Nicholas-Applegate Convertible & Income Funds Letter to Shareholders

April 17, 2006

Dear Shareholder:

We are pleased to provide you with the annual report for Nicholas-Applegate Convertible & Income Fund and Nicholas-Applegate Convertible & Income Fund II (the “Funds”) for the fiscal periods ended February 28, 2006. Please note that Nicholas-Applegate Convertible & Income Fund II changed its fiscal year-end from June 30 to February 28. Accordingly, the accompanying financial statements cover the eight-month period from July 1, 2005 to February 28, 2006.

The convertible market finished the twelve-month period ended February 28, 2006 on a positive note, as the Merrill Lynch All-Convertible Index increased 11.60% . For this period, the convertible market outperformed the Dow Jones Industrial Average but lagged both the S&P 500 Index and NASDAQ Composite Index. U.S. debt markets, as represented by the Lehman Brothers Aggregate Bond Index, produced positive, though modest, returns during the twelve-month period.

In this environment, Nicholas-Applegate Convertible & Income had a net asset value and market price return of 5.44% and 14.30%, respectively, for the reporting period. Nicholas-Applegate Convertible & Income II had a net asset value and market price return of 9.90% and 12.10%, respectively, for the eight-month period. Careful security selection was a key driver of the Funds’ performance. In the convertible portion of the portfolios, top performers were companies with improving operating statistics and those exceeding expectations, while exposure to automotive and transport issues proved to be a drag on performance. In the high-yield portion of the portfolios, upgrades exceeded downgrades across many industries, which was a positive for performance. Some of the more duration-sensitive holdings, however, detracted from performance as interest rates rose slightly over the reporting period.

Please review the following pages for more information on the Funds. If you have any questions regarding the information provided, we encourage you to contact your financial advisor or call the Funds’ shareholder servicing agent at (800) 331-1710. You will also find a wide range of information and resources on our Web site, www.allianzinvestors.com/closedendfunds.

Together with Allianz Global Investors Fund Management LLC, the Funds’ investment manager, and Nicholas-Applegate Capital Management, the Funds’ sub-adviser, we thank you for investing with us.

We remain dedicated to serving your financial needs.

Robert E. Connor		Brian S. Shlissel
Chairman		President & Chief Executive Officer

Nicholas-Applegate Convertible & Income Fund Performance & Statistics
February 28, 2006 (unaudited)

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Symbol:		Primary Investments:		Inception Date:
NCV		At least 50% of total assets		March 31, 2003
		in convertible securities.
Objective:				Net Assets(1) :
Seeks to provide total return				$1,542.8 million
through a combination of
capital appreciation and				Portfolio Manager:
high current income.				Douglas Forsyth

Total Return(2) :	Market Price	Net Asset Value (“NAV”)
1 year	14.30%	5.44	%
Commencement of Operations (3/31/03) to 2/28/06	15.35%	14.55	%
	Market Price/NAV:
	Market Price	$15.69
	NAV	$14.69
Common Share Market Price/NAV Performance:	Premium to NAV	6.81	%
Commencement of Operations (3/31/03) to 2/28/06	Market Price Yield(3)	9.56	%

(1) Inclusive of net assets attributable to Preferred Shares outstanding.

(2) Past performance is no guarantee of future results. Total return is calculated by subtracting the value of an investment in the Fund at the beginning of each specified period from the value at the end of the period and dividing the remainder by the value of the investment at the beginning of the period and expressing the result as a percentage. The calculation assumes that all income dividends and capital gain distributions have been reinvested at prices obtained under the Fund’s dividend reinvestment plan. Total return does not reflect broker commissions or sales charges. Total return for a period of less than one year is not annualized. Total return for a period of more than one year represents the average annual return.

An investment in the Fund involves risk, including the loss of principal. Total return, price, yield and net asset value will fluctuate with changes in market conditions. This data is provided for information only and is not intended for trading purposes. Closed-end funds, unlike open-end funds, are not continuously offered. There is a one-time public offering and once issued, shares of closed-end funds are sold in the open market through a stock exchange. Net asset value is total assets applicable to common shareholders less total liabilities divided by the number of common shares outstanding. Holdings are subject to change daily.

(3) Market Price Yield is determined by dividing the annualized current per share dividend to common shareholders by the market price per common share at February 28, 2006.

2 Nicholas-Applegate Convertible & Income Funds Annual Report | 2.28.06

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Nicholas-Applegate Convertible & Income Fund II Performance & Statistics
February 28, 2006 (unaudited)

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Symbol:		Primary Investments:		Inception Date:
NCZ		At least 50% of total assets		July 31, 2003
		in convertible securities.
Objective:				Total Net Assets(1):
Seeks to provide total return				$1,355.8 million
through a combination of
capital appreciation and high				Portfolio Manager:
current income.				Douglas Forsyth

Total Return(2) :	Market Price	Net Asset Value (“NAV”)
8 months ended February 28, 2006	12.10%	9.90	%
Commencement of Operations (7/31/03) to 2/28/06	10.26%	12.40	%
	Market Price/NAV:
	Market Price	$15.14
	NAV	$14.70
	Premium to NAV	2.99	%
Common Share Market Price/NAV Performance:
	Market Price Yield(3)	9.16	%
Commencement of Operations (7/31/03) to 2/28/06

(1) Inclusive of net assets attributable to Preferred Shares outstanding.

(2) Past performance is no guarantee of future results. Total return is calculated by subtracting the value of an investment in the Fund at the begining of each specified period from the value at the end of the period and dividing the remainder by the value of the investment at the begining of the period and expressing the result as a percentage. The calculation assumes that all of the Fund’s income dividends and capital gain distributions have been reinvested at prices obtained under the dividend reinvestment plan. Total return does not reflect broker commissions or sales charges. Total return for a period of less than one year is not annualized. Total return for a period of more than one year represents the average annual return.

An investment in the Fund involves risk, including the loss of principal. Total return, market price, market yield and net asset value will fluctuate with changes in market conditions. This data is provided for information only and is not intended for trading purposes. Closed-end funds, unlike open-end funds, are not continuously offered. There is a onetime public offering and once issued, shares of closed-end funds are sold in the open market through a stock exchange. Net asset value is total assets applicable to common shareholders less total liabilities divided by the number of common shares outstanding. Holdings are subject to change daily.

(3) Market Price Yield is determined by dividing the annualized current per share dividend to common shareholders by the market price per common share at February 28, 2006.

2.28.06 | Nicholas-Applegate Convertible & Income Funds Annual Report 3

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Nicholas-Applegate Convertible & Income Fund Schedule of Investments
February 28, 2006

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Principal
Amount			Credit Rating
(000)			(Moody’s/S&P)*			Value
CORPORATE BONDS & NOTES—40.7%
		Apparel—1.5%
		Levi Strauss & Co.
$    2,000		9.75%, 1/15/15	B3/B-		$	2,140,000
10,295		12.25%, 12/15/12	B3/B-			11,762,038
2,890		Oxford Industries, Inc., 8.875%, 6/1/11	B2/B			2,976,700
2,005		Phillips-Van Heusen Corp., 8.125%, 5/1/13	B1/BB			2,140,337
2,965		Warnaco, Inc., 8.875%, 6/15/13	B1/B+			3,172,550
						22,191,625
		Automotive—0.6%
11,543		HLI Operating Co., Inc., 10.50%, 6/15/10	Caa3/B-			9,811,550
		Chemicals—4.0%
5,713		Huntsman LLC, 11.625%, 10/15/10	Ba3/BB-			6,512,820
13,590		IMC Global, Inc., 11.25%, 6/1/11	Ba/BB			14,575,275
		Lyondell Chemical Co.,
3,120		9.625%, 5/1/07, Ser. A	B1/BB-			3,229,200
5,115		10.875%, 5/1/09	B3/B			5,217,300
5,435		11.125%, 7/15/12	B1/BB-			6,005,675
5,125		PolyOne Corp., 10.625%, 5/15/10	B3/B+			5,496,563
12,450		Resolution Performance Products, Inc., 13.50%, 11/15/10	Caa2/B-			13,321,500
4,830		Rhodia S.A., 10.25%, 6/1/10	B3/CCC+			5,457,900
						59,816,233
		Commercial Services—1.1%
5,400		Hertz Corp., 10.50%, 1/1/16 (a)	B3/B			5,818,500
10,005		Vertrue, Inc., 9.25%, 4/1/14	B2/B			10,255,125
						16,073,625
		Computers—0.0%
600		Unisys Corp., 8.00%, 10/15/12	Ba3/BB-			585,000
		Electric—2.8%
13,025		AES Corp., 9.50%, 6/1/09	B1/B-			14,083,281
12,750		Mission Energy Holdings Co., 13.50%, 7/15/08	B2/CCC+			14,694,375
11,755		PSEG Energy Holdings LLC, 10.00%, 10/1/09	Ba3 /BB-			13,165,600
						41,943,256
		Electronics—1.6%
11,795		IMAX Corp., 9.625, 12/1/10	B3/B-			12,178,337
12,170		Stoneridge, Inc., 11.50%, 5/1/12	B2/B+			12,139,575
						24,317,912
		Environmental Control—0.8%
10,495		Aleris International, Inc., 10.375%, 10/15/10	B2/B+			11,544,500
		Financial Services—2.0%
11,080		Alamosa Delaware, Inc., 11.00%, 7/31/10	Caa1/A-			12,354,200
7,095		AMR Holdings Co., 10.00%, 2/15/15	Caa1/B-			7,591,650
10,795		Ford Motor Credit Co., 7.00%, 10/1/13	Ba2/BB-			9,486,959
1,000		MedCath Holdings Corp., 9.875%, 7/15/12	Caa1/B-			1,038,750
						30,471,559
		Food Products—0.8%
11,645		Pilgrim’s Pride Corp., 9.625%, 9/15/11	Ba2/BB-			12,329,144

4 Nicholas-Applegate Convertible & Income Funds Annual Report | 2.28.06

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Nicholas-Applegate Convertible & Income Fund Schedule of Investments
February 28, 2006

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Principal
Amount				Credit Rating
(000)				(Moody’s/S&P)*				Value
		Healthcare—0.7%
$     7,425		Alliance Imaging, Inc., 7.25%, 12/15/12		B3/B-			$	6,218,437
3,941		Hanger Orthopedic Group, Inc., 11.25%, 6/15/09		NR/CCC+				3,916,369
								10,134,806
		Home Builders—1.6%
12,325		Ryland Group, Inc., 9.125%, 6/15/11		Ba2/BB+				12,973,714
11,620		William Lyon Homes, Inc., 10.75%, 4/1/13		B2/B				11,881,450
								24,855,164
		Home Furnishings—1.7%
11,370		Central Garden & Pet Co., 9.125%, 2/1/13		B2/B				11,995,350
14,100		Jarden Corp., 9.75%, 5/1/12		B3/B-				14,452,500
								26,447,850
		Hotels/Gaming—0.7%
10,500		Mandalay Resort Group, Inc., 10.25%, 8/1/07, Ser. B		Ba3/B+				11,143,125
		Machinery—0.9%
12,940		Case New Holland, Inc., 9.25%, 8/1/11		Ba3/BB-				13,878,150
		Manufacturing—0.5%
6,875		Clarke American Corp., 11.75%, 12/15/13 (a)		B2/B-				6,926,562
		Metals & Mining—2.7%		B1/B+
7,710		AK Steel Corp., 7.875%, 2/15/09						7,497,975
11,665		Freeport-McMoRan Copper & Gold, Inc., 10.125%, 2/1/10		B1/B+				12,569,038
6,040		Oregon Steel Mills, Inc., 10.00%, 7/15/09		Ba3/B+				6,417,500
13,420		United States Steel LLC, 10.75%, 8/1/08		Ba2/BB				14,829,100
								41,313,613
		Miscellaneous—2.2%
32,825		Dow Jones CDX High Yield, 10.50%, 12/29/09 (a) (b)		NR/NR				32,948,417
		Multi-Media—3.8%
12,870		CCH I LLC, 11.00%, 10/1/15 (a)		Caa3/CCC-				10,826,888
2,715		CSC Holdings Inc., 10.50%, 5/15/16		B3/B+				2,891,475
5,700		Lodgenet Entertainment Corp., 9.50%, 6/15/13		B3/B-				6,156,000
9,340		Mediacom Broadband LLC, 11.00%, 7/15/13		B2/B				9,993,800
6,665		Salem Communications Holding Corp., 9.00%, 7/1/11, Ser. B		B2/B-				6,998,250
8,140		Sirius Satellite Radio, Inc., 9.625%, 8/1/13		Caa1/CCC				8,017,900
11,911		XM Satellite Radio, Inc., 12.00%, 6/15/10		Caa1/CCC+				13,310,543
								58,194,856
		Office/Business Equipment—0.4%
5,565		Xerox Corp., 9.75%, 1/15/09		Ba2/BB+				6,107,587
		Office Furnishings—1.1%
		Interface, Inc.,
5,375		9.50%, 2/1/14		Caa1/CCC				5,536,250
6,490		10.375%, 2/1/10		B2/B-				7,090,325
3,791		Tempur-Pedic, Inc., 10.25%, 8/15/10		B2/B				4,056,370
								16,682,945
		Oil & Gas—0.4%
5,000		Seitel, Inc., 11.75%, 7/15/11		B3/NR				5,662,500

2.28.06 | Nicholas-Applegate Convertible & Income Funds Annual Report 5

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Nicholas-Applegate Convertible & Income Fund Schedule of Investments
February 28, 2006

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Principal
Amount			Credit Rating
(000)			(Moody’s/S&P)*				Value
		Paper Products—0.6%
$     5,096		Buckeye Technologies, Inc., 9.25%, 9/15/08	Caa1/B			$	5,096,000
3,240		Exopack Holdings Corp., 11.25%, 2/1/14 (a)	B2/B-				3,256,200
							8,352,200
		Pharmaceuticals—0.7%
10,955		Leiner Health Products, Inc., 11.00%, 6/1/12	Caa1/CCC+				10,763,288
		Pipelines—1.2%
4,275		Dynegy Holdings, Inc., 10.125%, 7/15/13 (a)	B1/B-				4,809,375
13,330		Sonat, Inc., 7.625%, 7/15/11	Caa1/B-				13,863,200
							18,672,575
		Real Estate—0.2%
2,715		Host Marriot L.P., 9.50%, 1/15/07, Ser. I, REIT	Ba2/BB-				2,799,844
		Retail—3.1%
5,420		EPL Finance Corp., 11.75%, 11/15/13 (a)	Caa1/CCC+				5,609,700
5,590		Mothers Work, Inc., 11.25%, 8/1/10	Caa1/B-				5,701,800
9,710		Neiman-Marcus Group, Inc., 10.375%, 10/15/15 (a)	B3/B-				10,219,775
10,000		R.H. Donnelley, Inc., 10.875%, 12/15/12	B2/B				11,250,000
13,575		Rite Aid Corp., 12.50%, 9/15/06	NR/B+				14,016,187
							46,797,462
		Semi-Conductors—1.0%
11,265		Amkor Technology, Inc., 10.50%, 5/1/09	Caa3/CCC				11,208,675
3,795		Avago Technologies Finance, 10.125%, 12/1/13 (a)	B3 /B				4,032,187
							15,240,862
		Telecommunications—2.0%
7,395		Hawaiian Telcom Communications, Inc., 12.50%, 5/1/15 (a)	Caa1/CCC+				7,006,762
12,180		Millicom International Cellular S.A., 10.00%, 12/1/13	B3/B-				13,413,225
8,860		Time Warner Telecom, Inc., 10.125%, 2/1/11	Caa1/CCC+				9,303,000
							29,722,987
		Total Corporate Bonds & Notes (cost-$611,209,801)					615,729,197
CONVERTIBLE BONDS & NOTES—31.5%
		Airlines—1.3%
20,572		Continental Airlines, Inc., 4.50%, 2/1/07	Caa2/CCC+				20,160,560
		Automotive—1.9%
		Goodyear Tire & Rubber Co.,
10,890		11.25%, 3/1/11	B3/NR				12,169,575
11,900		4.00%, 6/15/34 (a)	B3/B-				15,946,000
							28,115,575
		Chemicals—0.7%
6,760		Millennium Chemicals, Inc., 4.00%, 11/15/23	B1/BB-				11,272,300
		Commercial Services—3.1%
9,100		Bowne & Co., Inc., 5.00%, 10/1/33	B2/B-				9,786,140
20,614		Quebecor World USA, Inc., 6.00%, 10/1/07	B2/B				20,227,487
13,440		Memberworks, Inc., 5.50%, 10/1/10	NR/B-				16,497,600
							46,511,227
		Computers—1.2%
16,400		Maxtor Corp., 6.80%, 4/30/10	B2/NR				18,839,500

