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: 811-21284
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, New York 10019
(Name and address of agent for service)
Registrants telephone number, including area code: 212-739-3371
Date of fiscal year end: February 28
Date of reporting period: August 31, 2017
Item 1. Report to Shareholders
AllianzGI Convertible & Income 2024 Target Term Fund
AllianzGI Convertible & Income Fund
AllianzGI Convertible & Income Fund II
Semi-Annual Report
August 31, 2017
Thomas J. Fuccillo
President & Chief Executive Officer
Dear Shareholder:
The US economy continued to expand during the six-month fiscal reporting period ended August 31, 2017, although the overall pace was fairly modest. Meanwhile, there were indications that economic activity overseas was improving. Against this backdrop, US and international equities generated strong results. Elsewhere, the US bond market posted a relatively modest return during the reporting period.
For the period since its inception on June 30, 2017 through August 31, 2017:
∎ | AllianzGI Convertible & Income 2024 Target Term Fund returned 0.32% on net asset value (NAV) and -0.54% on market price. |
For the six-month reporting period ended August 31, 2017:
∎ | AllianzGI Convertible & Income Fund returned 1.98% on net asset value (NAV) and 7.13% on market price. |
∎ | AllianzGI Convertible & Income Fund II returned 2.29% on net asset value (NAV) and 7.05% on market price. |
During the six-month period ended August 31, 2017, the Standard & Poors (S&P) 500 Index, an unmanaged index generally representative of the US stock market, rose 5.65% and the BofA Merrill Lynch High Yield Master II Index, an unmanaged index generally representative of the high yield bond market, gained 3.08%. Convertible securities, which share characteristics of both stocks and bonds, also generated strong results. The BofA Merrill Lynch All Convertibles-All Qualities Index, an unmanaged index generally representative of the convertible securities market, returned 5.59%. The blended index 40% ML US Conv/45% ML US HY BB - B/15% CS Leveraged Loan, returned 1.57% since the AllianzGI Convertible & Income 2024 Target Term Fund was incepted on June 30, 2017, and returned 3.90% during the full reporting period.
Turning to the US economy, gross domestic product (GDP), the value of goods and services produced in the country, the broadest measure of economic activity and a principal indicator of economic performance, expanded at a 1.8% annualized pace during the fourth quarter of 2016. GDP then moderated to a 1.2% annual pace during the first quarter of 2017. The Commerce Departments final reading showed that GDP released after the reporting period had ended grew at an annual pace of 3.1% for the second quarter of 2017.
The US Federal Reserve (the Fed) raised interest rates on two separate occasions during the reporting period: in March 2017 and June 2017. In both cases, the Feds movements were well telegraphed. With the rate hike in June, the federal funds rate moved to a range between 1.00% and 1.25%. In a statement following the July meeting, the Fed indicated that it planned to begin reducing its balance sheet, saying The Committee expects to begin implementing its balance
2 | Semi-Annual Report | | August 31, 2017 |
our view, actively differentiating between regions and countries will become more important for investors.
Global growth has continued at around 3%, and we expect moderately higher core inflation over the medium term. While the global economic landscape remains solid, we expect it to become rocky over the months ahead, and believe that country-specific risk factors will become more important to asset-allocation strategies.
Central banks in the US, the eurozone and the UK have embarked on a path towards normalization or are, at least, talking about it. Fading bond reinvestments by the Fed, proper tapering by the European Central Bank and an already visible slowdown in Japanese government bond purchases by the Bank of Japan is expected to culminate in a global central bank peak liquidity during the first half of 2018, in our view.
Apart from ambitious valuations in most asset classes, in our view, signs of market complacency have grown. While we remain risk-on for cyclical reasons for the time being, we are fully aware that the risks for a setback have increased. Our message remains: If you take no risk, you will earn no return. In todays markets in particular, that means using active management to identify opportunities for income and capital gain, and to manage the periods of volatility that may arise.
For specific information on the Funds and their performance, please refer to 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, us.allianzgi.com/en-us/advisors/products-solutions/closed-end-funds.
On behalf of Allianz Global Investors U.S. LLC, the Funds investment manager, thank you for investing with us.
We remain dedicated to serving your investment needs.
Sincerely,
Thomas J. Fuccillo |
President & Chief Executive Officer |
August 31, 2017 | | Semi-Annual Report | 3 |
AllianzGI Convertible & Income 2024 Target Term Fund / AllianzGI Convertible & Income Fund /AllianzGI Convertible & Income Fund II
August 31, 2017 (unaudited)
4 | Semi-Annual Report | | August 31, 2017 |
August 31, 2017 | | Semi-Annual Report | 5 |
6 | Semi-Annual Report | | August 31, 2017 |
AllianzGI Convertible & Income 2024 Target Term Fund
August 31, 2017 (unaudited)
Total Return(1): | Market Price | NAV | ||||||
Commencement of Operations (6/30/17) to 8/31/17 |
-0.54% | 0.32% |
See Notes to Performance & Statistics on page 10.
August 31, 2017 | | Semi-Annual Report | 7 |
AllianzGI Convertible & Income Fund
August 31, 2017 (unaudited)
Total Return(1): | Market Price | NAV | ||||||
Six Month |
7.13% | 1.98% | ||||||
1 Year |
18.40% | 11.33% | ||||||
5 Year |
6.94% | 8.01% | ||||||
10 Year |
6.35% | 5.53% | ||||||
Commencement of Operations (3/31/03) to 8/31/17 |
7.65% | 7.69% |
See Notes to Performance & Statistics on page 10.
8 | Semi-Annual Report | | August 31, 2017 |
Performance & Statistics
AllianzGI Convertible & Income Fund II
August 31, 2017 (unaudited)
Total Return(1): | Market Price | NAV | ||||||
Six Month |
7.05% | 2.29% | ||||||
1 Year |
21.37% | 11.63% | ||||||
5 Year |
6.05% | 8.14% | ||||||
10 Year |
5.49% | 4.82% | ||||||
Commencement of Operations (7/31/03) to 8/31/17 |
6.49% | 6.64% |
See Notes to Performance & Statistics on page 10.
August 31, 2017 | | Semi-Annual Report | 9 |
Performance & Statistics
AllianzGI Convertible & Income Funds
August 31, 2017 (unaudited)
Notes to Performance & Statistics:
* Credit ratings apply to the underlying holdings of the Funds and not the Funds themselves and are divided into categories ranging from highest to lowest credit quality, determined for purposes of presentations in this report by using ratings provided by S&P Global Ratings (S&P). Presentations of credit ratings information in this report use ratings provided by S&P for this purpose, among other reasons, because of the access to background information and other materials provided by S&P, as well as the Funds considerations of industry practice. Securities not rated by S&P, or bonds that do not have a rating available from S&P, or bonds that had a rating withdrawn by S&P are designated as NR or NA, respectively. Credit quality ratings assigned by a rating agency are subjective opinions, not statements of fact, and are subject to change periodically, even as frequently as daily. Ratings assigned by S&P or another rating agency are not absolute standards of credit quality and do not evaluate market risk. Rating agencies may fail to make timely changes in credit ratings, and an issuers current financial condition may be better or worse than a rating indicates. In formulating investment decisions for the Funds, Allianz Global Investors U.S. LLC develops its own analysis of the credit quality and risks associated with individual debt instruments, rather than relying exclusively on rating agencies or third-party research.
(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 dividends and 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. Total return for a period of less than one year is not annualized.
Performance at market price will differ from results at NAV. Although market price returns tend to reflect investment results over time, during shorter periods returns at market price can also be influenced by factors such as changing views about the Funds, market conditions, supply and demand for each Funds shares, or changes in each Funds dividends.
An investment in each 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 one time 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 attributable to common shareholders less total liabilities divided by the number of common shares outstanding. Holdings are subject to change daily.
(2) The NAV disclosed in the Funds financial statements may differ from this NAV due to accounting principles generally accepted in the United States of America.
(3) Market Price Yield is determined by dividing the annualized current monthly dividend per common share (comprised of net investment income) by the market price per common share at August 31, 2017.
(4) Represents amounts drawn under the short-term margin loan facility (Leverage) outstanding, as a percentage of total managed assets. Total managed assets refer to total assets (including assets attributable to Leverage) minus liabilities (other than liabilities representing Leverage).
(5) Represents Preferred Shares (Leverage) outstanding, as a percentage of total managed assets. Total managed assets refer to total assets (including assets attributable to Leverage) minus liabilities (other than liabilities representing Leverage).
10 | Semi-Annual Report | | August 31, 2017 |
AllianzGI Convertible & Income 2024 Target Term Fund
August 31, 2017 (unaudited)
Principal Amount (000s) |
Value | |||||||||||
Corporate Bonds & Notes 59.1% | ||||||||||||
Aerospace & Defense 2.6% | ||||||||||||
$1,500 | KLX, Inc., 5.875%, 12/1/22 (a)(c)(e) | $1,578,750 | ||||||||||
1,500 | Kratos Defense & Security Solutions, Inc., 7.00%, 5/15/19 (e) | 1,530,000 | ||||||||||
1,500 | TransDigm, Inc., 6.50%, 7/15/24 (e) | 1,561,875 | ||||||||||
4,670,625 | ||||||||||||
Auto Components 0.9% | ||||||||||||
1,500 | American Axle & Manufacturing, Inc., 6.625%, 10/15/22 (e) | 1,554,375 | ||||||||||
Auto Manufacturers 0.9% | ||||||||||||
1,500 | Navistar International Corp., 8.25%, 11/1/21 (e) | 1,515,000 | ||||||||||
Building Materials 0.9% | ||||||||||||
1,500 | Builders FirstSource, Inc., 5.625%, 9/1/24 (a)(c)(e) | 1,573,125 | ||||||||||
Chemicals 3.5% | ||||||||||||
1,500 | Chemours Co., 6.625%, 5/15/23 (e) | 1,599,375 | ||||||||||
1,500 | Platform Specialty Products Corp., 6.50%, 2/1/22 (a)(c)(e) | 1,563,750 | ||||||||||
1,500 | Tronox Finance LLC, 7.50%, 3/15/22 (a)(c)(e) | 1,578,750 | ||||||||||
1,500 | Univar USA, Inc., 6.75%, 7/15/23 (a)(c)(e) | 1,567,500 | ||||||||||
6,309,375 | ||||||||||||
Computers 1.9% | ||||||||||||
1,500 | Dell International LLC, 7.125%, 6/15/24 (a)(c)(e) | 1,662,346 | ||||||||||
1,500 | Western Digital Corp., 10.50%, 4/1/24 (e) | 1,783,125 | ||||||||||
3,445,471 | ||||||||||||
Diversified Financial Services 3.4% | ||||||||||||
1,500 | Community Choice Financial, Inc., 10.75%, 5/1/19 (e) | 1,275,000 | ||||||||||
1,500 | Nationstar Mortgage LLC, 7.875%, 10/1/20 (e) | 1,535,625 | ||||||||||
1,500 | Navient Corp., 7.25%, 9/25/23 (e) | 1,634,400 | ||||||||||
1,500 | Springleaf Finance Corp., 8.25%, 10/1/23 (e) | 1,706,250 | ||||||||||
6,151,275 | ||||||||||||
Electric Utilities 0.9% | ||||||||||||
1,500 | NRG Energy, Inc., 6.25%, 5/1/24 (e) | 1,560,000 | ||||||||||
Engineering & Construction 0.9% | ||||||||||||
1,500 | AECOM, 5.875%, 10/15/24 (e) | 1,648,125 | ||||||||||
Entertainment 0.9% | ||||||||||||
1,500 | Cedar Fair L.P., 5.375%, 6/1/24 (e) | 1,590,000 | ||||||||||
Healthcare-Products 0.9% | ||||||||||||
1,500 | Hologic, Inc., 5.25%, 7/15/22 (a)(c)(e) | 1,584,825 | ||||||||||
Healthcare-Services 5.3% | ||||||||||||
1,500 | Community Health Systems, Inc., 6.25%, 3/31/23 (e) | 1,516,875 | ||||||||||
1,500 | DaVita, Inc., 5.125%, 7/15/24 (e) | 1,533,750 | ||||||||||
1,500 | Envision Healthcare Corp., 6.25%, 12/1/24 (a)(c)(e) | 1,620,000 | ||||||||||
1,500 | HCA, Inc., 7.50%, 2/15/22 (e) | 1,732,500 | ||||||||||
1,500 | Kindred Healthcare, Inc., 8.75%, 1/15/23 (e) | 1,458,750 | ||||||||||
1,500 | Tenet Healthcare Corp., 8.125%, 4/1/22 (e) | 1,578,750 | ||||||||||
9,440,625 | ||||||||||||
Home Builders 1.5% | ||||||||||||
1,000 | Beazer Homes USA, Inc., 8.75%, 3/15/22 (e) | 1,107,500 | ||||||||||
1,500 | CalAtlantic Group, Inc., 5.875%, 11/15/24 (e) | 1,633,125 | ||||||||||
2,740,625 |
August 31, 2017 | | Semi-Annual Report | 11 |
Schedule of Investments
AllianzGI Convertible & Income 2024 Target Term Fund
August 31, 2017 (unaudited) (continued)
Principal Amount (000s) |
Value | |||||||||||
Internet & Catalog Retail 0.9% | ||||||||||||
$1,500 | Netflix, Inc., 5.875%, 2/15/25 | $1,627,500 | ||||||||||
Iron/Steel 1.8% | ||||||||||||
1,500 | AK Steel Corp., 7.50%, 7/15/23 (e) | 1,631,250 | ||||||||||
1,500 | United States Steel Corp., 8.375%, 7/1/21 (a)(c)(e) | 1,661,250 | ||||||||||
3,292,500 | ||||||||||||
Lodging 0.9% | ||||||||||||
1,500 | Wynn Las Vegas LLC, 5.50%, 3/1/25 (a)(c)(e) | 1,567,500 | ||||||||||
Machinery-Construction & Mining 0.9% | ||||||||||||
1,500 | Terex Corp., 5.625%, 2/1/25 (a)(c)(e) | 1,578,750 | ||||||||||
Media 5.3% | ||||||||||||
1,500 | CCO Holdings LLC, 5.75%, 1/15/24 (e) | 1,577,325 | ||||||||||
1,500 | Clear Channel Worldwide Holdings, Inc., 6.50%, 11/15/22, Ser. B (e) | 1,548,750 | ||||||||||
1,500 | CSC Holdings LLC, 6.75%, 11/15/21 (e) | 1,661,700 | ||||||||||
1,500 | DISH DBS Corp., 5.875%, 7/15/22 (e) | 1,620,937 | ||||||||||
1,500 | McClatchy Co., 9.00%, 12/15/22 (e) | 1,565,625 | ||||||||||
1,500 | Nexstar Broadcasting, Inc., 5.625%, 8/1/24 (a)(c)(e) | 1,556,250 | ||||||||||
9,530,587 | ||||||||||||
Mining 3.1% | ||||||||||||
1,500 | Alcoa Nederland Holding BV, 6.75%, 9/30/24 (a)(c)(e) | 1,653,750 | ||||||||||
2,000 | Hudbay Minerals, Inc., 7.625%, 1/15/25 (a)(c)(e) | 2,215,000 | ||||||||||
1,500 | Joseph T. Ryerson & Son, Inc., 11.00%, 5/15/22 (a)(c)(e) | 1,700,625 | ||||||||||
5,569,375 | ||||||||||||
Miscellaneous Manufacturing 1.3% | ||||||||||||
1,500 | Koppers, Inc., 6.00%, 2/15/25 (a)(c)(e) | 1,593,750 | ||||||||||
750 | Trinseo Materials Operating SCA, 6.75%, 5/1/22 (a)(c)(e) | 800,063 | ||||||||||
2,393,813 | ||||||||||||
Oil, Gas & Consumable Fuels 3.3% | ||||||||||||
1,500 | Calumet Specialty Products Partners L.P., 6.50%, 4/15/21 | 1,447,500 | ||||||||||
1,500 | Carrizo Oil & Gas, Inc., 6.25%, 4/15/23 (e) | 1,462,500 | ||||||||||
1,500 | Continental Resources, Inc., 5.00%, 9/15/22 (e) | 1,513,125 | ||||||||||
1,500 | Oasis Petroleum, Inc., 6.875%, 3/15/22 (e) | 1,470,000 | ||||||||||
5,893,125 | ||||||||||||
Pharmaceuticals 0.8% | ||||||||||||
1,500 | Valeant Pharmaceuticals International, Inc., 7.50%, 7/15/21 (a)(c)(e) | 1,477,500 | ||||||||||
Real Estate 1.9% | ||||||||||||
1,500 | Kennedy-Wilson, Inc., 5.875%, 4/1/24 (e) | 1,546,875 | ||||||||||
1,950 | Uniti Group L.P., 8.25%, 10/15/23 (e) | 1,915,095 | ||||||||||
3,461,970 | ||||||||||||
Retail 0.8% | ||||||||||||
1,500 | Conns, Inc., 7.25%, 7/15/22 (e) | 1,462,500 | ||||||||||
Semiconductors 0.9% | ||||||||||||
1,515 | Advanced Micro Devices, Inc., 7.00%, 7/1/24 | 1,619,156 | ||||||||||
Semiconductors & Semiconductor Equipment 0.8% | ||||||||||||
1,250 | Microsemi Corp., 9.125%, 4/15/23 (a)(c)(e) | 1,434,638 | ||||||||||
Software 2.8% | ||||||||||||
1,500 | Camelot Finance S.A., 7.875%, 10/15/24 (a)(c) | 1,631,250 | ||||||||||
1,500 | First Data Corp., 7.00%, 12/1/23 (a)(c)(e) | 1,620,000 |
12 | Semi-Annual Report | | August 31, 2017 |
Schedule of Investments
AllianzGI Convertible & Income 2024 Target Term Fund
August 31, 2017 (unaudited) (continued)
Principal Amount (000s) |
Value | |||||||||||
Software (continued) | ||||||||||||
$185 | Rackspace Hosting, Inc., 8.625%, 11/15/24 (a)(c) | $196,794 | ||||||||||
1,500 | SS&C Technologies Holdings, Inc., 5.875%, 7/15/23 (e) | 1,582,500 | ||||||||||
5,030,544 | ||||||||||||
Telecommunications 8.2% | ||||||||||||
2,000 | CenturyLink, Inc., 7.50%, 4/1/24, Ser. Y (e) | 2,100,000 | ||||||||||
1,500 | Cincinnati Bell, Inc., 7.00%, 7/15/24 (a)(c)(e) | 1,488,750 | ||||||||||
1,500 | Consolidated Communications, Inc., 6.50%, 10/1/22 (e) | 1,455,937 | ||||||||||
1,500 | Frontier Communications Corp., 10.50%, 9/15/22 (e) | 1,353,750 | ||||||||||
2,000 | GTT Communications, Inc., 7.875%, 12/31/24 (a)(c)(e) | 2,140,000 | ||||||||||
