|
|
|
|
Nicholas-Applegate
International & Premium Strategy Fund
|
Notes
to Financial Statements
|
|
February 28, 2009
|
|
|
|
|
1. Organization and Significant Accounting Policies (continued)
date as a realized gain. The
difference between the premium received and the amount paid on effecting a
closing purchase transaction, including brokerage commissions, is also treated
as a realized gain, or if the premium is less than the amount paid for the
closing purchase transactions, as a realized loss. If a call option written by
the Fund is exercised, the premium is added to the proceeds from the sale of
the underlying security in determining whether there has been a realized gain
or loss. These liabilities are reflected as call options written in the
Statement of Assets and Liabilities.
The Fund, as writer of a call option,
may have no control over whether the underlying securities may be sold
(called). As a result, the Fund bears the market risk of an unfavorable change
in the price of the security underlying the written call option.
The Fund may also purchase put
options on equity indexes. The risk associated with purchasing a put option is
that the Fund pays a premium whether or not the option is exercised.
Additionally, the Fund bears the risk of loss of premium and change in market
value should the counterparty be unable or unwilling to perform under the
contract. Purchased put options are accounted for in the same manner as
portfolio securities. The proceeds from the securities sold through the
exercise of put options is decreased by the premiums paid.
The use of derivative transactions
may involve elements of both market and credit risk in excess of the amounts
reflected in the Statement of Assets and Liabilities.
(j) Repurchase Agreements
The Fund enters into transactions with its custodian bank or
securities brokerage firms whereby it purchases securities under agreements to
resell such securities at an agreed upon price and date (“repurchase
agreements”). Such agreements are carried at the contract amount in the
financial statements. Collateral pledged (the securities received), which
consists primarily of U.S. government obligations and asset-backed securities,
are held by the custodian bank until maturity of the repurchase agreement.
Provisions of the repurchase agreements and the procedures adopted by the Fund
require that the market value of the collateral, including accrued interest
thereon, be sufficient in the event of default by the counterparty. If the
counterparty defaults and the value of the collateral declines or if the
counterparty enters an insolvency proceeding, realization of the collateral by
the Fund may be delayed or limited.
(k) Custody Credits on Cash Balances
The Fund benefits from an expense offset arrangement with
its custodian bank, whereby uninvested cash balances earn credits which reduce
monthly custodian and accounting agent expenses. Had these cash balances been
invested in income-producing securities, they would have generated income for
the Fund.
(l) Concentration of Risk
The Fund may have elements of risk, not typically associated
with investments in the U.S., due to concentrated investments in specific
industries or investments in foreign issuers located in a specific country or
region. Such concentrations may subject the Fund to additional risks resulting
from future political or economic conditions in such country or region and the
possible imposition of adverse governmental laws of currency exchange
restrictions affecting such country or region, which could cause the securities
and their markets to be less liquid and prices more volatile than those of
comparable U.S. companies.
2. Investment Manager/ Sub-Adviser
The Fund has an Investment Management Agreement (the
“Agreement”) with the Investment Manager. Subject to the supervision of the
Fund’s Board of Trustees, the Investment Manager is responsible for managing,
either directly or through others selected by it, the Fund’s investment
activities, business affairs and administrative matters. Pursuant to the
Agreement, the Investment Manager receives an annual fee, payable on a monthly
basis at an annual rate of 1.00% of the Fund’s average daily total managed
assets.
The Investment Manager has retained
its affiliate, Nicholas-Applegate Capital Management LLC (“NACM” or the
“Sub-Adviser”), to manage the Fund’s investments. Effective November 25, 2008,
the Fund’s Sub-Adviser responsible for its option strategy changed from
Oppenheimer Capital LLC (“OCC”) to NACM. Subject to the supervision of the
Investment Manager, the Sub-Adviser makes all of the Fund’s investment
decisions. Pursuant to the amended and restated Portfolio Management Agreement
with NACM, the Investment Manager and not the Fund, pays the Sub-Adviser an
annual fee payable on a monthly basis. Investment management fees were not
impacted by this change although the Sub-Advisory fees payable by the
Investment Manager to NACM increase by the amount of the Sub-Advisory fee
previously payable to OCC.
|
2.28.09
|
Nicholas-Applegate International & Premium Strategy Fund
Annual Report
17
|
|
|
|
Nicholas-Applegate
International & Premium Strategy Fund
|
Notes
to Financial Statements
|
|
February 28, 2009
|
|
|
|
|
3. Investments in Securities
For the fiscal year ended February 28, 2009, purchases and
sales of investments, other than short-term securities were $246,720,954 and
$239,339,317, respectively.
Transactions in options written for
the fiscal year ended at February 28, 2009 were:
|
|
|
|
|
|
|
|
|
|
|
|
|
Contracts
|
|
|
Premiums
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding, February 29, 2008
|
|
|
196,423
|
|
$
|
2,205,568
|
|
|
Options written
|
|
|
2,822,995
|
|
|
15,614,017
|
|
|
Options terminated in closing transactions
|
|
|
(438,492
|
)
|
|
(1,459,020
|
)
|
|
Options expired
|
|
|
(2,129,544
|
)
|
|
(15,138,449
|
)
|
|
|
|
|
|
|
|
|
|
|
Options outstanding, February 28, 2009
|
|
|
451,382
|
|
$
|
1,222,116
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4. Income Tax
Information
|
|
|
|
|
|
|
|
|
The tax character of dividends
paid was:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended
|
|
Year ended
|
|
|
|
February 28, 2009
|
February 29, 2008
|
|
|
|
|
|
|
|
|
Ordinary Income
|
|
$
|
15,477,209
|
|
$
|
31,650,753
|
|
|
Long-Term Capital Gains
|
|
|
4,783,103
|
|
|
24,787,555
|
|
|
Return of Capital
|
|
|
—
|
|
|
96,861
|
|
At February 28, 2009, the tax
character of distributable earnings of $6,141,777 was comprised entirely of
ordinary income.
In accordance with U.S. Treasury
regulations, the Fund elected to defer realized long-term capital losses of
$270,625 and foreign currency losses of $37,262 arising after October 31, 2008.
Such losses are treated as arising on March 1, 2009.
For the fiscal year ended February
28, 2009, permanent “book-tax” differences were primarily attributable to the differing
treatment of foreign currency transactions. These adjustments were to decrease
paid-in-capital in excess of par by $6,499, decrease undistributed net
investment income by $115,362 and increase accumulated net realized gains by
$121,861.
The cost basis of portfolio
securities for federal income tax purposes is $228,062,239. Aggregate gross and
net unrealized depreciation for securities in which there is an excess of tax
cost over value is $130,180,604. The difference between book and tax cost basis
is primarily attributable to wash sales.
5. Subsequent Dividend Declarations
On March 13, 2009, a dividend of $0.46 per share was
declared to shareholders payable March 27, 2009 to shareholders of record on
March 23, 2009.
