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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number 811-21417

 

NFJ Dividend, Interest & Premium Strategy Fund


(Exact name of registrant as specified in charter)


 

 

1345 Avenue of the Americas, New York,

New York 10105


(Address of principal executive offices)

(Zip code)

 

 

Lawrence G. Altadonna - 1345 Avenue of the Americas, New York, New York 10105


(Name and address of agent for service)


 

Registrant’s telephone number, including area code: 212-739-3371

 

Date of fiscal year end: January 31, 2011

 

Date of reporting period: January 31, 2011

 

Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles.

A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget (“OMB”) control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 100 F Street, NE, Washington, DC 20549-2001. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.


Item 1. Report to Shareholders


 

 

 

 

 

 

 

(ALLIANZ LOGO)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Annual Report

 

 

 

 

 

 

 

 

January 31, 2011

NFJ Dividend, Interest & Premium Strategy Fund
AGIC Equity & Convertible Income Fund

(NFJ LOGO)          (NIE LOGO)



 

 

 

 

 

Contents

 

 

 

 

 

 

 

Letter to Shareholders

 

2 - 3

 

 

Fund Insights/Fund Performance & Statistics

 

4 - 9

 

 

Schedules of Investments

 

10 - 23

 

 

Statements of Assets and Liabilities

 

24

 

 

Statements of Operations

 

25

 

 

Statements of Changes in Net Assets

 

26

 

 

Notes to Financial Statements

 

27 - 35

 

 

Financial Highlights

 

36 - 37

 

 

Report of Independent Registered Public Accounting Firm

 

38

 

 

Tax Information

 

39

 

 

Annual Shareholder Meeting Results/Changes
to the Board of Trustees/Change in Portfolio Manager

 

40

 

 

Proxy Voting Policies & Procedures/Changes
in Investment Policy

 

41

 

 

Privacy Policy

 

42

 

 

Dividend Reinvestment Plan

 

43

 

 

Board of Trustees

 

44 - 45

 

 

Fund Officers

 

46


 

 

 

 

NFJ Dividend, Interest & Premium Strategy Fund

 

1.31.11 | 

AGIC Equity & Convertible Income Fund Annual Report

1




 

 

 

Dear Shareholder:

The twelve-month period ended January 31, 2011 saw unmistakable evidence that the U.S. economic recovery that began in the summer of 2009 was gathering steam. Financial markets responded accordingly, with stocks ending the fiscal period at highs not seen since the dark days of 2008. In fact, as the fiscal period drew to a close, the Standard & Poor’s 500 Index had nearly doubled from its low of March 2009 – the fastest such rise since 1936. The surging stock market lured many investors from the perceived refuge of U.S. Treasury bonds. The yield on the benchmark 10-year bond ended the fiscal period just 21 basis points (0.21%) lower than where it began – this despite falling dramatically during the middle of the twelve-month period.


The economy’s steady expansion was reflected in gross domestic product (“GDP”) figures throughout the year. In the first quarter of calendar 2010, GDP grew at a 3.7% annualized rate. This eased to 1.7% between April and June but accelerated the rest of the year expanding at a 2.6% pace during the third quarter and 3.2% during the fourth quarter of 2010. In January 2011, the final month of the fiscal period, most signs pointed to continued strength.

This strength was evident in a variety of ways. Exports increased and manufacturing, approximately one-tenth of the U.S. economy, staged an impressive comeback, The Wall Street Journal calling it “the shining star of this recovery.” However, the housing industry remains troubled and although the unemployment rate has declined, it remains stubbornly high.

 

(PHOTO OF HANS W. KERTESS)
Hans W. Kertess
Chairman


(PHOTO OF BRIAN S. SHLISSEL)
Brian S. Shlissel
President & CEO

Supporting this recovery was the continued accommodative stance by the Federal Reserve (“the Fed”). The Fed revealed plans to purchase up to $900 billion of U.S. Treasury bonds. The goal of this “quantitative easing” was to keep stimulating the economy by lowering interest rates. The Fed maintained its closely watched Federal Funds rate, the interest rate banks charge to lend federal funds to other banks, usually on an overnight basis in the 0.0% to 0.25% range. The discount rate, however, the interest rate charged to banks for direct loans was raised to 0.75% from 0.50%.

 

 

 

 

NFJ Dividend, Interest & Premium Strategy Fund

 

2

AGIC Equity & Convertible Income Fund Annual Report | 1.31.11

 



Twelve Months in Review
For the fiscal period ended January 31, 2011:

 

 

The NFJ Dividend, Interest & Premium Strategy Fund rose 16.02% on net asset value (“NAV”) and 28.20% on market price.

 

 

The AGIC Equity & Convertible Income Fund rose 22.56% on NAV and 30.16% on market price.

In contrast, the Russell 3000 Index, a broad measure of U.S. stock market performance, rose 23.95% during the twelve-month fiscal period. The Russell 1000 Value Index, a measure of large-cap value-style stocks, returned 21.54% and the Russell 1000 Growth Index, a measure of growth style stocks, gained 25.14% during the reporting period. Convertible securities, as reflected by the Merrill Lynch All Convertibles Index, advanced 21.09% during the fiscal period.

The Road Ahead
We anticipate that the economic recovery will continue and may, in fact, become more robust. At some point, companies are likely to accelerate hiring, which would boost the expansion still further. We are cautious, however, about interest rates, which have begun to move higher and could act as an economic headwind.

For specific information on the Funds and their performance, please review the following pages. If you have any questions regarding the information provided, we encourage you to contact your financial advisor or call the Funds’ shareholder servicing agent at (800) 254-5197. In addition, a wide range of information and resources is available on our website, www.allianzinvestors.com/closedendfunds.

 

 

 

Receive this report electronically and eliminate paper mailings. To enroll, go to www.allianzinvestors.com/edelivery.

 

 

 



Together with Allianz Global Investors Fund Management LLC, the Funds’ investment manager and NFJ Investment Group LLC and Allianz Global Investors Capital LLC, the Funds’ sub-advisers, we thank you for investing with us.

Sincerely,

 

 

-s- Hans W. Kertess

-s- Brian S. Shlissel

Hans W. Kertess

Brian S. Shlissel

Chairman

President & Chief Executive Officer


 

 

 

 

NFJ Dividend, Interest & Premium Strategy Fund

 

1.31.11 | 

AGIC Equity & Convertible Income Fund Annual Report

3




 

 

NFJ Dividend, Interest & Premium Strategy Fund

Fund Insights

January 31, 2011 (unaudited)

 

For the fiscal year ended January 31, 2011, NFJ Dividend, Interest & Premium Strategy Fund returned 16.02% on net asset value and 28.20% on market price.

During the 12-month review period, investors’ risk appetite returned, supported by a number of factors. In the equity market, the Russell 1000 Value Index, a subset of the broad market measuring value-oriented stocks, advanced strongly during the period. Equities were led by more economically sensitive and commodity-driven sectors such as materials and energy, as well as the consumer discretionary sector. More defensive segments such as utilities and consumer staples underperformed, with health care delivering the lowest returns for the fiscal year. Smaller and mid-size capitalized companies outperformed the largest capitalized firms. The most nimble companies were able to benefit from the improved macroeconomic environment.

Although convertible market sentiment varied throughout the fiscal period, the net result was a solid year. After an impressive return in the fourth quarter of 2010, the Merrill Lynch All Convertibles Index registered another good year of performance advancing 21.09%.

The factors driving fourth quarter and full year performance did not change significantly from earlier in the period. Although several hiccups occurred throughout the period, including mixed economic statistical releases and European sovereign concerns, these risks rose then abated quickly. Ultimately, stronger corporate profitability and an improving economy had the greatest influence on investor sentiment. Improved balance sheets and operating performance of corporations were supplemented by the incredible new corporate issuance volume that bolstered liquidity and reduced high-cost debt. Political risk abated after the November elections, and more accommodative decisions were made in Washington regarding taxes and further monetary policy easing (QE2). These factors also led to a healthy year-end rally in the equity markets and a sell-off in the Treasury market, all of which added to the appetite for convertible and equity investing.

Convertibles moved up in line with their historical equity upside participation during the fourth quarter of the period. Contrary to the first half of the fiscal period whereby credit improvement was the largest driver of performance, equity contribution increased later in the year.

Portfolio specifics
The equity portion of the portfolio recorded positive performance. At the sector level, both stock selection and overweight positions to telecommunications and consumer staples were strongly positive, as was an overweight to financials. Leading performer in the equity portion of the Fund’s portfolio included a significant overweight position in oil firm ConocoPhillips. That said, stock selection in the energy sector overall dampened returns, offsetting the beneficial effects of an overall overweighting to the sector. Stock selection in information technology and industrials also hampered returns. The largest detractors were Diamond Offshore Drilling and GlaxoSmithKline.

In the convertibles segment of the Fund’s portfolio, positions in the consumer discretionary, industrials and financial industries benefitted performance during the period. Select consumer discretionary issuers moved higher as automobile sales exceeded expectations and production schedules increased. Industrial issuers performed well on improving operating statistics and solid end-market demand. Financial companies gained on an improving global economic outlook and improving credit metrics.

Healthcare and consumer staples industries hindered relative performance during the reporting period. Generic drug manufacturing companies underperformed as international end-markets deteriorated, negatively impacting earnings. Consumer staples issuers were down as investors rotated into higher beta companies.

At the start of the reporting period, levels of implied volatility, as measured by the Chicago Board Options Exchange VIX Index (the “VIX”), trended from the mid 20’s down to the teens before spiking above 45 in May. One of the instances of increased volatility occurred due to the flash crash on May 6, 2010, where there was a chaotic drop in equity prices during afternoon trading. The equity market would regain strength towards the second half of the reporting period, resulting in declining levels of the VIX, which ended the last few months in the mid teens. The average volatility through the period was 22.29.

 

 

 

 

NFJ Dividend, Interest & Premium Strategy Fund

 

4

AGIC Equity & Convertible Income Fund Annual Report | 1.31.11

 




 

 

NFJ Dividend, Interest & Premium Strategy Fund

Fund Insights (continued)

January 31, 2011 (unaudited)

 

Outlook
With the expectation for better economic growth and continuing stimulus, we believe stocks should post gains in 2011. We believe this will occur with significant short-term volatility due to profit taking, uncertainties, and other routine but unforeseeable factors. Stock dividends compare well with bond yields and have begun rising, which bodes well for our particular investment style. We believe stock valuations remain attractive and corporate balance sheets are relatively healthy. In this environment we continue to seek to identify and invest in dividend-paying companies presenting stable financials and visibility of cash flow generation.

Our outlook for the convertible market is positive. The improvement in corporate earnings witnessed in the third quarter earnings continued in the fourth quarter of 2010. U.S. corporate cash levels are high, debt levels have been reduced and maturities have been extended. In addition, consumers are spending again and labor conditions are improving.

In 2011, we expect companies may use the high cash levels on their balance sheets and future free cash flow to boost shareholder value. Share buybacks, increased dividends and merger and acquisition activity are possible uses of excess cash. We believe these factors should benefit equity and convertible investors.

While we expect credit spread tightening should continue as high yield credit spreads remain above the historical average, positive convertible returns will be dependent on the equity markets going forward. Even though global and economic risk headlines persist, driving a continuation of choppy directional short-term performance, few companies have seen a change in demand or order patterns. We believe fundamentals remain intact and this should provide a positive backdrop for the U.S. equity markets. In such an environment, convertible bonds should benefit from credit spread tightening and higher equity prices, making them an attractive option for total return investors.

 

 

 

 

NFJ Dividend, Interest & Premium Strategy Fund

 

1.31.11 | 

AGIC Equity & Convertible Income Fund Annual Report

5




 

 

AGIC Equity & Convertible Income Fund

Fund Insights

January 31, 2011 (unaudited)

 

For the fiscal year ended January 31, 2011, AGIC Equity & Convertible Income Fund returned 22.56% on net asset value and 30.16% on market price.

Although market sentiment varied throughout the period, the net result for the equity and convertible markets was a solid year.

The factors driving the Fund’s fiscal year end performance did not change significantly from earlier in the period. Although several hiccups occurred throughout the period, including mixed economic statistical releases and European sovereign concerns, these risks rose then abated quickly. Ultimately, stronger corporate profitability and an improving economy had the greatest influence on investor sentiment. Improved balance sheets and operating performance of issuers were supplemented by the incredible new corporate issuance volume that bolstered liquidity and reduced high-cost debt. Political risk abated after the November elections, and more accommodative decisions were made in Washington regarding taxes and further monetary policy easing (QE2). These factors also led to a healthy year-end rally in the equity markets and a sell-off in the Treasury market. All of which added to the appetite for convertible investing.

The equity move higher was broad-based among industries and market capitalizations. Lagging areas of performance included utilities, telecommunications, and healthcare. The best performing sectors were technology, energy and consumer discretionary.

As was the theme throughout the fiscal year, smaller and mid-sized capitalized companies in the Merrill Lynch All Convertibles Index outperformed the largest capitalized firms. The most nimble companies were able to benefit from the improved macroeconomic environment.

Convertibles moved up in line with their historical equity upside participation during the fourth quarter of the reporting period. Unlike the first half of the period, where credit improvement was the bigger driver of returns, equity contributed more later in the year.

The Chicago Board Options Exchange Volatility Index (VIX), a key measure of market expectations of near-term volatility conveyed by S&P 500 stock index option prices, began the fiscal period in the mid twenties, spiked in May and then moved lower with the rising equity market. The VIX’s average volatility was 22.3, and remained in the mid to high teens during the last months of the period.

Portfolio specifics
The Fund’s equity positions in technology, industrials, and energy led much of the positive performance during the last fiscal quarter. Semiconductor chip manufacturers with exposure to smart phones and tablets were up on robust sales. Agricultural and mining equipment companies reported better than expected revenues and higher bookings. Energy names benefited from new build order flows that were much higher than analysts’ estimates.

The Fund’s weakest equity performers were healthcare companies. The market rotated away from the group as inline sales were overshadowed by higher inputs costs and potential pressure on future margins.

Convertible positions in the consumer discretionary, industrials and financial industries contributed positively to performance during the period. Select consumer discretionary issuers were higher as automobile sales exceeded expectations and production schedules increased. Industrial issuers performed well on improving operating statistics and solid end-market demand. Financial companies moved higher on an improving global economic outlook and improving credit metrics.

Convertible positions in the healthcare and consumer staples industries hindered relative performance over the period. Generic drug manufacturing companies underperformed as international end markets deteriorated, negatively impacting earnings. Consumer staples issues declined as investors rotated into higher beta companies.

Outlook
Our outlook for the equity and convertible markets is positive. The improvement in corporate earnings seen in the third quarter earnings continued in the fourth quarter. U.S. corporate cash levels are high, debt levels have been reduced and maturities have been extended. In addition, consumers are spending again and labor conditions are improving.

In 2011, we expect companies may use the high cash levels on their balance sheets and future free cash flow to help boost shareholder value. Share buybacks, increased dividends and merger and acquisition activity are possible uses of excess cash. We believe these factors will benefit investors in the convertible and equity markets.

 

 

 

 

NFJ Dividend, Interest & Premium Strategy Fund

 

6

AGIC Equity & Convertible Income Fund Annual Report | 1.31.11

 




 

 

AGIC Equity & Convertible Income Fund

Fund Insights (continued)

January 31, 2011 (unaudited)

 

Even though global and economic risk headlines persist, driving a continuation of choppy directional short-term performance, few companies have seen a change in demand or order patterns. We believe fundamentals remain intact and this should provide a positive backdrop for the U.S. equity markets. Convertible bonds should benefit from credit spread tightening and higher equity prices, an attractive option for total return investors.

The Fund’s disciplined approach of focusing on companies that are exceeding expectations and improving their credit statistics may be rewarded should those companies differentiate themselves from their peer group. In this environment, we believe companies that have reasonable earnings visibility should command premium valuations relative to other companies.

The portfolio management team continues to build the Fund’s portfolio one company at a time, by seeking to identify those that are opportunistically capitalizing on change. In addition, we look to maintain our discipline of seeking to identify the best total return candidates with the optimal risk/reward profile.

 

 

 

 

NFJ Dividend, Interest & Premium Strategy Fund

 

1.31.11 | 

AGIC Equity & Convertible Income Fund Annual Report

7




 

 

NFJ Dividend, Interest & Premium Strategy Fund

Fund Performance & Statistics

January 31, 2011 (unaudited)

 

 

 

 

 

 

 

 

 

Total Return(1):

 

 

Market Price

 

NAV

           

1 Year

 

 

28.20

%

 

16.02

%

               

5 Year

 

 

3.14

%

 

2.50

%

               

Commencement of Operations (2/28/05) to 1/31/11

 

 

1.82

%

 

3.54

%

               

Market Price/NAV Performance:
Commencement of Operations (2/28/05) to 1/31/11

 

 

(img)

Market Price

 

 

(img)

NAV

(LINE GRAPH)

 

 

 

 

 

Market Price/NAV:

 

 

 

 

         

Market Price

 

 

$17.60

 

         

NAV

 

 

$19.12

 

         

Discount to NAV

 

 

(7.95)%

 

         

Market Price Yield(2)

 

 

10.23%

 

         

 

Investment Allocation
(as a % of total investments)

 

(PIE CHART)



 

 

(1)

Past performance is no guarantee of future results. Total return is calculated by determining the percentage change in NAV or market price (as applicable) in the specified period. The calculation assumes that all income dividends and capital gain distributions, if any, have been reinvested. Total return does not reflect broker commissions or sales charges in connection with the purchase or sale of Fund shares. Total return for a period of more than one year represents the average annual total return.

 

 

Performance at market price will differ from its results at NAV. Although market price returns typically reflect investment results over time, during shorter periods returns at market price can also be influenced by factors such as changing views about the Fund, market conditions, supply and demand for the Fund’s shares, or changes in Fund dividends.

 

 

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

 

(2)

Market Price Yield is determined by dividing the annualized current quarterly per share dividend (comprised of net investment income and net capital gains, if any) payable to shareholders by the market price per share at January 31, 2011.


 

 

 

 

NFJ Dividend, Interest & Premium Strategy Fund

 

8

AGIC Equity & Convertible Income Fund Annual Report | 1.31.11

 




 

 

AGIC Equity & Convertible Income Fund  

Fund Performance & Statistics

January 31, 2011 (unaudited)

 

   

 

 

 

 

 

 

 

 

Total Return(1):

 

 

Market Price

 

NAV

           

1 Year

 

 

30.16

%

 

22.56

%

               

3 Year

 

 

5.12

%

 

3.83

%

               

Commencement of Operations (2/27/07) to 1/31/11

 

 

2.36

%

 

4.18

%

               

Market Price/NAV Performance:
Commencement of Operations (2/27/07) to 1/31/11

 

 

(img)

Market Price

 

 

(img)

NAV

(LINE GRAPH)

 

 

 

 

 

Market Price/NAV:

 

 

 

 

         

Market Price

 

 

$19.30

 

         

NAV

 

 

$20.28

 

         

Discount to NAV

 

 

(4.83)%

 

         

Market Price Yield(2)

 

 

5.80%

 

         

 

Investment Allocation
(as a % of total investments)

 

(PIE CHART)



 

 

(1)

Past performance is no guarantee of future results. Total return is calculated by determining the percentage change in NAV or market price (as applicable) in the specified period. The calculation assumes that all income dividends, capital gain and return of capital distributions, if any, have been reinvested. Total return does not reflect broker commissions or sales charges in connection with the purchase or sale of Fund shares. Total return for a period of more than one year represents the average annual total return.

 

 

Performance at market price will differ from its results at NAV. Although market price returns typically reflect investment results over time, during shorter periods returns at market price can also be influenced by factors such as changing views about the Fund, market conditions, supply and demand for the Fund’s shares, or changes in Fund dividends.

 

 

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

 

(2)

Market Price Yield is determined by dividing the annualized current quarterly per share dividend (comprised of net investment income and net capital gains, if any) payable to shareholders by the market price per share at January 31, 2011.


 

 

 

 

NFJ Dividend, Interest & Premium Strategy Fund

 

1.31.11 | 

AGIC Equity & Convertible Income Fund Annual Report

9




 

 

NFJ Dividend, Interest & Premium Strategy Fund

Schedule of Investments

January 31, 2011

 

 

 

 

 

 

 

 

 

 

 

 

Shares
(000s)

 

 

 

 

 

 

Value

 

                 

COMMON STOCK—69.9%

 

 

 

 

 

 

 

 

 

 

Aerospace & Defense—2.1%

 

 

 

 

 

 

 

 

387

 

Lockheed Martin Corp.

 

 

 

 

$

30,797,240

 

 

100

 

Northrop Grumman Corp.

