AllianzGI Convertible & Income Fund

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM N-Q

 

 

QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS

OF REGISTERED MANAGEMENT INVESTMENT COMPANY

Investment Company Act file number 811-21284

 

 

AllianzGI Convertible & Income Fund

(Exact name of registrant as specified in charter)

 

 

1633 Broadway, New York, NY 10019

(Address of principal executive offices) (Zip code)

Lawrence G. Altadonna

1633 Broadway,

New York, NY 10019

(Name and address of agent for service)

 

 

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

Date of fiscal year end: February 28, 2015

Date of reporting period: November 30, 2014

 

 

 


Item 1. Schedule of Investments

AllianzGI Convertible & Income Fund

November 30, 2014 (unaudited)

 

 

Shares

            Value*  

 

CONVERTIBLE PREFERRED STOCK—42.9%

  
     Aerospace & Defense—1.3%   
  239,625         United Technologies Corp., 7.50%, 8/1/15    $ 14,379,896   
       

 

 

 
     Automobiles—1.3%   
  495,375         The Goldman Sachs Group, Inc., 8.50%, 12/16/14 (General Motors) (a)      14,875,120   
       

 

 

 
     Banks—5.9%   
  9,695         Huntington Bancshares, Inc., 8.50% (b)      12,991,300   
  1,064,500         JPMorgan Chase & Co., 8.00%, 9/18/15 (Bank of America) (a)      17,553,605   
  364,075         The Goldman Sachs Group, Inc., 8.00%, 1/14/15 (Citigroup Inc.) (a)      17,872,442   
  13,990         Wells Fargo & Co., 7.50%, Ser. L (b)      17,173,075   
       

 

 

 
          65,590,422   
       

 

 

 
     Diversified Financial Services—1.4%   
  13,220         Bank of America Corp., 7.25%, Ser. L (b)      15,710,648   
       

 

 

 
     Electric Utilities—0.4%   
  85,390         Exelon Corp., 6.50%, 6/1/17      4,456,504   
       

 

 

 
     Energy Equipment & Services—1.5%   
  313,380         Credit Suisse, 8.00%, 3/5/15 (Baker Hughes) (a)      16,850,443   
       

 

 

 
     Food Products—1.5%   
  326,360         Wells Fargo & Co., 8.00%, 8/28/15 (Archer-Daniels-Midland Co.) (a)      16,471,389   
       

 

 

 
     Health Care Equipment & Supplies—1.7%   
  273,890         Credit Suisse AG, 8.00%, 6/23/15 (Medtronic, Inc.) (a)      18,769,682   
       

 

 

 
     Health Care Providers & Services—1.8%   
  339,700         JPMorgan Chase & Co., 8.00%, 5/5/15 (HCA Holdings, Inc.) (a)      20,280,090   
       

 

 

 
     Household Durables—1.8%   
  171,185         Stanley Black & Decker, Inc., 6.25%, 11/17/16      19,753,037   
       

 

 

 
     Independent Power & Renewable Electricity Producers—0.9%   
  91,960         Dynegy, Inc., 5.375%, 11/1/17      9,889,378   
       

 

 

 
     Internet Software & Services—1.4%   
  349,200         Barclays Bank PLC, 8.00%, 10/28/15 (Twitter, Inc.) (a)      16,010,820   
       

 

 

 
     Metals & Mining—1.5%   
  25,615         Alcoa, Inc., 5.375%, 10/1/17      1,365,280   
  792,720         ArcelorMittal, 6.00%, 1/15/16      15,668,586   
       

 

 

 
          17,033,866   
       

 

 

 
     Multiline Retail—1.6%   
  317,620         The Goldman Sachs Group, Inc., 8.00%, 1/12/15 (Macy’s) (a)      17,957,917   
       

 

 

 
     Multi-Utilities—1.7%   
  239,645         AES Trust III, 6.75%, 10/15/29      12,188,345   
  128,500         Dominion Resources, Inc., 6.375%, 7/1/17      6,649,875   
       