6. Legal Proceedings
In June and September 2004, the Investment Manager and
certain of its affiliates (including PEA Capital LLC (“PEA”), Allianz Global
Investors Distributors LLC and Allianz Global Investors of America L.P.),
agreed to settle, without admitting or denying the allegations, claims brought
by the Securities and Exchange Commission and the New Jersey 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. The settlements related to an alleged “market timing” arrangement in
certain open-end funds formerly sub-advised by PEA. The Investment Manager and
its affiliates agreed to pay a total of $68 million to settle the claims. In
addition to monetary payments, the settling parties agreed to undertake certain
corporate governance, compliance and disclosure reforms related to market
timing and consented to cease and desist orders and censures. Subsequent to
these events, PEA deregistered as an investment adviser and dissolved. None of
the settlements alleged that any inappropriate activity took place with respect
to the Fund.
Since February 2004, the Investment
Manager, the Sub-Adviser, and certain of their affiliates and their employees
have been named as defendants in a number of pending lawsuits concerning
“market timing” 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 proceeding in the U.S. District
Court of Maryland. Any potential resolution of these matters may include, but
not be limited to, judgments or settlements for damages against the Investment
Manager, the Sub-Adviser,
18
Nicholas-Applegate International
& Premium Strategy Fund Annual Report
|
2.28.09
|
|
|
|
|
Nicholas-Applegate
International & Premium Strategy Fund
|
Notes to Financial Statements
|
|
February 28, 2009
|
|
|
|
|
6. Legal Proceedings (continued)
or their affiliates or related injunctions.
The Investment Manager and the Sub-Adviser
believe that these matters are not likely to have a material adverse effect on
the Fund or on their ability to perform their respective investment advisory
activities relating to the Fund.
The foregoing speaks only as of the
date hereof.
| 2.28.09 | Nicholas-Applegate International & Premium Strategy Fund
Annual Report
19
|
|
|
|
Nicholas-Applegate International &
Premium Strategy Fund
|
Financial Highlights
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For
the period
April 29, 2005*
through
February 28, 2006
|
|
|
|
|
Year
ended
|
|
|
|
|
|
|
|
|
|
|
|
February
28, 2009
|
|
February
29, 2008
|
|
February
28, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net asset
value, beginning of period
|
|
|
|
$21.75
|
|
|
|
|
$28.52
|
|
|
|
|
$27.35
|
|
|
|
|
$23.88
|
**
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment Operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
investment income
|
|
|
|
0.48
|
|
|
|
|
0.49
|
|
|
|
|
0.33
|
|
|
|
|
0.16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
realized and change in unrealized gain (loss) on investments, call options
written and foreign currency transactions
|
|
|
|
(8.93
|
)
|
|
|
|
(1.48
|
)
|
|
|
|
4.77
|
|
|
|
|
4.81
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total from
investment operations
|
|
|
|
(8.45
|
)
|
|
|
|
(0.99
|
)
|
|
|
|
5.10
|
|
|
|
|
4.97
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends and Distributions to Shareholders
from:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
investment income
|
|
|
|
(0.46
|
)
|
|
|
|
(0.48
|
)
|
|
|
|
(1.11
|
)
|
|
|
|
(0.12
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
realized gains
|
|
|
|
(1.61
|
)
|
|
|
|
(5.29
|
)
|
|
|
|
(2.82
|
)
|
|
|
|
(1.33
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return of
capital
|
|
|
|
—
|
|
|
|
|
(0.01
|
)
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
dividends and distributions to shareholders
|
|
|
|
(2.07
|
)
|
|
|
|
(5.78
|
)
|
|
|
|
(3.93
|
)
|
|
|
|
(1.45
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Share Transactions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Offering
costs charged to paid-in capital in excess of par
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
(0.05
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net asset
value, end of period
|
|
|
|
$11.23
|
|
|
|
|
$21.75
|
|
|
|
|
$28.52
|
|
|
|
|
$27.35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market
price, end of period
|
|
|
|
$9.48
|
|
|
|
|
$20.81
|
|
|
|
|
$30.45
|
|
|
|
|
$24.64
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Investment Return (1)
|
|
|
|
(48.14
|
)%
|
|
|
|
(14.25
|
)%
|
|
|
|
42.23
|
%
|
|
|
|
4.66
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RATIOS/SUPPLEMENTAL DATA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets
end of period (000)
|
|
|
|
$109,823
|
|
|
|
|
$212,627
|
|
|
|
|
$277,930
|
|
|
|
|
$262,668
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio of
expenses to average net assets (2)
|
|
|
|
1.32
|
%
|
|
|
|
1.25
|
%
|
|
|
|
1.22
|
%
|
|
|
|
1.19
|
%(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio of
net investment income to average net assets
|
|
|
|
2.70
|
%
|
|
|
|
1.78
|
%
|
|
|
|
1.12
|
%
|
|
|
|
0.79
|
%(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Portfolio
turnover
|
|
|
|
152
|
%
|
|
|
|
179
|
%
|
|
|
|
203
|
%
|
|
|
|
192
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
Commencement of operations.
|
|
|
|
|
**
|
Initial public offering price of $25.00 per share less
underwriting discount of $1.125 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
each 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)
|
Inclusive of expenses offset by custody credits earned on
cash balances at the custodian bank. (See note 1(j) in Notes to Financial
Statements).
|
|
|
|
|
(3)
|
Annualized.
|
20
Nicholas-Applegate International & Premium
Strategy Fund Annual Report
|
2.28.09
|
|
|
|
Nicholas-Applegate International &
Premium Strategy Fund
Report of Independent Registered
Public Accounting Firm
|
|
|
To the Shareholders and Board of
Trustees of
Nicholas Applegate International & Premium Strategy Fund
In our opinion, the accompanying
statement of assets and liabilities, including the schedule of investments, and
the related statements of operations and of changes in net assets and the
financial highlights present fairly, in all material respects, the financial
position of Nicholas Applegate International & Premium Strategy Fund (the
“Fund”) at February 28, 2009, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended 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 Fund’s
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 a
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, 2009 by correspondence with the custodian, brokers
and agent banks, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
April 24, 2009
|
2.28.09
|
Nicholas-Applegate
International & Premium Strategy Fund Annual Report
21
|
|
|
|
Nicholas-Applegate International &
Premium Strategy Fund
|
T
ax Information
|
|
|
(unaudited)
|
|
|
Subchapter M of the Internal Revenue
Code of 1986, as amended, requires the Fund to advise shareholders within 60
days of the Fund’s tax year ended February 28, 2009 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, 2009 were as
follows:
|
|
|
|
|
|
|
Dividends from ordinary income
|
|
|
$1.10429
|
|
|
Distributions from net long-term capital gains
|
|
|
$0.96821
|
|
Pursuant to the Jobs and Growth Tax
Relief Reconciliation Act of 2003, the Fund designates qualified dividend
income of 40.18%, or the maximum amount allowable.
The percentage of ordinary dividends
paid by the Fund during the period ended February 28, 2009 which qualified for
the Dividends Received Deduction available to corporate shareholders was 0.10%.
Since the Fund’s tax year is not the
calendar year, another notification will be sent with respect to calendar year
2009. In January 2010, shareholders will be advised on IRS Form 1099-DIV as to
the federal tax status of the dividends and distributions received during
calendar year 2009. The amount that will be reported will be the amount to use
on your 2009 federal income tax return and may differ from the amount which
must be reported in connection with the Fund’s tax year ended February 28,
2010. Shareholders are advised to consult their tax advisers as to the federal,
state and local tax status of the dividend income received from the Fund.
