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

811-21989

 

AllianzGI Equity & Convertible Income Fund

(Exact name of registrant as specified in charter)

 

1633 Broadway, New York, New York

 

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)

 

Registrant’s telephone number, including area code:

212-739-3371

 

 

Date of fiscal year end:

January 31

 

 

Date of reporting period:

July 31, 2017

 

 



 

ITEM 1. REPORT TO SHAREHOLDERS

 

 

 

 

 

 

 

 

 

 

 


 

Table of Contents

 

 

2–3

 

Letter from the President

4–11

 

Fund Insights

12–14

 

Performance & Statistics

15–51

 

Schedules of Investments

52

 

Statements of Assets and Liabilities

53

 

Statements of Operations

54–55

 

Statements of Changes in Net Assets

56

 

Statement of Cash Flows

57–59

 

Financial Highlights

60–76

 

Notes to Financial Statements

77

 

Annual Shareholder Meeting Results

78–79

 

Proxy Voting Policies & Procedures/Changes in Investment Policy

80–87

 

Matters Relating to the Trustees’ Consideration of the Investment Management & Portfolio Management Agreements

88–90

 

Privacy Policy

 

July 31, 2017 | Semi-Annual Report 1

 


 

Letter from the President

 

Dear Shareholder:

 

The US economy continued to expand during the six-month reporting period ended July 31, 2017, although the overall pace was rather modest. Meanwhile, there were indications that economic activity overseas was improving. Against this backdrop, both US and international equities generated strong results. Elsewhere, the US bond market posted a modest return during the reporting period.

 

For the six-month reporting period ended July 31, 2017

¡  AllianzGI Diversified Income & Convertible Fund returned 8.60% on net asset value (“NAV”) and 16.31% on market price.

 

¡  AllianzGI Equity & Convertible Income Fund returned 6.50% on NAV and 9.68% on market price.

 

¡  AllianzGI NFJ Dividend, Interest & Premium Strategy Fund returned 3.22% on NAV and 7.15% on market price.

 

 Thomas J. Fuccillo

 President & Chief
 Executive Officer

 

During the six months ended July 31, 2017, the Russell 3000 Index, a broad measure of US stock market performance, gained 8.94%; the Russell 1000 Value Index, a measure of large-cap value-style stocks, rose 5.30%; and the Russell 1000 Growth Index, a measure of growth style stocks, gained 13.21%. Convertible securities, as reflected by the BofA Merrill Lynch All Convertibles Index, returned 7.21%.

 

Turning to the US economy, gross domestic product (“GDP”), the value of goods and services produced in the country, the broadest measure of economic activity and a principal indicator of economic performance, expanded at a 1.8% annual pace during the fourth quarter of 2016. GDP then moderated to a 1.2% annual pace during the first quarter of 2017. The Commerce Department’s estimate for the second quarter of 2017 showed that GDP – released after the reporting period had ended – grew at an annual pace of 3.0%.

 

The US Federal Reserve (the “Fed”) raised interest rates on two separate occasions during the reporting period: in March 2017 and June 2017. In both cases, the Fed’s movements were well telegraphed. With the rate hike in June, the federal funds rate moved to a range between 1.00% and 1.25%. In the statement following the July meeting, the Fed indicated that it planned to begin reducing its balance sheet, saying “The Committee expects to begin implementing its balance sheet normalization program relatively soon, provided that the economy evolves broadly as anticipated.”

 

2 Semi-Annual Report | July 31, 2017

 


 

Outlook

Looking ahead, we believe investors should expect muted growth as the US enters the later portion of an economic cycle, Japan is struggling with its aging population and Europe is suffering from the uncertainties related to Great Britain’s anticipated exit from the European Union (“Brexit”). In our view, the US and European Union should ultimately avoid recessions, but remain mired in a relatively weak economic expansion. We expect the Fed to continue modestly increasing rates in 2017, prompting central banks in emerging markets to lower their rates as inflation falls. Elsewhere, we expect the European Central Bank and Bank of Japan to maintain their accommodative monetary policies. In our view, we have passed peak global liquidity, as central banks have pushed past negative interest rate policies to begin supporting government spending.

 

 

Receive this report electronically and eliminate paper mailings.

 

 

To enroll, visit:

us.allianzgi.com/edelivery.

 

 

The tides of deregulation continued shifting in 2016, and nationalism and populism gained ground. Politics should remain a key investment consideration given the results from the last U.S. Presidential election and key elections in Europe, including the Netherlands, France and Germany. We also believe that monetary policy will become more political. As to where governments will spend the money their central banks print, we believe domestic infrastructure and defense spending will be the focus of many countries in the coming years.

 

Against this backdrop, we believe markets are increasingly susceptible to volatility as politics, geopolitics, divergent monetary policies and internal market structures all converge and evolve. We believe that navigating this sea of uncertainty requires a clear direction and an active management approach, with investors staying agile in their asset allocations, confident in their processes and thorough in their research.

 

On behalf of Allianz Global Investors U.S. LLC, thank you for investing with us. We encourage you to consult with your financial advisor and to visit our website, us.allianzgi.com, for additional information. We remain dedicated to serving your investment needs.

 

Sincerely,

 

 

Thomas J. Fuccillo

President & Chief Executive Officer

 

July 31, 2017 | Semi-Annual Report 3

 


 

Fund Insights

AllianzGI Diversified Income & Convertible Fund/AllianzGI Equity & Convertible Income Fund/AllianzGI NFJ Dividend, Interest & Premium Strategy Fund

July 31, 2017 (unaudited)

 

 

AllianzGI Diversified Income & Convertible Fund

 

For the period of February 1, 2017 through July 31, 2017, as provided by Doug Forsyth, CFA, Portfolio Manager.

 

For the six-month period ended July 31, 2017, the AllianzGI Diversified Income & Convertible Fund (the “Fund”) returned 8.60% on net asset value (“NAV”) and 16.31% on market price.

 

During the reporting period, the Russell 1000 Growth Index, a measure of growth style stocks, advanced 13.21%; and convertible securities, as reflected by the BofA Merrill Lynch All Convertibles Index, returned 7.21%.

 

Market Environment

The performance for the convertible, high yield and large cap equity markets was higher over the trailing six months.

 

Several factors influenced the three asset classes throughout the reporting period, including corporate fundamentals, economic indicators, moves made by the US Federal Reserve (the “Fed”), the new US administration’s pro-growth agenda and sustained investors’ appetite for risk assets.

 

During the reporting period US companies continued to exhibit improving fundamentals. For example, in the first quarter of 2017 operating results for most US companies met or exceeded expectations while credit metrics showed further improvement, continuing a trend from the fourth quarter of 2016. As an additional example, the first quarter of 2017 was the first time since 2011 where US companies saw double-digit year-over-year earnings growth, on average for the S&P 500 Index. In addition, according to Bank of America Merrill Lynch, net leverage continued to tick lower and interest coverage continued to rise higher, on average for the S&P 500 Index.

 

Certain economic statistics were positive and factored into the market’s strength. In May 2017, the unemployment rate fell to its lowest level since 2001 and private payroll figures were healthy. Housing prices continued their upward trend. Consumer and small business confidence levels came off their recent highs, but remained at bullish levels. Overall, the trend in economic data reinforced the favorable credit conditions for convertible bonds, high yield bonds and equities.

 

As anticipated, the Fed raised interest rates twice during the reporting period, pushing the federal funds rate to a range of 1.00% to 1.25%. The convertible market responded positively to the Fed’s rate decision and commentary. Near-term rate hike projections from the Fed remain unchanged, with one more expected this year and three expected in 2018. Additionally, the Fed noted that the process of balance sheet reduction is expected to begin later this year, reflecting their confidence in the

 

4 Semi-Annual Report | July 31, 2017

 


 

Fund Insights

AllianzGI Diversified Income & Convertible Fund/AllianzGI Equity & Convertible Income Fund/AllianzGI NFJ Dividend, Interest & Premium Strategy Fund

July 31, 2017 (unaudited) (continued)

 

 

US economy. Outside of the US, global central banks throughout Europe and Asia maintained aggressive measures to stimulate their respective economies.

 

The three assets classes also benefited from a persistent appetite among investors for risk assets, which in part, appeared to be centered on the continued optimism surrounding President Trump’s policies and pro-growth agenda. Additionally, a weaker dollar and favorable supply/demand dynamics helped lift select base metal and crude oil prices, which supported commodity-related issuers.

 

The volatility environment remained subdued over the reporting period. The Chicago Board Options Exchange Volatility Index (VIX) started the period in the low double-digits and was range bound between 10.5 and 13.0 throughout February 2017 and March 2017, spiked to a high of 16.0 in mid-April 2017, and reached a new record low of below 9.0 in mid-July 2017. The index started the period at 11.8 and ended the period at 10.3.

 

Portfolio Specifics

The Fund provided consistent income and generated a positive total return over the reporting period.

 

In the equity sleeve, the materials, real estate and health care sectors helped relative performance. Conversely, the information technology, energy and consumer staples sectors hindered relative performance.

 

In the convertible sleeve, sectors that contributed positively to relative performance were information technology, consumer discretionary and transportation. On the other hand, energy, media and utilities pressured relative performance.

 

In the high yield sleeve, industries that aided relative performance were health care, chemicals and theatres & entertainment. In contrast, the energy, telecommunications and utilities industries hampered relative performance.

 

Regarding the covered call strategy, many option positions expired below strike and the portfolio was able to retain the set premiums. With depressed implied volatility levels, fewer equities were subject to written call options during the reporting period than in prior periods.

 

Outlook

US equity markets continue to record new all-time highs, volatility is near all-time lows, and interest rates are trending higher on an improving economic outlook in our view. Historically, these factors have been positive indicators for both economic and corporate earnings growth and supportive of investments in risk assets.

 

July 31, 2017 | Semi-Annual Report 5

 


 

Fund Insights

AllianzGI Diversified Income & Convertible Fund/AllianzGI Equity & Convertible Income Fund/AllianzGI NFJ Dividend, Interest & Premium Strategy Fund

July 31, 2017 (unaudited) (continued)

 

 

From a fundamental standpoint, as well as the observed condition of the economy, high yield defaults in 2017 and 2018 are expected to remain below their long-term historical average in our view. This stage of the market cycle can be compared to the mid-1990s and mid-2000s, when market environments exhibited economic stability, low defaults and healthy balance sheets.

 

Stress in select industries of the market has waned, and overall, we believe balance sheets, leverage ratios and interest-coverage ratios continue to support an investment in these asset classes.

 

The US economy is expected to expand at a moderate pace for the remainder of 2017, in our view. The stock market’s strength and the US Treasury yield curve appear to confirm this expectation. Moreover, any combination of positive tax reform, decreased regulation, and increased fiscal spending could provide upside to growth expectations.

 

After bottoming in the second quarter of 2016, corporate profits have significantly improved through the first quarter of 2017. Based on bottom-up estimates, we believe they are poised to trend higher throughout year.

 

US monetary policy continues to be modestly accommodative with the Fed expected to take a gradual approach toward policy adjustments, in our view. Additional Fed rate hikes and balance sheet reduction efforts signal confidence in the US economy’s ability to grow and reflect the goal of achieving a normalized environment after an extended period of extreme accommodation. Global monetary policy continues to be constructive and accommodative.

 

AllianzGI Equity & Convertible Income Fund

 

For the period of February 1, 2017 through July 31, 2017, as provided by Doug Forsyth, CFA, Portfolio Manager.

 

For the six-month period ended July 31, 2017, the AllianzGI Equity & Convertible Income Fund (the “Fund”) returned 6.50% on net asset value (“NAV”) and 9.68% on market price.

 

During the reporting period, the Russell 1000 Growth Index, a measure of growth style stocks, advanced 13.21%; and convertible securities, as reflected by the BofA Merrill Lynch All Convertibles Index, returned 7.21%.

 

Market Environment

Several factors influenced equities and convertible bonds throughout the reporting period, including corporate fundamentals, economic indicators, the US Federal Reserve (the “Fed”) moves, the US new administration’s pro-growth agenda, and investors sustained appetite for risk assets.

 

During the reporting period US companies continued to exhibit improving fundamentals.

 

6 Semi-Annual Report | July 31, 2017

 


 

Fund Insights

AllianzGI Diversified Income & Convertible Fund/AllianzGI Equity & Convertible Income Fund/AllianzGI NFJ Dividend, Interest & Premium Strategy Fund

July 31, 2017 (unaudited) (continued)

 

 

For example, in the first quarter operating results for most US companies met or exceeded expectations while credit metrics showed further improvement, continuing a trend from the fourth quarter of 2016. The first quarter of 2017 was the first time since 2011 where US companies saw double-digit year-over-year earnings growth, on average for the S&P 500 Index. In addition, according to Bank of America Merrill Lynch, net leverage ticked lower and interest coverage rose the last two quarters, on average for the S&P 500 Index.

 

Certain economic statistics were positive and factored into the market’s strength. In May 2017, the unemployment rate fell to its lowest level since 2001 and private payroll figures were healthy. Housing prices continued their upward trend. Consumer and small business confidence levels came off their recent highs, but remained at bullish levels. Overall, the trend in economic data reinforced the favorable credit conditions for equities and convertible bonds.

 

As anticipated, the Fed raised interest rates twice during the reporting period, pushing the federal funds rate to a range of 1.00% to 1.25%. The convertible market responded positively to the Fed’s rate decision and commentary. Near-term rate hike projections from the Fed remain unchanged, with one more expected this year and three expected in 2018. Additionally, the Fed noted that the process of balance sheet reduction is expected to begin later this year, reflecting their confidence in the US economy. Outside of the US, global central banks throughout Europe and Asia maintained aggressive measures to stimulate their respective economies.

 

The asset classes also benefited from a persistent appetite among investors for risk assets, which in part, appeared to be centered on the continued optimism surrounding President Trump’s policies and pro-growth agenda. Additionally, a weaker dollar and favorable supply/demand dynamics helped lift select base metal and crude oil prices, which supported commodity-related issuers.

 

The volatility environment remained subdued over the quarter. The Chicago Board Options Exchange Volatility Index (VIX) started the period in low double-digits and was range bound between 10.5 and 13.0 throughout February and March, spiked to a high of 16.0 in mid-April, and reached a new record low of below 9.0 in mid-July. The index started the period at 11.8 and ended the period at 10.3.

 

Portfolio Specifics

The Fund provided consistent income and generated a positive total return over the reporting period.

 

In the equity sleeve, the materials, real estate and industrials sectors helped relative performance. Conversely the energy, information technology and consumer

 

July 31, 2017 | Semi-Annual Report 7

 


 

Fund Insights

AllianzGI Diversified Income & Convertible Fund/AllianzGI Equity & Convertible Income Fund/AllianzGI NFJ Dividend, Interest & Premium Strategy Fund

July 31, 2017 (unaudited) (continued)

 

 

discretionary sectors hindered relative performance.

 

In the convertible sleeve, sectors that contributed positively to relative performance were materials, transportation and consumer staples. On the other hand, information technology, health care and financials pressured relative performance.

 

The covered call strategy captured fewer gains than anticipated. The covered calls did provide some short-term capital gains for the portfolio, but with the depressed implied volatilities the magnitude of the premiums faced headwinds.

 

Outlook

US equity markets continue to record new all-time highs, volatility is near all-time lows, and interest rates are trending higher on an improving economic outlook, in our view. Historically, these factors have been positive indicators for both economic and corporate earnings growth and supportive of investments in risk assets.

 

Stress in select industries of the market has waned, and overall, we believe balance sheets, leverage ratios and interest-coverage ratios continue to support an investment in the convertible asset class.

 

The US economy is expected to expand at a moderate pace for the remainder of 2017, in our view. The stock market’s strength and the US Treasury yield curve appear to confirm this expectation. Moreover, any combination of positive tax reform, decreased regulation and increased fiscal spending could provide upside to growth expectations.

 

After bottoming in the second quarter of 2016, corporate profits have significantly improved through the first quarter of 2017. Based on bottom-up estimates, they are poised to trend higher throughout year in our view.

 

US monetary policy continues to be modestly accommodative with the Fed expected to take a gradual approach toward policy adjustments, in our view. Additional Fed rate hikes and balance sheet reduction efforts signal confidence in the US economy’s ability to grow and reflect the goal of achieving a normalized environment after an extended period of extreme accommodation. Global monetary policy continues to be constructive and accommodative.

 

AllianzGI NFJ Dividend, Interest & Premium Strategy Fund

 

For the period of February 1, 2017 through July 31, 2017, as provided by the Dallas Investment team.

 

For the six-month period ended July 31, 2017, the AllianzGI NFJ Dividend, Interest & Premium Strategy Fund (the “Fund”) returned 3.22% on net asset value (“NAV”) and 7.15% on market price.

 

8 Semi-Annual Report | July 31, 2017

 


 

Fund Insights

AllianzGI Diversified Income & Convertible Fund/AllianzGI Equity & Convertible Income Fund/AllianzGI NFJ Dividend, Interest & Premium Strategy Fund

July 31, 2017 (unaudited) (continued)

 

 

During the reporting period, the Russell 1000 Value Index, a measure of large-cap value style stocks, advance 5.30%; and convertible securities, as reflected by the BofA Merrill Lynch All Convertibles Index, returned 7.21%.

 

Market Environment

Several factors influenced equities and convertible bonds throughout the reporting period, including corporate fundamentals, economic indicators, the US Federal Reserve (the “Fed”) moves, the new US administration’s pro-growth agenda, and investors’ sustained appetite for risk assets.

 

During the reporting period US companies continued to exhibit improving fundamentals. For example, in the first quarter of 2017 operating results for most US companies met or exceeded expectations while credit metrics showed further improvement, continuing a trend from the fourth quarter of 2016. As an additional example, the first quarter of 2017 was the first time since 2011 where US companies saw double-digit year-over-year earnings growth, on average for the S&P 500 Index. In addition, according to Bank of America Merrill Lynch, net leverage ticked lower and interest coverage rose the last two quarters, on average for the S&P 500 Index.

 

Certain economic statistics were positive and factored into the market’s strength. In May 2017, the unemployment rate fell to its lowest level since 2001 and private payroll figures were healthy. Housing prices continued their upward trend. Consumer and small business confidence levels came off their recent highs, but remained at bullish levels. Overall, the trend in economic data reinforced the favorable credit conditions for equities and convertible bonds.

 

As anticipated, the Fed hiked rates twice during the reporting period, pushing the federal funds rate to a range of 1.00% to 1.25%. The convertible market responded positively to the Fed’s rate decision and commentary. Near-term rate hike projections from the Fed remain unchanged, with one more expected this year and three expected in 2018. Additionally, the Fed noted that the process of balance sheet reduction is expected to begin later this year, reflecting their confidence in the US economy. Outside of the US, global central banks throughout Europe and Asia maintained aggressive measures to stimulate their respective economies.

 

The asset classes also benefited from a persistent appetite among investors for risk assets, which in part, appeared to be centered on continued the optimism surrounding President Trump’s policies and pro-growth agenda. Additionally, a weaker dollar and favorable supply/demand dynamics helped lift select base metal and crude oil prices, which supported commodity-related issuers.

 

Portfolio Specifics

Within the Russell 1000 Value Index (the “benchmark”), all but two of The Global

 

July 31, 2017 | Semi-Annual Report 9

 


 

Fund Insights

AllianzGI Diversified Income & Convertible Fund/AllianzGI Equity & Convertible Income Fund/AllianzGI NFJ Dividend, Interest & Premium Strategy Fund

July 31, 2017 (unaudited) (continued)

 

 

Industry Classification Standards (“GICS”) economic sectors delivered positive returns as shares were boosted by strong corporate earnings and enduring optimism on pro-growth reform. Telecommunication services, a top performer during this period last year, fell 4% during the reporting period as industry competition intensified. Energy stocks lagged the benchmark more than any other sector and posted a return of -8%. High inventory levels contributed to concerns that crude oil supply continues to exceed demand and the “oil math” tug of war continued throughout the reporting period. Health care stocks bested all sectors while utilities and consumer staples followed as both sectors rose comparably.

 

The equity portion of the Fund performed largely in line with the benchmark over the reporting period. In terms of relative performance, positive stock selection counterbalanced negative sector allocation. The Fund’s holdings in the health care, industrials and materials sectors were the most beneficial and drove overall positive selection. Conversely, negative selection in the information technology, utilities and energy sectors detracted.

 

From a sector allocation perspective, an underweight to the financial and health care sectors resulted in the largest positive impact on the Fund’s performance. However, the Fund’s overweight in energy and underweight in consumer staples detracted from results.

 

During the reporting period, the equity portion of the Fund’s largest overweights relative to the Russell 1000 Value Index were in the energy and materials sectors. The Fund’s largest relative underweights were in bond-proxy sectors, including consumer staples and real estate.

 

In the convertibles sleeve, sector allocations that helped relative performance in the period were materials, consumer staples and transportation. In contrast, energy, health care and telecommunications exposure weighed on relative returns.

 

In the equity options sleeve, retaining call premium was difficult to start the period, but improved as equity markets slowed from their rapid ascent. Nearly half of the overall gains in the equity market occurred within the first month of the reporting period, led by the health care and technology sectors, which, throughout the reporting period, returned 14.4% and 17.1%, respectively; the consumer discretionary, financial, industrial and utility sectors all contributed high single-digit returns as well. Levels of implied volatility, as measured by the Chicago Board Options Exchange Volatility Index (“VIX”), dropped to a low of 9.36 in July, the lowest the index has been since 1993 and averaged 11.35 during the period, adversely affecting the strike distances on the call options written. Calls written on the energy and financial sectors aided returns; however the strong performance in equities to start the period

 

10 Semi-Annual Report | July 31, 2017

 


 

Fund Insights

AllianzGI Diversified Income & Convertible Fund/AllianzGI Equity & Convertible Income Fund/AllianzGI NFJ Dividend, Interest & Premium Strategy Fund

July 31, 2017 (unaudited) (continued)

 

 

resulted in options expiring in-the-money, requiring cash assignments in excess of the premium collected.

 

Outlook

US equity markets continue to record new all-time highs, volatility is near all-time lows and interest rates are trending higher on an improving economic outlook, in our view. Historically, these factors have been positive indicators for both economic and corporate earnings growth and supportive of investments in risk assets.

 

Stress in select industries of the market has waned, and overall, we believe balance sheets, leverage ratios and interest-coverage ratios continue to support an investment in the convertible asset class.

 

The US economy is expected to expand at a moderate pace for the remainder of 2017, in our view. The stock market’s strength and the US Treasury yield curve appear to confirm this expectation. Moreover, any combination of positive tax reform, decreased regulation and increased fiscal spending could provide upside to growth expectations.

 

After bottoming in the second quarter of 2016, corporate profits have significantly improved through the first quarter of 2017. Based on bottom-up estimates, they are poised to trend higher throughout year, in our view.

 

US monetary policy continues to be modestly accommodative with the Fed expected to take a gradual approach toward policy adjustments, in our view. Additional Fed rate hikes and balance sheet reduction efforts signal confidence in the US economy’s ability to grow and reflect the goal of achieving a normalized environment after an extended period of extreme accommodation. Global monetary policy continues to be constructive and accommodative.

 

July 31, 2017 | Semi-Annual Report 11


 

Performance & Statistics

AllianzGI Diversified Income & Convertible Fund

July 31, 2017 (unaudited)

 

Total Return(1)

 

Market Price

 

NAV

Six Months

 

16.31%

 

8.60%

1 Year

 

25.95%

 

15.85%

Commencement of Operations (5/27/15) to 7/31/17

 

3.48%

 

6.36%

 

Market Price/NAV Performance

 

Market Price/NAV

 

 

Commencement of Operations (5/27/15) to 7/31/17

 

Market Price

 

$21.62

 

 

NAV(2)

 

$22.40

 NAV

 

Discount to NAV

 

-3.48%

 Market Price

 

Market Price Yield(3)

 

9.27%

 

Leverage Ratio(4)

 

31.33%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(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 and includes the effect of expense reductions, if any. 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 typically reflect investment results over time, during shorter periods returns at market price can also be influenced by factors such as changing views about the Fund, market conditions, supply and demand for the Fund’s shares, or changes in the Fund’s dividends.

An investment in the Fund involves risk, including the loss of principal. Total return, market price, market price yield and NAV will fluctuate with changes in market conditions. This data is provided for information purposes only and is not intended for trading purposes. Closed-end funds, unlike open-end funds, are not continuously offered. There is a one-time public offering and once issued, shares of closed-end funds are traded in the open market through a stock exchange. NAV is equal to total assets attributable to common shareholders less total liabilities divided by the number of common shares outstanding. Holdings are subject to change daily.

(2) The NAV disclosed in the Fund’s financial statements may differ due to accounting principles generally accepted in the United States of America.

(3) Market Price Yield is determined by dividing the annualized current (declared August 1, 2017) monthly dividend per common share (comprised of net investment income and net capital gains, if any) by the market price per common share at July 31, 2017.

(4) Represents Mandatory Redeemable Preferred Shares, Senior Secured Notes and amounts drawn under the short-term margin loan facility (“Leverage”) outstanding, as a percentage of total managed assets. Total managed assets refer to total assets (including assets attributable to Leverage) minus liabilities (other than liabilities representing Leverage).

 

12 Semi-Annual Report | July 31, 2017

 


 

Performance & Statistics

AllianzGI Equity & Convertible Income Fund

July 31, 2017 (unaudited)

 

Total Return(1)

 

Market Price

 

NAV

Six Months

 

9.68%

 

6.50%

1 Year

 

12.66%

 

10.59%

5 Year

 

11.36%

 

10.44%

10 Year

 

6.62%

 

6.39%

Commencement of Operations (2/27/07) to 7/31/17

 

5.91%

 

6.58%

 

Market Price/NAV Performance

 

Market Price/NAV

 

 

Commencement of Operations (2/27/07) to 7/31/17

 

Market Price

 

$20.08

 

 

NAV(2)

 

$22.16

 NAV

 

Discount to NAV

 

-9.39%

 Market Price

 

Market Price Yield(3)

 

7.57%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(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 and includes the effect of expense reductions, if any. 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 typically reflect investment results over time, during shorter periods returns at market price can also be influenced by factors such as changing views about the Fund, market conditions, supply and demand for the Fund’s shares, or changes in the Fund’s dividends.

An investment in the 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 less total liabilities divided by the number of shares outstanding. Holdings are subject to change daily.

(2) The NAV disclosed in the Fund’s financial statements may differ due to accounting principles generally accepted in the United States of America.

(3) Market Price Yield is determined by dividing the annualized current quarterly dividend per share (comprised of net investment income and net capital gains, if any) by the market price per share at July 31, 2017.

 

July 31, 2017 | Semi-Annual Report 13

 


 

Performance & Statistics

AllianzGI NFJ Dividend, Interest & Premium Strategy Fund

July 31, 2017 (unaudited)

 

Total Return(1)

 

Market Price

 

NAV

Six Months

 

7.15%

 

3.22%

1 Year

 

14.86%

 

9.62%

5 Year

 

5.64%

 

6.11%

10 Year

 

3.55%

 

3.14%

Commencement of Operations (2/28/05) to 7/31/17

 

4.08%

 

4.61%

 

Market Price/NAV Performance

 

Market Price/NAV

 

 

Commencement of Operations (2/28/05) to 7/31/17

 

Market Price

 

$13.34

 

 

NAV(2)

 

$14.58

 NAV

 

Discount to NAV

 

-8.50%

 Market Price

 

Market Price Yield(3)

 

4.94%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(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 and includes the effect of expense reductions, if any. 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 typically reflect investment results over time, during shorter periods returns at market price can also be influenced by factors such as changing views about the Fund, market conditions, supply and demand for the Fund’s shares, or changes in the Fund’s dividends.

An investment in the 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 less total liabilities divided by the number of shares outstanding. Holdings are subject to change daily.

(2) The NAV disclosed in the Fund’s financial statements may differ due to accounting principles generally accepted in the United States of America.

(3) Market Price Yield is determined by dividing the annualized current quarterly dividend per share (comprised of net investment income and net capital gains, if any) by the market price per share at July 31, 2017.