 

 

 
          18,838,220   
       

 

 

 
     Oil, Gas & Consumable Fuels—2.1%   
  191,170         Credit Suisse, 8.00%, 3/5/15 (Occidental Petroleum Corp.) (a)      14,853,909   
  14,100         Energy XXI Bermuda Ltd., 5.625% (b)      1,513,548   
  124,235         PetroQuest Energy, Inc., 6.875% (b)      5,062,576   
  34,155         Sanchez Energy Corp., 6.50%, 4/6/18 (b)      1,439,223   
       

 

 

 
          22,869,256   
       

 

 

 
     Pharmaceuticals—3.6%   
  143,430         Bank of America Corp., 8.00%, 2/10/15 (Allergan, Inc.) (a)      23,674,556   
  333,295         JPMorgan Chase & Co., 8.00%, 4/30/15 (Mylan, Inc.) (a)      16,931,386   
       

 

 

 
          40,605,942   
       

 

 

 
     Real Estate Investment Trust—4.2%   
  439,700         Alexandria Real Estate Equities, Inc., 7.00% (b)      12,157,705   
  798,310         FelCor Lodging Trust, Inc., 1.95%, Ser. A (b)      21,235,046   
  208,680         Health Care REIT, Inc., 6.50%, 4/20/18, Ser. I (b)      13,633,064   
       

 

 

 
          47,025,815   
       

 

 

 
     Semiconductors & Semiconductor Equipment—3.4%   
  246,000         Barclays Bank PLC, 8.00%, 11/9/15 (Lam Research Corp.) (a)      19,756,260   
  530,000         Wells Fargo & Co., 8.00%, 6/18/15 (Micron Technology, Inc.) (a)      17,521,800   
       

 

 

 
          37,278,060   
       

 

 

 

 


AllianzGI Convertible & Income Fund

November 30, 2014 (unaudited) (continued)

 

 

 

Shares

            Value*  
     Specialty Retail—2.1%   
  16,000         Barnes & Noble, Inc., 7.75%, 8/18/21 (c)(d)    $ 23,385,000   
       

 

 

 
     Technology Hardware, Storage & Peripherals—1.8%   
  27,900         Bank of America Corp., 8.00%, 5/12/15 (Apple, Inc.) (a)      20,280,231   
       

 

 

 
     Total Convertible Preferred Stock (cost-$448,969,051)      478,311,736   
       

 

 

 

Principal

Amount

(000s)

               

 

CORPORATE BONDS & NOTES—40.4%

  
     Advertising—0.4%   
  $5,650         Affinion Group, Inc., 7.875%, 12/15/18      4,308,125   
       

 

 

 
     Aerospace & Defense—0.5%   
  250         Bombardier, Inc., 6.00%, 10/15/22 (c)(d)      254,425   
  5,570         Erickson, Inc., 8.25%, 5/1/20      5,263,650   
       

 

 

 
          5,518,075   
       

 

 

 
     Air Freight & Logistics—0.7%   
  6,820         XPO Logistics, Inc., 7.875%, 9/1/19 (c)(d)      7,280,350   
       

 

 

 
     Auto Components—0.8%   
  4,180         Chassix, Inc., 9.25%, 8/1/18 (c)(d)      2,831,950   
  5,280         Goodyear Tire & Rubber Co., 8.25%, 8/15/20      5,689,200   
       

 

 

 
          8,521,150   
       

 

 

 
     Auto Manufacturers—0.7%   
  7,410         Chrysler Group LLC, 8.25%, 6/15/21      8,299,200   
       

 

 

 
     Commercial Services—2.5%   
  4,000         Avis Budget Car Rental LLC/Avis Budget Finance, Inc., 9.75%, 3/15/20      4,400,000   
  11,500         Cenveo Corp., 11.50%, 5/15/17      10,867,500   
  5,705         DynCorp International, Inc., 10.375%, 7/1/17      4,880,627   
  7,375         Monitronics International, Inc., 9.125%, 4/1/20      7,338,125   
       

