For the period ended February 28, 2006, pursuant to the Jobs and Growth Tax Relief Reconciliation Act of 2003, the percentage of ordinary dividends paid by the Fund that the Fund designates as qualified dividend income is 14.54%, or the maximum amount allowable.
For the period ended February 28, 2006, foreign taxes paid and foreign source income are $245,063 and $2,075,076, respectively.
Since the Fund’s tax year is not the calendar year, another notification will be sent with respect to calendar year 2006. In January 2007, shareholders will be advised on IRS Form 1099 DIV as to the federal tax status of the dividends and distributions received during calendar 2006. The amount that will be reported will be the amount to use on your 2006 federal income tax return and may differ from the amount which must be reported in connection with the Fund’s tax year ended February 28, 2006. Shareholders are advised to consult their tax advisers as to the federal, state and local tax status of the dividend income received from the Fund.
As a managing director and the chief investment officer of Nicholas-Applegate, Horacio Valeiras is responsible for overseeing all investment and trading functions within the firm. Prior to joining Nicholas-Applegate in 2002, he was a managing director of Morgan Stanley Investment Management, London, responsible for developing and overseeing their Global Core Equity and European tactical asset allocation programs. From 1992 through 2000 he was head of International Equity and asset allocation programs with Philadelphia-based Miller Anderson & Sherrerd. He has eighteen years of investment management experience.
Steven Tael is a Vice President and Portfolio Manager at Nicholas-Applegate. Prior to joining Nicholas-Applegate in 2005, Mr. Tael was a research analyst for eight years at Mellon Capital Management. He has ten years of investment experience.
Nicholas-Applegate International & Premium Strategy Fund
Privacy Policy/Proxy Voting Policies & Procedures (unaudited)
Privacy Policy:
Our Commitment to You
We consider customer privacy to be a fundamental aspect of our relationship with clients. We are committed to maintaining the confidentiality, integrity, and security of our current, prospective and former clients’ personal information. We have developed policies designed to protect this confidentiality, while allowing client needs to be served.
Obtaining Personal Information
In the course of providing you with products and services, we may obtain non-public personal information about you. This information may come from sources such as account applications and other forms, from other written, electronic or verbal correspondence, from your transactions, from your brokerage or financial advisory firm, financial adviser or consultant, and/or from information captured on our internet web sites.
Respecting Your Privacy
We do not disclose any personal or account information provided by you or gathered by us to non-affiliated third parties, except as required or permitted by law. As is common in the industry, non-affiliated companies may from time to time be used to provide certain services, such as preparing and mailing prospectuses, reports, account statements and other information, conducting research on client satisfaction, and gathering shareholder proxies. We may also retain non-affiliated companies to market our products and enter in joint marketing agreements with other companies. These companies may have access to your personal and account information, but are permitted to use the information solely to provide the specific service or as otherwise permitted by law. We may also provide your personal and account information to your brokerage or financial advisory firm and/or to your financial adviser or consultant.
Sharing Information with Third Parties
We do reserve the right to disclose or report personal information to non-affiliated third parties in limited circumstances where we believe in good faith that disclosure is required under law, to cooperate with regulators or law enforcement authorities, to protect our rights or property, or upon reasonable request by any mutual fund in which you have chosen to invest. In addition, the fund may disclose information about a shareholder’s accounts to a non-affiliated third party with the consent or upon the request of the shareholder.
Sharing Information with Affiliates
We may share client information with our affiliates in connection with servicing your account or to provide you with information about products and services that we believe may be of interest to you. The information we share may include, for example, your participation in our mutual funds or other investment programs, your ownership of certain types of accounts (such as IRAs), or other data about your accounts. Our affiliates, in turn, are not permitted to share your information with non-affiliated entities, except as required or permitted by law.
Procedures to Safeguard Private Information
The Funds take seriously the obligation to safeguard shareholder non-public personal information. In addition to this policy, the Funds have also implemented procedures that are designed to restrict access to a shareholder’s non-public personal information only to internal personnel who need to know that information in order to provide products or services to such shareholders. In order to guard a shareholder’s non-public personal information, physical, electronic and procedural safeguards are in place.
Proxy Voting Policies & Procedures:A description of the policies and procedures that the Fund has adopted to determine how to vote proxies relating to portfolio securities and information about how the Fund voted proxies relating to portfolio securities held during the period ended June 30, 2005 is available (i) without charge, upon request, by calling the Fund’s shareholder servicing agent at (800) 331-1710; (ii) on the Fund’s website at www.allianzinvestors.com/closedendfunds; and (iii) on the Securities and Exchange Commission’s website at www.sec.gov.
24 Nicholas-Applegate International & Premium Strategy Fund Annual Report | 2.28.06 |
Nicholas-Applegate International & Premium Strategy Fund
Dividend Reinvestment Plan (unaudited)
Pursuant to the 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 PFPC Inc., as agent for the Common Shareholders (the “Plan Agent”), unless the shareholder elects to receive cash. An election to receive cash may be revoked or reinstated at the option of the shareholder. In the case of record shareholders such as banks, brokers or other nominees that hold Common Shares for others who are the beneficial owners, the Plan Agent will administer the Plan on the basis of the number of Common Shares certified from time to time by the record shareholder as representing the total amount registered in such shareholder’s name and held for the account of beneficial owners who are to participate in the Plan. Shareholders whose shares are held in the name of a bank, broker or nominee should contact the bank, broker or nominee for details. All distributions to investors who elect not to participate in the Plan (or whose broker or nominee elects not to participate on the investor’s behalf), will be paid cash by check mailed, in the case of direct shareholder, to the record holder by PFPC Inc., as the Fund’s dividend disbursement agent.
Unless you (or your broker or nominee) elects not to participate in the Plan, the number of Common Shares you will receive will be determined as follows:
| | (1) | If 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 Fund will issue new shares at the greater of (i) the net asset value per Common Share on the payment date or (ii) 95% of the market price per Common Share on the payment date; or |
| |
| | (2) | If 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 New York Stock Exchange or elsewhere, for the participants’ accounts. It is possible that the market price for the Common Shares may increase before the Plan Agent has completed its purchases. Therefore, the average purchase price per share paid by the Plan Agent may exceed the market price on the payment date, resulting in the purchase of fewer shares than if the dividend or distribution had been paid in Common Shares issued by the Fund. The Plan Agent will use all dividends and distributions received in cash to purchase Common Shares in the open market on or shortly after the payment date, but in no event later than the ex-dividend date for the next distribution. Interest will not be paid on any uninvested cash payments. |
You may withdraw from the Plan at any time by giving notice to the Plan Agent. If you withdraw or the Plan is terminated, you will receive a certificate for each whole share in your account under the Plan and you will receive a cash payment for any fraction of a share in your account. If you wish, the Plan Agent will sell your shares and send you the proceeds, minus brokerage commissions.
