UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-21284
AllianzGI Convertible & Income Fund
(Exact name of registrant as specified in charter)
1633 Broadway, New York, NY | 10019 | |
(Address of principal executive offices) | (Zip code) |
Lawrence G. Altadonna 1633 Broadway, New York, New York 10019
(Name and address of agent for service)
Registrants telephone number, including area code: 212-739-3371
Date of fiscal year end: February 29, 2016
Date of reporting period: August 31, 2015
Item 1. Report to Shareholders
AllianzGI Convertible & Income Fund
AllianzGI Convertible & Income Fund II
Semi-Annual Report
August 31, 2015
Julian Sluyters
President & CEO
Dear Shareholder:
The US economy expanded at an uneven pace during the six-month reporting period ended August 31, 2015, during which both stocks and bonds posted negative returns.
Six Months in Review through August 31, 2015
n | AllianzGI Convertible & Income Fund returned -7.76% on net asset value (NAV) and -15.38% on market price. |
n | AllianzGI Convertible & Income Fund II returned -7.98% on NAV and -17.65% on market price. |
In comparison, the Standard & Poors (S&P) 500 Index, an unmanaged index generally representative of the US stock market, declined 5.32% and the BofA Merrill Lynch High Yield Master II Index, an unmanaged index generally representative of the high yield bond market, fell 2.93% during the six-month reporting period. Convertible securities, which share characteristics of both stocks and bonds, also generated negative results. The BofA Merrill Lynch All Convertibles All Qualities Index, an unmanaged index generally representative of the convertible securities market, returned -3.72% for the period.
Turning to the US economy, gross domestic product (GDP), the value of goods and services produced in the country, the broadest measure of economic activity and the principal indicator of economic performance, expanded at a revised annual pace of 2.1% during the fourth quarter of 2014. The US economy moderated during the first quarter of 2015, as the US Commerce Department reported that GDP grew at an annual pace of 0.6%. US economic activity improved in the second quarter of 2015, as the Commerce Departments final estimate (released after the reporting period had ended) showed that GDP grew at an annual pace of 3.9%.
The Federal Reserve (the Fed) maintained an accommodative monetary policy during the six month reporting period. At its June 2015 meeting, the Fed said that it currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run. At its meeting in July 2015, the Fed provided some clues that it remains on target to institute its first rate hike by the end of 2015. In particular, the central bank cited solid job gains and noted that underutilization of labor resources has diminished since early this year. However, on September 17, 2015, after the reporting period ended, the Fed kept rates on hold between 0% and 0.25%.
2 | Semi-Annual Report | | August 31, 2015 |
Despite the changing economic environment, we believe bond markets still do not appear to be priced for the start of Fed tightening. This, combined with poor bond-market liquidity, could result in more volatility as we get closer to interest rate lift-off. While this may also affect equities, compared to bonds, we believe that stocks should see support from improving economic growth.
For specific information on the Funds and their performance, please refer to the following pages. If you have any questions regarding the information provided, we encourage you to contact your financial advisor or call the Funds shareholder servicing agent at (800) 254-5197. In addition, a wide range of information and resources is available on our website, us.allianzgi.com/closedendfunds.
On behalf of Allianz Global Investors Fund Management LLC, the Funds investment manager, and Allianz Global Investors U.S. LLC, the Funds sub-adviser, thank you for investing with us.
We remain dedicated to serving your investment needs.
Sincerely,
|
||
Julian Sluyters |
||
President & Chief Executive Officer |
August 31, 2015 | | Semi-Annual Report | 3 |
AllianzGI Convertible & Income Funds
August 31, 2015 (unaudited)
4 | Semi-Annual Report | | August 31, 2015 |
August 31, 2015 | | Semi-Annual Report | 5 |
AllianzGI Convertible & Income Fund
August 31, 2015 (unaudited)
Total Return(1): | Market Price | NAV | ||||||
Six Month |
-15.38% | -7.76% | ||||||
1 Year |
-18.52% | -10.77% | ||||||
5 Year |
7.70% | 9.79% | ||||||
10 Year |
5.11% | 5.80% | ||||||
Commencement of Operations (3/31/03) to 8/31/15 |
7.03% | 7.72% |
6 | Semi-Annual Report | | August 31, 2015 |
Performance & Statistics
AllianzGI Convertible & Income Fund II
August 31, 2015 (unaudited)
Total Return(1): | Market Price | NAV | ||||||
Six Month |
-17.65% | -7.98% | ||||||
1 Year |
-21.64% | -11.00% | ||||||
5 Year |
7.32% | 9.73% | ||||||
10 Year |
4.72% | 5.07% | ||||||
Commencement of Operations (7/31/03) to 8/31/15 |
5.90% | 6.45% |
August 31, 2015 | | Semi-Annual Report | 7 |
Performance & Statistics
AllianzGI Convertible & Income Funds
August 31, 2015 (unaudited)
* Bond 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 Moodys Investors Service, Inc. (Moodys). Presentation of credit ratings information in this report use ratings provided by Moodys for this purpose, among other reasons, because of the access to background information and other materials provided by Moodys, as well as the Funds consideration of industry practice. Bonds not rated by Moodys or bonds that do not have a rating available from Moodys are designated as NR and 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 Moodys 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, the sub-adviser to the Funds, 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) Market Price Yield is determined by dividing the annualized current (declared September 1, 2015) monthly dividend per common share (comprised of net investment income) by the market price per common share at August 31, 2015.
(3) Represents Preferred Shares (Leverage) outstanding, as a percentage of total managed assets. Total managed assets refer to total assets (including assets attributable to Leverage) minus liabilities (other than liabilities representing Leverage).
8 | Semi-Annual Report | | August 31, 2015 |
AllianzGI Convertible & Income Fund
August 31, 2015 (unaudited)
Principal Amount (000s) |
Value | |||||||||
Corporate Bonds & Notes 40.1% | ||||||||||
Advertising 0.4% | ||||||||||
$5,650 | Affinion Group, Inc., 7.875%, 12/15/18 | $3,930,281 | ||||||||
Aerospace & Defense 1.7% | ||||||||||
7,135 | Erickson, Inc., 8.25%, 5/1/20 | 5,114,903 | ||||||||
7,185 | Kratos Defense & Security Solutions, Inc., 7.00%, 5/15/19 | 6,520,387 | ||||||||
5,395 | TransDigm, Inc., 6.50%, 5/15/25 (a)(b) | 5,327,563 | ||||||||
16,962,853 | ||||||||||
Air Freight & Logistics 1.0% | ||||||||||
XPO Logistics, Inc., (a)(b) | ||||||||||
2,830 | 6.50%, 6/15/22 | 2,794,625 | ||||||||
6,820 | 7.875%, 9/1/19 | 7,254,775 | ||||||||
10,049,400 | ||||||||||
Auto Components 0.6% | ||||||||||
5,280 | Goodyear Tire & Rubber Co., 8.25%, 8/15/20 | 5,524,200 | ||||||||
Auto Manufacturers 0.8% | ||||||||||
7,410 | Chrysler Group LLC, 8.25%, 6/15/21 | 7,967,232 | ||||||||
Chemicals 0.7% | ||||||||||
7,500 | Chemours Co., 6.625%, 5/15/23 (a)(b) | 6,543,750 | ||||||||
Commercial Services 2.2% | ||||||||||
11,500 | Cenveo Corp., 11.50%, 5/15/17 | 10,853,125 | ||||||||
5,705 | DynCorp International, Inc., 10.375%, 7/1/17 | 4,193,175 | ||||||||
7,375 | Monitronics International, Inc., 9.125%, 4/1/20 | 6,932,500 | ||||||||
21,978,800 | ||||||||||
Construction Materials 0.8% | ||||||||||
7,310 | US Concrete, Inc., 8.50%, 12/1/18 | 7,675,500 | ||||||||
Consumer Finance 0.9% | ||||||||||
3,210 | Navient Corp., 8.45%, 6/15/18 | 3,426,675 | ||||||||
4,935 | Springleaf Finance Corp., 8.25%, 10/1/23 | 5,551,875 | ||||||||
8,978,550 | ||||||||||
Distribution/Wholesale 0.9% | ||||||||||
8,170 | HD Supply, Inc., 11.00%, 4/15/20 | 9,129,975 | ||||||||
Diversified Consumer Services 0.7% | ||||||||||
6,815 | Cambium Learning Group, Inc., 9.75%, 2/15/17 | 6,883,150 | ||||||||
Diversified Financial Services 1.4% | ||||||||||
Community Choice Financial, Inc., | ||||||||||
10,085 | 10.75%, 5/1/19 | 3,731,450 | ||||||||
7,130 | 12.75%, 5/1/20 (a)(b) | 2,459,850 | ||||||||
Nationstar Mortgage LLC / Nationstar Capital Corp., | ||||||||||
2,500 | 7.875%, 10/1/20 | 2,371,875 | ||||||||
5,300 | 9.625%, 5/1/19 | 5,545,125 | ||||||||
14,108,300 | ||||||||||
Electrical Components & Equipment 1.2% | ||||||||||
13,585 | WireCo WorldGroup, Inc., 9.50%, 5/15/17 | 11,615,175 | ||||||||
Electronic Equipment, Instruments & Components 0.7% | ||||||||||
7,725 | Kemet Corp., 10.50%, 5/1/18 | 7,338,750 |
August 31, 2015 | | Semi-Annual Report | 9 |
Schedule of Investments
AllianzGI Convertible & Income Fund
August 31, 2015 (unaudited) (continued)
Principal Amount (000s) |
Value | |||||||||
Food & Staples Retailing 0.5% | ||||||||||
$ 5,000 | US Foods, Inc., 8.50%, 6/30/19 | $ 5,225,000 | ||||||||
Health Care Providers & Services 1.8% | ||||||||||
7,955 | Kindred Healthcare, Inc., 8.75%, 1/15/23 (a)(b) | 8,939,431 | ||||||||
Tenet Healthcare Corp., | ||||||||||
3,500 | 5.00%, 3/1/19 | 3,506,965 | ||||||||
4,530 | 8.125%, 4/1/22 | 5,028,300 | ||||||||
17,474,696 | ||||||||||
Healthcare-Products 0.9% | ||||||||||
8,885 | Kinetic Concepts, Inc./KCI USA, Inc., 10.50%, 11/1/18 | 9,395,888 | ||||||||
Hotels, Restaurants & Leisure 1.0% | ||||||||||
8,405 | MGM Resorts International, 11.375%, 3/1/18 | 9,896,888 | ||||||||
Household Durables 1.2% | ||||||||||
Beazer Homes USA, Inc., | ||||||||||
2,945 | 7.25%, 2/1/23 | 2,834,562 | ||||||||
5,045 | 9.125%, 5/15/19 | 5,171,125 | ||||||||
3,950 | Jarden Corp., 7.50%, 5/1/17 | 4,266,000 | ||||||||
12,271,687 | ||||||||||
Household Products/Wares 0.8% | ||||||||||
7,610 | Reynolds Group Issuer, Inc., 9.875%, 8/15/19 | 8,009,525 | ||||||||
Independent Power & Renewable Electricity Producers 0.3% | ||||||||||