 

 

 

 

 

6,930,000

 

 

 

 

 

 

 

 

 

     

 

 

 

 

 

 

 

 

 

37,727,240

 

 

 

 

 

 

 

 

 

     

 

 

 

Capital Markets—1.4%

 

 

 

 

 

 

 

 

420

 

Ameriprise Financial, Inc. (a)

 

 

 

 

 

25,893,000

 

 

 

 

 

 

 

 

 

     

 

 

 

Chemicals—0.8%

 

 

 

 

 

 

 

 

135

 

Lubrizol Corp.

 

 

 

 

 

14,507,100

 

 

 

 

 

 

 

 

 

     

 

 

 

Commercial Banks—3.2%

 

 

 

 

 

 

 

 

456

 

PNC Financial Services Group, Inc. (a)

 

 

 

 

 

27,354,000

 

 

918

 

Wells Fargo & Co. (a)

 

 

 

 

 

29,748,592

 

 

 

 

 

 

 

 

 

     

 

 

 

 

 

 

 

 

 

57,102,592

 

 

 

 

 

 

 

 

 

     

 

 

 

Commercial Services & Supplies—2.1%

 

 

 

 

 

 

 

 

486

 

Pitney Bowes, Inc.

 

 

 

 

 

11,797,652

 

 

1,500

 

RR Donnelley & Sons Co. (a)

 

 

 

 

 

26,580,000

 

 

 

 

 

 

 

 

 

     

 

 

 

 

 

 

 

 

 

38,377,652

 

 

 

 

 

 

 

 

 

     

 

 

 

Communications Equipment—0.5%

 

 

 

 

 

 

 

 

200

 

Harris Corp.

 

 

 

 

 

9,308,000

 

 

 

 

 

 

 

 

 

     

 

 

 

Diversified Financial Services—0.6%

 

 

 

 

 

 

 

 

236

 

JP Morgan Chase & Co.

 

 

 

 

 

10,605,256

 

 

 

 

 

 

 

 

 

     

 

 

 

Diversified Telecommunication Services—2.5%

 

 

 

 

 

 

 

 

750

 

AT&T, Inc. (a)

 

 

 

 

 

20,640,000

 

 

150

 

CenturyLink, Inc.

 

 

 

 

 

6,486,000

 

 

530

 

Verizon Communications, Inc. (a)

 

 

 

 

 

18,878,600

 

 

 

 

 

 

 

 

 

     

 

 

 

 

 

 

 

 

 

46,004,600

 

 

 

 

 

 

 

 

 

     

 

 

 

Electric Utilities—1.8%

 

 

 

 

 

 

 

 

600

 

Edison International (a)

 

 

 

 

 

21,768,000

 

 

152

 

Entergy Corp.

 

 

 

 

 

10,952,086

 

 

 

 

 

 

 

 

 

     

 

 

 

 

 

 

 

 

 

32,720,086

 

 

 

 

 

 

 

 

 

     

 

 

 

Energy Equipment & Services—1.7%

 

 

 

 

 

 

 

 

421

 

Diamond Offshore Drilling, Inc. (a)

 

 

 

 

 

30,204,252

 

 

 

 

 

 

 

 

 

     

 

 

 

Food & Staples Retailing—0.2%

 

 

 

 

 

 

 

 

600

 

SUPERVALU, Inc.

 

 

 

 

 

4,374,000

 

 

 

 

 

 

 

 

 

     

 

 

 

Food Products—1.2%

 

 

 

 

 

 

 

 

39

 

Bunge Ltd.

 

 

 

 

 

2,657,317

 

 

633

 

Kraft Foods, Inc. —Cl. A (a)

 

 

 

 

 

19,363,038

 

 

 

 

 

 

 

 

 

     

 

 

 

 

 

 

 

 

 

22,020,355

 

 

 

 

 

 

 

 

 

     

 

 

 

Health Care Equipment & Supplies—1.9%

 

 

 

 

 

 

 

 

400

 

Baxter International, Inc. (a)

 

 

 

 

 

19,396,000

 

 

368

 

Medtronic, Inc. (a)

 

 

 

 

 

14,109,424

 

 

 

 

 

 

 

 

 

     

 

 

 

 

 

 

 

 

 

33,505,424

 

 

 

 

 

 

 

 

 

     

 

 

 

Household Durables—0.8%

 

 

 

 

 

 

 

 

200

 

Stanley Black & Decker, Inc.

 

 

 

 

 

14,536,000

 

 

 

 

 

 

 

 

 

     

 

 

 

Household Products—1.8%

 

 

 

 

 

 

 

 

504

 

Kimberly-Clark Corp.

 

 

 

 

 

32,649,812

 

 

 

 

 

 

 

 

 

     

 

 

 

 

NFJ Dividend, Interest & Premium Strategy Fund

 

10

AGIC Equity & Convertible Income Fund Annual Report | 1.31.11

 




 

 

NFJ Dividend, Interest & Premium Strategy Fund

Schedule of Investments

January 31, 2011

 

 

 

 

 

 

 

 

 

 

 

 

Shares
(000s)

 

 

 

 

 

 

Value

 

                 

 

 

 

Industrial Conglomerates—1.8%

 

 

 

 

 

 

 

 

1,653

 

General Electric Co. (a)

 

 

 

 

$

33,295,790

 

 

 

 

 

 

 

 

 

     

 

 

 

Insurance—5.2%

 

 

 

 

 

 

 

 

800

 

Allstate Corp. (a)

 

 

 

 

 

24,912,000

 

 

1,104

 

Lincoln National Corp. (a)

 

 

 

 

 

31,827,824

 

 

200

 

MetLife, Inc.

 

 

 

 

 

9,154,000

 

 

490

 

Travelers Cos, Inc. (a)

 

 

 

 

 

27,567,400

 

 

 

 

 

 

 

 

 

     

 

 

 

 

 

 

 

 

 

93,461,224

 

 

 

 

 

 

 

 

 

     

 

 

 

IT Services—0.7%

 

 

 

 

 

 

 

 

75

 

International Business Machines Corp.

 

 

 

 

 

12,150,000

 

 

 

 

 

 

 

 

 

     

 

 

 

Media—2.1%

 

 

 

 

 

 

 

 

1,300

 

CBS Corp. —Cl. B

 

 

 

 

 

25,779,000

 

 

399

 

Time Warner, Inc.

 

 

 

 

 

12,532,825

 

 

 

 

 

 

 

 

 

     

 

 

 

 

 

 

 

 

 

38,311,825

 

 

 

 

 

 

 

 

 

     

 

 

 

Metals & Mining—1.2%

 

 

 

 

 

 

 

 

200

 

Freeport-McMoRan Copper & Gold, Inc. (a)

 

 

 

 

 

21,750,000

 

 

 

 

 

 

 

 

 

     

 

 

 

Multi-Utilities—1.2%

 

 

 

 

 

 

 

 

750

 

Ameren Corp. (a)

 

 

 

 

 

21,277,500

 

 

 

 

 

 

 

 

 

     

 

 

 

Office Electronics—1.2%

 

 

 

 

 

 

 

 

2,125

 

Xerox Corp. (a)

 

 

 

 

 

22,567,500

 

 

 

 

 

 

 

 

 

     

 

 

 

Oil, Gas & Consumable Fuels—14.9%

 

 

 

 

 

 

 

 

200

 

Cenovus Energy, Inc.

 

 

 

 

 

6,922,000

 

 

1,000

 

Chesapeake Energy Corp. (a)

 

 

 

 

 

29,530,000

 

 

307

 

Chevron Corp. (a)

 

 

 

 

 

29,171,989

 

 

800

 

ConocoPhillips (a)

 

 

 

 

 

57,168,000

 

 

400

 

EnCana Corp.

 

 

 

 

 

12,908,000

 

 

900

 

Marathon Oil Corp. (a)

 

 

 

 

 

41,130,000

 

 

550

 

Royal Dutch Shell PLC —Cl. A - ADR (a)

 

 

 

 

 

39,044,500

 

 

900

 

Total SA - ADR (a)

 

 

 

 

 

52,893,000

 

 

 

 

 

 

 

 

 

     

 

 

 

 

 

 

 

 

 

268,767,489

 

 

 

 

 

 

 

 

 

     

 

 

 

Pharmaceuticals—8.2%

 

 

 

 

 

 

 

 

1,200

 

GlaxoSmithKline PLC - ADR (a)

 

 

 

 

 

43,596,000

 

 

369

 

Johnson & Johnson

 

 

 

 

 

22,032,298

 

 

3,000

 

Pfizer, Inc. (a)

 

 

 

 

 

54,660,000

 

 

800

 

Sanofi-Aventis S.A. - ADR

 

 

 

 

 

27,528,000

 

 

 

 

 

 

 

 

 

     

 

 

 

 

 

 

 

 

 

147,816,298

 

 

 

 

 

 

 

 

 

     

 

 

 

Real Estate Investment Trust—0.4%

 

 

 

 

 

 

 

 

400

 

Annaly Capital Management, Inc.

 

 

 

 

 

7,132,000

 

 

 

 

 

 

 

 

 

     

 

 

 

Semiconductors & Semiconductor Equipment—3.3%

 

 

 

 

 

 

 

 

2,790

 

Intel Corp. (a)

 

 

 

 

 

59,873,400

 

 

 

 

 

 

 

 

 

     

 

 

 

Software—2.0%

 

 

 

 

 

 

 

 

986

 

Microsoft Corp.

 

 

 

 

 

27,331,305

 

 

461

 

Symantec Corp. (b)

 

 

 

 

 

8,112,716

 

 

 

 

 

 

 

 

 

     

 

 

 

 

 

 

 

 

 

35,444,021

 

 

 

 

 

 

 

 

 

     

 

 

 

Textiles, Apparel & Luxury Goods—0.5%

 

 

 

 

 

 

 

 

100

 

VF Corp.

 

 

 

 

 

8,272,000

 

 

 

 

 

 

 

 

 

     

 

 

 

 

NFJ Dividend, Interest & Premium Strategy Fund

 

1.31.11 | 

AGIC Equity & Convertible Income Fund Annual Report

11




 

 

NFJ Dividend, Interest & Premium Strategy Fund

Schedule of Investments

January 31, 2011

 

 

 

 

 

 

 

 

 

 

 

 

Shares
(000s)

 

 

 

 

 

 

Value

 

                 

 

 

 

Thrifts & Mortgage Finance—2.2%

 

 

 

 

 

 

 

 

2,000

 

Hudson City Bancorp, Inc. (a)

 

 

 

 

$

21,960,000

 

 

1,000

 

New York Community Bancorp, Inc. (a)

 

 

 

 

 

18,320,000

 

 

 

 

 

 

 

 

 

     

 

 

 

 

 

 

 

 

 

40,280,000

 

 

 

 

 

 

 

 

 

     

 

 

 

Tobacco—2.4%

 

 

 

 

 

 

 

 

780

 

Altria Group, Inc. (a)

 

 

 

 

 

18,342,502

 

 

800

 

Reynolds American, Inc. (a)

 

 

 

 

 

25,448,000

 

 

 

 

 

 

 

 

 

     

 

 

 

 

 

 

 

 

 

43,790,502

 

 

 

 

 

 

 

 

 

     

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Common Stock (cost—$1,379,217,606)

 

 

 

 

 

1,263,724,918

 

 

 

 

 

 

 

 

 

     

 

 

 

 

 

 

 

 

 

 

 

CONVERTIBLE PREFERRED STOCK—13.2%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Credit Rating
(Moody’s/S&P)*

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Airlines—0.3%

 

 

 

 

 

 

 

 

123

 

Continental Airlines Finance Trust II, 6.00%, 11/15/30

 

 

Caa1/CCC

 

 

4,837,009

 

 

 

 

 

 

 

 

 

     

 

 

 

Automobiles—0.6%

 

 

 

 

 

 

 

 

190

 

General Motors Co., 4.75%, 12/1/13

 

 

NR/NR

 

 

10,331,663

 

 

 

 

 

 

 

 

 

     

 

 

 

Banks—0.4%

 

 

 

 

 

 

 

 

147

 

Barclays Bank PLC, 10.00%, 3/15/11

 

 

 

 

 

 

 

 

 

 

(Teva Pharmaceuticals Industries Ltd.)(c)

 

 

A1/A+

 

 

7,322,335

 

 

 

 

 

 

 

 

 

     

 

 

 

Capital Markets—0.7%

 

 

 

 

 

 

 

 

188

 

AMG Capital Trust I, 5.10%, 4/15/36

 

 

NR/BB

 

 

9,432,696

 

 

 

 

Lehman Brothers Holdings, Inc. (c)(d)(e),

 

 

 

 

 

 

 

 

630

 

6.00%, 10/12/10, Ser. GIS (General Mills, Inc.)

 

 

WR/NR

 

 

2,028,488

 

 

98

 

28.00%, 3/6/09, Ser. RIG (Transocean, Inc.)

 

 

WR/NR

 

 

1,331,778

 

 

 

 

 

 

 

 

 

     

 

 

 

 

 

 

 

 

 

12,792,962

 

 

 

 

 

 

 

 

 

     

 

 

 

Commercial Banks—0.9%

 

 

 

 

 

 

 

 

75

 

Fifth Third Bancorp, 8.50%, 6/30/13, Ser. G (f)

 

 

Ba1/BB

 

 

11,429,375

 

 

6

 

Wells Fargo & Co., 7.50%, 3/15/13, Ser. L (f)

 

 

Baa3/A-

 

 

5,733,750

 

 

 

 

 

 

 

 

 

     

 

 

 

 

 

 

 

 

 

17,163,125

 

 

 

 

 

 

 

 

 

     

 

 

 

Commercial Services & Supplies—0.4%

 

 

 

 

 

 

 

 

161

 

United Rentals, Inc., 6.50%, 8/1/28

 

 

Caa1/CCC

 

 

7,322,708

 

 

 

 

 

 

 

 

 

     

 

 

 

Diversified Financial Services—3.7%

 

 

 

 

 

 

 

 

189

 

2010 Swift Mandatory Common Exchange Security Trust,

 

 

 

 

 

 

 

 

 

 

6.00%, 12/31/13 (g)

 

 

NR/NR

 

 

2,598,026

 

 

 

 

Bank of America Corp.,

 

 

 

 

 

 

 

 

10

 

7.25%, 1/30/13, Ser. L (f)

 

 

Ba3/BB+

 

 

9,409,750

 

 

189

 

10.00%, 2/3/11, Ser. GILD (Gilead Sciences Inc.)(c)

 

 

A2/A

 

 

6,460,969

 

 

134

 

10.00%, 2/24/11, Ser. SLB (Schlumberger Ltd.)(c)

 

 

A2/A

 

 

9,648,907

 

 

74

 

Citigroup, Inc., 7.50%, 12/15/12

 

 

NR/NR

 

 

10,185,944

 

 

 

 

Credit Suisse Securities USA LLC,

 

 

 

 

 

 

 

 

173

 

7.00%, 7/27/11 (Target Corp.)(c)

 

 

Aa2/A

 

 

9,527,110

 

 

340

 

8.00%, 9/20/11 (Bristol-Myers Squibb Co.)(c)

 

 

Aa2/A

 

 

8,780,500

 

 

140

 

JP Morgan Chase & Co., 7.00%, 7/25/11

 

 

 

 

 

 

 

 

 

 

(McDonald’s Corp.)(c)

 

 

Aa3/A+

 

 

10,354,869

 

 

 

 

 

 

 

 

 

     

 

 

 

 

 

 

 

 

 

66,966,075

 

 

 

 

 

 

 

 

 

     

 

 

 

 

NFJ Dividend, Interest & Premium Strategy Fund

 

12

AGIC Equity & Convertible Income Fund Annual Report | 1.31.11

 




 

 

NFJ Dividend, Interest & Premium Strategy Fund

Schedule of Investments

January 31, 2011

 

 

 

 

 

 

 

 

 

 

 

 

Shares
(000s)

 

 

 

Credit Rating
(Moody’s/S&P)*

 

Value

 

                 

 

 

 

Electric Utilities—0.4%

 

 

 

 

 

 

 

 

 

 

NextEra Energy, Inc.,

 

 

 

 

 

 

 

 

50

 

7.00%, 9/1/13

 

 

NR/NR

 

$

2,462,750

 

 

88

 

8.375%, 6/1/12

 

 

NR/NR

 

 

4,416,340

 

 

 

 

 

 

 

 

 

     

 

 

 

 

 

 

 

 

 

6,879,090

 

 

 

 

 

 

 

 

 

     

 

 

 

Food Products—1.0%

 

 

 

 

 

 

 

 

157

 

Archer-Daniels-Midland Co., 6.25%, 6/1/11

 

 

NR/BBB+

 

 

6,569,440

 

 

114

 

Bunge Ltd., 4.875%, 12/1/11 (f)

 

 

Ba1/BB

 

 

11,212,255

 

 

 

 

 

 

 

 

 

     

 

 

 

 

 

 

 

 

 

17,781,695

 

 

 

 

 

 

 

 

 

     

 

 

 

Household Durables—0.8%

 

 

 

 

 

 

 

 

98

 

Newell Financial Trust I, 5.25%, 12/1/27

 

 

WR/BB

 

 

4,194,036

 

 

93

 

Stanley Black & Decker, Inc., 4.75%, 11/17/15

 

 

Baa3/BBB+

 

 

10,824,373

 

 

 

 

 

 

 

 

 

     

 

 

 

 

 

 

 

 

 

15,018,409

 

 

 

 

 

 

 

 

 

     

 

 

 

Insurance—0.9%

 

 

 

 

 

 

 

 

460

 

American International Group, Inc., 8.50%, 2/15/11

 

 

Baa2/NR

 

 

2,969,257

 

 

66

 

Assured Guaranty Ltd., 8.50%, 6/1/12

 

 

NR/NR

 

 

3,968,250

 

 

274

 

XL Group PLC, 10.75%, 8/15/11

 

 

Baa2/BBB-

 

 

8,658,505

 

 

 

 

 

 

 

 

 

     

 

 

 

 

 

 

 

 

 

15,596,012

 

 

 

 

 

 

 

 

 

     

 

 

 

Multi-Utilities—0.6%

 

 

 

 

 

 

 

 

244

 

AES Trust III, 6.75%, 10/15/29

 

 

B3/B+

 

 

11,899,875

 

 

 

 

 

 

 

 

 

     

 

 

 

Oil, Gas & Consumable Fuels—1.4%

 

 

 

 

 

 

 

 

140

 

Apache Corp., 6.00%, 8/1/13

 

 

NR/NR

 

 

9,168,144

 

 

45

 

ATP Oil & Gas Corp., 8.00%, 10/1/14 (f)(g)(h)

 

 

NR/NR

 

 

4,363,425

 

 

115

 

Chesapeake Energy Corp., 5.00%, 12/31/49

 

 

NR/B

 

 

11,380,050

 

 

 

 

 

 

 

 

 

     

 

 

 

 

 

 

 

 

 

24,911,619

 

 

 

 

 

 

 

 

 

     

 

 

 

Real Estate Investment Trust—1.1%

 

 

 

 

 

 

 

 

177

 

Alexandria Real Estate Equities, Inc., 7.00%, 4/20/13 (f)

 

 

NR/NR

 

 

4,420,000

 

 

602

 

FelCor Lodging Trust, Inc., 1.95%, 12/31/49, Ser. A (f)

 

 

Caa3/CCC-

 

 

15,849,144

 

 

 

 

 

 

 

 

 

     

 

 

 

 

 

 

 

 

 

20,269,144

 

 

 

 

 

 

 

 

 

     

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Convertible Preferred Stock (cost-—$263,800,753)

 

 

 

 

 

239,091,721

 

 

 

 

 

 

 

 

 

     

 

 

 

 

 

 

 

 

 

 

 

Principal
Amount
(000s)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CONVERTIBLE BONDS & NOTES—12.6%

 

 

 

 

 

 

 

 

 

 

Building Products—0.3%

 

 

 

 

 

 

 

 

$5,875

 

Griffon Corp., 4.00%, 1/15/17 (g)(h)

 

 

NR/NR

 

 

6,073,281

 

 

 

 

 

 

 

 

 

     

 

 

 

Capital Markets—0.2%

 

 

 

 

 

 

 

 

3,980

 

Ares Capital Corp., 5.75%, 2/1/16 (g)(h)

 

 

NR/BBB

 

 

4,109,350

 

 

 

 

 

 

 

 

 

     

 

 

 

Computers & Peripherals—0.6%

 

 

 

 

 

 

 

 

315

 

EMC Corp., 1.75%, 12/1/13

 

 

NR/A-

 

 

511,875

 

 

1,250

 