The Plan Agent maintains all shareholders’ accounts in the Plan and gives written confirmation of all transactions in the accounts, including information you may need for tax records. The Plan Agent will also furnish each person who buys Common Shares with written instructions detailing the procedures for electing not to participate in the Plan and to instead receive distributions in cash. Common Shares in your account will be held by the Plan Agent in non-certificated form. Any proxy you receive will include all Common Shares you have received under the Plan.
There is no brokerage charge for reinvestment of your dividends or distributions in Common Shares. However, all participants will pay a pro rata share of brokerage commissions incurred by the Plan Agent when it makes open market purchases.
Automatically reinvested dividends and distributions are taxed in the same manner as cash dividends and distributions.
The Fund and the Plan Agent reserve the right to amend or terminate the Plan. There is no direct service charge to participants in the Plan; however, the Fund reserves the right to amend the Plan to include a service charge payable by the participants. Additional information about the Plan may be obtained from the Fund’s shareholder servicing agent, PFPC Inc., P.O. Box 43027, Providence, RI 02940-3027, telephone number (800) 331-1710.
| 2.28.06 | Nicholas-Applegate International & Premium Strategy Fund Annual Report 25
Nicholas-Applegate International & Premium Strategy Fund
Board of Trustees (unaudited)
| Name, Date of Birth, Position(s) Held with Fund, | | |
| Length of Service, Other Trusteeships/Directorships | | |
| Held by Trustee; Number of Portfolios in Fund | | |
| Complex/Outside Fund Complexes Currently | | |
| Overseen by Trustee | | Principal Occupation(s) During Past 5 Years: |
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| |
| The address of each trustee is 1345 Avenue of the Americas, New York, NY 10105 |
| |
| Robert E. Connor | | Corporate Affairs Consultant; Formerly, Senior Vice President, Corporate Office, |
| Date of Birth: 9/17/34 | | Smith Barney Inc. |
| Chairman of the Board of Trustees since: 2005 | | |
| Trustee since: 2005 | | |
| Term of office: Expected to stand for re-election | | |
| at 2008 annual meeting of shareholders. | | |
| Trustee/Director of 24 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., |
| Date of Birth: 9/27/21 | | Goal Funding, Inc., Goal Funding II, Inc. and Surety Loan Fund, Inc.; Formerly, |
| Trustee since: 2005 | | Manager of Stratigos Fund LLC, Whistler Fund LLC, Xanthus Fund LLC & Wynstone |
| Term of Office: Expected to stand for re-election | | Fund LLC; and Formerly, Senior Executive and Member of the Board of Smith Barney, |
| at 2006 annual meeting of shareholders. | | Harris Upham & Co. |
| Trustee/Director of 24 funds in Fund Complex | | |
| Trustee/Director of no funds outside of Fund Complex | | |
| |
| John J. Dalessandro II | | Retired. Formerly, President and Director, J.J. Dalessandro II Ltd., registered |
| Date of Birth: 7/26/37 | | broker-dealer and member of the New York Stock Exchange. |
| Trustee since: 2005 | | |
| Term of office: Expected to stand for re-election | | |
| at 2007 annual meeting of shareholders. | | |
| Trustee of 24 funds in Fund Complex | | |
| Trustee of no funds outside of Fund Complex | | |
| |
| Hans W. Kertess | | President, H Kertess & Co. Formerly, Managing Director, Royal Bank of Canada |
| Date of Birth: 7/12/39 | | Capital Markets. |
| Trustee since: 2005 | | |
| Term of office: Expected to stand for re-election | | |
| at 2006 annual meeting of shareholders. | | |
| Trustee of 24 funds in Fund Complex | | |
| Trustee of no funds outside of Fund Complex | | |
Further information about Fund’s Trustees is available in the Fund’s Statement of Additional Information, dated April 26, 2005, which can be obtained upon request, without charge, by calling the Fund’s shareholder servicing agent at (800) 331-1710.
26 Nicholas-Applegate International & Premium Strategy Fund Annual Report | 2.28.06 |
Nicholas-Applegate International & Premium Strategy Fund
Principal Officers (unaudited)
| Name, Date of Birth, Position(s) Held with Fund | | Principal Occupation(s) During Past 5 Years: |
|
|
|
| |
| Brian S. Shlissel | | Executive Vice President, Allianz Global Investors Fund Management LLC; President |
| Date of Birth: 11/14/64 | | and Chief Executive Officer of 32 funds in the Fund Complex; Treasurer; Principal |
| President & Chief Executive Officer since: 2005 | | Financial and Accounting Officer of 33 funds in the Fund Complex; Trustee of 8 funds |
| | | in the Fund Complex. |
| |
| Lawrence G. Altadonna | | Senior Vice President, Allianz Global Investors Fund Management LLC; Treasurer, |
| Date of Birth: 3/10/66 | | Principal Financial and Accounting officer of 32 funds in the Fund Complex; |
| Treasurer, Principal/Financial and Accounting | | Assistant Treasurer of 33 funds in the Fund Complex. |
| Officer since: 2005 | | |
| |
| Thomas J. Fuccillo | | Senior Vice President, Senior Counsel, Allianz Global Investors of America L.P., |
| Date of Birth: 3/22/68 | | Secretary and Chief Legal Officer of 32 funds in the Fund Complex. Formerly, Vice |
| Secretary & Chief Legal Officer since: 2005 | | President and Associate General Counsel, Neuberger Berman, LLC (1991-2004). |
| |
| Youse Guia | | Senior Vice President, Group Compliance Manager, Allianz Global Investors of |
| Date of Birth: 9/3/72 | | America L.P., Chief Compliance Officer of 65 funds in the Fund Complex. Formerly, |
| Chief Compliance Officer since: 2005 | | Vice President, Group Compliance Manager, Allianz Global Investors of America L.P. |
| | | (2002-2004). Audit Manager, PricewaterhouseCoopers LLP (1996-2002). |
Officers hold office at the pleasure of the Board and until their successors are appointed and qualified or until their earlier resignation or removal.
| 2.28.06 | Nicholas-Applegate International & Premium Strategy Fund Annual Report 27
| Trustees and Principal Officers | |
| Robert E. Connor | Brian S. Shlissel |
| | Trustee, Chairman of the Board of Trustees | | President & Chief Executive Officer |
| Paul Belica | Lawrence G. Altadonna |
| Trustee | | Treasurer, Principal Financial & Accounting Officer |
| John J. Dalessandro II | Thomas J. Fuccillo |
| | Trustee | | Secretary & Chief Legal Officer |
| Hans W. Kertess | Youse Guia |
| | Trustee | | Chief Compliance Officer |
| Investment Manager | | |
Allianz Global Investors Fund Management LLC
1345 Avenue of the Americas
New York, NY 10105
| | |
| Sub-Advisers | | |
Nicholas Applegate Capital Management Company LLC
600 West Broadway, 30th Floor
San Diego, CA 92101
| | |
PEA Capital LLC
1345 Avenue of the Americas, 48th Floor
New York, NY 10105
| | |
| Custodian & Accounting Agent | | |
State Street Bank & Trust Co.