 

 

 
          27,486,252   
       

 

 

 
     Commercial Services & Supplies—0.6%   
  5,645         United Rentals North America, Inc., 8.375%, 9/15/20      6,096,600   
       

 

 

 
     Construction Materials—0.7%   
  7,310         US Concrete, Inc., 8.50%, 12/1/18      7,858,250   
       

 

 

 
     Consumer Finance—0.8%   
  3,210         Navient Corp., 8.45%, 6/15/18      3,635,325   
  4,935         Springleaf Finance Corp., 8.25%, 10/1/23      5,650,575   
       

 

 

 
          9,285,900   
       

 

 

 
     Distribution/Wholesale—0.8%   
  8,170         HD Supply, Inc., 11.00%, 4/15/20      9,395,500   
       

 

 

 
     Diversified Consumer Services—0.6%   
  6,815         Cambium Learning Group, Inc., 9.75%, 2/15/17      6,746,850   
       

 

 

 
     Diversified Financial Services—1.9%   
  8,395         Affinion Investments LLC, 13.50%, 8/15/18 (c)(d)      6,799,626   
     Community Choice Financial, Inc.,   
  10,085        

10.75%, 5/1/19

     7,160,350   
  7,130        

12.75%, 5/1/20 (c)(d)

     5,097,950   
  2,500         Nationstar Mortgage LLC / Nationstar Capital Corp., 7.875%, 10/1/20      2,418,750   
       

 

 

 
          21,476,676   
       

 

 

 
     Diversified Telecommunications—0.5%   
  4,923         Cincinnati Bell, Inc., 8.75%, 3/15/18      5,102,689   
       

 

 

 
     Electrical Components & Equipment—1.2%   
  13,585         WireCo WorldGroup, Inc., 9.50%, 5/15/17      13,890,663   
       

 

 

 
     Electronic Equipment, Instruments & Components—1.4%   
  7,725         Kemet Corp., 10.50%, 5/1/18      7,995,375   
  7,500         Viasystems, Inc., 7.875%, 5/1/19 (c)(d)      7,950,000   
       

 

 

 
          15,945,375   
       

 

 

 

 


AllianzGI Convertible & Income Fund

November 30, 2014 (unaudited) (continued)

 

 

 

Principal
Amount
(000s)

            Value*  
     Energy Equipment & Services—0.1%   
  $2,830         Hercules Offshore, Inc., 8.75%, 7/15/21 (c)(d)    $ 1,315,950   
       

 

 

 
     Food & Staples Retailing—0.5%   
  5,000         US Foods, Inc., 8.50%, 6/30/19      5,317,500   
       

 

 

 
     Health Care Providers & Services—1.6%   
  8,875         ExamWorks Group, Inc., 9.00%, 7/15/19      9,496,250   
     Tenet Healthcare Corp.,   
  3,500        

5.00%, 3/1/19 (c)(d)

     3,456,250   
  4,530        

8.125%, 4/1/22

     5,073,600   
       

 

 

 
          18,026,100   
       

 

 

 
     Healthcare-Products—0.9%   
  8,885         Kinetic Concepts, Inc./KCI USA, Inc., 10.50%, 11/1/18      9,862,350   
       

 

 

 
     Hotels, Restaurants & Leisure—0.9%   
  8,405         MGM Resorts International, 11.375%, 3/1/18      10,128,025   
       

 

 

 
     Household Durables—1.1%   
     Beazer Homes USA, Inc.,   
  2,945        

7.25%, 2/1/23

     2,937,638   
  5,045        

9.125%, 5/15/19

     5,284,637   
  3,950         Jarden Corp., 7.50%, 5/1/17      4,354,875   
       

 

 

 
          12,577,150   
       

 

 

 
     Household Products/Wares—0.7%   
  7,610         Reynolds Group Issuer, Inc., 9.875%, 8/15/19      8,237,825   
       