NetApp, Inc., 1.75%, 6/1/13

 

 

NR/NR

 

 

2,220,313

 

 

6,500

 

SanDisk Corp., 1.50%, 8/15/17

 

 

NR/BB-

 

 

7,109,375

 

 

 

 

 

 

 

 

 

     

 

 

 

 

 

 

 

 

 

9,841,563

 

 

 

 

 

 

 

 

 

     

 

 

 

Construction & Engineering—0.1%

 

 

 

 

 

 

 

 

635

 

MasTec, Inc., 4.00%, 6/15/14

 

 

NR/NR

 

 

783,431

 

 

 

 

 

 

 

 

 

     

 

 

 

 

NFJ Dividend, Interest & Premium Strategy Fund

 

1.31.11 | 

AGIC Equity & Convertible Income Fund Annual Report

13




 

 

NFJ Dividend, Interest & Premium Strategy Fund

Schedule of Investments

January 31, 2011

 

 

 

 

 

 

 

 

 

 

 

 

Shares
(000s)

 

 

 

Credit Rating
(Moody’s/S&P)*

 

Value

 

                 

 

 

 

Diversified Telecommunication Services—0.3%

 

 

 

 

 

 

 

 

$ 4,905

 

tw telecom, Inc., 2.375%, 4/1/26

 

 

B3/B-

 

$

5,493,600

 

 

 

 

 

 

 

 

 

     

 

 

 

Electrical Equipment—1.2%

 

 

 

 

 

 

 

 

8,780

 

EnerSys, 3.375%, 6/1/38 (i)

 

 

B2/BB

 

 

10,031,150

 

 

2,000

 

General Cable Corp., 4.50%, 11/15/29 (i)

 

 

B2/B

 

 

2,505,000

 

 

10,000

 

JA Solar Holdings Co., Ltd., 4.50%, 5/15/13

 

 

NR/NR

 

 

9,675,000

 

 

 

 

 

 

 

 

 

     

 

 

 

 

 

 

 

 

 

22,211,150

 

 

 

 

 

 

 

 

 

     

 

 

 

Energy Equipment & Services—0.2%

 

 

 

 

 

 

 

 

3,500

 

Newpark Resources, Inc., 4.00%, 10/1/17

 

 

NR/CCC+

 

 

3,228,750

 

 

 

 

 

 

 

 

 

     

 

 

 

Hotels, Restaurants & Leisure—0.9%

 

 

 

 

 

 

 

 

3,495

 

International Game Technology, 3.25%, 5/1/14

 

 

Baa2/BBB

 

 

4,067,306

 

 

1,402

 

Mandalay Resort Group, 1.054%, 3/21/33, FRN (d)(e)

 

 

Caa1/CCC+

 

 

1,513,970

 

 

9,295

 

MGM Resorts International, 4.25%, 4/15/15 (g)(h)

 

 

Caa1/CCC+

 

 

10,329,069

 

 

 

 

 

 

 

 

 

     

 

 

 

 

 

 

 

 

 

15,910,345

 

 

 

 

 

 

 

 

 

     

 

 

 

Household Durables—0.4%

 

 

 

 

 

 

 

 

6,820

 

Lennar Corp., 2.00%, 12/1/20 (g)(h)

 

 

B3/B+

 

 

7,050,175

 

 

 

 

 

 

 

 

 

     

 

 

 

Insurance—0.1%

 

 

 

 

 

 

 

 

2,000

 

American Equity Investment Life Holding Co.,

 

 

 

 

 

 

 

 

 

 

3.50%, 9/15/15 (g)(h)

 

 

NR/NR

 

 

2,390,000

 

 

 

 

 

 

 

 

 

     

 

 

 

Internet—0.2%

 

 

 

 

 

 

 

 

2,500

 

Symantec Corp., 1.00%, 6/15/13

 

 

NR/BBB

 

 

2,906,250

 

 

 

 

 

 

 

 

 

     

 

 

 

Internet Software & Services—0.2%

 

 

 

 

 

 

 

 

4,200

 

Equinix, Inc., 2.50%, 4/15/12

 

 

NR/B-

 

 

4,378,500

 

 

 

 

 

 

 

 

 

     

 

 

 

IT Services—0.4%

 

 

 

 

 

 

 

 

6,325

 

Alliance Data Systems Corp., 1.75%, 8/1/13

 

 

NR/NR

 

 

6,933,781

 

 

 

 

 

 

 

 

 

     

 

 

 

Lodging—0.1%

 

 

 

 

 

 

 

 

1,000

 

Gaylord Entertainment Co., 3.75%, 10/1/14 (g)(h)

 

 

NR/NR

 

 

1,392,500

 

 

 

 

 

 

 

 

 

     

 

 

 

Machinery—1.0%

 

 

 

 

 

 

 

 

6,035

 

AGCO Corp., 1.25%, 12/15/36

 

 

NR/BB+

 

 

8,283,038

 

 

3,500

 

Navistar International Corp., 3.00%, 10/15/14

 

 

NR/B

 

 

5,114,375

 

 

1,790

 

Titan International, Inc., 5.625%, 1/15/17 (g)(h)

 

 

NR/B+

 

 

3,797,037

 

 

 

 

 

 

 

 

 

     

 

 

 

 

 

 

 

 

 

17,194,450

 

 

 

 

 

 

 

 

 

     

 

 

 

Media—0.2%

 

 

 

 

 

 

 

 

7,160

 

Liberty Media LLC, 3.50%, 1/15/31

 

 

B1/BB-

 

 

4,027,500

 

 

 

 

 

 

 

 

 

     

 

 

 

Metals & Mining—0.7%

 

 

 

 

 

 

 

 

4,805

 

Steel Dynamics, Inc., 5.125%, 6/15/14

 

 

NR/BB+

 

 

6,126,375

 

 

3,000

 

United States Steel Corp., 4.00%, 5/15/14

 

 

Ba2/BB

 

 

5,808,750

 

 

 

 

 

 

 

 

 

     

 

 

 

 

 

 

 

 

 

11,935,125

 

 

 

 

 

 

 

 

 

     

 

 

 

Multi-line Retail—0.1%

 

 

 

 

 

 

 

 

1,940

 

Saks, Inc., 2.00%, 3/15/24

 

 

B3/B+

 

 

2,109,750

 

 

 

 

 

 

 

 

 

     

 

 

 

Oil, Gas & Consumable Fuels—1.4%

 

 

 

 

 

 

 

 

8,100

 

Alpha Natural Resources, Inc., 2.375%, 4/15/15

 

 

NR/BB

 

 

10,276,875

 

 

7,475

 

Peabody Energy Corp., 4.75%, 12/15/41

 

 

Ba3/B+

 

 

9,511,938

 

 

3,855

 

Western Refining, Inc., 5.75%, 6/15/14

 

 

NR/CCC+

 

 

5,204,250

 

 

 

 

 

 

 

 

 

     

 

 

 

 

 

 

 

 

 

24,993,063

 

 

 

 

 

 

 

 

 

     

 

 

 

 

NFJ Dividend, Interest & Premium Strategy Fund

 

14

AGIC Equity & Convertible Income Fund Annual Report | 1.31.11

 




 

 

NFJ Dividend, Interest & Premium Strategy Fund

Schedule of Investments

January 31, 2011

 

 

 

 

 

 

 

 

 

 

 

 

Principal
Amount
(000s)

 

 

 

Credit Rating
(Moody’s/S&P)*

 

Value

 

               

 

 

 

Pharmaceuticals—0.3%

 

 

 

 

 

 

 

 

$ 1,860

 

Valeant Pharmaceuticals International, Inc.,

 

 

 

 

 

 

 

 

 

 

5.375%, 8/1/14 (g)(h)

 

 

NR/NR

 

$

4,903,425

 

 

 

 

 

 

 

 

 

     

 

 

 

Real Estate Investment Trust—1.0%

 

 

 

 

 

 

 

 

3,125

 

Boston Properties LP, 3.75%, 5/15/36

 

 

NR/A-

 

 

3,593,750

 

 

8,800

 

Developers Diversified Realty Corp., 1.75%, 11/15/40

 

 

NR/NR

 

 

9,240,000

 

 

5,000

 

Health Care REIT, Inc., 4.75%, 12/1/26

 

 

Baa2/BBB-

 

 

5,500,000

 

 

 

 

 

 

 

 

 

     

 

 

 

 

 

 

 

 

 

18,333,750

 

 

 

 

 

 

 

 

 

     

 

 

 

Road & Rail—0.2%

 

 

 

 

 

 

 

 

2,000

 

Hertz Global Holdings, Inc., 5.25%, 6/1/14

 

 

NR/B-

 

 

3,877,500

 

 

 

 

 

 

 

 

 

     

 

 

 

Semiconductors & Semiconductor Equipment—0.1%

 

 

 

 

 

 

 

 

2,030

 

SunPower Corp., 4.75%, 4/15/14

 

 

NR/NR

 

 

1,936,112

 

 

 

 

 

 

 

 

 

     

 

 

 

Software—1.5%

 

 

 

 

 

 

 

 

2,000

 

Cadence Design Systems, Inc., 2.625%, 6/1/15 (g)(h)

 

 

NR/NR

 

 

2,635,000

 

 

3,000

 

Concur Technologies, Inc., 2.50%, 4/15/15 (g)(h)

 

 

NR/NR

 

 

3,555,000

 

 

5,000

 

Lawson Software, Inc., 2.50%, 4/15/12

 

 

NR/NR

 

 

5,287,500

 

 

7,500

 

Nuance Communications, Inc., 2.75%, 8/15/27

 

 

NR/B-

 

 

9,356,250

 

 

4,000

 

Salesforce.com, Inc., 0.75%, 1/15/15 (g)(h)

 

 

NR/NR

 

 

6,565,000

 

 

 

 

 

 

 

 

 

     

 

 

 

 

 

 

 

 

 

27,398,750

 

 

 

 

 

 

 

 

 

     

 

 

 

Telecommunications—0.4%

 

 

 

 

 

 

 

 

6,000

 

Ciena Corp., 4.00%, 3/15/15 (g)(h)

 

 

NR/NR

 

 

7,875,000

 

 

 

 

 

 

 

 

 

     

 

 

 

Thrifts & Mortgage Finance—0.5%

 

 

 

 

 

 

 

 

8,020

 

MGIC Investment Corp., 5.00%, 5/1/17

 

 

NR/CCC+

 

 

8,661,600

 

 

1,000

 

The PMI Group, Inc., 4.50%, 4/15/20

 

 

NR/CCC+

 

 

817,500

 

 

 

 

 

 

 

 

 

     

 

 

 

 

 

 

 

 

 

9,479,100

 

 

 

 

 

 

 

 

 

     

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Convertible Bonds & Notes (cost—$218,536,288)

 

 

 

 

 

226,766,201

 

 

 

 

 

 

 

 

 

     

 

 

 

 

 

 

 

 

 

 

 

YANKEE BOND—0.2%

 

 

 

 

 

 

 

 

 

 

Marine—0.2%

 

 

 

 

 

 

 

 

3,090

 

DryShips, Inc., 5.00%, 12/1/14 (cost-$3,476,922)

 

 

NR/NR

 

 

3,024,337

 

 

 

 

 

 

 

 

 

     

 

 

 

 

 

 

 

 

 

 

 

SHORT-TERM INVESTMENTS—4.4%

 

 

 

 

 

 

 

 

 

 

Time Deposits—4.4%

 

 

 

 

 

 

 

 

15,068

 

Citibank-London, 0.03%, 2/1/11,

 

 

 

 

 

15,068,176

 

 

8,250

 

Royal Bank of Canada-Toronto, 0.03%, 2/1/11,

 

 

 

 

 

8,249,846

 

 

56,721

 

Societe Generale-Paris, 0.03%, 2/1/11,

 

 

 

 

 

56,720,898

 

 

 

 

 

 

 

 

 

     

 

 

 

Total Short Term Investments (cost—$80,038,920)

 

 

 

 

 

80,038,920

 

 

 

 

 

 

 

 

 

     

 

 

 

Total Investments, before call options written

 

 

 

 

 

 

 

 

 

 

(cost—$1,945,070,489)—100.3%

 

 

 

 

 

1,812,646,097

 

 

 

 

 

 

 

 

 

     

 

 

 

 

NFJ Dividend, Interest & Premium Strategy Fund

 

1.31.11 | 

AGIC Equity & Convertible Income Fund Annual Report

15




 

 

NFJ Dividend, Interest & Premium Strategy Fund

Schedule of Investments

January 31, 2011

 

 

 

 

 

 

 

 

 

Shares
(000s)

 

 

 

Value

 

           

CALL OPTIONS WRITTEN (b)—(1.1)%

 

 

 

 

 

 

 

Morgan Stanley Cyclical Flex Index,

 

 

 

 

 

350

 

strike price $1060, expires 2/4/11

 

$

(393,204

)

 

 

 

Morgan Stanley Cyclical Index,

 

 

 

 

 

400

 

strike price $1060, expires 2/19/11

 

 

(892,000

)

 

400

 

strike price $1070, expires 2/19/11

 

 

(660,000

)

 

 

 

NASDAQ 100 Flex Index,

 

 

 

 

 

100

 

strike price $2275, expires 2/4/11

 

 

(197,524

)

 

125

 

strike price $2275, expires 2/11/11

 

 

(389,108

)

 

100

 

strike price $2350, expires 3/11/11

 

 

(215,736

)

 

 

 

NASDAQ 100 Index,

 

 

 

 

 

125

 

strike price $2275, expires 2/19/11

 

 

(537,500

)

 

100

 

strike price $2375, expires 3/19/11

 

 

(197,000

)

 

 

 

New York Stock Exchange Arca Mini Oil Flex Index,

 

 

 

 

 

5,500

 

strike price $60.50, expires 2/11/11

 

 

(2,312,365

)

 

5,000

 

strike price $63, expires 2/25/11

 

 

(1,147,200

)

 

4,500

 

strike price $64, expires 3/4/11

 

 

(810,225

)

 

6,000

 

strike price $65, expires 3/11/11

 

 

(853,680

)

 

5,000

 

strike price $66.50, expires 3/25/11

 

 

(337,100

)

 

 

 

New York Stock Exchange Arca Mini Oil Index,

 

 

 

 

 

13,500

 

strike price $65, expires 3/19/11

 

 

(2,126,250

)

 

 

 

Philadelphia Stock Exchange KBW Bank Flex Index,

 

 

 

 

 

6,500

 

strike price $52.50, expires 2/4/11

 

 

(523,055

)

 

6,500

 

strike price $56, expires 2/25/11

 

 

(186,550

)

 

5,500

 

strike price $56.50, expires 3/4/11

 

 

(173,085

)

 

6,000

 

strike price $57.50, expires 3/4/11

 

 

(106,800

)

 

 

 

Philadelphia Stock Exchange KBW Bank Index,

 

 

 

 

 

14,500

 

strike price $55, expires 3/19/11

 

 

(1,268,750

)

 

 

 

Standard & Poor’s 500 Flex Index,

 

 

 

 

 

550

 

strike price $1260, expires 2/4/11

 

 

(1,476,794

)

 

300

 

strike price $1265, expires 2/11/11

 

 

(781,137

)

 

300

 

strike price $1270, expires 2/11/11

 

 

(669,675

)

 

250

 

strike price $1300, expires 3/4/11

 

 

(365,897

)

 

300

 

strike price $1305, expires 3/11/11

 

 

(446,949

)

 

300

 

strike price $1310, expires 3/11/11

 

 

(388,179

)

 

 

 

Standard & Poor’s 500 Index,

 

 

 

 

 

550

 

strike price $1285, expires 2/19/11

 

 

(965,250

)

 

300

 

strike price $1305, expires 3/19/11

 

 

(517,500

)

 

300

 

strike price $1315, expires 3/19/11

 

 

(391,500

)

 

 

 

 

 

     

 

 

 

Total Call Options Written (premiums received—$14,849,891)

 

 

(19,330,013

)

 

 

 

 

 

     

 

 

 

Total Investments, net of call options written

 

 

 

 

 

 

 

(cost—$1,930,220,598)—99.2%

 

 

1,793,316,084

 

 

 

 

 

 

     

 

 

 

Other assets less other liabilities—0.8%

 

 

14,356,184

 

 

 

 

 

 

     

 

 

 

Net Assets—100.0%

 

$

1,807,672,268

 

 

 

 

 

 

     

 

 

 

 

NFJ Dividend, Interest & Premium Strategy Fund

 

16

AGIC Equity & Convertible Income Fund Annual Report | 1.31.11

 




 

 

AGIC Equity & Convertible Income Fund

Schedule of Investments

January 31, 2011

 

 

 

 

 

 

 

 

 

Shares
(000s)

 

 

 

Value

 

           

COMMON STOCK—71.7%

 

 

 

 

 

 

 

Aerospace & Defense—1.3%

 

 

 

 

 

74

 

L-3 Communications Holdings, Inc.

 

$

5,813,975

 

 

 

 

 

 

     

 

 

 

Auto Components—1.7%

 

 

 

 

 

206

 

Johnson Controls, Inc. (a)

 

 

7,912,179

 

 

 

 

 

 

     

 

 

 

Automobiles—1.6%

 

 

 

 

 

458

 

Ford Motor Co. (a)(b)

 

 

7,309,885

 

 

 

 

 

 

     

 

 

 

Beverages—4.6%

 

 

 

 

 

121

 

Coca-Cola Co.

 

 

7,604,850

 

 

127

 

Molson Coors Brewing Co. —Cl. B

 

 

5,966,551

 

 

114

 

PepsiCo, Inc.

 

 

7,331,340

 

 

 

 

 

 

     

 

 

 

 

 

 

20,902,741

 

 

 

 

 

 

     

 

 

 

Biotechnology—1.4%

 

 

 

 

 

164

 

Gilead Sciences, Inc. (b)

 

 

6,294,320

 

 

 

 

 

 

     

 

 

 

Commercial Services & Supplies—0.5%

 

 

 

 

 

52

 

Avery Dennison Corp.

 

 

2,168,098

 

 

 

 

 

 

     

 

 

 

Communications Equipment—5.7%

 

 

 

 

 

39

 

Aviat Networks, Inc. (b)

 

 

200,479

 

 

284

 

Cisco Systems, Inc. (b)

 

 

6,010,830

 

 

156

 

Harris Corp.

 

 

7,236,970

 

 

158

 

Qualcomm, Inc. (a)

 

 

8,541,714

 

 

61

 

Research In Motion Ltd. (b)

 

 

3,593,888

 

 

 

 

 

 

     

 

 

 

 

 

 

25,583,881

 

 

 

 

 

 

     

 

 

 

Computers & Peripherals—5.5%

 

 

 

 

 

24

 

Apple, Inc. (a)(b)

 

 

7,974,020

 

 

344

 

EMC Corp. (a)(b)

 

 

8,567,138

 

 

53

 

International Business Machines Corp. (a)

 

 

8,537,400

 

 

 

 

 

 

     

 

 

 

 

 

 

25,078,558

 

 

 

 

 

 

     

 

 

 

Diversified Financial Services—0.8%

 

 

 

 

 

84

 

JP Morgan Chase & Co.

 

 

3,765,972

 

 

 

 

 

 

     

 

 

 

Diversified Telecommunication Services—1.7%

 

 

 

 

 

48

 

Frontier Communications Corp.

 

 

444,635

 

 

202

 

Verizon Communications, Inc.

 

 

7,195,240

 

 

 

 

 

 

     

 

 

 

 

 

 

7,639,875

 

 

 

 

 

 

     

 

 

 

Electric Utilities—0.9%

 

 

 

 

 

54

 

Entergy Corp.

 

 

3,911,758

 

 

 

 

 

 

     

 

 

 

Electronic Equipment, Instruments & Components—1.8%

 

 

 

 

 

149

 

Amphenol Corp. —Cl. A

 

 

8,245,660

 

 

 

 

 

 

     

 

 

 

Energy Equipment & Services—5.0%

 

 

 

 

 

69

 

Diamond Offshore Drilling, Inc.

 

 

4,940,819

 

 

124

 

National Oilwell Varco, Inc. (a)

 

 

9,126,650

 

 

97

 

Schlumberger Ltd. (a)

 

 

8,605,333

 

 

 

 

 

 

     

 

 

 

 

 

 

22,672,802

 

 

 

 

 

 

     

 

 

 

Health Care Equipment & Supplies—2.6%

 

 

 

 

 

111

 

Baxter International, Inc.