225 Franklin Street
Boston, MA 02110
| | |
| Transfer Agent, Dividend Paying Agent and Registrar | | |
PFPC Inc.
P.O. Box 43027
Providence, RI 02940-3027
| | |
| Independent Registered Public Accounting Firm | | |
PricewaterhouseCoopers LLP
300 Madison Avenue
New York, NY 10017
| | |
| Legal Counsel | | |
Ropes & Gray LLP
One International Place
Boston, MA 02210-2624
| | |
| This report, including the financial information herein, is transmitted to the shareholders of Nicholas-Applegate International & Premium Strategy Fund for their information. It is not a prospectus, circular or representation intended for use in the purchase of shares of the Fund or any securities mentioned in this report. |
| |
| Notice is hereby given in accordance with Section 23(c) of the Investment Company Act of 1940, as amended, that from time to time the Fund may purchase shares of its common stock in the open market. |
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| The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission, (“SEC”) for the first and third quarters of its fiscal year on Form N-Q. The Fund’s form N-Q is available on the SEC’s website at www.sec.gov and may be reviewed and copied at the SEC’s Public Reference Room in Washington 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 Fund’s website at www.allianzinvestors.com/closedendfunds. |
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On April 12, 2005, the Fund submitted a CEO annual certification to the New York Stock Exchange (“NYSE”) on which the Fund’s principal executive officer certified that he was not aware as of the date, of any violation by the Fund of the NYSE’s Corporate Governance listing standards. In addition, as required by Section 302 of the Sarbanes-Oxley Act of 2002 and related SEC rules, the Fund’s principal executive and principal financial officer made quarterly certifications, included in filings with the SEC on Forms N-CSR and N-Q relating to, among other things, the Fund’s disclosure controls and procedures and internal control over financial reporting, as applicable.
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| Information on the Fund is available at www.allianzinvestors.com/closedendfunds or by calling the Fund’s shareholder servicing agent at (800) 331-1710. |
ITEM 2. CODE OF ETHICS
| | (a) | As of the end of the period covered by this report, the registrant has adopted a code of ethics (the “Section 406 Standards for Investment Companies — Ethical Standards for Principal Executive and Financial Officers”) that applies to the registrant’s Principal Executive Officer and Principal Financial Officer; the registrant’s Principal Financial Officer also serves as the Principal Accounting Officer. The registrant undertakes to provide a copy of such code of ethics to any person upon request, without charge, by calling 1-800-331-1710. The Investment Managers code of ethics are included as an Exhibit 99.CODE ETH hereto. |
| |
| | (b) | During the period covered by this report, there were not any amendments to a provision of the code of ethics adopted in 2(a) above. |
| |
| | (c) | During the period covered by this report, there were not any waivers or implicit waivers to a provision of the code of ethics adopted in 2(a) above. |
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT
The registrant’s Board has determined that Mr. Paul Belica, a member of the Board’s Audit Oversight Committee is an “audit committee financial expert,” and that he is “independent,” for purposes of this Item.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES
| | a) | Audit fees. The aggregate fees billed for each of the last two fiscal years (the “Reporting Periods”) for professional services rendered by the Registrant’s principal accountant (the “Auditor”) for the audit of the Registrant’s annual financial statements, or services that are normally provided by the Auditor in connection with the statutory and regulatory filings or engagements for the Reporting Periods, were $0 in 2005 and $79,000 in 2006 (February 28, 2006 was the Registrant’s initial fiscal year). |
| |
| | 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 $0 in 2005 and $12,500 in 2006. These services consist of accounting consultations, agreed upon procedure reports, attestation reports and comfort letters (February 28, 2006 was the Registrant’s initial fiscal year). |
| |
| | 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 $0 in 2005 and $11,000 in 2006. These services consisted of review or preparation of U.S. federal, state, local and excise tax returns. (February 28, 2006 was the Registrant’s initial fiscal year) |
| |
| | d) | All Other Fees. There were no other fees billed in the Reporting Periods for products and services provided by the Auditor to the Registrant. |
| |
| | e) | 1. Audit Committee Pre-Approval Policies and Procedures. The Registrant’s Audit Committee has established policies and procedures for pre-approval of all audit and permissible non-audit services by the Auditor for the Registrant, as well as the Auditor’s engagements related directly to the operations and financial reporting of the Registrant. The Registrant’s policy is stated below. |
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| | | Nicholas-Applegate International & Premium Strategy Fund (THE “FUND”) |
AUDIT OVERSIGHT COMMITTEE POLICY FOR PRE-APPROVAL OF SERVICES PROVIDED BY THE INDEPENDENT ACCOUNTANTS
The Funds’ Audit Oversight Committee (“Committee”) is charged with the oversight of the Funds’ financial reporting policies and practices and their internal controls. As part of this responsibility, the Committee must pre-approve any independent accounting firm’s engagement to render audit and/or permissible non-audit services, as required by law. In evaluating a proposed engagement by the independent accountants, the Committee will assess the effect that the engagement might reasonably be expected to have on the accountant’s independence. The Committee’s evaluation will be based on:
| | | a review of the nature of the professional services expected to provided, |
| | | |
| | | the fees to be charged in connection with the services expected to be provided, |
| | | |
| | | a review of the safeguards put into place by the accounting firm to safeguard independence, and |
| | | |
| | | periodic meetings with the accounting firm. |
POLICY FOR AUDIT AND NON-AUDIT SERVICES TO BE PROVIDED TO THE FUNDSOn an annual basis, the Funds’ Committee will review and pre-approve the scope of the audits of the Funds and proposed audit fees and permitted non-audit (including audit-related) services that may be performed by the Funds’ independent accountants. At least annually, the Committee will receive a report of all audit and non-audit services that were rendered in the previous calendar year pursuant to this Policy. In addition to the Committee’s
pre-approval of services pursuant to this Policy, the engagement of the independent accounting firm for any permitted non-audit service provided to the Funds will also require the separate written pre-approval of the President of the Funds, who will confirm, independently, that the accounting firm’s engagement will not adversely affect the firm’s independence. All non-audit services performed by the independent accounting firm will be disclosed, as required, in filings with the Securities and Exchange Commission.