Foreign Tax Credit:
The Fund has elected to pass-through
the credit for the taxed paid to foreign countries. The gross foreign income
dividend and foreign tax per share paid during the fiscal year ended February
28, 2009 is $0.74506 and $0.04174, respectively.
Shareholders are advised to consult
their tax advisor to determine how this information may apply to their
particular tax situation.
22
Nicholas-Applegate International & Premium
Strategy Fund Annual Report
|
2.28.09
|
|
|
|
|
Nicholas-Applegate International &
Premium Strategy Fund
|
|
|
Mat
ters Relating to the Trustees’ Consideration of the Change in
Portfolio
|
|
|
Management
Arrangements and the Approval of the Fund’s Amended &
|
|
|
Restated Portfolio Management Agreement
|
|
The 1940 Act requires that both the
full Board of Trustees and a majority of the non-interested (“Independent”)
Trustees, voting separately, approve the Fund’s Portfolio Management Agreement
between the Investment Manager and the Sub-Adviser. The Board met in person on
September 15, 2008 (the “contract review meeting”) for the specific purpose of
considering whether to approve the Fund’s Amended & Restated Portfolio
Management Agreement between AGIFM and NACM. The Independent Trustees were
assisted in their evaluation of the Portfolio Management Agreement 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. In connection with their deliberations regarding the approval of the
Portfolio Management Agreement, the Board, 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. 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 Portfolio Management Agreement should
be approved for an initial two-year term, subject to shareholder approval.
The Board’s decision to restructure
the Fund’s sub-advisory arrangements and designate NACM as the Fund’s sole
sub-adviser to manage the Fund’s entire portfolio (including implementation of
the Fund’s revised option strategy, which focuses primarily on writing call options
on individual securities held in the Fund’s international equity portfolio (the
“Revised Option Strategy”)) pursuant to the Portfolio Management Agreement
followed numerous previous discussions about the Fund and its two prior
sub-advisers, NACM and Oppenheimer Capital LLC (formerly PEA Capital LLC)
(“OpCap”). At the contract review meeting, the Board conducted further
discussions with management regarding the possibility of reassigning
responsibility for the implementation of the Fund’s option strategy from OpCap
to NACM and allowing NACM to implement the Revised Option Strategy going
forward. In evaluating this proposal, the Board considered that NACM
sub-advises other funds that are overseen by the Board and managed by AGIFM
(the “Other NACM Closed-End Funds”), including a fund that utilizes a strategy
substantially similar to the Revised Option Strategy, and that the Board had
regularly reviewed the services provided by NACM to those funds. At previous
Board meetings, including a meeting on June 10, 2008 and June 11, 2008, AGIFM
and NACM provided the Board with materials regarding services provided by NACM
and the performance of the Other NACM Closed-End Funds, as well as information
about other similar funds and accounts managed by NACM. The Board took into
account NACM’s strong reputation. The Board also considered differences in the
investment management approach of NACM as compared to OpCap and the changes to
the Fund’s index option strategy that would result from the Revised Option
Strategy. The Board placed considerable emphasis on NACM’s performance record
in sub-advising the Other NACM Closed-End Funds.
In connection with the approval of
the Portfolio Management Agreement, the Board relied upon materials previously
provided by AGIFM and NACM which included, among other items: (i) information
provided by Lipper Inc. (“Lipper”) on the investment performance of a group of
funds with substantially similar investment classifications/objectives as the
Fund identified by Lipper and the performance of applicable benchmark indices,
(ii) information on 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 NACM, (iv) an
estimate of the profitability to NACM from its relationship with the Fund under
the Portfolio Management Agreement, (v) descriptions of various functions
performed and to be performed by NACM for the Fund, such as portfolio
management, compliance monitoring and portfolio trading practices, and (vi)
information regarding the overall organization of NACM, including information
regarding portfolio managers and other personnel providing and to provide
investment management services to the Fund.
During the contract review meeting
and the Board’s annual review of sub-advisory arrangements for the Fund and the
Other NACM Closed-End Funds, the Board examined NACM’s abilities to provide
high quality investment management and other services to the Fund. The Board
considered NACM’s investment philosophy and research and decision-making
processes; the experience of key advisory personnel at NACM who would be
responsible for portfolio management of the Fund in the future; the ability of
NACM to attract and retain capable personnel; the capability and integrity of
the senior management and staff at NACM; and the level of skill required to
manage the Fund. In addition, the Board reviewed the quality of NACM’s services
with respect to regulatory compliance and compliance with the investment
policies of the Fund; and conditions that might affect NACM’s ability to
provide high quality services to the Fund in the future under the Portfolio
Management Agreement, including NACM’s business reputation, financial condition
and operational stability. Based on the foregoing, the Board concluded that
NACM’s investment process, research capabilities and philosophy were well
suited to the Fund given the proposed change to its options strategy, and that
NACM would be able to meet any reasonably foreseeable obligations under the
Portfolio Management Agreement.
|
2.28.09
|
Nicholas-Applegate
International & Premium Strategy Fund Annual Report
23
|
|
|
|
Nicholas-Applegate
International &
Premium Strategy Fund
|
|
|
Matters Relating to the Trustees’ Consideration
of the Change in Portfolio
|
|
|
Management Arrangements and
the Approval of the Fund’s Amended &
|
|
|
Restated
Portfolio Management Agreement
(continued)
|
|
In reviewing the information provided
by Lipper on the investment performance of the Fund and of a group of funds
with substantially similar investment classifications/objectives as the Fund
identified by Lipper, the Board noted that the Fund’s performance ranked in the
fifth quintile and thus underperformed the median for its peer group for the
one-year period ended March 31, 2008. The Board considered that the Fund did
not have three years of investment performance for the period ended March 31,
2008 to compare to its peer group’s returns.
In assessing the reasonableness of
the fee to be paid to NACM under the Portfolio Management Agreement, the Board
noted that the fee to be paid by AGIFM to NACM under the Portfolio Management
Agreement would be identical to the aggregate fee currently paid by AGIFM to
NACM and to OpCap under the Current Portfolio Management Agreement with respect
to the Fund, and that the management fee paid by the Fund to AGIFM would remain
unchanged. The Board noted that the fee to be paid to NACM under the Portfolio
Management Agreement is comparable to the fees paid to NACM to sub-advise Other
NACM Closed-End Funds (excluding any applicable fee waivers). The Board also
noted that the management fees for the Fund were generally higher than the fees
paid by similar open-end funds advised by AGIFM and NACM, but was advised that
there are additional portfolio management challenges in managing closed-end
funds such as the Fund, such as meeting a regular dividend. AGIFM and NACM do
not manage separate accounts with a similar investment strategy to the Fund;
therefore, the Board could not compare the fees charged by AGIFM or NACM to
comparable separate accounts.
Based on the profitability analysis
provided by AGIFM, the Board also considered the estimate of the profitability
of AGIFM and NACM from their relationships with the Fund and determined that
such profitability was not excessive in light of the nature, scope and quality
of services provided to the Fund.