 

 

5,387,239

 

 

20

 

Intuitive Surgical, Inc. (b)

 

 

6,603,510

 

 

 

 

 

 

     

 

 

 

 

 

 

11,990,749

 

 

 

 

 

 

     

 

 

 

 

NFJ Dividend, Interest & Premium Strategy Fund

 

1.31.11 | 

AGIC Equity & Convertible Income Fund Annual Report

17




 

 

AGIC Equity & Convertible Income Fund

Schedule of Investments

January 31, 2011

 

 

 

 

 

 

 

 

 

Shares
(000s)

 

 

 

Value

 

           

 

 

 

Health Care Providers & Services—3.4%

 

 

 

 

 

101

 

McKesson Corp.

 

$

7,554,585

 

 

126

 

Medco Health Solutions, Inc. (b)

 

 

7,670,214

 

 

 

 

 

 

     

 

 

 

 

 

 

15,224,799

 

 

 

 

 

 

     

 

 

 

Hotels, Restaurants & Leisure—1.5%

 

 

 

 

 

94

 

McDonald’s Corp.

 

 

6,888,145

 

 

 

 

 

 

     

 

 

 

Household Products—1.7%

 

 

 

 

 

121

 

Procter & Gamble Co.

 

 

7,663,982

 

 

 

 

 

 

     

 

 

 

Independent Power Producers & Energy Traders—1.4%

 

 

 

 

 

92

 

Constellation Energy Group, Inc.

 

 

2,967,000

 

 

154

 

NRG Energy, Inc. (b)

 

 

3,195,479

 

 

 

 

 

 

     

 

 

 

 

 

 

6,162,479

 

 

 

 

 

 

     

 

 

 

Industrial Conglomerates—3.1%

 

 

 

 

 

290

 

General Electric Co.

 

 

5,843,802

 

 

310

 

Textron, Inc. (a)

 

 

8,157,787

 

 

 

 

 

 

     

 

 

 

 

 

 

14,001,589

 

 

 

 

 

 

     

 

 

 

Insurance—1.7%

 

 

 

 

 

53

 

MetLife, Inc.

 

 

2,434,232

 

 

87

 

Prudential Financial, Inc.

 

 

5,351,370

 

 

 

 

 

 

     

 

 

 

 

 

 

7,785,602

 

 

 

 

 

 

     

 

 

 

Internet Software & Services—1.9%

 

 

 

 

 

14

 

Google, Inc. —Cl. A (a)(b)

 

 

8,405,040

 

 

 

 

 

 

     

 

 

 

Machinery—5.7%

 

 

 

 

 

176

 

AGCO Corp. (a)(b)

 

 

8,907,990

 

 

101

 

Deere & Co.

 

 

9,171,810

 

 

90

 

Joy Global, Inc. (a)

 

 

7,820,046

 

 

 

 

 

 

     

 

 

 

 

 

 

25,899,846

 

 

 

 

 

 

     

 

 

 

Metals & Mining—1.6%

 

 

 

 

 

66

 

Freeport-McMoRan Copper & Gold, Inc. (a)

 

 

7,199,250

 

 

 

 

 

 

     

 

 

 

Multiline Retail—1.7%

 

 

 

 

 

139

 

Target Corp.

 

 

7,599,438

 

 

 

 

 

 

     

 

 

 

Oil, Gas & Consumable Fuels—3.5%

 

 

 

 

 

84

 

Occidental Petroleum Corp. (a)

 

 

8,101,784

 

 

121

 

Peabody Energy Corp. (a)

 

 

7,680,162

 

 

 

 

 

 

     

 

 

 

 

 

 

15,781,946

 

 

 

 

 

 

     

 

 

 

Pharmaceuticals—2.5%

 

 

 

 

 

137

 

Abbott Laboratories

 

 

6,186,920

 

 

63

 

Johnson & Johnson

 

 

3,782,724

 

 

39

 

Merck & Co., Inc.

 

 

1,286,200

 

 

 

 

 

 

     

 

 

 

 

 

 

11,255,844

 

 

 

 

 

 

     

 

 

 

Semiconductors & Semiconductor Equipment—3.4%

 

 

 

 

 

342

 

Intel Corp.

 

 

7,343,612

 

 

239

 

Texas Instruments, Inc. (a)

 

 

8,104,490

 

 

 

 

 

 

     

 

 

 

 

 

 

15,448,102

 

 

 

 

 

 

     

 

 

 

 

NFJ Dividend, Interest & Premium Strategy Fund

 

18

AGIC Equity & Convertible Income Fund Annual Report | 1.31.11

 




 

 

AGIC Equity & Convertible Income Fund

Schedule of Investments

January 31, 2011

 

 

 

 

 

 

 

 

 

 

 

 

Shares
(000s)

 

 

 

 

 

Value

 

               

 

 

 

Software—3.5%

 

 

 

 

 

 

 

 

248

 

Microsoft Corp.

 

 

 

 

$

6,867,482

 

 

251

 

Oracle Corp. (a)

 

 

 

 

 

8,026,718

 

 

42

 

Symantec Corp. (b)

 

 

 

 

 

745,097

 

 

 

 

 

 

 

 

 

     

 

 

 

 

 

 

 

 

 

15,639,297

 

 

 

 

 

 

 

 

 

     

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Common Stock (cost—$386,558,408)

 

 

 

 

 

324,245,812

 

 

 

 

 

 

 

 

 

     

 

 

 

 

 

 

 

 

 

 

 

CONVERTIBLE PREFERRED STOCK—15.4%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Credit Rating
(Moody’s/S&P)*

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Airlines—0.4%

 

 

 

 

 

 

 

 

51

 

Continental Airlines Finance Trust II, 6.00%, 11/15/30

 

 

Caa1/NR

 

 

1,992,185

 

 

 

 

 

 

 

 

 

     

 

 

 

Automobiles—0.5%

 

 

 

 

 

 

 

 

45

 

General Motors Co., 4.75%, 12/1/13

 

 

NR/NR

 

 

2,443,950

 

 

 

 

 

 

 

 

 

     

 

 

 

Banks—0.3%

 

 

 

 

 

 

 

 

26

 

Barclays Bank PLC, 10.00%, 3/15/11

 

 

 

 

 

 

 

 

 

 

(Teva Pharmaceuticals Industries Ltd.)(c)

 

 

A1/A+

 

 

1,291,680

 

 

 

 

 

 

 

 

 

     

 

 

 

Capital Markets—1.3%

 

 

 

 

 

 

 

 

40

 

AMG Capital Trust I, 5.10%, 4/15/36

 

 

NR/BB

 

 

2,028,969

 

 

 

 

Lehman Brothers Holdings, Inc. (c)(d)(e),

 

 

 

 

 

 

 

 

209

 

6.00%, 10/12/10, Ser. GIS (General Mills, Inc.)

 

 

WR/NR

 

 

673,534

 

 

33

 

28.00%, 3/6/09, Ser. RIG (Transocean, Inc.)

 

 

WR/NR

 

 

455,286

 

 

104

 

The Goldman Sachs Group, Inc.,

 

 

 

 

 

 

 

 

 

 

7.00%, 8/1/11 (Weatherford Corp.)(c)

 

 

A1/A

 

 

2,429,246

 

 

 

 

 

 

 

 

 

     

 

 

 

 

 

 

 

 

 

5,587,035

 

 

 

 

 

 

 

 

 

     

 

 

 

Commercial Banks—1.2%

 

 

 

 

 

 

 

 

18

 

Fifth Third Bancorp, 8.50%, 6/30/13, Ser. G (f)

 

 

Ba1/BB

 

 

2,721,316

 

 

3

 

Wells Fargo & Co., 7.50%, 3/15/13, Ser. L (f)

 

 

Baa3/A-

 

 

2,814,750

 

 

 

 

 

 

 

 

 

     

 

 

 

 

 

 

 

 

 

5,536,066

 

 

 

 

 

 

 

 

 

     

 

 

 

Commercial Services & Supplies—1.0%

 

 

 

 

 

 

 

 

102

 

United Rentals, Inc., 6.50%, 8/1/28

 

 

Caa1/CCC

 

 

4,655,072

 

 

 

 

 

 

 

 

 

     

 

 

 

Diversified Financial Services—3.5%

 

 

 

 

 

 

 

 

 

 

Bank of America Corp.,

 

 

 

 

 

 

 

 

4

 

7.25%, 1/30/13, Ser. L (f)

 

 

Ba3/BB+

 

 

4,184,862

 

 

31

 

10.00%, 2/24/11, Ser. SLB (Schlumberger Ltd.)(c)

 

 

A2/A

 

 

2,228,335

 

 

19

 

Citigroup, Inc., 7.50%, 12/15/12

 

 

NR/NR

 

 

2,614,780

 

 

 

 

Credit Suisse Securities USA LLC,

 

 

 

 

 

 

 

 

45

 

7.00%, 7/27/11 (Target Corp.)(c)

 

 

Aa2/A

 

 

2,485,034

 

 

79

 

8.00%, 9/20/11 (Bristol-Myers Squibb Co.)(c)

 

 

Aa2/A

 

 

2,045,340

 

 

33

 

JP Morgan Chase & Co., 7.00%, 7/25/11

 

 

 

 

 

 

 

 

 

 

(McDonald’s Corp.)(c)

 

 

Aa3/A+

 

 

2,435,594

 

 

 

 

 

 

 

 

 

     

 

 

 

 

 

 

 

 

 

15,993,945

 

 

 

 

 

 

 

 

 

     

 

 

 

Electric Utilities—0.3%

 

 

 

 

 

 

 

 

23

 

NextEra Energy, Inc., 8.375%, 6/1/12

 

 

NR/NR

 

 

1,177,020

 

 

 

 

 

 

 

 

 

     

 

 

 

 

NFJ Dividend, Interest & Premium Strategy Fund

 

1.31.11 | 

AGIC Equity & Convertible Income Fund Annual Report

19




 

 

AGIC Equity & Convertible Income Fund

Schedule of Investments

January 31, 2011

 

 

 

 

 

 

 

 

 

 

 

 

Shares
(000s)

 

 

 

Credit Rating
(Moody’s/S&P)*

 

Value

 

 

 

 

Food Products—1.4%

 

 

 

 

 

 

 

 

58

 

Archer-Daniels-Midland Co., 6.25%, 6/1/11

 

 

NR/BBB+

 

$

2,407,244

 

 

39

 

Bunge Ltd., 4.875%, 12/1/11 (f)

 

 

Ba1/BB

 

 

3,821,800

 

 

 

 

 

 

 

 

 

 

6,229,044

 

 

 

 

Household Durables—0.4%

 

 

 

 

 

 

 

 

41

 

Newell Financial Trust I, 5.25%, 12/1/27

 

 

WR/BB

 

 

1,756,440

 

 

 

 

Insurance—0.9%

 

 

 

 

 

 

 

 

148

 

American International Group, Inc., 8.50%, 2/15/11

 

 

Baa2/NR

 

 

954,600

 

 

28

 

Assured Guaranty Ltd., 8.50%, 6/1/12

 

 

NR/NR

 

 

1,653,437

 

 

53

 

XL Group PLC, 10.75%, 8/15/11

 

 

Baa2/BBB-

 

 

1,663,212

 

 

 

 

 

 

 

 

 

 

4,271,249

 

 

 

 

Multi-Utilities—1.1%

 

 

 

 

 

 

 

 

102

 

AES Trust III, 6.75%, 10/15/29

 

 

B3/B+

 

 

4,951,050

 

 

 

 

Oil, Gas & Consumable Fuels—1.6%

 

 

 

 

 

 

 

 

37

 

Apache Corp., 6.00%, 8/1/13

 

 

NR/NR

 

 

2,414,736

 

 

20

 

ATP Oil & Gas Corp., 8.00%, 10/1/14 (f)(g)(h)

 

 

NR/NR

 

 

1,964,025

 

 

27

 

Chesapeake Energy Corp., 5.00%, 12/31/49

 

 

NR/B

 

 

2,707,650

 

 

 

 

 

 

 

 

 

 

7,086,411

 

 

 

 

Real Estate Investment Trust—1.1%

 

 

 

 

 

 

 

 

91

 

Alexandria Real Estate Equities, Inc., 7.00%, 4/20/13 (f)

 

 

NR/NR

 

 

2,262,500

 

 

99

 

FelCor Lodging Trust, Inc., 1.95%, 12/31/49, Ser. A (f)

 

 

Caa3/CCC-

 

 

2,602,059

 

 

 

 

 

 

 

 

 

 

4,864,559

 

 

 

 

Road & Rail—0.4%

 

 

 

 

 

 

 

 

1

 

Kansas City Southern, 5.125%, 2/20/11 (f)

 

 

NR/B-

 

 

2,040,243

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Convertible Preferred Stock (cost—$86,413,064)

 

 

 

 

 

69,875,949

 

 

 

 

 

 

 

 

 

 

 

 

CONVERTIBLE BONDS & NOTES—9.8%

 

 

 

 

 

 

 

 

 

 

 

Principal
Amount
(000s)

 

 

 

 

 

 

 

 

 

 

 

 

Auto Components—0.7%

 

 

 

 

 

 

 

 

$1,425

 

BorgWarner, Inc., 3.50%, 4/15/12

 

 

NR/BBB

 

 

2,974,687

 

 

 

 

Capital Markets—0.7%

 

 

 

 

 

 

 

 

2,900

 

Ares Capital Corp., 5.75%, 2/1/16 (g)(h)

 

 

NR/BBB

 

 

2,994,250

 

 

 

 

Electrical Equipment—0.6%

 

 

 

 

 

 

 

 

1,880

 

EnerSys, 3.375%, 6/1/38 (i)

 

 

B2/BB

 

 

2,147,900

 

 

500

 

JA Solar Holdings Co., Ltd., 4.50%, 5/15/13

 

 

NR/NR

 

 

483,750

 

 

 

 

 

 

 

 

 

 

2,631,650

 

 

 

 

Electronic Equipment, Instruments & Components—0.3%

 

 

 

 

 

 

 

 

1,335

 

Anixter International, Inc., 1.00%, 2/15/13

 

 

NR/B+

 

 

1,561,950

 

 

 

 

Hotels, Restaurants & Leisure—0.5%

 

 

 

 

 

 

 

 

2,100

 

MGM Resorts International, 4.25%, 4/15/15 (g)(h)

 

 

Caa1/CCC+

 

 

2,333,625

 

 

 

 

Internet Software & Services—0.5%

 

 

 

 

 

 

 

 

1,800

 

VeriSign, Inc., 3.25%, 8/15/37

 

 

NR/NR

 

 

2,092,500

 


 

 

 

 

NFJ Dividend, Interest & Premium Strategy Fund

 

20

AGIC Equity & Convertible Income Fund Annual Report | 1.31.11

 




 

 

AGIC Equity & Convertible Income Fund

Schedule of Investments

January 31, 2011

 

 

 

 

 

 

 

 

 

 

 

 

Principal
Amount
(000s)

 

 

 

Credit Rating
(Moody’s/S&P)*

 

Value

 

 

 

 

IT Services—0.5%

 

 

 

 

 

 

 

 

$2,110

 

Alliance Data Systems Corp., 1.75%, 8/1/13

 

 

NR/NR

 

$

2,313,088

 

 

 

 

Machinery—0.6%

 

 

 

 

 

 

 

 

1,200

 

Titan International, Inc., 5.625%, 1/15/17 (g)(h)

 

 

NR/B+

 

 

2,545,500

 

 

 

 

Media—1.2%

 

 

 

 

 

 

 

 

 

 

Liberty Media LLC,

 

 

 

 

 

 

 

 

1,365

 

3.125%, 3/30/23

 

 

B1/BB-

 

 

1,568,044

 

 

4,000

 

3.50%, 1/15/31

 

 

B1/BB-

 

 

2,250,000

 

 

1,600

 

Regal Entertainment Group, 6.25%, 3/15/11 (g)(h)

 

 

NR/NR

 

 

1,616,000

 

 

 

 

 

 

 

 

 

 

5,434,044

 

 

 

 

Metals & Mining—0.5%

 

 

 

 

 

 

 

 

1,800

 

Steel Dynamics, Inc., 5.125%, 6/15/14

 

 

NR/BB+

 

 

2,295,000

 

 

 

 

Oil, Gas & Consumable Fuels—0.3%

 

 

 

 

 

 

 

 

1,100

 

Western Refining, Inc., 5.75%, 6/15/14

 

 

NR/CCC+

 

 

1,485,000

 

 

 

 

Pharmaceuticals—0.7%

 

 

 

 

 

 

 

 

1,200

 

Valeant Pharmaceuticals International, Inc.,

 

 

 

 

 

 

 

 

 

 

5.375%, 8/1/14 (g)(h)

 

 

NR/NR

 

 

3,163,500

 

 

 

 

Real Estate Investment Trust—1.0%

 

 

 

 

 

 

 

 

2,000

 

Boston Properties LP, 3.75%, 5/15/36

 

 

NR/A-

 

 

2,300,000

 

 

2,100

 

Health Care REIT, Inc., 4.75%, 12/1/26

 

 

Baa2/BBB-

 

 

2,310,000

 

 

 

 

 

 

 

 

 

 

4,610,000

 

 

 

 

Semiconductors & Semiconductor Equipment—0.5%

 

 

 

 

 

 

 

 

2,500

 

SunPower Corp., 4.75%, 4/15/14

 

 

NR/NR

 

 

2,384,375

 

 

 

 

Software—0.4%

 

 

 

 

 

 

 

 

1,400

 

Nuance Communications, Inc., 2.75%, 8/15/27

 

 

NR/B-

 

 

1,746,500

 

 

 

 

Thrifts & Mortgage Finance—0.8%

 

 

 

 

 

 

 

 

 

 

MGIC Investment Corp.,

 

 

 

 

 

 

 

 

1,700

 

5.00%, 5/1/17

 

 

NR/CCC+

 

 

1,836,000

 

 

1,755

 

9.00%, 4/1/63 (g)(h)

 

 

Caa3/CC

 

 

1,816,425

 

 

 

 

 

 

 

 

 

 

3,652,425

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Convertible Bonds & Notes (cost-—$44,326,221)

 

 

 

 

 

44,218,094

 

 

 

 

 

 

 

 

 

 

 

 

CORPORATE BONDS & NOTES—1.1%

 

 

 

Electric—0.4%

 

 

 

 

 

 

 

 

2,000

 

Texas Competitive Electric Holdings Co. LLC /

 

 

 

 

 

 

 

 

 

 

TCEH Finance, Inc., 15.00%, 4/1/21 (g)(h)

 

 

Caa3/CCC-

 

 

1,790,000

 

 

 

 

Independent Power Producer—0.7%

 

 

 

 

 

 

 

 

4,340

 

Dynegy Holdings, Inc., 7.75%, 6/1/19

 

 

Caa2/B-

 

 

3,135,650

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Corporate Bonds & Notes (cost—$5,920,612)

 

 

 

 

 

4,925,650

 

 

 

 

 

 

 

 

 

 

 

 

YANKEE BOND—0.2%

 

 

 

Marine—0.2%

 

 

 

 

 

 

 

 

1,100

 

DryShips, Inc., 5.00%, 12/1/14 (cost-$1,241,382)

 

 

NR/NR

 

 

1,076,625

 


 

 

 

 

NFJ Dividend, Interest & Premium Strategy Fund

 

1.31.11 | 

AGIC Equity & Convertible Income Fund Annual Report

21




 

 

AGIC Equity & Convertible Income Fund

Schedule of Investments

January 31, 2011

 

 

 

 

 

 

 

 

 

Principal
Amount
(000s)

 

 

 

Value

 

SHORT-TERM INVESTMENT—2.5%

 

 

 

Time Deposit—2.5%

 

 

 

 

 

$11,432

 

Citibank-London, 0.03%, 2/1/11 (cost—$11,432,418)

 

$

11,432,418

 

 

 

 

Total Investments, before call options written

 

 

 

 

 

 

 

(cost-$535,892,105)—100.7%

 

 

455,774,548

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CALL OPTIONS WRITTEN (b)—(0.1)%

 

 

 

 

 

 

 

 

Contracts

 

 

 

 

 

 

 

 

 

AGCO Corp.,

 

 

 

 

 

270

 

strike price $55, expires 2/19/11

 

 

(13,500)

 

 

 

 

Apple, Inc.,

 

 

 

 

 

165

 

strike price $360, expires 2/19/11

 

 

(15,840)

 

 

 

 

EMC Corp.,

 

 

 

 

 

2,400

 

strike price $26, expires 2/19/11

 

 

(28,800)

 

 

 

 

Ford Motor Co.,

 

 

 

 

 

3,200

 

strike price $19, expires 2/19/11

 

 

(11,200)

 

 

 

 

Freeport-McMoRan Copper & Gold, Inc.,

 

 

 

 

 

460

 

strike price $64.50, expires 2/19/11

 

 

(8,050)

 

 

 

 

Google, Inc.,

 

 

 

 

 

100

 

strike price $640, expires 2/19/11

 

 

(13,500)

 

 

 

 

International Business Machines Corp.,

 

 

 

 

 

370

 

strike price $165, expires 2/19/11

 

 

(31,635)

 

 

 

 

Johnson Controls, Inc.,

 

 

 

 

 

1,445

 

strike price $40, expires 2/19/11

 

 

(39,738)

 

 

 

 

Joy Global, Inc.,

 

 

 

 

 

625

 

strike price $95, expires 2/19/11

 

 

(29,375)

 

 

 

 

National Oilwell Varco, Inc.,

 

 

 

 

 

195

 

strike price $75, expires 2/19/11

 

 

(40,950)

 

 

 

 

Occidental Petroleum Corp.,

 

 

 

 

 

585

 

strike price $100, expires 2/19/11

 

 

(53,527)

 

 

 

 

Oracle Corp.,

 

 

 

 

 

1,755

 

strike price $33, expires 2/19/11

 

 

(42,120)

 

 

 

 

Peabody Energy Corp.,

 

 

 

 

 

175

 

strike price $65, expires 2/19/11

 

 

(21,088)

 

 

 

 

Qualcomm, Inc.,

 

 

 

 

 

1,105

 

strike price $55, expires 2/19/11

 

 

(79,007)

 

 

 

 

Schlumberger Ltd.,

 

 

 

 

 

105

 

strike price $90, expires 2/19/11

 

 

(17,955)

 

 

 

 

Texas Instruments, Inc.,

 

 

 

 

 

1,675

 

strike price $35, expires 2/19/11

 

 

(36,850)

 

 

 

 

Textron, Inc.,

 

 

 

 

 

1,175

 

strike price $27, expires 2/19/11

 

 

(49,350)

 

 

 

 

Total Call Options Written (premiums received-$1,063,613)

 

 

(532,485)

 

 

 

 

Total Investments, net of call options written

 

 

 

 

 

 

 

(cost-$534,828,492)—100.6%

 

 

455,242,063

 

 

 

 

Other liabilities in excess of other assets—(0.6)%

 

 

(2,835,683)

 

 

 

 

Net Assets—100.0%

 

 

$452,406,380

 


 

 

 

 

NFJ Dividend, Interest & Premium Strategy Fund

 

22

AGIC Equity & Convertible Income Fund Annual Report | 1.31.11

 




 

 

NFJ Dividend, Interest & Premium Strategy Fund  

 

AGIC Equity & Convertible Income Fund

Notes to Schedule

January 31, 2011

of Investments


 

 

 

Notes to Schedules of Investments:

 

*

[Unaudited]

 

(a)

All or partial amount segregated as collateral for the benefit of the counterparty for call options written.