 

14 Semi-Annual Report | July 31, 2017


 

Schedule of Investments

AllianzGI Diversified Income & Convertible Fund

July 31, 2017 (unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

Principal
Amount
(000s)

 

 

 

Value

 

Convertible Bonds & Notes – 62.4%

 

 

 

 

 

Aerospace & Defense – 0.8%

 

 

 

$1,570

 

Aerojet Rocketdyne Holdings, Inc., 2.25%, 12/15/23 (a)(b)

 

$1,786,856

 

 

 

Auto Components – 0.6%

 

 

 

710

 

Meritor, Inc., 7.875%, 3/1/26

 

1,243,068

 

 

 

Auto Manufacturers – 0.9%

 

 

 

1,920

 

Tesla, Inc., 0.25%, 3/1/19 (f)

 

2,091,600

 

 

 

Biotechnology – 3.0%

 

 

 

700

 

AMAG Pharmaceuticals, Inc., 2.50%, 2/15/19 (f)

 

741,562

 

1,290

 

ANI Pharmaceuticals, Inc., 3.00%, 12/1/19 (f)

 

1,375,462

 

 

 

BioMarin Pharmaceutical, Inc. (f),

 

 

 

820

 

0.75%, 10/15/18

 

905,587

 

780

 

1.50%, 10/15/20

 

923,325

 

1,825

 

Illumina, Inc., 0.50%, 6/15/21 (f)

 

1,963,016

 

525

 

Ligand Pharmaceuticals, Inc., 0.75%, 8/15/19 (f)

 

867,891

 

325

 

Novavax, Inc., 3.75%, 2/1/23 (a)(f)

 

137,313

 

 

 

 

 

6,914,156

 

 

 

Building Materials – 0.8%

 

 

 

1,530

 

Cemex S.A.B de C.V., 3.72%, 3/15/20

 

1,794,881

 

 

 

Chemicals – 0.2%

 

 

 

305

 

RPM International, Inc., 2.25%, 12/15/20 (f)

 

354,753

 

 

 

Commercial Services – 3.6%

 

 

 

1,440

 

Euronet Worldwide, Inc., 1.50%, 10/1/44 (f)

 

1,987,200

 

1,220

 

LendingTree, Inc., 0.625%, 6/1/22 (a)(b)

 

1,539,488

 

1,280

 

Live Nation Entertainment, Inc., 2.50%, 5/15/19 (f)

 

1,512,000

 

1,605

 

Macquarie Infrastructure Corp., 2.875%, 7/15/19 (f)

 

1,761,487

 

1,135

 

Square, Inc., 0.375%, 3/1/22 (a)(b)(f)

 

1,513,806

 

 

 

 

 

8,313,981

 

 

 

Computers – 0.7%

 

 

 

1,315

 

Lumentum Holdings, Inc., 0.25%, 3/15/24 (a)(b)

 

1,637,997

 

 

 

Diversified Financial Services – 1.7%

 

 

 

1,775

 

Blackhawk Network Holdings, Inc., 1.50%, 1/15/22 (a)(b)

 

2,000,203

 

1,245

 

Encore Capital Group, Inc., 3.25%, 3/15/22 (a)(b)

 

1,343,822

 

675

 

PRA Group, Inc., 3.00%, 8/1/20 (f)

 

653,906

 

 

 

 

 

3,997,931

 

 

 

Electrical Equipment – 0.8%

 

 

 

 

 

SunPower Corp. (f),

 

 

 

1,115

 

0.875%, 6/1/21

 

906,634

 

1,035

 

4.00%, 1/15/23

 

934,088

 

 

 

 

 

1,840,722

 

 

 

Electronics – 0.8%

 

 

 

1,905

 

OSI Systems, Inc., 1.25%, 9/1/22 (a)(b)

 

1,930,003

 

 

 

Energy-Alternate Sources – 0.8%

 

 

 

1,915

 

SolarCity Corp., 1.625%, 11/1/19 (f)

 

1,809,675

 

 

July 31, 2017 | Semi-Annual Report 15


 

Schedule of Investments

AllianzGI Diversified Income & Convertible Fund

July 31, 2017 (unaudited) (continued)

 

 

 

 

 

 

 

 

 

 

 

 

Principal
Amount
(000s)

 

 

 

Value

 

 

 

Energy-Alternate Sources (continued)

 

 

 

$3,615

 

SunEdison, Inc., 3.375%, 6/1/25 (a)(b)(c)(f)(g)
(acquisition cost-$3,475,717; purchased 5/27/15-10/5/15)

 

$90,375

 

 

 

 

 

1,900,050

 

 

 

Engineering & Construction – 1.1%

 

 

 

1,125

 

Dycom Industries, Inc., 0.75%, 9/15/21 (f)

 

1,321,172

 

1,065

 

Tutor Perini Corp., 2.875%, 6/15/21

 

1,224,084

 

 

 

 

 

2,545,256

 

 

 

Healthcare-Products – 1.1%

 

 

 

955

 

NuVasive, Inc., 2.25%, 3/15/21 (f)

 

1,197,331

 

1,290

 

Wright Medical Group, Inc., 2.00%, 2/15/20

 

1,413,357

 

 

 

 

 

2,610,688

 

 

 

Healthcare-Services – 1.5%

 

 

 

555

 

Anthem, Inc., 2.75%, 10/15/42

 

1,416,291

 

495

 

Molina Healthcare, Inc., 1.625%, 8/15/44 (f)

 

617,512

 

715

 

Tivity Health, Inc., 1.50%, 7/1/18 (f)

 

1,461,728

 

 

 

 

 

3,495,531

 

 

 

Home Builders – 0.4%

 

 

 

825

 

CalAtlantic Group, Inc., 1.625%, 5/15/18 (f)

 

968,344

 

 

 

Insurance – 1.8%

 

 

 

2,510

 

AmTrust Financial Services, Inc., 2.75%, 12/15/44 (f)

 

1,973,487

 

510

 

Fidelity National Financial, Inc., 4.25%, 8/15/18

 

1,411,425

 

815

 

HCI Group, Inc., 4.25%, 3/1/37 (a)(b)(f)

 

776,288

 

 

 

 

 

4,161,200

 

 

 

Internet – 5.6%

 

 

 

1,530

 

Altaba, Inc., zero coupon, 12/1/18 (f)

 

1,809,225

 

1,145

 

Ctrip.com International Ltd., 1.25%, 9/15/22 (a)(b)(f)

 

1,297,428

 

1,830

 

Liberty Expedia Holdings, Inc., 1.00%, 6/30/47 (a)(b)

 

1,996,988

 

1,160

 

Palo Alto Networks, Inc., zero coupon, 7/1/19 (f)

 

1,510,900

 

1,310

 

Pandora Media, Inc., 1.75%, 12/1/20 (f)

 

1,253,506

 

2,625

 

Priceline Group, Inc., 0.90%, 9/15/21

 

3,131,953

 

600

 

VeriSign, Inc., 4.452%, 8/15/37 (f)

 

1,781,250

 

 

 

 

 

12,781,250

 

 

 

Iron/Steel – 0.4%

 

 

 

635

 

AK Steel Corp., 5.00%, 11/15/19 (f)

 

863,203

 

 

 

Media – 2.9%

 

 

 

2,125

 

DISH Network Corp., 3.375%, 8/15/26 (a)(b)

 

2,650,937

 

1,820

 

Liberty Interactive LLC, 1.75%, 9/30/46 (a)(b)(f)

 

2,259,075

 

1,610

 

Liberty Media Corp-Liberty Formula One, 1.00%, 1/30/23 (a)(b)

 

1,827,350

 

 

 

 

 

6,737,362

 

 

 

Metal Fabricate/Hardware – 0.5%

 

 

 

1,055

 

RTI International Metals, Inc., 1.625%, 10/15/19

 

1,175,006

 

 

 

Mining – 0.1%

 

 

 

205

 

Royal Gold, Inc., 2.875%, 6/15/19 (f)

 

228,063

 

 

16 Semi-Annual Report | July 31, 2017


 

Schedule of Investments

AllianzGI Diversified Income & Convertible Fund

July 31, 2017 (unaudited) (continued)

 

 

 

 

 

 

 

 

 

 

 

 

Principal
Amount
(000s)

 

 

 

Value

 

 

 

Oil, Gas & Consumable Fuels – 4.4%

 

 

 

$1,420

 

Alon USA Energy, Inc., 3.00%, 9/15/18 (f)

 

$1,614,363

 

890

 

Chesapeake Energy Corp., 5.50%, 9/15/26 (a)(b)(f)

 

845,500

 

740

 

Ensco Jersey Finance Ltd., 3.00%, 1/31/24 (a)(b)(f)

 

587,375

 

2,620

 

Nabors Industries, Inc., 0.75%, 1/15/24 (a)(b)(f)

 

2,068,163

 

1,635

 

Oasis Petroleum, Inc., 2.625%, 9/15/23 (f)

 

1,607,409

 

765

 

PDC Energy, Inc., 1.125%, 9/15/21 (f)

 

723,403

 

1,690

 

SM Energy Co., 1.50%, 7/1/21 (f)

 

1,576,981

 

1,020

 

Weatherford International Ltd., 5.875%, 7/1/21 (f)

 

1,085,025

 

 

 

 

 

10,108,219

 

 

 

Pharmaceuticals – 5.2%

 

 

 

650

 

Depomed, Inc., 2.50%, 9/1/21 (f)

 

578,500

 

610

 

DexCom, Inc., 0.75%, 5/15/22 (a)(b)

 

604,662

 

395

 

Flexion Therapeutics, Inc., 3.375%, 5/1/24 (a)(b)

 

436,969

 

1,360

 

Horizon Pharma Investment Ltd., 2.50%, 3/15/22 (f)

 

1,190,000

 

1,945

 

Impax Laboratories, Inc., 2.00%, 6/15/22 (f)

 

1,715,247

 

735

 

Ironwood Pharmaceuticals, Inc., 2.25%, 6/15/22

 

948,150

 

1,620

 

Jazz Investments I Ltd., 1.875%, 8/15/21

 

1,773,900

 

1,875

 

Neurocrine Biosciences, Inc., 2.25%, 5/15/24 (a)(b)

 

1,916,016

 

1,480

 

Pacira Pharmaceuticals, Inc., 2.375%, 4/1/22 (a)(b)(f)

 

1,493,875

 

185

 

Synergy Pharmaceuticals, Inc., 7.50%, 11/1/19 (a)(b)(f)

 

285,594

 

960

 

Teva Pharmaceutical Finance Co. LLC, Ser. C, 0.25%, 2/1/26 (f)

 

1,032,000

 

 

 

 

 

11,974,913

 

 

 

Pipelines – 0.7%

 

 

 

2,415

 

Cheniere Energy, Inc., 4.25%, 3/15/45 (f)

 

1,667,859

 

 

 

Retail – 0.5%

 

 

 

 

 

RH (a)(b)(f),

 

 

 

710

 

zero coupon, 6/15/19

 

634,563

 

680

 

zero coupon, 7/15/20

 

563,550

 

 

 

 

 

1,198,113

 

 

 

Semiconductors – 8.9%

 

 

 

540

 

Advanced Micro Devices, Inc., 2.125%, 9/1/26 (f)

 

1,013,850

 

1,460

 

Cypress Semiconductor Corp., 4.50%, 1/15/22

 

1,842,337

 

 

 

Inphi Corp. (f),

 

 

 

980

 

0.75%, 9/1/21 (a)(b)

 

993,475

 

170

 

1.125%, 12/1/20

 

203,575

 

1,000

 

Integrated Device Technology, Inc., 0.875%, 11/15/22 (f)

 

1,063,750

 

1,890

 

Intel Corp., 3.25%, 8/1/39 (f)

 

3,261,441

 

625

 

Lam Research Corp., 1.25%, 5/15/18

 

1,650,000

 

2,805

 

Microchip Technology, Inc., 1.625%, 2/15/27 (a)(b)

 

3,120,562

 

2,710

 

Micron Technology, Inc., Ser. G, 3.00%, 11/15/43 (f)

 

2,928,494

 

1,650

 

Synaptics, Inc., 0.50%, 6/15/22 (a)(b)

 

1,697,438

 

1,210

 

Teradyne, Inc., 1.25%, 12/15/23 (a)(b)

 

1,535,944

 

1,025

 

Veeco Instruments, Inc., 2.70%, 1/15/23

 

1,103,156

 

 

 

 

 

20,414,022

 

 

July 31, 2017 | Semi-Annual Report 17


 

Schedule of Investments

AllianzGI Diversified Income & Convertible Fund

July 31, 2017 (unaudited) (continued)

 

 

 

 

 

 

 

 

 

 

 

 

Principal
Amount
(000s)

 

 

 

Value

 

 

 

Software – 8.6%

 

 

 

$725

 

Evolent Health, Inc., 2.00%, 12/1/21 (a)(b)(f)

 

$925,281

 

1,690

 

HubSpot, Inc., 0.25%, 6/1/22 (a)(b)

 

1,736,475

 

1,040

 

Medidata Solutions, Inc., 1.00%, 8/1/18

 

1,435,200

 

1,555

 

Nice Systems, Inc., 1.25%, 1/15/24 (a)(b)

 

1,678,428

 

 

 

Nuance Communications, Inc. (f),

 

 

 

1,405

 

1.25%, 4/1/25 (a)(b)

 

1,422,563

 

975

 

1.50%, 11/1/35

 

1,004,859

 

1,525

 

Proofpoint, Inc., 0.75%, 6/15/20

 

1,910,063

 

1,900

 

PROS Holdings, Inc., 2.00%, 6/1/47 (a)(b)

 

1,748,000

 

1,490

 

RealPage, Inc., 1.50%, 11/15/22 (a)(b)

 

1,701,394

 

1,465

 

Salesforce.com, Inc., 0.25%, 4/1/18 (f)

 

2,028,109

 

1,755

 

ServiceNow, Inc., zero coupon, 6/1/22 (a)(b)

 

1,838,363

 

935

 

Synchronoss Technologies, Inc., 0.75%, 8/15/19 (f)

 

888,834

 

1,515

 

Verint Systems, Inc., 1.50%, 6/1/21 (f)

 

1,474,284

 

 

 

 

 

19,791,853

 

 

 

Telecommunications – 2.4%

 

 

 

 

 

Finisar Corp. (f),

 

 

 

775

 

0.50%, 12/15/33

 

883,500

 

1,315

 

0.50%, 12/15/36 (a)(b)

 

1,314,178

 

1,495

 

Gogo, Inc., 3.75%, 3/1/20 (f)

 

1,393,153

 

 

 

Viavi Solutions, Inc.,

 

 

 

1,170

 

0.625%, 8/15/33

 

1,322,100

 

525

 

1.00%, 3/1/24 (a)(b)

 

565,032

 

 

 

 

 

5,477,963

 

 

 

Transportation – 1.6%

 

 

 

1,520

 

Atlas Air Worldwide Holdings, Inc., 1.875%, 6/1/24

 

1,809,750

 

1,650

 

Greenbrier Cos., Inc., 2.875%, 2/1/24 (a)(b)

 

1,791,281

 

 

 

 

 

3,601,031

 

Total Convertible Bonds & Notes (cost-$153,155,185)

 

143,605,874

 

 

 

 

 

 

 

Shares

 

 

 

 

 

Common Stock – 35.3%

 

 

 

 

 

Aerospace & Defense – 0.9%

 

 

 

8,400

 

Boeing Co. (f)

 

2,036,664

 

 

 

Automobiles – 0.5%

 

 

 

104,700

 

Ford Motor Co. (f)

 

1,174,734

 

 

 

Banks – 1.2%

 

 

 

36,000

 

Bank of America Corp. (f)

 

868,320

 

8,500

 

JPMorgan Chase & Co.

 

780,300

 

20,300

 

Wells Fargo & Co. (f)

 

1,094,982

 

 

 

 

 

2,743,602

 

 

 

Beverages – 1.1%

 

 

 

17,860

 

Coca-Cola Co. (f)

 

818,703

 

14,200

 

PepsiCo, Inc.

 

1,655,862

 

 

 

 

 

2,474,565

 

 

18 Semi-Annual Report | July 31, 2017


 

Schedule of Investments

AllianzGI Diversified Income & Convertible Fund

July 31, 2017 (unaudited) (continued)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

 

Value

 

 

 

Biotechnology – 3.2%

 

 

 

25,200

 

AbbVie, Inc. (f)

 

$1,761,732

 

9,300

 

Amgen, Inc. (f)

 

1,622,943

 

4,200

 

Biogen, Inc. (f)(h)

 

1,216,278

 

2,100

 

Bioverativ, Inc. (f)(h)

 

130,137

 

18,600

 

Gilead Sciences, Inc. (f)

 

1,415,274

 

1,843

 

Regeneron Pharmaceuticals, Inc. (f)(h)

 

906,056

 

1,500

 

Vertex Pharmaceuticals, Inc. (f)(h)

 

227,730

 

 

 

 

 

7,280,150

 

 

 

Building Products – 0.5%

 

 

 

30,252

 

Johnson Controls International PLC (f)

 

1,178,315

 

 

 

Chemicals – 1.0%

 

 

 

21,400

 

Chemours Co.

 

1,018,854

 

11,900

 

Monsanto Co. (f)

 

1,390,158

 

 

 

 

 

2,409,012

 

 

 

Construction & Engineering – 0.3%

 

 

 

15,300

 

Fluor Corp. (f)

 

664,479

 

 

 

Diversified Telecommunication Services – 0.5%

 

 

 

25,100

 

Verizon Communications, Inc. (f)

 

1,214,840

 

 

 

Electronic Equipment, Instruments & Components – 0.8%

 

 

 

16,300

 

Amphenol Corp., Class A (f)

 

1,248,906

 

19,700

 

Corning, Inc. (f)

 

574,058

 

 

 

 

 

1,822,964

 

 

 

Energy Equipment & Services – 0.4%

 

 

 

15,000

 

Schlumberger Ltd. (f)

 

1,029,000

 

 

 

Food & Staples Retailing – 1.8%

 

 

 

8,400

 

Costco Wholesale Corp.

 

1,331,484

 

37,600

 

Kroger Co. (f)

 

921,952

 

22,400

 

Walgreens Boots Alliance, Inc. (f)

 

1,807,008

 

 

 

 

 

4,060,444

 

 

 

Food Products – 0.3%

 

 

 

11,414

 

Tyson Foods, Inc., Class A (f)

 

723,191

 

 

 

Health Care Equipment & Supplies – 0.6%

 

 

 

21,400

 

Baxter International, Inc. (f)

 

1,294,272

 

 

 

Health Care Providers & Services – 1.9%

 

 

 

20,825

 

Envision Healthcare Corp. (f)(h)

 

1,175,155

 

9,300

 

McKesson Corp. (f)

 

1,505,391

 

9,500

 

UnitedHealth Group, Inc.

 

1,822,195

 

 

 

 

 

4,502,741

 

 

 

Hotels, Restaurants & Leisure – 1.5%

 

 

 

9,100

 

McDonald’s Corp. (f)

 

1,411,774

 

19,900

 

MGM Resorts International (f)

 

655,307

 

25,700

 

Starbucks Corp. (f)

 

1,387,286

 

 

 

 

 

3,454,367

 

 

July 31, 2017 | Semi-Annual Report 19


 

Schedule of Investments

AllianzGI Diversified Income & Convertible Fund

July 31, 2017 (unaudited) (continued)

 

 

 

 

 

 

 

 

 

 

 

 



Shares

 

 

 

Value

 

 

 

Household Durables – 0.2%

 

 

 

10,000

 

Lennar Corp., Class A (f)

 

$524,400

 

 

 

Household Products – 0.4%

 

 

 

11,100

 

Procter & Gamble Co.

 

1,008,102

 

 

 

Industrial Conglomerates – 1.0%

 

 

 

7,100

 

3M Co.

 

1,428,307

 

35,500

 

General Electric Co. (f)

 

909,155

 

 

 

 

 

2,337,462

 

 

 

Insurance – 0.7%

 

 

 

13,400

 

Prudential Financial, Inc.

 

1,517,282

 

 

 

Internet & Catalog Retail – 1.0%

 

 

 

2,250

 

Amazon.com, Inc. (f)(h)

 

2,222,505

 

 

 

Internet Software & Services – 2.6%

 

 

 

7,900

 

Alibaba Group Holding Ltd., ADR (f)(h)

 

1,224,105

 

2,400

 

Alphabet, Inc., Class A (f)(h)

 

2,269,200

 

14,700

 

Facebook, Inc., Class A (f)(h)

 

2,487,975

 

 

 

 

 

5,981,280

 

 

 

IT Services – 1.2%

 

 

 

7,400

 

International Business Machines Corp. (f)

 

1,070,558

 

18,100

 

Visa, Inc., Class A

 

1,802,036

 

 

 

 

 

2,872,594

 

 

 

Machinery – 1.1%

 

 

 

11,300

 

Caterpillar, Inc. (f)

 

1,287,635

 

9,500

 

Deere & Co. (f)

 

1,218,660

 

 

 

 

 

2,506,295

 

 

 

Media – 1.7%

 

 

 

44,000

 

Comcast Corp., Class A (f)

 

1,779,800

 

13,573

 

LiveStyle, Inc. (d)(h)

 

1

 

18,700

 

Walt Disney Co. (f)

 

2,055,691

 

 

 

 

 

3,835,492

 

 

 

Multi-Line Retail – 0.6%

 

 

 

25,100

 

Target Corp. (f)

 

1,422,417

 

 

 

Oil, Gas & Consumable Fuels – 0.7%

 

 

 

8,100

 

Occidental Petroleum Corp. (f)

 

501,633

 

15,200

 

Valero Energy Corp. (f)

 

1,048,344

 

 

 

 

 

1,549,977

 

 

 

Pharmaceuticals – 0.5%

 

 

 

20,300

 

Bristol-Myers Squibb Co. (f)

 

1,155,070

 

 

 

Road & Rail – 0.7%

 

 

 

14,900

 

Union Pacific Corp.

 

1,534,104

 

 

 

Semiconductors & Semiconductor Equipment – 2.4%

 

 

 

4,100

 

Broadcom Ltd. (f)

 

1,011,306

 

48,300

 

Intel Corp. (f)

 

1,713,201

 

2,400

 

NVIDIA Corp.

 

390,024

 

 

20 Semi-Annual Report | July 31, 2017


 

Schedule of Investments

AllianzGI Diversified Income & Convertible Fund

July 31, 2017 (unaudited) (continued)

 

 

 

 

 

 

 

 

 

 

 

 



Shares

 

 

 

Value

 

 

 

Semiconductors & Semiconductor Equipment (continued)

 

 

 

17,200

 

QUALCOMM, Inc. (f)

 

$914,868

 

19,100

 

Texas Instruments, Inc. (f)

 

1,554,358

 

 

 

 

 

5,583,757

 

 

 

Software – 2.1%

 

 

 

9,600

 

Adobe Systems, Inc. (f)(h)

 

1,406,304

 

34,500

 

Microsoft Corp. (f)

 

2,508,150

 

19,300

 

Oracle Corp. (f)

 

963,649

 

 

 

 

 

4,878,103

 

 

 

Specialty Retail – 0.8%

 

 

 

12,300

 

Home Depot, Inc. (f)

 

1,840,080

 

 

 

Technology Hardware, Storage & Peripherals – 1.1%

 

 

 

16,800

 

Apple, Inc. (f)

 

2,498,664

 

Total Common Stock (cost-$88,922,874)

 

81,330,924

 

 

 

 

 

 

 

Principal
Amount
(000s)

 

 

 

 

 

Corporate Bonds & Notes – 33.1%

 

 

 

 

 

Aerospace & Defense – 1.1%

 

 

 

$1,000

 

KLX, Inc., 5.875%, 12/1/22 (a)(b)(f)

 

1,055,000

 

435

 

Kratos Defense & Security Solutions, Inc., 7.00%, 5/15/19

 

445,875

 

1,000

 

TransDigm, Inc., 6.50%, 5/15/25 (f)

 

1,055,000

 

 

 

 

 

2,555,875

 

 

 

Apparel & Textiles – 0.1%

 

 

 

165

 

Hanesbrands, Inc., 4.625%, 5/15/24 (a)(b)

 

169,331

 

 

 

Banks – 0.4%

 

 

 

160

 

CIT Group, Inc., 5.00%, 8/15/22 (f)

 

173,392

 

680

 

Royal Bank of Scotland Group PLC, 5.125%, 5/28/24

 

722,232

 

 

 

 

 

895,624

 

 

 

Building Materials – 0.3%

 

 

 

565

 

Builders FirstSource, Inc., 5.625%, 9/1/24 (a)(b)

 

595,369

 

 

 

Chemicals – 1.5%

 

 

 

1,000

 

Chemours Co., 7.00%, 5/15/25 (f)

 

1,120,000

 

305

 

Kraton Polymers LLC, 7.00%, 4/15/25 (a)(b)

 

329,400

 

1,000

 

Platform Specialty Products Corp., 6.50%, 2/1/22 (a)(b)(f)

 

1,042,500

 

540

 

Tronox Finance LLC, 7.50%, 3/15/22 (a)(b)

 

568,350

 

365

 

Univar USA, Inc., 6.75%, 7/15/23 (a)(b)(f)

 

384,162

 

 

 

 

 

3,444,412

 

 

 

Commercial Services – 1.8%

 

 

 

 

 

Cardtronics, Inc.,

 

 

 

1,000

 

5.125%, 8/1/22 (f)

 

1,025,000

 

190

 

5.50%, 5/1/25 (a)(b)

 

196,175

 

350

 

Cenveo Corp., 6.00%, 5/15/24 (a)(b)(f)

 

312,375

 

300

 

Gartner, Inc., 5.125%, 4/1/25 (a)(b)

 

318,000

 

 

July 31, 2017 | Semi-Annual Report 21


 

Schedule of Investments

AllianzGI Diversified Income & Convertible Fund

July 31, 2017 (unaudited) (continued)

 

 

 

 

 

 

 

 

 

 

 

 

Principal
Amount
(000s)

 

 

 

Value

 

 

 

Commercial Services (continued)

 

 

 

$365

 

KAR Auction Services, Inc., 5.125%, 6/1/25 (a)(b)

 

$381,425

 

915

 

RR Donnelley & Sons Co., 6.00%, 4/1/24 (f)

 

894,412

 

1,000

 

United Rentals North America, Inc., 5.50%, 7/15/25 (f)

 

1,058,750

 

 

 

 

 

4,186,137

 

 

 

Computers – 0.6%

 

 

 

520

 

Dell International LLC, 7.125%, 6/15/24 (a)(b)(f)

 

578,946

 

500

 

Harland Clarke Holdings Corp., 9.25%, 3/1/21 (a)(b)

 

496,250

 

310

 

Western Digital Corp., 10.50%, 4/1/24

 

367,737

 

 

 

 

 

1,442,933

 

 

 

Distribution/Wholesale – 0.5%

 

 

 

1,000

 

H&E Equipment Services, Inc., 7.00%, 9/1/22 (f)

 

1,040,000

 

 

 

Diversified Financial Services – 2.4%

 

 

 

1,500

 

Community Choice Financial, Inc., 10.75%, 5/1/19 (f)

 

1,312,500

 

1,000

 

International Lease Finance Corp., 8.25%, 12/15/20 (f)

 

1,184,050

 

1,000

 

Nationstar Mortgage LLC, 7.875%, 10/1/20 (f)

 

1,026,225

 

1,000

 

Navient Corp., 8.45%, 6/15/18 (f)

 

1,052,700

 

1,000

 

Springleaf Finance Corp., 6.90%, 12/15/17 (f)

 

1,017,500

 

 

 

 

 

5,592,975

 

 

 

Electric Utilities – 0.8%

 

 

 

1,000

 

NRG Energy, Inc., 6.25%, 5/1/24 (f)

 

1,042,500

 

1,000

 

Talen Energy Supply LLC, 6.50%, 6/1/25 (f)

 

725,000

 

 

 

 

 

1,767,500

 

 

 

Engineering & Construction – 0.4%

 

 

 

500

 

AECOM, 5.875%, 10/15/24 (f)

 

548,125

 

435

 

Tutor Perini Corp., 6.875%, 5/1/25 (a)(b)

 

468,713

 

 

 

 

 

1,016,838

 

 

 

Entertainment – 1.0%

 

 

 

185

 

AMC Entertainment Holdings, Inc., 6.125%, 5/15/27 (f)

 

190,763

 

 

 

Cedar Fair L.P.,

 

 

 

750

 

5.375%, 6/1/24 (f)

 

791,250

 

190

 

5.375%, 4/15/27 (a)(b)

 

200,925

 

1,000

 

International Game Technology PLC, 6.25%, 2/15/22 (a)(b)(f)

 

1,100,000

 

 

 

 

 

2,282,938

 

 

 

Equity Real Estate Investment Trusts (REITs) – 0.1%

 

 

 

 

 

CyrusOne L.P. (a)(b),

 

 

 

210

 

5.00%, 3/15/24

 

218,925

 

60

 

5.375%, 3/15/27

 

63,525

 

 

 

 

 

282,450

 

 

 

Food & Beverage – 0.9%

 

 

 

170

 

Albertsons Cos. LLC, 6.625%, 6/15/24 (a)(b)

 

161,500

 

380

 

Lamb Weston Holdings, Inc., 4.875%, 11/1/26 (a)(b)

 

399,156

 

495

 

Post Holdings, Inc., 5.75%, 3/1/27 (a)(b)

 

527,175

 

1,000

 

SUPERVALU, Inc., 6.75%, 6/1/21 (f)

 

997,500

 

 

 

 

 

2,085,331

 

 

22 Semi-Annual Report | July 31, 2017


 

Schedule of Investments

AllianzGI Diversified Income & Convertible Fund

July 31, 2017 (unaudited) (continued)

 

 

 

 

 

 

 

 

 

 

 

 

Principal
Amount
(000s)

 

 

 

Value

 

 

 

Healthcare-Products – 0.3%

 

 

 

$260

 

Hill-Rom Holdings, Inc., 5.00%, 2/15/25 (a)(b)

 

$268,450

 

360

 

Hologic, Inc., 5.25%, 7/15/22 (a)(b)(f)

 

381,600

 

 

 

 

 

650,050

 

 

 

Healthcare-Services – 2.0%

 

 

 

1,000

 

Community Health Systems, Inc., 6.875%, 2/1/22 (f)

 

855,000

 

310

 

DaVita, Inc., 5.125%, 7/15/24 (f)

 

319,300

 

185

 

Envision Healthcare Corp., 6.25%, 12/1/24 (a)(b)

 

199,800

 

1,000

 

HCA, Inc., 7.50%, 2/15/22 (f)

 

1,157,500

 

1,000

 

Kindred Healthcare, Inc., 8.75%, 1/15/23 (f)

 

1,001,250

 

1,000

 

Tenet Healthcare Corp., 8.125%, 4/1/22 (f)

 

1,077,500

 

 

 

 

 

4,610,350

 

 

 

Home Builders – 0.8%

 

 

 

375

 

Beazer Homes USA, Inc., 8.75%, 3/15/22

 

419,464

 

365

 

Brookfield Residential Properties, Inc., 6.50%, 12/15/20 (a)(b)(f)

 

378,687

 

1,000

 

KB Home, 8.00%, 3/15/20 (f)

 

1,126,250

 

 

 

 

 

1,924,401

 

 

 

Internet – 0.2%

 

 

 

305

 

Symantec Corp., 5.00%, 4/15/25 (a)(b)

 

320,250

 

90

 

Zayo Group LLC, 5.75%, 1/15/27 (a)(b)

 

95,625

 

 

 

 

 

415,875

 

 

 

Iron/Steel – 0.4%

 

 

 

 

 

AK Steel Corp.,

 

 

 

205

 

7.00%, 3/15/27

 

215,506

 

265

 

7.50%, 7/15/23 (f)

 

291,169

 

445

 

United States Steel Corp., 8.375%, 7/1/21 (a)(b)

 

493,394

 

 

 

 

 

1,000,069

 

 

 

Lodging – 1.0%

 

 

 

1,000

 

MGM Resorts International, 6.625%, 12/15/21 (f)

 

1,127,500

 

1,000

 

Wynn Las Vegas LLC, 5.50%, 3/1/25 (a)(b)(f)

 

1,054,790

 

 

 

 

 

2,182,290

 

 

 

Machinery-Construction & Mining – 0.2%

 

 

 

360

 

Terex Corp., 5.625%, 2/1/25 (a)(b)

 

375,750

 

 

 

Machinery-Diversified – 0.2%

 

 

 

250

 

Tennant Co., 5.625%, 5/1/25 (a)(b)

 

267,187

 

250

 

Zebra Technologies Corp., 7.25%, 10/15/22

 

266,563

 

 

 

 

 

533,750

 

 

 

Media – 2.5%

 

 

 

1,000

 

Cablevision Systems Corp., 8.00%, 4/15/20 (f)

 

1,123,500

 

 

 

CCO Holdings LLC,

 

 

 

125

 

5.125%, 5/1/27 (a)(b)

 

129,531

 

500

 

5.75%, 1/15/24 (f)

 

527,500

 

1,000

 

Clear Channel Worldwide Holdings, Inc., Ser. B, 6.50%, 11/15/22 (f)

 

1,041,250

 

425

 

CSC Holdings LLC, 6.75%, 11/15/21 (f)

 

474,156

 

750

 

DISH DBS Corp., 5.875%, 7/15/22 (f)

 

818,205

 

 

July 31, 2017 | Semi-Annual Report 23


 

Schedule of Investments

AllianzGI Diversified Income & Convertible Fund

July 31, 2017 (unaudited) (continued)

 

 

 

 

 

 

 

 

 

 

 

 

Principal
Amount
(000s)

 

 

 

Value

 

 

 

Media (continued)

 

 

 

$500

 

LIN Television Corp., 5.875%, 11/15/22

 

$526,875

 

1,000

 

Mediacom Broadband LLC, 6.375%, 4/1/23 (f)

 

1,052,500

 

 

 

 

 

5,693,517

 

 

 

Metal Fabricate/Hardware – 0.1%

 

 

 

270

 

Park-Ohio Industries, Inc., 6.625%, 4/15/27 (a)(b)

 

286,200

 

 

 

Mining – 0.6%

 

 

 

305

 

Alcoa Nederland Holding BV, 6.75%, 9/30/24 (a)(b)

 

337,788

 

560

 

Freeport-McMoRan, Inc., 3.55%, 3/1/22

 

544,600

 

 

 

Hudbay Minerals, Inc. (a)(b),

 

 

 

80

 

7.25%, 1/15/23

 

87,100

 

270

 

7.625%, 1/15/25

 

297,675

 

 

 

 

 

1,267,163

 

 

 

Miscellaneous Manufacturing – 0.1%

 

 

 

285

 

Koppers, Inc., 6.00%, 2/15/25 (a)(b)

 

304,238

 

 

 

Oil, Gas & Consumable Fuels – 4.1%

 

 

 

235

 

AmeriGas Partners L.P., 5.875%, 8/20/26

 

242,050

 

1,000

 

BreitBurn Energy Partners L.P., 8.625%, 10/15/20 (c)(f)

 

225,000

 

250

 

