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)
Scott Whisten 1633 Broadway, New York, New York 10019
(Name and address of agent for service)
Registrants telephone number, including area code: 212-739-3367
Date of fiscal year end: February 28
Date of reporting period: August 31, 2018
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, 2018
Thomas J. Fuccillo
President & Chief Executive Officer
Dear Shareholder:
U.S. economic expansion accelerated during the six-month fiscal reporting period ended August 31, 2018. In contrast, economic growth overseas moderated. Against this backdrop, the overall U.S. equity market posted a solid return, whereas international equities were weak. Elsewhere, the overall U.S. bond market posted a small gain during the reporting period.
For the six month reporting period ended August 31, 2018:
∎ | AllianzGI Convertible & Income 2024 Target Term Fund returned 4.52% on net asset value (NAV) and 4.01% on market price. |
∎ | AllianzGI Convertible & Income Fund returned 3.90% on NAV and 9.13% on market price. |
∎ | AllianzGI Convertible & Income Fund II returned 3.89% on NAV and 7.89% on market price. |
During the six-month period ended August 31, 2018, the Standard & Poors (S&P) 500 Index, an unmanaged index generally representative of the U.S. stock market, rose 7.96% and the ICE BofA Merrill Lynch High Yield Master II Index, an unmanaged index generally representative of the high yield bond market, gained 2.23%. Convertible securities, which share characteristics of both stocks and bonds, generated even stronger results. The ICE BofA Merrill Lynch All Convertibles All Qualities Index, an unmanaged index generally representative of the convertible securities market, returned 8.61%.
Turning to the U.S. economy, gross domestic product (GDP), the value of goods and services produced in the country, which is the broadest measure of economic activity and the principal indicator of economic performance, expanded at a 2.3% annualized pace during the fourth quarter of 2017. GDP growth then moderated to 2.2% during the first quarter of 2018. Finally, the Commerce Departments final reading released after the reporting period had ended showed that GDP grew at an annual pace of 4.2% for the second quarter of 2018.
After raising interest rates three times in 2017, the U.S. Federal Reserve (the Fed) again raised rates at its meetings in March and June 2018. The last hike pushed the federal funds rate to a range between 1.75% and 2.00%. At its meeting in June 2018, the Fed announced that it anticipated raising rates an additional two times before the end of the year. In September 2018 after the reporting period ended the Fed raised the federal funds rate to a range between 2.00% and 2.25%.
2 | Semi-Annual Report | | August 31, 2018 |
however, these outcomes cannot be assured. Households and businesses may well rethink their spending plans over the months ahead as they evaluate the meaning of tax changes, government spending, economic policy adjustments and new risks to their well-being. If capital expenditures by businesses go to unproductive investment, productivity fails to accelerate and inflation-adjusted workers compensation does not increase, real economic growth could languish.
While Fed monetary policymakers will continue to base their interest-rate decisions on the flow of inflation, wage and labor market data, how the Fed implements monetary policy over the next several years may be at least as important as the timing and magnitude of its policy decisions.
Meanwhile, the interconnectedness of the U.S. economy to other countries remains intricate and deep. Even as trade relations deteriorate, we believe the forces of globalization and technological revolution promise to defeat the forces of nationalism, populism and withdrawal from multilateral arrangements. Even if U.S.-China and U.S.-European Union trade relations play out acrimoniously over the years ahead, for example, a complicated and extensive flow of goods, services, resources and intellectual property between the nations will continue based, for the time being, on a co-dependency built up over the last three decades.
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 are available on our website, us.allianzgi.com/closedendfunds.
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, 2018 | | Semi-Annual Report | 3 |
AllianzGI Convertible & Income 2024 Target Term Fund / AllianzGI Convertible & Income Fund /AllianzGI Convertible & Income Fund II
August 31, 2018 (unaudited)
4 | Semi-Annual Report | | August 31, 2018 |
August 31, 2018 | | Semi-Annual Report | 5 |
6 | Semi-Annual Report | | August 31, 2018 |
AllianzGI Convertible & Income 2024 Target Term Fund
August 31, 2018 (unaudited)
Total Return(1): | Market Price | NAV | ||||||
Six Month |
4.01% | 4.52% | ||||||
1 Year |
-0.23% | 7.18% | ||||||
Commencement of Operations (6/30/17) to 8/31/18 |
-0.65% | 6.38% |
See Notes to Performance & Statistics on page 10.
August 31, 2018 | | Semi-Annual Report | 7 |
AllianzGI Convertible & Income Fund
August 31, 2018 (unaudited)
Total Return(1): | Market Price | NAV | ||||||
Six Month |
9.13% | 3.90% | ||||||
1 Year |
14.32% | 9.05% | ||||||
5 Year |
7.20% | 5.50% | ||||||
10 Year |
8.38% | 7.81% | ||||||
Commencement of Operations (3/31/03) to 8/31/18 |
8.07% | 7.78% |
See Notes to Performance & Statistics on page 10.
8 | Semi-Annual Report | | August 31, 2018 |
Performance & Statistics
AllianzGI Convertible & Income Fund II
August 31, 2018 (unaudited)
Total Return(1): | Market Price | NAV | ||||||
Six Month |
7.89% | 3.89% | ||||||
1 Year |
11.71% | 9.01% | ||||||
5 Year |
5.80% | 5.52% | ||||||
10 Year |
7.86% | 7.22% | ||||||
Commencement of Operations (7/31/03) to 8/31/18 |
6.83% | 6.80% |
See Notes to Performance & Statistics on page 10.
August 31, 2018 | | Semi-Annual Report | 9 |
Performance and Statistics
AllianzGI Convertible & Income Funds
August 31, 2018 (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. Bonds 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, 2018.
(4) Represents amounts drawn under the liquidity 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 and amounts drawn under the liquidity 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).
10 | Semi-Annual Report | | August 31, 2018 |
AllianzGI Convertible & Income 2024 Target Term Fund
August 31, 2018 (unaudited)
Principal Amount (000s) |
Value | |||||||||||
Convertible Bonds & Notes 58.3% | ||||||||||||
Auto Manufacturers 0.6% | ||||||||||||
$1,000 | Navistar International Corp., 4.75%, 4/15/19 | $1,042,189 | ||||||||||
Biotechnology 3.3% | ||||||||||||
2,000 | Acorda Therapeutics, Inc., 1.75%, 6/15/21 | 1,955,000 | ||||||||||
1,500 | Innoviva, Inc., 2.125%, 1/15/23 | 1,484,377 | ||||||||||
1,000 | Intercept Pharmaceuticals, Inc., 3.25%, 7/1/23 | 967,399 | ||||||||||
1,500 | PTC Therapeutics, Inc., 3.00%, 8/15/22 | 1,617,267 | ||||||||||
6,024,043 | ||||||||||||
Building Materials 0.8% | ||||||||||||
1,500 | Patrick Industries, Inc., 1.00%, 2/1/23 (a)(c) | 1,471,616 | ||||||||||
Commercial Services 1.2% | ||||||||||||
2,500 | Macquarie Infrastructure Corp., 2.00%, 10/1/23 (f) | 2,243,940 | ||||||||||
Computers 0.8% | ||||||||||||
1,500 | Western Digital Corp., 1.50%, 2/1/24 (a)(c)(f) | 1,443,803 | ||||||||||
Distribution/Wholesale 1.1% | ||||||||||||
2,000 | Titan Machinery, Inc., 3.75%, 5/1/19 | 1,987,644 | ||||||||||
Diversified Financial Services 4.1% | ||||||||||||
2,000 | Encore Capital Europe Finance Ltd., 4.50%, 9/1/23 | 2,156,240 | ||||||||||
2,550 | Encore Capital Group, Inc., 2.875%, 3/15/21 (e) | 2,437,519 | ||||||||||
3,000 | PRA Group, Inc., 3.00%, 8/1/20 | 2,910,564 | ||||||||||
7,504,323 | ||||||||||||
Electrical Equipment 1.4% | ||||||||||||
3,215 | SunPower Corp., 4.00%, 1/15/23 (f) | 2,618,814 | ||||||||||
Electronics 1.6% | ||||||||||||
3,000 | OSI Systems, Inc., 1.25%, 9/1/22 | 2,938,845 | ||||||||||
Energy-Alternate Sources 3.2% | ||||||||||||
500 | NextEra Energy Partners L.P., 1.50%, 9/15/20 (a)(c) | 512,305 | ||||||||||
3,000 | Pattern Energy Group, Inc., 4.00%, 7/15/20 | 2,991,000 | ||||||||||
2,500 | Tesla Energy Operations, Inc., 1.625%, 11/1/19 (f) | 2,289,735 | ||||||||||
5,793,040 | ||||||||||||
Engineering & Construction 1.8% | ||||||||||||
1,000 | Dycom Industries, Inc., 0.75%, 9/15/21 (f) | 1,110,956 | ||||||||||
2,000 | Tutor Perini Corp., 2.875%, 6/15/21 (f) | 2,074,694 | ||||||||||
3,185,650 | ||||||||||||
Entertainment 0.9% | ||||||||||||
1,500 | Live Nation Entertainment, Inc., 2.50%, 3/15/23 (a)(c) | 1,557,179 | ||||||||||
Equity Real Estate Investment Trusts (REITs) 5.6% | ||||||||||||
3,000 | PennyMac Corp., 5.375%, 5/1/20 | 3,003,765 | ||||||||||
2,850 | Starwood Property Trust, Inc., 4.375%, 4/1/23 (f) | 2,848,390 | ||||||||||
2,750 | Two Harbors Investment Corp., 6.25%, 1/15/22 | 2,853,625 | ||||||||||
1,500 | Western Asset Mortgage Capital Corp., 6.75%, 10/1/22 | 1,553,853 | ||||||||||
10,259,633 | ||||||||||||
Healthcare-Products 1.4% | ||||||||||||
2,500 | Nevro Corp., 1.75%, 6/1/21 | 2,564,460 | ||||||||||
Insurance 1.6% | ||||||||||||
3,000 | HCI Group, Inc., 4.25%, 3/1/37 (a) | 2,878,605 |
See accompanying Notes to Financial Statements | | August 31, 2018 | | Semi-Annual Report | 11 |
Schedule of Investments
AllianzGI Convertible & Income 2024 Target Term Fund
August 31, 2018 (unaudited) (continued)
Principal Amount (000s) |
Value | |||||||||||
Internet 2.7% | ||||||||||||
$3,000 | FireEye, Inc., 1.625%, 6/1/35, Ser. B | $2,749,533 | ||||||||||
1,500 | Twitter, Inc., 1.00%, 9/15/21 (f) | 1,410,256 | ||||||||||
750 | Zillow Group, Inc., 1.50%, 7/1/23 | 708,363 | ||||||||||
4,868,152 | ||||||||||||
Investment Companies 4.9% | ||||||||||||
2,900 | Goldman Sachs BDC, Inc., 4.50%, 4/1/22 | 2,944,576 | ||||||||||
3,000 | Prospect Capital Corp., 4.95%, 7/15/22 (f) | 2,921,382 | ||||||||||
3,000 | TPG Specialty Lending, Inc., 4.50%, 8/1/22 | 3,021,876 | ||||||||||
8,887,834 | ||||||||||||
Media 1.5% | ||||||||||||
3,000 | DISH Network Corp., 2.375%, 3/15/24 (f) | 2,644,509 | ||||||||||
Oil, Gas & Consumable Fuels 7.1% | ||||||||||||
2,000 | Ensco Jersey Finance Ltd., 3.00%, 1/31/24 (f) | 1,837,500 | ||||||||||
3,000 | Green Plains, Inc., 4.125%, 9/1/22 (e) | 2,907,816 | ||||||||||
3,000 | Helix Energy Solutions Group, Inc., 4.25%, 5/1/22 | 3,221,226 | ||||||||||
3,425 | Nabors Industries, Inc., 0.75%, 1/15/24 (f) | 2,711,357 | ||||||||||
2,150 | PDC Energy, Inc., 1.125%, 9/15/21 | 2,130,220 | ||||||||||
12,808,119 | ||||||||||||
Pharmaceuticals 4.2% | ||||||||||||
2,000 | Dermira, Inc., 3.00%, 5/15/22 (e) | 1,651,500 | ||||||||||
3,250 | Horizon Pharma Investment Ltd., 2.50%, 3/15/22 | 3,349,531 | ||||||||||
1,000 | Jazz Investments I Ltd., 1.50%, 8/15/24 (f) | 1,034,706 | ||||||||||
1,500 | Pacira Pharmaceuticals, Inc., 2.375%, 4/1/22 (f) | 1,577,304 | ||||||||||
7,613,041 | ||||||||||||
Semiconductors 2.6% | ||||||||||||
2,000 | Inphi Corp., 0.75%, 9/1/21 | 1,962,092 | ||||||||||
1,750 | Synaptics, Inc., 0.50%, 6/15/22 (f) | 1,723,633 | ||||||||||
1,300 | Veeco Instruments, Inc., 2.70%, 1/15/23 | 1,115,241 | ||||||||||
4,800,966 | ||||||||||||
Software 2.3% | ||||||||||||
3,000 | Avaya Holdings Corp., 2.25%, 6/15/23 (a)(c) | 3,161,811 | ||||||||||
1,000 | Envestnet, Inc., 1.75%, 6/1/23 (a)(c)(f) | 1,107,275 | ||||||||||
4,269,086 | ||||||||||||
Telecommunications 0.4% | ||||||||||||
750 | GDS Holdings Ltd., 2.00%, 6/1/25 (a)(c) | 733,303 | ||||||||||
Transportation 3.2% | ||||||||||||
2,000 | Air Transport Services Group, Inc., 1.125%, 10/15/24 (a)(c)(f) | 1,872,774 | ||||||||||
3,000 | Echo Global Logistics, Inc., 2.50%, 5/1/20 (f) | 3,260,625 | ||||||||||
750 | Teekay Corp., 5.00%, 1/15/23 (a)(c) | 681,603 | ||||||||||
5,815,002 | ||||||||||||
Total Convertible Bonds & Notes (cost-$104,265,090) | 105,953,796 | |||||||||||
Corporate Bonds & Notes 52.9% | ||||||||||||
Aerospace & Defense 2.0% | ||||||||||||
1,500 | KLX, Inc., 5.875%, 12/1/22 (a)(c)(e)(f) | 1,556,250 | ||||||||||
2,000 | TransDigm, Inc., 6.50%, 7/15/24 (f) | 2,037,500 | ||||||||||
3,593,750 |
12 | Semi-Annual Report | | August 31, 2018 | | See accompanying Notes to Financial Statements |
Schedule of Investments
AllianzGI Convertible & Income 2024 Target Term Fund
August 31, 2018 (unaudited) (continued)
Principal Amount (000s) |
Value | |||||||||||
Auto Components 0.7% | ||||||||||||
$1,227 | American Axle & Manufacturing, Inc., 6.625%, 10/15/22 | $1,259,209 | ||||||||||
Building Materials 0.8% | ||||||||||||
1,500 | Builders FirstSource, Inc., 5.625%, 9/1/24 (a)(c) | 1,462,500 | ||||||||||
Chemicals 1.7% | ||||||||||||
1,500 | Chemours Co., 6.625%, 5/15/23 (f) | 1,573,125 | ||||||||||
1,500 | Platform Specialty Products Corp., 6.50%, 2/1/22 (a)(c) | 1,539,375 | ||||||||||
3,112,500 | ||||||||||||
Computers 0.9% | ||||||||||||
1,500 | Dell International LLC, 7.125%, 6/15/24 (a)(c)(f) | 1,603,878 | ||||||||||
Distribution/Wholesale 0.8% | ||||||||||||
1,500 | Univar USA, Inc., 6.75%, 7/15/23 (a)(c) | 1,548,750 | ||||||||||
Diversified Financial Services 3.3% | ||||||||||||
2,000 | Community Choice Financial, Inc., 10.75%, 5/1/19 | 1,650,000 | ||||||||||
2,000 | Navient Corp., 7.25%, 9/25/23 | 2,120,000 | ||||||||||
2,000 | Springleaf Finance Corp., 8.25%, 10/1/23 (f) | 2,215,000 | ||||||||||
5,985,000 | ||||||||||||
Electric Utilities 0.9% | ||||||||||||
1,500 | NRG Energy, Inc., 6.25%, 5/1/24 (f) | 1,560,000 | ||||||||||
Engineering & Construction 0.9% | ||||||||||||
1,500 | AECOM, 5.875%, 10/15/24 (f) | 1,608,585 | ||||||||||
Entertainment 0.8% | ||||||||||||
1,500 | Cedar Fair L.P., 5.375%, 6/1/24 | 1,509,375 | ||||||||||
Healthcare-Services 5.4% | ||||||||||||
1,500 | Community Health Systems, Inc., 6.25%, 3/31/23 (f) | 1,432,500 | ||||||||||
1,500 | DaVita, Inc., 5.125%, 7/15/24 | 1,453,680 | ||||||||||
1,500 | Encompass Health Corp., 5.75%, 11/1/24 (f) | 1,524,375 | ||||||||||
1,500 | Envision Healthcare Corp., 6.25%, 12/1/24 (a)(c)(e) | 1,608,750 | ||||||||||
1,500 | HCA, Inc., 7.50%, 2/15/22 | 1,650,000 | ||||||||||
2,000 | Tenet Healthcare Corp., 8.125%, 4/1/22 (f) | 2,120,000 | ||||||||||
9,789,305 | ||||||||||||
Home Builders 0.9% | ||||||||||||
1,500 | Lennar Corp., 5.875%, 11/15/24 (f) | 1,563,900 | ||||||||||
Internet 0.9% | ||||||||||||
1,500 | Netflix, Inc., 5.875%, 2/15/25 (f) | 1,552,500 | ||||||||||
Iron/Steel 0.9% | ||||||||||||
1,500 | AK Steel Corp., 7.50%, 7/15/23 | 1,575,000 | ||||||||||
Lodging 0.8% | ||||||||||||
1,500 | Wynn Las Vegas LLC, 5.50%, 3/1/25 (a)(c)(f) | 1,487,850 | ||||||||||
Machinery-Construction & Mining 1.1% | ||||||||||||
2,000 | Terex Corp., 5.625%, 2/1/25 (a)(c) | 1,987,500 | ||||||||||
Media 4.4% | ||||||||||||
1,500 | CCO Holdings LLC, 5.75%, 1/15/24 (f) | 1,529,745 | ||||||||||
1,500 | Clear Channel Worldwide Holdings, Inc., 6.50%, 11/15/22, Ser. B (f) | 1,541,250 | ||||||||||
1,500 | CSC Holdings LLC, 6.75%, 11/15/21 (f) | 1,593,750 | ||||||||||
2,000 | DISH DBS Corp., 5.875%, 7/15/22 (f) | 1,927,500 | ||||||||||
1,500 | Nexstar Broadcasting, Inc., 5.625%, 8/1/24 (a)(c) | 1,477,800 | ||||||||||
8,070,045 |
See accompanying Notes to Financial Statements | | August 31, 2018 | | Semi-Annual Report | 13 |
Schedule of Investments
AllianzGI Convertible & Income 2024 Target Term Fund
