Allianzgi Convertible & Income Fund Ii - ALLIANZGI CONVERTIBLE & INCOME FUND II

SecurityNCZ / AGIC Convertible & Income Fund II
Form TypeN-Q
File Date2018-01-18

Document List

Allianzgi Convertible & Income Fund Ii - ALLIANZGI CONVERTIBLE & INCOME FUND II
Allianzgi Convertible & Income Fund Ii - SECTION 302 CERTIFICATION
AllianzGI Convertible & Income Fund II

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM N-Q

 

 

QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS

OF REGISTERED MANAGEMENT INVESTMENT COMPANY

Investment Company Act file number 811-21338

 

 

AllianzGI Convertible & Income Fund II

(Exact name of registrant as specified in charter)

 

 

1633 Broadway, New York, NY 10019

(Address of principal executive offices) (Zip code)

 

 

Lawrence G. Altadonna

1633 Broadway,

New York, NY 10019

(Name and address of agent for service)

 

 

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

Date of fiscal year end: February 28

Date of reporting period: November 30, 2017

 

 

 


Item 1. Schedule of Investments

Schedule of Investments

AllianzGI Convertible & Income Fund II

November 30, 2017 (unaudited)

 

 

Principal
Amount
(000s)

          Value*  
 

CORPORATE BONDS & NOTES—40.6%

  
  

Aerospace & Defense—1.7%

  
  $5,071      Kratos Defense & Security Solutions, Inc., 7.00%, 5/15/19    $ 5,225,665  
  5,750      TransDigm, Inc., 6.50%, 5/15/25      5,882,825  
  1,080      Triumph Group, Inc., 7.75%, 8/15/25 (a)(b)      1,166,400  
     

 

 

 
        12,274,890  
     

 

 

 
  

Auto Manufacturers—0.5%

  
  3,560      Navistar International Corp., 6.625%, 11/1/25 (a)(b)      3,695,743  
     

 

 

 
  

Building Materials—0.7%

  
  4,335      U.S. Concrete, Inc., 6.375%, 6/1/24      4,670,963  
     

 

 

 
  

Chemicals—2.7%

  
  5,500      Chemours Co., 6.625%, 5/15/23      5,843,750  
  3,640      Kraton Polymers LLC, 7.00%, 4/15/25 (a)(b)      3,940,300  
  4,330      Platform Specialty Products Corp., 6.50%, 2/1/22 (a)(b)      4,486,962  
  5,120      Tronox Finance LLC, 7.50%, 3/15/22 (a)(b)      5,388,800  
     

 

 

 
        19,659,812  
     

 

 

 
  

Commercial Services—1.8%

  
  5,974      Cenveo Corp., 6.00%, 5/15/24 (a)(b)      5,257,120  
  5,925      Monitronics International, Inc., 9.125%, 4/1/20      5,021,437  
  2,500      United Rentals North America, Inc., 5.50%, 7/15/25      2,668,750  
     

 

 

 
        12,947,307  
     

 

 

 
  

Computers—1.9%

  
  3,917      DynCorp International, Inc., PIK 1.50%, 11.875%, 11/30/20      4,161,666  
  5,650      Harland Clarke Holdings Corp., 9.25%, 3/1/21 (a)(b)      5,755,938  
  3,155      Western Digital Corp., 10.50%, 4/1/24      3,669,659  
     

 

 

 
        13,587,263  
     

 

 

 
  

Distribution/Wholesale—0.6%

  
  4,110      H&E Equipment Services, Inc., 5.625%, 9/1/25 (a)(b)      4,315,500  
     

 

 

 
  

Diversified Financial Services—3.5%

  
   Community Choice Financial, Inc.,   
  7,465      10.75%, 5/1/19      6,606,525  
  5,370      12.75%, 5/1/20 (a)(b)      4,322,850  
   Nationstar Mortgage LLC,   
  2,000      7.875%, 10/1/20      2,043,250  
  4,250      9.625%, 5/1/19      4,378,562  
   Navient Corp.,   
  1,200      7.25%, 9/25/23      1,299,000  
  2,605      8.45%, 6/15/18      2,692,268  
  3,865      Springleaf Finance Corp., 8.25%, 10/1/23      4,290,150  
     

