa1 BBB+ 10,005,000
---------------------------------------------------------------------------------------------------------------------------------
Diversified Financial Services - 4.8%
7,200 BBVA Preferred Capital Ltd., Series B 7.750% A1 A- 191,088
26,500 CIT Group Incorporated (CORTS) 7.750% A3 BBB+ 728,088
186,200 Citigroup Capital Trust VII 7.125% Aa2 A 4,915,680
1,006,400 Citigroup Capital Trust VIII 6.950% Aa2 A 26,407,936
268,800 Citigroup Capital Trust IX 6.000% Aa2 A 6,773,760
40,100 General Electric Capital Corporation 6.625% Aaa AAA 1,072,675
5,000 ING Capital Funding Trust II 9.200% A2 A- 128,600
584,220 ING Group NV 7.200% A2 A- 15,873,257
722,775 ING Group NV 7.050% NA A- 19,442,648
43,200 JPM Capital Trust (CORTS) 7.200% A2 A- 1,145,664
9,900 JPM Capital Trust I, Series 2001-1, Class A-1 (CORTS) 7.850% A1 A- 267,597
31
Nuveen Preferred and Convertible Income Fund 2 (JQC) (continued)
Portfolio of Investments December 31, 2004
Ratings*
--------------- Market
Shares Description(1) Coupon Moody's S&P Value
---------------------------------------------------------------------------------------------------------------------------------
Diversified Financial Services (continued)
71,965 JPMorgan Chase & Compamy (PCARS) 7.125% A2 A- $ 1,862,814
712,420 JPMorgan Chase Capital Trust X 7.000% A1 NA 19,042,987
73,600 JPMorgan Chase Trust, Series 2002-6, Class A (SATURNS) 7.125% A1 A- 1,966,592
71,500 Merrill Lynch Capital Trust II 8.000% A1 A- 1,946,230
---------------------------------------------------------------------------------------------------------------------------------
Diversified Telecommunication Services - 0.6%
36,700 BellSouth Capital Funding (CORTS) 7.100% A1 A 974,385
16,000 BellSouth Corporation (CORTS) 7.000% Aa3 A 414,400
17,600 BellSouth Corporation, CABCO Trust 9.750% NA A 459,360
48,600 BellSouth Corporation, Series 2001-3 (SATURNS) 7.125% A2 A 1,265,058
30,800 BellSouth Inc. (CORTS) 7.000% A2 A 810,040
70,600 BellSouth Telecommunications (PPLUS) 7.300% Aa3 A 1,825,010
57,900 Deutsche Telekom International Finance, B.V., 7.875% Baa1 BBB+ 1,523,928
Series 2001-24, Class A-1 (CORTS)
50,000 SBC Communications Inc. 7.000% A2 A 1,314,000
26,300 Verizon Communications (CORTS) 7.625% A2 A+ 707,470
47,300 Verizon Communications (CORTS) 7.375% A2 A+ 1,266,931
50,700 Verizon New England Inc., Series B 7.000% A2 NA 1,353,690
29,900 Verizon South Inc., Series F 7.000% A2 A+ 792,350
---------------------------------------------------------------------------------------------------------------------------------
Electric Utilities - 0.6%
5,000 Consolidated Edison Company 7.250% A2 A- 134,050
12,000 Consolidated Edison Company of New York Inc. 7.500% A1 A 317,280
4,000 Detroit Edison Company 7.375% Baa2 BB+ 100,800
21,100 DTE Energy Trust I 7.800% Baa3 BB+ 565,058
27,400 Entergy Louisiana Inc. 7.600% Baa1 A- 732,402
6,600 Entergy Mississippi Inc. 7.250% Baa2 A- 179,850
3,000 Georgia Power Capital Trust V 7.125% A3 BBB+ 80,550
130,000 Interstate Power and Light Company (a) 7.100% Baa3 BBB- 3,601,000
11,000 Mississippi Power Capital Trust II 7.200% A2 BBB+ 294,305
40,000 National Rural Utilities Cooperative Finance Corporation 6.100% A3 BBB+ 1,002,800
33,600 Northern States Power Company 8.000% A3 BBB- 915,936
10,900 Southern Company Capital Trust I (CORTS) 8.190% Baa1 BBB+ 308,252
30,300 Southern Company Capital Trust I (CORTS) 7.375% Baa1 BBB+ 809,919
13,100 Southern Company Capital Trust VI 7.125% Baa1 BBB+ 348,853
122,300 Virginia Power Capital Trust 7.375% Baa1 BBB- 3,295,985
---------------------------------------------------------------------------------------------------------------------------------
Food Products - 0.4%
75,000 Dairy Farmers of America Inc., 144A (a) 7.875% Baa3 BBB- 7,828,125
---------------------------------------------------------------------------------------------------------------------------------
Gas Utilities - 0.1%
75,300 AGL Capital Trust II 8.000% Baa2 BBB 1,997,709
---------------------------------------------------------------------------------------------------------------------------------
Insurance - 8.4%
157,500 ACE Capital Trust I, Series 1999 8.875% Baa1 BBB- 3,980,025
1,302,383 Ace Ltd., Series C 7.800% Baa2 BBB- 34,747,578
587,500 Aetna Incorporated 8.500% Baa2 BBB+ 15,739,125
5,100 Allstate Corporation (PCARS) 7.150% A2 A- 134,895
87,300 AMBAC Financial Group Inc. 5.950% Aa2 AA 2,194,722
674,601 Delphi Financial Group Inc. 8.000% Baa3 BBB 18,382,877
192,956 EverestRe Capital Trust II 6.200% Baa1 BBB 4,522,889
89,500 EverestRe Group Limited 7.850% Baa1 BBB 2,475,570
10,700 Financial Security Assurance Holdings 6.875% Aa2 AA 282,480
284,700 Hartford Capital Trust III, Series C 7.450% Baa1 BBB 7,464,834
41,100 Hartford Life Capital Trust II, Series B 7.625% Baa1 BBB 1,087,917
53,400 Lincoln National Capital Trust V, Series E 7.650% Baa1 BBB 1,416,168
1,402,300 Lincoln National Capital Trust VI 6.750% Baa1 BBB 37,567,617
3,600 MBIA Inc. 8.000% Aa2 AA 94,500
78,200 PartnerRe Limited 7.900% A3 BBB+ 2,080,120
900,702 PartnerRe Limited, Series C 6.750% Baa1 BBB+ 23,364,210
80,000 PLC Capital Trust III 7.500% Baa1 BBB+ 2,113,600
67,200 PLC Capital Trust IV 7.250% Baa1 BBB+ 1,787,520
13,800 PLC Capital Trust V 6.125% Baa1 BBB+ 339,480
32
Ratings*
--------------- Market
Shares Description(1) Coupon Moody's S&P Value
---------------------------------------------------------------------------------------------------------------------------------
Insurance (continued)
38,800 Prudential plc 6.750% Baa1 A $ 1,006,084
114,400 RenaissanceRe Holdings Ltd., Series A 8.100% Baa2 BBB+ 3,052,192
124,700 RenaissanceRe Holdings Ltd., Series B 7.300% Baa2 BBB+ 3,346,948
24,900 Safeco Capital Trust I (CORTS) 8.700% Baa2 BBB- 679,272
20,900 Safeco Capital Trust I (CORTS) 8.750% Baa2 BBB- 638,495
20,100 Safeco Capital Trust I, Series 2001-4 (CORTS) 8.750% Baa2 BBB- 542,700
45,800 Safeco Capital Trust III (CORTS) 8.072% Baa2 BBB- 1,257,210
16,600 Safeco Capital Trust IV (CORTS) 8.375% Baa2 BBB- 466,377
37,300 Safeco Corporation, Series 2002-5 (SATURNS) 8.250% Baa2 BBB- 1,012,136
37,900 Safeco Corporation, Series 2001-7 (SATURNS) 8.250% Baa2 BBB- 1,003,213
53,700 Torchmark Capital Trust I 7.750% Baa1 A- 1,440,503
118,100 W.R. Berkley Capital Trust, Series 2002-1 (CBTCS) 8.125% Baa3 BBB- 1,262,489
66,800 XL Capital Ltd., Series A 8.000% Baa1 BBB+ 1,824,308
101,100 XL Capital Ltd., Series B 7.625% Baa1 BBB+ 2,722,623
---------------------------------------------------------------------------------------------------------------------------------
Media - 0.1%
52,700 Viacom Inc. 7.300% A3 A- 1,380,740
---------------------------------------------------------------------------------------------------------------------------------
Multi-Utilities & Unregulated Power - 0.2%
51,400 Dominion CNG Capital Trust I 7.800% Baa1 BBB- 1,376,492
30,700 Dominion Resources Capital Trust II 8.400% Baa2 BBB- 827,365
85,200 Energy East Capital Trust I 8.250% Baa3 BBB- 2,285,916
---------------------------------------------------------------------------------------------------------------------------------
Oil & Gas - 0.9%
685,000 Nexen Inc. 7.350% Baa3 BB+ 18,447,050
---------------------------------------------------------------------------------------------------------------------------------
Pharmaceuticals - 0.1%
50,000 Bristol Myers Squibb Company (CORTS) 6.250% A1 A+ 1,299,750
---------------------------------------------------------------------------------------------------------------------------------
Real Estate - 11.2%
318,355 AMB Property Corporation, Series L 6.500% Baa2 BBB- 8,175,356
77,100 AvalonBay Communities, Inc., Series H 8.700% Baa2 BBB 2,175,762
220,400 BRE Properties, Series B 8.080% Baa3 BBB- 5,917,740
80,000 BRE Properties, Series D 6.750% Baa3 BBB- 2,008,000
1,166,500 CarrAmerica Realty Corporation, Series E 7.500% Baa3 BBB- 30,982,240
104,100 Developers Diversified Realty Corporation, Series G 8.000% Ba1 BBB- 2,784,675
1,264,845 Developers Diversified Realty Corporation, Series H 7.375% Ba1 BBB- 32,772,134
21,100 Duke Realty Corporation, Series K 6.500% Baa2 BBB 533,830
120,000 Duke Realty Corporation, Series L 6.600% Baa2 BBB 3,000,000
98,000 Duke-Weeks Realty Corporation 6.625% Baa2 BBB 2,567,600
25,000 Duke-Weeks Realty Corporation, Series B 7.990% Baa2 BBB 1,265,625
5,400 Duke-Weeks Realty Corporation, Series I 8.450% Baa2 BBB 142,020
192,100 Equity Office Properties Trust, Series G 7.750% Baa3 BBB 5,186,700
3,200 Equity Residential Properties Trust, Series C 9.125% Baa2 BBB 86,048
15,400 Equity Residential Properties Trust, Series D 8.600% Baa2 BBB 421,652
467,489 Equity Residential Properties Trust, Series N 6.480% Baa2 BBB 11,850,846
140,000 Federal Realty Investment Trust 8.500% Baa3 BBB- 3,798,200
11,600 First Industrial Realty Trust, Inc., Series C 8.625% Baa3 BBB- 319,000
44,041 Gables Residential Trust, Series D 7.500% Baa3 BBB- 1,136,258
423,729 HRPT Properties Trust, Series A 9.875% Baa3 BBB- 11,461,869
458,600 HRPT Properties Trust, Series B 8.750% Baa3 BBB- 12,682,583
99,400 New Plan Excel Realty Trust, Series E 7.625% NA BBB- 2,618,196
3,997 Prologis Trust, Series C 8.540% Baa2 BBB 240,445
96,075 Prologis Trust, Series G 6.750% Baa2 BBB 2,423,972
299,600 PS Business Parks Inc. 7.000% Ba1 BBB- 7,427,084
240,000 PS Business Parks Inc., Series L 7.600% Ba1 BBB- 6,134,400
31,000 Public Storage Inc., Series Q 8.600% Baa2 BBB+ 811,890
147,450 Public Storage Inc., Series R 8.000% Baa2 BBB+ 3,888,257
50,060 Public Storage Inc., Series S 7.875% Baa2 BBB+ 1,318,080
42,000 Public Storage Inc., Series T 7.625% Baa2 BBB+ 1,103,760
173,800 Public Storage Inc., Series U 7.625% Baa2 BBB+ 4,630,032
31,500 Public Storage Inc., Series V 7.500% Baa2 BBB+ 834,750
33
Nuveen Preferred and Convertible Income Fund 2 (JQC) (continued)
Portfolio of Investments December 31, 2004
Ratings*
--------------- Market
Shares Description(1) Coupon Moody's S&P Value
---------------------------------------------------------------------------------------------------------------------------------
Real Estate (continued)
166,100 Regency Centers Corporation 7.450% Baa3 BBB- $ 4,427,396
20,500 Simon Property Group, Inc., Series F 8.750% Baa2 BBB- 551,655
15,100 Simon Property Group, Inc., Series G 7.890% Baa2 BBB 803,622
165,000 Vornado Realty Trust 6.625% Baa3 BBB- 4,075,500
3,370 Vornado Realty Trust, Series C 8.500% Ba1 BBB- 84,520
1,987,734 Wachovia Preferred Funding Corporation 7.250% A2 BBB+ 56,411,891
130,000 Weingarten Realty Trust, Series E 6.950% Baa1 A- 3,412,500
---------------------------------------------------------------------------------------------------------------------------------
Specialty Retail - 0.0%
26,400 Sherwin Williams Company, Series III (CORTS) 7.250% A2 A 714,120
---------------------------------------------------------------------------------------------------------------------------------
Thrifts & Mortgage Finance - 1.3%
68,400 Countrywide Capital III (PPLUS) 8.050% Baa1 BBB+ 1,855,008
75,900 Countrywide Capital Trust II, Series II (CORTS) 8.000% Baa1 BBB+ 2,029,566
666,500 Countrywide Capital Trust IV 6.750% Baa1 BBB+ 17,135,715
14,800 Fannie Mae (a) 3.780% Aa3 AA- 743,700
33,000 Fannie Mae (a) 5.125% Aa3 AA- 1,411,410
11,600 Fannie Mae (a) 4.750% Aa3 AA- 479,080
52,000 Fannie Mae 0.000% Aa3 AA- 2,944,500
26,000 Federal Home Loan Mortgage Corporation (a) 5.100% Aa3 AA- 1,133,600
15,000 Federal Home Loan Mortgage Corporation (a) 5.000% Aa3 AA- 645,000
---------------------------------------------------------------------------------------------------------------------------------
Wireless Telecommunication Services - 0.7%
28,000 AT&T Wireless Services Equity, Series 2002-B (SATURNS) 9.250% Baa2 A 789,600
55,900 AT&T Wireless, Series 2002-7 (CORTS) 8.000% Baa2 A 1,522,716
112,000 Telephone and Data Systems Inc. 7.600% Baa1 A- 2,954,560
340,000 United States Cellular Corporation 7.500% Baa1 A- 9,214,000
48,900 United States Cellular Corporation 8.750% Baa1 A- 1,368,222
---------------------------------------------------------------------------------------------------------------------------------
Total $25 Par (or similar) Securities (cost
$957,306,520) 975,481,863
---------------------------------------------------------------------------------------------------------------
CONVERTIBLE PREFERRED SECURITIES -17.9% (12.4% of Total Investments)
Automobiles - 1.3%
96,885 Ford Motor Company Capital Trust II 6.500% Baa2 BB 5,114,559
835,200 General Motors Corporation 6.250% Baa2 BBB- 22,266,432
---------------------------------------------------------------------------------------------------------------------------------
Capital Markets - 1.1%
309,000 Gabelli Asset Management Inc. 6.950% Baa2 NA 8,275,020
394,500 Goldmand Sachs Group Inc., Series EMC 6.125% Aa3 NA 5,208,978
143,200 Lehman Brothers Holdings Inc., Series GIS 6.250% NA NA 3,866,400
29,725 State Street Corporation 6.750% NA BB+ 6,658,400
---------------------------------------------------------------------------------------------------------------------------------
Chemicals - 0.4%
84,400 The Mosaic Company 7.500% Caa1 NA 9,262,900
---------------------------------------------------------------------------------------------------------------------------------
Commercial Banks - 1.6%
130,500 HSBC Finance Corporation 8.875% A1 A 6,094,350
273,600 National Australia Bank Limited 7.875% NA NA 10,380,384
217,375 Sovereign Capital Trust IV, Convertible Security 4.375% Ba1 BB- 10,651,375
115,725 Washington Mutual Inc., Unit 1 Trust 5.375% Baa1 BBB 6,526,427
---------------------------------------------------------------------------------------------------------------------------------
Communications Equipment - 0.8%
9,200 Lucent Technologies Capital Trust I 7.750% Caa1 CCC- 10,943,952
115 Nortel Networks Corp. 7.000% NA NA 7,091,740
---------------------------------------------------------------------------------------------------------------------------------
Construction Materials - 0.5%
216,700 TXI Capital Trust I 6.500% B3 B- 10,975,855
---------------------------------------------------------------------------------------------------------------------------------
Consumer Finance - 0.1%
45,000 Capital One Financial Corporation 6.250% Baa3 BBB- 2,539,800
---------------------------------------------------------------------------------------------------------------------------------
Containers & Packaging - 0.4%
149,000 Temple Inland Inc. 7.500% Baa3 BBB 8,388,700
34
Ratings*
--------------- Market
Shares Description(1) Coupon Moody's S&P Value
---------------------------------------------------------------------------------------------------------------------------------
Diversified Financial Services - 0.6%
281,600 Citigroup Global Markets 2.000% Aa1 AA- $ 13,241,677
---------------------------------------------------------------------------------------------------------------------------------
Electric Utilities - 1.2%
260,000 Centerpoint Energy Inc. 2.000% Ba2 BBB- 9,618,180
154,500 FPL Group Inc. 8.000% NA A- 9,307,080
2,630,000 PG&E Corporation 9.500% NA NA 7,028,675
---------------------------------------------------------------------------------------------------------------------------------
Electrical Equipment - 0.2%
60,775 General Cable Corporation, 144A 5.750% NA NA 4,824,016
---------------------------------------------------------------------------------------------------------------------------------
Electronic Equipment & Instruments - 0.5%
182,200 Pioneer-Standard Financial Trust 6.750% B2 NA 10,225,975
---------------------------------------------------------------------------------------------------------------------------------
Food & Staples Retailing - 0.4%
357,025 Albertsons Inc. 7.250% Baa2 BBB 9,068,435
---------------------------------------------------------------------------------------------------------------------------------
Gas Utilities - 0.1%
30,150 Southern Union Company, Series B 5.750% Baa3 NA 2,197,935
---------------------------------------------------------------------------------------------------------------------------------
