rate securities, an increase) in market interest rates will adversely affect the income received from such securities and the NAV of the Funds’ shares.
The Funds are exposed to credit risk, which is the risk of losing money if the issuer or guarantor of a fixed income security is unable or unwilling, or is perceived (whether by market participants, rating agencies, pricing services or otherwise) as unable or unwilling, to make timely principal and/or interest payments, or to otherwise honor its obligations. Securities are subject to varying degrees of credit risk, which are often reflected in credit ratings.
The market values of equity securities, such as common and preferred stock and securities convertible into equity securities, may decline due to general market conditions which are not specifically related to a particular company, such as real or perceived adverse economic conditions, changes in the general outlook for corporate earnings, changes in interest or currency rates or adverse investor sentiment. They may also decline due to factors which affect a particular industry or industries, such as labor shortages or increased production costs and competitive conditions within an industry. Equity securities generally have greater market price volatility than fixed income securities.
The Funds are exposed to counterparty risk, or the risk that an institution or other entity with which the Funds have unsettled or open transactions will default. The potential loss to the Funds could exceed the value of the financial assets recorded in the Funds’ financial statements. Financial assets, which potentially expose the Funds to counterparty risk, consist principally of cash due from counterparties and investments. The Funds’ sub-adviser, Allianz Global Investors Capital LLC (“AGIC” or the “Sub-Adviser”), an affiliate of the Investment Manager, seeks to minimize the Funds’ counterparty risks by performing reviews of each counterparty and by minimizing concentration of counterparty risk by undertaking transactions with multiple customers and counterparties on recognized and reputable exchanges. Delivery of securities sold is only made once the Funds have received payment. Payment is made on the purchase once the securities have been delivered by the counterparty. The trade will fail if either party fails to meet its obligation.
The Funds held synthetic convertible securities with Lehman Brothers entities as counterparty at the time the relevant Lehman Brothers entity filed for protection or was placed in administration. The values of the relevant securities have been written down to their estimated recoverable values.
On April 8, 2011, the Funds sold these synthetic convertible securities. The sale of the General Mills, Inc. security resulted in a net asset value per common share increase of $0.03 and $0.04 for Convertible & Income and Convertible & Income II, respectively. The sale of Transocean, Inc. security resulted in a net asset value per common share increase of $0.02 for both Convertible & Income and Convertible & Income II.
The Investment Manager has retained the Sub-Adviser to manage the Funds’ investments. Subject to the supervision of the Investment Manager, the Sub-Adviser is responsible for making all of the Funds’ investment decisions. The Investment Manager, and not the Funds, pays a portion of the fees it receives as Investment Manager to the Sub-Adviser in return for its services.
Effective August 25, 2010, the Sub-Advisory Agreements between the Investment Manager and Nicholas-Applegate Capital Management LLC (“NACM”) relating to the Funds were novated from NACM to AGIC, the indirect parent of NACM. The novations coincided with a larger corporate reorganization transferring the advisory businesses of NACM and Oppenheimer Capital LLC (“OCC”) to AGIC. Since 2009, AGIC has assumed a number of non-advisory functions from both NACM and OCC, and the transaction in August 2010 marked the last step in the full integration of these businesses under a single name.
| |
AGIC Convertible & Income Funds | Notes to Financial Statements |
February 28, 2011 | |
| | |
4. Investment in Securities
For the year ended February 28, 2011, purchases and sales of investments, other than short-term securities were:
| | | | | | | |
| | Convertible
& Income | | Convertible
& Income II | |
| | | | | | |
Purchases | | $ | 521,013,704 | | $ | 408,271,973 | |
Sales | | �� | 531,444,940 | | | 413,974,907 | |
5. Income Tax Information
Convertible & Income:
For the years ended February 28, 2011 and February 28, 2010, dividends paid of $93,561,577 and $79,507,476, respectively, were comprised entirely of ordinary income.
At February 28, 2011, distributable earnings of $2,551,875 was comprised entirely of ordinary income.
For the year ended February 28, 2011, permanent “book-tax” differences were primarily attributable to the differing treatment of premium amortization, convertible preferred securities and consent payments. These adjustments were to decrease dividends in excess of net investment income and increase accumulated net realized loss by $1,013,071.
At February 28, 2011, Convertible & Income had a capital loss carryforward of $390,325,891, (of which $1,183,341 will expire in 2016, $131,342,119 will expire in 2017 and $257,800,431 will expire in 2018) available as a reduction, to the extent provided in the regulations, of any future net realized gains. To the extent that these losses are used to offset future realized capital gains, such gains will not be distributed.
During the year ended February 28, 2011, Convertible & Income utilized $11,608,814 of available capital loss carryforwards.
The cost basis of investments for federal income tax purposes was $1,006,845,880. Aggregate gross unrealized appreciation for securities in which there was an excess value over tax cost was $126,424,694; aggregate gross unrealized depreciation for securities in which there was an excess of tax cost over value was $59,396,576; net unrealized appreciation for federal income tax purposes was $67,028,118. The difference between book and tax basis unrealized was attributable to wash sales and the differing treatment of bond premium amortization and convertible preferred securities.
Convertible & Income II:
For the years ended February 28, 2011 and February 28, 2010, dividends paid of $71,852,345 and $69,200,358, respectively, were comprised entirely of ordinary income.
At February 28, 2011, distributable earnings of $1,389,931 was comprised entirely of ordinary income.
For the year ended February 28, 2011, permanent “book-tax” differences were primarily attributable to the differing treatment of premium amortization, convertible preferred securities and consent payments. These adjustments were to decrease dividends in excess of net investment income and increase accumulated net realized loss by $1,173,234.
At February 28, 2011, Convertible & Income II had a capital loss carryforward of $362,287,816, (of which $3,821,101 will expire in 2016, $130,798,418 will expire in 2017 and $227,668,297 will expire in 2018) available as a reduction, to the extent provided in the regulations, of any future net realized gains. To the extent that these losses are used to offset future realized capital gains, such gains will not be distributed.
During the year ended February 28, 2011, Convertible & Income II utilized $9,268,742 of available capital loss carryforwards.
The cost basis of investments for federal income tax purposes was $770,990,205. Aggregate gross unrealized appreciation for securities in which there was an excess value over tax cost was $97,550,913; aggregate gross unrealized depreciation for securities in which there was an excess of tax cost over value was $50,399,126; net unrealized appreciation for federal income tax purposes was $47,151,787. The difference between book and tax basis unrealized was attributable to wash sales and the differing treatment of bond premium amortization and convertible preferred securities
6. Auction-Rate Preferred Shares
Convertible & Income has 2,856 shares of Preferred Shares Series A, 2,856 shares of Preferred Shares Series B, 2,856 shares of Preferred Shares Series C, 2,856 shares of Preferred Shares Series D and 2,856 shares of Preferred Shares Series E outstanding, each with a liquidation preference value of $25,000 per share plus any accumulated, unpaid dividends.
| |
| AGIC Convertible & Income Fund |
2.28.11 | | AGIC Convertible & Income Fund II Annual Report 31 |
| |
AGIC Convertible & Income Funds | Notes to Financial Statements |
February 28, 2011 | |
| | |
6. Auction-Rate Preferred Shares (continued)
Convertible & Income II has 2,192 shares of Preferred Shares Series A, 2,192 shares of Preferred Shares Series B, 2,192 shares of Preferred Shares Series C, 2,192 shares of Preferred Shares Series D and 2,192 shares of Preferred Shares Series E outstanding, each with a liquidation preference value of $25,000 per share plus any accumulated, unpaid dividends.
Dividends are accumulated daily at an annual rate (typically re-set every seven days) through auction procedures. Distributions of net realized capital gains, if any, are paid annually.
For the year end February 28, 2011, the annualized dividend rates for the Funds ranged from:
| | | | | | | |
| | High | | Low | | 2/28/11 | |
| | | | | | | | |
Series A | | 0.542% | | 0.150% | | 0.225% | |
Series B | | 0.422% | | 0.105% | | 0.240% | |
Series C | | 0.452% | | 0.120% | | 0.225% | |
Series D | | 0.527% | | 0.135% | | 0.225% | |
Series E | | 0.452% | | 0.135% | | 0.225% | |
| | | | | | | | |
The Funds are subject to certain limitations and restrictions while Preferred Shares are outstanding. Failure to comply with these limitations and restrictions could preclude the Funds from declaring or paying any dividends or distributions to common shareholders or repurchasing common shares and/or could trigger the mandatory redemption of Preferred Shares at their liquidation value plus any accumulated, unpaid dividends.