3,055 | TerraForm Power Operating LLC, 5.875%, 2/1/23 (a)(b) | 2,917,525 | ||||||||
Internet 0.4% | ||||||||||
8,395 | Affinion Investments LLC, 13.50%, 8/15/18 | 3,861,516 | ||||||||
Internet Software & Services 1.1% | ||||||||||
EarthLink, Inc., | ||||||||||
2,800 | 7.375%, 6/1/20 | 2,940,000 | ||||||||
7,488 | 8.875%, 5/15/19 | 7,806,240 | ||||||||
10,746,240 | ||||||||||
Iron/Steel 0.5% | ||||||||||
7,305 | AK Steel Corp., 8.375%, 4/1/22 | 4,638,675 | ||||||||
Lodging 0.4% | ||||||||||
12,385 | Caesars Entertainment Operating Co., Inc., 12.75%, 4/15/18 (c) | 3,901,275 | ||||||||
Machinery 1.1% | ||||||||||
5,250 | BlueLine Rental Finance Corp., 7.00%, 2/1/19 (a)(b) | 4,987,500 | ||||||||
6,755 | Navistar International Corp., 8.25%, 11/1/21 | 5,927,513 | ||||||||
10,915,013 | ||||||||||
Media 2.8% | ||||||||||
5,000 | CCO Holdings LLC / CCO Holdings Capital Corp., 7.00%, 1/15/19 | 5,168,750 | ||||||||
8,355 | McClatchy Co., 9.00%, 12/15/22 | 7,592,606 | ||||||||
8,220 | McGraw-Hill Global Education Holdings LLC / McGraw-Hill Global Education Finance, 9.75%, 4/1/21 | 9,083,100 | ||||||||
3,745 | Mood Media Corp., 9.25%, 10/15/20 (a)(b) | 2,864,925 | ||||||||
4,671 | SFX Entertainment, Inc., 9.625%, 2/1/19 (a)(b) | 2,896,020 | ||||||||
27,605,401 | ||||||||||
Metals & Mining 1.8% | ||||||||||
6,590 | ArcelorMittal, 10.60%, 6/1/19 | 7,702,062 | ||||||||
3,680 | HudBay Minerals, Inc., 9.50%, 10/1/20 | 3,356,900 |
10 | Semi-Annual Report | | August 31, 2015 |
Schedule of Investments
AllianzGI Convertible & Income Fund
August 31, 2015 (unaudited) (continued)
Principal Amount (000s) |
Value | |||||||||
Metals & Mining (continued) | ||||||||||
Thompson Creek Metals Co., Inc., | ||||||||||
$ 8,295 | 7.375%, 6/1/18 | $ 5,018,475 | ||||||||
2,830 | 12.50%, 5/1/19 | 1,736,064 | ||||||||
17,813,501 | ||||||||||
Miscellaneous Manufacturing 0.6% | ||||||||||
7,350 | Harland Clarke Holdings Corp., 9.25%, 3/1/21 (a)(b) | 6,146,438 | ||||||||
Oil & Gas 1.5% | ||||||||||
BreitBurn Energy Partners LP / BreitBurn Finance Corp., | ||||||||||
5,055 | 7.875%, 4/15/22 | 2,249,475 | ||||||||
3,680 | 8.625%, 10/15/20 | 1,992,094 | ||||||||
1,135 | Calumet Specialty Products Partners LP / Calumet Finance Corp., 6.50%, 4/15/21 | 1,078,250 | ||||||||
9,050 | Energy XXI Gulf Coast, Inc., 9.25%, 12/15/17 | 2,669,750 | ||||||||
6,038 | United Refining Co., 10.50%, 2/28/18 | 6,309,710 | ||||||||
1,000 | Vanguard Natural Resources LLC / VNR Finance Corp., 7.875%, 4/1/20 | 705,000 | ||||||||
15,004,279 | ||||||||||
Oil, Gas & Consumable Fuels 1.2% | ||||||||||
2,840 | Arch Coal, Inc., 9.875%, 6/15/19 | 397,600 | ||||||||
5,050 | EP Energy LLC / Everest Acquisition Finance, Inc., 9.375%, 5/1/20 | 4,916,175 | ||||||||
5,615 | Linn Energy LLC / Linn Energy Finance Corp., 6.50%, 5/15/19 | 2,358,300 | ||||||||
4,530 | Sanchez Energy Corp., 6.125%, 1/15/23 | 3,420,150 | ||||||||
730 | Ultra Petroleum Corp., 6.125%, 10/1/24 (a)(b) | 485,450 | ||||||||
11,577,675 | ||||||||||
Paper & Forest Products 0.3% | ||||||||||
3,000 | Louisiana-Pacific Corp., 7.50%, 6/1/20 | 3,187,500 | ||||||||
Pharmaceuticals 0.7% | ||||||||||
2,290 | Endo Finance LLC & Endo Finco, Inc., 5.375%, 1/15/23 (a)(b) | 2,312,900 | ||||||||
4,000 | Valeant Pharmaceuticals International, Inc., 7.50%, 7/15/21 (a)(b) | 4,305,000 | ||||||||
6,617,900 | ||||||||||
Real Estate Investment Trust 0.3% | ||||||||||
3,085 | Kennedy-Wilson, Inc., 5.875%, 4/1/24 | 3,009,418 | ||||||||
Retail 1.0% | ||||||||||
9,465 | Neiman Marcus Group Ltd. LLC, 8.00%, 10/15/21 (a)(b) | 10,044,731 | ||||||||
Semiconductors & Semiconductor Equipment 0.4% | ||||||||||
3,745 | Amkor Technology, Inc., 6.375%, 10/1/22 | 3,656,056 | ||||||||
Software 1.9% | ||||||||||
First Data Corp., | ||||||||||
5,645 | 8.25%, 1/15/21 (a)(b) | 5,955,475 | ||||||||
1,834 | 10.625%, 6/15/21 | 2,033,448 | ||||||||
9,045 | 12.625%, 1/15/21 | 10,413,056 | ||||||||
18,401,979 | ||||||||||
Specialty Retail 0.8% | ||||||||||
3,500 | Claires Stores, Inc., 9.00%, 3/15/19 (a)(b) | 2,966,250 | ||||||||
5,500 | Conns, Inc., 7.25%, 7/15/22 | 5,238,750 | ||||||||
8,205,000 | ||||||||||
Telecommunications 1.3% | ||||||||||
7,370 | Consolidated Communications, Inc., 6.50%, 10/1/22 (a)(b) | 6,854,100 |
August 31, 2015 | | Semi-Annual Report | 11 |
Schedule of Investments
AllianzGI Convertible & Income Fund
August 31, 2015 (unaudited) (continued)
Principal Amount (000s) |
Value | |||||||||
Telecommunications (continued) | ||||||||||
$ 7,655 | Windstream Corp., 7.50%, 4/1/23 | $ 6,028,389 | ||||||||
12,882,489 | ||||||||||
Transportation 0.7% | ||||||||||
6,837 | Quality Distribution LLC, 9.875%, 11/1/18 | 7,100,737 | ||||||||
Wireless Telecommunication Services 0.8% | ||||||||||
7,205 | Sprint Communications, Inc., 11.50%, 11/15/21 | 8,249,725 | ||||||||
Total Corporate Bonds & Notes (cost-$456,393,226) | 397,442,673 | |||||||||
Shares | ||||||||||
Convertible Preferred Stock 37.6% | ||||||||||
Automobiles 1.5% | ||||||||||
532,000 | The Goldman Sachs Group, Inc., 8.00%, 12/17/15 (General Motors) (d) | 15,013,572 | ||||||||
Banks 4.6% | ||||||||||
9,695 | Huntington Bancshares, Inc., 8.50% (e) | 12,991,300 | ||||||||
1,064,500 | JPMorgan Chase & Co., 8.00%, 9/18/15 (Bank of America) (d) | 15,839,760 | ||||||||
13,990 | Wells Fargo & Co., 7.50%, Ser. L (e) | 16,494,210 | ||||||||
45,325,270 | ||||||||||
Diversified Financial Services 1.5% | ||||||||||
13,220 | Bank of America Corp., 7.25%, Ser. L (e) | 14,608,364 | ||||||||
Diversified Telecommunications Services 1.8% | ||||||||||
175,845 | Frontier Communications Corp., 11.125%, 6/29/18 | 17,725,176 | ||||||||
Electric Utilities 0.4% | ||||||||||
85,390 | Exelon Corp., 6.50%, 6/1/17 | 3,867,313 | ||||||||
Electronic Equipment, Instruments & Components 1.4% | ||||||||||
738,000 | Bank of America Corp., 8.00%, 2/17/16 (Corning, Inc.) (d) | 14,243,400 | ||||||||
Food Products 0.6% | ||||||||||
114,045 | Tyson Foods, Inc., 4.75%, 7/15/17 | 5,868,756 | ||||||||
Health Care Providers & Services 4.4% | ||||||||||
204,920 | Anthem, Inc., 5.25%, 5/1/18 | 10,010,342 | ||||||||
240,300 | JPMorgan Chase & Co., 8.00%, 5/5/16 (HCA Holding, Inc.) (d) | 18,962,073 | ||||||||
127,130 | The Goldman Sachs Group, Inc., 8.00%, 3/31/16 (Laboratory Corp. of America Holdings) (d) | 14,913,875 | ||||||||
43,886,290 | ||||||||||
Independent Power & Renewable Electricity Producers 1.4% | ||||||||||
150,730 | Dynegy, Inc., 5.375%, 11/1/17 | 14,100,792 | ||||||||
Internet Software & Services 1.3% | ||||||||||
349,200 | Barclays Bank PLC, 8.00%, 10/28/15 (Twitter, Inc.) (d) | 13,224,204 | ||||||||
Machinery 2.0% | ||||||||||
171,185 | Stanley Black & Decker, Inc., 6.25%, 11/17/16 | 19,843,765 | ||||||||
Metals & Mining 1.2% | ||||||||||
46,705 | Alcoa, Inc., 5.375%, 10/1/17 | 1,639,345 | ||||||||
792,720 | ArcelorMittal, 6.00%, 1/15/16 | 10,404,450 | ||||||||
12,043,795 | ||||||||||
Multiline Retail 1.5% | ||||||||||
258,000 | The Goldman Sachs Group, Inc., 8.00%, 1/14/16 (Macys, Inc.) (d) | 14,913,948 |
12 | Semi-Annual Report | | August 31, 2015 |
Schedule of Investments
AllianzGI Convertible & Income Fund
August 31, 2015 (unaudited) (continued)
Shares | Value | |||||||||
Multi-Utilities 1.9% | ||||||||||
239,645 | AES Trust III, 6.75%, 10/15/29 | $ 12,087,095 | ||||||||
128,500 | Dominion Resources, Inc., 6.375%, 7/1/17 | 6,508,525 | ||||||||
18,595,620 | ||||||||||
Oil, Gas & Consumable Fuels 2.3% | ||||||||||
159,375 | Anadarko Petroleum Corp., 7.50%, 6/7/18 | 7,275,469 | ||||||||
2,660 | Chesapeake Energy Corp., 5.75% (a)(b)(e) | 1,172,063 | ||||||||
14,100 | Energy XXI Bermuda Ltd., 5.625% (e) | 339,281 | ||||||||
124,235 | PetroQuest Energy, Inc., 6.875% (e) | 2,535,164 | ||||||||
230,425 | Sanchez Energy Corp., 6.50%, 4/6/18 (e) | 5,050,916 | ||||||||
65,550 | Southwestern Energy Co., 6.25%, 1/15/18 | 2,518,431 | ||||||||
87,340 | WPX Energy, Inc., 6.25%, 7/31/18 | 3,403,640 | ||||||||
22,294,964 | ||||||||||
Pharmaceuticals 1.6% | ||||||||||
15,935 | Allergan PLC, 5.50%, 3/1/18 | 16,343,334 | ||||||||
Real Estate Investment Trust 4.5% | ||||||||||
439,700 | Alexandria Real Estate Equities, Inc., 7.00% (e) | 12,132,994 | ||||||||
798,310 | FelCor Lodging Trust, Inc., 1.95%, Ser. A (e) | 20,316,989 | ||||||||
208,680 | Health Care REIT, Inc., 6.50%, 4/20/18, Ser. I (e) | 12,501,226 | ||||||||
44,951,209 | ||||||||||
Semiconductors & Semiconductor Equipment 1.7% | ||||||||||
246,000 | Barclays Bank PLC, 8.00%, 11/9/15 (Lam Research Corp.) (d) | 16,627,140 | ||||||||
Technology Hardware, Storage & Peripherals 1.8% | ||||||||||
150,500 | Bank of America Corp., 8.00%, 5/10/16 (Apple, Inc.) (d) | 17,537,765 | ||||||||
Wireless Telecommunication Services 0.2% | ||||||||||
28,510 | T-Mobile US, Inc., 5.50%, 12/15/17 | 1,967,475 | ||||||||
Total Convertible Preferred Stock (cost-$384,657,330) | 372,982,152 | |||||||||
Principal Amount (000s) |
||||||||||
Convertible Bonds & Notes 18.9% | ||||||||||
Capital Markets 2.6% | ||||||||||
$13,195 | BGC Partners, Inc., 4.50%, 7/15/16 | 14,093,909 | ||||||||
16,490 | Walter Investment Management Corp., 4.50%, 11/1/19 | 12,078,925 | ||||||||
26,172,834 | ||||||||||
Commercial Services 1.8% | ||||||||||
20,305 | Cenveo Corp., 7.00%, 5/15/17 | 17,931,853 | ||||||||
Diversified Consumer Services 1.0% | ||||||||||
13,510 | Ascent Capital Group, Inc., 4.00%, 7/15/20 | 9,887,631 | ||||||||
Electrical Equipment 0.4% | ||||||||||
4,055 | SolarCity Corp., 1.625%, 11/1/19 (a)(b) | 3,527,850 | ||||||||
Independent Power & Renewable Electricity Producers 0.8% | ||||||||||
8,375 | NRG Yield, Inc., 3.25%, 6/1/20 (a)(b) | 7,375,234 | ||||||||
Iron/Steel 0.1% | ||||||||||
1,425 | AK Steel Corp., 5.00%, 11/15/19 | 1,215,703 | ||||||||
Machinery 2.6% | ||||||||||
Meritor, Inc., | ||||||||||
12,480 | 4.625%, 3/1/26 | 12,651,600 | ||||||||
6,975 | 7.875%, 3/1/26 | 10,806,891 |
August 31, 2015 | | Semi-Annual Report | 13 |
Schedule of Investments
AllianzGI Convertible & Income Fund
August 31, 2015 (unaudited) (continued)
Principal Amount (000s) |