AUDIT SERVICES
The categories of audit services and related fees to be reviewed and pre-approved annually by the Committee are:
| | Annual Fund financial statement audits
Seed audits (related to new product filings, as required)
SEC and regulatory filings and consents
Semiannual financial statement reviews |
AUDIT-RELATED SERVICES
The following categories of audit-related services are considered to be consistent with the role of the Fund’s independent accountants and services falling under one of these categories will be pre-approved by the Committee on an annual basis if the Committee deems those services to be consistent with the accounting firm’s independence:
| | Accounting consultations
Fund merger support services
Agreed upon procedure reports (inclusive of quarterly review of Basic Maintenance testing associated
with issuance of Preferred Shares and semiannual report review)
Other attestation reports
Comfort letters
Other internal control reports |
Individual audit-related services that fall within one of these categories and are not presented to the Committee as part of the annual pre-approval process described above, may be pre-approved, if deemed consistent with the accounting firm’s independence, by the Committee Chair (or any other Committee member who is a disinterested trustee under the Investment Company Act to whom this responsibility has been delegated) so long as the estimated fee for those services does not exceed $100,000. Any such pre-approval shall be reported to the full Committee at its next regularly scheduled meeting.
TAX SERVICES
The following categories of tax services are considered to be consistent with the role of the Funds’ independent accountants and services falling under one of these categories will be pre-approved by the Committee on an annual basis if the Committee deems those services to be consistent with the accounting firm’s independence:
| | Tax compliance services related to the filing or amendment of the following:
Federal, state and local income tax compliance; and, sales and use tax compliance
Timely RIC qualification reviews
Tax distribution analysis and planning
Tax authority examination services
Tax appeals support services
Accounting methods studies
Fund merger support service
Other tax consulting services and related projects |
Individual tax services that fall within one of these categories and are not presented to the Committee as part of the annual pre-approval process described above, may be pre-approved, if deemed consistent with the accounting firm’s independence, by the Committee Chairman (or any other Committee member who is a disinterested trustee under the Investment Company Act to whom this responsibility has been delegated) so long as the estimated fee for those services does not exceed $100,000. Any such pre-approval shall be reported to the full Committee at its next regularly scheduled meeting.
PROSCRIBED SERVICES
The Funds’ independent accountants will not render services in the following categories of non-audit services:
| | Bookkeeping or other services related to the accounting records or financial statements of the Funds
Financial information systems design and implementation
Appraisal or valuation services, fairness opinions, or contribution-in-kind reports
Actuarial services
Internal audit outsourcing services
Management functions or human resources
Broker or dealer, investment adviser or investment banking services
Legal services and expert services unrelated to the audit
Any other service that the Public Company Accounting Oversight Board determines, by regulation, is
impermissible |
PRE-APPROVAL OF NON-AUDIT SERVICES PROVIDED TO OTHER ENTITIES WITHIN THE FUND COMPLEX
The Committee will pre-approve annually any permitted non-audit services to be provided to Allianz Global Investors Fund Management LLC (Formerly, PA Fund Management LLC) or any other investment manager to the Funds (but not including any sub-adviser whose role is primarily portfolio management and is sub-contracted by the investment manager) (the “Investment Manager”) and any entity
controlling, controlled by, or under common control with the Investment Manager that provides ongoing services to the Funds (including affiliated sub-advisers to the Funds), provided, in each case, that the engagement relates directly to the operations and financial reporting of the Funds (such entities, including the Investment Manager, shall be referred to herein as the “Accounting Affiliates”). Individual projects that are not presented to the Committee as part of the annual pre-approval process, may be pre-approved, if deemed consistent with the accounting firm’s independence, by the Committee Chairman (or any other Committee member who is a disinterested trustee under the Investment Company Act to whom this responsibility has been delegated) so long as the estimated fee for those services does not exceed $100,000. Any such pre-approval shall be reported to the full Committee at its next regularly scheduled meeting.
Although the Committee will not pre-approve all services provided to the Investment Manager and its affiliates, the Committee will receive an annual report from the Funds’ independent accounting firm showing the aggregate fees for all services provided to the Investment Manager and its affiliates. DE MINIMUS EXCEPTION TO REQUIREMENT OF PRE-APPROVAL OF NON-AUDIT SERVICES
With respect to the provision of permitted non-audit services to a Fund or Accounting Affiliates, the pre-approval requirement is waived if:
| | (1) | The aggregate amount of all such permitted non-audit services provided constitutes no more than (i) with respect to such services provided to the Fund, five percent (5%) of the total amount of revenues paid by the Fund to its independent accountant during the fiscal year in which the services are provided, and (ii) with respect to such services provided to Accounting Affiliates, five percent (5%) of the total amount of revenues paid to the Fund’s independent accountant by the Fund and the Accounting Affiliates during the fiscal year in which the services are provided; |
| |
| | (2) | Such services were not recognized by the Fund at the time of the engagement for such services to be non-audit services; and |
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| | (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 2006 Reporting Period was $2,764,225. (February 28, 2006 was the Registrant’s initial fiscal year) h) Auditor Independence. The Registrant’s Audit Oversight Committee has considered whether the provision of non-audit services that were rendered to the Adviser which were not pre-approved is compatible with maintaining the Auditor’s independence. |
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANT
The Fund has a separately designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934. The audit committee of the Fund is comprised of Robert E. Connor, Paul Belica, John J. Dalessandro II and Hans W. Kertess.
ITEM 6. SCHEDULE OF INVESTMENTS Schedule of Investments is included as part of the report to shareholders filed under Item 1 of this form.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Allianz Global Investors and Nicholas-Applegate
Description of Proxy Voting Policy and Procedures
The Registrant and its Board of Trustees have delegated to Allianz Global Investors Fund Management LLC (“Allianz Global Investors”), and Allianz Global Investors has in turn delegated to the sub-advisers, responsibility for voting any proxies relating to portfolio securities held by the Registrant in accordance with the sub-advisers’ proxy voting policies and procedures.
Each of Allianz Global Investors and Nicholas-Applegate Capital Management LLC (“Nicholas Applegate”) (for purposes of this description, each a “Company”) typically votes proxies as part of its discretionary authority to manage accounts (except as provided below with respect to Allianz Global Investors’ registered investment company clients), unless the client has explicitly reserved the authority for itself. When voting proxies, each Company’s primary objective is to make voting decisions solely in the best economic interests of its clients. Each Company will act in a manner that it deems prudent and diligent and which is intended to enhance the economic value of the underlying portfolio securities held in its clients’ accounts.