 

 

 
        25,632,605  
     

 

 

 
  

Electric Utilities—0.6%

  
  4,265      NRG Energy, Inc., 6.25%, 5/1/24      4,542,225  
     

 

 

 
  

Engineering & Construction—0.6%

  
  3,900      Tutor Perini Corp., 6.875%, 5/1/25 (a)(b)      4,155,060  
     

 

 

 
  

Entertainment—0.7%

  
  2,055      AMC Entertainment Holdings, Inc., 6.125%, 5/15/27      2,047,294  
  3,045      Cedar Fair L.P., 5.375%, 6/1/24      3,204,862  
     

 

 

 
        5,252,156  
     

 

 

 
  

Healthcare-Services—2.9%

  
  2,165      Community Health Systems, Inc., 6.25%, 3/31/23      2,035,100  
  4,125      DaVita, Inc., 5.125%, 7/15/24      4,204,922  
  2,950      Envision Healthcare Corp., 6.25%, 12/1/24 (a)(b)      3,123,312  
  2,950      HCA, Inc., 7.50%, 2/15/22      3,337,630  
  6,045      Kindred Healthcare, Inc., 8.75%, 1/15/23      6,075,225  
  2,750      Tenet Healthcare Corp., 7.00%, 8/1/25 (a)(b)      2,505,938  
     

 

 

 
        21,282,127  
     

 

 

 


Schedule of Investments

AllianzGI Convertible & Income Fund II

November 30, 2017 (unaudited) (continued)

 

 

Principal
Amount
(000s)

          Value*  
  

Home Builders—0.5%

  
  $3,365      Beazer Homes USA, Inc., 8.75%, 3/15/22    $ 3,697,294  
     

 

 

 
  

Internet & Catalog Retail—0.3%

  
  2,200      Netflix, Inc., 5.875%, 2/15/25      2,359,500  
     

 

 

 
  

Iron/Steel—1.1%

  
   AK Steel Corp.,   
  1,550      7.00%, 3/15/27      1,542,560  
  1,005      7.50%, 7/15/23      1,095,450  
  4,525      United States Steel Corp., 8.375%, 7/1/21 (a)(b)      4,949,219  
     

 

 

 
        7,587,229  
     

 

 

 
  

Machinery-Construction & Mining—0.5%

  
  3,235      Terex Corp., 5.625%, 2/1/25 (a)(b)      3,418,991  
     

 

 

 
  

Media—2.2%

  
  5,630      Cablevision Systems Corp., 8.00%, 4/15/20      6,038,175  
  2,850      Gray Television, Inc., 5.875%, 7/15/26 (a)(b)      2,899,875  
  3,589      LiveStyle, Inc., 9.625%, 2/1/19 (a)(b)(c)(h)(j) (acquisition cost-$3,749,795; purchased 5/7/14-2/26/15)      72  
  6,645      McClatchy Co., 9.00%, 12/15/22      6,948,178  
     

 

 

 
        15,886,300  
     

 

 

 
  

Metal Fabricate/Hardware—0.4%

  
  2,920      Park-Ohio Industries, Inc., 6.625%, 4/15/27      3,149,950  
     

 

 

 
  

Mining—1.8%

  
  3,900      Alcoa Nederland Holding BV, 7.00%, 9/30/26 (a)(b)      4,426,500  
  2,715      Constellium NV, 6.625%, 3/1/25 (a)(b)      2,891,475  
  2,135      Hudbay Minerals, Inc., 7.625%, 1/15/25 (a)(b)      2,367,181  
  3,050      Joseph T. Ryerson & Son, Inc., 11.00%, 5/15/22 (a)(b)      3,444,975  
     

 

 

 
        13,130,131  
     

 

 

 
  