August 31, 2018 (unaudited) (continued)
Principal Amount (000s) |
Value | |||||||||||
Mining 4.0% | ||||||||||||
$1,500 | Alcoa Nederland Holding BV, 6.75%, 9/30/24 (a)(c)(f) | $1,597,500 | ||||||||||
2,000 | Constellium NV, 6.625%, 3/1/25 (a)(c)(f) | 2,040,000 | ||||||||||
2,000 | Hudbay Minerals, Inc., 7.625%, 1/15/25 (a)(c)(f) | 2,042,500 | ||||||||||
1,500 | Joseph T. Ryerson & Son, Inc., 11.00%, 5/15/22 (a)(c) | 1,657,500 | ||||||||||
7,337,500 | ||||||||||||
Miscellaneous Manufacturing 1.1% | ||||||||||||
2,000 | Koppers, Inc., 6.00%, 2/15/25 (a)(c)(f) | 2,015,000 | ||||||||||
Oil, Gas & Consumable Fuels 5.1% | ||||||||||||
2,000 | Callon Petroleum Co., 6.125%, 10/1/24 (f) | 2,055,000 | ||||||||||
1,500 | Calumet Specialty Products Partners L.P., 6.50%, 4/15/21 | 1,485,000 | ||||||||||
1,500 | Carrizo Oil & Gas, Inc., 6.25%, 4/15/23 (f) | 1,541,250 | ||||||||||
1,500 | Continental Resources, Inc., 5.00%, 9/15/22 (f) | 1,526,646 | ||||||||||
825 | CVR Refining LLC, 6.50%, 11/1/22 | 845,625 | ||||||||||
280 | Noble Holding International Ltd., 7.75%, 1/15/24 (f) | 275,100 | ||||||||||
1,500 | Oasis Petroleum, Inc., 6.875%, 3/15/22 (f) | 1,530,000 | ||||||||||
9,258,621 | ||||||||||||
Pharmaceuticals 2.0% | ||||||||||||
1,500 | Bausch Health Cos, Inc., 7.50%, 7/15/21 (a)(c)(f) | 1,526,632 | ||||||||||
2,000 | Horizon Pharma, Inc., 6.625%, 5/1/23 (f) | 2,045,000 | ||||||||||
3,571,632 | ||||||||||||
Real Estate 2.1% | ||||||||||||
2,000 | Kennedy-Wilson, Inc., 5.875%, 4/1/24 | 1,992,500 | ||||||||||
1,950 | Uniti Group L.P., 8.25%, 10/15/23 (f) | 1,847,020 | ||||||||||
3,839,520 | ||||||||||||
Retail 1.2% | ||||||||||||
2,000 | Conns, Inc., 7.25%, 7/15/22 (f) | 2,019,600 | ||||||||||
85 | Mens Wearhouse, Inc., 7.00%, 7/1/22 (f) | 87,763 | ||||||||||
2,107,363 | ||||||||||||
Semiconductors 0.9% | ||||||||||||
1,515 | Advanced Micro Devices, Inc., 7.00%, 7/1/24 (e) | 1,613,475 | ||||||||||
Software 2.2% | ||||||||||||
1,500 | Camelot Finance S.A., 7.875%, 10/15/24 (a)(c) | 1,498,125 | ||||||||||
1,500 | First Data Corp., 7.00%, 12/1/23 (a)(c)(f) | 1,564,500 | ||||||||||
1,000 | Rackspace Hosting, Inc., 8.625%, 11/15/24 (a)(c)(f) | 986,875 | ||||||||||
4,049,500 | ||||||||||||
Telecommunications 6.5% | ||||||||||||
2,000 | CenturyLink, Inc., 7.50%, 4/1/24, Ser. Y (f) | 2,145,000 | ||||||||||
1,500 | Cincinnati Bell, Inc., 7.00%, 7/15/24 (a)(c)(f) | 1,327,500 | ||||||||||
2,000 | Consolidated Communications, Inc., 6.50%, 10/1/22 (f) | 1,897,500 | ||||||||||
2,000 | GTT Communications, Inc., 7.875%, 12/31/24 (a)(c)(f) | 1,900,000 | ||||||||||
1,500 | Hughes Satellite Systems Corp., 7.625%, 6/15/21 (f) | 1,620,000 | ||||||||||
2,000 | Sprint Corp., 7.125%, 6/15/24 (f) | 2,080,000 | ||||||||||
1,620 | Windstream Services LLC, 6.375%, 8/1/23 (a)(c)(f) | 877,489 | ||||||||||
11,847,489 | ||||||||||||
Transportation 0.6% | ||||||||||||
1,125 | XPO Logistics, Inc., 6.50%, 6/15/22 (a)(c)(f) | 1,166,310 | ||||||||||
Total Corporate Bonds & Notes (cost-$98,739,357) | 96,076,057 |
14 | Semi-Annual Report | | August 31, 2018 | | See accompanying Notes to Financial Statements |
Schedule of Investments
AllianzGI Convertible & Income 2024 Target Term Fund
August 31, 2018 (unaudited) (continued)
Principal Amount (000s) |
Value | |||||||||||
Senior Loans (a)(b) 24.4% | ||||||||||||
Aerospace & Defense 0.5% | ||||||||||||
$867 | Engility Corporation, 1 mo. LIBOR + 2.750%, 4.826%, 8/12/23, Term Loan B2 | $870,521 | ||||||||||
Automobiles 0.5% | ||||||||||||
Winnebago Industries, Inc., 11/8/23, 2017 Term Loan B | ||||||||||||
317 | 1 mo. LIBOR + 3.500%, 5.583% | 318,486 | ||||||||||
599 | 3 mo. LIBOR + 3.500%, 5.821% | 601,584 | ||||||||||
920,070 | ||||||||||||
Chemicals 1.2% | ||||||||||||
321 | Kraton Polymers, LLC, 1 mo. LIBOR + 2.500%, 4.576%, 3/5/25, 2018 USD Term Loan | 322,976 | ||||||||||
872 | Omnova Solutions Inc., 1 mo. LIBOR + 3.250%, 5.326%, 8/28/23, 2016 Term Loan B2 | 877,708 | ||||||||||
1,000 | PQ Corporation, 3 mo. LIBOR + 2.500%, 2/8/25, 2018 Term Loan B (d) | 1,002,235 | ||||||||||
2,202,919 | ||||||||||||
Commercial Services & Supplies 0.5% | ||||||||||||
974 | Advanced Disposal Services, Inc., 1 Week LIBOR + 2.250%, 4.207%, 11/10/23, Term Loan B3 | 977,613 | ||||||||||
Communications Equipment 0.6% | ||||||||||||
1,000 | Plantronics, Inc., 1 mo. LIBOR + 2.500%, 4.576%, 7/2/25, 2018 Term Loan B | 999,165 | ||||||||||
Diversified Consumer Services 0.6% | ||||||||||||
776 | Laureate Education, Inc., 1 mo. LIBOR + 3.500%, 5.576%, 4/26/24, 2017 Term Loan B | 778,656 | ||||||||||
396 | ServiceMaster Company, 1 mo. LIBOR + 2.500%, 4.576%, 11/8/23, 2016 Term Loan B | 396,846 | ||||||||||
1,175,502 | ||||||||||||
Electrical Equipment 0.6% | ||||||||||||
1,000 | Gates Global LLC, 3 mo. LIBOR + 2.750%, 4/1/24, 2017 Term Loan B (d) | 1,006,015 | ||||||||||
Electronics 0.5% | ||||||||||||
950 | Kemet Electronic Corporation, 1 mo. LIBOR + 6.000%, 8.076%, 4/26/24, Term Loan B | 969,000 | ||||||||||
Entertainment 0.6% | ||||||||||||
1,000 | Stars Group Holdings B.V., 3 mo. LIBOR + 3.500%, 5.831%, 7/10/25, 2018 USD Incremental Term Loan | 1,009,130 | ||||||||||
Food & Staples Retailing 0.5% | ||||||||||||
990 | US Foods, Inc., 1 mo. LIBOR + 2.000%, 4.076%, 6/27/23, 2016 Term Loan B | 989,850 | ||||||||||
Healthcare Providers & Services 0.5% | ||||||||||||
Select Medical Corporation, 3/1/21, 2017 Term Loan B | ||||||||||||
989 | 1 mo. LIBOR + 2.750%, 4.82% | 996,435 | ||||||||||
1 | 3 mo. PRIME + 1.750%, 6.75% | 549 | ||||||||||
996,984 | ||||||||||||
Healthcare-Products 1.0% | ||||||||||||
748 | Greatbatch Ltd., 1 mo. LIBOR + 3.250%, 5.07%, 10/27/22, 2017 1st Lien Term Loan B | 753,638 | ||||||||||
1,000 | Ortho-Clinical Diagnostics SA, 1 mo. LIBOR + 3.250%, 5.316%, 6/30/25, 2018 Term Loan B | 1,001,160 | ||||||||||
1,754,798 | ||||||||||||
Hotels, Restaurants & Leisure 3.8% | ||||||||||||
992 | 1011778 B.C. Unlimited Liability Company, 1 mo. LIBOR + 2.250%, 4.326%, 2/16/24, Term Loan B3 | 993,226 | ||||||||||
1,000 | AP Gaming I, LLC, 3 mo. LIBOR + 4.250%, 2/15/24, 2018 1st Lien Term Loan (d) | 1,010,625 | ||||||||||
917 | Boyd Gaming Corporation, 1 Week LIBOR + 2.250%, 4.207%, 9/15/23, Term Loan B3 | 923,225 |
See accompanying Notes to Financial Statements | | August 31, 2018 | | Semiannual Report | 15 |
Schedule of Investments
AllianzGI Convertible & Income 2024 Target Term Fund
August 31, 2018 (unaudited) (continued)
Principal Amount (000s) |
Value | |||||||||||
Hotels, Restaurants & Leisure (continued) | ||||||||||||
$995 | Golden Entertainment, Inc., 1 mo. LIBOR + 3.000%, 5.08%, 10/20/24, 2017 1st Lien Term Loan | $997,074 | ||||||||||
990 | Playa Resorts Holding B.V., 1 mo. LIBOR + 2.750%, 4.83%, 4/5/24, 2017 Term Loan B | 983,572 | ||||||||||
995 | Scientific Games International, Inc., 1 mo. LIBOR + 2.750%, 4.826%, 8/14/24, 2018 Term Loan B5 | 993,494 | ||||||||||
1,000 | Travelport Finance (Luxembourg) S.a.r.l., 3 mo. LIBOR + 2.500%, 3/17/25, 2018 Term Loan B (d) | 1,000,340 | ||||||||||
6,901,556 | ||||||||||||
Internet 1.1% | ||||||||||||
990 | Everi Payments, Inc., 1 mo. LIBOR + 3.000%, 5.076%, 5/9/24, Term Loan B | 995,673 | ||||||||||
1,000 | Go Daddy Operating Company, LLC, 1 mo. LIBOR + 2.250%, 4.326%, 2/15/24, 2017 Repriced Term Loan | 1,003,875 | ||||||||||
1,999,548 | ||||||||||||
Internet Software & Services 1.6% | ||||||||||||
747 | Blucora, Inc., 3 mo. LIBOR + 3.000%, 5.334%, 5/22/24, 2017 Term Loan B | 752,227 | ||||||||||
EIG Investors Corp., 2/9/23, 2018 1st Lien Term Loan | ||||||||||||
6 | 1 mo. LIBOR + 3.750%, 5.815% | 6,076 | ||||||||||
1,183 | 3 mo. LIBOR + 3.750%, 6.061% | 1,190,010 | ||||||||||
1,000 | Match Group Inc., 1 mo. LIBOR + 2.500%, 4.577%, 11/16/22, 2017 Term Loan B | 1,007,500 | ||||||||||
2,955,813 | ||||||||||||
IT Services 1.1% | ||||||||||||
923 | First Data Corporation, 1 mo. LIBOR + 2.000%, 4.066%, 4/26/24, 2024 USD Term Loan | 922,640 | ||||||||||
990 | Xerox Business Services LLC, 1 mo. LIBOR + 2.500%, 4.576%, 12/7/23, USD Term Loan B | 993,870 | ||||||||||
1,916,510 | ||||||||||||
Leisure Time 0.6% | ||||||||||||
1,000 | Sabre GLBL, Inc., 3 mo. LIBOR + 2.000%, 2/22/24, 2018 Term Loan B (d) | 1,002,425 | ||||||||||
Machinery 1.1% | ||||||||||||
915 | Gardner Denver, Inc., 1 mo. LIBOR + 2.750%, 4.826%, 7/30/24, 2017 USD Term Loan B | 918,753 | ||||||||||
995 | Harsco Corporation, 1 mo. LIBOR + 2.250%, 4.375%, 12/6/24, 2017 Term Loan B1 | 1,001,212 | ||||||||||
1,919,965 | ||||||||||||
Media 1.1% | ||||||||||||
932 | Gray Television, Inc., 1 mo. LIBOR + 2.250%, 4.331%, 2/7/24, 2017 Term Loan B | 934,424 | ||||||||||
998 | Lions Gate Capital Holdings LLC, 1 mo. LIBOR + 2.250%, 4.315%, 3/24/25, 2018 Term Loan B | 998,124 | ||||||||||
1,932,548 | ||||||||||||
Pharmaceuticals 1.5% | ||||||||||||
1,000 | Endo International PLC, 3 mo. LIBOR + 4.250%, 6.375%, 4/27/24, 2017 Term Loan B | 1,007,500 | ||||||||||
1,000 | Herbalife Nutrition Ltd., 3 mo. LIBOR + 3.250%, 8/16/25, 2018 Term Loan B (d) | 1,005,000 | ||||||||||
920 | Lannett Company, Inc., 1 mo. LIBOR + 5.375%, 7.451%, 11/25/22, Term Loan B | 778,968 | ||||||||||
2,791,468 | ||||||||||||
Road & Rail 0.5% | ||||||||||||
924 | YRC Worldwide, Inc., 1 mo. LIBOR + 8.500%, 10.576%, 7/24/22, 2017 Term Loan | 939,822 |
16 | Semi-Annual Report | | August 31, 2018 | | See accompanying Notes to Financial Statements |
Schedule of Investments
AllianzGI Convertible & Income 2024 Target Term Fund
August 31, 2018 (unaudited) (continued)
Principal Amount (000s) |
Value | |||||||||||
Semiconductors & Semiconductor Equipment 0.5% | ||||||||||||
$969 | Cypress Semiconductor Corporation, 3 mo. LIBOR + 2.250%, 4.32%, 7/5/21, 2016 Term Loan B | $973,176 | ||||||||||
Specialty Retail 2.7% | ||||||||||||
997 | At Home Holding III Inc., 3 mo. LIBOR + 4.000%, 5.842%, 6/3/22, Term Loan | 1,001,786 | ||||||||||
861 | Burlington Coat Factory Warehouse Corporation, 1 mo. LIBOR + 2.500%, 4.57%, 11/17/24, 2017 Term Loan B5 | 866,634 | ||||||||||
995 | Mens Wearhouse, Inc., 1 mo. LIBOR + 3.500%, 5.582%, 4/9/25, 2018 Term Loan B | 1,003,084 | ||||||||||
993 | National Vision, Inc., 1 mo. LIBOR + 2.75%, 4.826%, 11/20/24, 2017 Repriced Term Loan | 997,150 | ||||||||||
1,000 | Party City Holdings Inc., 3 mo. LIBOR + 2.750%, 8/19/22, 2018 Term Loan B (d) | 1,005,355 | ||||||||||
4,874,009 | ||||||||||||
Telecommunications 0.6% | ||||||||||||
1,000 | SBA Senior Finance II LLC, 1 mo. LIBOR + 2.000%, 4.08%, 4/11/25, 2018 Term Loan B | 998,125 | ||||||||||
Textiles, Apparel & Luxury Goods 0.6% | ||||||||||||
G-III Apparel Group, Ltd., 1 mo. LIBOR + 5.250%, 12/1/22, Term Loan B | ||||||||||||
282 | 7.314% | 286,022 | ||||||||||
847 | 7.375% | 858,067 | ||||||||||
1,144,089 | ||||||||||||
Total Senior Loans (cost-$44,354,369) | 44,220,621 | |||||||||||
Repurchase Agreements 3.6% | ||||||||||||
6,568 | State Street Bank and Trust Co., dated 8/31/18, 0.35%, due 9/4/18, proceeds $6,568,255; collateralized by U.S. Treasury Notes, 3.625%, due 2/15/44, valued at $6,699,981 including accrued interest (cost-$6,568,000) |
6,568,000 | ||||||||||
Total Investments (cost-$253,926,816) 139.2% | 252,818,474 | |||||||||||
Liabilities in excess of other assets (39.2)% | (71,163,553 | ) | ||||||||||
Net Assets 100.0% | $181,654,921 |
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 $94,113,479, representing 51.8% 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, 2018. |
(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 $47,014,253, representing 25.9% of net assets. |
(d) | When-issued or delayed-delivery. To be settled/delivered after August 31, 2018. |
(e) | All or partial amount segregated for the benefit of the counterparty as collateral for liquidity facility. |
(f) | Security, or portion of security, is on loan. The aggregate value of securities on loan is $61,863,998; cash collateral (included in liabilities) of $63,344,814 was received through a liquidity facilitySee Note 8 in the Notes to Financial Statements. |
(g) | Fair Value MeasurementsSee Note 1(b) in the Notes to Financial Statements. |
See accompanying Notes to Financial Statements | | August 31, 2018 | | Semi-Annual Report | 17 |
Schedule of Investments
AllianzGI Convertible & Income 2024 Target Term Fund
August 31, 2018 (unaudited) (continued)
Level 1 Quoted Prices |
Level 2 Other Significant Observable Inputs |
Level 3 Significant Unobservable Inputs |
Value at 8/31/18 |
|||||||||||||
Investments in Securities Assets |
||||||||||||||||
Convertible Bonds & Notes |
| $ | 105,953,796 | | $ | 105,953,796 | ||||||||||
Corporate Bonds & Notes |
| 96,076,057 | | 96,076,057 | ||||||||||||
Senior Loans |
| 44,220,621 | | 44,220,621 | ||||||||||||
Repurchase Agreements |
| 6,568,000 | | 6,568,000 | ||||||||||||
Totals |
| $ | 252,818,474 | | $ | 252,818,474 |
Remaining Contractual Maturity of the Agreements As of August 31, 2018 |
||||||||||||||||||||
Overnight and |
Up to 30 days | 30 90 days |
Greater than 90 days |
Total | ||||||||||||||||
Securities Lending Transactions |
||||||||||||||||||||
Convertible Bonds and Notes |
$22,017,208 | $ | $ | $ | $22,017,208 | |||||||||||||||
Corporate Bonds and Notes |
41,047,606 | 41,047,606 | ||||||||||||||||||
Gross amount of recognized liabilities for securities lending transactions |
|
$63,344,814 |
Glossary:
LIBOR | - | London Inter-Bank Offered Rate | ||
REIT | - | Real Estate Investment Trust |
18 | Semi-Annual Report | | August 31, 2018 | | See accompanying Notes to Financial Statements |
Schedule of Investments
AllianzGI Convertible & Income Fund
August 31, 2018 (unaudited)
Principal Amount (000s) |
Value | |||||||||||
Corporate Bonds & Notes 37.0% | ||||||||||||
Aerospace & Defense 1.0% | ||||||||||||
$7,540 | TransDigm, Inc., 6.50%, 5/15/25 | $7,690,800 | ||||||||||
1,420 | Triumph Group, Inc., 7.75%, 8/15/25 | 1,382,725 | ||||||||||
9,073,525 | ||||||||||||
Auto Manufacturers 0.7% | ||||||||||||
6,135 | Navistar International Corp., 6.625%, 11/1/25 (a)(b)(l) | 6,411,075 | ||||||||||
Building Materials 0.6% | ||||||||||||
5,665 | U.S. Concrete, Inc., 6.375%, 6/1/24 | 5,742,894 | ||||||||||
Chemicals 3.1% | ||||||||||||
7,500 | Chemours Co., 6.625%, 5/15/23 (g) | 7,865,625 | ||||||||||
4,790 | Kraton Polymers LLC, 7.00%, 4/15/25 (a)(b) | 4,963,638 | ||||||||||
3,785 | Olin Corp., 5.00%, 2/1/30 (g)(l) | 3,628,869 | ||||||||||
5,670 | Platform Specialty Products Corp., 6.50%, 2/1/22 (a)(b)(l) | 5,818,837 | ||||||||||
1,065 | Tronox Finance PLC, 5.75%, 10/1/25 (a)(b) | 1,027,725 | ||||||||||
5,470 | Tronox, Inc., 6.50%, 4/15/26 (a)(b) | 5,374,275 | ||||||||||
28,678,969 | ||||||||||||
Commercial Services 0.4% | ||||||||||||
8,050 | Cenveo Corp., 6.00%, 5/15/24, (cost-$10,370,870; purchased 3/22/12) (a)(b)(c)(i) | 442,750 | ||||||||||
3,500 | United Rentals North America, Inc., 5.50%, 7/15/25 (g)(l) | 3,583,125 | ||||||||||
4,025,875 | ||||||||||||
Computers 1.3% | ||||||||||||
5,281 | DynCorp International, Inc., PIK 1.50%, 11.875%, 11/30/20 (g) | 5,525,306 | ||||||||||
7,350 | Harland Clarke Holdings Corp., 9.25%, 3/1/21 (a)(b) | 6,725,250 | ||||||||||
12,250,556 | ||||||||||||
Distribution/Wholesale 0.6% | ||||||||||||
5,380 | H&E Equipment Services, Inc., 5.625%, 9/1/25 (l) | 5,354,714 | ||||||||||
Diversified Financial Services 2.6% | ||||||||||||