Preferred shareholders, who are entitled to one vote per share, generally vote together with the common shareholders but vote separately as a class to elect two Trustees and on any matters affecting the rights of the Preferred Shares.
Since mid-February 2008, holders of auction-rate preferred shares (“ARPS”) issued by the Funds have been directly impacted by an unprecedented lack of liquidity, which has similarly affected ARPS holders in many of the nation’s closed-end funds. Since then, regularly scheduled auctions for ARPS issued by the Funds have consistently “failed” because of insufficient demand (bids to buy shares) to meet the supply (shares offered for sale) at each auction. In a failed auction, ARPS holders cannot sell all, and may not be able to sell any, of their shares tendered for sale. While repeated auction failures have affected the liquidity for ARPS, they do not constitute a default or automatically alter the credit quality of the ARPS, and ARPS holders have continued to receive dividends at the defined “maximum rate”, equal to the 7-day “AA” Composite Commercial Paper Rate multiplied by 150% (which is a function of short-term interest rates and typically higher than the rate that would have otherwise been set through a successful auction). If the Funds’ ARPS auctions continue to fail and the “maximum rate” payable on the ARPS rises as a result of changes in short-term interest rates, returns for the Funds’ common shareholders could be adversely affected.
See Note 7 – Legal Proceedings below for a discussion of shareholder demand letters received by the Funds and certain other closed end funds managed by the Investment Manager.
7. 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 (“SEC”) 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 Funds.
Since February 2004, the Investment Manager and certain of its affiliates and their employees have been named as defendants in a number of pending lawsuits concerning “market timing,” which allege the same or similar conduct underlying the regulatory settlements discussed above. The market timing lawsuits have been consolidated in a multidistrict litigation proceeding in the U.S. District Court for the District of Maryland (the “MDL Court”). After a number of claims in the lawsuits were dismissed by the MDL Court, the parties entered into a stipulation of settlement, which was publicly filed with the MDL Court in April 2010, resolving all remaining claims, but the settlement remains subject to the approval of the MDL Court.
| |
| AGIC Convertible & Income Fund |
32 | AGIC Convertible & Income Fund II Annual Report | 2.28.11 |
| |
AGIC Convertible & Income Funds | Notes to Financial Statements |
February 28, 2011 | |
| | |
7. Legal Proceedings (continued)
Beginning in May 2010, several closed-end funds managed by the Investment Manager, including the Funds, each received a demand letter from a law firm on behalf of certain common shareholders. The demand letters alleged that the Investment Manager and certain officers and trustees of the funds breached their fiduciary duties in connection with the redemption at par of a portion of the funds’ ARPS and demanded that the boards of trustees take certain action to remedy those alleged breaches. After conducting an investigation, in August 2010 the independent trustees of the Funds rejected the demands made in the demand letters.
The Investment Manager and the Sub-Adviser believe that these matters are not likely to have a material adverse effect on the Funds or on their ability to perform their respective investment advisory activities relating to the Funds.
8. Subsequent Events
On March 1, 2011 the following monthly dividends were declared to common shareholders, payable April 1, 2011 to shareholders of record on March 11, 2011:
| |
Convertible & Income | $0.09 per common share |
Convertible & Income II | $0.085 per common share |
On April 1, 2011 the following monthly dividends were declared to common shareholders, payable May 2, 2011 to shareholders of record on April 11, 2011:
| |
Convertible & Income | $0.09 per common share |
Convertible & Income II | $0.085 per common share |
| |
| AGIC Convertible & Income Fund |
2.28.11 | | AGIC Convertible & Income Fund II Annual Report 33 |
|
AGIC Convertible & Income Fund Financial Highlights |
For a common share outstanding throughout each year: |
| | | | | | | | | | | | | | | | | | | | |
| | Year ended | |
| | February 28,
2011 | | February 28,
2010 | | February 28,
2009 | | February 29,
2008 | | February 28,
2007 |
Net asset value, beginning of year | | | $8.80 | | | | $4.80 | | | | $12.52 | | | | $14.84 | | | | $14.69 | |
Investment Operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income | | | 1.20 | | | | 1.07 | | | | 1.56 | | | | 1.62 | | | | 1.66 | |
Net realized and change in unrealized gain (loss) on investments and interest rate caps | | | 1.02 | | | | 4.02 | | | | (7.75 | ) | | | (2.05 | ) | | | 0.55 | |
Total from investment operations | | | 2.22 | | | | 5.09 | | | | (6.19 | ) | | | (0.43 | ) | | | 2.21 | |
Dividends and Distributions on Preferred Shares from: | | | | | | | | | | | | | | | | | | | | |
Net investment income | | | (0.01 | ) | | | (0.01 | ) | | | (0.17 | ) | | | (0.39 | ) | | | (0.34 | ) |
Net realized gain | | | — | | | | — | | | | — | | | | — | | | | (0.03 | ) |
Total dividends and distributions on preferred shares | | | (0.01 | ) | | | (0.01 | ) | | | (0.17 | ) | | | (0.39 | ) | | | (0.37 | ) |
Net increase (decrease) in net assets applicable to common shareholders resulting from investment operations | | | 2.21 | | | | 5.08 | | | | (6.36 | ) | | | (0.82 | ) | | | 1.84 | |
Dividends and Distributions to Common Shareholders from: | | | | | | | | | | | | | | | | | | | | |
Net investment income | | | (1.25 | ) | | | (1.08 | ) | | | (1.36 | ) | | | (1.50 | ) | | | (1.50 | ) |
Net realized gains | | | — | | | | — | | | | — | | | | — | | | | (0.19 | ) |
Total dividends and distributions to common shareholders | | | (1.25 | ) | | | (1.08 | ) | | | (1.36 | ) | | | (1.50 | ) | | | (1.69 | ) |
Net asset value, end of year | | | $9.76 | | | | $8.80 | | | | $4.80 | | | | $12.52 | | | | $14.84 | |
Market price, end of year | | | $11.00 | | | | $9.39 | | | | $4.05 | | | | $12.50 | | | | $16.08 | |
Total Investment Return (1) | | | 33.53 | % | | | 166.37 | % | | | (61.55 | )% | | | (13.63 | )% | | | 14.60 | % |
RATIOS/SUPPLEMENTAL DATA: | | | | | | | | | | | | | | | | | | | | |
Net assets, applicable to common shareholder, end of year (000s) | | | $727,229 | | | | $644,408 | | | | $348,544 | | | | $895,043 | | | | $1,050,149 | |
Ratio of expenses to average net assets (2) | | | 1.27 | % | | | 1.39 | % | | | 1.56 | %(3) | | | 1.26 | % | | | 1.27 | % |
Ratio of net investment income to average net assets (2) | | | 13.25 | % | | | 14.21 | % | | | 16.87 | % | | | 11.26 | % | | | 11.37 | % |
Preferred shares asset coverage per share | | | $75,925 | | | | $70,125 | | | | $49,406 | | | | $67,626 | | | | $74,981 | |
Portfolio turnover | | | 52 | % | | | 58 | % | | | 62 | % | | | 33 | % | | | 67 | % |
| |
(1) | Total investment return is calculated assuming a purchase of a common share at the market price on the first day and a sale of a common share at the market price on the last day of each year reported. Dividends and distributions, if any, 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 in connection with the purchase or sale of Fund shares. |
(2) | Calculated on the basis of income and expenses applicable to both common shares and preferred shares relative to the average net assets of common shareholders. |
(3) | Ratio of expenses to average net assets of common shareholders, excluding excise tax expense was 1.53% for the year ended February 28, 2009. |
| |
| AGIC Convertible & Income Fund |
34 | AGIC Convertible & Income Fund II Annual Report | 2.28.11 | See accompanying Notes to Financial Statements |
|
AGIC Convertible & Income Fund II Financial Highlights |
For a common share outstanding throughout each year: |
| | | | | | | | | | | | | | | | | | | | |
| | Year ended | |
| | February 28,
2011 | | February 28,
2010 | | February 28,
2009 | | February 29,
2008 | | February 28,
2007 |