Oil, Gas & Consumable Fuels—4.7%

  
  2,300      Calumet Specialty Products Partners L.P., 6.50%, 4/15/21      2,302,875  
  1,420      Carrizo Oil & Gas, Inc., 6.25%, 4/15/23      1,460,825  
  12,800      Cobalt International Energy, Inc., 10.75%, 12/1/21 (a)(b)      13,600,000  
  450      Ensco PLC, 5.20%, 3/15/25      371,250  
  6,180      EP Energy LLC, 9.375%, 5/1/20      4,604,100  
  2,165      NGL Energy Partners L.P., 7.50%, 11/1/23      2,235,363  
  740      Noble Holding International Ltd., 7.75%, 1/15/24      643,800  
  3,745      Oasis Petroleum, Inc., 6.875%, 3/15/22      3,824,581  
  3,470      Sanchez Energy Corp., 6.125%, 1/15/23      2,945,162  
  1,280      Transocean, Inc., 7.50%, 1/15/26 (a)(b)      1,318,400  
  630      Weatherford International Ltd., 8.25%, 6/15/23      626,456  
     

 

 

 
        33,932,812  
     

 

 

 
  

Pharmaceuticals—1.2%

  
  1,755      Endo Finance LLC, 5.375%, 1/15/23 (a)(b)      1,377,675  
  4,425      Horizon Pharma, Inc., 6.625%, 5/1/23      4,336,500  
  3,000      Valeant Pharmaceuticals International, Inc., 7.50%, 7/15/21 (a)(b)      2,977,500  
     

 

 

 
        8,691,675  
     

 

 

 
  

Pipelines—0.4%

  
  2,715      Energy Transfer Equity L.P., 5.50%, 6/1/27      2,843,963  
     

 

 

 
  

Real Estate—0.9%

  
  2,345      Kennedy-Wilson, Inc., 5.875%, 4/1/24      2,421,213  
  4,090      Uniti Group L.P., 8.25%, 10/15/23      3,936,625  
     

 

 

 
        6,357,838  
     

 

 

 
  

Retail—1.9%

  
  4,500      Claire’s Stores, Inc., 9.00%, 3/15/19 (a)(b)      2,823,750  
  4,370      Conn’s, Inc., 7.25%, 7/15/22      4,380,925  
  2,165      Dollar Tree, Inc., 5.75%, 3/1/23      2,275,956  
  1,170      L Brands, Inc., 6.875%, 11/1/35      1,187,550  
  5,785      Neiman Marcus Group Ltd. LLC, 8.00%, 10/15/21 (a)(b)      3,326,375  
     

 

 

 
        13,994,556  
     

 

 

 
  

Semiconductors—1.0%

  
  4,090      Advanced Micro Devices, Inc., 7.00%, 7/1/24      4,294,500  
  2,875      Amkor Technology, Inc., 6.375%, 10/1/22      2,975,625  
     

 

 

 
        7,270,125  
     

 

 

 


Schedule of Investments

AllianzGI Convertible & Income Fund II

November 30, 2017 (unaudited) (continued)

 

 

Principal
Amount
(000s)

          Value*  
  

Software—0.7%

  
  $3,850     

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

   $ 4,129,125  
  1,135     

Rackspace Hosting, Inc., 8.625%, 11/15/24 (a)(b)

     1,220,125  
     

 

 

 
        5,349,250  
     

 

 

 
  

Telecommunications—4.2%

  
  2,750     

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

     2,674,375  
  7,130     

Consolidated Communications, Inc., 6.50%, 10/1/22

     6,532,862  
  4,045     

Frontier Communications Corp., 10.50%, 9/15/22

     3,215,775  
  2,050     

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

     2,166,317  
  

Hughes Satellite Systems Corp.,

  
  1,130     

6.625%, 8/1/26

     1,185,088  
  3,500     

7.625%, 6/15/21

     3,885,000  
  5,545     

Sprint Communications, Inc., 11.50%, 11/15/21

     6,764,900  
  6,283     

Windstream Services LLC, 6.375%, 8/1/23 (a)(b)

     4,115,365  
     

 

 

 
        30,539,682  
     

 

 

 
  