Community Choice Financial, Inc., | ||||||||||||
10,085 | 10.75%, 5/1/19 | 8,320,125 | ||||||||||
7,130 | 12.75%, 5/1/20 (a)(b) | 4,670,150 | ||||||||||
1,575 | Navient Corp., 7.25%, 9/25/23 | 1,669,500 | ||||||||||
4,935 | Springleaf Finance Corp., 8.25%, 10/1/23 (l) | 5,465,512 | ||||||||||
3,570 | Travelport Corporate Finance PLC, 6.00%, 3/15/26 (a)(b) | 3,641,400 | ||||||||||
23,766,687 | ||||||||||||
Electric Utilities 0.6% | ||||||||||||
5,585 | NRG Energy, Inc., 6.25%, 5/1/24 (g) | 5,808,400 | ||||||||||
Electronic Equipment, Instruments & Components 0.2% | ||||||||||||
1,600 | Energizer Holdings, Inc., 5.50%, 6/15/25 (a)(b)(l) | 1,600,000 | ||||||||||
Engineering & Construction 0.9% | ||||||||||||
2,835 | AECOM, 5.125%, 3/15/27 (l) | 2,792,475 | ||||||||||
5,100 | Tutor Perini Corp., 6.875%, 5/1/25 (a)(b)(l) | 5,202,000 | ||||||||||
7,994,475 | ||||||||||||
Entertainment 1.0% | ||||||||||||
4,990 | AMC Entertainment Holdings, Inc., 6.125%, 5/15/27 | 4,915,150 | ||||||||||
4,000 | Cedar Fair L.P., 5.375%, 6/1/24 (g) | 4,025,000 | ||||||||||
8,940,150 |
See accompanying Notes to Financial Statements | | August 31, 2018 | | Semi-Annual Report | 19 |
Schedule of Investments
AllianzGI Convertible & Income Fund
August 31, 2018 (unaudited) (continued)
Principal Amount (000s) |
Value | |||||||||||
Healthcare-Services 2.6% | ||||||||||||
$2,460 | Centene Corp., 5.375%, 6/1/26 (a)(b)(g)(l) | $2,545,682 | ||||||||||
2,835 | Community Health Systems, Inc., 6.25%, 3/31/23 (l) | 2,707,425 | ||||||||||
5,430 | DaVita, Inc., 5.125%, 7/15/24 | 5,262,322 | ||||||||||
1,730 | Encompass Health Corp., 5.75%, 11/1/24 | 1,758,112 | ||||||||||
3,860 | Envision Healthcare Corp., 6.25%, 12/1/24 (a)(b)(g)(l) | 4,139,850 | ||||||||||
3,800 | HCA, Inc., 7.50%, 2/15/22 | 4,180,000 | ||||||||||
3,500 | Tenet Healthcare Corp., 7.00%, 8/1/25 (l) | 3,506,562 | ||||||||||
24,099,953 | ||||||||||||
Home Builders 0.3% | ||||||||||||
2,285 | Beazer Homes USA, Inc., 8.75%, 3/15/22 | 2,421,392 | ||||||||||
Internet 0.3% | ||||||||||||
2,800 | Netflix, Inc., 5.875%, 2/15/25 (l) | 2,898,000 | ||||||||||
Iron/Steel 0.7% | ||||||||||||
AK Steel Corp., | ||||||||||||
2,025 | 7.00%, 3/15/27 | 1,928,812 | ||||||||||
1,315 | 7.50%, 7/15/23 | 1,380,750 | ||||||||||
2,835 | United States Steel Corp., 6.875%, 8/15/25 (l) | 2,891,700 | ||||||||||
6,201,262 | ||||||||||||
Lodging 0.5% | ||||||||||||
1,300 | Wyndham Hotels & Resorts, Inc., 5.375%, 4/15/26 (a)(b) | 1,296,750 | ||||||||||
2,835 | Wynn Las Vegas LLC, 5.50%, 3/1/25 (a)(b) | 2,812,036 | ||||||||||
4,108,786 | ||||||||||||
Machinery-Construction & Mining 0.5% | ||||||||||||
4,695 | Terex Corp., 5.625%, 2/1/25 (a)(b) | 4,665,656 | ||||||||||
Media 1.5% | ||||||||||||
7,370 | Cablevision Systems Corp., 8.00%, 4/15/20 (g) | 7,775,350 | ||||||||||
3,740 | Gray Television, Inc., 5.875%, 7/15/26 (a)(b) | 3,749,350 | ||||||||||
4,671 | LiveStyle, Inc., 9.625%, 2/1/19, (cost-$4,689,999; purchased 5/7/14-2/26/15) (a)(b)(c)(f)(i)(k) | 93 | ||||||||||
1,745 | Meredith Corp., 6.875%, 2/1/26 (a)(b)(l) | 1,771,175 | ||||||||||
13,295,968 | ||||||||||||
Metal Fabricate/Hardware 0.4% | ||||||||||||
3,830 | Park-Ohio Industries, Inc., 6.625%, 4/15/27 | 3,935,325 | ||||||||||
Mining 1.9% | ||||||||||||
5,100 | Alcoa Nederland Holding BV, 7.00%, 9/30/26 (a)(b)(g) | 5,527,125 | ||||||||||
4,405 | Constellium NV, 6.625%, 3/1/25 (a)(b) | 4,493,100 | ||||||||||
2,775 | Hudbay Minerals, Inc., 7.625%, 1/15/25 (a)(b)(l) | 2,833,969 | ||||||||||
3,950 | Joseph T. Ryerson & Son, Inc., 11.00%, 5/15/22 (a)(b) | 4,364,750 | ||||||||||
17,218,944 | ||||||||||||
Miscellaneous Manufacturing 0.3% | ||||||||||||
2,945 | Koppers, Inc., 6.00%, 2/15/25 (a)(b) | 2,967,088 | ||||||||||
Oil, Gas & Consumable Fuels 3.7% | ||||||||||||
2,700 | Calumet Specialty Products Partners L.P., 6.50%, 4/15/21 (l) | 2,673,000 | ||||||||||
1,900 | Carrizo Oil & Gas, Inc., 6.25%, 4/15/23 (l) | 1,952,250 | ||||||||||
Ensco PLC (l), | ||||||||||||
590 | 5.20%, 3/15/25 | 495,600 | ||||||||||
4,660 | 7.75%, 2/1/26 | 4,467,775 |
20 | Semi-Annual Report | | August 31, 2018 | | See accompanying Notes to Financial Statements |
Schedule of Investments
AllianzGI Convertible & Income Fund
August 31, 2018 (unaudited) (continued)
Principal Amount (000s) |
Value | |||||||||||
Oil, Gas & Consumable Fuels (continued) | ||||||||||||
$7,225 | EP Energy LLC, 9.375%, 5/1/20 | $7,116,625 | ||||||||||
2,835 | NGL Energy Partners L.P., 7.50%, 11/1/23 | 2,909,419 | ||||||||||
2,740 | Noble Holding International Ltd., 7.75%, 1/15/24 | 2,692,050 | ||||||||||
4,895 | Oasis Petroleum, Inc., 6.875%, 3/15/22 (l) | 4,992,900 | ||||||||||
4,530 | Sanchez Energy Corp., 6.125%, 1/15/23 (l) | 2,580,515 | ||||||||||
3,370 | Transocean, Inc., 7.50%, 1/15/26 (a)(b)(l) | 3,441,612 | ||||||||||
820 | Weatherford International Ltd., 8.25%, 6/15/23 (l) | 766,700 | ||||||||||
34,088,446 | ||||||||||||
Pharmaceuticals 1.3% | ||||||||||||
4,000 | Bausch Health Cos, Inc., 7.50%, 7/15/21 (a)(b) | 4,071,020 | ||||||||||
2,290 | Endo Finance LLC, 5.375%, 1/15/23 (a)(b) | 1,969,400 | ||||||||||
5,865 | Horizon Pharma, Inc., 6.625%, 5/1/23 | 5,996,962 | ||||||||||
12,037,382 | ||||||||||||
Pipelines 0.4% | ||||||||||||
3,550 | Energy Transfer Equity L.P., 5.50%, 6/1/27 (g)(l) | 3,731,938 | ||||||||||
Real Estate 1.2% | ||||||||||||
5,505 | Kennedy-Wilson, Inc., 5.875%, 4/1/24 | 5,484,356 | ||||||||||
5,365 | Uniti Group L.P., 8.25%, 10/15/23 (l) | 5,081,675 | ||||||||||
10,566,031 | ||||||||||||
Retail 1.5% | ||||||||||||
5,980 | Conns, Inc., 7.25%, 7/15/22 (l) | 6,038,604 | ||||||||||
1,530 | L Brands, Inc., 6.875%, 11/1/35 | 1,281,834 | ||||||||||
9,465 | Neiman Marcus Group Ltd. LLC, 8.00%, 10/15/21 (a)(b) | 6,459,862 | ||||||||||
13,780,300 | ||||||||||||
Semiconductors 1.2% | ||||||||||||
5,355 | Advanced Micro Devices, Inc., 7.00%, 7/1/24 (g) | 5,703,075 | ||||||||||
4,645 | Amkor Technology, Inc., 6.375%, 10/1/22 (g) | 4,737,900 | ||||||||||
10,440,975 | ||||||||||||
Software 0.7% | ||||||||||||
5,035 | Camelot Finance S.A., 7.875%, 10/15/24 (a)(b) | 5,028,706 | ||||||||||
1,480 | Rackspace Hosting, Inc., 8.625%, 11/15/24 (a)(b)(l) | 1,460,575 | ||||||||||
6,489,281 | ||||||||||||
Telecommunications 4.6% | ||||||||||||
1,135 | CenturyLink, Inc., 7.50%, 4/1/24, Ser. Y | 1,217,288 | ||||||||||
4,080 | Cincinnati Bell, Inc., 7.00%, 7/15/24 (a)(b)(l) | 3,610,800 | ||||||||||
9,370 | Consolidated Communications, Inc., 6.50%, 10/1/22 (l) | 8,889,787 | ||||||||||
5,290 | Frontier Communications Corp., 10.50%, 9/15/22 (l) | 4,681,650 | ||||||||||
2,685 | GTT Communications, Inc., 7.875%, 12/31/24 (a)(b)(l) | 2,550,750 | ||||||||||
Hughes Satellite Systems Corp., | ||||||||||||
1,460 | 6.625%, 8/1/26 | 1,401,600 | ||||||||||
4,250 | 7.625%, 6/15/21 (g)(l) | 4,590,000 | ||||||||||
7,205 | Sprint Communications, Inc., 11.50%, 11/15/21 | 8,519,913 | ||||||||||
1,865 | Sprint Corp., 7.625%, 3/1/26 (l) | 1,963,211 | ||||||||||
8,229 | Windstream Services LLC, 6.375%, 8/1/23 (a)(b) | 4,457,320 | ||||||||||
41,882,319 |
See accompanying Notes to Financial Statements | | August 31, 2018 | | Semi-Annual Report | 21 |
Schedule of Investments
AllianzGI Convertible & Income Fund
August 31, 2018 (unaudited) (continued)
Principal Amount (000s) |
Value | |||||||||||
Transportation 0.4% | ||||||||||||
$3,623 | XPO Logistics, Inc., 6.50%, 6/15/22 (a)(b)(g)(l) | $3,756,037 | ||||||||||
Total Corporate Bonds & Notes (cost-$363,396,777) | 338,232,403 | |||||||||||
Convertible Bonds & Notes 30.2% | ||||||||||||
Apparel & Textiles 0.9% | ||||||||||||
14,580 | Iconix Brand Group, Inc., 5.75%, 8/15/23 | 8,283,263 | ||||||||||
Auto Components 0.3% | ||||||||||||
4,165 | Horizon Global Corp., 2.75%, 7/1/22 | 3,037,164 | ||||||||||
Auto Manufacturers 1.3% | ||||||||||||
6,225 | Navistar International Corp., 4.75%, 4/15/19 | 6,487,627 | ||||||||||
Tesla, Inc., | ||||||||||||
2,365 | 0.25%, 3/1/19 | 2,433,774 | ||||||||||
2,850 | 1.25%, 3/1/21 (l) | 2,963,042 | ||||||||||
11,884,443 | ||||||||||||
Biotechnology 1.2% | ||||||||||||
1,130 | Exact Sciences Corp., 1.00%, 1/15/25 | 1,347,406 | ||||||||||
9,625 | Intercept Pharmaceuticals, Inc., 3.25%, 7/1/23 | 9,311,216 | ||||||||||
10,658,622 | ||||||||||||
Building Materials 0.5% | ||||||||||||
4,275 | Cemex S.A.B de C.V., 3.72%, 3/15/20 | 4,342,831 | ||||||||||
Commercial Services 1.1% | ||||||||||||
10,530 | Huron Consulting Group, Inc., 1.25%, 10/1/19 (g) | 10,277,280 | ||||||||||
Distribution/Wholesale 0.7% | ||||||||||||
6,600 | Titan Machinery, Inc., 3.75%, 5/1/19 | 6,559,225 | ||||||||||
Diversified Financial Services 2.3% | ||||||||||||
9,320 | Encore Capital Group, Inc., 3.00%, 7/1/20 (g) | 9,638,679 | ||||||||||
12,165 | PRA Group, Inc., 3.00%, 8/1/20 (g) | 11,802,337 | ||||||||||
21,441,016 | ||||||||||||
Electric Utilities 1.0% | ||||||||||||
9,230 | NRG Yield, Inc., 3.25%, 6/1/20 (a)(b)(g) | 9,241,519 | ||||||||||
Electrical Equipment 1.1% | ||||||||||||
SunPower Corp. (g), | ||||||||||||
3,135 | 0.875%, 6/1/21 | 2,461,427 | ||||||||||
9,405 | 4.00%, 1/15/23 | 7,660,946 | ||||||||||
10,122,373 | ||||||||||||
Electronics 0.9% | ||||||||||||
7,890 | OSI Systems, Inc., 1.25%, 9/1/22 (g) | 7,729,162 | ||||||||||
Energy-Alternate Sources 2.4% | ||||||||||||
6,840 | Pattern Energy Group, Inc., 4.00%, 7/15/20 (g) | 6,819,480 | ||||||||||
16,800 | Tesla Energy Operations, Inc., 1.625%, 11/1/19 (l) | 15,387,019 | ||||||||||
22,206,499 | ||||||||||||
Equity Real Estate Investment Trusts (REITs) 1.3% | ||||||||||||
3,975 | Two Harbors Investment Corp., 6.25%, 1/15/22 | 4,124,786 | ||||||||||
7,690 | Western Asset Mortgage Capital Corp., 6.75%, 10/1/22 | 7,966,086 | ||||||||||
12,090,872 | ||||||||||||
Healthcare/Healthcare Distributors 1.0% | ||||||||||||
11,415 | Aceto Corp., 2.00%, 11/1/20 | 9,270,395 |
22 | Semi-Annual Report | | August 31, 2018 | | See accompanying Notes to Financial Statements |
Schedule of Investments
AllianzGI Convertible & Income Fund
August 31, 2018 (unaudited) (continued)
Principal Amount (000s) |
Value | |||||||||||
Insurance 2.6% | ||||||||||||
$11,070 | AmTrust Financial Services, Inc., 2.75%, 12/15/44 (g) | $10,741,221 | ||||||||||
11,390 | AXA S.A., 7.25%, 5/15/21 (a)(b) | 12,846,884 | ||||||||||
23,588,105 | ||||||||||||
Iron/Steel 0.1% | ||||||||||||
910 | AK Steel Corp., 5.00%, 11/15/19 (g) | 1,033,825 | ||||||||||
Oil, Gas & Consumable Fuels 1.5% | ||||||||||||
2,850 | Green Plains, Inc., 4.125%, 9/1/22 (g) | 2,762,425 | ||||||||||
2,280 | Nabors Industries, Inc., 0.75%, 1/15/24 (g)(l) | 1,804,933 | ||||||||||
9,980 | Whiting Petroleum Corp., 1.25%, 4/1/20 (l) | 9,558,804 | ||||||||||
14,126,162 | ||||||||||||
Pharmaceuticals 1.9% | ||||||||||||
12,190 | Dermira, Inc., 3.00%, 5/15/22 (g) | 10,065,892 | ||||||||||
3,260 | Horizon Pharma Investment Ltd., 2.50%, 3/15/22 (l) | 3,359,838 | ||||||||||
3,415 | Jazz Investments I Ltd., 1.50%, 8/15/24 (l) | 3,533,521 | ||||||||||
16,959,251 | ||||||||||||
Pipelines 2.2% | ||||||||||||
24,750 | Cheniere Energy, Inc., 4.25%, 3/15/45 | 19,717,830 | ||||||||||
Semiconductors 0.4% | ||||||||||||
3,935 | Veeco Instruments, Inc., 2.70%, 1/15/23 (g) | 3,375,750 | ||||||||||
Software 2.0% | ||||||||||||
15,785 | Avid Technology, Inc., 2.00%, 6/15/20 | 14,285,883 | ||||||||||
3,985 | Synchronoss Technologies, Inc., 0.75%, 8/15/19 (g) | 3,709,951 | ||||||||||
17,995,834 | ||||||||||||
Telecommunications 0.8% | ||||||||||||
7,715 | GDS Holdings Ltd., 2.00%, 6/1/25 (a)(b) | 7,543,241 | ||||||||||
Tobacco 1.4% | ||||||||||||
Vector Group Ltd. (h), | ||||||||||||
5,665 | 3 mo. Cash Dividends on Common Stock + 1.75%, 1.75%, 4/15/20 (g) | 5,873,410 | ||||||||||
6,215 | 3 mo. Cash Dividends on Common Stock + 2.50%, 2.50%, 1/15/19 | 6,891,726 | ||||||||||
12,765,136 | ||||||||||||
Transportation 1.3% | ||||||||||||
3,990 | Aegean Marine Petroleum Network, Inc., 4.25%, 12/15/21 | 2,633,268 | ||||||||||
4,560 | Echo Global Logistics, Inc., 2.50%, 5/1/20 | 4,956,150 | ||||||||||
4,725 | Teekay Corp., 5.00%, 1/15/23 (a)(b) | 4,294,099 | ||||||||||
11,883,517 | ||||||||||||
Total Convertible Bonds & Notes (cost-$269,659,944) | 276,133,315 | |||||||||||
Shares | ||||||||||||
Convertible Preferred Stock 29.0% | ||||||||||||
Banks 4.1% | ||||||||||||
12,080 | Bank of America Corp., 7.25%, Ser. L (e) | 15,811,995 | ||||||||||
16,980 | Wells Fargo & Co., 7.50%, Ser. L (e) | 22,005,910 | ||||||||||
37,817,905 | ||||||||||||
Chemicals 1.1% | ||||||||||||
68,495 | Rayonier Advanced Materials, Inc., 8.00%, 8/15/19, Ser. A | 9,848,211 |
See accompanying Notes to Financial Statements | | August 31, 2018 | | Semi-Annual Report | 23 |
Schedule of Investments
AllianzGI Convertible & Income Fund
August 31, 2018 (unaudited) (continued)
Shares | Value | |||||||||||
Commercial Services & Supplies 0.7% | ||||||||||||
145,890 | Stericycle, Inc., 5.25%, 9/15/18 | $6,614,653 | ||||||||||
Diversified Financial Services 0.2% | ||||||||||||
28,470 | AMG Capital Trust II, 5.15%, 10/15/37 | 1,673,598 | ||||||||||
Electric Utilities 2.5% | ||||||||||||
302,350 | Dominion Energy, Inc., 6.75%, 8/15/19, Ser. A | 14,222,544 | ||||||||||
147,670 | NextEra Energy, Inc., 6.123%, 9/1/19 | 8,431,957 | ||||||||||
22,654,501 | ||||||||||||
Electronic Equipment, Instruments & Components 1.1% | ||||||||||||
101,585 | Belden, Inc., 6.75%, 7/15/19 (g) | 9,884,220 | ||||||||||
Electronics 1.2% | ||||||||||||
10,110 | Fortive Corp., 5.00%, 7/1/21, Ser. A | 10,877,325 | ||||||||||
Equity Real Estate Investment Trusts (REITs) 6.3% | ||||||||||||
10,320 | Crown Castle International Corp., 6.875%, 8/1/20, Ser. A | 11,383,476 | ||||||||||
56,955 | QTS Realty Trust, Inc., 6.50%, Ser. B (e) | 6,290,680 | ||||||||||
631,070 | RLJ Lodging Trust, 1.95%, Ser. A (e) | 16,786,462 | ||||||||||
410,065 | Sutherland Asset Management Corp., 7.00%, 8/15/23 | 10,794,961 | ||||||||||
198,090 | Welltower, Inc., 6.50%, Ser. I (e) | 12,327,141 | ||||||||||
57,582,720 | ||||||||||||
Gas Utilities 1.5% | ||||||||||||
244,375 | South Jersey Industries, Inc., 7.25%, 4/15/21 | 13,688,666 | ||||||||||
Hand/Machine Tools 1.7% | ||||||||||||
139,055 | Stanley Black & Decker, Inc., 5.375%, 5/15/20 | 15,099,982 | ||||||||||
Healthcare-Products 2.3% | ||||||||||||
326,685 | Becton Dickinson and Co., 6.125%, 5/1/20, Ser. A | 21,474,802 | ||||||||||
Insurance 1.9% | ||||||||||||
158,570 | Assurant, Inc., 6.50%, 3/15/21, Ser. D | 17,487,892 | ||||||||||
Multi-Utilities 1.8% | ||||||||||||
160,380 | Sempra Energy, 6.00%, 1/15/21, Ser. A | 16,483,856 | ||||||||||
Oil, Gas & Consumable Fuels 1.2% | ||||||||||||
173,410 | Kinder Morgan, Inc., 9.75%, 10/26/18, Ser. A | 5,793,628 | ||||||||||
67,960 | Nabors Industries Ltd., 6.00%, 5/1/21 (g) | 2,968,493 | ||||||||||
230,425 | Sanchez Energy Corp., 6.50%, Ser. B (e) | 2,534,675 | ||||||||||
11,296,796 | ||||||||||||
Pharmaceuticals 1.4% | ||||||||||||
30,895 | Teva Pharmaceutical Industries Ltd., 7.00%, 12/15/18 | 13,135,009 | ||||||||||
Total Convertible Preferred Stock (cost-$259,626,295) | 265,620,136 | |||||||||||
Preferred Stock (a)(d)(f)(j)(k) 0.9% | ||||||||||||
Media 0.9% | ||||||||||||
3,554 | LiveStyle, Inc., Ser. A | 483,522 | ||||||||||
76,572 | LiveStyle, Inc., Ser. B | 7,657,200 | ||||||||||
6,750 | LiveStyle, Inc., Ser. B | 67 | ||||||||||