1,500 | Hughes Satellite Systems Corp., 7.625%, 6/15/21 (e) | 1,713,750 | ||||||||||
1,500 | Sprint Corp., 7.125%, 6/15/24 (e) | 1,651,875 | ||||||||||
1,500 | West Corp., 5.375%, 7/15/22 (a)(c)(e) | 1,520,625 | ||||||||||
1,500 | Windstream Services LLC, 7.50%, 6/1/22 (e) | 1,177,500 | ||||||||||
14,602,187 | ||||||||||||
Transportation 0.9% | ||||||||||||
1,500 | XPO Logistics, Inc., 6.50%, 6/15/22 (a)(c)(e) | 1,580,625 | ||||||||||
Total Corporate Bonds & Notes (cost-$106,183,701) | 105,905,716 | |||||||||||
Convertible Bonds & Notes 54.3% | ||||||||||||
Apparel & Textiles 1.8% | ||||||||||||
3,250 | Iconix Brand Group, Inc., 1.50%, 3/15/18 (e) | 3,227,656 | ||||||||||
Auto Components 1.6% | ||||||||||||
2,825 | Horizon Global Corp., 2.75%, 7/1/22 (e) | 2,925,641 | ||||||||||
Auto Manufacturers 1.4% | ||||||||||||
2,500 | Navistar International Corp., 4.75%, 4/15/19 (e) | 2,582,813 | ||||||||||
Biotechnology 4.0% | ||||||||||||
2,500 | Innoviva, Inc., 2.125%, 1/15/23 (e) | 2,415,625 | ||||||||||
3,000 | Intercept Pharmaceuticals, Inc., 3.25%, 7/1/23 (e) | 3,028,125 | ||||||||||
2,000 | PTC Therapeutics, Inc., 3.00%, 8/15/22 (e) | 1,691,250 | ||||||||||
7,135,000 | ||||||||||||
Capital Markets 1.8% | ||||||||||||
3,000 | TPG Specialty Lending, Inc., 4.50%, 8/1/22 (a)(c)(e) | 3,123,750 | ||||||||||
Computers 1.0% | ||||||||||||
2,000 | KeyW Holding Corp., 2.50%, 7/15/19 (e) | 1,847,500 | ||||||||||
Distribution/Wholesale 1.7% | ||||||||||||
3,000 | Titan Machinery, Inc., 3.75%, 5/1/19 (e) | 2,955,000 | ||||||||||
Diversified Financial Services 3.2% | ||||||||||||
3,050 | Encore Capital Group, Inc., 2.875%, 3/15/21 (e) | 2,962,312 | ||||||||||
3,000 | PRA Group, Inc., 3.00%, 8/1/20 (e) | 2,756,250 | ||||||||||
5,718,562 | ||||||||||||
Electrical Equipment 1.3% | ||||||||||||
2,715 | SunPower Corp., 4.00%, 1/15/23 (e) | 2,399,381 | ||||||||||
Energy-Alternate Sources 1.3% | ||||||||||||
2,500 | SolarCity Corp., 1.625%, 11/1/19 (e) | 2,387,500 | ||||||||||
Engineering & Construction 1.2% | ||||||||||||
2,200 | Layne Christensen Co., 4.25%, 11/15/18 (e) | 2,088,625 | ||||||||||
Equity Real Estate Investment Trusts (REITs) 7.1% | ||||||||||||
2,900 | IAS Operating Partnership L.P., 5.00%, 3/15/18 (a)(c)(e) | 2,936,250 | ||||||||||
3,000 | PennyMac Corp., 5.375%, 5/1/20 (e) | 2,992,500 |
August 31, 2017 | | Semi-Annual Report | 13 |
Schedule of Investments
AllianzGI Convertible & Income 2024 Target Term Fund
August 31, 2017 (unaudited) (continued)
Principal Amount (000s) |
Value | |||||||||||
Equity Real Estate Investment Trusts (REITs) (continued) | ||||||||||||
$1,000 | Redwood Trust, Inc., 4.75%, 8/15/23 | $1,004,375 | ||||||||||
2,850 | Starwood Property Trust, Inc., 4.375%, 4/1/23 (e) | 2,901,656 | ||||||||||
2,750 | Two Harbors Investment Corp., 6.25%, 1/15/22 (e) | 2,944,219 | ||||||||||
12,779,000 | ||||||||||||
Health Care/Health Care Distributors 1.5% | ||||||||||||
3,100 | Aceto Corp., 2.00%, 11/1/20 (e) | 2,743,500 | ||||||||||
Insurance 1.4% | ||||||||||||
3,500 | AmTrust Financial Services, Inc., 2.75%, 12/15/44 (e) | 2,585,625 | ||||||||||
Internet 3.9% | ||||||||||||
3,000 | FireEye, Inc., 1.625%, 6/1/35, Ser. B (e) | 2,746,875 | ||||||||||
2,500 | Pandora Media, Inc., 1.75%, 12/1/20 (e) | 2,357,812 | ||||||||||
1,800 | WebMD Health Corp., 2.625%, 6/15/23 (e) | 1,801,125 | ||||||||||
6,905,812 | ||||||||||||
Investment Companies 3.3% | ||||||||||||
2,900 | Goldman Sachs BDC, Inc., 4.50%, 4/1/22 (a)(c)(e) | 2,948,937 | ||||||||||
3,000 | Prospect Capital Corp., 4.95%, 7/15/22 (e) | 2,970,000 | ||||||||||
5,918,937 | ||||||||||||
Oil, Gas & Consumable Fuels 6.2% | ||||||||||||
3,000 | Green Plains, Inc., 4.125%, 9/1/22 | 2,904,375 | ||||||||||
3,000 | Helix Energy Solutions Group, Inc., 4.25%, 5/1/22 (e) | 2,902,500 | ||||||||||
3,425 | Nabors Industries, Inc., 0.75%, 1/15/24 (a)(c)(e) | 2,491,688 | ||||||||||
3,150 | PDC Energy, Inc., 1.125%, 9/15/21 (e) | 2,854,687 | ||||||||||
11,153,250 | ||||||||||||
Pharmaceuticals 4.1% | ||||||||||||
3,750 | Horizon Pharma Investment Ltd., 2.50%, 3/15/22 (e) | 3,421,875 | ||||||||||
3,250 | Impax Laboratories, Inc., 2.00%, 6/15/22 (e) | 2,894,531 | ||||||||||
1,000 | Sucampo Pharmaceuticals, Inc., 3.25%, 12/15/21 (a)(c) | 1,034,375 | ||||||||||
7,350,781 | ||||||||||||
Retail 1.5% | ||||||||||||
3,500 | RH, zero coupon, 7/15/20 (a)(c)(e) | 2,751,875 | ||||||||||
Semiconductors 1.7% | ||||||||||||
3,300 | Veeco Instruments, Inc., 2.70%, 1/15/23 (e) | 3,046,313 | ||||||||||
Telecommunications 1.7% | ||||||||||||
3,100 | Gogo, Inc., 3.75%, 3/1/20 (e) | 2,985,688 | ||||||||||
Transportation 1.6% | ||||||||||||
3,000 | Echo Global Logistics, Inc., 2.50%, 5/1/20 (e) | 2,842,500 | ||||||||||
Total Convertible Bonds & Notes (cost-$97,479,025) | 97,454,709 | |||||||||||
Senior Loans (a)(b) 19.3% | ||||||||||||
Aerospace & Defense 0.5% | ||||||||||||
983 | Engility Corp., 1 mo. LIBOR + 3.250%, 4.489%, 8/12/23, Term Loan B2 | 993,580 | ||||||||||
Airlines 0.6% | ||||||||||||
1,000 | Delta Air Lines, Inc., 1 mo. LIBOR + 2.500%, 3.729%, 10/18/18, 2018 Term Loan B1 | 1,007,969 | ||||||||||
Automobiles 0.6% | ||||||||||||
Winnebago Industries, Inc., 11/8/23, Term Loan B | ||||||||||||
704 | 3 mo. LIBOR + 4.500%, 5.719% | 711,480 | ||||||||||
296 | 3 mo. LIBOR + 4.500%, 5.729% | 299,145 | ||||||||||
1,010,625 |
14 | Semi-Annual Report | | August 31, 2017 |
Schedule of Investments
AllianzGI Convertible & Income 2024 Target Term Fund
August 31, 2017 (unaudited) (continued)
Principal Amount (000s) |
Value | |||||||||||
Building Materials 0.6% | ||||||||||||
$1,000 | GYP Holdings III Corp., 3 mo. LIBOR + 3.000%, 4.311%, 4/1/23, 2017 Term Loan B | $1,004,375 | ||||||||||
Chemicals 1.1% | ||||||||||||
448 | Huntsman International LLC, 1 mo. LIBOR + 3.000%, 4.239%, 4/1/23, Term Loan B2 (d) | 451,059 | ||||||||||
587 | Kraton Polymers LLC, 1 mo. LIBOR + 3.000%, 4.239%, 1/6/22, 2017 USD Term Loan B (d) | 592,273 | ||||||||||
997 | Omnova Solutions, Inc., 1 mo. LIBOR + 4.250%, 5.489%, 8/28/23, 2016 Term Loan B | 1,007,456 | ||||||||||
2,050,788 | ||||||||||||
Commercial Services & Supplies 0.6% | ||||||||||||
1,000 | Advanced Disposal Services, Inc., 1 Week LIBOR + 2.750%, 3.944%, 11/10/23, Term Loan B3 | 1,007,266 | ||||||||||
Construction & Engineering 0.6% | ||||||||||||
1,000 | Summit Materials Companies I LLC, 1 mo. LIBOR + 2.750%, 3.989%, 7/17/22, 2015 Term Loan B | 1,009,167 | ||||||||||
Diversified Consumer Services 0.6% | ||||||||||||
1,000 | Laureate Education, Inc., 1 mo. LIBOR + 4.500%, 5.739%, 4/26/24, 2017 Term Loan B | 1,005,469 | ||||||||||
Electronic Equipment, Instruments & Components 1.1% | ||||||||||||
1,000 | TTM Technologies, Inc., 1 mo. LIBOR + 4.250%, 5.489%, 5/31/21, 1st Lien Term Loan (d) | 1,014,375 | ||||||||||
1,000 | Zebra Technologies Corp., 3 mo. LIBOR + 2.000%, 3.314%, 10/27/21, 2017 Term Loan B | 1,001,569 | ||||||||||
2,015,944 | ||||||||||||
Electronics 0.6% | ||||||||||||
1,000 | Kemet Electronic Corp., 1 mo. LIBOR + 6.000%, 7.239%, 4/26/24, Term Loan B | 1,006,250 | ||||||||||
Food & Staples Retailing 0.6% | ||||||||||||
1,000 | US Foods, Inc., 1 mo. LIBOR + 2.750%, 3.989%, 6/27/23, 2016 Term Loan B | 1,006,250 | ||||||||||
Health Care Providers & Services 1.1% | ||||||||||||
1,000 | Acadia Healthcare Company, Inc., 1 mo. LIBOR + 2.750%, 3.982%, 2/16/23, Term Loan B2 | 1,011,125 | ||||||||||
Select Medical Corp., 3/6/24, 2017 Term Loan B | ||||||||||||
997 | 3 mo. LIBOR + 3.500%, 4.81% | 1,007,999 | ||||||||||
3 | 2 mo. LIBOR + 3.500%, 4.76% | 3,033 | ||||||||||
| * | PRIME + 2.500%, 6.75% | 1 | |||||||||
2,022,158 | ||||||||||||
Healthcare-Products 0.5% | ||||||||||||
973 | Greatbatch Ltd., 1 mo. LIBOR + 3.500%, 4.73%, 10/27/22, 2017 Term Loan B | 976,517 | ||||||||||
Hotels, Restaurants & Leisure 2.2% | ||||||||||||
990 | Boyd Gaming Corp., 1 Week LIBOR + 2.500%, 3.697%, 9/15/23, Term Loan B (d) | 992,960 | ||||||||||
1,000 | Playa Resorts Holding B.V., 3 mo. LIBOR + 3.000%, 4.32%, 4/5/24, 2017 Term Loan B (d) | 1,004,000 | ||||||||||
1,000 | Scientific Games International, Inc., 3 mo. LIBOR + 3.250%, 4.512%, 8/14/24, 2017 Term Loan B4 (d) | 1,009,196 | ||||||||||
997 | Travelport Finance (Luxembourg) Sarl, 3 mo. LIBOR + 2.750%, 4.061%, 9/2/21, New 2017 Term Loan C (d) | 997,382 | ||||||||||
4,003,538 | ||||||||||||
Internet 0.6% | ||||||||||||
1,000 | Everi Payments, Inc., 1 mo. LIBOR + 4.500%, 5.739%, 5/9/24, Term Loan B | 1,010,375 |
August 31, 2017 | | Semi-Annual Report | 15 |
Schedule of Investments
AllianzGI Convertible & Income 2024 Target Term Fund
August 31, 2017 (unaudited) (continued)
Principal Amount (000s) |
Value | |||||||||||
Internet Software & Services 0.8% | ||||||||||||
$500 | Blucora, Inc., 3 mo. LIBOR + 3.750%, 5.037%, 5/22/24, Term Loan | $504,166 | ||||||||||
1,000 | Match Group, Inc., 3 mo. LIBOR + 2.500%, 3.809%, 11/16/22, 2017 Term Loan B (d) | 1,008,750 | ||||||||||
1,512,916 | ||||||||||||
IT Services 1.1% | ||||||||||||
988 | First Data Corp., 1 mo. LIBOR + 2.500%, 3.736%, 4/26/24, 2017 Term Loan | 989,935 | ||||||||||
1,000 | Xerox Business Services LLC, 1 mo. LIBOR + 4.000%, 5.239%, 12/7/23, USD Term Loan B | 1,010,625 | ||||||||||
2,000,560 | ||||||||||||
Machinery 1.1% | ||||||||||||
1,000 | Gardner Denver, Inc., 3 mo. LIBOR + 3.250%, 4.546%, 7/30/24, USD Term Loan B1 | 1,000,938 | ||||||||||
1,000 | Harsco Corp., 1 mo. LIBOR + 5.000%, 6.25%, 11/2/23, Term Loan B | 1,018,125 | ||||||||||
2,019,063 | ||||||||||||
Media 1.1% | ||||||||||||
1,000 | Gray Television, Inc., 1 mo. LIBOR + 2.500%, 3.731%, 2/7/24, 2017 Term Loan B2 (d) | 1,006,250 | ||||||||||
1,000 | Lions Gate Entertainment Corp., 1 mo. LIBOR + 3.000%, 4.239%, 12/8/23, 2016 1st Lien Term Loan B (d) | 1,007,995 | ||||||||||
2,014,245 | ||||||||||||
Personal Products 0.5% | ||||||||||||
985 | Prestige Brands, Inc., 1 mo. LIBOR + 2.750%, 3.989%, 1/26/24, Term Loan B4 (d) | 989,217 | ||||||||||
Pharmaceuticals 1.1% | ||||||||||||
1,000 | HLF Financing Sarl, 1 mo. LIBOR + 5.500%, 6.739%, 2/15/23, Term Loan B | 1,009,583 | ||||||||||
1,000 | Lannett Company, Inc., 1 mo. LIBOR + 5.375%, 6.614%, 11/25/22, Term Loan B | 996,667 | ||||||||||
2,006,250 | ||||||||||||
Road & Rail 0.5% | ||||||||||||
945 | YRC Worldwide, Inc., 3 mo. LIBOR + 8.500%, 9.739%, 2/3/19, 2017 Term Loan (d) | 929,642 | ||||||||||
Semiconductors & Semiconductor Equipment 0.6% | ||||||||||||
1,000 | Cypress Semiconductor Corp., 1 mo. LIBOR + 2.750%, 3.98%, 7/5/21, 2016 Term Loan B (d) | 1,006,750 | ||||||||||
Software 0.6% | ||||||||||||
999 | Go Daddy Operating Co. LLC, 1 mo. LIBOR + 2.500%, 3.734%, 2/15/24, 2017 Term Loan B | 1,003,047 | ||||||||||
Total Senior Loans (cost-$34,660,878) | 34,611,961 | |||||||||||
Repurchase Agreements 11.2% | ||||||||||||
20,014 | State Street Bank and Trust Co., dated 8/31/17, 0.12%, due 9/1/17, proceeds $20,014,067; collateralized by U.S. Treasury Inflation Indexed Notes, 0.625%, due 1/15/26, valued at $20,417,631 including accrued interest (cost-$20,014,000) |
20,014,000 | ||||||||||
Total Investments (cost-$258,337,604) 143.9% | 257,986,386 | |||||||||||
Other liabilities in excess of other assets (43.9)% | (78,688,071 | ) | ||||||||||
Net Assets 100.0% | $179,298,315 |
16 | Semi-Annual Report | | August 31, 2017 |
Schedule of Investments
AllianzGI Convertible & Income 2024 Target Term Fund
August 31, 2017 (unaudited) (continued)
Notes to Schedule of Investments:
* | Less than $500. |
(a) | Private PlacementRestricted as to resale and may not have a readily available market. Securities with an aggregate value of $90,045,002, representing 50.2% of net assets. |
(b) | These securities generally pay interest at rates which are periodically pre-determined by reference to a base lending rate plus a premium. These base lending rates are generally either the lending rate offered by one or more major European banks, such as the LIBOR or the prime rate offered by one or more major United States banks, or the certificate of deposit rate. These securities are generally considered to be restricted as the Fund is ordinarily contractually obligated to receive approval from the Agent bank and/or borrower prior to disposition. Remaining maturities of senior loans may be less than the stated maturities shown as a result of contractual or optional payments by the borrower. Such prepayments cannot be predicted with certainty. The interest rate disclosed reflects the rate in effect on August 31, 2017. |
(c) | 144AExempt 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. Securities with an aggregate value of $55,433,041, representing 30.9% of net assets. |
(d) | When-issued or delayed-delivery. To be settled/delivered after August 31, 2017. |
(e) | All or partial amount segregated for the benefit of the counterparty as collateral for short-term loan financing. |
(f) | Fair Value Measurements-See Note 1(b) in the Notes to Financial Statements. |
Level 1 Quoted Prices |
Level 2 Other Significant Observable Inputs |
Level 3 Significant Unobservable Inputs |
Value at 8/31/17 |
|||||||||||||
Investments in Securities Assets |
||||||||||||||||
Corporate Bonds & Notes |
$ | | $105,905,716 | $ | $105,905,716 | |||||||||||
Convertible Bonds & Notes |
| 97,454,709 | | 97,454,709 | ||||||||||||
Senior Loans |
| 34,611,961 | | 34,611,961 | ||||||||||||
Repurchase Agreements |
| 20,014,000 | | 20,014,000 | ||||||||||||
Totals |
$ | | $257,986,386 | $ | $257,986,386 |
Glossary:
LIBOR | - | London Inter-Bank Offered Rate | ||
REIT | - | Real Estate Investment Trust |
See accompanying Notes to Financial Statements | | August 31, 2017 | | Semi-Annual Report | 17 |
Schedule of Investments
AllianzGI Convertible & Income Fund
August 31, 2017 (unaudited)
Principal Amount (000s) |
Value | |||||||||||
Corporate Bonds & Notes 40.1% | ||||||||||||
Aerospace & Defense 1.7% | ||||||||||||
$6,636 | Kratos Defense & Security Solutions, Inc., 7.00%, 5/15/19 | $6,768,720 | ||||||||||
7,540 | TransDigm, Inc., 6.50%, 5/15/25 | 7,785,050 | ||||||||||
1,420 | Triumph Group, Inc., 7.75%, 8/15/25 (a)(b) | 1,464,730 | ||||||||||
16,018,500 | ||||||||||||
Auto Manufacturers 0.7% | ||||||||||||
6,755 | Navistar International Corp., 8.25%, 11/1/21 | 6,822,550 | ||||||||||
Building Materials 0.7% | ||||||||||||
5,665 | U.S. Concrete, Inc., 6.375%, 6/1/24 | 6,146,525 | ||||||||||
Chemicals 2.8% | ||||||||||||
7,500 | Chemours Co., 6.625%, 5/15/23 | 7,996,875 | ||||||||||
4,790 | Kraton Polymers LLC, 7.00%, 4/15/25 (a)(b) | 5,173,200 | ||||||||||
5,670 | Platform Specialty Products Corp., 6.50%, 2/1/22 (a)(b) | 5,910,975 | ||||||||||
6,720 | Tronox Finance LLC, 7.50%, 3/15/22 (a)(b) | 7,072,800 | ||||||||||
26,153,850 | ||||||||||||
Commercial Services 1.8% | ||||||||||||
8,050 | Cenveo Corp., 6.00%, 5/15/24 (a)(b) | 7,124,250 | ||||||||||
7,375 | Monitronics International, Inc., 9.125%, 4/1/20 | 6,241,094 | ||||||||||
3,500 | United Rentals North America, Inc., 5.50%, 7/15/25 | 3,758,125 | ||||||||||
17,123,469 | ||||||||||||
Computers 1.9% | ||||||||||||
5,203 | DynCorp International, Inc., PIK 1.50%, 11.875%, 11/30/20 | 5,514,888 | ||||||||||
7,350 | Harland Clarke Holdings Corp., 9.25%, 3/1/21 (a)(b) | 7,515,375 | ||||||||||
3,935 | Western Digital Corp., 10.50%, 4/1/24 | 4,677,731 | ||||||||||
17,707,994 | ||||||||||||
Distribution/Wholesale 0.5% | ||||||||||||
H&E Equipment Services, Inc., | ||||||||||||
1,815 | 5.625%, 9/1/25 (a)(b) | 1,878,525 | ||||||||||
2,250 | 7.00%, 9/1/22 | 2,337,188 | ||||||||||
4,215,713 | ||||||||||||
Diversified Financial Services 3.5% | ||||||||||||
Community Choice Financial, Inc., | ||||||||||||
10,085 | 10.75%, 5/1/19 | 8,572,250 | ||||||||||
7,130 | 12.75%, 5/1/20 (a)(b) | 4,991,000 | ||||||||||
Nationstar Mortgage LLC, | ||||||||||||
2,500 | 7.875%, 10/1/20 | 2,559,375 | ||||||||||
5,300 | 9.625%, 5/1/19 | 5,480,200 | ||||||||||
Navient Corp., | ||||||||||||
1,575 | 7.25%, 9/25/23 | 1,716,120 | ||||||||||
3,210 | 8.45%, 6/15/18 | 3,374,513 | ||||||||||
4,935 | Springleaf Finance Corp., 8.25%, 10/1/23 | 5,613,562 | ||||||||||
32,307,020 | ||||||||||||
Electric Utilities 0.6% | ||||||||||||
5,585 | NRG Energy, Inc., 6.25%, 5/1/24 | 5,808,400 | ||||||||||
Engineering & Construction 0.6% | ||||||||||||
5,100 | Tutor Perini Corp., 6.875%, 5/1/25 (a)(b) | 5,482,500 |
18 | Semi-Annual Report | | August 31, 2017 |
Schedule of Investments
AllianzGI Convertible & Income Fund
August 31, 2017 (unaudited) (continued)
Principal Amount (000s) |
Value | |||||||||||
Entertainment 0.5% | ||||||||||||
$4,000 | Cedar Fair L.P., 5.375%, 6/1/24 | $4,240,000 | ||||||||||
Healthcare-Services 3.0% | ||||||||||||
2,835 | Community Health Systems, Inc., 6.25%, 3/31/23 | 2,866,894 | ||||||||||
5,430 | DaVita, Inc., 5.125%, 7/15/24 | 5,552,175 | ||||||||||
