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NFJ Dividend, Interest & Premium
Strategy Fund
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Nicholas-Applegate Equity & Convertible Income Fund
|
Matters
Relating to
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the
Trustees’
|
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|
Consideration
of the
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Investment
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Management
&
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Portfolio
Management
|
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Agreements
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(unaudited)
|
The Investment
Company Act of 1940, as amended, requires that both the full Board of Trustees
(the “Trustees”) and a majority of the non-interested Trustees (the
“Independent Trustees”), voting separately, approve the Funds’ Management
Agreements (the “Advisory Agreements”) with the Investment Manager and
Portfolio Management Agreements (the “Sub-Advisory Agreements”, and together
with the Advisory Agreements, the “Agreements”) between the Investment Manager
and the Sub-Advisers. The Trustees met in person on June 16-17, 2009 (the
“contract review meeting”) for the specific purpose of considering whether to
approve the continuation of the Advisory Agreements and the Sub-Advisory
Agreements. The Independent Trustees were assisted in their evaluation of the
Agreements by independent legal counsel, from whom they received separate legal
advice and with whom they met separately from Fund management during the
contract review meeting.
Based on
their evaluation of factors that they deemed to be material, including those
factors described below, the Board of Trustees, including a majority of the
Independent Trustees, concluded that the continuation of the Funds’ Advisory
Agreements and the Sub-Advisory Agreements, as amended, should be approved for
a one-year period commencing July 1, 2009.
In
connection with their deliberations regarding the continuation of the
Agreements, the Trustees, including the Independent Trustees, considered such
information and factors as they believed, in light of the legal advice
furnished to them and their own business judgment, to be relevant. As described
below, the Trustees considered the nature, quality, and extent of the various
investment management, administrative and other services performed by the
Investment Manager or the Sub-Advisers under the applicable Agreement.
In
connection with their contract review meeting, the Trustees received and relied
upon materials provided by the Investment Manager which included, among other
items: (i) information provided by Lipper Inc. (“Lipper”) on the total return
investment performance (based on net assets) of the Funds for various time
periods, the investment performance of a group of funds with substantially
similar investment classifications/objectives as the Funds identified by Lipper
and the performance of applicable benchmark indices, (ii) information provided
by Lipper on the Funds’ management fees and other expenses and the management
fees and other expenses of comparable funds identified by Lipper, (iii)
information regarding the investment performance and management fees of
comparable portfolios of other clients of the Sub-Advisers, including
institutional separate accounts, (iv) the profitability to the Investment
Manager and the Sub-Advisers from their relationships with the Funds for the
one year period ended March 31, 2009, (v) descriptions of various functions
performed by the Investment Manager and the Sub-Advisers for the Funds, such as
portfolio management, compliance monitoring and portfolio trading practices,
and (vi) information regarding the overall organization of the Investment
Manager and the Sub-Advisers, including information regarding senior
management, portfolio managers and other personnel providing investment
management, administrative and other services to the Funds.
The
Trustees’ conclusions as to the continuation of the Agreements were based on a
comprehensive consideration of all information provided to the Trustees and
were not the result of any single factor. Some of the factors that figured
particularly in the Trustees’ deliberations are described below, although
individual Trustees may have evaluated the information presented differently
from one another, attributing different weights to various factors.
As part of
their review, the Trustees examined each of the Investment Manager’s and the
Sub-Advisers’ abilities to provide high quality investment management and other
services to the Funds. The Trustees considered the investment philosophy and
research and decision-making processes of the Sub-Advisers;the experience of
key advisory personnel of the Sub-Advisers responsible for portfolio management
of the Funds; the ability of the Investment Manager and the Sub-Advisers to
attract and retain capable personnel; the capability and integrity of the
senior management and staff of the Investment Manager and the Sub-Advisers; and
the level of skill required to manage the Funds. In addition, the Trustees
reviewed the quality of the Investment Manager’s and the Sub-Advisers’ services
with respect to regulatory compliance and compliance with the investment
policies of the Funds; the nature and quality of certain administrative
services the Investment Manager is responsible for providing to the Funds; and
conditions that might affect the Investment Manager’s or the Sub-Advisers’
ability to provide high quality services to the Funds in the future under the
Agreements, including each organization’s respective business reputation,
financial condition and operational stability. Based on the foregoing, the
Trustees concluded that the Sub-Advisers’ investment process, research
capabilities and philosophy were well suited to each of the Funds given their
respective investment objectives and policies, and that the Investment Manager
and the Sub-Advisers would be able to continue to meet any reasonably
foreseeable obligations under the Agreements.