Total Preferred Stock (cost-$14,596,967) | 8,140,789 | |||||||||||
Common Stock (j) 0.3% | ||||||||||||
Advertising 0.2% | ||||||||||||
173,720 | Affinion Group Holdings, Inc., Class A, (cost-$3,080,312; purchased 11/9/15-11/12/15) (a)(d)(f)(i) | 2,056,845 | ||||||||||
Aerospace & Defense 0.1% | ||||||||||||
8,295 | Erickson, Inc. (a)(d)(f) | 263,781 |
24 | Semi-Annual Report | | August 31, 2018 | | See accompanying Notes to Financial Statements |
Schedule of Investments
AllianzGI Convertible & Income Fund
August 31, 2018 (unaudited) (continued)
Shares | Value | |||||||||||
Media 0.0% | ||||||||||||
90,407 | LiveStyle, Inc. (a)(d)(f)(k) | $9 | ||||||||||
Textiles, Apparel & Luxury Goods 0.0% | ||||||||||||
741,085 | Iconix Brand Group, Inc. | 259,380 | ||||||||||
Total Common Stock (cost-$10,550,826) | 2,580,015 | |||||||||||
Units | ||||||||||||
Warrants (d)(f)(j) 0.0% | ||||||||||||
Commercial Services 0.0% | ||||||||||||
2,062,338 | Cenveo, Inc., strike price $12.00, expires 6/10/24 (b) | 21 | ||||||||||
Media 0.0% | ||||||||||||
19,500 | LiveStyle, Inc., expires 11/30/21, Ser. C (a)(k) | 2 | ||||||||||
Total Warrants (cost-$246,984) | 23 | |||||||||||
Principal Amount (000s) |
||||||||||||
Repurchase Agreements 2.6% | ||||||||||||
$23,932 | State Street Bank and Trust Co., | |||||||||||
dated 8/31/18, 0.35%, due 9/4/18, | ||||||||||||
proceeds $23,932,931; collateralized by | ||||||||||||
U.S. Treasury Notes, 3.625%, due 2/15/44, | ||||||||||||
valued at $24,414,619 including accrued interest (cost-$23,932,000) | 23,932,000 | |||||||||||
Total Investments (cost-$942,009,793) 100.0% | 914,638,681 | |||||||||||
Liabilities in excess of other assets | (121,521,410 | ) | ||||||||||
Preferred Shares | (223,275,000 | ) | ||||||||||
Net Assets Applicable to Common Shareholders | $569,842,271 |
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 $168,236,975, representing 18.4% 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 $157,775,570, representing 17.3% of total investments. |
(c) | In default. |
(d) | Fair-ValuedSecurities with an aggregate value of $10,461,447, representing 1.1% 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(a) and Note 1(b) in the Notes to Financial Statements. |
(g) | All or partial amount segregated for the benefit of the counterparty as collateral for liquidity facility. |
(h) | 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. |
(i) | Restricted. The aggregate cost of such securities is $18,141,181. The aggregate value is $2,499,688, representing 0.3% of total investments. |
(j) | Non-income producing. |
(k) | A member of the Funds portfolio management team is a member of the board of directors of LiveStyle, Inc. The Funds aggregate value of investments in LiveStyle, Inc. represents 0.9% of total investments. |
(l) | Security, or portion of security, is on loan. The aggregate value of securities on loan is $52,832,323; cash collateral (included in liabilities) of $53,889,750 was received through a liquidity facilitySee Note 8 in the Notes to Financial Statements. |
See accompanying Notes to Financial Statements | | August 31, 2018 | | Semi-Annual Report | 25 |
Schedule of Investments
AllianzGI Convertible & Income Fund
August 31, 2018 (unaudited) (continued)
(m) | 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 8/31/18 |
|||||||||||||
Investments in Securities Assets |
| |||||||||||||||
Corporate Bonds & Notes: |
| |||||||||||||||
Media |
| $13,295,875 | $93 | $13,295,968 | ||||||||||||
All Other |
| 324,936,435 | | 324,936,435 | ||||||||||||
Convertible Bonds & Notes |
| 276,133,315 | | 276,133,315 | ||||||||||||
Convertible Preferred Stock: |
| |||||||||||||||
Chemicals |
| 9,848,211 | | 9,848,211 | ||||||||||||
Diversified Financial Services |
| 1,673,598 | | 1,673,598 | ||||||||||||
Electronics |
| 10,877,325 | | 10,877,325 | ||||||||||||
Equity Real Estate Investment Trusts (REITs) |
$35,404,283 | 22,178,437 | | 57,582,720 | ||||||||||||
Hand/Machine Tools |
| 15,099,982 | | 15,099,982 | ||||||||||||
Healthcare-Products |
| 21,474,802 | | 21,474,802 | ||||||||||||
Oil, Gas & Consumable Fuels |
8,762,121 | 2,534,675 | | 11,296,796 | ||||||||||||
Pharmaceuticals |
| 13,135,009 | | 13,135,009 | ||||||||||||
All Other |
124,631,693 | | | 124,631,693 | ||||||||||||
Preferred Stock |
| | 8,140,789 | 8,140,789 | ||||||||||||
Common Stock: |
| |||||||||||||||
Advertising |
| | 2,056,845 | 2,056,845 | ||||||||||||
Aerospace & Defense |
| | 263,781 | 263,781 | ||||||||||||
Media |
| | 9 | 9 | ||||||||||||
Textiles, Apparel & Luxury Goods |
259,380 | | | 259,380 | ||||||||||||
Warrants |
| | 23 | 23 | ||||||||||||
Repurchase Agreements |
| 23,932,000 | | 23,932,000 | ||||||||||||
Totals |
$ | 169,057,477 | $ | 735,119,664 | $ | 10,461,540 | $ | 914,638,681 |
At August 31, 2018, securities valued at $37,278,419 were transferred from Level 1 to Level 2. The transfer was a result of the securities having used an exchange-traded closing price on February 28, 2018, and then using an evaluated price from a third-party independent pricing vendor on August 31, 2018.
A roll forward of fair value measurements using significant unobservable inputs (Level 3) for the six months ended August 31, 2018, was as follows:
Beginning Balance 2/28/18 |
Purchases | Sales | Accrued Discount (Premiums) |
Net Realized Gain (Loss) |
||||||||||||||||
Investments in Securities Assets |
||||||||||||||||||||
Corporate Bonds & Notes: |
||||||||||||||||||||
Media |
$ | $ | $ | $ | $ | |||||||||||||||
Preferred Stock: |
||||||||||||||||||||
Media |
8,491,167 | | (650,957 | ) | | 173,359 | ||||||||||||||
Common Stock: |
||||||||||||||||||||
Advertising |
2,630,121 | | | | | |||||||||||||||
Aerospace & Defense |
260,380 | | | | | |||||||||||||||
Media |
9 | | | | | |||||||||||||||
Warrants: |
||||||||||||||||||||
Commercial Services |
361 | | | | | |||||||||||||||
Media |
2 | | | | | |||||||||||||||
Totals |
$11,382,040 | $ | $(650,957 | ) | $ | $173,359 |
26 | Semi-Annual Report | | August 31, 2018 | | See accompanying Notes to Financial Statements |
Schedule of Investments
AllianzGI Convertible & Income Fund
August 31, 2018 (unaudited) (continued)
Net Change in Unrealized Appreciation/ Depreciation |
Transfers into Level 3* |
Transfers out of Level 3 |
Ending Balance 8/31/18 |
|||||||||||||
Investments in Securities Assets (continued) |
||||||||||||||||
Corporate Bonds & Notes: |
||||||||||||||||
Media |
$ | $93 | $ | $ 93 | ||||||||||||
Preferred Stock: |
||||||||||||||||
Media |
127,220 | | | 8,140,789 | ||||||||||||
Common Stock: |
||||||||||||||||
Advertising |
(573,276 | ) | | | 2,056,845 | |||||||||||
Aerospace & Defense |
3,401 | | | 263,781 | ||||||||||||
Media |
| | | 9 | ||||||||||||
Warrants: |
||||||||||||||||
Commercial Services |
(340 | ) | | | 21 | |||||||||||
Media |
| | | 2 | ||||||||||||
Totals |
$(442,995 | ) | $93 | $ | $10,461,540 |
* | At August 31, 2018, a security valued at $93 was transferred from Level 2 to Level 3. The transfer was due to uncertainty regarding the receipt of updated financial statements and data related to a current evaluated price. |
The following table presents additional information about valuation techniques and inputs used for investments that are measured at fair value and categorized within Level 3 at August 31, 2018:
Ending Balance at 8/31/18 |
Valuation Technique Used |
Unobservable Inputs |
Input Values (Range) | |||||||
Investments in Securities Assets | ||||||||||
Preferred Stock |
$483,522 | Market and Company Comparables |
EV Multiples Applicable Liquidity Multiple Illiquidity Discount |
0.65x (0.29x 1.12x) 1.60 30% | ||||||
$7,567,200 | Market and Company Comparables |
EV Multiples Illiquidity Discount |
0.65x (0.29x 1.12x) 30% | |||||||
Common Stock |
$2,056,845 | Market and Company Comparables |
EV Multiples Illiquidity Discount |
5.20x (2.15x 9.72x) 20% | ||||||
$263,781 | Market and Company Comparables |
EV Multiples M&A Transaction Multiples |
0.72x (0.51x 1.11x) 0.87x(0.32x 2.12x) 40% |
The net change in unrealized appreciation/depreciation of Level 3 investments held at August 31, 2018 was $(442,094).
Remaining Contractual Maturity of the Agreements As of August 31, 2018 |
||||||||||||||||||||
Overnight and |
Up to 30 days | 3090 days | Greater than 90 days |
Total | ||||||||||||||||
Securities Lending Transactions |
| |||||||||||||||||||
Convertible Bonds and Notes |
$6,697,878 | $ | $ | $ | $6,697,878 | |||||||||||||||
Corporate Bonds and Notes |
47,191,872 | 47,191,872 | ||||||||||||||||||
Gross amount of recognized liabilities for securities lending transactions |
|
$53,889,750 |
Glossary:
PIK | | Payment-in-Kind | ||
REIT | | Real Estate Investment Trust |
See accompanying Notes to Financial Statements | | August 31, 2018 | | Semi-Annual Report | 27 |
Schedule of Investments
AllianzGI Convertible & Income Fund II
August 31, 2018 (unaudited)
Principal Amount (000s) |
Value | |||||||||||
Corporate Bonds & Notes 37.0% | ||||||||||||
Aerospace & Defense 1.0% | ||||||||||||
$5,750 | TransDigm, Inc., 6.50%, 5/15/25 | $5,865,000 | ||||||||||
1,080 | Triumph Group, Inc., 7.75%, 8/15/25 | 1,051,650 | ||||||||||
6,916,650 | ||||||||||||
Auto Manufacturers 0.7% | ||||||||||||
4,685 | Navistar International Corp., 6.625%, 11/1/25 (a)(b) | 4,895,825 | ||||||||||
Building Materials 0.6% | ||||||||||||
4,335 | U.S. Concrete, Inc., 6.375%, 6/1/24 | 4,394,606 | ||||||||||
Chemicals 3.1% | ||||||||||||
5,500 | Chemours Co., 6.625%, 5/15/23 (g) | 5,768,125 | ||||||||||
3,640 | Kraton Polymers LLC, 7.00%, 4/15/25 (a)(b) | 3,771,950 | ||||||||||
2,890 | Olin Corp., 5.00%, 2/1/30 (g) | 2,770,788 | ||||||||||
4,330 | Platform Specialty Products Corp., 6.50%, 2/1/22 (a)(b) | 4,443,662 | ||||||||||
810 | Tronox Finance PLC, 5.75%, 10/1/25 (a)(b) | 781,650 | ||||||||||
4,180 | Tronox, Inc., 6.50%, 4/15/26 (a)(b) | 4,106,850 | ||||||||||
21,643,025 | ||||||||||||
Commercial Services 0.4% | ||||||||||||
5,974 | Cenveo Corp., 6.00%, 5/15/24, (cost-$6,469,777; purchased 03/22/12) (a)(b)(c)(i) | 328,570 | ||||||||||
2,500 | United Rentals North America, Inc., 5.50%, 7/15/25 (g) | 2,559,375 | ||||||||||
2,887,945 | ||||||||||||
Computers 1.3% | ||||||||||||
3,976 | DynCorp International, Inc., PIK 1.50%, 11.875%, 11/30/20 (g) | 4,159,716 | ||||||||||
5,650 | Harland Clarke Holdings Corp., 9.25%, 3/1/21 (a)(b) | 5,169,750 | ||||||||||
9,329,466 | ||||||||||||
Distribution/Wholesale 0.6% | ||||||||||||
4,110 | H&E Equipment Services, Inc., 5.625%, 9/1/25 | 4,090,683 | ||||||||||
Diversified Financial Services 2.6% | ||||||||||||
Community Choice Financial, Inc., | ||||||||||||
7,465 | 10.75%, 5/1/19 | 6,158,625 | ||||||||||
5,370 | 12.75%, 5/1/20 (a)(b) | 3,517,350 | ||||||||||
1,200 | Navient Corp., 7.25%, 9/25/23 | 1,272,000 | ||||||||||
3,865 | Springleaf Finance Corp., 8.25%, 10/1/23 | 4,280,487 | ||||||||||
2,730 | Travelport Corporate Finance PLC, 6.00%, 3/15/26 (a)(b) | 2,784,600 | ||||||||||
18,013,062 | ||||||||||||
Electric Utilities 0.6% | ||||||||||||
4,265 | NRG Energy, Inc., 6.25%, 5/1/24 (g) | 4,435,600 | ||||||||||
Electronic Equipment, Instruments & Components 0.2% | ||||||||||||
1,225 | Energizer Holdings, Inc., 5.50%, 6/15/25 (a)(b) | 1,225,000 | ||||||||||
Engineering & Construction 0.9% | ||||||||||||
2,165 | AECOM, 5.125%, 3/15/27 | 2,132,525 | ||||||||||
3,900 | Tutor Perini Corp., 6.875%, 5/1/25 (a)(b) | 3,978,000 | ||||||||||
6,110,525 | ||||||||||||
Entertainment 1.0% | ||||||||||||
3,810 | AMC Entertainment Holdings, Inc., 6.125%, 5/15/27 | 3,752,850 | ||||||||||
3,045 | Cedar Fair L.P., 5.375%, 6/1/24 (g) | 3,064,031 | ||||||||||
6,816,881 |
28 | Semi-Annual Report | | August 31, 2018 | | See accompanying Notes to Financial Statements |
Schedule of Investments
AllianzGI Convertible & Income Fund II
August 31, 2018 (unaudited) (continued)
Principal Amount (000s) |
Value | |||||||||||
Healthcare-Services 2.7% | ||||||||||||
$1,880 | Centene Corp., 5.375%, 6/1/26 (a)(b)(g) | $1,945,481 | ||||||||||
2,165 | Community Health Systems, Inc., 6.25%, 3/31/23 | 2,067,575 | ||||||||||
4,125 | DaVita, Inc., 5.125%, 7/15/24 | 3,997,620 | ||||||||||
1,325 | Encompass Health Corp., 5.75%, 11/1/24 | 1,346,531 | ||||||||||
2,950 | Envision Healthcare Corp., 6.25%, 12/1/24 (a)(b)(g) | 3,163,875 | ||||||||||
2,950 | HCA, Inc., 7.50%, 2/15/22 | 3,245,000 | ||||||||||
2,750 | Tenet Healthcare Corp., 7.00%, 8/1/25 | 2,755,156 | ||||||||||
18,521,238 | ||||||||||||
Home Builders 0.3% | ||||||||||||
1,745 | Beazer Homes USA, Inc., 8.75%, 3/15/22 | 1,849,159 | ||||||||||
Internet 0.3% | ||||||||||||
2,200 | Netflix, Inc., 5.875%, 2/15/25 | 2,277,000 | ||||||||||
Iron/Steel 0.7% | ||||||||||||
AK Steel Corp., | ||||||||||||
1,550 | 7.00%, 3/15/27 | 1,476,375 | ||||||||||
1,005 | 7.50%, 7/15/23 (g) | 1,055,250 | ||||||||||
2,165 | United States Steel Corp., 6.875%, 8/15/25 | 2,208,300 | ||||||||||
4,739,925 | ||||||||||||
Lodging 0.5% | ||||||||||||
1,000 | Wyndham Hotels & Resorts, Inc., 5.375%, 4/15/26 (a)(b) | 997,500 | ||||||||||
2,165 | Wynn Las Vegas LLC, 5.50%, 3/1/25 (a)(b) | 2,147,464 | ||||||||||
3,144,964 | ||||||||||||
Machinery-Construction & Mining 0.5% | ||||||||||||
3,585 | Terex Corp., 5.625%, 2/1/25 (a)(b) | 3,562,594 | ||||||||||
Media 1.5% | ||||||||||||
5,630 | Cablevision Systems Corp., 8.00%, 4/15/20 (g) | 5,939,650 | ||||||||||
2,850 | Gray Television, Inc., 5.875%, 7/15/26 (a)(b) | 2,857,125 | ||||||||||
3,589 | LiveStyle, Inc., 9.625%, 2/1/19, (cost-$3,603,642; purchased 5/7/14-2/26/15) (a)(b)(c)(f)(i)(k) |
72 | ||||||||||
1,330 | Meredith Corp., 6.875%, 2/1/26 (a)(b) | 1,349,950 | ||||||||||
10,146,797 | ||||||||||||
Metal Fabricate/Hardware 0.4% | ||||||||||||
2,920 | Park-Ohio Industries, Inc., 6.625%, 4/15/27 | 3,000,300 | ||||||||||
Mining 1.9% | ||||||||||||
3,900 | Alcoa Nederland Holding BV, 7.00%, 9/30/26 (a)(b)(g) | 4,226,625 | ||||||||||
3,365 | Constellium NV, 6.625%, 3/1/25 (a)(b) | 3,432,300 | ||||||||||
2,135 | Hudbay Minerals, Inc., 7.625%, 1/15/25 (a)(b) | 2,180,369 | ||||||||||
3,050 | Joseph T. Ryerson & Son, Inc., 11.00%, 5/15/22 (a)(b)(g) | 3,370,250 | ||||||||||
13,209,544 | ||||||||||||
Miscellaneous Manufacturing 0.3% | ||||||||||||
2,255 | Koppers, Inc., 6.00%, 2/15/25 (a)(b) | 2,271,913 | ||||||||||
Oil, Gas & Consumable Fuels 3.9% | ||||||||||||
2,300 | Calumet Specialty Products Partners L.P., 6.50%, 4/15/21 | 2,277,000 | ||||||||||
1,420 | Carrizo Oil & Gas, Inc., 6.25%, 4/15/23 | 1,459,050 | ||||||||||
Ensco PLC, | ||||||||||||
450 | 5.20%, 3/15/25 | 378,000 | ||||||||||
3,565 | 7.75%, 2/1/26 | 3,417,944 |
See accompanying Notes to Financial Statements | | August 31, 2018 | | Semi-Annual Report | 29 |
Schedule of Investments
AllianzGI Convertible & Income Fund II
August 31, 2018 (unaudited) (continued)
Principal Amount (000s) |
Value | |||||||||||
Oil, Gas & Consumable Fuels (continued) | ||||||||||||
$6,180 | EP Energy LLC, 9.375%, 5/1/20 | $6,087,300 | ||||||||||
2,165 | NGL Energy Partners L.P., 7.50%, 11/1/23 | 2,221,831 | ||||||||||
2,095 | Noble Holding International Ltd., 7.75%, 1/15/24 | 2,058,337 | ||||||||||
3,745 | Oasis Petroleum, Inc., 6.875%, 3/15/22 | 3,819,900 | ||||||||||
3,470 | Sanchez Energy Corp., 6.125%, 1/15/23 | 1,976,686 | ||||||||||
2,580 | Transocean, Inc., 7.50%, 1/15/26 (a)(b) | 2,634,825 | ||||||||||