Net asset value, beginning of year | | | $8.02 | | | | $4.39 | | | | $12.38 | | | | $14.91 | | | | $14.70 | |
Investment Operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income | | | 1.09 | | | | 0.98 | | | | 1.55 | | | | 1.70 | | | | 1.69 | |
Net realized and change in unrealized gain (loss) on investments and interest rate caps | | | 0.95 | | | | 3.80 | | | | (8.05 | ) | | | (2.17 | ) | | | 0.61 | |
Total from investment operations | | | 2.04 | | | | 4.78 | | | | (6.50 | ) | | | (0.47 | ) | | | 2.30 | |
Dividends and Distributions on Preferred Shares from: | | | | | | | | | | | | | | | | | | | | |
Net investment income | | | (0.01 | ) | | | (0.01 | ) | | | (0.20 | ) | | | (0.45 | ) | | | (0.38 | ) |
Net realized gain | | | — | | | | — | | | | — | | | | — | | | | (0.04 | ) |
Total dividends and distributions on preferred shares | | | (0.01 | ) | | | (0.01 | ) | | | (0.20 | ) | | | (0.45 | ) | | | (0.42 | ) |
Net increase (decrease) in net assets applicable to common shareholders resulting from investment operations | | | 2.03 | | | | 4.77 | | | | (6.70 | ) | | | (0.92 | ) | | | 1.88 | |
Dividends and Distributions to Common Shareholders from: | | | | | | | | | | | | | | | | | | | | |
Net investment income | | | (1.16 | ) | | | (1.14 | ) | | | (1.29 | ) | | | (1.61 | ) | | | (1.42 | ) |
Net realized gains | | | — | | | | — | | | | — | | | | — | | | | (0.25 | ) |
Total dividends and distributions to common shareholders | | | (1.16 | ) | | | (1.14 | ) | | | (1.29 | ) | | | (1.61 | ) | | | (1.67 | ) |
Net asset value, end of year | | | $8.89 | | | | $8.02 | | | | $4.39 | | | | $12.38 | | | | $14.91 | |
Market price, end of year | | | $10.21 | | | | $8.76 | | | | $3.73 | | | | $12.09 | | | | $15.42 | |
Total Investment Return (1) | | | 32.85 | % | | | 174.62 | % | | | (63.34 | )% | | | (12.08 | )% | | | 13.99 | % |
RATIOS/SUPPLEMENTAL DATA: | | | | | | | | | | | | | | | | | | | | |
Net assets, applicable to common shareholder, end of year (000s) | | | $549,130 | | | | $487,130 | | | | $263,220 | | | | $753,359 | | | | $879,014 | |
Ratio of expenses to average net assets (2) | | | 1.29 | % | | | 1.42 | % | | | 1.71 | %(3) | | | 1.35 | %(3) | | | 1.34 | % |
Ratio of net investment income to average net assets (2) | | | 13.20 | % | | | 14.20 | % | | | 17.26 | % | | | 11.75 | % | | | 11.56 | % |
Preferred shares asset coverage per share | | | $75,102 | | | | $69,445 | | | | $49,015 | | | | $61,410 | | | | $68,493 | |
Portfolio turnover | | | 54 | % | | | 58 | % | | | 57 | % | | | 34 | % | | | 60 | % |
| |
(1) | Total investment return is calculated assuming a purchase of a common share at the market price on the first day and a sale of a common share at the market price on the last day of each year reported. Dividends and distributions, if any, 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 in connection with the purchase or sale of Fund shares. |
(2) | Calculated on the basis of income and expenses applicable to both common shares and preferred shares relative to the average net assets of common shareholders. |
(3) | Ratio of expenses to average net assets of common shareholders, excluding excise tax expense was 1.63% for the year ended February 28, 2009 and 1.34% for the year ended February 29, 2008. |
| | |
| AGIC Convertible & Income Fund | |
See accompanying Notes to Financial Statements | 2.28.11 | | AGIC Convertible & Income Fund II Annual Report | 35 |
| |
AGIC Convertible & Income Funds | Report of Independent
Registered Public
Accounting Firm |
| |
To the Shareholders and Board of Trustees of
AGIC Convertible & Income Fund
AGIC Convertible & Income Fund II
In our opinion, the accompanying statements of assets and liabilities, including the schedules of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the AGIC Convertible & Income Fund and AGIC Convertible & Income Fund II (the “Funds”) at February 28, 2011, the results of each of their operations for the year then ended, changes in net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at February 28, 2011, by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
April 20, 2011
| |
| AGIC Convertible & Income Fund |
36 | AGIC Convertible & Income Fund II Annual Report | 2.28.11 |
| |
AGIC Convertible & Income Funds | Tax Information/Annual Shareholder |
| Meeting Results/Changes to Board |
| of Trustees (unaudited) |
| |
Tax Information:
Pursuant to the Jobs and Growth Tax Relief Reconciliation Act of 2003, Convertible & Income and Convertible & Income II designate 19.26% and 18.89%, respectively, of ordinary dividends paid by the Funds during the year ended February 28, 2011 (or the maximum allowable amount) as Qualified Dividend Income.
The percentage of ordinary dividends paid by Convertible & Income and Convertible & Income II during the year ended February 28, 2011 which qualified for the Dividends Received Deduction available to corporate shareholders was 19.26% and 18.89%, respectively, (or the maximum allowable amount).
Since the Funds’ tax year is not the calendar year, another notification will be sent with respect to calendar year 2011. In January 2012, shareholders will be advised on IRS Form 1099 DIV as to the federal tax status of dividends and distributions received during calendar 2011. The amount that will be reported will be the amount to use on your 2011 federal income tax return and may differ from the amount which must be reported in connection with the Funds’ tax year ended February 28, 2011. Shareholders are advised to consult their tax advisers as to the federal, state and local tax status of the dividend income received from the Funds.
Annual Shareholder Meeting Results:
The Funds held their joint annual meeting of shareholders on July 21, 2010. Common/Preferred shareholders voted as indicated below:
| | | | | | | |
| | Affirmative | | Withheld
Authority | |
| |
| | | | | | | |
Convertible & Income | | | | | | | |
Election of James A. Jacobson* – Class II to serve until 2011 | | | 10,563 | | | 102 | |
Re-election of Hans W. Kertess – Class I to serve until 2013 | | | 64,989,435 | | | 2,087,322 | |
Re-election of William B. Ogden, IV – Class I to serve until 2013 | | | 64,896,519 | | | 2,180,238 | |
Election of Alan Rappaport* – Class I to serve until 2013 | | | 10,563 | | | 102 | |
The other members of the Board of Trustees at the time of the meeting, namely Messrs. Paul Belica and John C. Maney† continued to serve as Trustees of Convertible & Income Fund.
| | | | | | | |
| | Affirmative | | Withheld
Authority | |
| |
| | | | | | | |
Convertible & Income II | | | | | | | |
Re-election of Paul Belica – Class I to serve until 2013 | | | 52,976,212 | | | 1,837,107 | |
Election of James A. Jacobson* – Class II to serve until 2011 | | | 8,092 | | | 121 | |
Re-election of William B. Ogden, IV – Class I to serve until 2013 | | | 53,015,204 | | | 1,798,115 | |
Election of Alan Rappaport* – Class I to serve until 2013 | | | 8,092 | | | 121 | |
The other members of the Board of Trustees at the time of the meeting, namely Messrs. Hans W. Kertess and John C. Maney† continued to serve as Trustees of Convertible & Income II Fund.
| |
| | |
* Preferred Shares Trustee |
† Interested Trustee |
| |
Changes to Board of Trustees:
R. Peter Sullivan, III retired from the Funds’ Board of Trustees effective July 31, 2010.
Effective June 22, 2010, the funds’ Board of Trustees appointed Alan Rappaport as a Class I Trustee of each Fund.
Effective September 21, 2010, the Funds’ Board of Trustees appointed Brad Gallagher as a Class II Trustee of each Fund to serve until 2011.
Effective March 7, 2011, the Funds’ Board of Trustees appointed Deborah A. Zoullas as a Class III Trustee of Convertible & Income and a Class II Trustee of Convertible & Income II to serve until 2011.
| |
| AGIC Convertible & Income Fund |
2.28.11 | | AGIC Convertible & Income Fund II Annual Report 37 |
| |
AGIC Convertible & Income Funds | 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 shareholders and are committed to maintaining the confidentiality, integrity, and security of our current, prospective and former shareholders’ personal information. To ensure our shareholders’ privacy, we have developed policies that are designed to protect this confidentiality, while allowing shareholders’ needs to be served.