The Board took into account that, as
a closed-end investment company, the Fund does not currently intend to raise additional
assets, so the assets of the Fund will grow (if at all) only through the
investment performance of the Fund. Therefore, the Board did not consider
potential economies of scale as a principal factor in assessing the fee rates
payable under the Portfolio Management Agreement.
Additionally, the Board considered
so-called “fall-out benefits” to NACM, such as reputational value derived from
serving as sub-adviser to the Fund.
After reviewing these and other
related factors, the Board concluded, within the context of their overall
conclusions regarding the Portfolio Management Agreement, that the fee payable
under the Portfolio Management Agreement represents reasonable compensation in
light of the nature and quality of the services to be provided by NACM on
behalf of the Fund and that the approval of the Portfolio Management Agreement
would be consistent with the interests of the Fund and its shareholders. The
Board’s conclusions as to the approval of the Portfolio Management Agreement
were based on a comprehensive consideration of all information provided to the
Board and not the result of any single factor. Some of the factors that figured
particularly in the Board’s deliberations are described above, although
individual Trustees may have evaluated the information presented differently
from one another, giving different weights to various factors. Based on its
evaluation, the Board, including a majority of the Independent Trustees,
unanimously voted to approve the Portfolio Management Agreement and to submit
the Portfolio Management Agreement for shareholder approval.
24
Nicholas-Applegate International
& Premium Strategy Fund Annual Report
|
2.28.09
|
|
|
|
|
Nicholas-Applegate International &
Premium Strategy Fund
|
Shareholder
|
|
|
Meetings
|
|
|
Results
and
|
|
|
Portfolio
|
|
|
Management
|
|
|
Change
(unaudited)
|
|
|
|
|
|
|
|
The Fund held its annual meeting of shareholders on July
23, 2008. Shareholders voted to re-elect Robert E. Connor and John C. Maney
and to elect Diana L. Taylor as Trustees, as indicated below:
|
|
|
|
|
|
|
|
|
|
|
Affirmative
|
|
Withheld
Authority
|
|
|
|
|
|
|
|
|
|
Re-election of Robert E. Connor Class III – to serve until
2011
|
|
8,029,620
|
|
122,256
|
|
|
Re-election of John C. Maney Class III – to serve until
2011
|
|
8,037,732
|
|
114,144
|
|
|
Election of Diana L. Taylor Class II – to serve until 2010
|
|
8,037,163
|
|
144,713
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Messrs. Paul Belica, Hans W. Kertess, William B. Ogden,
IV, and R. Peter Sullivan III continue to serve as Trustees of the Fund.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At a special meeting of shareholders held on November 12,
2008, shareholders approved the change of the Fund’s Sub-Adviser responsible
for the option strategy from Oppenheimer Capital LLC to Nicholas-Applegate
Capital Management LLC, as indicated below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Affirmative
|
|
Against
|
|
Withheld
Authority
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,471,343
|
|
|
124,566
|
|
|
159,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Micheal Yee is responsible for the day-to-day
portfolio management of the option strategy of the portfolio. Mr. Yee is a
Senior Vice President and Portfolio Manager at NACM. He joined NACM in 1995
and has been a portfolio manager since 1998.
|
|
2.28.09
|
Nicholas-Applegate International & Premium Strategy Fund Annual
Report
25
|
|
|
Nicholas-Applegate International &
Premium Strategy Fund
|
|
Privacy
Policy/Proxy Voting Policies & Procedures
(unaudited)
|
|
|
|
|
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. To ensure clients’
privacy 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 and certain service providers to the Fund, such as
the Fund’s investment adviser, 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
As a matter of policy, 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 or as
necessary for third parties to perform their agreements with respect to the
Fund. 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. In
most cases you will be clients of the third party, but 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, the fund may disclose information about
a shareholder’s accounts to a non-affiliated third party with the consent or
upon the request of the shareholder.
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 sponsored by us or our
affiliates, 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.
Procedures to Safeguard Private Information
The Fund takes seriously the
obligation to safeguard your non-public personal information. In addition to
this policy, the Fund have also implemented procedures that are designed to
restrict access to a shareholder’s non-public personal information only to
internal personnel who need to know that information in order to provide
products or services to such shareholders. In order to guard your non-public
personal information, physical, electronic and procedural safeguards are in
place.
|
|
|
|
|
Proxy Voting
Policies & Procedures:
|
|
|
|
A description of the policies and procedures that the Fund
has 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 most recent twelve month period ended June 30 is
available (i) without charge, upon request, by calling the Fund’s shareholder
servicing agent at (800) 331-1710; (ii) on the Fund’s website at
www.allianzinvestors.com/closedendfunds; and (iii) on the Securities and
Exchange Commission’s website at www.sec.gov.
|
26
Nicholas-Applegate International & Premium Strategy Fund Annual
Report
|
2.28.09
|
|
|
|
Nicholas-Applegate International &
Premium Strategy Fund
|
|
Dividend
Reinvestment Plan
(unaudited)
|
|
|
|
|
Dividend Reinvestment Plan
Pursuant to the Fund’s Dividend
Reinvestment Plan (the “Plan”), all Shareholders whose shares are registered in
their own names will have all dividends, including any capital gain dividends,
reinvested automatically in additional Shares by PNC Global Investment
Servicing, as agent for the 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 Shares for others who are
the beneficial owners, the Plan Agent will administer the Plan on the basis of
the number of 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 PNC Global
Investment Servicing, as the Fund’s dividend disbursement agent.
Unless you elect (or your broker or
nominee elects) not to participate in the Plan, the number of Shares you will
receive will be determined as follows:
|
|
|
|
|
|
(1)
|
If on the payment date the net asset value of the Shares
is equal to or less than the market price per Share plus estimated brokerage
commissions that would be incurred upon the purchase of Shares on the open
market, the Fund will issue new shares at the greater of (i) the net asset
value per Share on the payment date or (ii) 95% of the market price per Share
on the payment date; or
|
|
|
|
|
|
|
(2)
|
If on the payment date the net asset value of the Shares
is greater than the market price per Share plus estimated brokerage
commissions that would be incurred upon the purchase of Shares on the open
market, the Plan Agent will receive the dividend or distribution in cash and
will purchase Shares in the open market, on the NYSE or elsewhere, for the
participants’ accounts. It is possible that the market price for the 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 Shares issued by the
Fund. The Plan Agent will use all dividends and distributions received in
cash to purchase 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 Shares with written instructions
detailing the procedures for electing not to participate in the Plan and to
instead receive distributions in cash. Shares in your account will be held by
the Plan Agent in non-certificated form. Any proxy you receive will include all
Shares you have received under the Plan.