630 | Weatherford International Ltd., 8.25%, 6/15/23 | 589,050 | ||||||||||
26,919,923 | ||||||||||||
Pharmaceuticals 1.3% | ||||||||||||
3,000 | Bausch Health Cos, Inc., 7.50%, 7/15/21 (a)(b) | 3,053,265 | ||||||||||
1,755 | Endo Finance LLC, 5.375%, 1/15/23 (a)(b) | 1,509,300 | ||||||||||
4,425 | Horizon Pharma, Inc., 6.625%, 5/1/23 | 4,524,562 | ||||||||||
9,087,127 | ||||||||||||
Pipelines 0.4% | ||||||||||||
2,715 | Energy Transfer Equity L.P., 5.50%, 6/1/27 (g) | 2,854,144 | ||||||||||
Real Estate 1.2% | ||||||||||||
4,205 | Kennedy-Wilson, Inc., 5.875%, 4/1/24 | 4,189,231 | ||||||||||
4,090 | Uniti Group L.P., 8.25%, 10/15/23 | 3,874,007 | ||||||||||
8,063,238 | ||||||||||||
Retail 1.3% | ||||||||||||
4,370 | Conns, Inc., 7.25%, 7/15/22 | 4,412,826 | ||||||||||
1,170 | L Brands, Inc., 6.875%, 11/1/35 | 980,226 | ||||||||||
5,785 | Neiman Marcus Group Ltd. LLC, 8.00%, 10/15/21 (a)(b) | 3,948,262 | ||||||||||
9,341,314 | ||||||||||||
Semiconductors 1.1% | ||||||||||||
4,090 | Advanced Micro Devices, Inc., 7.00%, 7/1/24 (g) | 4,355,850 | ||||||||||
2,875 | Amkor Technology, Inc., 6.375%, 10/1/22 (g) | 2,932,500 | ||||||||||
7,288,350 | ||||||||||||
Software 0.7% | ||||||||||||
3,850 | Camelot Finance S.A., 7.875%, 10/15/24 (a)(b) | 3,845,188 | ||||||||||
1,135 | Rackspace Hosting, Inc., 8.625%, 11/15/24 (a)(b) | 1,120,103 | ||||||||||
4,965,291 | ||||||||||||
Telecommunications 4.6% | ||||||||||||
865 | CenturyLink, Inc., 7.50%, 4/1/24, Ser. Y | 927,713 | ||||||||||
3,125 | Cincinnati Bell, Inc., 7.00%, 7/15/24 (a)(b) | 2,765,625 | ||||||||||
7,130 | Consolidated Communications, Inc., 6.50%, 10/1/22 | 6,764,587 | ||||||||||
4,045 | Frontier Communications Corp., 10.50%, 9/15/22 | 3,579,825 | ||||||||||
2,050 | GTT Communications, Inc., 7.875%, 12/31/24 (a)(b) | 1,947,500 | ||||||||||
Hughes Satellite Systems Corp., | ||||||||||||
1,130 | 6.625%, 8/1/26 | 1,084,800 | ||||||||||
3,500 | 7.625%, 6/15/21 (g) | 3,780,000 | ||||||||||
5,545 | Sprint Communications, Inc., 11.50%, 11/15/21 | 6,556,962 | ||||||||||
1,425 | Sprint Corp., 7.625%, 3/1/26 | 1,500,041 | ||||||||||
6,283 | Windstream Services LLC, 6.375%, 8/1/23 (a)(b) | 3,403,250 | ||||||||||
32,310,303 | ||||||||||||
Transportation 0.4% | ||||||||||||
2,940 | XPO Logistics, Inc., 6.50%, 6/15/22 (a)(b)(g) | 3,047,957 | ||||||||||
Total Corporate Bonds & Notes (cost-$275,588,973) | 257,360,349 |
30 | Semi-Annual Report | | August 31, 2018 | | See accompanying Notes to Financial Statements |
Schedule of Investments
AllianzGI Convertible & Income Fund II
August 31, 2018 (unaudited) (continued)
Principal Amount (000s) |
Value | |||||||||||
Convertible Bonds & Notes 29.9% | ||||||||||||
Apparel & Textiles 0.9% | ||||||||||||
$11,020 | Iconix Brand Group, Inc., 5.75%, 8/15/23 | $6,260,738 | ||||||||||
Auto Components 0.3% | ||||||||||||
3,135 | Horizon Global Corp., 2.75%, 7/1/22 | 2,286,076 | ||||||||||
Auto Manufacturers 1.3% | ||||||||||||
4,675 | Navistar International Corp., 4.75%, 4/15/19 | 4,872,233 | ||||||||||
Tesla, Inc., | ||||||||||||
1,785 | 0.25%, 3/1/19 | 1,836,908 | ||||||||||
2,150 | 1.25%, 3/1/21 | 2,235,278 | ||||||||||
8,944,419 | ||||||||||||
Biotechnology 1.2% | ||||||||||||
850 | Exact Sciences Corp., 1.00%, 1/15/25 | 1,013,536 | ||||||||||
7,260 | Intercept Pharmaceuticals, Inc., 3.25%, 7/1/23 | 7,023,317 | ||||||||||
8,036,853 | ||||||||||||
Building Materials 0.5% | ||||||||||||
3,225 | Cemex S.A.B de C.V., 3.72%, 3/15/20 | 3,276,171 | ||||||||||
Commercial Services 1.1% | ||||||||||||
7,960 | Huron Consulting Group, Inc., 1.25%, 10/1/19 (g) | 7,768,960 | ||||||||||
Distribution/Wholesale 0.7% | ||||||||||||
4,975 | Titan Machinery, Inc., 3.75%, 5/1/19 | 4,944,264 | ||||||||||
Diversified Financial Services 2.3% | ||||||||||||
7,030 | Encore Capital Group, Inc., 3.00%, 7/1/20 (g) | 7,270,377 | ||||||||||
9,160 | PRA Group, Inc., 3.00%, 8/1/20 (g) | 8,886,922 | ||||||||||
16,157,299 | ||||||||||||
Electric Utilities 1.0% | ||||||||||||
6,905 | NRG Yield, Inc., 3.25%, 6/1/20 (a)(b)(g) | 6,913,617 | ||||||||||
Electrical Equipment 1.1% | ||||||||||||
SunPower Corp. (g), | ||||||||||||
2,365 | 0.875%, 6/1/21 | 1,856,866 | ||||||||||
7,095 | 4.00%, 1/15/23 | 5,779,310 | ||||||||||
7,636,176 | ||||||||||||
Electronics 0.8% | ||||||||||||
5,955 | OSI Systems, Inc., 1.25%, 9/1/22 (g) | 5,833,607 | ||||||||||
Energy-Alternate Sources 2.4% | ||||||||||||
5,160 | Pattern Energy Group, Inc., 4.00%, 7/15/20 (g) | 5,144,520 | ||||||||||
12,690 | Tesla Energy Operations, Inc., 1.625%, 11/1/19 (g) | 11,622,695 | ||||||||||
16,767,215 | ||||||||||||
Equity Real Estate Investment Trusts (REITs) 1.3% | ||||||||||||
3,025 | Two Harbors Investment Corp., 6.25%, 1/15/22 | 3,138,988 | ||||||||||
5,810 | Western Asset Mortgage Capital Corp., 6.75%, 10/1/22 | 6,018,591 | ||||||||||
9,157,579 | ||||||||||||
Healthcare/Healthcare Distributors 1.0% | ||||||||||||
8,615 | Aceto Corp., 2.00%, 11/1/20 | 6,996,448 | ||||||||||
Insurance 2.6% | ||||||||||||
8,400 | AmTrust Financial Services, Inc., 2.75%, 12/15/44 (g) | 8,150,520 | ||||||||||
8,605 | AXA S.A., 7.25%, 5/15/21 (a)(b) | 9,705,657 | ||||||||||
17,856,177 |
See accompanying Notes to Financial Statements | | August 31, 2018 | | Semi-Annual Report | 31 |
Schedule of Investments
AllianzGI Convertible & Income Fund II
August 31, 2018 (unaudited) (continued)
Principal Amount (000s) |
Value | |||||||||||
Iron/Steel 0.1% | ||||||||||||
$690 | AK Steel Corp., 5.00%, 11/15/19 (g) | $783,889 | ||||||||||
Oil, Gas & Consumable Fuels 1.5% | ||||||||||||
2,150 | Green Plains, Inc., 4.125%, 9/1/22 (g) | 2,083,935 | ||||||||||
1,720 | Nabors Industries, Inc., 0.75%, 1/15/24 (g) | 1,361,615 | ||||||||||
7,525 | Whiting Petroleum Corp., 1.25%, 4/1/20 | 7,207,415 | ||||||||||
10,652,965 | ||||||||||||
Pharmaceuticals 1.8% | ||||||||||||
9,210 | Dermira, Inc., 3.00%, 5/15/22 (g) | 7,605,157 | ||||||||||
2,460 | Horizon Pharma Investment Ltd., 2.50%, 3/15/22 | 2,535,338 | ||||||||||
2,585 | Jazz Investments I Ltd., 1.50%, 8/15/24 | 2,674,715 | ||||||||||
12,815,210 | ||||||||||||
Pipelines 2.1% | ||||||||||||
18,700 | Cheniere Energy, Inc., 4.25%, 3/15/45 (g) | 14,897,916 | ||||||||||
Semiconductors 0.4% | ||||||||||||
2,970 | Veeco Instruments, Inc., 2.70%, 1/15/23 (g) | 2,547,898 | ||||||||||
Software 2.0% | ||||||||||||
11,915 | Avid Technology, Inc., 2.00%, 6/15/20 | 10,783,420 | ||||||||||
3,015 | Synchronoss Technologies, Inc., 0.75%, 8/15/19 (g) | 2,806,902 | ||||||||||
13,590,322 | ||||||||||||
Telecommunications 0.8% | ||||||||||||
5,735 | GDS Holdings Ltd., 2.00%, 6/1/25 (a)(b) | 5,607,322 | ||||||||||
Tobacco 1.4% | ||||||||||||
Vector Group Ltd. (h), | ||||||||||||
4,335 | 3 mo. Cash Dividends on Common Stock + 1.75%, 1.75%, 4/15/20 (g) | 4,494,480 | ||||||||||
4,685 | 3 mo. Cash Dividends on Common Stock + 2.50%, 2.50%, 1/15/19 | 5,195,131 | ||||||||||
9,689,611 | ||||||||||||
Transportation 1.3% | ||||||||||||
3,010 | Aegean Marine Petroleum Network, Inc., 4.25%, 12/15/21 | 1,986,501 | ||||||||||
3,440 | Echo Global Logistics, Inc., 2.50%, 5/1/20 | 3,738,850 | ||||||||||
3,555 | Teekay Corp., 5.00%, 1/15/23 (a)(b) | 3,230,798 | ||||||||||
8,956,149 | ||||||||||||
Total Convertible Bonds & Notes (cost-$203,558,195) | 208,376,881 | |||||||||||
Shares | ||||||||||||
Convertible Preferred Stock 28.8% | ||||||||||||
Banks 4.1% | ||||||||||||
9,140 | Bank of America Corp., 7.25%, Ser. L (e) | 11,963,711 | ||||||||||
12,835 | Wells Fargo & Co., 7.50%, Ser. L (e) | 16,634,032 | ||||||||||
28,597,743 | ||||||||||||
Chemicals 1.1% | ||||||||||||
51,505 | Rayonier Advanced Materials, Inc., 8.00%, 8/15/19, Ser. A | 7,405,389 | ||||||||||
Commercial Services & Supplies 0.7% | ||||||||||||
110,120 | Stericycle, Inc., 5.25%, 9/15/18 | 4,992,841 | ||||||||||
Diversified Financial Services 0.2% | ||||||||||||
21,530 | AMG Capital Trust II, 5.15%, 10/15/37 | 1,265,632 |
32 | Semi-Annual Report | | August 31, 2018 | | See accompanying Notes to Financial Statements |
Schedule of Investments
AllianzGI Convertible & Income Fund II
August 31, 2018 (unaudited) (continued)
Shares | Value | |||||||||||
Electric Utilities 2.5% | ||||||||||||
228,650 | Dominion Energy, Inc., 6.75%, 8/15/19, Ser. A | $10,755,696 | ||||||||||
111,635 | NextEra Energy, Inc., 6.123%, 9/1/19 | 6,374,359 | ||||||||||
17,130,055 | ||||||||||||
Electronic Equipment, Instruments & Components 1.1% | ||||||||||||
76,780 | Belden, Inc., 6.75%, 7/15/19 (g) | 7,470,694 | ||||||||||
Electronics 1.2% | ||||||||||||
7,625 | Fortive Corp., 5.00%, 7/1/21, Ser. A | 8,203,719 | ||||||||||
Equity Real Estate Investment Trusts (REITs) 6.2% | ||||||||||||
7,795 | Crown Castle International Corp., 6.875%, 8/1/20, Ser. A | 8,598,275 | ||||||||||
43,045 | QTS Realty Trust, Inc., 6.50%, Ser. B (e) | 4,754,320 | ||||||||||
476,235 | RLJ Lodging Trust, 1.95%, Ser. A (e) | 12,667,851 | ||||||||||
309,935 | Sutherland Asset Management Corp., 7.00%, 8/15/23 | 8,159,039 | ||||||||||
149,485 | Welltower, Inc., 6.50%, Ser. I (e) | 9,302,451 | ||||||||||
43,481,936 | ||||||||||||
Gas Utilities 1.5% | ||||||||||||
184,475 | South Jersey Industries, Inc., 7.25%, 4/15/21 | 10,333,367 | ||||||||||
Hand/Machine Tools 1.6% | ||||||||||||
104,940 | Stanley Black & Decker, Inc., 5.375%, 5/15/20 | 11,395,435 | ||||||||||
Healthcare-Products 2.3% | ||||||||||||
246,820 | Becton Dickinson and Co., 6.125%, 5/1/20, Ser. A | 16,224,836 | ||||||||||
Insurance 1.9% | ||||||||||||
120,100 | Assurant, Inc., 6.50%, 3/15/21, Ser. D | 13,245,229 | ||||||||||
Multi-Utilities 1.8% | ||||||||||||
121,195 | Sempra Energy, 6.00%, 1/15/21, Ser. A | 12,456,422 | ||||||||||
Oil, Gas & Consumable Fuels 1.2% | ||||||||||||
130,590 | Kinder Morgan, Inc., 9.75%, 10/26/18, Ser. A | 4,363,012 | ||||||||||
51,395 | Nabors Industries Ltd., 6.00%, 5/1/21 (g) | 2,244,934 | ||||||||||
173,845 | Sanchez Energy Corp., 6.50%, Ser. B (e) | 1,912,295 | ||||||||||
8,520,241 | ||||||||||||
Pharmaceuticals 1.4% | ||||||||||||
23,315 | Teva Pharmaceutical Industries Ltd., 7.00%, 12/15/18 | 9,912,372 | ||||||||||
Total Convertible Preferred Stock (cost-$195,216,615) | 200,635,911 | |||||||||||
Preferred Stock (a)(d)(f)(j)(k) 1.2% | ||||||||||||
Media 1.2% | ||||||||||||
3,554 | LiveStyle, Inc., Ser. A | 483,522 | ||||||||||
76,572 | LiveStyle, Inc., Ser. B | 7,657,200 | ||||||||||
6,750 | LiveStyle, Inc., Ser. B | 50 | ||||||||||
Total Preferred Stock (cost-$12,855,448) | 8,140,772 | |||||||||||
Common Stock (j) 0.3% | ||||||||||||
Advertising 0.2% | ||||||||||||
133,715 | Affinion Group Holdings, Inc., Class A, (cost-$2,371,020; purchased 11/9/15-11/12/15) (a)(d)(f)(i) | 1,583,186 | ||||||||||
Aerospace & Defense 0.1% | ||||||||||||
6,354 | Erickson, Inc. (a)(d)(f) | 202,057 | ||||||||||
Media 0.0% | ||||||||||||
90,407 | LiveStyle, Inc. (a)(d)(f)(k) | 9 | ||||||||||
Textiles, Apparel & Luxury Goods 0.0% | ||||||||||||
560,133 | Iconix Brand Group, Inc. | 196,046 | ||||||||||
Total Common Stock (cost-$8,116,959) | 1,981,298 |
See accompanying Notes to Financial Statements | | August 31, 2018 | | Semi-Annual Report | 33 |
Schedule of Investments
AllianzGI Convertible & Income Fund II
August 31, 2018 (unaudited) (continued)
Units | Value | |||||||||||
Warrants (d)(f)(j) 0.0% | ||||||||||||
Commercial Services 0.0% | ||||||||||||
1,562,241 | Cenveo, Inc., strike price $12.00, expires 6/10/24 (b) | $16 | ||||||||||
Media 0.0% | ||||||||||||
19,500 | LiveStyle, Inc., expires 11/30/21, Ser. C (a)(k) | 2 | ||||||||||
Total Warrants (cost-$183,305) | 18 | |||||||||||
Principal Amount (000s) |
||||||||||||
Repurchase Agreements 2.8% | ||||||||||||
$19,722 | State Street Bank and Trust Co., dated 8/31/18, 0.35%, due 9/4/18, proceeds $19,722,767; collateralized by U.S. Treasury Notes, 3.625%, due 2/15/44, valued at $20,116,623 including accrued interest (cost-$19,722,000) |
19,722,000 | ||||||||||
Total Investments (cost-$715,241,495) 100.0% | 696,217,229 | |||||||||||
Liabilities in excess of other assets | (101,630,172 | ) | ||||||||||
Preferred Shares | (162,525,000 | ) | ||||||||||
Net Assets Applicable to Common Shareholders | $432,062,057 |
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 $129,167,420, representing 18.6% 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 $119,241,410, representing 17.1% of total investments. |
(c) | In default. |
(d) | Fair-ValuedSecurities with an aggregate value of $9,926,042, representing 1.4% 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(a) and Note 1(b) in the Notes to Financial Statements. |
(g) | All or partial amount segregated for the benefit of the counterparty as collateral for liquidity facility. |
(h) | 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. |
(i) | Restricted. The aggregate cost of such securities is $12,444,439. The aggregate value is $1,911,828, representing 0.3% of total investments. |
(j) | Non-income producing. |
(k) | A member of the Funds portfolio management team is a member of the board of directors of LiveStyle, Inc. The Funds aggregate value of investments in LiveStyle, Inc. represents 1.2% of total investments. |
(l) | Fair Value MeasurementsSee Note 1(b) in the Notes to Financial Statements. |
34 | Semi-Annual Report | | August 31, 2018 | | See accompanying Notes to Financial Statements |
Schedule of Investments
AllianzGI Convertible & Income Fund II
August 31, 2018 (unaudited) (continued)
Level 1 Quoted Prices |
Level 2 Other Significant Observable Inputs |
Level 3 Significant |
Value at 8/31/18 |
|||||||||||||
Investments in Securities Assets |
||||||||||||||||
Corporate Bonds & Notes: |
||||||||||||||||
Media |
| $10,146,725 | $72 | $10,146,797 | ||||||||||||
All Other |
| 247,213,552 | | 247,213,552 | ||||||||||||
Convertible Bonds & Notes |
| 208,376,881 | | 208,376,881 | ||||||||||||
Convertible Preferred Stock: |
||||||||||||||||
Chemicals |
| 7,405,389 | | 7,405,389 | ||||||||||||
Diversified Financial Services |
| 1,265,632 | | 1,265,632 | ||||||||||||
Electronics |
| 8,203,719 | | 8,203,719 | ||||||||||||
Equity Real Estate Investment Trusts (REITs) |
$26,724,622 | 16,757,314 | | 43,481,936 | ||||||||||||
Hand/Machine Tools |
| 11,395,435 | | 11,395,435 | ||||||||||||
Healthcare-Products |
| 16,224,836 | | 16,224,836 | ||||||||||||
Oil, Gas & Consumable Fuels |
6,607,946 | 1,912,295 | | 8,520,241 | ||||||||||||
Pharmaceuticals |
| 9,912,372 | | 9,912,372 | ||||||||||||
All Other |
94,226,351 | | | 94,226,351 | ||||||||||||
Preferred Stock |
| | 8,140,772 | 8,140,772 | ||||||||||||
Common Stock: |
||||||||||||||||
Advertising |
| | 1,583,186 | 1,583,186 | ||||||||||||
Aerospace & Defense |
| | 202,057 | 202,057 | ||||||||||||
Media |
| | 9 | 9 | ||||||||||||
Textiles, Apparel & Luxury Goods |
196,046 | | | 196,046 | ||||||||||||
Warrants |
| | 18 | 18 | ||||||||||||
Repurchase Agreements |
| 19,722,000 | | 19,722,000 | ||||||||||||
Totals |
$ | 127,754,965 | $ | 558,536,150 | $ | 9,926,114 | $ | 696,217,229 |
At August 31, 2018, securities valued at $28,152,749 were transferred from Level 1 to Level 2. The transfer was a result of the securities having used an exchange-traded closing price on February 28, 2018, and then using an evaluated price from a third-party independent pricing vendor on August 31, 2018.