6 Nicholas-Applegate Convertible & Income Funds Annual Report | 2.28.06 

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Nicholas-Applegate Convertible & Income Fund Schedule of Investments
February 28, 2006

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Principal
Amount				Credit Rating
(000)				(Moody’s/S&P)*				Value
		Electric—1.2%
$     6,075		PG&E Corp., 9.50%, 6/30/10		NR/NR			$	17,382,094
		Electrical Components & Equipment—0.6%
7,250		Artesyn Technologies, Inc., 5.50%, 8/15/10		NR/NR				9,823,750
		Financial Services—1.1%
100		Citigroup Funding, Inc., 5.18%, 9/27/08 (c)		Aa1/AA-				3,199,000
11,800		E*Trade Financial Corp., 6.00%, 2/1/07		NR/B-				13,083,250
								16,282,250
		Household Products—0.7%
7,300		American Greetings Corp., 7.00%, 7/15/06		Ba2/BB+				11,205,500
		Insurance—0.2%
2,250		American Equity Investment Life Holding Co., 5.25%, 12/6/24		NR/BB+				2,700,000
		Metals & Mining—1.4%
12,600		Freeport-McMoRan Copper & Gold, Inc., 7.00%, 2/11/11		NR/B+				21,656,250
		Multi-Media—1.4%
20,995		EchoStar Communications Corp., 5.75%, 5/15/08		B2/B				20,732,562
		Oil & Gas—1.1%
14,100		Devon Energy Corp., 4.95%, 8/15/08		Baa2/BBB				16,179,750
		Pharmaceuticals—2.7%
9,650		Ligand Pharmaceuticals, Inc., 6.00%, 11/16/07		NR/NR				19,517,125
20,950		Sepracor, Inc., 5.00%, 2/15/07		NR/B-				20,897,625
								40,414,750
		Retail—2.3%
4,790		GSC Holdings Corp., 8.00%, 10/1/12 (a)		Ba3/B+				4,778,028
6,101		Guitar Center, Inc., 4.00%, 7/15/13		B1/BB-				9,304,025
21,008		Sonic Automotive, Inc., 5.25%, 5/7/09		B3/B				20,771,660
								34,853,713
		Semi-Conductors—2.4%
		Amkor Technology, Inc.
2,363		5.00%, 3/15/07		Caa3/CCC				2,312,786
17,379		5.75%, 6/1/06		Caa3/CCC				17,422,447
16,750		Fairchild Semiconductor Corp., 5.00%, 11/1/08		NR/B				16,687,187
								36,422,420
		Telecommunications—5.8%
19,000		American Tower Corp., 5.00%, 2/15/10		B1/BB-				18,881,250
15,900		CenturyTel, Inc., 4.75%, 8/1/32		Baa2/BBB+				16,396,875
19,800		Lucent Technologies, Inc., 8.00%, 8/1/31		B3/CCC+				20,121,750
20,500		Nextel Communications, Inc., 5.25%, 1/15/10		Baa2/A-				20,602,500
12,345		Nortel Networks Corp., 4.25%, 9/1/08		B3 /B-				11,712,318
								87,714,693
		Transportation—0.9%
9,150		YRC Worldwide, Inc., 5.00%, 8/8/23		Ba1/BBB-				13,439,062
		Trucking/Leasing—1.5%
18,500		GATX Corp., 7.50%, 2/1/07		Baa3/BBB				22,893,750
		Total Convertible Bonds & Notes (cost-$475,544,545)						476,599,706

2.28.06 | Nicholas-Applegate Convertible & Income Funds Annual Report 7

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Nicholas-Applegate Convertible & Income Fund Schedule of Investments
February 28, 2006

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Shares				Credit Rating
(000)				(Moody’s/S&P)*				Value
CONVERTIBLE PREFERRED STOCK—22.7%
		Automotive—0.5%
244		Ford Motor Co., Capital Trust II, 6.50%, 1/15/32		B2/B-			$	7,393,291
		Banking—1.2%
322		Washington Mutual Capital Trust, 5.375%, 5/3/41		Baa1/BBB				17,490,253
		Commercial Services—1.5%
495		United Rentals, Inc., 6.50%, 8/1/28		Caa2/B-				23,141,250
		Electric—2.3%
447		AES Trust III, 6.75%, 10/15/29		B3/CCC+				20,709,180
62		NRG Energy, Inc., 5.75%, 3/16/09		B3/CCC+				14,344,875
								35,054,055
		Financial Services—3.7%
255		E Trade Financial Corp., 6.125%, 11/18/08		B3/NA				8,510,625
560		Lehman Brothers Holdings, Inc., 6.25%, 10/15/07		A1/A+				14,772,800
		Morgan Stanley,
215		20.00%, 12/14/06		Aa3/A+				15,965,900
280		20.00%, 12/22/06		Aa3/A+				16,561,772
								55,811,097
		Food—0.7%
442		Albertson’s, Inc., 7.25%, 5/16/07		Baa3/BBB-				10,953,824
		Holding Companies—0.5%
79		Williams Holdings of Delaware, Inc., 5.50%, 6/1/33		NR/B-				8,048,425
		Insurance—5.4%
460		Genworth Financial, Inc., 6.00%, 5/16/07		A2/A				16,100,000
760		Metlife, Inc., 6.375%, 8/15/08		NR/BBB+				20,899,347
240		Platinum Underwriters Holdings Ltd., 6.00%, 2/15/09		NR/BB+				7,350,000
765		PMI Group, Inc., 5.875, 11/15/06		A1/A				19,507,500
782		XL Capital Ltd., 6.50%, 5/15/07		A3/A-				17,704,480
								81,561,327
		Iron/Steel—0.5%
46		U.S. Steel Corp., 7.00%, 6/15/06, Ser. B		NR/B				8,006,788
		Office/Business Equipment—1.1%
137		Xerox Corp., 6.25%, 7/1/06		B1/B+				16,935,840
		Oil & Gas—2.2%
133		Amerada Hess Corp., 7.00%, 12/01/06		Ba3/BB				15,451,940
100		Chesapeake Energy Corp., 5.00%, 12/31/49		B2/B				18,335,600
								33,787,540
		Pharmaceuticals—0.9%
274		Schering-Plough Corp., 6.00%, 9/14/07		Baa3/BBB				13,658,670
		Real Estate—0.6%
336		FelCor Lodging Trust, Inc., 1.95%, 12/31/49, Ser. A, REIT		B3/CCC+				8,494,100
		Telecommunications—1.1%
300		Crown Castle International Corp., 6.25%, 8/15/12		NR/NR				16,500,000

8 Nicholas-Applegate Convertible & Income Funds Annual Report | 2.28.06

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Nicholas-Applegate Convertible & Income Fund Schedule of Investments
February 28, 2006

Shares				Credit Rating
(000)				(Moody’s/S&P)*			Value
		Waste Disposal—0.5%
138		Allied Waste Industries, Inc., 6.25%, 4/1/06		Caa3/B		$	7,374,125
		Total Convertible Preferred Stock (cost-$325,771,406)					344,210,585
U.S. GOVERNMENT SECURITIES—2.4%
Principal
Amount
(000)
		United States Treasury Notes,
$16,275		10.375%, 11/15/12					17,773,455
16,275		12.00%, 8/15/13					19,030,309
		Total U.S. Government Securities (cost-$38,317,453)					36,803,764
SHORT-TERM INVESTMENT—2.7%
		Time Deposit—2.7%
40,408		Bank of America – London, 3.88%, 3/1/06
		(cost-$40,408,127)					40,408,127
		Total Investments (cost-$1,491,251,332)-100.0%				$	1,513,751,379

2.28.06 | Nicholas-Applegate Convertible & Income Funds Annual Report 9

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Nicholas-Applegate Convertible & Income Fund II Schedule of Investments
February 28, 2006

---

Principal
Amount			Credit Rating
(000)			(Moody’s/S&P)*				Value
CORPORATE BONDS & NOTES—41.0%
		Apparel—1.4%
		Levi Strauss & Co.
$    2,000		9.75%, 1/15/15	B3/B-			$	2,140,000
8,705		12.25%, 12/15/12	B3/B-				9,945,463
2,610		Oxford Industries, Inc., 8.875%, 6/1/11	B2/B				2,688,300
1,920		Phillips-Van Heusen Corp., 8.125%, 5/1/13	B1/BB				2,049,600
2,030		Warnaco, Inc., 8.875%, 6/15/13	B1/B+				2,172,100
							18,995,463
		Automotive—1.4%
9,260		Goodyear Tire & Rubber Co., 11.25%, 3/1/11	B3/NR				10,348,050
10,030		HLI Operating Co., Inc., 10.50%, 6/15/10	Caa3/B-				8,525,500
							18,873,550
		Chemicals—4.0%
4,988		Huntsman LLC, 11.625%, 10/15/10	Ba3/BB-				5,686,320
11,410		IMC Global, Inc., 11.25%, 6/1/11	Ba/BB				12,237,225
		Lyondell Chemical Co.,
4,435		9.625%, 5/1/07, Ser. A	B1/BB-				4,590,225
4,315		10.875%, 5/1/09	B3/B				4,401,300
4,565		11.125%, 7/15/12	B1/BB-				5,044,325
4,765		PolyOne Corp., 10.625%, 5/15/10	B3/B+				5,110,463
10,950		Resolution Performance Products, Inc., 13.50%, 11/15/10	Caa2/B-				11,716,500
3,609		Rhodia S.A., 10.25%, 6/1/10	B3/CCC+				4,078,170
							52,864,528
		Commercial Services—1.0%
4,600		Hertz Corp., 10.50%, 1/1/16 (a)	B3/B				4,956,500
8,595		Vertrue, Inc., 9.25%, 4/1/14	B2/B				8,809,875
							13,766,375
		Computers—0.0%
600		Unisys Corp., 8.00%, 10/15/12	Ba3/BB-				585,000
		Electric—2.7%
12,000		AES Corp., 9.50%, 6/1/09	B1/B-				12,975,000
10,250		Mission Energy Holdings Co., 13.50%, 7/15/08	B2/CCC+				11,813,125
9,820		PSEG Energy Holdings LLC, 10.00%, 10/1/09	Ba3/BB-				10,998,400
							35,786,525
		Electronics—1.5%
9,510		IMAX Corp., 9.625, 12/1/10	B3/B-				9,819,075
10,335		Stoneridge, Inc., 11.50%, 5/1/12	B2/B+				10,309,162
							20,128,237
		Environmental Control—0.8%
9,060		Aleris International, Inc., 10.375%, 10/15/10	B2/B+				9,966,000
		Financial Services—1.9%
9,400		Alamosa Delaware, Inc., 11.00%, 7/31/10	Caa1/A-				10,481,000
5,835		AMR Holdings Co., 10.00%, 2/15/15	Caa1/B-				6,243,450
9,205		Ford Motor Credit Co., 7.00%, 10/1/13	Ba2/BB-				8,089,621
1,000		MedCath Holdings Corp., 9.875%, 7/15/12	Caa1/B-				1,038,750
							25,852,821

10 Nicholas-Applegate Convertible & Income Funds Annual Report | 2.28.06

---

Nicholas-Applegate Convertible & Income Fund II Schedule of Investments
February 28, 2006

---

Principal
Amount				Credit Rating
(000)				(Moody’s/S&P)*				Value
		Food Products—0.8%
$     9,815		Pilgrim’s Pride Corp., 9.625%, 9/15/11		Ba2/BB-			$	10,391,631
		Healthcare—0.7%
6,325		Alliance Imaging, Inc., 7.25%, 12/15/12		B3/B-				5,297,188
3,550		Hanger Orthopedic Group, Inc., 11.25%, 6/15/09		NR/CCC+				3,527,813
								8,825,001
		Home Builders—1.7%
11,500		Ryland Group, Inc., 9.125%, 6/15/11		Ba2/BB+				12,105,291
9,800		William Lyon Homes, Inc., 10.75%, 4/1/13		B2/B				10,020,500
								22,125,791
		Home Furnishings—1.7%
9,670		Central Garden & Pet Co., 9.125%, 2/1/13		B2/B				10,201,850
11,900		Jarden Corp., 9.75%, 5/1/12		B3/B-				12,197,500
								22,399,350
		Hotels/Gaming—0.9%
11,080		Mandalay Resort Group, Inc., 10.25%, 8/1/07, Ser. B		Ba3/B+				11,758,650
		Machinery—0.9%
10,730		Case New Holland, Inc., 9.25%, 8/1/11		Ba3/BB-				11,507,925
		Manufacturing—0.4%
5,825		Clarke American Corp., 11.75%, 12/15/13 (a)		B2/B-				5,868,688
		Metals & Mining—2.7%
6,490		AK Steel Corp., 7.875%, 2/15/09		B1/B+				6,311,525
9,835		Freeport-McMoRan Copper & Gold, Inc., 10.125%, 2/1/10		B1/B+				10,597,212
5,710		Oregon Steel Mills, Inc., 10.00%, 7/15/09		Ba3/B+				6,066,875
11,450		United States Steel LLC, 10.75%, 8/1/08		Ba2/BB				12,652,250
								35,627,862
		Miscellaneous—2.0%
25,975		Dow Jones CDX High Yield, 10.50%, 12/29/09 (a) (b)		NR/NR				26,072,062
		Multi-Media—3.6%
12,291		CCH I LLC, 11.00%, 10/1/15 (a)		Caa3/CCC-				10,339,804
2,285		CSC Holdings Inc., 10.50%, 5/15/16		B3/B+				2,433,525
2,975		Lodgenet Entertainment Corp., 9.50%, 6/15/13		B3/B-				3,213,000
7,860		Mediacom Broadband LLC, 11.00%, 7/15/13		B2/B				8,410,200
5,735		Salem Communications Holding Corp., 9.00%, 7/1/11, Ser. B		B2/B-				6,021,750
6,860		Sirius Satellite Radio, Inc., 9.625%, 8/1/13		Caa1/CCC				6,757,100
10,055		XM Satellite Radio, Inc., 12.00%, 6/15/10		Caa1/CCC+				11,236,462
								48,411,841
		Office/Business Equipment—0.4%
5,195		Xerox Corp., 9.75%, 1/15/09		Ba2/BB+				5,701,512
		Office Furnishings—1.1%
		Interface, Inc.,
4,625		9.50%, 2/1/14		Caa1/CCC				4,763,750
5,625		10.375%, 2/1/10		B2/B-				6,145,313
3,199		Tempur-Pedic, Inc., 10.25%, 8/15/10		B2/B				3,422,930
								14,331,993