3,860 | Envision Healthcare Corp., 6.25%, 12/1/24 (a)(b) | 4,168,800 | ||||||||||
3,800 | HCA, Inc., 7.50%, 2/15/22 | 4,389,000 | ||||||||||
7,955 | Kindred Healthcare, Inc., 8.75%, 1/15/23 | 7,736,237 | ||||||||||
3,500 | Tenet Healthcare Corp., 7.00%, 8/1/25 (a)(b) | 3,443,685 | ||||||||||
28,156,791 | ||||||||||||
Home Builders 0.5% | ||||||||||||
4,395 | Beazer Homes USA, Inc., 8.75%, 3/15/22 | 4,867,463 | ||||||||||
Internet & Catalog Retail 0.3% | ||||||||||||
2,800 | Netflix, Inc., 5.875%, 2/15/25 | 3,038,000 | ||||||||||
Iron/Steel 1.7% | ||||||||||||
AK Steel Corp., | ||||||||||||
1,315 | 7.50%, 7/15/23 | 1,430,063 | ||||||||||
7,305 | 8.375%, 4/1/22 | 7,609,984 | ||||||||||
5,975 | United States Steel Corp., 8.375%, 7/1/21 (a)(b) | 6,617,312 | ||||||||||
15,657,359 | ||||||||||||
Machinery-Construction & Mining 0.5% | ||||||||||||
4,245 | Terex Corp., 5.625%, 2/1/25 (a)(b) | 4,467,863 | ||||||||||
Media 2.2% | ||||||||||||
7,370 | Cablevision Systems Corp., 8.00%, 4/15/20 | 8,171,487 | ||||||||||
3,740 | Gray Television, Inc., 5.875%, 7/15/26 (a)(b) | 3,861,550 | ||||||||||
4,671 | LiveStyle, Inc., 9.625%, 2/1/19 (acquisition cost-$4,879,905; purchased 5/7/14-2/26/15) (a)(b)(c)(h) |
29,194 | ||||||||||
8,355 | McClatchy Co., 9.00%, 12/15/22 | 8,720,531 | ||||||||||
20,782,762 | ||||||||||||
Metal Fabricate/Hardware 0.4% | ||||||||||||
3,830 | Park-Ohio Industries, Inc., 6.625%, 4/15/27 | 4,066,981 | ||||||||||
Mining 1.1% | ||||||||||||
5,100 | Alcoa Nederland Holding BV, 7.00%, 9/30/26 (a)(b) | 5,724,750 | ||||||||||
3,950 | Joseph T. Ryerson & Son, Inc., 11.00%, 5/15/22 (a)(b) | 4,478,312 | ||||||||||
10,203,062 | ||||||||||||
Oil, Gas & Consumable Fuels 4.4% | ||||||||||||
2,700 | Calumet Specialty Products Partners L.P., 6.50%, 4/15/21 | 2,605,500 | ||||||||||
1,900 | Carrizo Oil & Gas, Inc., 6.25%, 4/15/23 | 1,852,500 | ||||||||||
16,950 | Cobalt International Energy, Inc., 10.75%, 12/1/21 (a)(b) | 16,017,750 | ||||||||||
7,225 | EP Energy LLC, 9.375%, 5/1/20 | 5,355,531 | ||||||||||
2,835 | NGL Energy Partners L.P., 7.50%, 11/1/23 | 2,742,863 | ||||||||||
4,895 | Oasis Petroleum, Inc., 6.875%, 3/15/22 | 4,797,100 | ||||||||||
3,500 | Rice Energy, Inc., 6.25%, 5/1/22 | 3,644,375 | ||||||||||
4,530 | Sanchez Energy Corp., 6.125%, 1/15/23 | 3,476,775 | ||||||||||
820 | Weatherford International Ltd., 8.25%, 6/15/23 | 805,650 | ||||||||||
41,298,044 | ||||||||||||
Pharmaceuticals 1.2% | ||||||||||||
2,290 | Endo Finance LLC, 5.375%, 1/15/23 (a)(b) | 1,929,325 | ||||||||||
5,865 | Horizon Pharma, Inc., 6.625%, 5/1/23 | 5,718,375 | ||||||||||
4,000 | Valeant Pharmaceuticals International, Inc., 7.50%, 7/15/21 (a)(b) | 3,940,000 | ||||||||||
11,587,700 |
August 31, 2017 | | Semi-Annual Report | 19 |
Schedule of Investments
AllianzGI Convertible & Income Fund
August 31, 2017 (unaudited) (continued)
Principal Amount (000s) |
Value | |||||||||||
Pipelines 0.4% | ||||||||||||
$3,550 | Energy Transfer Equity L.P., 5.50%, 6/1/27 | $3,798,500 | ||||||||||
Real Estate 0.9% | ||||||||||||
3,085 | Kennedy-Wilson, Inc., 5.875%, 4/1/24 | 3,181,406 | ||||||||||
5,365 | Uniti Group L.P., 8.25%, 10/15/23 | 5,268,967 | ||||||||||
8,450,373 | ||||||||||||
Retail 1.6% | ||||||||||||
3,500 | Claires Stores, Inc., 9.00%, 3/15/19 (a)(b) | 1,837,500 | ||||||||||
5,500 | Conns, Inc., 7.25%, 7/15/22 | 5,362,500 | ||||||||||
2,835 | Dollar Tree, Inc., 5.75%, 3/1/23 | 3,005,100 | ||||||||||
9,465 | Neiman Marcus Group Ltd. LLC, 8.00%, 10/15/21 (a)(b) | 4,898,137 | ||||||||||
15,103,237 | ||||||||||||
Semiconductors 0.5% | ||||||||||||
4,645 | Amkor Technology, Inc., 6.375%, 10/1/22 | 4,813,381 | ||||||||||
Software 0.7% | ||||||||||||
5,035 | Camelot Finance S.A., 7.875%, 10/15/24 (a)(b) | 5,475,562 | ||||||||||
645 | Rackspace Hosting, Inc., 8.625%, 11/15/24 (a)(b) | 686,119 | ||||||||||
6,161,681 | ||||||||||||
Telecommunications 4.9% | ||||||||||||
3,500 | Cincinnati Bell, Inc., 7.00%, 7/15/24 (a)(b) | 3,473,750 | ||||||||||
9,370 | Consolidated Communications, Inc., 6.50%, 10/1/22 | 9,094,756 | ||||||||||
5,290 | Frontier Communications Corp., 10.50%, 9/15/22 | 4,774,225 | ||||||||||
2,685 | GTT Communications, Inc., 7.875%, 12/31/24 (a)(b) | 2,872,950 | ||||||||||
4,250 | Hughes Satellite Systems Corp., 7.625%, 6/15/21 | 4,855,625 | ||||||||||
7,205 | Sprint Communications, Inc., 11.50%, 11/15/21 | 9,168,362 | ||||||||||
5,585 | West Corp., 5.375%, 7/15/22 (a)(b) | 5,661,794 | ||||||||||
7,655 | Windstream Services LLC, 7.50%, 4/1/23 | 5,951,763 | ||||||||||
45,853,225 | ||||||||||||
Transportation 0.5% | ||||||||||||
4,830 | XPO Logistics, Inc., 6.50%, 6/15/22 (a)(b) | 5,089,612 | ||||||||||
Total Corporate Bonds & Notes (cost-$387,826,828) | 375,422,555 | |||||||||||
Convertible Bonds & Notes 30.5% | ||||||||||||
Apparel & Textiles 1.6% | ||||||||||||
15,150 | Iconix Brand Group, Inc., 1.50%, 3/15/18 | 15,045,844 | ||||||||||
Auto Components 2.1% | ||||||||||||
6,155 | Horizon Global Corp., 2.75%, 7/1/22 | 6,374,272 | ||||||||||
6,975 | Meritor, Inc., 7.875%, 3/1/26 | 13,213,266 | ||||||||||
19,587,538 | ||||||||||||
Auto Manufacturers 1.0% | ||||||||||||
6,225 | Navistar International Corp., 4.75%, 4/15/19 | 6,431,203 | ||||||||||
2,850 | Tesla, Inc., 1.25%, 3/1/21 | 3,295,313 | ||||||||||
9,726,516 | ||||||||||||
Building Materials 0.5% | ||||||||||||
4,275 | Cemex S.A.B de C.V., 3.72%, 3/15/20 | 4,884,188 | ||||||||||
Commercial Services 1.5% | ||||||||||||
13,510 | Ascent Capital Group, Inc., 4.00%, 7/15/20 | 10,672,900 | ||||||||||
3,705 | ServiceSource International, Inc., 1.50%, 8/1/18 | 3,637,847 | ||||||||||
14,310,747 |
20 | Semi-Annual Report | | August 31, 2017 |
Schedule of Investments
AllianzGI Convertible & Income Fund
August 31, 2017 (unaudited) (continued)
Principal Amount (000s) |
Value | |||||||||||
Distribution/Wholesale 0.7% | ||||||||||||
$6,600 | Titan Machinery, Inc., 3.75%, 5/1/19 | $6,501,000 | ||||||||||
Diversified Financial Services 2.3% | ||||||||||||
9,320 | Encore Capital Group, Inc., 3.00%, 7/1/20 | 10,170,450 | ||||||||||
12,165 | PRA Group, Inc., 3.00%, 8/1/20 | 11,176,594 | ||||||||||
21,347,044 | ||||||||||||
Electric Utilities 1.0% | ||||||||||||
9,230 | NRG Yield, Inc., 3.25%, 6/1/20 (a)(b) | 9,258,844 | ||||||||||
Electrical Equipment 1.2% | ||||||||||||
SunPower Corp., | ||||||||||||
3,135 | 0.875%, 6/1/21 | 2,556,984 | ||||||||||
9,405 | 4.00%, 1/15/23 | 8,311,669 | ||||||||||
10,868,653 | ||||||||||||
Energy-Alternate Sources 1.7% | ||||||||||||
16,800 | SolarCity Corp., 1.625%, 11/1/19 | 16,044,000 | ||||||||||
Engineering & Construction 0.3% | ||||||||||||
3,230 | Layne Christensen Co., 4.25%, 11/15/18 | 3,066,481 | ||||||||||
Equity Real Estate Investment Trusts (REITs) 0.6% | ||||||||||||
5,400 | Two Harbors Investment Corp., 6.25%, 1/15/22 | 5,781,375 | ||||||||||
Health Care/Health Care Distributors 1.1% | ||||||||||||
11,415 | Aceto Corp., 2.00%, 11/1/20 | 10,102,275 | ||||||||||
Insurance 1.0% | ||||||||||||
12,780 | AmTrust Financial Services, Inc., 2.75%, 12/15/44 | 9,441,225 | ||||||||||
Iron/Steel 0.1% | ||||||||||||
910 | AK Steel Corp., 5.00%, 11/15/19 | 1,231,344 | ||||||||||
Oil, Gas & Consumable Fuels 2.9% | ||||||||||||
18,235 | Helix Energy Solutions Group, Inc., 3.25%, 3/15/32 | 18,383,159 | ||||||||||
9,980 | Whiting Petroleum Corp., 1.25%, 4/1/20 | 8,520,425 | ||||||||||
26,903,584 | ||||||||||||
Pharmaceuticals 2.8% | ||||||||||||
16,145 | Herbalife Ltd., 2.00%, 8/15/19 | 16,286,349 | ||||||||||
3,260 | Horizon Pharma Investment Ltd., 2.50%, 3/15/22 | 2,974,750 | ||||||||||
7,800 | Impax Laboratories, Inc., 2.00%, 6/15/22 | 6,946,875 | ||||||||||
26,207,974 | ||||||||||||
Pipelines 1.0% | ||||||||||||
13,370 | Cheniere Energy, Inc., 4.25%, 3/15/45 | 9,250,369 | ||||||||||
Retail 1.3% | ||||||||||||
RH (a)(b), | ||||||||||||
10,425 | zero coupon, 6/15/19 | 8,880,797 | ||||||||||
3,990 | zero coupon, 7/15/20 | 3,137,137 | ||||||||||
12,017,934 | ||||||||||||
Semiconductors 0.9% | ||||||||||||
2,850 | Cypress Semiconductor Corp., 4.50%, 1/15/22 | 3,525,094 | ||||||||||
4,570 | Micron Technology, Inc., 3.00%, 11/15/43, Ser. G | 5,378,318 | ||||||||||
8,903,412 | ||||||||||||
Software 1.3% | ||||||||||||
15,785 | Avid Technology, Inc., 2.00%, 6/15/20 | 11,582,244 | ||||||||||
570 | PROS Holdings, Inc., 2.00%, 12/1/19 | 597,431 | ||||||||||
12,179,675 |
August 31, 2017 | | Semi-Annual Report | 21 |
Schedule of Investments
AllianzGI Convertible & Income Fund
August 31, 2017 (unaudited) (continued)
Principal Amount (000s) |
Value | |||||||||||
Telecommunications 1.1% | ||||||||||||
$11,065 | Gogo, Inc., 3.75%, 3/1/20 | $10,656,978 | ||||||||||
Tobacco 1.7% | ||||||||||||
Vector Group Ltd. (g), | ||||||||||||
5,665 | 3 mo. Cash Dividends on Common Stock + 1.75%, 1.75%, 4/15/20 | 6,486,425 | ||||||||||
6,215 | 3 mo. Cash Dividends on Common Stock + 2.50%, 2.50%, 1/15/19 | 9,058,362 | ||||||||||
15,544,787 | ||||||||||||
Transportation 0.8% | ||||||||||||
3,990 | Aegean Marine Petroleum Network, Inc., 4.25%, 12/15/21 (a)(b) | 3,019,931 | ||||||||||
4,560 | Echo Global Logistics, Inc., 2.50%, 5/1/20 | 4,320,600 | ||||||||||
7,340,531 | ||||||||||||
Total Convertible Bonds & Notes (cost-$260,285,341) | 286,202,318 | |||||||||||
Shares | ||||||||||||
Convertible Preferred Stock 25.6% | ||||||||||||
Aerospace & Defense 0.3% | ||||||||||||
78,975 | Arconic, Inc., 5.375%, 10/1/17 | 3,202,436 | ||||||||||
Agriculture 0.9% | ||||||||||||
82,645 | Bunge Ltd., 4.875% (e) | 8,765,535 | ||||||||||
Banks 4.6% | ||||||||||||
12,080 | Bank of America Corp., 7.25%, Ser. L (e) | 15,921,440 | ||||||||||
9,695 | Huntington Bancshares, Inc., 8.50%, Ser. A (e) | 13,946,258 | ||||||||||
9,880 | Wells Fargo & Co., 7.50%, Ser. L (e) | 13,150,280 | ||||||||||
43,017,978 | ||||||||||||
Chemicals 0.8% | ||||||||||||
68,495 | Rayonier Advanced Materials, Inc., 8.00%, 8/15/19, Ser. A | 7,150,878 | ||||||||||
Commercial Services & Supplies 0.9% | ||||||||||||
145,890 | Stericycle, Inc., 5.25%, 9/15/18 | 8,671,702 | ||||||||||
Computers 0.3% | ||||||||||||
2,045 | NCR Corp., PIK 5.50%, 5.50%, Ser. A (e) | 2,932,660 | ||||||||||
Diversified Financial Services 0.5% | ||||||||||||
5,700 | Cowen, Inc., 5.625%, Ser. A (e) | 4,921,152 | ||||||||||
Diversified Telecommunication Services 0.4% | ||||||||||||
155,900 | Frontier Communications Corp., 11.125%, 6/29/18, Ser. A | 3,648,060 | ||||||||||
Electric Utilities 2.1% | ||||||||||||
302,350 | Dominion Energy, Inc., 6.75%, 8/15/19, Ser. A | 15,465,203 | ||||||||||
66,215 | NextEra Energy, Inc., 6.123%, 9/1/19 | 3,681,554 | ||||||||||
19,146,757 | ||||||||||||
Equity Real Estate Investment Trusts (REITs) 4.6% | ||||||||||||
4,940 | Crown Castle International Corp., 6.875%, 8/1/20, Ser. A | 5,538,555 | ||||||||||
631,070 | FelCor Lodging Trust, Inc., 1.95%, Ser. A (e) | 17,669,960 | ||||||||||
410,065 | Sutherland Asset Management Corp., 7.00%, 8/15/23 | 10,427,953 | ||||||||||
141,135 | Welltower, Inc., 6.50%, Ser. I (e) | 9,336,080 | ||||||||||
42,972,548 | ||||||||||||
Hand/Machine Tools 1.7% | ||||||||||||
139,055 | Stanley Black & Decker, Inc., 5.375%, 5/15/20 | 15,390,607 | ||||||||||
Health Care Providers & Services 2.2% | ||||||||||||
386,815 | Anthem, Inc., 5.25%, 5/1/18 | 20,300,051 |
22 | Semi-Annual Report | | August 31, 2017 |
Schedule of Investments
AllianzGI Convertible & Income Fund
August 31, 2017 (unaudited) (continued)
Shares | Value | |||||||||||
Healthcare-Products 1.2% | ||||||||||||
199,155 | Becton Dickinson and Co., 6.125%, 5/1/20, Ser. A | $11,102,891 | ||||||||||
Independent Power Producers & Energy Traders 0.5% | ||||||||||||
156,435 | Dynegy, Inc., 5.375%, 11/1/17, Ser. A | 4,932,396 | ||||||||||
Investment Companies 1.3% | ||||||||||||
60,080 | Mandatory Exchangeable Trust, 5.75%, 6/3/19 (a)(b) | 11,733,924 | ||||||||||
Oil, Gas & Consumable Fuels 2.3% | ||||||||||||
159,375 | Anadarko Petroleum Corp., 7.50%, 6/7/18 | 5,896,875 | ||||||||||
173,410 | Kinder Morgan, Inc., 9.75%, 10/26/18, Ser. A | 7,312,700 | ||||||||||
230,425 | Sanchez Energy Corp., 6.50%, Ser. B (e) | 4,113,086 | ||||||||||
12,485 | Southwestern Energy Co., 6.25%, 1/15/18, Ser. B | 165,177 | ||||||||||
92,860 | WPX Energy, Inc., 6.25%, 7/31/18, Ser. A | 4,433,136 | ||||||||||
21,920,974 | ||||||||||||
Pharmaceuticals 1.0% | ||||||||||||
4,275 | Allergan PLC, 5.50%, 3/1/18, Ser. A | 3,502,251 | ||||||||||
19,505 | Teva Pharmaceutical Industries Ltd., 7.00%, 12/15/18 | 6,211,367 | ||||||||||
9,713,618 | ||||||||||||
Total Convertible Preferred Stock (cost-$245,017,746) | 239,524,167 | |||||||||||
Preferred Stock (a)(d)(f)(i) 0.9% | ||||||||||||
Media 0.9% | ||||||||||||
8,339 | LiveStyle, Inc., Ser. A | 833,900 | ||||||||||
76,572 | LiveStyle, Inc., Ser. B | 7,657,200 | ||||||||||
6,750 | LiveStyle, Inc., Ser. B | 67 | ||||||||||
Total Preferred Stock (cost-$15,074,564) | 8,491,167 | |||||||||||
Common Stock (a)(d)(f)(i) 0.2% | ||||||||||||
Advertising 0.2% | ||||||||||||
173,720 | Affinion Group Holdings, Inc., Class A | |||||||||||
(acquisition cost-$3,080,312; purchased 11/9/15-11/12/15) (h) | 2,074,217 | |||||||||||
Aerospace & Defense 0.0% | ||||||||||||
8,295 | Erickson, Inc. | 231,679 | ||||||||||
Media 0.0% | ||||||||||||
90,407 | LiveStyle, Inc. | 9 | ||||||||||
Total Common Stock (cost-$10,187,309) | 2,305,905 | |||||||||||
Units | ||||||||||||
Warrants (a)(d)(f)(i) 0.1% | ||||||||||||
Commercial Services 0.1% | ||||||||||||
2,062,338 | Cenveo Corp., strike price $12.00, expires 6/10/24 | 442,760 | ||||||||||
Media 0.0% | ||||||||||||
19,500 | LiveStyle, Inc., expires 11/30/21, Ser. C. | 2 | ||||||||||
Total Warrants (cost-$246,984) | 442,762 | |||||||||||
Principal Amount (000s) |
||||||||||||
Repurchase Agreements 2.6% | ||||||||||||
$24,782 | State Street Bank and Trust Co., dated 8/31/17, 0.12%, due 9/1/17, proceeds $24,782,083; collateralized by U.S. Treasury Inflation Indexed Notes, 0.625%, due 1/15/26, valued at $25,278,721 including accrued interest (cost-$24,782,000) |
24,782,000 | ||||||||||
Total Investments (cost-$943,420,772)-100.0% | $937,170,874 |
August 31, 2017 | | Semi-Annual Report | 23 |
Schedule of Investments
AllianzGI Convertible & Income Fund
August 31, 2017 (unaudited) (continued)
Notes to Schedule of Investments:
(a) | Private PlacementRestricted as to resale and may not have a readily available market. Securities with an aggregate value of $178,557,787, representing 19.1% of total investments. |
(b) | 144AExempt 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. Securities with an aggregate value of $167,317,953, representing 17.9% of total investments. |
(c) | In default. |
(d) | Fair-ValuedSecurities with an aggregate value of $11,239,834, representing 1.2% of total investments. See Note 1(a) and Note 1(b) in the Notes to Financial Statements. |
(e) | Perpetual maturity. The date shown, if any, is the next call date. |
(f) | Level 3 security. See Note 1(b) in the Notes to Financial Statements. |
(g) | 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. |
(h) | Restricted. The aggregate acquisition cost of such securities is $7,960,217. The aggregate value is $2,103,411 representing 0.2% of total investments. |
(i) | Non-income producing. |
(j) | Fair Value Measurements-See Note 1(b) in the Notes to Financial Statements. |
Level 1 Quoted Prices |
Level 2 Other Significant Observable Inputs |
Level 3 Significant Unobservable Inputs |
Value at 8/31/17 |
|||||||||||||
Investments in Securities Assets |
| |||||||||||||||
Corporate Bonds & Notes |
$ | | $375,422,555 | $ | | $375,422,555 | ||||||||||
Convertible Bonds & Notes |
| 286,202,318 | | 286,202,318 | ||||||||||||
Convertible Preferred Stock: |
| |||||||||||||||
Agriculture |
| 8,765,535 | | 8,765,535 | ||||||||||||
Computers |
| 2,932,660 | | 2,932,660 | ||||||||||||
Diversified Financial Services |
| 4,921,152 | | 4,921,152 | ||||||||||||
Healthcare-Products |
| 11,102,891 | | 11,102,891 | ||||||||||||
Investment Companies |
| 11,733,924 | | 11,733,924 | ||||||||||||
Oil, Gas & Consumable Fuels |
17,807,888 | 4,113,086 | | 21,920,974 | ||||||||||||
Pharmaceuticals |
3,502,251 | 6,211,367 | | 9,713,618 | ||||||||||||
All Other |
168,433,413 | | | 168,433,413 | ||||||||||||
Preferred Stock |
| | 8,491,167 | 8,491,167 | ||||||||||||
Common Stock |
| | 2,305,905 | 2,305,905 | ||||||||||||
Warrants |
| | 442,762 | 442,762 | ||||||||||||
Repurchase Agreements |
| 24,782,000 | | 24,782,000 | ||||||||||||
Totals |
$ | 189,743,552 | $736,187,488 | $ | 11,239,834 | $937,170,874 |
At August 31, 2017, a security valued at $7,150,878 was transferred from Level 2 to Level 1. The transfer was a result of the security having used an evaluated price from a third-party independent pricing vendor at February 28, 2017, and used an exchange-traded closing price on August 31, 2017.