See accompanying Notes to Financial Statements | | August 31, 2018 | | Semi-Annual Report | 35 |
Schedule of Investments
AllianzGI Convertible & Income Fund II
August 31, 2018 (unaudited) (continued)
A roll forward of fair value measurements using significant unobservable inputs (Level 3) for the six months ended August 31, 2018, was as follows:
Beginning Balance 2/28/18 |
Purchases | Sales | Accrued Discount (Premiums) |
Net Realized Gain (Loss) |
Net Change in Unrealized Appreciation/ Depreciation |
Transfers into Level 3* |
Transfers out of Level 3 |
Ending Balance 8/31/18 |
||||||||||||||||||||||||||||
Investments in Securities Assets |
||||||||||||||||||||||||||||||||||||
Corporate Bonds & Notes: |
||||||||||||||||||||||||||||||||||||
Media |
$ | $ | $ | $ | $ | $ | $72 | $ | $72 | |||||||||||||||||||||||||||
Preferred Stock: |
||||||||||||||||||||||||||||||||||||
Media |
8,491,150 | | (650,957 | ) | | 181,840 | 118,739 | | | 8,140,772 | ||||||||||||||||||||||||||
Common Stock: |
||||||||||||||||||||||||||||||||||||
Advertising |
2,024,445 | | | | | (441,259 | ) | | | 1,583,186 | ||||||||||||||||||||||||||
Aerospace & Defense |
199,452 | | | | | 2,605 | | | 202,057 | |||||||||||||||||||||||||||
Media |
9 | | | | | | | | 9 | |||||||||||||||||||||||||||
Warrants: |
||||||||||||||||||||||||||||||||||||
Commercial Services |
273 | | | | | (257 | ) | | | 16 | ||||||||||||||||||||||||||
Media |
2 | | | | | | | | 2 | |||||||||||||||||||||||||||
Totals |
$10,715,331 | $ | $(650,957 | ) | $ | $181,840 | $(320,172 | ) | $72 | $ | $9,926,114 |
* | At August 31, 2018, a security valued at $72 was transferred from Level 2 to Level 3. The transfer was due to uncertainty regarding the receipt of updated financial statements and data related to a current evaluated price. |
The following table presents additional information about valuation techniques and inputs used for investments that are measured at fair value and categorized within Level 3 at August 31, 2018:
Ending Balance at 8/31/18 |
Valuation Technique Used |
Unobservable Inputs |
Input Values (Range) | |||||||
Investments in Securities Assets | ||||||||||
Preferred Stock |
$483,522 | Market and Company Comparables |
EV Multiples Applicable Liquidity Multiple Illiquidity Discount |
0.65x (0.29x 1.12x) 1.60 30% | ||||||
$7,567,200 | Market and Company Comparables |
EV Multiples Illiquidity Discount |
0.65x (0.29x 1.12x) 30% | |||||||
Common Stock |
$1,583,186 | Market and Company Comparables |
EV Multiples Illiquidity Discount |
5.20x (2.15x 9.72x) 20% | ||||||
$202,057 | Market and Company Comparables |
EV Multiples M&A Transaction Multiples |
0.72x (0.51x 1.11x) 0.87x (0.32x 2.12x) 40% |
The net change in unrealized appreciation/depreciation of Level 3 investments held at August 31, 2018 was $(310,790).
Glossary:
PIK | - | Payment-in-Kind | ||
REIT | - | Real Estate Investment Trust |
36 | Semi-Annual Report | | August 31, 2018 | | See accompanying Notes to Financial Statements |
Statements of Assets and Liabilities
AllianzGI Convertible & Income Funds
August 31, 2018 (unaudited)
Convertible & Income 2024 Target Term |
Convertible & Income |
Convertible & Income II |
||||||||||||||||||||||
Assets: | ||||||||||||||||||||||||
Investments, at value, including securities on loan of $61,863,998, $52,832,323, and $0, respectively (cost-$253,926,816, $942,009,793 and $715,241,495, respectively) | $252,818,474 | $914,638,681 | $696,217,229 | |||||||||||||||||||||
Receivable for investments sold | 4,515,864 | 164,439 | 123,939 | |||||||||||||||||||||
Interest and dividends receivable | 2,847,437 | 10,768,211 | 8,153,487 | |||||||||||||||||||||
Investments in Affiliated Funds Trustees Deferred Compensation Plan (see Note 3) | 17,731 | 135,191 | 102,571 | |||||||||||||||||||||
Prepaid expenses | 14,450 | 76,214 | 33,807 | |||||||||||||||||||||
Receivable for security litigation | | 93,780 | 81,992 | |||||||||||||||||||||
Deferred offering costs | | 69,851 | 55,255 | |||||||||||||||||||||
Total Assets |
260,213,956 | 925,946,367 | 704,768,280 | |||||||||||||||||||||
Liabilities: | ||||||||||||||||||||||||
Loan payable (See Note 8) | 69,700,000 | 125,701,500 | 104,786,500 | |||||||||||||||||||||
Payable for investments purchased | 7,040,000 | | | |||||||||||||||||||||
Dividends payable to common and preferred shareholders | 839,823 | 5,849,308 | 4,364,182 | |||||||||||||||||||||
Payable to custodian for cash overdraft | 566,262 | 4,409 | 4,798 | |||||||||||||||||||||
Investment management fees payable | 159,633 | 545,254 | 415,073 | |||||||||||||||||||||
Loan interest payable | 101,596 | 310,741 | 258,021 | |||||||||||||||||||||
Trustees Deferred Compensation Plan payable (see Note 3) | 17,731 | 135,191 | 102,571 | |||||||||||||||||||||
Accrued expenses | 133,990 | 282,693 | 250,078 | |||||||||||||||||||||
Total Liabilities |
78,559,035 | 132,829,096 | 110,181,223 | |||||||||||||||||||||
Preferred Shares ($0.00001 par value and $25,000 liquidation preference per share applicable to an aggregate of 0, 8,931 and 6,501 shares issued and outstanding, respectively) | | 223,275,000 | 162,525,000 | |||||||||||||||||||||
Net Assets Applicable to Common Shareholders | $181,654,921 | $569,842,271 | $432,062,057 | |||||||||||||||||||||
Composition of Net Assets Applicable to Common Shareholders: | ||||||||||||||||||||||||
Common Shares: | ||||||||||||||||||||||||
Par value ($0.00001 per share) |
$183 | $892 | $752 | |||||||||||||||||||||
Paid-in-capital in excess of par |
179,156,440 | 801,519,223 | 614,427,099 | |||||||||||||||||||||
Undistributed (dividends in excess of) net investment income | 1,023,795 | (19,948,054) | (14,879,449) | |||||||||||||||||||||
Accumulated net realized gain (loss) | 2,582,845 | (184,358,678) | (148,462,079) | |||||||||||||||||||||
Net unrealized depreciation | (1,108,342) | (27,371,112) | (19,024,266) | |||||||||||||||||||||
Net Assets Applicable to Common Shareholders | $181,654,921 | $569,842,271 | $432,062,057 | |||||||||||||||||||||
Common Shares Issued and Outstanding | 18,257,012 | 89,185,330 | 75,220,257 | |||||||||||||||||||||
Net Asset Value Per Common Share | $9.95 | $6.39 | $5.74 |
See accompanying Notes to Financial Statements | | August 31, 2018 | | Semi-Annual Report | 37 |
AllianzGI Convertible & Income Funds
Six Months ended August 31, 2018 (unaudited)
Convertible & Income 2024 Target Term |
Convertible & Income |
Convertible & Income II |
||||||||||||||||||||||
Investment Income: | ||||||||||||||||||||||||
Interest | $6,257,617 | $22,763,888 | $17,144,392 | |||||||||||||||||||||
Dividends | 1,313,299 | 9,032,715 | 6,870,752 | |||||||||||||||||||||
Miscellaneous | 39,133 | 63,329 | 47,964 | |||||||||||||||||||||
Total Investment Income |
7,610,049 | 31,859,932 | 24,063,108 | |||||||||||||||||||||
Expenses: | ||||||||||||||||||||||||
Investment management | 943,915 | 3,245,405 | 2,470,388 | |||||||||||||||||||||
Loan Interest | 1,027,439 | 310,741 | 258,021 | |||||||||||||||||||||
Audit and tax services | 44,785 | 53,924 | 57,278 | |||||||||||||||||||||
Custodian and accounting agent | 30,966 | 56,681 | 47,536 | |||||||||||||||||||||
Shareholder communications | 22,366 | 45,521 | 40,136 | |||||||||||||||||||||
Legal | 18,892 | 76,471 | 73,836 | |||||||||||||||||||||
Transfer agent | 12,700 | 37,053 | 36,920 | |||||||||||||||||||||
New York Stock Exchange listing | 6,914 | 28,340 | 23,859 | |||||||||||||||||||||
Trustees | 5,874 | 19,102 | 14,196 | |||||||||||||||||||||
Insurance | 3,940 | 8,329 | 6,819 | |||||||||||||||||||||
Auction agent and commissions | | 205,628 | 168,196 | |||||||||||||||||||||
Miscellaneous | 3,778 | 56,413 | 57,057 | |||||||||||||||||||||
Total Expenses |
2,121,569 | 4,143,608 | 3,254,242 | |||||||||||||||||||||
Net Investment Income | 5,488,480 | 27,716,324 | 20,808,866 | |||||||||||||||||||||
Realized and Change in Unrealized Gain (Loss): | ||||||||||||||||||||||||
Net realized gain (loss) on investments | 1,573,738 | (9,262,937) | (7,873,954) | |||||||||||||||||||||
Net change in unrealized appreciation/depreciation of investments | 871,366 | (837,975) | (110,416) | |||||||||||||||||||||
Net realized and change in unrealized gain (loss) | 2,445,104 | (10,100,912) | (7,984,370) | |||||||||||||||||||||
Net Increase in Net Assets Resulting from Investment Operations | 7,933,584 | 17,615,412 | 12,824,496 | |||||||||||||||||||||
Dividends on Preferred Shares from Net Investment Income | | (4,409,327) | (3,362,737) | |||||||||||||||||||||
Net Increase in Net Assets Applicable to Common Shareholders Resulting from Investment Operations | $7,933,584 | $13,206,085 | $9,461,759 |
38 | Semi-Annual Report | | August 31, 2018 | | See accompanying Notes to Financial Statements |
Statements of Changes in Net Assets
AllianzGI Convertible & Income 2024 Target Term Fund
Six Months ended August 31, 2018 (unaudited) |
Period from June 30, 2017** through February 28, 2018 |
|||||||||||||||
Investment Operations: | ||||||||||||||||
Net investment income | $5,488,480 | $6,336,947 | ||||||||||||||
Net realized gain | 1,573,738 | 1,089,016 | ||||||||||||||
Net change in unrealized appreciation/depreciation | 871,366 | (1,979,708) | ||||||||||||||
Net increase in net assets resulting from investment operations | 7,933,584 | 5,446,255 | ||||||||||||||
Dividends to Common Shareholders from Net Investment Income | (5,038,935) | (5,878,756) | ||||||||||||||
Share Transactions: | ||||||||||||||||
Net proceeds from shares issued in offering | | 179,457,239 | ||||||||||||||
Offering costs charged to paid-in capital in excess of par | | (364,936) | ||||||||||||||
Reinvestment of dividends | | 468 | ||||||||||||||
Net increase in net assets from share transactions | | 179,092,771 | ||||||||||||||
Total increase in net assets | 2,894,649 | 178,660,270 | ||||||||||||||
Net Assets: | ||||||||||||||||
Beginning of period | 178,760,272 | 100,002 | ||||||||||||||
End of period* | $181,654,921 | $178,760,272 | ||||||||||||||
*Including undistributed net investment income of: | $1,023,795 | $574,250 | ||||||||||||||
Shares Activity: | ||||||||||||||||
Shares outstanding, beginning of period | 18,257,012 | 10,168 | ||||||||||||||
Shares issued in offering | | 18,246,796 | ||||||||||||||
Shares issued in reinvestment of dividends | | 48 | ||||||||||||||
Shares outstanding, end of period | 18,257,012 | 18,257,012 |
** Commencement of operations.
See accompanying Notes to Financial Statements | | August 31, 2018 | | Semi-Annual Report | 39 |
Statements of Changes in Net Assets Applicable to Common Shareholders
AllianzGI Convertible & Income Fund
Six Months ended August 31, 2018 (unaudited) |
Year ended February 28, 2018 |
|||||||||||||||
Investment Operations: | ||||||||||||||||
Net investment income | $27,716,324 | $60,943,168 | ||||||||||||||
Net realized gain (loss) | (9,262,937) | 18,030,865 | ||||||||||||||
Net change in unrealized appreciation/depreciation | (837,975) | (32,466,081) | ||||||||||||||
Net increase in net assets resulting from investment operations | 17,615,412 | 46,507,952 | ||||||||||||||
Dividends on Preferred Shares from Net Investment Income | (4,409,327) | (6,007,597) | ||||||||||||||
Net increase in net assets applicable to common shareholders resulting from investment operations | 13,206,085 | 40,500,355 | ||||||||||||||
Dividends and Distributions to Common Shareholders from: | ||||||||||||||||
Net investment income | (34,720,678) | (68,079,863) | ||||||||||||||
Return of capital | | (959,598) | ||||||||||||||
Total dividends and distributions to common shareholders | (34,720,678) | (69,039,461) | ||||||||||||||
Preferred Share Transactions: | ||||||||||||||||
Net increase resulting from tender offer of Auction-Rate Preferred Shares** | 8,023,500 | | ||||||||||||||
Common Share Transactions: | ||||||||||||||||
Reinvestment of dividends | 2,466,526 | 4,211,517 | ||||||||||||||
Total decrease in net assets applicable to common shareholders | (11,024,567) | (24,327,589) | ||||||||||||||
Net Assets Applicable to Common Shareholders: | ||||||||||||||||
Beginning of period | 580,866,838 | 605,194,427 | ||||||||||||||
End of period* | $569,842,271 | $580,866,838 | ||||||||||||||
*Including dividends in excess of net investment income of: | $(19,948,054) | $(8,534,373) | ||||||||||||||
Common Shares Activity: | ||||||||||||||||
Common shares outstanding, beginning of period | 88,808,652 | 88,185,843 | ||||||||||||||
Common shares issued in reinvestment of dividends and distributions | 376,678 | 622,809 | ||||||||||||||