 

 

 
     Internet Software & Services—1.2%   
     EarthLink, Inc.,   
  2,800        

7.375%, 6/1/20

     2,926,000   
  10,060        

8.875%, 5/15/19

     10,298,925   
       

 

 

 
          13,224,925   
       

 

 

 
     Iron/Steel—0.6%   
  7,305         AK Steel Corp., 8.375%, 4/1/22      7,049,325   
       

 

 

 
     Lodging—0.2%   
  12,385         Caesars Entertainment Operating Co., Inc., 12.75%, 4/15/18      1,733,900   
       

 

 

 
     Machinery—1.1%   
  5,250         BlueLine Rental Finance Corp., 7.00%, 2/1/19 (c)(d)      5,460,000   
  6,755         Navistar International Corp., 8.25%, 11/1/21      6,982,981   
       

 

 

 
          12,442,981   
       

 

 

 
     Media—2.8%   
  5,500         AMC Entertainment, Inc., 9.75%, 12/1/20      6,118,750   
  8,355         McClatchy Co., 9.00%, 12/15/22      9,305,381   
  8,220         McGraw-Hill Global Education Holdings LLC / McGraw-Hill Global Education Finance, 9.75%, 4/1/21      9,268,050   
  3,745         Mood Media Corp., 9.25%, 10/15/20 (c)(d)      3,164,525   
  3,871         SFX Entertainment, Inc., 9.625%, 2/1/19 (c)(d)      3,532,288   
       

 

 

 
          31,388,994   
       

 

 

 
     Metals & Mining—2.0%   
  6,590         ArcelorMittal, 10.35%, 6/1/19      8,048,037   
  3,680         HudBay Minerals, Inc., 9.50%, 10/1/20      3,827,200   
     Thompson Creek Metals Co., Inc.,   
  8,295        

7.375%, 6/1/18

     7,610,663   
  2,830        

12.50%, 5/1/19

     3,013,950   
       

 

 

 
          22,499,850   
       

 

 

 
     Miscellaneous Manufacturing—0.7%   
  7,350         Harland Clarke Holdings Corp., 9.25%, 3/1/21 (c)(d)      7,377,563   
       

 

 

 
     Oil & Gas—1.3%   
  9,050         Energy XXI Gulf Coast, Inc., 9.25%, 12/15/17      8,145,000   
  6,038         United Refining Co., 10.50%, 2/28/18      6,460,660   
       

 

 

 
          14,605,660   
       

 

 

 


AllianzGI Convertible & Income Fund

November 30, 2014 (unaudited) (continued)

 

 

 

Principal
Amount

(000s)

            Value*  
     Oil, Gas & Consumable Fuels—1.6%   
  $2,840         Arch Coal, Inc., 9.875%, 6/15/19    $ 1,263,800   
  5,050         EP Energy LLC / Everest Acquisition Finance, Inc., 9.375%, 5/1/20      5,542,375   
  4,500         Laredo Petroleum, Inc., 9.50%, 2/15/19      4,702,500   
  5,615         Linn Energy LLC / Linn Energy Finance Corp., 6.50%, 5/15/19      5,074,556   
  730         Ultra Petroleum Corp., 6.125%, 10/1/24 (c)(d)      667,950   
       

 

 

 
          17,251,181   
       

 

 

 
     Packaging & Containers—0.7%   
  6,692         Tekni-Plex, Inc., 9.75%, 6/1/19 (c)(d)      7,361,200   
       

 

 

 
     Paper & Forest Products—0.3%   
  3,000         Louisiana-Pacific Corp., 7.50%, 6/1/20      3,240,000   
       

 

 

 
     Pharmaceuticals—0.2%   
  2,290         Endo Finance LLC & Endo Finco, Inc., 5.375%, 1/15/23 (c)(d)      2,242,757   
       

 

 