Healthcare Equipment & Supplies - 0.3%
124,000 Baxter International Inc. 7.000% Baa1 NA 7,001,040
---------------------------------------------------------------------------------------------------------------------------------
Hotels Restaurants & Leisure - 0.4%
157,000 Host Marriott Financial Trust 6.750% B2 CCC+ 8,850,875
---------------------------------------------------------------------------------------------------------------------------------
Household Durables - 0.4%
187,325 Newell Financial Trust I 5.250% Baa3 BBB- 8,827,691
---------------------------------------------------------------------------------------------------------------------------------
Insurance - 1.9%
147,000 Chubb Corporation 7.000% NA A 4,349,730
395,000 Genworth Financial Inc. 6.000% A2 A 12,801,950
167,000 Reinsurance Group of America Inc. 5.750% Baa2 BBB 10,270,500
100,000 UnumProvident Corporation 8.250% Ba1 BB+ 3,607,000
340,650 XL Capital Limited 6.500% A2 A 8,669,543
---------------------------------------------------------------------------------------------------------------------------------
Media - 0.7%
137,000 Emmis Communications Corporation, Series A 6.250% Caa1 CCC+ 6,308,850
70,350 Interpublic Group, Series A 5.375% NA NA 3,447,150
97,500 Sinclair Broadcast Group Inc., Series D 6.000% Caa1 B- 4,240,275
---------------------------------------------------------------------------------------------------------------------------------
Metals & Mining - 0.5%
24,300 Phelps Dodge Corporation 0.000% NA BB 5,026,698
36,000 United States Steel Corporation, Series B 7.000% NA B 6,006,600
---------------------------------------------------------------------------------------------------------------------------------
Multi-Utilities & Unregulated Power - 1.8%
86,975 Aquila Inc. 6.750% B2 B- 3,013,684
197,500 Dominion Resources Inc. 8.750% Baa1 BBB+ 10,898,050
151,300 Public Service Enterprise Group 10.250% Baa3 BBB- 10,185,516
442,550 Sempra Energy 8.500% NA BBB+ 13,772,156
---------------------------------------------------------------------------------------------------------------------------------
Oil & Gas - 1.0%
8,955 Chesapeake Energy Corporation, 144A 4.125% NA NA 10,421,381
222,100 Teekay Shipping Corporation 7.250% NA BB- 10,905,110
---------------------------------------------------------------------------------------------------------------------------------
Pharmaceuticals - 0.6%
217,875 Schering-Plough Corporation 6.000% Baa3 BBB 12,222,788
---------------------------------------------------------------------------------------------------------------------------------
Real Estate - 0.5%
225,250 Equity Office Properties Trust, Series B 5.250% Baa2 BBB 11,568,840
---------------------------------------------------------------------------------------------------------------------------------
Thrifts & Mortgage Finance - 0.6%
77 Fannie Mae 5.375% Aa3 AA- 8,162,000
140,000 PMI Group Inc. 5.875% A1 A 3,701,600
---------------------------------------------------------------------------------------------------------------------------------
Total Convertible Preferred Securities (cost $340,265,576) 384,016,272
---------------------------------------------------------------------------------------------------------------
35
Nuveen Preferred and Convertible Income Fund 2 (JQC) (continued)
Portfolio of Investments December 31, 2004
Principal Ratings*
Amount (000)/ --------------- Market
Shares Description(1) Coupon Maturity Moody's S&P Value
---------------------------------------------------------------------------------------------------------------------------------
CONVERTIBLE BONDS - 28.4% (19.6% of Total Investments)
Aerospace & Defense - 0.4%
3,860 AAR Corporation, 144A 2.875% 2/01/24 B2 BB- $ 3,739,375
4,900 EDO Corporation, Convertible Subordinate Note 5.250% 4/15/07 NA NA 5,365,500
---------------------------------------------------------------------------------------------------------------------------------
Airlines - 0.9%
8,450 American Airlines Corporation, 144A 4.250% 9/23/23 Caa2 CCC 7,562,750
8,050 Continental Airlines Inc. 4.500% 2/01/07 Caa2 CCC+ 6,782,125
3,200 Northwest Airlines Corporation 6.625% 5/15/23 Caa1 CCC+ 3,168,000
2,250 Northwest Airlines Corporation, Convertible Notes, 6.625% 5/15/23 Caa1 CCC+ 2,227,500
144A
---------------------------------------------------------------------------------------------------------------------------------
Auto Components - 0.2%
6,440 Lear Corporation 0.000% 2/20/22 Baa3 BBB- 3,356,850
---------------------------------------------------------------------------------------------------------------------------------
Automobiles - 0.2%
3,595 Fleetwood Enterprises Inc., 144A 5.000% 12/15/23 B2 B 5,145,344
---------------------------------------------------------------------------------------------------------------------------------
Biotechnology - 1.1%
5,000 Cephalon Inc. 0.000% 6/15/33 NA B- 5,150,000
3,790 Imclone Systems Inc., 144A 1.375% 5/15/24 NA NA 3,515,225
5,975 Ivax Corporation, Convertible Note, 144A 1.500% 3/01/24 NA NA 5,810,688
8,500 Ivax Corporation, Convertible Senior Subordinated 4.500% 5/15/08 NA NA 8,542,500
Notes
---------------------------------------------------------------------------------------------------------------------------------
Commercial Services & Supplies - 0.7%
7,000 Electronic Data Systems, Convertible Senior Notes, 3.875% 7/15/23 Ba1 BBB- 7,428,750
144A
8,200 IOS Capital LLC, Convertible Subordinate 5.000% 5/01/07 Ba3 B+ 8,425,500
Debentures, 144A
---------------------------------------------------------------------------------------------------------------------------------
Communications Equipment - 1.5%
9,200 Ciena Corporation 3.750% 2/01/08 B2 B 8,211,000
5,245 Corning Inc. 3.500% 11/01/08 Ba2 BB+ 6,392,344
3,775 Lucent Technologies Inc. 2.750% 6/15/23 B2 B 5,214,219
4,475 Powerwave Technologies Inc. 1.825% 11/15/24 NA NA 4,603,656
6,850 Skyworks Solutions Inc. 4.750% 11/15/07 NA NA 8,408,375
---------------------------------------------------------------------------------------------------------------------------------
Computers & Peripherals - 0.5%
11,635 Hewlett-Packard Company 0.000% 10/14/17 Baa1 BBB+ 6,646,494
3,250 Mercury Computer Systems Inc., 144A 2.000% 5/01/24 NA NA 3,867,500
---------------------------------------------------------------------------------------------------------------------------------
Construction & Engineering - 0.4%
8,500 Quanta Services Incorporated 4.000% 7/01/07 NA NA 8,117,500
---------------------------------------------------------------------------------------------------------------------------------
Consumer Finance - 0.4%
8,000 Providian Financial Corporation, Convertible 3.250% 8/15/05 B2 B 8,030,000
Senior Notes
---------------------------------------------------------------------------------------------------------------------------------
Diversified Financial Services - 0.4%
2,650 JMH Finance Limited 4.750% 9/06/07 NA NA 2,777,690
4,075 Leucadia National Corporation, 144A 3.750% 4/15/14 Ba3 B+ 5,058,094
---------------------------------------------------------------------------------------------------------------------------------
Electronic Equipment & Instruments - 0.7%
21,000 Anixter International Inc. 0.000% 6/28/20 Ba3 BB+ 7,481,250
7,020 Vishay Intertechnology Inc. 3.625% 8/01/23 B3 B+ 7,906,275
---------------------------------------------------------------------------------------------------------------------------------
Energy Equipment & Services - 1.5%
8,400 Diamond Offshore Drilling Inc. 1.500% 4/15/31 NA A- 8,946,000
8,500 Maverick Tube Corporation 4.000% 6/15/33 NA NA 11,411,250
9,250 Schlumberger Limited 2.125% 6/01/23 A1 A+ 10,036,250
1,210 Willbros Group Inc., 144A 2.750% 3/15/24 NA NA 1,560,900
---------------------------------------------------------------------------------------------------------------------------------
Healthcare Equipment & Supplies - 1.1%
5,745 Advanced Medical Optics 2.500% 7/15/24 B3 B 6,276,413
8,195 Fisher Scientific International Inc. 3.250% 3/01/24 Ba3 BB+ 9,229,619
8,700 Lifepoint Hospitals Inc. 4.500% 6/01/09 B3 NA 8,732,625
36
Principal Ratings*
Amount (000)/ --------------- Market
Shares Description(1) Coupon Maturity Moody's S&P Value
---------------------------------------------------------------------------------------------------------------------------------
Hotels Restaurants & Leisure - 3.0%
10,775 Carnival Corporation 2.000% 4/15/21 A3 A- $ 16,310,656
7,500 Hilton Hotels Corporation 3.375% 4/15/23 Baa3 BBB- 9,009,375
7,125 Kerzner International Limited, 144A 2.375% 4/15/24 B2 B 8,701,406
16,000 Royal Caribbean Cruises Limited, Senior 0.000% 2/02/21 Ba2 BB+ 10,300,000
Convertible Zero Coupon Liquid Yield Option Notes
4,985 Scientific Games Corporation 0.750% 12/01/24 B2 B+ 5,215,556
4,750 Six Flags Inc. 4.500% 5/15/15 Caa1 CCC 5,367,500
7,755 Starwood Hotels and Resorts Worldwide Inc. 3.500% 5/16/23 Ba1 BB+ 9,654,975
---------------------------------------------------------------------------------------------------------------------------------
Industrial Conglomerates - 0.9%
4,650 Tyco International Group Limited, Convertible 3.125% 1/15/23 Ba1 BBB 7,835,250
Notes, 144A
7,200 Tyco International Group SA 3.125% 1/15/23 Baa3 BBB 12,132,000
---------------------------------------------------------------------------------------------------------------------------------
Internet & Catalog Retail - 0.1%
2,395 Overstock.com Inc. 3.750% 12/01/11 NA NA 2,978,781
---------------------------------------------------------------------------------------------------------------------------------
IT Services - 0.6%
1,470 BearingPoint Inc. 2.500% 12/15/24 Ba3 BB- 1,552,688
1,470 BearingPoint Inc. 2.750% 12/15/24 Ba3 BB- 1,558,200
7,100 Digital River Inc., 144A 1.250% 1/01/24 NA NA 8,395,750
1,070 Euronet Worldwide Inc. 1.625% 12/15/24 NA NA 1,143,563
---------------------------------------------------------------------------------------------------------------------------------
Leisure Equipment & Products - 0.7%
4,850 Collegiate Pacific Inc. 5.750% 12/01/09 NA NA 5,516,875
7,000 Hasbro Inc. 2.750% 12/01/21 Baa3 BB+ 7,577,500
1,165 K2 Corporation, Convertible Notes, 144A 5.000% 6/15/10 NA NA 1,677,600
---------------------------------------------------------------------------------------------------------------------------------
Media - 5.1%
3,210 Charter Communications Inc. 5.875% 11/16/09 Ca CCC- 3,631,313
415,000 Comcast Corporation 2.000% 10/15/29 Ba2 BBB- 18,463,350
4,500 Interpublic Group Companies Inc. 4.500% 3/15/23 Baa3 BB+ 5,917,500
6,340 Lamar Advertising Company, Convertible Notes 2.875% 12/31/10 B2 B 7,029,475
6,990 Liberty Media Corporation 0.750% 3/30/23 Baa3 BBB- 8,449,163
11,000 Liberty Media Corporation, Senior Debentures, 3.250% 3/15/31 Baa3 BBB- 10,848,750
Exchangeable for Class B Viacom Common Stock
10,565 Liberty Media Corporation, Senior Debentures, 3.500% 1/15/31 Baa3 BBB- 10,023,544
Exchangeable for Motorola Common Stock
26,800 Liberty Media Corporation, Senior Debentures, 4.000% 11/15/29 Baa3 BBB- 19,731,500
Exchangeable for PCS Common Stock, Series 1
890,000 Lions Gate Entertainment Corporation 4.875% 12/15/10 NA NA 1,825,613
3,780,000 Lions Gate Entertainment Corporation,Convertible 4.875% 12/15/10 NA NA 7,753,725
Bond, 144A
3,540 Lions Gate Entertainment Corporation, 144A 2.938% 10/15/24 NA NA 4,212,600
8,050 Walt Disney Company, Convertible Senior Notes 2.125% 4/15/23 Baa1 BBB+ 8,995,875
---------------------------------------------------------------------------------------------------------------------------------
Metals & Mining - 0.2%
4,510 Trizec Hahn Corporation 3.000% 1/29/21 Ba1 NA 3,681,288
---------------------------------------------------------------------------------------------------------------------------------
Oil & Gas - 0.7%
8,600 Kerr-McGee Corporation 5.250% 2/15/10 Ba1 BBB- 9,148,250
4,170 McMoran Exploration Corporation, Notes, 144A 6.000% 7/02/08 NA NA 6,322,763
---------------------------------------------------------------------------------------------------------------------------------
Pharmaceuticals - 2.3%
1,845 Abgenix Inc., Senior Convertible Note, 144A 1.750% 12/15/11 NA NA 2,004,131
2,400 Alexion Pharmaceuticals Inc. 5.750% 3/15/07 NA NA 2,436,000
9,530 Allergan Inc., Convertible Zero Coupon Senior Notes 0.000% 11/06/22 A3 A 9,363,225
1,255 Atherogenics Inc., 144A 4.500% 9/01/08 NA NA 2,193,113
7,000 OSI Pharmaceuticals Inc. 3.250% 9/08/23 NA NA 12,048,750
5,425 Teva Pharmaceutical Finance, Series B 0.250% 2/01/24 NA BBB 5,533,500
4,350 Valeant Pharmaceuticals International, 144A 3.000% 8/16/10 NA B 4,812,188
2,545 Valeant Pharmaceuticals International, 144A 4.000% 11/15/13 NA B 2,809,044
8,500 Wyeth, 144A 1.000% 1/15/24 Baa1 A 8,755,085
37
Nuveen Preferred and Convertible Income Fund 2 (JQC) (continued)
Portfolio of Investments December 31, 2004
Principal Ratings*
Amount (000)/ --------------- Market
Shares Description(1) Coupon Maturity Moody's S&P Value
---------------------------------------------------------------------------------------------------------------------------------
Real Estate - 0.2%
3,625 Avatar Holdings Inc., 144A 4.500% 4/01/24 NA NA $ 4,105,313
---------------------------------------------------------------------------------------------------------------------------------
Semiconductors & Equipment - 1.4%
6,180 Advanced Micro Devices Inc. 4.750% 2/01/22 B3 B- 7,130,175
8,325 Agere Systems Inc. 6.500% 12/15/09 B3 B 8,845,313
6,400 ASM International NV 4.250% 12/06/11 NA B- 6,776,000
5,500 ASM Lithography Holding NV 5.750% 10/15/06 B2 NA 6,256,250
---------------------------------------------------------------------------------------------------------------------------------
Software - 0.8%
4,200 Computer Associates International Inc. 5.000% 3/15/07 Ba1 BBB- 5,444,250
7,100 Mentor Graphics Corporation, Convertible 6.875% 6/15/07 NA NA 7,499,375
Subordinate Notes
5,105 Novell Inc., 144A 0.500% 7/15/24 NA NA 4,881,656
---------------------------------------------------------------------------------------------------------------------------------
Specialty Retail - 1.6%
7,820 Charming Shoppes Inc. 4.750% 6/01/12 B2 BB- 9,296,025
11,450 Lowes Companies Inc. 0.000% 2/16/21 A2 A+ 10,949,063
8,700 Sonic Automotive Inc., Convertible Senior 5.250% 5/07/09 B3 B+ 8,700,000
Subordinated Notes
5,900 TJX Companies Inc. 0.000% 2/13/21 Baa1 A- 5,206,750
---------------------------------------------------------------------------------------------------------------------------------
Textiles & Apparel - 0.3%
6,025 Reebok International Ltd. 2.000% 5/01/24 Baa3 BBB 6,582,313
---------------------------------------------------------------------------------------------------------------------------------
Wireless Telecommunication Services - 0.5%
2,975 NII Holdings Inc., 144A 3.500% 9/15/33 NA NA 5,756,625
4,100 NII Holdings Inc., 144A 2.875% 2/01/34 NA NA 4,745,750
---------------------------------------------------------------------------------------------------------------------------------
Total Convertible Bonds (cost $545,132,216) 608,219,839
---------------------------------------------------------------------------------------------------------------
CORPORATE BONDS - 16.9% (11.7% of Total
Investments)
Aerospace & Defense - 0.2%
3,500 K&F Aquisition Inc. 7.750% 11/15/14 Caa1 B- 3,631,250
---------------------------------------------------------------------------------------------------------------------------------
Auto Components - 0.4%
3,550 Affinia Group Inc. 9.000% 11/30/14 Caa1 B 3,718,625
4,000 Tenneco Auto, Inc. 10.250% 7/15/13 B2 B- 4,740,000
---------------------------------------------------------------------------------------------------------------------------------
Automobiles - 2.2%
2,000 Ford Motor Company 8.900% 1/15/32 Baa1 BBB- 2,279,958
7,570 Ford Motor Company, Debentures 7.700% 5/15/97 Baa1 BBB- 7,335,587
17,095 Ford Motor Company, Debentures 9.980% 2/15/47 Baa1 BBB- 21,306,182
15,630 General Motors Corporation, Senior Debentures 8.375% 7/15/33 Baa2 BBB- 16,238,820