Common shares outstanding, end of period | 89,185,330 | 88,808,652 |
** See Note 7 in the Notes to Financial Statements.
40 | Semi-Annual Report | | August 31, 2018 | | See accompanying Notes to Financial Statements |
Statements of Changes in Net Assets Applicable to Common Shareholders
AllianzGI Convertible & Income Fund II
Six Months ended August 31, 2018 (unaudited) |
Year ended February 28, 2018 |
|||||||||||||||
Investment Operations: | ||||||||||||||||
Net investment income | $20,808,866 | $46,067,795 | ||||||||||||||
Net realized gain (loss) | (7,873,954) | 15,554,119 | ||||||||||||||
Net change in unrealized appreciation/depreciation | (110,416) | (25,318,362) | ||||||||||||||
Net increase in net assets resulting from investment operations | 12,824,496 | 36,303,552 | ||||||||||||||
Dividends on Preferred Shares from Net Investment Income | (3,362,737) | (4,610,846) | ||||||||||||||
Net increase in net assets applicable to common shareholders resulting from investment operations | 9,461,759 | 31,692,706 | ||||||||||||||
Dividends and Distributions to Common Shareholders from: | ||||||||||||||||
Net investment income | (25,907,104) | (45,589,913) | ||||||||||||||
Return of capital | | (5,945,822) | ||||||||||||||
Total dividends and distributions to common shareholders | (25,907,104) | (51,535,735) | ||||||||||||||
Preferred Share Transactions: | ||||||||||||||||
Net increase resulting from tender offer of Auction-Rate Preferred Shares** | 6,688,500 | | ||||||||||||||
Common Share Transactions: | ||||||||||||||||
Reinvestment of dividends and distributions | 1,713,116 | 2,964,037 | ||||||||||||||
Total decrease in net assets applicable to common shareholders | (8,043,729) | (16,878,992) | ||||||||||||||
Net Assets Applicable to Common Shareholders: | ||||||||||||||||
Beginning of period | 440,105,786 | 456,984,778 | ||||||||||||||
End of period* | $432,062,057 | $440,105,786 | ||||||||||||||
*Including dividends in excess of net investment income of: | $(14,879,449) | $(6,418,474) | ||||||||||||||
Common Shares Activity: | ||||||||||||||||
Common shares outstanding, beginning of period | 74,921,851 | 74,430,542 | ||||||||||||||
Common shares issued in reinvestment of dividends and distributions | 298,406 | 491,309 | ||||||||||||||
Common shares outstanding, end of period | 75,220,257 | 74,921,851 |
** See Note 7 in the Notes to Financial Statements.
See accompanying Notes to Financial Statements | | August 31, 2018 | | Semi-Annual Report | 41 |
AllianzGI Convertible & Income 2024 Target Term Fund
Six Months ended August 31, 2018 (unaudited)
Decrease in Cash from: | ||||||||
Cash Flows provided by Operating Activities: | ||||||||
Net increase in net assets resulting from investment operations |
$7,933,584 | |||||||
Adjustments to Reconcile Net Increase in Net Assets Resulting from Investment Operations to Net Cash provided by Operating Activities: | ||||||||
Purchases of long-term investments |
(168,044,473) | |||||||
Proceeds from sales of long-term investments |
164,875,324 | |||||||
Purchases of short-term portfolio investments, net |
(485,000) | |||||||
Net change in unrealized appreciation/depreciation |
(871,366) | |||||||
Net amortization/accretion on investments |
(283,384) | |||||||
Net realized gain |
(1,573,738) | |||||||
Increase in payable for investments purchased |
5,034,392 | |||||||
Increase in investments in Affiliated Funds Trustees Deferred Compensation Plan |
(14,460) | |||||||
Decrease in Trustees Compensation Plan payable |
14,460 | |||||||
Increase in receivable for investments sold |
(2,585,933) | |||||||
Decrease in interest and dividends receivable |
418,700 | |||||||
Decrease in tax reclaims receivable |
9,625 | |||||||
Decrease in receivable for principal paydowns |
19,790 | |||||||
Decrease in prepaid expenses |
1,522 | |||||||
Increase in investment management fees payable |
16,885 | |||||||
Decrease in accrued expenses and other liabilities |
(71,269) | |||||||
Increase in loan interest payable |
90,322 | |||||||
Net cash provided by operating activities | 4,484,981 | |||||||
Cash Flows used for Financing Activities: | ||||||||
Increase in payable to custodian for cash overdraft |
553,954 | |||||||
Cash dividends paid |
(5,038,935) | |||||||
Net cash used for financing activities | (4,484,981) | |||||||
Net increase (decrease) in cash | | |||||||
Cash: | ||||||||
Beginning of period | | |||||||
End of period | $ | |||||||
Supplemental Disclosure of Cash Flow Information: | ||||||||
Interest expense paid on loan |
$937,117 |
* Statement of Cash Flows is not required for Convertible & Income and Convertible & Income II.
42 | Semi-Annual Report | | August 31, 2018 | | See accompanying Notes to Financial Statements |
AllianzGI Convertible & Income 2024 Target Term Fund
For a common share outstanding throughout each period^:
Six Months August 31, |
Period from June 30, 2017* through February 28, 2018 |
|||||||||||||
Net asset value, beginning of period | $9.79 | $9.84 | ** | |||||||||||
Investment Operations: | ||||||||||||||
Net investment income | 0.30 | 0.35 | ||||||||||||
Net realized and change in unrealized gain (loss) | 0.14 | (0.06 | ) | |||||||||||
Total from investment operations | 0.44 | 0.29 | ||||||||||||
Dividends to Shareholders from Net Investment Income | (0.28 | ) | (0.32 | ) | ||||||||||
Share Transactions: | ||||||||||||||
Capital charge resulting from issuance of common shares and related offering costs | | (0.02 | ) | |||||||||||
Net asset value, end of period | $9.95 | $9.79 | ||||||||||||
Market price, end of period | $9.31 | $9.22 | ||||||||||||
Total Investment Return (1) | 4.01 | % | (4.59 | )% | ||||||||||
RATIOS/SUPPLEMENTAL DATA: | ||||||||||||||
Net assets, end of period (000s) | $181,655 | $178,760 | ||||||||||||
Ratio of expenses to average net assets, including interest expense (2)(3) | 2.34 | % | 2.14 | %(4)(5) | ||||||||||
Ratio of expenses to average net assets, excluding interest expense (2)(3) | 1.21 | % | 1.23 | %(4)(5) | ||||||||||
Ratio of net investment income to average net assets (2) | 6.05 | % | 5.47 | %(4)(5) | ||||||||||
Portfolio turnover rate | 68 | % | 66 | % |
^ | A zero balance may reflect actual amounts rounding to less than $0.01 or 0.01%. |
* | 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, unless otherwise noted. |
(3) | Interest expense relates to participation in the debt financing (See Note 8). |
(4) | Certain expenses incurred by the Fund were not annualized. |
(5) | Inclusive of excise tax expense of 0.02% (not annualized). |
See accompanying Notes to Financial Statements | | August 31, 2018 | | Semi-Annual Report | 43 |
Financial Highlights
AllianzGI Convertible & Income Fund
For a common share outstanding throughout each period^:
Six Months 2018 |
Year ended | |||||||||||||||||||||||||||||||||||
February 28, 2018 |
February 28, 2017 |
February 29, 2016 |
February 28, 2015 |
February 28, 2014 |
||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $6.54 | $6.86 | $5.50 | $8.44 | $9.49 | $8.78 | ||||||||||||||||||||||||||||||
Investment Operations: | ||||||||||||||||||||||||||||||||||||
Net investment income | 0.31 | 0.69 | 0.73 | 0.83 | 0.87 | 1.02 | (1) | |||||||||||||||||||||||||||||
Net realized and change in unrealized gain (loss) | (0.11 | ) | (0.16 | ) | 1.44 | (2.83 | ) | (0.85 | ) | 0.75 | ||||||||||||||||||||||||||
Total from investment operations | 0.20 | 0.53 | 2.17 | (2.00 | ) | 0.02 | 1.77 | |||||||||||||||||||||||||||||
Dividends on Preferred Shares from Net Investment Income (1) | (0.05 | ) | (0.07 | ) | (0.03 | ) | (0.01 | ) | (0.00 | ) | (0.01 | ) | ||||||||||||||||||||||||
Net increase (decrease) in net assets applicable to common shareholders resulting from investment operations | 0.15 | 0.46 | 2.14 | (2.01 | ) | 0.02 | 1.76 | |||||||||||||||||||||||||||||
Dividends and Distributions to Common Shareholders from: | ||||||||||||||||||||||||||||||||||||
Net Investment Income | (0.39 | ) | (0.77 | ) | (0.78 | ) | (0.93 | ) | (1.08 | ) | (1.08 | ) | ||||||||||||||||||||||||
Return of capital | | (0.01 | ) | | | | | |||||||||||||||||||||||||||||
Total dividends and distributions to common shareholders | (0.39 | ) | (0.78 | ) | (0.78 | ) | (0.93 | ) | (1.08 | ) | (1.08 | ) | ||||||||||||||||||||||||
Preferred Share Transactions: | ||||||||||||||||||||||||||||||||||||
Accretion to net asset value, resulting from tender offer of Auction-Rate Preferred Shares | 0.09 | | | | | | ||||||||||||||||||||||||||||||
Common Share Transactions: | ||||||||||||||||||||||||||||||||||||
Accretion to net asset value, resulting from offerings | | | | | 0.01 | 0.03 | ||||||||||||||||||||||||||||||
Capital charge resulting from issuance of common shares and related offering costs | | | | | (0.00 | ) | (0.00 | ) | ||||||||||||||||||||||||||||
Total common share transactions | | | | | 0.01 | 0.03 | ||||||||||||||||||||||||||||||
Net asset value, end of period | $6.39 | $6.54 | $6.86 | $5.50 | $8.44 | (2) | $9.49 | |||||||||||||||||||||||||||||
Market price, end of period | $7.13 | $6.93 | $6.93 | $4.92 | $9.12 | $10.20 | ||||||||||||||||||||||||||||||
Total Investment Return (3) | 9.13 | % | 12.22 | % | 59.15 | % | (38.23 | )% | 0.37 | % | 24.87 | % |
44 | Semi-Annual Report | | August 31, 2018 | | See accompanying Notes to Financial Statements |
Financial Highlights
AllianzGI Convertible & Income Fund
For a common share outstanding throughout each period^: (continued)
Six Months 2018 |
Year ended | |||||||||||||||||||||||||||||||||||
February 28, 2018 |
February 28, 2017 |
February 29, 2016 |
February 28, 2015 |
February 28, 2014 |
||||||||||||||||||||||||||||||||
RATIOS/SUPPLEMENTAL DATA: | ||||||||||||||||||||||||||||||||||||
Net assets, applicable to common shareholders, end of period (000s) | $569,842 | $580,867 | $605,194 | $484,512 | $739,983 | $811,397 | ||||||||||||||||||||||||||||||
Ratio of expenses to average net assets, including interest expense (4)(5) | 1.46 | %(6)(9) | 1.28 | % | 1.36 | %(8) | 1.26 | %(8) | 1.23 | %(8) |
|
1.21 |
%(7)(8) | |||||||||||||||||||||||
Ratio of expenses to average net assets, excluding interest expense (4)(5) | 1.35 | %(6)(9) | 1.28 | % | 1.36 | %(8) | 1.26 | %(8) | 1.23 | %(8) | 1.21 | %(7)(8) | ||||||||||||||||||||||||
Ratio of net investment income to average net assets (4) | 9.75 | %(6)(9) | 10.32 | % | 11.33 | %(8) | 11.51 | %(8) | 9.73 | %(8) | 11.13 | %(7)(8) | ||||||||||||||||||||||||
Preferred shares asset coverage per share | $88,790 | $65,668 | $67,376 | $58,927 | $76,819 | $81,820 | ||||||||||||||||||||||||||||||
Portfolio turnover rate | 22 | % | 34 | % | 28 | % | 51 | % | 56 | % | 79 | % |
^ | A zero balance may reflect actual amounts rounding to less than $0.01 or 0.01%. |
(1) | Calculated on average common shares outstanding. |
(2) | Payment from affiliate increased the net asset value by less than $0.01. |
(3) | 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. |
(4) | Calculated on the basis of income and expenses applicable to both common and preferred shares relative to average net assets of common shareholders. |
(5) | Interest expense relates to participation in the debt financing (See Note 8). |
(6) | Annualized, unless otherwise noted. |
(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) | Inclusive of tender offer expense of 0.02%. |
See accompanying Notes to Financial Statements | | August 31, 2018 | | Semi-Annual Report | 45 |
Financial Highlights
AllianzGI Convertible & Income Fund II
For a common share outstanding throughout each period^:
Six Months 2018 |
Year ended | |||||||||||||||||||||||||||||||||||
February 28, 2018 |
February 28, 2017 |
February 29, 2016 |
February 28, 2015 |
February 28, 2014 |
||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $5.87 | $6.14 | $4.89 | $7.56 | $8.53 | $7.97 | ||||||||||||||||||||||||||||||
Investment Operations: | ||||||||||||||||||||||||||||||||||||
Net investment income | 0.28 | 0.62 | 0.66 | 0.75 | 0.80 | 0.95 | (1) | |||||||||||||||||||||||||||||
Net realized and change in unrealized gain (loss) | (0.11 | ) | (0.14 | ) | 1.30 | (2.55 | ) | (0.75 | ) | 0.62 | ||||||||||||||||||||||||||
Total from investment operations | 0.17 | 0.48 | 1.96 | (1.80 | ) | 0.05 | 1.57 | |||||||||||||||||||||||||||||
Dividends on Preferred Shares from Net Investment Income (1) | (0.04 | ) | (0.06 | ) | (0.02 | ) | (0.01 | ) | (0.00 | ) | (0.01 | ) | ||||||||||||||||||||||||
Net increase (decrease) in net assets applicable to common shareholders resulting from investment operations | 0.13 | 0.42 | 1.94 | (1.81 | ) | 0.05 | 1.56 | |||||||||||||||||||||||||||||
Dividends to Common Shareholders from: | ||||||||||||||||||||||||||||||||||||
Net Investment Income | (0.35 | ) | (0.61 | ) | (0.69 | ) | (0.86 | ) | (1.02 | ) | (1.02 | ) | ||||||||||||||||||||||||
Return of capital | | (0.08 | ) | | | | | |||||||||||||||||||||||||||||
Total dividends and distributions to common shareholders | (0.35 | ) | (0.69 | ) | (0.69 | ) | (0.86 | ) | (1.02 | ) | (1.02 | ) | ||||||||||||||||||||||||
Preferred Share Transactions: | ||||||||||||||||||||||||||||||||||||
Accretion to net asset value, resulting from tender offer of Auction-Rate Preferred Shares | 0.09 | | | | | | ||||||||||||||||||||||||||||||
Common Share Transactions: | ||||||||||||||||||||||||||||||||||||
Accretion to net asset value, resulting from offerings | | | | | | 0.02 | ||||||||||||||||||||||||||||||
Capital charge resulting from issuance of common shares and related offering costs | | | | | | (0.00 | ) | |||||||||||||||||||||||||||||
Total common share transactions | | | | | | 0.02 | ||||||||||||||||||||||||||||||
Net asset value, end of period | $5.74 | $5.87 | $6.14 | $4.89 | $7.56 | (2) | $8.53 | |||||||||||||||||||||||||||||
Market price, end of period | $6.20 | $6.10 | $6.17 | $4.46 | $8.58 | $9.71 | ||||||||||||||||||||||||||||||
Total Investment Return (3) | 7.89 | % | 10.84 | % | 56.31 | % | (40.34 | )% | (0.81 | )% | 28.50 | % |
46 | Semi-Annual Report | | August 31, 2018 | | See accompanying Notes to Financial Statements |
Financial Highlights
AllianzGI Convertible & Income Fund II
For a common share outstanding throughout each period^: (continued)
Six Months 2018 |
Year ended | |||||||||||||||||||||||||||||||||||
February 28, 2018 |
February 28, 2017 |
February 29, 2016 |
February 28, 2015 |
February 28, 2014 |
||||||||||||||||||||||||||||||||
RATIOS/SUPPLEMENTAL DATA: | ||||||||||||||||||||||||||||||||||||
Net assets, applicable to common shareholders, end of period (000s) | $432,062 | $440,106 | $456,985 | $363,991 | $559,342 | $627,112 | ||||||||||||||||||||||||||||||
Ratio of expenses to average net assets, including interest expense (4)(5) | 1.51 | %(6)(8) | 1.32 | % | 1.37 | % | 1.28 | % | 1.19 | % | 1.18 | %(7) | ||||||||||||||||||||||||
Ratio of expenses to average net assets, excluding interest expense (4)(5) | 1.39 | %(6)(8) | 1.32 | % | 1.37 | % | 1.28 | % | 1.19 | % | 1.18 | %(7) | ||||||||||||||||||||||||
Ratio of net investment income to average net assets (4) | 9.66 | %(6)(8) | 10.31 | % | 11.46 | % | 11.58 | % | 9.87 | % | 11.50 | %(7) | ||||||||||||||||||||||||
Preferred shares asset coverage per share | $91,445 | $65,147 | $66,691 | $58,208 | $76,034 | $82,218 | ||||||||||||||||||||||||||||||
Portfolio turnover rate | 22 | % | 33 | % | 28 | % | 51 | % | 57 | % | 93 | % |
^ | A zero balance may reflect actual amounts rounding to less than $0.01 or 0.01%. |
(1) | Calculated on average common shares outstanding. |
(2) | Payment from affiliate increased the net asset value by less than $0.01. |
(3) | 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. |
(4) | Calculated on the basis of income and expenses applicable to both common and preferred shares relative to average net assets of common shareholders. |
(5) | Interest expense relates to participation in the debt financing (See Note 8). |
(6) | Annualized, unless otherwise noted. |
(7) | Inclusive of expense reimbursement from Investment Manager of 0.02%. |
(8) | Inclusive of tender offer expense of 0.02%. |
See accompanying Notes to Financial Statements | | August 31, 2018 | | Semi-Annual Report | 47 |
AllianzGI Convertible & Income 2024 Target Term Fund/AllianzGI Convertible & Income Fund/AllianzGI Convertible & Income Fund II
August 31, 2018 (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 registered 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 II each have an investment objective 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.
48 | Semi-Annual Report | | August 31, 2018 |
Notes to Financial Statements
AllianzGI Convertible & Income 2024 Target Term Fund/AllianzGI Convertible & Income Fund/AllianzGI Convertible & Income Fund II
August 31, 2018 (unaudited)
1. Organization and Significant Accounting Policies (continued)
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.
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.
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.
ASUs 2016-15 and 2016-18 took effect on March 1, 2018 and the financial statements have been modified accordingly, as applicable.
In March 2017, the FASB issued ASU 2017-08 which changes the amortization period for a callable debt security from the maturity date to the earliest call date. The ASU is effective for annual periods beginning after December 15, 2018, and interim periods within those annual periods. At this time, management is evaluating the implications of these changes on the financial statements.
In August 2018, the FASB issued ASU 2018-13 which changes the fair value measurement disclosure requirements for investment companies. The ASU is effective for annual periods beginning after December 15, 2019, 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
August 31, 2018 | | 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, 2018 (unaudited)
1. Organization and Significant Accounting Policies (continued)
Funds Valuation Committee was established by the Board to oversee the implementation of the 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. In unusual circumstances, the Board or
the Valuation Committee may in good faith determine the NAV as of 4:00 p.m., Eastern Time, notwithstanding an earlier, unscheduled close or halt of trading on the NYSE.
(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, 2018 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
50 | Semi-Annual Report | | August 31, 2018 |
Notes to Financial Statements
AllianzGI Convertible & Income 2024 Target Term Fund/AllianzGI Convertible & Income Fund/AllianzGI Convertible & Income Fund II
August 31, 2018 (unaudited)
1. Organization and Significant Accounting Policies (continued)
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 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 based on 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
August 31, 2018 | | 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, 2018 (unaudited)
1. Organization and Significant Accounting Policies (continued)
benchmark securities when broker-dealer quotes are unavailable. These quoted prices are based on interest rates, yield curves, option 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 Funds, 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, 2018, 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 Common Shares
The distributions by Convertible & Income 2024 Target Term may be comprised in varying portions of net investment income, capital gains, including short-term or long-term capital
52 | Semi-Annual Report | | August 31, 2018 |
Notes to Financial Statements
AllianzGI Convertible & Income 2024 Target Term Fund/AllianzGI Convertible & Income Fund/AllianzGI Convertible & Income Fund II
August 31, 2018 (unaudited)
1. Organization and Significant Accounting Policies (continued)
gains, and return of capital. Convertible & Income 2024 Target Term may distribute some or all net realized long-term capital gains not previously distributed, if any, at least annually.