2.28.06 | Nicholas-Applegate Convertible & Income Funds Annual Report 11

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Nicholas-Applegate Convertible & Income Fund II Schedule of Investments
February 28, 2006

---

Principal
Amount				Credit Rating
(000)				(Moody’s/S&P)*				Value
		Oil & Gas—0.4%
$    5,000		Seitel, Inc., 11.75%, 7/15/11		B3/NR			$	5,662,500
		Paper Products—0.5%
4,013		Buckeye Technologies, Inc., 9.25%, 9/15/08		Caa1/B				4,013,000
2,760		Exopac Holdings Corp., 11.25%, 2/1/14 (a)		B2/B-				2,773,800
								6,786,800
		Pharmaceuticals—0.7%
9,310		Leiner Health Products, Inc., 11.00%, 6/1/12		Caa1/CCC+				9,147,075
		Pipelines—1.3%
4,025		Dynegy Holdings, Inc., 10.125%, 7/15/13 (a)		B1/B-				4,528,125
12,240		Sonat, Inc., 7.625%, 7/15/11		Caa1/B-				12,729,600
								17,257,725
		Real Estate—0.2%
2,285		Host Marriot L.P., 9.50%, 1/15/07, Ser. I, REIT		Ba2/BB-				2,356,406
		Retail—3.4%
4,580		EPL Finance Corp., 11.75%, 11/15/13 (a)		Caa1/CCC+				4,740,300
4,210		GSC Holdings Corp., 8.00%, 10/1/12 (a)		Ba3/B+				4,199,475
4,495		Mothers Work, Inc., 11.25%, 8/1/10		Caa1/B-				4,584,900
8,290		Neiman-Marcus Group, Inc., 10.375%, 10/15/15 (a)		B3/B-				8,725,225
10,000		R.H. Donnelley, Inc., 10.875%, 12/15/12		B2/B				11,250,000
11,460		Rite Aid Corp., 12.50%, 9/15/06		NR/B+				11,832,450
								45,332,350
		Semi-Conductors—1.0%
9,660		Amkor Technology, Inc., 10.50%, 5/1/09		Caa3/CCC				9,611,700
3,205		Avago Technologies Finance, 10.125%, 12/1/13 (a)		B3/B				3,405,313
								13,017,013
		Telecommunications—1.9%
6,305		Hawaiian Telcom Communications, Inc., 12.50%, 5/1/15 (a)		Caa1/CCC+				5,973,987
10,380		Millicom International Cellular S.A., 10.00%, 12/1/13		B3/B-				11,430,975
7,510		Time Warner Telecom, Inc., 10.125%, 2/1/11		Caa1/CCC+				7,885,500
								25,290,462
		Total Corporate Bonds & Notes (cost-$543,945,532)						544,691,136
CONVERTIBLE BONDS & NOTES—30.5%
		Airlines—1.2%
16,300		Continental Airlines, Inc., 4.50%, 2/1/07		Caa2/CCC+				15,974,000
		Automotive—1.2%
11,700		Goodyear Tire & Rubber Co., 4.00%, 6/15/34 (a)		B3/B-				15,678,000
		Chemicals—0.7%
5,950		Millennium Chemicals, Inc., 4.00%, 11/15/23		B1/BB-				9,921,625
		Commercial Services—3.1%
10,125		Bowne & Co., Inc., 5.00%, 10/1/33		B2/B-				10,888,425
17,985		Quebecor World USA, Inc., 6.00%, 10/1/07		B2/B				17,647,781
11,000		Memberworks, Inc., 5.50%, 10/1/10		NR/B-				13,502,500
								42,038,706

12 Nicholas-Applegate Convertible & Income Funds Annual Report | 2.28.06

---

Nicholas-Applegate Convertible & Income Fund II Schedule of Investments
February 28, 2006

---

Principal
Amount					Credit Rating
(000)					(Moody’s/S&P)*				Value
			Computers—1.2%
$     14,400			Maxtor Corp., 6.80%, 4/30/10		B2/NR			$	16,542,000
			Electric—1.2%
5,425			PG&E Corp., 9.50%, 6/30/10		NR/NR				15,522,281
			Electrical Components & Equipment—0.8%
8,150			Artesyn Technologies, Inc., 5.50%, 8/15/10		NR/NR				11,043,250
			Financial Services—0.9%
100			Citigroup Funding, Inc., 5.18%, 9/27/08 (c)		Aa1/AA-				3,199,000
8,758			E*Trade Financial Corp., 6.00%, 2/1/07		NR/B-				9,710,433
									12,909,433
			Household Products—0.8%
7,050			American Greetings Corp., 7.00%, 7/15/06		Ba2/BB+				10,821,750
			Insurance—0.2%
2,150			American Equity Investment Life Holding Co., 5.25%, 12/6/24		NR/BB+				2,580,000
			Metals & Mining—1.5%
11,200			Freeport-McMoRan Copper & Gold, Inc., 7.00%, 2/11/11		NR/B+				19,250,000
			Multi-Media—1.4%
18,500			EchoStar Communications Corp., 5.75%, 5/15/08		B2/B				18,268,750
			Oil & Gas—1.1%
12,500			Devon Energy Corp., 4.95%, 8/15/08		Baa2/BBB				14,343,750
			Pharmaceuticals—2.7%
8,490			Ligand Pharmaceuticals, Inc., 6.00%, 11/16/07		NR/NR				17,171,025
18,550			Sepracor, Inc., 5.00%, 2/15/07		NR/B-				18,503,625
									35,674,650
			Retail—2.0%
5,200			Guitar Center, Inc., 4.00%, 7/15/13		B1/BB-				7,930,000
18,535			Sonic Automotive, Inc., 5.25%, 5/7/09		B3/B				18,326,481
									26,256,481
			Semi-Conductors—2.4%
			Amkor Technology, Inc.
14,300			5.00%, 3/15/07		Caa3/CCC				13,996,125
3,000			5.75%, 6/1/06		Caa3/CCC				3,007,500
15,000			Fairchild Semiconductor Corp., 5.00%, 11/1/08		NR/B				14,943,750
									31,947,375
			Telecommunications—5.7%
16,250			American Tower Corp., 5.00%, 2/15/10		B1/BB-				16,148,438
13,600			CenturyTel, Inc., 4.75%, 8/1/32		Baa2/BBB+				14,025,000
17,500			Lucent Technologies, Inc., 8.00%, 8/1/31		B3/CCC+				17,784,375
18,500			Nextel Communications, Inc., 5.25%, 1/15/10		Baa2/A-				18,592,500
9,940			Nortel Networks Corp., 4.25%, 9/1/08		B3/B-				9,430,575
									75,980,888
			Transportation—0.9%
8,100			YRC Worldwide, Inc., 5.00%, 8/8/23		Ba1/BBB-				11,896,875
			Trucking/Leasing—1.5%
15,900			GATX Corp., 7.50%, 2/1/07		Baa3/BBB				19,676,250
			Total Convertible Bonds & Notes (cost-$405,143,636)						406,326,064

2.28.06 | Nicholas-Applegate Convertible & Income Funds Annual Report 13

---

Nicholas-Applegate Convertible & Income Fund II Schedule of Investments
February 28, 2006

---

Shares				Credit Rating
(000)				(Moody’s/S&P)*				Value
CONVERTIBLE PREFERRED STOCK—23.3%
		Automotive—0.5%
209		Ford Motor Co., Capital Trust II, 6.50%, 1/15/32		B2/B-			$	6,338,760
		Banking—1.1%
275		Washington Mutual Capital Trust, 5.375%, 5/3/41		Baa1/BBB				14,960,000
		Commercial Services—1.7%
469		United Rentals, Inc., 6.50%, 8/1/28		Caa2/B-				21,902,375
		Electric—2.2%
344		AES Trust III, 6.75%, 10/15/29		B3/CCC+				15,962,940
58		NRG Energy, Inc., 5.75%, 3/16/09		B3/CCC+				13,411,875
								29,374,815
		Financial Services—3.8%
250		E Trade Financial Corp., 6.125%, 11/18/08		B3/NA				8,343,750
500		Lehman Brothers Holdings, Inc., 6.25%, 10/15/07		A1/A+				13,190,000
		Morgan Stanley,
190		20.00%, 12/14/06		Aa3/A+				14,109,400
250		20.00%, 12/22/06		Aa3/A+				14,837,452
								50,480,602
		Food—0.7%
371		Albertson’s, Inc., 7.25%, 5/16/07		Baa3/BBB-				9,176,056
		Holding Companies—0.6%
73		Williams Holdings of Delaware, Inc., 5.50%, 6/1/33		NR/B-				7,376,875
		Insurance—5.5%
408		Genworth Financial, Inc., 6.00%, 5/16/07		A2/A				14,262,500
674		Metlife, Inc., 6.375%, 8/15/08		NR/BBB+				18,527,985
220		Platinum Underwriters Holdings Ltd., 6.00%, 2/15/09		NR/BB+				6,737,500
665		PMI Group, Inc., 5.875, 11/15/06		A1/A				16,957,500
732		XL Capital Ltd., 6.50%, 5/15/07		A3/A-				16,572,480
								73,057,965
		Iron/Steel—0.6%
43		U.S. Steel Corp., 7.00%, 6/15/06, Ser. B		NR/B				7,431,762
		Office/Business Equipment—1.1%
123		Xerox Corp., 6.25%, 7/1/06		B1/B+				15,227,400
		Oil & Gas—2.2%
119		Amerada Hess Corp., 7.00%, 12/01/06		Ba3/BB				13,825,420
86		Chesapeake Energy Corp., 5.00%, 12/31/49		B2/B				15,860,800
								29,686,220
		Pharmaceuticals—1.0%
276		Schering-Plough Corp., 6.00%, 9/14/07		Baa3/BBB				13,795,124
		Real Estate—0.6%
315		FelCor Lodging Trust, Inc., 1.95%, 12/31/49, Ser. A, REIT		B3/CCC+				7,953,750
		Telecommunications—1.1%
270		Crown Castle International Corp., 6.25%, 8/15/12		NR/NR				14,850,000

14 Nicholas-Applegate Convertible & Income Funds Annual Report | 2.28.06

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Nicholas-Applegate Convertible & Income Fund II Schedule of Investments
February 28, 2006

---

Shares				Credit Rating
(000)				(Moody’s/S&P)*			Value
		Waste Disposal—0.6%
138		Allied Waste Industries, Inc., 6.25%, 4/1/06		Caa3/B		$	7,374,125
		Total Convertible Preferred Stock (cost-$296,514,355)					308,985,829
U.S. GOVERNMENT SECURITIES—2.3%
Principal
Amount
(000)
		United States Treasury Notes,
$    13,725		10.375%, 11/15/12					14,988,675
13,725		12.00%, 8/15/13					16,048,601
		Total U.S. Government Securities (cost-$32,313,797)					31,037,276
SHORT-TERM INVESTMENT—2.9%
		Time Deposit—2.9%
37,765		Bank of America - London, 3.88%, 3/1/06
		(cost-$37,764,599)					37,764,599
		Total Investments (cost-$1,315,681,919)—100.0%				$	1,328,804,904

Notes to Schedules of Investments
*	Unaudited
(a)	144A-security - Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, typically only to qualified institutional buyers. Unless otherwise indicated these securities are not considered to be illiquid.
(b)	Credit-linked trust certificate.
(c)	Variable rate security. Interest rate disclosed reflects the rate in effect on February 28, 2006.

Glossary: NR — Not Rated REIT — Real Estate Investment Trust

See accompanying Notes to Financial Statements | 2.28.06 | Nicholas-Applegate Convertible & Income Funds Annual Report 15

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Nicholas-Applegate Convertible & Income Funds Statements of Assets and Liabilities
February 28, 2006 

---

			Convertible &			Convertible &
			Income			Income II
Assets:
Investments, at value (cost—$1,491,251,332 and
$1,315,681,919, respectively)		$	1,513,751,379		$	1,328,804,904
Cash			271			240
Interest and dividends receivable			20,910,256			18,316,431
Interest rate cap premium paid			14,101,172			13,563,985
Unrealized appreciation on interest rate cap			4,926,827			4,739,015
Receivable for investments sold			2,690,549			2,690,549
Prepaid expenses			86,967			79,941
Total Assets			1,556,467,421			1,368,195,065
Liabilities:
Dividends payable to common and preferred shareholders			8,920,460			6,945,012
Payable for investments purchased			3,711,438			4,515,370
Investment management fees payable			830,414			729,769
Accrued expenses			226,531			235,506
Total Liabilities			13,688,843			12,425,657
Preferred Shares ($0.00001 par value; $25,000 net asset and
liquidation value per share applicable to 21,000 and 20,200 shares
issued and outstanding, respectively)			525,000,000			505,000,000
Net Assets Applicable to Common Shareholders		$	1,017,778,578		$	850,769,408
Composition of Net Assets Applicable to Common Shareholders:
Common Stock:
Par value ($0.00001 per share applicable to 69,270,294 and 57,873,575
shares issued and outstanding, respectively)			$693			$579
Paid-in-capital in excess of par			988,775,082			822,399,390
Undistributed (Dividends in excess of) net investment income			(2,256,453			2,759,510
Accumulated net realized gain on investments			3,832,382			7,747,929
Net unrealized appreciation of investments and interest rate caps			27,426,874			17,862,000
Net Assets Applicable to Common Shareholders		$	1,017,778,578		$	850,769,408
Net Asset Value Per Common Share			$14.69			$14.70

16 Nicholas-Applegate Convertible & Income Funds Annual Report | 2.28.06 | See accompanying Notes to Financial Statements

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Nicholas-Applegate Convertible & Income Funds Statements of Operations
For the year periods indicated

---

			Convertible &
			Income				Convertible & Income II*
			Year ended				Period ended				Year ended
			February 28,				February 28,				June 30,
			2006				2006				2005
Investment Income:
Interest		$	90,793,722			$	52,476,084			$	74,025,820
Dividends			22,128,388				13,533,783				20,320,746
Other Income			3,286,339				1,920,765				—
Total Investment Income			116,208,449				67,930,632				94,346,566
Expenses:
Investment management fees			10,861,374				6,338,386				9,463,365
Auction agent fees and commissions			1,338,727				856,211				1,289,158
Excise tax expense			225,616				90,868				—
Custodian and accounting agent fees			206,029				77,280				205,026
Shareholder reports and notices			199,326				175,883				157,375
Trustees’ fees and expenses			84,672				51,470				66,362
Audit and tax services			69,350				62,170				67,584
New York Stock Exchange listing fees			55,239				27,880				61,051
Legal fees			42,716				27,194				35,290
Transfer agent fees			42,085				30,370				33,264
Insurance expense			30,464				19,692				23,478
Investor relations			20,243				10,731				19,615
Miscellaneous			14,840				16,010				21,335
Total expenses			13,190,681				7,784,145				11,442,903
Net Investment Income			103,017,768				60,146,487				82,903,663
Realized and Change in Unrealized Gain (Loss):
Net realized gain on:
Investments			22,377,128				33,371,780				20,820,061
Interest rate caps			1,662,562				141,793				1,875,812
			24,039,690				33,513,573				22,695,873
Net change in unrealized appreciation/depreciation of:
Investments			(58,446,125	)			(4,144,908	)			(36,307,517	)
Interest rate caps			2,610,058				3,282,003				(1,076,152	)
			(55,836,067	)			(862,905	)			(37,383,669	)
Net realized and change in unrealized gain (loss)
on investments and interest rate caps			(31,796,377	)			32,650,668				(14,687,796	)
Net Increase in Net Assets Resulting from
Investment Operations			71,221,391				92,797,155				68,215,867
Dividends and Distributions on Preferred
Shares from:
Net investment income			(17,331,721	)			(10,113,694	)			(11,768,307	)
Net realized gains			(1,272,471	)			(2,619,976	)			(75,399	)
Total dividends and distributions on preferred shares			(18,604,192	)			(12,733,670	)			(11,843,706	)
Net Increase in Net Assets Applicable to
Common Shareholders Resulting from
Investment Operations		$	52,617,199			$	80,063,485			$	56,372,161
* Fiscal year-end was changed to February 28 from June 30 during the period.