Value | |||||||||
Machinery (continued) | ||||||||||
$ 2,290 | Navistar International Corp., 4.75%, 4/15/19 | $ 1,724,656 | ||||||||
25,183,147 | ||||||||||
Oil, Gas & Consumable Fuels 2.2% | ||||||||||
4,835 | Cheniere Energy, Inc., 4.25%, 3/15/45 | 3,460,047 | ||||||||
17,495 | Cobalt International Energy, Inc., 2.625%, 12/1/19 | 12,596,400 | ||||||||
9,295 | Energy XXI Ltd., 3.00%, 12/15/18 | 1,254,825 | ||||||||
16,605 | Goodrich Petroleum Corp., 5.00%, 10/1/32 | 3,237,975 | ||||||||
1,825 | Stone Energy Corp., 1.75%, 3/1/17 | 1,503,344 | ||||||||
22,052,591 | ||||||||||
Personal Products 1.6% | ||||||||||
17,590 | Herbalife Ltd., 2.00%, 8/15/19 | 16,061,957 | ||||||||
Pharmaceuticals 0.9% | ||||||||||
9,135 | IGI Laboratories, Inc., 3.75%, 12/15/19 (a)(b) | 8,541,225 | ||||||||
Semiconductors & Semiconductor Equipment 0.8% | ||||||||||
13,440 | SunEdison, Inc., 3.375%, 6/1/25 (a)(b) | 8,080,800 | ||||||||
Software 1.0% | ||||||||||
10,320 | TeleCommunication Systems, Inc., 7.75%, 6/30/18 | 10,120,050 | ||||||||
Thrifts & Mortgage Finance 0.7% | ||||||||||
6,535 | MGIC Investment Corp., 5.00%, 5/1/17 | 7,257,935 | ||||||||
Tobacco 2.4% | ||||||||||
Vector Group Ltd., (f) | ||||||||||
5,665 | 1.75%, 4/15/20 | 6,295,231 | ||||||||
11,865 | 2.50%, 1/15/19 | 17,607,482 | ||||||||
23,902,713 | ||||||||||
Total Convertible Bonds & Notes (cost-$194,712,180) | 187,311,523 | |||||||||
Shares | ||||||||||
Common Stock 1.4% | ||||||||||
Food Products 1.4% | ||||||||||
301,176 | Archer-Daniels-Midland Co. (cost-$16,381,771) | 13,549,908 | ||||||||
Principal Amount (000s) |
||||||||||
Short-Term Investment 2.0% | ||||||||||
Time Deposit 2.0% | ||||||||||
$19,760 | ANZ National Bank - London, 0.03%, 9/1/15 (cost-$19,759,733) | 19,759,733 | ||||||||
Total Investments (cost-$1,071,904,240) 100.0% | $991,045,989 |
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 $114,753,480, representing 11.6% 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. Unless otherwise indicated, these securities are not considered to be illiquid. |
14 | Semi-Annual Report | | August 31, 2015 |
Schedule of Investments
AllianzGI Convertible & Income Fund
August 31, 2015 (unaudited) (continued)
(c) | In default. |
(d) | Securities exchangeable or convertible into securities of an entity different than the issuer or structured by the issuer to provide exposure to securities of an entity different than the issuer (synthetic convertible securities). Such entity is identified in the parenthetical. |
(e) | Perpetual maturity. The date shown, if any, is the next call date. |
(f) | In addition to the coupon rate shown, the issuer is expected to pay additional interest based on the actual dividends paid on its common stock. |
(g) | Fair Value Measurements-See Note 1(b) in Notes to Financial Statements |
Level 1 Quoted Prices |
Level 2 Other Significant Observable Inputs |
Level 3 Significant Unobservable Inputs |
Value at 8/31/15 |
|||||||||||||
Investments in Securities Assets |
| |||||||||||||||
Corporate Bonds & Notes |
$ | | $397,442,673 | $ | | $397,442,673 | ||||||||||
Convertible Preferred Stock: |
||||||||||||||||
Automobiles |
| | 15,013,572 | 15,013,572 | ||||||||||||
Banks |
29,485,510 | | 15,839,760 | 45,325,270 | ||||||||||||
Electronic Equipment, Instruments & Components |
| | 14,243,400 | 14,243,400 | ||||||||||||
Health Care Providers & Services |
10,010,342 | | 33,875,948 | 43,886,290 | ||||||||||||
Internet Software & Services |
| | 13,224,204 | 13,224,204 | ||||||||||||
Metals & Mining |
1,639,345 | 10,404,450 | | 12,043,795 | ||||||||||||
Multiline Retail |
| | 14,913,948 | 14,913,948 | ||||||||||||
Multi-Utilities |
6,508,525 | 12,087,095 | | 18,595,620 | ||||||||||||
Oil, Gas & Consumable Fuels |
9,793,900 | 12,501,064 | | 22,294,964 | ||||||||||||
Pharmaceuticals |
| 16,343,334 | | 16,343,334 | ||||||||||||
Real Estate Investment Trust |
20,316,989 | 24,634,220 | | 44,951,209 | ||||||||||||
Semiconductors & Semiconductor Equipment |
| | 16,627,140 | 16,627,140 | ||||||||||||
Technology Hardware, Storage & Peripherals |
| | 17,537,765 | 17,537,765 | ||||||||||||
All Other |
77,981,641 | | | 77,981,641 | ||||||||||||
Convertible Bonds & Notes |
| 187,311,523 | | 187,311,523 | ||||||||||||
Common Stock |
13,549,908 | | | 13,549,908 | ||||||||||||
Short-Term Investment |
| 19,759,733 | | 19,759,733 | ||||||||||||
Totals |
$ | 169,286,160 | $680,484,092 | $ | 141,275,737 | $ | 991,045,989 |
At August 31, 2015, securities valued at $39,256,479 were transferred from Level 1 to Level 2. This transfer was the result of securities with an exchange-traded closing price at February 28, 2015, using an evaluated mean price at August 31, 2015.
August 31, 2015 | | Semi-Annual Report | 15 |
Schedule of Investments
AllianzGI Convertible & Income Fund
August 31, 2015 (unaudited) (continued)
A roll forward of fair value measurements using significant unobservable inputs (Level 3) for the six months ended August 31, 2015, was as follows:
Beginning Balance 2/28/15 |
Purchases | Sales | Accrued Discounts (Premiums) |
Net Realized Gain (Loss) |
||||||||||||||||
Investments in Securities Assets |
|
|||||||||||||||||||
Convertible Preferred Stock: |
|
|||||||||||||||||||
Automobiles |
$18,538,604 | $ | $ | $ | $ | |||||||||||||||
Banks |
16,265,560 | | | | | |||||||||||||||
Electronic Equipment, Instruments & Components |
18,073,620 | | | | | |||||||||||||||
Energy Equipment & Services |
17,643,294 | | (19,489,102 | ) | | | ||||||||||||||
Food Products |
15,175,740 | | (16,381,771 | ) | | | ||||||||||||||
Health Care Equipment & Supplies |
19,120,261 | | (18,680,530 | ) | | 913,286 | ||||||||||||||
Health Care Providers & Services |
20,297,075 | 34,697,388 | (21,035,429 | ) | | 2,992,332 | ||||||||||||||
Internet Software & Services |
16,482,240 | | | | | |||||||||||||||
Multiline Retail |
16,338,624 | | | | | |||||||||||||||
Oil, Gas & Consumable Fuels |
14,301,428 | | (14,612,820 | ) | | (3,577,006 | ) | |||||||||||||
Pharmaceuticals |
16,504,768 | | (19,741,621 | ) | | 3,039,542 | ||||||||||||||
Semiconductors & Semiconductor Equipment |
34,291,700 | | (12,277,079 | ) | | (4,910,503 | ) | |||||||||||||
Technology Hardware, Storage & Peripherals |
21,315,600 | 19,068,350 | (20,597,732 | ) | | 3,862,567 | ||||||||||||||
Totals |
$244,348,514 | $53,765,738 | $(142,816,084 | ) | $ | $2,320,218 |
Net Change in Unrealized Appreciation/ Depreciation |
Transfers into Level 3 |
Transfers out of Level 3 |
Ending Balance 8/31/15 |
|||||||||||||
Investments in Securities Assets (continued) |
|
|||||||||||||||
Convertible Preferred Stock: |
|
|||||||||||||||
Automobiles |
$(3,525,032 | ) | $ | $ | $15,013,572 | |||||||||||
Banks |
(425,800 | ) | | | 15,839,760 | |||||||||||
Electronic Equipment, Instruments & Components |
(3,830,220 | ) | | | 14,243,400 | |||||||||||
Energy Equipment & Services |
1,845,808 | | | | ||||||||||||
Food Products |
1,206,031 | | | | ||||||||||||
Health Care Equipment & Supplies |
(1,353,017 | ) | | | | |||||||||||
Health Care Providers & Services |
(3,075,418 | ) | | | 33,875,948 | |||||||||||
Internet Software & Services |
(3,258,036 | ) | | | 13,224,204 | |||||||||||
Multiline Retail |
(1,424,676 | ) | | | 14,913,948 | |||||||||||
Oil, Gas & Consumable Fuels |
3,888,398 | | | | ||||||||||||
Pharmaceuticals |
197,311 | | | | ||||||||||||
Semiconductors & Semiconductor Equipment |
(476,978 | ) | | | 16,627,140 | |||||||||||
Technology Hardware, Storage & Peripherals |
(6,111,020 | ) | | | 17,537,765 | |||||||||||
Totals |
$(16,342,649 | ) | $ | $ | $141,275,737 |
| Conversion |
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, 2015:
Ending Balance at 8/31/15 |
Valuation Technique Used |
Unobservable Inputs |
Input Values | |||||||
Investments in Securities Assets |
||||||||||
Convertible Preferred Stock |
$141,275,737 | Third-Party Pricing Vendor | Single Broker Quote | $14.88 $117.312 |
The net change in unrealized appreciation/depreciation of Level 3 investments held at August 31, 2015, was $(17,290,550). Net realized gain (loss) and change in unrealized appreciation/depreciation is reflected on the Statement of Operations.
Glossary :
REIT | - | Estate Investment Trust |
16 | Semi-Annual Report | | August 31, 2015 | | See accompanying Notes to Financial Statements |
Schedule of Investments
AllianzGI Convertible & Income Fund II
August 31, 2015 (unaudited)
Principal Amount (000s) |
Value | |||||||||
Corporate Bonds & Notes 40.3% | ||||||||||
Advertising 0.4% | ||||||||||
$4,350 | Affinion Group, Inc., 7.875%, 12/15/18 | $3,025,969 | ||||||||
Aerospace & Defense 1.7% | ||||||||||
5,465 | Erickson, Inc., 8.25%, 5/1/20 | 3,917,722 | ||||||||
5,490 | Kratos Defense & Security Solutions, Inc., 7.00%, 5/15/19 | 4,982,175 | ||||||||
4,120 | TransDigm, Inc., 6.50%, 5/15/25 (a)(b) | 4,068,500 | ||||||||
12,968,397 | ||||||||||
Air Freight & Logistics 1.0% | ||||||||||
XPO Logistics, Inc., (a)(b) | ||||||||||
2,170 | 6.50%, 6/15/22 | 2,142,875 | ||||||||
5,230 | 7.875%, 9/1/19 | 5,563,413 | ||||||||
7,706,288 | ||||||||||
Auto Components 0.5% | ||||||||||
3,970 | Goodyear Tire & Rubber Co., 8.25%, 8/15/20 | 4,153,612 | ||||||||
Auto Manufacturers 0.8% | ||||||||||
5,590 | Chrysler Group LLC, 8.25%, 6/15/21 | 6,010,368 | ||||||||
Chemicals 0.6% | ||||||||||
5,500 | Chemours Co., 6.625%, 5/15/23 (a)(b) | 4,798,750 | ||||||||
Commercial Services 2.2% | ||||||||||
8,535 | Cenveo Corp., 11.50%, 5/15/17 | 8,054,906 | ||||||||
4,295 | DynCorp International, Inc., 10.375%, 7/1/17 | 3,156,825 | ||||||||
5,925 | Monitronics International, Inc., 9.125%, 4/1/20 | 5,569,500 | ||||||||
16,781,231 | ||||||||||
Construction Materials 0.8% | ||||||||||
5,690 | US Concrete, Inc., 8.50%, 12/1/18 | 5,974,500 | ||||||||
Consumer Finance 0.9% | ||||||||||
2,605 | Navient Corp., 8.45%, 6/15/18 | 2,780,837 | ||||||||
3,865 | Springleaf Finance Corp., 8.25%, 10/1/23 | 4,348,125 | ||||||||
7,128,962 | ||||||||||
Distribution/Wholesale 1.0% | ||||||||||
6,430 | HD Supply, Inc., 11.00%, 4/15/20 | 7,185,525 | ||||||||