Callon Petroleum Co., 6.125%, 10/1/24

 

261,250

 

560

 

Calumet Specialty Products Partners L.P., 6.50%, 4/15/21 (f)

 

513,800

 

1,000

 

Carrizo Oil & Gas, Inc., 6.25%, 4/15/23 (f)

 

998,750

 

1,000

 

Chesapeake Energy Corp., 6.625%, 8/15/20 (f)

 

1,017,500

 

2,030

 

Cobalt International Energy, Inc., 10.75%, 12/1/21 (a)(b)(f)

 

2,004,625

 

1,000

 

CVR Refining LLC, 6.50%, 11/1/22 (f)

 

1,020,000

 

1,000

 

Rice Energy, Inc., 6.25%, 5/1/22 (f)

 

1,046,250

 

1,000

 

Sanchez Energy Corp., 6.125%, 1/15/23 (f)

 

823,125

 

1,000

 

Sunoco L.P., 6.375%, 4/1/23 (f)

 

1,057,500

 

165

 

Weatherford International Ltd., 8.25%, 6/15/23

 

167,887

 

 

 

 

 

9,377,737

 

 

 

Paper & Forest Products – 0.2%

 

 

 

525

 

Mercer International, Inc., 7.75%, 12/1/22

 

563,719

 

 

 

Pharmaceuticals – 1.0%

 

 

 

615

 

Endo Finance LLC, 5.375%, 1/15/23 (a)(b)(f)

 

528,900

 

1,000

 

Horizon Pharma, Inc., 6.625%, 5/1/23 (f)

 

952,500

 

1,000

 

Valeant Pharmaceuticals International, Inc., 6.125%, 4/15/25 (a)(b)(f)

 

855,000

 

 

 

 

 

2,336,400

 

 

 

Pipelines – 1.0%

 

 

 

1,000

 

Energy Transfer Equity L.P., 5.875%, 1/15/24 (f)

 

1,082,500

 

1,000

 

Sabine Pass Liquefaction LLC, 5.75%, 5/15/24 (f)

 

1,125,825

 

 

 

 

 

2,208,325

 

 

 

Real Estate – 0.8%

 

 

 

500

 

Equinix, Inc., 5.375%, 1/1/22 (f)

 

525,000

 

1,000

 

Kennedy-Wilson, Inc., 5.875%, 4/1/24 (f)

 

1,031,250

 

360

 

Uniti Group L.P., 8.25%, 10/15/23 (f)

 

372,600

 

 

 

 

 

1,928,850

 

 

24 Semi-Annual Report | July 31, 2017


 

Schedule of Investments

AllianzGI Diversified Income & Convertible Fund

July 31, 2017 (unaudited) (continued)

 

 

 

 

 

 

 

 

 

 

 

 

Principal
Amount
(000s)

 

 

 

Value

 

 

 

Retail – 0.5%

 

 

 

$500

 

Dollar Tree, Inc., 5.75%, 3/1/23 (f)

 

$531,875

 

1,000

 

Neiman Marcus Group Ltd. LLC, 8.00%, 10/15/21 (a)(b)(f)

 

557,500

 

 

 

 

 

1,089,375

 

 

 

Semiconductors – 1.3%

 

 

 

1,000

 

Amkor Technology, Inc., 6.375%, 10/1/22 (f)

 

1,043,750

 

1,000

 

Micron Technology, Inc., 5.875%, 2/15/22 (f)

 

1,041,250

 

500

 

Qorvo, Inc., 7.00%, 12/1/25

 

571,250

 

400

 

Sensata Technologies BV, 5.625%, 11/1/24 (a)(b)(f)

 

436,500

 

 

 

 

 

3,092,750

 

 

 

Software – 0.3%

 

 

 

340

 

Camelot Finance S.A., 7.875%, 10/15/24 (a)(b)

 

370,600

 

290

 

SS&C Technologies Holdings, Inc., 5.875%, 7/15/23

 

309,575

 

 

 

 

 

680,175

 

 

 

Telecommunications – 3.5%

 

 

 

390

 

Cincinnati Bell, Inc., 7.00%, 7/15/24 (a)(b)(f)

 

395,850

 

1,000

 

Consolidated Communications, Inc., 6.50%, 10/1/22 (f)

 

985,000

 

700

 

Frontier Communications Corp., 10.50%, 9/15/22 (f)

 

659,750

 

355

 

GTT Communications, Inc., 7.875%, 12/31/24 (a)(b)

 

382,512

 

1,000

 

Hughes Satellite Systems Corp., 7.625%, 6/15/21 (f)

 

1,151,250

 

500

 

Level 3 Financing, Inc., 5.375%, 5/1/25 (f)

 

532,500

 

1,000

 

Sprint Communications, Inc., 6.00%, 11/15/22 (f)

 

1,057,500

 

1,000

 

T-Mobile USA, Inc., 6.836%, 4/28/23 (f)

 

1,063,750

 

1,000

 

West Corp., 5.375%, 7/15/22 (a)(b)(f)

 

1,015,100

 

1,000

 

Windstream Services LLC, 7.50%, 6/1/22 (f)

 

860,000

 

 

 

 

 

8,103,212

 

 

 

Transportation – 0.1%

 

 

 

200

 

XPO Logistics, Inc., 6.50%, 6/15/22 (a)(b)(f)

 

208,500

 

Total Corporate Bonds & Notes (cost-$76,011,821)

 

76,190,409

 

 

 

 

 

 

 

Shares

 

 

 

 

 

Convertible Preferred Stock – 10.9%

 

 

 

 

 

Banks – 1.2%

 

 

 

2,000

 

Wells Fargo & Co., Ser. L, 7.50% (e)

 

2,655,000

 

 

 

Commercial Services & Supplies – 0.6%

 

 

 

23,485

 

Stericycle, Inc., 5.25%, 9/15/18 (f)

 

1,479,790

 

 

 

Computers – 0.4%

 

 

 

591

 

NCR Corp., Ser. A, 5.50%, PIK (e)(f)

 

869,361

 

 

 

Diversified Telecommunication Services – 0.3%

 

 

 

24,375

 

Frontier Communications Corp., Ser. A, 11.125%, 6/29/18 (f)

 

618,394

 

 

 

Electric Utilities – 0.3%

 

 

 

11,470

 

NextEra Energy, Inc., 6.123%, 9/1/19

 

637,273

 

 

July 31, 2017 | Semi-Annual Report 25


 

Schedule of Investments

AllianzGI Diversified Income & Convertible Fund

July 31, 2017 (unaudited) (continued)

 

 

 

 

 

 

 

 

 

 

 

 



Shares

 

 

 

Value

 

 

 

Equity Real Estate Investment Trusts (REITs) – 1.6%

 

 

 

14,540

 

American Tower Corp., 5.50%, 2/15/18 (f)

 

$1,777,544

 

1,800

 

Crown Castle International Corp., Ser. A, 6.875%, 8/1/20

 

1,920,915

 

 

 

 

 

3,698,459

 

 

 

Food & Beverage – 0.3%

 

 

 

4,595

 

Post Holdings, Inc., 2.50% (e)(f)

 

723,138

 

 

 

Hand/Machine Tools – 0.8%

 

 

 

17,475

 

Stanley Black & Decker, Inc., 5.375%, 5/15/20

 

1,875,592

 

 

 

Health Care Providers & Services – 0.8%

 

 

 

37,540

 

Anthem, Inc., 5.25%, 5/1/18 (f)

 

1,932,559

 

 

 

Healthcare-Products – 0.8%

 

 

 

33,275

 

Becton Dickinson and Co., Ser. A, 6.125%, 5/1/20

 

1,868,058

 

 

 

Independent Power Producers & Energy Traders – 0.2%

 

 

 

6,130

 

Dynegy, Inc., 7.00%, 7/1/19 (f)

 

395,079

 

 

 

Oil, Gas & Consumable Fuels – 0.7%

 

 

 

20,135

 

Hess Corp., 8.00%, 2/1/19 (f)

 

1,132,594

 

27,685

 

Southwestern Energy Co., Ser. B, 6.25%, 1/15/18 (f)

 

382,883

 

 

 

 

 

1,515,477

 

 

 

Pharmaceuticals – 2.3%

 

 

 

4,560

 

Allergan PLC, Ser. A, 5.50%, 3/1/18 (f)

 

4,076,686

 

2,310

 

Teva Pharmaceutical Industries Ltd., 7.00%, 12/15/18 (f)

 

1,339,915

 

 

 

 

 

5,416,601

 

 

 

Wireless Telecommunication Services – 0.6%

 

 

 

13,960

 

T-Mobile U.S., Inc., 5.50%, 12/15/17 (f)

 

1,399,490

 

Total Convertible Preferred Stock (cost-$31,272,779)

 

25,084,271

 

Preferred Stock (a)(d)(h) – 0.6%

 

 

 

 

 

Media – 0.6%

 

 

 

1,248

 

LiveStyle, Inc., Ser. A

 

124,800

 

11,496

 

LiveStyle, Inc., Ser. B

 

1,149,600

 

1,250

 

LiveStyle, Inc., Ser. B

 

13

 

Total Preferred Stock (cost-$2,499,840)

 

1,274,413

 

 

 

 

 

 

 

Units

 

 

 

 

 

Warrants (a)(d)(h) – 0.0%

 

 

 

 

 

Commercial Services – 0.0%

 

 

 

37,000

 

Cenveo Corp., strike price $12.00, expires 6/10/24

 

8,385

 

 

 

Media – 0.0%

 

 

 

3,000

 

LiveStyle, Inc. Ser. C, expires 11/30/21

 

 

Total Warrants (cost-$10,113)

 

8,385

 

 

26 Semi-Annual Report | July 31, 2017

 


 

Schedule of Investments

AllianzGI Diversified Income & Convertible Fund

July 31, 2017 (unaudited) (continued)

 

 

 

 

 

 

 

 

 

 

 

 

Principal
Amount
(000s)

 

 

 

Value

 

Repurchase Agreements – 3.6%

 

 

 

$8,248

 

State Street Bank and Trust Co.,
dated 7/31/17, 0.12%, due
8/1/17, proceeds $8,248,027;
collateralized by U.S. Treasury Notes,
2.00%, due 2/15/25, valued at
$8,416,015 including accrued
interest (cost-$8,248,000)

 

$8,248,000

 

Total Investments, before options written
(cost-$360,120,612) – 145.9%

 

335,742,276

 

 

 

 

 

 

 

 

 

 

 

 

 

Contracts

 

 

 

 

 

Options Written – (0.0)%

 

 

 

 

 

Call Options Written (CBOE) (h) – (0.0)%

 

 

 

125

 

AbbVie, Inc., strike price $77.50, expires 8/18/17

 

(1,937

)

55

 

Adobe Systems, Inc., strike price $155.00, expires 8/18/17

 

(1,925

)

40

 

Alibaba Group Holding Ltd., strike price $177.50, expires 8/18/17

 

(1,520

)

10

 

Alphabet, Inc., strike price $1,060.00, expires 8/18/17

 

(675

)

13

 

Amazon.com, Inc., strike price $1,200.00, expires 9/15/17

 

(877

)

45

 

Amgen, Inc., strike price $185.00, expires 8/18/17

 

(450

)

80

 

Amphenol Corp., strike price $80.00, expires 8/18/17

 

(800

)

85

 

Apple, Inc., strike price $162.50, expires 8/18/17

 

(2,763

)

130

 

Baxter International, Inc., strike price $65.00, expires 8/18/17

 

(845

)

10

 

Bioverativ, Inc., strike price $70.00, expires 8/18/17

 

(350

)

20

 

Broadcom Ltd., strike price $272.50, expires 8/18/17

 

(550

)

60

 

Caterpillar, Inc., strike price $115.00, expires 8/18/17

 

(7,680

)

125

 

Coca-Cola Co., strike price $46.50, expires 8/18/17

 

(1,938

)

265

 

Comcast Corp., strike price $42.50, expires 8/18/17

 

(2,253

)

50

 

Corning, Inc., strike price $33.00, expires 8/18/17

 

(75

)

55

 

Deere & Co., strike price $130.00, expires 8/18/17

 

(13,145

)

80

 

Facebook, Inc., strike price $180.00, expires 8/18/17

 

(3,800

)

75

 

Home Depot, Inc., strike price $165.00, expires 8/18/17

 

(262

)

65

 

McDonald’s Corp., strike price $160.00, expires 8/18/17

 

(2,275

)

75

 

MGM Resorts International, strike price $37.00, expires 8/18/17

 

(375

)

205

 

Microsoft Corp., strike price $80.00, expires 8/18/17

 

(410

)

115

 

Texas Instruments, Inc., strike price $85.00, expires 8/18/17

 

(2,300

)

75

 

Valero Energy Corp., strike price $72.50, expires 8/18/17

 

(900

)

Total Call Options Written (cost-$84,372)

 

(48,105

)

Total Investments, net of options written
(cost-$360,036,240) – 145.9%

 

335,694,171

 

Other liabilities in excess of other assets – (45.9)%

 

(105,545,239

)

Net Assets – 100.0%

 

$230,148,932

 

 

July 31, 2017 | Semi-Annual Report 27


 

Schedule of Investments

AllianzGI Diversified Income & Convertible Fund

July 31, 2017 (unaudited) (continued)

 

 

 

 

Notes to Schedule of Investments:

(a)         Private Placement–Restricted as to resale and may not have a readily available market. Securities with an aggregate value of $77,175,762, representing 33.5% of net assets.

(b)         144A–Exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, typically only to qualified institutional buyers. Securities with an aggregate value of $75,755,651, representing 32.9% of net assets.

(c)          In default.

(d)         Fair-Valued–Securities with an aggregate value of $1,282,799, representing 0.6% of net assets. See Note 1(a) and Note 1(b) in the Notes to Financial Statements.

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

(f)           All or partial amount segregated for the benefit of the counterparty as collateral for options written and long-term and short-term loan financing.

(g)          Restricted. The aggregate acquisition cost of such security is $3,475,717. The aggregate value is $90,375, representing less than 0.05% of net assets.

(h)         Non-income producing.

(i)             Transactions in options written for the six months ended July 31, 2017:

 

 

 

Contracts

 

Premiums

 

Options outstanding, January 31, 2017

 

 

2,136

 

 

 

$79,800

 

 

Options written

 

 

7,345

 

 

 

308,720

 

 

Options terminated in closing transactions

 

 

(2,170

)

 

 

(93,366

)

 

Options expired

 

 

(5,453

)

 

 

(210,782

)

 

Options outstanding, July 31, 2017

 

 

1,858

 

 

 

$84,372

 

 

 

(k)         Fair Value Measurements–See Note 1(b) in the Notes to Financial Statements.

 

 

 

Level 1 –
Quoted Prices

 

Level 2 –
Other Significant
Observable
Inputs

 

Level 3 –
Significant
Unobservable
Inputs

 

Value at
7/31/17

 

Investments in Securities – Assets

 

 

 

 

 

 

 

 

 

Convertible Bonds & Notes:

 

 

 

 

 

 

 

 

 

Insurance

 

$–

 

$2,749,775

 

$1,411,425

 

$4,161,200

 

All Other

 

 

139,444,674

 

 

139,444,674

 

Common Stock:

 

 

 

 

 

 

 

 

 

Media

 

3,835,491

 

 

1

 

3,835,492

 

All Other

 

77,495,432

 

 

 

77,495,432

 

Corporate Bonds & Notes

 

 

76,190,409

 

 

76,190,409

 

Convertible Preferred Stock:

 

 

 

 

 

 

 

 

 

Computers

 

 

869,361

 

 

869,361

 

Equity Real Estate Investment Trusts (REITs)

 

1,920,915

 

1,777,544

 

 

3,698,459

 

Food & Beverage

 

 

723,138

 

 

723,138

 

Healthcare-Products

 

 

1,868,058

 

 

1,868,058

 

Pharmaceuticals

 

4,076,686

 

1,339,915

 

 

5,416,601

 

All Other

 

12,508,654

 

 

 

12,508,654

 

Preferred Stock

 

 

 

1,274,413

 

1,274,413

 

Warrants

 

 

 

8,385

 

8,385

 

Repurchase Agreements

 

 

8,248,000

 

 

8,248,000

 

 

 

99,837,178

 

233,210,874

 

2,694,224

 

335,742,276

 

 

28 Semi-Annual Report | July 31, 2017


 

Schedule of Investments

AllianzGI Diversified Income & Convertible Fund

July 31, 2017 (unaudited) (continued)

 

 

 

 

 

Level 1 –
Quoted Prices

 

Level 2 –
Other Significant
Observable
Inputs

 

Level 3 –
Significant
Unobservable
Inputs

 

Value at
7/31/17

 

Investments in Securities – Liabilities

 

 

 

 

 

 

 

 

 

Options Written:

 

 

 

 

 

 

 

 

 

Market Price

 

$(48,105

)

$–

 

$–

 

$(48,105

)

Totals

 

$99,789,073

 

$233,210,874

 

$2,694,224

 

$335,694,171

 

 

At July 31, 2017, a security valued at $1,777,544 was transferred from Level 1 to Level 2. This transfer was a result of a security with an exchange-traded closing price at January 31, 2017, which was not available on July 31, 2017.

 

A roll forward of fair value measurements using significant unobservable inputs (Level 3) for the six months ended July 31, 2017, was as follows:

 

 

 

Beginning
Balance
1/31/17

 

Purchases

 

Sales

 

Accrued
Discount
(Premiums)

 

Net
Realized
Gain
(Loss)

 

Net
Change in
Unrealized
Appreciation/
Depreciation

 

Transfers
into
Level 3

 

Transfers
out of
Level 3

 

Ending
Balance
7/31/17

 

Investments in Securities – Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Convertible Bonds & Notes

 

$–

 

$1,355,503

 

$(190,837

)

 

$18,676

 

$228,083

 

 

 

$1,411,425

 

Common Stock:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Media

 

1

 

 

 

 

 

 

 

 

1

 

Preferred Stock

 

1,165,086

 

 

 

 

 

109,327

 

 

 

1,274,413

 

Warrants

 

10,634

 

 

 

 

 

(2,249

)

 

 

8,385

 

Totals

 

$1,175,721

 

$1,355,503

 

$(190,837

)

 

$18,676

 

$335,161

 

 

 

$2,694,224

 

 

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 July 31, 2017:

 

 

 

Ending Balance
at 7/31/17

 

Valuation
Technique Used

 

Unobservable
Inputs

 

Input
Values

 

Investments in Securities – Assets

 

 

 

 

 

 

 

Convertible Bonds & Notes

 

$1,411,425

 

Third-Party Pricing Vendor

 

Single Broker Quote

 

$276.75

 

Common Stock

 

1

 

Model Price

 

Proprietary Data Used in Model

 

$0.0001

 

Preferred Stock

 

1,274,400

 

Model Price

 

Proprietary Data Used in Model

 

$100.00

 

Preferred Stock

 

13

 

Liquidation Value

 

Price of Stock

 

$0.01*

 

Warrants

 

8,385

 

Fundamental Analytical Data Relating to the Investment

 

Price of Warrant

 

$0.22663

 

 

*                 Preferred stock trades are in lots of 1,000.

 

The net change in unrealized appreciation/depreciation of Level 3 investments held at July 31, 2017, was $335,161. Net change in unrealized appreciation/depreciation is reflected on the Statements of Operations.

 

July 31, 2017 | Semi-Annual Report 29


 

Schedule of Investments

AllianzGI Diversified Income & Convertible Fund

July 31, 2017 (unaudited) (continued)

 

 

 

(l)             The following is a summary of the Fund’s derivatives categorized by risk exposure:

 

The effect of derivatives on the Fund’s Statements of Assets and Liabilities at July 31, 2017:

 

Location

 

Market Price

 

Liability derivatives:

 

 

 

Options written, at value

 

$(48,105)

 

 

The effect of derivatives on the Fund’s Statements of Operations for the six months ended July 31, 2017:

 

Location

 

Market Price

 

Net realized loss on:

 

 

 

Options written

 

$(180,279)

 

Net change in unrealized appreciation/depreciation of:

 

 

 

Options written

 

$17,328 

 

 

The average volume (based on the open positions at each fiscal month-end) of derivative activity during the six months ended July 31, 2017 was 1,494 call options written contracts.

 

 

Glossary:

ADR

-

American Depositary Receipt

CBOE

-

Chicago Board Options Exchange

PIK

-

Payment-in-Kind

REIT

-

Real Estate Investment Trust

 

30 Semi-Annual Report | July 31, 2017 | See accompanying Notes to Financial Statements

 


 

Schedule of Investments

AllianzGI Equity & Convertible Income Fund

July 31, 2017 (unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

 

Value

 

Common Stock – 64.3%

 

 

 

 

 

Aerospace & Defense – 2.0%

 

 

 

42,300

 

Boeing Co.

 

$10,256,058

 

15,390

 

United Technologies Corp.

 

1,824,792

 

 

 

 

 

12,080,850

 

 

 

Automobiles – 1.0%

 

 

 

547,300

 

Ford Motor Co.

 

6,140,706

 

 

 

Banks – 1.9%

 

 

 

96,000

 

Bank of America Corp.

 

2,315,520

 

42,700

 

JPMorgan Chase & Co.

 

3,919,860

 

101,000

 

Wells Fargo & Co.

 

5,447,940

 

 

 

 

 

11,683,320

 

 

 

Beverages – 2.0%

 

 

 

90,718

 

Coca-Cola Co. (e)

 

4,158,513

 

72,000

 

PepsiCo, Inc.

 

8,395,920

 

 

 

 

 

12,554,433

 

 

 

Biotechnology – 4.9%

 

 

 

138,100

 

AbbVie, Inc. (e)

 

9,654,571

 

52,700

 

Amgen, Inc. (e)

 

9,196,677

 

9,700

 

Biogen, Inc. (i)

 

2,809,023

 

4,850

 

Bioverativ, Inc. (e)(i)

 

300,554

 

91,000

 

Gilead Sciences, Inc.

 

6,924,190

 

7,600

 

Vertex Pharmaceuticals, Inc. (i)

 

1,153,832

 

 

 

 

 

30,038,847

 

 

 

Building Products – 0.8%

 

 

 

133,544

 

Johnson Controls International PLC

 

5,201,539

 

 

 

Chemicals – 1.4%

 

 

 

46,400

 

Chemours Co.

 

2,209,104

 

56,400

 

Monsanto Co.

 

6,588,648

 

 

 

 

 

8,797,752

 

 

 

Construction & Engineering – 0.1%

 

 

 

15,200

 

Fluor Corp.

 

660,136

 

 

 

Diversified Telecommunication Services – 1.1%

 

 

 

140,400

 

Verizon Communications, Inc.

 

6,795,360

 

 

 

Electric Utilities – 0.6%

 

 

 

97,185

 

Exelon Corp.

 

3,726,073

 

 

 

Electronic Equipment, Instruments & Components – 1.9%

 

 

 

77,100

 

Amphenol Corp., Class A (e)

 

5,907,402

 

208,900

 

Corning, Inc. (e)

 

6,087,346

 

 

 

 

 

11,994,748

 

 

 

Energy Equipment & Services – 1.7%

 

 

 

103,271

 

Baker Hughes a GE Co.

 

3,809,667

 

53,600

 

National Oilwell Varco, Inc.

 

1,753,256

 

72,000

 

Schlumberger Ltd.

 

4,939,200

 

 

 

 

 

10,502,123

 

 

July 31, 2017 | Semi-Annual Report 31


 

Schedule of Investments

AllianzGI Equity & Convertible Income Fund

July 31, 2017 (unaudited) (continued)

 

 

 

 

 

 

 

 

 

 

 

 



Shares

 

 

 

Value

 

 

 

Food & Staples Retailing – 2.9%

 

 

 

44,900

 

Costco Wholesale Corp.

 

$7,117,099

 

182,400

 

Kroger Co.

 

4,472,448

 

74,100

 

Walgreens Boots Alliance, Inc.

 

5,977,647

 

 

 

 

 

17,567,194

 

 

 

Health Care Equipment & Supplies – 0.9%

 

 

 

93,300

 

Baxter International, Inc. (e)

 

5,642,784

 

 

 

Health Care Providers & Services – 2.6%

 

 

 

46,400

 

McKesson Corp.

 

7,510,768

 

44,400

 

UnitedHealth Group, Inc.

 

8,516,364

 

 

 

 

 

16,027,132

 

 

 

Hotels, Restaurants & Leisure – 2.5%

 

 

 

46,400

 

McDonald’s Corp. (e)

 

7,198,496

 

33,700

 

MGM Resorts International (e)

 

1,109,741

 

128,900

 

Starbucks Corp.

 

6,958,022

 

 

 

 

 

15,266,259

 

 

 

Household Products – 0.9%

 

 

 

57,900

 

Procter & Gamble Co.

 

5,258,478

 

 

 

Industrial Conglomerates – 2.0%

 

 

 

37,100

 

3M Co.

 

7,463,407

 

184,485

 

General Electric Co.

 

4,724,661

 

 

 

 

 

12,188,068

 

 

 

Insurance – 1.2%

 

 

 

67,300

 

Prudential Financial, Inc.

 

7,620,379

 

 

 

Internet & Catalog Retail – 1.8%

 

 

 

11,300

 

Amazon.com, Inc. (e)(i)

 

11,161,914

 

 

 

Internet Software & Services – 5.5%

 

 

 

55,700

 

Alibaba Group Holding Ltd., ADR (e)(i)

 

8,630,715

 

12,400

 

Alphabet, Inc., Class A (e)(i)

 

11,724,200

 

78,100

 

Facebook, Inc., Class A (e)(i)

 

13,218,425

 

 

 

 

 

33,573,340

 

 

 

IT Services – 2.4%

 

 

 

42,400

 

International Business Machines Corp.

 

6,134,008

 

85,600

 

Visa, Inc., Class A

 

8,522,336

 

 

 

 

 

14,656,344

 

 

 

Machinery – 2.1%

 

 

 

57,700

 

Caterpillar, Inc. (e)

 

6,574,915

 

47,800

 

Deere & Co. (e)

 

6,131,784

 

 

 

 

 

12,706,699

 

 

 

Media – 3.0%

 

 

 

222,800

 

Comcast Corp., Class A (e)

 

9,012,260

 

88,200

 

Walt Disney Co.

 

9,695,826

 

 

 

 

 

18,708,086

 

 

32 Semi-Annual Report | July 31, 2017


 

Schedule of Investments

AllianzGI Equity & Convertible Income Fund

July 31, 2017 (unaudited) (continued)

 

 

 

 

 

 

 

 

 

 

 

 



Shares

 

 

 

Value

 

 

 

Metals & Mining – 0.1%

 

 

 

23,400

 

Freeport-McMoRan, Inc. (i)

 

$342,108

 

 

 

Multi-Line Retail – 1.6%

 

 

 

126,482

 

Macy’s, Inc.

 

3,003,948

 

118,000

 

Target Corp.

 

6,687,060

 

 

 

 

 

9,691,008

 

 

 

Oil, Gas & Consumable Fuels – 1.7%

 

 

 

83,400

 

Occidental Petroleum Corp.

 

5,164,962

 

72,400

 

Valero Energy Corp. (e)

 

4,993,428

 

 

 

 

 

10,158,390

 

 

 

Pharmaceuticals – 0.9%

 

 

 

99,100

 

Bristol-Myers Squibb Co.

 

5,638,790

 

 

 

Road & Rail – 0.9%

 

 

 

51,300

 

Union Pacific Corp.

 

5,281,848

 

 

 

Semiconductors & Semiconductor Equipment – 4.8%

 

 

 

13,000

 

Broadcom Ltd. (e)

 

3,206,580

 

275,700

 

Intel Corp.

 

9,779,079

 

12,200

 

NVIDIA Corp.

 

1,982,622

 

128,100

 

QUALCOMM, Inc.

 

6,813,639

 

96,000

 

Texas Instruments, Inc. (e)

 

7,812,480

 

 

 

 

 

29,594,400

 

 

 

Software – 3.6%

 

 

 

37,300

 

Adobe Systems, Inc. (e)(i)

 

5,464,077

 

166,900

 

Microsoft Corp. (e)

 

12,133,630

 

96,500

 

Oracle Corp.

