|
|
|
Nicholas-Applegate Global Equity &
Convertible Income Fund
Notes to Financial Statements
|
|
February 28, 2009 (unaudited)
|
|
|
1. Organization and Significant Accounting Policies (continued)
When an option is written, the
premium received is recorded as an asset with an equal liability and is
subsequently marked to market to reflect the current market value of the option.
These liabilities are reflected as call options written in the 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 purchase transactions, as a realized loss. If a call option is
exercised, the premium is added to the proceeds from the sale of the underlying
security or index option in determining whether there has been a realized gain
or loss.
The Fund, as a writer of call
options, may have no control over whether the underlying securities or index
options may be sold (called). As a result, the Fund bears the market risk of an
unfavorable change in the price of the security or index underlying the written
call option.
The Fund may also purchase put
options on equity and/or equity indexes. The risk associated with purchasing a
put option is that the Fund pays a premium whether or not the option is
exercised. Additionally, the Fund bears the risk of loss of premium and change
in market value should the counterparty be unable or unwilling to perform under
the contract. Purchased put options are accounted for in the same manner as
portfolio securities. The proceeds from the securities sold through the
exercise of put options is decreased by the premiums paid.
The use of derivative transactions
may involve elements of both market and credit risk in excess of the amounts
reflected on the Statement of Assets and Liabilities.
(h) Foreign Currency Translations
The Fund’s accounting records are
maintained in U.S dollars as follows: (1) the foreign currency market value of
investments and other assets and liabilities denominated in foreign currency
are translated at the prevailing exchange rate of the respective currency at
the spot rate at 11 am Eastern Time against the US dollar, as provided by an
approved pricing service; and (2) purchase and sales, income and expenses are
translated at the prevailing exchange rate on the respective dates of such
transactions. The resulting net foreign currency gain or loss is included in the
Statement of Operations.
The Fund does not generally isolate
that portion of the results of operations arising as a result of changes in the
foreign currency exchange rates from the fluctuations arising from changes in
the market prices of securities. Accordingly, such foreign currency gain (loss)
is included in net realized gain (loss) on investments.
However, the Fund does isolate the
effect of fluctuations in foreign currency exchange rates when determining the
gain or loss upon the sale or maturity of foreign currency denominated debt
obligations pursuant to U.S. federal income tax regulations; such amount is
categorized as foreign currency gain or loss for both financial reporting and
income tax reporting purposes.
(i) Concentration of Risk
It is the Fund’s policy to invest a
portion of its 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 convertible securities held by the Fund 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 Fund is exposed to greater downside risk than traditional convertible
securities, but still less than that of the underlying common stock. The Fund
is also exposed to the risk that the issuers or counterparties to the
agreements may be unable to deliver the stated underlying securities or agreed
proceeds upon maturity.
During the six-months ended February
28, 2009, the Fund held synthetic convertible securities with Lehman Brothers
Holdings, Inc. as the counterparty. On September 15, 2008, Lehman Brothers
Holdings, Inc. filed for protection under Chapter 11 of the United States
Bankruptcy Code. The value of the relevant securities have been written down to
their estimated recoverable values.
24
Nicholas-Applegate Global Equity & Convertible Income
Fund Semi-Annual Report
|
2.28.09
|
|
|
|
|
Nicholas-Applegate
Global Equity & Convertible Income Fund
Notes to Financial Statements
|
|
February 28, 2009 (unaudited)
|
|
|
|
|
2. Investment Manager/Sub-Adviser
The Fund has entered into an
Investment Management Agreement (the “Agreement”) with the Investment Manager.
Subject to the supervision of the Fund’s Board of Trustees, the Investment
Manager is responsible for managing, either directly or through others selected
by it, the Fund’s investment activities, business affairs and administrative
matters. Pursuant to the Agreement, the 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
the Fund (including assets attributable to borrowings) minus accrued
liabilities (other than liabilities representing borrowings). The Investment
Manager has retained its affiliate, Nicholas-Applegate Capital Management LLC
(the “Sub-Adviser”), to manage the Fund’s investments. Subject to the
supervision of the Investment Manager, the Sub-Adviser makes all of the Fund’s
investment decisions. For its services, pursuant to a Sub-Advisory agreement,
the Investment Manager and not the Fund, pays the Sub-Adviser a monthly fee.
3. Investment in Securities
For the six months ended February 28,
2009, purchases and sales of investments, other than short-term securities were
$7,641,250 and $9,246,398, respectively.