 
     Real Estate Investment Trust—0.3%   
  3,085         Kennedy-Wilson, Inc., 5.875%, 4/1/24      3,100,425   
       

 

 

 
     Retail—0.9%   
  9,465         Neiman Marcus Group LTD LLC, 8.00%, 10/15/21 (c)(d)      10,127,550   
       

 

 

 
     Semiconductors & Semiconductor Equipment—1.0%   
  3,745         Amkor Technology, Inc., 6.375%, 10/1/22      3,707,550   
  7,160         Freescale Semiconductor, Inc., 10.75%, 8/1/20      7,893,900   
       

 

 

 
          11,601,450   
       

 

 

 
     Software—1.7%   
     First Data Corp.,   
  5,645        

8.25%, 1/15/21 (c)(d)

     6,068,375   
  1,834        

10.625%, 6/15/21

     2,099,930   
  9,045        

12.625%, 1/15/21

     10,786,163   
       

 

 

 
          18,954,468   
       

 

 

 
     Specialty Retail—1.1%   
  4,160         Brown Shoe Co., Inc., 7.125%, 5/15/19      4,357,600   
  3,500         Claire’s Stores, Inc., 9.00%, 3/15/19 (c)(d)      3,561,250   
  5,500         Conn’s, Inc., 7.25%, 7/15/22 (c)(d)      4,798,750   
       

 

 

 
          12,717,600   
       

 

 

 
     Telecommunications—1.3%   
  7,415         Consolidated Communications, Inc., 10.875%, 6/1/20      8,443,831   
  5,660         Windstream Corp., 7.50%, 4/1/23      5,787,350   
       

 

 

 
          14,231,181   
       

 

 

 
     Transportation—0.7%   
  7,239         Quality Distribution LLC, 9.875%, 11/1/18      7,655,242   
       

 

 

 
     Wireless Telecommunication Services—0.8%   
  7,205         Sprint Communications, Inc., 11.50%, 11/15/21      8,988,238   
       

 

 

 
     Total Corporate Bonds & Notes (cost-$463,701,610)      450,471,045   
       

 

 

 

 

CONVERTIBLE BONDS & NOTES—14.8%

  
     Capital Markets—2.6%   
  7,740         Ares Capital Corp., 5.75%, 2/1/16      8,059,275   
  13,195         BGC Partners, Inc., 4.50%, 7/15/16      14,143,391   
  8,460         Walter Investment Management Corp., 4.50%, 11/1/19      6,604,087   
       

 

 

 
          28,806,753   
       

 

 

 
     Commercial Services—1.8%   
  20,305         Cenveo Corp., 7.00%, 5/15/17      19,733,922   
       

 

 

 

 


AllianzGI Convertible & Income Fund

November 30, 2014 (unaudited) (continued)

 

 

 

Principal
Amount

(000s)

            Value*  
     Construction Materials—0.8%   
  $7,645         Cemex S.A.B. de C.V., 4.875%, 3/15/15    $ 8,763,081   
       

 

 

 
     Diversified Consumer Services—0.4%   
  5,875         Ascent Capital Group, Inc., 4.00%, 7/15/20      4,894,610   
       

 

 

 
     Hotels, Restaurants & Leisure—0.5%   
  4,270         MGM Resorts International, 4.25%, 4/15/15      5,372,194   
       

 

 

 
     Insurance—0.3%   
  3,965         HCI Group, Inc., 3.875%, 3/15/19 (c)(d)      3,756,838   
       

 

 

 
     Life Sciences Tools & Services—0.4%   
  4,420         Sequenom, Inc., 5.00%, 10/1/17      4,182,425   
       

 

 

 
     Machinery—2.0%   
     Meritor, Inc.,   
  12,480        

4.625%, 3/1/26 (e)

     12,542,400   
  6,225        

7.875%, 3/1/26

     10,041,703   
       

 

 

 
          22,584,103   
       

 

 

 
     Oil, Gas & Consumable Fuels—0.6%   
  9,960         Goodrich Petroleum Corp., 5.00%, 10/1/32      6,747,900   
       