See accompanying Notes to Financial Statements | 2.28.06 | Nicholas-Applegate Convertible & Income Funds Annual Report 17

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Nicholas-Applegate Convertible & Income Funds Statements of Changes in Net Assets Applicable to Common Shareholders

			Convertible & Income
			Year ended
			February 28,
			2006				2005
Investment Operations:
Net investment income		$	103,017,768			$	98,689,848
Net realized gain on investments and interest rate caps			24,039,690				76,587,151
Net change in unrealized appreciation/depreciation of
investments and interest rate caps			(55,836,067	)			(51,322,836	)
Net increase in net assets resulting from investment operations			71,221,391				123,954,163
Dividends and Distributions on Preferred Shares from:
Net investment income			(17,331,721	)			(8,047,820	)
Net realized gains			(1,272,471	)			(1,139,514	)
Total dividends and distributions on preferred shares			(18,604,192	)			(9,187,334	)
Net increase in net assets applicable to common shareholders
resulting from investment operations			52,617,199				114,766,829
Dividends and Distributions to Common Shareholders from:
Net investment income			(130,588,596	)			(99,815,537	)
Net realized gains			(15,782,779	)			(54,342,014	)
Total dividends and distributions to common shareholders			(146,371,375	)			(154,157,551	)
Capital Share Transactions:
Net proceeds from the sale of common stock			—				—
Preferred shares underwriting discount charged to paid-in-capital
in excess of par			—				—
Common stock and preffered shares offering costs charged to
paid-in-capital in excess of par			—				—
Reinvestment of dividends and distributions			25,531,435				23,559,496
Net increase from capital share transactions			25,531,435				23,559,496
Total increase (decrease) in net assets applicable to common shareholders			(68,222,741	)			(15,831,226	)
Net Assets Applicable to Common Shareholders:
Beginning of period			1,086,001,319				1,101,832,545
End of period (including undistributed (dividends in excess of) net
investment income of $(2,256,453), $10,772,076;
$2,759,510, $7,077,799 and $2,968,466 respectively)		$	1,017,778,578			$	1,086,001,319
Common Shares Issued in Reinvested:
Issued			—				—
Issued in reinvestment of dividends and distributions			1,705,242				1,480,665
Net Increase			1,705,242				1,480,665

*	Represents the eight months ended February 28, 2006. During the period, the Fund’s fiscal year-end was changed to February 28 from June 30.
**	Commencement of operations

18 Nicholas-Applegate Convertible & Income Funds Annual Report | 2.28.06 | See accompanying Notes to Financial Statements

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Convertible & Income II
	For the period								For the period
	July 1, 2005								July 31, 2003**
	through				Year ended				through
	February 28, 2006*				June 30, 2005				June 30, 2004
$	60,146,487			$	82,903,663			$	69,176,349
	33,513,573				22,695,873				6,708,496
	(862,905	)			(37,383,669	)			55,595,157
	92,797,155				68,215,867				131,480,002
	(10,113,694	)			(11,768,307	)			(4,538,086	)
	(2,619,976	)			(75,399	)			—
	(12,733,670	)			(11,843,706	)			(4,538,086	)
	80,063,485				56,372,161				126,941,916
	(60,083,257	)			(81,000,846	)			(69,866,227	)
	(15,188,931	)			(7,680,066	)			(1,815,413	)
	(75,272,188	)			(88,680,912	)			(71,681,640	)
	—				—				805,781,250
	—				—				(5,050,000	)
	—				—				(1,977,092	)
	11,068,696				11,434,945				1,668,784
	11,068,696				11,434,945				800,422,942
	15,859,993				(20,873,806	)			855,683,218
	834,909,415				855,783,221				100,003
$	850,769,408			$	834,909,415			$	855,783,221
	—				—				56,250,000
	744,597				764,611				107,386
	744,597				764,611				56,357,386

| 2.28.06 | Nicholas-Applegate Convertible & Income Funds Annual Report 19

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Nicholas-Applegate Convertible & Income Funds Notes to Financial Statements
February 28, 2006

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1. Organization and Significant Accounting Policies

Nicholas-Applegate Convertible & Income Fund (“Convertible & Income”) and Nicholas-Applegate Convertible & Income Fund II (“Convertible & Income II”), collectively referred to as the “Funds”, were organized as Massachusetts business trusts on January 17, 2003 and April 22, 2003, respectively. In December 2005, Convertible & Income II changed its fiscal year end from June 30 to February 28. Accordingly, the financial statements of this Fund cover the eight-month period from July 1, 2005 through February 28, 2006. Prior to commencing operations on March 31, 2003, and July 31, 2003, respectively, the Funds had no operations other than matters relating to their organization and registration as diversified, closed-end management investment companies under the Investment Company Act of 1940 and the rules and regulations there under, as amended. Allianz Global Investors Fund Management LLC (the “Investment Manager”), serves as the Funds’ Investment Manager and is an indirect wholly-owned subsidiary of Allianz Global Investors of America L.P. (“Allianz Global”). Allianz Global is an indirect, majority-owned subsidiary of Allianz AG. The Funds have an unlimited amount of $0.00001 par value common stock authorized.

The Funds’ investment objective is to provide total return through a combination of capital appreciation and high current income. The Funds attempt to achieve this objective by investing in a portfolio of convertible securities and non-convertible income-producing securities.

The preparation of the financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from these estimates.

In the normal course of business, the Funds enter into contracts that contain a variety of representations which provide general indemnifications. 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 been asserted. However, the Funds expect the risk of any loss to be remote.

The following is a summary of significant accounting policies followed by the Funds.

(a) Valuation of Investments

Portfolio securities and other financial instruments for which market quotations are readily available are stated at market value. Portfolio securities and other financial instruments for which market quotations are not readily available or if a development/event occurs that may significantly impact the value of a security, may be fair-valued, in good faith, pursuant to guidelines established by the Board of Trustees. The Funds’ investments are valued daily by an independent pricing service or dealer quotations, using the last sale price on the exchange that is the primary market for such securities, or the last quoted bid price on corporate bonds and notes or the last quoted mean price on convertible securities for which the over-the-counter market is the primary market or for listed securities in which there were no sales. Independent pricing services use information provided by market makers or estimates of market values obtained from yield data relating to investments or securities with similar characteristics. Short-term investments maturing in 60 days or less are valued at amortized cost, if their original term to maturity was 60 days or less, or by amortizing their value on the 61st day prior to maturity, if the original term to maturity exceeded 60 days. The prices used by the Funds to value securities may differ from the value that would be realized if the securities were sold and the differences could be material to the financial statements. The Funds’ net asset values are determined daily as of the close of regular trading (normally, 4:00 p.m. Eastern time) on the New York Stock Exchange (“NYSE”) on each day the NYSE is open for business.

(b) Investment Transactions and Investment Income

Investment transactions are accounted for on the trade date. Realized gains and losses on investments are determined on the identified cost basis. Interest income is recorded on an accrual basis. Discounts or premiums on corporate bonds and notes purchased are accreted or amortized to interest income over the lives of the respective securities using the effective interest method. Dividend income is recorded on the ex-dividend date.

(c) Federal Income Taxes

The Funds intend to comply with the requirements of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies. Accordingly, no provision for U.S. federal income taxes is required

(d) Dividends and Distributions-Common Stock

The Funds declare dividends from net investment income monthly to common shareholders. Distributions of net realized capital gains, if any, are paid at least annually. The Funds record dividends and distributions to its shareholders on the ex-dividend date. The amount of dividends and distributions from net investment income and net realized capital gains

20 Nicholas-Applegate Convertible & Income Funds Annual Report | 2.28.06

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Nicholas-Applegate Convertible & Income Funds Notes to Financial Statements
February 28, 2006

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1. Organization and Significant Accounting Policies (continued)

(d) Dividends and Distributions-Common Stock (continued) are determined in accordance with federal income tax regulations, which may differ from generally accepted accounting principles. These “book-tax” differences are considered either temporary or permanent in nature. To the extent these differences are permanent in nature, such amounts are reclassified within the capital accounts based on their federal income tax treatment; temporary differences do not require reclassification. With respect to Convertible & Income, for the fiscal year ended February 28, 2006, permanent differences are primarily attributable to the differing treatment of convertible preferred securities, interest rate cap premium amortization and periodic payments, consent payments, premium amortization and non-deductible excise tax. These adjustments were a decrease to dividends in excess of net investment income of $31,874,020, a decrease to paid-in capital of $218,991 and a decrease to net realized gains of $31,655,029. For Convertible & Income II, for the fiscal period July 1, 2005 through February 28, 2006, permanent differences are primarily attributable to the differing treatment of convertible preferred securities, interest rate cap premium amortization and periodic payments, consent payments, premium amortization and non-deductible excise tax. These adjustments were to an increase to undistributed net investment income of $5,732,175, a decrease to paid-in capital of $88,200 and a decrease to net realized gains of $5,643,975. To the extent dividends and/or distributions exceed current and accumulated earnings and profits for federal income tax purposes, they are reported as dividends and/or distributions of paid-in capital in excess of par.

(e) Credit-Linked Trust Certificates

Credit-linked trust certificates are investments in a limited purpose trust or other vehicle formed under state law which, in turn, invests in a basket of derivative instruments, such as credit default swaps, interest rate swaps and other securities, in order to provide exposure to the high yield or another fixed income market.

Similar to an investment in a bond, investments in these credit-linked trust certificates represent the right to receive periodic income payments (in the form of distributions) and payment of principal at the end of the term of the certificate. However, these payments are conditioned on the trusts’ receipt of payments from, and the trusts’ potential obligations to, the counterparties to the derivative instruments and other securities in which the trusts invest in.

(f) Interest Rate Caps

In an interest rate cap, one party pays a fee while the other party pays the excess, if any, of a floating rate over a specified fixed rate. Interest rate caps are intended to manage the Funds’ exposure to changes in short-term interest rates and hedge the Auction Preferred Shares. Owning interest rate caps reduces the Funds’ duration, making it less sensitive to changes in interest rates from a market value perspective. The effect on income involves protection from rising short-term rates, which the Funds experience primarily in the form of leverage. The Funds are exposed to credit loss in the event of non-performance by the other party to the interest rate cap. Premiums paid by the Funds are recognized as an asset and amortized into realized loss over the life of the interest rate cap. Changes in the value of the interest rate cap is recognized as unrealized appreciation or depreciation. Periodic payments received during periods the floating rate exceeds the specified fixed rate are recognized into realized gain.

(g) Concentration of Risk

It is the Funds’ policy to invest a significant portion of its assets in convertible securities. Although convertible securities do derive part of their value from that of the securities into which they are convertible, they are not considered derivative financial instruments. However, certain of the Funds’ investments include features which render them more sensitive to price changes in their underlying securities. Consequently, this exposes the Funds to greater downside risk than traditional convertible securities, but still less than that of the underlying common stock.

2. Investment Manager/Sub-Adviser

The Funds have entered into Investment Management Agreements (the “Agreements”) with the Investment Manager. Subject to the supervision of the Funds’ Boards of Trustees, the Investment Manager is responsible for managing, either directly or through others selected by it, the Funds’ investment activities, business affairs and administrative matters. Pursuant to the Agreements, the Funds pay the Investment Manager an annual fee, payable monthly, at the annual rate of 0.70% of the Funds’ average daily total managed assets. Total managed assets refer to the total assets of each Fund’s (including assets attributable to any Preferred Shares and borrowings that may be outstanding) minus accrued liabilities (other than liabilities representing borrowings).

2.28.06 | Nicholas-Applegate Convertible & Income Funds Annual Report 21

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Nicholas-Applegate Convertible & Income Funds Notes to Financial Statements
February 28, 2006

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2. Investment Manager/Sub-Adviser (continued)

The Investment Manager has retained its affiliate, Nicholas-Applegate Capital Management LLC (the “Sub-Adviser”), to manage the Funds’ investments. Subject to the supervision of the Investment Manager, the Sub-Adviser is responsible for making all of the Funds’ investment decisions. For its services pursuant to Sub-Advisory agreements, the Investment Manager and not the Funds, pay the Sub-Adviser a monthly fee.

3. Investment in Securities

For the fiscal periods ended February 28, 2006, purchases and sales of investments, other than short-term securities and U.S. government obligations were:

				Convertible & Income				Convertible & Income II
Purchases				$748,270,905				$397,701,841
Sales				815,698,180				465,038,411

For the fiscal periods ended February 28, 2006, purchases and sales of U.S. government obligations were:

			Convertible & Income				Convertible & Income II
Purchases					$38,317,453		$32,313,797
Sales					18,000,000		10,000,000
(a) Interest rate cap agreements outstanding at February 28, 2006
Convertible & Income:
		Notional	Termination				Payment received		Unrealized
Counterparty		Amount	Date		Premium		by Fund		Appreciation
UBS AG		$525,000,000	1/15/08		$14,101,172		1 month LIBOR-BBA		$4,926,827
							over 3% strike price
Convertible & Income II:
		Notional	Termination				Payment received		Unrealized
Counterparty		Amount	Date		Premium		by Fund		Appreciation
UBS AG		$505,000,000	1/15/08		$13,563,985		1 month LIBOR-BBA		$4,739,015
							over 3% strike price
LIBOR-London Interbank Offered Rate
4. Income Tax Information
The tax character of dividends and distributions paid were:
Convertible & Income:
					Year ended		Year ended
					February 28, 2006		February 28, 2005
Ordinary Income					$147,920,317		$146,636,384
Long-Term Capital Gains					17,055,250		16,708,501

At February 28, 2006, the tax character of distributable earnings was comprised of $15,393,964 of long-term capital gains.