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NFJ Dividend, Interest & Premium Strategy Fund
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34
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Nicholas-Applegate Equity & Convertible Income Fund Semi-Annual Report
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7.31.09
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NFJ Dividend, Interest & Premium
Strategy Fund
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Nicholas-Applegate Equity & Convertible Income Fund
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Matters
Relating to
|
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|
the
Trustees’
|
|
|
Consideration
of the
|
|
|
Investment
|
|
|
Management
&
|
|
|
Portfolio
Management
|
|
|
Agreements
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|
(unaudited) (continued)
|
Based on
information provided by Lipper, the Trustees also reviewed each Fund’s total
return investment performance as well as the performance of comparable funds
identified by Lipper. In the course of their deliberations, the Trustees took
into account information provided by the Investment Manager in connection with
the contract review meeting, as well as during investment review meetings
conducted with portfolio management personnel during the course of the year
regarding each Fund’s performance.
In
assessing the reasonableness of each Fund’s fees under the Agreements, the
Trustees considered, among other information, each Fund’s management fee and
the total expense ratio as a percentage of average net assets attributable to
common shares and the management fee and total expense ratios of comparable funds
identified by Lipper.
For each of
the Funds, the Trustees specifically took note of how each Fund compared to its
Lipper peers as to performance, management fee expenses and total expenses. The
Trustees noted that the Investment Manager had provided a memorandum containing
comparative information on the performance and expenses information of the
Funds compared to their Lipper peer categories. The Trustees noted that while
the Funds are not charged a separate administration fee, it was not clear whether
the peer funds in the Lipper categories were charged such a fee by their
investment managers.
NFJ
Dividend, Interest & Premium Strategy
The
Trustees noted that NFJ ranked in the top quintile for actual management fees
and total expenses as compared to a group of six peer funds. For the 1-year
performance ranking, the Fund ranked 26 out of 32 and for the 3-year period
ranked 18 out of 22, representing the bottom quintile for both periods. NFJ is
ranked in the third quintile for the 3-months ended May 31, 2009 and has fourth
quintile performance for the 3-year period as of that date.
Nicholas-Applegate
Equity & Convertible Income
The
Trustees noted that the expense group for NIE consists of only three funds. The
Trustees also noted that the actual management fees were above the median and
total actual expenses were at the median. The Trustees also noted that NIE was
last out of 4 funds for the 1-year performance. NIE moved into the third
quintile for performance during the 3-months period ended May 31, 2009..
After
reviewing these and related factors, the Trustees concluded, within the context
of their overall conclusions regarding the Agreements, that they were satisfied
with the Investment Manager’s and the Sub-Advisers’ responses and efforts to
continue to improve the Funds’ investment performance. The Trustees agreed to
reassess the services provided by the Investment Manager and Sub-Advisers under
the Agreements in light of the Fund’s ongoing performance at each quarterly
Board meeting.
The
Trustees also considered the management fees charged by Sub-Advisers to other
clients, including institutional separate accounts with investment strategies
similar to those of the Funds. Regarding the institutional separate accounts,
they noted that the management fees paid by the Funds are generally higher than
the fees paid by these clients of the Sub-Advisers, but the Trustees were
advised by the Sub-Advisers that the administrative burden for the Investment
Manager and the Sub-Advisers with respect to the Funds are also relatively
higher, due in part to the more extensive regulatory regime to which the Funds
are subject in comparison to institutional separate accounts. The Trustees
noted that the management fees paid by the Funds are generally higher than the
fees paid by the open-end funds offered for comparison but were advised that
there are additional portfolio management challenges in managing the Funds,
such as meeting a regular dividend.
Based on a
profitability analysis provided by the Investment Manager, the Trustees also
considered the profitability of the Investment Manager and the Sub-Advisers
from their relationship with each Fund and determined that such profitability
was not excessive.
The
Trustees also took into account that, as closed-end investment companies, the
Funds do not currently intend to raise additional assets, so the assets of the
Funds will grow (if at all) only through the investment performance of each
Fund. Therefore, the Trustees did not consider potential economies of scale as
a principal factor in assessing the fee rates payable under the Agreements.
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NFJ
Dividend, Interest & Premium Strategy Fund
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| 7.31.09 | Nicholas-Applegate Equity & Convertible Income Fund Semi-Annual
Report
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35
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|
|
|
NFJ Dividend, Interest & Premium
Strategy Fund
|
|
|
Nicholas-Applegate Equity & Convertible Income Fund
|
Matters
Relating to
|
|
|
the
Trustees’
|
|
|
Consideration
of the
|
|
|
Investment
|
|
|
Management
&
|
|
|
Portfolio
Management
|
|
|
Agreements
|
|
|
(unaudited) (continued)
|
Additionally,
the Trustees considered so-called “fall-out benefits” to the Investment Manager
and the Sub-Advisers, such as reputational value derived from serving as
Investment Manager and Sub-Advisers to the Funds.
After
reviewing these and other factors described herein, the Trustees concluded with
respect to each Fund, within the context of their overall conclusions regarding
the Agreements, that the fees payable under the Agreements represent reasonable
compensation in light of the nature and quality of the services being provided
by the Investment Manager and Sub-Advisers to the Funds.