---------------------------------------------------------------------------------------------------------------------------------
Building Products - 0.2%
4,000 Jacuzzi Brands Inc. 9.625% 7/01/10 B3 B 4,460,000
---------------------------------------------------------------------------------------------------------------------------------
Chemicals - 0.6%
6,500 OM Group Inc. 9.250% 12/15/11 Caa1 B- 6,955,000
3,500 Resolution Performance Products LLC 8.000% 12/15/09 B2 B 3,780,000
3,000 Rockwood Specialties Group 7.500% 11/15/14 B3 B- 3,127,500
---------------------------------------------------------------------------------------------------------------------------------
Commercial Banks - 0.5%
10,000 Washington Mutual Bank FA 5.125% 1/15/15 A3 A- 9,951,340
---------------------------------------------------------------------------------------------------------------------------------
Commercial Services & Supplies - 0.4%
3,523 Allied Waste North America, Series B 10.000% 8/01/09 Caa2 B+ 3,716,765
1,518 IOS Capital LLC, Senior Notes 7.250% 6/30/08 Ba1 BB 1,641,338
2,000 Williams Scotsman Inc. 10.000% 8/15/08 B2 B 2,230,000
---------------------------------------------------------------------------------------------------------------------------------
Construction Materials - 0.1%
2,000 Texas Industries Inc. 10.250% 6/15/11 B1 BB- 2,350,000
38
Principal Ratings*
Amount (000)/ --------------- Market
Shares Description(1) Coupon Maturity Moody's S&P Value
---------------------------------------------------------------------------------------------------------------------------------
Containers & Packaging - 0.4%
2,000 Berry Plastics Corporation 10.750% 7/15/12 B3 B- $ 2,300,000
3,000 Owens-Brockway Glass Containers, Guaranteed 8.250% 5/15/13 B2 B 3,315,000
Senior Note
3,000 Owens-Illinois Inc. 7.500% 5/15/10 B3 B 3,198,750
---------------------------------------------------------------------------------------------------------------------------------
Diversified Financial Services - 0.2%
3,450 MDP Acquisitions plc, Senior Notes 9.625% 10/01/12 B3 B- 3,864,000
---------------------------------------------------------------------------------------------------------------------------------
Electric Utilities - 0.1%
2,000 Midwest Generation LLC 8.750% 5/01/34 B1 B- 2,280,000
---------------------------------------------------------------------------------------------------------------------------------
Food & Staples Retailing - 0.1%
3,000 Stater Brothers Holdings Inc. 8.125% 6/15/12 B1 BB- 3,187,500
---------------------------------------------------------------------------------------------------------------------------------
Food Products - 1.0%
7,610 Del Monte Corporation 8.625% 12/15/12 B2 B 8,561,250
7,000 Dole Foods Company 7.875% 7/15/13 B2 B+ 7,857,500
1,435 Dole Foods Company 8.625% 5/01/09 B2 B+ 1,567,738
3,250 Seminis Vegetable Seeds Inc. 10.250% 10/01/13 B3 B- 3,672,500
---------------------------------------------------------------------------------------------------------------------------------
Healthcare Equipment & Supplies - 0.1%
1,500 Fisher Scientific International Inc. 8.000% 9/01/13 Ba3 BB+ 1,710,000
---------------------------------------------------------------------------------------------------------------------------------
Healthcare Providers & Services - 0.4%
3,000 Quintiles Transitional Corporation 10.000% 10/01/13 B3 B 3,375,000
2,000 Service Corporation International 7.700% 4/15/09 Ba3 BB 2,170,000
3,000 US Oncology Inc., 144A 10.750% 8/15/14 B3 B- 3,487,500
---------------------------------------------------------------------------------------------------------------------------------
Hotels Restaurants & Leisure - 2.2%
5,190 Aztar Corporation 9.000% 8/15/11 Ba3 B+ 5,747,925
2,345 Boyd Gaming Corporation 8.750% 4/15/12 B1 B+ 2,620,538
4,075 Boyd Gaming Corporation 7.750% 12/15/12 B1 B+ 4,467,219
3,172 Dominos Inc. 8.250% 7/01/11 B2 B- 3,481,270
1,500 Herbst Gaming Inc. 7.000% 11/15/14 B3 B- 1,526,250
4,100 Intrawest Corporation 7.500% 10/15/13 B1 B+ 4,381,875
3,000 Las Vegas Sands Inc., Venetian Casino Resorts, 11.000% 6/15/10 B2 B 3,438,750
LLC Mortgage Notes
2,000 MGM Mirage, Inc. 6.750% 8/01/07 Ba1 BB+ 2,110,000
3,500 Park Place Entertainment 7.875% 12/15/05 Ba2 BB- 3,640,000
1,000 Park Place Entertainment 9.375% 2/15/07 Ba2 BB- 1,105,000
1,000 Park Place Entertainment 7.875% 3/15/10 Ba2 BB- 1,131,250
4,000 Penn National Gaming Inc., Senior Subordinated 8.875% 3/15/10 B2 B 4,385,000
Notes
500 Penn National Gaming Inc., Series B 11.125% 3/01/08 B2 B 536,250
3,000 Pinnacle Entertainment Inc. 8.750% 10/01/13 Caa1 B- 3,262,500
2,000 Pinnacle Entertainment Inc. 8.250% 3/15/12 Caa1 B- 2,135,000
4,000 Universal City Development Partners 11.750% 4/01/10 B2 B- 4,745,000
---------------------------------------------------------------------------------------------------------------------------------
Household Durables - 0.5%
1,000 D.R. Horton, Inc. 10.500% 4/01/05 Ba1 BB+ 1,022,500
4,500 K. Hovnanian Enterprises Inc., Senior Subordinate 8.875% 4/01/12 Ba3 B+ 4,995,000
Notes
5,000 KB Home 8.625% 12/15/08 Ba2 BB- 5,675,000
---------------------------------------------------------------------------------------------------------------------------------
Insurance - 0.1%
2,500 Fairfax Financial Holdings Ltd. 7.750% 4/26/12 Ba3 BB 2,562,500
---------------------------------------------------------------------------------------------------------------------------------
IT Services - 0.2%
3,000 Global Cash Access LLC 8.750% 3/15/12 Caa1 B- 3,247,500
---------------------------------------------------------------------------------------------------------------------------------
Machinery - 0.3%
3,000 Terex Corporation, Senior Subordinated Notes 10.375% 4/01/11 B3 B 3,375,000
3,000 Terex Corporation, Senior Subordinated Notes 9.250% 7/15/11 B3 B 3,382,500
39
Nuveen Preferred and Convertible Income Fund 2 (JQC) (continued)
Portfolio of Investments December 31, 2004
Principal Ratings*
Amount (000)/ --------------- Market
Shares Description(1) Coupon Maturity Moody's S&P Value
---------------------------------------------------------------------------------------------------------------------------------
Media - 4.0%
6,900 Allbritton Communications Company, Series B 7.750% 12/15/12 B3 B- $ 7,176,000
2,000 AMC Entertainment Inc. 8.000% 3/01/14 B3 CCC+ 2,000,000
1,345 American Media Operations Inc. 8.875% 1/15/11 B3 B- 1,437,469
6,000 American Media Operations Inc., Series B 10.250% 5/01/09 B3 B- 6,352,500
3,000 Cablevision Systems Corporation 7.250% 7/15/08 B1 BB- 3,180,000
2,000 Cablevision Systems Corporation 8.125% 7/15/09 B1 BB- 2,197,500
5,000 Cablevision Systems Corporation, Series B 8.125% 8/15/09 B1 BB- 5,493,750
2,000 Charter Communications Operating LLC, 144A 8.000% 4/30/12 B2 B- 2,090,000
6,000 Cinemark USA Inc. 9.000% 2/01/13 B3 B- 6,877,500
1,000 Dex Media West LLC 8.500% 8/15/10 B1 B 1,117,500
2,198 Dex Media West LLC 9.875% 8/15/13 B2 B 2,544,185
3,000 Loews Cineplex Entertainment Corporation, 144A 9.000% 8/01/14 B3 CCC+ 3,262,500
3,855 Mail-Well I Corporation, Senior Unsecured Note, 144A 9.625% 3/15/12 B1 B+ 4,250,138
4,000 Medianews Group Inc. 6.375% 4/01/14 B2 B+ 3,980,000
8,000 Primedia Inc., Senior Notes 8.875% 5/15/11 B3 B 8,500,000
2,000 R H Donnelley Finance Corp 1 10.875% 12/15/12 B2 B+ 2,385,000
2,000 Sun Media Corporation 7.625% 2/15/13 Ba3 B 2,192,500
10,000 Vertis Inc. 9.750% 4/01/09 B2 B- 10,900,000
1,000 Young Broadcasting Inc. 8.500% 12/15/08 B2 B 1,075,000
2,000 Young Broadcasting Inc. 8.750% 1/15/14 Caa1 CCC+ 2,025,000
5,500 Young Broadcasting Inc., Senior Subordinate Notes 10.000% 3/01/11 Caa1 CCC+ 5,898,750
---------------------------------------------------------------------------------------------------------------------------------
Metals & Mining - 0.1%
1,682 United States Steel Corporation 9.750% 5/15/10 Ba2 BB 1,925,890
---------------------------------------------------------------------------------------------------------------------------------
Multiline Retail - 0.2%
1,000 Saks Inc. 7.375% 2/15/19 Ba3 BB 995,000
2,000 Saks Inc., Notes 7.500% 12/01/10 Ba3 BB 2,140,000
1,000 Saks Inc., Notes 9.875% 10/01/11 Ba3 BB 1,190,000
---------------------------------------------------------------------------------------------------------------------------------
Multi-Utilities & Unregulated Power - 0.0%
500 Northwestern Corporation 5.875% 11/01/14 Ba1 BB 513,986
---------------------------------------------------------------------------------------------------------------------------------
Oil & Gas - 0.5%
2,345 Chesapeake Energy Corporation 7.750% 1/15/15 Ba3 BB- 2,561,913
2,563 Chesapeake Energy Corporation 9.000% 8/15/12 Ba3 BB- 2,941,043
2,000 Premcor Refining Group Inc. 7.500% 6/15/15 Ba3 BB- 2,175,000
1,000 Tesoro Petroleum Corporation 8.000% 4/15/08 Ba2 BBB- 1,092,500
1,000 Tesoro Petroleum Corporation, Senior Subordinate 9.625% 11/01/08 B2 BB- 1,095,000
Notes, Series B
---------------------------------------------------------------------------------------------------------------------------------
Paper & Forest Products - 0.4%
2,000 Georgia Pacific Corporation, Debentures 7.700% 6/15/15 Ba3 BB+ 2,295,000
5,000 Georgia Pacific Corporation, Notes 8.125% 5/15/11 Ba3 BB+ 5,775,000
---------------------------------------------------------------------------------------------------------------------------------
Road & Rail - 0.2%
3,000 Laidlaw International Inc. 10.750% 6/15/11 B2 B+ 3,517,500
---------------------------------------------------------------------------------------------------------------------------------
Specialty Retail - 0.7%
6,000 Asbury Automotive Group Inc. 9.000% 6/15/12 B3 B 6,330,000
8,000 Warnaco Inc., Senior Notes 8.875% 6/15/13 B1 B 8,840,000
---------------------------------------------------------------------------------------------------------------------------------
Textiles & Apparel - 0.2%
4,000 Jostens IH Corporation, 144A 7.625% 10/01/12 B3 B- 4,180,000
---------------------------------------------------------------------------------------------------------------------------------
Trading Cos & Distributors - 0.2%
1,300 Keystone Automotive Operations Inc. 9.750% 11/01/13 B3 B- 1,397,500
2,000 United Rentals North America Inc. 6.500% 2/15/12 B1 BB- 1,960,000
---------------------------------------------------------------------------------------------------------------------------------
Wireless Telecommunication Services - 0.2%
4,000 Nextel Communications Inc. 7.375% 8/01/15 Ba3 BB 4,420,000
---------------------------------------------------------------------------------------------------------------------------------
Total Corporate Bonds (cost $342,622,897) 361,263,554
---------------------------------------------------------------------------------------------------------------
40
Principal Ratings*
Amount (000)/ --------------- Market
Shares Description(1) Coupon Maturity Moody's S&P Value
---------------------------------------------------------------------------------------------------------------------------------
CAPITAL PREFERRED SECURITIES - 34.5% (23.9% of
Total Investments)
Capital Markets - 5.2%
6,273 BT Capital Trust, Series B1 7.900% 1/15/27 A2 A- $ 7,017,015
15,000 BT Institutional Capital Trust A, 144A 8.090% 12/01/26 A2 A- 17,094,675
2,000 BT Institutional Capital Trust B, 144A 7.750% 12/01/26 A2 A- 2,214,880
1,250 C.A. Preferred Fund Trust II 7.000% 10/30/49 A1 A 1,309,445
32,750 C.A. Preferred Funding Trust 7.000% 1/30/49 A1 A 34,152,945
3,000 Compass Trust I, Series A 8.230% 1/15/27 A3 BBB- 3,404,235
3,500 First Union Capital Trust II, Series A 7.950% 11/15/29 A1 BBB+ 4,402,741
500 First Union Institutional Capital II 7.850% 1/01/27 A1 BBB+ 544,424
2,000 First Union Institutional Capital Securities I 8.040% 12/01/26 A1 BBB+ 2,183,800
8,300 Goldman Sachs Group Inc. 6.345% 2/15/34 A1 A- 8,672,072
19,335 Mellon Capital Trust I, Series A 7.720% 12/01/26 A2 A- 20,997,887
9,000 State Street Institutional Capital Trust, 144A 8.035% 3/15/27 A1 A 10,041,300
---------------------------------------------------------------------------------------------------------------------------------
Commercial Banks - 17.4%
2,000 AB Svensk Exportkredit, 144A 6.375% 10/27/49 Aa3 AA- 2,026,426
20,000 Abbey National Capital Trust I 8.963% 12/30/49 A2 A- 27,959,220
45,300 AgFirst Farm Credit Bank 7.300% 12/15/53 NA NA 45,766,318
2,400 ANZ Capital Trust I, 144A 5.360% 12/29/49 A2 A- 2,438,777
12,840 Bank One Capital III 8.750% 9/01/30 A1 A- 17,433,947
1,974 BankAmerica Capital II, Series 2 8.000% 12/15/26 Aa3 A- 2,170,198
2,600 BankAmerica Institutional Capital Trust,Series B, 144A 7.700% 12/31/26 Aa3 A- 2,802,979
5,000 BankAmerica Institutional Trust, 144A 8.070% 12/31/26 Aa3 A- 5,518,410
2,000 BankBoston Capital Trust I, Series B 8.250% 12/15/26 Aa3 A- 2,194,742
1,000 BanPonce Trust I, Series A 8.327% 2/01/27 Baa1 BBB- 1,100,098
1,500 Barclays Bank plc, 144A 8.550% 6/15/49 Aa3 A+ 1,828,862
500 Barnett Capital I 8.060% 12/01/26 Aa3 A- 547,044
21,000 CBA Capital Trust I, 144A 5.805% 12/30/49 A2 A- 21,904,575
2,200 DBS Capital Funding Corporation, 144A 7.657% 3/15/49 A1 A- 2,547,180
5,000 Farm Credit Bank of Texas 7.561% 11/05/49 NA NA 5,152,070
2,350 FBS Capital Trust I 8.090% 11/15/26 Aa3 A- 2,564,816
4,315 First Chicago NBD Institutional Capital Trust, 7.750% 12/01/26 A1 NA 4,674,970
Series B, 144A
6,000 First Chicago NBD Institutional Capital, 144A 7.950% 12/01/26 A1 NA 6,527,316
5,750 First Empire Capital Trust I 8.234% 2/01/27 Baa1 BBB 6,368,522
11,550 First Empire Capital Trust II 8.277% 6/01/27 Baa1 BBB 12,854,434
4,250 First Midwest Bancorp Inc. 6.950% 12/01/33 Baa2 BBB- 4,645,905
12,838 HSBC Capital Funding LP, 144A 9.547% 12/31/49 A1 A- 16,012,029
14,000 HSBC Capital Funding LP, Debt 10.176% 6/30/50 A1 A- 21,740,124
19,605 KBC Bank Fund Trust III, 144A 9.860% 11/02/49 A2 A- 24,076,587
4,000 KeyCorp Capital III 7.750% 7/15/29 A3 BBB 4,805,568
15,000 KeyCorp Institutional Capital Trust A 7.826% 12/01/26 A3 BBB 16,289,355
17,000 Lloyds TSB Bank plc, Subordinate Note 6.900% 11/22/49 Aa2 A+ 17,844,016
1,000 Nordbanken AB, 144A 8.950% 11/29/49 A2 A- 1,185,704
18,500 North Fork Capital Trust II 8.000% 12/15/27 A3 BBB- 20,485,402
500 PNC Institutional Capital Securities, 144A 7.950% 12/15/26 A3 BBB+ 546,936
2,000 Popular North American Capital Trust I 6.564% 9/15/34 Baa1 BBB- 2,112,396
16,750 RBS Capital Trust B 6.800% 12/31/49 A1 A 17,326,183
2,000 Reliance Capital Trust I, Series B 8.170% 5/01/28 NA NA 2,242,108
1,202 Republic New York Capital II, Capital Securities 7.530% 12/04/26 A1 A- 1,294,085
3,400 Royal Bank of Scotland Group plc 7.648% 8/31/49 A1 A 4,152,355
6,200 Royal Bank of Scotland Group plc 9.118% 3/31/49 A1 A 7,559,877
4,000 SocGen Real Estate Company LLC, 144A 7.640% 12/29/49 A1 A 4,390,316
4,472 St. George Funding Company LLC, 144A 8.485% 6/30/47 Baa1 NA 5,121,858
14,330 Unicredito Italiano Capital Trust, 144A 9.200% 10/05/49 A1 A 17,623,937
3,800 Union Planters Capital Trust A 8.200% 12/15/26 A2 BBB+ 4,127,575
3,455 Washington Mutual Capital Trust I 8.375% 6/01/27 Baa1 BBB 3,841,217
2,000 Zions Institutional Capital Trust,Series A 8.536% 12/15/26 Baa1 BBB- 2,268,508
41
Nuveen Preferred and Convertible Income Fund 2 (JQC) (continued)
Portfolio of Investments December 31, 2004
Principal Ratings*
Amount (000)/ --------------- Market
Shares Description(1) Coupon Maturity Moody's S&P Value
---------------------------------------------------------------------------------------------------------------------------------
Diversified Financial Services - 5.4%
15,750 BNP Paribas Capital Trust 7.200% 12/31/49 A1 A+ $ 16,680,542
900 Chase Capital Trust I, Series A 7.670% 12/01/26 A1 A- 970,251
1,000 Citigroup Capital III 7.625% 12/01/36 Aa2 A 1,229,842
51,900 HBOS Capital Funding LP, Notes (DD, settling 1/03/05) 6.850% 3/01/49 A1 A 53,485,753
10,000 ING Capital Funding Trust III 8.439% 12/30/49 A2 A- 11,987,740
2,150 JPM Capital Trust I 7.540% 1/15/27 A1 A- 2,317,633
3,000 JPM Capital Trust II 7.950% 2/01/27 A1 A- 3,282,252
23,600 Old Mutual Capital Funding, Notes 8.000% 6/22/53 Baa2 NA 24,971,608