There is no brokerage charge for
reinvestment of your dividends or distributions in 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 Fund 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 Fund reserves 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 Fund’s shareholder
servicing agent, PNC Global Investment Servicing, P.O. Box 43027, Providence,
RI 02940-3027, telephone number (800) 331-1710.
|
2.28.09
|
Nicholas-Applegate International & Premium Strategy Fund Annual
Report
27
|
|
|
Nicholas-Applegate International &
Premium Strategy Fund
|
|
Board
of Trustees
(unaudited)
|
|
|
|
|
|
|
|
|
|
Name, Date of
Birth, Position(s) Held with Fund,
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
|
|
|
|
|
|
Hans W. Kertess
|
|
President, H. Kertess & Co.,
a financial advisory company; Formerly, Managing
|
|
Date of Birth: 7/12/39
|
|
Director, Royal Bank of Canada
Capital Markets.
|
|
Chairman of the Board of Trustees since:
2007
|
|
|
|
Trustee since: 2005
|
|
|
|
Term of office: Expected to stand for
re-election
|
|
|
|
at 2009 annual meeting of shareholders.
|
|
|
|
Trustee/Director of 48 Funds in Fund
Complex;
|
|
|
|
Trustee/Director of no funds outside of
Fund Complex
|
|
|
|
|
|
|
|
Paul Belica
|
|
Retired. Formerly Director,
Student Loan Finance Corp., Education Loans, Inc., Goal
|
|
Date of Birth: 9/27/21
|
|
Funding, Inc., Goal Funding II,
Inc. and Surety Loan Fund, Inc.; formerly, Manager of
|
|
Trustee since: 2005
|
|
Stratigos Fund LLC, Whistler Fund
LLC, Xanthus Fund LLC & Wynstone Fund LLC.
|
|
Term of office: Expected to stand for
re-election
|
|
|
|
at 2009 annual meeting of shareholders.
|
|
|
|
Trustee/Director of 48 funds in Fund
Complex
|
|
|
|
Trustee/Director of no funds outside of
Fund Complex
|
|
|
|
|
|
|
|
Robert E. Connor
|
|
Retired; Formerly, Senior Vice
President, Corporate Office, Smith Barney Inc.
|
|
Date of Birth: 9/17/34
|
|
|
|
Trustee since: 2005
|
|
|
|
Term of office: Expected to stand for
re-election
|
|
|
|
at 2011 annual meeting of shareholders.
|
|
|
|
Trustee/Director of 48 funds in Fund
Complex
|
|
|
|
Trustee/Director of no funds outside of
Fund Complex
|
|
|
|
|
|
|
|
William B. Ogden, IV
|
|
Asset Management Industry
Consultant; Formerly, Managing Director, Investment
|
|
Date of Birth: 1/11/45
|
|
Banking Division of Citigroup
Global Markets Inc.
|
|
Trustee since: 2006
|
|
|
|
Term of office: Expected to stand for
election
|
|
|
|
at 2009 annual meeting of shareholders.
|
|
|
|
Trustee/Director of 48 Funds in Fund
Complex;
|
|
|
|
Trustee/Director of no funds outside of
Fund Complex
|
|
|
|
|
|
|
|
R. Peter Sullivan III
|
|
Retired. Formerly, Managing
Partner, Bear Wagner Specialists LLC, specialist firm on
|
|
Date of Birth: 9/4/41
|
|
the New York Stock Exchange.
|
|
Trustee since: 2006
|
|
|
|
Term of office: Expected to stand for
re-election
|
|
|
|
at 2010 annual meeting of shareholders.
|
|
|
|
Trustee/Director of 48 funds in Fund
Complex
|
|
|
|
Trustee/Director of no funds outside of
Fund Complex
|
|
|
|
|
|
|
|
Diana L. Taylor
|
|
Managing Director, Wolfensohn
& Co., 2007-present; Superintendent of Banks,
|
|
Date of Birth: 2/16/55
|
|
State of New York, 2003-2007.
|
|
Trustee since: 2008
|
|
|
|
Term of office: Expected to stand for
re-election
|
|
|
|
at 2010 annual meeting of shareholders.
|
|
|
|
Trustee/Director of 44 Funds in Fund
Complex
|
|
|
|
Trustee/Director of Brookfield
Properties Corporation
|
|
|
|
of Sotheby’s
|
|
|
28
Nicholas-Applegate International & Premium Strategy Fund
Annual Report
|
2.28.09
|
|
|
|
Nicholas-Applegate
International & Premium Strategy Fund
|
|
Board
of Trustees
(unaudited) (continued)
|
|
|
|
|
|
|
|
|
|
Name, Date of
Birth, Position(s) Held with Fund,
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:
|
|
|
|
|
|
|
|
|
|
John C. Maney†
Date of Birth: 8/3/59
Trustee since: 2006
Term of office: Expected to stand for re-election
at 2009 annual meeting of shareholders.
Trustee/Director of 79 Funds in Fund Complex
Trustee/Director of No Funds outside the Fund Complex
|
|
Management Board of Allianz
Global Investors Fund Management LLC; Management Board and Managing Director
of Allianz Global Investors of America L.P. since January 2005 and Chief
Operating Officer of Allianz Global Investors of America L.P. since November
2006; Formerly, Executive Vice President and Chief Financial Officer of Apria
Healthcare Group, Inc.
|
|
|
|
|
†
|
Mr. Maney is an
“interested person” of the Fund due to his affiliation with Allianz Global
Investors of America L.P. In addition to Mr. Maney’s positions set forth in
the table above, he holds the following positions with affiliated persons:
Management Board, Managing Director and Chief Operating Officer of Allianz
Global Investors of America L.P., Allianz Global Investors of America LLC and
Allianz-Pac Life Partners LLC; Member - Board of Directors and Chief
Operating Officer of Allianz Global Investors of America Holdings Inc.,
Oppenheimer Group, Inc. and PFP Holdings, Inc.; Managing Director and Chief
Operating Officer of Allianz Global Investors NY Holdings LLC; Management
Board and Managing Director of Allianz Global Investors U.S. Holding LLC;
Managing Director and Chief Operating Officer of Allianz Hedge Fund Partners
Holding L.P.; Managing Director and Chief Operating Officer of Allianz Global
Investors U.S. Retail LLC; Member – Board of Directors and Managing Director
of Allianz Global Investors Advertising Agency Inc.; Compensation Committee
of NFJ Investment Group LLC.; Management Board of Allianz Global Investors
Fund Management LLC, Allianz Global Investors Management Partners LLC,
Nicholas-Applegate Holdings LLC and OpCap Advisors LLC; Member – Board of
Directors and Chief Operating Officer of PIMCO Global Advisors (Resources)
Limited; Executive Vice President of PIMCO Japan Ltd.; and Chief Operating
Officer of Allianz Global Investors U.S. Holding II LLC.
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Further information about certain of the Fund’s Trustees is available
in the Fund’s Statements of Additional Information, dated April 26, 2005, which
can be obtained upon request, without charge, by calling the Fund’s shareholder
servicing agent at (800) 331-1710.
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2.28.09
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Nicholas-Applegate International & Premium Strategy Fund Annual
Report
29
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Nicholas-Applegate
International & Premium Strategy Fund
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F
und Officers
(unaudited)
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Name, Date of
Birth, Position(s) Held with Fund.
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Principal
Occupation(s) During Past 5 Years:
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Brian S.
Shlissel
Date of Birth:
11/14/64
President & Chief Executive Officer since: 2005
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Executive Vice President,
Director of Fund Administration, Allianz Global Investors Fund Management
LLC; President and Chief Executive Officer of 35 funds in the Fund Complex;
Treasurer; Principal Financial and Accounting Officer of 46 funds in the Fund
Complex and The Korea Fund, Inc.