The Funds declare dividends from net investment income to common shareholders monthly. The distributions by Convertible & Income and Convertible & Income II may be comprised in varying proportions of net investment income and return of capital. Convertible & Income and Convertible & Income II distribute net realized capital gains, if any, at least annually. The Funds record dividends and distributions on the ex-dividend date. The amount of dividends from net investment income and distributions 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. As of August 31, 2018, it is anticipated that Convertible & Income and Convertible & Income II will have a return of capital at fiscal year-end.
(f) Convertible Securities
It is the Funds policy to invest a portion of their 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 in full, even though a percentage of the principal amounts may never be utilized by the borrower.
August 31, 2018 | | 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, 2018 (unaudited)
1. Organization and Significant Accounting Policies (continued)
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 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
54 | Semi-Annual Report | | August 31, 2018 |
Notes to Financial Statements
AllianzGI Convertible & Income 2024 Target Term Fund/AllianzGI Convertible & Income Fund/AllianzGI Convertible & Income Fund II
August 31, 2018 (unaudited)
1. Organization and Significant Accounting Policies (continued)
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 Terms 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.
(k) Loan Interest Expense
With respect to Convertible & Income 2024 Target Term, loan interest expense relates to amounts borrowed under the BNP Facility (as defined below) and under its SSB Facility (as defined below). With respect to Convertible & Income and Convertible & Income II, loan interest expense relates to amounts borrowed under each Funds respective SSB Facility (See Note 8). Loan 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 Funds may be delayed or limited. The gross values are included in the Funds Schedules of Investments. As of August 31, 2018, 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
August 31, 2018 | | 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, 2018 (unaudited)
2. Principal Risks (continued)
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 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 a fund may lose money as a result of movements in interest rates. A fund 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 also 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
56 | Semi-Annual Report | | August 31, 2018 |
Notes to Financial Statements
AllianzGI Convertible & Income 2024 Target Term Fund/AllianzGI Convertible & Income Fund/AllianzGI Convertible & Income Fund II
August 31, 2018 (unaudited)
2. Principal Risks (continued)
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 interest costs on such leverage 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 8, the Funds have entered into a liquidity facility.
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
August 31, 2018 | | 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, 2018 (unaudited)
2. Principal Risks (continued)
4. Investments in Securities
For the six months ended August 31, 2018, purchases and sales of investments, other than short-term securities were:
Purchases | Sales | |||||||
Convertible & Income 2024 Target Term |
$ | 168,044,473 | $ | 164,875,324 | ||||
Convertible & Income |
198,224,213 | 196,406,953 | ||||||
Convertible & Income II |
150,171,819 | 150,912,740 |
58 | Semi-Annual Report | | August 31, 2018 |
Notes to Financial Statements
AllianzGI Convertible & Income 2024 Target Term Fund/AllianzGI Convertible & Income Fund/AllianzGI Convertible & Income Fund II
August 31, 2018 (unaudited)
5. Income Tax Information
At August 31, 2018, the aggregate cost basis and the net unrealized 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 |
$ | 254,742,319 | $ | 3,640,577 | $ | 5,564,422 | $ | (1,923,845 | ) | |||||||
Convertible & Income |
947,960,226 | 52,817,169 | 86,138,714 | (33,321,545 | ) | |||||||||||
Convertible & Income II |
719,864,249 | 40,875,965 | 64,522,985 | (23,647,020 | ) |
(1) | Differences between book and tax cost basis are primarily attributable to wash sale loss deferrals, if any, and differing treatment of bond premium amortization. |
For the six months ended August 31, 2018, the annualized dividend rates paid with respect to the Preferred shares of Convertible & Income and Convertible & Income II ranged from:
High | Low | At August 31, 2018 | ||||||||||
Series A |
2.927% | 2.162% | 2.852% | |||||||||
Series B |
2.882% | 2.147% | 2.852% | |||||||||
Series C |
2.867% | 2.162% | 2.852% | |||||||||
Series D |
2.867% | 2.162% | 2.852% | |||||||||
Series E |
2.882% | 2.177% | 2.882% |
August 31, 2018 | | Semi-Annual Report | 59 |
Notes to Financial Statements
AllianzGI Convertible & Income 2024 Target Term Fund/AllianzGI Convertible & Income Fund/AllianzGI Convertible & Income Fund II
August 31, 2018 (unaudited)
6. Auction-Rate Preferred Shares (continued)
Since mid-February 2008, holders of auction-rate preferred shares (ARPS) issued by the Funds have been directly impacted by a lack of liquidity, which has similarly affected ARPS holders in many of the nations closed-end funds. Since then, regularly scheduled auctions for the Preferred shares (which are ARPS) issued by the Funds have consistently failed because of insufficient demand (bids to buy shares) to meet the supply (shares offered for sale) at each auction.
In a failed auction, ARPS holders cannot sell all, and may not be able to sell any, of their shares tendered for sale. While repeated auction failures have affected the liquidity for ARPS, they do not constitute a default or automatically alter the credit quality of the ARPS, and ARPS holders have continued to receive dividends at the defined maximum rate, which for the Funds is equal to the 7-day AA Composite Commercial Paper Rate multiplied by a minimum of 150%, depending on the credit rating of the ARPS. The maximum rate is a function of short-term interest rates and typically higher than the rate that would have otherwise been set through a successful auction.
On May 29, 2014, Moodys Investors Service upgraded each Funds Preferred shares ratings to Aa3 from A1. As a result, the applicable multiplier for calculating the maximum rate decreased from 200% to 150% beginning on that date. If the Funds Preferred shares auctions continue to fail and the maximum rate payable on the Preferred shares rises as result of changes in short-term interest rates, returns for the Funds common shareholders could be adversely affected.
7. Tender Offer
On June 20, 2018, the Board announced a tender offer to purchase for cash up to 100% of
the outstanding ARPS of each of Convertible & Income and Convertible & Income II at a price equal to 94% of the ARPS liquidation preference of $25,000 per share (or $23,500 per share) plus any unpaid dividends accrued through the expiration date of each tender offer, or such later date to which such tender offer may be extended (each a Tender Offer and, together, the Tender Offers).
On June 28, 2018, Convertible & Income and Convertible & Income II each commenced its respective Tender Offer. The tables below include the per share liquidation preference and tender offer price per share for the ARPS of each of Convertible & Income and Convertible & Income II.
On July 31, 2018, the Tender Offers expired and Convertible & Income and Convertible & Income II announced the results of the Tender Offers. With respect to Convertible & Income, 5,349 ARPS were tendered, representing approximately 37% of the outstanding ARPS. With respect to Convertible & Income II, 4,459 ARPS were tendered, representing approximately 41% of the outstanding ARPS. The Tender Offers resulted in accretion to the NAVs of common shareholders of $0.09 per common share for both Convertible & Income and Convertible & Income II. The ARPS of Convertible & Income and Convertible & Income II that were not tendered remain outstanding.
60 | Semi-Annual Report | | August 31, 2018 |
Notes to Financial Statements
AllianzGI Convertible & Income 2024 Target Term Fund/AllianzGI Convertible & Income Fund/AllianzGI Convertible & Income Fund II
August 31, 2018 (unaudited)
7. Tender Offer (continued)
Details of the ARPS tendered and not withdrawn for the six months ended August 31, 2018 are provided in the tables below:
Convertible & |
Liquidation Preference Per share |
Tender Offer Price Per Share |
Price Percentage |
Cash Including |
ARPS Outstanding as of 2/28/2018 |
ARPS Tendered |
ARPS Outstanding after Tender Offer as of 8/31/2018 |
|||||||||||||||||||||
Series A |
$ | 25,000 | $ | 23,500 | 94% | $ | 22,608,878 | 2,856 | 962 | 1,894 | ||||||||||||||||||
Series B |
25,000 | 23,500 | 94% | 25,309,500 | 2,856 | 1,077 | 1,779 | |||||||||||||||||||||
Series C |
25,000 | 23,500 | 94% | 22,265,661 | 2,856 | 947 | 1,909 | |||||||||||||||||||||
Series D |
25,000 | 23,500 | 94% | 23,838,959 | 2,856 | 1,014 | 1,842 | |||||||||||||||||||||
Series E |
25,000 | 23,500 | 94% | 31,706,769 | 2,856 | 1,349 | 1,507 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||||||
$ | 125,729,767 | 14,280 | 5,349 | 8,931 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
Convertible & |
Liquidation Preference Per share |
Tender Offer Price Per Share |
Price Percentage |
Cash Including |
ARPS Outstanding as of 2/28/2018 |
ARPS Tendered |
ARPS Outstanding after Tender Offer as of 8/31/2018 |
|||||||||||||||||||||
Series A |
$ | 25,000 | $ | 23,500 | 94% | $ | 21,057,750 | 2,192 | 896 | 1,296 | ||||||||||||||||||
Series B |
25,000 | 23,500 | 94% | 15,980,000 | 2,192 | 680 | 1,512 | |||||||||||||||||||||
Series C |
25,000 | 23,500 | 94% | 22,406,732 | 2,192 | 953 | 1,239 | |||||||||||||||||||||
Series D |
25,000 | 23,500 | 94% | 24,356,175 | 2,192 | 1,036 | 1,156 | |||||||||||||||||||||
Series E |
25,000 | 23,500 | 94% | 21,012,491 | 2,192 | 894 | 1,298 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||||||
$ | 104,813,148 | 10,960 | 4,459 | 6,501 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
August 31, 2018 | | Semi-Annual Report | 61 |
Notes to Financial Statements
AllianzGI Convertible & Income 2024 Target Term Fund/AllianzGI Convertible & Income Fund/AllianzGI Convertible & Income Fund II
August 31, 2018 (unaudited)
8. Liquidity Facility (continued)
and $104,786,500, respectively. The interest rate charged at August 31, 2018, was 2.871%. During the period ended August 31, 2018, the weighted average daily balance outstanding was $69,700,000, $125,701,500 and $104,786,500, respectively, at the weighted average interest rate of 3.083%, 2.873% and 2.873%, respectively. Convertible & Income 2024 Target Term previously had a margin loan financing agreement with BNP Paribas Prime Brokerage International Ltd. at a daily rate equal to the U.S. 3-month LIBOR rate plus 0.90% which expired on June 26, 2018 (the BNP Facility). Loan interest expense of $1,027,439, $310,741 and $258,021, respectively, are included in the Funds Statement of Operations. Borrowings under the SSB Facilities are fully secured by an all-assets lien. The SSB Facilities permit draw-downs to be funded through securities lending and reverse repurchase transactions administered by State Street.
The Funds have the right to call a loan and obtain the securities loaned after notice to State Street. As of August 31, 2018, Convertible & Income 2024 Term and Convertible & Income used approximately $63,344,814 and $53,889,750, respectively, of their cash collateral to offset borrowings under the SSB Facilities, representing 25.2% and 5.9% of managed assets, respectively. As of August 31, 2018, $61,863,998 and $52,832,323 of securities were on loan (all fixed income securities), respectively, under the SSB Facilities. These amounts are reflected on the Statements of Assets and Liabilities in Investments, at value. The borrowings are categorized as Level 2 within the fair value hierarchy.
9. Related Party Transactions
The Investment Manager is a related party. Fees payable to this party are disclosed in Note 3 and the accrued related party fee amounts are
disclosed on the Statements of Assets and Liabilities.
The Funds are permitted to purchase or sell securities from or to certain related affiliated funds under specified conditions outlined in procedures adopted by the Board. The procedures have been designed to ensure that any purchase or sale of securities by the Funds from or to another fund or portfolio that are, or could be, considered an affiliate by virtue of having a common investment adviser (or affiliated investment advisers), common Trustees and/or common officers comply with Rule 17a-7 of the 1940 Act. Further, as defined under the procedures, each transaction is effected at the current market price.
During the six months ended August 31, 2018, the Funds didnt engaged in sales of securities pursuant to Rule 17a-7 of the 1940 Act.
10. Common Shares Issued
During the fiscal year ended February 28, 2018, Convertible & Income 2024 Target Term issued 16,500,000 common shares in its initial public offering. An additional 1,746,796 shares were issued in connection with the exercise of the underwriters over-allotment option. These shares were all issued at $9.835 per share (public offering price of $10.00 per share less sales load of 1.65% of the offering price). Offering costs of $364,936 (representing $0.02 per share) were incurred by Convertible & Income 2024 Target Term for the shares issued in the initial offering and the exercise of the underwriters over-allotment option and were charged to paid-in capital in excess of par. The Investment Manager agreed to pay all offering costs associated with the public offering (other than the sales load) exceeding $0.02 per share, which came to approximately $1,170,064.
62 | Semi-Annual Report | | August 31, 2018 |
Notes to Financial Statements
AllianzGI Convertible & Income 2024 Target Term Fund/AllianzGI Convertible & Income Fund/AllianzGI Convertible & Income Fund II
August 31, 2018 (unaudited)
On September 4, 2018 the following monthly dividends were declared to common shareholders, payable October 1, 2018 to common shareholders of record on September 14, 2018:
Convertible & Income 2024 Target Term | $0.046 per common share | |||
Convertible & Income | $0.065 per common share | |||
Convertible & Income II | $0.0575 per common share |
August 31, 2018 | | Semi-Annual Report | 63 |
Notes to Financial Statements
AllianzGI Convertible & Income 2024 Target Term Fund/AllianzGI Convertible & Income Fund/AllianzGI Convertible & Income Fund II
August 31, 2018 (unaudited)
12. Subsequent Events (continued)
On October 1, 2018 the following monthly dividends were declared to common shareholders, payable November 1, 2018 to common shareholders of record on October 11, 2018:
Convertible & Income 2024 Target Term | $0.046 per common 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.
64 | Semi-Annual Report | | August 31, 2018 |
Annual Shareholder Meeting Results/Changes to Fund Officers/Proxy Voting Policies & Procedures (unaudited)
AllianzGI Convertible & Income 2024 Target Term Fund/AllianzGI Convertible & Income Fund/AllianzGI Convertible & Income Fund II
August 31, 2018 (unaudited)
Convertible & Income 2024 Target Term, Convertible & Income and Convertible & Income II held their meeting of shareholders on July 12, 2018. Shareholders voted as indicated below:
Convertible & Income 2024 Target Term: | Affirmative | Withheld Authority |
||||||
Re-election of Hans W. Kertess Class I to serve until
the |
16,660,986 | 79,842 | ||||||
Re-election of William B. Ogden, IV Class I to serve
until the |
16,658,268 | 82,560 | ||||||
Re-election of Alan Rappaport Class I to serve until
the |
16,664,644 | 76,184 | ||||||
Re-election of Davey S. Scoon Class I to serve until
the |
16,663,374 | 77,454 | ||||||
Election of Erick R. Holt Class II to serve until
the |
16,663,402 | 77,426 |
The other members of the Board of Trustees at the time of the meeting, namely, Ms. Deborah A. DeCotis and Messrs. F. Ford Drummond, A. Douglas Eu, Bradford K. Gallagher, James A. Jacobson and James S. MacLeod continued to serve as Trustees of the Fund.
| Interested Trustee |
Convertible & Income: | Affirmative | Withheld Authority |
||||||
Re-election of Deborah A. DeCotis Class III to serve
until the |
77,053,514 | 2,482,862 | ||||||
Re -election of F. Ford Drummond Class III to serve until the |
77,251,934 | 2,284,442 | ||||||
Re-election of James S. MacLeod Class III to serve until the |
77,272,195 | 2,264,181 | ||||||
Re-election of A. Douglas Eu Class III to serve until the |
77,251,089 | 2,285,287 | ||||||
Election of Erick R. Holt Class I to serve until
the |
77,321,579 | 2,214,797 |
The other members of the Board of Trustees at the time of the meeting, namely, Messrs. Davey S. Scoon, Bradford K. Gallagher, Hans W. Kertess, James A. Jacobson*, 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 the 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 F. Ford Drummond Class III to serve until
the |
66,620,839 | 2,493,508 | ||||||
Re-election of Hans W. Kertess Class III to serve until the |
66,336,101 | 2,778,246 | ||||||
Re-election of James S. MacLeod Class III to serve until the |
66,685,217 | 2,429,130 |
August 31, 2018 | | Semi-Annual Report | 65 |
Annual Shareholder Meeting Results/Changes to Fund Officers/Proxy Voting Policies & Procedures (unaudited)
AllianzGI Convertible & Income 2024 Target Term Fund/AllianzGI Convertible & Income Fund/AllianzGI Convertible & Income Fund II
August 31, 2018 (unaudited) (continued)
Convertible & Income II: | Affirmative | Withheld Authority |
||||||
Re-election of A. Douglas Eu Class III to serve until the |
66,574,790 | 2,539,557 | ||||||
Election of Erick R. Holt Class I to serve until
the |
66,637,465 | 2,476,882 |
The other members of the Board of Trustees at the time of the meeting, namely, Ms. Deborah A. DeCotis and Messrs. Davey S. Scoon, Bradford K. Gallagher, James A. Jacobson*, 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 the Convertible & Income II were elected by common and preferred shareholders voting together as a single class. |
| Interested Trustee |
Changes to Fund Officers:
Effective April 13, 2018, Lawrence G. Altadonna resigned as the Treasurer, Principal Financial and Accounting officer of the Funds.
Effective April 13, 2018, Scott Whisten was appointed Treasurer, Principal Financial and Accounting officer of the Funds.
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/products-solutions/closed-end-funds; and (iii) on the Securities and Exchange Commission website at www.sec.gov.
66 | Semi-Annual Report | | August 31, 2018 |
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
August 31, 2018 | | 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, 2018 |
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, 2018 | | 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, 2018 |
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, 2018 | | Semi-Annual Report | 71 |
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
72 | Semi-Annual Report | | August 31, 2018 |
AllianzGI Convertible & Income 2024 Target Term Fund/AllianzGI Convertible & Income Fund/AllianzGI Convertible & Income Fund II
August 31, 2018 | | Semi-Annual Report | 73 |
Privacy Policy (unaudited) (continued)
AllianzGI Convertible & Income 2024 Target Term Fund/AllianzGI Convertible & Income Fund/AllianzGI Convertible & Income Fund II
74 | Semi-Annual Report | | August 31, 2018 |
Privacy Policy (unaudited) (continued)
AllianzGI Convertible & Income 2024 Target Term Fund/AllianzGI Convertible & Income Fund/AllianzGI Convertible & Income Fund II
August 31, 2018 | | Semi-Annual Report | 75 |
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/products-solutions/closed-end-funds.
Information on the Funds is available at us.allianzgi.com/en-us/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_083118 |
591265
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 Registrants
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 Purchasers.
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 Purchasers.
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. Disclosure of Securities Lending Activities for Closed-End Management Investment Companies.
The registrant does not maintain a securities lending program and does not receive income, fees or other compensation that would be reportable under this Item. However, the registrant maintains a liquidity facility with State Street Bank and Trust Company (State Street) that permits draw-downs to be funded through securities lending and reverse repurchase transactions administered by State Street. The registrant believes that this arrangement permits State Street to provide financing on more favorable economic terms than would otherwise apply.
Item 13. Exhibits.
(a) (1) Not required in this filing.
(a) (2) Exhibit 99_ Cert. Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
(a) (3) Not applicable.
(a) (4) 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 30, 2018 | ||
By: | /s/ Scott Whisten | |
Scott Whisten Treasurer, Principal Financial & Accounting Officer | ||
Date: October 30, 2018 |
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 30, 2018 | ||
By: | /s/ Scott Whisten | |
Scott Whisten Treasurer, Principal Financial & Accounting Officer | ||
Date: October 30, 2018 |