24 | Semi-Annual Report | | August 31, 2017 |
Schedule of Investments
AllianzGI Convertible & Income Fund
August 31, 2017 (unaudited) (continued)
A roll forward of fair value measurements using significant unobservable inputs (Level 3) for the six months ended August 31, 2017, was as follows:
Beginning Balance 2/28/17 |
Purchases | Sales | Accrued Discount (Premiums) |
Net Realized Gain (Loss) |
||||||||||||||||
Investments in Securities Assets |
||||||||||||||||||||
Corporate Bonds & Notes: |
||||||||||||||||||||
Commercial Services |
$7,224,875 | $ | | $ | $(86,351 | ) | $ | |||||||||||||
Preferred Stock |
7,759,048 | | | | | |||||||||||||||
Common Stock: |
||||||||||||||||||||
Advertising |
2,581,479 | | | | | |||||||||||||||
Aerospace & Defense |
| 7,106,997 | | | | | ||||||||||||||
Media |
9 | | | | | |||||||||||||||
Warrants: |
||||||||||||||||||||
Commercial Services |
449,705 | | | | | |||||||||||||||
Media |
2 | | | | | |||||||||||||||
Totals |
$18,015,118 | $7,106,997 | $ | $(86,351 | ) | $ |
Net Change in Unrealized Appreciation/ Depreciation |
Transfers into Level 3 |
Transfers out of Level 3* |
Ending Balance 8/31/17 |
|||||||||||||
Investments in Securities Assets |
||||||||||||||||
Corporate Bonds & Notes: |
||||||||||||||||
Commercial Services |
$(14,274 | ) | $ | | $(7,124,250 | ) | $ | | ||||||||
Preferred Stock |
732,119 | | | 8,491,167 | ||||||||||||
Common Stock: |
||||||||||||||||
Advertising |
(507,262 | ) | | | 2,074,217 | |||||||||||
Aerospace & Defense |
(6,875,318 | ) | | | 231,679 | |||||||||||
Media |
| | | 9 | ||||||||||||
Warrants: |
||||||||||||||||
Commercial Services |
(6,945 | ) | | | 442,760 | |||||||||||
Media |
| | | 2 | ||||||||||||
Totals |
$ | (6,671,680 | ) | $ | | $(7,124,250 | ) | $ | 11,239,834 |
| Issued via reorganization |
* | Transferred out of Level 3 into Level 2 because an evaluated price from a third-party independent pricing vendor was used on August 31, 2017. |
August 31, 2017 | | Semi-Annual Report | 25 |
Schedule of Investments
AllianzGI Convertible & Income Fund
August 31, 2017 (unaudited) (continued)
The following tables present additional information about valuation techniques and inputs used for investments that are measured at fair value and categorized within Level 3 at August 31, 2017:
Ending Balance at 8/31/17 |
Valuation Technique Used |
Unobservable Inputs |
Input Values | |||||||||||||
Investments in Securities Assets |
|
|||||||||||||||
Preferred Stock |
$8,491,100 | Model Price | |
Proprietary Data Used in Model |
|
$100 | ||||||||||
$67 | Liquidation Value | Price of Stock | $0.01* | |||||||||||||
Common Stock |
$2,305,905 | Model Price | |
Proprietary Data Used in Model |
|
$0.01 $27.93 | ||||||||||
Warrants |
$442,760 | |
Fundamental Analytical Data Relating to the Investment |
|
Price of Warrant | $0.214690 | ||||||||||
$2 | Model Price | |
Proprietary Data Used in Model |
|
$0.0001 |
* | Preferred stock trades are in lots of 1,000. |
The net change in unrealized appreciation/depreciation of Level 3 investments held at August 31, 2017, was $(6,657,406). Net change in unrealized appreciation/depreciation is reflected on the Statements of Operations.
Glossary:
PIK | - | Payment-in-Kind | ||
REIT | - | Real Estate Investment Trust |
26 | Semi-Annual Report | | August 31, 2017 | | See accompanying Notes to Financial Statements |
Schedule of Investments
AllianzGI Convertible & Income Fund II
August 31, 2017 (unaudited)
Principal Amount (000s) |
Value | |||||||||||
Corporate Bonds & Notes 40.4% | ||||||||||||
Aerospace & Defense 1.7% | ||||||||||||
$5,071 | Kratos Defense & Security Solutions, Inc., 7.00%, 5/15/19 | $5,172,420 | ||||||||||
5,750 | TransDigm, Inc., 6.50%, 5/15/25 | 5,936,875 | ||||||||||
1,080 | Triumph Group, Inc., 7.75%, 8/15/25 (a)(b) | 1,114,020 | ||||||||||
12,223,315 | ||||||||||||
Auto Manufacturers 0.8% | ||||||||||||
5,495 | Navistar International Corp., 8.25%, 11/1/21 | 5,549,950 | ||||||||||
Building Materials 0.7% | ||||||||||||
4,335 | U.S. Concrete, Inc., 6.375%, 6/1/24 | 4,703,475 | ||||||||||
Chemicals 2.8% | ||||||||||||
5,500 | Chemours Co., 6.625%, 5/15/23 | 5,864,375 | ||||||||||
3,640 | Kraton Polymers LLC, 7.00%, 4/15/25 (a)(b) | 3,931,200 | ||||||||||
4,330 | Platform Specialty Products Corp., 6.50%, 2/1/22 (a)(b) | 4,514,025 | ||||||||||
5,120 | Tronox Finance LLC, 7.50%, 3/15/22 (a)(b) | 5,388,800 | ||||||||||
19,698,400 | ||||||||||||
Commercial Services 1.8% | ||||||||||||
5,974 | Cenveo Corp., 6.00%, 5/15/24 (a)(b) | 5,286,990 | ||||||||||
5,925 | Monitronics International, Inc., 9.125%, 4/1/20 | 5,014,031 | ||||||||||
2,500 | United Rentals North America, Inc., 5.50%, 7/15/25 | 2,684,375 | ||||||||||
12,985,396 | ||||||||||||
Computers 1.9% | ||||||||||||
3,917 | DynCorp International, Inc., PIK 1.50%, 11.875%, 11/30/20 | 4,151,874 | ||||||||||
5,650 | Harland Clarke Holdings Corp., 9.25%, 3/1/21 (a)(b) | 5,777,125 | ||||||||||
3,155 | Western Digital Corp., 10.50%, 4/1/24 | 3,750,506 | ||||||||||
13,679,505 | ||||||||||||
Distribution/Wholesale 0.5% | ||||||||||||
H&E Equipment Services, Inc., | ||||||||||||
1,395 | 5.625%, 9/1/25 (a)(b) | 1,443,825 | ||||||||||
1,750 | 7.00%, 9/1/22 | 1,817,813 | ||||||||||
3,261,638 | ||||||||||||
Diversified Financial Services 3.5% | ||||||||||||
Community Choice Financial, Inc., | ||||||||||||
7,465 | 10.75%, 5/1/19 | 6,345,250 | ||||||||||
5,370 | 12.75%, 5/1/20 (a)(b) | 3,759,000 | ||||||||||
Nationstar Mortgage LLC, | ||||||||||||
2,000 | 7.875%, 10/1/20 | 2,047,500 | ||||||||||
4,250 | 9.625%, 5/1/19 | 4,394,500 | ||||||||||
Navient Corp., | ||||||||||||
1,200 | 7.25%, 9/25/23 | 1,307,520 | ||||||||||
2,605 | 8.45%, 6/15/18 | 2,738,506 | ||||||||||
3,865 | Springleaf Finance Corp., 8.25%, 10/1/23 | 4,396,438 | ||||||||||
24,988,714 | ||||||||||||
Electric Utilities 0.6% | ||||||||||||
4,265 | NRG Energy, Inc., 6.25%, 5/1/24 | 4,435,600 | ||||||||||
Engineering & Construction 0.6% | ||||||||||||
3,900 | Tutor Perini Corp., 6.875%, 5/1/25 (a)(b) | 4,192,500 | ||||||||||
Entertainment 0.4% | ||||||||||||
3,045 | Cedar Fair L.P., 5.375%, 6/1/24 | 3,227,700 |
August 31, 2017 | | Semi-Annual Report | 27 |
Schedule of Investments
AllianzGI Convertible & Income Fund II
August 31, 2017 (unaudited) (continued)
Principal Amount (000s) |
Value | |||||||||||
Healthcare-Services 3.0% | ||||||||||||
$2,165 | Community Health Systems, Inc., 6.25%, 3/31/23 | $2,189,356 | ||||||||||
4,125 | DaVita, Inc., 5.125%, 7/15/24 | 4,217,813 | ||||||||||
2,950 | Envision Healthcare Corp., 6.25%, 12/1/24 (a)(b) | 3,186,000 | ||||||||||
2,950 | HCA, Inc., 7.50%, 2/15/22 | 3,407,250 | ||||||||||
6,045 | Kindred Healthcare, Inc., 8.75%, 1/15/23 | 5,878,762 | ||||||||||
2,750 | Tenet Healthcare Corp., 7.00%, 8/1/25 (a)(b) | 2,705,753 | ||||||||||
21,584,934 | ||||||||||||
Home Builders 0.5% | ||||||||||||
3,365 | Beazer Homes USA, Inc., 8.75%, 3/15/22 | 3,726,738 | ||||||||||
Internet & Catalog Retail 0.3% | ||||||||||||
2,200 | Netflix, Inc., 5.875%, 2/15/25 | 2,387,000 | ||||||||||
Iron/Steel 1.7% | ||||||||||||
AK Steel Corp., | ||||||||||||
1,005 | 7.50%, 7/15/23 | 1,092,938 | ||||||||||
5,600 | 8.375%, 4/1/22 | 5,833,800 | ||||||||||
4,525 | United States Steel Corp., 8.375%, 7/1/21 (a)(b) | 5,011,437 | ||||||||||
11,938,175 | ||||||||||||
Machinery-Construction & Mining 0.5% | ||||||||||||
3,235 | Terex Corp., 5.625%, 2/1/25 (a)(b) | 3,404,838 | ||||||||||
Media 2.3% | ||||||||||||
5,630 | Cablevision Systems Corp., 8.00%, 4/15/20 | 6,242,262 | ||||||||||
2,850 | Gray Television, Inc., 5.875%, 7/15/26 (a)(b) | 2,942,625 | ||||||||||
3,589 | LiveStyle, Inc., 9.625%, 2/1/19 (acquisition cost-$3,749,795; purchased 5/7/14-2/26/15) (a)(b)(c)(h) |
22,431 | ||||||||||
6,645 | McClatchy Co., 9.00%, 12/15/22 | 6,935,719 | ||||||||||
16,143,037 | ||||||||||||
Metal Fabricate/Hardware 0.4% | ||||||||||||
2,920 | Park-Ohio Industries, Inc., 6.625%, 4/15/27 | 3,100,675 | ||||||||||
Mining 1.1% | ||||||||||||
3,900 | Alcoa Nederland Holding BV, 7.00%, 9/30/26 (a)(b) | 4,377,750 | ||||||||||
3,050 | Joseph T. Ryerson & Son, Inc., 11.00%, 5/15/22 (a)(b) | 3,457,938 | ||||||||||
7,835,688 | ||||||||||||
Oil, Gas & Consumable Fuels 4.5% | ||||||||||||
2,300 | Calumet Specialty Products Partners L.P., 6.50%, 4/15/21 | 2,219,500 | ||||||||||
1,420 | Carrizo Oil & Gas, Inc., 6.25%, 4/15/23 | 1,384,500 | ||||||||||
12,800 | Cobalt International Energy, Inc., 10.75%, 12/1/21 (a)(b) | 12,096,000 | ||||||||||
6,180 | EP Energy LLC, 9.375%, 5/1/20 | 4,580,925 | ||||||||||
2,165 | NGL Energy Partners L.P., 7.50%, 11/1/23 | 2,094,637 | ||||||||||
3,745 | Oasis Petroleum, Inc., 6.875%, 3/15/22 | 3,670,100 | ||||||||||
2,500 | Rice Energy, Inc., 6.25%, 5/1/22 | 2,603,125 | ||||||||||
3,470 | Sanchez Energy Corp., 6.125%, 1/15/23 | 2,663,225 | ||||||||||
630 | Weatherford International Ltd., 8.25%, 6/15/23 | 618,975 | ||||||||||
31,930,987 | ||||||||||||
Pharmaceuticals 1.2% | ||||||||||||
1,755 | Endo Finance LLC, 5.375%, 1/15/23 (a)(b) | 1,478,587 | ||||||||||
4,425 | Horizon Pharma, Inc., 6.625%, 5/1/23 | 4,314,375 | ||||||||||
3,000 | Valeant Pharmaceuticals International, Inc., 7.50%, 7/15/21 (a)(b) | 2,955,000 | ||||||||||
8,747,962 |
28 | Semi-Annual Report | | August 31, 2017 |
Schedule of Investments
AllianzGI Convertible & Income Fund II
August 31, 2017 (unaudited) (continued)
Principal Amount (000s) |
Value | |||||||||||
Pipelines 0.4% | ||||||||||||
$2,715 | Energy Transfer Equity L.P., 5.50%, 6/1/27 | $2,905,050 | ||||||||||
Real Estate 0.9% | ||||||||||||
2,345 | Kennedy-Wilson, Inc., 5.875%, 4/1/24 | 2,418,281 | ||||||||||
4,090 | Uniti Group L.P., 8.25%, 10/15/23 | 4,016,789 | ||||||||||
6,435,070 | ||||||||||||
Retail 1.6% | ||||||||||||
4,500 | Claires Stores, Inc., 9.00%, 3/15/19 (a)(b) | 2,362,500 | ||||||||||
4,000 | Conns, Inc., 7.25%, 7/15/22 | 3,900,000 | ||||||||||
2,165 | Dollar Tree, Inc., 5.75%, 3/1/23 | 2,294,900 | ||||||||||
5,785 | Neiman Marcus Group Ltd. LLC, 8.00%, 10/15/21 (a)(b) | 2,993,737 | ||||||||||
11,551,137 | ||||||||||||
Semiconductors 0.4% | ||||||||||||
2,875 | Amkor Technology, Inc., 6.375%, 10/1/22 | 2,979,219 | ||||||||||
Software 0.7% | ||||||||||||
3,850 | Camelot Finance S.A., 7.875%, 10/15/24 (a)(b) | 4,186,875 | ||||||||||
490 | Rackspace Hosting, Inc., 8.625%, 11/15/24 (a)(b) | 521,238 | ||||||||||
4,708,113 | ||||||||||||
Telecommunications 5.0% | ||||||||||||
2,750 | Cincinnati Bell, Inc., 7.00%, 7/15/24 (a)(b) | 2,729,375 | ||||||||||
7,130 | Consolidated Communications, Inc., 6.50%, 10/1/22 | 6,920,556 | ||||||||||
4,045 | Frontier Communications Corp., 10.50%, 9/15/22 | 3,650,613 | ||||||||||
2,050 | GTT Communications, Inc., 7.875%, 12/31/24 (a)(b) | 2,193,500 | ||||||||||
3,500 | Hughes Satellite Systems Corp., 7.625%, 6/15/21 | 3,998,750 | ||||||||||
5,545 | Sprint Communications, Inc., 11.50%, 11/15/21 | 7,056,012 | ||||||||||
4,265 | West Corp., 5.375%, 7/15/22 (a)(b) | 4,323,644 | ||||||||||
5,845 | Windstream Services LLC, 7.50%, 4/1/23 | 4,544,487 | ||||||||||
35,416,937 | ||||||||||||
Transportation 0.6% | ||||||||||||
3,920 | XPO Logistics, Inc., 6.50%, 6/15/22 (a)(b) | 4,130,700 | ||||||||||
Total Corporate Bonds & Notes (cost-$297,384,525) | 287,872,453 | |||||||||||
Convertible Bonds & Notes 30.3% | ||||||||||||
Apparel & Textiles 1.6% | ||||||||||||
11,450 | Iconix Brand Group, Inc., 1.50%, 3/15/18 | 11,371,281 | ||||||||||
Auto Components 2.1% | ||||||||||||
4,645 | Horizon Global Corp., 2.75%, 7/1/22 | 4,810,478 | ||||||||||
5,255 | Meritor, Inc., 7.875%, 3/1/26 | 9,954,941 | ||||||||||
14,765,419 | ||||||||||||
Auto Manufacturers 1.0% | ||||||||||||
4,675 | Navistar International Corp., 4.75%, 4/15/19 | 4,829,859 | ||||||||||
2,150 | Tesla, Inc., 1.25%, 3/1/21 | 2,485,938 | ||||||||||
7,315,797 | ||||||||||||
Building Materials 0.5% | ||||||||||||
3,225 | Cemex S.A.B de C.V., 3.72%, 3/15/20 | 3,684,563 | ||||||||||
Commercial Services 1.5% | ||||||||||||
10,220 | Ascent Capital Group, Inc., 4.00%, 7/15/20 | 8,073,800 | ||||||||||
2,795 | ServiceSource International, Inc., 1.50%, 8/1/18 | 2,744,341 | ||||||||||
10,818,141 | ||||||||||||
Distribution/Wholesale 0.7% | ||||||||||||
4,975 | Titan Machinery, Inc., 3.75%, 5/1/19 | 4,900,375 |
August 31, 2017 | | Semi-Annual Report | 29 |
Schedule of Investments
AllianzGI Convertible & Income Fund II
August 31, 2017 (unaudited) (continued)
Principal Amount (000s) |
Value | |||||||||||
Diversified Financial Services 2.3% | ||||||||||||
$7,030 | Encore Capital Group, Inc., 3.00%, 7/1/20 | $7,671,487 | ||||||||||
9,160 | PRA Group, Inc., 3.00%, 8/1/20 | 8,415,750 | ||||||||||
16,087,237 | ||||||||||||
Electric Utilities 1.0% | ||||||||||||
6,905 | NRG Yield, Inc., 3.25%, 6/1/20 (a)(b) | 6,926,578 | ||||||||||
Electrical Equipment 1.1% | ||||||||||||
SunPower Corp., | ||||||||||||
2,365 | 0.875%, 6/1/21 | 1,928,953 | ||||||||||
7,095 | 4.00%, 1/15/23 | 6,270,206 | ||||||||||
8,199,159 | ||||||||||||
Energy-Alternate Sources 1.7% | ||||||||||||
12,690 | SolarCity Corp., 1.625%, 11/1/19 | 12,118,950 | ||||||||||
Engineering & Construction 0.3% | ||||||||||||
2,445 | Layne Christensen Co., 4.25%, 11/15/18 | 2,321,222 | ||||||||||