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NFJ Dividend, Interest & Premium Strategy Fund
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36
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Nicholas-Applegate Equity & Convertible Income Fund Semi-Annual Report
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7.31.09
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Trustees
|
Principal
Officers
|
|
|
|
Hans W. Kertess
|
Brian S. Shlissel
|
|
Chairman of the Board of Trustees
|
President & Chief Executive Officer
|
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Paul
Belica
|
Lawrence G. Altadonna
|
|
Robert E. Connor
|
Treasurer, Principal Financial & Accounting Officer
|
|
John C. Maney
|
Thomas J. Fuccillo
|
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William B. Ogden, IV
|
Vice President, Secretary & Chief Legal Officer
|
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R. Peter Sullivan III
|
Scott Whisten
|
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Assistant Treasurer
|
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Richard J. Cochran
|
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Assistant Treasurer
|
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Youse E. Guia
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Chief Compliance Officer
|
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Kathleen A. Chapman
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Assistant Secretary
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Lagan Srivastava
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Assistant Secretary
|
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Investment
Manager
|
|
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Allianz Global Investors Fund
Management LLC
|
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|
1345 Avenue of the Americas
|
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New York, NY 10105
|
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Sub-Advisers
|
|
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NFJ Investment Group L.P.
|
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2100 Ross Avenue, Suite 1840
|
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Dallas, TX 75201
|
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Nicholas-Applegate Capital
Management LLC
|
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600 West Broadway, 30th Floor
|
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San Diego, CA 92101
|
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Oppenheimer Capital LLC
|
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1345 Avenue of the Americas
|
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New York, NY 10105
|
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Custodian & Accounting Agent
|
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Brown Brothers Harriman & Co.
|
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40 Water Street
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Boston, MA 02109
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Transfer Agent,
Dividend Paying Agent and Registrar
|
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PNC Global Investment Servicing
|
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P.O. Box 43027
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Providence, RI 02940-3027
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Independent
Registered Public Accounting Firm
|
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PricewaterhouseCoopers LLP
|
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300 Madison Avenue
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New York, NY 10017
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Legal Counsel
|
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Ropes & Gray LLP
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One International Place
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Boston, MA 02210-2624
|
|
This report,
including the financial information herein, is transmitted to the
shareholders of NFJ Dividend, Interest & Premium Strategy Fund and
Nicholas-Applegate Equity & Convertible Fund 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.
The financial information included herein is taken from the records of
the Funds without examination by an independent registered public accounting
firm, who did not express an opinion.
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 stock in the open market.
The Funds file their complete schedules of portfolio holdings with the
Securities and Exchange Commission (“SEC”) for the first and third quarters of
their fiscal year on Form N-Q. The Funds’ Form N-Q’s are 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 July 22, 2009 (NFJ) and July 23, 2009 (NIE), 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 Fund 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.
Information on the Funds are available at
www.allianzinvestors.com/closedendfunds or by calling the Funds’ shareholder
servicing agent at (800) 254-5197.
ITEM 2. CODE OF ETHICS
Not required in this filing.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT
Not required in this filing.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Not required in this filing.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANT
Not required in this filing.
ITEM 6. SCHEDULE OF INVESTMENTS
Schedule of Investments is included as part of the report to shareholders filed under Item 1 of this form.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not required in this filing.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT
INVESTMENT COMPANIES
Not required in this filing.
ITEM 9. Purchase of Equity Securities by Closed-End Management Investment Company and Affiliated Companies
None
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.
ITEM 11. CONTROLS AND PROCEDURES
(a) The registrant’s President and Chief Executive
Officer and Treasurer, Principal Financial & Accounting Officer have concluded
that the registrant’s
disclosure controls and procedures (as defined in Rule 30a-2(c) under the Act
(17 CFR 270.30a-3(c))), 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 over financial reporting (as defined in Rule 30a-3(d) under the Act (17 CFR 270.30a -3(d))) that occurred during the second fiscal quarter of the period covered by this report that has
materially affected, or is reasonably likely to materially affect, the registrants control over financial reporting.
ITEM 12. EXHIBITS
(a) Exhibit 99.302 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
Signature
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)
NFJ Dividend Interest & Premium
Strategy
Fund
|
By
/s/ Brian S. Shlissel
|
|
President and Chief Executive Officer
|
|
|
|
Date October 7, 2009
|
|
|
|
By
/s/ Lawrence G. Altadonna
|
|
Treasurer, Principal Financial & Accounting
Officer
|
|
|
|
Date October 7, 2009
|
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 October 7, 2009
|
|
|
|
By
/s/ Lawrence G. Altadonna
|
|
Treasurer, Principal Financial & Accounting
Officer
|
|
|
|
Date October
7, 2009
|
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