EXHIBIT g.2
PORTFOLIO MANAGEMENT AGREEMENT
NFJ Dividend, Interest & Premium Strategy Fund
This Portfolio Management Agreement is executed as of February 15, 2005
by and between PA FUND MANAGEMENT LLC, a Delaware limited liability company (the
"Manager"), and NFJ INVESTMENT GROUP L.P., a Delaware limited partnership (the
"Portfolio Manager").
WITNESSETH:
That in consideration of the mutual covenants herein contained, it is
agreed as follows:
1. SERVICES TO BE RENDERED BY THE PORTFOLIO MANAGER TO THE FUND.
(a) Subject always to the direction and oversight of the Trustees of
NFJ Dividend, Interest & Premium Strategy Fund (the "Fund"), a
Massachusetts business trust, and the Manager, the Portfolio
Manager, at its expense, will furnish continuously an investment
program for the Fund with respect to the portion of the Fund's
assets allocated from time to time and comprising its "Equity
Component" (as such term is described and used in the Fund's
current Prospectus) and will make all related investment
decisions on behalf of the Fund and place all orders for the
purchase and sale of portfolio securities and other investments
for the Fund's Equity Component. In the performance of its
duties, the Portfolio Manager (1) will comply with the
provisions of the Fund's Fifth Amended and Restated Agreement
and Declaration of Trust and Amended and Restated Bylaws,
including any amendments thereto (upon receipt of such
amendments by the Portfolio Manager), and the investment
objectives, policies and restrictions of the Fund as set forth
in its current Prospectus and Statement of Additional
Information (copies of which will be supplied to the Portfolio
Manager upon filing with the Securities and Exchange Commission
(the "SEC")), (2) will use its best efforts to safeguard and
promote the welfare of the Fund and (3) will comply with other
policies which the Trustees or the Manager, as the case may be,
may from time to time determine as promptly as practicable after
such policies have been communicated to the Portfolio Manager in
writing. The Portfolio Manager and the Manager shall each make
its officers and employees available to the other from time to
time at reasonable times to review the investment policies of
the Fund and the Equity Component and to consult with each other
and any other sub-adviser(s) to the Fund regarding the
investment affairs of the Fund.
(b) The Portfolio Manager shall be responsible for daily monitoring
of the investment activities and portfolio holdings of the
Equity Component in connection with Fund's compliance with the
investment objectives, policies and restrictions of the Fund
applicable to the Equity Component, as set forth in the Fund's
current Prospectus and Statement of Additional Information. The
Portfolio Manager shall also cooperate with and provide
sufficient information to the Manager to assist the Manager in
its monitoring of the investment activities and portfolio
holdings of the Fund as a whole in connection with the Fund's
overall compliance with the Investment Company Act of 1940, as
amended from time to time, and the rules and regulations
thereunder (the "1940 Act"), the Fund's compliance with the
investment objectives, policies and restrictions of the Fund as
set forth in its current Prospectus and Statement of Additional
Information, and the Fund's satisfaction of quarterly
diversification requirements for qualification as a regulated
investment company under the Internal Revenue Code of 1986, as
amended from time to time, and the rules and regulations
thereunder. Notwithstanding the investment discretion delegated
to the Portfolio Manager in paragraph (a) of this section, the
Portfolio Manager shall act on any instructions of the Manager
with respect to the investment activities of the Equity
Component to ensure the Fund's compliance with the foregoing.
(c) The Portfolio Manager, at its expense, will furnish (i) all
necessary investment and management facilities, including
salaries of personnel, required for it to execute its duties
hereunder faithfully and (ii) administrative facilities,
including bookkeeping, clerical personnel and equipment
necessary for the efficient conduct of the investment affairs of
the Fund relating to the Equity Component, including
verification and oversight of the pricing of the portfolio
securities and other instruments comprising the Equity Component
(but excluding determination of net asset value and shareholder
accounting services).
(d) In the selection of brokers or dealers and the placing of orders
for the purchase and sale of portfolio investments for the Fund,
the Portfolio Manager shall use its best efforts to obtain for
the Fund the most favorable price and execution available,
except to the extent it may be permitted to pay higher brokerage
commissions for brokerage and research services as described
below. In using its best efforts to obtain for the Fund the most
favorable price and execution available, the Portfolio Manager,
bearing in mind the Fund's best interests at all times, shall
consider all factors it deems relevant, including, by way of
illustration, price, the size of the transaction, the nature of
the market for the security, the amount of the commission, the
timing of the transaction taking into account market prices and
trends, the reputation, experience and financial stability of
the broker or dealer involved and the quality of service
rendered by the broker or dealer in other transactions. Subject
to such policies as the Trustees of the Fund may determine and
communicate to the Portfolio Manager in writing, the Portfolio
Manager shall not be deemed to have acted unlawfully or to have
breached any duty created by this Agreement or otherwise solely
by reason of its having caused the Fund to pay a broker or
dealer that provides brokerage and
-2-
research services to the Portfolio Manager or its affiliates an
amount of commission for effecting a portfolio investment
transaction in excess of the amount of commission another broker
or dealer would have charged for effecting that transaction, if
the Portfolio Manager determines in good faith that such amount
of commission was reasonable in relation to the value of the
brokerage and research services provided by such broker or
dealer, viewed in terms of either that particular transaction or
the Portfolio Manager's overall responsibilities with respect to
the Fund and to other clients of the Portfolio Manager and its
affiliates as to which the Portfolio Manager and its affiliates
exercise investment discretion. The Fund agrees that any entity
or person associated with the Portfolio Manager or its
affiliates which is a member of a national securities exchange
is expressly authorized to effect any transaction on such
exchange for the account of the Fund which is permitted by
Section 11(a) of the Securities Exchange Act of 1934 (the "1934
Act").