---------------------------------------------------------------------------------------------------------------------------------
Diversified Telecommunication Services - 1.5%
24,080 Centaur Funding Corporation, Series B, 144A 9.080% 4/21/20 Baa1 BBB+ 31,778,087
---------------------------------------------------------------------------------------------------------------------------------
Insurance - 3.8%
987 Allstate Financing II 7.830% 12/01/45 A2 A- 1,068,614
10,000 American General Capital II 8.500% 7/01/30 Aa1 AA 13,489,590
4,980 American General Institutional Capital, 144A 8.125% 3/15/46 Aa1 AA 6,541,643
612 Berkeley Capital Trust 8.197% 12/15/45 Baa3 BBB- 649,744
14,250 Mangrove Bay, Class 3, 144A 6.102% 7/15/33 Baa1 BBB+ 14,187,129
3,750 Prudential plc 6.500% 6/29/49 Baa1 A 3,773,344
13,500 Sun Life Canada Capital Trust, Capital Securities, 8.526% 5/06/47 A1 A+ 14,991,845
144A
23,513 Zurich Capital Trust I, 144A 8.376% 6/01/37 Baa2 A- 26,479,240
---------------------------------------------------------------------------------------------------------------------------------
Oil & Gas - 1.0%
18,855 KN Capital Trust III 7.630% 4/15/28 Baa3 BB+ 21,148,032
---------------------------------------------------------------------------------------------------------------------------------
Thrifts & Mortgage Finance - 0.2%
500 Countrywide Capital Trust I 8.000% 12/15/26 Baa1 BBB+ 526,728
3,365 Great Western Financial Trust II, Series A 8.206% 2/01/27 Baa1 BBB 3,677,316
---------------------------------------------------------------------------------------------------------------------------------
Total Capital Preferred Securities (cost $733,857,521) 739,345,297
---------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS - 0.7% (0.5% of Total
Investments)
$ 13,980 State Street Bank, 1.000%, dated 12/31/04, due
============== 1/03/05, repurchase price $13,980,703,
collateralized by $14,200,000 U.S. Treasury Notes,
1.500%, due 2/28/05, value 14,260,691 13,979,538
---------------------------------------------------------------------------------------------------------------
Total Repurchase Agreements (cost $13,979,538) 13,979,538
---------------------------------------------------------------------------------------------------------------
Total Investments (cost $2,945,376,977) - 144.6% $ 3,095,444,615
===============================================================================================================
42
Market
Shares Description(1) Value
---------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS SOLD SHORT - (3.4)%
Automobiles - (0.2)%
(102,665) General Motors Corporation $ (4,112,760)
---------------------------------------------------------------------------------------------------------------------------------
Chemicals - (0.4)%
(535,880) The Mosaic Company (8,745,562)
---------------------------------------------------------------------------------------------------------------------------------
Communications Equipment - (0.2)%
(1,195,000) Lucent Technologies Inc. (4,493,200)
---------------------------------------------------------------------------------------------------------------------------------
Consumer Finance - (0.0)%
(12,072) Capital One Financial Corporation (1,016,583)
---------------------------------------------------------------------------------------------------------------------------------
Electric Utilities - (0.1)%
(62,830) PG&E Corporation (2,090,982)
---------------------------------------------------------------------------------------------------------------------------------
Food & Staples Retailing - (0.2)%
(158,510) Albertsons, Inc. (3,785,219)
---------------------------------------------------------------------------------------------------------------------------------
Food Products - (0.1)%
(49,530) General Mills Inc. (2,462,136)
---------------------------------------------------------------------------------------------------------------------------------
Gas Utilities - (0.1)%
(75,425) Southern Union Company (1,808,692)
---------------------------------------------------------------------------------------------------------------------------------
Healthcare Equipment & Supplies - (0.2)%
(149,200) Baxter International Inc. (5,153,368)
---------------------------------------------------------------------------------------------------------------------------------
Insurance - (0.4)%
(40,765) Chubb Corporation (3,134,829)
(90,200) Genworth Financial Inc. (2,435,400)
(166,530) UnumProvident Corporation (2,987,548)
---------------------------------------------------------------------------------------------------------------------------------
Leisure Equipment & Products - (0.1)%
(74,056) K2 Inc. (1,176,009)
---------------------------------------------------------------------------------------------------------------------------------
Media - (0.4)%
(777,950) Lions Gate Entertainment Corporation, Equity (8,261,829)
---------------------------------------------------------------------------------------------------------------------------------
Metals & Mining - (0.4)%
(50,042) Phelps Dodge Corporation (4,950,155)
(111,725) United States Steel Corporation (5,725,906)
---------------------------------------------------------------------------------------------------------------------------------
Multi-Utilities & Unregulated Power - (0.3)%
(682,255) Aquila Inc. (2,517,521)
(82,825) Sempra Energy (3,038,021)
---------------------------------------------------------------------------------------------------------------------------------
Pharmaceuticals - (0.2)%
(163,190) Schering-Plough Corporation (3,407,407)
---------------------------------------------------------------------------------------------------------------------------------
Thrifts & Mortgage Finance - (0.1)%
(53,539) PMI Group Inc. (2,235,253)
---------------------------------------------------------------------------------------------------------------------------------
Total Common Stocks Sold Short (proceeds $63,815,481) (73,538,380)
---------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 3.9% 83,656,871
---------------------------------------------------------------------------------------------------------------
FundPreferred Shares, at Liquidation Value - (45.1)% (965,000,000)
---------------------------------------------------------------------------------------------------------------
Net Assets Applicable to Common Shares - 100% $ 2,140,563,106
===============================================================================================================
43
Nuveen Preferred and Convertible Income Fund 2 (JQC) (continued)
Portfolio of Investments December 31, 2004
Interest Rate Swap Contracts outstanding at December 31, 2004:
Notional Termination Unrealized
Counterparty Amount Fixed Rate Floating Rate** Date Appreciation
------------------------------------------------------------------------------------------------------------------------------------
JPMorgan $97,000,000 1.3605% 2.4150% 1/23/05 $ 91,876
Morgan Stanley 97,000,000 2.0250 2.4150 1/23/06 1,111,380
Royal Bank of Canada 97,000,000 2.6790 2.4150 1/23/07 1,444,759
Morgan Stanley 97,000,000 3.0480 2.4150 1/23/08 1,666,881
JPMorgan 97,000,000 3.3595 2.4150 1/23/09 1,708,185
------------------------------------------------------------------------------------------------------------------------------------
$ 6,023,081
====================================================================================================================================
Futures Contracts outstanding at December 31, 2004:
Unrealized
Number of Contract Original Value at Appreciation
Type Contracts Expiration Value December 31, 2004 (Depreciation)
------------------------------------------------------------------------------------------------------------------------------------
U.S. Treasury Bonds 823 3/05 $ 92,163,000 $92,587,500 $ (424,500)
====================================================================================================================================
(1) All percentages shown in the Portfolio of Investments are based on
net assets applicable to Common shares unless otherwise noted.
* Ratings (not covered by the report of independent registered public
accounting firm): Below Baa by Moody's Investor Service, Inc. or BBB
by Standard and Poor's Group are considered to be below investment
grade.
** Based on LIBOR (London Inter-bank Offered Rate).
(a) Security is eligible for the Dividends Received Deduction.
(DD) Portion of security purchased on a delayed delivery basis.
144A 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.
NA Security is not rated.
See accompanying notes to financial statements.
44
Statement of
Assets and Liabilities December 31, 2004
Preferred and Preferred and
Convertible Convertible
Income Income 2
(JPC) (JQC)
--------------------------------------------------------------------------------------------------------------------------------
Assets
Investments, at market value (cost $2,118,230,234 and $2,945,376,977, respectively) $ 2,251,359,182 $ 3,095,444,615
Cash -- 3,691,321
Deposits with brokers for securities sold short 40,045,892 57,652,088
Deposits with brokers for open futures contracts 316,400 1,152,200
Interest rate swaps, at value 4,583,843 6,023,081
Receivables:
Dividends 3,528,451 3,822,595
Interest 11,021,605 17,068,869
Investments sold 3,130,376 8,728,582
Reclaims -- 69,108
Other assets 61,630 76,076
--------------------------------------------------------------------------------------------------------------------------------
Total assets 2,314,047,379 3,193,728,535
--------------------------------------------------------------------------------------------------------------------------------
Liabilities
Securities sold short, at value (proceeds $43,543,883 and $63,815,481, respectively) 60,103,128 73,538,380
Cash overdraft 10,365,148 --
Payable for investments purchased 26,167 11,805,910
Payable for variation margin on futures contracts 169,500 617,250
Accrued expenses:
Management fees 1,008,772 1,346,454
Other 436,933 458,098
Dividends payable:
FundPreferred shares 162,300 203,649
Securities sold short 53,658 195,688
--------------------------------------------------------------------------------------------------------------------------------
Total liabilities 72,325,606 88,165,429
--------------------------------------------------------------------------------------------------------------------------------
FundPreferred shares, at liquidation value 708,000,000 965,000,000
--------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common shares $ 1,533,721,773 $ 2,140,563,106
================================================================================================================================
Common shares outstanding 100,123,177 141,007,000
================================================================================================================================
Net asset value per Common share outstanding (net assets applicable to
Common shares, divided by Common shares outstanding) $ 15.32 $ 15.18
================================================================================================================================
Net assets applicable to Common shares consist of:
Common shares, $.01 par value per share $ 1,001,232 $ 1,410,070
Paid-in surplus 1,416,726,904 1,996,734,899
Undistributed (Over-distribution of) net investment income (11,275,840) (14,268,017)
Accumulated net realized gain from investments 6,441,806 10,742,834
Net unrealized appreciation (depreciation) of investments, futures and interest rate swaps 120,827,671 145,943,320
--------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common shares $ 1,533,721,773 $ 2,140,563,106
================================================================================================================================
Authorized shares:
Common Unlimited Unlimited
FundPreferred shares Unlimited Unlimited
================================================================================================================================
See accompanying notes to financial statements.
45
Statement of
Operations
Preferred and Preferred and
Convertible Income (JPC) Convertible Income 2 (JQC)
------------------------------- -------------------------------
For the Five For the Five
Months Ended Year Ended Months Ended Year Ended
12/31/04 7/31/04 12/31/04 7/31/04
-------------------------------------------------------------------------------------------------------------------------------
Investment Income
Dividends (net of foreign tax withheld of $7,090, $15,423,
$13,759 and $27,621, respectively) $ 31,789,267 $ 75,590,258 $ 40,966,552 $ 86,980,897
Interest 26,354,522 65,298,892 40,099,988 96,813,930
-------------------------------------------------------------------------------------------------------------------------------
Total investment income 58,143,789 140,889,150 81,066,540 183,794,827
-------------------------------------------------------------------------------------------------------------------------------
Expenses
Management fees 7,914,830 18,870,178 10,662,995 25,051,089
Dividend expense on securities sold short 239,184 387,841 395,973 559,225
FundPreferred shares - auction fees 741,946 1,774,851 1,011,267 2,326,576
FundPreferred shares - dividend disbursing agent fees 15,393 33,428 22,455 54,454
Shareholders' servicing agent fees and expenses 4,190 10,238 6,266 14,762
Custodian's fees and expenses 214,130 477,127 278,230 653,706
Trustees' fees and expenses 18,016 59,851 26,802 76,923
Professional fees 60,724 121,316 55,614 116,396
Shareholders' reports - printing and mailing expenses 168,630 338,208 190,775 398,044
Stock exchange listing fees 34,696 48,302 32,835 45,597
Investor relations expense 127,711 300,311 167,464 369,831
Other expenses 19,972 397,116 21,329 353,479
-------------------------------------------------------------------------------------------------------------------------------
Total expenses before custodian fee credit and expense
reimbursement 9,559,422 22,818,767 12,872,005 30,020,082
Custodian fee credit (4,673) (14,475) (6,990) (41,717)
Expense reimbursement (2,979,998) (7,048,071) (4,088,064) (9,520,638)
-------------------------------------------------------------------------------------------------------------------------------
Net expenses 6,574,751 15,756,221 8,776,951 20,457,727
-------------------------------------------------------------------------------------------------------------------------------
Net investment income 51,569,038 125,132,929 72,289,589 163,337,100
-------------------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss)
Net realized gain from investments 2,985,875 27,972,286 8,940,540 8,739,463
Net realized gain (loss) from interest rate swaps (974,786) (2,330,892) (1,354,773) (3,205,449)
Change in net unrealized appreciation (depreciation) of
investments 85,689,077 39,651,341 120,207,237 90,207,632
Change in net unrealized appreciation (depreciation) of
futures (325,875) -- (424,500) --
Change in net unrealized appreciation (depreciation) of
interest rate swaps (989,371) 5,573,214 (1,354,625) 7,377,706
-------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain 86,384,920 70,865,949 126,013,879 103,119,352
-------------------------------------------------------------------------------------------------------------------------------
Distributions to FundPreferred Shareholders
From net investment income (4,040,083) (8,171,424) (7,259,855) (11,296,561)
From accumulated net realized gains from investments (1,465,951) (384,871) (211,517) --
-------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets applicable to Common shares from
distributions to FundPreferred shareholders (5,506,034) (8,556,295) (7,471,372) (11,296,561)
-------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets applicable to Common shares from
operations $ 132,447,924 $ 187,442,583 $ 190,832,096 $ 255,159,891
===============================================================================================================================
See accompanying notes to financial statements.