Obtaining Personal Information
In the course of providing shareholders with products and services, we may obtain non-public personal information about shareholders, which may come from sources such as account applications and other forms, from other written, electronic or verbal correspondence, from shareholder transactions, from a shareholder’s 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 shareholders or gathered by us to non-affiliated third parties, except as required for everyday business purposes, such as to process transactions or service a shareholder’s account, or otherwise permitted by law. As is common in the industry, non-affiliated companies may from time to time be used to provide certain services, such as preparing and mailing prospectuses, reports, account statements and other information, and gathering shareholder proxies. We may also retain non-affiliated financial services providers, such as broker-dealers, to market our shares and products and we may enter in joint-marketing agreements with them and other financial companies. We may also retain marketing and research service firms to conduct research on shareholder satisfaction. These companies may have access to a shareholder’s personal and account information, but are permitted to use the information solely to provide the specific service or as otherwise permitted by law. We may also provide a shareholder’s personal and account information to their respective brokerage or financial advisory firm, Custodian, and/or to their financial adviser or consultant.
Sharing Information with Third Parties
We 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 Fund in which a shareholder has chosen to invest. In addition, we may disclose information about a shareholder or shareholder’s accounts to a non-affiliated third party only if we receive a shareholder’s written request or consent.
Sharing Information with Affiliates
We may share shareholder information with our affiliates in connection with our affiliates’ everyday business purposes, such as servicing a shareholder’s account, but our affiliates may not use this information to market products and services to you except in conformance with applicable laws or regulations. The information we share includes information about our experiences and transactions with a shareholder and may include, for example, shareholder’s participation in one of the Funds or in other investment programs, a shareholder’s ownership of certain types of accounts (such as IRAs), or other data about a shareholder’s transactions or accounts. Our affiliates, in turn, are not permitted to share shareholder information with non-affiliated entities, except as required or permitted by law.
Procedures to Safeguard Private Information
We take seriously the obligation to safeguard shareholder non-public personal information. In addition to this policy, we 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 addition, we have physical, electronic and procedural safeguards in place to guard a shareholder’s non-public personal information.
Disposal of Confidential Records
We will dispose of records, if any, that are knowingly derived from data received from a consumer reporting agency regarding a shareholder that is an individual in a manner that ensures the confidentiality of the data is maintained. Such records include, among other things, copies of consumer reports and notes of conversations with individuals at consumer agencies.
Proxy Voting Policies & Procedures:
A description of the polices and procedures that the Funds have adopted to determine how to vote proxies relating to portfolio securities and information about how the Funds 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 Funds’ shareholder servicing agent at (800) 254-5197; (ii) on the Funds’ website at www.allianzinvestors.com/closedendfunds; and (iii) on the Securities and Exchange Commission’s website at www.sec.gov.
| |
| AGIC Convertible & Income Fund |
38 | AGIC Convertible & Income Fund II Annual Report | 2.28.11 |
| |
AGIC Convertible & Income Funds | Dividend Reinvestment |
| Plan (unaudited) |
| | |
Pursuant to each Fund’s Dividend Reinvestment Plan (the “Plan”), all Common Shareholders whose shares are registered in their own names will have all dividends, including any capital gain dividends, reinvested automatically in additional Common Shares by BNY Mellon, as agent for the Common Shareholders (the “Plan Agent”), unless the shareholder elects to receive cash. An election to receive cash may be revoked or reinstated at the option of the shareholder. In the case of record shareholders such as banks, brokers or other nominees that hold Common Shares for others who are the beneficial owners, the Plan Agent will administer the Plan on the basis of the number of Common Shares certified from time to time by the record shareholder as representing the total amount registered in such shareholder’s name and held for the account of beneficial owners who are to participate in the Plan. Shareholders whose shares are held in the name of a bank, broker or nominee should contact the bank, broker or nominee for details. All distributions to investors who elect not to participate in the Plan (or whose broker or nominee elects not to participate on the investor’s behalf), will be paid cash by check mailed, in the case of direct shareholder, to the record holder by BNY Mellon, as the Funds’ dividend disbursement agent.
Unless you elect (or your broker or nominee elects) not to participate in the Plan, the number of Common Shares you will receive will be determined as follows:
| |
(1) | If on the payment date the net asset value of the Common Shares is equal to or less than the market price per Common Share plus estimated brokerage commissions that would be incurred upon the purchase of Common Shares on the open market, the Funds will issue new shares at the greater of (i) the net asset value per Common Share on the payment date or (ii) 95% of the market price per Common Share on the payment date; or |
| |
(2) | If on the payment date the net asset value of the Common Shares is greater than the market price per Common Share plus estimated brokerage commissions that would be incurred upon the purchase of Common Shares on the open market, the Plan Agent will receive the dividend or distribution in cash and will purchase Common Shares in the open market, on the NYSE or elsewhere, for the participants’ accounts. It is possible that the market price for the Common Shares may increase before the Plan Agent has completed its purchases. Therefore, the average purchase price per share paid by the Plan Agent may exceed the market price on the payment date, resulting in the purchase of fewer shares than if the dividend or distribution had been paid in Common Shares issued by the Funds. The Plan Agent will use all dividends and distributions received in cash to purchase Common Shares in the open market on or shortly after the payment date, but in no event later than the ex-dividend date for the next distribution. Interest will not be paid on any uninvested cash payments. |
You may withdraw from the Plan at any time by giving notice to the Plan Agent. If you withdraw or the Plan is terminated, you will receive a certificate for each whole share in your account under the Plan and you will receive a cash payment for any fraction of a share in your account. If you wish, the Plan Agent will sell your shares and send you the proceeds, minus brokerage commissions.
The Plan Agent maintains all shareholders’ accounts in the Plan and gives written confirmation of all transactions in the accounts, including information you may need for tax records. The Plan Agent will also furnish each person who buys Common Shares with written instructions detailing the procedures for electing not to participate in the Plan and to instead receive distributions in cash. Common Shares in your account will be held by the Plan Agent in non-certificated form. Any proxy you receive will include all Common Shares you have received under the Plan.
There is no brokerage charge for reinvestment of your dividends or distributions in Common Shares. However, all participants will pay a pro rata share of brokerage commissions incurred by the Plan Agent when it makes open market purchases.
Automatically reinvested dividends and distributions are taxed in the same manner as cash dividends and distributions.
The Funds and the Plan Agent reserve the right to amend or terminate the Plan. There is no direct service charge to participants in the Plan; however, the Funds reserve the right to amend the Plan to include a service charge payable by the participants. Additional information about the Plan may be obtained from the Funds’ shareholder servicing agent, BNY Mellon, P.O. Box 43027, Providence, RI 02940-3027, telephone number (800) 254-5197.