(e) The Portfolio Manager shall not be obligated to pay any expenses
of or for the Fund not expressly assumed by the Portfolio
Manager pursuant to this Section 1.
2. OTHER AGREEMENTS, ETC.
It is understood that any of the shareholders, Trustees, officers and
employees of the Fund may be a shareholder, member, director, officer or
employee of, or be otherwise interested in, the Portfolio Manager, and
in any person controlled by or under common control with the Portfolio
Manager, and that the Portfolio Manager and any person controlled by or
under common control with the Portfolio Manager may have an interest in
the Fund. It is also understood that the Portfolio Manager and persons
controlled by or under common control with the Portfolio Manager have
and may have advisory, management service or other contracts with other
organizations and persons, and may have other interests and businesses.
3. COMPENSATION TO BE PAID BY THE MANAGER TO THE PORTFOLIO MANAGER.
The Manager will pay the Portfolio Manager as compensation for the
Portfolio Manager's services rendered and for the expenses borne by the
Portfolio Manager pursuant to Section 1, a fee computed and paid monthly
at the annual rate of 0.25% of the average daily total managed assets
attributable to the Equity Component.
For purposes of this Section 3, "total managed assets" means the total
assets of the Fund (including any assets attributable to any preferred
shares and borrowings that may be outstanding) minus accrued liabilities
attributable to the Fund (other than liabilities representing
borrowings). The average daily total managed assets of the Fund
attributable to the Equity Component shall be determined by taking an
average of all of the determinations of such amount during such month at
the close of business on each business day during such month while this
Agreement is in effect. Such fee from the Manager to the Portfolio
Manager shall be payable for each month within 10 business
-3-
days after the end of the month. The Manager shall be responsible for
determining the portion of the Fund's average daily total managed assets
attributable to the Equity Component at any time and from time to time,
and for otherwise calculating fees payable hereunder, provided that the
Manager shall provide sufficient back-up information verifying any such
determination to the Portfolio Manager upon request, and the Portfolio
Manager reserves the right to challenge any calculation through
discussions with the Manager if it has a reasonable basis for concluding
that such calculation was in error.
In the event that the Portfolio Manager has agreed to a fee waiver
arrangement with the Manager, subject to such terms and conditions as
the Manager and the Portfolio Manager may set forth in such agreement,
the compensation due the Portfolio Manager hereunder shall be reduced to
the extent required by such fee waiver arrangement.
If the Portfolio Manager shall serve for less than the whole of a month,
the foregoing compensation shall be prorated.
4. ASSIGNMENT TERMINATES THIS AGREEMENT; AMENDMENTS OF THIS AGREEMENT.
This Agreement shall automatically terminate, without the payment of any
penalty, in the event of its assignment or in the event that the
Investment Management Agreement between the Manager and the Fund shall
have terminated for any reason; and this Agreement shall not be amended
unless such amendment is approved at a meeting by the affirmative vote
of a majority of the outstanding shares of the Fund, and by the vote,
cast in person at a meeting called for the purpose of voting on such
approval, of a majority of the Trustees of the Fund who are not
interested persons of the Fund or of the Manager or the Portfolio
Manager.
5. EFFECTIVE PERIOD AND TERMINATION OF THIS AGREEMENT.
This Agreement shall become effective upon its execution, and shall
remain in full force and effect as to the Fund continuously thereafter
(unless terminated automatically as set forth in Section 4) until
terminated as follows:
(a) The Fund may at any time terminate this Agreement by written
notice delivered or mailed by registered mail, postage prepaid,
to the Manager and the Portfolio Manager, or
(b) If (i) the Trustees of the Fund or the shareholders by the
affirmative vote of a majority of the outstanding shares of the
Fund, and (ii) a majority of the Trustees of the Fund who are
not interested persons of the Fund or of the Manager or of the
Portfolio Manager, by vote cast in person at a meeting called
for the purpose of voting on such approval, do not specifically
approve at least annually the continuance of this Agreement,
then this Agreement shall automatically terminate at the close
of business on the second anniversary of its execution, or upon
the expiration of one year from the effective date of the last
such continuance,
-4-
whichever is later; provided, however, that if the continuance
of this Agreement is submitted to the shareholders of the Fund
for their approval and such shareholders fail to approve such
continuance of this Agreement as provided herein, the Portfolio
Manager may continue to serve hereunder in a manner consistent
with the 1940 Act, or
(c) The Manager may at any time terminate this Agreement by not less
than 60 days' written notice delivered or mailed by registered
mail, postage prepaid, to the Portfolio Manager, and the
Portfolio Manager may at any time terminate this Agreement by
not less than 60 days' written notice delivered or mailed by
registered mail, postage prepaid, to the Manager.