 

4,818,245

 

 

 

 

 

22,415,952

 

 

 

Specialty Retail – 1.4%

 

 

 

57,800

 

Home Depot, Inc. (e)

 

8,646,880

 

 

 

Technology Hardware, Storage & Peripherals – 2.1%

 

 

 

84,800

 

Apple, Inc. (e)

 

12,612,304

 

Total Common Stock (cost-$437,669,118)

 

394,934,244

 

 

 

 

 

 

 

Principal
Amount
(000s)

 

 

 

 

 

Convertible Bonds & Notes – 23.9%

 

 

 

 

 

Apparel & Textiles – 0.4%

 

 

 

$2,595

 

Iconix Brand Group, Inc., 1.50%, 3/15/18

 

2,543,100

 

 

 

Auto Components – 0.7%

 

 

 

2,525

 

Meritor, Inc., 7.875%, 3/1/26

 

4,420,770

 

 

 

Auto Manufacturers – 0.7%

 

 

 

 

 

Tesla, Inc.,

 

 

 

2,820

 

0.25%, 3/1/19

 

3,072,038

 

1,000

 

2.375%, 3/15/22

 

1,186,250

 

 

 

 

 

4,258,288

 

 

July 31, 2017 | Semi-Annual Report 33


 

Schedule of Investments

AllianzGI Equity & Convertible Income Fund

July 31, 2017 (unaudited) (continued)

 

 

 

 

 

 

 

 

 

 

 

 

Principal
Amount
(000s)

 

 

 

Value

 

 

 

Biotechnology – 0.8%

 

 

 

$1,210

 

BioMarin Pharmaceutical, Inc., 1.50%, 10/15/20

 

$1,432,338

 

1,500

 

Illumina, Inc., 0.50%, 6/15/21

 

1,613,437

 

700

 

Ionis Pharmaceuticals, Inc., 1.00%, 11/15/21

 

756,000

 

1,205

 

Medicines Co., 2.75%, 7/15/23

 

1,288,597

 

 

 

 

 

5,090,372

 

 

 

Commercial Services – 0.3%

 

 

 

1,505

 

Live Nation Entertainment, Inc., 2.50%, 5/15/19

 

1,777,781

 

 

 

Computers – 0.4%

 

 

 

690

 

Carbonite, Inc., 2.50%, 4/1/22 (a)(b)

 

803,850

 

1,500

 

Electronics For Imaging, Inc., 0.75%, 9/1/19

 

1,621,875

 

 

 

 

 

2,425,725

 

 

 

Diversified Financial Services – 0.8%

 

 

 

1,000

 

Blackhawk Network Holdings, Inc., 1.50%, 1/15/22 (a)(b)

 

1,126,875

 

410

 

Encore Capital Group, Inc., 3.25%, 3/15/22 (a)(b)

 

442,544

 

3,625

 

PRA Group, Inc., 3.00%, 8/1/20

 

3,511,718

 

 

 

 

 

5,081,137

 

 

 

Electric Utilities – 0.4%

 

 

 

2,265

 

NRG Yield, Inc., 3.25%, 6/1/20 (a)(b)

 

2,263,584

 

 

 

Electrical Equipment – 0.6%

 

 

 

 

 

SunPower Corp.,

 

 

 

2,100

 

0.875%, 6/1/21

 

1,707,563

 

2,135

 

4.00%, 1/15/23

 

1,926,837

 

 

 

 

 

3,634,400

 

 

 

Energy-Alternate Sources – 0.3%

 

 

 

1,700

 

SolarCity Corp., 1.625%, 11/1/19

 

1,606,500

 

 

 

SunEdison, Inc. (a)(b)(c)(h),

 

 

 

4,000

 

2.625%, 6/1/23 (acquisition cost – $4,134,388; purchased 6/5/15)

 

100,000

 

1,000

 

3.375%, 6/1/25 (acquisition cost – $361,809; purchased 1/8/16)

 

25,000

 

 

 

 

 

1,731,500

 

 

 

Equity Real Estate Investment Trusts (REITs) – 0.7%

 

 

 

2,225

 

Extra Space Storage L.P., 3.125%, 10/1/35 (a)(b)

 

2,414,125

 

2,000

 

Two Harbors Investment Corp., 6.25%, 1/15/22

 

2,116,250

 

 

 

 

 

4,530,375

 

 

 

Healthcare-Products – 1.1%

 

 

 

1,930

 

Hologic, Inc., 2.00%, 3/1/42 (g)

 

2,767,138

 

1,375

 

NuVasive, Inc., 2.25%, 3/15/21

 

1,723,906

 

2,135

 

Wright Medical Group, Inc., 2.00%, 2/15/20

 

2,339,159

 

 

 

 

 

6,830,203

 

 

 

Healthcare-Services – 0.3%

 

 

 

1,625

 

Molina Healthcare, Inc., 1.625%, 8/15/44

 

2,027,188

 

 

 

Internet – 2.4%

 

 

 

1,540

 

Altaba, Inc., zero coupon, 12/1/18

 

1,821,050

 

2,500

 

FireEye, Inc., Ser. A, 1.00%, 6/1/35

 

2,368,750

 

1,380

 

Liberty Expedia Holdings, Inc., 1.00%, 6/30/47 (a)(b)

 

1,505,925

 

1,700

 

Pandora Media, Inc., 1.75%, 12/1/20

 

1,626,688

 

 

34 Semi-Annual Report | July 31, 2017


 

Schedule of Investments

AllianzGI Equity & Convertible Income Fund

July 31, 2017 (unaudited) (continued)

 

 

 

 

 

 

 

 

 

 

 

 

Principal
Amount
(000s)

 

 

 

Value

 

 

 

Internet (continued)

 

 

 

$3,500

 

Priceline Group, Inc., 0.35%, 6/15/20

 

$5,516,875

 

535

 

VeriSign, Inc., 4.452%, 8/15/37

 

1,588,281

 

 

 

 

 

14,427,569

 

 

 

Media – 1.6%

 

 

 

3,780

 

DISH Network Corp., 3.375%, 8/15/26 (a)(b)

 

4,715,550

 

1,765

 

Liberty Interactive LLC, 1.75%, 9/30/46 (a)(b)

 

2,190,806

 

 

 

Liberty Media Corp.,

 

 

 

860

 

1.375%, 10/15/23

 

1,089,448

 

1,950

 

2.25%, 9/30/46 (a)(b)

 

2,104,781

 

 

 

 

 

10,100,585

 

 

 

Metal Fabricate/Hardware – 0.3%

 

 

 

1,635

 

RTI International Metals, Inc., 1.625%, 10/15/19

 

1,820,981

 

 

 

Mining – 0.3%

 

 

 

1,500

 

Royal Gold, Inc., 2.875%, 6/15/19

 

1,668,750

 

 

 

Oil, Gas & Consumable Fuels – 1.3%

 

 

 

2,235

 

Chesapeake Energy Corp., 5.50%, 9/15/26 (a)(b)

 

2,123,250

 

750

 

Helix Energy Solutions Group, Inc., 4.25%, 5/1/22

 

736,406

 

2,000

 

Nabors Industries, Inc., 0.75%, 1/15/24 (a)(b)

 

1,578,750

 

1,500

 

SM Energy Co., 1.50%, 7/1/21

 

1,399,688

 

2,240

 

Weatherford International Ltd., 5.875%, 7/1/21

 

2,382,800

 

 

 

 

 

8,220,894

 

 

 

Pharmaceuticals – 0.5%

 

 

 

900

 

Jazz Investments I Ltd., 1.875%, 8/15/21

 

985,500

 

270

 

TESARO, Inc., 3.00%, 10/1/21

 

999,338

 

1,115

 

Teva Pharmaceutical Finance Co. LLC, Ser. C, 0.25%, 2/1/26

 

1,198,625

 

 

 

 

 

3,183,463

 

 

 

Pipelines – 0.5%

 

 

 

4,000

 

Cheniere Energy, Inc., 4.25%, 3/15/45

 

2,762,500

 

 

 

Retail – 0.5%

 

 

 

3,495

 

RH, zero coupon, 6/15/19 (a)(b)

 

3,123,656

 

 

 

Semiconductors – 5.2%

 

 

 

870

 

Advanced Micro Devices, Inc., 2.125%, 9/1/26

 

1,633,425

 

2,025

 

Cypress Semiconductor Corp., 4.50%, 1/15/22

 

2,555,297

 

2,615

 

Inphi Corp., 0.75%, 9/1/21 (a)(b)

 

2,650,956

 

2,000

 

Integrated Device Technology, Inc., 0.875%, 11/15/22

 

2,127,500

 

 

 

Intel Corp.,

 

 

 

2,270

 

3.25%, 8/1/39

 

3,917,180

 

1,895

 

3.493%, 12/15/35

 

2,566,541

 

1,350

 

Lam Research Corp., 1.25%, 5/15/18

 

3,564,000

 

4,575

 

Microchip Technology, Inc., 1.625%, 2/15/27 (a)(b)

 

5,089,687

 

215

 

Micron Technology, Inc., Ser. D, 3.125%, 5/1/32

 

615,841

 

3,865

 

Micron Technology, Inc., Ser. G, 3.00%, 11/15/43

 

4,176,616

 

345

 

Novellus Systems, Inc., 2.625%, 5/15/41

 

1,631,850

 

1,000

 

Teradyne, Inc., 1.25%, 12/15/23 (a)(b)

 

1,269,375

 

 

 

 

 

31,798,268

 

 

July 31, 2017 | Semi-Annual Report 35


 

Schedule of Investments

AllianzGI Equity & Convertible Income Fund

July 31, 2017 (unaudited) (continued)

 

 

 

 

 

 

 

 

 

 

 

 

Principal
Amount
(000s)

 

 

 

Value

 

 

 

Software – 2.1%

 

 

 

$2,000

 

CSG Systems International, Inc., 4.25%, 3/15/36

 

$2,180,000

 

500

 

Medidata Solutions, Inc., 1.00%, 8/1/18

 

690,000

 

1,750

 

Nuance Communications, Inc., 1.25%, 4/1/25 (a)(b)

 

1,771,875

 

1,200

 

Proofpoint, Inc., 0.75%, 6/15/20

 

1,503,000

 

1,030

 

Red Hat, Inc., 0.25%, 10/1/19

 

1,463,888

 

1,550

 

Salesforce.com, Inc., 0.25%, 4/1/18

 

2,145,781

 

1,250

 

ServiceNow, Inc., zero coupon, 11/1/18

 

1,904,687

 

825

 

Workday, Inc., 0.75%, 7/15/18

 

1,061,156

 

 

 

 

 

12,720,387

 

 

 

Telecommunications – 0.9%

 

 

 

40

 

Ciena Corp., 3.75%, 10/15/18

 

55,100

 

 

 

Finisar Corp.,

 

 

 

1,200

 

0.50%, 12/15/33

 

1,368,000

 

2,785

 

0.50%, 12/15/36 (a)(b)

 

2,783,259

 

1,300

 

Gogo, Inc., 3.75%, 3/1/20

 

1,211,438

 

 

 

 

 

5,417,797

 

 

 

Tobacco – 0.3%

 

 

 

1,700

 

Vector Group Ltd., 1.75%, 4/15/20 (f)

 

1,901,875

 

 

 

Transportation – 0.5%

 

 

 

1,380

 

Atlas Air Worldwide Holdings, Inc., 2.25%, 6/1/22

 

1,539,562

 

1,260

 

Greenbrier Cos., Inc., 2.875%, 2/1/24 (a)(b)

 

1,367,888

 

 

 

 

 

2,907,450

 

Total Convertible Bonds & Notes (cost-$148,228,856)

 

146,668,598

 

 

 

 

 

 

 

Shares

 

 

 

 

 

Convertible Preferred Stock – 8.5%

 

 

 

 

 

Agriculture – 0.2%

 

 

 

9,550

 

Bunge Ltd., 4.875% (d)

 

1,043,934

 

 

 

Banks – 1.5%

 

 

 

3,965

 

Bank of America Corp., Ser. L, 7.25% (d)

 

5,146,570

 

770

 

Huntington Bancshares, Inc., Ser. A, 8.50% (d)

 

1,112,650

 

2,335

 

Wells Fargo & Co., Ser. L, 7.50% (d)

 

3,099,712

 

 

 

 

 

9,358,932

 

 

 

Commercial Services & Supplies – 0.3%

 

 

 

29,890

 

Stericycle, Inc., 5.25%, 9/15/18

 

1,883,369

 

 

 

Computers – 0.5%

 

 

 

2,164

 

NCR Corp., Ser. A, 5.50%, PIK (d)

 

3,183,244

 

 

 

Diversified Telecommunication Services – 0.2%

 

 

 

42,905

 

Frontier Communications Corp., Ser. A, 11.125%, 6/29/18

 

1,088,500

 

 

 

Electric Utilities – 0.4%

 

 

 

50,000

 

NextEra Energy, Inc., 6.123%, 9/1/19

 

2,778,000

 

 

 

Equity Real Estate Investment Trusts (REITs) – 1.0%

 

 

 

19,480

 

American Tower Corp., 5.50%, 2/15/18

 

2,381,469

 

1,850

 

Crown Castle International Corp., Ser. A, 6.875%, 8/1/20

 

1,974,274

 

30,000

 

Welltower, Inc., Ser. I, 6.50% (d)

 

1,962,000

 

 

 

 

 

6,317,743

 

 

36 Semi-Annual Report | July 31, 2017


 

Schedule of Investments

AllianzGI Equity & Convertible Income Fund

July 31, 2017 (unaudited) (continued)

 

 

 

 

 

 

 

 

 

 

 

 



Shares

 

 

 

Value

 

 

 

Food & Beverage – 0.3%

 

 

 

11,900

 

Post Holdings, Inc., 2.50% (d)

 

$1,872,762

 

 

 

Hand/Machine Tools – 0.3%

 

 

 

17,030

 

Stanley Black & Decker, Inc., 5.375%, 5/15/20

 

1,827,830

 

 

 

Health Care Providers & Services – 0.7%

 

 

 

85,670

 

Anthem, Inc., 5.25%, 5/1/18

 

4,410,292

 

 

 

Healthcare-Products – 0.4%

 

 

 

40,000

 

Becton Dickinson and Co., Ser. A, 6.125%, 5/1/20

 

2,245,600

 

 

 

Investment Companies – 0.4%

 

 

 

12,660

 

Mandatory Exchangeable Trust, 5.75%, 6/3/19 (a)(b)

 

2,263,418

 

 

 

Oil, Gas & Consumable Fuels – 0.7%

 

 

 

 

 

ATP Oil & Gas Corp., 8.00% (a)(b)(d)(h)

 

 

 

25,000

 

(acquisition cost – $3,160,750; purchased 4/21/10)

 

3

 

46,870

 

Kinder Morgan, Inc., Ser. A, 9.75%, 10/26/18

 

2,074,935

 

39,900

 

Southwestern Energy Co., Ser. B, 6.25%, 1/15/18

 

551,817

 

35,410

 

WPX Energy, Inc., Ser. A, 6.25%, 7/31/18

 

1,778,644

 

 

 

 

 

4,405,399

 

 

 

Pharmaceuticals – 1.2%

 

 

 

6,005

 

Allergan PLC, Ser. A, 5.50%, 3/1/18

 

5,368,530

 

2,960

 

Teva Pharmaceutical Industries Ltd., 7.00%, 12/15/18

 

1,716,948

 

 

 

 

 

7,085,478

 

 

 

Wireless Telecommunication Services – 0.4%

 

 

 

25,160

 

T-Mobile U.S., Inc., 5.50%, 12/15/17

 

2,522,290

 

Total Convertible Preferred Stock (cost-$58,640,644)

 

52,286,791

 

 

 

 

 

 

 

Principal
Amount
(000s)

 

 

 

 

 

Corporate Bonds & Notes (a)(b) – 0.8%

 

 

Oil, Gas & Consumable Fuels – 0.8%

 

 

 

 

 

Cobalt International Energy, Inc.,

 

 

 

$2,509

 

7.75%, 12/1/23

 

1,643,395

 

3,200

 

10.75%, 12/1/21

 

3,160,000

 

Total Corporate Bonds & Notes (cost-$6,337,612)

 

4,803,395

 

 

 

Repurchase Agreements – 3.1%

 

 

 

19,047

 

State Street Bank and Trust Co.,
dated 7/31/17, 0.12%, due
8/1/17, proceeds $19,047,063;
collateralized by U.S. Treasury Notes,
2.00%, due 2/15/25, valued at
$19,432,708 including accrued
interest (cost-$19,047,000)

 

19,047,000

 

Total Investments, before options written
(cost-$669,923,230) – 100.6%

 

617,740,028

 

 

July 31, 2017 | Semi-Annual Report 37


 

Schedule of Investments

AllianzGI Equity & Convertible Income Fund

July 31, 2017 (unaudited) (continued)

 

 

 

 

 

 

 

 

 

 

 

 



Contracts

 

 

 

Value

 

Call Options Written (CBOE) (i) – (0.1)%

 

 

 

690

 

AbbVie, Inc., strike price $77.50, expires 8/18/17

 

$(10,695

)

225

 

Adobe Systems, Inc., strike price $155.00, expires 8/18/17

 

(7,875

)

280

 

Alibaba Group Holding Ltd., strike price $177.50, expires 8/18/17

 

(10,640

)

75

 

Alphabet, Inc., strike price $1,060.00, expires 8/18/17

 

(5,062

)

60

 

Amazon.com, Inc., strike price $1,200.00, expires 9/15/17

 

(4,050

)

265

 

Amgen, Inc., strike price $185.00, expires 8/18/17

 

(2,650

)

390

 

Amphenol Corp., strike price $80.00, expires 8/18/17

 

(3,900

)

425

 

Apple, Inc., strike price $162.50, expires 8/18/17

 

(13,813

)

560

 

Baxter International, Inc., strike price $65.00, expires 8/18/17

 

(3,640

)

15

 

Bioverativ, Inc., strike price $70.00, expires 8/18/17

 

(525

)

80

 

Broadcom Ltd., strike price $272.50, expires 8/18/17

 

(2,200

)

290

 

Caterpillar, Inc., strike price $115.00, expires 8/18/17

 

(37,120

)

635

 

Coca-Cola Co., strike price $46.50, expires 8/18/17

 

(9,843

)

1,335

 

Comcast Corp., strike price $42.50, expires 8/18/17

 

(11,348

)

815

 

Corning, Inc., strike price $33.00, expires 8/18/17

 

(1,222

)

290

 

Deere & Co., strike price $130.00, expires 8/18/17

 

(69,310

)

390

 

Facebook, Inc., strike price $180.00, expires 8/18/17

 

(18,525

)

345

 

Home Depot, Inc., strike price $165.00, expires 8/18/17

 

(1,207

)

325

 

McDonald’s Corp., strike price $160.00, expires 8/18/17

 

(11,375

)

170

 

MGM Resorts International, strike price $37.00, expires 8/18/17

 

(850

)

1,000

 

Microsoft Corp., strike price $80.00, expires 8/18/17

 

(2,000

)

575

 

Texas Instruments, Inc., strike price $85.00, expires 8/18/17

 

(11,500

)

365

 

Valero Energy Corp., strike price $72.50, expires 8/18/17

 

(4,380

)

Total Call Options Written (cost-$437,045)

 

(243,730

)

Total Investments, net of options written
(cost-$669,486,185) – 100.5%

 

617,496,298

 

Other liabilities in excess of other assets – (0.5)%

 

(3,367,697

)

Net Assets – 100.0%

 

$614,128,601

 

 

 

Notes to Schedule of Investments:

(a)         Private Placement–Restricted as to resale and may not have a readily available market. Securities with an aggregate value of $46,518,552, representing 7.6% of net assets.

(b)         144A–Exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, typically only to qualified institutional buyers. Securities with an aggregate value of $46,518,552, representing 7.6% of net assets.

(c)          In default.

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

(e)          All or partial amount segregated for the benefit of the counterparty as collateral for options written.

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

(h)         Restricted. The aggregate acquisition cost of such securities is $7,656,947. The aggregate value is $125,003, representing less than 0.05% of net assets.

(i)             Non-income producing.

 

38 Semi-Annual Report | July 31, 2017


 

Schedule of Investments

AllianzGI Equity & Convertible Income Fund

July 31, 2017 (unaudited) (continued)

 

 

 

(j)            Transactions in options written for the six months ended July 31, 2017:

 

 

 

Contracts

 

Premiums

 

Options outstanding, January 31, 2017

 

 

9,220

 

 

 

$278,983

 

 

Options written

 

 

35,576

 

 

 

1,464,740

 

 

Options terminated in closing transactions

 

 

(10,940

)

 

 

(407,940

)

 

Options expired

 

 

(24,256

)

 

 

(898,738

)

 

Options outstanding, July 31, 2017

 

 

9,600

 

 

 

$437,045

 

 

 

(m)     Fair Value Measurements–See Note 1(b) in the Notes to Financial Statements.

 

 

 

Level 1 –
Quoted Prices

 

Level 2 –
Other Significant
 Observable
Inputs

 

Level 3 –
Significant
Unobservable
Inputs

 

Value at
7/31/17

 

Investments in Securities – Assets

 

 

 

 

 

 

 

 

 

Common Stock

 

$394,934,244

 

$–

 

 

$394,934,244

 

Convertible Bonds & Notes

 

 

146,668,598

 

 

146,668,598

 

Convertible Preferred Stock:

 

 

 

 

 

 

 

 

 

Agriculture

 

 

1,043,934

 

 

1,043,934

 

Computers

 

 

3,183,244

 

 

3,183,244

 

Equity Real Estate Investment Trusts (REITs)

 

3,936,274

 

2,381,469

 

 

6,317,743

 

Food & Beverage

 

 

1,872,762

 

 

1,872,762

 

Healthcare-Products

 

 

2,245,600

 

 

2,245,600

 

Investment Companies

 

 

2,263,418

 

 

2,263,418

 

Oil, Gas & Consumable Fuels

 

4,405,396

 

3

 

 

4,405,399

 

Pharmaceuticals

 

5,368,530

 

1,716,948

 

 

7,085,478

 

All Other

 

23,869,213

 

 

 

23,869,213

 

Corporate Bonds & Notes

 

 

4,803,395

 

 

4,803,395

 

Repurchase Agreements

 

 

19,047,000

 

 

19,047,000

 

 

 

432,513,657

 

185,226,371

 

 

617,740,028

 

Investments in Securities – Liabilities

 

 

 

 

 

 

 

 

 

Options Written:

 

 

 

 

 

 

 

 

 

Market Price

 

(243,730

)

 

 

(243,730

)

Totals

 

$432,269,927

 

$185,226,371

 

 

$617,496,298

 

 

At July 31, 2017, a security valued at $2,381,469 was transferred from Level 1 to Level 2. This transfer was a result of a security with an exchange-traded closing price at January 31, 2017, which was not available on July 31, 2017.

 

(n)         The following is a summary of the Fund’s derivatives categorized by risk exposure:

 

July 31, 2017 | Semi-Annual Report 39


 

Schedule of Investments

AllianzGI Equity & Convertible Income Fund

July 31, 2017 (unaudited) (continued)

 

 

 

The effect of derivatives on the Fund’s Statements of Assets and Liabilities at July 31, 2017:

 

Location

 

Market Price

 

Liability derivatives:

 

 

 

Options written, at value

 

$(243,730)

 

 

The effect of derivatives on the Fund’s Statements of Operations for the six months ended July 31, 2017:

 

Location

 

Market Price

 

Net realized loss on:

 

 

 

Options written

 

$(1,083,751)

 

Net change in unrealized appreciation/depreciation of:

 

 

 

Options written

 

$147,987

 

 

The average volume (based on the open positions at each fiscal month-end) of derivative activity during the six months ended July 31, 2017 was 7,129 call options written contracts.

 

Glossary:

ADR

-

American Depositary Receipt

CBOE

-

Chicago Board Options Exchange

PIK

-

Payment-in-Kind

REIT

-

Real Estate Investment Trust

 

40 Semi-Annual Report | July 31, 2017 | See accompanying Notes to Financial Statements

 


 

Schedule of Investments

AllianzGI NFJ Dividend, Interest & Premium Strategy Fund

July 31, 2017 (unaudited)

 

 

 

 

 

 

 

 

 

 

 

 



Shares

 

 

 

Value

 

Common Stock – 68.1%

 

 

 

 

 

Aerospace & Defense – 2.6%

 

 

 

93,000

 

General Dynamics Corp. (f)

 

$18,258,690

 

155,000

 

United Technologies Corp. (f)

 

18,378,350

 

 

 

 

 

36,637,040

 

 

 

Automobiles – 1.1%

 

 

 

428,900

 

General Motors Co. (f)

 

15,431,822

 

 

 

Banks – 12.3%

 

 

 

821,500

 

Bank of America Corp.

 

19,814,580

 

318,300

 

Citigroup, Inc.

 

21,787,635

 

774,200

 

Fifth Third Bancorp (f)

 

20,671,140

 

478,100

 

JPMorgan Chase & Co. (f)

 

43,889,580

 

173,600

 

PNC Financial Services Group, Inc.

 

22,359,680

 

410,100

 

U.S. Bancorp (f)

 

21,645,078

 

359,200

 

Wells Fargo & Co. (f)

 

19,375,248

 

 

 

 

 

169,542,941

 

 

 

Beverages – 1.4%

 

 

 

210,700

 

Dr. Pepper Snapple Group, Inc.

 

19,207,412

 

 

 

Biotechnology – 1.2%

 

 

 

228,900

 

AbbVie, Inc. (f)

 

16,002,399

 

 

 

Capital Markets – 2.0%

 

 

 

76,500

 

Ameriprise Financial, Inc.

 

11,083,320

 

360,000

 

Morgan Stanley (f)

 

16,884,000

 

 

 

 

 

27,967,320

 

 

 

Chemicals – 1.5%

 

 

 

244,600

 

Eastman Chemical Co. (f)

 

20,340,936

 

 

 

Communications Equipment – 0.9%

 

 

 

377,000

 

Cisco Systems, Inc.

 

11,856,650

 

 

 

Consumer Finance – 1.3%

 

 

 

214,300

 

American Express Co. (f)

 

18,264,789

 

 

 

Containers & Packaging – 1.4%

 

 

 

350,000

 

International Paper Co. (f)

 

19,243,000

 

 

 

Diversified Telecommunication Services – 2.8%

 

 

 

508,200

 

AT&T, Inc. (f)

 

19,819,800

 

398,400

 

Verizon Communications, Inc.

 

19,282,560

 

 

 

 

 

39,102,360

 

 

 

Electric Utilities – 2.4%

 

 

 

242,600

 

American Electric Power Co., Inc. (f)

 

17,113,004

 

215,000

 

Entergy Corp. (f)

 

16,494,800

 

 

 

 

 

33,607,804

 

 

 

Electrical Equipment – 0.7%

 

 

 

124,700

 

Eaton Corp. PLC (f)

 

9,757,775

 

 

 

Energy Equipment & Services – 3.5%

 

 

 

2,800,900

 

Nabors Industries Ltd. (f)

 

21,594,939

 

 

July 31, 2017 | Semi-Annual Report 41


 

Schedule of Investments

AllianzGI NFJ Dividend, Interest & Premium Strategy Fund

July 31, 2017 (unaudited) (continued)

 

 

 

 

 

 

 

 

 

 

 

 



Shares

 

 

 

Value

 

 

 

Energy Equipment & Services (continued)

 

 

 

385,100

 

Schlumberger Ltd. (f)

 

$26,417,860

 

 

 

 

 

48,012,799

 

 

 

Food & Staples Retailing – 1.5%

 

 

 

261,000

 

Wal-Mart Stores, Inc. (f)

 

20,877,390

 

 

 

Health Care Equipment & Supplies – 1.0%

 

 

 

171,900

 

Medtronic PLC (f)

 

14,434,443

 

 

 

Health Care Providers & Services – 2.6%

 

 

 

125,700

 

Aetna, Inc. (f)

 

19,396,767

 

153,900

 

Quest Diagnostics, Inc. (f)

 

16,668,909

 

 

 

 

 

36,065,676

 

 

 

Hotels, Restaurants & Leisure – 0.7%

 

 

 

145,700

 

Carnival Corp. (f)

 

9,729,846

 

 

 

Household Products – 1.1%

 

 

 

175,000

 

Procter & Gamble Co. (f)

 

15,893,500

 

 

 

Industrial Conglomerates – 1.4%

 

 

 

141,800

 

Honeywell International, Inc. (f)

 

19,301,816

 

 

 

Insurance – 3.5%

 

 

 

51,900

 

Everest Re Group Ltd. (f)

 

13,618,041

 

375,700

 

MetLife, Inc. (f)

 

20,663,500

 

107,600

 

Travelers Cos., Inc. (f)

 

13,782,484

 

 

 

 

 

48,064,025

 

 

 

IT Services – 0.7%

 

 

 

66,140

 

International Business Machines Corp.

 

9,568,474

 

 

 

Media – 1.1%

 

 

 

226,000

 

CBS Corp., Class B (f)

 

14,877,580

 

 

 

Multi-Utilities – 1.2%

 

 

 

25

 

Dominion Energy, Inc.

 

1,930

 

369,100

 

Public Service Enterprise Group, Inc. (f)

 

16,598,427

 

 

 

 

 

16,600,357

 

 

 

Oil, Gas & Consumable Fuels – 9.3%

 

 

 

572,000

 

Apache Corp. (f)

 

28,302,560

 

254,200

 

Chevron Corp. (f)

 

27,756,098

 

322,900

 

Exxon Mobil Corp. (f)

 

25,844,916

 

832,500

 

Royal Dutch Shell PLC, Class A, ADR (f)

 

47,061,225

 

29,338

 

Sanchez Energy Corp. (i)

 

165,466

 

 

 

 

 

129,130,265

 

 

 

Pharmaceuticals – 2.8%

 

 

 

110,500

 

Johnson & Johnson (f)

 

14,665,560

 

733,384

 

Pfizer, Inc. (f)

 

24,319,013

 

 

 

 

 

38,984,573

 

 

 

Road & Rail – 1.2%

 

 

 

158,900

 

Kansas City Southern (f)

 

16,396,891

 

 

42 Semi-Annual Report | July 31, 2017


 

Schedule of Investments

AllianzGI NFJ Dividend, Interest & Premium Strategy Fund

July 31, 2017 (unaudited) (continued)

 

 

 

 

 

 

 

 

 

 

 

 



Shares

 

 

 

Value

 

 

 

Semiconductors & Semiconductor Equipment – 2.1%

 

 

 

563,800

 

Intel Corp. (f)

 

$19,997,986

 

59,600

 

Lam Research Corp. (f)

 

9,503,816

 

 

 

 

 

29,501,802

 

 

 

Software – 1.0%

 

 

 

266,000

 

Oracle Corp. (f)

 

13,281,380

 

 

 

Technology Hardware, Storage & Peripherals – 1.8%

 

 

 

67,900

 

Apple, Inc. (f)

 

10,098,767

 

753,700

 

HP, Inc. (f)

 

14,395,670

 

 

 

 

 

24,494,437

 

Total Common Stock (cost-$850,287,505)

 

942,177,502

 

 

 

 

 

 

 

Principal
Amount
(000s)

 

 

 

 

 

Convertible Bonds & Notes – 19.6%

 

 

 

 

 

Apparel & Textiles – 0.4%

 

 

 

$5,720

 

Iconix Brand Group, Inc., 1.50%, 3/15/18

 

5,605,600

 

 

 

Auto Components – 0.6%

 

 

 

4,850

 

Meritor, Inc., 7.875%, 3/1/26

 

8,491,380

 

 

 

Auto Manufacturers – 0.6%

 

 

 

 

 

Tesla, Inc.,

 

 

 

4,580

 

0.25%, 3/1/19

 

4,989,337

 

3,000

 

2.375%, 3/15/22

 

3,558,750

 

 

 

 

 

8,548,087

 

 

 

Biotechnology – 0.8%

 

 

 

 

 

BioMarin Pharmaceutical, Inc.,

 

 

 

725

 

0.75%, 10/15/18

 

800,672

 

2,290

 

1.50%, 10/15/20

 

2,710,787

 

3,000

 

Illumina, Inc., 0.50%, 6/15/21

 

3,226,875

 

1,300

 

Ionis Pharmaceuticals, Inc., 1.00%, 11/15/21

 

1,404,000

 

2,295

 

Medicines Co., 2.75%, 7/15/23

 

2,454,216

 

 

 

 

 

10,596,550

 

 

 

Commercial Services – 0.2%

 

 

 

2,000

 

Live Nation Entertainment, Inc., 2.50%, 5/15/19

 

2,362,500

 

 

 

Computers – 0.4%

 

 

 

1,310

 

Carbonite, Inc., 2.50%, 4/1/22 (a)(b)

 

1,526,150

 

3,570

 

Electronics For Imaging, Inc., 0.75%, 9/1/19

 

3,860,062

 

 

 

 

 

5,386,212

 

 

 

Diversified Financial Services – 1.0%

 

 

 

2,000

 

Blackhawk Network Holdings, Inc., 1.50%, 1/15/22 (a)(b)

 

2,253,750

 

5,000

 

Encore Capital Group, Inc., 2.875%, 3/15/21

 

4,834,375

 

7,130

 

PRA Group, Inc., 3.00%, 8/1/20

 

6,907,187

 

 

 

 

 

13,995,312

 

 

July 31, 2017 | Semi-Annual Report 43


 

Schedule of Investments

AllianzGI NFJ Dividend, Interest & Premium Strategy Fund

July 31, 2017 (unaudited) (continued)

 

 

 

 

 

 

 

 

 

 

 

 

Principal
Amount
(000s)

 

 

 

Value

 

 

 

Electric Utilities – 0.3%

 

 

 

$4,300

 

NRG Yield, Inc., 3.25%, 6/1/20 (a)(b)

 

$4,297,313

 

 

 

Electrical Equipment – 0.4%

 

 

 

 

 

SunPower Corp.,

 

 

 

3,900

 

0.875%, 6/1/21

 

3,171,187

 

2,365

 

4.00%, 1/15/23

 

2,134,413

 

 

 

 

 

5,305,600

 

 

 

Electronics – 0.0%

 

 

 

400

 

Fluidigm Corp., 2.75%, 2/1/34

 

229,000

 

 

 

Energy-Alternate Sources – 0.3%

 

 

 

4,175

 

SolarCity Corp., 1.625%, 11/1/19

 

3,945,375

 

 

 

SunEdison, Inc. (a)(b)(c)(h),

 

 

 

2,915

 

2.625%, 6/1/23 (acquisition cost-$2,777,292; purchased 7/24/15)

 

72,875

 

3,820

 

3.375%, 6/1/25 (acquisition cost-$1,849,469; purchased 10/7/15-1/7/16)

 

95,500

 

 

 

 

 

4,113,750

 

 

 

Equity Real Estate Investment Trusts (REITs) – 0.3%

 

 

 

4,000

 

Two Harbors Investment Corp., 6.25%, 1/15/22

 

4,232,500

 

 

 

Healthcare-Products – 0.9%

 

 

 

3,750

 