Transactions in call options written
for the six months ended February 28, 2009 were:
|
|
|
|
|
|
|
|
|
|
|
|
Contracts
|
|
Premiums
|
|
|
|
|
|
|
|
|
|
Options outstanding, August 31, 2008
|
|
|
89,753
|
|
$
|
786,666
|
|
|
Options written
|
|
|
532,017
|
|
|
3,416,232
|
|
|
Options terminated in closing purchase transactions
|
|
|
(124,863
|
)
|
|
(1,085,804
|
)
|
|
Options expired
|
|
|
(383,852
|
)
|
|
(2,666,318
|
)
|
|
|
|
|
|
|
|
|
|
|
Options outstanding, February 28, 2009
|
|
|
113,055
|
|
$
|
450,776
|
|
|
|
|
|
|
|
|
|
|
4. Income Tax Information
The cost basis of portfolio
securities of $166,383,412 is substantially the same for both federal income
tax and financial reporting purposes. Aggregated gross unrealized appreciation
for securities in which there is an excess value over tax cost is $1,819,495;
aggregated gross unrealized depreciation for securities in which there is an
excess tax cost over value is $92,222,058; net unrealized depreciation for
federal income tax purposes is $90,402,563.
5. Subsequent Dividend Declarations
On March 13, 2009, a dividend of
$0.35 per share was declared to shareholders payable March 27, 2009 to
shareholders of record on March 23, 2009.
6. Legal Proceedings
In June and September 2004, the
Investment Manager and certain of its affiliates (including PEA Capital LLC
(“PEA”), Allianz Global Investors Distributors LLC and Allianz Global Investors
of America, L.P.) agreed to settle, without admitting or denying the
allegations, claims brought by the 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 Fund.
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
multi-district litigation proceeding in the U.S. District Court for the
District of Maryland. Any potential resolution of these matters may include,
but not be limited to, judgments or settlements for damages against the
Investment Manager or its affiliates or related injunctions.
The Investment Manager and the
Sub-Adviser believe that these matters are not likely to have a material
adverse effect on the Fund or on their ability to perform their respective
investment advisory activities relating to the Fund.
The foregoing speaks only as of the
date hereof.
|
|
|
|
| 2.28.09 | Nicholas-Applegate Global Equity & Convertible Income Fund
Semi-Annual Report
|
25
|
|
|
|
|
Nicholas-Applegate
Global Equity & Convertible Income Fund
F
inancial Highlights
|
|
For a share outstanding throughout each period:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months
ended
February 28, 2009
(unaudited)
|
|
For the period
September 28, 2007*
through
August 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net asset value, beginning of period
|
|
|
|
$18.84
|
|
|
|
|
$23.88
|
**
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
|
|
0.27
|
|
|
|
|
0.65
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net realized and change in unrealized loss on investments,
call options written and foreign currency transactions
|
|
|
|
(7.20
|
)
|
|
|
|
(3.72
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total from investment operations
|
|
|
|
(6.93
|
)
|
|
|
|
(3.07
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends and Distributions to
Shareholders from:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
|
|
(0.44
|
)
|
|
|
|
(0.60
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net realized gains
|
|
|
|
(0.55
|
)
|
|
|
|
(1.32
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total dividends and distributions to shareholders
|
|
|
|
(0.99
|
)
|
|
|
|
(1.92
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Share Transactions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Offering costs charged to paid-in capital in excess of par
|
|
|
|
—
|
|
|
|
|
(0.05
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net asset value, end of period
|
|
|
|
$10.92
|
|
|
|
|
$18.84
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market price, end of period
|
|
|
|
$8.93
|
|
|
|
|
$18.10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Investment Return (1)
|
|
|
|
(46.81
|
)%
|
|
|
|
(20.67
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RATIOS/SUPPLEMENTAL DATA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets, end of period (000)
|
|
|
|
$76,509
|
|
|
|
|
$131,941
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio of expenses to average net assets
|
|
|
|
1.44
|
%(2)
|
|
|
|
1.23
|
%(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio of net investment income to average net assets
|
|
|
|
4.18
|
%(2)
|
|
|
|
3.31
|
%(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Portfolio turnover
|
|
|
|
8
|
%
|
|
|
|
105
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
Commencement of operations.
|
|
**
|
Initial public offering price of $25.00 per share less
underwriting discount of $1.125 per share.