| |
| AGIC Convertible & Income Fund |
2.28.11 | | AGIC Convertible & Income Fund II Annual Report 39 |
| |
AGIC Convertible & Income Funds | Board of Trustees (unaudited) |
| | |
| | |
Name, Date of Birth, Position(s) Held with | | |
Funds, Length of Service, Other Trusteeships/ | | |
Directorships Held by Trustee; Number of | | |
Portfolios in Fund Complex/Outside Fund | | |
Complexes Currently Overseen by Trustee | | Principal Occupation(s) During Past 5 Years: |
| | | |
The address of each trustee is 1345 Avenue of the | | |
Americas, New York, NY 10105. | | |
| | |
Hans W. Kertess | | President, H. Kertess & Co., a financial advisory company. Formerly, Managing Director, Royal Bank of Canada Capital Markets. |
Date of Birth: 7/12/39 | |
Chairman of the Board of Trustees since: 2007 | | |
Trustee since: 2004 - NCV/ 2003 - NCZ | | |
Term of office: Expected to stand for re-election at | | |
2013 - NCV/ 2012 - NCZ annual meeting of | | |
shareholders. | | |
Trustee/Director of 55 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 Funding, Inc., Goal Funding II, Inc. and Surety Loan Fund, Inc.; Formerly, Manager of Stratigos Fund LLC, Whistler Fund LLC, Xanthus Fund LLC & Wynstone Fund LLC. |
Date of Birth: 9/27/21 | |
Trustee since: 2003 | |
Term of office: Expected to stand for re-election at | | |
2012 - NCV/ 2013 - NCZ annual meeting of | | |
shareholders. | | |
Trustee/Director of 55 funds in Fund Complex | | |
Trustee/Director of no funds outside of Fund | | |
Complex | | |
| | |
Bradford K. Gallagher | | Founder, Spyglass Investments LLC, a private investment vehicle (since 2001); Founder, President and CEO of Cypress Holding Company and Cypress Tree Investment Management Company (since 1995); Trustee, The Common Fund (since 2005); Director, Anchor Point Inc. (since 1995); Chairman and Trustee, Atlantic Maritime Heritage Foundation (since 2007); and Director, Shielding Technology Inc. (since 2006). |
Date of Birth: 2/28/44 | |
Trustee since: 2010 | |
Term of office: Expected to stand for election at | |
2011 annual meeting of shareholders. | |
Trustee/Director of 55 funds in Fund Complex | | |
Trustee/Director of no funds outside of Fund | | |
Complex | | |
Formerly, Chairman and Trustee of Grail Advisors | | |
ETF Trust (2009-2010) and Trustee of Nicholas- | | |
Applegate Institutional Funds (2007-2010) | | |
| | |
James A. Jacobson | | Retired. Formerly, Vice Chairman and Managing Director of Spear, Leeds & Kellogg Specialists, LLC, a specialist firm on the New York Stock Exchange. |
Date of Birth: 2/3/45 | |
Trustee since: 2009 | | |
Term of office: Expected to stand for election at | | |
2011 annual meeting of shareholders. | | |
Trustee/Director of 55 funds in Fund Complex | | |
Trustee/Director of 16 funds in Alpine Mutual Funds | | |
Complex | | |
| | |
John C. Maney† | | Management Board, Managing Director and Chief Executive Officer of Allianz Global Investors Fund Management LLC; Management Board and Managing Director of Allianz Global Investors of America L.P. since January 2005 and also Chief Operating Officer of Allianz Global Investors of America L.P. since November 2006. |
Date of Birth: 8/3/59 | |
Trustee since: 2006 | |
Term of office: Expected to stand for re-election at | |
2012 annual meeting of shareholders. | | |
Trustee/Director of 80 funds in Fund Complex | | |
Trustee/Director of no funds outside the Fund | | |
Complex | | |
| |
| AGIC Convertible & Income Fund |
40 | AGIC Convertible & Income Fund II Annual Report | 2.28.11 |
| |
AGIC Convertible & Income Funds | Board of Trustees (unaudited) |
| |
| | |
Name, Date of Birth, Position(s) Held with Funds, Length of Service, Other Trusteeships/Directorships Held by Trustee; Number of Portfolios in Fund Complex/Outside Fund Complexes Currently Overseen by Trustee | | Principal Occupation(s) During Past 5 Years: |
| |
William B. Ogden, IV | | Asset Management Industry Consultant. Formerly, Managing Director, Investment Banking Division of Citigroup Global Markets Inc. |
Date of Birth: 1/11/45 | |
Trustee since: 2006 | | |
Term of office: Expected to stand for re-election at | | |
2013 annual meeting of shareholders | | |
Trustee/Director of 55 funds in Fund Complex; | | |
Trustee/Director of no funds outside of Fund | | |
Complex | | |
| | |
Alan Rappaport | | Vice Chairman, Roundtable Investment Partners (since 2009); Chairman (formerly President), Private Bank of Bank of America; Vice Chairman, US Trust (2001-2008). |
Date of Birth: 3/13/53 | |
Trustee since: 2010 | |
Term of office: Expected to stand for election at | | |
2013 annual meeting of shareholders. | | |
Trustee/Director of 55 funds in Fund Complex | | |
Trustee/Director of no funds outside the Fund | | |
Complex | | |
| | |
Deborah A. Zoullas | | Advisory Director, Morgan Stanley & Co., Inc. (since 1996); Director, Helena Rubenstein Foundation (since 1997); Co-Chair Special Projects Committee, Memorial Sloan Kettering (since2005); Board Member and Member of the Investment and Finance Committees, Henry Street Settlement (since 2007); Trustee, Stanford University (since 2010). Formerly, Advisory Council, Stanford Business School (2002-2008) and Director, Armor Holdings, a manufacturing company (2002-2007). |
Date of Birth: 11/13/52 | |
Trustee since: 2011 | |
Term of office: Expected to stand for election at | |
2011 annual meeting of shareholders. | |
Trustee/Director of 51 funds in Fund Complex | |
Trustee/Director of no funds outside of Fund | |
Complex | |
† Mr. Maney is an “interested person” of the Funds, as defined in Section 2(a)(19) of the 1940 Act, 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 LLC; Member - Board of Directors and Chief Operating Officer of Allianz Global Investors of America Holdings Inc. and Oppenheimer Group, Inc.; Managing Director and Chief Operating Officer of Allianz Global Investors NY Holdings LLC; Managing Director and Chief Operating Officer of Allianz Hedge Fund Partners Holding L.P. and Allianz Global Investors U.S. Retail LLC; Compensation Committee of NFJ Investment Group LLC; Management Board of Nicholas-Applegate Holdings LLC; Member - Board of Directors and Chief Operating Officer of PIMCO Global Advisors (Resources) Limited; Executive Vice President of PIMCO Japan Ltd.; Chief Operating Officer of Allianz Global Investors U.S. Holding II LLC; and Member and Chairman - Board of Directors, President and Chief Operating Officer of PFP Holdings, Inc. and Managing Director of Allianz Global Investors Capital LLC.
| |
| AGIC Convertible & Income Fund |
2.28.11 | | AGIC Convertible & Income Fund II Annual Report 41 |
| |
AGIC Convertible & Income Funds | Fund Officers (unaudited) |
| | |
| | |
Name, Date of Birth, Position(s) | | |
Held with Funds | | Principal Occupation(s) During Past 5 Years: |
| |
| |
Brian S. Shlissel | | Management Board, Managing Director and Head of Mutual Fund Services of Allianz Global Investors Fund Management LLC; President and Chief Executive Officer of 29 funds in the Fund Complex; President of 51 funds in the Fund Complex; and Treasurer, Principal Financial and Accounting Officer of The Korea Fund, Inc. Formerly, Treasurer, Principal Financial and Accounting Officer of 50 funds in the Fund Complex. |
Date of Birth: 11/14/64 | |
President & Chief Executive Officer since: | |
2003 | |
| | |
Lawrence G. Altadonna | | Senior Vice President, Director of Fund Administration of Allianz Global Investors Fund Management LLC; Treasurer, Principal Financial and Accounting Officer of 80 funds in the Fund Complex; and Assistant Treasurer of The Korea Fund, Inc. Formerly, Assistant Treasurer of 50 Funds in the Fund Complex. |
Date of Birth: 3/10/66 | |
Treasurer, Principal Financial and Accounting | |
Officer since: 2003 | |
| | |
Thomas J. Fuccillo | | Executive Vice President, Chief Legal Officer and Secretary of Allianz Global Investors Fund Management LLC; Executive Vice President of Allianz Global Investors of America L.P.; Vice President, Secretary and Chief Legal Officer of 80 funds in the Fund Complex; and Secretary and Chief Legal Officer of The Korea Fund, Inc. |
Date of Birth: 3/22/68 | |
Vice President, Secretary & Chief Legal | |
Officer since: 2004 | |
| | |
Scott Whisten | | Senior Vice President, Allianz Global Investors Fund Management LLC; and Assistant Treasurer of 80 funds in the Fund Complex. |
Date of Birth: 3/13/71 | |
Assistant Treasurer since: 2007 | |
| | |
Richard J. Cochran | | Vice President, Allianz Global Investors Fund Management LLC; Assistant Treasurer of 80 funds in the Fund Complex and of The Korea Fund, Inc. Formerly, Tax Manager, Teachers Insurance Annuity Association/College Retirement Equity Fund (TIAA-CREF) (2002-2008). |
Date of Birth: 1/23/61 | |
Assistant Treasurer since: 2008 | |
| | |
| | |
Orhan Dzemaili | | Vice President, Allianz Global Investors Fund Management LLC; Assistant Treasurer of 80 funds in the Fund Complex. Formerly, Accounting Manager, Prudential Investments LLC (2004-2007). |
Date of Birth: 4/18/74 | |
Assistant Treasurer since: 2011 | |
| | |
Youse E. Guia | | Senior Vice President, Chief Compliance Officer of Allianz Global Investors of America L.P.; Chief Compliance Officer of 80 funds in the Fund Complex and of The Korea Fund, Inc. |
Date of Birth: 9/3/72 | |
Chief Compliance Officer since: 2004 | |
| | |
Lagan Srivastava | | Vice President of Allianz Global Investors of America L.P.; Assistant Secretary of 80 funds in the Fund Complex and of The Korea Fund, Inc. |
Date of Birth: 9/20/77 | |
Assistant Secretary since: 2006 | |
Officers hold office at the pleasure of the Board and until their successors are appointed and qualified or until their earlier resignation or removal.