Hologic, Inc., zero coupon, 12/15/43 (g)

 

4,694,531

 

2,625

 

NuVasive, Inc., 2.25%, 3/15/21

 

3,291,094

 

4,040

 

Wright Medical Group, Inc., 2.00%, 2/15/20

 

4,426,325

 

 

 

 

 

12,411,950

 

 

 

Healthcare-Services – 0.3%

 

 

 

2,235

 

Molina Healthcare, Inc., 1.125%, 1/15/20

 

3,799,500

 

 

 

Home Builders – 0.2%

 

 

 

2,000

 

KB Home, 1.375%, 2/1/19

 

2,145,000

 

 

 

Insurance – 0.1%

 

 

 

2,530

 

AmTrust Financial Services, Inc., 2.75%, 12/15/44

 

1,989,213

 

 

 

Internet – 2.3%

 

 

 

2,950

 

Altaba, Inc., zero coupon, 12/1/18

 

3,488,375

 

1,000

 

FireEye, Inc., Ser. A, 1.00%, 6/1/35

 

947,500

 

4,500

 

FireEye, Inc., Ser. B, 1.625%, 6/1/35

 

4,109,063

 

2,620

 

Liberty Expedia Holdings, Inc., 1.00%, 6/30/47 (a)(b)

 

2,859,075

 

2,610

 

Palo Alto Networks, Inc., zero coupon, 7/1/19

 

3,399,525

 

 

 

Priceline Group, Inc.,

 

 

 

2,000

 

0.35%, 6/15/20

 

3,152,500

 

5,000

 

0.90%, 9/15/21

 

5,965,625

 

5,530

 

Twitter, Inc., 0.25%, 9/15/19

 

5,253,500

 

1,015

 

VeriSign, Inc., 4.452%, 8/15/37

 

3,013,281

 

 

 

 

 

32,188,444

 

 

 

Iron/Steel – 0.1%

 

 

 

1,000

 

AK Steel Corp., 5.00%, 11/15/19

 

1,359,375

 

 

 

Media – 0.8%

 

 

 

7,195

 

DISH Network Corp., 3.375%, 8/15/26 (a)(b)

 

8,975,762

 

1,640

 

Liberty Media Corp., 1.375%, 10/15/23

 

2,077,552

 

 

 

 

 

11,053,314

 

 

44 Semi-Annual Report | July 31, 2017


 

Schedule of Investments

AllianzGI NFJ Dividend, Interest & Premium Strategy Fund

July 31, 2017 (unaudited) (continued)

 

 

 

 

 

 

 

 

 

 

 

 

Principal
Amount
(000s)

 

 

 

Value

 

 

 

Metal Fabricate/Hardware – 0.2%

 

 

 

$3,110

 

RTI International Metals, Inc., 1.625%, 10/15/19

 

$3,463,763

 

 

 

Mining – 0.1%

 

 

 

1,500

 

Royal Gold, Inc., 2.875%, 6/15/19

 

1,668,750

 

 

 

Oil, Gas & Consumable Fuels – 1.0%

 

 

 

4,240

 

Chesapeake Energy Corp., 5.50%, 9/15/26 (a)(b)

 

4,028,000

 

600

 

Helix Energy Solutions Group, Inc., 4.25%, 5/1/22

 

589,125

 

2,000

 

Nabors Industries, Inc., 0.75%, 1/15/24 (a)(b)

 

1,578,750

 

3,000

 

SM Energy Co., 1.50%, 7/1/21

 

2,799,375

 

4,260

 

Weatherford International Ltd., 5.875%, 7/1/21

 

4,531,575

 

 

 

 

 

13,526,825

 

 

 

Pharmaceuticals – 0.5%

 

 

 

3,600

 

Jazz Investments I Ltd., 1.875%, 8/15/21

 

3,942,000

 

515

 

TESARO, Inc., 3.00%, 10/1/21

 

1,906,144

 

885

 

Teva Pharmaceutical Finance Co. LLC, Ser. C, 0.25%, 2/1/26

 

951,375

 

 

 

 

 

6,799,519

 

 

 

Pipelines – 0.2%

 

 

 

4,335

 

Cheniere Energy, Inc., 4.25%, 3/15/45

 

2,993,859

 

 

 

Retail – 0.4%

 

 

 

5,950

 

RH, zero coupon, 7/15/20 (a)(b)

 

4,931,063

 

 

 

Semiconductors – 4.3%

 

 

 

1,655

 

Advanced Micro Devices, Inc., 2.125%, 9/1/26

 

3,107,263

 

3,875

 

Cypress Semiconductor Corp., 4.50%, 1/15/22

 

4,889,766

 

155

 

Inphi Corp., 0.75%, 9/1/21 (a)(b)

 

157,131

 

5,000

 

Integrated Device Technology, Inc., 0.875%, 11/15/22

 

5,318,750

 

 

 

Intel Corp.,

 

 

 

4,155

 

3.25%, 8/1/39

 

7,169,993

 

3,605

 

3.493%, 12/15/35

 

4,882,522

 

2,550

 

Lam Research Corp., 1.25%, 5/15/18

 

6,732,000

 

 

 

Microchip Technology, Inc. (a)(b),

 

 

 

8,685

 

1.625%, 2/15/27

 

9,662,062

 

2,000

 

2.25%, 2/15/37

 

2,195,000

 

400

 

Micron Technology, Inc., Ser. D, 3.125%, 5/1/32

 

1,145,750

 

7,925

 

Micron Technology, Inc., Ser. G, 3.00%, 11/15/43

 

8,563,953

 

655

 

Novellus Systems, Inc., 2.625%, 5/15/41

 

3,098,150

 

2,000

 

Veeco Instruments, Inc., 2.70%, 1/15/23

 

2,152,500

 

 

 

 

 

59,074,840

 

 

 

Software – 1.6%

 

 

 

1,000

 

Evolent Health, Inc., 2.00%, 12/1/21 (a)(b)

 

1,276,250

 

950

 

Medidata Solutions, Inc., 1.00%, 8/1/18

 

1,311,000

 

 

 

Nuance Communications, Inc.,

 

 

 

1,450

 

1.00%, 12/15/35

 

1,405,594

 

1,950

 

1.25%, 4/1/25 (a)(b)

 

1,974,375

 

2,300

 

Proofpoint, Inc., 0.75%, 6/15/20

 

2,880,750

 

1,970

 

Red Hat, Inc., 0.25%, 10/1/19

 

2,799,862

 

2,950

 

Salesforce.com, Inc., 0.25%, 4/1/18

 

4,083,906

 

 

July 31, 2017 | Semi-Annual Report 45


 

Schedule of Investments

AllianzGI NFJ Dividend, Interest & Premium Strategy Fund

July 31, 2017 (unaudited) (continued)

 

 

 

 

 

 

 

 

 

 

 

 

Principal
Amount
(000s)

 

 

 

Value

 

 

 

Software (continued)

 

 

 

$2,500

 

ServiceNow, Inc., zero coupon, 11/1/18

 

$3,809,375

 

2,000

 

Workday, Inc., 0.75%, 7/15/18

 

2,572,500

 

 

 

 

 

22,113,612

 

 

 

Telecommunications – 0.9%

 

 

 

785

 

Ciena Corp., 3.75%, 10/15/18

 

1,081,338

 

 

 

Finisar Corp.,

 

 

 

3,300

 

0.50%, 12/15/33

 

3,762,000

 

2,980

 

0.50%, 12/15/36 (a)(b)

 

2,978,137

 

5,000

 

Gogo, Inc., 3.75%, 3/1/20

 

4,659,375

 

 

 

 

 

12,480,850

 

 

 

Transportation – 0.4%

 

 

 

2,620

 

Atlas Air Worldwide Holdings, Inc., 2.25%, 6/1/22

 

2,922,937

 

2,390

 

Greenbrier Cos., Inc., 2.875%, 2/1/24 (a)(b)

 

2,594,644

 

 

 

 

 

5,517,581

 

Total Convertible Bonds & Notes (cost-$270,092,433)

 

270,681,262

 



Shares

 

 

 

 

 

Convertible Preferred Stock – 7.6%

 

 

 

 

 

Agriculture – 0.2%

 

 

 

18,080

 

Bunge Ltd., 4.875% (e)

 

1,976,370

 

 

 

Banks – 1.3%

 

 

 

7,465

 

Bank of America Corp., Ser. L, 7.25% (e)

 

9,689,570

 

1,455

 

Huntington Bancshares, Inc., Ser. A, 8.50% (e)

 

2,102,475

 

4,440

 

Wells Fargo & Co., Ser. L, 7.50% (e)

 

5,894,100

 

 

 

 

 

17,686,145

 

 

 

Chemicals – 0.3%

 

 

 

34,000

 

Rayonier Advanced Materials, Inc., Ser. A, 8.00%, 8/15/19

 

3,802,900

 

 

 

Commercial Services & Supplies – 0.1%

 

 

 

30,390

 

Stericycle, Inc., 5.25%, 9/15/18

 

1,914,874

 

 

 

Computers – 0.4%

 

 

 

3,984

 

NCR Corp., Ser. A, 5.50%, PIK (e)

 

5,860,464

 

 

 

Diversified Telecommunication Services – 0.2%

 

 

 

110,050

 

Frontier Communications Corp., Ser. A, 11.125%, 6/29/18

 

2,791,968

 

 

 

Electric Utilities – 0.4%

 

 

 

100,000

 

NextEra Energy, Inc., 6.123%, 9/1/19

 

5,556,000

 

 

 

Equity Real Estate Investment Trusts (REITs) – 0.6%

 

 

 

10,000

 

American Tower Corp., 5.50%, 2/15/18

 

1,222,520

 

3,530

 

Crown Castle International Corp., Ser. A, 6.875%, 8/1/20

 

3,767,128

 

55,725

 

Welltower, Inc., Ser. I, 6.50% (e)

 

3,644,415

 

 

 

 

 

8,634,063

 

 

 

Food & Beverage – 0.2%

 

 

 

17,500

 

Post Holdings, Inc., 2.50% (e)

 

2,754,063

 

 

46 Semi-Annual Report | July 31, 2017


 

Schedule of Investments

AllianzGI NFJ Dividend, Interest & Premium Strategy Fund

July 31, 2017 (unaudited) (continued)

 

 

 

 

 

 

 

 

 

 

 

 



Shares

 

 

 

Value

 

 

 

Hand/Machine Tools – 0.2%

 

 

 

31,000

 

Stanley Black & Decker, Inc., 5.375%, 5/15/20

 

$3,327,230

 

 

 

Health Care Providers & Services – 0.5%

 

 

 

125,775

 

Anthem, Inc., 5.25%, 5/1/18

 

6,474,897

 

 

 

Healthcare-Products – 0.4%

 

 

 

108,135

 

Becton Dickinson and Co., Ser. A, 6.125%, 5/1/20

 

6,070,699

 

 

 

Independent Power Producers & Energy Traders – 0.1%

 

 

 

57,635

 

Dynegy, Inc., Ser. A, 5.375%, 11/1/17

 

1,732,508

 

 

 

Investment Companies – 0.3%

 

 

 

24,100

 

Mandatory Exchangeable Trust, 5.75%, 6/3/19 (a)(b)

 

4,308,718

 

 

 

Oil, Gas & Consumable Fuels – 1.0%

 

 

 

45,100

 

ATP Oil & Gas Corp., 8.00% (a)(b)(e)(h) 
(acquisition cost-$4,510,000; purchased 9/23/09)

 

5

 

16,265

 

Energy XXI Ltd., 5.625% (e)(i)

 

8,295

 

56,750

 

Kinder Morgan, Inc., Ser. A, 9.75%, 10/26/18

 

2,512,322

 

224,530

 

Sanchez Energy Corp., Ser. B, 6.50% (e)

 

4,894,754

 

89,005

 

Southwestern Energy Co., Ser. B, 6.25%, 1/15/18

 

1,230,939

 

96,625

 

WPX Energy, Inc., Ser. A, 6.25%, 7/31/18

 

4,853,474

 

 

 

 

 

13,499,789

 

 

 

Pharmaceuticals – 1.0%

 

 

 

11,410

 

Allergan PLC, Ser. A, 5.50%, 3/1/18

 

10,200,654

 

6,225

 

Teva Pharmaceutical Industries Ltd., 7.00%, 12/15/18

 

3,610,811

 

 

 

 

 

13,811,465

 

 

 

Wireless Telecommunication Services – 0.4%

 

 

 

47,835

 

T-Mobile U.S., Inc., 5.50%, 12/15/17

 

4,795,459

 

Total Convertible Preferred Stock (cost-$128,678,175)

 

104,997,612

 

 

 

 

 

 

 

Principal
Amount
(000s)

 

 

 

 

 

Corporate Bonds & Notes (a)(b) – 0.6%

 

 

 

 

 

Oil, Gas & Consumable Fuels – 0.6%

 

 

 

 

 

Cobalt International Energy, Inc.,

 

 

 

$4,647

 

7.75%, 12/1/23

 

3,043,785

 

5,350

 

10.75%, 12/1/21

 

5,283,125

 

Total Corporate Bonds & Notes (cost-$11,153,991)

 

8,326,910

 



Units

 

 

 

 

 

Warrants (a)(d)(i) – 0.0%

 

 

 

 

 

Commercial Services – 0.0%

 

 

 

97,838

 

Cenveo Corp., strike price $12.00, expires 6/10/24, expires 6/10/24 (cost-$0)

 

22,173

 

 

July 31, 2017 | Semi-Annual Report 47

 


 

Schedule of Investments

AllianzGI NFJ Dividend, Interest & Premium Strategy Fund

July 31, 2017 (unaudited) (continued)

 

 

 

 

 

 

 

 

 

 

 

 

Principal
Amount
(000s)

 

 

 

Value

 

Repurchase Agreements – 4.1%

 

 

 

$56,516

 

State Street Bank and Trust Co.,
dated 7/31/17, 0.12%, due
8/1/17, proceeds $56,516,188;
collateralized by U.S. Treasury Notes,
2.00%, due 2/15/25, valued at
$57,654,193 including accrued
interest (cost-$56,516,000)

 

$56,516,000

 

Total Investments, before options written
(cost-$1,316,728,104) – 100.0%

 

1,382,721,459

 



Contracts

 

 

 

 

 

Call Options Written (i) – (0.4)%

 

 

 

 

 

Consumer Discretionary Select Sector SPDR Index, (CBOE),

 

 

 

2,500

 

strike price $91.00, expires 8/4/17

 

(171,250

)

1,800

 

strike price $90.50, expires 8/11/17

 

(220,500

)

1,800

 

strike price $91.00, expires 8/18/17

 

(186,300

)

1,800

 

strike price $92.00, expires 8/25/17

 

(122,400

)

2,000

 

strike price $92.50, expires 9/1/17

 

(122,000

)

 

 

KBW Bank Index, (OTC),

 

 

 

3,200

 

strike price $96.50, expires 8/4/17

 

(115,482

)

2,800

 

strike price $100.50, expires 8/11/17

 

(4,372

)

2,800

 

strike price $100.00, expires 8/18/17

 

(29,089

)

2,800

 

strike price $97.50, expires 8/25/17

 

(232,420

)

2,800

 

strike price $98.50, expires 9/1/17

 

(175,925

)

 

 

Nasdaq 100 Stock Index, (OTC),

 

 

 

20

 

strike price $5,850.00, expires 8/4/17

 

(116,900

)

15

 

strike price $5,775.00, expires 8/11/17

 

(200,550

)

10

 

strike price $5,925.00, expires 8/18/17

 

(48,600

)

15

 

strike price $5,990.00, expires 8/25/17

 

(50,925

)

20

 

strike price $6,000.00, expires 9/1/17

 

(81,400

)

 

 

PHLX Oil Service Index, (OTC),

 

 

 

1,500

 

strike price $140.00, expires 8/4/17

 

(20,307

)

1,400

 

strike price $139.00, expires 8/11/17

 

(124,319

)

1,400

 

strike price $142.50, expires 8/18/17

 

(99,010

)

1,300

 

strike price $143.50, expires 8/25/17

 

(118,332

)

1,400

 

strike price $144.00, expires 9/1/17

 

(156,575

)

 

 

S&P 500 Index, (OTC),

 

 

 

125

 

strike price $2,445.00, expires 8/4/17

 

(343,125

)

150

 

strike price $2,450.00, expires 8/4/17

 

(344,250

)

105

 

strike price $2,435.00, expires 8/11/17

 

(410,025

)

105

 

strike price $2,440.00, expires 8/11/17

 

(363,300

)

105

 

strike price $2,440.00, expires 8/18/17

 

(387,450

)

105

 

strike price $2,455.00, expires 8/18/17

 

(263,025

)

105

 

strike price $2,470.00, expires 8/18/17

 

(151,200

)

 

48 Semi-Annual Report | July 31, 2017


 

Schedule of Investments

AllianzGI NFJ Dividend, Interest & Premium Strategy Fund

July 31, 2017 (unaudited) (continued)

 

 

 

 

 

 

 

 

 

 

 

 



Contracts

 

 

 

Value

 

105

 

strike price $2,465.00, expires 8/25/17

 

$(219,975

)

105

 

strike price $2,475.00, expires 8/25/17

 

(154,875

)

120

 

strike price $2,480.00, expires 8/25/17

 

(144,600

)

105

 

strike price $2,465.00, expires 9/1/17

 

(250,425

)

105

 

strike price $2,480.00, expires 9/1/17

 

(154,875

)

120

 

strike price $2,480.00, expires 9/8/17

 

(208,200

)

120

 

strike price $2,480.00, expires 9/15/17

 

(242,400

)

Total Call Options Written (cost-$5,994,457)

 

(6,034,381

)

Total Investments, net of options written
(cost-$1,310,733,647) – 99.6%

 

1,376,687,078

 

Other assets less other liabilities – 0.4%

 

5,498,858

 

Net Assets – 100.0%

 

$1,382,185,936

 

 

 

Notes to Schedule of Investments:

(a)         Private Placement–Restricted as to resale and may not have a readily available market. Securities with an aggregate value of $55,786,733, representing 4.0% of net assets.

(b)         144A–Exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, typically only to qualified institutional buyers. Securities with an aggregate value of $55,764,560, representing 4.0% of net assets.

(c)          In default.

(d)         Fair-Valued–Security with a value of $22,173, representing less than 0.05% of net assets. See Note 1(a) and Note 1(b) in the Notes to Financial Statements.

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

(f)           All or partial amount segregated for the benefit of the counterparty as collateral for options written.

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

(h)         Restricted. The aggregate acquisition cost of such securities is $9,136,761. The aggregate value is $168,380, representing less than 0.05% of net assets.

(i)             Non-income producing.

(j)            Transactions in options written for the six months ended July 31, 2017:

 

 

 

Contracts

 

Premiums

 

Options outstanding, January 31, 2017

 

 

30,700

 

 

 

$5,895,707

 

 

Options written

 

 

172,410

 

 

 

30,476,453

 

 

Options terminated in closing transactions

 

 

(47,390

)

 

 

(6,231,562

)

 

Options expired

 

 

(97,145

)

 

 

(13,003,311

)

 

Options exercised

 

 

(25,615

)

 

 

(11,142,830

)

 

Options outstanding, July 31, 2017

 

 

32,960

 

 

 

$5,994,457

 

 

 

(k)         Fair Value Measurements–See Note 1(b) in the Notes to Financial Statements.

 

 

 

Level 1 –
Quoted Prices

 

Level 2 –
Other Significant
Observable
Inputs

 

Level 3 –
Significant
Unobservable
Inputs

 

Value at
7/31/17

 

Investments in Securities – Assets

 

 

 

 

 

 

 

 

 

Common Stock

 

$942,177,502

 

$–

 

$–

 

$942,177,502

 

Convertible Bonds & Notes

 

 

270,681,262

 

 

270,681,262

 

Convertible Preferred Stock:

 

 

 

 

 

 

 

 

 

Agriculture

 

 

1,976,370

 

 

1,976,370

 

Computers

 

 

5,860,464

 

 

5,860,464

 

 

July 31, 2017 | Semi-Annual Report 49


 

Schedule of Investments

AllianzGI NFJ Dividend, Interest & Premium Strategy Fund

July 31, 2017 (unaudited) (continued)

 

 

 

 

 

Level 1 –
Quoted Prices

 

Level 2 –
Other Significant
Observable
Inputs

 

Level 3 –
Significant
Unobservable
Inputs

 

Value at
7/31/17

 

Equity Real Estate Investment Trusts (REITs)

 

$7,411,543

 

$1,222,520

 

$–

 

$8,634,063

 

Food & Beverage

 

 

2,754,063

 

 

2,754,063

 

Healthcare-Products

 

 

6,070,699

 

 

6,070,699

 

Investment Companies

 

 

4,308,718

 

 

4,308,718

 

Oil, Gas & Consumable Fuels

 

8,596,735

 

4,903,054

 

 

13,499,789

 

Pharmaceuticals

 

10,200,654

 

3,610,811

 

 

13,811,465

 

All Other

 

48,081,981

 

 

 

48,081,981

 

Corporate Bonds & Notes

 

 

8,326,910

 

 

8,326,910

 

Warrants

 

 

 

22,173

 

22,173

 

Repurchase Agreements

 

 

56,516,000

 

 

56,516,000

 

 

 

1,016,468,415

 

366,230,871

 

22,173

 

1,382,721,459

 

Investments in Securities – Liabilities

 

 

 

 

 

 

 

 

 

Options Written:

 

 

 

 

 

 

 

 

 

Market Price

 

(4,958,550

)

(1,075,831

)

 

(6,034,381

)

Totals

 

$1,011,509,865

 

$365,155,040

 

$22,173

 

$1,376,687,078

 

 

At July 31, 2017, a security valued at $1,222,520 was transferred from Level 1 to Level 2. This transfer was a result of a security with an exchange-traded closing price at January 31, 2017, which was not available on July 31, 2017.

 

A roll forward of fair value measurements using significant unobservable inputs (Level 3) for the six months ended July 31, 2017, was as follows:

 

 

 

Beginning
Balance
1/31/17

 

Purchases

 

Sales

 

Accrued
Discount
(Premiums)

 

Net
Realized
Gain
(Loss)

 

Net
Change in
Unrealized
Appreciation/
Depreciation

 

Transfers
into
Level 3

 

Transfers
out of
Level 3

 

Ending
Balance
7/31/17

 

Investments in Securities – Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Warrants

 

$28,118

 

 

 

 

 

$(5,945)

 

 

 

$22,173

 

 

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 July 31, 2017:

 

 

 

Ending Balance
at 7/31/17

 

Valuation
Technique Used

 

Unobservable
Inputs

 

Input
Values

 

Investments in Securities – Assets

 

 

 

 

 

 

 

Warrants 

 

$22,173

 

Fundamental Analytical Data Relating to the Investment

 

Price of Warrant

 

$0.22663

 

 

 

The net change in unrealized appreciation/depreciation of Level 3 investments held at July 31, 2017, was $(5,945). The change in unrealized appreciation/depreciation is reflected on the Statements of Operations.

 

50 Semi-Annual Report | July 31, 2017


 

Schedule of Investments

AllianzGI NFJ Dividend, Interest & Premium Strategy Fund

July 31, 2017 (unaudited) (continued)

 

 

 

(l)             The following is a summary of the Fund’s derivatives categorized by risk exposure:

 

The effect of derivatives on the Fund’s Statements of Assets and Liabilities at July 31, 2017:

 

Location

 

Market Price

 

Liability derivatives:

 

 

 

Options written, at value

 

$(6,034,381)

 

 

The effect of derivatives on the Fund’s Statements of Operations for the six months ended July 31, 2017:

 

Location

 

Market Price

 

Net realized loss on:

 

 

 

Options written

 

$(5,767,982)

 

Net change in unrealized appreciation/depreciation of:

 

 

 

Options written

 

$(1,646,781)

 

 

The average volume (based on the open positions at each fiscal month-end) of derivative activity during the six months ended July 31, 2017 was 32,019 call options written contracts.

 

Glossary:

ADR

-

American Depositary Receipt

CBOE

-

Chicago Board Options Exchange

OTC

-

Over-the-Counter

PIK

-

Payment-in-Kind

REIT

-

Real Estate Investment Trust

SPDR

-

Standard & Poor’s Depositary Receipts

 

See accompanying Notes to Financial Statements | July 31, 2017 | Semi-Annual Report 51


 

Statements of Assets and Liabilities

AllianzGI Diversified Income & Convertible Fund

AllianzGI Equity & Convertible Income Fund

AllianzGI NFJ Dividend, Interest & Premium Strategy Fund

July 31, 2017 (unaudited)

 

 

 

Diversified
Income &
Convertible

 

 

Equity &
Convertible
Income

 

 

Dividend,
Interest &
Premium
Strategy

 

Assets:

 

 

 

 

 

 

 

 

 

Investments, at value (cost-$360,120,612, $669,923,230 and $1,316,728,104, respectively)

 

$335,742,276

 

 

$617,740,028

 

 

$1,382,721,459

 

Cash

 

 

 

1,694,834

 

 

1,581

 

Receivable for investments sold

 

13,137,968

 

 

18,961,288

 

 

49,253,143

 

Interest and dividends receivable

 

2,107,541

 

 

1,448,973

 

 

3,555,357

 

Prepaid expenses and other assets

 

7,607

 

 

7,205

 

 

26,257

 

Investments in Affiliated Funds- Trustees Deferred Compensation Plan (see Note 4)

 

14,976

 

 

38,824

 

 

92,254

 

Total Assets

 

351,010,368

 

 

639,891,152

 

 

1,435,650,051

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

Loan payable (See Note 7 and Note 8)

 

75,000,000

 

 

 

 

 

Payable for investments purchased

 

12,730,848

 

 

24,857,991

 

 

46,128,322

 

Dividends payable to common shareholders

 

1,715,920

 

 

 

 

 

Loan interest payable

 

807,110

 

 

 

 

 

Payable to custodian for cash overdraft

 

5,124

 

 

 

 

 

Investment management fees payable

 

265,197

 

 

484,302

 

 

981,436

 

Interest payable on dividends to mandatory redeemable preferred shareholders

 

103,166

 

 

 

 

 

Call options written, at value (premiums received- $84,372, $437,045 and $5,994,457, respectively)

 

48,105

 

 

243,730

 

 

6,034,381

 

Trustees Deferred Compensation Plan payable (see Note 4)

 

14,976

 

 

38,824

 

 

92,254

 

Accrued expenses

 

170,990

 

 

137,704

 

 

227,722

 

Mandatory redeemable preferred shares (see Note 7)

 

30,000,000

 

 

 

 

 

Total Liabilities

 

120,861,436

 

 

25,762,551

 

 

53,464,115

 

Net Assets Applicable to Common Shareholders

 

$230,148,932

 

 

$614,128,601

 

 

$1,382,185,936

 

 

 

 

 

 

 

 

 

 

 

Composition of Net Assets Applicable to Common Shareholders:

 

 

 

 

 

 

 

 

 

Common Stock:

 

 

 

 

 

 

 

 

 

Par value ($0.00001 per share)

 

$103

 

 

$277

 

 

$948

 

Paid-in-capital in excess of par

 

250,781,385

 

 

671,525,781

 

 

1,564,468,707

 

Dividends in excess of net investment income

 

(8,814,517

)

 

(4,093,820

)

 

(46,832,116

)

Accumulated net realized gain (loss)

 

12,524,030

 

 

(1,310,756

)

 

(201,405,034

)

Net unrealized appreciation (depreciation)

 

(24,342,069

)

 

(51,992,881

)

 

65,953,431

 

Net Assets Applicable to Common Shareholders

 

$230,148,932

 

 

$614,128,601

 

 

$1,382,185,936

 

Common Shares Issued and Outstanding

 

10,274,970

 

 

27,708,965

 

 

94,801,581

 

Net Asset Value Per Common Share

 

$22.40

 

 

$22.16

 

 

$14.58

 

 

52 Semi-Annual Report | July 31, 2017 | See accompanying Notes to Financial Statements

 


 

Statements of Operations

AllianzGI Diversified Income & Convertible Fund

AllianzGI Equity & Convertible Income Fund

AllianzGI NFJ Dividend, Interest & Premium Strategy Fund

Six Months ended July 31, 2017 (unaudited)

 

 

 

Diversified
Income &
Convertible

 

 

Equity &
Convertible
Income

 

 

Dividend,
Interest &
Premium
Strategy

 

Investment Income:

 

 

 

 

 

 

 

 

 

Interest

 

$3,773,362

 

 

$2,056,788

 

 

$3,551,123

 

Dividends (net of foreign withholding taxes of $12,128, $15,540 and $360,350, respectively)

 

1,669,459

 

 

8,516,302

 

 

18,600,000

 

Miscellaneous

 

18,625

 

 

349

 

 

2,700

 

Total Investment Income

 

5,461,446

 

 

10,573,439

 

 

22,153,823

 

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

 

Investment management

 

1,640,408

 

 

3,002,963

 

 

6,165,733

 

Loan interest

 

1,228,296

 

 

 

 

 

Interest on dividends to mandatory redeemable preferred shareholders

 

643,886

 

 

 

 

 

Custodian and accounting agent

 

55,386

 

 

49,742

 

 

108,600

 

Audit and tax services

 

40,882

 

 

40,829

 

 

49,254

 

Legal

 

31,080

 

 

17,956

 

 

46,569

 

Shareholder communications

 

30,388

 

 

34,824

 

 

85,259

 

Transfer agent

 

15,544

 

 

11,683

 

 

12,165

 

Trustees

 

6,870

 

 

16,831

 

 

39,390

 

New York Stock Exchange listing

 

6,250

 

 

7,101

 

 

24,293

 

Insurance

 

4,612

 

 

7,742

 

 

15,007

 

Miscellaneous

 

15,183

 

 

7,465

 

 

31,222

 

Total Expenses

 

3,718,785

 

 

3,197,136

 

 

6,577,492

 

 

 

 

 

 

 

 

 

 

 

Net Investment Income

 

1,742,661

 

 

7,376,303

 

 

15,576,331

 

 

 

 

 

 

 

 

 

 

 

Realized and Change in Unrealized Gain (Loss):

 

 

 

 

 

 

 

 

 

Net realized gain (loss) on:

 

 

 

 

 

 

 

 

 

Investments

 

13,517,895

 

 

18,540,648

 

 

42,844,100

 

Call options written

 

(180,279

)

 

(1,083,751

)

 

(5,767,982

)

Net change in unrealized appreciation/depreciation of:

 

 

 

 

 

 

 

 

 

Investments

 

3,497,799

 

 

13,293,121

 

 

(7,054,560

)

Call options written

 

17,328

 

 

147,987

 

 

(1,646,781

)

Foreign currency transactions

 

 

 

2,179

 

 

 

Net realized and change in unrealized gain

 

16,852,743

 

 

30,900,184

 

 

28,374,777

 

 

 

 

 

 

 

 

 

 

 

Net Increase in Net Assets Resulting from Investment Operations

 

$18,595,404

 

 

$38,276,487

 

 

$43,951,108

 

 

See accompanying Notes to Financial Statements | July 31, 2017 | Semi-Annual Report 53

 


 

Statement of Changes in Net Assets Applicable to Common Shareholders

AllianzGI Diversified Income & Convertible Fund

 

 

 

 

 

Six Months
ended
July 31, 2017
(unaudited)

 

 

Year ended
January 31, 2017

 

Investment Operations:

 

 

 

 

 

 

Net investment income

 

$1,742,661

 

 

$4,003,036

 

Net realized gain

 

13,337,616

 

 

17,171,792

 

Net change in unrealized appreciation/depreciation

 

3,515,127

 

 

26,235,147

 