 

(b)

Non-income producing.

 

(c)

Securities exchangeable or convertible into securities of an entity different than the issuer or structured by the issuer to provide exposure to securities of an entity different than the issuer (synthetic convertible securities). Such entity is identified in the parenthetical.

 

(d)

Fair-Valued—Securities in NFJ Dividend, Interest & Premium Strategy and AGIC Equity & Convertible Income Fund, with an aggregate value of $4,874,236 and $1,128,820, representing 0.27% and 0.25% of net assets, respectively. See Note 1 (a) and Note 1 (b) in the Notes to Financial Statements.

 

(e)

In default.

 

(f)

Perpetual maturity. Maturity date shown is the first call date.

 

(g)

144A–Exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, typically only to qualified institutional buyers. Unless otherwise indicated, these securities are not considered to be illiquid.

 

(h)

Private Placement–Restricted as to resale and may not have a readily available market. Securities in NFJ Dividend, Interest & Premium Strategy Fund & AGIC Equity & Convertible Income Fund, with an aggregate market value of $65,038,262 and $18,223,325, representing 3.60% and 4.03% of net assets, respectively.

 

(i)

Step-Bond–Coupon is a fixed rate for an initial period then resets at a specific date and rate.

 

 

 

 


 

Glossary:

ADR–American Depositary Receipt

FRN–Floating Rate Notes. The interest rate disclosed reflects the rate in effect on January 31, 2011.

NR–Not Rated

WR–Withdrawn Rating


 

 

 

 

NFJ Dividend, Interest & Premium Strategy Fund

 

See accompanying Notes to Financial Statements | 1.31.11 | 

AGIC Equity & Convertible Income Fund Annual Report

23




 

 

NFJ Dividend, Interest & Premium Strategy Fund
AGIC Equity & Convertible Income Fund
January 31, 2011

Statements of Assets
and Liabilities


 

 

 

 

 

 

 

 

 

 

 

NFJ Dividend,
Interest &
Premium Strategy

 

AGIC Equity
& Convertible
Income

Assets:

 

 

 

 

 

 

 

 

Investments, at value (cost – $1,945,070,489 and $535,892,105, respectively)

 

$

1,812,646,097

 

 

$

455,774,548

 

Receivable for investments sold

 

 

25,552,810

 

 

 

2,773,237

 

Dividends and interest receivable

 

 

4,356,624

 

 

 

1,302,438

 

Prepaid expenses

 

 

18,197

 

 

 

4,678

 

Total Assets

 

 

1,842,573,728

 

 

 

459,854,901

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

Call options written, at value (premiums received – $14,849,891 and $1,063,613, respectively)

 

 

19,330,013

 

 

 

532,485

 

Payable for investments purchased

 

 

13,863,860

 

 

 

6,389,454

 

Investment management fees payable

 

 

1,378,344

 

 

 

382,742

 

Accrued expenses

 

 

329,243

 

 

 

143,840

 

Total Liabilities

 

 

34,901,460

 

 

 

7,448,521

 

Net Assets

 

$

1,807,672,268

 

 

$

452,406,380

 

 

 

 

 

 

 

 

 

 

Composition of Net Assets:

 

 

 

 

 

 

 

 

Common Stock:

 

 

 

 

 

 

 

 

Par value ($0.00001 per share applicable to 94,524,325 and 22,304,189 shares issued and outstanding, respectively)

 

 

$945

 

 

 

$223

 

Paid-in-capital in excess of par

 

 

2,242,686,741

 

 

 

517,458,932

 

Undistributed (Dividends in excess of) net investment income

 

 

(3,316,174

)

 

 

303,108

 

Accumulated net realized gain (loss)

 

 

(294,794,730

)

 

 

14,230,546

 

Net unrealized depreciation of investments and call options written

 

 

(136,904,514

)

 

 

(79,586,429

)

Net Assets

 

$

1,807,672,268

 

 

$

452,406,380

 

Net Asset Value Per Share

 

 

$19.12

 

 

 

$20.28

 


 

 

 

 

NFJ Dividend, Interest & Premium Strategy Fund

 

24

AGIC Equity & Convertible Income Fund Annual Report | 1.31.11 | See accompanying Notes to Financial Statements




 

 

NFJ Dividend, Interest & Premium Strategy Fund
AGIC Equity & Convertible Income Fund

For the year ended January 31, 2011

Statements of Operations


 

 

 

 

 

 

 

 

 

 

 

NFJ Dividend,
Interest &
Premium Strategy

 

AGIC Equity
& Convertible
Income

Investment Income:

 

 

 

 

 

 

 

 

Dividends (net of foreign withholding taxes of $1,084,557 and $0, respectively)

 

$69,298,800

 

 

$10,454,793

 

Interest

 

 

7,748,823

 

 

 

2,919,373

 

Total Investment Income

 

 

77,047,623

 

 

 

13,374,166

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

Investment management fees

 

 

15,381,578

 

 

 

4,101,246

 

Custodian and accounting agent fees

 

 

363,300

 

 

 

119,764

 

Shareholder communications

 

 

296,240

 

 

 

82,212

 

Trustees’ fees and expenses

 

 

141,075

 

 

 

33,405

 

Audit and tax services

 

 

87,380

 

 

 

67,525

 

New York Stock Exchange listing fees

 

 

74,721

 

 

 

21,250

 

Legal fees

 

 

55,235

 

 

 

21,690

 

Insurance expenses

 

 

44,519

 

 

 

11,285

 

Dividend expense

 

 

35,968

 

 

 

 

Transfer agent fees

 

 

29,930

 

 

 

31,965

 

Miscellaneous

 

 

12,164

 

 

 

4,773

 

Total expenses

 

 

16,522,110

 

 

 

4,495,115

 

 

 

 

 

 

 

 

 

 

Net Investment Income

 

 

60,525,513

 

 

 

8,879,051

 

 

 

 

 

 

 

 

 

 

Realized and Change in Unrealized Gain (Loss):

 

 

 

 

 

 

 

 

Net realized gain (loss) on:

 

 

 

 

 

 

 

 

Investments

 

 

96,344,271

 

 

 

34,230,888

 

Call Options written

 

 

(76,157,888

)

 

 

(489,209

)

Net change in unrealized appreciation/depreciation of:

 

 

 

 

 

 

 

 

Investments

 

 

189,959,185

 

 

 

42,869,951

 

Call Options written

 

 

(13,654,523

)

 

 

(195,442

)

Net realized and change in unrealized gain on investments and call options written

 

 

196,491,045

 

 

 

76,416,188

 

Net Increase in Net Assets Resulting from Investment Operations

 

$257,016,558

 

 

$85,295,239

 


 

 

 

 

       NFJ Dividend, Interest & Premium Strategy Fund

 

See accompanying Notes to Financial Statements | 1.31.11 | AGIC Equity & Convertible Income Fund Annual Report

25




 

 

NFJ Dividend, Interest & Premium Strategy Fund

Statements of Changes

AGIC Equity & Convertible Income Fund

in Net Assets


 

 

 

 

 

 

 

 

 

NFJ Dividend, Interest & Premium Strategy:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year ended
January 31, 2011

 

Year ended
January 31, 2010

Investments Operations:

 

 

 

 

 

 

 

 

Net investment income

 

$

60,525,513

 

 

$

58,104,787

 

Net realized gain (loss) on investments and call options written

 

 

20,186,383

 

 

 

(158,414,644

)

Net change in unrealized appreciation/depreciation of investments and call options written

 

 

176,304,662

 

 

 

458,016,688

 

Net increase in net assets resulting from investment operations

 

 

257,016,558

 

 

 

357,706,831

 

 

 

 

 

 

 

 

 

 

Dividends to Shareholders from Net investment income

 

 

(85,071,892

)

 

 

(56,714,595

)

Total increase in net assets

 

 

171,944,666

 

 

 

300,992,236

 

 

 

 

 

 

 

 

 

 

Net Assets:

 

 

 

 

 

 

 

 

Beginning of year

 

 

1,635,727,602

 

 

 

1,334,735,366

 

End of year (including undistributed (dividends in excess of) net investment income of $(3,316,174), and $7,833,420, respectively)

 

$

1,807,672,268

 

 

$

1,635,727,602

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AGIC Equity & Convertible Income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year ended
January 31, 2011

 

Year ended
January 31, 2010

Investments Operations:

 

 

 

 

 

 

 

 

Net investment income

 

$

8,879,051

 

 

$

9,004,789

 

Net realized gain on investments and call options written

 

 

33,741,679

 

 

 

15,405,697

 

Net change in unrealized appreciation/depreciation of investments and call options written

 

 

42,674,509

 

 

 

93,536,166

 

Net increase in net assets resulting from investment operations

 

 

85,295,239

 

 

 

117,946,652

 

 

 

 

 

 

 

 

 

 

Dividends and Distributions to Shareholders from:

 

 

 

 

 

 

 

 

Net investment income

 

 

(9,137,004

)

 

 

(22,085,355

)

Net realized gains

 

 

(15,843,688

)

 

 

 

Return of capital

 

 

 

 

 

(2,895,337

)

Total dividends and distributions to shareholders

 

 

(24,980,692

)

 

 

(24,980,692

)

Total increase in net assets

 

 

60,314,547

 

 

 

92,965,960

 

 

 

 

 

 

 

 

 

 

Net Assets:

 

 

 

 

 

 

 

 

Beginning of year

 

 

392,091,833

 

 

 

299,125,873

 

End of year (including undistributed (dividends in excess of) net investment income of $303,108, and $(647,147), respectively)

 

 

$452,406,380

 

 

 

$392,091,833

 


 

 

 

 

NFJ Dividend, Interest & Premium Strategy Fund

 

26

AGIC Equity & Convertible Income Fund Annual Report | 1.31.11 | See accompanying Notes to Financial Statements




 

 

NFJ Dividend, Interest & Premium Strategy Fund
AGIC Equity & Convertible Income Fund

January 31, 2011

Notes to Financial Statements

   

1. Organization and Significant Accounting Policies
NFJ Dividend, Interest & Premium Strategy Fund and AGIC Equity & Convertible Income Fund (collectively referred to as the “Funds”) were organized as Massachusetts business trusts on August 20, 2003 and December 12, 2006, respectively. Prior to commencing operations on February 28, 2005 and February 27, 2007, respectively, the Funds had no operations other than matters relating to their organization and registration as diversified, closed-end management investment companies under the Investment Company Act of 1940 and the rules and regulations there under, as amended. Allianz Global Investors Fund Management LLC (the “Investment Manager”) serves as the Funds’ Investment Manager and is an indirect wholly-owned subsidiary of Allianz Global Investors of America L.P. (“Allianz Global”). Allianz Global is an indirect, wholly-owned subsidiary of Allianz SE, a publicly traded European insurance and financial services company. Each Fund has an unlimited amount of $0.00001 par value common shares authorized.

NFJ Dividend, Interest & Premium Strategy’s primary investment objective is to seek current income and gains, with a secondary objective of long-term capital appreciation. Under normal market conditions the Fund pursues its investment objectives by investing in a diversified portfolio of dividend-paying common stocks and income-producing convertible securities. The Fund will also employ a strategy of writing (selling) call options on equity indexes in an attempt to generate gains from option premiums.

AGIC Equity & Convertible Income’s investment objective is to seek total return comprised of capital appreciation, current income and gains. Under normal market conditions the Fund pursues its objective by investing in a diversified portfolio of equity securities and income producing convertible securities. The Fund will also employ a strategy of writing (selling) call options on the equity securities held by the Fund.

There is no guarantee that the Funds will meet their stated objectives.

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

In the normal course of business, the Funds enter into contracts that contain a variety of representations which provide general indemnifications. The Funds’ maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Funds that have not yet occurred.

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

(a) Valuation of Investments
Portfolio securities and other financial instruments for which market quotations are readily available are stated at market value. Market value is generally determined on the basis of last reported sales prices, or if no sales are reported, on the basis of quotes obtained from a quotation reporting system, established market makers, or independent pricing services.

Portfolio securities and other financial instruments for which market quotations are not readily available or for which a development/event occurs that may significantly impact the value of a security are fair-valued, in good faith, pursuant to procedures established by the Board of Trustees, or persons acting at their discretion pursuant to procedures established by the Board of Trustees. The Funds’ investments are valued daily using prices supplied by an independent pricing service or dealer quotations, or by using the last sale price on the exchange that is the primary market for such securities, or the mean between the last quoted bid and ask price. Independent pricing services use information provided by market makers or estimates of market values obtained from yield data relating to investments or securities with similar characteristics. Synthetic convertible securities are valued based on quotations obtained from unaffiliated brokers who are the principal market-makers in such securities. Such valuations are derived by the brokers from proprietary models which are generally based on readily available market information including valuations of the common stock underlying the synthetic security. Short-term securities maturing in 60 days or less are valued at amortized cost, if their original term to maturity was 60 days or less, or by amortizing their value on the 61st day prior to maturity, if the original term to maturity exceeded 60 days.

The prices used by the Funds to value securities may differ from the value that would be realized if the securities were sold and these differences could be material to each Fund’s financial statements. Each Fund’s net asset value (“NAV”) is normally determined as of the close of regular trading (normally, 4:00 p.m. Eastern time) on the New York Stock Exchange (“NYSE”) on each day the NYSE is open for business.

 

 

 

 

      NFJ Dividend, Interest & Premium Strategy Fund

 

 

1.31.11 | AGIC Equity & Convertible Income Fund Annual Report

27




 

 

NFJ Dividend, Interest & Premium Strategy Fund
AGIC Equity & Convertible Income Fund

January 31, 2011

Notes to Financial Statements

   

1. Organization and Significant Accounting Policies (continued)

(b) Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e. the “exit price”) in an orderly transaction between market participants. The three levels of the fair value hierarchy are described below:

 

 

Level 1 – quoted prices in active markets for identical investments that the Funds have the ability to access

•           Level 2 – valuations based on other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.) or quotes from inactive exchanges

Level 3 – valuations based on significant unobservable inputs (including the Funds’ own assumptions in determining the fair value of investments)

An investment asset’s or liability’s level within the fair value hierarchy is based on the lowest level input, individually or in the aggregate, that is significant to fair value measurement. The objective of fair value measurement remains the same even when there is a significant decrease in the volume and level of activity for an asset or liability and regardless of the valuation technique used.

The valuation techniques used by the Funds to measure fair value during the year ended January 31, 2011 maximized the use of observable inputs and minimized the use of unobservable inputs. When fair-valuing securities the Funds utilized multi-dimensional relational pricing models.

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The following are certain inputs and techniques that the Funds generally use to evaluate how to classify each major category of assets and liabilities, for Level 2 and Level 3, in accordance with Generally Accepted Accounting Principles (“GAAP”).

Equity Securities (Common and Preferred Stock) – Equity securities traded in inactive markets are valued using inputs which include broker-dealer quotes, recently executed transactions adjusted for changes in the benchmark index, or evaluated price quotes received from independent pricing services that take into account the integrity of the market sector and issuer, the individual characteristics of the security, and information received from broker-dealers and other market sources pertaining to the issuer or security. To the extent that these inputs are observable, the values of equity securities are categorized as Level 2. To the extent that these inputs are unobservable the values are categorized as Level 3.

Convertible Bonds & Notes – Convertible bonds and notes are valued by independent pricing services using various inputs and techniques, which include broker-dealer quotations from relevant market makers and recently executed transactions in securities of the issuer or comparable issuers. The broker-dealer quotations received are supported by credit analysis of the issuer that takes into consideration credit quality assessments, daily trading activity, and the activity of the underlying equities, listed bonds and sector-specific trends. To the extent that these inputs are observable, the values of convertible bonds and notes are categorized as Level 2. To the extent that these inputs are unobservable the values are categorized as Level 3.

Corporate Bonds & Notes – Corporate bonds and notes are generally comprised of two main categories, investment grade bonds and high yield bonds. Investment grade bonds are valued by independent pricing services using various inputs and techniques, which include broker-dealer quotations, live trading levels, recently executed transactions in securities of the issuer or comparable issuers, and option adjusted spread models that include base curve and spread curve inputs. Adjustments to individual bonds can be applied to recognize trading differences compared to other bonds issued by the same issuer. High yield bonds are valued by independent pricing services based primarily on broker-dealer quotations from relevant market makers and recently executed transactions in securities of the issuer or comparable issuers. The broker-dealer quotations received are supported by credit analysis of the issuer that takes into consideration credit quality assessments, daily trading activity, and the activity of the underlying equities, listed bonds and sector-specific trends. To the extent that these inputs are observable, the values of corporate bonds and notes are categorized as Level 2. To the extent that these inputs are unobservable the values are categorized as Level 3.

Option Contracts — Option contracts traded over the counter (“OTC”) are valued by independent pricing services based on pricing models that incorporate various inputs such as interest rates, credit spreads, currency exchange rates and volatility measurements for in-the-money, at-the-money, and out-of-the-money contracts based on a given strike price. To the extent that these inputs are observable, the values of OTC option contracts are categorized as Level 2. To the extent that these inputs are unobservable the values are categorized as Level 3.

 

 

 

 

NFJ Dividend, Interest & Premium Strategy Fund

 

28

AGIC Equity & Convertible Income Fund Annual Report | 1.31.11

 




 

 

NFJ Dividend, Interest & Premium Strategy Fund
AGIC Equity & Convertible Income Fund

January 31, 2011

Notes to Financial Statements

 

1. Organizational and Significant Accounting Policies (continued)

The Funds’ policy is to recognize transfers between levels at the end of the reporting period.