| |
| AGIC Convertible & Income Fund |
42 | AGIC Convertible & Income Fund II Annual Report | 2.28.11 |
| |
Trustees | Fund Officers |
Hans W. Kertess | Brian S. Shlissel |
Chairman of the Board of Trustees | President & Chief Executive Officer |
Paul Belica | Lawrence G. Altadonna |
Bradford K. Gallagher | Treasurer, Principal Financial & Accounting Officer |
James A. Jacobson | Thomas J. Fuccillo |
John C. Maney | Vice President, Secretary & Chief Legal Officer |
William B. Ogden, IV | Scott Whisten |
Alan Rappaport | Assistant Treasurer |
Deborah A. Zoullas | Richard J. Cochran |
| Assistant Treasurer |
| Orhan Dzemaili |
| Assistant Treasurer |
| Youse E. Guia |
| Chief Compliance Officer |
| Lagan Srivastava |
| Assistant Secretary |
Investment Manager
Allianz Global Investors Fund Management LLC
1345 Avenue of the Americas
New York, NY 10105
Sub-Adviser
Allianz Global Investors Capital LLC
600 West Broadway, 30th Floor
San Diego, CA 92101
Custodian & Accounting Agent
Brown Brothers Harriman & Co.
40 Water Street
Boston, MA 02109
Transfer Agent, Dividend Paying Agent and Registrar
BNY Mellon
P.O. Box 43027
Providence, RI 02940-3027
Independent Registered Public Accounting Firm
PricewaterhouseCoopers LLP
300 Madison Avenue
New York, NY 10017
Legal Counsel
Ropes & Gray LLP
Prudential Tower
800 Boylston Street
Boston, MA 02199
This report, including the financial information herein, is transmitted to the shareholders of AGIC Convertible & Income Fund and AGIC Convertible & Income Fund II for their information. It is not a prospectus, circular or representation intended for use in the purchase of shares of the Funds or any securities mentioned in this report.
Notice is hereby given in accordance with Section 23(c) of the Investment Company Act of 1940, as amended, that from time to time the Funds may purchase their common shares in the open market.
The Funds file their complete schedule of portfolio holdings with the Securities and Exchange Commission (“SEC”) for the first and third quarters of its fiscal year on Form N-Q. Each 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 D.C. Information on the operation of the Public Reference Room may be obtained by calling (800) SEC-0330. The information on Form N-Q is also available on the Funds’ website at www.allianzinvestors.com/closedendfunds.
Information on the Funds are available at www.allianzinvestors.com/closedendfunds or by calling the Funds’ shareholder servicing agent at (800) 254-5197
Receive this report electronically and eliminate paper mailings. To enroll, go to www.allianzinvestors.com/edelivery.
AGI-2011-03-01-0559
AZ603AR_022811
ITEM 2. CODE OF ETHICS
| | |
| (a) | As of the end of the period covered by this report, the registrant has adopted a code of ethics (the “Section 406 Standards for Investment Companies — Ethical Standards for Principal Executive and Financial Officers”) that applies to the registrant’s Principal Executive Officer and Principal Financial Officer; the registrant’s Principal Financial Officer also serves as the Principal Accounting Officer. The registrant undertakes to provide a copy of such code of ethics to any person upon request, without charge, by calling 1-800-254-5197. The code of ethics is included as an Exhibit 99.CODEETH hereto. |
| | |
| (b) | The CODE OF ETHICS PURSUANT TO SECTION 406 OF THE SARBANES-OXLEY ACT OF 2002 FOR PRINCIPAL EXECUTIVE AND SENIOR FINANCIAL OFFICERS (the “Code”) was updated to remove interested trustees from being subject to the Code, which is not required under Section 406 of the Sarbanes-Oxley Act of 2002. The Code also was updated to remove examples of specific conflict of interest situations and to add an annual certification requirement for Covered Officers. In addition, the approval or ratification process for material amendments to the Code was clarified to include approval by a majority of the independent trustees. |
| | |
| (c) | During the period covered by this report, there were not any waivers or implicit waivers to a provision of the code of ethics adopted in 2(a) above. |
| | |
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT
The registrant’s Board has determined that Mr. Paul Belica and James A. Jacobson, members of the Board’s Audit Oversight Committee are “audit committee financial experts,” and that they are “independent,” for purposes of this Item.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES
| | |
| a) | Audit fees. The aggregate fees billed for each of the last two fiscal years (the “Reporting Periods”) for professional services rendered by the Registrant’s principal accountant (the “Auditor”) for the audit of the Registrant’s annual financial statements, or services that are normally provided by the Auditor in connection with the statutory and regulatory filings or engagements for the Reporting Periods were $54,000 in 2010 and $54,000 in 2011. |
| | |
| b) | Audit-Related Fees. The aggregate fees billed in the Reporting Periods for assurance and related services by the principal accountant that are reasonably related to the performance of the audit registrant’s financial statements and are not reported under paragraph (e) of this Item were $10,000 in 2010 and $10,000 in 2011. These services consist of accounting consultations, agreed upon procedure reports (inclusive of annual review of basic maintenance testing associated with the Preferred Shares), attestation reports and comfort letters. |
| | |
| c) | Tax Fees. The aggregate fees billed in the Reporting Periods for professional services rendered by the Auditor for tax compliance, tax service and tax planning (“Tax Services”) were $13,650 in 2010 and $14,110 in 2011. These services consisted of review or preparation of U.S. federal, state, local and excise tax returns and calculation of excise tax distributions. |
| | |
| d) | All Other Fees. There were no other fees billed in the Reporting Periods for products and services provided by the Auditor to the Registrant. |
| | |
| e) | 1. Audit Committee Pre-Approval Policies and Procedures. The Registrant’s Audit Committee has established policies and procedures for pre-approval of all audit and permissible non-audit services |
| | |
| | by the Auditor for the Registrant, as well as the Auditor’s engagements related directly to the operations and financial reporting of the Registrant. The Registrant’s policy is stated below. |
| | |
| | AGIC Convertible & Income Fund (The “Fund”) |
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 Funds’ financial reporting policies and practices and their internal controls. As part of this responsibility, the Committee must pre-approve any independent accounting firm’s engagement to render audit and/or permissible non-audit services, as required by law. In evaluating a proposed engagement by the independent accountants, the Committee will assess the effect that the engagement might reasonably be expected to have on the accountant’s independence. The Committee’s evaluation will be based on:
a review of the nature of the professional services expected to provided,
the fees to be charged in connection with the services expected to be provided,
a review of the safeguards put into place by the accounting firm to safeguard independence, and
periodic meetings with the accounting firm.