Diversified Consumer Services 0.7% | ||||||||||
5,270 | Cambium Learning Group, Inc., 9.75%, 2/15/17 | 5,322,700 | ||||||||
Diversified Financial Services 1.5% | ||||||||||
Community Choice Financial, Inc., | ||||||||||
7,465 | 10.75%, 5/1/19 | 2,762,050 | ||||||||
5,370 | 12.75%, 5/1/20 (a)(b) | 1,852,650 | ||||||||
Nationstar Mortgage LLC / Nationstar Capital Corp., | ||||||||||
2,000 | 7.875%, 10/1/20 | 1,897,500 | ||||||||
4,250 | 9.625%, 5/1/19 | 4,446,563 | ||||||||
10,958,763 | ||||||||||
Electrical Components & Equipment 1.2% | ||||||||||
10,275 | WireCo WorldGroup, Inc., 9.50%, 5/15/17 | 8,785,125 | ||||||||
Electronic Equipment, Instruments & Components 0.7% | ||||||||||
5,815 | Kemet Corp., 10.50%, 5/1/18 | 5,524,250 |
August 31, 2015 | | Semi-Annual Report | 17 |
Schedule of Investments
AllianzGI Convertible & Income Fund II
August 31, 2015 (unaudited) (continued)
Principal Amount (000s) |
Value | |||||||||
Food & Staples Retailing 0.7% | ||||||||||
$ 5,000 | US Foods, Inc., 8.50%, 6/30/19 | $ 5,225,000 | ||||||||
Health Care Providers & Services 1.8% | ||||||||||
6,045 | Kindred Healthcare, Inc., 8.75%, 1/15/23 (a)(b) | 6,793,069 | ||||||||
Tenet Healthcare Corp., | ||||||||||
2,750 | 5.00%, 3/1/19 | 2,755,472 | ||||||||
3,470 | 8.125%, 4/1/22 | 3,851,700 | ||||||||
13,400,241 | ||||||||||
Healthcare-Products 1.0% | ||||||||||
6,785 | Kinetic Concepts, Inc./KCI USA, Inc., 10.50%, 11/1/18 | 7,175,138 | ||||||||
Hotels, Restaurants & Leisure 1.0% | ||||||||||
6,395 | MGM Resorts International, 11.375%, 3/1/18 | 7,530,112 | ||||||||
Household Durables 1.0% | ||||||||||
Beazer Homes USA, Inc., | ||||||||||
2,245 | 7.25%, 2/1/23 | 2,160,812 | ||||||||
3,920 | 9.125%, 5/15/19 | 4,018,000 | ||||||||
1,390 | Jarden Corp., 7.50%, 5/1/17 | 1,501,200 | ||||||||
7,680,012 | ||||||||||
Household Products/Wares 0.8% | ||||||||||
5,725 | Reynolds Group Issuer, Inc., 9.875%, 8/15/19 | 6,025,563 | ||||||||
Independent Power & Renewable Electricity Producers 0.3% | ||||||||||
2,340 | TerraForm Power Operating LLC, 5.875%, 2/1/23 (a)(b) | 2,234,700 | ||||||||
Internet 0.4% | ||||||||||
6,462 | Affinion Investments LLC, 13.50%, 8/15/18 | 2,972,382 | ||||||||
Internet Software & Services 1.1% | ||||||||||
EarthLink, Inc., | ||||||||||
2,200 | 7.375%, 6/1/20 | 2,310,000 | ||||||||
5,652 | 8.875%, 5/15/19 | 5,892,210 | ||||||||
8,202,210 | ||||||||||
Iron/Steel 0.5% | ||||||||||
5,600 | AK Steel Corp., 8.375%, 4/1/22 | 3,556,000 | ||||||||
Lodging 0.4% | ||||||||||
9,455 | Caesars Entertainment Operating Co., Inc., 12.75%, 4/15/18 (c) | 2,978,325 | ||||||||
Machinery 1.2% | ||||||||||
4,225 | BlueLine Rental Finance Corp., 7.00%, 2/1/19 (a)(b) | 4,013,750 | ||||||||
5,495 | Navistar International Corp., 8.25%, 11/1/21 | 4,821,862 | ||||||||
8,835,612 | ||||||||||
Media 2.8% | ||||||||||
3,250 | CCO Holdings LLC / CCO Holdings Capital Corp., 7.00%, 1/15/19 | 3,359,687 | ||||||||
6,645 | McClatchy Co., 9.00%, 12/15/22 | 6,038,644 | ||||||||
6,280 | McGraw-Hill Global Education Holdings LLC / McGraw-Hill Global Education Finance, 9.75%, 4/1/21 | 6,939,400 | ||||||||
2,850 | Mood Media Corp., 9.25%, 10/15/20 (a)(b) | 2,180,250 | ||||||||
3,589 | SFX Entertainment, Inc., 9.625%, 2/1/19 (a)(b) | 2,225,180 | ||||||||
20,743,161 | ||||||||||
Metals & Mining 1.8% | ||||||||||
5,050 | ArcelorMittal, 10.60%, 6/1/19 | 5,902,187 | ||||||||
2,820 | HudBay Minerals, Inc., 9.50%, 10/1/20 | 2,572,407 |
18 | Semi-Annual Report | | August 31, 2015 |
Schedule of Investments
AllianzGI Convertible & Income Fund II
August 31, 2015 (unaudited) (continued)
Principal Amount (000s) |
Value | |||||||||
Metals & Mining (continued) | ||||||||||
Thompson Creek Metals Co., Inc., | ||||||||||
$ 6,145 | 7.375%, 6/1/18 | $ 3,717,725 | ||||||||
2,170 | 12.50%, 5/1/19 | 1,331,187 | ||||||||
13,523,506 | ||||||||||
Miscellaneous Manufacturing 0.6% | ||||||||||
5,650 | Harland Clarke Holdings Corp., 9.25%, 3/1/21 (a)(b) | 4,724,813 | ||||||||
Oil & Gas 1.5% | ||||||||||
BreitBurn Energy Partners LP / BreitBurn Finance Corp., | ||||||||||
3,870 | 7.875%, 4/15/22 | 1,722,150 | ||||||||
2,820 | 8.625%, 10/15/20 | 1,526,551 | ||||||||
865 | Calumet Specialty Products Partners LP / Calumet Finance Corp., 6.50%, 4/15/21 | 821,750 | ||||||||
7,000 | Energy XXI Gulf Coast, Inc., 9.25%, 12/15/17 | 2,065,000 | ||||||||
4,306 | United Refining Co., 10.50%, 2/28/18 | 4,499,770 | ||||||||
1,000 | Vanguard Natural Resources LLC / VNR Finance Corp., 7.875%, 4/1/20 | 705,000 | ||||||||
11,340,221 | ||||||||||
Oil, Gas & Consumable Fuels 1.3% | ||||||||||
2,160 | Arch Coal, Inc., 9.875%, 6/15/19 | 302,400 | ||||||||
4,550 | EP Energy LLC / Everest Acquisition Finance, Inc., 9.375%, 5/1/20 | 4,429,425 | ||||||||
4,305 | Linn Energy LLC / Linn Energy Finance Corp., 6.50%, 5/15/19 | 1,808,100 | ||||||||
3,470 | Sanchez Energy Corp., 6.125%, 1/15/23 | 2,619,850 | ||||||||
560 | Ultra Petroleum Corp., 6.125%, 10/1/24 (a)(b) | 372,400 | ||||||||
9,532,175 | ||||||||||
Paper & Forest Products 0.3% | ||||||||||
2,000 | Louisiana-Pacific Corp., 7.50%, 6/1/20 | 2,125,000 | ||||||||
Pharmaceuticals 0.7% | ||||||||||
1,755 | Endo Finance LLC & Endo Finco, Inc., 5.375%, 1/15/23 (a)(b) | 1,772,550 | ||||||||
3,000 | Valeant Pharmaceuticals International, Inc., 7.50%, 7/15/21 (a)(b) | 3,228,750 | ||||||||
5,001,300 | ||||||||||
Real Estate Investment Trust 0.3% | ||||||||||
2,345 | Kennedy-Wilson, Inc., 5.875%, 4/1/24 | 2,287,548 | ||||||||
Retail 0.8% | ||||||||||
5,785 | Neiman Marcus Group Ltd. LLC, 8.00%, 10/15/21 (a)(b) | 6,139,331 | ||||||||
Semiconductors & Semiconductor Equipment 0.4% | ||||||||||
2,875 | Amkor Technology, Inc., 6.375%, 10/1/22 | 2,806,719 | ||||||||
Software 1.9% | ||||||||||
First Data Corp., | ||||||||||
4,355 | 8.25%, 1/15/21 (a)(b) | 4,594,525 | ||||||||
1,465 | 10.625%, 6/15/21 | 1,624,319 | ||||||||
6,955 | 12.625%, 1/15/21 | 8,006,943 | ||||||||
14,225,787 | ||||||||||
Specialty Retail 0.9% | ||||||||||
4,500 | Claires Stores, Inc., 9.00%, 3/15/19 (a)(b) | 3,813,750 | ||||||||
3,500 | Conns, Inc., 7.25%, 7/15/22 | 3,333,750 | ||||||||
7,147,500 | ||||||||||
Telecommunications 1.3% | ||||||||||
5,630 | Consolidated Communications, Inc., 6.50%, 10/1/22 (a)(b) | 5,235,900 | ||||||||
5,845 | Windstream Corp., 7.50%, 4/1/23 | 4,602,996 | ||||||||
9,838,896 |
August 31, 2015 | | Semi-Annual Report | 19 |
Schedule of Investments
AllianzGI Convertible & Income Fund II
August 31, 2015 (unaudited) (continued)
Principal Amount (000s) |
Value | |||||||||
Transportation 0.7% | ||||||||||
$ 5,044 | Quality Distribution LLC, 9.875%, 11/1/18 | $ 5,238,572 | ||||||||
Wireless Telecommunication Services 0.8% | ||||||||||
5,545 | Sprint Communications, Inc., 11.50%, 11/15/21 | 6,349,025 | ||||||||
Total Corporate Bonds & Notes (cost-$348,696,409) | 303,163,289 | |||||||||
Shares | ||||||||||
Convertible Preferred Stock 37.3% | ||||||||||
Automobiles 1.5% | ||||||||||
402,000 | The Goldman Sachs Group, Inc., 8.00%, 12/17/15 (General Motors) (d) | 11,344,842 | ||||||||
Banks 4.5% | ||||||||||
7,455 | Huntington Bancshares, Inc., 8.50% (e) | 9,989,700 | ||||||||
805,310 | JPMorgan Chase & Co., 8.00%, 9/18/15 (Bank of America) (d) | 11,983,013 | ||||||||
9,900 | Wells Fargo & Co., 7.50%, Ser. L (e) | 11,672,100 | ||||||||
33,644,813 | ||||||||||
Diversified Financial Services 1.5% | ||||||||||
10,100 | Bank of America Corp., 7.25%, Ser. L (e) | 11,160,702 | ||||||||
Diversified Telecommunication Services 1.8% | ||||||||||
132,535 | Frontier Communications Corp., 11.125%, 6/29/18 | 13,359,528 | ||||||||
Electric Utilities 0.8% | ||||||||||
134,610 | Exelon Corp., 6.50%, 6/1/17 | 6,096,487 | ||||||||
Electronic Equipment, Instruments & Components 1.4% | ||||||||||
557,000 | Bank of America Corp., 8.00%, 2/17/16 (Corning, Inc.) (d) | 10,750,100 | ||||||||
Food Products 0.6% | ||||||||||
85,955 | Tyson Foods, Inc., 4.75%, 7/15/17 | 4,423,244 | ||||||||
Health Care Providers & Services 4.4% | ||||||||||
154,515 | Anthem, Inc., 5.25%, 5/1/18 | 7,548,058 | ||||||||
181,300 | JPMorgan Chase & Co., 8.00%, 5/5/16 (HCA Holding, Inc.) (d) | 14,306,383 | ||||||||
95,960 | The Goldman Sachs Group, Inc., 8.00%, 3/31/16 (Laboratory Corp. of America Holdings) (d) | 11,257,259 | ||||||||
33,111,700 | ||||||||||
Independent Power & Renewable Electricity Producers 1.4% | ||||||||||
113,265 | Dynegy, Inc., 5.375%, 11/1/17 | 10,595,941 | ||||||||
Internet Software & Services 1.3% | ||||||||||
264,285 | Barclays Bank PLC, 8.00%, 10/28/15 (Twitter, Inc.) (d) | 10,008,473 | ||||||||
Machinery 2.0% | ||||||||||
128,815 | Stanley Black & Decker, Inc., 6.25%, 11/17/16 | 14,932,235 | ||||||||
Metals & Mining 1.2% | ||||||||||
35,295 | Alcoa, Inc., 5.375%, 10/1/17 | 1,238,854 | ||||||||
604,670 | ArcelorMittal, 6.00%, 1/15/16 | 7,936,294 | ||||||||
9,175,148 | ||||||||||
Multiline Retail 1.5% | ||||||||||
195,000 | The Goldman Sachs Group, Inc., 8.00%, 1/14/16 (Macys, Inc.) (d) | 11,272,170 | ||||||||
Multi-Utilities 1.3% | ||||||||||
186,560 | AES Trust III, 6.75%, 10/15/29 | 9,409,620 | ||||||||
Oil, Gas & Consumable Fuels 2.2% | ||||||||||
120,125 | Anadarko Petroleum Corp., 7.50%, 6/7/18 | 5,483,706 |
20 | Semi-Annual Report | | August 31, 2015 |
Schedule of Investments
AllianzGI Convertible & Income Fund II
August 31, 2015 (unaudited) (continued)
Shares | Value | |||||||||
Oil, Gas & Consumable Fuels (continued) | ||||||||||
2,010 | Chesapeake Energy Corp., 5.75% (a)(b)(e) | $ 885,656 | ||||||||
10,900 | Energy XXI Bermuda Ltd., 5.625% (e) | 262,281 | ||||||||
94,905 | PetroQuest Energy, Inc., 6.875% (e) | 1,936,651 | ||||||||
173,845 | Sanchez Energy Corp., 6.50%, 4/6/18 (e) | 3,810,683 | ||||||||
49,470 | Southwestern Energy Co., 6.25%, 1/15/18 | 1,900,637 | ||||||||
65,820 | WPX Energy, Inc., 6.25%, 7/31/18 | 2,565,005 | ||||||||
16,844,619 | ||||||||||
Pharmaceuticals 1.6% | ||||||||||
12,015 | Allergan PLC, 5.50%, 3/1/18 | 12,322,885 | ||||||||
Real Estate Investment Trust 4.6% | ||||||||||
335,200 | Alexandria Real Estate Equities, Inc., 7.00%, (e) | 9,249,442 | ||||||||