A summary of the inputs used at January 31, 2011 in valuing each Fund’s assets and liabilities is listed below:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NFJ Dividend, Interest & Premium Strategy:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Level 1 –
Quoted Prices

 

Level 2 –
Other Significant
Observable
Inputs

 

Level 3 –
Significant
Unobservable
Inputs

 

Value at
1/31/11

 

                   

Investments in Securities – Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

$

1,263,724,918

 

 

 

 

 

$

1,263,724,918

 

Convertible Preferred Stock:

 

 

 

 

 

 

 

 

 

 

 

 

 

Airlines

 

 

 

$

4,837,009

 

 

 

 

4,837,009

 

Banks

 

 

 

 

7,322,335

 

 

 

 

7,322,335

 

Capital Markets

 

 

 

 

9,432,696

 

$

3,360,266

 

 

12,792,962

 

Commercial Banks

 

 

5,733,750

 

 

11,429,375

 

 

 

 

17,163,125

 

Commercial Services & Supplies

 

 

 

 

7,322,708

 

 

 

 

7,322,708

 

Diversified Financial Services

 

 

19,595,694

 

 

47,370,381

 

 

 

 

66,966,075

 

Household Durables

 

 

10,824,373

 

 

4,194,036

 

 

 

 

15,018,409

 

Oil, Gas & Consumable Fuels

 

 

9,168,144

 

 

15,743,475

 

 

 

 

24,911,619

 

All Other

 

 

82,757,479

 

 

 

 

 

 

82,757,479

 

Convertible Bonds & Notes:

 

 

 

 

 

 

 

 

 

 

 

 

 

Hotels, Restaurants & Leisure

 

 

 

 

14,396,375

 

 

1,513,970

 

 

15,910,345

 

All Other

 

 

 

 

210,855,856

 

 

 

 

210,855,856

 

Yankee Bond

 

 

 

 

3,024,337

 

 

 

 

3,024,337

 

Short-Term Investments

 

 

 

 

80,038,920

 

 

 

 

80,038,920

 

                           

Total Investments in Securities – Assets

 

$

1,391,804,358

 

$

415,967,503

 

$

4,874,236

 

$

1,812,646,097

 

                           

Investments in Securities – Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

Call Options Written, at value:

 

 

 

 

 

 

 

 

 

 

 

 

 

Market price

 

$

(7,555,750

)

$

(11,774,263

)

 

 

$

(19,330,013

)

                           

Total Investments

 

$

1,384,248,608

 

$

404,193,240

 

$

4,874,236

 

$

1,793,316,084

 

                           

There were no significant transfers into and out of Levels 1 and 2 during the year ended January 31, 2011.

A roll forward of fair value measurements using significant unobservable inputs (Level 3) for the year ended January 31, 2011, were as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning
Balance
1/31/10

 

Net
Purchases
(Sales) and
Settlements

 

Net Change
in Unrealized
Appreciation/
Depreciation

 

Transfers
into
Level 3*

 

Transfers
out of
Level 3*

 

Ending
Balance
1/31/11

 

                           

Investments in Securities – Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Convertible Preferred Stock:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital Markets

 

$

3,360,266

 

 

 

 

 

 

 

 

 

$

3,360,266

 

Convertible Bonds & Notes:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Hotels, Restaurants & Leisure

 

 

1,513,970

 

 

 

 

 

 

 

 

 

 

1,513,970

 

                                       

Total Investments

 

$

4,874,236

 

 

 

 

 

 

 

 

 

$

4,874,236

 

                                       

There was no change in unrealized appreciation/depreciation of Level 3 investments which the Fund held at January 31, 2011.

* There were no transfers into and out of Level 3 during the year ended January 31, 2011.

 

 

 

 

       NFJ Dividend, Interest & Premium Strategy Fund

 

 

1.31.11 | AGIC Equity & Convertible Income Fund Annual Report

29




 

 

NFJ Dividend, Interest & Premium Strategy Fund
AGIC Equity & Convertible Income Fund

January 31, 2011

Notes to Financial Statements

   

 

 

1. Organization and Significant Accounting Policies (continued)

 

 

AGIC Equity & Convertible Income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Level 1 –
Quoted Prices

 

Level 2 –
Other Significant
Observable
Inputs

 

Level 3 –
Significant
Unobservable
Inputs

 

Value at
1/31/11

 

                   

Investments in Securities – Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

$

324,245,812

 

 

 

 

 

 

 

 

 

 

 

$

324,245,812

 

 

Convertible Preferred Stock:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Airlines

 

 

 

 

 

 

$

1,992,185

 

 

 

 

 

 

 

 

1,992,185

 

 

Banks

 

 

 

 

 

 

 

1,291,680

 

 

 

 

 

 

 

 

1,291,680

 

 

Capital Markets

 

 

 

 

 

 

 

4,458,215

 

 

 

$

1,128,820

 

 

 

 

5,587,035

 

 

Commercial Banks

 

 

 

2,814,750

 

 

 

 

2,721,316

 

 

 

 

 

 

 

 

5,536,066

 

 

Commercial Services & Supplies

 

 

 

 

 

 

 

4,655,072

 

 

 

 

 

 

 

 

4,655,072

 

 

Diversified Financial Services

 

 

 

6,799,642

 

 

 

 

9,194,303

 

 

 

 

 

 

 

 

15,993,945

 

 

Household Durables

 

 

 

 

 

 

 

1,756,440

 

 

 

 

 

 

 

 

1,756,440

 

 

Oil, Gas & Consumable Fuels

 

 

 

2,414,736

 

 

 

 

4,671,675

 

 

 

 

 

 

 

 

7,086,411

 

 

Road & Rail

 

 

 

 

 

 

 

2,040,243

 

 

 

 

 

 

 

 

2,040,243

 

 

All Other

 

 

 

23,936,872

 

 

 

 

 

 

 

 

 

 

 

 

23,936,872

 

 

Convertible Bonds & Notes

 

 

 

 

 

 

 

44,218,094

 

 

 

 

 

 

 

 

44,218,094

 

 

Corporate Bonds & Notes

 

 

 

 

 

 

 

4,925,650

 

 

 

 

 

 

 

 

4,925,650

 

 

Yankee Bond

 

 

 

 

 

 

 

1,076,625

 

 

 

 

 

 

 

 

1,076,625

 

 

Short-Term Investments

 

 

 

 

 

 

 

11,432,418

 

 

 

 

 

 

 

 

11,432,418

 

 

                                           

Total Investments in Securities – Assets

 

 

$

360,211,812

 

 

 

$

94,433,916

 

 

 

$

1,128,820

 

 

 

$

455,774,548

 

 

                                           

Investments in Securities – Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Call Options Written, at value:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Market price

 

 

$

(532,485

)

 

 

 

 

 

 

 

 

 

 

$

(532,485

)

 

                                           

Total Investments

 

 

$

359,679,327

 

 

 

$

94,433,916

 

 

 

$

1,128,820

 

 

 

$

455,242,063

 

 

                                           

There were no significant transfers into and out of Levels 1 and 2 during the year ended January 31, 2011.

A roll forward of fair value measurements using significant unobservable inputs (Level 3) for the year ended January 31, 2011, were as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning
Balance
1/31/10

 

Net
Purchases
(Sales) and
Settlements

 

Net Change
in Unrealized
Appreciation/
Depreciation

 

Transfers
into
Level 3*

 

Transfers
out of
Level 3*

 

Ending
Balance
1/31/11

 

                           

Investments in Securities – Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Convertible Preferred Stock:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital Markets

 

 

$

1,128,820

 

 

 

 

 

 

 

$

1,128,820

 

 

                                               

Total Investments

 

 

$

1,128,820

 

 

 

 

 

 

 

$

1,128,820

 

 

                                               

There was no change in unrealized appreciation/depreciation of Level 3 investments which the Fund held at January 31, 2011.

*There were no transfers into and out of Level 3 during the year ended January 31, 2011.

(c) Investment Transactions and Investment Income
Investment transactions are accounted for on the trade date. Realized gains and losses on investments are determined on the identified cost basis. Interest income adjusted for the accretion of discount and amortization of premium is recorded on an accrual basis. Discounts or premiums on debt securities purchased are accreted or amortized, respectively, to interest income over the lives of the respective securities. Dividend income is recorded on the ex-dividend date. Conversion premium is not amortized. Payments received from certain investments may be comprised of dividends, realized gains

 

 

 

 

NFJ Dividend, Interest & Premium Strategy Fund

 

30

AGIC Equity & Convertible Income Fund Annual Report | 1.31.11

 




 

 

NFJ Dividend, Interest & Premium Strategy Fund
AGIC Equity & Convertible Income Fund
January 31, 2011

Notes to Financial Statements

 

1. Organization and Significant Accounting Policies (continued)

and return of capital. These payments may initially be recorded as dividend income and may be subsequently be reclassified as realized gains and/or return of capital upon receipt of information from the issuer. Payments received on synthetic convertible securities are generally included in dividends.

(d) Federal Income Taxes
The Funds intend to distribute all of their taxable income and to comply with the other requirements of Subchapter M of the U.S. Internal Revenue Code of 1986, as amended, applicable to regulated investment companies. Accordingly, no provision for U.S. federal income taxes is required.

Accounting for uncertainty in income taxes establishes for all entities, including pass-through entities such as the Funds, a minimum threshold for financial statement recognition of the benefit of positions taken in filing tax returns (including whether an entity is taxable in a particular jurisdiction), and requires certain expanded tax disclosures. The Funds’ management has determined that its evaluation has resulted in no material impact on the Funds’ financial statements at January 31, 2011. The Funds’ federal tax returns for the prior three years remain subject to examination by the Internal Revenue Service.

(e) Dividends and Distributions
The Funds declare quarterly dividends and distributions from net investment income and gains from option premiums and the sale of portfolio securities. The Funds record dividends and distributions to its shareholders on the ex-dividend date. The amount of dividends and distributions from net investment income and net realized capital gains are determined in accordance with federal income tax regulations, which may differ from GAAP. These “book-tax” differences are considered either temporary or permanent in nature. To the extent these differences are permanent in nature, such amounts are reclassified within the capital accounts based on their federal income tax treatment. Temporary differences do not require reclassification. To the extent dividends and/or distributions exceed current and accumulated earnings and profits for federal income tax purposes, they are reported as dividends and/or distributions of paid-in capital in excess of par.

(f) Convertible Securities
It is the Funds’ policy to invest a portion of their assets in convertible securities. Although convertible securities do derive part of their value from that of the securities into which they are convertible, they are not considered derivative financial instruments. However, certain of the Funds’ investments in convertible securities include features which render them more sensitive to price changes in their underlying securities. The value of structured/synthetic convertible securities can be affected by interest rate changes and credit risks of the issuer. Such securities may be structured in ways that limit their potential for capital appreciation and the entire value of the security may be at risk of loss depending on the performance of the underlying equity security. Consequently, the Funds are exposed to greater downside risk than traditional convertible securities, but still less than that of the underlying stock.

(g) Short Sales
Short sale transactions involve the Fund selling securities it does not own in anticipation of a decline in the market price of the securities. The Fund is obligated to deliver securities at the market price at the time the short position is closed. Possible losses from short sales may be unlimited whereas losses from purchases cannot exceed the total amount invested. Dividend expense is recorded on ex-date.

2. Principal Risks
In the normal course of business, the Funds trade financial instruments and enter into financial transactions where risk of potential loss exists due to, among other things, changes in the market (market risk) or failure of the other party to a transaction to perform (counterparty risk). The Funds also are exposed to various risks such as, but not limited to, interest rate and credit risks.

Interest rate risk is the risk that fixed income securities will decline in value because of changes in interest rates. As nominal interest rates rise, the value of certain fixed income securities held by the Funds are likely to decrease. A nominal interest rate can be described as the sum of a real interest rate and an expected inflation rate. Fixed income securities with longer durations tend to be more sensitive to changes in interest rates, usually making them more volatile than securities with shorter durations. Duration is useful primarily as a measure of the sensitivity of a fixed income security’s market price to interest rate (i.e. yield) movements.

Variable and floating rate securities generally are less sensitive to interest rate changes but may decline in value if their interest rates do not rise as much, or as quickly, as interest rates in general. Conversely, floating rate securities will not generally increase in value if interest rates decline. Inverse floating rate securities may decrease in value if interest rates increase. Inverse floating rate securities may also exhibit greater price volatility than a fixed rate obligation with similar

 

 

 

 

        NFJ Dividend, Interest & Premium Strategy Fund

 

 

1.31.11 | AGIC Equity & Convertible Income Fund Annual Report

31




 

 

NFJ Dividend, Interest & Premium Strategy Fund
AGIC Equity & Convertible Income Fund
January 31, 2011

Notes to Financial Statements

 

2. Principal Risks (continued)

credit quality. When a Fund holds a variable or floating rate securities, a decrease (or, in the case of inverse floating rate securities, an increase) in market interest rates will adversely affect the income received from such securities and the NAV of the Fund’s 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, securities convertible into equity securities or equity-related investments such as options, 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-Advisers, NFJ Investment Group LLC (“NFJ”) and Allianz Global Investors Capital LLC (“AGIC”), also affiliates of the Investment Manager, seek to minimize counterparty risks to each applicable Fund by performing reviews of each counterparty. 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.

3. Financial Derivatives Instruments
Disclosure about derivatives and hedging activities require qualitative disclosures regarding objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of gains and losses on derivatives, and disclosure about credit-risk related contingent features in derivative agreements. The disclosure requirements distinguish between derivatives which are accounted for as “hedges” and those that do not qualify for such accounting. Although the Funds sometimes use derivatives for hedging purposes, the Funds reflect derivatives at fair value and recognize changes in fair value through the Funds’ Statements of Operations, and such derivatives do not qualify for hedge accounting treatment.

Option Transactions
The Funds write (sell) call options on securities and indices to earn premiums, for hedging purposes, risk management purposes or otherwise as part of its investment strategies.

When an option is written, the premium received is recorded as an asset with an equal liability which is subsequently marked to market to reflect the market value of the option written. These liabilities are reflected as call options written in the Funds’ Statement of Assets and Liabilities. Premiums received from writing options which expire unexercised are recorded on the expiration date as a realized gain. The difference between the premium received and the amount paid on effecting a closing purchase transaction, including brokerage commissions, is also treated as a realized gain, or if the premium is less than the amount paid for the closing purchased transactions, as a realized loss. If a call option written is exercised, the premium is added to the proceeds from the sale of the underlying security in determining whether there has been a realized gain or loss. In writing an option, the Funds bear the market risk of an unfavorable change in the price of the security underlying the written option. Exercise of a written option could result in the Funds purchasing a security at a price different from its current market value.

The following is a summary of the fair valuations of the Funds’ derivatives categorized by risk exposure.

The effect of derivatives on the Funds’ Statements of Assets and Liabilities at January 31, 2011:

 

 

 

 

NFJ Dividend, Interest & Premium Strategy Fund

 

32

AGIC Equity & Convertible Income Fund Annual Report | 1.31.11

 




 

 

NFJ Dividend, Interest & Premium Strategy Fund
AGIC Equity & Convertible Income Fund
January 31, 2011

Notes to Financial Statements

 

3. Financial Derivatives Instruments (continued)

NFJ Dividend, Interest & Premium Strategy:

 

 

 

 

 

 

 

Location

 

Market
Price

 

       

Liability derivatives:

 

 

 

 

 

 

Call options written, at value

 

 

$

(19,330,013

)

 

 

 

 

   

 

 

AGIC Equity & Convertible Income:

 

 

 

 

 

 

 

Location

 

Market
Price

 

       

Liability derivatives:

 

 

 

 

 

 

Call options written, at value

 

 

$

(532,485)

 

 

 

 

 

   

 

 

The effect of derivatives on the Funds’ Statements of Operations for the year ended January 31, 2011:

 

 

 

 

 

 

 

 

 

 

 

 

Location

 

NFJ Dividend,
Interest & Premium
Strategy

 

AGIC
Equity &
Convertible
Income

 

           

Net realized loss on:

 

 

 

 

 

 

 

 

 

 

 

Call options written, Market Price

 

 

$

(76,157,888

)

 

 

$

(489,209

)

 

                       

Net change in unrealized appreciation/depreciation of:

 

 

 

 

 

 

 

 

 

 

 

Call options written, Market Price

 

 

$

(13,654,523

)

 

 

$

(195,442

)

 

                       

The average volumes of derivative activity during the year ended January 31, 2011 was:

 

 

 

 

 

 

 

 

 

Options
Written
Contracts

 

       

NFJ Dividend, Interest & Premium Strategy

 

 

90,395

 

 

AGIC Equity & Convertible Income

 

 

11,765

 

 

4. Investment Manager/Sub-Advisers
Each Fund has an Investment Management Agreement (the “Agreement”) with the Investment Manager. Subject to the supervision of the Funds’ Board of Trustees, the Investment Manager is responsible for managing, either directly or through others selected by it, the Funds’ investment activities, business affairs and administrative matters. Pursuant to its Agreement, the NFJ Dividend, Interest & Premium Strategy Fund pays the Investment Manager an annual fee, payable monthly, at the annual rate of 0.90% of the Fund’s average daily total managed assets. Pursuant to its Agreement, the AGIC Equity & Convertible Income Fund pays the Investment Manager an annual fee, payable monthly, at the annual rate of 1.00% of the Fund’s average daily total managed assets. Total managed assets refer to the total assets of each Fund (including borrowings that may be outstanding) minus accrued liabilities (other than liabilities representing borrowings).

The Investment Manager has retained its affiliates NFJ and AGIC (the “Sub-Advisers”), to manage NFJ Dividend, Interest & Premium Strategy. NFJ manages the Fund’s equity component and AGIC manages the Fund’s convertible and index option strategy components. AGIC serves as the sole sub-adviser to AGIC Equity & Convertible Income. Subject to the supervision of the Investment Manager, NFJ and AGIC make all of NFJ Dividend, Interest & Premium Strategy’s investment decisions in connection with their respective components of the Fund’s investments. Subject to the supervision of the Investment Manager, AGIC is responsible for making all of AGIC Equity & Convertible Income’s investment decisions. Pursuant to Sub-Advisory Agreements, the Investment Manager and not the Funds, pays a portion of the fees it receives as Investment Manager to the Sub-Advisers in return for their services.

Effective August 25, 2010, the Sub-Advisory Agreements between the Investment Manager and Nicholas-Applegate Capital Management LLC (“NACM”) relating to the Funds and the Sub-Advisory Agreement between the Investment Manager and Oppenheimer Capital LLC (“OCC”) relating to NFJ Dividend, Interest & Premium Strategy Fund were novated from NACM and OCC, respectively, to AGIC, the indirect parent of NACM and OCC and an affiliate of the Investment Manager.

 

 

 

 

       NFJ Dividend, Interest & Premium Strategy Fund

 

 

1.31.11 | AGIC Equity & Convertible Income Fund Annual Report

33




 

 

NFJ Dividend, Interest & Premium Strategy Fund
AGIC Equity & Convertible Income Fund

January 31, 2011

Notes to Financial Statements

   

4. Investment Manager/Sub-Advisers (continued)

The novations coincided with a larger corporate reorganization transferring the advisory businesses of NACM and OCC to AGIC. Since 2009, AGIC has assumed a number of non-advisory functions from both NACM and OCC, and the transactions in August 2010 marked the last step in the full integration of these businesses under a single name.

5. Investment in Securities
For the year ended January 31, 2011, purchases and sales of investments, other than short-term securities were:

 

 

 

 

 

 

 

 

 

 

NFJ Dividend,
Interest & Premium
Strategy

 

AGIC
Equity &
Convertible
Income

 

               

Purchases

 

 

$1,077,669,357

 

 

$672,798,955

 

Sales

 

 

1,250,051,718

 

 

692,817,502

 

(a) Transactions in call options written for the year ended January 31, 2011:

 

 

 

 

 

 

 

 

NFJ Dividend, Interest & Premium Strategy:

 

Contracts

 

Premiums

 

               

Options outstanding, January 31, 2010

 

 

105,650

 

$

15,703,026

 

Options written

 

 

652,005

 

 

103,678,353

 

Options terminated in closing purchase transactions

 

 

(326,530

)

 

(50,765,944

)

Options expired

 

 

(347,775

)

 

(53,765,544

)

               

Options outstanding, January 31, 2011

 

 

83,350

 

$

14,849,891

 

               

 

 

 

 

 

 

 

 

AGIC Equity & Convertible Income:

 

Contracts

 

Premiums

 

               

Options outstanding, January 31, 2010

 

 

17,065

 

$

878,695

 

Options written

 

 

139,240

 

 

7,240,028

 

Options terminated in closing purchase transactions

 

 

(60,425

)

 

(3,223,600

)

Options expired

 

 

(80,075

)

 

(3,831,510

)

               

Options outstanding, January 31, 2011

 

 

15,805

 

$

1,063,613

 

               

 

 

 

 

 

 

 

 

6. Income Tax Information

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NFJ Dividend, Interest & Premium Strategy:

 

 

 

 

 

 

 

The tax character of dividends and distributions paid were:

 

 

 

 

 

 

 

 

 

Year ended

 

Year ended

 

 

 

January 31, 2011

 

January 31, 2010

 

               

Ordinary Income

 

$85,071,892

 

$56,714,595

 

               

At January 31, 2011, there were no distributable earnings.