Equity Real Estate Investment Trusts (REITs) 0.6% | ||||||||||||
4,100 | Two Harbors Investment Corp., 6.25%, 1/15/22 | 4,389,563 | ||||||||||
Health Care/Health Care Distributors 1.1% | ||||||||||||
8,615 | Aceto Corp., 2.00%, 11/1/20 | 7,624,275 | ||||||||||
Insurance 1.0% | ||||||||||||
9,690 | AmTrust Financial Services, Inc., 2.75%, 12/15/44 | 7,158,487 | ||||||||||
Iron/Steel 0.1% | ||||||||||||
690 | AK Steel Corp., 5.00%, 11/15/19 | 933,656 | ||||||||||
Oil, Gas & Consumable Fuels 2.8% | ||||||||||||
13,775 | Helix Energy Solutions Group, Inc., 3.25%, 3/15/32 | 13,886,922 | ||||||||||
7,525 | Whiting Petroleum Corp., 1.25%, 4/1/20 | 6,424,469 | ||||||||||
20,311,391 | ||||||||||||
Pharmaceuticals 2.8% | ||||||||||||
12,175 | Herbalife Ltd., 2.00%, 8/15/19 | 12,281,592 | ||||||||||
2,460 | Horizon Pharma Investment Ltd., 2.50%, 3/15/22 | 2,244,750 | ||||||||||
5,885 | Impax Laboratories, Inc., 2.00%, 6/15/22 | 5,241,328 | ||||||||||
19,767,670 | ||||||||||||
Pipelines 1.0% | ||||||||||||
10,095 | Cheniere Energy, Inc., 4.25%, 3/15/45 | 6,984,478 | ||||||||||
Retail 1.3% | ||||||||||||
RH (a)(b), | ||||||||||||
7,860 | zero coupon, 6/15/19 | 6,695,737 | ||||||||||
3,010 | zero coupon, 7/15/20 | 2,366,613 | ||||||||||
9,062,350 | ||||||||||||
Semiconductors 0.9% | ||||||||||||
2,150 | Cypress Semiconductor Corp., 4.50%, 1/15/22 | 2,659,281 | ||||||||||
3,430 | Micron Technology, Inc., 3.00%, 11/15/43, Ser. G | 4,036,682 | ||||||||||
6,695,963 | ||||||||||||
Software 1.3% | ||||||||||||
11,915 | Avid Technology, Inc., 2.00%, 6/15/20 | 8,742,631 | ||||||||||
430 | PROS Holdings, Inc., 2.00%, 12/1/19 | 450,694 | ||||||||||
9,193,325 | ||||||||||||
Telecommunications 1.1% | ||||||||||||
8,310 | Gogo, Inc., 3.75%, 3/1/20 | 8,003,569 |
30 | Semi-Annual Report | | August 31, 2017 |
Schedule of Investments
AllianzGI Convertible & Income Fund II
August 31, 2017 (unaudited) (continued)
Principal Amount (000s) |
Value | |||||||||||
Tobacco 1.7% | ||||||||||||
Vector Group Ltd. (g), | ||||||||||||
$4,335 | 3 mo. Cash Dividends on Common Stock + 1.75%, 1.75%, 4/15/20 | $4,963,575 | ||||||||||
4,685 | 3 mo. Cash Dividends on Common Stock + 2.50%, 2.50%, 1/15/19 | 6,828,387 | ||||||||||
11,791,962 | ||||||||||||
Transportation 0.8% | ||||||||||||
3,010 | Aegean Marine Petroleum Network, Inc., 4.25%, 12/15/21 (a)(b) | 2,278,194 | ||||||||||
3,440 | Echo Global Logistics, Inc., 2.50%, 5/1/20 | 3,259,400 | ||||||||||
5,537,594 | ||||||||||||
Total Convertible Bonds & Notes (cost-$196,412,213) | 215,963,005 | |||||||||||
Shares | ||||||||||||
Convertible Preferred Stock 25.4% | ||||||||||||
Aerospace & Defense 0.3% | ||||||||||||
59,615 | Arconic, Inc., 5.375%, 10/1/17 | 2,417,388 | ||||||||||
Agriculture 0.9% | ||||||||||||
62,355 | Bunge Ltd., 4.875% (e) | 6,613,527 | ||||||||||
Banks 4.6% | ||||||||||||
9,140 | Bank of America Corp., 7.25%, Ser. L (e) | 12,046,520 | ||||||||||
7,455 | Huntington Bancshares, Inc., 8.50%, Ser. A (e) | 10,724,018 | ||||||||||
7,435 | Wells Fargo & Co., 7.50%, Ser. L (e) | 9,895,985 | ||||||||||
32,666,523 | ||||||||||||
Chemicals 0.8% | ||||||||||||
51,505 | Rayonier Advanced Materials, Inc., 8.00%, 8/15/19, Ser. A | 5,377,122 | ||||||||||
Commercial Services & Supplies 0.9% | ||||||||||||
110,120 | Stericycle, Inc., 5.25%, 9/15/18 | 6,545,533 | ||||||||||
Computers 0.3% | ||||||||||||
1,543 | NCR Corp., PIK 5.50%, 5.50%, Ser. A (e) | 2,212,944 | ||||||||||
Diversified Financial Services 0.5% | ||||||||||||
4,300 | Cowen, Inc., 5.625%, Ser. A (e) | 3,712,448 | ||||||||||
Diversified Telecommunication Services 0.4% | ||||||||||||
117,480 | Frontier Communications Corp., 11.125%, 6/29/18, Ser. A | 2,749,032 | ||||||||||
Electric Utilities 2.0% | ||||||||||||
228,650 | Dominion Energy, Inc., 6.75%, 8/15/19, Ser. A | 11,695,448 | ||||||||||
50,060 | NextEra Energy, Inc., 6.123%, 9/1/19 | 2,783,336 | ||||||||||
14,478,784 | ||||||||||||
Equity Real Estate Investment Trusts (REITs) 4.6% | ||||||||||||
3,730 | Crown Castle International Corp., 6.875%, 8/1/20, Ser. A | 4,181,946 | ||||||||||
476,235 | FelCor Lodging Trust, Inc., 1.95%, Ser. A (e) | 13,334,580 | ||||||||||
309,935 | Sutherland Asset Management Corp., 7.00%, 8/15/23 | 7,881,647 | ||||||||||
106,440 | Welltower, Inc., 6.50%, Ser. I (e) | 7,041,006 | ||||||||||
32,439,179 | ||||||||||||
Hand/Machine Tools 1.6% | ||||||||||||
104,940 | Stanley Black & Decker, Inc., 5.375%, 5/15/20 | 11,614,759 | ||||||||||
Health Care Providers & Services 2.2% | ||||||||||||
292,115 | Anthem, Inc., 5.25%, 5/1/18 | 15,330,195 | ||||||||||
Healthcare-Products 1.2% | ||||||||||||
150,440 | Becton Dickinson and Co., 6.125%, 5/1/20, Ser. A | 8,387,030 |
August 31, 2017 | | Semi-Annual Report | 31 |
Schedule of Investments
AllianzGI Convertible & Income Fund II
August 31, 2017 (unaudited) (continued)
Shares | Value | |||||||||||
Independent Power Producers & Energy Traders 0.5% | ||||||||||||
117,560 | Dynegy, Inc., 5.375%, 11/1/17, Ser. A | $3,706,667 | ||||||||||
Investment Companies 1.3% | ||||||||||||
45,390 | Mandatory Exchangeable Trust, 5.75%, 6/3/19 (a)(b) | 8,864,894 | ||||||||||
Oil, Gas & Consumable Fuels 2.3% | ||||||||||||
120,125 | Anadarko Petroleum Corp., 7.50%, 6/7/18 | 4,444,625 | ||||||||||
130,590 | Kinder Morgan, Inc., 9.75%, 10/26/18, Ser. A | 5,506,980 | ||||||||||
173,845 | Sanchez Energy Corp., 6.50%, Ser. B (e) | 3,103,133 | ||||||||||
8,585 | Southwestern Energy Co., 6.25%, 1/15/18, Ser. B | 113,580 | ||||||||||
70,105 | WPX Energy, Inc., 6.25%, 7/31/18, Ser. A | 3,346,813 | ||||||||||
16,515,131 | ||||||||||||
Pharmaceuticals 1.0% | ||||||||||||
3,225 | Allergan PLC, 5.50%, 3/1/18, Ser. A | 2,642,049 | ||||||||||
14,705 | Teva Pharmaceutical Industries Ltd., 7.00%, 12/15/18 | 4,682,807 | ||||||||||
7,324,856 | ||||||||||||
Total Convertible Preferred Stock (cost-$183,981,632) | 180,956,012 | |||||||||||
Preferred Stock (a)(d)(f)(i) 1.2% | ||||||||||||
Media 1.2% | ||||||||||||
8,339 | LiveStyle, Inc., Ser. A | 833,900 | ||||||||||
76,572 | LiveStyle, Inc., Ser. B | 7,657,200 | ||||||||||
5,000 | LiveStyle, Inc., Ser. B | 50 | ||||||||||
Total Preferred Stock (cost-$13,324,564) | 8,491,150 | |||||||||||
Common Stock (a)(d)(f)(i) 0.2% | ||||||||||||
Advertising 0.2% | ||||||||||||
133,715 | Affinion Group Holdings, Inc., Class A | |||||||||||
(acquisition cost-$2,371,020; purchased 11/9/15-11/12/15) (h) | 1,596,557 | |||||||||||
Aerospace & Defense 0.0% | ||||||||||||
6,354 | Erickson, Inc. | 177,467 | ||||||||||
Media 0.0% | ||||||||||||
90,407 | LiveStyle, Inc. | 9 | ||||||||||
Total Common Stock (cost-$7,842,203) | 1,774,033 | |||||||||||
Units | ||||||||||||
Warrants (a)(d)(f)(i) 0.0% | ||||||||||||
Commercial Services 0.0% | ||||||||||||
1,562,241 | Cenveo Corp. strike price $12.00, expires 6/10/24 | 335,394 | ||||||||||
Media 0.0% | ||||||||||||
19,500 | LiveStyle, Inc., expires 11/30/21, Ser. C | 2 | ||||||||||
Total Warrants (cost-$183,305) | 335,396 | |||||||||||
Principal Amount (000s) |
||||||||||||
Repurchase Agreements 2.5% | ||||||||||||
$17,543 | State Street Bank and Trust Co., dated 8/31/17, 0.12%, due 9/1/17, proceeds $17,543,058; collateralized by U.S. Treasury Inflation Indexed Notes, 0.625%, due 1/15/26, valued at $17,897,650 including accrued interest (cost-$17,543,000) |
17,543,000 | ||||||||||
Total Investments (cost-$716,671,442)-100.0% | $712,935,049 |
32 | Semi-Annual Report | | August 31, 2017 |
Schedule of Investments
AllianzGI Convertible & Income Fund II
August 31, 2017 (unaudited) (continued)
Notes to Schedule of Investments:
(a) | Private PlacementRestricted as to resale and may not have a readily available market. Securities with an aggregate value of $138,220,008, representing 19.4% of total investments. |
(b) | 144AExempt 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. Securities with an aggregate value of $127,619,429, representing 17.9% of total investments. |
(c) | In default. |
(d) | Fair-ValuedSecurities with an aggregate value of $10,600,579, representing 1.5% of total investments. See Note 1(a) and Note 1(b) in the Notes to Financial Statements. |
(e) | Perpetual maturity. The date shown, if any, is the next call date. |
(f) | Level 3 security. See Note 1(b) in the Notes to Financial Statements. |
(g) | 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. |
(h) | Restricted. The aggregate acquisition cost of such securities is $6,830,107. The aggregate value is $1,618,988, representing 0.2% of total investments. |
(i) | Non-income producing. |
(j) | Fair Value Measurements-See Note 1(b) in the Notes to Financial Statements. |
Level 1 Quoted Prices |
Level 2 Other Significant Observable Inputs |
Level 3 Significant Unobservable Inputs |
Value at 8/31/17 |
|||||||||||||
Investments in Securities Assets |
||||||||||||||||
Corporate Bonds & Notes |
$ | | $287,872,453 | $ | | $287,872,453 | ||||||||||
Convertible Bonds & Notes |
| 215,963,005 | | 215,963,005 | ||||||||||||
Convertible Preferred Stock: |
||||||||||||||||
Agriculture |
| 6,613,527 | | 6,613,527 | ||||||||||||
Computers |
| 2,212,944 | | 2,212,944 | ||||||||||||
Diversified Financial Services |
| 3,712,448 | | 3,712,448 | ||||||||||||
Healthcare-Products |
| 8,387,030 | | 8,387,030 | ||||||||||||
Investment Companies |
| 8,864,894 | | 8,864,894 | ||||||||||||
Oil, Gas & Consumable Fuels |
13,411,998 | 3,103,133 | | 16,515,131 | ||||||||||||
Pharmaceuticals |
2,642,049 | 4,682,807 | | 7,324,856 | ||||||||||||
All Other |
127,325,182 | | | 127,325,182 | ||||||||||||
Preferred Stock |
| | 8,491,150 | 8,491,150 | ||||||||||||
Common Stock |
| | 1,774,033 | 1,774,033 | ||||||||||||
Warrants |
| | 335,396 | 335,396 | ||||||||||||
Repurchase Agreements |
| 17,543,000 | | 17,543,000 | ||||||||||||
Totals |
$ | 143,379,229 | $558,955,241 | $ | 10,600,579 | $712,935,049 |
At August 31, 2017, a security valued at $5,377,122 was transferred from Level 2 to Level 1. The transfer was a result of the security having used an evaluated price from a third-party independent pricing vendor at February 28, 2017, and used an exchange-traded closing price on August 31, 2017.
August 31, 2017 | | Semi-Annual Report | 33 |
Schedule of Investments
AllianzGI Convertible & Income Fund II
August 31, 2017 (unaudited) (continued)
A roll forward of fair value measurements using significant unobservable inputs (Level 3) for the six months ended August 31, 2017, was as follows:
Beginning Balance 2/28/17 |
Purchases | Sales | Accrued Discounts (Premiums) |
Net Realized Gain (Loss) |
||||||||||||||||
Investments in Securities Assets |
| |||||||||||||||||||
Corporate Bonds & Notes: |
||||||||||||||||||||
Commercial Services |
$5,361,665 | $ | $ | $(64,082 | ) | $ | ||||||||||||||
Preferred Stock |
7,759,031 | | | | | |||||||||||||||
Common Stock: |
||||||||||||||||||||
Advertising |
1,987,005 | | | | | |||||||||||||||
Aerospace & Defense |
| 5,471,183 | | | | | ||||||||||||||
Media |
9 | | | | | |||||||||||||||
Warrants: |
||||||||||||||||||||
Commercial Services |
340,656 | | | | | |||||||||||||||
Media |
2 | | | | | |||||||||||||||
Totals |
$15,448,368 | $5,471,183 | $ | $(64,082 | ) | $ |
Net Change in Unrealized Appreciation/ Depreciation |
Transfers into Level 3 |
Transfers out of Level 3* |
Ending Balance 8/31/17 |
|||||||||||||
Investments in Securities Assets |
||||||||||||||||
Corporate Bonds & Notes: |
||||||||||||||||
Commercial Services |
$(10,593 | ) | $ | $(5,286,990 | ) | $ | ||||||||||
Preferred Stock |
732,119 | | | 8,491,150 | ||||||||||||
Common Stock: |
||||||||||||||||
Advertising |
(390,448 | ) | | | 1,596,557 | |||||||||||
Aerospace & Defense |
(5,293,716 | ) | | | 177,467 | |||||||||||
Media |
| | | 9 | ||||||||||||
Warrants: |
||||||||||||||||
Commercial Services |
(5,262 | ) | | | 335,394 | |||||||||||
Media |
| | | 2 | ||||||||||||
Totals |
$(4,967,900 | ) | $ | $(5,286,990 | ) | $10,600,579 |
| Issued via reorganization |
* | Transferred out of Level 3 into Level 2 because an evaluated price from a third-party independent pricing vendor was used on August 31, 2017. |
The following tables present additional information about valuation techniques and inputs used for investments that are measured at fair value and categorized within Level 3 at August 31, 2017:
Ending Balance at 8/31/17 |
Valuation Technique Used |
Unobservable Inputs |
Input Values | |||||||||||
Investments in Securities Assets |
||||||||||||||
Preferred Stock |
$8,491,100 | Model Price | |
Proprietary Data Used in Model |
|
$100 | ||||||||
$50 | Liquidation Value | Price of Stock | $0.01* | |||||||||||
Common Stock |
$1,774,033 | Model Price | |
Proprietary Data Used in Model |
|
$0.01 $27.93 | ||||||||
Warrants |
$335,394 | Fundamental Analytical Data Relating to the Investment |
|
Price of Warrant |
|
$0.21469 | ||||||||
$2 | Model Price | |
Proprietary Data Used in Model |
|
$0.0001 |
* | Preferred stock trades are in lots of 1,000. |
The net change in unrealized appreciation/depreciation of Level 3 investments held at August 31, 2017, was $(4,957,307). Net change in unrealized appreciation/depreciation is reflected on the Statements of Operations.