POLICY FOR AUDIT AND NON-AUDIT SERVICES TO BE PROVIDED TO THE FUNDS
On an annual basis, the Fund’s Committee will review and pre-approve the scope of the audits of the Funds and proposed audit fees and permitted non-audit (including audit-related) services that may be performed by the 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 the annual review of Basic Maintenance testing associated with issuance of Preferred Shares)
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:
| | | |
| | (1) | The aggregate amount of all such permitted non-audit services provided constitutes no more than (i) with respect to such services provided to the Fund, five percent (5%) of the total amount of revenues paid by the Fund to its independent accountant during the fiscal year in which the services are provided, and (ii) with respect to such services provided to Accounting Affiliates, five percent (5%) of the total amount of revenues paid to the Fund’s independent accountant by the Fund and the Accounting Affiliates during the fiscal year in which the services are provided; |
| | | |
| | (2) | Such services were not recognized by the Fund at the time of the engagement for such services to be non-audit services; and |
| | | |
| | (3) | Such services are promptly brought to the attention of the Committee and approved prior to the completion of the audit by the Committee or by the Committee Chairman (or any other Committee member who is a disinterested trustee under the Investment Company Act to whom this Committee Chairman or other delegate shall be reported to the full Committee at its next regularly scheduled meeting. |
| | | |
| e) | 2. No services were approved pursuant to the procedures contained in paragraph (C) (7) (i) (C) of Rule 2-01 of Registration S-X. |
| | | |
| f) | Not applicable |
| | | |
| g) | Non-audit fees. The aggregate non-audit fees billed by the Auditor for services rendered to the Registrant, and rendered to the Adviser, for the 2010 Reporting Period was $566,790 and the 2011 Reporting Period was $2,712,320. |
| | |
| h) | Auditor Independence. The Registrant’s Audit Oversight Committee has considered whether the provision of non-audit services that were rendered to the Adviser which were not pre-approved is compatible with maintaining the Auditor’s independence. |
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANT
The Fund has a separately designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934. The audit committee of the Fund is comprised of Paul Belica, Hans W. Kertess, Alan Rappaport, William B. Ogden, IV, James A. Jacobson, Bradford K. Gallagher and Deborah A. Zoullas.
ITEM 6. SCHEDULE OF INVESTMENTS
(a) Schedule of Investments is included as part of the report to shareholders filed under Item 1 of this form.
(b) Not applicable due to no such divestments during the period covered since the previous Form NCSR filing.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
AGIC Convertible & Income Fund (NCV)
AGIC Convertible & Income Fund II (NCZ)
(each a “Trust”)
PROXY VOTING POLICY
| |
1. | It is the policy of each 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. Each 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, each Trust’s policy shall be to delegate proxy voting responsibility to those entities with portfolio management responsibility for the Trust. |
| |
2. | Each 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 particular Trust. AGIFM’s Proxy Voting Policy Summary is attached as Appendix A hereto. Summaries of the detailed proxy voting policies of the Trusts’ current sub-advisers are set forth in Appendix B attached hereto. Such summaries may be revised from time to time to reflect changes to the sub-advisers’ detailed proxy voting policies. |
| |
3. | 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. |
| |
4. | AGIFM and each sub-adviser of a 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. |
| |
5. | The party voting the proxy shall: (i) maintain such records and provide such voting information as is required for the Trusts’ 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 Trusts’ Chief Compliance Officer. |
| |
6. | This Proxy Voting Policy Statement, the Proxy Voting Policy Summary of AGIFM and summaries of the detailed proxy voting policies of each sub-adviser of a Trust |
| |
| with proxy voting authority and how each Trust voted proxies relating to portfolio securities held during the most recent twelve month period ending June 30, shall be made available (i) without charge, upon request, by calling 1-800-254-5197; (ii) on the Trusts’ website at www.allianzinvestors.com; and (iii) on the Securities and Exchange Commission’s (“SEC’s”) website at http://www.sec.gov. In addition, to the extent required by applicable law or determined by the Trusts’ Chief Compliance Officer or Board of Trustees, the Proxy Voting Policy Summary of AGIFM and summaries of the detailed proxy voting policies of each sub-adviser with proxy voting authority shall also be included in the Trusts’ Registration Statements or Form N-CSR filings. |
Appendix A
ALLIANZ GLOBAL INVESTORS FUND MANAGEMENT LLC (“AGIFM”)
| |
1. | 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. |
| |
2. | AGIFM, for each fund for which it acts as investment adviser, delegates the responsibility for voting proxies to the sub-adviser for the respective fund. |
| |
3. | The party voting proxies (e.g., the sub-adviser) vote the proxies in accordance with their proxy voting policies and, to the extent consistent with their policies, may rely on information and/or recommendations supplied by others. |
| |
4. | AGIFM and each sub-adviser of a fund will deliver a copy of their 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. |
| |
5. | The party voting the proxy will: (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) will provide additional information as may be requested, from time to time, by the funds’ respective boards or chief compliance officers. |
| |
6. | Summaries of the proxy voting policies for AGIFM and each sub-adviser of a fund advised by AGIFM and how each fund voted proxies relating to portfolio securities held during the most recent twelve month period ended June 30 will be available (i) without charge, upon request, by calling 1-800-254-5197; (ii) on the Allianz Global Investors Distributors Web site at www.allianzinvestors.com; and (iii) on the Securities and Exchange Commission’s (“SEC’s”) website at http://www.sec.gov. In addition, to the extent required by applicable law or determined by the relevant fund’s board of directors/trustees or chief compliance officer, summaries of the detailed proxy voting policies of AGIFM, 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
Allianz Global Investors Capital (“AGI Capital”)
Description of Proxy Voting Policy and Procedures
AGI Capital typically votes proxies as part of its discretionary authority to manage accounts, unless the client has explicitly reserved the authority for itself. When voting proxies, AGI Capital seeks to make voting decisions solely in the best interests of its clients and to enhance the economic value of the underlying portfolio securities held in its clients’ accounts.
AGI Capital has adopted written Proxy Policy Guidelines and Procedures (the “Proxy Guidelines”) that are reasonably designed to ensure that the firm is voting in the best interest of its clients. The Proxy Guidelines reflect AGI Capital’s general voting positions on specific corporate governance issues and corporate actions. AGI Capital has retained an independent third party service provider (the “Proxy Provider”) to assist in the proxy voting process by implementing the votes in accordance with the Proxy Guidelines as well as assisting in the administrative process. In certain circumstances, a client may request in writing that AGI Capital vote proxies for its account in accordance with a set of guidelines which differs from the Proxy Guidelines. In that case, AGI Capital will vote the shares held by such client accounts in accordance with their direction which may be different from the vote cast for shares held on behalf of other client accounts that vote in accordance with the Proxy Guidelines.
AGI Capital will generally refrain from voting proxies on foreign securities that are subject to share blocking restrictions. Certain countries require the freezing of shares for trading purposes at the custodian/sub-custodian bank level in order to vote proxies to ensure that shareholders voting at meetings continue to hold the shares through the actual shareholder meeting. However, because AGI Capital cannot anticipate every proxy proposal that may arise (including a proxy proposal that an analyst and/or portfolio manager believes has the potential to significantly affect the economic value of the underlying security, such as proxies relating to mergers and acquisitions), AGI Capital may, from time to time, instruct the Proxy Provider to cast a vote for a proxy proposal in a share blocked country.
The Proxy Guidelines also provide for oversight of the proxy voting process by a Proxy Committee. The Proxy Committee meets at a minimum on an annual basis and when necessary to address potential conflicts of interest. AGI Capital may have conflicts of interest that can affect how it votes its client’s proxies. In order to ensure that all material conflicts of interest are addressed appropriately while carrying out AGI Capital’s obligation to vote proxies, the Proxy Committee is responsible for developing a process to identify proxy voting issues that may raise conflicts of interest between AGI Capital and its clients and to resolve such issues. Any deviations from the Proxy Guidelines will
be documented and maintained in accordance with Rule 204-2 under the Investment Advisers Act.
The Proxy Committee monitors the outsourcing of voting obligations to the Proxy Provider and AGI Capital’s proxy voting recordkeeping practices; adheres to a process for resolution of voting issues that require a case-by-case analysis; and, to the extent the Proxy Guidelines do not cover potential proxy voting issues, determines a process for voting such issues.
In accordance with the Proxy Guidelines, AGI Capital may review additional criteria associated with voting proxies and evaluate the expected benefit to its clients when making an overall determination on how or whether to vote a proxy. Upon receipt of a client’s written request, AGI Capital may also vote proxies for that client’s account in a particular manner that may differ from the Proxy Guidelines. In addition, AGI Capital may refrain from voting a proxy on behalf of its clients’ accounts due to de-minimis holdings, immaterial impact on the portfolio, items relating to non-U.S. issuers (such as those described below), non-discretionary holdings not covered by AGI Capital, timing issues related to the opening/closing of accounts, securities lending issues (see below), contractual arrangements with clients and/or their authorized delegate, the timing of receipt of information, or where circumstances beyond its control prevent it from voting. These issues may include, but are not limited to: (i) proxy statements and ballots being written in a foreign language, (ii) untimely notice of a shareholder meeting, (iii) requirements to vote proxies in person, (iv) restrictions on foreigner’s ability to exercise votes, (v) restrictions on the sale of securities for a period of time in proximity to the shareholder meeting, or (vi) requirements to provide local agents with power of attorney to facilitate the voting instructions. Such proxies are voted on a best-efforts basis.