For the year ended January 31, 2011, permanent differences are primarily attributable to the differing treatment of convertible securities, reclasses of taxable overdistributions, and investments in Real Estate Investment Trusts. These adjustments were to decrease dividends in excess of net investment income by $13,396,785, increase accumulated net realized loss by $2,271,567 and decrease paid-in capital in excess of par by $11,125,218.

At January 31, 2011, the Fund had a capital loss carryforward of $ 270,756,167, $17,766,745 of which will expire in 2017 and $252,989,422 of which will expire in 2018, and is 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 January 31, 2011, the Fund utilized available capital loss carryforwards of $38,126,673.

In accordance with U.S. Treasury regulations, the Fund elected to defer realized capital losses of $22,765,961 arising after October 31, 2010.

 

 

 

 

NFJ Dividend, Interest & Premium Strategy Fund

 

34

AGIC Equity & Convertible Income Fund Annual Report | 1.31.11

 




 

 

NFJ Dividend, Interest & Premium Strategy Fund
AGIC Equity & Convertible Income Fund

January 31, 2011

Notes to Financial Statements

   

 

 

 

 

 

 

 

 

6. Income Tax Information (continued)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AGIC Equity & Convertible Income:

 

 

 

 

 

 

 

The tax character of dividends and distributions paid were:

 

 

 

 

 

 

 

 

 

Year ended

 

Year ended

 

 

 

January 31, 2011

 

January 31, 2010

 

           

Ordinary Income

 

 

$24,481,089     

 

 

$22,085,355     

 

Long-term capital gains

 

 

499,603     

 

 

—      

 

Return of capital

 

 

—      

 

 

2,895,337     

 

               

At January 31, 2011, the tax character of distributable earnings was comprised of $15,491,112 of ordinary income and $705,938 of long-term capital gains.

For the year ended January 31, 2011, permanent differences are primarily attributable to the differing treatment of convertible securities, premium adjustments and investments in Real Estate Investment Trusts. These adjustments were to increase undistributed net investment income by $1,208,208, decrease net realized gains by $1,208,208.

During the year ended January 31, 2011, the Fund utilized available capital loss carryforwards of $2,459,237.

The Funds’ cost of investments for federal income tax purposes and gross unrealized appreciation and gross unrealized depreciation of investments at January 31, 2011 were:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross

 

Gross

 

Net

 

 

 

Cost of

 

Unrealized

 

Unrealized

 

Unrealized

 

 

 

Investments

 

Appreciation

 

Depreciation

 

Depreciation

 

                   

NFJ Dividend, Interest & Premium Strategy

 

$1,948,235,098

 

$111,177,035

 

$(246,766,036

)

$(135,589,001

)

AGIC Equity & Convertible Income

 

 

536,788,539

 

 

2,748,646

 

 

(83,762,637

)

 

(81,013,991

)

                           

The difference between book and tax depreciation is attributable to wash sales and the tax treatment of convertible securities.

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 in April 2010, 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.

The Investment Manager believes 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 11, 2011 the following quarterly dividends were declared to shareholders, payable March 30, 2011 to shareholders of record on March 21, 2011:

 

 

 

 

NFJ Dividend, Interest & Premium Strategy

$0.45 per share

 

AGIC Equity & Convertible Income

$0.28 per share


 

 

 

 

       NFJ Dividend, Interest & Premium Strategy Fund

 

 

1.31.11 | AGIC Equity & Convertible Income Fund Annual Report

35




 

 

NFJ Dividend, Interest & Premium Strategy Fund

Financial Highlights

For a share outstanding throughout each year:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year ended January 31,

 

 

2011

 

 

2010

 

 

2009

 

 

2008

 

 

2007

 

Net asset value, beginning of year

 

 

$17.30

 

 

 

$14.12

 

 

 

$23.84

 

 

 

$25.72

 

 

 

$24.18

 

Investment Operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net investment income

 

 

0.64

 

 

 

0.61

 

 

 

0.89

 

 

 

0.80

 

 

 

0.75

 

Net realized and change in unrealized
gain (loss) on investments, call options
written and short sales

 

 

2.08

 

 

 

3.17

 

 

 

(8.63

)

 

 

(0.44

)

 

 

2.89

 

Total from investment operations

 

 

2.72

 

 

 

3.78

 

 

 

(7.74

)

 

 

0.36

 

 

 

3.64

 

Dividends and Distributions to

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shareholders from:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net investment income

 

 

(0.90

)

 

 

(0.60

)

 

 

(0.87

)

 

 

(1.01

)

 

 

(0.73

)

Net realized gains

 

 

 

 

 

 

 

 

(1.11

)

 

 

(1.23

)

 

 

(1.37

)

Total dividends and distributions to
shareholders

 

 

(0.90

)

 

 

(0.60

)

 

 

(1.98

)

 

 

(2.24

)

 

 

(2.10

)

Net asset value, end of year

 

 

$19.12

 

 

 

$17.30

 

 

 

$14.12

 

 

 

$23.84

 

 

 

$25.72

 

Market price, end of year

 

 

$17.60

 

 

 

$14.50

 

 

 

$12.97

 

 

 

$23.26

 

 

 

$25.87

 

Total Investment Return (1)

 

 

28.20

%

 

 

17.31

%

 

 

(37.93

)%

 

 

(1.65

)%

 

 

27.15

%

RATIOS/SUPPLEMENTAL DATA:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets, end of year (000’s)

 

$

1,807,672

 

 

$

1,635,728

 

 

$

1,334,735

 

 

$

2,253,652

 

 

$

2,431,595

 

Ratio of expenses to average net assets

 

 

0.97

%

 

 

0.98

%

 

 

0.97

%

 

 

0.95

%

 

 

0.95

%

Ratio of net investment income to
average net assets

 

 

3.54

%

 

 

3.95

%

 

 

4.40

%

 

 

3.13

%

 

 

3.08

%

Portfolio turnover rate

 

 

65

%

 

 

57

%

 

 

48

%

 

 

82

%

 

 

69

%


 

 

(1)

Total investment return is calculated assuming a purchase of a share of common stock at the current market price on the first day of each period and a sale of a share of common stock at the current market price on the last day of each year reported. Income dividends and capital gain distributions are assumed, for purposes of this calculation, to be reinvested at prices obtained under the Fund’s dividend reinvestment plan. Total investment return does not reflect brokerage commissions or sales charges in connection with the purchase or sale of Fund shares.


 

 

 

 

NFJ Dividend, Interest & Premium Strategy Fund

 

36

AGIC Equity & Convertible Income Fund Annual Report | 1.31.11 |

See accompanying Notes to Financial Statements




 

 

AGIC Equity & Convertible Income Fund

Financial Highlights

For a share outstanding throughout each period:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the
Period
February 27,
2007*
through
January 31,
2008

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year ended January 31,

 

 

 

 

2011 

 

 

2010 

 

 

2009 

 

 

Net asset value, beginning of period

 

 

$17.58

 

 

 

$13.41

 

 

 

$23.44

 

 

 

$23.88

**

Investment Operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net investment income

 

 

0.40

 

 

 

0.40

 

 

 

0.67

 

 

 

0.62

 

Net realized and change in unrealized gain (loss) on
investments and call options written

 

 

3.42

 

 

 

4.89

 

 

 

(8.39

)

 

 

0.68

 

Total from investment operations

 

 

3.82

 

 

 

5.29

 

 

 

(7.72

)

 

 

1.30

 

Dividends and Distributions to Shareholders from:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net investment income

 

 

(0.41

)

 

 

(0.99

)

 

 

(0.65

)

 

 

(0.70

)

Net realized gains

 

 

(0.71

)

 

 

 

 

 

(1.66

)

 

 

(0.99

)

Return of capital

 

 

 

 

 

(0.13

)

 

 

 

 

 

 

Total dividends and distributions to shareholders

 

 

(1.12

)

 

 

(1.12

)

 

 

(2.31

)

 

 

(1.69

)

Capital Share Transactions:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Offering costs charged to paid-in capital in excess of par

 

 

 

 

 

 

 

 

 

 

 

(0.05

)

Net asset value, end of period

 

 

$20.28

 

 

 

$17.58

 

 

 

$13.41

 

 

 

$23.44

 

Market price, end of period

 

 

$19.30

 

 

 

$15.83

 

 

 

$13.10

 

 

 

$22.02

 

Total Investment Return (1)

 

 

30.16

%

 

 

30.75

%

 

 

(31.75

)%

 

 

(5.66

)%

RATIOS/SUPPLEMENTAL DATA:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets, end of period (000’s)

 

$

452,406

 

 

$

392,092

 

 

$

299,126

 

 

$

522,848

 

Ratio of expenses to average net assets

 

 

1.10

%

 

 

1.10

%

 

 

1.07

%

 

 

1.08

%(2)

Ratio of net investment income to average net assets

 

 

2.16

%

 

 

2.54

%

 

 

3.42

%

 

 

2.73

%(2)

Portfolio turnover rate

 

 

168

%

 

 

94

%

 

 

86

%

 

 

241

%


 

 

*

Commencement of operations.

**

Initial public offering price of $25.00 per share less underwriting discount of $1.125 per share.

(1)

Total investment return is calculated assuming a purchase of a share of common stock at the current market price on the first day of each period and a sale of a share of common stock at the current market price on the last day of each period reported. Income dividends, capital gain and return of capital 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.

 

Total investment return for a period of less than one year is not annualized.

(2)

Annualized.


 

 

 

 

       NFJ Dividend, Interest & Premium Strategy Fund

 

See accompanying Notes to Financial Statements | 1.31.11 | AGIC Equity & Convertible Income Fund Annual Report

37




 

 

NFJ Dividend, Interest & Premium Strategy Fund

Report of Independent

AGIC Equity & Convertible Income Fund

Registered Public

 

Accounting Firm

 

To the Shareholders and Board of Trustees

NFJ Dividend, Interest & Premium Strategy Fund
AGIC Equity & Convertible Income Fund

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 NFJ Dividend, Interest & Premium Strategy Fund and AGIC Equity & Convertible Income Fund (the “Funds”) at January 31, 2011, the results of each of their operations, changes in net assets and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at January 31, 2011, by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP
New York, New York
March 24, 2011

 

 

 

 

NFJ Dividend, Interest & Premium Strategy Fund

 

38

AGIC Equity & Convertible Income Fund Annual Report | 1.31.11

 




 

 

NFJ Dividend, Interest & Premium Strategy Fund

 

AGIC Equity & Convertible Income Fund

Tax Information (unaudited)

 

Tax Information:

Subchapter M of the Internal Revenue Code of 1986, as amended, requires NFJ Dividend, Interest & Premium Strategy and AGIC Equity & Convertible Income Fund to advise shareholders within 60 days of the Funds’ tax year ended January 31, 2011 as to the federal tax status of dividends and distributions received by shareholders during such tax year. Total dividends and distributions for the tax year ended January 31, 2011 were as follows:

NFJ Dividend, Interest & Premium Strategy:

 

 

 

 

 

Dividends from ordinary income

 

$

85,071,892

 

Pursuant to the Jobs and Growth Tax Relief Reconciliation Act of 2003, the Fund designates qualified dividend income of 71.19%, or the maximum amount allowable.

The percentage of ordinary dividends paid during the year ended January 31, 2011 which qualified for the Dividends Received Deduction available to corporate shareholders was 61.90%.

AGIC Equity & Convertible Income:

 

 

 

 

 

Dividends from ordinary income

 

$

24,481,089

 

Distributions from long-term gains

 

 

$499,603

 

Pursuant to the Jobs and Growth Tax Relief Reconciliation Act of 2003, the Fund designates qualified dividend income of 37.05%, or the maximum amount allowable.

The percentage of ordinary dividends paid during the year ended January 31, 2011 which qualified for the Dividends Received Deduction available to corporate shareholders was 36.90%.

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 January 31, 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.

 

 

 

 

       NFJ Dividend, Interest & Premium Strategy Fund

 

 

1.31.11 | AGIC Equity & Convertible Income Fund Annual Report

39




 

 

 

 

NFJ Dividend, Interest & Premium Strategy Fund
AGIC Equity & Convertible Income Fund

 

Annual Shareholder
Meetings Results/Changes
to the Board of Trustees/
Change in Portfolio
Manager
(unaudited)

       
Annual Shareholder Meetings Results:

The Funds held their joint annual meetings of shareholders on July 21, 2010. Shareholders voted as indicated below:

 

 

 

 

 

 

 

 

 

 

Affirmative

 

Withheld
Authority

 

           

 

 

 

 

 

 

 

 

NFJ Dividend, Interest & Premium Strategy:

 

 

 

 

 

 

 

Re-election of Paul Belica – Class I to serve until 2012

 

 

82,137,502

 

 

6,447,365

 

Re-election of Hans W. Kertess – Class I to serve until 2012

 

 

82,260,364

 

 

6,324,503

 

Re-election of William B. Ogden, IV – Class I to serve until 2012

 

 

82,240,577

 

 

6,344,290

 

Re-election of R. Peter Sullivan III – Class II to serve until 2013

 

 

82,286,373

 

 

6,298,494

 

Election of Alan Rappaport – Class III to serve until 2011

 

 

82,290,170

 

 

6,294,697

 

Election of James A. Jacobson – Class II to serve until 2013

 

 

82,294,420

 

 

6,290,447

 

 

 

 

 

 

 

 

 

Mr. John C. Maney†, continued to serve as a Trustee.

 

 

 

 

 

 

 


 

 

 

 

 

 

 

 

 

 

Affirmative

 

Withheld
Authority

 

           

 

 

 

 

 

 

 

 

AGIC Equity & Convertible Income:

 

 

 

 

 

 

 

Re-election of Paul Belica – Class III to serve until 2013

 

 

20,373,540

 

 

431,256

 

Re-election of R. Peter Sullivan III – Class III to serve until 2013

 

 

20,383,082

 

 

421,714

 

Election of Alan Rappaport – Class I to serve until 2011

 

 

20,393,694

 

 

411,102

 

Election of James A. Jacobson – Class II to serve until 2012

 

 

20,389,533

 

 

415,263

 

 

 

 

 

 

 

 

 

Messrs. Hans W. Kertess, John C. Maney† and William B. Ogden, IV, continued to serve as Trustees.

 

 

 

 


 

 

 

 

† Interested Trustee

 

 

 

   

Changes to the Board of Trustees:

Robert E. Connor served as Trustee of the Funds until his death on April 8, 2010.

R. Peter Sullivan, III retired from the Funds’ Board of Trustees effective July 31, 2010.

Effective September 21, 2010, the Funds’ Board of Trustees appointed Brad Gallagher as a Class II Trustee for NFJ and Class III for NIE to serve until 2011.

Effective March 7, 2011, the Funds’ Board of Trustees appointed Deborah A. Zoullas as a Class II Trustee for NFJ and Class III for NIE to serve until 2011.

 

 

 

Change in Portfolio Manager (NFJ Dividend, Interest & Premium Strategy Fund only)

Effective May 14, 2010, Mr. Baxter Hines replaced Mr. Jeff Partenheimer as a portfolio manager of the Fund’s equity component. Mr. Ben Fischer continues to be the lead portfolio manager of the equity component.

Mr. Baxter Hines is a Vice President and Portfolio Manager at NFJ. He has over 5 years experience in equity research and investment consulting. Prior to joining NFJ in 2008, Mr. Hines attended the University of Texas where he received an MBA from the McCombs School of Business. Before attending business school, Mr. Hines worked as a market data specialist for Reuters. He received a BA in Economics from the University of Virginia in 2001.

 

 

 

 

NFJ Dividend, Interest & Premium Strategy Fund

 

40

AGIC Equity & Convertible Income Fund Annual Report | 1.31.11

 




 

 

NFJ Dividend, Interest & Premium Strategy Fund
AGIC Equity & Convertible Income Fund

Proxy Voting Policies &
Procedures/Changes in
Investment Policy
(unaudited)

   

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.

 

 

 

Changes in Investment Policy – (AGIC Equity & Convertible Income Fund only)

Effective June 30, 2010, the description of AGIC Equity & Convertible Income’s option strategy was revised as follows:

AGIC Equity & Convertible Income employs its Option Strategy by writing (selling) call options on stocks held in its equity securities portfolio (the “Equity Component”). When the Fund writes a call option on an individual stock held in the Equity Component, it will ordinarily do so with respect to approximately 70% of the value of the position. Therefore, if the Fund determines to write call options on all or substantially all of the individual stocks held in the Equity Component, it is expected that the Fund will have written call options positions with respect to approximately 70% of the aggregate value of the Equity Component. However, the extent of the Fund’s use of the Option Strategy will vary depending on market conditions and other factors, and the Fund may determine from time to time to write call options on only a portion, or none, of the individual stocks held in the Equity Component.

The Fund’s Option Strategy, to the extent utilized, is designed to generate gains from option premiums in an attempt to enhance distributions payable to the Fund’s shareholders and to reduce overall portfolio risk. However, there is no assurance that the Fund’s Option Strategy will achieve its objectives.

There are various risks associated with the Fund’s Option Strategies, including that the Fund forgoes, during the life of a written call option, the opportunity to profit from increases in the market value of the underlying security or securities held by the Fund (in the case of an index option, to the extent the performance of the index is correlated with the corresponding securities held by the Fund) with respect to which the option was written above the sum of the premium and the strike price of the call. Therefore, an Option Strategy generally limits the Fund’s ability to benefit from the full upside potential of its equity holdings, while the Fund retains the risk of loss (net of premiums received) should the price of the Fund’s portfolio securities decline. The use of written call options by the Fund also potentially involves correlation, liquidity, valuation, tax and other risks.

 

 

 

 

        NFJ Dividend, Interest & Premium Strategy Fund

 

 

1.31.11 | AGIC Equity & Convertible Income Fund Annual Report

41




 

 

NFJ Dividend, Interest & Premium Strategy Fund
AGIC Equity & Convertible Income Fund

Privacy Policy (unaudited)

   

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 Personnel 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.

 

 

 

 

NFJ Dividend, Interest & Premium Strategy Fund

 

42

AGIC Equity & Convertible Income Fund Annual Report | 1.31.11

 




 

 

NFJ Dividend, Interest & Premium Strategy Fund
AGIC Equity & Convertible Income Fund

Dividend Reinvestment Plan
(unaudited)

   

Pursuant to the Funds’ Dividend Reinvestment Plan (the “Plan”), all Common Shareholders whose shares are registered in their own names will have all dividends, including any capital gain dividends, reinvested automatically in additional Common Shares by 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 Fund’s 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.

 

 

 

 

       NFJ Dividend, Interest & Premium Strategy Fund

 

 

1.31.11 | AGIC Equity & Convertible Income Fund Annual Report

43




 

 

NFJ Dividend, Interest & Premium Strategy Fund
AGIC Equity & 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: 2005 - NFJ/ 2007 - NIE

 

Term of office: Expected to stand for re-election at
2012 - NFJ/ 2011 - NIE annual meetings of shareholders.

 

Trustee/Director of 54 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.; Manager of Stratigos Fund LLC, Whistler Fund LLC, Xanthus Fund LLC & Wynstone Fund LLC.

Date of Birth: 9/27/21

 

Trustee since: 2005 - NFJ/ 2007 - NIE

 

Term of office: Expected to stand for re-election at
2012- NFJ/ 2013 - NIE annual meetings of shareholders.

 

Trustee/Director of 54 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 meetings of shareholders.

 

Trustee/Director of 54 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 re-election at
2013- NFJ, 2012 - NIE annual meetings of shareholders.

 

Trustee/Director of 54 funds in Fund Complex

 

Trustee/Director of16 funds in Alpine Mutual Funds Complex

 

 

 

 

John C. Maney†

 

Chief Executive Officer of Allianz Global Investors Fund Management LLC since January 2011; Management Board of Allianz Global Investors Fund Management LLC; Management Board and Managing Director of Allianz Global Investors of America L.P. since January 2005 and also Chief Operating Officer of Allianz Global Investors of America L.P. since November 2006.

Date of Birth: 8/3/59

 

Trustee since: 2006 - NFJ/ 2007 - NIE

 

Term of office: Expected to stand for re-election at
2011 - NFJ/ 2012 - NIE annual meeting of shareholders.

 

Trustee/Director of 79 Funds in Fund Complex

 

Trustee/Director of no funds outside the Fund Complex

 


 

 

 

 

NFJ Dividend, Interest & Premium Strategy Fund

 

44

AGIC Equity & Convertible Income Fund Annual Report | 1.31.11

 




 

 

NFJ Dividend, Interest & Premium Strategy Fund

 

AGIC Equity & Convertible Income Fund

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 - NFJ/ 2007 - NIE

 

Term of office: Expected to stand for re-election at 2012 - NFJ/ 2011 - NIE annual meetings of shareholders.