The cost basis of portfolio securities for federal income tax purposes is $1,503,828,439. Aggregated gross unrealized appreciation for securities in which there is an excess value over tax cost is $48,374,258; aggregate gross unrealized depreciation for securities in which there is an excess of tax cost over value is $38,451,318; net unrealized appreciation for federal income tax purposes is $9,922,940. The difference between book and the tax basis unrealized appreciation is attributable to wash sales, amortization of premium and the differing treatment of convertible preferred securities.

22 Nicholas-Applegate Convertible & Income Funds Annual Report | 2.28.06

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Nicholas-Applegate Convertible & Income Funds Notes to Financial Statements
February 28, 2006

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4. Income Tax Information (continued) The tax character of dividends and distributions paid were:

Convertible & Income II:

				Eight Months ended				Year ended
				February 28, 2006				June 30, 2005
Ordinary Income				$71,532,886				$99,600,485
Long-Term Capital Gains				16,472,972				924,133

At February 28, 2006, the tax character of distributable earnings of $21,657,890 was comprised $4,885,448 of ordinary income and $16,772,442 of long-term capital gains.

The cost basis of portfolio securities for federal income tax purposes is $1,325,941,761. Aggregated gross unrealized appreciation for securities in which there is an excess value over tax cost is $39,985,732; aggregate gross unrealized depreciation for securities in which there is an excess of tax cost over value is $37,122,589; net unrealized appreciation for federal income tax purposes is $2,863,143. The difference between book and tax basis unrealized appreciation is attributable to wash sales, amortization of premium and the differing treatment of convertible preferred securities.

Convertible & Income and Convertible & Income II paid excise taxes of $225,616 and $90,868, respectively, in connection with an underdistribution of ordinary income resulting from book/tax differences for convertible preferred securities from the prior excise tax period.

5. Auction Preferred Shares

Convertible & Income has issued 4,200 shares of Preferred Shares Series A, 4,200 shares of Preferred Shares Series B, 4,200 shares of Preferred Shares Series C, 4,200 shares of Preferred Shares Series D, and 4,200 shares of Preferred Shares Series E each with a net asset and liquidation value of $25,000 per share plus accrued dividends.

Convertible & Income II has issued 4,040 shares of Preferred Shares Series A, 4,040 shares of Preferred Shares Series B, 4,040 shares of Preferred Shares Series C, 4,040 shares of Preferred Shares Series D, and 4,040 shares of Preferred Shares Series E each with a net asset and liquidation value of $25,000 per share plus accrued dividends.

Dividends are accumulated daily at an annual rate set through auction procedures. Distributions of net realized long-term capital gains, if any, are paid annually.

Convertible & Income:

For the year ended February 28, 2006, the annualized dividend rate ranged from:

		High			Low			At 2/28/06
Series A		4.40	%		2.57	%		4.37	%
Series B		4.40	%		2.54	%		4.40	%
Series C		4.45	%		2.55	%		4.20	%
Series D		4.45	%		2.55	%		4.37	%
Series E		4.40	%		2.60	%		4.37	%
Convertible & Income II:
For the eight months ended February 28, 2006, the annualized dividend rate ranged from:
		High			Low			At 2/28/06
Series A		4.44	%		3.08	%		4.37	%
Series B		4.40	%		3.20	%		4.40	%
Series C		4.45	%		3.18	%		4.30	%
Series D		4.45	%		3.01	%		4.37	%
Series E		4.40	%		3.10	%		4.37	%

The Funds are subject to certain limitations and restrictions while preferred shares are outstanding. Failure to comply with these limitations and restrictions could preclude the Funds from declaring any dividends or distributions to common shareholders or repurchasing common shares and/or could trigger the mandatory redemption of Preferred Shares at their liquidation value.

2.28.06 | Nicholas-Applegate Convertible & Income Funds Annual Report 23

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Nicholas-Applegate Convertible & Income Funds Notes to Financial Statements
February 28, 2006

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Preferred Shares, which are entitled to one vote per share, generally vote with the common stock but vote separately as a class to elect two Trustees and on any matters affecting the rights of the Preferred Shares.

6. Subsequent Common Dividend Declarations

On March 1, 2006, the following dividends were declared to common shareholders payable April 3, 2006 to shareholders of record on March 10, 2006:

Convertible & Income Convertible & Income II

$0.125 per common share $0.115625 per common share

On April 3, 2006, the following dividends were declared to common shareholders payable May 1, 2006 to shareholders of record on April 13, 2006:

Convertible & Income Convertible & Income II

$0.125 per common share $0.115625 per common share

7. Legal Proceedings

In June and September 2004, the Investment Manager, certain of its affiliates (Allianz Global Investors Distributors LLC and PEA Capital LLC) and Allianz Global, agreed to settle, without admitting or denying the allegations, claims brought by the Securities and Exchange Commission (the “Commission”), the New Jersey Attorney General and the California Attorney General alleging violations of federal and state securities laws with respect to certain open-end funds for which the Investment Manager serves as investment adviser. Two settlements (with the Commission and New Jersey) related to an alleged “market timing” arrangement in certain open-end funds sub-advised by PEA Capital. Two settlements (with the Commission and California) related to the alleged use of cash and fund portfolio commissions to finance “shelf-space” arrangements with broker-dealers for open-end funds. The Investment Manager and its affiliates agreed to pay a total of $68 million to settle the claims related to market timing and $20.6 million to settle the claims related to shelf space. The settling parties also agreed to make certain corporate governance changes. None of the settlements allege that any inappropriate activity took place with respect to the Funds.

Since February 2004, the Investment Manager and certain of its affiliates and their employees have been named as defendants in a number of pending lawsuits concerning “market timing,” and “revenue sharing/shelf space/directed brokerage,” which allege the same or similar conduct underlying the regulatory settlements discussed above. The market timing lawsuits have been consolidated in a Multi-District Litigation in the United States District Court for the District of Maryland, and the revenue sharing/shelf space/directed brokerage lawsuits have been consolidated in the United States District Court for the District of Connecticut. An additional market timing lawsuit filed by the Attorney General of West Virginia against a number of fund companies, including the Investment Manager and two of its affiliates, has also been transferred to the Multi-District Litigation in Maryland. Any potential resolution of these matters may include, but not be limited to, judgments or settlements for damages against the Investment Manager or its affiliates or related injunctions. The Investment Manager believes that other similar lawsuits may be filed in federal or state courts in the future.

Under Section 9(a) of the Investment Company Act of 1940, if any of the various regulatory proceedings or lawsuits were to result in a court injunction against the Investment Manager, Allianz Global and/or their affiliates, they and their affiliates would, in the absence of exemptive relief granted by the Commission, be barred from serving as an investment adviser/sub-adviser or principal underwriter for any registered investment company, including the Funds. In connection with an inquiry from the Commission concerning the status of the New Jersey settlement referenced above with regard to any implications under Section 9(a), the Investment Manager and certain of its affiliates, including the Investment Adviser, (together, the ‘’Applicants’’) have sought exemptive relief from the Commission under Section 9(c) of the 1940 Act. The Commission has granted the Applicants a temporary exemption from the provisions of Section 9(a) with respect to the New Jersey settlement until the earlier of (i) September 13, 2006 and (ii) the date on which the Commission takes final action on their application for a permanent exemptive order. There is no assurance that the Commission will issue a permanent order. If a court injunction were to be issued against the Investment Manager or the Affiliates with respect to any of the other matters referenced above, the Investment Manager or the affiliates would, in turn, seek similar exemptive relief under Section 9(c) with respect to that matter, although there is no assurance that such exemptive relief would be granted.

The foregoing speaks only as of the date hereof.

24 Nicholas-Applegate Convertible & Income Funds Annual Report | 2.28.06

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Nicholas-Applegate Convertible & Income Fund Financial Highlights

For a share of common stock outstanding throughout each period

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											For the Period
			Year ended								March 31, 2003*
											through
			February 28,				February 28,				February 29,
			2006				2005				2004
Net asset value, beginning of period			$16.07				$16.67				$14.33	**
Income from Investment Operations:
Net investment income			1.51				1.48				1.28
Net realized and unrealized gain (loss) on investments			(0.48	)			0.38				2.61
Total from investment operations			1.03				1.86				3.89
Dividends and Distributions on Preferred Shares from:
Net investment income			(0.25	)			(0.12	)			(0.07	)
Net realized gains			(0.02	)			(0.02	)			—
Total dividends and distributions on preferred shares			(0.27	)			(0.14	)			(0.07	)
Net increase in net assets applicable to common shareholders
resulting from investment operations			0.76				1.72				3.82
Dividends and Distributions to Common Shareholders
from:
Net investment income			(1.91	)			(1.50	)			(1.33	)
Net realized gains			(0.23	)			(0.82	)			(0.03	)
Total dividends and distributions to common shareholders			(2.14	)			(2.32	)			(1.36	)
Capital Share Transactions:
Common stock offering costs charged to paid-in capital in
excess of par			—				—				(0.03	)
Preferred shares offering costs/underwriting discounts
charged to paid-in capital in excess of par			—				—				(0.09	)
Total capital share transactions			—				—				(0.12	)
Net asset value, end of period			$14.69				$16.07				$16.67
Market price, end of period			$15.69				$15.82				$16.38
Total Investment Return (1)			14.30	%			11.53	%			18.98	%
RATIOS/SUPPLEMENTAL DATA:
Net assets applicable to common shareholders,
end of period (000)			$1,017,779				$1,086,001				$1,101,833
Ratio of expenses to average net assets (2)			1.28	%			1.24	%			1.17% (3)
Ratio of expenses, excluding excise tax, to average
net assets (2)			1.26	%			1.24	%			1.17% (3)
Ratio of net investment income to average net assets (2)			10.03	%			9.20	%			8.97% (3)
Preferred shares asset coverage per share			$73,442				$76,698				$77,460
Portfolio turnover			52	%			70	%			86	%

*	Commencement of operations
**	Initial public offering price of $15.00 per share less underwriting discount of $0.675 per share.

(1)	Total investment return is calculated assuming a purchase of a share of common stock at the current market price on the first day of the period and a sale of a share of common stock at the current market price on the last day of each period reported. Dividends and distributions are assumed, for purposes of this calculation, to be reinvested at prices obtained under the Fund’s dividend reinvestment plan. Total investment return does not reflect brokerage commissions or sales charges. Total investment return for a period of less than one year is not annualized.
(2)	Calculated on the basis of income and expenses applicable to both common shares and preferred shares relative to the average net assets of common shareholders.
(3)	Annualized.

2.28.06 | Nicholas-Applegate Convertible & Income Funds Annual Report 25

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Nicholas-Applegate Convertible & Income Fund II Financial Highlights
For a share of common stock outstanding throughout each period

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			For the Period								For the Period
			July 1, 2005								July 31, 2003*
			through				Year ended				through
			February 28,				June 30,				June 30,
			2006 †				2005				2004
Net asset value, beginning of period			$14.61				$15.18				$14.33	**
Income from Investment Operations:
Net investment income			1.04				1.59				1.23
Net realized and unrealized gain on investments			0.58				(0.39	)			1.10
Total from investment operations			1.62				1.20				2.33
Dividends and Distributions on Preferred Shares from:
Net investment income			(0.17	)			(0.21	)			(0.08	)
Net realized gains			(0.05	)			(0.00	)††			—
Total dividends and distributions on preferred shares			(0.22	)			(0.21	)			(0.08	)
Net increase in net assets applicable to common shareholders
resulting from investment operations			1.40				0.99				2.25
Dividends and Distributions to Common Shareholders
from:
Net investment income			(1.05	)			(1.42	)			(1.24	)
Net realized gains			(0.26	)			(0.14	)			(0.03	)
Total dividends and distributions to common shareholders			(1.31	)			(1.56	)			(1.27	)
Capital Share Transactions:
Common stock offering costs charged to paid-in capital
in excess of par			—				—				(0.03	)
Preferred shares offering costs/underwriting discounts
charged to paid-in capital in excess of par			—				—				(0.10	)
Total capital share transactions			—				—				(0.13	)
Net asset value, end of period			$14.70				$14.61				$15.18
Market price, end of period			$15.14				$14.74				$14.05
Total Investment Return (1)			12.10	%			16.44	%			1.88	%
RATIOS/SUPPLEMENTAL DATA:
Net assets applicable to common shareholders,
end of period (000)			$850,769				$834,909				$855,783
Ratio of expenses to average net assets (2)			1.37%	(3)			1.35	%			1.23%	(3)
Ratio of expenses, excluding excise tax, to average
net assets (2)			1.35%	(3)			1.35	%			1.23%	(3)
Ratio of net investment income to average net assets (2)			10.57%	(3)			9.79	%			8.87%	(3)
Preferred shares asset coverage per share			$    67,096				$   66,319				$   67,359
Portfolio turnover			33	%			67	%			73	%

*	Commencement of operations
**	Initial public offering price of $15.00 per share less underwriting discount of $0.675 per share.
†	During the period, the Fund’s fiscal year-end changed from June 30 to February 28.
††	Less than $0.005 per share.
(1)	Total investment return is calculated assuming a purchase of a share of common stock at the current market price on the first day of the period and a sale of a share at the current market price on the last day of each period reported.
	Dividends and distributions are assumed, for purposes of this calculation, to be reinvested at prices obtained under the Fund’s dividend reinvestment plan. Total investment return does not reflect brokerage commissions or sales charges. Total investment return for a period of less than one year is not annualized.
(2)	Calculated on the basis of income and expenses applicable to both common shares and preferred shares relative to the average net assets of common shareholders.
(3)	Annualized.

26 Nicholas-Applegate Convertible & Income Funds Annual Report | 2.28.06

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Nicholas-Applegate Convertible & Income Funds
Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Trustees of Nicholas-Applegate Convertible & Income Fund Nicholas-Applegate Convertible & Income Fund II

In our opinion, the accompanying statements of assets and liabilities, including the schedules of investments, and the related statements of operations and of changes in net assets applicable to common shareholders and the financial highlights present fairly, in all material respects, the financial position of the Nicholas-Applegate Convertible & Income Fund and Nicholas-Applegate Convertible & Income Fund II (the “Funds”) at February 28, 2006, and the results of each of their operations, changes in net assets applicable to common shareholders and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Funds’ management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements 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 are free of material misstatement. An audit includes examining, on test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at February 28, 2006, by correspondence with the custodian and brokers provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP New York, New York April 26, 2006

2.28.06 | Nicholas-Applegate Convertible & Income Funds Annual Report 27

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Nicholas-Applegate Convertible & Income Funds Tax Information (unaudited)

Subchapter M of the Internal Revenue Code of 1986, as amended, requires the Funds to advise shareholders within 60 days of the Funds’ tax year-end (February 28, 2006) as to the federal tax status of dividends and distributions received by shareholders during such tax year. Per share dividends for the tax year ended February 28, 2006 were as follows:

Convertible & Income:
Dividends to common shareholders from ordinary income				$1.91
Dividends to preferred shareholders from ordinary income				$825.32005
Distributions to common shareholders from net long-term capital gains				$0.23090
Distributions to preferred shareholders from net long-term capital gains				$60.59386

Pursuant to the Jobs and Growth Tax Relief Reconciliation Act of 2003, the percentage of ordinary dividends paid by the Fund that the Fund designates as qualified dividend income is 4.19% or the maximum allowable amount.