Transportation—0.6%

  
  3,920     

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

     4,111,100  
     

 

 

 
  

Total Corporate Bonds & Notes (cost-$303,335,519)

     294,336,047  
     

 

 

 
 

CONVERTIBLE BONDS & NOTES—31.5%

  
  

Apparel & Textiles—1.3%

  
  11,020     

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

     9,311,900  
     

 

 

 
  

Auto Components—0.6%

  
  4,645     

Horizon Global Corp., 2.75%, 7/1/22

     4,438,878  
     

 

 

 
  

Auto Manufacturers—1.0%

  
  4,675     

Navistar International Corp., 4.75%, 4/15/19

     5,069,453  
  2,150     

Tesla, Inc., 1.25%, 3/1/21

     2,311,250  
     

 

 

 
        7,380,703  
     

 

 

 
  

Biotechnology—0.8%

  
  7,260     

Intercept Pharmaceuticals, Inc., 3.25%, 7/1/23

     5,835,225  
     

 

 

 
  

Building Materials—0.5%

  
  3,225     

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

     3,362,062  
     

 

 

 
  

Commercial Services—2.5%

  
  10,220     

Ascent Capital Group, Inc., 4.00%, 7/15/20

     8,150,450  
  7,960     

Huron Consulting Group, Inc., 1.25%, 10/1/19

     7,571,950  
  2,795     

ServiceSource International, Inc., 1.50%, 8/1/18

     2,740,847  
     

 

 

 
        18,463,247  
     

 

 

 
  

Distribution/Wholesale—0.7%

  
  4,975     

Titan Machinery, Inc., 3.75%, 5/1/19

     4,981,219  
     

 

 

 
  

Diversified Financial Services—2.3%

  
  7,030     

Encore Capital Group, Inc., 3.00%, 7/1/20

     8,264,644  
  9,160     

PRA Group, Inc., 3.00%, 8/1/20

     8,833,675  
     

 

 

 
        17,098,319  
     

 

 

 
  

Electric Utilities—0.9%

  
  6,905     

NRG Yield, Inc., 3.25%, 6/1/20 (a)(b)

     6,900,684  
     

 

 

 
  

Electrical Equipment—1.1%

  
  

SunPower Corp.,

  
  2,365     

0.875%, 6/1/21

     1,849,134  
  7,095     

4.00%, 1/15/23

     6,110,569  
     

 

 

 
        7,959,703  
     

 

 

 
  

Energy-Alternate Sources—1.6%

  
  12,690     

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

     11,746,181  
     

 

 

 
  

Engineering & Construction—0.3%

  
  2,445     

Layne Christensen Co., 4.25%, 11/15/18

     2,399,156  
     

 

 

 
  

Equity Real Estate Investment Trusts (REITs)—1.4%

  
  4,100     

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

     4,279,375  
  5,810     

Western Asset Mortgage Capital Corp., 6.75%, 10/1/22

     5,759,162  
     

 

 

 
        10,038,537  
     

 

 

 


Schedule of Investments

AllianzGI Convertible & Income Fund II

November 30, 2017 (unaudited) (continued)

 

 

Principal
Amount
(000s)

          Value*  
  

Healthcare/Healthcare Distributors—1.1%

  
  $8,615     

Aceto Corp., 2.00%, 11/1/20

   $ 7,764,269  
     

 

 

 
  

Insurance—1.0%

  
  9,690     

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

     7,019,194  
     

 

 

 
  

Iron/Steel—0.1%

  
  690     

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

     850,856  
     

 

 

 
  

Oil, Gas & Consumable Fuels—2.8%

  
  13,775     

Helix Energy Solutions Group, Inc., 3.25%, 3/15/32

     13,731,953  
  7,525     

Whiting Petroleum Corp., 1.25%, 4/1/20

     6,810,125  
     

 

 

 
        20,542,078  
     

 

 

 
  