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Lawrence G.
Altadonna
Date of Birth:
3/10/66
Treasurer, Principal Financial and Accounting Officer
since: 2005
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Senior Vice President, Allianz
Global Investors Fund Management LLC; Treasurer, Principal Financial and
Accounting officer of 35 funds in the Fund Complex; Assistant Treasurer of 46
funds in the Fund Complex and The Korea Fund, Inc.
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Thomas J. Fuccillo
Date of Birth: 3/22/68
Vice President, Secretary & Chief Legal Officer
since: 2005
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Executive Vice President, Chief
Legal Officer and Secretary of Allianz Global Investors Fund Management LLC
and Allianz Global Investors Solutions LLC; Executive Vice President of
Allianz Global Investors of America L.P Vice President, Secretary and Chief
Legal Officer of 79 funds in the Fund Complex; Secretary and Chief Legal
Officer of The Korea Fund, Inc. Formerly, Vice President and Associate
General Counsel, Neuberger Berman, LLC, 1991-2004.
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Scott Whisten
Date of Birth: 3/13/71
Assistant Treasurer since: 2007
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Vice President, Allianz Global
Investors Fund Management LLC; Assistant Treasurer of 81 funds in the Fund
Complex. Formerly, Accounting Manager, Prudential Investments (2002-2005).
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Richard J.
Cochran
Date of Birth:
1/23/61
Assistant Treasurer since: 2008
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Vice President, Allianz Global
Investors Fund Management LLC; Assistant Treasurer of 81 funds in the Funds
Complex. Formerly, Tax Manager, Teacher Insurance Annuity Association/College
Retirement Equity Fund (2002-2008).
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Youse E. Guia
Date of Birth:
9/3/72
Chief Compliance Officer since: 2005
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Senior Vice President, Group
Compliance Manager, Allianz Global Investors of America L.P.; Chief
Compliance Officer of 81 funds in the Fund Complex and The Korea Fund, Inc.
Formerly, Vice President, Group Compliance Manager, Allianz Global Investors
of America L.P. (2002-2004). Audit Manager, PricewaterhouseCoopers LLP
(1996-2002).
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Kathleen A.
Chapman
Date of Birth:
11/11/54
Assistant Secretary since: 2006
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Assistant Secretary of 81 funds
in the Fund Complex; Manager IIG Advisory Law, Morgan Stanley (2004-2005);
The Prudential Insurance Company of America and Assistant Corporate Secretary
of affiliated American Skandia companies (1996-2004).
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Lagan Srivastava
Date of Birth:
9/20/77
Assistant Secretary since: 2006
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Assistant Secretary of 81 funds
in the Fund Complex and The Korea Fund, Inc.; formerly Research Assistant,
Dechert LLP (2004-2005); Research Assistant, Swidler Berlin Shereff Friedman
LLP (2002-2004).
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Officers hold office at the pleasure of the Board and until their
successors are appointed and qualified or until their earlier resignation or
removal.
30
Nicholas-Applegate International
& Premium Strategy Fund Annual Report
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2.28.09
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(This Page Intentionally Left Blank)
(This Page Intentionally Left Blank)
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Trustees and
Fund Officers
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Hans W. Kertess
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Brian S. Shlissel
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Trustee, Chairman of the Board of
Trustees
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President & Chief Executive
Officer
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Paul Belica
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Lawrence G. Altadonna
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Trustee
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Treasurer, Principal Financial &
Accounting Officer
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Robert E. Connor
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Thomas J. Fuccillo
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Trustee
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Vice President, Secretary & Chief
Legal Officer
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John C. Maney
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Scott Whisten
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Trustee
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Assistant Treasurer
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William B. Ogden, IV
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Richard J. Cochran
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Trustee
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Assistant Treasurer
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R. Peter Sullivan III
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Youse E. Guia
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Trustee
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Chief Compliance Officer
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Diana L. Taylor
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Kathleen A. Chapman
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Trustee
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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-Adviser
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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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Custodian &
Accounting Agent
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State Street Bank & Trust Co.
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225 Franklin Street
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Boston, MA 02110
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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 02110-2624
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This report, including the financial information herein, is transmitted
to the shareholders of Nicholas-Applegate International & Premium Strategy
Fund for their information. It is not a prospectus, circular or representation
intended for use in the purchase of shares of the Fund 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 Fund may
purchase shares of its common stock in the open market.
The Fund files its complete schedule of portfolio holdings with the
Securities and Exchange Commission (“SEC”) for the first and third quarters of
its fiscal year on Form N-Q. The Fund’s 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, DC. 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 Fund’s website at
www.allianzinvestors.com/closedendfunds.
On July 31, 2008, the Fund submitted a CEO annual certification to the
New York Stock Exchange (“NYSE”) on which the Fund’s 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 Fund’s 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 Fund’s disclosure controls and procedures
and internal control over financial reporting, as applicable.
Information on the Fund is available at
www.allianzinvestors.com/closedendfunds or by calling the Fund’s shareholder
servicing agent at (800) 331-1710.
ITEM 2. CODE OF ETHICS
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(a)
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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 code of ethics are included as an Exhibit 99.CODEETH hereto.
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(b)
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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.
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(c)
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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.
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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
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a)
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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
$
46,000 in 2008 and $50,000 in 2009.
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b)
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Audit-Related Fees. There were no audit-related fees billed for each of the last two fiscal years.
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c)
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Tax Fees. The aggregate fees billed in the Reporting Periods for professional services rendered by the Auditor for tax compliance,
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tax service and tax planning (“Tax
Services”) were $12,500 in 2008 and $13,125 in 2009 .
These services consisted of review or preparation of U.S. federal, state,
local and excise tax returns and calculation of excise tax distributions.
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d)
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All Other Fees. There were no other fees billed in the Reporting Periods for products and services provided by the Auditor to the Registrant.
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e)
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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 International & Premium Strategy Fund (the “Fund”)
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AUDIT OVERSIGHT COMMITTEE POLICY FOR PRE-APPROVAL OF SERVICES PROVIDED BY THE INDEPENDENT ACCOUNTANTS
The Fund’s Audit Oversight Committee (“Committee”) is charged with the oversight of the Fund’s 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 FUND
On an annual basis, the Fund’s Committee will review and pre-approve the scope of the audits of the Fund and proposed audit fees and permitted non-audit (including audit-related) services that may be performed by the
Fund’s 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 Fund will also require the separate written pre-approval of the
President of the Fund, 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
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 $250,000. 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 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:
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 $250,000.
Any such pre-approval shall be reported to the full Committee at its next regularly scheduled meeting.
PROSCRIBED SERVICES
The Fund’s 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 Fund (including affiliated sub-advisers to the Fund), provided, in each case, that the engagement relates
directly to the operations and financial reporting of the Fund (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 $250,000.
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:
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(1)
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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;
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(2)
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Such services were not recognized by the Fund at the time of the engagement for such services to be non-audit services; and
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(3)
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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.
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e)
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2. No services were approved pursuant
to the procedures contained in paragraph (C) (7) (i) (C) of Rule 2-01 of
Registration S-X.
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f)
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Not applicable
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g)
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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 2008 Reporting Period
was $487,892 and the 2009 Reporting Period was $348,185.