|
|
(1)
|
Total investment return is calculated assuming a purchase
of a share of common stock at the current market price on the first day of
each period and a sale of a share of common stock at the current market price
on the last day of each period reported. Dividends and distributions are
assumed, for purposes of this calculation, to be reinvested at prices obtained
under the Fund’s dividend reinvestment plan. Total investment return does not
reflect brokerage commissions or sales charges. Total investment return of a
period of less than one year is not annualized.
|
|
(2)
|
Annualized.
|
|
|
|
|
|
Nicholas-Applegate Global Equity
& Convertible Income Fund
|
|
26
|
Semi-Annual Report | 2.28.09 |
See accompanying Notes to Financial Statements
|
|
|
|
|
|
Nicholas-Applegate Global Equity &
Convertible Income Fund
|
|
A
nnual
Shareholder
|
|
|
|
Meeting
Results/
|
|
|
|
Proxy
Voting
|
|
|
|
Policies
&
|
|
|
|
Procedures
|
|
|
|
(unaudited)
|
|
|
|
|
Annual Shareholder Meeting Results
The Fund
held its annual meeting of shareholders on December 16, 2008. Shareholders
voted to re-elect Robert E. Connor, Hans W. Kertess and William B. Ogden, IV
and to elect Diana L. Taylor as Trustees, as indicated below.
|
|
|
|
|
|
|
|
|
|
|
|
|
Affirmative
|
|
Withheld
Authority
|
|
|
|
|
|
|
|
|
|
|
|
Re-election of Robert E. Connor—Class I to serve until
2011
|
|
|
6,143,813
|
|
|
162,102
|
|
|
Re-election of Hans W. Kertess—Class I to serve until 2011
|
|
|
6,145,813
|
|
|
160,102
|
|
|
Re-election of William B. Ogden, IV—Class I to serve until
2011
|
|
|
6,147,963
|
|
|
157,952
|
|
|
Election of Diana L. Taylor—Class II to serve until 2009
|
|
|
6,149,163
|
|
|
156,752
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Messrs. Paul Belica, John C. Maney
and R. Peter Sullivan III continue to serve as Trustees.
Mr. John J. Dalessandro II served as
a Class III Trustee of the Fund until his death on September 14, 2008.
|
|
|
|
|
Proxy Voting Policies & Procedures
|
A description of the policies and
procedures that the Fund has adopted to determine how to vote proxies relating
to portfolio securities and information about how the Fund voted proxies relating
to portfolio securities held during the twelve month period ended June 30 is
available (i) without charge upon request by calling the Fund’s shareholder
servicing agent at (800) 331-1710; (ii) on the Fund’s website at
www.allianzinvestors.com/closedendfunds; and (iii) on the Securities and
Exchange Commission website at www.sec.gov.
|
2.28.09
|
Nicholas-Applegate Global Equity & Convertible Income
Fund Semi-Annual Report
27
(This Page Intentionally Left Blank)
Trustees and Fund Officers
|
|
|
|
|
Hans W. Kertess
|
|
Brian S. Shlissel
|
|
Trustee, Chairman of the Board of
Trustees
|
|
President & Chief Executive
Officer
|
|
Paul Belica
|
|
Lawrence G. Altadonna
|
|
Trustee
|
|
Treasurer, Principal Financial
& Accounting Officer
|
|
Robert E. Connor
|
|
Thomas J. Fuccillo
|
|
Trustee
|
|
Vice President, Secretary &
Chief Legal Officer
|
|
John C. Maney
|
|
Scott Whisten
|
|
Trustee
|
|
Assistant Treasurer
|
|
William B. Ogden, IV
|
|
Richard J. Cochran
|
|
Trustee
|
|
Assistant Treasurer
|
|
R. Peter Sullivan III
|
|
Youse E. Guia
|
|
Trustee
|
|
Chief Compliance Officer
|
|
Diana L. Taylor
|
|
Kathleen A. Chapman
|
|
Trustee
|
|
Assistant Secretary
|
|
|
|
Lagan Srivastava
|
|
|
|
Assistant Secretary
|
Investment Manager
Allianz Global Investors Fund
Management LLC
1345 Avenue of the Americas
New York, NY 10105
Sub-Adviser
Nicholas-Applegate Capital
Management LLC
600 West Broadway, 30th Floor
San Diego, California 92101
Custodian & Accounting Agent
Brown Brothers Harriman & Co.