Each Company has adopted written Proxy Voting Policies and Procedures (the “Proxy Guidelines”) that are reasonably designed to ensure that such Company is voting in the best interest of its clients. The Proxy Guidelines reflect each Company’s general voting positions on specific corporate governance issues and corporate actions. Some issues may require a case by case analysis prior to voting and may result in a vote being cast that will deviate from the Proxy Guidelines. Upon receipt of a client’s written request, a Company may also vote proxies for that client’s account in a particular manner that may differ from the Proxy Guidelines. Deviation from a Company’s Proxy Guidelines will be documented and maintained in accordance with Rule 204-2 under the Investment Advisers Act of 1940.
In accordance with the Proxy Guidelines, a Company may review additional criteria associated with voting proxies and evaluate the expected benefit to its clients when making an overall determination on how or whether to vote the proxy. A Company may vote proxies individually for an account or aggregate and record votes across a group of accounts, strategy or product. In addition, a Company may refrain from voting a proxy on behalf of its clients’ accounts due to de-minimis holdings, impact on the portfolio, items relating to foreign issuers, timing issues related to the opening/closing of accounts and contractual arrangements with clients and/or their authorized delegate. For example, a Company may refrain from voting a proxy of a foreign issuer due to logistical considerations that may have a detrimental effect on a Company’s ability to vote the
proxy. These issues may include, but are not limited to: (i) proxy statements and ballots being written in a foreign language, (ii) untimely notice of a shareholder meeting, (iii) requirements to vote proxies in person, (iv) restrictions on a foreigner’s ability to exercise votes, (v) restrictions on the sale of securities for a period of time in proximity to the shareholder meeting, or (vi) requirements to provide local agents with power of attorney to facilitate the voting instructions. Such proxies are voted on a best-efforts basis.
To assist in the proxy voting process, a Company may retain an independent third party service provider to assist in providing research, analysis and voting recommendations on corporate governance issues and corporate actions as well as assist in the administrative process. The services provided offer a variety of proxy-related services to assist in a Company’s handling of proxy voting responsibilities.
Conflicts of Interest. A Company may have conflicts of interest that can affect how it votes its clients’ proxies. For example, a Company or an affiliate may manage a pension plan whose management is sponsoring a proxy proposal. The Proxy Guidelines are designed to prevent material conflicts of interest from affecting the manner in which a Company votes its clients’ proxies. In order to ensure that all material conflicts of interest are addressed appropriately while carrying out its obligation to vote proxies, the Chief Investment Officer of the relevant Company may designate an employee or a proxy committee to be responsible for addressing how the Company resolves such material conflicts of interest with its clients.
Registered Investment Companies for which Allianz Global Investors Serves as Adviser. With respect to registered investment companies (“funds”) for which Allianz Global Investors serves as investment adviser, it is the policy of Allianz Global Investors that proxies should be voted in the interest of the shareholders of the applicable fund, as determined by those who are in the best position to make this determination. Allianz Global Investors believes that the firms and/or persons purchasing and selling securities for the funds and analyzing the performance of the funds’ securities are in the best position and have the information necessary to vote proxies in the best interests of the funds and their shareholders, including in situations where conflicts of interest may arise between the interests of shareholders, on one hand, and the interests of the investment adviser, a sub-adviser and/or any other affiliated person of the fund, on the other. Accordingly, Allianz Global Investor’s policy is to delegate proxy voting responsibility to those entities with portfolio management responsibility for the funds.
PEA Capital
Description of Proxy Voting Policy and Procedures
PEA Capital LLC (for purposes of this description, the “Company”) may be granted by its clients the authority to vote proxies of the securities held in client portfolios. To ensure that the proxies are voted in the best interests of its clients, the Company has adopted detailed proxy voting procedures and has guidelines for voting proxies on
specific types of issues. The Company 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, the Company’s primary objective is to make voting decisions solely in the best economic interests of its clients. The Company will act in a manner which is intended to enhance the economic value of the underlying portfolio securities held in its clients’ accounts.
The Company has adopted written Proxy Voting Policies 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 the Company’s general voting positions on specific corporate governance issues and corporate actions. The Company 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. The services provided offer a variety of proxy-related services to assist in the Company’s handling of proxy voting responsibilities.
The Company’s Proxy Guidelines also provide for oversight of the proxy voting process by a Proxy Committee. The Proxy Committee meets at a minimum on a quarterly basis and when necessary to address potential conflicts of interest. The Company may have conflicts of interest that can affect how it votes its client’s proxies. For example, the Company may manage a pension plan whose management is sponsoring a proxy proposal. In order to ensure that all material conflicts of interest are addressed appropriately while carrying out the Company’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 the Company 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 of 1940.
The Company’s Proxy Committee’s duties also include monitoring the outsourcing of voting obligations to the Proxy Provider and the Company’s proxy voting recordkeeping practices; developing 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, determining a process for voting such issues. The Company’s Proxy Committee will review, at least annually, the services provided by the Proxy Provider and all proxy voting processes and procedures and will update or revise them as necessary.
In accordance with the Proxy Guidelines, theCompany 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, the Company may also vote proxies for that client’s account in a particular manner that may differ from the Proxy Guidelines. In addition, the Company 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 foreign issuers (such as those described below), timing issues related to the opening/closing of accounts and contractual arrangements with clients and/or their authorized delegate. For example, the
Company may refrain from voting a proxy of a foreign issuer due to logistical considerations that may have a detrimental effect on the Company’s ability to vote the proxy. These issues may include, but are not limited to: (i) proxy statements and ballots being written in a foreign language, (ii) untimely notice of a shareholder meeting, (iii) requirements to vote proxies in person, (iv) restrictions on a foreigner’s ability to exercise votes, (v) restrictions on the sale of securities for a period of time in proximity to the shareholder meeting, or (vi) requirements to provide local agents with power of attorney to facilitate the voting instructions. Such proxies are voted on a best-efforts basis.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES
(a)(1)
Nicholas Applegate Capital Management LLC (“NACM”)
As of May 9, 2006, the following individuals constitute the team that has primary responsibility for the day-to-day implementation of the Nicholas-Applegate International & Premium strategy Fund (NAI), with Horacio Valeiras, CFA, serving as head of the team:
Horacio A. Valeiras, CFA
Managing Director and Chief Investment Officer, Nicholas-Applegate Capital Management
As a managing director and the chief investment officer of Nicholas-Applegate, Horacio Valeiras is responsible for overseeing all investment and trading functions within the firm. He is also lead portfolio manager for the International Growth portfolios and a member of the Executive Committee. Prior to joining Nicholas-Applegate in 2002, he was a managing director of Morgan Stanley Investment Management, London, responsible for developing and overseeing their Global Core Equity and European tactical asset allocation programs. Horacio was previously head of International Equity and asset allocation programs with Philadelphia-based Miller Anderson & Sherrerd. He started in the investment management industry with Credit Suisse First Boston, where he became the director and chief international investment strategist based in their London office. Horacio serves on the Board of Directors of the San Diego Rowing Club and of the Bishop’s School. He earned his M.B.A. with an emphasis on finance from the University of California at Berkeley and his master’s degree from Massachusetts Institute of Technology, where he became an instructor in their graduate school program. He earned a B.S. in chemical engineering from Virginia Tech. He has eighteen years of investment management experience.