Glossary:
PIK | - | Payment-in-Kind | ||
REIT | - | Real Estate Investment Trust |
34 | Semi-Annual Report | | August 31, 2017 | | See accompanying Notes to Financial Statements |
Statements of Assets and Liabilities
AllianzGI Convertible & Income Funds
August 31, 2017 (unaudited)
Convertible & Income 2024 Target Term |
Convertible & Income |
Convertible & Income II |
||||||||||||||||||||||
Assets: | ||||||||||||||||||||||||
Investments, at value (cost-$258,337,604, $943,420,772 and $716,671,442, respectively) | $257,986,386 | $937,170,874 | $712,935,049 | |||||||||||||||||||||
Cash | 1,015,286 | 265 | 95 | |||||||||||||||||||||
Receivable for investments sold | 3,755,579 | | | |||||||||||||||||||||
Interest and dividends receivable | 3,027,358 | 12,427,672 | 9,529,179 | |||||||||||||||||||||
Investments in Affiliated Funds - Trustees Deferred Compensation Plan (see Note 3) | | 60,872 | 45,955 | |||||||||||||||||||||
Tax reclaims receivable | | 11,756 | 8,869 | |||||||||||||||||||||
Prepaid expenses and other assets | 4,978 | 80,036 | 32,680 | |||||||||||||||||||||
Total Assets |
265,789,587 | 949,751,475 | 722,551,827 | |||||||||||||||||||||
Liabilities: | ||||||||||||||||||||||||
Loan payable (See Note 7) | 69,700,000 | | | |||||||||||||||||||||
Payable for investments purchased | 15,342,853 | 837,314 | 637,378 | |||||||||||||||||||||
Dividends payable to common and preferred shareholders | 839,820 | 5,809,716 | 4,337,483 | |||||||||||||||||||||
Due to Investment Manager | 364,936 | | | |||||||||||||||||||||
Investment management fees payable | 154,680 | 560,491 | 426,428 | |||||||||||||||||||||
Loan interest payable | 7,059 | | | |||||||||||||||||||||
Trustees Deferred Compensation Plan payable (see Note 3) | | 60,872 | 45,955 | |||||||||||||||||||||
Accrued expenses | 81,924 | 166,670 | 149,872 | |||||||||||||||||||||
Total Liabilities |
86,491,272 | 7,435,063 | 5,597,116 | |||||||||||||||||||||
Preferred Shares ($0.00001 par value and $25,000 liquidation preference per share applicable to an aggregate of 0, 14,280 and 10,960 shares issued and outstanding, respectively) | | 357,000,000 | 274,000,000 | |||||||||||||||||||||
Net Assets Applicable to Common Shareholders | $179,298,315 | $585,316,412 | $442,954,711 | |||||||||||||||||||||
Composition of Net Assets Applicable to Common Shareholders: | ||||||||||||||||||||||||
Common Shares: | ||||||||||||||||||||||||
Par value ($0.00001 per share) |
$183 | $885 | $747 | |||||||||||||||||||||
Paid-in-capital in excess of par |
179,192,122 | 1,047,115,752 | 837,836,770 | |||||||||||||||||||||
Undistributed (dividends in excess of) net investment income | 248,245 | (10,236,685) | (15,024,076) | |||||||||||||||||||||
Accumulated net realized gain (loss) | 208,983 | (445,313,642) | (376,122,337) | |||||||||||||||||||||
Net unrealized depreciation | (351,218) | (6,249,898) | (3,736,393) | |||||||||||||||||||||
Net Assets Applicable to Common Shareholders | $179,298,315 | $585,316,412 | $442,954,711 | |||||||||||||||||||||
Common Shares Issued and Outstanding | 18,256,964 | 88,473,991 | 74,660,994 | |||||||||||||||||||||
Net Asset Value Per Common Share | $9.82 | $6.62 | $5.93 |
See accompanying Notes to Financial Statements | | August 31, 2017 | | Semi-Annual Report | 35 |
AllianzGI Convertible & Income Funds
Period or Six Months ended August 31, 2017 (unaudited)
Convertible & Income 2024 Target Term (1) |
Convertible & Income |
Convertible & Income II |
||||||||||||||||||||||
Investment Income: | ||||||||||||||||||||||||
Interest | $1,511,491 | $26,716,039 | $20,250,181 | |||||||||||||||||||||
Dividends (net of foreign withholding taxes of $26,250, $187,736 and $141,536, respectively) | 100,750 | 8,723,369 | 6,504,099 | |||||||||||||||||||||
Miscellaneous | 39,933 | | | |||||||||||||||||||||
Total Investment Income |
1,652,174 | 35,439,408 | 26,754,280 | |||||||||||||||||||||
Expenses: | ||||||||||||||||||||||||
Investment management | 276,393 | 3,349,114 | 2,546,447 | |||||||||||||||||||||
Loan interest | 203,921 | | | |||||||||||||||||||||
Audit and tax services | 26,233 | 50,126 | 53,358 | |||||||||||||||||||||
Custodian and accounting agent | 23,896 | 69,766 | 61,190 | |||||||||||||||||||||
Legal | 13,176 | 42,189 | 38,270 | |||||||||||||||||||||
Shareholder communications | 8,498 | 48,923 | 41,103 | |||||||||||||||||||||
Transfer agent | 4,455 | 12,623 | 13,042 | |||||||||||||||||||||
Trustees | 3,951 | 27,187 | 20,657 | |||||||||||||||||||||
Insurance | 164 | 9,405 | 7,632 | |||||||||||||||||||||
Auction agent and commissions | | 204,687 | 167,506 | |||||||||||||||||||||
New York Stock Exchange listing | | 26,324 | 22,022 | |||||||||||||||||||||
Miscellaneous | 3,422 | 9,993 | 28,252 | |||||||||||||||||||||
Total Expenses |
564,109 | 3,850,337 | 2,999,479 | |||||||||||||||||||||
Net Investment Income | 1,088,065 | 31,589,071 | 23,754,801 | |||||||||||||||||||||
Realized and Change in Unrealized Gain (Loss): | ||||||||||||||||||||||||
Net realized gain (loss) on investments | 208,983 | (4,134,732) | (1,285,741) | |||||||||||||||||||||
Net change in unrealized appreciation/depreciation of investments | (351,218) | (12,182,842) | (10,140,905) | |||||||||||||||||||||
Net realized and change in unrealized loss | (142,235) | (16,317,574) | (11,426,646) | |||||||||||||||||||||
Net Increase in Net Assets Resulting from Investment Operations | 945,830 | 15,271,497 | 12,328,155 | |||||||||||||||||||||
Dividends on Preferred Shares from Net Investment Income | | (2,649,788) | (2,033,706) | |||||||||||||||||||||
Net Increase in Net Assets Applicable to Common Shareholders Resulting from Investment Operations | $945,830 | $12,621,709 | $10,294,449 |
(1) Commencement of operations was June 30, 2017. Information represents the period from June 30, 2017 through August 31, 2017.
36 | Semi-Annual Report | | August 31, 2017 | | See accompanying Notes to Financial Statements |
Statements of Changes in Net Assets
AllianzGI Convertible & Income 2024 Target Term Fund
Period from June 30, 2017** through August 31, 2017 (unaudited) |
||||||||
Investment Operations: | ||||||||
Net investment income | $1,088,065 | |||||||
Net realized gain | 208,983 | |||||||
Net change in unrealized appreciation/depreciation | (351,218) | |||||||
Net increase in net assets resulting from investment operations | 945,830 | |||||||
Dividends to Common Shareholders from Net Investment Income | (839,820) | |||||||
Share Transactions: | ||||||||
Net proceeds from shares issued | 179,457,239 | |||||||
Offering costs charged to paid-in capital in excess of par (Note 9) | (364,936) | |||||||
Net increase in net assets from share transactions | 179,092,303 | |||||||
Total increase in net assets applicable to shareholders | 179,198,313 | |||||||
Net Assets Applicable | ||||||||
Beginning of period | 100,002 | |||||||
End of period* | $179,298,315 | |||||||
*Including undistributed net investment income of: | $248,245 | |||||||
Shares Activity: | ||||||||
Shares outstanding, beginning of period | 10,168 | |||||||
Shares issued | 18,246,796 | |||||||
Shares outstanding, end of period | 18,256,964 |
** Commencement of operations.
See accompanying Notes to Financial Statements | | August 31, 2017 | | Semi-Annual Report | 37 |
Statement of Changes in Net Assets Applicable to Common Shareholders
AllianzGI Convertible & Income Fund
Six Months ended August 31, 2017 (unaudited) |
Year ended February 28, 2017 |
|||||||||||||||
Investment Operations: | ||||||||||||||||
Net investment income | $31,589,071 | $64,277,340 | ||||||||||||||
Net realized loss | (4,134,732) | (49,853,202) | ||||||||||||||
Net change in unrealized appreciation/depreciation | (12,182,842) | 176,239,359 | ||||||||||||||
Net increase in net assets resulting from investment operations | 15,271,497 | 190,663,497 | ||||||||||||||
Dividends on Preferred Shares from Net Investment Income | (2,649,788) | (2,357,962) | ||||||||||||||
Net increase in net assets applicable to common shareholders resulting from investment operations | 12,621,709 | 188,305,535 | ||||||||||||||
Dividends to Common Shareholders from Net Investment Income | (34,459,248) | (68,722,510) | ||||||||||||||
Common Share Transactions: | ||||||||||||||||
Reinvestment of dividends | 1,959,524 | 1,099,679 | ||||||||||||||
Total increase (decrease) in net assets applicable to common shareholders | (19,878,015) | 120,682,704 | ||||||||||||||
Net Assets Applicable to Common Shareholders: | ||||||||||||||||
Beginning of period | 605,194,427 | 484,511,723 | ||||||||||||||
End of period* | $585,316,412 | $605,194,427 | ||||||||||||||
*Including dividends in excess of net investment income of: | $(10,236,685) | $(4,716,720) | ||||||||||||||
Common Shares Activity: | ||||||||||||||||
Common Shares outstanding, beginning of period | 88,185,843 | 88,018,356 | ||||||||||||||
Common Shares issued | 288,148 | 167,487 | ||||||||||||||
Common Shares outstanding, end of period | 88,473,991 | 88,185,843 |
38 | Semi-Annual Report | | August 31, 2017 | | See accompanying Notes to Financial Statements |
Statement of Changes in Net Assets Applicable to Common Shareholders
AllianzGI Convertible & Income II Fund
Six Months ended August 31, 2017 (unaudited) |
Year ended February 28, 2017 |
|||||||||||||||
Investment Operations: | ||||||||||||||||
Net investment income | $23,754,801 | $49,013,543 | ||||||||||||||
Net realized loss | (1,285,741) | (37,695,132) | ||||||||||||||
Net change in unrealized appreciation/depreciation | (10,140,905) | 134,580,526 | ||||||||||||||
Net increase in net assets resulting from investment operations | 12,328,155 | 145,898,937 | ||||||||||||||
Dividends on Preferred Shares from Net Investment Income | (2,033,706) | (1,809,753) | ||||||||||||||
Net increase in net assets applicable to common shareholders resulting from investment operations | 10,294,449 | 144,089,184 | ||||||||||||||
Dividends to Common Shareholders from Net Investment Income | (25,725,559) | (51,344,679) | ||||||||||||||
Common Share Transactions: | ||||||||||||||||
Reinvestment of dividends | 1,401,043 | 249,618 | ||||||||||||||
Total increase (decrease) in net assets applicable to common shareholders | (14,030,067) | 92,994,123 | ||||||||||||||
Net Assets Applicable to Common Shareholders: | ||||||||||||||||
Beginning of period | 456,984,778 | 363,990,655 | ||||||||||||||
End of period* | $442,954,711 | $456,984,778 | ||||||||||||||
*Including dividends in excess of net investment income of: | $(15,024,076) | $(11,019,612) | ||||||||||||||
Common Shares Activity: | ||||||||||||||||
Common Shares outstanding, beginning of period | 74,430,542 | 74,387,429 | ||||||||||||||
Common Shares issued | 230,452 | 43,113 | ||||||||||||||
Common Shares outstanding, end of period | 74,660,994 | 74,430,542 |
See accompanying Notes to Financial Statements | | August 31, 2017 | | Semi-Annual Report | 39 |
AllianzGI Convertible & Income 2024 Target Term Fund
Period from June 30, 2017** through August 31, 2017 (unaudited)
Increase in Cash from: | ||||||||
Cash Flows Used for Operating Activities: | ||||||||
Net increase in net assets resulting from investment operations |
$945,830 | |||||||
Adjustments to Reconcile Net Increase in Net Assets Resulting from Investment Operations to Net Cash Used for Operating Activities: | ||||||||
Purchases of long-term investments |
(257,613,426) | |||||||
Proceeds from sales of long-term investments |
25,720,066 | |||||||
Purchases of short-term portfolio investments, net |
(26,121,313) | |||||||
Net change in unrealized appreciation/depreciation |
351,218 | |||||||
Net amortization/accretion on investments |
(113,948) | |||||||
Net realized gain |
(208,983) | |||||||
Increase in payable for investments purchased |
15,342,853 | |||||||
Increase in receivable for investments sold |
(3,755,579) | |||||||
Increase in interest and dividends receivable |
(3,027,358) | |||||||
Increase in prepaid expenses |
(4,978) | |||||||
Increase in investment management fees payable |
154,680 | |||||||
Increase in due to Investment Manager |
364,936 | |||||||
Increase in accrued expenses |
81,924 | |||||||
Increase in loan interest payable |
7,059 | |||||||
Net cash used for operating activities | (247,877,019) | |||||||
Cash Flows Provided by Financing Activities: | ||||||||
Proceeds from common shares issued |
179,457,239 | |||||||
Increase in loan payable |
69,700,000 | |||||||
Cash dividends paid |
| |||||||
Offering costs |
(364,936) | |||||||
Net cash provided by financing activities | 248,792,303 | |||||||
Net increase in cash | 915,284 | |||||||
Beginning of period | 100,002 | |||||||
End of period | $1,015,286 | |||||||
Supplemental Disclosure of Cash Flow Information: | ||||||||
Interest expense paid on loan |
$196,862 |
* Statement of Cash Flows is not required for Convertible & Income and Convertible & Income II.