 

 

 
     Personal Products—1.1%   
  15,310         Herbalife Ltd., 2.00%, 8/15/19 (c)(d)      12,027,995   
       

 

 

 
     Real Estate Investment Trust—0.6%   
  7,070         IAS Operating Partnership LP, 5.00%, 3/15/18 (c)(d)      6,751,850   
       

 

 

 
     Software—0.9%   
  10,320         TeleCommunication Systems, Inc., 7.75%, 6/30/18      9,804,000   
       

 

 

 
     Thrifts & Mortgage Finance—0.7%   
  6,535         MGIC Investment Corp., 5.00%, 5/1/17      7,392,719   
       

 

 

 
     Tobacco—2.0%   
     Vector Group Ltd., (f)   
  5,665        

1.75%, 4/15/20

     6,043,847   
  11,865        

2.50%, 1/15/19

     16,836,494   
       

 

 

 
          22,880,341   
       

 

 

 
     Trading Companies & Distribution—0.1%   
  1,190         Titan Machinery, Inc., 3.75%, 5/1/19      915,556   
       

 

 

 
     Total Convertible Bonds & Notes (cost-$151,984,965)      164,614,287   
       

 

 

 

 

SHORT-TERM INVESTMENT—1.9%

  
     Time Deposit—1.9%   
  20,980         JPMorgan Chase & Co.-Nassau, 0.03%, 12/1/14 (cost-$20,979,754)      20,979,754   
       

 

 

 
     Total Investments (cost-$1,085,635,380) (g)—100.0%    $ 1,114,376,822   
       

 

 

 


AllianzGI Convertible & Income Fund

November 30, 2014 (unaudited) (continued)

 

 

Notes to Schedule 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 official closing prices, last reported sales prices, or if no sales or closing prices are reported, on the basis of quotes obtained from a quotation reporting system, established market makers, or independent pricing services. The Fund’s investments are valued daily using prices supplied by an independent pricing service or broker/dealer quotations, or by using the last sale or settlement price on the exchange that is the primary market for such securities, or the mean between the last bid and ask quotations. 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.

The Board of Trustees (the “Board”) has adopted procedures for valuing portfolio securities and other financial instruments in circumstances where market quotations are not readily available, and has delegated primary responsibility for applying the valuation methods to Allianz Global Investors Fund Management LLC (the “Investment Manager”) and Allianz Global Investors U.S. LLC (the “Sub-Adviser”), affiliate of the Investment Manager. The Fund’s Valuation Committee was established by the Board to oversee the implementation of the Fund’s valuation methods and to make fair value determinations on behalf of the Board, as instructed by the Board. The Sub-Adviser monitors the continued appropriateness of methods applied and determines if adjustments should be made in light of market changes, events affecting the issuer or other factors. If the Sub-Adviser determines that a valuation method may no longer be appropriate, another valuation method may be selected or the Valuation Committee will be convened to consider the matter and take any appropriate action in accordance with procedures set forth by the Board. The Board shall review and ratify the appropriateness of the valuation methods and these methods may be amended or supplemented from time to time by the Valuation Committee.

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 debt instruments maturing in 60 days or less are value at amortized cost, if their original term to maturity was 60 days or less, or by amortizing premium or discount based on their value on the 61st day prior to maturity, if the original term to maturity exceeded 60 days.

The prices used by the Fund to value investments may differ from the value that would be realized if the investments were sold, and these differences could be material. The 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.

 

(a) 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.

 

(b) Perpetual maturity. The date shown, if any, is the next call date.

 

(c) Private Placement—Restricted as to resale and may not have a readily available market. Securities with an aggregate value of $135,270,392, representing 12.1% of total investments.

 

(d) 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.

 

(e) Step Bond—Coupon is a fixed rate for an initial period then resets at a specific date and rate.

 

(f) In addition to the coupon rate shown, the issuer is expected to pay additional interest based on the actual dividends paid on its common stock.