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h)
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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.
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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, Hans W. Kertess, R. Peter Sullivan III, William B. Ogden, IV and Diana L. Taylor.
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.
Nicholas-Applegate International & Premium Strategy Fund (NAI)
(the “Trust”)
PROXY VOTING POLICY
|
1.
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It is the policy of the Trust that proxies should be voted in the interest of its
shareholders, as determined by those who are in the best position to make this
determination. The Trust believes that the firms and/or persons purchasing and selling
securities for the Trust and analyzing the performance of the Trust’s securities are in
the best position and have the information necessary to vote proxies in the best
interests of the Trust and its 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 Trust,
on the other. Accordingly, the Trust’s policy shall be to delegate proxy voting
responsibility to those entities with portfolio management responsibility for the Trust.
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2.
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The Trust delegates the responsibility for voting proxies to Allianz Global Investors
Fund Management LLC (“AGIFM”), which will in turn delegate such responsibility to
the sub-adviser of the Trust. AGIFM’s Proxy Voting Policy Summary is attached as
Appendix A
hereto. A summary of the detailed proxy voting policy of the Trust’s
current sub-adviser is set forth in
Appendix B
attached hereto. Such summary may be
revised from time to time to reflect changes to the sub-adviser’s detailed proxy voting
policy.
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3.
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The party voting the proxies (i.e., the sub-adviser) shall vote such proxies in
accordance with such party’s proxy voting policies and, to the extent consistent with
such policies, may rely on information and/or recommendations supplied by others.
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4.
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AGIFM and the sub-adviser of the Trust with proxy voting authority shall deliver a
copy of its respective proxy voting policies and any material amendments thereto to
the applicable Board of the Trust promptly after the adoption or amendment of any
such policies.
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5.
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The party voting the proxy shall: (i) maintain such records and provide such voting
information as is required for the Trust’s regulatory filings including, without
limitation, Form N-PX and the required disclosure of policy called for by Item 18 of
Form N-2 and Item 7 of Form N-CSR; and (ii) shall provide such additional
information as may be requested, from time to time, by the Board or the Trust’s Chief
Compliance Officer.
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6.
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This Proxy Voting Policy Statement (including
Appendix B
), the Proxy Voting Policy
Summary of AGIFM and summary of the detailed proxy voting policy of the sub-
adviser of the Trust with proxy voting authority, shall be made available (i) without
charge, upon request, by calling 1-800-426-0107 and (ii) on the Trust’s website at
www.allianzinvestors.com. In addition, to the extent required by applicable law or
determined by the Trust’s Chief Compliance Officer or Board of Trustees, the Proxy
Voting Policy Summary of AGIFM and summary of the detailed proxy voting policy
of the Trust’s sub-adviser with proxy voting authority shall also be included in the
Trust’s Registration Statements or Form N-CSR filings.
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Appendix A
ALLIANZ GLOBAL INVESTORS FUND MANAGEMENT LLC (“AGIFM”)
|
1.
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It is the policy of AGIFM 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. AGIFM 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, AGIFM’s policy shall be to
delegate proxy voting responsibility to those entities with portfolio management
responsibility for the funds.
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2.
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AGIFM, for each fund which it acts as an investment adviser, delegates the
responsibility for voting proxies to the sub-adviser for the respective fund, subject to
the terms hereof.
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3.
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The party voting the proxies (e.g., the sub-adviser) shall vote such proxies in
accordance with such party’s proxy voting policies and, to the extent consistent with
such policies, may rely on information and/or recommendations supplied by others.
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4.
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AGIFM and each sub-adviser of a fund shall deliver a copy of its respective proxy
voting policies and any material amendments thereto to the board of the relevant fund
promptly after the adoption or amendment of any such policies.
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5.
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The party voting the proxy shall: (i) maintain such records and provide such voting
information as is required for such funds’ regulatory filings including, without
limitation, Form N-PX and the required disclosure of policy called for by Item 18 of
Form N-2 and Item 7 of Form N-CSR; and (ii) shall provide such additional
information as may be requested, from time to time, by such funds’ respective boards
or chief compliance officers.
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6.
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This Proxy Voting Policy Summary and summaries of the proxy voting policies for
each sub-adviser of a fund advised by AGIFM shall be available (i) without charge,
upon request, by calling 1-800-426-0107 and (ii) at www.allianzinvestors.com. In
addition, to the extent required by applicable law or determined by the relevant fund’s
board of directors/trustees or chief compliance officer, this Proxy Voting Policy
Summary and summaries of the detailed proxy voting policies of each sub-adviser and
each other entity with proxy voting authority for a fund advised by AGIFM shall also
be included in the Registration Statement or Form N-CSR filings for the relevant fund.
|
Appendix B
Nicholas-Applegate Capital Management LLC ("NACM")
Description of Proxy Voting Policy and Procedures
NACM votes proxies on behalf of its clients pursuant to its written Proxy Policy Guidelines and Procedures (the "Proxy Guidelines"), unless a client requests otherwise. The Proxy Guidelines are designed to honor NACM's fiduciary
duties to its clients and protect and enhance its clients' economic welfare and rights.
The Proxy Guidelines are established by a Proxy Committee consisting of executive, investment, sales, marketing, compliance and operations personnel. The Proxy Guidelines reflect NACM's normal voting positions on specific
corporate actions, including but not limited to those relating to social and corporate responsibility issues, stock option plans and other management compensation issues, changes to a portfolio company's capital structure and corporate governance.
For example, NACM generally votes for proposals to declassify boards and generally supports proposals that remove restrictions on shareholders' ability to call special meetings independently of management. Some issues will require a case-by-case
analysis.
The Proxy Guidelines largely follow the recommendations of Glass, Lewis & Co. LLC ("Glass Lewis"), an investment research and proxy advisory firm. The Proxy Guidelines may not apply to every situation and NACM may vote
differently than specified by the Proxy Guidelines and/or contrary to Glass Lewis' recommendation if NACM reasonably determines that to do so is in its clients' best interest. Any variance from the Proxy Guidelines is documented.
In the case of a potential conflict of interest, NACM's Proxy Committee will be responsible for reviewing the potential conflict and will have the final decision as to how the relevant proxy should be voted.
Under certain circumstances, NACM may in its reasonable discretion refrain from voting clients' proxies due to cost or other factors.
ITEM 8
(a)(1)
Nicholas-Applegate Capital Management LLC (“Nicholas-Applegate” or the
“Investment
Adviser”)
As of May 6, 2009, the following individuals constitute the team that has primary responsibility for the day-to-day implementation of the Nicholas-Applegate International & Premium Strategy
Fund (NAI):
Steven Tael, Ph.D., CFA
Vice President, Portfolio Manager, Systematic
Steven Tael has been a portfolio manager since March 2006. Mr. Tael joined Nicholas-Applegate in 2005 and is a member of the Global Systematic Large Cap Team. Previously, he worked at Mellon Capital Management in San Francisco,
where he was a research analyst in the area of investment research. His experience spans quantitative model building, model production and portfolio management. Prior to that, he was an Advisory Systems Engineer for Bank of America, where he
co-developed a global portfolio risk reporting system. He also was Director of Information Technologies at AffiniCorp USA. Mr. Tael has a Ph.D. in applied mathematics and statistics from State University of New York, Stony Brook, and a B.S. and M.A.
in mathematics from the University of California, Santa Barbara. He has thirteen years of relevant experience.