610,095 | FelCor Lodging Trust, Inc., 1.95%, Ser. A (e) | 15,526,917 | ||||||||
159,235 | Health Care REIT, Inc., 6.50%, 4/20/18, Ser. I (e) | 9,539,164 | ||||||||
34,315,523 | ||||||||||
Semiconductors & Semiconductor Equipment 1.7% | ||||||||||
186,000 | Barclays Bank PLC, 8.00%, 11/9/15 (Lam Research Corp.) (d) | 12,571,740 | ||||||||
Technology Hardware, Storage & Peripherals 1.8% | ||||||||||
113,500 | Bank of America Corp., 8.00%, 5/10/16 (Apple, Inc.) (d) | 13,226,155 | ||||||||
Wireless Telecommunication Services 0.2% | ||||||||||
21,490 | T-Mobile US, Inc., 5.50%, 12/15/17 | 1,483,025 | ||||||||
Total Convertible Preferred Stock (cost-$286,980,259) | 280,048,950 | |||||||||
Principal Amount (000s) |
||||||||||
Convertible Bonds & Notes 18.9% | ||||||||||
Capital Markets 2.7% | ||||||||||
$10,075 | BGC Partners, Inc., 4.50%, 7/15/16 | 10,761,359 | ||||||||
12,440 | Walter Investment Management Corp., 4.50%, 11/1/19 | 9,112,300 | ||||||||
19,873,659 | ||||||||||
Commercial Services 1.8% | ||||||||||
15,600 | Cenveo Corp., 7.00%, 5/15/17 | 13,776,750 | ||||||||
Diversified Consumer Services 1.0% | ||||||||||
10,220 | Ascent Capital Group, Inc., 4.00%, 7/15/20 | 7,479,763 | ||||||||
Electrical Equipment 0.4% | ||||||||||
3,045 | SolarCity Corp., 1.625%, 11/1/19 (a)(b) | 2,649,150 | ||||||||
Independent Power & Renewable Electricity Producers 0.7% | ||||||||||
6,260 | NRG Yield, Inc., 3.25%, 6/1/20 (a)(b) | 5,512,713 | ||||||||
Iron/Steel 0.1% | ||||||||||
1,075 | AK Steel Corp., 5.00%, 11/15/19 | 917,109 | ||||||||
Machinery 2.6% | ||||||||||
Meritor, Inc., | ||||||||||
9,545 | 4.625%, 3/1/26 | 9,676,244 | ||||||||
5,255 | 7.875%, 3/1/26 | 8,141,965 | ||||||||
1,710 | Navistar International Corp., 4.75%, 4/15/19 | 1,287,844 | ||||||||
19,106,053 | ||||||||||
Oil, Gas & Consumable Fuels 2.2% | ||||||||||
3,650 | Cheniere Energy, Inc., 4.25%, 3/15/45 | 2,612,031 |
August 31, 2015 | | Semi-Annual Report | 21 |
Schedule of Investments
AllianzGI Convertible & Income Fund II
August 31, 2015 (unaudited) (continued)
Principal Amount (000s) |
Value | |||||||||
Oil, Gas & Consumable Fuels (continued) | ||||||||||
$ 13,200 | Cobalt International Energy, Inc., 2.625%, 12/1/19 | $ 9,504,000 | ||||||||
7,015 | Energy XXI Ltd., 3.00%, 12/15/18 | 947,025 | ||||||||
12,550 | Goodrich Petroleum Corp., 5.00%, 10/1/32 | 2,447,250 | ||||||||
1,380 | Stone Energy Corp., 1.75%, 3/1/17 | 1,136,775 | ||||||||
16,647,081 | ||||||||||
Personal Products 1.6% | ||||||||||
13,335 | Herbalife Ltd., 2.00%, 8/15/19 | 12,176,589 | ||||||||
Pharmaceuticals 0.9% | ||||||||||
6,890 | IGI Laboratories, Inc., 3.75%, 12/15/19 (a)(b) | 6,442,150 | ||||||||
Semiconductors & Semiconductor Equipment 0.8% | ||||||||||
10,060 | SunEdison, Inc., 3.375%, 6/1/25 (a)(b) | 6,048,575 | ||||||||
Software 1.0% | ||||||||||
7,890 | TeleCommunication Systems, Inc., 7.75%, 6/30/18 | 7,737,131 | ||||||||
Thrifts & Mortgage Finance 0.7% | ||||||||||
4,965 | MGIC Investment Corp., 5.00%, 5/1/17 | 5,514,253 | ||||||||
Tobacco 2.4% | ||||||||||
Vector Group Ltd., (f) | ||||||||||
4,335 | 1.75%, 4/15/20 | 4,817,269 | ||||||||
9,035 | 2.50%, 1/15/19 | 13,407,804 | ||||||||
18,225,073 | ||||||||||
Total Convertible Bonds & Notes (cost-$147,560,096) | 142,106,049 | |||||||||
Shares | ||||||||||
Common Stock 1.4% | ||||||||||
Food Products 1.4% | ||||||||||
227,847 | Archer-Daniels-Midland Co. (cost-$12,393,244) | 10,250,837 | ||||||||
Principal Amount (000s) |
||||||||||
Short-Term Investment 2.1% | ||||||||||
Time Deposit 2.1% | ||||||||||
$15,601 | ANZ National Bank - London, 0.03%, 9/1/15 (cost-$15,601,416) | 15,601,416 | ||||||||
Total Investments (cost-$811,231,424) 100.0% | $751,170,541 |
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 $87,293,400, representing 11.6% 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. Unless otherwise indicated, these securities are not considered to be illiquid. |
(c) | In default. |
(d) | Securities exchangeable or convertible into securities of an entity different than the issuer or structured by the issuer to provide exposure to securities of an entity different than the issuer (synthetic convertible securities). Such entity is identified in the parenthetical. |
(e) | Perpetual maturity. The date shown, if any, is the next call date. |
22 | Semi-Annual Report | | August 31, 2015 |
Schedule of Investments
AllianzGI Convertible & Income Fund II
August 31, 2015 (unaudited) (continued)
(f) | In addition to the coupon rate shown, the issuer is expected to pay additional interest based on the actual dividends paid on its common stock. |
(g) | Fair Value Measurements-See Note 1(b) in Notes to Financial Statements |
Level 1 Quoted Prices |
Level 2 Other Significant Observable Inputs |
Level 3 Significant Unobservable Inputs |
Value at 8/31/15 |
|||||||||||||
Investments in Securities Assets |
||||||||||||||||
Corporate Bonds & Notes |
$ | | $ | 303,163,289 | $ | | $ | 303,163,289 | ||||||||
Convertible Preferred Stock: |
||||||||||||||||
Automobiles |
| | 11,344,842 | 11,344,842 | ||||||||||||
Banks |
21,661,800 | | 11,983,013 | 33,644,813 | ||||||||||||
Electronic Equipment, Instruments & Components |
| | 10,750,100 | 10,750,100 | ||||||||||||
Health Care Providers & Services |
7,548,058 | | 25,563,642 | 33,111,700 | ||||||||||||
Internet Software & Services |
| | 10,008,473 | 10,008,473 | ||||||||||||
Metals & Mining |
1,238,854 | 7,936,294 | | 9,175,148 | ||||||||||||
Multiline Retail |
| | 11,272,170 | 11,272,170 | ||||||||||||
Multi-Utilities |
| 9,409,620 | | 9,409,620 | ||||||||||||
Oil, Gas & Consumable Fuels |
7,384,343 | 9,460,276 | | 16,844,619 | ||||||||||||
Pharmaceuticals |
| 12,322,885 | | 12,322,885 | ||||||||||||
Real Estate Investment Trust |
15,526,917 | 18,788,606 | | 34,315,523 | ||||||||||||
Semiconductors & Semiconductor Equipment |
| | 12,571,740 | 12,571,740 | ||||||||||||
Technology Hardware, Storage & Peripherals |
| | 13,226,155 | 13,226,155 | ||||||||||||
All Other |
62,051,162 | | | 62,051,162 | ||||||||||||
Convertible Bonds & Notes |
| 142,106,049 | | 142,106,049 | ||||||||||||
Common Stock |
10,250,837 | | | 10,250,837 | ||||||||||||
Short-Term Investment |
| 15,601,416 | | 15,601,416 | ||||||||||||
Totals |
$ | 125,661,971 | $ | 518,788,435 | $ | 106,720,135 | $ | 751,170,541 |
At August 31, 2015, securities valued at $30,134,877 were transferred from Level 1 to Level 2. This transfer was the result of securities with an exchange-traded closing price at February 28, 2015, using an evaluated mean price at August 31, 2015.
August 31, 2015 | | Semi-Annual Report | 23 |
Schedule of Investments
AllianzGI Convertible & Income Fund II
August 31, 2015 (unaudited) (continued)
A roll forward of fair value measurements using significant unobservable inputs (Level 3) for the six months ended August 31, 2015, was as follows:
Beginning Balance 2/28/15 |
Purchases | Sales | Accrued Discounts (Premiums) |
Net Realized Gain (Loss) |
||||||||||||||||
Investments in Securities Assets |
|
|||||||||||||||||||
Convertible Preferred Stock: |
|
|||||||||||||||||||
Automobiles |
$14,008,494 | $ | $ | $ | $ | |||||||||||||||
Banks |
12,305,137 | | | | | |||||||||||||||
Electronic Equipment, Instruments & Components |
13,640,930 | | | | | |||||||||||||||
Energy Equipment & Services |
13,545,217 | | (14,962,292 | ) | | | ||||||||||||||
Food Products |
11,480,850 | | (12,393,244 | ) | | | ||||||||||||||
Health Care Equipment & Supplies |
14,660,100 | | (14,322,945 | ) | | 700,245 | ||||||||||||||
Health Care Providers & Services |
15,403,550 | 26,183,923 | (15,964,680 | ) | | 2,271,685 | ||||||||||||||
Internet Software & Services |
12,474,252 | | | | | |||||||||||||||
Multiline Retail |
12,348,960 | | | | | |||||||||||||||
Oil, Gas & Consumable Fuels |
10,979,490 | | (11,218,552 | ) | | (2,746,138 | ) | |||||||||||||
Pharmaceuticals |
12,529,303 | | (14,986,503 | ) | | 2,307,415 | ||||||||||||||
Semiconductors & Semiconductor Equipment |
26,480,100 | | (9,729,006 | ) | | (3,891,342 | ) | |||||||||||||
Technology Hardware, Storage & Peripherals |
16,147,140 | 14,380,450 | (15,603,336 | ) | | 2,925,999 | ||||||||||||||
Totals |
$186,003,523 | $40,564,373 | $(109,180,558 | ) | $ | $1,567,864 |
Net Change in Unrealized Appreciation/ Depreciation |
Transfers into Level 3 |
Transfers out of Level 3 |
Ending Balance 8/31/15 |
|||||||||||||
Investments in Securities Assets |
|
|||||||||||||||
Convertible Preferred Stock: |
|
|||||||||||||||
Automobiles |
$(2,663,652 | ) | $ | $ | $11,344,842 | |||||||||||
Banks |
(322,124 | ) | | | 11,983,013 | |||||||||||
Electronic Equipment, Instruments & Components |
(2,890,830 | ) | | | 10,750,100 | |||||||||||
Energy Equipment & Services |
1,417,075 | | | | ||||||||||||
Food Products |
912,394 | | | | ||||||||||||
Health Care Equipment & Supplies |
(1,037,400 | ) | | | | |||||||||||
Health Care Providers & Services |
(2,330,836 | ) | | | 25,563,642 | |||||||||||
Internet Software & Services |
(2,465,779 | ) | | | 10,008,473 | |||||||||||
Multiline Retail |
(1,076,790 | ) | | | 11,272,170 | |||||||||||
Oil, Gas & Consumable Fuels |
2,985,200 | | | | ||||||||||||
Pharmaceuticals |
149,785 | | | | ||||||||||||
Semiconductors & Semiconductor Equipment |
(288,012 | ) | | | 12,571,740 | |||||||||||
Technology Hardware, Storage & Peripherals |
(4,624,098 | ) | | | 13,226,155 | |||||||||||
Totals |
$(12,235,067 | ) | $ | $ | $106,720,135 |
| Conversion |
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, 2015:
Ending Balance at 8/31/15 |
Valuation Technique Used |
Unobservable Inputs |
Input Values | |||||||
Investments in Securities Assets |
||||||||||
Convertible Preferred Stock |
$106,720,135 | Third-Party Pricing Vendor | Single Broker Quote | $14.88 $117.312 |
The net change in unrealized appreciation/(depreciation) of Level 3 investments held at August 31, 2015, was $(13,064,911). Net realized gain (loss) and net change in unrealized appreciation/(depreciation) are reflected on the Statement of Operations.