Action by the Fund under (a) above may be taken either (i) by
vote of a majority of the Trustees, or (ii) by the affirmative
vote of a majority of the outstanding shares of the Fund.
Termination of this Agreement pursuant to this Section 5 shall
be without the payment of any penalty.
6. CERTAIN INFORMATION.
The Portfolio Manager shall promptly notify the Manager in writing of
the occurrence of any of the following events: (a) the Portfolio Manager
shall fail to be registered as an investment adviser under the
Investment Advisers Act of 1940, as amended from time to time, (b) the
Portfolio Manager shall have been served or otherwise have notice of any
action, suit, proceeding, inquiry or investigation, at law or in equity,
before or by any court, public board or body, involving the affairs of
the Fund, (c) there is a change in control of the Portfolio Manager or
any parent of the Portfolio Manager within the meaning of the 1940 Act,
or (d) there is a material adverse change in the business or financial
position of the Portfolio Manager.
7. CERTAIN DEFINITIONS.
For the purposes of this Agreement, the "affirmative vote of a majority
of the outstanding shares" means the affirmative vote, at a duly called
and held meeting of shareholders, (a) of the holders of 67% or more of
the shares of the Fund, as the case may be, present (in person or by
proxy) and entitled to vote at such meeting, if the holders of more than
50% of the outstanding shares of the Fund, as the case may be, entitled
to vote at such meeting are present in person or by proxy, or (b) of the
holders of more than 50% of the outstanding shares of the Fund, as the
case may be, entitled to vote at such meeting, whichever is less.
For the purposes of this Agreement, the terms "affiliated person,"
"control," "interested person" and "assignment" shall have their
respective meanings defined in the 1940 Act; the term "specifically
approve at least annually" shall be construed in a manner consistent
with the 1940 Act and the rules and regulations thereunder, subject,
however, to such
-5-
exemptions as may be granted by the SEC under the 1940 Act and the rules
and regulations thereunder; and the term "brokerage and research
services" shall have the meaning given in the 1934 Act and the rules and
regulations thereunder.
8. NONLIABILITY OF PORTFOLIO MANAGER.
Notwithstanding any other provisions of this Agreement, in the absence
of willful misfeasance, bad faith or gross negligence on the part of the
Portfolio Manager, or reckless disregard of its obligations and duties
hereunder, the Portfolio Manager, including its officers, directors and
members, shall not be subject to any liability to the Manager, to the
Fund, or to any shareholder, officer, director, partner or Trustee
thereof, for any act or omission in the course of, or connected with,
rendering services hereunder.
9. LIMITATION OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS.
A copy of the Agreement and Declaration of Trust of the Fund is on file
with the Secretary of State of The Commonwealth of Massachusetts, and
notice is hereby given that this instrument is executed on behalf of the
Trustees of the Fund as Trustees and not individually and that the
obligations of this instrument are not binding upon any of the Trustees
or shareholders individually but are binding only upon the assets and
property of the Fund.
10. EXERCISE OF VOTING RIGHTS.
Except with the agreement (which may be evidenced by resolution) or on
the specific instructions of the Trustees of the Fund or the Manager,
the Portfolio Manager shall not exercise or procure the exercise of any
voting right attaching to investments of the Fund.
11. COUNTERPARTS.
This Agreement may be signed in one or more counterparts, each of which
shall be deemed to be an original.
-6-
IN WITNESS WHEREOF, PA FUND MANAGEMENT LLC and NFJ INVESTMENT GROUP L.P.
have each caused this instrument to be signed on its behalf by its duly
authorized representative, all as of the day and year first above written.
PA FUND NFJ INVESTMENT GROUP L.P.
MANAGEMENT LLC
By: XXXXXX XXXXXX By: XXXXX XXXXXXX
---------------------------- ----------------------------
Name: Xxxxxx Xxxxxx Name: Xxxxx X. Xxxxxxx
Title: Managing Director Title: Managing Director
Accepted and agreed to as of the
day and year first above written:
NFJ DIVIDEND, INTEREST & PREMIUM
STRATEGY FUND
By: XXXXX XXXXXXXX
----------------------------
Name: Xxxxx X. Xxxxxxxx
Title: President and Chief Executive Officer