Net increase in net assets resulting from investment operations

 

18,595,404

 

 

47,409,975

 

 

 

 

 

 

 

 

Dividends and Distributions to Common Shareholders from:

 

 

 

 

 

 

Net investment income

 

(7,672,178

)

 

(5,346,002

)

Net realized gains

 

(2,623,342

)

 

(15,349,833

)

Total dividends and distributions to common shareholders

 

(10,295,520

)

 

(20,695,835

)

 

 

 

 

 

 

 

Common Share Transactions:

 

 

 

 

 

 

Cost of shares repurchased

 

 

 

(6,509,184

)

Total increase in net assets

 

8,299,884

 

 

20,204,956

 

 

 

 

 

 

 

 

Net Assets:

 

 

 

 

 

 

Beginning of period

 

221,849,048

 

 

201,644,092

 

End of period*

 

$230,148,932

 

 

$221,849,048

 

* Including dividends in excess of net investment income of:

 

$(8,814,517

)

 

$(2,885,000

)

 

 

 

 

 

 

 

Shares Activity:

 

 

 

 

 

 

Shares outstanding, beginning of period

 

10,274,970

 

 

10,661,039

 

Shares repurchased

 

 

 

(386,069

)

Shares outstanding, end of period

 

10,274,970

 

 

10,274,970

 

 

54 Semi-Annual Report | July 31, 2017 | See accompanying Notes to Financial Statements


 

Statements of Changes in Net Assets

AllianzGI Equity & Convertible Income Fund
AllianzGI Dividend, Interest & Premium Strategy Fund

Equity & Convertible Income:

 

 

 

Six Months
ended
July 31, 2017
(unaudited)

 

 

Year ended
January 31, 2017

 

Investment Operations:

 

 

 

 

 

 

Net investment income

 

$7,376,303

 

 

$11,233,451

 

Net realized gain

 

17,456,897

 

 

16,212,157

 

Net change in unrealized appreciation/depreciation

 

13,443,287

 

 

60,205,403

 

Net increase in net assets resulting from investment operations

 

38,276,487

 

 

87,651,011

 

 

 

 

 

 

 

 

Dividends and Distributions to Shareholders from:

 

 

 

 

 

 

Net investment income

 

(9,046,353

)

 

(14,987,688

)

Net realized gains

 

(12,012,461

)

 

(27,129,938

)

Total dividends and distributions to shareholders

 

(21,058,814

)

 

(42,117,626

)

Total increase in net assets

 

17,217,673

 

 

45,533,385

 

 

 

 

 

 

 

 

Net Assets:

 

 

 

 

 

 

Beginning of period

 

596,910,928

 

 

551,377,543

 

End of period*

 

$614,128,601

 

 

$596,910,928

 

* Including dividends in excess of net investment income of:

 

$(4,093,820

)

 

$(2,423,770

)

 

Dividend, Interest & Premium Strategy:

 

 

 

Six Months
ended
July 31, 2017
(unaudited)

 

 

Year ended
January 31, 2017

 

Investment Operations:

 

 

 

 

 

 

Net investment income

 

$15,576,331

 

 

$32,796,080

 

Net realized gain (loss)

 

37,076,118

 

 

(31,654,348

)

Net change in unrealized appreciation/depreciation

 

(8,701,341

)

 

219,417,196

 

Net increase in net assets resulting from investment operations

 

43,951,108

 

 

220,558,928

 

 

 

 

 

 

 

 

Dividends and Distributions to Shareholders from:

 

 

 

 

 

 

Net investment income

 

(56,880,948

)

 

(34,626,028

)

Return of capital

 

 

 

(79,135,870

)

Total dividends and distributions to shareholders

 

(56,880,948

)

 

(113,761,898

)

Total increase (decrease) in net assets

 

(12,929,840

)

 

106,797,030

 

 

 

 

 

 

 

 

Net Assets:

 

 

 

 

 

 

Beginning of period

 

1,395,115,776

 

 

1,288,318,746

 

End of period*

 

$1,382,185,936

 

 

$1,395,115,776

 

* Including dividends in excess of net investment income of:

 

$(46,832,116

)

 

$(5,527,499

)

 

See accompanying Notes to Financial Statements | July 31, 2017 | Semi-Annual Report 55

 


 

Statement of Cash Flows*

AllianzGI Diversified Income & Convertible Fund

For the Six Months ended July 31, 2017 (unaudited)

 

Increase (Decrease) in Cash from:

 

Cash Flows provided by Operating Activities:

 

 

 

Net increase in net assets resulting from investment operations

 

$18,595,404

 

 

 

 

 

Adjustments to Reconcile Net Increase in Net Assets Resulting from Investment Operations to Net Cash provided by Operating Activities:

 

 

 

Purchases of long-term investments

 

(273,191,647

)

Proceeds from sales of long-term investments

 

282,475,949

 

Purchases of short-term portfolio investments, net

 

(2,080,267

)

Net change in unrealized appreciation/depreciation

 

(3,515,127

)

Net amortization/accretion on investments

 

59,561

 

Net realized gain

 

(13,337,616

)

Increase in payable for investments purchased

 

9,764,142

 

Proceeds from sale of written options

 

308,720

 

Payments to cover written options

 

(484,427

)

Increase in investments in Affiliated Funds – Trustees Deferred Compensation Plan

 

5,716

 

Increase in Trustees Compensation Plan payable

 

(5,716

)

Increase in receivable for investments sold

 

(8,336,116

)

Decrease in interest and dividends receivable

 

38,427

 

Decrease in prepaid expenses and other assets

 

6,289

 

Decrease in investment management fees payable

 

(11,115

)

Increase in accrued expenses

 

20,517

 

Decrease in loan interest payable

 

(15,184

)

Net cash provided by operating activities

 

10,297,510

 

 

 

 

 

Cash Flows used for Financing Activities:

 

 

 

Increase in payable to custodian for cash overdraft

 

5,124

 

Cash dividends paid

 

(10,302,634

)

Net cash used for financing activities

 

(10,297,510

)

Net increase (decrease) in cash

 

 

 

 

 

 

Cash:

 

 

 

Beginning of period

 

 

End of period

 

$–

 

 

 

 

 

Cash Paid for Interest

 

$1,243,480

 

Cash Paid for Interest on Dividends to Mandatory Redeemable Preferred Shares

 

$651,000

 

 

* Statement of Cash Flows is not required for Equity & Convertible Income and Dividend, Interest & Premium Strategy.

 

56 Semi-Annual Report | July 31, 2017 | See accompanying Notes to Financial Statements


 

Financial Highlights

AllianzGI Diversified Income & Convertible Fund

For a common share outstanding throughout each period:

 

 

 

Six Months
ended
July 31, 2017
(unaudited)

 

Year ended
January 31, 2017

 

For the period
May 27, 2015*
through
January 31, 2016

Net asset value, beginning of period

 

$21.59

 

 

$18.91

 

 

$23.88

 

Investment Operations:

 

 

 

 

 

 

 

 

 

Net investment income (1)

 

0.17

 

 

0.39

 

 

0.18

 

Net realized and change in unrealized gain (loss)

 

1.64

 

 

4.21

 

 

(4.09

)

Total from investment operations

 

1.81

 

 

4.60

 

 

(3.91

)

Dividends and Distributions to Common Shareholders from:

 

 

 

 

 

 

 

 

 

Net investment income

 

(0.75

)

 

(0.51

)

 

(0.62

)

Net realized gains

 

(0.25

)

 

(1.49

)

 

(0.55

)

Total dividends and distributions to common shareholders

 

(1.00

)

 

(2.00

)

 

(1.17

)

Common Share Transactions:

 

 

 

 

 

 

 

 

 

Offering costs charged to paid-in-capital in excess of par

 

 

 

 

 

(0.05

)

Accretion to net asset value resulting from share repurchases

 

 

 

0.08

 

 

0.16

 

Net asset value, end of period

 

$22.40

 

 

$21.59

 

 

$18.91

 

Market price, end of period

 

$21.62

 

 

$19.49

 

 

$16.40

 

Total Investment Return (2)

 

16.31

%

 

32.56

%

 

(30.12

)%

RATIOS/SUPPLEMENTAL DATA:

 

 

 

 

 

 

 

 

 

Net assets, end of period (000s)

 

$230,149

 

 

$221,849

 

 

$201,644

 

Ratio of expenses to average net assets, including interest expense (4)(5)

 

3.32

%(3)

 

3.48

%

 

3.26

%(3)

Ratio of expenses to average net assets, excluding interest expense (4)(5)

 

2.22

%(3)

 

2.34

%

 

2.56

%(3)

Ratio of net investment income to average net assets (5)

 

1.56

%(3)

 

1.90

%

 

1.24

%(3)

Mandatory redeemable preferred shares asset coverage per share

 

$216

 

 

$209

 

 

$193

 

Portfolio turnover rate

 

84

%

 

196

%

 

149

%

 

*                 Commencement of operations.

(1)         Calculated on average common shares outstanding.

(2)         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 Fund’s 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.

(3)         Annualized.

(4)         Interest expense relates to participation in the debt financing (See Note 7 and Note 8).

(5)         Calculated on the basis of income and expenses applicable to both common and mandatory redeemable preferred shares relative to average net assets of common shareholders.

 

See accompanying Notes to Financial Statements | July 31, 2017 | Semi-Annual Report 57

 


 

Financial Highlights

AllianzGI Equity & Convertible Income Fund

For a share outstanding throughout each period:

 

 

 

Six Months
ended
July 31, 2017

 

Year ended January 31,

 

 

(unaudited)

 

2017

 

2016

 

2015

 

2014

 

2013

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net asset value, beginning of period

 

$21.54

 

 

$19.90

 

 

$22.13

 

 

$21.79

 

 

$20.10

 

 

$19.28

 

Investment Operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net investment income

 

0.27

 

 

0.41

 

 

0.47

 

 

0.53

 

 

0.56

 

 

0.39

 

Net realized and change in unrealized gain (loss)

 

1.11

 

 

2.75

 

 

(1.18

)

 

1.13

 

 

2.49

 

 

1.55

 

Total from investment operations

 

1.38

 

 

3.16

 

 

(0.71

)

 

1.66

 

 

3.05

 

 

1.94

 

Dividends and Distributions to Shareholders from:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net investment income

 

(0.33

)

 

(0.54

)

 

(0.41

)

 

(0.63

)

 

(0.92

)

 

(0.28

)

Net realized gains

 

(0.43

)

 

(0.98

)

 

(1.11

)

 

(0.69

)

 

(0.44

)

 

(0.84

)

Total dividends and distributions to shareholders

 

(0.76

)

 

(1.52

)

 

(1.52

)

 

(1.32

)

 

(1.36

)

 

(1.12

)

Net asset value, end of period

 

$22.16

 

 

$21.54

 

 

$19.90

 

 

$22.13

(1)

 

$21.79

 

 

$20.10

 

Market price, end of period

 

$20.08

 

 

$19.03

 

 

$16.97

 

 

$20.01

 

 

$18.73

 

 

$17.91

 

Total Investment Return (2)

 

9.68

%

 

21.69

%

 

(8.01

)%

 

14.07

%

 

12.35

%

 

10.92

%

RATIOS/SUPPLEMENTAL DATA:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets, end of period (000s)

 

$614,129

 

 

$596,911

 

 

$551,378

 

 

$613,133

 

 

$603,786

 

 

$448,384

 

Ratio of expenses to average net assets

 

1.06

%(3)

 

1.08

%

 

1.10

%

 

1.13

%

 

1.09

%(4)

 

1.09

%

Ratio of net investment income to average net assets

 

2.46

%(3)

 

1.94

%

 

2.15

%

 

2.34

%

 

2.39

%(4)

 

2.06

%

Portfolio turnover rate

 

56

%

 

90

%

 

110

%

 

63

%

 

82

%

 

122

%

 

(1)   Payment from affiliates increased the net asset value by less than $0.01.

(2)   Total investment return is calculated assuming a purchase of a share at the market price on the first day and a sale of a 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 Fund’s 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.

(3)   Annualized.

(4)   Inclusive of Reimbursement from Investment Manager of 0.02%.

 

58 Semi-Annual Report | July 31, 2017 | See accompanying Notes to Financial Statements

 


 

Financial Highlights

AllianzGI NFJ Dividend, Interest & Premium Strategy Fund

For a share outstanding throughout each period:

 

 

 

Six Months
ended
July 31, 2017

 

Year ended January 31,

 

 

(unaudited)

 

2017

 

 

2016

 

 

2015

 

 

2014

 

 

2013

 

Net asset value, beginning of period

 

$14.72

 

 

$13.59

 

 

$16.95

 

 

$18.19

 

 

$17.91

 

 

$18.06

 

Investment Operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net investment income

 

0.16

 

 

0.35

 

 

0.38

 

 

0.41

 

 

0.49

 

 

0.53

 

Net realized and change in unrealized gain (loss)

 

0.30

 

 

1.98

 

 

(2.09

)

 

0.15

 

 

1.59

 

 

1.12

 

Total from investment operations

 

0.46

 

 

2.33

 

 

(1.71

)

 

0.56

 

 

2.08

 

 

1.65

 

Dividends and Distributions to Shareholders from:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net investment income

 

(0.60

)

 

(0.37

)

 

(0.39

)

 

(0.65

)

 

(0.54

)

 

(0.67

)

Return of capital

 

 

 

(0.83

)

 

(1.26

)

 

(1.15

)

 

(1.26

)

 

(1.13

)

Total dividends and distributions to shareholders

 

(0.60

)

 

(1.20

)

 

(1.65

)

 

(1.80

)

 

(1.80

)

 

(1.80

)

Net asset value, end of period

 

$14.58

 

 

$14.72

 

 

$13.59

 

 

$16.95

(1)

 

$18.19

 

 

$17.91

 

Market price, end of period

 

$13.34

 

 

$13.03

 

 

$11.50

 

 

$15.88

 

 

$17.86

 

 

$16.65

 

Total Investment Return (2)

 

7.15

%

 

24.60

%

 

(18.68

)%

 

(1.75

)%

 

18.83

%

 

6.83

%

RATIOS/SUPPLEMENTAL DATA:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets, end of period (000s)

 

$1,382,186

 

 

$1,395,116

 

 

$1,288,319

 

 

$1,606,718

 

 

$1,719,489

 

 

$1,692,659

 

Ratio of expenses to average net assets

 

0.96

%(3)

 

1.01

%

 

0.97

%

 

0.96

%

 

0.94

%(4)

 

0.97

%

Ratio of net investment income to average net assets

 

2.27

%(3)

 

2.42

%

 

2.41

%

 

2.20

%

 

2.69

%(4)

 

2.97

%

Portfolio turnover rate

 

43

%

 

39

%

 

54

%

 

47

%

 

48

%

 

46

%

 

(1)   Payment from affiliates increased the net asset value by $0.02.

(2)   Total investment return is calculated assuming a purchase of a share at the market price on the first day and a sale of a 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 Fund’s 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.

(3)   Annualized.

(4)   Inclusive of Reimbursement from Investment Manager of 0.02%.

 

See accompanying Notes to Financial Statements | July 31, 2017 | Semi-Annual Report 59


 

Notes to Financial Statements

AllianzGI Diversified Income & Convertible Fund

AllianzGI Equity & Convertible Income Fund

AllianzGI NFJ Dividend, Interest & Premium Strategy Fund

July 31, 2017 (unaudited)

 

 

1. Organization and Significant Accounting Policies

 

AllianzGI Diversified Income & Convertible Fund (“Diversified Income & Convertible”), AllianzGI Equity & Convertible Income Fund (“Equity & Convertible Income”) and AllianzGI NFJ Dividend, Interest & Premium Strategy Fund (“Dividend, Interest & Premium Strategy”) (each, a “Fund” and, collectively, the “Funds”) were organized as Massachusetts business trusts on March 10, 2015, December 12, 2006 and August 20, 2003, respectively. The Funds follow the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 946 Financial Services – Investment Companies. Prior to commencing operations on May 27, 2015, February 27, 2007, and February 28, 2005, respectively, the Funds had no operations other than matters relating to their organization and registration as diversified, closed-end management investment companies registered under the Investment Company Act of 1940, as amended (the “1940 Act”), and the rules and regulations thereunder. Allianz Global Investors U.S. LLC (“AllianzGI U.S.” or the “Investment Manager”) serves as the Funds’ investment manager and during part of the reporting period, NFJ Investment Group LLC (“NFJ” or the “Sub-Adviser”), an affiliate of the Investment Manager, served as a sub-adviser to Dividend, Interest & Premium Strategy. On July 1, 2017, NFJ merged with and into AllianzGI U.S. (the “NFJ Merger”). As of July 1, 2017, AllianzGI U.S. assumed all services and responsibilities that had been provided by NFJ and Dividend, Interest & Premium Strategy ceased to have a sub-adviser. The NFJ Merger did not result in any change to the manner in which investment management services are provided to the Fund, the personnel responsible for providing investment management services to the Fund or the personnel ultimately responsible for overseeing the provision of such services. The Investment Manager is, and NFJ prior to its merger with and into AllianzGI U.S. on July 1, 2017, was, an indirect wholly-owned subsidiary 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.

 

Diversified Income & Convertible’s investment objective is to provide total return through a combination of current income and capital appreciation, while seeking to provide downside protection against capital loss. Under normal market conditions, the Fund will seek to achieve its investment objective by investing in a combination of convertible securities, debt and other income-producing instruments and common stocks and other equity securities. The Fund expects to employ a strategy of writing (selling) covered call options on the stocks held in the equity portion of the portfolio.

 

Equity & Convertible Income’s investment objective is to seek total return comprised of capital appreciation, current income and gains. Under normal market conditions the

 

60 Semi-Annual Report | July 31, 2017

 


 

Notes to Financial Statements

AllianzGI Diversified Income & Convertible Fund

AllianzGI Equity & Convertible Income Fund

AllianzGI NFJ Dividend, Interest & Premium Strategy Fund

July 31, 2017 (unaudited)

 

 

1. Organization and Significant Accounting Policies (continued)

Fund pursues its objective by investing in a diversified portfolio of equity securities and income-producing convertible securities. The Fund will also employ a strategy of writing (selling) call options on the equity securities held by the Fund as well as on equity indexes.

 

Dividend, Interest & Premium Strategy’s primary investment objective is to seek current income and gains, with a secondary objective of long-term capital appreciation. Under normal market conditions the Fund pursues its investment objectives by investing in a diversified portfolio of dividend-paying common stocks and income-producing convertible securities. The Fund will also employ a strategy of writing (selling) call options on equity indexes in an attempt to generate gains from option premiums.

 

Effective June 28, 2017, pursuant to Board approval, the Fund may invest up to 10% of its total assets in securities issued by master limited partnerships (“MLPs”), including, without limitation, common units, preferred units, convertible subordinated units or other equity or debt 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 Fund’s 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.

 

In August 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-15 which amends ASC 230 to clarify guidance on the classification of certain cash receipts and cash payments in the statement of cash flows. The ASU 2016-15 is effective for annual periods beginning after December 15, 2017, and interim periods within those annual periods. At this time, management is evaluating the implications of these changes on the financial statements.

 

In October 2016, the U.S. Securities and Exchange Commission (“SEC”) adopted new rules and forms, and amendments to certain current rules and forms, to modernize reporting and disclosure of information by registered investment companies. The amendments to Regulation S-X will require standardized, enhanced disclosure about derivatives in investment company financial statements, and will also change the rules governing the form and content of such financial statements. The compliance date for these amendments was August 1, 2017. Compliance is based on reporting period-end date. At this time, management is evaluating

 

July 31, 2017 | Semi-Annual Report 61

 


 

Notes to Financial Statements

AllianzGI Diversified Income & Convertible Fund

AllianzGI Equity & Convertible Income Fund

AllianzGI NFJ Dividend, Interest & Premium Strategy Fund

July 31, 2017 (unaudited)

 

 

1. Organization and Significant Accounting Policies (continued)

the implications of these changes on the financial statements.

 

In November 2016, the FASB issued ASU 2016-18 which amends ASC 230 to provide guidance on the classification and presentation of changes in restricted cash and restricted cash equivalents on the statement of cash flows. The ASU 2016-18 is effective for annual periods beginning after December 15, 2017, and interim periods within those annual periods. At this time, management is evaluating the implications of these changes on the financial statements.

 

The following is a summary of significant accounting policies consistently followed by the Funds:

 

(a) Valuation of Investments

 

Portfolio securities and other financial instruments for which market quotations are readily available are stated at market value. Market value is generally determined on the basis of official closing prices, last reported sales prices, or if no sales or closing prices are reported, on the basis of quotes obtained from a quotation reporting system, established market makers, or independent pricing services. The Funds’ investments are valued daily using prices supplied by an independent pricing service or broker/dealer quotations, or by using the last sale or settlement price on the exchange that is the primary market for such securities, or the mean between the last bid and ask quotations. Independent pricing services use information provided by market makers or estimates of market values obtained from yield data relating to investments or securities with similar characteristics.

 

The Board of Trustees of each Fund (together, the “Board”) have 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 have delegated primary responsibility for applying the valuation methods to the Investment Manager. The Funds’ Valuation Committee of the Board of each Fund was established by the Board to oversee the implementation of the Funds’ valuation methods and to make fair value determinations on behalf of the Board, as necessary. The Investment Manager monitors the continued appropriateness of methods applied and identifies circumstances and events that may require fair valuation. The Investment Manager determines if adjustments should be made in light of market changes, events affecting the issuer, or other factors. If the Investment Manager determines that a valuation method may no longer be appropriate, another valuation method may be selected or the Funds’ 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 Funds’ Valuation Committee.

 

62 Semi-Annual Report | July 31, 2017

 


 

Notes to Financial Statements

AllianzGI Diversified Income & Convertible Fund

AllianzGI Equity & Convertible Income Fund

AllianzGI NFJ Dividend, Interest & Premium Strategy Fund

July 31, 2017 (unaudited)

 

 

1. Organization and Significant Accounting Policies (continued)

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

 

The prices used by the Funds to value investments may differ from the value that would be realized if the investments were sold, and these differences could be material to the Funds’ financial statements. Each Fund’s net asset value (“NAV”) is normally determined as of the close of regular trading (normally, 4:00 p.m. Eastern Time) on the New York Stock Exchange (“NYSE”) on each day the NYSE is open for business.

 

(b) Fair Value Measurements

 

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants. The three levels of the fair value hierarchy are described below:

 

§   Level 1 – quoted prices in active markets for identical investments that the Funds have the ability to access

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

§   Level 3 – valuations based on significant unobservable inputs (including the Investment Manager’s or Valuation Committee’s own assumptions and securities whose price was determined by using a single broker’s quote)

 

The valuation techniques used by the Funds to measure fair value during the six months ended July 31, 2017 were intended to maximize the use of observable inputs and to minimize the use of unobservable inputs.

 

The Funds’ policy is to recognize transfers between levels at the end of the reporting period. An investment asset’s or liability’s level within the fair value hierarchy is based on the lowest level input, individually or in aggregate, that is significant to the fair value measurement. The objective of fair value measurement remains the same even when there is a significant decrease in the volume and level of activity for an asset or liability and regardless of the valuation techniques used. Investments categorized as Level 1 or 2 as of period end may have been transferred between Levels 1 and 2 since the prior period due to changes in the valuation method utilized in valuing the investments.

 

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The following are certain inputs and techniques that the Funds generally use to evaluate how to classify each major category of assets and liabilities within Level 2 and Level 3, in accordance with U.S. GAAP.

 

Equity Securities (Common and Preferred Stock and Warrants) – Equity securities

 

July 31, 2017 | Semi-Annual Report 63

 


 

Notes to Financial Statements

AllianzGI Diversified Income & Convertible Fund

AllianzGI Equity & Convertible Income Fund

AllianzGI NFJ Dividend, Interest & Premium Strategy Fund

July 31, 2017 (unaudited)

 

 

1. Organization and Significant Accounting Policies (continued)

traded in inactive markets are valued using inputs which include broker-dealer quotes, recently executed transactions adjusted for changes in the benchmark index, or evaluated price quotes received from independent pricing services that take into account the integrity of the market sector and issuer, the individual characteristics of the security, and information received from broker-dealers and other market sources pertaining to the issuer or security. To the extent that these inputs are observable, the values of equity securities are categorized as Level 2. To the extent that these inputs are unobservable, the values are categorized as Level 3.

 

Convertible Bonds & Notes – Convertible bonds & notes are valued by independent pricing services using various inputs and techniques, which include broker-dealer quotations from relevant market makers and recently executed transactions in securities of the issuer or comparable issuers. The broker-dealer quotations received are supported by credit analysis of the issuer that takes into consideration credit quality assessments, daily trading activity, and the activity of the underlying equities, listed bonds and sector-specific trends. To the extent that these inputs are observable, the values of convertible bonds & notes are categorized as Level 2. To the extent that these inputs are unobservable the values are categorized as Level 3.

 

Corporate Bonds & Notes – Corporate bonds & notes are generally comprised of two main categories: investment grade bonds and high yield bonds. Investment grade bonds are valued by independent pricing services using various inputs and techniques, which include broker-dealer quotations, live trading levels, recently executed transactions in securities of the issuer or comparable issuers, and option adjusted spread models that include base curve and spread curve inputs. Adjustments to individual bonds can be applied to recognize trading differences compared to other bonds issued by the same issuer. High yield bonds are valued by independent pricing services based primarily on broker-dealer quotations from relevant market makers and recently executed transactions in securities of the issuer or comparable issuers. The broker-dealer quotations received are supported by credit analysis of the issuer that takes into consideration credit quality assessments, daily trading activity, and the activity of the underlying equities, listed bonds and sector-specific trends. To the extent that these inputs are observable, the values of corporate bonds & notes are categorized as Level 2. To the extent that these inputs are unobservable, the values are categorized as Level 3.

 

Option Contracts – Option contracts traded over-the-counter (“OTC”) and FLexible EXchange (“FLEX”) options are valued by independent pricing services based on pricing models that incorporate various inputs such as interest rates, credit spreads, currency exchange rates and volatility measurements for in-the-money, at-the-money, and out-of-the-money contracts based on a given strike price. To the extent that these inputs are

 

64 Semi-Annual Report | July 31, 2017

 


 

Notes to Financial Statements

AllianzGI Diversified Income & Convertible Fund

AllianzGI Equity & Convertible Income Fund

AllianzGI NFJ Dividend, Interest & Premium Strategy Fund

July 31, 2017 (unaudited)

 

 

1. Organization and Significant Accounting Policies (continued)

observable, the values of OTC and FLEX option contracts are categorized as Level 2. To the extent that these inputs are unobservable, the values are categorized as Level 3.

 

(c) Investment Transactions and Investment Income

 

Investment transactions are accounted for on the trade date. Realized gains and losses on investments are determined on an identified cost basis. Interest income adjusted for the accretion of discounts and amortization of premiums is recorded on an accrual basis. Discounts or premiums on debt securities purchased are accreted or amortized, respectively, to interest income. Conversion premium is not amortized. Dividend income is recorded on the ex-dividend date, except for certain dividends from foreign securities where the ex-dividend date may have passed, and then are recorded as soon after the ex-dividend date as the Fund, using reasonable diligence, become aware of such dividends. Consent fees relating to corporate actions and facility are recorded as miscellaneous income upon receipt. Payments received from certain investments may be comprised of dividends, realized gains and return of capital. These payments may initially be recorded as dividend income and may subsequently be reclassified as realized gains and/or return of capital upon receipt of information from the issuer. Payments considered return of capital reduce the cost basis of the respective security. Distributions, if any, in excess of the cost basis of a security are recognized as capital gains. Expenses are recorded on an accrual basis.

 

(d) Federal Income Taxes

 

The Funds intend to distribute all of their taxable income and to comply with the other requirements of Subchapter M of the U.S. Internal Revenue Code of 1986, as amended, applicable to regulated investment companies. Accordingly, no provision for U.S. federal income taxes is required. The Funds may be subject to excise tax based on distributions to shareholders.

 

Accounting for uncertainty in income taxes establishes for all entities, including pass-through entities such as the Funds, a minimum threshold for financial statement recognition of the benefit of positions taken in filing tax returns (including whether an entity is taxable in a particular jurisdiction), and requires certain expanded tax disclosures. In accordance with provisions set forth under U.S. GAAP, the Investment Manager has reviewed the Funds’ tax positions for all open tax years. As of July 31, 2017, the Funds have recorded no liability for net unrecognized tax benefits relating to uncertain income tax positions they have taken. The Funds’ federal income tax returns for the prior three years, as applicable, remain subject to examination by the Internal Revenue Service.

 

(e) Dividends and Distributions to Shareholders

 

Diversified Income & Convertible declares dividends and distributions on a monthly basis. Equity & Convertible Income and Dividend, Interest & Premium Strategy declare dividends and distributions on a quarterly basis. These dividends and distributions may be comprised in varying

 

July 31, 2017 | Semi-Annual Report 65

 


 

Notes to Financial Statements

AllianzGI Diversified Income & Convertible Fund

AllianzGI Equity & Convertible Income Fund

AllianzGI NFJ Dividend, Interest & Premium Strategy Fund

July 31, 2017 (unaudited)

 

 

1. Organization and Significant Accounting Policies (continued)

proportions of net investment income, gains from option premiums and the sale of portfolio securities and return of capital. The Funds record dividends and distributions on the ex-dividend date. The amount of dividends from net investment income and distributions from net realized capital gains or return of capital is determined in accordance with federal income tax regulations, which may differ from U.S. GAAP. These “book-tax” differences are considered either temporary or permanent in nature. To the extent these differences are permanent in nature, such amounts are reclassified within the capital accounts based on their federal income tax treatment. Temporary differences do not require reclassification. To the extent dividends and/or distributions exceed current and accumulated earnings and profits for federal income tax purposes, they are reported as dividends and/or distributions to shareholders from return of capital. As of July 31, 2017, it is anticipated that Dividend, Interest & Premium Strategy will have a return of capital at fiscal year-end.

 

(f) Convertible Securities

 

It is the Funds’ policy to invest a portion of their assets in convertible securities. Although convertible securities derive part of their value from that of the securities into which they are convertible, they are not considered derivative financial instruments. However, certain of the Funds’ investments in convertible securities include features which render them sensitive to price changes in their underlying securities. The value of structured/synthetic convertible securities can be affected by interest rate changes and credit risks of the issuer. Such securities may be structured in ways that limit their potential for capital appreciation and the entire value of the security may be at risk of loss depending on the performance of the underlying equity security. Consequently, the Funds are exposed to greater downside risk than traditional convertible securities, but typically still less than that of the underlying stock.

 

(g) Payment In-Kind Securities

 

The Funds may invest in payment in-kind securities, which are debt or preferred stock securities that require or permit payment of interest in the form of additional securities. Payment in-kind securities allow the issuer to avoid or delay the need to generate cash to meet current interest payments and, as a result, may involve greater risk than securities that pay interest currently or in cash.