Pharmaceuticals—3.2%

  
  12,175     

Herbalife Ltd., 2.00%, 8/15/19

     12,388,062  
  2,460     

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

     2,286,263  
  5,885     

Impax Laboratories, Inc., 2.00%, 6/15/22

     5,785,691  
  2,585     

Jazz Investments I Ltd., 1.50%, 8/15/24 (a)(b)

     2,460,597  
     

 

 

 
        22,920,613  
     

 

 

 
  

Pipelines—1.0%

  
  10,095     

Cheniere Energy, Inc., 4.25%, 3/15/45

     7,079,119  
     

 

 

 
  

Retail—1.1%

  
  7,860     

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

     8,311,950  
     

 

 

 
  

Semiconductors—0.8%

  
  2,150     

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

     2,909,219  
  1,775     

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

     2,641,422  
     

 

 

 
        5,550,641  
     

 

 

 
  

Software—1.8%

  
  11,915     

Avid Technology, Inc., 2.00%, 6/15/20

     10,336,263  
  3,015     

Synchronoss Technologies, Inc., 0.75%, 8/15/19

     2,794,528  
     

 

 

 
        13,130,791  
     

 

 

 
  

Telecommunications—1.1%

  
  8,310     

Gogo, Inc., 3.75%, 3/1/20

     7,665,975  
     

 

 

 
  

Tobacco—1.7%

  
  

Vector Group Ltd. (g),

  
  4,335     

3 mo. Cash Dividends on Common Stock + 1.75%, 1.75%, 4/15/20

     4,990,669  
  4,685     

3 mo. Cash Dividends on Common Stock + 2.50%, 2.50%, 1/15/19

     7,355,450  
     

 

 

 
        12,346,119  
     

 

 

 
  

Transportation—0.8%

  
  3,010     

Aegean Marine Petroleum Network, Inc., 4.25%, 12/15/21 (a)(b)

     2,035,512  
  3,440     

Echo Global Logistics, Inc., 2.50%, 5/1/20

     3,498,050  
     

 

 

 
        5,533,562  
     

 

 

 
  

Total Convertible Bonds & Notes (cost-$213,135,079)

     228,630,981  
     

 

 

 

Shares

             
 

CONVERTIBLE PREFERRED STOCK—22.8%

  
  

Agriculture—0.9%

  
  62,355     

Bunge Ltd., 4.875% (e)

     6,434,257  
     

 

 

 
  

Banks—4.5%

  
  9,140     

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

     12,046,520  
  7,455     

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

     10,550,689  
  7,435     

Wells Fargo & Co., 7.50%, Ser. L (e)

     9,970,335  
     

 

 

 
        32,567,544  
     

 

 

 
  

Chemicals—0.9%

  
  51,505     

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

     6,933,088  
     

 

 

 


Schedule of Investments

AllianzGI Convertible & Income Fund II

November 30, 2017 (unaudited) (continued)

 

 

Shares

          Value*  
   Commercial Services & Supplies—0.8%   
  110,120     

Stericycle, Inc., 5.25%, 9/15/18

   $ 5,754,871  
     

 

 

 
   Diversified Financial Services—0.5%   
  4,300     

Cowen, Inc., 5.625%, Ser. A (e)

     3,604,561  
     

 

 

 
   Diversified Telecommunication Services—0.2%   
  117,480     

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

     1,719,907  
     

 

 

 
   Electric Utilities—2.1%   
  228,650     

Dominion Energy, Inc., 6.75%, 8/15/19, Ser. A

     12,093,298  
  50,060     

NextEra Energy, Inc., 6.123%, 9/1/19

     2,823,384  
     

 

 

 
        14,916,682  
     

 

 

 
   Equity Real Estate Investment Trusts (REITs)—4.3%   
  3,490     

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

     4,037,197  
  476,235     

RLJ Lodging Trust, 1.95%, Ser. A (e)

     13,039,314  
  309,935     

Sutherland Asset Management Corp., 7.00%, 8/15/23

     7,887,846  
  106,440     

Welltower, Inc., 6.50%, Ser. I (e)

     6,621,633  
     

 

 

 
        31,585,990  
     

 

 

 
   Hand/Machine Tools—1.8%   
  104,940     

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

     12,855,150  
     

 