Glossary :
REIT | - | Real Estate Investment Trust |
24 | Semi-Annual Report | | August 31, 2015 | | See accompanying Notes to Financial Statements |
Statements of Assets and Liabilities
AllianzGI Convertible & Income Funds
August 31, 2015 (unaudited)
Convertible & Income |
Convertible & Income II |
|||||||||||
Assets: | ||||||||||||
Investments, at value (cost-$1,071,904,240 and $811,231,424, respectively) | $991,045,989 | $751,170,541 | ||||||||||
Interest and dividends receivable | 14,689,235 | 11,283,858 | ||||||||||
Prepaid expenses | 83,752 | 56,557 | ||||||||||
Investments in Affiliated Funds - Trustees Deferred Compensation Plan (see Note 3) | 7,266 | 5,503 | ||||||||||
Total Assets |
1,005,826,242 | 762,516,459 | ||||||||||
Liabilities: | ||||||||||||
Dividends payable to common and preferred shareholders | 7,926,152 | 6,325,090 | ||||||||||
Investment management fees payable | 601,589 | 455,950 | ||||||||||
Accrued expenses | 187,770 | 120,636 | ||||||||||
Trustees Deferred Compensation Plan payable (see Note 3) | 7,266 | 5,503 | ||||||||||
Total Liabilities |
8,722,777 | 6,907,179 | ||||||||||
Preferred Shares ($0.00001 par value; $25,000 liquidation preference per share applicable to an aggregate 14,280 and 10,960 shares issued and outstanding, respectively) | 357,000,000 | 274,000,000 | ||||||||||
Net Assets Applicable to Common Shareholders | $640,103,465 | $481,609,280 | ||||||||||
Composition of Net Assets Applicable to Common Shareholders: | ||||||||||||
Common Shares: | ||||||||||||
Par value ($0.00001 per share) |
$880 | $743 | ||||||||||
Paid-in-capital in excess of par |
1,174,835,179 | 969,740,142 | ||||||||||
Dividends in excess of net investment income | (7,621,229) | (14,731,637) | ||||||||||
Accumulated net realized loss | (446,253,114) | (413,339,085) | ||||||||||
Net unrealized depreciation | (80,858,251) | (60,060,883) | ||||||||||
Net Assets Applicable to Common Shareholders | $640,103,465 | $481,609,280 | ||||||||||
Common Shares Issued and Outstanding | 87,956,663 | 74,330,417 | ||||||||||
Net Asset Value Per Common Share | $7.28 | $6.48 |
See accompanying Notes to Financial Statements | | August 31, 2015 | | Semi-Annual Report | 25 |
AllianzGI Convertible & Income Funds
Six Months ended August 31, 2015 (unaudited)
Convertible & Income |
Convertible & Income II |
|||||||||||
Investment Income: | ||||||||||||
Interest | $26,143,618 | $19,910,835 | ||||||||||
Dividends | 15,407,064 | 11,618,221 | ||||||||||
Total Investment Income |
41,550,682 | 31,529,056 | ||||||||||
Expenses: | ||||||||||||
Investment management | 3,747,962 | 2,843,486 | ||||||||||
Auction agent | 205,494 | 170,132 | ||||||||||
Custodian and accounting agent | 81,140 | 69,703 | ||||||||||
Shareholder communications | 61,440 | 49,709 | ||||||||||
Audit and tax services | 52,330 | 55,598 | ||||||||||
Legal | 41,423 | 34,940 | ||||||||||
New York Stock Exchange listing | 34,808 | 15,557 | ||||||||||
Trustees | 27,472 | 21,770 | ||||||||||
Transfer agent | 12,967 | 13,067 | ||||||||||
Insurance | 12,141 | 9,747 | ||||||||||
Miscellaneous | 4,755 | 20,509 | ||||||||||
Total expenses |
4,281,932 | 3,304,218 | ||||||||||
Net Investment Income | 37,268,750 | 28,224,838 | ||||||||||
Realized and Change in Unrealized Gain (Loss): | ||||||||||||
Net realized gain on investments | 564,524 | 188,212 | ||||||||||
Net change in unrealized appreciation/depreciation of investments | (92,182,410) | (70,380,705) | ||||||||||
Net realized and change in unrealized loss | (91,617,886) | (70,192,493) | ||||||||||
Net Decrease in Net Assets Resulting from Investment Operations | (54,349,136) | (41,967,655) | ||||||||||
Dividends on Preferred Shares from Net Investment Income | (236,015) | (181,141) | ||||||||||
Net Decrease in Net Assets Applicable to Common Shareholders Resulting from Investments Operations | $(54,585,151) | $(42,148,796) |
26 | Semi-Annual Report | | August 31, 2015 | | See accompanying Notes to Financial Statements |
Statement of Changes in Net Assets Applicable to Common Shareholders
AllianzGI Convertible & Income Fund
Six Months ended August 31, 2015 |
Year ended February 28, 2015 |
|||||||||||
Investments Operations: | ||||||||||||
Net investment income | $37,268,750 | $76,214,860 | ||||||||||
Net realized gain | 564,524 | 698,971 | ||||||||||
Net change in unrealized appreciation/depreciation | (92,182,410) | (75,180,856) | ||||||||||
Net increase (decrease) in net assets resulting from investment operations | (54,349,136) | 1,732,975 | ||||||||||
Dividends on Preferred Shares from Net Investment Income | (236,015) | (421,660) | ||||||||||
Net increase (decrease) in net assets applicable to common shareholders resulting from investment operations | (54,585,151) | 1,311,315 | ||||||||||
Dividends to Common Shareholders from Net Investment Income | (47,449,774) | (94,257,466) | ||||||||||
Common Share Transactions: | ||||||||||||
Net proceeds from shares sold | | 16,959,259 | ||||||||||
Offering costs on sale of shares (See Note 7) | | (16,983) | ||||||||||
Reinvestment of dividends | 2,155,112 | 4,590,091 | ||||||||||
Net increase in net assets from common share transactions | 2,155,112 | 21,532,367 | ||||||||||
Total decrease in net assets applicable to common shareholders | (99,879,813) | (71,413,784) | ||||||||||
Net Assets Applicable to Common Shareholders: | ||||||||||||
Beginning of period | 739,983,278 | 811,397,062 | ||||||||||
End of period* | $640,103,465 | $739,983,278 | ||||||||||
*Including undistributed (dividends in excess of) net investment income of: | $(7,621,229) | $2,795,810 | ||||||||||
Common Shares Issued: | ||||||||||||
Shares sold | | 1,678,728 | ||||||||||
Reinvestment of dividends | 254,004 | 490,671 | ||||||||||
Total increase in shares outstanding | 254,004 | 2,169,399 |
See accompanying Notes to Financial Statements | | August 31, 2015 | | Semi-Annual Report | 27 |
Statement of Changes in Net Assets Applicable to Common Shareholders
AllianzGI Convertible & Income Fund II
Six Months ended August 31, 2015 (unaudited) |
Year ended February 28, 2015 |
|||||||||||
Investments Operations: | ||||||||||||
Net investment income | $28,224,838 | $58,690,752 | ||||||||||
Net realized gain (loss) | 188,212 | (374,783) | ||||||||||
Net change in unrealized appreciation/depreciation | (70,380,705) | (55,112,120) | ||||||||||
Net increase (decrease) in net assets resulting from investment operations | (41,967,655) | 3,203,849 | ||||||||||
Dividends on Preferred Shares from Net Investment Income | (181,141) | (323,627) | ||||||||||
Net increase (decrease) in net assets applicable to common shareholders resulting from investment operations | (42,148,796) | 2,880,222 | ||||||||||
Dividends to Common Shareholders from Net Investment Income | (37,843,136) | (75,259,709) | ||||||||||
Common Share Transactions: | ||||||||||||
Reinvestment of dividends | 2,259,365 | 4,609,781 | ||||||||||
Total decrease in net assets applicable to common shareholders | (77,732,567) | (67,769,706) | ||||||||||
Net Assets Applicable to Common Shareholders: | ||||||||||||
Beginning of period | 559,341,847 | 627,111,553 | ||||||||||
End of period* | $481,609,280 | $559,341,847 | ||||||||||
*Including dividends in excess of net investment income of: | $(14,731,637) | $(4,932,198) | ||||||||||
Common Shares Issued: | ||||||||||||
Shares sold | | | ||||||||||
Reinvestment of dividends | 297,847 | 520,118 | ||||||||||
Total increase in shares outstanding | 297,847 | 520,118 |
28 | Semi-Annual Report | | August 31, 2015 | | See accompanying Notes to Financial Statements |
AllianzGI Convertible & Income Funds
Six Months ended August 31, 2015 (unaudited)
Convertible & Income |
Convertible & Income II |
|||||||||||
Increase in Cash from: | ||||||||||||
Cash Flows used for Operating Activities: | ||||||||||||
Net decrease in net assets resulting from investment operations |
$(54,349,136) | $(41,967,655) | ||||||||||
Adjustments to Reconcile Net Decrease in Net Assets Resulting from Investment Operations to Net Cash provided by Operating Activities: | ||||||||||||
Purchases of long-term investments |
(278,137,695) | (209,189,910) | ||||||||||
Proceeds from sales of long-term investments |
293,861,278 | 224,778,965 | ||||||||||
Proceeds from security litigation |
19,448 | 19,448 | ||||||||||
Purchases of short-term investments, net |
(7,160,651) | (8,355,695) | ||||||||||
Net change in unrealized appreciation/depreciation |
92,182,410 | 70,380,705 | ||||||||||
Net amortization/accretion on investments |
(2,021,316) | (1,443,641) | ||||||||||
Net realized gain |
(564,524) | (188,212) | ||||||||||
Decrease in payable for investments purchased |
(8,072,027) | (5,972,337) | ||||||||||
Increase in investments in Affiliated Funds Trustees Deferred Compensation Plan |
(7,266) | (5,503) | ||||||||||
Increase in Trustees Deferred Compensation Plan payable |
7,266 | 5,503 | ||||||||||
Decrease in receivable for investments sold |
8,647,572 | 6,530,412 | ||||||||||
Decrease in interest and dividends receivable |
1,545,816 | 1,176,680 | ||||||||||
Increase in prepaid expenses |
(62,051) | (7,681) | ||||||||||
Decrease in accrued expenses |
(402,586) | (36,603) | ||||||||||
Increase in investment management fees payable |
16,800 | 11,684 | ||||||||||
Net cash provided by operating activities | $45,503,338 | $35,736,160 | ||||||||||
Cash Flows used for Financing Activities: | ||||||||||||
Cash dividends paid (excluding reinvestment of dividends of $2,155,112 and $2,259,365, respectively) |
(45,503,338) | (35,736,160) | ||||||||||
Net increase in cash | | | ||||||||||
Cash | ||||||||||||
Beginning of period | | | ||||||||||
End of period | $ | $ | ||||||||||
Noncash Investing and Financing Activities: | ||||||||||||
Noncash investment transactions Conversions of convertible preferred stock |
$145,737,827 | $109,883,441 |
See accompanying Notes to Financial Statements | | August 31, 2015 | | Semi-Annual Report | 29 |
AllianzGI Convertible & Income Funds
August 31, 2015 (unaudited)
1. Organization and Significant Accounting Policies
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 January 17, 2003 and April 22, 2003, respectively, and accordingly, follow the investment company accounting and reporting guidance of Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946 Financial Services Investment Companies. Prior to commencing operations on March 31, 2003, and July 31, 2003, respectively, the Funds had no operations other than matters relating to their organization and registration as diversified, closed-end management investment companies under the Investment Company Act of 1940, as amended (the 1940 Act) and the rules and regulations thereunder. Allianz Global Investors Fund Management LLC (the Investment Manager) and Allianz Global Investors U.S. LLC (the Sub-Adviser) serve as the Funds investment manager and sub-adviser, respectively, and are indirect, wholly-owned subsidiaries of Allianz Asset Management of America L.P. (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.
Each Funds investment objective is to provide total return through a combination of capital appreciation and high current income. The Funds attempt to achieve this objective by investing in a portfolio of convertible securities and non-convertible income-producing securities. There can be no assurance that the Funds will meet their stated objectives.
The preparation of the Funds financial statements in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) requires the Funds management to make estimates and assumptions that affect the reported amounts and disclosures in each Funds financial statements. Actual results could differ from those estimates.
In the normal course of business, the Funds enter into contracts that contain a variety of representations that provide general indemnifications. The Funds maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Funds that have not yet occurred.
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.
30 | Semi-Annual Report | | August 31, 2015 |
Notes to Financial Statements
AllianzGI Convertible & Income Funds
August 31, 2015 (unaudited)
1. Organization and Significant Accounting Policies (continued)
The Board of Trustees (the Board) has adopted procedures for valuing portfolio securities and other financial instruments in circumstances where market quotations are not readily available (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 and Sub-Adviser. The 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 instructed by the Board. The Sub-Adviser monitors the continued appropriateness of methods applied and identifies to the Investment Manager circumstances and events that may require fair valuation. The Investment Manager, in turn, determines if adjustments should be made in light of market changes, events affecting the issuer, or other factors. If the Investment Manager (in consultation with the Sub-Adviser) determines that a valuation method may no longer be appropriate, another valuation method may be selected or the Valuation Committee will be convened to consider the matter and take any appropriate action in accordance with procedures set forth by the Board. The Board shall review and ratify the appropriateness of the valuation methods and these methods may be amended or supplemented from time to time by the Valuation Committee.
Synthetic convertible securities are valued based on quotations obtained from unaffiliated brokers who are the principal market-makers in such securities. Such valuations are derived by the brokers from proprietary models which are generally based on readily available market information including valuations of the
common stock underlying the synthetic security.
Short-term debt instruments maturing in 60 days or less are valued at amortized cost, if their original term to maturity was 60 days or less, or by amortizing premium or discount based on their value on the 61st day prior to maturity, if the original term to maturity exceeded 60 days.
The prices used by the 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 at the close of regular trading (normally, 4:00 p.m. Eastern Time) on the New York Stock Exchange (NYSE) on each day the NYSE is open for business.
(b) Fair Value Measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the exit price) in an orderly transaction between market participants. The three levels of the fair value hierarchy are described below:
n | Level 1 quoted prices in active markets for identical investments that the Funds have the ability to access |
n | 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 |
n | Level 3 valuations based on significant unobservable inputs (including the Sub-Advisers or Valuation Committees own assumptions and securities whose price was determined by using a single brokers quote) |
August 31, 2015 | | Semi-Annual Report | 31 |
Notes to Financial Statements
AllianzGI Convertible & Income Funds
August 31, 2015 (unaudited)
1. Organization and Significant Accounting Policies (continued)
The valuation techniques used by the Funds to measure fair value during the six months ended August 31, 2015 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 fair value measurement. The objective of fair value measurement remains the same even when there is a significant decrease in the volume and level of activity for an asset or liability and regardless of the valuation techniques used. Assets categorized as Level 1 or 2 as of period end may have been transferred between Levels 1 and 2 since the prior period due to changes in the valuation method utilized in valuing the investments.