46
Statement of
Changes in Net Assets
Preferred and
Convertible Income (JPC)
------------------------------------------------------
For the
Period 3/26/03
For the Five (commencement
Months Ended Year Ended of operations)
12/31/04 7/31/04 through 7/31/03
-------------------------------------------------------------------------------------------------------------
Operations
Net investment income $ 51,569,038 $ 125,132,929 $ 30,420,215
Net realized gain (loss) from investments 2,985,875 27,972,286 6,249,317
Net realized gain (loss) from interest rate swaps (974,786) (2,330,892) --
Change in net unrealized appreciation
(depreciation) of investments 85,689,077 39,651,341 (8,770,714)
Change in net unrealized appreciation
(depreciation) of futures (325,875) -- --
Change in net unrealized appreciation
(depreciation) of interest rate swaps (989,371) 5,573,214 --
Distributions to FundPreferred shareholders:
From net investment income (4,040,083) (8,171,424) (1,781,038)
From accumulated net realized gains
from investments (1,465,951) (384,871) --
-------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets applicable
to Common shares from operations 132,447,924 187,442,583 26,117,780
-------------------------------------------------------------------------------------------------------------
Distributions to Common Shareholders
From net investment income (50,311,897) (121,827,639) (30,157,634)
From accumulated net realized gains
from investments (23,388,774) (4,581,333) --
-------------------------------------------------------------------------------------------------------------
Decrease in net assets applicable to
Common shares from distributions to
Common shareholders (73,700,671) (126,408,972) (30,157,634)
-------------------------------------------------------------------------------------------------------------
Capital Share Transactions
Common shares:
Net proceeds from sale of shares (4,237) (188,221) 1,430,942,591
Net proceeds from shares issued to
shareholders due to reinvestment of distributions -- 1,175,103 549,331
FundPreferred shares offering costs (4,237) (20,355) (14,569,487)
-------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets applicable
to Common shares from capital share transactions (8,474) 966,527 1,416,922,435
-------------------------------------------------------------------------------------------------------------
Net increase in net assets applicable to
Common shares 58,738,779 62,000,138 1,412,882,581
Net assets applicable to Common shares at
the beginning of period 1,474,982,994 1,412,982,856 100,275
-------------------------------------------------------------------------------------------------------------
Net assets applicable to Common shares
at the end of period $ 1,533,721,773 $ 1,474,982,994 $ 1,412,982,856
=============================================================================================================
Undistributed (Over-distribution of) net
investment income at the end of period $ (11,275,840) $ (5,581,774) $ (234,434)
=============================================================================================================
Preferred and
Convertible Income 2 (JQC)
------------------------------------------------------
For the
Period 6/25/03
For the Five (commencement
Months Ended Year Ended of operations)
12/31/04 7/31/04 through 7/31/03
-------------------------------------------------------------------------------------------------------------
Operations
Net investment income $ 72,289,589 $ 163,337,100 $ 5,416,996
Net realized gain (loss) from investments 8,940,540 8,739,463 (2,710,553)
Net realized gain (loss) from interest rate swaps (1,354,773) (3,205,449) --
Change in net unrealized appreciation
(depreciation) of investments 120,207,237 90,207,632 (70,070,126)
Change in net unrealized appreciation
(depreciation) of futures (424,500) -- --
Change in net unrealized appreciation
(depreciation) of interest rate swaps (1,354,625) 7,377,706 --
Distributions to FundPreferred shareholders:
From net investment income (7,259,855) (11,296,561) --
From accumulated net realized gains
from investments (211,517) -- --
-------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets applicable
to Common shares from operations 190,832,096 255,159,891 (67,363,683)
-------------------------------------------------------------------------------------------------------------
Distributions to Common Shareholders
From net investment income (68,740,915) (164,952,618) --
From accumulated net realized gains
from investments (2,777,838) (25,575) --
-------------------------------------------------------------------------------------------------------------
Decrease in net assets applicable to
Common shares from distributions to
Common shareholders (71,518,753) (164,978,193) --
-------------------------------------------------------------------------------------------------------------
Capital Share Transactions
Common shares:
Net proceeds from sale of shares (4,047) 176,684 2,017,885,896
Net proceeds from shares issued to
shareholders due to reinvestment of distributions -- -- --
FundPreferred shares offering costs (4,047) (19,723,013) --
-------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets applicable
to Common shares from capital share transactions (8,094) (19,546,329) 2,017,885,896
-------------------------------------------------------------------------------------------------------------
Net increase in net assets applicable to
Common shares 119,305,249 70,635,369 1,950,522,213
Net assets applicable to Common shares at
the beginning of period 2,021,257,857 1,950,622,488 100,275
-------------------------------------------------------------------------------------------------------------
Net assets applicable to Common shares
at the end of period $ 2,140,563,106 $ 2,021,257,857 $ 1,950,622,488
=============================================================================================================
Undistributed (Over-distribution of) net
investment income at the end of period $ (14,268,017) $ (6,443,674) $ 5,445,706
=============================================================================================================
See accompanying notes to financial statements.
47
Notes to
Financial Statements
1. General Information and Significant Accounting Policies
The funds (the "Funds") covered in this report and their corresponding Common
share New York Stock Exchange symbols are Nuveen Preferred and Convertible
Income Fund (JPC) and Nuveen Preferred and Convertible Income Fund 2 (JQC). The
Funds are registered under the Investment Company Act of 1940, as amended, as
diversified, closed-end management investment companies.
Prior to the commencement of operations of the Funds, each Fund had no
operations other than those related to organizational matters, the initial
capital contribution of $100,275 per Fund by Nuveen Institutional Advisory Corp.
(the "Adviser"), a wholly owned subsidiary of Nuveen Investments, Inc.,
("Nuveen") and the recording of the organization expenses ($11,500 per Fund) and
their reimbursement by Nuveen Investments, LLC, also a wholly owned subsidiary
of Nuveen.
Each Fund seeks to provide high current income by investing primarily in a
portfolio of preferred securities, convertible securities and, to a lesser
degree, high yield securities. Each Fund may also invest in other debt
instruments and common stocks acquired upon conversion of a convertible
security.
The Board of Trustees of the Funds approved a change in the Funds' fiscal year
end from July 31 to December 31 upon completion of the Funds' July 31, 2004
fiscal year.
The following is a summary of significant accounting policies followed by the
Funds in the preparation of their financial statements in accordance with U.S.
generally accepted accounting principles.
Securities Valuation
Exchange-listed securities and instruments are generally valued at the last
sales price on the exchange on which such securities or instruments are
primarily traded. Securities or instruments traded on an exchange for which
there are no transactions on a given day or securities or instruments not listed
on an exchange are valued at the mean of the closing bid and asked prices.
Futures contracts are valued using the closing settlement price or, in the
absence of such a price, at the mean of the bid and asked prices. Securities
traded on Nasdaq are valued at the Nasdaq Official Closing Price. The prices of
fixed-income securities are generally provided by an independent pricing service
approved by the Funds' Board of Trustees and based on the mean between the bid
and asked prices. When price quotes are not readily available, the pricing
service or, in the absence of a pricing service for a particular security or
instrument, the Board of Trustees of the Funds, or its designee, may establish
fair market value using a wide variety of market data including yields or prices
of securities of comparable quality, type of issue, coupon, maturity and rating,
market quotes or indications of value from security dealers, evaluations of
anticipated cash flows or collateral, general market conditions and other
information and analysis, including the obligor's credit characteristics
considered relevant by the pricing service or the Board of Trustee's designee.
Short-term securities are valued at amortized cost, which approximates market
value.
Securities Transactions
Securities transactions are recorded on a trade date basis. Realized gains and
losses from transactions are determined on the specific identification method.
Securities purchased on a when-issued or delayed delivery basis may have
extended settlement periods. Any securities so purchased are subject to market
fluctuation during this period. The Funds have instructed the custodian to
segregate assets with a current value at least equal to the amount of the
when-issued and delayed delivery purchase commitments. At December 31, 2004,
Preferred and Convertible Income 2 (JQC) had an outstanding delayed delivery
purchase commitment of $3,689,904. There were no such outstanding purchase
commitments in Preferred and Convertible Income (JPC).
Investment Income
Dividend income on securities purchased and dividend expense on securities sold
short are recorded on the ex-dividend date or, for foreign securities, when
information is available. Interest income, which includes the amortization of
premiums and accretion of discounts for financial reporting purposes, is
recorded on an accrual basis.
Income Taxes
Each Fund is a separate taxpayer for federal income tax purposes. Each Fund
intends to distribute substantially all net investment income and net capital
gains to shareholders and to otherwise comply with the requirements of
Subchapter M of the Internal Revenue Code applicable to regulated investment
companies. Therefore, no federal income tax provision is required.
48
Dividends and Distributions to Common Shareholders
Distributions to Common shareholders are recorded on the ex-dividend date. The
amount and timing of distributions are determined in accordance with federal
income tax regulations, which may differ from U.S. generally accepted accounting
principles.
Dividends to Common shareholders are declared monthly. With respect to the REIT
securities held in the Funds' Portfolio of Investments, distributions received
by the Funds are generally comprised of investment income, long-term and
short-term capital gains, and a return of REIT capital. The actual character of
amounts received during the period is not known until after the fiscal year-end.
For the twelve months ended December 31, 2004, the character of distributions to
the Funds from the REITs was as follows:
Preferred Preferred
and and
Convertible Convertible
Income Income 2
2004 (JPC) (JQC)
--------------------------------------------------------------------------------
Ordinary income* 83.15% 83.29%
Long-term and short-term capital gains 14.69 15.13
Return of REIT capital 2.16 1.58
================================================================================
For the twelve months ended December 31, 2003, the character of distributions to
the Funds from the REITs was as follows:
Preferred Preferred
and and
Convertible Convertible
Income Income 2
2003 (JPC) (JQC)
--------------------------------------------------------------------------------
Ordinary income* 84.04% 77.85%
Long-term and short-term capital gains .20 .17
Return of REIT capital 15.76 21.98
================================================================================
* Ordinary income consists of net taxable income derived from dividends,
interest, and net short-term capital gains, if any.
For the fiscal period ended December 31, 2004, each Fund applied the actual
character of distributions reported by the REITs in which the Fund invests to
its receipts from the REITs. If a REIT held in the portfolio of investments did
not report the actual character of its distributions during the period, the Fund
treated the distributions as ordinary income.
For fiscal periods ended prior to December 31, 2004, each Fund applied a
percentage estimate for the breakdown of income type, to its receipts from the
REITs and treated as income in the Statement of Operations only the amount of
ordinary income so calculated. Each Fund adjusted that estimated breakdown of
income type (and consequently its net investment income) as necessary in the
following calendar year when the REITs informed their shareholders of the actual
breakdown of income type.
For the fiscal period ended December 31, 2004, each Fund applied the actual
character of distributions reported by the REITs in which the Fund invests to
the distributions paid to each Funds shareholders.
With respect to the portion of each Fund's monthly distribution to its
shareholders derived from the Fund's investments in REIT securities for fiscal
periods ended prior to December 31, 2004, each Fund treated that portion of its
distribution as being entirely from net investment income. The Funds
recharacterized those distributions as being from ordinary income, long-term and
short-term capital gains, and return of capital, if necessary, in the subsequent
calendar year, based upon the income type breakdown information conveyed at that
time by the REITs whose securities are held in each Fund's portfolio.
Consequently, the financial statements for fiscal periods ended prior to
December 31, 2004, may have reflected an over-distribution of net investment
income that was at least partly attributable to the fact that, as of the date of
the financial statements, some of the amounts received by the Funds from the
portfolio REITs, but none of the dividends paid by the Funds to shareholders
from the portfolio REITs were treated as something other than ordinary income.
49
Notes to
Financial Statements (continued)
FundPreferred Shares
The Funds have issued and outstanding FundPreferred shares, $25,000 stated value
per share, as a means of effecting financial leverage. Each Fund's FundPreferred
shares are issued in more than one Series. The dividend rate on each Series is
determined every seven days, pursuant to a dutch auction process overseen by the
auction agent, and is payable weekly at the end of each rate period. The number
of shares outstanding, by Series and in total, for each Fund is as follows:
Preferred Preferred
and and
Convertible Convertible
Income Income 2
(JPC) (JQC)
--------------------------------------------------------------------------------
Number of shares:
Series M 4,720 3,860
Series M2 -- 3,860
Series T 4,720 3,860
Series T2 -- 3,860
Series W 4,720 3,860
Series W2 -- 3,860
Series TH 4,720 3,860
Series TH2 -- 3,860
Series F 4,720 3,860
Series F2 4,720 3,860
--------------------------------------------------------------------------------
Total 28,320 38,600
================================================================================
Interest Rate Swap Transactions
The Funds may invest in certain derivative financial instruments. The Funds' use
of interest rate swap transactions is intended to mitigate the negative impact
that an increase in short-term interest rates could have on Common share net
earnings as a result of leverage. Interest rate swap transactions involve each
Fund's agreement with the counterparty to pay a fixed rate payment in exchange
for the counterparty paying the Fund a variable rate payment that is intended to
approximate each Fund's variable rate payment obligation on FundPreferred shares
or any variable rate borrowing. The payment obligation is based on the notional
amount of the interest rate swap contract. Interest rate swaps do not involve
the delivery of securities or other underlying assets or principal. Accordingly,
the risk of loss with respect to the swap counterparty on such transactions is
limited to the net amount of interest payments that each Fund is to receive.
Interest rate swap positions are valued daily. Although there are economic
advantages of entering into interest rate swap transactions, there are also
additional risks. The Funds help manage the credit risks associated with
interest rate swap transactions by entering into agreements only with
counterparties the Adviser believes have the financial resources to honor their
obligations and by having the Adviser continually monitor the financial
stability of the swap counterparties.
Due to recent clarification provided by the SEC to regulated investment
companies, effective with the July 31, 2004, reporting period, the Funds changed
the way they present net interest expense on interest rate swap transactions in
the financial statements. Net interest expense amounts paid during the year are
included in "Net realized gain (loss) from interest rate swap transactions". Net
interest expense amounts accrued, but not yet paid, at the end of the fiscal
year, are included in "Change in net unrealized appreciation (depreciation) of
interest rate swap transactions". Previously, net interest expense was presented
in "Expenses" and reported as "Net interest expense on interest rate swap
transactions". This reclassification does not alter the tax treatment of
interest rate payments on swap transactions which is to include such payments as
an operating expense for tax purposes.
50
Futures Contracts
Each Fund may use futures contracts to hedge against changes in the values of
securities the Fund owns. Each Fund bears the market risk arising from changes
in the value of these financial instruments. At the time a Fund enters into a
futures contract, the Fund deposits and maintains as collateral an initial
margin as required by the exchange on which the transaction is affected.
Pursuant to the contract, the Fund agrees to receive from or pay to the broker
an amount of cash equal to the daily fluctuation in the value of the contract.
Such receipts or payments are known as variation margin and are recorded by the
Fund as unrealized gains or losses on futures contracts. Risk may arise from the
potential inability of the counterparty to meet the terms of the contract. When
a contract is closed, the Fund records a realized gain or loss equal to the
difference between the value of the contract at the time it was opened and the
time is was closed.
Short Sales
The Funds are authorized to make short sales of securities if the Funds own at
least an equal amount of such securities or securities convertible into
securities of the same issuer. To secure its obligation to deliver securities
sold short, the Funds have instructed the custodian to segregate assets in an
equivalent amount of the securities sold short or securities convertible into or
exchangeable for such securities. The Fund is obligated to pay to the party to
which the securities were sold short, dividends declared on the stock by the
issuer and records such amounts as expense in the Statement of Operations. Short
sales are valued daily and the corresponding unrealized gains or losses are
included in "Change in net unrealized appreciation (depreciation) of
investments."
Repurchase Agreements
In connection with transactions in repurchase agreements, it is the Funds'
policy that its custodian take possession of the underlying collateral
securities, the fair value of which exceeds the principal amount of the
repurchase transaction, including accrued interest, at all times. If the seller
defaults, and the fair value of the collateral declines, realization of the
collateral may be delayed or limited.
Organization and Offering Costs
Nuveen Investments, LLC has agreed to reimburse all organization expenses
(approximately $11,500 per Fund) and pay all Common share offering costs (other
than the sales load) that exceed $.03 per Common share. Preferred and
Convertible Income's (JPC) and Preferred and Convertible Income 2's (JQC) share
of Common share offering costs ($1,749,867 and $1,766,467, respectively) were
recorded as reductions of the proceeds from the sale of Common shares.
Costs incurred by Preferred and Convertible Income (JPC) and Preferred and
Convertible Income 2 (JQC) in connection with their offering of FundPreferred
shares ($14,594,079 and $19,727,060, respectively) were recorded as reductions
to paid-in surplus.
Custodian Fee Credit
Each Fund has an arrangement with the custodian bank whereby certain custodian
fees and expenses are reduced by credits earned on each Fund's cash on deposit
with the bank. Such deposit arrangements are an alternative to overnight
investments.
Indemnifications
Under the Funds' organizational documents, its Officers and Trustees are
indemnified against certain liabilities arising out of the performance of their
duties to the Funds. In addition, in the normal course of business, the Funds
enter into contracts that provide general indemnifications to other parties. The
Funds' maximum exposure under these arrangements is unknown as this would
involve future claims that may be made against the Funds that have not yet
occurred. However, the Funds have not had prior claims or losses pursuant to
these contracts and expect the risk of loss to be remote.
Use of Estimates
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of increases and
decreases in net assets applicable to Common shares from operations during the
reporting period. Actual results may differ from those estimates.