 

(g) At November 30, 2014, the cost basis of portfolio securities for federal income tax purposes was $1,092,555,585. Gross unrealized appreciation was $77,700,027 gross unrealized depreciation was $55,878,790 and net unrealized appreciation was $21,821,237. Differences between book and tax cost basis were attributable to wash sale loss deferrals and the differing treatment of bond premium amortization.


AllianzGI Convertible & Income Fund

November 30, 2014 (unaudited) (continued)

 

 

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 Fund has the ability to access

• Level 2 – valuations based on other significant observable inputs, which may include, but are not limited to, quoted prices for similar assets or liabilities, interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates or other market corroborated inputs

• Level 3 – valuations based on significant unobservable inputs (including the Sub-Adviser’s or Valuation Committee’s own assumptions and single broker’s quote)

The valuation techniques used by the Fund to measure fair value during the nine months ended November 30, 2014 were intended to maximize the use of observable inputs and to minimize the use of unobservable inputs.

The Fund’s policy is to recognize transfers between levels at the end of the reporting period. An investment asset’s or liability’s level within the fair value hierarchy is based on the lowest level of input, individually or in 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 techniques used. Assets categorized as Level 1 or 2 as of period end may have been transferred between Levels 1 and 2 since the prior period due to changes in the valuation method utilized in valuing the investments.

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 Fund generally uses to evaluate how to classify each major category of assets and liabilities for Level 2 and Level 3, in accordance with U.S. Generally Accepted Accounting Principles.

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 & 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 & 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 & notes are generally comprised of two main categories: investment grade bonds and high yield bond. 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 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 & notes are categorized as Level 2. To the extent that these are unobservable, the values are categorized as Level 3.

 


Schedule of Investments

AllianzGI Convertible & Income Fund

November 30, 2014 (unaudited) (continued)

 

 

A summary of the inputs used at November 30, 2014 in valuing the Fund’s assets and liabilities is listed below (refer to the Schedule of Investments for more detailed information on Investments in Securities):

 

     Level 1—
Quoted Prices
     Level 2—
Other Significant
Observable
Inputs
     Level 3 —
Significant
Unobservable
Inputs
     Value at
11/30/14
 

Investments in Securities—Assets

           

Convertible Preferred Stock:

           

Automobiles

   $       $       $ 14,875,120       $ 14,875,120   

Banks

     30,164,375                 35,426,047         65,590,422   

Energy Equipment & Services

                     16,850,443         16,850,443   

Food Products

                     16,471,389         16,471,389   

Health Care Equipment & Supplies

                     18,769,682         18,769,682   

Health Care Providers & Services

                     20,280,090         20,280,090   

Internet Software & Services

                     16,010,820         16,010,820   

Metals & Mining

     1,365,280         15,668,586                 17,033,866   

Multiline Retail

                     17,957,917         17,957,917   

Oil, Gas & Consumable Fuels

             8,015,347         14,853,909         22,869,256   

Pharmaceuticals

                     40,605,942         40,605,942   

Semiconductors & Semiconductor Equipment

                     37,278,060         37,278,060   

Technology Hardware, Storage & Peripherals

                     20,280,231         20,280,231   

All Other

     153,438,498                         153,438,498   

Corporate Bonds & Notes

             450,471,045                 450,471,045   

Convertible Bonds & Notes

             164,614,287                 164,614,287   

Short-Term Investment

             20,979,754                 20,979,754   
  

 

 

    

 

 

    

 

 

    

 

 

 

Totals

   $ 184,968,153       $ 659,749,019       $ 269,659,650       $ 1,114,376,822   
  

 

 

    

 

 

    

 

 

    

 

 

 

At November 30, 2014, the Fund had no transfers between Levels 1 and 2.