40 Water Street
Boston, MA 02109
Transfer Agent, Dividend Paying Agent and
Registrar
PNC Global
Investment Servicing
P.O. Box 43027
Providence, RI 02940-3027
Independent Registered Public Accounting Firm
PricewaterhouseCoopers LLP
300 Madison Avenue
New York, NY 10017
Legal Counsel
Ropes & Gray LLP
One International Place
Boston, MA 02210-2624
This report, including the financial information herein, is transmitted
to the shareholders of Nicholas-Applegate Global Equity & Convertible
Income Fund for their information. It is not a prospectus, circular or
representation intended for use in the purchase of shares of the Fund or any
securities mentioned in this report.
The financial information included herein is taken from the records of
the Fund without examination by an independent registered accounting firm, who
did not express an opinion hereon.
Notice is hereby given in accordance with Section 23(c) of the
Investment Company Act of 1940, as amended, that from time to time the Fund may
purchase shares of their common stock in the open market.
The Fund files its complete schedule of portfolio holdings with the
Securities and Exchange Commission (“SEC”) for the first and third quarters of
its fiscal year on Form N-Q. The Fund’s Form N-Q is available on the SEC’s
website at www.sec.gov and may be reviewed and copied at the SEC’s Public
Reference Room in Washington D.C. Information on the operation of the Public
Reference Room may be obtained by calling (800) SEC-0330. The information on
Form N-Q is also available on the Fund’s website at
www.allianzinvestors.com/closedendfunds.
On January 9, 2009, the Fund submitted a CEO annual certification to
the New York Stock Exchange (“NYSE”) on which the Fund’s principal executive
officer certified that he was not aware, as of the date, of any violation by
the Fund of the NYSE’s Corporate Governance listing standards. In addition, as
required by Section 302 of the Sarbanes-Oxley Act of 2002 and related SEC
rules, the Fund’s principal executive and principal financial officer made
quarterly certifications, included in filings with the SEC on Forms N-CSR and
N-Q relating to, among other things, the Fund’s disclosure controls and
procedures and internal control over financial reporting, as applicable.
Information on the Fund is available at
www.allianzinvestors.com/closedendfunds or by calling the Fund’s shareholder
servicing agent at (800) 331-1710.
|
|
|
|
ITEM 2.
|
CODE OF ETHICS
|
|
|
|
|
|
Not required in this filing.
|
|
|
|
|
ITEM 3.
|
AUDIT COMMITTEE FINANCIAL EXPERT
|
|
|
|
|
|
Not required in this filing.
|
|
|
|
|
ITEM 4.
|
PRINCIPAL ACCOUNTANT FEES AND SERVICES
|
|
|
|
|
|
Not required in this filing
|
|
|
|
|
ITEM 5.
|
AUDIT COMMITTEE OF LISTED REGISTRANT
|
|
|
|
|
|
Not required in this filing
|
|
|
|
|
ITEM 6.
|
SCHEDULE OF INVESTMENTS
|
|
|
|
|
|
Schedule of Investments is included as part of the Report to Shareholders filed under Item 1 of this form.
|
|
|
|
|
ITEM 7.
|
DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES
FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES
|
|
|
|
|
|
Not required in this filing
|
|
|
|
|
ITEM 8.
|
PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT
COMPANIES
|
|
|
|
|
|
Not required in this filing
|
|
|
|
|
ITEM 9.
|
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.
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ITEM 11.
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CONTROLS AND PROCEDURES
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(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.
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(b) There were no significant changes in the
registrant’s internal controls (over financial reporting as defined
in Rule 30a-3(d) under the Act (17 CFR 270.30a -3(d))) that occurred
during the second fiscal quarter of the period covered by this report
that has materially affected, or is reasonably likely to materially affect,
the registrants control over financial reporting.
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ITEM 12.
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EXHIBITS
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(a) Exhibit 99.302 Cert. - Certification pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002
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(b) Exhibit 99.906 Cert. - Certification pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002
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Signature
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
(Registrant) Nicholas-Applegate Global Equity & Convertible Income Fund
By
/s/ Brian S. Shlissel
President & Chief Executive Officer
Date
May 4, 2009
By
/s/ Lawrence G. Altadonna
Treasurer, Principal Financial & Accounting Officer
Date
May 4, 2009
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on
the dates indicated.
By
/s/ Brian S. Shlissel
President & Chief Executive Officer
Date
May 4, 2009
By
/s/ Lawrence G. Altadonna
Treasurer, Principal Financial & Accounting Officer
Date
May 4, 2009
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