 

 
   Healthcare Providers & Services—2.4%   
  302,850     

Anthem, Inc., 5.25%, 5/1/18

     17,483,530  
     

 

 

 
   Healthcare-Products—1.3%   
  150,440     

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

     9,139,230  
     

 

 

 
   Oil, Gas & Consumable Fuels—2.2%   
  120,125     

Anadarko Petroleum Corp., 7.50%, 6/7/18

     3,917,276  
  130,590     

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

     4,654,228  
  173,845     

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

     3,536,007  
  8,585     

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

     124,397  
  62,570     

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

     3,555,227  
     

 

 

 
        15,787,135  
     

 

 

 
   Pharmaceuticals—0.9%   
  23,315     

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

     6,697,234  
     

 

 

 
  

Total Convertible Preferred Stock (cost-$169,886,730)

     165,479,179  
     

 

 

 
 

PREFERRED STOCK (a)(d)(f)(i)(j)—1.2%

  
   Media—1.2%   
  8,339     

LiveStyle, Inc., Ser. A

     833,900  
  76,572     

LiveStyle, Inc., Ser. B

     7,657,200  
  5,000     

LiveStyle, Inc., Ser. B

     50  
     

 

 

 
  

Total Preferred Stock (cost-$13,324,564)

     8,491,150  
     

 

 

 
 

COMMON STOCK (a)(d)(f)(i)—0.2%

  
   Advertising—0.2%   
  133,715     

Affinion Group Holdings, Inc., Class A (h)(acquisition cost-$2,371,020; purchased 11/9/15-11/12/15)

     1,365,230  
     

 

 

 
   Aerospace & Defense—0.0%   
  6,354     

Erickson, Inc.

     204,091  
     

 

 

 
   Media—0.0%   
  90,407     

LiveStyle, Inc.(j)

     9  
     

 

 

 
  

Total Common Stock (cost-$7,842,202)

     1,569,330  
     

 

 

 

Units

             
 

WARRANTS (a)(d)(f)(i)—0.0%

  
   Commercial Services—0.0%   
  1,562,241     

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

     34,994  
     

 

 

 
   Media—0.0%   
  19,500     

LiveStyle, Inc., expires 11/30/21, Ser. C. (j)

     2  
     

 

 

 
  

Total Warrants (cost-$183,305)

     34,996  
     

 

 

 


Schedule of Investments

AllianzGI Convertible & Income Fund II

November 30, 2017 (unaudited) (continued)

 

 

Principal
Amount
(000s)

        Value*  
  

Repurchase Agreements—3.7%

  
$27,018   

State Street Bank and Trust Co., dated 11/30/17, 0.12%, due 12/1/17, proceeds $27,018,090; collateralized by U.S. Treasury Inflation Indexed Bonds, 2.00%, due 1/15/26, valued at $27,565,168 including accrued interest (cost-$27,018,000)

   $ 27,018,000  
     

 

 

 
  

Total Investments (cost-$734,725,399) (k)—100.0%

   $ 725,559,683  
     

 

 

 


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

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

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

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

 

(a) Private Placement—Restricted as to resale and may not have a readily available market. Securities with an aggregate value of $146,156,537, representing 20.1% of total investments.

 

(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 $136,061,061, representing 18.8% of total investments.

 

(c) In default.

 

(d) Fair-Valued—Securities with an aggregate value of $10,095,476, representing 1.4% of total investments.

 

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

 

(f) Level 3 security.

 

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

 

(h) Restricted. The aggregate acquisition cost of such securities is $6,120,815. The aggregate value is $1,365,302, representing 0.2% of total investments.

 

(i) Non-income producing.

 

(j) A member of the Fund’s portfolio management team is a member of the board of directors of LiveStyle, Inc. The Fund’s aggregate value of investments in LiveStyle, Inc. represents 1.2% of total investments.