The percentage of ordinary dividends paid by the Fund during the period ended February 28, 2006, which qualified for the Dividends Received Deduction available to corporate shareholders is 4.13% or the maximum allowable amount.

Convertible & Income II:
Dividends to common shareholders from ordinary income				$1.045
Dividends to preferred shareholders from ordinary income				$500.67792
Distributions to common shareholders from net long-term capital gains				$0.264
Distributions to preferred shareholders from net long-term capital gains				$129.70178

Pursuant to the Jobs and Growth Tax Relief Reconciliation Act of 2003, the percentage of ordinary dividends paid by the Fund that the Fund designates as qualified dividend income is 5.73% or the maximum allowable amount.

The percentage of ordinary dividends paid by the Fund during the period ended February 28, 2006, which qualified for the Dividends Received Deduction available to corporate shareholders is 6.24% or the maximum allowable amount.

Since the Funds’ tax year is not the calendar year, another notification will be sent with respect to calendar year 2007. In January 2007, shareholders will be advised on IRS Form 1099 DIV as to the federal tax status of the dividends and distributions received during calendar 2006. The amount that will be reported, will be the amount to use on your 2006 federal income tax return and may differ from the amount which must be reported in connection with each Fund’s tax year ended February 28, 2006. Shareholders are advised to consult their tax advisers as to the federal, state and local tax status of the dividend income received from the Funds.

28 Nicholas-Applegate Convertible & Income Funds Annual Report | 2.28.06

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Nicholas-Applegate Convertible & Income Funds Privacy Policy/Proxy Voting Policies & Procedures (unaudited)

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Privacy Policy:

Our Commitment to You

We consider customer privacy to be a fundamental aspect of our relationship with clients. We are committed to maintaining the confidentiality, integrity, and security of our current, prospective and former clients’ personal information. We have developed policies designed to protect this confidentiality, while allowing client needs to be served.

Obtaining Personal Information

In the course of providing you with products and services, we may obtain non-public personal information about you. This information may come from sources such as account applications and other forms, from other written, electronic or verbal correspondence, from your transactions, from your brokerage or financial advisory firm, financial adviser or consultant, and/or from information captured on our internet web sites.

Respecting Your Privacy

We do not disclose any personal or account information provided by you or gathered by us to non-affiliated third parties, except as required or permitted by law. As is common in the industry, non-affiliated companies may from time to time be used to provide certain services, such as preparing and mailing prospectuses, reports, account statements and other information, conducting research on client satisfaction, and gathering shareholder proxies. We may also retain non-affiliated companies to market our products and enter in joint marketing agreements with other companies. These companies may have access to your personal and account information, but are permitted to use the information solely to provide the specific service or as otherwise permitted by law. We may also provide your personal and account information to your brokerage or financial advisory firm and/or to your financial adviser or consultant.

Sharing Information with Third Parties

We do reserve the right to disclose or report personal information to non-affiliated third parties in limited circumstances where we believe in good faith that disclosure is required under law, to cooperate with regulators or law enforcement authorities, to protect our rights or property, or upon reasonable request by any mutual fund in which you have chosen to invest. In addition, we may disclose information about you or your accounts to a non-affiliated third party with the consent or at your request or if you consent in writing to the disclosure.

Sharing Information with Affiliates

We may share client information with our affiliates in connection with servicing your account or to provide you with information about products and services that we believe may be of interest to you. The information we share may include, for example, your participation in our mutual funds or other investment programs, your ownership of certain types of accounts (such as IRAs), or other data about your accounts. Our affiliates, in turn, are not permitted to share your information with non-affiliated entities, except as required or permitted by law.

Implementation of Procedures

We take seriously the obligation to safeguard your non-public personal information. We have implemented procedures designed to restrict access to your non-public personal information to our personnel who need to know that information to provide products or services to you. To guard your non-public personal information, physical, electronic, and procedural safeguards are in place.

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Proxy Voting Policies & Procedures:

A description of the policies and procedures that the Funds have adopted to determine how to vote proxies relating to portfolio securities and information about how the Fund voted proxies relating to portfolio securities held during the twelve months ended June 30, 2005 is available (i) without charge, upon request, by calling the Funds’ shareholder servicing agent at (800) 331-1710; (ii) on the Funds’ website at www.allianzinvestors.com/closedendfunds; and (iii) on the Securities and Exchange Commission’s website at www.sec.gov.

2.28.06 | Nicholas-Applegate Convertible & Income Funds Annual Report 29

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Nicholas-Applegate Convertible & Income Funds Dividend Reinvestment Plan (unaudited)

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Pursuant to the Funds’ Dividend Reinvestment Plan (the “Plan”), all Common Shareholders whose shares are registered in their own names will have all dividends, including any capital gain dividends, reinvested automatically in additional Common Shares by PFPC Inc., as agent for the Common Shareholders (the “Plan Agent”), unless the shareholder elects to receive cash. An election to receive cash may be revoked or reinstated at the option of the shareholder. In the case of record shareholders such as banks, brokers or other nominees that hold Common Shares for others who are the beneficial owners, the Plan Agent will administer the Plan on the basis of the number of Common Shares certified from time to time by the record shareholder as representing the total amount registered in such shareholder’s name and held for the account of beneficial owners who are to participate in the Plan. Shareholders whose shares are held in the name of a bank, broker or nominee should contact the bank, broker or nominee for details. All distributions to investors who elect not to participate in the Plan (or whose broker or nominee elects not to participate on the investor’s behalf), will be paid cash by check mailed, in the case of direct shareholder, to the record holder by PFPC Inc., as the Fund’s dividend disbursement agent.

Unless you (or your broker or nominee) elects not to participate in the Plan, the number of Common Shares you will receive will be determined as follows:

(1)	If Common Shares are trading at or above net asset value on the payment date, the Fund will issue new shares at the greater of (i) the net asset value per Common Share on the payment date or (ii) 95% of the market price per Common Share on the payment date; or
(2)	If Common Shares are trading below net asset value (minus estimated brokerage commissions that would be incurred upon the purchase of Common Shares on the open market) on the payment date, the Plan Agent will receive the dividend or distribution in cash and will purchase Common Shares in the open market, on the New York Stock Exchange or elsewhere, for the participants’ accounts. It is possible that the market price for the Common Shares may increase before the Plan Agent has completed its purchases. Therefore, the average purchase price per share paid by the Plan Agent may exceed the market price on the payment date, resulting in the purchase of fewer shares than if the dividend or distribution had been paid in Common Shares issued by the Fund. The Plan Agent will use all dividends and distributions received in cash to purchase Common Shares in the open market on or shortly after the payment date, but in no event later than the ex-dividend date for the next distribution. Interest will not be paid on any uninvested cash payments.

You may withdraw from the Plan at any time by giving notice to the Plan Agent. If you withdraw or the Plan is terminated, you will receive a certificate for each whole share in your account under the Plan and you will receive a cash payment for any fraction of a share in your account. If you wish, the Plan Agent will sell your shares and send you the proceeds, minus brokerage commissions.

The Plan Agent maintains all shareholders’ accounts in the Plan and gives written confirmation of all transactions in the accounts, including information you may need for tax records. The Plan Agent will also furnish each person who buys Common Shares with written instructions detailing the procedures for electing not to participate in the Plan and to instead receive distributions in cash. Common Shares in your account will be held by the Plan Agent in non-certificated form. Any proxy you receive will include all Common Shares you have received under the Plan.

There is no brokerage charge for reinvestment of your dividends or distributions in Common Shares. However, all participants will pay a pro rata share of brokerage commissions incurred by the Plan Agent when it makes open market purchases.

Automatically reinvested dividends and distributions are taxed in the same manner as cash dividends and distributions.

The Funds and the Plan Agent reserve the right to amend or terminate the Plan. There is no direct service charge to participants in the Plan; however, the Funds reserve the right to amend the Plan to include a service charge payable by the participants. Additional information about the Plan may be obtained from the Funds’ shareholder servicing agent, PFPC Inc., P.O. Box 43027, Providence, RI 02940-3027, telephone number (800) 331-1710.

30 Nicholas-Applegate Convertible & Income Funds Annual Report | 2.28.06

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Nicholas-Applegate Convertible & Income Funds Principal Officers (unaudited)

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Name, Date of Birth, Position(s) Held with
the Funds, Length of Service, Other
Trusteeships/Directorships Held by
Trustee; Number of Portfolios in Fund
Complex/Outside Fund Complexes
Currently Overseen by Trustee		Principal Occupation(s) During Past 5 years:
The address of each trustee is 1345 Avenue of
the Americas, New York, NY 10105
Robert E. Connor		Corporate Affairs Consultant; Formerly, Senior Vice President, Corporate
Date of Birth: 9/17/34		Office, Smith Barney Inc.
Chairman of the Board of Trustees since: 2004
Trustee since: 2003
Term of office: Expected to stand for re-election
at 2007 annual meetings of shareholders.
Trustee/Director of 24 funds in Fund Complex
Trustee/Director of no funds outside of Fund
Complex
Paul Belica		Former Director, Student Loan Finance Corp., Education Loans, Inc., Goal
Date of Birth: 9/27/21		Funding, Inc., Goal Funding II, Inc. and Surety Loan Funding, Inc.;
Trustee since: 2003		Formerly, Manager of Stratigos Fund LLC, Whistler Fund LLC; and
Term of Office: Expected to stand for re-election		Xanthus Fund LLC & Wynstone Fund LLC; and Formerly, senior executive
at 2006 (Convertible & Income)/2007		and member of the Board of Smith Barney, Harris Upham & Co.
(Convertible & Income II) annual meetings
of shareholders
Director/Trustee of 24 funds in Fund Complex
Director/Trustee of no funds outside of Fund
Complex
John J. Dalessandro II		Formerly, President and Director, J.J. Dalessandro II Ltd., registered
Date of Birth: 7/26/37		broker-dealer and member of the New York Stock Exchange.
Trustee since: 2003
Term of office: Expected to stand for re-election
at 2008 annual meetings of shareholders.
Trustee of 24 funds in Fund Complex
Trustee of no funds outside of Fund complex
David C. Flattum †		Managing Director, Chief Operating Officer, General Consel and member
Date of Birth: 8/27/64		of Management Board, Allianz Global Investors of America, L.P.;
Trustee since: 2004		Member of Management board, Allianz Global Investors Fund
Term of office: Expected to stand for re-election		Management LLC,; Formerly, Head of Corporate Functions of Allianz
at 2008 annual meetings of shareholders.		Global Investors of America L.P.; Formerly, Partner, Latham & Watkins
Trustee of 52 funds in Fund Complex		LLP (1998-2001).
Trustee of no funds outside of Fund Complex
Hans W. Kertess		President, H Kertess & Co. L.P. Formerly, Managing Director, Royal
Date of Birth: 7/12/39		Bank of Canada Capital Markets.
Trustee since: 2004
Term of office: Expected to stand for re-election
at 2006 (Convertible & Income)/ 2007
(Convertible & Income II) annual meetings
of shareholders.
Trustee of 24 Funds in Fund Complex;
Trustee of no funds outside of Fund Complex
R. Peter Sullivan III		Formerly, Managing Partner, Bear Wagner Specialists LLC, specialist
Date of Birth: 9/4/41		firm on the New York Stock Exchange.
Trustee since: 2004 (Convertible & Income)
Trustee since: 2005 (Convertible & Income II)
Term of office: Expected to stand for re-election
at 2008 annual meetings of shareholders.
Trustee of 21 funds in Fund Complex
Trustee of no funds outside of Fund Complex

†

Mr. Flattum is an “interested person” of the Funds due to his affiliation with Allianz Global Investors of America L.P. and the Investment Manager. In addition to Mr. Flattum’s positions with affiliated persons of the Funds set forth in the table above, he holds the following positions with affiliated persons: Director, PIMCO Global Advisors (Resources) Limited; Managing Director, Allianz Dresdner Asset Management U.S. Equities LLC, Allianz Hedge Fund Partners Holdings L.P., Allianz Pac-Life Partners LLC, PA Holdings LLC; Director and Chief Executive Officer. Oppenheimer Group, Inc.

Further information about Funds’ Trustees is available in the Funds’ Statements of Additional Information, dated May 21, 2003 and September 25, 2003 for Convertible & Income and Convertible & Income II, respectively, which can be obtained upon request, without charge, by calling the Funds’ shareholder servicing agent at (800) 331-1710.

2.28.06 | Nicholas-Applegate Convertible & Income Funds Annual Report 31

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Nicholas-Applegate Convertible & Income Funds Principal Officers (unaudited)

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Name, Date of Birth, Position(s) Held with
the Funds	Principal Occupation(s) During Past 5 years:
	Executive Vice President, Allianz Global Investors Fund Management
Brian S. Shlissel	LLC; President and Chief Executive Officer of 32 funds in the Fund
Date of Birth: 11/14/64	Complex; Treasurer; Principal Financial and Accounting Officer of 33 funds
President & Chief Executive Officer since: 2003	in the Fund Complex; Trustee of 8 funds in the Fund Complex.
1345 Avenue of the Americas
47th Floor
New York, NY 10105
Lawrence G. Altadonna	Senior Vice President, Allianz Global Investors Fund Management LLC;
Date of Birth: 3/10/66	Treasurer, Principal Financial and Accounting officer of 24 funds in the
Treasurer, Principal/Financial and Accounting	Fund Complex; Assistant Treasurer of 33 funds in the Fund Complex.
Officer since: 2003	Treasurer of 8 funds in the Fund Complex.
1345 Avenue of the Americas
47th Floor
New York, NY 10105
Thomas J. Fuccillo	Senior Vice President, Senior Counsel, Allianz Global Investors of
Date of Birth: 3/22/68	America L.P., Secretary and Chief Legal Officer of 32 funds in the Fund
Secretary & Chief Legal Officer since: 2004	Complex. Formerly, Vice President and Associate General Counsel,
1345 Avenue of the Americas	Neuberger Berman, LLC (1991-2004).
50th Floor
New York, NY 10105
Youse Guia	Senior Vice President, Group Compliance Manager, Allianz Global
Date of Birth: 9/3/72	Investors of America L.P., Chief Compliance Officer of 65 funds in the
Chief Compliance Officer since: 2004	Fund Complex; Formerly, Vice President, Group Compliance Manager,
600 Newport Center Drive	Allianz Global Investors of America L.P. (2002-2004). Audit Manager,
Suite 250	PricewaterhouseCoopers LLP (1996-2002).
Newport Beach, CA 92660

Officers hold office at the pleasure of the Boards and until their successors are appointed and qualified or until their earlier resignation or removal.