** Commencement of operations.
40 | Semi-Annual Report | | August 31, 2017 | | See accompanying Notes to Financial Statements |
AllianzGI Convertible & Income 2024 Target Term Fund
For a common share outstanding throughout each period:
Period from June 30, 2017* through August 31, 2017 (unaudited) |
||||||
Net asset value, beginning of period | $9.84 | ** | ||||
Investment Operations: | ||||||
Net investment income | 0.06 | |||||
Net realized and change in unrealized loss | (0.01 | ) | ||||
Total from investment operations | 0.05 | |||||
Dividends to Shareholders from Net Investment Income | (0.05 | ) | ||||
Share Transactions: | ||||||
Capital charge resulting from issuance of shares and related offering costs | (0.02 | ) | ||||
Net asset value, end of period | $9.82 | |||||
Market price, end of period | $9.90 | |||||
Total Investment Return (1) | (0.54 | )% | ||||
RATIOS/SUPPLEMENTAL DATA: | ||||||
Net assets, end of period (000s) | $179,298 | |||||
Ratio of expenses to average net assets, including interest expense (3) | 2.02 | %(2) | ||||
Ratio of expenses to average net assets, excluding interest expense (3) | 1.29 | %(2) | ||||
Ratio of net investment income to average net assets | 3.90 | %(2) | ||||
Portfolio turnover rate | 17 | % |
* | Commencement of operations. |
** | Initial public offering price of $10.00 per share less sales load of 1.65% of the offering price. |
(1) | Total investment return is calculated assuming a purchase of a common share at the market price on the first day and a sale of a common share at the market price on the last day of each period reported. Dividends and distributions, if any, are assumed, for purposes of this calculation, to be reinvested at prices obtained under the Funds 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. |
(3) | Interest expense relates to participation in debt financing (See Note 7). |
See accompanying Notes to Financial Statements | | August 31, 2017 | | Semi-Annual Report | 41 |
AllianzGI Convertible & Income Fund
For a common share outstanding throughout each period:
Six Months August 31, |
Year ended | |||||||||||||||||
February 28, 2017 |
February 29, 2016 |
|||||||||||||||||
Net asset value, beginning of period | $6.86 | $5.50 | $8.44 | |||||||||||||||
Investment Operations: | ||||||||||||||||||
Net investment income | 0.36 | 0.73 | 0.83 | |||||||||||||||
Net realized and change in unrealized gain (loss) | (0.18 | ) | 1.44 | (2.83 | ) | |||||||||||||
Total from investment operations | 0.18 | 2.17 | (2.00 | ) | ||||||||||||||
Dividends on Preferred Shares from Net Investment Income | (0.03 | )(1) | (0.03 | )(1) | (0.01 | )(1) | ||||||||||||
Net increase (decrease) in net assets applicable to common shareholders resulting from investment operations | 0.15 | 2.14 | (2.01 | ) | ||||||||||||||
Dividends to Common Shareholders from Net Investment Income | (0.39 | ) | (0.78 | ) | (0.93 | ) | ||||||||||||
Common Share Transactions: | ||||||||||||||||||
Accretion to net asset value, resulting from offerings | | | | |||||||||||||||
Capital charge resulting from issuance of common shares and related offering costs | | | | |||||||||||||||
Total common share transactions | | | | |||||||||||||||
Net asset value, end of period | $6.62 | $6.86 | $5.50 | |||||||||||||||
Market price, end of period | $7.01 | $6.93 | $4.92 | |||||||||||||||
Total Investment Return (5) | 7.13 | % | 59.15 | % | (38.23 | )% | ||||||||||||
RATIOS/SUPPLEMENTAL DATA: | ||||||||||||||||||
Net assets, applicable to common shareholders, end of period (000s) | $585,316 | $605,194 | $484,512 | |||||||||||||||
Ratio of expenses to average net assets (6) | 1.29 | %(9) | 1.36 | %(8) | 1.26 | %(8) | ||||||||||||
Ratio of net investment income to average net assets (6) | 10.58 | %(9) | 11.33 | %(8) | 11.51 | %(8) | ||||||||||||
Preferred shares asset coverage per share | $65,982 | $67,376 | $58,927 | |||||||||||||||
Portfolio turnover rate | 22 | % | 28 | % | 51 | % |
(1) | Calculated on average common shares outstanding. |
(2) | Less than $(0.005) per common share. |
(3) | Less than $0.005 per common share. |
(4) | Payment from affiliate increased the net asset value by less than $0.01. |
(5) | Total investment return is calculated assuming a purchase of a common share at the market price on the first day and a sale of a common share at the market price on the last day of each period reported. Dividends and distributions, if any, are assumed, for purposes of this calculation, to be reinvested at prices obtained under the Funds 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. |
(6) | Calculated on the basis of income and expenses applicable to both common and preferred shares relative to average net assets of common shareholders. |
(7) | Inclusive of expense reimbursement from Investment Manager of 0.01%. |
(8) | Inclusive of excise tax expense of 0.03%, less than 0.005%, 0.05% and 0.04% for the years ended February 28, 2017, February 29, 2016, February 28, 2015 and February 28, 2014, respectively. |
(9) | Annualized. |
42 | Semi-Annual Report | | August 31, 2017 | | See accompanying Notes to Financial Statements |
Year ended | ||||||||||||||||
February 28, 2015 |
February 28, 2014 |
February 28, 2013 |
||||||||||||||
$9.49 | $8.78 | $8.65 | ||||||||||||||
0.87 | 1.02 | (1) | 1.02 | |||||||||||||
(0.85 | ) | 0.75 | 0.20 | |||||||||||||
0.02 | 1.77 | 1.22 | ||||||||||||||
(0.00 | )(1)(2) | (0.01 | )(1) | (0.01 | ) | |||||||||||
0.02 | 1.76 | 1.21 | ||||||||||||||
(1.08 | ) | (1.08 | ) | (1.08 | ) | |||||||||||
0.01 | 0.03 | 0.00 | (3) | |||||||||||||
(0.00 | )(2) | (0.00 | )(2) | (0.00 | )(2) | |||||||||||
0.01 | 0.03 | 0.00 | (3) | |||||||||||||
$8.44 | (4) | $9.49 | $8.78 | |||||||||||||
$9.12 | $10.20 | $9.18 | ||||||||||||||
0.37 | % | 24.87 | % | 7.02 | % | |||||||||||
$739,983 | $811,397 | $680,022 | ||||||||||||||
1.23 | %(8) | 1.21 | %(7)(8) | 1.28 | % | |||||||||||
9.73 | %(8) | 11.13 | %(7)(8) | 12.12 | % | |||||||||||
$76,819 | $81,820 | $72,619 | ||||||||||||||
56 | % | 79 | % | 39 | % |
See accompanying Notes to Financial Statements | | August 31, 2017 | | Semi-Annual Report | 43 |
Financial Highlights
AllianzGI Convertible & Income Fund II
For a common share outstanding throughout each period:
Six Months August 31, |
Year ended | |||||||||||||||||
February 28, 2017 |
February 29, 2016 |
|||||||||||||||||
Net asset value, beginning of period | $6.14 | $4.89 | $7.56 | |||||||||||||||
Investment Operations: | ||||||||||||||||||
Net investment income | 0.32 | 0.66 | 0.75 | |||||||||||||||
Net realized and change in unrealized gain (loss) | (0.15 | ) | 1.30 | (2.55 | ) | |||||||||||||
Total from investment operations | 0.17 | 1.96 | (1.80 | ) | ||||||||||||||
Dividends on Preferred Shares from Net Investment Income | (0.03 | )(1) | (0.02 | )(1) | (0.01 | )(1) | ||||||||||||
Net increase (decrease) in net assets applicable to common shareholders resulting from investment operations | 0.14 | 1.94 | (1.81 | ) | ||||||||||||||
Dividends to Common Shareholders from Net Investment Income | (0.35 | ) | (0.69 | ) | (0.86 | ) | ||||||||||||
Common Share Transactions: | ||||||||||||||||||
Accretion to net asset value, resulting from offerings | | | | |||||||||||||||
Capital charge resulting from issuance of common shares and related offering costs | | | | |||||||||||||||
Total common share transactions | | | | |||||||||||||||
Net asset value, end of period | $5.93 | $6.14 | $4.89 | |||||||||||||||
Market price, end of period | $6.24 | $6.17 | $4.46 | |||||||||||||||
Total Investment Return (4) | 7.05 | % | 56.31 | % | (40.34 | )% | ||||||||||||
RATIOS/SUPPLEMENTAL DATA: | ||||||||||||||||||
Net assets, applicable to common shareholders, end of period (000s) | $442,955 | $456,985 | $363,991 | |||||||||||||||
Ratio of expenses to average net assets (5) | 1.33 | %(7) | 1.37 | % | 1.28 | % | ||||||||||||
Ratio of net investment income to average net assets (5) | 10.53 | %(7) | 11.46 | % | 11.58 | % | ||||||||||||
Preferred shares asset coverage per share | $65,409 | $66,691 | $58,208 | |||||||||||||||
Portfolio turnover rate | 22 | % | 28 | % | 51 | % |
(1) | Calculated on average common shares outstanding. |
(2) | Less than $(0.005) per common share. |
(3) | Payment from affiliate increased the net asset value by less than $0.01. |
(4) | Total investment return is calculated assuming a purchase of a common share at the market price on the first day and a sale of a common share at the market price on the last day of each period reported. Dividends and distributions, if any, are assumed, for purposes of this calculation, to be reinvested at prices obtained under the Funds 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. |
(5) | Calculated on the basis of income and expenses applicable to both common and preferred shares relative to average net assets of common shareholders. |
(6) | Inclusive of expense reimbursement from Investment Manager of 0.02%. |
(7) | Annualized. |
44 | Semi-Annual Report | | August 31, 2017 | | See accompanying Notes to Financial Statements |
Year ended | ||||||||||||||||
February 28, 2015 |
February 28, 2014 |
February 28, 2013 |
||||||||||||||
$8.53 | $7.97 | $7.86 | ||||||||||||||
0.80 | 0.95 | (1) | 0.93 | |||||||||||||
(0.75 | ) | 0.62 | 0.20 | |||||||||||||
0.05 | 1.57 | 1.13 | ||||||||||||||
(0.00 | )(1)(2) | (0.01 | )(1) | (0.01 | ) | |||||||||||
0.05 | 1.56 | 1.12 | ||||||||||||||
(1.02 | ) | (1.02 | ) | (1.02 | ) | |||||||||||
| 0.02 | 0.01 | ||||||||||||||
| (0.00 | )(2) | (0.00 | )(2) | ||||||||||||
| 0.02 | 0.01 | ||||||||||||||
$7.56 | (3) | $8.53 | $7.97 | |||||||||||||
$8.58 | $9.71 | $8.52 | ||||||||||||||
(0.81 | )% | 28.50 | % | 9.35 | % | |||||||||||
$559,342 | $627,112 | $518,277 | ||||||||||||||
1.19 | % | 1.18 | %(6) | 1.31 | % | |||||||||||
9.87 | % | 11.50 | %(6) | 12.20 | % | |||||||||||
$76,034 | $82,218 | $72,287 | ||||||||||||||
57 | % | 93 | % | 41 | % |
See accompanying Notes to Financial Statements | | August 31, 2017 | | Semi-Annual Report | 45 |
AllianzGI Convertible & Income 2024 Target Term Fund/AllianzGI Convertible & Income Fund/AllianzGI Convertible & Income Fund II
August 31, 2017 (unaudited)
1. Organization and Significant Accounting Policies
AllianzGI Convertible & Income 2024 Target Term Fund (Convertible & Income 2024 Target Term), AllianzGI Convertible & Income Fund (Convertible & Income) and AllianzGI Convertible & Income Fund II (Convertible & Income II) (each, a Fund and, collectively, the Funds), were organized as Massachusetts business trusts on March 21, 2017, January 17, 2003 and April 22, 2003, respectively, and accordingly follow the investment company accounting and reporting guidance of the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 946 Financial Services Investment Companies. Prior to commencing operations on June 30, 2017, Convertible & Income 2024 Target Term had no operations other than matters relating to its organization and registration as a diversified, closed-end management investment company under the Investment Company Act of 1940, as amended (the 1940 Act), and the rules and regulations thereunder, and the sale and issuance of 10,168 shares at an aggregate price of $100,002 (net of sales load) to Allianz Asset Management of America L.P. (AAM). Convertible & Income and Convertible & Income II are organized and registered as diversified, closed-end management investment companies registered under the 1940 Act, and the rules and regulations thereunder. Allianz Global Investors U.S. LLC (AllianzGI U.S. or the Investment Manager), serves as the Funds investment manager. AllianzGI U.S. is an indirect, wholly-owned subsidiary of AAM. AAM is an indirect, wholly-owned subsidiary of Allianz SE, a publicly-traded European insurance and financial services company. Each Fund has authorized an unlimited amount of common shares with $0.00001 par value.
Convertible & Income 2024 Target Terms investment objectives are to provide a high level of income and to return at least $9.835 per common share (the original net asset value per common share of beneficial interest before
deducting offering costs of $0.02 per share) (the Original NAV) to holders of common shares on or about September 1, 2024 (the Termination Date). The objective to return Convertible & Income 2024 Target Terms Original NAV is not an express or implied guarantee obligation of Convertible & Income 2024 Target Term, the Investment Manager or any other entity, and an investor may receive less than the Original NAV upon termination of Convertible & Income 2024 Target Term. Convertible & Income 2024 Target Term attempts to achieve its investment objectives by investing in a diversified portfolio of high yield securities, convertible securities and other income-producing debt instruments, including senior secured loans, primarily of U.S. issuers. The Fund intends, on or about the Termination Date, to cease its investment operations, liquidate its portfolio (to the extent possible), retire or redeem any outstanding leverage facilities and distribute all its liquidated assets to the then-record holders of common shares, unless such term is extended by the Trustees and absent Trustee and shareholder approval to amend the limited term.
Convertible & Income and Convertible & Income IIs investment objective is to provide total return through a combination of capital appreciation and high current income. Convertible & Income and Convertible & Income II attempt to achieve this objective by investing in a portfolio of domestic convertible securities and non-convertible income-producing securities.
There can be no assurance that the Funds will meet their stated objectives.
The preparation of the Funds financial statements in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) requires the Funds management to make estimates and assumptions that affect the reported amounts and disclosures in each Funds financial statements. Actual results could differ from those estimates.
46 | Semi-Annual Report | | August 31, 2017 |
Notes to Financial Statements
AllianzGI Convertible & Income 2024 Target Term Fund/AllianzGI Convertible & Income Fund/AllianzGI Convertible & Income Fund II
August 31, 2017 (unaudited)
1. Organization and Significant Accounting Policies (continued)
In the normal course of business, the Funds enter into contracts that contain a variety of representations that provide general indemnifications. The Funds maximum exposures under these arrangements are unknown as this would involve future claims that may be made against the Funds that have not yet occurred.
In August 2016, the FASB issued Accounting Standards Update (ASU) 2016-15 which amends ASC 230 to clarify guidance on the classification of certain cash receipts and cash payments in the statement of cash flows. The ASU 2016-15 is effective for annual periods beginning after December 15, 2017, and interim periods within those annual periods. At this time, management is evaluating the implications of these changes on the financial statements.
In October 2016, the U.S. Securities and Exchange Commission (SEC) adopted new rules and forms, and amendments to certain current rules and forms, to modernize reporting and disclosure of information by registered investment companies. The amendments to Regulation S-X require standardized, enhanced disclosure about derivatives in investment company financial statements, and also change the rules governing the form and content of such financial statements. The amendments to Regulation S-X took effect on August 1, 2017 and the financial statements have been modified accordingly, as applicable.
In November 2016, the FASB issued ASU 2016-18 which amends ASC 230 to provide guidance on the classification and presentation of changes in restricted cash and restricted cash equivalents on the statement of cash flows. The
ASU 2016-18 is effective for annual periods beginning after December 15, 2017, and interim periods within those annual periods. At this time, management is evaluating the implications of these changes on the financial statements.
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 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 Funds 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 of each fund (together, the Board) has adopted procedures for valuing portfolio securities and other financial instruments in circumstances where market quotations are not readily available (including in cases where available market quotations are deemed to be unreliable), and has delegated primary responsibility for applying the valuation methods to the Investment Manager. The Funds Valuation Committee was established by the Board to oversee the implementation of the
August 31, 2017 | | Semi-Annual Report | 47 |
Notes to Financial Statements
AllianzGI Convertible & Income 2024 Target Term Fund/AllianzGI Convertible & Income Fund/AllianzGI Convertible & Income Fund II
August 31, 2017 (unaudited)
1. Organization and Significant Accounting Policies (continued)
Funds valuation methods and to make fair value determinations on behalf of the Board, as necessary. The Investment Manager monitors the continued appropriateness of methods applied and identifies circumstances and events that may require fair valuation. The Investment Manager determines if adjustments should be made in light of market changes, events affecting the issuer, or other factors. If the Investment Manager determines that a valuation method may no longer be appropriate, another valuation method previously approved by the Funds Valuation Committee may be selected or the Funds Valuation Committee will be convened to consider the matter and take any appropriate action in accordance with procedures adopted 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 Funds Valuation Committee.
Short-term debt instruments 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 premiums or discounts 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 Funds to value investments may differ from the value that would be realized if the investments were sold, and these differences could be material to the Funds financial statements. Each Funds 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.
(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, 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 Investment Managers or Valuation Committees own assumptions and securities whose price was determined by using a single brokers quote) |
The valuation techniques used by the Funds to measure fair value during the six months ended August 31, 2017 were intended to maximize the use of observable inputs and to minimize the use of unobservable inputs.
The Funds policy is to recognize transfers between levels at the end of the reporting period. An investment assets or liabilitys level within the fair value hierarchy is based on the lowest level input, individually or in aggregate, that is significant to the 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. Investments categorized as Level 1 or 2 as of period end may have been transferred between
48 | Semi-Annual Report | | August 31, 2017 |
Notes to Financial Statements
AllianzGI Convertible & Income 2024 Target Term Fund/AllianzGI Convertible & Income Fund/AllianzGI Convertible & Income Fund II
August 31, 2017 (unaudited)
1. Organization and Significant Accounting Policies (continued)
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 Funds generally use to evaluate how to classify each major category of assets and liabilities within Level 2 and Level 3, in accordance with U.S. GAAP.
Equity Securities (Common and Preferred Stock and Warrants) 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 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 & notes are categorized as Level 2. To the extent that these inputs are unobservable, the values are categorized as Level 3.
Senior Loans Senior Loans generally are valued by independent pricing services based on the average of quoted prices received from multiple dealers or valued relative to other benchmark securities when broker-dealer quotes are unavailable. These quoted prices are based on interest rates, yield curves, option
August 31, 2017 | | Semi-Annual Report | 49 |
Notes to Financial Statements
AllianzGI Convertible & Income 2024 Target Term Fund/AllianzGI Convertible & Income Fund/AllianzGI Convertible & Income Fund II
August 31, 2017 (unaudited)
1. Organization and Significant Accounting Policies (continued)
adjusted spreads, credit spreads and/or other criteria. To the extent that these inputs are observable, the values of Senior Loans are categorized as Level 2. To the extent that these inputs are unobservable, the values are categorized as Level 3.
(c) Investment Transactions and Investment Income
Investment transactions are accounted for on the trade date. Realized gains and losses on investments are determined on an identified cost basis. Interest income adjusted for the accretion of discounts and amortization of premiums is recorded on an accrual basis. Discounts or premiums on debt securities purchased are accreted or amortized, respectively, to interest income. Conversion premium is not amortized. Dividend income is recorded on the ex-dividend date, except for certain dividends from foreign securities where the ex-dividend date may have passed, and then are recorded as soon after the ex-dividend date as the Fund, using reasonable diligence, become aware of such dividends. Facility fees and other fees (such as origination fees) received on settlement date are amortized as income over the expected term of the senior loan. Consent fees relating to corporate actions and facility fees and other fees received after settlement date relating to senior loans and commitment fees received relating to unfunded purchase commitments are recorded as miscellaneous income upon receipt. Payments received from certain investments may be comprised of dividends, realized gains and return of capital. These payments may initially be recorded as dividend income and may subsequently be reclassified as realized gains and/or return of capital upon receipt of information from the issuer. Payments considered return of capital reduce the cost
basis of the respective security. Distributions, if any, in excess of the cost basis of a security are recognized as capital gains. Expenses are recorded on an accrual basis.
(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. The Funds may be subject to excise tax based on distributions to shareholders.
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. In accordance with provisions set forth under U.S. GAAP, the Investment Manager has reviewed the Funds tax positions for all open tax years. As of August 31, 2017, the Funds have recorded no liability for net unrecognized tax benefits relating to uncertain income tax positions they have taken. The Funds federal income tax returns for the prior three years, as applicable, remain subject to examination by the Internal Revenue Service.
(e) Dividends and Distributions to Shareholders Common Shares
The Funds declare dividends from net investment income to common shareholders monthly. Distributions of net realized capital gains, if any, are paid at least annually. The Funds record dividends and distributions on the ex-dividend date. The amount of dividends from net investment income and distributions
50 | Semi-Annual Report | | August 31, 2017 |
Notes to Financial Statements
AllianzGI Convertible & Income 2024 Target Term Fund/AllianzGI Convertible & Income Fund/AllianzGI Convertible & Income Fund II
August 31, 2017 (unaudited)
1. Organization and Significant Accounting Policies (continued)
from net realized capital gains or return of capital is determined in accordance with federal income tax regulations, which may differ from U.S. 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 to shareholders from return of capital.
(f) Convertible Securities
Each of the Funds invests a portion of its assets in convertible securities. Although convertible securities 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 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 typically still less than that of the underlying stock.
(g) Senior Loans
The Funds may purchase assignments of, and participations in, Senior Loans originated, negotiated and structured by a U.S. or foreign commercial bank, insurance company, finance company or other financial institution for a lending syndicate of financial institutions (the Lender). When purchasing an assignment, the Funds succeed to all the rights and obligations under the loan agreement with the same rights and obligations as the assigning Lender. Assignments may, however, be arranged through private negotiations between potential assignees and potential assignors, and the rights and obligations acquired by the purchaser of an assignment may differ from, and be more limited than, those held by the assigning Lender. The Funds may also enter into lending arrangements involving unfunded loan commitments, which are contractual obligations for future funding. Unfunded loan commitments may include revolving credit facilities, which may obligate the Funds to supply additional cash to the borrower on demand. Unfunded loan commitments represent a future obligation, even though a percentage of the principal amounts may never be utilized by the borrower.
The Funds may purchase the securities of distressed companies (including assignments or direct investments), including companies engaged in restructurings or bankruptcy proceedings. Investments in distressed companies may include senior obligations of an issuer issued in connection with a restructuring under Chapter 11 of the U.S. Bankruptcy Code (commonly known as debtor-in-possession or DIP financings). Debtor-in-possession financings generally allow the issuer to continue its operations while reorganizing. Such financings constitute senior liens on unencumbered collateral (i.e., collateral not subject to other creditors claims). There is risk
August 31, 2017 | | Semi-Annual Report | 51 |
Notes to Financial Statements
AllianzGI Convertible & Income 2024 Target Term Fund/AllianzGI Convertible & Income Fund/AllianzGI Convertible & Income Fund II
August 31, 2017 (unaudited)
1. Organization and Significant Accounting Policies (continued)
that the issuer under a debtor-in-possession financing will not emerge from Chapter 11 and be forced to liquidate its assets under Chapter 7 of the U.S. Bankruptcy Code. In the event of liquidation, the Funds only recourse would be against the collateral securing the debtor-in-possession financing.
(h) Payment In-Kind Securities
The Funds may invest in, payment in-kind securities, which are debt or preferred stock securities that require or permit payment of interest in the form of additional securities. Payment in-kind securities allow the issuer to avoid or delay the need to generate cash to meet current interest payments and, as a result, may involve greater risk than securities that pay interest currently or in cash.
(i) Warrants
The Funds may receive warrants. Warrants are securities that are usually issued together with a debt security or preferred stock and that give the holder the right to buy a proportionate amount of common stock at a specified price. Warrants may be freely transferable and are often traded on major exchanges. Warrants normally have a life that is measured in years and entitle the holder to buy common stock of a company at a price that is usually higher than the market price at the time the warrant is issued. Warrants may entail greater risks than certain other types of investments. Generally, warrants do not carry the right to receive dividends or exercise voting rights with respect to the underlying securities, and they do not represent any rights in the assets of the issuer. In addition, their value does not necessarily change with the value of the underlying securities, and they cease to have value if they are not exercised on or before their expiration date. If the market price of the underlying stock
does not exceed the exercise price during the life of the warrant, the warrant will expire worthless. Warrants may increase the potential profit or loss to be realized from the investment as compared with investing the same amount in the underlying securities. Similarly, the percentage increase or decrease in the value of an equity security warrant may be greater than the percentage increase or decrease in the value of the underlying common stock. Warrants may relate to the purchase of equity or debt securities. Debt obligations with warrants attached to purchase equity securities have many characteristics of convertible securities and their prices may, to some degree, reflect the performance of the underlying stock. Debt obligations also may be issued with warrants attached to purchase additional debt securities at the same coupon rate. A decline in interest rates would permit a Fund to sell such warrants at a profit. If interest rates rise, these warrants would generally expire with no value.
(j) Statement of Cash Flows
U.S. GAAP requires entities providing financial statements that report both financial position and results of operations to also provide a statement of cash flows for each period for which results of operations are provided, but exempts investment companies meeting certain conditions. One of the conditions is that the fund had little or no debt, based on the average debt outstanding during the period, in relation to average total assets. Convertible & Income 2024 Target Term indebtedness has been determined to be at a level requiring a statement of cash flows. The Statement of Cash Flows has been prepared using the indirect method which required net change in net assets resulting from operations to be adjusted to reconcile to net cash flows from operating activities. Convertible & Income and Convertible & Income II do not require a Statement of Cash Flows.
52 | Semi-Annual Report | | August 31, 2017 |
Notes to Financial Statements
AllianzGI Convertible & Income 2024 Target Term Fund/AllianzGI Convertible & Income Fund/AllianzGI Convertible & Income Fund II
August 31, 2017 (unaudited)
1. Organization and Significant Accounting Policies (continued)
(k) Loan Interest Expense
Loan interest expense relates to the Convertible & Income 2024 Target Terms participation in debt financing transactions (See Note 7). Interest expense is recorded as it is incurred.