 

Trustee/Director of 54 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: 3/3/53

 

Trustee since: 2010

 

Term of office: Expected to stand for election at 2011 annual meetings of shareholders.

 

Trustee/Director of 54 funds in Fund Complex

 

 

Trustee/Director of no funds outside of 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 (since 2005); 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 meetings of shareholders.

 

Trustee/Director of 50 funds in Fund Complex

 

Trustee/Director of no funds outside of Fund Complex

 


 

 

† Mr. Maney is an “interested person” of the Trust, 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.


 

 

 

 

       NFJ Dividend, Interest & Premium Strategy Fund

 

 

1.31.11 | AGIC Equity & Convertible Income Fund Annual Report

45




 

 

NFJ Dividend, Interest & Premium Strategy Fund

 

AGIC Equity & Convertible Income Fund

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 50 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: 2005 - NFJ and 2007 - NIE

 

 

 

 

Lawrence G. Altadonna

 

Senior Vice President, Director of Fund Administration of Allianz Global Investors Fund Management LLC; Treasurer, Principal Financial and Accounting Officer of 79 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: 2005 - NFJ and 2007 - NIE

 

 

 

 

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 79 funds in the Fund Complex; Secretary and Chief Legal Officer of The Korea Fund, Inc.

Date of Birth: 3/22/68

 

Vice President, Secretary & Chief Legal Officer since: 2005 - NFJ and 2007 - NIE

 

 

 

 

Scott Whisten

 

Senior Vice President, Allianz Global Investors Fund Management LLC; Assistant Treasurer of 79 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 79 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 79 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, Allianz Global Investors of America L.P.; Chief Compliance Officer of 79 funds in the Fund Complex and of The Korea Fund, Inc.

Date of Birth: 9/3/72

 

Chief Compliance Officer since: 2005 - NFJ and 2007 - NIE

 

 

 

 

Lagan Srivastava

 

Vice President of Allianz Global Investors of America L.P.; Assistant Secretary of 79 funds in the Fund Complex and of The Korea Fund, Inc.

Date of Birth: 9/20/77

 

Assistant Secretary since: 2006 - NFJ and 2007 - NIE

 

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

 

 

 

 

NFJ Dividend, Interest & Premium Strategy Fund

 

46

AGIC Equity & Convertible Income Fund Annual Report | 1.31.11

 




 

 

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-Advisers

NFJ Investment Group LLC

2100 Ross Avenue, Suite 1840

Dallas, TX 75201

 

Allianz Global Investors Capital LLC

600 West Broadway, 30th Floor

San Diego, CA 92101

 

Allianz Global Investors Capital LLC

1345 Avenue of the Americas

New York, NY 10105

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 NFJ Dividend, Interest & Premium Strategy Fund and AGIC Equity & Convertible Fund for their information. It is not a prospectus, circular or representation intended for use in the purchase of shares of the Funds or any securities mentioned in this report.

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

The Funds file their complete schedule of portfolio holdings with the Securities and Exchange Commission (“SEC”) for the first and third quarters of their fiscal year on Form N-Q. The Funds’ Form N-Q 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 is available at www.allianzinvestors.com/closedendfunds or by calling the Funds’ shareholder servicing agent at (800) 254-5197.


(ALLIANZ LOGO)

Receive this report electronically and eliminate paper mailings. To enroll, go to
www.allianzinvestors.com/edelivery.

AGI-2011-02-28-0550
AZ601AR_013111


Table of Contents

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 are included as an exhibit 99.CODE ETH here to.

 

 

 

 

(b)

The CODE OF ETHICS PURSUANT TO SECTION 406 OF THE SARBANES-OXLEY ACT OF 2002 FOR PRINCIPAL EXECUTIVE AND SENIOR FINANCIAL OFFCIERS (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 is an “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 $67,000 in 2010 and $67,000 in 2011.

 

 

 

 

b)

Audit-Related Fees. There were no audit related fees billed for each of the last two fiscal years.

 

 

 

 

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 $14,175 in 2010 and $14,700 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.

 

 

 

 

 

NFJ Dividend, Interest & Premium Strategy 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 Fund’s financial reporting policies and practices and their internal controls. As part of this responsibility, the Committee must pre-approve any independent accounting firm’s engagement to render audit and/or permissible non-audit services, as required by law. In evaluating a proposed engagement by the independent accountants, the Committee will assess the effect that the engagement might reasonably be expected to have on the accountant’s independence. The Committee’s evaluation will be based on:

 

 

 

a review of the nature of the professional services expected to provided,

 

 

 

the fees to be charged in connection with the services expected to be provided,

 

 

 

a review of the safeguards put into place by the accounting firm to safeguard independence, and

 

 

 

periodic meetings with the accounting firm.

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

On an annual basis, the Fund’s Committee will review and pre-approve the scope of the audits of the Fund and proposed audit fees and permitted non-audit (including audit-related) services that may be performed by the 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 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

 

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 Fund

 

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 Funds), 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 $568,365 and the 2011 Reporting Period was $2,506,354.

 

 

 

 

          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 J. Jacobson, Bradford K. Gallagher and Deborah A. Zoullas.

ITEM 6. SCHEDULE OF INVESTMENTS

 

 

 

 

(a)

The registrant’s 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 N-CSR filing.

 


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

NFJ Dividend Interest & Premium Strategy Fund
(the “Trust”)

PROXY VOTING POLICY

 

 

1.

It is the policy of the Trust that proxies should be voted in the interest of its shareholders, as determined by those who are in the best position to make this determination. The Trust believes that the firms and/or persons purchasing and selling securities for the Trust and analyzing the performance of the Trust’s securities are in the best position and have the information necessary to vote proxies in the best interests of the Trust and its shareholders, including in situations where conflicts of interest may arise between the interests of shareholders, on one hand, and the interests of the investment adviser, a sub-adviser and/or any other affiliated person of the Trust, on the other. Accordingly, the Trust’s policy shall be to delegate proxy voting responsibility to those entities with portfolio management responsibility for the Trust.

 

 

2.

The Trust delegates the responsibility for voting proxies to Allianz Global Investors Fund Management LLC (“AGIFM”), which will in turn delegate such responsibility to the sub-adviser of the Trust. AGIFM’s Proxy Voting Policy Summary is attached as Appendix A hereto. A summary of the detailed proxy voting policies of the Trust’s current sub-adviser is set forth in Appendix B attached hereto. Such summary may be revised from time to time to reflect changes to the sub-advisers’ detailed proxy voting policies.

 

 

3.

The party voting the proxies (i.e., the sub-adviser or portfolio manager) 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 the sub-adviser of the Trust with proxy voting authority shall deliver a copy of its respective proxy voting policies and any material amendments thereto to the applicable Board of the Trust promptly after the adoption or amendment of any such policies.

 

 

5.

The party voting the proxy shall: (i) maintain such records and provide such voting information as is required for the Trust’s regulatory filings including, without limitation, Form N-PX and the required disclosure of policy called for by Item 18 of Form N-2 and Item 7 of Form N-CSR; and (ii) shall provide such additional information as may be requested, from time to time, by the Board or the Trust’s Chief Compliance Officer.

 

 

6.

This Proxy Voting Policy Statement (including Appendix B), the Proxy Voting Policy Summary of AGIFM and summary of the detailed proxy voting policy of the sub-




 

 

 

adviser of the Trust with proxy voting authority, shall be made available (i) without charge, upon request, by calling 1-800-426-0107 and (ii) on the Trust’s website at www.allianzinvestors.com. In addition, to the extent required by applicable law or determined by the Trust’s Chief Compliance Officer or Board of Trustees, the Proxy Voting Policy Summary of AGIFM and summaries of the detailed proxy voting policies of each sub-adviser with proxy voting authority shall also be included in the Trust’s Registration Statements or Form N-CSR filings.

-2-


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 which it acts as an investment adviser, delegates the responsibility for voting proxies to the sub-adviser for the respective fund, subject to the terms hereof.

 

 

3.

The party voting the proxies (e.g., the sub-adviser) shall vote such proxies in accordance with such party’s proxy voting policies and, to the extent consistent with such policies, may rely on information and/or recommendations supplied by others.

 

 

4.

AGIFM and each sub-adviser of a fund shall deliver a copy of its respective proxy voting policies and any material amendments thereto to the board of the relevant fund promptly after the adoption or amendment of any such policies.

 

 

5.

The party voting the proxy shall: (i) maintain such records and provide such voting information as is required for such funds’ regulatory filings including, without limitation, Form N-PX and the required disclosure of policy called for by Item 18 of Form N-2 and Item 7 of Form N-CSR; and (ii) shall provide such additional information as may be requested, from time to time, by such funds’ respective boards or chief compliance officers.

 

 

6.

This Proxy Voting Policy Summary and summaries of the proxy voting policies for each sub-adviser of a fund advised by AGIFM shall be available (i) without charge, upon request, by calling 1-800-426-0107 and (ii) at www.allianzinvestors.com. In addition, to the extent required by applicable law or determined by the relevant fund’s board of directors/trustees or chief compliance officer, this Proxy Voting Policy Summary and summaries of the detailed proxy voting policies of each sub-adviser and each other entity with proxy voting authority for a fund advised by AGIFM shall also be included in the Registration Statement or Form N-CSR filings for the relevant fund.

A-1


Appendix B

Allianz Global Investors Capital LLC (“AGI Capital”)

Description of Proxy Voting Policy and Procedures

AGI Capital votes proxies on behalf of its clients pursuant to its written Proxy Policy Guidelines and Procedures (the “Proxy Guidelines”), unless a client requests otherwise. The Proxy Guidelines are designed to honor AGI Capital’s fiduciary duties to its clients and protect and enhance its clients’ economic welfare and rights.

The Proxy Guidelines are established by a Proxy Committee consisting of executive, investment, client services, legal/compliance and operations personnel. The Proxy Guidelines reflect AGI Capital’s normal voting positions on specific corporate actions, including but not limited to those relating to social and corporate responsibility issues, stock option plans and other management compensation issues, changes to a portfolio company’s capital structure and corporate governance. For example, AGI Capital generally votes for proposals to declassify boards and generally supports proposals that remove restrictions on shareholders’ ability to call special meetings independently of management. Some issues will require a case-by-case analysis.

The Proxy Guidelines largely follow the recommendations of Glass, Lewis & Co. LLC (“Glass Lewis”), an investment research and proxy advisory firm. The Proxy Guidelines may not apply to every situation and AGI Capital may vote differently than specified by the Proxy Guidelines and/or contrary to Glass Lewis’ recommendation if AGI Capital reasonably determines that to do so is in its clients’ best interest. Any variance from the Proxy Guidelines is documented.

In the case of a potential conflict of interest, AGI Capital’s Proxy Committee will review the voting decision to ensure that the voting decision has not been affected by the potential conflict.

Under certain circumstances, AGI Capital may in its reasonable discretion refrain from voting clients’ proxies due to cost or other factors.

NFJ Investment Group (“NFJ”)

Description of Proxy Voting Policy and Procedures

THE NFJ PROXY VOTING POLICY AND PROCEDURES IS CURRENTLY UNDER REVISION. ONCE COMPLETED, WE WILL SEND YOU THE UPDATED POLICY.

A-2


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

(a) (1) Allianz Global Investors Capital (“AGI Capital”)

As of April 4, 2011, the following individual has primary responsibility for the day-to-day implementation of the Convertible Component.

Douglas G. Forsyth, CFA
Managing Director
Doug Forsyth has portfolio management and research responsibilities for the Income and Growth Strategies team and has been a Portfolio Manager since the Fund’s inception in February 2005. Prior to joining AGI Capital via a predecessor affiliate in 1994, Doug was a securities analyst at AEGON USA. Doug 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.

As of April 4, 2011 the following individual has primary responsibility for the day-to-day implementation of the Index Option Strategy.

Stephen Bond-Nelson
Senior Vice President
Stephen Bond-Nelson has portfolio management and research responsibilities for the Structured Products team, and has been with the team since its inception in 2005. Prior to joining AGI Capital via a predecessor affiliate in 1999, he was as a research analyst/ associate with Prudential Mutual Funds. He earned his M.B.A. from Rutgers University and his B.S. from Lehigh University. Stephen has eighteen years of investment industry experience.

NFJ Investment Group LLC (“NFJ”)

As of April 4, 2011, the following individuals constitute the team that has primary responsibility for the day-to-day implementation of the Equity Component, with Mr. Fischer serving as head of the team:

BEN J. FISCHER, CFA - MANAGING DIRECTOR
Mr. Fischer is a founding partner of NFJ Investment Group and has been a portfolio manager of the Fund since its inception in February 2005. He has over 45 years of experience in portfolio management, investment analysis and research. Prior to founding NFJ in 1989, he was chief investment officer (institutional and fixed income), senior vice president and senior portfolio manager at NationsBank which he joined in 1971. Prior to joining NationsBank, Mr. Fischer was a securities analyst at Chase Manhattan Bank and Clark, Dodge. He earned his B.A. in Economics, a J.D. from Oklahoma University, and an M.B.A. from New York University.

A-3


L. BAXTER HINES – VICE PRESIDENT, PORTFOLIO MANAGER

Mr. Hines has over 5 years of experience in equity research and investment consulting. Prior to joining NFJ Investment Group in 2008, Mr. Hines attended the University of Texas where he completed an MBA from the McCombs School of Business. Before attending graduate school, Mr. Hines worked as a market data specialist for Reuters. Mr. Hines received his BA degree in Economics from the University of Virginia in 2001.

(a) (2) AGI Capital

The following summarizes information regarding each of the accounts, excluding the Fund, that were managed by the Portfolio Managers as of January 31, 2011 including accounts managed by a team, committee, or other group that includes the Portfolio Managers.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other RICs

 

Other Accounts

 

Other Pooled

 

 

 


 


 


 

PM

 

#

 

 

AUM($million)

 

#

 

AUM($million)

 

#

 

AUM($million)

 


 


 


 


 


 


 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Douglas G. Forsyth, CFA

 

 

7

 

 

3,564.9

 

 

11

 

 

1,494.6

 

 

6

 

 

626.5

*

Stephen Bond-Nelson

 

 

0

 

 

0

 

 

3

 

 

26.5

 

 

6

 

 

1,044.2

**

*Of these other pooled investment vehicles, two accounts totaling $381.6 million in assets pay an advisory fee that is based in part on the performance of the account.
**Of these other pooled investment vehicles, 6 accounts totaling $1,044.2 in assets pay an advisory fee that is based in part on the performance of the account.

NFJ

The following summarizes information regarding each of the accounts, excluding the Fund, that were managed by the Portfolio Managers as of January 31, 2011 including accounts managed by a team, committee, or other group that includes the Portfolio Managers.

 

 

 

 

 

 

 

 

 

Portfolio Manager

 

Account Type

 

Number
of
accounts

 

Assets Under
Management
01/31/11

 


 


 


 


 

 

Ben Fischer, CFA

 

Other investment companies

 

4

 

$

168.8

 

 

 

Other accounts

 

49

 

$

11,251

 

 

 

Registered Investment

 

23

 

$

22,862

 

 

 

 

 

 

 

 

 

 

L. Baxter Hines

 

Other investment companies

 

2

 

$

80.1

 

 

 

Other accounts

 

36

 

$

9,645

 

 

 

Registered Investment

 

8

 

$

12,700

 

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AGI Capital
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.

AGI Capital has adopted compliance policies and procedures that address certain of these potential conflicts. The management of accounts with different advisory fee rates and/or fee structures, including accounts that pay advisory fees based on account performance may raise potential conflicts of interest by creating an incentive to favor higher-fee accounts. These potential conflicts may include, among others:

 

 

 

 

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 AGI Capital considers the purchase or sale of a security to be in the best interests of a Fund as well as other accounts, AGI Capital’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. AGI Capital 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. AGI Capital 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.. AGI Capital 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

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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.AGI Capital 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 AGI Capital 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, AGI Capital has adopted a brokerage allocation policy embodying the concepts of Section 28(e) of the Securities Exchange Act of 1934. AGI Capital 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 Fund 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.

AGI Capital’s investment personnel, including each Fund’s Portfolio Manager, are subject to restrictions on engaging in personal securities transactions pursuant to Allianz Global Investors of America L.P.’s Codes of Ethics, which contain provisions and requirements designed to identify and address conflicts of interest between personal investment activities and the interests of the Fund. The Code of Ethics is designed to

A-6


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.

NFJ

Potential Conflict of Interest

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 NFJ believes are faced by investment professionals at most major financial firms. NFJ, the 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 interest of a Fund as well as other accounts, the NFJ’s trading desk may, to the extent 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 o trades may create the potential for unfairness to a Fund or another account if one account is favored over another in allocating 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.

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 objective, 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 decision made, with respect to a Fund. In addition, investment decisions are the product of many factors in addition to basic suitability for

A-7


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. There may be circumstances when purchased or sales of portfolio securities for one or more accounts may have an adverse effect on other accounts.

Portfolio managers are responsible for managing multiple funds and/or accounts with 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 ach 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 managers 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 an 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 been available. These services may be more beneficial to certain funs or accounts than to others. Although the payment of brokerage commissions is subject to the requirement that the portfolio manager determine in good faith and the commissions are reasonable in relation to the value of the brokerage and research services provided to the Fund and NFJ’s other clients, 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 managers.

A Fund’s portfolio managers may also face other potential conflicts of interest in managing a Fund, and the description above is not 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 manger 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. Front-running could also exist if a portfolio manager transacted in his own account prior to placing an order for a Fund or other clients. NFJ’s investment personnel, including each Fund’s portfolio manager, are subject to restrictions on engaging in personal securities transactions, pursuant to a Code of Ethics adopted by NFJ, which contain provisions and requirements designed to identify and address certain conflicts of interest between personal investments activities and the interest of the Funds.

As part of NFJ’s Compliance Program, NFJ has established a Compliance Committee, a Best Execution Committee, a Proxy Voting Committee and a Pricing Committee to help develop policies and procedures that help NFJ avoid, mitigate, monitor and oversee areas that could present potential conflicts of interest.

A-8


(a) (3) AGI Capital

As of January 31, 2011 the following explains the compensation structure of each individual (as listed in the Prospectus) that shares primary responsibility for day-to-day portfolio management of the Fund (for the purposes of this section, “Portfolio Managers”):

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, NFJ Investment Group 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 Interest
Managing Directors at AGI Capital and NFJ Investment Group 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 analyst’s compensation and benefits in the top quartile for comparable experience, as measured by industry

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benchmarks surveyed by independent firms such as McLagan and ECS (Watson Wyatt Data Services).

NFJ

The following information is provided as of January 31, 2011.

Our 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
The short-term incentive pools for the NFJ investment team are annual discretionary bonuses directly related to the revenue of the investment business and the performance of the investment strategies relative to their individual benchmarks over a five-year period. The percentage allocated to the investment team increases based on the number of strategies outperforming. The pool is then subjectively allocated to team members based on individual contributions. 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, NFJ Investment Group and the other Allianz Global Investors companies to promote long-term growth and profitability. The plan is based on the operating earnings growth of both AGI Capital and Allianz Global Investors and has a three-year vesting schedule.

Ownership Interest
Managing Directors at AGI Capital and NFJ Investment Group 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 such as McLagan and ECS (Watson Wyatt Data Services).

4) The following information is provided as of January 31, 2011.

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AGI Capital

 

 

 

NFJ Dividend Interest and Premium Strategy


 

PM Ownership



Doug Forsyth, CFA

None

Stephen Bond-Nelson

None

 

 

NFJ

 

 

 

NFJ Dividend Interest and Premium Strategy


 

PM Ownership



Ben Fischer, CFA

$100,001 - $500,000

L. Baxter Hines

None

A-11


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 change in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the Act (17 CFR 270.30a-3 (d))) that that occurred during the second fiscal quarter of the period covered by this report that materially affected , or is reasonably likely to affect, the registrant’s 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) 

NFJ Dividend, Interest &
Premium Strategy Fund

 



 

 

By 

/s/ Brian S. Shlissel

 


President and Chief Executive Officer

 

 

 

 

Date 

April 4, 2011

 


 

 

 

 

By 

/s/ Lawrence G. Altadonna

 


Treasurer, Principal Financial & Accounting Officer

 

 

 

 

Date 

April 4, 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 4, 2011

 


 

 

 

 

By 

/s/ Lawrence G. Altadonna

 


Treasurer, Principal Financial & Accounting Officer

 

 

 

 

Date 

April 4, 2011