51
Notes to
Financial Statements (continued)
2. Fund Shares
Transactions in Common and FundPreferred shares were as follows:
Preferred and Preferred and
Convertible Income (JPC) Convertible Income 2 (JQC)
---------------------------------------------- ---------------------------------------------
For the For the
Period 3/26/03 Period 6/25/03
For the Five Year (commencement For the Five Year (commencement
Months Ended Ended of operations) Months Ended Ended of operations)
12/31/04 7/31/04 through 7/31/03 12/31/04 7/31/04 through 7/31/03
------------------------------------------------------------------------------------------------------------------------------
Common shares:
Shares sold -- -- 100,000,000 -- -- 141,000,000
Shares issued to
shareholders due to
reinvestment of
distributions -- 79,185 36,992 -- -- --
------------------------------------------------------------------------------------------------------------------------------
-- 79,185 100,036,992 -- -- 141,000,000
==============================================================================================================================
FundPreferred shares sold -- -- 28,320 -- 38,600 --
==============================================================================================================================
3. Securities Transactions
Purchases and sales (including maturities and transactions in securities sold
short but excluding short-term investments) of investment securities during the
five months ended December 31, 2004, were as follows:
Preferred Preferred
and and
Convertible Convertible
Income Income 2
(JPC) (JQC)
--------------------------------------------------------------------------------
Purchases:
Investment securities $276,835,304 $388,953,897
Sales and maturities:
Investment securities 287,821,050 389,231,630
================================================================================
4. Income Tax Information
The following information is presented on an income tax basis based on the
information currently available to the Funds. 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,
and timing differences in recognizing certain gains and losses on security
transactions.
At December 31, 2004, the cost of investments was as follows:
Preferred Preferred
and and
Convertible Convertible
Income Income 2
(JPC) (JQC)
---------------------------------------------------------------------------------------------------------------------
Cost of investments (net of proceeds received on securities sold short) $2,135,341,481 $2,967,916,061
=====================================================================================================================
52
Gross unrealized appreciation and gross unrealized depreciation of investments
at December 31, 2004, were as follows:
Preferred Preferred
and and
Convertible Convertible
Income Income 2
(JPC) (JQC)
--------------------------------------------------------------------------------
Gross unrealized:
Appreciation $ 151,312,210 $ 158,870,119
Depreciation (35,294,509) (31,341,565)
--------------------------------------------------------------------------------
Net unrealized appreciation of investments $ 116,017,701 $ 127,528,554
================================================================================
The tax components of undistributed net ordinary income and net realized gains
at December 31, 2004, were as follows:
Preferred Preferred
and and
Convertible Convertible
Income Income 2
(JPC) (JQC)
--------------------------------------------------------------------------------
Undistributed net ordinary income * $ 8,790,389 $ 11,988,764
Undistributed net long-term capital gains 3,341,644 6,828,270
================================================================================
* Net ordinary income consists of net taxable income derived from dividends,
interest and net short-term capital gains, if any.
The tax character of distributions paid during the fiscal periods ended December
31, 2004, July 31, 2004 and July 31, 2003, was designated for purposes of the
dividends paid deduction as follows:
Preferred Preferred
and and
Convertible Convertible
Income Income 2
Five Months Ended December 31, 2004 (JPC) (JQC)
--------------------------------------------------------------------------------
Distributions from net ordinary income * $ 82,128,245 $ 89,938,792
Distributions from net long-term capital gains 7,112,884 2,762,657
================================================================================
Preferred Preferred
and and
Convertible Convertible
Income Income 2
Fiscal Period Ended July 31, 2004 (JPC) (JQC)
--------------------------------------------------------------------------------
Distributions from net ordinary income * $134,895,598 $162,336,998
Distributions from net long-term capital gains -- 22,781
================================================================================
Preferred Preferred
and and
Convertible Convertible
Income Income 2
Fiscal Period Ended July 31, 2003 (JPC) (JQC)
--------------------------------------------------------------------------------
Distributions from net ordinary income * $ 21,811,614 $ --
Distributions from net long-term capital gains -- --
================================================================================
* Net ordinary income consists of net taxable income derived from dividends,
interest and net short-term capital gains, if any.
Calculation of certain of the amounts presented above (namely, undistributed net
ordinary income for tax purposes) involves the application of complex aspects of
the Internal Revenue Code to certain securities held by the Funds. In
calculating the amount of taxable income derived from these securities,
management made assumptions as to the correct tax treatment of certain of those
securities and made estimates about the tax characteristics of income received
from those securities, based on information currently available to the Funds.
The use of these assumptions and estimates will not affect the qualification of
the Funds as regulated investment companies under Subchapter M of the Internal
Revenue Code, nor is it expected that these assumptions and estimates will be
used in computing taxable income for purposes of preparing the federal and state
income and excise tax returns.
53
Notes to
Financial Statements (continued)
5. Management Fee and Other Transactions with Affiliates
As approved by the Board of Trustees, effective August 1, 2004, a complex-wide
management fee structure was adopted for all funds sponsored by the Adviser and
its affiliates. This fee structure separates each fund's management fee into two
components - a complex-level component, based on the aggregate amount of all
funds assets managed by the Adviser and its affiliates, and a specific
fund-level component, based only on the amount of assets within each individual
fund. This pricing structure enables Nuveen fund shareholders to benefit from
growth in the assets within each individual fund as well as from growth in the
amount of complex-wide assets managed by the Adviser and its affiliates. Under
no circumstances will this pricing structure result in a fund paying management
fees at a rate higher than would otherwise have been applicable had the
complex-wide management fee structure not been implemented. As a consequence of
this new management fee structure, the funds' effective management fees were
reduced by approximately .009% as of January 31, 2005.
Effective August 1, 2004, the annual fund-level fee, payable monthly, for each
of the Funds is based upon the average daily Managed Assets of each Fund as
follows:
Average Daily Managed Assets Fund-Level Fee Rate
--------------------------------------------------------------------------------
For the first $500 million .7000%
For the next $500 million .6750
For the next $500 million .6500
For the next $500 million .6250
For Managed Assets over $2 billion .6000
================================================================================
Effective August 1, 2004, the annual complex-level fee, payable monthly, which
is additive to the fund-level fee, for all Nuveen sponsored funds in the U.S.,
is based on the aggregate amount of total fund assets managed as follows:
Complex-Level Assets(1) Complex-Level Fee Rate
--------------------------------------------------------------------------------
For the first $55 billion .2000%
For the next $1 billion .1800
For the next $1 billion .1600
For the next $3 billion .1425
For the next $3 billion .1325
For the next $3 billion .1250
For the next $5 billion .1200
For the next $5 billion .1175
For the next $15 billion .1150
For Managed Assets over $91 billion (2) .1400
================================================================================
(1) The complex-level fee component of the management fee for the funds is
calculated based upon the aggregate Managed Assets ("Managed Assets" means
the average daily net assets of each fund including assets attributable to
all types of leverage used by the Nuveen funds) of Nuveen-sponsored funds
in the U.S.
(2) With respect to the complex-wide Managed Assets over $91 billion, the fee
rate or rates that will apply to such assets will be determined at a later
date. In the unlikely event that complex-wide Managed Assets reach $91
billion prior to a determination of the complex-level fee rate or rates to
be applied to Managed Assets in excess of $91 billion, the complex-level
fee rate for such complex-wide Managed Assets shall be .1400% until such
time as a different rate or rates is determined.
Each Fund paid through July 31, 2004, an annual management fee, payable monthly,
at the rates set forth below, which were based upon the average daily Managed
Assets of each Fund as follows:
Average Daily Managed Assets Management Fee Rate
--------------------------------------------------------------------------------
For the first $500 million .9000%
For the next $500 million .8750
For the next $500 million .8500
For the next $500 million .8250
For Managed Assets over $2 billion .8000
================================================================================
54
The management fee compensates the Adviser for overall investment advisory and
administrative services and general office facilities. The Adviser has entered
into Sub-Advisory Agreements with Spectrum Asset Management, Inc. ("Spectrum"),
and Froley, Revy Investment Co., Inc. (Froley, Revy). Spectrum manages the
portion of the Fund's investment portfolio allocated to preferred securities
while Froley, Revy manages the portion of the investment portfolio allocated to
convertible securities. Spectrum and Froley, Revy are compensated for their
services to the Funds from the management fees paid to the Adviser. Spectrum
also receives compensation on certain portfolio transactions for providing
brokerage services to the Funds. The Adviser is responsible for the overall
strategy and asset allocation decisions as well as managing the portion of the
investment portfolio allocated to other debt securities.
The Funds pay no compensation directly to those of its Trustees who are
affiliated with the Adviser or to its officers, all of whom receive remuneration
for their services to the Funds from the Adviser or its affiliates. The Board of
Trustees has adopted a deferred compensation plan for independent Trustees that
enables Trustees to elect to defer receipt of all or a portion of the annual
compensation they are entitled to receive from certain Nuveen advised Funds.
Under the plan, deferred amounts are treated as though equal dollar amounts had
been invested in shares of select Nuveen advised Funds.
For the first eight years of Preferred and Convertible Income's (JPC)
operations, the Adviser has agreed to reimburse the Fund, as a percentage of
average daily Managed Assets, for fees and expenses in the amounts and for the
time periods set forth below:
Year Ending Year Ending
March 31, March 31,
--------------------------------------------------------------------------------
2003* .32% 2008 .32%
2004 .32 2009 .24
2005 .32 2010 .16
2006 .32 2011 .08
2007 .32
================================================================================
* From the commencement of operations.
The Adviser has not agreed to reimburse Preferred and Convertible Income (JPC)
for any portion of its fees and expenses beyond March 31, 2011.
For the first eight years of Preferred and Convertible Income 2's (JQC)
operations, the Adviser has agreed to reimburse the Fund, as a percentage of
average daily Managed Assets, for fees and expenses in the amounts and for the
time periods set forth below:
Year Ending Year Ending
June 30, June 30,
--------------------------------------------------------------------------------
2003* .32% 2008 .32%
2004 .32 2009 .24
2005 .32 2010 .16
2006 .32 2011 .08
2007 .32
================================================================================
* From the commencement of operations.
The Adviser has not agreed to reimburse Preferred and Convertible Income 2 (JQC)
for any portion of its fees and expenses beyond June 30, 2011.
6. Subsequent Events
Distributions to Common Shareholders
The Funds declared Common share dividend distributions from their net investment
income which were paid on February 1, 2005, to shareholders of record on January
15, 2005, as follows:
Preferred Preferred
and and
Convertible Convertible
Income Income 2
(JPC) (JQC)
--------------------------------------------------------------------------------
Dividend per share $.1005 $.0975
================================================================================
Adviser Merger
Effective January 1, 2005, the Adviser and its affiliate, Nuveen Advisory Corp.
("NAC"), were merged into Nuveen Asset Management ("NAM"), also a wholly owned
subsidiary of Nuveen. As a result of the merger, NAM is now the adviser to all
funds previously advised by either NAC or the Adviser.
Announcement Regarding Parent Company of Adviser
After the close of trading on the New York Stock Exchange on January 31, 2005,
The St. Paul Travelers Companies, Inc. announced that it intended to explore
strategic alternatives to divest its equity stake in Nuveen.
55
Financial
Highlights
Selected data for a Common share outstanding throughout each period:
Investment Operations
--------------------------------------------------------------------
Distributions Distributions
from Net from
Beginning Investment Capital
Common Net Income to Gains to
Share Net Realized/ FundPreferred FundPreferred
Net Asset Investment Unrealized Share- Share-
Value Income(a) Gain (Loss) holders+ holders+ Total
-------------------------------------------------------------------------------------------------------
Preferred and Convertible Income (JPC)
-------------------------------------------------------------------------------------------------------
8/01/04-12/31/04 $14.73 $ .52 $ .85 $ (.04) $ (.01) $ 1.32
8/01/03-7/31/04 14.12 1.25 .71 (.08) -- 1.88
3/26/03-7/31/03 14.33 .30 (.02) (.02) -- .26
Preferred and Convertible Income 2 (JQC)
-------------------------------------------------------------------------------------------------------
8/01/04-12/31/04 14.33 .51 .90 (.05) -- 1.36
8/01/03-7/31/04 13.83 1.16 .73 (.08) -- 1.81
6/25/03-7/31/03 14.33 .04 (.53) -- -- (.49)
=======================================================================================================
Less Distributions Total Returns
--------------------------------- -------------------
Based
Net Offering on
Investment Capital Costs and Ending Common
Income to Gains to FundPreferred Common Based Share
Common Common Share Share Ending on Net
Share- Share- Underwriting Net Asset Market Market Asset
holders holders Total Discounts Value Value Value** Value**
------------------------------------------------------------------------------------------------------------------
Preferred and Convertible Income (JPC)
------------------------------------------------------------------------------------------------------------------
8/01/04-12/31/04 $ (.50) $ (.23) $ (.73) $ -- $15.32 $14.33 8.06% 9.07%
8/01/03-7/31/04 (1.22) (.05) (1.27) -- 14.73 13.95 4.34 13.44
3/26/03-7/31/03 (.30) -- (.30) (.17) 14.12 14.57 (.89) .58
Preferred and Convertible Income 2 (JQC)
------------------------------------------------------------------------------------------------------------------
8/01/04-12/31/04 (.49) (.02) (.51) -- 15.18 13.87 6.20 9.59
8/01/03-7/31/04 (1.17) -- (1.17) (.14) 14.33 13.54 .10 12.25
6/25/03-7/31/03 -- -- -- (.01) 13.83 14.69 (2.07) (3.49)
==================================================================================================================
Ratios/Supplemental Data
-----------------------------------------------------------------------------------------
Before Credit/Reimbursement After Credit/Reimbursement***
----------------------------- -----------------------------
Ratio of Net Ratio of Net
Ratio of Investment Ratio of Investment
Ending Expenses Income to Expenses Income to
Net to Average Average to Average Average
Assets Net Assets Net Assets Net Assets Net Assets
Applicable Applicable Applicable Applicable Applicable Portfolio
to Common to Common to Common to Common to Common Turnover
Shares (000) Shares++ Shares++ Shares++ Shares++ Rate
-------------------------------------------------------------------------------------------------------------
Preferred and Convertible Income (JPC)
-------------------------------------------------------------------------------------------------------------
8/01/04-12/31/04 $1,533,722 1.51%* 7.66%* 1.04%* 8.13%* 13%
8/01/03-7/31/04 1,474,983 1.53 7.90 1.05 8.37 19
3/26/03-7/31/03 1,412,983 1.29* 5.67* .87* 6.09* 21
Preferred and Convertible Income 2 (JQC)
-------------------------------------------------------------------------------------------------------------
8/01/04-12/31/04 2,140,563 1.47* 7.81* 1.00* 8.28* 13
8/01/03-7/31/04 2,021,258 1.47 7.51 1.00 7.98 27
6/25/03-7/31/03 1,950,622 .97* 2.86* .65* 3.18* 5
=============================================================================================================
FundPreferred Shares at End of Period
--------------------------------------
Aggregate Liquidation
Amount and Market Asset
Outstanding Value Coverage
(000) Per Share Per Share
----------------------------------------------------------
Preferred and Convertible Income (JPC)
----------------------------------------------------------
8/01/04-12/31/04 $ 708,000 $ 25,000 $ 79,157
8/01/03-7/31/04 708,000 25,000 77,083
3/26/03-7/31/03 708,000 25,000 74,893
Preferred and Convertible Income 2 (JQC)
----------------------------------------------------------
8/01/04-12/31/04 965,000 25,000 80,455
8/01/03-7/31/04 965,000 25,000 77,364
6/25/03-7/31/03 -- -- --
==========================================================
* Annualized.
** Total Investment Return on Market Value is the combination of changes in
the market price per share and the effect of reinvested dividend income
and reinvested capital gains distributions, if any, at the average price
paid per share at the time of reinvestment. Total Return on Common Share
Net Asset Value is the combination of changes in Common Share net asset
value, reinvested dividend income at net asset value and reinvested
capital gains distributions at net asset value, if any.
Total returns are not annualized.
*** After custodian fee credit and expense reimbursement, where applicable.
+ The amounts shown are based on Common share equivalents.
++ o Ratios do not reflect the effect of dividend payments to
FundPreferred shareholders.
o Income ratios reflect income earned on assets attributable to
FundPreferred shares.
o Each ratio includes the effect of the dividend expense on securities
sold short as follows:
Ratio of
Dividend
Expense on
Securities
Sold Short to
Average Net
Assets Applicable
to Common Shares
-----------------
Preferred and Convertible Income (JPC)
8/01/04-12/31/04 .04%*
8/01/03-7/31/04 .03
3/26/03-7/31/03 --
Preferred and Convertible Income 2 (JQC)
8/01/04-12/31/04 .05*
8/01/03-7/31/04 .03
6/25/03-7/31/03 --
(a) Per share Net Investment Income is calculated using the average daily
shares method.
See accompanying notes to financial statements.
56-57 SPREAD
Board Members
and Officers
The management of the Funds, including general supervision of the duties
performed for the Funds by the Adviser, is the responsibility of the Board
Members of the Funds. The number of board members of the Funds is currently set
at nine. None of the board members who are not "interested" persons of the Funds
has ever been a director or employee of, or consultant to, Nuveen or its
affiliates. The names and business addresses of the board members and officers
of the Funds, their principal occupations and other affiliations during the past
five years, the number of portfolios each oversees and other directorships they
hold are set forth below.
Number of Portfolios
Principal Occupation(s) in Fund Complex
Name, Birthdate Position(s) Held Year First Elected Including other Directorships Overseen by
and Address with the Funds or Appointed (2) During Past 5 Years Board Member
------------------------------------------------------------------------------------------------------------------------------------
Board member who is an interested person of the Funds:
------------------------------------------------------------------------------------------------------------------------------------
Timothy R. Schwertfeger (1) Chairman of 1994 Chairman and Director (since 1996) of 153
3/28/49 the Board Nuveen Investments, Inc. and Nuveen
333 W. Wacker Drive and Trustee Investments, LLC; Director (since 1992)
Chicago, IL 60606 and Chairman (since 1996) of Nuveen
Advisory Corp. and Nuveen Institutional
Advisory Corp. (3); Chairman and
Director (since 1997) of Nuveen Asset
Management; Director (since 1996) of
Institutional Capital Corporation;
Chairman and Director (since 1999) of
Rittenhouse Asset Management, Inc.;
Chairman of Nuveen Investments Advisers
Inc. (since 2002).