Steven Tael, Ph.D.
Vice President, Portfolio Manager, Systematic
Steven Tael joined Nicholas-Applegate from Mellon Capital Management in San Francisco, where he was a research analyst in the area of investment research. His
experience spans quantitative model building, model production and portfolio management support. Prior to that, he was an Advisory Systems Engineer for Bank of America, where he co-developed a global portfolio risk reporting system. He also was Director of Information Technologies at AffiniCorp USA. Steve has a Ph.D. in Applied Mathematics and Statistics from State University of New York in Stony Brook, and a B.S. and M.S. in Mathematics from the University of California, Santa Barbara. He recently passed the Level II CFA examination, and has ten years of investment experience.
PEA Capital LLC (“PEA”)
As of May 9, 2006, the following individuals are part of the derivatives group at PEA and constitute the team that has primary responsibility for the day-to-day implementation of the Fund's investment strategy, with Mr. Tournant serving as head of the team."
Greg Tournant - Portfolio Manager for PEA. Prior to joining PEA in 2001, he was a Senior Research Analyst at Eagle Asset Management, a division of Raymond James Financial. Before that he spend three years as a strategy consultant for McKinsey & Co., and two years as a research analyst for Eagle Asset Management. He has nine years of investment experience. Mr. Tournant holds a B.S. from Trinity University in San Antonio, Texas and an M.B.A. from the Kellogg School of Business at Northwestern University.
Stephen Bond-Nelson - Portfolio Manager/Senior Analyst for PEA. Prior to joining PEA in 1999, he was a Research Analyst/Associate at Prudential Mutual Funds. He has ten years of investment experience. Mr. Bond-Nelson holds a B.S. from Lehigh University and an M.B.A. from Rutgers University.
Valentin Ivanov - Quantitative Analyst for PEA. Prior to joining PEA in 2005, he was a portfolio administrator and trader with Allianz Global Investors Managed Accounts and Nicholas-Applegate Capital Management. He has seven years of industry experience. Mr. Ivanov holds a B.A. from the University of San Diego.
Brandon Primack - Research Analyst. Prior to joining the derivatives group, he was an equity analyst at PEA. Prior to joining PEA in 1999, he was portfolio administrator at Scudder Kemper Investments. He has four years of derivatives experience and seven years of combined industry and investment experience. Mr. Primack holds a B.A. in Economics from the University of Michigan. He is a CFA charterholder and a member of the New York Society of Security Analysts.
(a)(2)
NACM
The following summarizes information regarding each of the accounts, excluding portfolios of the Nicholas-Applegate International & Premium strategy Fund (NAI) that were managed by Portfolio Managers as of March 31, 2006, including accounts managed by a team, committee, or other group that includes the Portfolio Managers.
| | | Other RICs | | Other Accounts | | Other Pooled |
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| PM | | # | | AUM($million) | | # | | AUM($million) | | # | | AUM($million) |
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|
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|
| |
|
|
| |
| Horacio | | 23 | | 1845.0 | | 64 | | 2408.9 | | 5 | | 173.2 |
| Valeiras, | | | | | | | | | | | | |
| CFA | | | | | | | | | | | | |
| |
|
| |
|
| |
|
|
| Steven | | 22 | | 1819.0 | | 60 | | 1516.6 | | 4 | | 47.2 |
| Tael, | | | | | | | | | | | | |
| Ph.D. | | | | | | | | | | | | |
| |
|
| |
|
| |
|
|
| |
| Accounts and Assets for which Advisory Fee is Based on Performance | | |
| |
| | | Other RICs | | Other Accounts | | Other Pooled |
| |
| |
| |
|
| PM | | # | | AUM($million) | | # | | AUM($million) | | # | | AUM($million) |
| |
|
| |
|
| |
|
|
| Horacio | | 1 | | 114.9 | | 3 | | 105.2 | | - | | - |
| Valeiras, | | | | | | | | | | | | |
| CFA | | | | | | | | | | | | |
| |
|
| |
|
| |
|
|
| Steven | | 1 | | 114.9 | | 3 | | 105.2 | | - | | - |
| Tael, | | | | | | | | | | | | |
| Ph.D. | | | | | | | | | | | | |
| |
| |
| |
| |
| |
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Like other investment professionals with multiple clients, a Portfolio Manager for a Fund may face certain potential conflicts of interest in connection with managing both the Fund and other accounts at the same time. The paragraphs below describe some of these potential conflicts, which the Investment Adviser believes are faced by investment professionals at most major financial firms.
The Investment Adviser and the Trustees have adopted compliance policies and procedures that attempt to address certain of these potential conflicts. The management of accounts with different advisory fee rates and/or fee structures, including accounts that pay advisory fees based on account performance (“performance fee accounts”), may raise potential conflicts of interest by creating an incentive to favor higher-fee accounts. These potential conflicts may include, among others:
• The most attractive investments could be allocated to higher-fee accounts or performance fee accounts.
• The trading of higher-fee accounts could be favored as to timing and/or execution price. For example, higher-fee accounts could be permitted to sell securities earlier than other accounts when a prompt sale is desirable or to buy securities at an earlier and more opportune time.
• The investment management team could focus their time and efforts primarily on higher-fee accounts due to a personal stake in compensation.
A potential conflict of interest may arise when a Fund and other accounts purchase or sell the same securities. On occasions when a Portfolio Manager considers the purchase or sale of a security to be in the best interests of a Fund as well as other accounts, the Investment Adviser’s trading desk may, to the extent permitted by applicable laws and regulations, aggregate the securities to be sold or purchased in order to obtain the best execution and lower brokerage commissions, if any. Aggregation of trades may create the potential for unfairness to a Fund or another account if one account is favored over another in allocating the securities purchased or sold—for example, by allocating a disproportionate amount of a security that is likely to increase in value to a favored account.