32 Nicholas-Applegate Convertible & Income Funds Annual Report | 2.28.06

 

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Trustees and Principal Officers
Robert E. Connor
     Trustee, Chairman of the Board of Trustees
Paul Belica
     Trustee
John J. Dalessandro II
     Trustee
David C. Flattum
     Trustee
Hans W. Kertess
     Trustee
R. Peter Sullivan III
     Trustee
Brian S. Shlissel
     President & Chief Executive Officer
Lawrence G. Altadonna
     Treasurer, Principal Financial & Accounting Officer
Thomas J. Fuccillo
     Secretary & Chief Legal Officer
Youse Guia
     Chief Compliance Officer

Investment Manager
Allianz Global Investors Fund Management LLC
1345 Avenue of the Americas
New York, NY 10105

Sub-Advisers
Nicholas-Applegate Capital Management LLC
600 West Broadway, 30th Fl
San Diego, California 92101

Custodian & Accounting Agent
Brown Brothers Harriman & Co.
40 Water Street
Boston, MA 02109

Transfer Agent, Dividend Paying Agent and Registrar
PFPC Inc.
P.O. Box 43027
Providence, RI 02940-3027

Independent Registered Public Accounting Firm
PricewaterhouseCoopers LLP
300 Madison Avenue
New York, NY 10017

Legal Counsel
Ropes & Gray LLP
One International Place
Boston, MA 02210-2624

This report, including the financial information herein, is transmitted to the shareholders of Nicholas Applegate Convertible & Income Fund and Nicholas Applegate Convertible & Income Fund II for their information. It is not a prospectus, circular or representation intended for use in the purchase of shares of the Funds or any securities mentioned in this report.

Notice is hereby given in accordance with Section 23(c) of the Investment Company Act of 1940, as amended, that from time to time the Funds may purchase shares of its common stock in the open market.

The Funds file their complete schedule of portfolio holdings with the Securities and Exchange Commission (“SEC”) for the first and third quarters of their fiscal years on Form N-Q. The Funds’ Form N-Q is available on the SEC’s website at www.sec.gov and may be reviewed and copied at the SEC’s Public Reference Room in Washington D.C. Information on the operation of the Public Reference Room may be obtained by calling (800) SEC-0330. The information on Form N-Q is also available on the Funds’ website at www.allianzinvestors.com/closedendfunds.

On November 7, 2005 each Fund submitted a CEO annual certification to the New York Stock Exchange (“NYSE”) on which the Funds’ principal executive officer certified that he was not aware, as of the date, of any violation by the Funds of the NYSE’s Corporate Governance listing standards. In addition, as required by Section 302 of the Sarbanes-Oxley Act of 2002 and related SEC rules, the Funds’ principal executive and principal financial officer made quarterly certifications, included in filings with the SEC on Forms N-CSR and N-Q relating to, among other things, the Funds’ disclosure controls and procedures and internal control over financial reporting, as applicable.

Additional information on the Funds are available at www.allianzinvestors.com/closedendfunds or by calling the Funds’ shareholder servicing agent at (800) 331-1710.

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ITEM 2. CODE OF ETHICS

	(a)	As of the end of the period covered by this report, the registrant has adopted a code of ethics (the “Section 406 Standards for Investment Companies — Ethical Standards for Principal Executive and Financial Officers”) that applies to the registrant’s Principal Executive Officer and Principal Financial Officer; the registrant’s Principal Financial Officer also serves as the Principal Accounting Officer. The registrant undertakes to provide a copy of such code of ethics to any person upon request, without charge, by calling 1-800-331-1710. The Investment Managers code of ethics are included as an Exhibit 99.CODE ETH hereto.
	(b)	During the period covered by this report, there were not any amendments to a provision of the code of ethics adopted in 2(a) above.
	(c)	During the period covered by this report, there were not any waivers or implicit waivers to a provision of the code of ethics adopted in 2(a) above.

ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT

The registrant’s Board has determined that Mr. Paul Belica, a member of the Board’s Audit Oversight Committee is an “audit committee financial expert,” and that he is “independent,” for purposes of this Item.

ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES

	a)	Audit fees. The aggregate fees billed for each of the last two fiscal years (the “Reporting Periods”) for professional services rendered by the Registrant’s principal accountant (the “Auditor”) for the audit of the Registrant’s annual financial statements, or services that are normally provided by the Auditor in connection with the statutory and regulatory filings or engagements for the Reporting Periods, were $48,000 in 2005 and $48,000 in 2006.
	b)	Audit-Related Fees. The aggregate fees billed in the Reporting Periods for assurance and related services by the principal accountant that are reasonably related to the performance of the audit registrant’s financial statements and are not reported under paragraph (e) of this Item were $10,000 in 2005 and $10,000 in 2006. These services consist of accounting consultations, agreed upon procedure reports (inclusive of annual review of basic maintenance testing associated with the Preferred Shares), attestation reports and comfort letters.
	c)	Tax Fees. The aggregate fees billed in the Reporting Periods for professional services rendered by the Auditor for tax compliance, tax service and tax planning (“Tax Services”) were $11,250 in 2005 and $15,000 in 2006. These services consisted of review or preparation of U.S. federal, state, local and excise tax returns.
	d)	All Other Fees. There were no other fees billed in the Reporting Periods for products and services provided by the Auditor to the Registrant.
	e)	1. Audit Committee Pre-Approval Policies and Procedures. The Registrant’s Audit Committee has established policies and procedures for pre-approval of all audit and permissible non-audit services by the Auditor for the Registrant, as well as the Auditor’s engagements related directly to the operations and financial reporting of the Registrant. The Registrant’s policy is stated below.

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             Nicholas-Applegate Convertible & Income Fund II (THE “FUND”)

AUDIT OVERSIGHT COMMITTEE POLICY FOR PRE-APPROVAL OF SERVICES PROVIDED BY THE INDEPENDENT ACCOUNTANTS

The Funds’ Audit Oversight Committee (“Committee”) is charged with the oversight of the Funds’ financial reporting policies and practices and their internal controls. As part of this responsibility, the Committee must pre-approve any independent accounting firm’s engagement to render audit and/or permissible non-audit services, as required by law. In evaluating a proposed engagement by the independent accountants, the Committee will assess the effect that the engagement might reasonably be expected to have on the accountant’s independence. The Committee’s evaluation will be based on:

	a review of the nature of the professional services expected to provided,
	the fees to be charged in connection with the services expected to be provided,
	a review of the safeguards put into place by the accounting firm to safeguard independence, and
	periodic meetings with the accounting firm.

POLICY FOR AUDIT AND NON-AUDIT SERVICES TO BE PROVIDED TO THE FUNDS

On an annual basis, the Funds’ Committee will review and pre-approve the scope of the audits of the Funds and proposed audit fees and permitted non-audit (including audit-related) services that may be performed by the Funds’ independent accountants. At least annually, the Committee will receive a report of all audit and non-audit services that were rendered in the previous calendar year pursuant to this Policy. In addition to the Committee’s pre-approval of services pursuant to this Policy, the engagement of the independent accounting firm for any permitted non-audit service provided to the Funds will also require the separate written pre-approval of the President of the Funds, who will confirm, independently, that the accounting firm’s engagement will not adversely affect the firm’s independence. All non-audit services performed by the independent accounting firm will be disclosed, as required, in filings with the Securities and Exchange Commission.

AUDIT SERVICES

The categories of audit services and related fees to be reviewed and pre-approved annually by the Committee are:

Annual Fund financial statement audits  Seed audits (related to new product filings, as required)  SEC and regulatory filings and consents  Semiannual financial statement reviews

AUDIT-RELATED SERVICES

The following categories of audit-related services are considered to be consistent with the role of the Fund’s independent accountants and services falling under one of these categories will be pre-approved by the Committee on an annual basis if the Committee deems those services to be consistent with the accounting firm’s independence:

Accounting consultations  Fund merger support services  Agreed upon procedure reports (inclusive of quarterly review of Basic Maintenance testing associated with issuance of Preferred Shares and semiannual report review)  Other attestation reports  Comfort letters  Other internal control reports

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Individual audit-related services that fall within one of these categories and are not presented to the Committee as part of the annual pre-approval process described above, may be pre-approved, if deemed consistent with the accounting firm’s independence, by the Committee Chair (or any other Committee member who is a disinterested trustee under the Investment Company Act to whom this responsibility has been delegated) so long as the estimated fee for those services does not exceed $100,000. Any such pre-approval shall be reported to the full Committee at its next regularly scheduled meeting.

TAX SERVICES

The following categories of tax services are considered to be consistent with the role of the Funds’ independent accountants and services falling under one of these categories will be pre-approved by the Committee on an annual basis if the Committee deems those services to be consistent with the accounting firm’s independence:

Tax compliance services related to the filing or amendment of the following:       Federal, state and local income tax compliance; and, sales and use tax compliance       Timely RIC qualification reviews       Tax distribution analysis and planning       Tax authority examination services       Tax appeals support services       Accounting methods studies       Fund merger support service       Other tax consulting services and related projects

Individual tax services that fall within one of these categories and are not presented to the Committee as part of the annual pre-approval process described above, may be pre-approved, if deemed consistent with the accounting firm’s independence, by the Committee Chairman (or any other Committee member who is a disinterested trustee under the Investment Company Act to whom this responsibility has been delegated) so long as the estimated fee for those services does not exceed $100,000. Any such pre-approval shall be reported to the full Committee at its next regularly scheduled meeting.

PROSCRIBED SERVICES

The Funds’ independent accountants will not render services in the following categories of non-audit services:

Bookkeeping or other services related to the accounting records or financial statements of the Funds  Financial information systems design and implementation  Appraisal or valuation services, fairness opinions, or contribution-in-kind reports  Actuarial services  Internal audit outsourcing services  Management functions or human resources  Broker or dealer, investment adviser or investment banking services  Legal services and expert services unrelated to the audit  Any other service that the Public Company Accounting Oversight Board determines, by regulation, is impermissible

PRE-APPROVAL OF NON-AUDIT SERVICES PROVIDED TO OTHER ENTITIES WITHIN THE FUND COMPLEX

The Committee will pre-approve annually any permitted non-audit services to be provided to Allianz Global Investors Fund Management LLC (Formerly, PA Fund Management LLC) or any other investment manager to the Funds (but not including any sub-adviser whose role is primarily portfolio management and is sub-contracted by the investment manager) (the “Investment Manager”) and any entity controlling, controlled by, or under common control with the Investment Manager that provides ongoing services to the Funds (including affiliated sub-advisers to the Funds), provided, in each case, that the engagement relates

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directly to the operations and financial reporting of the Funds (such entities, including the Investment Manager, shall be referred to herein as the “Accounting Affiliates”). Individual projects that are not presented to the Committee as part of the annual pre-approval process, may be pre-approved, if deemed consistent with the accounting firm’s independence, by the Committee Chairman (or any other Committee member who is a disinterested trustee under the Investment Company Act to whom this responsibility has been delegated) so long as the estimated fee for those services does not exceed $100,000. Any such pre-approval shall be reported to the full Committee at its next regularly scheduled meeting.

Although the Committee will not pre-approve all services provided to the Investment Manager and its affiliates, the Committee will receive an annual report from the Funds’ independent accounting firm showing the aggregate fees for all services provided to the Investment Manager and its affiliates.

DE MINIMUS EXCEPTION TO REQUIREMENT OF PRE-APPROVAL OF NON-AUDIT SERVICES

With respect to the provision of permitted non-audit services to a Fund or Accounting Affiliates, the pre-approval requirement is waived if:

	(1)	The aggregate amount of all such permitted non-audit services provided constitutes no more than (i) with respect to such services provided to the Fund, five percent (5%) of the total amount of revenues paid by the Fund to its independent accountant during the fiscal year in which the services are provided, and (ii) with respect to such services provided to Accounting Affiliates, five percent (5%) of the total amount of revenues paid to the Fund’s independent accountant by the Fund and the Accounting Affiliates during the fiscal year in which the services are provided;
	(2)	Such services were not recognized by the Fund at the time of the engagement for such services to be non-audit services; and
	(3)	Such services are promptly brought to the attention of the Committee and approved prior to the completion of the audit by the Committee or by the Committee Chairman (or any other Committee member who is a disinterested trustee under the Investment Company Act to whom this Committee Chairman or other delegate shall be reported to the full Committee at its next regularly scheduled meeting.
	e) 2. No services were approved pursuant to the procedures contained in paragraph (C) (7) (i) (C) of Rule 2-01 of Registration S-X.        f) Not applicable        g) Non-audit fees. The aggregate non-audit fees billed by the Auditor for services rendered to the Registrant, and rendered to the Adviser, for the 2005 Reporting Period was $2,308,930 and the 2006 Reporting Period was $2,778,225.        h) Auditor Independence. The Registrant’s Audit Oversight Committee has considered whether the provision of non-audit services that were rendered to the Adviser which were not pre-approved is compatible with maintaining the Auditor’s independence.

ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANT

The Fund has a separately designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934. The audit committee of the Fund is comprised of Robert E. Connor, Paul Belica, John J. Dalessandro II, Hans W. Kertess and R. Peter Sullivan III.

ITEM 6. SCHEDULE OF INVESTMENTS Schedule of Investments is included as part of the report to shareholders filed under Item 1 of this form.

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ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.

Allianz Global Investors and Nicholas-Applegate

Description of Proxy Voting Policy and Procedures

The Registrants and its Board of Trustees have delegated to Allianz Global Investors Fund Management LLC (“Allianz Global Investors”), and Allianz Global Investors has in turn delegated to the sub-adviser, responsibility for voting any proxies relating to portfolio securities held by the Registrants in accordance with the sub-advisers’ proxy voting policies and procedures.

Each of Allianz Global Investors and Nicholas-Applegate Capital Management LLC (“Nicholas Applegate”) (for purposes of this description, each a “Company”) typically votes proxies as part of its discretionary authority to manage accounts (except as provided below with respect to Allianz Global Investors’ registered investment company clients), unless the client has explicitly reserved the authority for itself. When voting proxies, each Company’s primary objective is to make voting decisions solely in the best economic interests of its clients. Each Company will act in a manner that it deems prudent and diligent and which is intended to enhance the economic value of the underlying portfolio securities held in its clients’ accounts.

Each Company has adopted written Proxy Voting Policies and Procedures (the “Proxy Guidelines”) that are reasonably designed to ensure that such Company is voting in the best interest of its clients. The Proxy Guidelines reflect each Company’s general voting positions on specific corporate governance issues and corporate actions. Some issues may require a case by case analysis prior to voting and may result in a vote being cast that will deviate from the Proxy Guidelines. Upon receipt of a client’s written request, a Company may also vote proxies for that client’s account in a particular manner that may differ from the Proxy Guidelines. Deviation from a Company’s Proxy Guidelines will be documented and maintained in accordance with Rule 204-2 under the Investment Advisers Act of 1940.