 

(h) Warrants

 

The Funds may receive warrants. Warrants are securities that are usually issued together with a debt security or preferred stock and that give the holder the right to buy a proportionate amount of common stock at a specified price. Warrants may be freely transferable and are often traded on major exchanges. Warrants normally have a life that is measured in years and entitle the holder to buy common stock of a company at a price that is usually higher than the market price at the time the warrant is issued. Warrants may entail greater risks than certain other types of investments. Generally, warrants do not carry the right to

 

66 Semi-Annual Report | July 31, 2017

 


 

Notes to Financial Statements

AllianzGI Diversified Income & Convertible Fund

AllianzGI Equity & Convertible Income Fund

AllianzGI NFJ Dividend, Interest & Premium Strategy Fund

July 31, 2017 (unaudited)

 

 

1. Organization and Significant Accounting Policies (continued)

receive dividends or exercise voting rights with respect to the underlying securities, and they do not represent any rights in the assets of the issuer. In addition, their value does not necessarily change with the value of the underlying securities, and they cease to have value if they are not exercised on or before their expiration date. If the market price of the underlying stock does not exceed the exercise price during the life of the warrant, the warrant will expire worthless. Warrants may increase the potential profit or loss to be realized from the investment as compared with investing the same amount in the underlying securities. Similarly, the percentage increase or decrease in the value of an equity security warrant may be greater than the percentage increase or decrease in the value of the underlying common stock. Warrants may relate to the purchase of equity or debt securities. Debt obligations with warrants attached to purchase equity securities have many characteristics of convertible securities and their prices may, to some degree, reflect the performance of the underlying stock. Debt obligations also may be issued with warrants attached to purchase additional debt securities at the same coupon rate. A decline in interest rates would permit a Fund to sell such warrants at a profit. If interest rates rise, these warrants would generally expire with no value.

 

(i) Statement of Cash Flows

 

U.S. GAAP requires entities providing financial statements that report both financial position and results of operations to also provide a statement of cash flows for each period for which results of operations are provided, but exempts investment companies meeting certain conditions. One of the conditions is that the fund had little or no debt, based on the average debt outstanding during the period, in relation to average total assets. Diversified Income & Convertible’s indebtedness has been determined to be at a level requiring a statement of cash flows. The Statement of Cash Flows has been prepared using the indirect method which required net change in net assets resulting from operations to be adjusted to reconcile to net cash flows from operating activities.

 

(j) Loan Interest Expense

 

Loan interest expense relates to the Diversified Income & Convertible’s participation in debt financing transactions (See Note 7 and Note 8). Interest expense is recorded as it is incurred.

 

(k) Repurchase Agreements

 

The Funds are parties to Master Repurchase Agreements (“Master Repo Agreements”) with select counterparties. The Master Repo Agreements maintain provisions for initiation, income payments, events of default, and maintenance of collateral.

 

The Funds enter into transactions, under the Master Repo Agreements, with their custodian bank or securities brokerage firms whereby they purchase securities under agreements (i.e., repurchase agreements) to resell such securities at an agreed upon price and date. The Funds, through their custodian, take possession of securities collateralizing

 

July 31, 2017 | Semi-Annual Report 67

 


 

Notes to Financial Statements

AllianzGI Diversified Income & Convertible Fund

AllianzGI Equity & Convertible Income Fund

AllianzGI NFJ Dividend, Interest & Premium Strategy Fund

July 31, 2017 (unaudited)

 

 

1. Organization and Significant Accounting Policies (continued)

the repurchase agreement. Such agreements are carried at the contract amount in the financial statements, which is considered to represent fair value. The collateral that is pledged (i.e., the securities received by the Funds), which consists primarily of U.S. government obligations and asset-backed securities, is held by the custodian bank for the benefit of the Funds until maturity of the repurchase agreement. Provisions of the repurchase agreements and the procedures adopted by the Funds require that the market value of the collateral, including accrued interest thereon, be sufficient in the event of default by the counterparty. If the counterparty defaults under the Master Repo Agreements and the value of the collateral declines or if the counterparty enters an insolvency proceeding, realization of the collateral by the Funds may be delayed or limited. The gross values are included in the Funds’ Schedules of Investments. As of July 31, 2017, the value of the related collateral exceeded the value of the repurchase agreements.

 

(l) Restricted Securities

 

The Funds are permitted to invest in securities that are subject to legal or contractual restrictions on resale. These securities generally may be resold in transactions exempt from registration or to the public if the securities are registered. Disposal of these securities may involve time-consuming negotiations and expenses, and prompt sale at an acceptable price may be difficult.

 

2. Principal Risks

 

In the normal course of business, the Funds trade financial instruments and enter into financial transactions where risk of potential loss exists due to, among other things, changes in the market (market risk) or failure of the other party to a transaction to perform (counterparty risk). The Funds are also exposed to other risks such as, but not limited to, interest rate, credit and leverage risks.

 

Interest rate risk is the risk that fixed income securities’ valuations will change because of changes in interest rates. During periods of rising nominal interest rates, the values of fixed income instruments are generally expected to decline. Conversely, during periods of declining nominal interest rates, the values of fixed income instruments are generally expected to rise. To the extent that a Fund effectively has short positions with respect to fixed income instruments, the values of such short positions would generally be expected to rise when nominal interest rates rise and to decline with nominal interest rates decline. A nominal interest rate can be described as the sum of a real interest rate and an expected inflation rate. Fixed income securities with longer durations tend to be more sensitive to changes in interest rates, usually making them more volatile than securities with shorter durations. Duration is used primarily as a measure of the sensitivity of a fixed income security’s 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

 

68 Semi-Annual Report | July 31, 2017

 


 

Notes to Financial Statements

AllianzGI Diversified Income & Convertible Fund

AllianzGI Equity & Convertible Income Fund

AllianzGI NFJ Dividend, Interest & Premium Strategy Fund

July 31, 2017 (unaudited)

 

 

2. Principal Risks (continued)

choose not to do so for cost or other reasons. In addition, any hedges may not work as intended. The values of equity and other non-fixed income securities may decline due to fluctuations in interest rates.

 

The Funds are exposed to credit risk, which is the risk of losing money if the issuer or guarantor of a fixed income security is unable or unwilling, or is perceived (whether by market participants, rating agencies, pricing services or otherwise) as unable or unwilling, to make timely principal and/or interest payments, or to otherwise honor its obligations. Securities are subject to varying degrees of credit risk, which are often reflected in credit ratings.

 

The market values of securities may decline due to general market conditions (market risk) which are not specifically related to a particular company, such as real or perceived adverse economic conditions, changes in the general outlook for corporate earnings, changes in interest or currency rates, adverse changes to credit markets or adverse investor sentiment. They may also decline due to factors that affect a particular industry or industries, such as labor shortages or increased production costs and competitive conditions within an industry. Equity securities and equity-related investments generally have greater market price volatility than fixed income securities, although under certain market conditions fixed income securities may have comparable or greater price volatility. Credit ratings downgrades may also negatively affect securities held by the Funds. Even when markets perform well, there is no assurance that the investments held by the Funds will increase in value along with the broader market. In addition, market risk includes the risk that geopolitical events will disrupt the economy on a national or global level.

 

The Funds are exposed to counterparty risk, or the risk that an institution or other entity with which the Funds have unsettled or open transactions will default. The potential loss to the Funds could exceed the value of the financial assets recorded in the Funds’ financial statements. Financial assets, which potentially expose the Funds to counterparty risk, consist principally of cash due from counterparties and investments. The Investment Manager seeks to minimize the Funds’ counterparty risk by performing reviews of each counterparty and by minimizing concentration of counterparty risk by undertaking transactions with multiple customers and counterparties on recognized and reputable exchanges. Delivery of securities sold is only made once the Funds have received payment. Payment is made on a purchase once the securities have been delivered by the counterparty. The trade will fail if either party fails to meet its obligation.

 

The Funds are exposed to risks associated with leverage. Leverage may cause the value of the Funds’ shares to be more volatile than if the Funds did not use leverage. This is because leverage tends to exaggerate the effect of any increase or decrease in the value of the Funds’ portfolio securities. The Funds may engage in transactions or purchase instruments that give rise to forms of

 

July 31, 2017 | Semi-Annual Report 69

 


 

Notes to Financial Statements

AllianzGI Diversified Income & Convertible Fund

AllianzGI Equity & Convertible Income Fund

AllianzGI NFJ Dividend, Interest & Premium Strategy Fund

July 31, 2017 (unaudited)

 

 

2. Principal Risks (continued)

leverage. In addition, to the extent the Funds employ leverage, dividend 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 7 and Note 8, Diversified Income & Convertible has mandatory redeemable preferred shares and senior secured notes outstanding and entered into margin loan financing.

 

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 often 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 additional expenses to the extent it is required to seek recovery upon a portfolio security’s default in the payment of principal or interest. In any bankruptcy proceeding relating to a defaulted investment, a Fund may lose its entire investment or may be required to accept cash or securities with a value substantially less than its original investment.

 

Diversified Income & Convertible will terminate on the first business day following the fifteenth anniversary of the effective date of its registration statement, May 22, 2030, unless such term is extended by the Trustees and absent Trustee and shareholder approval to amend the limited term. Leading up to the Fund’s dissolution date, the Fund may begin liquidating all or a portion of the Fund’s portfolio, and the Fund may deviate from its investment strategy. As a result, during the wind-down period, the Fund’s distributions may decrease, and such distributions may include a return of capital. The Fund does not seek to return $25.00 per common share (its initial offering price) upon termination. As the assets of the Fund will liquidate in connection with its termination, the Fund may be required to sell portfolio securities when it otherwise would not, including at times when market conditions are not favorable, which may cause the Fund to lose money.

 

There can be no assurance that repurchases of common shares by Diversified Income & Convertible pursuant to its Repurchase Plan (as defined in Note 9) caused the common shares to trade at a price equal to or in excess of NAV or prevented or reduced any decline in the market price of the common shares. Any acquisition of common shares by the Fund decreased the managed assets of the Fund and therefore tended to have the effect of increasing the Fund’s gross expense ratio and decreasing the asset coverage with respect to any leverage outstanding. Because of the nature of the Fund’s investment objective, policies and portfolio, the Investment Manager does not believe that repurchases of common shares interfered with the ability of the Fund to manage its investments in order to seek its investment objective, and does not believe any material difficulty in borrowing

 

70 Semi-Annual Report | July 31, 2017

 


 

Notes to Financial Statements

AllianzGI Diversified Income & Convertible Fund

AllianzGI Equity & Convertible Income Fund

AllianzGI NFJ Dividend, Interest & Premium Strategy Fund

July 31, 2017 (unaudited)

 

 

2. Principal Risks (continued)

money or disposing of portfolio securities to consummate repurchases, although no assurance can be given that this was the case. The Fund’s repurchase of shares under the Repurchase Plan was subject to certain conditions under Rule 10b-18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and other applicable laws, including Regulation M, which may have prohibited such repurchases under certain circumstances.

 

3. Financial Derivative Instruments

 

Disclosure about derivatives and hedging activities requires qualitative disclosure regarding objectives and strategies for using derivatives, quantitative disclosure about fair value amounts of gains and losses on derivatives, and disclosure about credit-risk-related contingent features in derivative agreements. The disclosure requirements distinguish between derivatives which are accounted for as “hedges”, and those that do not qualify for such accounting. Although the Funds at times use derivatives for hedging purposes, the Funds reflect derivatives at fair value and recognize changes in fair value through the Funds’ Statements of Operations, and such derivatives do not qualify for hedge accounting treatment.

 

Option Transactions

 

The Funds may write (sell) put and call options on securities and indices to earn premiums, for hedging purposes, risk management purposes or otherwise as part of their investment strategies. When an option is written, the premium received is recorded as an asset with an equal liability that is subsequently marked to market to reflect the market value of the option written. These liabilities, if any, are reflected as call options written in the Funds’ Statements of Assets and Liabilities. Premiums received from writing options which expire unexercised are recorded on the expiration date as a realized gain. The difference between the premium received and the amount paid on effecting a closing purchase transaction, including brokerage commissions, is also treated as a realized gain, or if the premium is less than the amount paid for the closing purchase transaction, as a realized loss. If a call option written is exercised, the premium is added to the proceeds from the sale of the underlying security in determining whether there has been a realized gain or loss. If a put option written is exercised, the premium reduces the cost basis of the security. In writing an option, the Funds bear the market risk of an unfavorable change in the price of the security underlying the written option. Exercise of a written option could result in the Funds purchasing a security at a price different from its current market value.

 

There are several risks associated with option transactions on securities. For example, there are significant differences between the securities and options markets that could result in an imperfect correlation between these markets, causing a given transaction not to achieve its objective. The Funds’ ability to use options successfully will depend on the Investment Manager’s ability to predict pertinent market movements, which cannot be assured. As the writer of a covered call option, a Fund foregoes, during the option’s life, the opportunity to profit from increases in the market value of the security covering the

 

July 31, 2017 | Semi-Annual Report 71

 


 

Notes to Financial Statements

AllianzGI Diversified Income & Convertible Fund

AllianzGI Equity & Convertible Income Fund

AllianzGI NFJ Dividend, Interest & Premium Strategy Fund

July 31, 2017 (unaudited)

 

 

3. Financial Derivative Instruments (continued)

call option above the sum of the premium and the strike price of the call, but has retained the risk of loss should the price of the underlying security decline.

 

4. Investment Manager/Sub-Adviser & Deferred Compensation

 

Investment Manager/Sub-Adviser. Each Fund has an Investment Management Agreement (for the purpose of this section, each an “Agreement”) with the Investment Manager. Subject to the supervision of the Funds’ Board, the Investment Manager is responsible for managing, either directly or through others selected by it, the Funds’ investment activities, business affairs and administrative matters. Pursuant to their Agreements, Diversified Income & Convertible and Equity & Convertible Income pay the Investment Manager an annual fee, payable monthly, at an annual rate of 1.00% of their average daily total managed assets. Pursuant to its Agreement, Dividend, Interest & Premium Strategy pays the Investment Manager an annual fee, payable monthly, at an annual rate of 0.90% of its average daily total managed assets. Diversified Income & Convertible’s Agreement defines total managed assets as the total assets of the Fund (including assets attributable to any Preferred Shares, borrowings, issued debt securities or other forms of leverage that may be outstanding) minus accrued liabilities (other than liabilities representing leverage). The Agreements of each of Equity & Convertible Income and Dividend, Interest & Premium Strategy define total managed assets as the total assets of each Fund (including assets attributable to any borrowing that may be outstanding) minus accrued liabilities (other than liabilities representing borrowings).

 

Prior to the NFJ Merger, AllianzGI U.S. retained NFJ as sub-adviser to Dividend, Interest & Premium Strategy, with respect to its equity sleeve only. From and after the NFJ Merger, AllianzGI U.S. has directly provided all advisory services for the Fund.

 

During the period, the Funds’ primary adviser and not the Fund, paid advisory fees to Dividend, Interest & Premium Strategy’s sub-advisor.

 

Deferred Compensation. Trustees do not currently receive any pension or retirement benefits from the Funds. The Funds have adopted a deferred compensation plan (the “Plan”) for the Trustees, which permits the Trustees to defer their receipt of compensation from the Funds, at their election, in accordance with the terms of the Plan. Under the Plan, each Trustee may elect not to receive all or a portion of his or her fees from the Funds on a current basis but to receive in a subsequent period chosen by the Trustee an amount equal to the value of such compensation if such compensation had been invested in one or more series of Allianz Funds Multi-Strategy Trust or Allianz Funds selected by the Trustees from and after the normal payment dates for such compensation. The deferred compensation program is structured such that the Funds remain in substantially the same financial position whether Trustee fees are paid when earned or deferred.

 

72 Semi-Annual Report | July 31, 2017

 


 

Notes to Financial Statements

AllianzGI Diversified Income & Convertible Fund

AllianzGI Equity & Convertible Income Fund

AllianzGI NFJ Dividend, Interest & Premium Strategy Fund

July 31, 2017 (unaudited)

 

 

5. Investments in Securities

 

For the six months ended July 31, 2017, purchases and sales of investments, other than short-term securities were:

 

 

 

Purchases

 

Sales

 

Diversified Income & Convertible

 

273,191,647

 

282,388,163

 

Equity & Convertible Income

 

331,276,235

 

355,833,274

 

Dividend, Interest & Premium Strategy

 

569,004,837

 

629,706,674

 

 

6. Income Tax Information

 

At July 31, 2017, the aggregate cost basis and the net unrealized appreciation (depreciation) of investments (before call options written) for federal income tax purposes were:

 

 

 

Federal Tax
Cost Basis
(1)

 

Unrealized
Appreciation

 

Unrealized
Depreciation

 

Net Unrealized
Appreciation
(Depreciation)

 

Diversified Income & Convertible

 

$361,217,725

 

$8,438,981

 

$33,914,430

 

$(25,475,449

)

Equity & Convertible Income

 

670,304,870

 

29,386,699

 

81,951,541

 

(52,564,842

)

Dividend, Interest & Premium Strategy

 

1,318,269,777

 

147,459,011

 

83,007,329

 

64,451,682

 

 

(1) Differences between book and tax cost basis are primarily attributable to wash sale loss deferrals, Reclassifications in REITs and differing treatment of bond premium amortization.

 

7. Long-term Financing Arrangements

 

On October 2, 2015, Diversified Income & Convertible completed a private placement with a single institutional investor, consisting of $30,000,000 in Series A Mandatory Redeemable Preferred Shares (“MRPS”) with a mandatory redemption date of October 2, 2025, and $50,000,000 in Senior Secured Notes (“Notes” and together with MRPS, “Long-Term Financing Arrangements”) due November 22, 2029. Fitch Ratings (“Fitch”) assigned a rating of “AA” to the MRPS and “AAA” to the Notes. Diversified Income & Convertible also maintains a short-term credit facility at variable interest rates for a portion of its borrowings.

 

Mandatory Redeemable Preferred Shares

 

At July 31, 2017, Diversified Income & Convertible had 1,200,000 shares of MRPS outstanding with an aggregate liquidation preference of $30,000,000 ($25.00 per share). The following table summarizes the key terms of the MRPS at July 31, 2017:

 

Mandatory
Redemption Date

 

Annual
Dividend Rate

 

Aggregate
Liquidation
Preference

 

Estimated Fair
Value

 

October 2, 2025

 

4.34%

 

$30,000,000

 

$30,000,000

 

 

July 31, 2017 | Semi-Annual Report 73

 


 

Notes to Financial Statements

AllianzGI Diversified Income & Convertible Fund

AllianzGI Equity & Convertible Income Fund

AllianzGI NFJ Dividend, Interest & Premium Strategy Fund

July 31, 2017 (unaudited)

 

 

7. Long-term Financing Arrangements (continued)

Holders of MRPS are entitled to receive a quarterly dividend at an annual fixed dividend rate of 4.34%, subject to upward adjustment (by as much as 4.00%) during any period when the MRPS have a rating of below “A” from Fitch, or the equivalent from another rating agency (with the rate increasing at lower rating levels). The MRPS will have a “default” interest rate of 5.00% whenever a past due amount is outstanding with respect to the MRPS. Dividends are accrued daily and paid quarterly and are presented in Diversified Income & Convertible’s Statement of Assets & Liabilities as interest payable on dividends to mandatory redeemable preferred shareholders. For the six months ended July 31, 2017, Diversified Income & Convertible paid $651,000 in interest on dividends to mandatory redeemable preferred shareholders. The MRPS are senior, with priority in all respects, to Diversified Income & Convertible’s outstanding common shares as to payments of dividends and as to distribution of assets upon dissolution, liquidation or winding up of the affairs of the Fund. The MRPS rank pari passu with any and all other preferred shares of the Fund, and rank junior to the Fund’s indebtedness, including the Notes, the Margin Loan Financing and any other senior secured indebtedness. Diversified Income & Convertible may redeem all or any part of the MRPS at any time, subject to certain redemption premiums. Diversified Income & Convertible is subject to periodic asset coverage testing and must redeem some or all of the MRPS when its asset coverage declines below certain levels.

 

Senior Secured Notes

 

At July 31, 2017, Diversified Income & Convertible had $50,000,000 in aggregate principal amount of Notes outstanding. The Notes rank pari passu with all other senior debt of Diversified Income & Convertible, including the Margin Loan Financing, and are secured by a lien on all assets of the Fund of every kind, including all securities and all other investment property, equal and ratable with the liens securing the Margin Loan Financing. The Notes are senior, with priority in all respects, to the MRPS and the outstanding common shares as to payments of dividends and as to distribution of assets upon dissolution, liquidation or winding up of the affairs of the Fund. Holders of the Notes are entitled to receive cash interest payments semi-annually until maturity. The Notes accrue interest at an annual fixed rate of 3.94%. The Notes will be subject to a penalty interest rate of an additional 2.00% while overdue payments are outstanding, and an additional 1.00% during any interest rate period when the Notes, at any time, have a rating of less than “A-” from Fitch or the equivalent from another agency. The Notes are prepayable in whole or in part at any time, subject to a prepayment premium, which may be adjusted under some circumstances based on asset coverage levels. Interest expense of $976,904 is included in the Diversified Income & Convertible’s Statement of Operations.

 

74 Semi-Annual Report | July 31, 2017

 


 

Notes to Financial Statements

AllianzGI Diversified Income & Convertible Fund

AllianzGI Equity & Convertible Income Fund

AllianzGI NFJ Dividend, Interest & Premium Strategy Fund

July 31, 2017 (unaudited)

 

 

7. Long-term Financing Arrangements (continued)

The following table shows the maturity date, interest rate, notional/carrying amount and estimated fair value of the Notes outstanding at July 31, 2017:

 

Maturity Date

 

Interest Rate

 

Notional/Carrying
Amount

 

Estimated Fair
Value

 

November 22, 2029

 

3.94%

 

$50,000,000

 

$50,000,000

 

 

The agreements governing the MRPS and Notes impose certain additional customary covenants and restrictions on the Fund, including, among others, asset coverage requirements, restrictions on distributions and a requirement that the Fund adhere to its stated investment policies.

 

8. Margin Loan Financing

 

Diversified Income & Convertible has entered into a margin loan financing agreement with BNP Paribas Prime Brokerage International, Ltd. (“BNP”). The margin loan is offered at a daily rate equal to the U.S. 3-month LIBOR rate plus 0.90%. At July 31, 2017, the Fund had a borrowing outstanding under the margin agreement totaling $25,000,000. The interest rate charged at July 31, 2017 was 2.211%. During the six months ended July 31, 2017, the weighted average daily balance was $25,000,000 at the weighted average interest rate of 2.084%. With respect to the margin agreement, loan interest expense of $251,392 is included in the Diversified Income & Convertible’s Statement of Operations.

 

The Fund is required to fully collateralize its outstanding loan balance as determined by BNP. Pledged assets are held in a segregated account and are denoted in the Fund’s Schedule of Investments.

 

9. Common Share Repurchase Plan

 

The common share repurchase plan (the “Repurchase Plan”) of Diversified Income & Convertible (for purposes of this paragraph, the “Fund”) became effective on September 4, 2015. The Board of Trustees initially authorized the Repurchase Plan at the Fund’s organizational meeting on April 20, 2015. The Repurchase Plan was intended in part to provide additional liquidity in the marketplace for the Fund’s common shares. The Repurchase Plan remained in effect until 230 days after the commencement of the Repurchase Plan (i.e., April 21, 2016) (the “Repurchase Period”), during which the Fund repurchased its common shares in the open market on any trading day when the Fund’s common shares were trading at a discount of 2% or more from the common shares’ closing NAV on the prior trading day and only so long as shares of the SPDR Barclays Convertible Securities ETF had not, at any time during such trading day, traded down 2% or more from their closing market price on the prior trading day. Any repurchases were made through a single broker-dealer who was not an underwriter in this initial public offering of the Fund’s common shares acting as the Fund’s agent. On any day that shares were repurchased under the Repurchase Plan, the Fund, subject to certain conditions under Rule 10b-18 under the Exchange Act and

 

July 31, 2017 | Semi-Annual Report 75

 


 

Notes to Financial Statements

AllianzGI Diversified Income & Convertible Fund

AllianzGI Equity & Convertible Income Fund

AllianzGI NFJ Dividend, Interest & Premium Strategy Fund

July 31, 2017 (unaudited)

 

 

9. Common Share Repurchase Plan (continued)

other applicable laws, including Regulation M, repurchased its shares in an amount equal to the lesser of (i) $125,000 based on the aggregate purchase price of the common shares or (ii) the maximum number of common shares the Fund may purchase under Rule 10b-18, which, generally, is currently 25% of the average daily trading volume of the common shares over the trailing four week period. In addition to providing potential additional liquidity in the marketplace, any repurchases under the Repurchase Plan were made by the Fund at a discount to then current NAV of the common shares and therefore were accretive to the NAV of the remaining common shares following the repurchases, and the Repurchase Plan may have had the effect of preventing or reducing a significant decline in the market price of the common shares in comparison to their NAV. Effective April 22, 2016, the Common Share Repurchase Plan was discontinued.

 

10. Subsequent Events

 

In preparing these financial statements, the Funds’ management has evaluated events and transactions for potential recognition or disclosure through the date the financial statements were issued.

 

On August 1, 2017, a monthly distribution of $0.167 per share was declared to Diversified Income & Convertible common shareholders, payable September 1, 2017 to common shareholders of record on August 11, 2017.

 

On September 1, 2017, a monthly distribution of $0.167 per share was declared to Diversified Income & Convertible common shareholders, payable October 2, 2017 to common shareholders of record on September 11, 2017.

 

On September 1, 2017, the following quarterly distributions were declared to shareholders, payable September 22, 2017 to shareholders of record on September 11, 2017:

 

Equity & Convertible Income

 

$0.38 per share

 

Dividend, Interest & Premium Strategy

 

$0.30 per share

 

 

There were no other subsequent events identified that require recognition or disclosure.

 

76 Semi-Annual Report | July 31, 2017

 


 

Annual Shareholder Meeting Results (unaudited)

AllianzGI Diversified Income & Convertible Fund
AllianzGI Equity & Convertible Income Fund
AllianzGI NFJ Dividend, Interest & Premium Strategy Fund

 

 

The Funds held their annual meeting of shareholders on July 13, 2017. Shareholders voted as indicated below:

 

Diversified Income & Convertible:

 

 

 

Affirmative

 

Withheld Authority

 

Re-election of A. Douglas Eu† – Class II to serve until the annual meeting for the 2017-2018 fiscal year

 

10,350,768

 

106,726

 

 

 

 

 

 

 

Election of F. Ford Drummond – Class I to serve until the annual meeting for the 2017-2018 fiscal year

 

10,349,967

 

107,527

 

 

 

 

 

 

 

Election of James S. MacLeod – Class I to serve until the annual meeting for the 2017-2018 fiscal year

 

10,351,085

 

106,409

 

 

 

 

 

 

 

Re-election of James A. Jacobson – Class II to serve until the annual meeting for the 2017-2018 fiscal year*

 

  1,200,000

 

           

 

 

The other members of the Board of Trustees at the time of the meeting, namely, Mses. Deborah A. DeCotis, Barbara R Claussen and Messrs. Davey S. Scoon, Bradford K. Gallagher, Hans W. Kertess, William B. Ogden, IV and Alan Rappaport continued to serve as Trustees of the Fund.

 


*  Mr. Jacobson was elected by preferred shareholders voting as a separate class. All other trustees of Diversified Income & Convertible were elected by common and preferred shareholders voting together as a single class.

†  Interested Trustee

 

Equity & Convertible Income:

 

 

 

Affirmative

 

Withheld Authority

 

Election of Hans W. Kertess – Class I to serve until the annual meeting for the 2017-2018 fiscal year

 

23,914,013

 

1,669,797

 

 

 

 

 

 

 

Election of William B. Ogden, IV – Class I to serve until the annual meeting for the 2017-2018 fiscal year

 

23,906,845

 

1,676,965

 

 

 

 

 

 

 

Election of Alan Rappaport – Class I to serve until the annual meeting for the 2017-2018 fiscal year

 

23,986,609

 

1,597,201

 

 

 

 

 

 

 

Election of Davey S. Scoon – Class I to serve until the annual meeting for the 2017-2018 fiscal year

 

23,889,524

 

1,694,286

 

 

The other members of the Board of Trustees at the time of the meeting, namely, Mses. Barbara R Claussen, Deborah A. DeCotis and Messrs. F. Ford Drummond, A. Douglas Eu, Bradford K. Gallagher, James A. Jacobson and James S. MacLeod continued to serve as Trustees of the Fund.

 

Dividend, Interest & Premium Strategy:

 

 

 

Affirmative

 

Withheld Authority

 

Election of F. Ford Drummond – Class I to serve until the annual meeting for the 2017-2018 fiscal year

 

82,595,842

 

1,711,352

 

 

 

 

 

 

 

Election of Alan Rappaport – Class I to serve until the annual meeting for the 2017-2018 fiscal year

 

82,586,972

 

1,720,222

 

 

 

 

 

 

 

Election of Davey S. Scoon – Class I to serve until the annual meeting for the 2017-2018 fiscal year

 

82,553,972

 

1,753,222

 

 

The other members of the Board of Trustees at the time of the meeting, namely, Mses. Barbara R. Claussen, Deborah A. DeCotis and Messrs. A. Douglas Eu, Bradford K. Gallagher, James A. Jacobson, Hans W. Kertess, James S. MacLeod and William B. Ogden, IV continued to serve as Trustees of the Fund.

 

July 31, 2017 | Semi-Annual Report 77

 


 

Proxy Voting Policies & Procedures/
Changes in Investment Policy
(unaudited)

AllianzGI Diversified Income & Convertible Fund
AllianzGI Equity & Convertible Income Fund
AllianzGI NFJ Dividend, Interest & Premium Strategy Fund

 

 

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 Commission website at www.sec.gov.

 

 

Changes in Investment Policy:

 

Effective June 14, 2017, Dividend, Interest & Premium Strategy adopted the following investment policy, which permits the Fund to invest up to 10% of its total assets in securities issued by master limited partnerships (“MLPs”):

 

The Fund may invest up to 10% of its total assets in securities issued by master limited partnerships (“MLPs”), including, without limitation, common units, preferred units, convertible subordinated units or other equity or debt securities.

 

Information regarding master limited partnerships and the risks related to investments in master limited partnerships is included below.

 

Master Limited Partnerships

 

A master limited partnership (“MLP”) generally is a publicly traded company organized as a limited partnership or limited liability company and treated as a partnership for U.S. federal income tax purposes. A Fund’s investments in interests in oil, gas or mineral exploration or development programs, including pipelines, or in the financial sector, may be held through MLPs. While MLPs often own or own interests in properties or businesses that are related to oil and gas industries or financials, MLPs may invest in other types of industries, or in credit related investments. MLPs generally have two classes of owners, the general partner and limited partners. The general partner of an MLP is typically owned by one or more of the following: a major energy company, an investment fund or the direct management of the MLP. The general partner may be structured as a private or publicly traded corporation or other entity. The general partner typically controls the operations and management of the MLP through an up to 2% equity interest in the MLP plus, in many cases, ownership of common units and subordinated units. Limited partners own the remainder of the partnership through ownership of common units and have a limited role in the partnership’s operations and management. For purposes of qualifying as a regulated investment company under the U.S. Internal Revenue Code of 1986, a Fund is not permitted to have more than 25% of the value of its total assets invested in qualified publicly traded partnerships, including MLPs. Additionally, while MLPs are typically treated as partnerships for U.S. federal income tax purposes, changes

 

78 Semi-Annual Report | July 31, 2017

 


 

Proxy Voting Policies & Procedures/
Changes in Investment Policy
(unaudited) (continued)

AllianzGI Diversified Income & Convertible Fund
AllianzGI Equity & Convertible Income Fund
AllianzGI NFJ Dividend, Interest & Premium Strategy Fund

 

 

in U.S. tax laws could revoke the pass-through attributes that provide the tax efficiencies that make MLPs attractive investment structures.