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The following are certain inputs and techniques that the Funds generally use to evaluate how to classify each major category of assets and liabilities for Level 2 and Level 3, in accordance with U.S. GAAP.
Equity Securities (Common and Preferred Stock) Equity securities traded in inactive markets are valued using inputs which include broker-dealer quotes, recently executed transactions adjusted for changes in the benchmark index, or evaluated price quotes received from independent pricing services that take into account the integrity of the market sector and issuer, the individual characteristics of the security, and information received from broker-dealers and other market sources
pertaining to the issuer or security. To the extent that these inputs are observable, the values of equity securities are categorized as Level 2. To the extent that these inputs are unobservable the values are categorized as Level 3.
Convertible Bonds & Notes Convertible bonds & notes are valued by independent pricing services using various inputs and techniques, which include broker-dealer quotations from relevant market makers and recently executed transactions in securities of the issuer or comparable issuers. The broker-dealer quotations received are supported by credit analysis of the issuer that takes into consideration credit quality assessments, daily trading activity, and the activity of the underlying equities, listed bonds and sector-specific trends. To the extent that these inputs are observable, the values of convertible bonds & notes are categorized as Level 2. To the extent that these inputs are unobservable the values are categorized as Level 3.
Corporate Bonds & Notes Corporate bonds & notes are generally comprised of two main categories: investment grade bonds and high yield 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
32 | Semi-Annual Report | | August 31, 2015 |
Notes to Financial Statements
AllianzGI Convertible & Income Funds
August 31, 2015 (unaudited)
1. Organization and Significant Accounting Policies (continued)
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.
(c) Investment Transactions and Investment Income
Investment transactions are accounted for on the trade date. Realized gains and losses on investments are determined on the identified cost basis. Interest income adjusted for the accretion of discount 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. Payments received on synthetic convertible securities are generally included in dividends. Consent fees relating to corporate actions 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.
(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, 2015, the Funds have recorded no liability for net unrecognized tax benefits relating to uncertain income tax positions they have taken. The Funds federal tax returns for the prior three years remain subject to examination by the Internal Revenue Service.
(e) Dividends and Distributions to Shareholders Common Shares
The Funds declare dividends from net investment income to common shareholders monthly. Distributions of net realized capital gains, if any, are paid at least annually. The Funds record dividends and distributions on the ex-dividend date. The amount of dividends from net investment income and distributions 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
August 31, 2015 | | Semi-Annual Report | 33 |
Notes to Financial Statements
AllianzGI Convertible & Income Funds
August 31, 2015 (unaudited)
1. Organization and Significant Accounting Policies (continued)
distributions to shareholders from return of capital.
(f) Convertible Securities
It is the Funds policy to invest a portion of their assets in convertible securities. Although convertible securities do derive part of their value from that of the securities into which they are convertible, they are not considered derivative financial instruments. However, certain of the Funds investments in convertible securities include features which render them more sensitive to price changes in their underlying securities. The value of structured/synthetic convertible securities can be affected by interest rate changes and credit risks of the issuer. Such securities may be structured in ways that limit their potential for capital appreciation and the entire value of the security may be at risk of loss depending on the performance of the underlying equity security. Consequently, the Funds are exposed to greater downside risk than traditional convertible securities, but typically still less than that of the underlying stock.
(g) Statement of Cash Flows
U.S. GAAP requires entities providing financial statements that report both financial position and results of operations to also provide a statement of cash flows for each period for which results of operations are provided, but exempts investment companies meeting certain conditions. One of the conditions is that substantially all of the enterprises investments were carried at fair value during the period and classified as Level 1 or Level 2 in the fair value hierarchy in accordance with the requirements of U.S. GAAP. Another condition is that the enterprise had little or no debt, based on the average debt outstanding during the period, in relation to average total assets. Each Funds Level 3 investments have been determined to
be at a level requiring a statement of cash flows. The Statements of Cash Flows have been prepared using the indirect method which requires net change in net assets resulting from operations to be adjusted to reconcile to net cash flows from operating activities.
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 also are exposed to other risks such as, but not limited to, interest rate, credit and leverage risks.
Interest rate risk is the risk that fixed income securities will decline in value because of changes in interest rates. This risk may be particularly acute in the current market environment because market interest rates are currently at historically low levels. As nominal interest rates rise, the value of certain fixed income securities held by the Funds are likely to decrease. 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.
34 | Semi-Annual Report | | August 31, 2015 |
Notes to Financial Statements
AllianzGI Convertible & Income Funds
August 31, 2015 (unaudited)
2. Principal Risks (continued)
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, adverse 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 a Fund. Even when markets perform well, there is no assurance that the investments held by a Fund 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 Sub-Adviser seeks to minimize the Funds counterparty risk by performing reviews of each counterparty and by minimizing concentration of counterparty risk by undertaking transactions with multiple customers and counterparties on recognized and reputable exchanges. Delivery of securities sold is only made once the Funds have received payment. Payment is made on a purchase once the securities have been delivered by the counterparty. The trade will fail if either party fails to meet its obligation.
The Funds are exposed to risks associated with leverage. Leverage may cause the value of the Funds shares to be more volatile than if the Funds did not use leverage. This is because leverage tends to exaggerate the effect of any increase or decrease in the value of the Funds portfolio securities. The Funds may engage in transactions or purchase instruments that give rise to forms of leverage. In addition, to the extent the Funds employ leverage, dividends and interest costs may not be recovered by any appreciation of the securities purchased with the leverage proceeds and could exceed the Funds investment returns, resulting in greater losses. As discussed further in Note 6, each Fund has auction-rate preferred shares outstanding.
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 may also be 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
August 31, 2015 | | Semi-Annual Report | 35 |
Notes to Financial Statements
AllianzGI Convertible & Income Funds
August 31, 2015 (unaudited)
2. Principal Risks (continued)
4. Investment in Securities
For the six months ended August 31, 2015, purchases and sales of investments, other than short-term securities were:
Purchases | Sales | |||||||
Convertible & Income |
$ | 278,137,695 | $ | 293,861,278 | ||||
Convertible & Income II |
209,189,910 | 224,753,907 |
36 | Semi-Annual Report | | August 31, 2015 |
Notes to Financial Statements
AllianzGI Convertible & Income Funds
August 31, 2015 (unaudited)
5. Income Tax Information
At August 31, 2015, the aggregate cost basis and net unrealized depreciation of investments for federal income tax purposes were:
Federal Tax Cost Basis |
Unrealized Appreciation |
Unrealized Depreciation |
Net Depreciation |
|||||||||||||
Convertible & Income |
$ | 1,079,751,772 | $ | 51,036,203 | $ | 139,741,986 | $ | (88,705,783 | ) | |||||||
Convertible & Income II |
817,298,844 | 40,771,516 | 106,899,819 | (66,128,303 | ) |
Differences between book and tax cost basis were attributable to wash sale loss deferrals and the differing treatment of bond premium amortization.
6. Auction-Rate Preferred Shares
For the six months ended August 31, 2015, the annualized dividend rates for the Funds ranged from:
High | Low | At August 31, 2015 | ||||||||||
Series A |
0.21% | 0.105% | 0.21% | |||||||||
Series B |
0.21% | 0.105% | 0.21% | |||||||||
Series C |
0.225% | 0.075% | 0.225% | |||||||||
Series D |
0.225% | 0.105% | 0.165% | |||||||||
Series E |
0.21% | 0.09% | 0.135% |
August 31, 2015 | | Semi-Annual Report | 37 |
Notes to Financial Statements
AllianzGI Convertible & Income Funds
August 31, 2015 (unaudited)
6. Auction-Rate Preferred Shares (continued)
9. Subsequent Events
In preparing these financial statements, the Funds management has evaluated events and transactions for potential recognition or disclosure through the date the financial statements were issued.
38 | Semi-Annual Report | | August 31, 2015 |
Notes to Financial Statements
AllianzGI Convertible & Income Funds
August 31, 2015 (unaudited)
9. Subsequent Events (continued)
On September 1, 2015 the following monthly dividends were declared to common shareholders, payable October 1, 2015 to shareholders of record on September 11, 2015 (which reflected a decrease from the prior monthly dividend rates):
Convertible & Income | $0.065 per common share | |
Convertible & Income II | $0.0575 per common share |
On October 1, 2015 the following monthly dividends were declared to common shareholders, payable November 2, 2015 to shareholders of record on October 13, 2015:
Convertible & Income | $0.065 per common share | |
Convertible & Income II | $0.0575 per common share |
There were no other subsequent events identified that require recognition or disclosure.
August 31, 2015 | | Semi-Annual Report | 39 |
AllianzGI Convertible & Income Fund
For a common share outstanding throughout each period:
Six Months ended August 31, 2015 (unaudited) |
Year ended | |||||||||||||||||||||||||||||||||||
February 28, 2015 |
February 28, 2014 |
February 28, 2013 |
February 29, 2012 |
February 28, 2011 |
||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $8.44 | $9.49 | $8.78 | $8.65 | $9.76 | $8.80 | ||||||||||||||||||||||||||||||
Investment Operations: | ||||||||||||||||||||||||||||||||||||
Net investment income | 0.42 | 0.87 | 1.02 | (1) | 1.02 | 1.07 | 1.20 | |||||||||||||||||||||||||||||
Net realized and change in unrealized gain (loss) | (1.04 | ) | (0.85 | ) | 0.75 | 0.20 | (1.04 | ) | 1.02 | |||||||||||||||||||||||||||
Total from investment operations | (0.62 | ) | 0.02 | 1.77 | 1.22 | 0.03 | 2.22 | |||||||||||||||||||||||||||||
Dividends on Preferred Shares from Net Investment Income | (0.00 | )(1)(2) | (0.00 | )(1)(2) | (0.01 | )(1) | (0.01 | ) | (0.01 | ) | (0.01 | ) | ||||||||||||||||||||||||
Net increase (decrease) in net assets applicable to common shareholders resulting from investment operations | (0.62 | ) | 0.02 | 1.76 | 1.21 | 0.02 | 2.21 | |||||||||||||||||||||||||||||
Dividends to Common Shareholders from Net Investment Income | (0.54 | ) | (1.08 | ) | (1.08 | ) | (1.08 | ) | (1.13 | ) | (1.25 | ) | ||||||||||||||||||||||||
Common Share Transactions: | ||||||||||||||||||||||||||||||||||||
Accretion to net asset value, resulting from offerings | | 0.01 | 0.03 | 0.00 | (3) | | | |||||||||||||||||||||||||||||
Capital charge resulting from issuance of common shares and related offering costs | | (0.00 | )(2) | (0.00 | )(2) | (0.00 | )(2) | | | |||||||||||||||||||||||||||
Total common share transactions | | 0.01 | 0.03 | 0.00 | (3) | | | |||||||||||||||||||||||||||||
Net asset value, end of period | $7.28 | $8.44 | (4) | $9.49 | $8.78 | $8.65 | $9.76 | |||||||||||||||||||||||||||||
Market price, end of period | $7.22 | $9.12 | $10.20 | $9.18 | $9.70 | $11.00 | ||||||||||||||||||||||||||||||
Total Investment Return (5) | (15.38 | )% | 0.37 | % | 24.87 | % | 7.02 | % | (0.15 | )% | 33.53 | % |
40 | Semi-Annual Report | | August 31, 2015 | | See accompanying Notes to Financial Statements |
Financial Highlights
AllianzGI Convertible & Income Fund
For a common share outstanding throughout each period: (continued)
Six Months ended August 31, 2015 (unaudited) |
Year ended | |||||||||||||||||||||||||||||||||||
February 28, 2015 |
February 28, 2014 |
February 28, 2013 |
February 29, 2012 |
February 28, 2011 |
||||||||||||||||||||||||||||||||
RATIOS/SUPPLEMENTAL DATA: | ||||||||||||||||||||||||||||||||||||
Net assets, applicable to common shareholders, end of period (000s) | $640,103 | $739,983 | $811,397 | $680,022 | $653,381 | $727,229 | ||||||||||||||||||||||||||||||
Ratio of expenses to average net assets (6) | 1.20 | %(9) | 1.23 | %(8) | 1.21 | %(7)(8) | 1.28 | % | 1.28 | % | 1.27 | % | ||||||||||||||||||||||||
Ratio of net investment income to average net assets (6) | 10.47 | %(9) | 9.73 | %(8) | 11.13 | %(7)(8) | 12.12 | % | 12.32 | % | 13.25 | % | ||||||||||||||||||||||||
Preferred shares asset coverage per share | $69,824 | $76,819 | $81,820 | $72,619 | $70,755 | $75,925 | ||||||||||||||||||||||||||||||