“Cross trades,” in which one Investment Adviser account sells a particular security to another account (potentially saving transaction costs for both accounts), may also pose a potential conflict of interest. Cross trades may be seen to involve a potential conflict of interest if, for example, one account is permitted to sell a security to another account at a higher price than an independent third party would pay. The Investment Adviser and the Board of Trustees have adopted compliance procedures that provide that any transactions between the Funds and another Investment Adviser-advised account are to be made at an independent current market price, as required by law.
Another potential conflict of interest may arise based on the different investment objectives and strategies of a Fund and other accounts. For example, another account may have a shorter-term investment horizon or different investment objectives, policies or restrictions than a Fund. Depending on another account’s objectives or other factors, a Portfolio Manager may give advice and make decisions that may differ from advice given, or the timing or nature of decisions made, with respect to a Fund. In addition, investment decisions are the product of many factors to basic suitability for the particular account involved. Thus, a particular security may be bought or sold for certain accounts even though it could have been bought or sold for other accounts at the same time. More rarely, a particular security may be bought for one or more accounts managed by a Portfolio Manager when one or more other accounts are selling the security (including short sales). There may be circumstances when purchases or sales of portfolio securities for one or more accounts may have an adverse effect on other accounts.
A Fund’s Portfolio Manager who is responsible for managing multiple funds and/or accounts may devote unequal time and attention to the management of those funds and/or accounts. As a result, the Portfolio Manager may not be able to formulate as complete a
strategy or identify equally attractive investment opportunities for each of those accounts as might be the case if he or she were to devote substantially more attention to the management of a single fund. The effects of this potential conflict may be more pronounced where funds and/or accounts overseen by a particular Portfolio Manager have different investment strategies. A Fund’s Portfolio Manager(s) may be able to select or influence the selection of the brokers and dealers that are used to execute securities transactions for the Funds. In addition to executing trades, some brokers and dealers provide Portfolio Managers with brokerage and research services (as those terms are defined in Section 28(e) of the Securities Exchange Act of 1934), which may result in the payment of higher brokerage fees than might have otherwise be available. These services may be more beneficial to certain funds or accounts than to others. Although the payment of brokerage commissions is subject to the requirement that the Portfolio Manager determine in good faith that the commissions are reasonable in relation to the value of the brokerage and research services provided to the Fund, a Portfolio Manager’s decision as to the selection of brokers and dealers could yield disproportionate costs and benefits among the Funds and/or accounts that he or she manages. See “Portfolio Transactions and Brokerage”.
A Fund’s Portfolio Manager(s) may also face other potential conflicts of interest in managing a Fund, and the description above is not a complete description of every conflict that could be deemed to exist in managing both the Funds and other accounts. In addition, a Fund’s Portfolio Manager may also manage other accounts (including their personal assets or the assets of family members) in their personal capacity. The management of these accounts may also involve certain of the potential conflicts described above. The Investment Adviser’s investment personnel, including each Fund’s Portfolio Manager, are subject to restrictions on engaging in personal securities transactions pursuant to the Codes of Ethics adopted by the Investment Adviser and the Funds, which contain provisions and requirements designed to identify and address certain conflicts of interest between personal investment activities and the interests of the Funds.
PEA
As of February 28, 2006:
Greg Tournant:
Other Registered Investment Companies (4) - $2,293,124,717; Other Pooled Investment Entities - $0; Other Accounts (2) - $4,264,241
Stephen Bond-Nelson:
Other Registered Investment Companies (4) - $2,293,124,717; Other Pooled Investment Entities - $0; Other Accounts (2) - $4,264,241
Valentin Ivanov:
Other Registered Investment Companies (4) - $2,293,124,717; Other Pooled Investment Entities - $0; Other Accounts (2) - $4,264,241
Brandon Primack:
Other Registered Investment Companies (1) - $1,736,688,268; Other Pooled Investment Entities - $0; Other Accounts (2) - $4,264,241
The advisory fee charged for managing each of the accounts listed above is not based on performance.
When a portfolio manager has responsibility for managing more than one account, potential conflicts of interest may arise. Those conflicts could include preferential treatment of one account over others in terms of allocation of resources or of investment opportunities. While the portfolio managers of PEA Capital are subject to a written Code of Ethics that is designed to ensure that the personal securities transactions of covered persons will not interfere with making decisions in the best interest of advisory clients, the portfolio managers may, from time to time, acquire, possess, manage and dispose of securities or other investment assets for their own accounts, for the accounts of their families, for the account of any entity in which they have a beneficial interest or for the accounts of others for whom they provide investment advisory services (collectively, "Managed Accounts"), in transactions which may or may not correspond with transactions effected or positions held in the Funds. When PEA Capital determines that it would be appropriate for a particular Fund and one or more Managed Accounts to participate in an investment opportunity, PEA Capital will seek to execute orders for a Fund and for such Managed Accounts on a basis which it considers equitable, but that equality of treatment of a Fund and one or more other Managed Accounts is not assured. In such situations, PEA Capital may (but is not required to) place orders for a Fund and each other Managed Account simultaneously and if all such orders are not filled at the same price, PEA Capital may cause a Fund and each Managed Account to pay or receive the average of the prices at which the orders were filled. If all such orders cannot be fully executed under prevailing market conditions, PEA Capital may allocate the securities traded among a Fund and other Managed Accounts, pursuant to policies and procedures adopted to address these potential conflicts of interest, in a manner which it considers equitable, taking into account the size of the order placed for a Fund and each other Managed Account as well as any other factors which it deems relevant.
(a) (3)
NACM
As of March 31, 2006, the following explains the compensation structure of each individual that shares primary responsibility for day-to-day portfolio management of the Fund (for the purposes of this section, “Portfolio Managers”):
Base Salary. Each Portfolio Manager is paid a fixed base salary set at a competitive level, taking into consideration the Portfolio Manager’s experience and responsibilities, as determined by the Investment Adviser.
Annual Bonus, Profit Sharing Opportunity, and Long-Term Cash Bonus Plan . Each Portfolio Manager’s compensation is directly affected by the performance, on a pre-tax basis, of the individual portfolios he or she manages, including each Fund; as well as the performance of the individual’s portfolio management team and the overall success of the firm.
Approximately 75% of an investment professional’s performance bonus is based on one-and three-year annualized performance of client accounts, with greater weight placed on three-year performance. Relative performance to the benchmark is approximately half of the calculation and the product’s peer ranking in institutional consultant universes determines the other half. The remaining 25% of the performance bonus is based on a qualitative review and firm profitability. In the qualitative review, team members are evaluated based on the consistency of their implementation of the investment process. Lead portfolio managers evaluate the members of their teams. The Chief Investment Officer evaluates the lead portfolio managers.