Board members who are not interested persons of the Funds:
------------------------------------------------------------------------------------------------------------------------------------
Robert P. Bremner Board member 1997 Private Investor and Management 153
8/22/40 Consultant.
333 W. Wacker Drive
Chicago, IL 60606
------------------------------------------------------------------------------------------------------------------------------------
Lawrence H. Brown Board member 1993 Retired (1989) as Senior Vice President 153
7/29/34 of The Northern Trust Company; Director,
333 W. Wacker Drive Community Advisory Board for Highland
Chicago, IL 60606 Park and Highwood, United Way of the
North Shore (since 2002).
------------------------------------------------------------------------------------------------------------------------------------
Jack B. Evans Board member 1999 President, The Hall-Perrine Foundation, 153
10/22/48 a private philanthropic corporation
333 W. Wacker Drive (since 1996); Director and Vice
Chicago, IL 60606 Chairman, United Fire Group, a publicly
held company; Adjunct Faculty Member,
University of Iowa; Director, Gazette
Companies; Life Trustee of Coe College;
Director, Iowa College Foundation;
formerly, Director, Federal Reserve Bank
of Chicago; formerly, President and
Chief Operating Officer, SCI Financial
Group, Inc., a regional financial
services firm.
------------------------------------------------------------------------------------------------------------------------------------
William C. Hunter Board member 2004 Dean and Distinguished Professor of 153
3/6/48 Finance, School of Business at the
333 W. Wacker Drive University of Connecticut (since 2003);
Chicago, IL 60606 previously Senior Vice President and
Director of Research at the Federal
Reserve Bank of Chicago (1995-2003);
Director, Credit Research Center at
Georgetown University; Director of Xerox
Corporation (since 2004).
------------------------------------------------------------------------------------------------------------------------------------
David J. Kundert Board member 2005 Retired (2004) as Chairman, JPMorgan 151
10/28/42 Fleming Asset Management, President and
333 W. Wacker Drive CEO, Banc One Investment Advisors
Chicago, IL 60606 Corporation, and President, One Group
Mutual Funds; prior thereto, Executive
Vice President, Banc One Corporation and
Chairman and CEO, Banc One Investment
Management Group; Board of Regents,
Luther College; currently a member of
the American and Wisconsin Bar
Associations.
58
Number of Portfolios
Principal Occupation(s) in Fund Complex
Name, Birthdate Position(s) Held Year First Elected Including other Directorships Overseen by
and Address with the Funds or Appointed (2) During Past 5 Years Board Member
------------------------------------------------------------------------------------------------------------------------------------
Board members who are not interested persons of the Funds (continued):
------------------------------------------------------------------------------------------------------------------------------------
William J. Schneider Board member 1997 Chairman, formerly, Senior Partner and 153
9/24/44 Chief Operating Officer,
333 W. Wacker Drive Miller-Valentine Partners Ltd., a real
Chicago, IL 60606 estate investment company; formerly,
Vice President, Miller-Valentine Realty,
a construction company; Director, Chair
of the Finance Committee and Member of
the Audit Committee of Premier Health
Partners, the not-for-profit parent
company of Miami Valley Hospital;
President of the Dayton Philharmonic
Orchestra Association; Director and
Immediate Past Chair, Dayton Development
Coalition; formerly, Member, Community
Advisory Board, National City Bank,
Dayton, Ohio and Business Advisory
Council, Cleveland Federal Reserve Bank.
------------------------------------------------------------------------------------------------------------------------------------
Judith M. Stockdale Board member 1997 Executive Director, Gaylord and Dorothy 153
12/29/47 Donnelley Foundation (since 1994); prior
333 W. Wacker Drive thereto, Executive Director, Great Lakes
Chicago, IL 60606 Protection Fund (from 1990 to 1994)
------------------------------------------------------------------------------------------------------------------------------------
Eugene S. Sunshine Board member 2005 Senior Vice President for Business and 153
1/22/50 Finance (since 1997), Northwestern
333 W. Wacker Drive University; Director (since 2003),
Chicago, IL 60606 Chicago Board of Options Exchange;
Director (since 2003), National Mentor
Holdings, a privately-held, national
provider of home and community-based
services; Chairman (since 1997), Board
of Directors, Rubicon, an insurance
company owned by Northwestern
University; Director (since 1997),
Evanston Chamber of Commerce and
Evanston Inventure, a business
development organization.
Number of Portfolios
Name, Birthdate Position(s) Held Year First Elected Principal Occupation(s) in Fund Complex
and Address with the Funds or Appointed (4) During Past 5 Years Overseen by Officer
------------------------------------------------------------------------------------------------------------------------------------
Officers of the Funds:
------------------------------------------------------------------------------------------------------------------------------------
Gifford R. Zimmerman Chief 1988 Managing Director (since 2002), 153
9/9/56 Administrative Assistant Secretary and Associate
333 W. Wacker Drive Officer General Counsel, formerly, Vice
Chicago, IL 60606 President and Assistant General Counsel
of Nuveen Investments, LLC; Managing
Director (since 2002), General Counsel
and Assistant Secretary, formerly, Vice
President of Nuveen Advisory Corp. and
Nuveen Institutional Advisory Corp. (3);
Managing Director (since 2002),
Assistant Secretary and Associate
General Counsel, formerly, Vice
President (since 2000), of Nuveen Asset
Management; Managing Director (since
2004) and Assistant Secretary (since
1994) of Nuveen Investments, Inc.;
Assistant Secretary of NWQ Investment
Management Company, LLC (since 2002);
Vice President and Assistant Secretary
of Nuveen Investments Advisers Inc.
(since 2002); Managing Director,
Associate General Counsel and Assistant
Secretary of Rittenhouse Asset
Management, Inc. (since 2003); Chartered
Financial Analyst.
59
Board Members
and Officers (continued)
Number of Portfolios
Name, Birthdate Position(s) Held Year First Elected Principal Occupation(s) in Fund Complex
and Address with the Funds or Appointed (3) During Past 5 Years Overseen by Officer
------------------------------------------------------------------------------------------------------------------------------------
Officers of the Funds (continued):
------------------------------------------------------------------------------------------------------------------------------------
Julia L. Antonatos Vice President 2004 Managing Director (since 2005), 153
9/22/63 previously, Vice President (since 2002),
333 W. Wacker Drive formerly, Assistant Vice President
Chicago, IL 60606 (since 1999) of Nuveen Investments, LLC;
Chartered Financial Analyst.
------------------------------------------------------------------------------------------------------------------------------------
Michael T. Atkinson Vice President 2000 Vice President (since 2002), formerly, 153
2/3/66 and Assistant Assistant Vice President (since 2000),
333 W. Wacker Drive Secretary previously, Associate of Nuveen
Chicago, IL 60606 Investments, LLC.
------------------------------------------------------------------------------------------------------------------------------------
Peter H. D'Arrigo Vice President 1999 Vice President of Nuveen Investments, 153
11/28/67 and Treasurer LLC (since 1999), prior thereto,
333 W. Wacker Drive Assistant Vice President (since 1997);
Chicago, IL 60606 Vice President and Treasurer of Nuveen
Investments, Inc. (since 1999); Vice
President and Treasurer of Nuveen
Advisory Corp. and Nuveen Institutional
Advisory Corp (since 1999) (3); Vice
President and Treasurer of Nuveen Asset
Management (since 2002) and of Nuveen
Investments Advisers Inc. (since 2002);
Assistant Treasurer of NWQ Investment
Management Company, LLC (since 2002);
Vice President and Treasurer of Nuveen
Rittenhouse Asset Management, Inc.
(since 2003); Chartered Financial
Analyst.
------------------------------------------------------------------------------------------------------------------------------------
Jessica R. Droeger Vice President 2000 Vice President (since 2002) and 153
9/24/64 and Secretary Assistant General Counsel (since 1998),
333 W. Wacker Drive formerly, Assistant Vice President
Chicago, IL 60606 (since 1998) of Nuveen Investments, LLC;
Vice President (since 2002) and
Assistant Secretary (since 1998),
formerly, Assistant Vice President of
Nuveen Advisory Corp. and Nuveen
Institutional Advisory Corp. (3); Vice
President and Assistant Secretary (since
2002) of Nuveen Asset Management.
------------------------------------------------------------------------------------------------------------------------------------
Lorna C. Ferguson Vice President 1998 Managing Director (since 2004) formerly, 153
10/24/45 Vice President of Nuveen Investments,
333 W. Wacker Drive LLC; Managing Director (since 2004)
Chicago, IL 60606 formerly, Vice President (since 1998) of
Nuveen Advisory Corp. and Nuveen
Institutional Advisory Corp. (3);
Managing Director (since 2005) of Nuveen
Asset Management.
------------------------------------------------------------------------------------------------------------------------------------
William M. Fitzgerald Vice President 1995 Managing Director (since 2002) of Nuveen 153
3/2/64 Investments, LLC; Managing Director
333 W. Wacker Drive (since 2001), formerly Vice President of
Chicago, IL 60606 Nuveen Advisory Corp. and Nuveen
Institutional Advisory Corp. (since
1995) (3); Managing Director of Nuveen
Asset Management (3) (since 2001); Vice
President of Nuveen Investment Advisers
Inc. (since 2002); Chartered Financial
Analyst.
------------------------------------------------------------------------------------------------------------------------------------
Stephen D. Foy Vice President 1998 Vice President (since 1993) and Funds 153
5/31/54 and Controller Controller (since 1998) of Nuveen
333 W. Wacker Drive Investments, LLC and, formerly, Vice
Chicago, IL 60606 President and Funds Controller (since
1998) of Nuveen Investments, Inc.;
Certified Public Accountant.
60
Number of Portfolios
Name, Birthdate Position(s) Held Year First Elected Principal Occupation(s) in Fund Complex
and Address with the Funds or Appointed (3) During Past 5 Years Overseen by Officer
------------------------------------------------------------------------------------------------------------------------------------
Officers of the Funds (continued):
------------------------------------------------------------------------------------------------------------------------------------
David J. Lamb Vice President 2000 Vice President (since 2000) of Nuveen 153
3/22/63 Investments, LLC, previously Assistant
333 W. Wacker Drive Vice President (since 1999); prior
Chicago, IL 60606 thereto, Associate of Nuveen
Investments, LLC; Certified Public
Accountant.
------------------------------------------------------------------------------------------------------------------------------------
Tina M. Lazar Vice President 2002 Vice President (since 1999), previously, 153
8/27/61 Assistant Vice President (since 1993) of
333 W. Wacker Drive Nuveen Investments, LLC.
Chicago, IL 60606
------------------------------------------------------------------------------------------------------------------------------------
Larry W. Martin Vice President 1988 Vice President, Assistant Secretary and 153
7/27/51 and Assistant Assistant General Counsel of Nuveen
333 W. Wacker Drive Secretary Investments, LLC; Vice President and
Chicago, IL 60606 Assistant Secretary of Nuveen Advisory
Corp. and Nuveen Institutional Advisory
Corp. (3); Assistant Secretary of Nuveen
Investments, Inc. and (since 1997)
Nuveen Asset Management, Vice President
(since 2000), Assistant Secretary and
Assistant General Counsel (since 1998)
of Rittenhouse Asset Management, Inc.;
Vice President and Assistant Secretary
of Nuveen Investments Advisers Inc.
(since 2002); Assistant Secretary of NWQ
Investment Management Company, LLC
(since 2002).
(1) Mr. Schwertfeger is an "interested person" of the Funds, as defined in the
Investment Company Act of 1940, because he is an officer and board member
of the Adviser.
(2) Board members serve an indefinite term until his/her successor is elected.
The year first elected or appointed represents the year in which the board
member was first elected or appointed to any fund in the Nuveen Complex.
(3) Nuveen Advisory Corp. and Nuveen Institutional Advisory Corp. were
reorganized into Nuveen Asset Management, effective January 1, 2005.
(4) Officers serve one year terms through July of each year. The year first
elected or appointed represents the year in which the Officer was first
elected or appointed to any fund in the Nuveen Complex.
61
Reinvest Automatically
Easily and Conveniently
Sidebar text: Nuveen makes reinvesting easy. A phone call is all it takes to set
up your reinvestment account.
Nuveen Closed-End Exchange-Traded Funds Dividend Reinvestment Plan
Your Nuveen Closed-End Exchange-Traded Fund allows you to conveniently reinvest
dividends and/or capital gains distributions in additional fund shares.
By choosing to reinvest, you'll be able to invest money regularly and
automatically, and watch your investment grow through the power of compounding.
It is important to note that an automatic reinvestment plan does not ensure a
profit, nor does it protect you against loss in a declining market.
Easy and convenient
To make recordkeeping easy and convenient, each month you'll receive a statement
showing your total dividends and distributions, the date of investment, the
shares acquired and the price per share, and the total number of shares you own.
How shares are purchased
The shares you acquire by reinvesting will either be purchased on the open
market or newly issued by the Fund. If the shares are trading at or above net
asset value at the time of valuation, the Fund will issue new shares at the
greater of the net asset value or 95% of the then-current market price. If the
shares are trading at less than net asset value, shares for your account will be
purchased on the open market. Dividends and distributions received to purchase
shares in the open market will normally be invested shortly after the dividend
payment date. No interest will be paid on dividends and distributions awaiting
reinvestment. Because the market price of the shares may increase before
purchases are completed, the average purchase price per share may exceed the
market price at the time of valuation, resulting in the acquisition of fewer
shares than if the dividend or distribution had been paid in shares issued by
the Fund. A pro rata portion of any applicable brokerage commissions on open
market purchases will be paid by Plan participants. These commissions usually
will be lower than those charged on individual transactions.
Flexible
You may change your distribution option or withdraw from the Plan at any time,
should your needs or situation change. Should you withdraw, you can receive a
certificate for all whole shares credited to your reinvestment account and cash
payment for fractional shares, or cash payment for all reinvestment account
shares, less brokerage commissions and a $2.50 service fee.
You can reinvest whether your shares are registered in your name, or in the name
of a brokerage firm, bank, or other nominee. Ask your investment advisor if his
or her firm will participate on your behalf. Participants whose shares are
registered in the name of one firm may not be able to transfer the shares to
another firm and continue to participate in the Plan.
The Fund reserves the right to amend or terminate the Plan at any time. Although
the Fund reserves the right to amend the Plan to include a service charge
payable by the participants, there is no direct service charge to participants
in the Plan at this time.
Call today to start reinvesting dividends and/or distributions
For more information on the Nuveen Automatic Reinvestment Plan or to enroll in
or withdraw from the Plan, speak with your financial advisor or call us at (800)
257-8787.
62
Other Useful
Information
Effective Jan. 1, 2005, the asset management services and operations of Nuveen
Advisory Corp. (NAC) and Nuveen Institutional Advisory Corp (NIAC) became part
of Nuveen Asset Management (NAM). This internal consolidation is intended to
simplify the delivery of services to the investment management clients of Nuveen
Investments. It does not affect the investment objectives or portfolio
management of any Fund.
Quarterly Portfolio of Investments and Proxy voting information
Each Fund's (i) quarterly portfolio of investments, (ii) information regarding
how the Funds voted proxies relating to portfolio securities held during the
most recent 12-month period ended June 30, 2004 and (iii) a description of the
policies and procedures that the Funds used to determine how to vote proxies
relating to portfolio securities are available without charge, upon request, by
calling Nuveen Investments toll-free at (800) 257-8787 or on Nuveen's website at
www.nuveen.com.
You may also obtain this and other Fund information directly from the Securities
and Exchange Commission ("SEC"). The SEC may charge a copying fee for this
information. Visit the SEC on-line at http://www.sec.gov or in person at the
SEC's Public Reference Room in Washington, D.C. Call the SEC at 1-202-942-8090
for room hours and operation. You may also request Fund information by sending
an e-mail request to publicinfo@sec.gov or by writing to the SEC's Public
Reference Section at 450 Fifth Street NW, Washington, D.C. 20549.
Dividend Information
The Nuveen Preferred and Convertible Income Fund and Nuveen Preferred and
Convertible Income Fund 2 designates 7.93% and 7.73% respectively, of dividends
declared from net investment income as dividends qualifying for the 70%
dividends received deduction for corporations and 10.82% and 9.86% respectively,
as qualified dividend income for individuals under the Jobs and Growth Tax
Relief Reconciliation Act of 2003.
Glossary of Terms Used in this Report
Average Annual Total Return: This is a commonly used method to express an
investment's performance over a particular, usually multi-year time period. It
expresses the return that would have been necessary each year to equal the
investment's actual cumulative performance (including change in NAV or market
price and reinvested dividends and capital gains distributions, if any) over the
time period being considered.
Market Yield (also known as Dividend Yield or Current Yield): An investment's
current annualized dividend divided by its current market price.
Net Asset Value (NAV): A Fund's common share NAV per share is calculated by
subtracting the liabilities of the Fund (including any MuniPreferred shares
issued in order to leverage the Fund) from its total assets and then dividing
the remainder by the number of shares outstanding. Fund NAVs are calculated at
the end of each business day.