Portfolio turnover rate | 27 | % | 56 | % | 79 | % | 39 | % | 33 | % | 52 | % |
(1) | Calculated on average common shares outstanding. |
(2) | Less than $(0.005) per common share. |
(3) | Less than $0.005 per common share. |
(4) | Payment from affiliate increased the net asset value by less than $0.01. |
(5) | Total investment return is calculated assuming a purchase of a common share at the market price on the first day and a sale of a common share at the market price on the last day of each period reported. Dividends and distributions, if any, are assumed, for purposes of this calculation, to be reinvested at prices obtained under the Funds dividend reinvestment plan. Total investment return does not reflect brokerage commissions or sales charges in connection with the purchase or sale of Fund shares. Total investment return for a period of less than one year is not annualized. |
(6) | Calculated on the basis of income and expenses applicable to both common and preferred shares relative to the average net assets of common shareholders. |
(7) | Inclusive of reimbursement from Investment Manager of 0.01%. |
(8) | Inclusive of excise tax expense of 0.05% and 0.04% for the years ended February 28, 2015 and February 28, 2014, respectively. |
(9) | Annualized. |
See accompanying Notes to Financial Statements | | August 31, 2015 | | Semi-Annual Report | 41 |
Financial Highlights
AllianzGI Convertible & Income Fund II
For a common share outstanding throughout each period:
Six Months ended August 31, 2015 (unaudited) |
Year ended | |||||||||||||||||||||||||||||||||||
February 28, 2015 |
February 28, 2014 |
February 28, 2013 |
February 29, 2012 |
February 28, 2011 |
||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $7.56 | $8.53 | $7.97 | $7.86 | $8.89 | $8.02 | ||||||||||||||||||||||||||||||
Investment Operations: | ||||||||||||||||||||||||||||||||||||
Net investment income | 0.38 | 0.80 | 0.95 | (1) | 0.93 | 0.97 | 1.09 | |||||||||||||||||||||||||||||
Net realized and change in unrealized gain (loss) | (0.95 | ) | (0.75 | ) | 0.62 | 0.20 | (0.98 | ) | 0.95 | |||||||||||||||||||||||||||
Total from investment operations | (0.57 | ) | 0.05 | 1.57 | 1.13 | (0.01 | ) | 2.04 | ||||||||||||||||||||||||||||
Dividends on Preferred Shares from Net Investment Income | (0.00 | )(1)(2) | (0.00 | )(1)(2) | (0.01 | )(1) | (0.01 | ) | (0.00 | )(2) | (0.01 | ) | ||||||||||||||||||||||||
Net increase (decrease) in net assets applicable to common shareholders resulting from investment operations | (0.57 | ) | 0.05 | 1.56 | 1.12 | (0.01 | ) | 2.03 | ||||||||||||||||||||||||||||
Dividends to Common Shareholders from Net Investment Income | (0.51 | ) | (1.02 | ) | (1.02 | ) | (1.02 | ) | (1.02 | ) | (1.16 | ) | ||||||||||||||||||||||||
Common Share Transactions: | ||||||||||||||||||||||||||||||||||||
Accretion to net asset value, resulting from offerings | | | 0.02 | 0.01 | | | ||||||||||||||||||||||||||||||
Capital charge resulting from issuance of common shares and related offering costs | | | (0.00 | )(2) | (0.00 | )(2) | | | ||||||||||||||||||||||||||||
Total common share transactions | | | 0.02 | 0.01 | | | ||||||||||||||||||||||||||||||
Net asset value, end of period | $6.48 | $7.56 | (3) | $8.53 | $7.97 | $7.86 | $8.89 | |||||||||||||||||||||||||||||
Market price, end of period | $6.59 | $8.58 | $9.71 | $8.52 | $8.84 | $10.21 | ||||||||||||||||||||||||||||||
Total Investment Return (4) | (17.65 | )% | (0.81 | )% | 28.50 | % | 9.35 | % | (2.27 | )% | 32.85 | % |
42 | Semi-Annual Report | | August 31, 2015 | | See accompanying Notes to Financial Statements |
Financial Highlights
AllianzGI Convertible & Income Fund II
For a common share outstanding throughout each period: (continued)
Six Months ended August 31, 2015 (unaudited) |
Year ended | |||||||||||||||||||||||||||||||||||
February 28, 2015 |
February 28, 2014 |
February 28, 2013 |
February 29, 2012 |
February 28, 2011 |
||||||||||||||||||||||||||||||||
RATIOS/SUPPLEMENTAL DATA: | ||||||||||||||||||||||||||||||||||||
Net assets, applicable to common shareholders, end of period (000s) | $481,609 | $559,342 | $627,112 | $518,277 | $493,139 | $549,130 | ||||||||||||||||||||||||||||||
Ratio of expenses to average net assets (5) | 1.23 | %(7) | 1.19 | % | 1.18 | %(6) | 1.31 | % | 1.31 | % | 1.29 | % | ||||||||||||||||||||||||
Ratio of net investment income to average net assets (5) | 10.51 | %(7) | 9.87 | % | 11.50 | %(6) | 12.20 | % | 12.39 | % | 13.20 | % | ||||||||||||||||||||||||
Preferred shares asset coverage per share | $68,941 | $76,034 | $82,218 | $72,287 | $69,994 | $75,102 | ||||||||||||||||||||||||||||||
Portfolio turnover rate | 27 | % | 57 | % | 93 | % | 41 | % | 32 | % | 54 | % |
(1) | Calculated on average common shares outstanding. |
(2) | Less than $(0.005) per common share. |
(3) | Payment from affiliate increased the net asset value by less than $0.01. |
(4) | Total investment return is calculated assuming a purchase of a common share at the market price on the first day and a sale of a common share at the market price on the last day of each period reported. Dividends and distributions, if any, are assumed, for purposes of this calculation, to be reinvested at prices obtained under the Funds dividend reinvestment plan. Total investment return does not reflect brokerage commissions or sales charges in connection with the purchase or sale of Fund shares. Total investment return for a period of less than one year is not annualized. |
(5) | Calculated on the basis of income and expenses applicable to both common and preferred shares relative to the average net assets of common shareholders. |
(6) | Inclusive of reimbursement from Investment Manager of 0.02%. |
(7) | Annualized. |
See accompanying Notes to Financial Statements | | August 31, 2015 | | Semi-Annual Report | 43 |
Annual Shareholders Meeting Results (unaudited)
AllianzGI Convertible & Income Funds
Annual Shareholders Meeting Results:
The Funds held their joint annual meeting of shareholders on June 2, 2015. Common/Preferred shareholders voted as indicated below:
Convertible & Income: | Affirmative | Withheld Authority |
||||||
Re-election of Deborah A. DeCotis Class III to serve until the annual meeting for the 2018-2019 fiscal year |
69,281,519 | 2,598,613 | ||||||
Election of F. Ford Drummond Class III to serve until the annual meeting for the 2018-2019 fiscal year |
69,560,947 | 2,319,185 | ||||||
Election of Davey S. Scoon Class II to serve until the annual meeting for the 2017-2018 fiscal year |
69,450,634 | 2,429,498 | ||||||
Election of James S. MacLeod Class III to serve until the annual meeting for the 2018-2019 fiscal year |
69,489,752 | 2,390,380 | ||||||
Election of Julian Sluyters Class III to serve until the annual meeting for the 2018-2019 fiscal year |
69,539,106 | 2,341,026 | ||||||
Election of Susan M. King Class I to serve until the annual meeting for the 2016-2017 fiscal year |
69,331,552 | 2,548,580 |
The re-election of Messrs. Alan Rappaport and James A. Jacobson had been proposed at the annual meeting of shareholders, but a quorum of Preferred shareholders was not present, and the meeting did not proceed with respect to these proposed re-elections. However, Messrs. Rappaport and Jacobson continued to serve as Trustees pursuant to the terms of the Funds Agreement and Declaration of Trust. The other members of the Board of Trustees at the time of the meeting, namely Messrs. Hans W. Kertess, William B. Ogden, IV and Bradford K. Gallagher continued to serve as Trustees.
Convertible & Income II: | Affirmative | Withheld Authority |
||||||
Re-election of Hans W. Kertess Class III to serve until the annual meeting for the 2018-2019 fiscal year |
60,354,741 | 2,567,242 | ||||||
Election of F. Ford Drummond Class III to serve until the annual meeting for the 2018-2019 fiscal year |
60,424,395 | 2,497,588 | ||||||
Election of Davey S. Scoon Class II to serve until the annual meeting for the 2017-2018 fiscal year |
60,336,304 | 2,585,679 | ||||||
Election of James S. MacLeod Class III to serve until the annual meeting for the 2018-2019 fiscal year |
60,471,246 | 2,450,737 | ||||||
Election of Julian Sluyters Class III to serve until the annual meeting for the 2018-2019 fiscal year |
60,510,513 | 2,411,470 | ||||||
Election of Susan M. King Class I to serve until the annual meeting for the 2016-2017 fiscal year |
60,343,148 | 2,578,835 |
The re-election of Messrs. Alan Rappaport and James A. Jacobson had been proposed at the annual meeting of shareholders, but a quorum of Preferred shareholders was not present, and the meeting did not proceed with respect to these proposed re-elections. However, Messrs. Rappaport and Jacobson continued to serve as Trustees pursuant to the terms of the Funds Agreement and Declaration of Trust. The other members of the Board of Trustees at the time of the meeting, namely, Ms. Deborah A. DeCotis and Messrs. William B. Ogden, IV and Bradford K. Gallagher continued to serve as Trustees.
* | Preferred Shares Trustee |
| Interested Trustee |
44 | Semi-Annual Report | | August 31, 2015 |
Changes to the Board of Trustees/Proxy Voting Policies & Procedures (unaudited)
AllianzGI Convertible & Income Funds
Changes to the Board of Trustees:
Effective September 11, 2015, Susan M. King resigned as Trustee of each Fund.
Effective October 8, 2015, Barbara R. Claussen became a Class I Trustee of the Convertible and Income Funds. Ms. Claussen is an interested person of the Funds, as defined in Section 2(a)(19) of the 1940 Act, due to her positions with the Investment Manager and its affiliates.
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/closedendfunds; and (iii) on the Securities and Exchange Commissions website at www.sec.gov.
August 31, 2015 | | Semi-Annual Report | 45 |
Matters Relating to the Trustees Consideration of the Investment Management & Portfolio Management Agreements (unaudited)
AllianzGI Convertible & Income Funds
46 | Semi-Annual Report | | August 31, 2015 |
Matters Relating to the Trustees Consideration of the Investment Management & Portfolio Management Agreements (unaudited) (continued)
AllianzGI Convertible & Income Funds
August 31, 2015 | | Semi-Annual Report | 47 |
Matters Relating to the Trustees Consideration of the Investment Management & Portfolio Management Agreements (unaudited) (continued)
AllianzGI Convertible & Income Funds
48 | Semi-Annual Report | | August 31, 2015 |
Matters Relating to the Trustees Consideration of the Investment Management & Portfolio Management Agreements (unaudited) (continued)
AllianzGI Convertible & Income Funds
August 31, 2015 | | Semi-Annual Report | 49 |
Matters Relating to the Trustees Consideration of the Investment Management & Portfolio Management Agreements (unaudited) (continued)
AllianzGI Convertible & Income Funds
50 | Semi-Annual Report | | August 31, 2015 |
AllianzGI Convertible & Income Funds
August 31, 2015 | | Semi-Annual Report | 51 |
Privacy Policy (unaudited) (continued)
AllianzGI Convertible & Income Funds
52 | Semi-Annual Report | | August 31, 2015 |
This report, including the financial information herein, is transmitted to the shareholders of AllianzGI Convertible & Income Fund and AllianzGI Convertible & Income Fund II 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/closedendfunds.
Information on the Funds is available at us.allianzgi.com/closedendfunds or by calling the Funds shareholder servicing agent at (800) 254-5197.
Receive this report electronically and eliminate paper mailings.
To enroll, go to us.allianzgi.com/edelivery.
Allianz Global Investors Distributors LLC | AZ603SA_083115 |
AGI-2015-08-27-13111
ITEM 2. CODE OF ETHICS
Not required in this filing.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT
Not required in this filing.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Not required in this filing
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANT
Not required in this filing
ITEM 6. INVESTMENTS
(a) | The registrants Schedule of Investments is included as part of the report to shareholders filed under Item 1 of this form. |
(b) | Not applicable. |
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES
Not required in this filing
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES
Not required in this filing
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED COMPANIES
None
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There have been no material changes to the procedures by which shareholders may recommend nominees to the Funds Board of Trustees since the Fund last provided disclosure in response to this item.
ITEM 11. CONTROLS AND PROCEDURES
(a) The registrants President and Chief Executive Officer and Treasurer, Principal Financial & Accounting Officer have concluded that the registrants disclosure controls and procedures (as defined in Rule 30a-3(c) under the Act (17 CFR 270.30a-3(c))) are effective based on their evaluation of these controls and procedures as of a date within 90 days of the filing date of this document.
(b) There were no significant changes in the registrants internal control over financial reporting (as defined in Rule 30a-3(d) under the Act (17 CFR 270.30a-3(d))) that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting.
ITEM 12. EXHIBITS
(a) (1) Not required in this filing.
(a) (2) Exhibit 99.302 Cert. Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
(a) (3) Not applicable
(b) Exhibit 99.906 Cert. Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Registrant: AllianzGI Convertible & Income Fund
By: | /s/ Julian Sluyters | |
Julian Sluyters, President & Chief Executive Officer | ||
Date: | October 30, 2015 |
By: | /s/ Lawrence G. Altadonna | |
Lawrence G. Altadonna, | ||
Treasurer, Principal Financial & Accounting Officer | ||
Date: | October 30, 2015 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By: | /s/ Julian Sluyters | |
Julian Sluyters, President & Chief Executive Officer | ||
Date: | October 30, 2015 |
By: | /s/ Lawrence G. Altadonna | |
Lawrence G. Altadonna, | ||
Treasurer, Principal Financial & Accounting Officer | ||
Date: | October 30, 2015 |