 

(k) At November 30, 2017, the cost basis of portfolio securities for federal income tax purposes was $739,660,462. Gross unrealized appreciation was $53,518,822; gross unrealized depreciation was $67,619,601; and net unrealized depreciation was $14,100,779. The difference between book and tax cost was attributable to wash sale loss deferrals and the differing treatment of bond amortization.


Fair Value Measurements

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

 

  •  

Level 1 – quoted prices in active markets for identical investments that the Fund has the ability to access

 

  •  

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

 

  •  

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

The valuation techniques used by the Fund to measure fair value during the nine months ended November 30, 2017 were intended to maximize the use of observable inputs and to minimize the use of unobservable inputs.

The Fund’s policy is to recognize transfers between levels at the end of the reporting period. An investment asset’s or liability’s level within the fair value hierarchy is based on the lowest level 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 Fund generally uses to evaluate how to classify each major category of assets and liabilities within Level 2 and Level 3, in accordance with accounting principles generally accepted in the United States of America.

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

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

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


A summary of the inputs used at November 30, 2017 in valuing the Fund’s assets and liabilities is listed below (refer to the Schedule of Investments for more detailed information on Investments in Securities):

 

     Level 1 -
Quoted Prices
     Level 2 -
Other Significant
Observable
Inputs
     Level 3 -
Significant
Unobservable
Inputs
     Value at
11/30/17
 

Investments in Securities—Assets

 

Corporate Bonds & Notes

   $ —        $ 294,336,047      $ —        $ 294,336,047  

Convertible Bonds & Notes

     —          228,630,981        —          228,630,981  

Convertible Preferred Stock:

 

Agriculture

     —          6,434,257        —          6,434,257  

Banks

     22,016,855        10,550,689        —          32,567,544  

Diversified Financial Services

     —          3,604,561        —          3,604,561  

Healthcare-Products

     —          9,139,230        —          9,139,230  

Oil, Gas & Consumable Fuels

     12,251,128        3,536,007        —          15,787,135  

Pharmaceuticals

     —          6,697,234        —          6,697,234  

All Other

     91,249,218        —          —          91,249,218  

Preferred Stock

     —          —          8,491,150        8,491,150  

Common Stock

     —          —          1,569,330        1,569,330  

Warrants

     —          —          34,996        34,996  

Repurchase Agreements

     —          27,018,000        —          27,018,000  
  

 

 

    

 

 

    

 

 

    

 

 

 

Totals

   $ 125,517,201      $ 589,947,006      $ 10,095,476      $ 725,559,683  
  

 

 

    

 

 

    

 

 

    

 

 

 

At November 30, 2017, a security valued at $10,550,689 was transferred from Level 1 to Level 2. The transfer was a result of the security having used an exchange-traded closing price at February 28, 2017, and having used an evaluated price from a third-party independent pricing vendor on November 30, 2017.

At November 30, 2017, a security valued $6,933,088 was transferred from Level 2 to Level 1. The transfer was a result of the security having used an evaluated price from a third-party independent pricing vendor at February 28, 2017, and having used an exchange-traded closing price on November 30, 2017.

A roll forward of fair value measurements using significant unobservable inputs (Level 3) for the nine months ended November 30, 2017, was as follows:

 

     Beginning
Balance
2/28/17
     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
11/30/17
 

Investments in Securities—Assets

 

Corporate Bonds & Notes:

 

Commercial Services

   $ 5,361,665        —         —        $ (8,515     —        $ (96,030     —        $ (5,257,120   $ —    

Preferred Stock

     7,759,031        —         —          —         —          732,119       —          —         8,491,150  

Common Stock:

 

Advertising

     1,987,005        —         —          —         —          (621,775     —          —         1,365,230  

Aerospace & Defense

     —        $ 5,471,184 †      —          —         —          (5,267,093     —          —         204,091  

Media

     9        —         —          —         —          —         —          —         9  

Warrants:

 

Commercial Services

     340,656        —         —          —         —          (305,662     —          —         34,994  

Media

     2        —         —          —         —          —         —          —         2  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Totals

   $ 15,448,368      $ 5,471,184       —        $ (8,515     —        $ (5,558,441   $ —        $ (5,257,120   $ 10,095,476  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

 

† Issued via reorganization.
* Transferred out of Level 3 into Level 2 because an evaluated price from a third-party independent pricing vendor was used on November 30, 2017.