Investment teams have a profit-sharing plan which represents approximately 25% of the total bonus. Each team receives a pool which is based on the pre-tax profit of their product. All team members are eligible. Allocations are decided between the Chief Investment Officer and lead portfolio managers of the teams. The share of pre-tax profit increases with increasing profitability. This structure, together with the bonus based on investment performance, fully aligns the team with client interests.
A Long-Term Cash Bonus Plan was established to provide long-term incentives and rewards to certain key staff and executives of Nicholas-Applegate and the other Allianz Global Investors companies to promote their long-term growth and profitability. The Plan provides awards that are valued based on the operating earnings growth of the worldwide Allianz Global Investors group of companies, as well as the target achievement of Nicholas-Applegate’s average operating earnings on a three-year basis. The Plan provides a link between longer term company performance and participant pay, further motivating participants to make a long-term commitment to the company’s success.
PEA
As of February 28, 2006, each portfolio manager’s compensation consists of the following elements:
Base salary. Each portfolio manager is paid a fixed base salary which is set at a level determined by PEA Capital. In setting the base salary, the firm’s intention is to be competitive in light of the particular portfolio manager’s experience and responsibilities. Management of the firm evaluates competitive market compensation by reviewing compensation survey results conducted by an independent third party of investment industry compensation.
Annual bonus or profit sharing opportunity. For portfolio managers who share in a bonus pool, bonuses are designed to reward investment professionals for sustained high performance by linking pay to two core elements: quantitatively measured investment results, and firm profitability. At the start of the year, each participant receives an allocated target percentage of the pool. The initial target allocation is a measure of past performance, current job accountability and expectations, and competitive market practice. At year-end the firm’s CEO and CIO determine the size of the pool based on overall investment results, firm profitability, asset flows and external market compensation levels. For portfolio managers who participate as profit sharers, these professionals are assigned an amount that is primarily determined by the profitability of the firm. Individual investment performance can increase or decrease this payment by as much as 10%. Bonuses are based in part on pre-tax performance against the Funds’ relevant benchmark and Morningstar/Lipper peer group over one and three year periods, with some consideration of longer time periods.
Equity incentive units. Portfolio managers participate in the Allianz Equity Incentive Plan. This plan identifies a substantial pool of funds for the benefit of participating PEA Capital employees, each of whom receives shares in the pool. The value of the pool is determined by the cumulative revenue growth of PEA Capital over rolling three-year periods. Shares in the pool vest three years after they are awarded provided the employee remains with the firm.
Participation in group retirement plans. Portfolio managers are eligible to participate in a non-qualified deferred compensation plan, which affords participating employees the tax benefits of deferring the receipt of a portion of their cash compensation until such time as designated by the Non-Qualified Deferred Compensation Plan.
(a)(4)
NACM
As of March 31, 2006, none of the portfolio managers beneficially own any of the shares issued by the Fund.
PEA
As of February 28, 2006, none of the portfolio managers beneficially own any of the shares issued by the Fund.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED COMPANIES
| | | | | | | Total Number | | Maximum Number of |
| | | | | | | Of Shares Purchased | | Shares That May Yet Be |
| | | Total Number | | Average | | As Part Of Publicly | | Purchased Under The |
| | | Of Shares | | Price Paid | | Announced Plans Or | | Plans |
| Period | | Purchased | | Per Share | | Programs | | Or Programs |
| |
| |
| |
| |
|
| |
| March 2006 | | N/A | | N/A | | N/A | | N/A |
| April 2006 | | N/A | | N/A | | N/A | | N/A |
| May 2006 | | N/A | | N/A | | N/A | | N/A |
| June 2006 | | N/A | | N/A | | N/A | | N/A |
| July 2006 | | N/A | | N/A | | N/A | | N/A |
| August 2006 | | N/A | | N/A | | N/A | | N/A |
| September 2006 | | N/A | | N/A | | N/A | | N/A |
| October 2006 | | N/A | | N/A | | N/A | | N/A |
| November 2006 | | N/A | | N/A | | N/A | | N/A |
| December 2006 | | N/A | | N/A | | N/A | | N/A |
| January 2007 | | N/A | | N/A | | N/A | | N/A |
| February 2007 | | N/A | | N/A | | N/A | | N/A |
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Registrant’s Board of Trustees adopted a Nominating Committee Charter governing the affairs of the Nominating Committee of the Board, which is posted on the Allianz Investors website at www.allianzinvestors.com. Appendix B to the Nominating Committee Charter includes “Procedures for Shareholders to Submit Nominee Candidates, “which sets forth the procedures by which shareholders may recommend nominees to the Registrant’s Board of Trustees. The Registrant has not yet held its first annual shareholders’ meeting, so these procedures have yet to be disclosed in response to the requirements of Item 7(d)(2)(ii)(G) of Schedule 14A, and this is the first Form N-CSR filing made by the Registrant. Among other requirements, the procedures provide that the recommending shareholder must submit any recommendation in writing to the Registrant to the attention of the Registrant’s Secretary, at the address of the principal executive offices of the Registrant and that such submission must be received at such offices not less than 45 days nor more than 75 days prior to the date of the Board of shareholder meeting at which the nominee would be elected. Any recommendation must include certain biographical and other information regarding the candidate and the recommending shareholder, and must include a written and signed consent of the candidate to be named as a nominee and to serve as a Trustee if elected. The foregoing description of the requirements is only a summary and is qualified in its entirety by reference to Appendix B of the Nominating Committee Charter.
ITEM 11. CONTROLS AND PROCEDURES
| (a) | The registrant’s President and Chief Executive Officer and Principal Financial Officer have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-2(c) under the Investment Company Act of 1940, as amended are effective based on their evaluation of these controls and procedures as of a date within 90 days of the filing date of this document. |
| |
| (b) | There were no significant changes in the registrant’s internal controls or in factors that could affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. |
ITEM 12. EXHIBITS
(a) (1) Exhibit 99.CODE ETH - Code of Ethics
(a) (2) Exhibit 99 Cert. - Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
(b) Exhibit 99.906 Cert. - Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
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) | Nicholas-Applegate International & |
| Premium Strategy Fund |
By /s/ Brian S. Shlissel
President and Chief Executive OfficerDate May 9, 2006
By /s/ Lawrence G. Altadonna
Treasurer, Principal Financial & Accounting OfficerDate May 9, 2006
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By /s/ Brian S. Shlissel
President and Chief Executive Officer
Date May 9, 2006
By /s/ Lawrence G. Altadonna
Treasurer, Principal Financial & Accounting Officer
Date May 9, 2006