If a client has decided to participate in a securities lending program, AGI Capital will defer to the client’s determination and not attempt to recall securities on loan solely for the purpose of voting routine proxies as this could impact the returns received from securities lending and make the client a less desirable lender in the marketplace. If the participating client requests, AGI Capital will use reasonable efforts to notify the client of proxy measures that AGI Capital deems material.
ITEM 8: PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT COMPANIES
(a)(1) Allianz Global Investors Capital (“AGI Capital” or the “Investment Adviser”)
As of April 28, 2011, the following individuals constitute the team that has primary responsibility for the day-to-day implementation of the AGIC Convertible & Income Fund (NCV) and AGIC Convertible & Income Fund II (NCZ), with Mr. Forsyth serving as the lead portfolio manager:
|
Douglas G. Forsyth, CFA |
Managing Director, Portfolio Manager |
Doug Forsyth has portfolio manager and research responsibilities for the Income and Growth Strategies team and has been has been the lead portfolio manager since the Funds’ inception (March 2003 - NCV) and (July 2003 - NCZ) and oversees AGI Capital’s Income and Growth Strategies portfolio management and research teams. Prior to joining AGI Capital via a predecessor affiliate in 1994, Mr. Forsyth was a securities analyst at AEGON USA. Mr. Forsyth was previously a research assistant at The University of Iowa, where he earned his B.B.A. in finance. He has nineteen years of investment industry experience. |
|
Justin Kass, CFA |
Managing Director, Portfolio Manager |
Justin Kass has portfolio manager and research responsibilities for the Income and Growth Strategies team and has been a co-portfolio manager since the Funds’ inception (March 2003 - NCV) and (July 2003 - NCZ) and joined AGI Capital via a predecessor affiliate in 2000 with responsibilities for portfolio management and research on the Income and Growth Strategies team. He was previously an analyst and intern on the team, adding significant depth to the proprietary Upgrade Alert Model. He earned his M.B.A. in finance from the UCLA Anderson School of Management and his B.S. from the University of California, Davis. He has thirteen 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, 2011 including accounts managed by a team, committee, or other group that includes the portfolio managers.
NCV
| | | | | | | | | | | | | | | | |
| | Other Registered
Investment Companies | | Other Accounts | | Other Pooled
Investment Vehicles | |
| |
| |
| |
| |
PM | | # | | AUM($million) | | # | | AUM($million) | | # | | AUM($million) | |
| |
| |
| |
| |
| |
| |
| |
| | | | | | | | | | | | | | | | |
Douglas G. Forsyth | | 7 | | | 3,575.8 | | 11 | | | 1,546.5 | | 6 | | | 623.5 | * |
Justin Kass | | 7 | | | 3,575.8 | | 11 | | | 1,546.5 | | 6 | | | 623.5 | * |
*Of these “Other Pooled Investment Vehicles,” two accounts totaling $383.6 million pay and advisory fee that is based in part on the performance of the accounts.
NCZ
| | | | | | | | | | | | | | | | |
| | Other Registered
Investment Companies | | Other Accounts | | Other Pooled
Investment Vehicles | |
| |
| |
| |
| |
PM | | # | | AUM($million) | | # | | AUM($million) | | # | | AUM($million) | |
| |
| |
| |
| |
| |
| |
| |
| | | | | | | | | | | | | | | | |
Douglas G. Forsyth | | 7 | | | 3,313.3 | | 11 | | | 1,546.5 | | 6 | | | 623.5 | * |
Justin Kass | | 7 | | | 3,313.3 | | 11 | | | 1,546.5 | | 6 | | | 623.5 | * |
*Of these “Other Pooled Investment Vehicles,” two accounts totaling $383.6 million pay and advisory fee that is based in part on the performance of the accounts.
| |
| 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 (“performance fee accounts”) may raise potential conflicts of interest by creating an incentive to favor higher-fee accounts. These potential conflicts may include, among others: |
| | |
| • | The most attractive investments could be allocated to higher-fee accounts or performance fee accounts. |
| • | The trading of higher-fee accounts could be favored as to timing and/or execution price. For example, higher-fee accounts could be permitted to sell securities earlier than other accounts when a prompt sale is desirable or to buy securities at an earlier and more opportune time. |
| • | The investment management team could focus their time and efforts primarily on higher-fee accounts due to a personal stake in compensation. |
| |
| 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 when cross trades are effected in a manner perceived to favor one client over another. For example, if the Investment Advisor crosses a trade between performance fee account and a fixed fee account that result in a benefit to the performance fee account and a detriment to the fixed fee account. 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 Allianz Global Investors of America L.P.’s Code 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. The Code of Ethics is designed to ensure that the personal securities transactions, activities and interests of the employees of the Investment Adviser will not interfere with (i) making decisions in the best interest of advisory clients (including the Funds) or (ii) implementing such decisions while, at the same time, allowing employees to invest for their own accounts. |
(a) (3)
As of February 28, 2011 the following explains the compensation structure of each individual who shares primary responsibility for day-to-day portfolio management of the Fund:
AGI Capital’s compensation plan is designed specifically to be aligned with the interests of our clients. We aim to provide rewards for exceptional investment performance and build an enduring firm with a long-term culture of shared success. To that end, in addition to competitive base salaries, we offer both short- and long-term incentive plans.
|
Compensation and Investment Performance |
Short-term incentive pools for investment teams are annual discretionary bonuses funded by the firm’s revenue and allocated based on the performance of the strategies and the teams. The percentage allocated to an investment team is adjusted to reflect performance relative to the benchmark over a one-, three-, and five-year period (the timeframe may vary depending on the strategy). The team pools are then subjectively allocated to team members based on individual contributions to client accounts. This revenue sharing arrangement directly aligns compensation with investment performance. |
|
Long-Term Incentive Plan |
A Long-Term Incentive Plan provides rewards to certain key staff and executives of AGI Capital and the other Allianz Global Investors companies to promote long-term growth and profitability. The Plan is based on the firm’s operating earnings growth of both AGI Capital and Allianz Global Investors, has a three-year vesting schedule and is paid in cash upon vesting. |
|
Ownership |
Managing Directors at AGI Capital are provided with an interest that shares in the future growth and profitability of AGI Capital. Each unit is designed to deliver an annual distribution and a value based on the growth in profits. The plan has a five-year vesting schedule. |
The long-term components of our compensation structure are designed to link successful investment performance and longer-term company performance with participant pay,
further motivating key employees to continue making important contributions to the success of our business.
Overall, we believe that competitive compensation is essential to retaining top industry talent. With that in mind, we continually reevaluate our compensation policies against industry benchmarks. Our 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 independent firms including McLagan Partners.
(a)(4)
Unless otherwise noted, the following summarizes the dollar range of securities the portfolio manager for the Fund beneficially owned of the Fund that he managed as of February 28, 2011.
| |
AGIC Convertible & Income Fund |
|
| PM Ownership |
|
|
Douglas G. Forsyth | $100,001 - $500,000 |
Justin Kass* | $0 |
*As of March 4, 2011
| |
AGIC Convertible & Income Fund II |
|
| PM Ownership |
|
|
Douglas G. Forsyth | $0 |
Justin Kass | $0 |
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 in the registrant’s internal controls 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
(a) (3) Not applicable
(b) Exhibit 99.906 Cert. - Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| |
(Registrant) | AGIC Convertible & Income Fund |
| | |
By | /s/ Brian S. Shlissel | |
|
| |
President and Chief Executive Officer |
Date April 28, 2011
| | |
By | /s/ Lawrence G. Altadonna |
|
| |
Treasurer, Principal Financial & Accounting Officer |
Date April 28, 2011
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| | |
By | /s/ Brian S. Shlissel | |
|
| |
President and Chief Executive Officer |
Date April 28, 2011
| | |
By | /s/ Lawrence G. Altadonna | |
|
| |
Treasurer, Principal Financial & Accounting Officer |
Date April 28, 2011