 

MLP securities may include, without limitation, common units, preferred units, convertible subordinated units or other equity or debt securities. Investments in MLPs are generally subject to many of the risks that apply to investments in partnerships. For example, holders of the units of MLPs may have limited control and limited voting rights on matters affecting the partnership. There may be fewer corporate protections afforded investors in an MLP than investors in a corporation. Conflicts of interest may exist among unit holders, subordinated unit holders and the general partner of an MLP, including those arising from incentive distribution payments. MLPs that concentrate in a particular industry or region are subject to risks associated with such industry or region. MLPs holding credit-related investments are subject to interest rate risk and the risk of default on payment obligations by debt issuers. Investments held by MLPs may be illiquid. MLP units may trade infrequently and in limited volume, and they may be subject to more abrupt or erratic price movements than securities of larger or more broadly based companies.

 

Master Limited Partnership Risk

 

Equity securities of MLPs are generally listed and traded on U.S. securities exchanges. The value of an MLP equity security fluctuates based predominately on the MLP’s financial performance, as well as changes in overall market conditions. Investments in MLP equity securities involve risks that differ from investments in common stocks, including risks related to the fact that investors have limited control of and limited rights to vote on matters affecting the MLP; dilution risks; and risks related to the general partner’s right to require investors to sell their holdings at an undesirable time or price. Debt securities of MLPs have characteristics similar to debt securities of other types of issuers, and are subject to the risks applicable to debt securities in general, such as credit risk, interest rate risk and liquidity risk. Investments in debt securities of MLPs may not offer the tax characteristics of equity securities of MLPs. To the extent a Fund invests in debt securities of MLPs that are rated below investment grade, such investments are also generally subject to the risks associated with “high yield” investments. Investments in MLPs are subject to cash flow risk and risks related to potential conflicts of interest between the MLP and the MLP’s general partner. Certain MLP securities may trade in lower volumes due to their smaller capitalizations, and may be subject to more abrupt or erratic price movements and lower market liquidity. MLP securities are generally considered interest-rate sensitive investments. During periods of interest rate volatility, these investments may not provide attractive returns and may decline in value. MLPs may be subject to state taxation in certain jurisdictions, which may reduce the amount of income an MLP pays to its investors. In addition, if the tax treatment of an MLP changes, a Fund’s after-tax return from its MLP investment would be materially reduced.

 

July 31, 2017 | Semi-Annual Report 79

 


 

Matters Relating to the Trustees’ Consideration of the Investment

Management & Portfolio Management Agreements (unaudited)

AllianzGI Diversified Income & Convertible Fund
AllianzGI Equity & Convertible Income Fund
AllianzGI NFJ Dividend, Interest & Premium Strategy Fund

 

 

The Investment Company Act of 1940, as amended, requires that both the full Board of Trustees (the “Board” or the “Trustees”) and a majority of the non-interested Trustees (the “Independent Trustees”), voting separately, approve each Fund’s (as defined below) Investment Management Agreement (for purposes of this section, the “Advisory Agreement”) with Allianz Global Investors U.S. LLC (“AllianzGI U.S.” or the “Investment Manager”) with respect to AllianzGI Equity & Convertible Income Fund (“NIE”), AllianzGI NFJ Dividend, Interest & Premium Strategy Fund (“NFJ”), and AllianzGI Diversified Income & Convertible Fund (“ACV” and, together with NFJ and NIE, for the purposes of this section, the “Funds”) and the Portfolio Management Agreement between the Investment Manager and NFJ Investment Group LLC (“NFJ LLC” or the “Sub-Adviser”) with respect to NFJ (for purposes of this section, the “Sub-Advisory Agreement,” and together with the Advisory Agreement, the “Agreements”). The Trustees met in person on June 6, 2017 for the specific purpose of considering whether to approve the continuation of the Advisory Agreement and the Sub-Advisory Agreement for an additional year. The Funds’ Contracts Committees, which are comprised of all of the Independent Trustees, met on May 22, 2017 and June 6, 2017 with independent counsel to discuss the materials provided by the Investment Manager in response to the Independent Trustees’ written request for information regarding the annual renewal. Representatives from fund management attended portions of those meetings to, among other topics, review the comparative fee and expense information and comparative performance information prepared and provided by Broadridge Financial Solutions, Inc. (“Broadridge”), an independent third party, for each Fund using its respective Broadridge peer groups for performance and expense comparisons.

 

In connection with their deliberations regarding the approval of the Agreements, the Trustees, including the Independent Trustees, considered such information and factors as they believed, in light of the legal advice furnished to them and their own business judgment, to be relevant. As described below, the Trustees considered the nature, quality and extent of the various investment management, administrative and other services performed by the Investment Manager and the Sub-Adviser under the applicable Agreement.

 

It was noted that, on October 1, 2016, during the period under review, Allianz Global Investors Fund Management LLC (“AGIFM”), the former investment manager to the Funds, merged into AllianzGI U.S., a former sub-adviser to certain Funds, after which AllianzGI U.S. assumed AGIFM’s roles as investment manager and administrator to the Funds and continued to provide the day-to-day portfolio management services it previously provided as sub-adviser in its new capacity as Investment Manager, and the applicable sub-advisory agreements with AllianzGI U.S. were terminated. In addition, it was noted that NFJ LLC, a former sub-adviser to NFJ, was at the time of consideration of the contract

 

80 Semi-Annual Report | July 31, 2017

 


 

Matters Relating to the Trustees’ Consideration of the Investment

Management & Portfolio Management Agreements (unaudited) (continued)

AllianzGI Diversified Income & Convertible Fund
AllianzGI Equity & Convertible Income Fund
AllianzGI NFJ Dividend, Interest & Premium Strategy Fund

 

 

renewals, expected to merge into AllianzGI U.S. effective July 1, 2017, after which AllianzGI U.S. would assume the sole day-to-day portfolio management responsibilities for NFJ in its capacity as Investment Manager, and the applicable sub-advisory contract with NFJ LLC would terminate. The NFJ LLC merger and termination of the applicable sub-advisory contract with NFJ LLC did occur effective July 1, 2017. References in the following disclosure to the “Sub-Adviser” pertain to NFJ LLC, although it no longer serves in this capacity. In the course of their deliberations regarding the approval of the Agreements, the Trustees took into account that the personnel at NFJ LLC who previously provided sub-advisory services for NFJ would continue to do so in the same capacities as employees of AllianzGI U.S., and that neither the merger of AGIFM into AllianzGI U.S., nor the anticipated merger of NFJ LLC into AllianzGI U.S. was expected to have any impact on the nature or quality of investment advisory or administrative services provided to the Funds.

 

In connection with their contract review meetings, the Trustees received and relied upon materials provided by the Investment Manager including, among other items: (i) information provided by Broadridge on the total return investment performance (based on net asset value and common share market price) of the Funds for various time periods, and the investment performance of a group of funds with investment classifications and/or objectives comparable to those of the Funds identified by Broadridge (the “Broadridge Performance Universe”); (ii) information provided by Broadridge on the Funds’ management fees and other expenses, and the fees and other expenses of comparable funds identified by Broadridge (the “Broadridge Expense Group” or “Expense Group”) (based both on common share and leveraged assets combined (if applicable), and on common share assets alone); (iii) information regarding the investment performance and fees for other funds and accounts managed by the Investment Manager and/or the Sub-Adviser with strategies that have similarities (but none of which are substantially similar) to those of the Funds; (iv) an estimate of the profitability to the Investment Manager from its relationship with the Funds for the twelve months ended December 31, 2016; (v) descriptions of various functions performed by the Investment Manager and the Sub-Adviser for the Funds, such as portfolio management, compliance monitoring, portfolio trading practices and oversight of third party service providers; (vi) information regarding the overall organization and business functions of the Investment Manager and the Sub-Adviser, including, without limitation, information regarding senior management, portfolio managers and other personnel providing or proposed to provide investment management, administrative and other services, and corporate ownership and business operations unrelated to the Funds; (vii) fact cards for each Fund including, among other information, investment objective, total net assets, annual fund operating expenses, portfolio managers, performance based on net asset value and

 

July 31, 2017 | Semi-Annual Report 81

 


 

Matters Relating to the Trustees’ Consideration of the Investment

Management & Portfolio Management Agreements (unaudited) (continued)

AllianzGI Diversified Income & Convertible Fund
AllianzGI Equity & Convertible Income Fund
AllianzGI NFJ Dividend, Interest & Premium Strategy Fund

 

 

market value, related share price premium and/or discount information, performance (based on net asset value) relative to each Fund’s Broadridge Performance Universe, total expense ratio and management fee comparisons between each Fund and its Broadridge Expense Group and trends in profitability to the Investment Manager of its advisory relationship with each Fund; and (viii) summaries assigning a quadrant placement to each Fund based on an average of certain measures of performance and fees/expenses versus its Broadridge peer group medians.

 

The Trustees’ conclusions as to the approval of the Agreements were based on a comprehensive consideration of all information provided to the Trustees and were not the result of any single factor. Some of the factors that figured particularly in the Trustees’ deliberations are described below, although individual Trustees may have evaluated the information presented differently from one another, attributing different weights to various factors. The Trustees recognized that the fee arrangements for the Funds are the result of review and discussion in the prior years between the Independent Trustees and the Investment Manager, that certain aspects of such arrangements may receive greater scrutiny in some years than in others and that the Trustees’ conclusions may be based, in part, on their consideration of these same arrangements during the course of the year and in prior years. The Trustees evaluated information available to them on a Fund-by-Fund basis, and their determinations were made separately in respect of each Fund. The Trustees also considered the risk profiles of the Funds.

 

Performance Information

 

Fund-specific performance results for the Funds reviewed by the Trustees are discussed below. The comparative performance information was prepared and provided by Broadridge and was not independently verified by the Trustees. Due to the passage of time, these performance results may differ from the performance results for more recent periods. The Trustees reviewed, among other information, comparative information showing performance of each Fund against its respective Broadridge Performance Universe (based on net asset value and market value) for the one-year, three-year, five-year and ten-year periods (to the extent each such Fund had been in existence), each ended March 31, 2017.

 

In addition, the Trustees considered matters bearing on the Funds and their advisory arrangements at their meetings throughout the year, including a review of performance data at each regular meeting (either by the full Board and/or the Performance Committee of the Board).

 

As part of their review, the Trustees examined the ability of the Investment Manager and the Sub-Adviser to provide high-quality investment management and other services to the Funds. Among other information, the Trustees considered the investment philosophy and research and decision-making processes of the Investment Manager

 

82 Semi-Annual Report | July 31, 2017

 


 

Matters Relating to the Trustees’ Consideration of the Investment

Management & Portfolio Management Agreements (unaudited) (continued)

AllianzGI Diversified Income & Convertible Fund
AllianzGI Equity & Convertible Income Fund
AllianzGI NFJ Dividend, Interest & Premium Strategy Fund

 

 

and the Sub-Adviser, as well as the Sub-Adviser’s broker selection process and trading operations; the experience of key advisory personnel of the Investment Manager and the Sub-Adviser or their affiliates, as applicable, responsible for portfolio management of the Funds; the ability of the Investment Manager and the Sub-Adviser to attract and retain capable personnel; the background and capabilities of the senior management and staff of the Investment Manager and the Sub-Adviser; employee compensation; and the operational infrastructure, including technology and systems, of the Investment Manager and the Sub-Adviser. In addition, the Trustees reviewed the extent and quality of the Investment Manager’s and the Sub-Adviser’s services with respect to regulatory compliance and ability to comply with the investment policies of the Funds; the compliance programs and risk controls of the Investment Manager and the Sub-Adviser; the specific contractual obligations of the Investment Manager and the Sub-Adviser pursuant to the Agreements; the nature, extent and quality of certain administrative services the Investment Manager is responsible for providing to the Funds; the Investment Manager’s risk management function; and conditions that might affect the ability of the Investment Manager or the Sub-Adviser to provide high quality services to the Funds in the future under the Agreements, including, but not limited to, each organization’s respective financial condition and operational stability. Based on the foregoing, the Trustees concluded that the Investment Manager’s and the Sub-Adviser’s investment processes, research capabilities and philosophy were well-suited to the applicable Fund, given its respective investment objective and policies, that the Investment Manager and the Sub-Adviser would be able to continue to meet any reasonably foreseeable obligations under the Agreements, and that the Investment Manager and the Sub-Adviser would otherwise be able to provide services to the Funds of sufficient extent and quality.

 

Fee and Expense Information

 

In assessing the reasonableness of each Fund’s fees under the Agreements, the Trustees considered, among other information, each Fund’s management fee and its total expense ratio as a percentage of average net assets attributable to common shares and as a percentage of average managed assets (including assets attributable to common shares and leverage outstanding combined) and the management fee and total expense ratios of such Fund’s Broadridge Expense Group. Specifically, the Trustees reviewed each Fund’s ranking within its Broadridge Expense Group for total expense ratio (including any interest and borrowing expenses) based on common share assets and total expense ratio (including any interest and borrowing expenses) based on common share and leveraged assets combined, as applicable. Each Fund’s ranking within its Broadridge Expense Group for both actual management fees based on common share assets and actual management fees based on common and leveraged assets combined were also considered, as applicable. The

 

July 31, 2017 | Semi-Annual Report 83

 


 

Matters Relating to the Trustees’ Consideration of the Investment

Management & Portfolio Management Agreements (unaudited) (continued)

AllianzGI Diversified Income & Convertible Fund
AllianzGI Equity & Convertible Income Fund
AllianzGI NFJ Dividend, Interest & Premium Strategy Fund

 

 

Fund-specific fee and expense results discussed below were prepared and provided by Broadridge and were not independently verified by the Trustees.

 

The Trustees specifically took note of how each Fund compared to its Broadridge peers as to performance, management fee and total expense ratio. The Trustees noted that while the Funds are not charged a separate administration fee (recognizing that their management fee includes a component for administrative services), it was not clear in all cases whether the peer funds in the Broadridge categories were separately charged such a fee by their investment managers, so that the total expense ratio (rather than any individual expense component) represented the most relevant comparison. It was noted that the total expense ratio comparisons reflect the effect of any expense waivers/reimbursements (although none exist for the Funds).

 

Dividend, Interest & Premium Strategy

 

The Trustees noted that the Broadridge Expense Group for the Fund consisted of a total of six closed-end funds, including the Fund. The Trustees also noted that average net assets of the common shares of the six funds in the Broadridge Expense Group ranged from $255.6 million to $1.64 billion, and that one fund in the group was larger in asset size than the Fund. The Trustees also noted that the Fund was ranked second out of six funds in the Expense Group for both total expense ratio based on common share assets and actual management fees based on common share assets (with the fund ranked first having the lowest fees/expenses and the fund ranked sixth having the highest fees/expenses in the Expense Group).

 

With respect to total return performance relative to its Broadridge Performance Universe (based on net asset value), the Trustees noted that the Fund had fourth quintile performance for the one-year period and fifth quintile performance for the three-, five- and ten-year periods, each ended March 31, 2017.

 

Equity & Convertible Income

 

The Trustees noted that the Broadridge Expense Group for the Fund consisted of a total of seven closed-end funds, including the Fund. The Trustees also noted that average net assets of the common shares of the seven funds in the Broadridge Expense Group ranged from $231.8 million to $839.6 million, and that two funds in the group were larger in asset size than the Fund. The Trustees also noted that the Fund was ranked third out of seven funds in the Expense Group for both total expense ratio based on common share assets and actual management fees based on common share assets (with the fund ranked first having the lowest fees/expenses and the fund ranked seventh having the highest fees/expenses in the Expense Group).

 

With respect to total return performance relative to its Broadridge Performance Universe (based on net asset value), the Trustees noted that the Fund was ranked fourth out of four funds for performance for the one-year period and first out of four funds for performance for the three-, five- and ten-year periods, each ended March 31, 2017.

 

84 Semi-Annual Report | July 31, 2017

 


 

Matters Relating to the Trustees’ Consideration of the Investment

Management & Portfolio Management Agreements (unaudited) (continued)

AllianzGI Diversified Income & Convertible Fund
AllianzGI Equity & Convertible Income Fund
AllianzGI NFJ Dividend, Interest & Premium Strategy Fund

 

 

Diversified Income & Convertible

 

The Trustees noted that the Broadridge Expense Group for the Fund consisted of a total of nine closed-end funds, including the Fund. The Trustees also noted that average net assets of the common shares of the nine funds in the Broadridge Expense Group ranged from $72.4 million to $319.2 million, and that four funds in the group were larger in asset size than the Fund. The Trustees noted that the Fund was ranked ninth out of nine funds in the Expense Group for total expense ratio (including any interest and borrowing expenses) based on common share assets, ninth based on total expense ratio (including any interest and borrowing expenses) based on common share and leveraged assets combined, ninth in the Expense Group for actual management fees based on common share assets and seventh in the Expense Group for actual management fees based on common and leveraged assets combined (with the fund ranked first having the lowest fees/expenses and the fund ranked ninth having the highest fees/expenses in the Expense Group).

 

With respect to total return performance relative to its Broadridge Performance Universe (based on net asset value), the Trustees noted that the Fund had second quintile performance for the one-year period and first quintile performance for the period since inception on May 27, 2015, each ended March 31, 2017.

 

In addition to their review of Fund performance based on net asset value, the Trustees also considered the market value performance of each Fund’s common shares and related share price premium and/or discount information based on the materials provided by Broadridge and the Investment Manager.

 

The Trustees were advised that the Investment Manager and the Sub-Adviser do not manage any funds or accounts, including institutional or separate accounts, with investment strategies and return profiles substantially similar to those of the Funds. However, the Trustees considered the management fees charged by the Investment Manager and/or the Sub-Adviser to other funds and accounts with strategies that have similarities (but none of which are substantially similar) to those of the Funds, including open-end funds and, in some cases, separate accounts, advised by the Investment Manager and/or the Sub-Adviser. The Trustees noted that the management fees paid by the Funds are generally higher than the fees paid by such separate account clients. However, the Trustees were advised that the Investment Manager and Sub-Adviser generally provide broader and more extensive services to the Funds in comparison to separate accounts, and incur additional expenses in connection with the more extensive regulatory regime to which the Funds are subject in comparison to separate accounts generally. The Trustees noted that the management fees paid by the Funds are generally higher than the fees paid by the open-end funds offered for comparison, but were advised by the Investment Manager that there are additional portfolio management

 

July 31, 2017 | Semi-Annual Report 85


 

Matters Relating to the Trustees’ Consideration of the Investment

Management & Portfolio Management Agreements (unaudited) (continued)

AllianzGI Diversified Income & Convertible Fund
AllianzGI Equity & Convertible Income Fund
AllianzGI NFJ Dividend, Interest & Premium Strategy Fund

 

 

challenges in managing closed-end funds such as the Funds, including, but not limited to, those associated with less liquid holdings, the use of leverage, issues relating to trading on a national exchange and attempting to meet a regular dividend, that do not apply to the management of open-end funds.

 

The Trustees also took into account that ACV has preferred shares, senior notes or short-term loans outstanding to provide leverage, which increase the amount of management fees payable by ACV under the Agreement (because the Fund’s fees are calculated based on average daily managed assets, including assets attributable to any outstanding borrowings, issued debt securities or preferred shares, reverse repurchase agreements and dollar rolls). The Trustees took into account that the Investment Manager has a financial incentive for ACV to continue to have preferred shares, senior notes or short-term loans and other borrowings outstanding, which may create a conflict of interest between ACV and the Investment Manager, on one hand, and ACV’s common shareholders, on the other. In this regard, the Trustees considered information provided by the Investment Manager and related presentations as to why ACV’s use of leverage continues to be appropriate and in the best interests of the Fund under current market conditions. The Trustees also considered the Investment Manager’s representation that it will use leverage for the Fund solely as it determines to be in the best interests of the Fund from an investment perspective and without regard to the level of compensation the Investment Manager receives.

 

Based on a profitability analysis provided by the Investment Manager, the Trustees also considered the estimated profitability to the Investment Manager from its relationship with each Fund and determined that such profitability did not appear to be excessive.

 

The Trustees also considered the extent to which the Investment Manager and the Sub-Adviser may realize economies of scale or other efficiencies in managing and supporting the Funds. The Trustees took into account that, as a general matter, as closed-end investment companies, the assets of the Funds will grow (if at all) principally through the investment performance of each Fund or through the use of additional leverage. The Trustees considered that NFJ, NIE and ACV do not currently intend to raise additional assets, and the Trustees therefore did not consider potential economies of scale as a principal factor in assessing the fee rates payable under the Agreements. The Trustees considered that, as the assets of the Funds grow over time, certain economies of scale and other efficiencies may be realized through spreading certain fixed costs across a larger asset base.

 

Additionally, the Trustees considered so-called “fall-out benefits” potentially available to the Investment Manager and the Sub-Adviser as a result of their advisory arrangements with the Funds, including research, statistical and quotation services from broker-dealers executing the Funds’ portfolio transactions on an agency basis, and

 

86 Semi-Annual Report | July 31, 2017


 

Matters Relating to the Trustees’ Consideration of the Investment

Management & Portfolio Management Agreements (unaudited) (continued)

AllianzGI Diversified Income & Convertible Fund
AllianzGI Equity & Convertible Income Fund
AllianzGI NFJ Dividend, Interest & Premium Strategy Fund

 

 

enhanced visibility for marketing and distribution of other products managed by the Investment Manager and the Sub-Adviser. The Trustees also took into account the entrepreneurial, legal, regulatory and business risks the Investment Manager has undertaken as investment manager and sponsor of the Funds.

 

After reviewing these and other factors described herein, the Trustees concluded, within the context of their overall conclusions regarding the Agreements, that they were satisfied with the Investment Manager’s and the Sub-Adviser’s responses and ongoing efforts relating to the investment performance of the Funds. The Trustees also concluded that the fees payable under each Agreement represent reasonable compensation in light of the nature, extent and quality of services provided by the Investment Manager or the Sub-Adviser, as the case may be, and should be continued. Based on their evaluation of factors that they deemed to be material, including, but not limited to, those factors described above, the Independent Trustees unanimously concluded that the continuation of the Agreements with respect to each Fund was in the interests of the Fund and its shareholders, and determined to recommend that the continuance of the Agreements be approved by the full Board.

 

July 31, 2017 | Semi-Annual Report 87


 

Privacy Policy (unaudited)

AllianzGI Diversified Income & Convertible Fund
AllianzGI Equity & Convertible Income Fund
AllianzGI NFJ Dividend, Interest & Premium Strategy Fund

 

 

Please read this Policy carefully. It gives you important information about how Allianz Global Investors U.S. LLC and its U.S. affiliates (“AllianzGI U.S.,” “we” or “us”) handle non-public personal information (“Personal Information”) that we may receive about you. It applies to all of our past, present and future clients and shareholders of AllianzGI U.S. and the funds and accounts it manages, advises, sub-advises, administers or distributes, and will continue to apply when you are no longer a client or shareholder. As used throughout this Policy, “AllianzGI U.S.” means Allianz Global Investors U.S. LLC, Allianz Global Investors Distributors LLC, NFJ Investment Group LLC and the family of registered and unregistered funds managed by one or more of these firms. AllianzGI U.S. is part of a global investment management group, and the privacy policies of other Allianz Global Investors entities outside of the United States may have provisions in their policies that differ from this Privacy Policy. Please refer to the website of the specific non-U.S. Allianz Global Investors entity for its policy on privacy.

 

We Care about Your Privacy

 

We consider your privacy to be a fundamental aspect of our relationship with you, and we strive to maintain the confidentiality, integrity and security of your Personal Information. To ensure your privacy, we have developed policies that are designed to protect your Personal Information while allowing your needs to be served.

 

Information We May Collect

 

In the course of providing you with products and services, we may obtain Personal Information about you, which may come from sources such as account application and other forms, from other written, electronic, or verbal communications, from account transactions, from a brokerage or financial advisory firm, financial advisor or consultant, and/or from information you provide on our website.

 

You are not required to supply any of the Personal Information that we may request. However, failure to do so may result in us being unable to open and maintain your account, or to provide services to you.

 

How Your Information Is Shared

 

We do not disclose your Personal Information to anyone for marketing purposes. We disclose your Personal Information only to those service providers, affiliated and non-affiliated, who need the information for everyday business purposes, such as to respond to your inquiries, to perform services, and/or to service and maintain your account. This applies to all of the categories of Personal Information we collect about you. The affiliated and non-affiliated service providers who receive your Personal Information also may use it to process your transactions, provide you with materials (including preparing and mailing prospectuses and shareholder reports and gathering shareholder proxies), and provide you with account statements and other materials relating to your account. These service providers provide services at our direction, and under their agreements with us, are required to keep your Personal Information confidential and to use it only for providing the contractually required services. Our service providers may not use your Personal Information to market products and services

 

88 Semi-Annual Report | July 31, 2017


 

Privacy Policy (unaudited) (continued)

AllianzGI Diversified Income & Convertible Fund
AllianzGI Equity & Convertible Income Fund
AllianzGI NFJ Dividend, Interest & Premium Strategy Fund

 

 

to you except in conformance with applicable laws and regulations. We also may provide your Personal Information to your respective brokerage or financial advisory firm, custodian, and/or to your financial advisor or consultant.

 

In addition, we reserve the right to disclose or report Personal Information to non-affiliated third parties, in limited circumstances, where we believe in good faith that disclosure is required under law, to cooperate with regulators or law enforcement authorities or pursuant to other legal process, or to protect our rights or property, including to enforce our Privacy Policy or other agreements with you. Personal Information collected by us may also be transferred as part of a corporate sale, restructuring, bankruptcy, or other transfer of assets.

 

Security of Your Information

 

We maintain your Personal Information for as long as necessary for legitimate business purposes or otherwise as required by law. In maintaining this information, we have implemented appropriate procedures that are designed to restrict access to your Personal Information only to those who need to know that information in order to provide products and/or services to you. In addition, we have implemented physical, electronic and procedural safeguards to help protect your Personal Information.

 

Privacy and the Internet

 

The Personal Information that you provide through our website, as applicable, is handled in the same way as the Personal Information that you provide by any other means, as described above. This section of the Policy gives you additional information about the way in which Personal Information that is obtained online is handled.

 

· Online Enrollment, Account Access and Transactions: When you visit our website, you can visit pages that are open to the general public, or, where available, log into protected pages to enroll online, access information about your account, or conduct certain transactions. Access to the secure pages of our website is permitted only after you have created a User ID and Password. The User ID and Password must be supplied each time you want to access your account information online. This information serves to verify your identity. When you enter Personal Information into our website (including your Social Security Number or Taxpayer Identification Number and your password) to enroll or access your account online, you will log into secure pages. By using our website, you consent to this Privacy Policy and to the use of your Personal Information in accordance with the practices described in this Policy. If you provide Personal Information to effect transactions on our website, a record of the transactions you have performed while on the site is retained by us. For additional terms and conditions governing your use of our website, please refer to the Investor Mutual Fund Access – Disclaimer which is incorporated herein by reference and is available on our website.

 

· Cookies and Similar Technologies: Cookies are small text files stored in your computer’s hard drive when you visit certain web pages. Cookies and similar technologies help us to provide customized services and information.

 

July 31, 2017 | Semi-Annual Report 89


 

Privacy Policy (unaudited) (continued)

AllianzGI Diversified Income & Convertible Fund
AllianzGI Equity & Convertible Income Fund
AllianzGI NFJ Dividend, Interest & Premium Strategy Fund

 

 

We use these technologies on our website to improve our website and services, including to evaluate the effectiveness of our site, and to enhance the site user experience. Because an industry-standard Do-Not-Track protocol is not yet established, our website will continue to operate as described in this Privacy Policy and will not be affected by any Do-Not-Track signals from any browser.

 

Changes to Our Privacy Policy

 

We may modify this Privacy Policy from time-to-time to reflect changes in related practices and procedures, or applicable laws and regulations. If we make changes, we will notify you on our website and the revised Policy will become effective immediately upon posting to our website. We also will provide account owners with a copy of our Privacy Policy annually. We encourage you to visit our website periodically to remain up to date on our Privacy Policy. You acknowledge that by using our website after we have posted changes to this Privacy Policy, you are agreeing to the terms of the Privacy Policy as modified.

 

Obtaining Additional Information

 

If you have any questions about this Privacy Policy or our privacy related practices in the United States, you may contact us via our dedicated email at PrivacyUS@allianzgi.com.

 

90 Semi-Annual Report | July 31, 2017

 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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July 31, 2017 | Semi-Annual Report 91


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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92 Semi-Annual Report | July 31, 2017


 

Trustees

Davey S. Scoon
Chairman of the Board of Trustees

Barbara R. Claussen

Deborah A. DeCotis

F. Ford Drummond

A. Douglas Eu

Bradford K. Gallagher

James A. Jacobson

Hans W. Kertess

James S. MacLeod

William B. Ogden, IV

Alan Rappaport

 

Fund Officers

Thomas J. Fuccillo
President and Chief Executive Officer

Lawrence G. Altadonna
Treasurer, Principal Financial & Accounting Officer

Angela Borreggine
Chief Legal Officer & Secretary

Thomas L. Harter, CFA
Chief Compliance Officer

Scott Whisten
Assistant Treasurer

Orhan Dzemaili
Assistant Treasurer

Richard J. Cochran
Assistant Treasurer

Debra Rubano
Assistant Secretary

Investment Manager

Allianz Global Investors U.S. LLC
1633 Broadway
New York, NY 10019

 

Sub-Adviser*

AllianzGI NFJ Dividend, Interest & Premium Strategy Fund

NFJ Investment Group LLC
2100 Ross Avenue, Suite 700
Dallas, TX 75201

 

Custodian & Accounting Agent

State Street Bank & Trust Co.
801 Pennsylvania Avenue
Kansas City, MO 64105

 

Transfer Agent, Dividend Paying Agent and Registrar

American Stock Transfer & Trust Company, LLC
6201 15th Avenue
Brooklyn, NY 11219

 

Independent Registered Public Accounting Firm

PricewaterhouseCoopers LLP
300 Madison Avenue
New York, NY 10017

 

Legal Counsel

Ropes & Gray LLP
Prudential Tower
800 Boylston Street
Boston, MA 02199

 

* On July 1, 2017, NFJ merged with and into AllianzGI U.S. Following the merger, AllianzGI U.S. assumed all responsibilities to the Fund which had been previously delegated to NFJ.

 

This report, including the financial information herein, is transmitted to the shareholders of AllianzGI Diversified Income & Convertible Fund, AllianzGI Equity & Convertible Income Fund and AllianzGI NFJ Dividend, Interest & Premium Strategy Fund, for their information. It is not a prospectus, circular or representation intended for use in the purchase of shares of the Fund’s 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 Fund’s Form N-Q is available on the SEC’s website at www.sec.gov and may be reviewed and copied at the SEC’s 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.

 

 

242321

 

 

Allianz Global Investors Distributors LLC

AZ601SA_073117

 


 

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. SCHEDULE OF INVESTMENTS

 

(a) The registrant’s 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 Fund’s Board of Trustees since the Fund last provided disclosure in response to this item.

 



 

ITEM 11. CONTROLS AND PROCEDURES

 

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

 

(b) There were no significant changes in 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 registrant’s 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

 



 

Signatures

 

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

AllianzGI Equity & Convertible Income Fund

 

By:

/s/ Thomas J. Fuccillo

 

 

Thomas J. Fuccillo

President & Chief Executive Officer

 

 

 

 

Date: October 3, 2017

 

 

By:

/s/ Lawrence G. Altadonna

 

 

Lawrence G. Altadonna

 

 

Treasurer, Principal Financial & Accounting Officer

 

 

 

Date: October 3, 2017

 

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

By:

/s/ Thomas J. Fuccillo

 

 

Thomas J. Fuccillo

President and Chief Executive Officer

 

 

 

 

Date: October 3, 2017

 

 

By:

/s/ Lawrence G. Altadonna

 

 

Lawrence G. Altadonna

 

 

Treasurer, Principal Financial & Accounting Officer

 

 

 

Date: October 3, 2017