In accordance with the Proxy Guidelines, a Company may review additional criteria associated with voting proxies and evaluate the expected benefit to its clients when making an overall determination on how or whether to vote the proxy. A Company may vote proxies individually for an account or aggregate and record votes across a group of accounts, strategy or product. In addition, a Company may refrain from voting a proxy on behalf of its clients’ accounts due to de-minimis holdings, impact on the portfolio, items relating to foreign issuers, timing issues related to the opening/closing of accounts and contractual arrangements with clients and/or their authorized delegate. For example, a Company may refrain from voting a proxy of a foreign issuer due to logistical considerations that may have a detrimental effect on a Company’s ability to vote the proxy. These issues may include, but are not limited to: (i) proxy statements and ballots being written in a foreign language, (ii) untimely notice of a shareholder meeting, (iii) requirements to vote proxies in person, (iv) restrictions on a foreigner’s ability to exercise votes, (v) restrictions on the sale of securities for a period of time in proximity to the shareholder meeting, or (vi) requirements to provide local agents with power of attorney to facilitate the voting instructions. Such proxies are voted on a best-efforts basis.

To assist in the proxy voting process, a Company may retain an independent third party service provider to assist in providing research, analysis and voting recommendations on corporate governance issues and corporate actions as well as assist in the administrative process. The services provided offer a variety of proxy-related services to assist in a Company’s handling of proxy voting responsibilities.

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Conflicts of Interest. A Company may have conflicts of interest that can affect how it votes its clients’ proxies. For example, a Company or an affiliate may manage a pension plan whose management is sponsoring a proxy proposal. The Proxy Guidelines are designed to prevent material conflicts of interest from affecting the manner in which a Company votes its clients’ proxies. In order to ensure that all material conflicts of interest are addressed appropriately while carrying out its obligation to vote proxies, the Chief Investment Officer of the relevant Company may designate an employee or a proxy committee to be responsible for addressing how the Company resolves such material conflicts of interest with its clients.

Registered Investment Companies for which Allianz Global Investors Serves as Adviser. With respect to registered investment companies (“funds”) for which Allianz Global Investors serves as investment adviser, it is the policy of Allianz Global Investors that proxies should be voted in the interest of the shareholders of the applicable fund, as determined by those who are in the best position to make this determination. Allianz Global Investors believes that the firms and/or persons purchasing and selling securities for the funds and analyzing the performance of the funds’ securities are in the best position and have the information necessary to vote proxies in the best interests of the funds and their shareholders, including in situations where conflicts of interest may arise between the interests of shareholders, on one hand, and the interests of the investment adviser, a sub-adviser and/or any other affiliated person of the fund, on the other. Accordingly, Allianz Global Investor’s policy is to delegate proxy voting responsibility to those entities with portfolio management responsibility for the funds.

ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES

(a)(1)      As of May 9, 2006, the following individuals constitute the team that has primary responsibility for the day-to-day implementation of the Nicholas-Applegate Convertible & Income Fund (NCV) and Nicholas-Applegate Convertible & Income Fund II (NCZ), with Mr. Forsyth serving as head of the team:

Douglas G. Forsyth, CFA
Managing Director, Portfolio Manager, US High Yield Bond/Convertibles
Doug Forsyth oversees Nicholas-Applegate's US High Yield Bond and US Convertibles portfolio management and research teams and is a member of the firm’s Executive Committee. Prior to joining Nicholas-Applegate in 1994, Doug was a securities analyst at AEGON USA, where he was responsible for financial and strategic analysis of high yield securities. Doug was previously a research assistant at the University of Iowa, where he earned his B.B.A. in finance. He has fourteen years of investment industry experience.

William (Brit) L. Stickney
Managing Director, Portfolio Manager, US High Yield Bond/Convertibles
Brit Stickney has portfolio management and research responsibilities as a member of the firm’s US High Yield Bond/Convertibles team. Prior to joining the firm in 1999, he was a vice president of Institutional Fixed Income Sales with ABN AMRO, Inc., where his primary focus was on high yield corporate securities. Brit’s previous experience was in institutional fixed income with Cowen & Company and Wayne Hummer & Company. He holds an M.B.A. from the J.L. Kellogg School of Management at Northwestern University and a B.S. in finance from Miami University of Ohio. He has seventeen years of investment industry experience.

Justin Kass, CFA
Senior Vice President, Portfolio Manager, US High Yield Bond/Convertibles
Justin Kass joined the firm in 2000 with responsibilities for portfolio management and research on our US High Yield Bond/Convertibles team. He was previously an analyst and interned on the team, where he added significant depth to our proprietary Upgrade Alert Model. He earned his M.B.A. in finance from the Anderson School at University of California, Los Angeles and his B.S. from the University of California, Davis. He has eight years of investment industry experience.

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Michael E. Yee
Senior Vice President, Portfolio Manager, US High Yield Bond/Convertibles
As a member of the US High Yield Bond/Convertibles team since 1999, Michael Yee has responsibilities in portfolio management, trading and research for the US Convertible Arbitrage Fund. Michael was previously an Analyst for the Global/Systematic team, held positions in global and domestic portfolio administration areas, and in client services. Prior to joining the firm in 1995, he worked as a financial consultant for Priority One Financial/Liberty Foundation. Michael holds an M.B.A. from San Diego State University and a B.S. from the University of California at San Diego. He has eleven years of investment industry experience.

(a)(2)      The following summarizes information regarding each of the accounts, excluding portfolios of the Nicholas-Applegate Convertible & Income Fund (NCV) and Nicholas-Applegate Convertible & Income Fund II (NCZ) Fund that were managed by Portfolio Managers as of February 28, 2006, including accounts managed by a team, committee, or other group that includes the Portfolio Managers.

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	Other RICs		Other Accounts		Other Pooled
PM	#	AUM($million)	#	AUM($million)	#	AUM($million)
Douglas G.	2	685.9	15	1590.0	5	551.9
Forsythe,
CFA
Justin Kass,	2	685.9	15	1590.0	5	551.9
CFA
William	2	685.9	15	1590.0	5	551.9
(Brit) L.
Stickney
Michael E.	2	685.9	15	1590.0	5	551.9
Yee
Accounts and Assets for which Advisory Fee is Based on Performance
	Other RICs		Other Accounts		Other Pooled
PM	#	AUM($million)	#	AUM($million)	#	AUM($million)
Douglas G.	-	-	-	-	1	5.0
Forsythe,
CFA
Justin Kass,	-	-	-	-	1	5.0
CFA
William	-	-	-	-	1	5.0
(Brit) L.
Stickney
Michael E.	-	-	-	-	1	5.0
Yee

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Like other investment professionals with multiple clients, a Portfolio Manager for a Fund may face certain potential conflicts of interest in connection with managing both the Fund and other accounts at the same time. The paragraphs below describe some of these potential conflicts, which the Investment Adviser believes are faced by investment professionals at most major financial firms.

The Investment Adviser and the Trustees have adopted compliance policies and procedures that attempt to address certain of these potential conflicts. The management of accounts with different advisory fee rates and/or fee structures, including accounts that pay advisory fees based on account performance (“performance fee accounts”), may raise potential conflicts of interest by creating an incentive to favor higher-fee accounts. These potential conflicts may include, among others:

• The most attractive investments could be allocated to higher-fee accounts or performance fee accounts.

• The trading of higher-fee accounts could be favored as to timing and/or execution price. For example, higher-fee accounts could be permitted to sell securities earlier than other accounts when a prompt sale is desirable or to buy securities at an earlier and more opportune time.

• The investment management team could focus their time and efforts primarily on higher-fee accounts due to a personal stake in compensation.

A potential conflict of interest may arise when a Fund and other accounts purchase or sell the same securities. On occasions when a Portfolio Manager considers the purchase or sale of a security to be in the best interests of a Fund as well as other accounts, the Investment Adviser’s trading desk may, to the extent permitted by applicable laws and regulations, aggregate the securities to be sold or purchased in order to obtain the best execution and lower brokerage commissions, if any. Aggregation of trades may create the potential for unfairness to a Fund or another account if one account is favored over another in allocating the securities purchased or sold—for example, by allocating a disproportionate amount of a security that is likely to increase in value to a favored account.

“Cross trades,” in which one Investment Adviser account sells a particular security to another account (potentially saving transaction costs for both accounts), may also pose a potential conflict of interest. Cross trades may be seen to involve a potential conflict of interest if, for example, one account is permitted to sell a security to another account at a higher price than an independent third party would pay. The Investment Adviser and the Board of Trustees have adopted compliance procedures that provide that any transactions between the Funds and another Investment Adviser-advised account are to be made at an independent current market price, as required by law.

Another potential conflict of interest may arise based on the different investment objectives and strategies of a Fund and other accounts. For example, another account may have a shorter-term investment horizon or different investment objectives, policies or restrictions than a Fund. Depending on another account’s objectives or other factors, a Portfolio Manager may give advice and make decisions that may differ from advice given, or the timing or nature of decisions made, with respect to a Fund. In addition, investment decisions are the product of many factors to basic suitability for the particular account involved. Thus, a particular security may be bought or sold for certain accounts even though it could have been bought or sold for other accounts at the same time. More rarely, a particular security may be bought for one or more accounts managed by a Portfolio Manager when one or more other accounts are selling the security (including short sales). There may be circumstances when purchases or sales of portfolio securities for one or more accounts may have an adverse effect on other accounts.

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A Fund’s Portfolio Manager who is responsible for managing multiple funds and/or accounts may devote unequal time and attention to the management of those funds and/or accounts. As a result, the Portfolio Manager may not be able to formulate as complete a strategy or identify equally attractive investment opportunities for each of those accounts as might be the case if he or she were to devote substantially more attention to the management of a single fund. The effects of this potential conflict may be more pronounced where funds and/or accounts overseen by a particular Portfolio Manager have different investment strategies. A Fund’s Portfolio Manager(s) may be able to select or influence the selection of the brokers and dealers that are used to execute securities transactions for the Funds. In addition to executing trades, some brokers and dealers provide Portfolio Managers with brokerage and research services (as those terms are defined in Section 28(e) of the Securities Exchange Act of 1934), which may result in the payment of higher brokerage fees than might have otherwise be available. These services may be more beneficial to certain funds or accounts than to others. Although the payment of brokerage commissions is subject to the requirement that the Portfolio Manager determine in good faith that the commissions are reasonable in relation to the value of the brokerage and research services provided to the Fund, a Portfolio Manager’s decision as to the selection of brokers and dealers could yield disproportionate costs and benefits among the Funds and/or accounts that he or she manages. See “Portfolio Transactions and Brokerage”.

A Fund’s Portfolio Manager(s) may also face other potential conflicts of interest in managing a Fund, and the description above is not a complete description of every conflict that could be deemed to exist in managing both the Funds and other accounts. In addition, a Fund’s Portfolio Manager may also manage other accounts (including their personal assets or the assets of family members) in their personal capacity. The management of these accounts may also involve certain of the potential conflicts described above. The Investment Adviser’s investment personnel, including each Fund’s Portfolio Manager, are subject to restrictions on engaging in personal securities transactions pursuant to the Codes of Ethics adopted by the Investment Adviser and the Funds, which contain provisions and requirements designed to identify and address certain conflicts of interest between personal investment activities and the interests of the Funds.

(a) (3)      As of February 28, 2006, the following explains the compensation structure of each individual that shares primary responsibility for day-to-day portfolio management of the Funds (for the purposes of this section, “Portfolio Managers”):

Base Salary. Each Portfolio Manager is paid a fixed base salary set at a competitive level, taking into consideration the Portfolio Manager’s experience and responsibilities, as determined by the Investment Adviser.

Annual Bonus, Profit Sharing Opportunity, and Long-Term Cash Bonus Plan . Each Portfolio Manager’s compensation is directly affected by the performance, on a pre-tax basis, of the individual portfolios he or she manages, including each Fund; as well as the performance of the individual’s portfolio management team and the overall success of the firm.

Approximately 75% of an investment professional’s performance bonus is based on one- and three-year annualized performance of client accounts, with greater weight placed on three-year performance. Relative performance to the benchmark is approximately half of the calculation and the product’s peer ranking in institutional consultant universes determines the other half. The

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remaining 25% of the performance bonus is based on a qualitative review and firm profitability. In the qualitative review, team members are evaluated based on the consistency of their implementation of the investment process. Lead portfolio managers evaluate the members of their teams. The Chief Investment Officer evaluates the lead portfolio managers.

Investment teams have a profit-sharing plan which represents approximately 25% of the total bonus. Each team receives a pool which is based on the pre-tax profit of their product. All team members are eligible. Allocations are decided between the Chief Investment Officer and lead portfolio managers of the teams. The share of pre-tax profit increases with increasing profitability. This structure, together with the bonus based on investment performance, fully aligns the team with client interests.

A Long-Term Cash Bonus Plan was established to provide long-term incentives and rewards to certain key staff and executives of Nicholas-Applegate and the other Allianz Global Investors companies to promote their long-term growth and profitability. The Plan provides awards that are valued based on the operating earnings growth of the worldwide Allianz Global Investors group of companies, as well as the target achievement of Nicholas-Applegate’s average operating earnings on a three-year basis. The Plan provides a link between longer term company performance and participant pay, further motivating participants to make a long-term commitment to the company’s success.

(a)(4)      As of February 28, 2006, none of the Portfolio Managers beneficially own any of the shares issued by the Funds.

ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED COMPANIES

				Total Number
				of Shares Purchased	Maximum Number of
		Total Number	Average	as Part of Publicly	Shares that May yet Be
		of Shares	Price Paid	Announced Plans or	Purchased Under the Plans
Period		Purchased	Per Share	Programs	or Programs
July 2005		N/A	14.66	85,599	N/A
August 2005		N/A	15.18	82,221	N/A
September 2005		N/A	15.25	80,780	N/A
October 2005		N/A	N/A	N/A	N/A
November 2005		N/A	14.69	79,183	N/A
December 2005		N/A	14.90	77,071	N/A
December 2005		N/A	N/A	N/A	N/A
January 2006		N/A	14.74	263,724	N/A
February 2006		N/A	14.93	76,019	N/A

ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

There have been no material changes to the procedures by which shareholders may recommend nominees to the Fund’s Board of Trustees since the Fund last provided disclosure in response to this item.

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ITEM 11. CONTROLS AND PROCEDURES

(a)	The registrant’s President and Chief Executive Officer and Principal Financial Officer have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-2(c) under the Investment Company Act of 1940, as amended are effective based on their evaluation of these controls and procedures as of a date within 90 days of the filing date of this document.
(b)	There were no significant changes in the registrant’s internal controls or in factors that could affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

ITEM 12. EXHIBITS

(a) (1) Exhibit 99.CODE ETH - Code of Ethics

(a) (2) Exhibit 99 Cert. - Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

(b) Exhibit 99.906 Cert. - Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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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) Nicholas-Applegate Convertible & Income Fund II     

By /s/ Brian S. Shlissel     
President and Chief Executive Officer

Date May 9, 2006     

By /s/ Lawrence G. Altadonna     
Treasurer, Principal Financial & Accounting Officer

Date May 9, 2006     

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

By /s/ Brian S. Shlissel     
President and Chief Executive Officer

Date May 9, 2006     

By /s/ Lawrence G. Altadonna     
Treasurer, Principal Financial & Accounting Officer

Date May 9, 2006     

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