(l) Repurchase Agreements
The Funds are parties to Master Repurchase Agreements (Master Repo Agreements) with select counterparties. The Master Repo Agreements include provisions for initiation of repurchase transactions, income payments, events of default, and maintenance of collateral.
The Funds enter into transactions, under the Master Repo Agreements, with their custodian bank or securities brokerage firms whereby they purchase securities under agreements (i.e., repurchase agreements) to resell such securities at an agreed upon price and date. The Funds, through their custodian, take possession of securities collateralizing the repurchase agreement. Such agreements are carried at the contract amount in the financial statements, which is considered to represent fair value. The collateral that is pledged (i.e., the securities received by the Funds), which consists primarily of U.S. government obligations and asset-backed securities, is held by the custodian bank for the benefit of the Funds until maturity of the repurchase agreement. Provisions of the repurchase agreements and the procedures adopted by the Funds require that the market value of the collateral, including accrued interest thereon, be sufficient in the event of default by the counterparty. If the counterparty defaults under the Master Repo Agreements and the value of the collateral declines or if the counterparty enters an insolvency proceeding, realization of the collateral by the Fund may be delayed or limited. The gross values are
included in the Funds Schedules of Investments. As of August 31, 2017, the value of the related collateral exceeded the value of the repurchase agreements for each Fund.
(m) Restricted Securities
The Funds are permitted to invest in securities that are subject to legal or contractual restrictions on resale. These securities generally may be resold in transactions exempt from registration or to the public if the securities are registered. Disposal of these securities may involve time-consuming negotiations and expenses, and prompt sale at an acceptable price may be difficult.
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 are also exposed to other risks such as, but not limited to, interest rate, credit and leverage risks. Additionally, Convertible & Income 2024 Target Term is exposed to limited term risk.
Interest rate risk is the risk that fixed income securities valuations will change because of changes in interest rates. During periods of rising nominal interest rates, the values of fixed income instruments are generally expected to decline. Conversely, during periods of declining nominal interest rates, the values of fixed income instruments are generally expected to rise. To the extent that a Fund effectively has short positions with respect to fixed income instruments, the values of such short positions would generally be expected to rise when nominal interest rates rise and to decline when nominal interest rates decline. A nominal interest rate can be described as the sum of a
August 31, 2017 | | Semi-Annual Report | 53 |
Notes to Financial Statements
AllianzGI Convertible & Income 2024 Target Term Fund/AllianzGI Convertible & Income Fund/AllianzGI Convertible & Income Fund II
August 31, 2017 (unaudited)
2. Principal Risks (continued)
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 used primarily as a measure of the sensitivity of a fixed income securitys market price to interest rate (i.e., yield) movements. Interest rate changes can be sudden and unpredictable, and the Funds may lose money as a result of movements in interest rates. The Funds may not be able to hedge against changes in interest rates or may choose not to do so for cost or other reasons. In addition, any hedges may not work as intended. The values of equity and other non-fixed income securities may decline due to fluctuations in interest rates.
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 securities may decline due to general market conditions (market risk) 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, adverse changes to credit markets or adverse investor sentiment. They may also decline due to factors that affect a particular industry or industries, such as labor shortages or increased production costs and competitive conditions within an industry. Equity securities and equity-related investments generally have greater market price volatility than fixed income securities, although under
certain market conditions fixed income securities may have comparable or greater price volatility. Credit ratings downgrades may also negatively affect securities held by the Funds. Even when markets perform well, there is no assurance that the investments held by the Funds will increase in value along with the broader market. In addition, market risk includes the risk that geopolitical events will disrupt the economy on a national or global level.
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 Investment Manager seeks to minimize the Funds counterparty risk by performing reviews of each counterparty and by minimizing concentration of counterparty risk by undertaking transactions with multiple customers and counterparties on recognized and reputable exchanges. Delivery of securities sold is only made once the Funds have received payment. Payment is made on a purchase once the securities have been delivered by the counterparty. The trade will fail if either party fails to meet its obligation.
The Funds are exposed to risks associated with leverage. Leverage may cause the value of the Funds shares to be more volatile than if the Funds did not use leverage. This is because leverage tends to exaggerate the effect of any increase or decrease in the value of the Funds portfolio securities. The Funds may engage in transactions or purchase instruments that give rise to forms of leverage. In addition, to the extent the Funds employ leverage, dividend and
54 | Semi-Annual Report | | August 31, 2017 |
Notes to Financial Statements
AllianzGI Convertible & Income 2024 Target Term Fund/AllianzGI Convertible & Income Fund/AllianzGI Convertible & Income Fund II
August 31, 2017 (unaudited)
2. Principal Risks (continued)
interest costs may not be recovered by any appreciation of the securities purchased with the leverage proceeds and could exceed the Funds investment returns, resulting in greater losses. As discussed further in Note 6, Convertible & Income and Convertible & Income II have auction-rate preferred shares outstanding. As discussed further in Note 7, Convertible & Income 2024 Target Term has entered into margin loan financing.
Convertible & Income 2024 Target Term is exposed to limited term risk. The Fund has a limited term feature, pursuant to which it intends, on or about September 1, 2024, to cease its investment operations, liquidate its portfolio (to the extent possible), retire or redeem any outstanding leverage facilities and distribute all its liquidated assets to its then record shareholders, unless the term is extended by the Funds Board of Trustees (for up to six months) and absent Trustee and shareholder approval to amend the limited term. Because the assets of the Fund will be liquidated in connection with its termination, the Fund may be required to sell portfolio securities when it otherwise would not, including at times when market conditions are not favorable, or at a time when a particular security has entered into default or bankruptcy, or otherwise is in severe distress, which may cause the Fund to lose money. Although the Fund has an investment objective of returning the Original NAV to Common Shareholders on or about the Termination Date, this is not a guarantee and the Fund may not be successful in achieving this objective. There can be no assurance that the Fund will be able to return the Original NAV to Common Shareholders, and such return is not backed or otherwise guaranteed by the Fund, the Investment Manager or any other entity.
The Funds may hold defaulted securities that may involve special considerations including
bankruptcy proceedings, other regulatory and legal restrictions affecting the Funds ability to trade, and the availability of prices from independent pricing services or dealer quotations. Defaulted securities are often illiquid and may not be actively traded. Sale of securities in bankrupt companies at an acceptable price may be difficult and differences compared to the value of the securities used by the Funds could be material. A Fund may incur additional expenses to the extent it is required to seek recovery upon a portfolio securitys default in the payment of principal or interest. In any bankruptcy proceeding relating to a defaulted investment, a Fund may lose its entire investment or may be required to accept cash or securities with a value substantially less than its original investment.
Investments in senior loans and repurchase agreements also involve special risks. Although typically secured, senior loans may not be backed by sufficient collateral to satisfy their issuers obligations in the event of bankruptcy or similar scenarios. Senior loans may also be illiquid. Similarly, repurchase agreements may result in losses if the collateral associated with such positions is insufficient in the event of a bankruptcy or similar scenario. Repurchase agreement positions may be illiquid.
3. Investment Manager & Deferred Compensation
Investment Manager. Each Fund has an Investment Management Agreement (for the purpose of this section, each an Agreement) with the Investment Manager. Subject to the supervision of the Funds Board, 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, Convertible & Income 2024 Target Term pays the Investment Manager an annual
August 31, 2017 | | Semi-Annual Report | 55 |
Notes to Financial Statements
AllianzGI Convertible & Income 2024 Target Term Fund/AllianzGI Convertible & Income Fund/AllianzGI Convertible & Income Fund II
August 31, 2017 (unaudited)
3. Investment Manager & Deferred Compensation (continued)
Due to Investment Manager on the Statements of Asset and Liabilities represents the remaining payable for Convertible & Income 2024 Target Terms offering costs that were paid by the Investment Manager.
4. Investments in Securities
For the period or six months ended August 31, 2017, purchases and sales of investments, other than short-term securities were:
Purchases | Sales | |||||||
Convertible & Income 2024 Target Term |
$ | 257,613,426 | $ | 25,720,066 | ||||
Convertible & Income |
204,232,634 | 220,308,606 | ||||||
Convertible & Income II |
154,256,701 | 166,108,846 |
5. Income Tax Information
At August 31, 2017, the aggregate cost basis and the net unrealized appreciation (depreciation) of investments for federal income tax purposes were:
Federal Tax Cost Basis(1) |
Unrealized Appreciation |
Unrealized Depreciation |
Net Unrealized Depreciation |
|||||||||||||
Convertible & Income 2024 Target Term |
$ | 258,454,930 | $ | 1,909,080 | $ | 2,377,624 | $ | (468,544 | ) | |||||||
Convertible & Income |
949,612,838 | 79,879,208 | 92,321,172 | (12,441,964 | ) | |||||||||||
Convertible & Income II |
721,510,800 | 61,731,006 | 70,306,757 | (8,575,751 | ) |
(1) | Differences between book and tax cost basis are primarily attributable to wash sale loss deferrals and differing treatment of bond premium amortization. |
56 | Semi-Annual Report | | August 31, 2017 |
Notes to Financial Statements
AllianzGI Convertible & Income 2024 Target Term Fund/AllianzGI Convertible & Income Fund/AllianzGI Convertible & Income Fund II
August 31, 2017 (unaudited)
6. Auction-Rate Preferred Shares
For the six months ended August 31, 2017, the annualized dividend rates paid with respect to the Preferred shares of each Fund ranged from:
High | Low | At August 31, 2017 | ||||||||||
Series A |
1.757% | 0.992% | 1.742% | |||||||||
Series B |
1.742% | 0.977% | 1.667% | |||||||||
Series C |
1.772% | 0.872% | 1.757% | |||||||||
Series D |
1.772% | 1.007% | 1.772% | |||||||||
Series E |
1.772% | 0.992% | 1.712% |
August 31, 2017 | | Semi-Annual Report | 57 |
Notes to Financial Statements
AllianzGI Convertible & Income 2024 Target Term Fund/AllianzGI Convertible & Income Fund/AllianzGI Convertible & Income Fund II
August 31, 2017 (unaudited)
6. Auction-Rate Preferred Shares (continued)
During the period or six months ended August 31, 2017, the following Funds engaged in purchases and sales of securities pursuant to Rule 17a-7 of the 1940 Act:
Purchases | Sales | |||||||
Convertible & Income 2024 Target Term |
$ | 12,200,084 | | |||||
Convertible & Income |
| $ | 2,802,416 | |||||
Convertible & Income II |
| 2,112,527 |
58 | Semi-Annual Report | | August 31, 2017 |
Notes to Financial Statements
AllianzGI Convertible & Income 2024 Target Term Fund/AllianzGI Convertible & Income Fund/AllianzGI Convertible & Income Fund II
August 31, 2017 (unaudited)
9. Common Shares Issued
10. Subsequent Events
In preparing these financial statements, the Funds management has evaluated events and transactions for potential recognition or disclosure through the date the financial statements were issued.
On September 1, 2017 the following monthly dividends were declared to common shareholders, payable October 2, 2017 to common shareholders of record on September 11, 2017:
Convertible & Income 2024 Target Term | $0.046 per share | |
Convertible & Income | $0.065 per common share | |
Convertible & Income II | $0.0575 per common share |
On October 2, 2017 the following monthly dividends were declared to common shareholders, payable November 1, 2017 to common shareholders of record on October 12, 2017:
Convertible & Income 2024 Target Term | $0046 per share | |
Convertible & Income | $0.065 per common share | |
Convertible & Income II | $0.0575 per common share |
There were no other subsequent events identified that require recognition or disclosure.
August 31, 2017 | | Semi-Annual Report | 59 |
Annual Shareholder Meeting Results (unaudited)
AllianzGI Convertible & Income Fund/AllianzGI Convertible & Income II Fund
Convertible & Income and Convertible & Income II held their meeting of shareholders on July 13, 2017. Shareholders voted as indicated below:
Convertible & Income: | Affirmative | Withheld Authority |
||||||
Re-election of James A. Jacobson* Class II to serve until the annual meeting for the 2020-2021 fiscal year |
9,895 | 578 | ||||||
Re-election of Bradford K. Gallagher Class II to serve until the annual meeting for the 2020-2021 fiscal year |
73,785,803 | 1,692,906 | ||||||
Re-election of Davey S. Scoon Class II to serve until the annual meeting for the 2020-2021 fiscal year |
73,769,344 | 1,709,365 |
The other members of the Board of Trustees at the time of the meeting, namely, Ms. Barbara R. Claussen, Ms. Deborah A. DeCotis and Messrs. F. Ford Drummond, A. Douglas Eu, Hans W. Kertess, James S. MacLeod, William B. Ogden, IV and Alan Rappaport continued to serve as Trustees of the Fund.
* | Mr. Jacobson was elected by preferred shareholders voting as a separate class. All other trustees of Convertible & Income were elected by common and preferred shareholders voting together as a single class. |
| Interested Trustee |
Convertible & Income II: | Affirmative | Withheld Authority |
||||||
Re-election of James A. Jacobson* Class II to serve until the annual meeting for the 2020-2021 fiscal year |
7,293 | 745 | ||||||
Re-election of Deborah A. Decotis Class II to serve until the annual meeting for the 2020-2021 fiscal year |
62,784,656 | 2,978,029 | ||||||
Re -election of Bradford K. Gallagher Class II to serve until the annual meeting for the 2020-2021 fiscal year |
62,923,561 | 2,839,124 | ||||||
Re-election of Davey S. Scoon Class II to serve until the annual meeting for the 2020-2021 fiscal year |
62,932,560 | 2,830,125 |
The other members of the Board of Trustees at the time of the meeting, namely, Ms. Barbara R. Claussen and Messrs. F. Ford Drummond, A. Douglas Eu, Hans W. Kertess, James S. MacLeod, William B. Ogden, IV and Alan Rappaport continued to serve as Trustees of the Fund.
* | Mr. Jacobson was elected by preferred shareholders voting as a separate class. All other trustees of Convertible & Income II were elected by common and preferred shareholders voting together as a single class. |
| Interested Trustee |
60 | Semi-Annual Report | | August 31, 2017 |
Proxy Voting Policies & Procedures (unaudited)
AllianzGI Convertible & Income 2024 Target Term Fund/AllianzGI Convertible & Income Fund/AllianzGI Convertible & Income Fund II
Proxy Voting Policies & Procedures:
A description of the policies 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 us.allianzgi.com/en-us/advisors/products-solutions/closed-end-funds; and (iii) on the Securities and Exchange Commission website at www.sec.gov.
August 31, 2017 | | Semi-Annual Report | 61 |
Matters Relating to the Trustees Consideration of the Investment
Management Agreements (unaudited)
AllianzGI Convertible & Income 2024 Target Term Fund/ AllianzGI Convertible & Income Fund/AllianzGI Convertible & Income Fund II
62 | Semi-Annual Report | | August 31, 2017 |
Matters Relating to the Trustees Consideration of the Investment
Management Agreements (unaudited) (continued)
AllianzGI Convertible & Income 2024 Target Term Fund/ AllianzGI Convertible & Income Fund/AllianzGI Convertible & Income Fund II
August 31, 2017 | | Semi-Annual Report | 63 |
Matters Relating to the Trustees Consideration of the Investment
Management Agreements (unaudited) (continued)
AllianzGI Convertible & Income 2024 Target Term Fund/ AllianzGI Convertible & Income Fund/AllianzGI Convertible & Income Fund II
64 | Semi-Annual Report | | August 31, 2017 |
Matters Relating to the Trustees Consideration of the Investment
Management Agreements (unaudited) (continued)
AllianzGI Convertible & Income 2024 Target Term Fund/ AllianzGI Convertible & Income Fund/AllianzGI Convertible & Income Fund II
August 31, 2017 | | Semi-Annual Report | 65 |
Matters Relating to the Trustees Consideration of the Investment
Management Agreements (unaudited) (continued)
AllianzGI Convertible & Income 2024 Target Term Fund/ AllianzGI Convertible & Income Fund/AllianzGI Convertible & Income Fund II
66 | Semi-Annual Report | | August 31, 2017 |
Matters Relating to the Trustees Consideration of the Investment
Management Agreements (unaudited) (continued)
AllianzGI Convertible & Income 2024 Target Term Fund/ AllianzGI Convertible & Income Fund/AllianzGI Convertible & Income Fund II
August 31, 2017 | | Semi-Annual Report | 67 |
Matters Relating to the Trustees Consideration of the Investment
Management Agreements (unaudited) (continued)
AllianzGI Convertible & Income 2024 Target Term Fund/ AllianzGI Convertible & Income Fund/AllianzGI Convertible & Income Fund II
68 | Semi-Annual Report | | August 31, 2017 |
Matters Relating to the Trustees Consideration of the Investment
Management Agreements (unaudited) (continued)
AllianzGI Convertible & Income 2024 Target Term Fund/ AllianzGI Convertible & Income Fund/AllianzGI Convertible & Income Fund II
August 31, 2017 | | Semi-Annual Report | 69 |
Matters Relating to the Trustees Consideration of the Investment
Management Agreements (unaudited) (continued)
AllianzGI Convertible & Income 2024 Target Term Fund/ AllianzGI Convertible & Income Fund/AllianzGI Convertible & Income Fund II
70 | Semi-Annual Report | | August 31, 2017 |
AllianzGI Convertible & Income 2024 Target Term Fund/AllianzGI Convertible & Income Fund/AllianzGI Convertible & Income Fund II
August 31, 2017 | | Semi-Annual Report | 71 |
Privacy Policy (unaudited) (continued)
AllianzGI Convertible & Income 2024 Target Term Fund/AllianzGI Convertible & Income Fund/AllianzGI Convertible & Income Fund II
72 | Semi-Annual Report | | August 31, 2017 |
Privacy Policy (unaudited) (continued)
AllianzGI Convertible & Income 2024 Target Term Fund/AllianzGI Convertible & Income Fund/AllianzGI Convertible & Income Fund II
August 31, 2017 | | Semi-Annual Report | 73 |
* | Effective May 1, 2017, services related to custody and fund accounting for the AllianzGI Convertible & Income and AllianzGI Convertible & Income II Funds transitioned from Brown Brothers Harriman & Co. to State Street Bank and Trust Company. |
This report, including the financial information herein, is transmitted to the shareholders of AllianzGI Convertible & Income 2024 Target Term, AllianzGI Convertible & Income and AllianzGI Convertible & Income II Funds 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.
The financial information included herein is taken from the records of the Funds without examination by an independent registered public accounting firm, who did not express an opinion herein.
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 their 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. Each Funds Form N-Q is available on the SECs website at www.sec.gov and may be reviewed and copied at the SECs 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 us.allianzgi.com/en-us/advisors/products-solutions/closed-end-funds.
Information on the Funds is available at us.allianzgi.com/en-us/advisors/products-solutions/closed-end-funds or by calling the Funds shareholder servicing agent at (800) 254-5197.
Receive this report electronically and eliminate paper mailings.
To enroll, visit us.allianzgi.com/edelivery.
Allianz Global Investors Distributors LLC | AZ603SA_083117 |
253957
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. INVESTMENTS
(a) The registrants Schedule of Investments is included as part of the report to shareholders filed under Item 1 of this form.
(b) Not applicable.
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 Funds Board of Trustees since the Fund last provided disclosure in response to this item.
ITEM 11. CONTROLS AND PROCEDURES
(a) The registrants President and Chief Executive Officer and Treasurer, Principal Financial & Accounting Officer have concluded that the registrants 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 registrants 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 second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting.
ITEM 12. EXHIBITS
(a) (1) Not required in this filing.
(a) (2) Exhibit 99.302 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: AllianzGI Convertible & Income Fund
By: | /s/ Thomas J. Fuccillo | |
Thomas J. Fuccillo President & Chief Executive Officer | ||
Date: October 27, 2017 | ||
By: | /s/ Lawrence G. Altadonna | |
Lawrence G. Altadonna Treasurer, Principal Financial & Accounting Officer | ||
Date: October 27, 2017 |
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/ Thomas J. Fuccillo | |
Thomas J. Fuccillo President & Chief Executive Officer | ||
Date: October 27, 2017 | ||
By: | /s/ Lawrence G. Altadonna | |
Lawrence G. Altadonna Treasurer, Principal Financial & Accounting Officer | ||
Date: October 27, 2017 |