Schedule of Investments

AllianzGI Convertible & Income Fund

November 30, 2014 (unaudited) (continued)

 

 

A roll forward of fair value measurements using significant unobservable inputs (Level 3) for the nine months ended November 30, 2014, was as follows:

 

    Beginning
Balance
2/28/14
    Purchases     Sales     Accrued
Discounts
(Premiums)
    Net
Realized
Gain (Loss)
    Net
Change in
Unrealized
Appreciation/
Depreciation
    Transfers
into
Level 3
    Transfers
out of
Level 3
    Ending
Balance
11/30/14
 

Investments in Securities—Assets

                 

Convertible Preferred Stock:

                 

Automobiles

  $ 13,802,523      $ 4,474,514      $      $      $      $ (3,401,917   $      $      $ 14,875,120   

Banks

    15,935,338        20,061,560                             (570,851                   35,426,047   

Computers & Peripherals

    12,985,586               (13,019,681 )†                    34,095                        

Energy Equipment & Services

    39,698,096               (22,376,924            3,560,974        (4,031,703                   16,850,443   

Food Products

           16,381,771                             89,618                      16,471,389   

Health Care Equipment & Supplies

           17,767,244                             1,002,438                      18,769,682   

Health Care Providers & Services

           18,043,098                             2,236,992                      20,280,090   

Household Durables

    14,324,200               (13,840,543 )†                    (483,657                     

Insurance

    14,641,250               (14,915,891            1,319,888        (1,045,247                     

Internet & Catalog Retail

    14,992,436               (13,224,046            2,121,459        (3,889,849                     

Internet Software & Services

           18,022,212                             (2,011,392                   16,010,820   

Multiline Retail

    17,715,255                                    242,662                      17,957,917   

Oil, Gas & Consumable Fuels

    18,189,826                                    (3,335,917                   14,853,909   

Pharmaceuticals

    17,363,636        16,702,079                             6,540,227                      40,605,942   

Semiconductors & Semiconductor Equipment

           36,882,342                             395,718                      37,278,060   

Technology Hardware, Storage & Peripherals

           16,735,165                             3,545,066                      20,280,231   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Totals

  $ 179,648,146      $ 165,069,985      $ (77,377,085   $      $ 7,002,321      $ (4,683,717   $      $      $ 269,659,650   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The following table presents additional information about valuation techniques and inputs used for investments that are measured at fair value and categorized within Level 3 at November 30, 2014:

 

     Ending Balance
at 11/30/14
     Valuation
Technique Used
     Unobservable
Inputs
     Input Values  

Investments in Securities—Assets

           

Convertible Preferred Stock

   $ 269,659,650         Third-Party Pricing Vendor         Single Broker Quote       $ 16.49-$726.89   

 

Conversion

The net change in unrealized appreciation/depreciation of Level 3 investments held at November 30, 2014 was $2,018,191.

Glossary :

REIT—Real Estate Investment Trust


Item 2. Controls and Procedures

(a) The registrant’s President & Chief Executive Officer and Treasurer, Principal Financial & Accounting Officer have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Act (17 CFR 270.30a-3(c))) are effective based on their evaluation of these controls and procedures as of a date within 90 days of the filing date of this document.

(b) There were no significant changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the Act (17 CFR 270.30a-3(d))) that occurred during the registrant’s last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

Item 3. Exhibits

(a) Exhibit 99.302 Cert.—Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002


SIGNATURES

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: AllianzGI Convertible & Income Fund

By

 

/s/ Julian Sluyters

       Julian Sluyters,
       President & Chief Executive Officer

Date:

  January 26, 2015

 

By

 

/s/ Lawrence G. Altadonna

       Lawrence G. Altadonna
       Treasurer, Principal Financial & Accounting Officer

Date:

  January 26, 2015

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/ Julian Sluyters

       Julian Sluyters,
       President & Chief Executive Officer

Date:

  January 26, 2015

 

By

 

/s/ Lawrence G. Altadonna

       Lawrence G. Altadonna
       Treasurer, Principal Financial & Accounting Officer

Date:

  January 26, 2015