The following table presents additional information about valuation techniques and inputs used for investments that are measured at fair value and categorized within Level 3 at November 30, 2017:

 

     Ending Balance
at 11/30/17
     Valuation
Technique Used
   Unobservable
Inputs
   Input Values

Investments in Securities—Assets

Preferred Stock

   $ 8,491,100      Market and Company Comparables    EV Multiples

Illiquidity Discount

   0.77x (0.29x - 1.17x)

20%

Common Stock

   $ 1,365,230      Market and Company Comparables    Broker quotes

EV Multiples

Illiquidity Discount

   $11.50 ($11.00 - $12.00)

1.04x (0.24x - 1.51x)

30%

     $ 204,091      Market and Company Comparables    EV Multiples

Illiquidity Discount

   0.90x (0.74x - 1.13x)

40%

Warrants

   $ 34,994      Black Scholes Model    Volatility    71%

The net change in unrealized appreciation/depreciation of Level 3 investments held at November 30, 2017 was $(5,462,411).

Glossary:

PIK - Payment-in-Kind

REIT - Real Estate Investment Trust


Item 2. Controls and Procedures

(a) The registrant’s President & Chief Executive Officer and Treasurer, Principal Financial & Accounting Officer have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940 (the “1940 Act”) (17 CFR 270.30a-3(c))) are effective based on their evaluation of these controls and procedures as of a date within 90 days of the filing date of this document.

(b) There were no significant changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR 270.30a-3(d))) that occurred during the registrant’s last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

Item 3. Exhibits

Certifications pursuant to Rule 30a-2(a) under the 1940 Act are filed and attached hereto as Exhibit 99_CERT:


SIGNATURES

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

Registrant: AllianzGI Convertible & Income Fund II

 

By   /s/ Thomas J. Fuccillo
 

    Thomas J. Fuccillo

    President & Chief Executive Officer

Date: January 18, 2018
By   /s/ Lawrence G. Altadonna
 

    Lawrence G. Altadonna

    Treasurer, Principal Financial & Accounting Officer

Date: January 18, 2018

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

 

By   /s/ Thomas J. Fuccillo
      Thomas J. Fuccillo
      President & Chief Executive Officer
Date: January 18, 2018
By   /s/ Lawrence G. Altadonna
 

    Lawrence G. Altadonna

    Treasurer, Principal Financial & Accounting Officer

Date: January 18, 2018
) Section 302 Certification

Exhibit 99_CERT

CERTIFICATIONS

I, Thomas J. Fuccillo, certify that:

 

  1. I have reviewed this report on Form N-Q of AllianzGI Convertible & Income Fund II;

 

  2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

  3. Based on my knowledge, the schedules of investments included in this report fairly present in all material respects the investments of the registrant as of the end of the fiscal quarter for which the report is filed;

 

  4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have:

 

  (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

  (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

  (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report, based on such evaluation; and

 

  (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

  5. The registrant’s other certifying officer(s) and I have disclosed to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and

 

  (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: January 18, 2018

 

Signature & Title:

  /s/ Thomas J. Fuccillo    
 

    Thomas J. Fuccillo

    President & Chief Executive Officer


I, Lawrence G. Altadonna, certify that:

 

  1. I have reviewed this report on Form N-Q of AllianzGI Convertible & Income Fund II;

 

  2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

  3. Based on my knowledge, the schedules of investments included in this report fairly present in all material respects the investments of the registrant as of the end of the fiscal quarter for which the report is filed;

 

  4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have:

 

  (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

  (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

  (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report, based on such evaluation; and

 

  (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

  5. The registrant’s other certifying officer(s) and I have disclosed to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and

 

  (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: January 18, 2018

 

Signature & Title:   /s/ Lawrence G. Altadonna  
 

     Lawrence G. Altadonna

     Treasurer, Principal Financial & Accounting Officer

)