Board of Trustees
Robert P. Bremner
Lawrence H. Brown
Jack B. Evans
William C. Hunter
David J. Kundert
William J. Schneider
Timothy R. Schwertfeger
Judith M. Stockdale
Eugene S. Sunshine
Fund Manager
Nuveen Asset Management
333 West Wacker Drive
Chicago, IL 60606
Custodian
State Street Bank & Trust
Boston, MA
Transfer Agent and Shareholder Services
State Street Bank & Trust
Nuveen Funds
P.O. Box 43071
Providence, RI 02940-3071
(800) 257-8787
Legal Counsel
Chapman and Cutler LLP
Chicago, IL
Independent Registered Public Accounting Firm
Ernst & Young LLP
Chicago, IL
Each Fund intends to repurchase shares of its own common or preferred stock in
the future at such times and in such amounts as is deemed advisable. No shares
were repurchased during the period covered by this report. Any future
repurchases will be reported to shareholders in the next annual or semiannual
report.
63
Nuveen Investments:
SERVING Investors
For GENERATIONS
Photo of: 2 women looking at a photo album.
Since 1898, financial advisors and their clients have relied on Nuveen
Investments to provide dependable investment solutions. For the past century,
Nuveen Investments has adhered to the belief that the best approach to investing
is to apply conservative risk-management principles to help minimize volatility.
Building on this tradition, we today offer a range of high quality equity and
fixed-income solutions that are integral to a well-diversified core portfolio.
Our clients have come to appreciate this diversity, as well as our continued
adherence to proven, long-term investing principles.
We offer many different investing solutions for our clients' different needs.
Managing more than $115 billion in assets, Nuveen Investments offers access to a
number of different asset classes and investing solutions through a variety of
products. Nuveen Investments markets its capabilities under four distinct
brands: Nuveen, a leader in fixed-income investments; NWQ, a leader in
value-style equities; Rittenhouse, a leader in growth-style equities; and
Symphony, a leading institutional manager of market-neutral alternative
investment portfolios.
Find out how we can help you reach your financial goals.
To learn more about the products and services Nuveen Investments offers, talk to
your financial advisor, or call us at (800) 257-8787. Please read the
information provided carefully before you invest.
Be sure to obtain a prospectus, where applicable. Investors should consider the
investment objective and policies, risk considerations, charges and expenses of
the Fund carefully before investing. The prospectus contains this and other
information relevant to an investment in the Fund. For a prospectus, please
contact your securities representative or Nuveen Investments, 333 W. Wacker Dr.,
Chicago, IL 60606. Please read the prospectus carefully before you invest or
send money.
o Share prices
Learn more o Fund details
about Nuveen Funds at o Daily financial news
www.nuveen.com/etf o Investor education
o Interactive planning tools
Logo: NUVEEN Investments
EAN-F-1204D
ITEM 2. CODE OF ETHICS.
As of the end of the period covered by this report, the registrant has adopted a
code of ethics that applies to the registrant's principal executive officer,
principal financial officer, principal accounting officer or controller, or
persons performing similar functions. There were no amendments to or waivers
from the Code during the period covered by this report. The registrant has
posted the code of ethics on its website at www.nuveen.com/etf. (To view the
code, click on the Investor Resources drop down menu box, click on Fund
Governance and then click on Code of Conduct.)
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The registrant's Board of Directors or Trustees determined that the registrant
has at least one "audit committee financial expert" (as defined in Item 3 of
Form N-CSR) serving on its Audit Committee. The registrant's audit committee
financial expert is Jack B. Evans, Chairman of the Audit Committee, who is
"independent" for purposes of Item 3 of Form N-CSR. Mr. Evans has served as the
registrant's audit committee financial expert from July 26, 2004 to the end of
the reporting period on December 31, 2004.
Prior to July 26, 2004, William E. Bennett, who was "independent" for purposes
of Item 3 of Form N-CSR, served as the audit committee financial expert. Mr.
Bennett unexpectedly resigned from the Board effective April 30, 2004.
Accordingly for this reporting period, the registrant did not have a designated
"audit committee financial expert" from July 1, 2004 to July 26, 2004.
Mr. Evans was formerly President and Chief Operating Officer of SCI Financial
Group, Inc., a full service registered broker-dealer and registered investment
adviser ("SCI"). As part of his role as President and Chief Operating Officer,
Mr. Evans actively supervised the Chief Financial Officer (the "CFO") and
actively supervised the CFO's preparation of financial statements and other
filings with various regulatory authorities. In such capacity, Mr. Evans was
actively involved in the preparation of SCI's financial statements and the
resolution of issues raised in connection therewith. Mr. Evans has also served
on the audit committee of various reporting companies. At such companies, Mr.
Evans was involved in the oversight of audits, audit plans, and the preparation
of financial statements. Mr. Evans also formerly chaired the audit committee of
the Federal Reserve Bank of Chicago.
Mr. Bennett was formerly Executive Vice President and Chief Credit Officer of
First Chicago Corporation and its principal subsidiary, The First National Bank
of Chicago. As part of his role as Chief Credit Officer, Mr. Bennett set policy
as to accrual of assets/loans; designated performing/non-performing assets; set
the level of reserves against the credit portfolio; and determined the carrying
value of credit related assets and exposure. Among other things, Mr. Bennett was
also responsible for the oversight of the internal analysis function including
setting ground rules for the review and preparation of financial analysis and
financial statements for use in making credit and risk decisions for clients.
Mr. Bennett has significant experience reviewing, analyzing and evaluating
financial statements of domestic and international companies in a variety of
industries with complex accounting issues.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Nuveen Preferred and Convertible Income Fund
The following tables show the amount of fees that Ernst & Young LLP, the Fund's
auditor, billed to the Fund during the Fund's last two full fiscal years. For
engagements with Ernst & Young LLP entered into on or after May 6, 2003, the
Audit Committee approved in advance all audit services and non-audit services
that Ernst & Young LLP provided to the Fund, except for those non-audit services
that were subject to the pre-approval exception under Rule 2-01 of Regulation
S-X (the "pre-approval exception"). The pre-approval exception for services
provided directly to the Fund waives the pre-approval requirement for services
other than audit, review or attest services if: (A) the aggregate amount of all
such services provided constitutes no more than 5% of the total amount of
revenues paid by the Fund to its accountant during the fiscal year in which the
services are provided; (B) the Fund did not recognize the services as non-audit
services at the time of the engagement; and (C) the services are promptly
brought to the Audit Committee's attention, and the Committee (or its delegate)
approves the services before the audit is completed.
The Audit Committee has delegated certain pre-approval responsibilities to its
Chairman (or, in his absence, any other member of the Audit Committee).
SERVICES THAT THE FUND'S AUDITOR BILLED TO THE FUND
AUDIT FEES BILLED AUDIT-RELATED FEES TAX FEES ALL OTHER FEES
FISCAL YEAR ENDED TO FUND BILLED TO FUND BILLED TO FUND BILLED TO FUND
------------------------------------------------------------------------------------------------------------------------------------
December 31, 2004 * $ 18,139 $ 0 $ 855 $ 1,800
------------------------------------------------------------------------------------------------------------------------------------
Percentage approved N/A 0% 0% 0%
pursuant to
pre-approval
exception
------------------------------------------------------------------------------------------------------------------------------------
AUDIT FEES BILLED AUDIT-RELATED FEES TAX FEES ALL OTHER FEES
FISCAL YEAR ENDED TO FUND BILLED TO FUND BILLED TO FUND BILLED TO FUND
------------------------------------------------------------------------------------------------------------------------------------
July 31, 2004 $ 18,139 $ 0 $ 7,549 $ 3,450
------------------------------------------------------------------------------------------------------------------------------------
Percentage approved N/A 0% 0% 0%
pursuant to
pre-approval
exception
------------------------------------------------------------------------------------------------------------------------------------
July 31, 2003 $ 19,300 $ 0 $ 0 $ 0
------------------------------------------------------------------------------------------------------------------------------------
Percentage approved N/A 0% 0% 0%
pursuant to
pre-approval
exception
------------------------------------------------------------------------------------------------------------------------------------
*Nuveen Preferred and Convertible Fund changed its fiscal year end from July 31
to December 31, therefore, these numbers represent the period 08/01/04 -
12/31/04.
The above "All Other Fees" are fees paid to audit firms to perform agreed
upon procedures required by the rating agencies to rate fund preferred shares.
The above "Tax Fees" were billed for professional services for tax advice, tax
compliance and tax planning.
SERVICES THAT THE FUND'S AUDITOR BILLED TO THE
ADVISER AND AFFILIATED FUND SERVICE PROVIDERS
The following tables show the amount of fees billed by Ernst & Young LLP to
Nuveen Institutional Advisory Corp. ("NIAC" or the "Adviser"), and any entity
controlling, controlled by or under common control with NIAC ("Control
Affiliate") that provides ongoing services to the Fund ("Affiliated Fund Service
Provider"), for engagements directly related to the Fund's operations and
financial reporting, during the Fund's last two full fiscal years.
The table also shows the percentage of fees subject to the pre-approval
exception. The pre-approval exception for services provided to the Adviser and
any Affiliated Fund Service Provider (other than audit, review or attest
services) waives the pre-approval requirement if: (A) the aggregate amount of
all such services provided constitutes no more than 5% of the total amount of
revenues paid to Ernst & Young LLP by the Fund, the Adviser and Affiliated Fund
Service Providers during the fiscal year in which the services are provided that
would have to be pre-approved by the Audit Committee; (B) the Fund did not
recognize the services as non-audit services at the time of the engagement; and
(C) the services are promptly brought to the Audit Committee's attention, and
the Committee (or its delegate) approves the services before the Fund's audit is
completed.
FISCAL YEAR ENDED AUDIT-RELATED FEES TAX FEES BILLED TO ALL OTHER FEES
BILLED TO ADVISER AND ADVISER AND BILLED TO ADVISER
AFFILIATED FUND AFFILIATED FUND AND AFFILIATED FUND
SERVICE PROVIDERS SERVICE PROVIDERS SERVICE PROVIDERS
-----------------------------------------------------------------------------------------------------------------------------------
December 31, 2004 * $ 0 $ 0 $ 0
-----------------------------------------------------------------------------------------------------------------------------------
Percentage approved 0% 0% 0%
pursuant to
pre-approval
exception
-----------------------------------------------------------------------------------------------------------------------------------
July 31, 2004 $ 0 $ 0 $ 0
-----------------------------------------------------------------------------------------------------------------------------------
Percentage approved 0% 0% 0%
pursuant to
pre-approval
exception
-----------------------------------------------------------------------------------------------------------------------------------
July 31, 2003 $ 0 $ 0 $ 0
-----------------------------------------------------------------------------------------------------------------------------------
Percentage approved N/A N/A N/A
pursuant to
pre-approval
exception
-----------------------------------------------------------------------------------------------------------------------------------
*Nuveen Preferred and Convertible Fund changed its fiscal year end from July 31
to December 31, therefore, these numbers represent the period 08/01/04 -
12/31/04.
NON-AUDIT SERVICES
The following table shows the amount of fees that Ernst & Young LLP billed
during the Fund's last two full fiscal years for non-audit services. For
engagements entered into on or after May 6, 2003, the Audit Committee is
required to pre-approve non-audit services that Ernst & Young LLP provides to
the Adviser and any Affiliated Fund Services Provider, if the engagement related
directly to the Fund's operations and financial reporting (except for those
subject to the de minimis exception described above). The Audit Committee
requested and received information from Ernst & Young LLP about any non-audit
services that Ernst & Young LLP rendered during the Fund's last fiscal year to
the Adviser and any Affiliated Fund Service Provider. The Committee considered
this information in evaluating Ernst & Young LLP's independence.
FISCAL YEAR ENDED TOTAL NON-AUDIT FEES
BILLED TO ADVISER AND
AFFILIATED FUND SERVICE TOTAL NON-AUDIT FEES
PROVIDERS (ENGAGEMENTS BILLED TO ADVISER AND
RELATED DIRECTLY TO THE AFFILIATED FUND SERVICE
TOTAL NON-AUDIT FEES OPERATIONS AND FINANCIAL PROVIDERS (ALL OTHER
BILLED TO FUND REPORTING OF THE FUND) ENGAGEMENTS) TOTAL
------------------------------------------------------------------------------------------------------------------------------------
December 31, 2004 * $ 2,655 $ 0 $ 0 $ 2,655
July 31, 2004 $ 10,999 $ 0 $ 0 $ 10,999
July 31, 2003 $ 0 $ 0 $ 0 $ 0
*Nuveen Preferred and Convertible Fund changed its fiscal year end from July 31
to December 31, therefore, these numbers represent the period 08/01/04 -
12/31/04.
Audit Committee Pre-Approval Policies and Procedures. Generally, the audit
committee must approve (i) all non-audit services to be performed for the Fund
by the Fund's independent accountants and (ii) all audit and non-audit services
to be performed by the Fund's independent accountants for the Affiliated Fund
Service Providers with respect to operations and financial reporting of the
Fund. Regarding tax and research projects conducted by the independent
accountants for the Fund and Affiliated Fund Service Providers (with respect to
operations and financial reports of the Fund) such engagements will be (i)
pre-approved by the audit committee if they are expected to be for amounts
greater than $10,000; (ii) reported to the audit committee chairman for his
verbal approval prior to engagement if they are expected to be for amounts under
$10,000 but greater than $5,000; and (iii) reported to the audit committee at
the next audit committee meeting if they are expected to be for an amount under
$5,000.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
The registrant's Board of Directors or Trustees has a separately designated
audit committee established in accordance with Section 3(a)(58)(A) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") (15 U.S.C.
78c(a)(58)(A)). The members of the audit committee are Robert P. Bremner,
Lawrence H. Brown, Jack B. Evans and William J. Schneider.
ITEM 6. SCHEDULE OF INVESTMENTS.
See Schedule I in Item 1.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
In the rare event that a municipal issuer held by the Fund were to issue a proxy
or that the Fund were to receive a proxy issued by a cash management security,
the Adviser would either engage an independent third party to determine how the
proxy should be voted or vote the proxy with the consent, or based on the
instructions, of the Fund's Board of Directors or Trustees or its
representative. In the case of a conflict of interest, the proxy would be
submitted to the applicable Fund's Board to determine how the proxy should be
voted. A member of the Adviser's legal department would oversee the
administration of the voting, and ensure that records were maintained in
accordance with Rule 204-2(c)(2) under the Investment Advisers Act of 1940 (17
CFR 275.204-2(c)(2)), reports were filed with the SEC on Form N-PX, and the
results were provided to the Board of Directors or Trustees and made available
to shareholders as required by applicable rules.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable at this time.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
In the event of a vacancy on the Board, the nominating and governance committee
receives suggestions from various sources, including shareholders, as to
suitable candidates. Suggestions should be sent in writing to Lorna Ferguson,
Vice President for Board Relations, Nuveen Investments, 333 West Wacker Drive,
Chicago, IL 60606. The nominating and governance committee sets appropriate
standards and requirements for nominations for new directors or trustees and
reserves the right to interview all candidates and to make the final selection
of any new directors or trustees.
ITEM 11. 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 Rules 13a-15(b) or 15d-15(b) under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")
(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 second fiscal quarter
of the period covered by this report that has materially affected, or
is reasonably likely to materially affect, the registrant's internal
control over financial reporting.
ITEM 12. EXHIBITS.
File the exhibits listed below as part of this Form. Letter or number the
exhibits in the sequence indicated.
(a)(1) Any code of ethics, or amendment thereto, that is the subject of the
disclosure required by Item 2, to the extent that the registrant intends to
satisfy the Item 2 requirements through filing of an exhibit: Not applicable
because the code is posted on registrant's website at www.nuveen.com/etf. and
there were no amendments during the period covered by this report (To view the
code, click on the Investor Resources drop down menu box, click on Fund
Governance and then Code of Conduct.).
(a)(2) 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)) in the exact form set forth below: Ex-99.CERT
Attached hereto.
(a)(3) Any written solicitation to purchase securities under Rule 23c-1 under
the 1940 Act (17 CFR 270.23c-1) sent or given during the period covered by the
report by or on behalf of the registrant to 10 or more persons. Not applicable.
(b) If the report is filed under Section 13(a) or 15(d) of the Exchange Act,
provide the certifications required by Rule 30a-2(b) under the 1940 Act (17 CFR
270.30a-2(b)); Rule 13a-14(b) or Rule 15d-14(b) under the Exchange Act (17 CFR
240.13a-14(b) or 240.15d-14(b)), and Section 1350 of Chapter 63 of Title 18 of
the United States Code (18 U.S.C. 1350) as an exhibit. A certification furnished
pursuant to this paragraph will not be deemed "filed" for purposes of Section 18
of the Exchange Act (15 U.S.C. 78r), or otherwise subject to the liability of
that section. Such certification will not be deemed to be incorporated by
reference into any filing under the Securities Act of 1933 or the Exchange Act,
except to the extent that the registrant specifically incorporates it by
reference. Ex-99.906 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
-----------------------------------------------------------
By (Signature and Title)* /s/ Jessica R. Droeger
----------------------------------------------
Jessica R. Droeger
Vice President and Secretary
Date: March 9, 2005
-------------------------------------------------------------------
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: March 9, 2005
-------------------------------------------------------------------
By (Signature and Title)* /s/ Stephen D. Foy
----------------------------------------------
Stephen D. Foy
Vice President and Controller
(principal financial officer)
Date: March 9, 2005
-------------------------------------------------------------------
* Print the name and title of each signing officer under his or her signature.