Kunal Ghosh
Senior Vice President, Portfolio Manager, Systematic
Kunal Ghosh has been a portfolio manager since July 2006. Mr. Ghosh joined the firm in 2006 and is a member of the Global Systematic Large Cap Team. Prior to joining the firm, Mr. Ghosh was a research associate and then portfolio
manager for Barclays Global Investors. His experience includes building and implementing models for portfolio management. Before that, he was a quantitative analyst for the Cayuga Hedge Fund. Mr. Ghosh earned his M.B.A. in finance from Cornell
University, his M.S. in material engineering from the University of British Columbia, and his B.Tech from Indian Institute of Technology. He has six years of relevant experience.
Michael E. Yee
Senior Vice President
Michael Yee has been a portfolio manager since November 2008 portfolio management, trading and research responsibilities for the Income and Growth Strategies team. He has been a member of the team
since 1999. Mr. Yee 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. Mr. Yee holds an M.B.A. from San Diego State University and a B.S. from the University of California at San Diego. He has fifteen years of investment industry experience.
(a)(2)
The following summarizes information regarding each of the accounts, excluding the Funds managed by portfolio managers as of February 28, 2009 including accounts managed by a team, committee, or other group that includes the
portfolio managers.
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Other RICs
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Other Accounts
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Other Pooled
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PM
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#
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AUM($million)
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#
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AUM($million)
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#
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AUM($million)
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Steven
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11
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$429.7
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47
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$719.5
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6
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$516.9
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Tael, PhD,
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CFA*
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Kunal
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11
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$429.7
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47
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$719.5
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6
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$519.9
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Ghosh*
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Michael E.
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8
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$2,288.5
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10
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$923.3
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6
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$613.8
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Yee**
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*Performance based fees for five accounts totaling $393 million
**Performance based fees for two accounts totaling $338.1 million
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 conflicts faced by investment professionals at most major financial firms.
The Investment Adviser has adopted compliance policies and procedures that 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 may raise potential conflicts of interest by creating an incentive to favor higher-fee accounts. These potential conflicts may include, among others:
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The most attractive investments could be allocated to higher-fee accounts or
performance fee accounts.
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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.
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The investment management team could focus their time and efforts primarily on
higher-fee accounts due to a personal stake in compensation.
When the Investment Adviser 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. 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.
The Investment Adviser considers many factors when allocating securities among accounts, including the
account’s investment style, applicable investment restrictions, availability of securities, available cash and other current holdings. The Investment Adviser attempts to allocate investment opportunities among accounts in a fair and equitable
manner. However, accounts are not assured of participating equally or at all in particular investment allocations due to such factors as noted above.
“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 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 has adopted compliance procedures that provide that all cross trades are to be made at an
independent current market price, as required by law.
Another potential conflict of interest may arise from 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 subject to suitability for the particular account involved. Thus, a particular security may not be bought or sold for certain accounts even though it was 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.
The Investment Adviser maintains trading policies designed to provide portfolio managers an opportunity to minimize the
effect that short sales in one portfolio may have on holdings in other portfolios.
A Portfolio Manager who is responsible for managing multiple accounts may devote unequal time and attention to the management of those 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 broker/dealers that are used to execute securities transactions for the Fund. In addition to executing trades, some brokers and dealers
provide the Investment Adviser 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. In order to be assured of continuing to receive services considered of value to its clients, the Investment Adviser has adopted a brokerage allocation
policy embodying the concepts of Section 28(e) of the Securities Exchange Act of 1934. The Investment Adviser allocates 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 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 Investment Adviser’s investment
personnel, including each Fund’s Portfolio Manager, are subject to restrictions on engaging in personal securities transactions pursuant to the Investment Adviser’s Codes of Ethics, which contain provisions and requirements designed to
identify and address conflicts of interest between personal investment activities and the interests of the Funds.
(a) (3)
Nicholas-Applegate believes that competitive compensation is essential to retaining top industry talent. With that in mind, the firm continually reevaluates its compensation policies against industry benchmarks. Its goal is to
offer portfolio managers and analysts compensation and benefits in the top quartile for comparable experience, as measured by industry benchmarks surveyed by McLagan and ECS (Watson Wyatt Data Services).
Nicholas-Applegate’s compensation policy features both short-term and long-term components. The firm offers competitive base salaries and bonuses, profit-sharing and generous retirement plans. Investment professionals’
annual compensation is directly affected by the performance of their portfolios, their performance as individuals and the success of the firm. Typically, an investment professional’s compensation is comprised of a base salary and a
bonus.
Investment professionals are awarded bonuses based primarily on product performance. A 360-degree qualitative review is also considered. As part of the 360-degree review, analysts and portfolio managers are reviewed by the
portfolio manager who is responsible for the team’s final investment decisions and other portfolio managers to whose portfolios they contribute. Portfolio managers responsible for final investment decisions
are reviewed by the Chief Investment Officer, who evaluates performance both quantitatively versus benchmarks and peer universes, as well as qualitatively.
Compensation and Account Performance
Compensation pools for investment teams are directly related to the size of the business and the performance of the products. Approximately half of the pool is based on one, three and five year performance relative to benchmarks and peers. The team pools are then subjectively allocated to team members based on
individual contributions to client accounts. We believe our compensation system clearly aligns the interests of clients with our people and keeps our compensation competitive with industry norms.
Long-Term Incentive Plan
A
Long-Term Incentive Plan provides rewards to certain key staff and executives
of Nicholas-Applegate and the other Allianz Global Investors companies to promote
long-term growth and profitability. The Plan provides awards that are based on
Nicholas-Applegate’s operating earnings growth. 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.
Equity Ownership
In September 2006, Allianz SE approved an equity ownership plan for key employees of Nicholas-Applegate. The plan was implemented as of January 31, 2007. Nicholas-Applegate believes this plan is important in retaining and
recruiting key investment professionals, as well as providing ongoing incentives for Nicholas-Applegate employees.
NACM
The following information is provided as of February 28, 2009.
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PM Ownership
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Steven Tael
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$1- $10, 000
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Kunal Ghosh
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$1 - $10,000
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Michael Yee
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None
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ITEM 9. PURCHASES 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)(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
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.
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(Registrant) Nicholas Applegate
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International & Premium Strategy Fund
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By:
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/s/ Brian S. Shlissel
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Brian S. Shlissel
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President and Chief Executive Officer
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Date: May 6, 2009
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By:
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/s/ Lawrence G. Altadonna
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Lawrence G. Altadonna
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Treasurer, Principal Financial &
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Accounting Officer
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Date: May 6, 2009
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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.
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By:
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/s/ Brian S. Shlissel
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Brian S. Shlissel
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President and Chief Executive Officer
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Date: May 6, 2009
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By:
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/s/ Lawrence G. Altadonna
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Lawrence G. Altadonna
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Treasurer, Principal Financial &
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Accounting Officer
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Date: May 6, 2009
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