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 811-21284

 

 

AllianzGI Convertible & Income Fund

(Exact name of registrant as specified in charter)

 

 

1633 Broadway, New York, NY 10019

(Address of principal executive offices) (Zip code)

Lawrence G. Altadonna

1633 Broadway,

New York, 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 29, 2016

Date of reporting period: May 31, 2015

 

 

 

---

Item 1. Schedule of Investments

AllianzGI Convertible & Income Fund

May 31, 2015 (unaudited)

 

 

Principal Amount (000s)						Value*
	CORPORATE BONDS & NOTES—41.1%
				Advertising—0.4%
	$5,650			Affinion Group, Inc., 7.875%, 12/15/18		$	3,983,250
				Aerospace & Defense—0.8%
	250			Bombardier, Inc., 6.00%, 10/15/22 (a)(b)			227,812
	7,135			Erickson, Inc., 8.25%, 5/1/20			5,440,438
	3,215			Kratos Defense & Security Solutions, Inc., 7.00%, 5/15/19			2,877,425
							8,545,675
				Air Freight & Logistics—0.7%
	6,820			XPO Logistics, Inc., 7.875%, 9/1/19 (a)(b)			7,348,550
				Auto Components—0.8%
	4,180			Chassix, Inc., 9.25%, 8/1/18 (a)(b)(c)			3,594,800
	5,280			Goodyear Tire & Rubber Co., 8.25%, 8/15/20			5,570,400
							9,165,200
				Auto Manufacturers—0.8%
	7,410			Chrysler Group LLC, 8.25%, 6/15/21			8,202,870
				Chemicals—0.7%
	7,500			Chemours Co., 6.625%, 5/15/23 (a)(b)			7,631,250
				Commercial Services—2.2%
	11,500			Cenveo Corp., 11.50%, 5/15/17			11,859,375
	5,705			DynCorp International, Inc., 10.375%, 7/1/17			4,535,475
	7,375			Monitronics International, Inc., 9.125%, 4/1/20			7,282,812
							23,677,662
				Construction Materials—0.7%
	7,310			US Concrete, Inc., 8.50%, 12/1/18			7,785,150
				Consumer Finance—0.9%
	3,210			Navient Corp., 8.45%, 6/15/18			3,603,225
	4,935			Springleaf Finance Corp., 8.25%, 10/1/23			5,650,575
							9,253,800
				Distribution/Wholesale—0.9%
	8,170			HD Supply, Inc., 11.00%, 4/15/20			9,293,375
				Diversified Consumer Services—0.6%
	6,815			Cambium Learning Group, Inc., 9.75%, 2/15/17			6,942,781
				Diversified Financial Services—1.5%
				Community Choice Financial, Inc.,
	10,085			10.75%, 5/1/19			4,992,075
	7,130			12.75%, 5/1/20 (a)(b)			3,386,750
				Nationstar Mortgage LLC / Nationstar Capital Corp.,
	2,500			7.875%, 10/1/20			2,546,875
	5,300			9.625%, 5/1/19			5,664,375
							16,590,075
				Electrical Components & Equipment—1.2%
	13,585			WireCo WorldGroup, Inc., 9.50%, 5/15/17			12,634,050
				Electronic Equipment, Instruments & Components—1.5%
	7,725			Kemet Corp., 10.50%, 5/1/18			7,879,500
	7,500			Viasystems, Inc., 7.875%, 5/1/19 (a)(b)			7,978,125
							15,857,625
				Food & Staples Retailing—0.5%
	5,000			US Foods, Inc., 8.50%, 6/30/19			5,237,500
				Independent Power & Renewable Electricity Producers—0.3%
	3,055			TerraForm Power Operating LLC, 5.875%, 2/1/23 (a)(b)			3,161,925
				Health Care Providers & Services—0.8%
				Tenet Healthcare Corp.,
	3,500			5.00%, 3/1/19 (a)(b)			3,504,375
	4,530			8.125%, 4/1/22			4,949,025
							8,453,400
				Healthcare-Products—0.9%
	8,885			Kinetic Concepts, Inc./KCI USA, Inc., 10.50%, 11/1/18			9,578,030

---

AllianzGI Convertible & Income Fund

May 31, 2015 (unaudited) (continued)

 

 

Principal Amount (000s)						Value*
				Hotels, Restaurants & Leisure—0.9%
	$8,405			MGM Resorts International, 11.375%, 3/1/18		$	10,128,025
				Household Durables—1.2%
				Beazer Homes USA, Inc.,
	2,945			7.25%, 2/1/23			2,886,100
	5,045			9.125%, 5/15/19			5,259,412
	3,950			Jarden Corp., 7.50%, 5/1/17			4,364,750
							12,510,262
				Household Products/Wares—0.8%
	7,610			Reynolds Group Issuer, Inc., 9.875%, 8/15/19			8,090,381
				Internet—0.4%
	8,395			Affinion Investments LLC, 13.50%, 8/15/18			4,742,949
				Internet Software & Services—1.2%
				EarthLink, Inc.,
	2,800			7.375%, 6/1/20			2,943,500
	10,060			8.875%, 5/15/19			10,512,700
							13,456,200
				Iron/Steel—0.6%
	7,305			AK Steel Corp., 8.375%, 4/1/22			6,382,744
				Lodging—0.3%
	12,385			Caesars Entertainment Operating Co., Inc., 12.75%, 4/15/18 (c)			3,220,100
				Machinery—1.1%
	5,250			BlueLine Rental Finance Corp., 7.00%, 2/1/19 (a)(b)			5,446,875
	6,755			Navistar International Corp., 8.25%, 11/1/21			6,788,775
							12,235,650
				Media—3.3%
	5,500			AMC Entertainment, Inc., 9.75%, 12/1/20			6,019,475
	5,000			CCO Holdings LLC / CCO Holdings Capital Corp., 7.00%, 1/15/19			5,203,125
	8,355			McClatchy Co., 9.00%, 12/15/22			8,177,456
	8,220			McGraw-Hill Global Education Holdings LLC / McGraw-Hill Global Education Finance, 9.75%, 4/1/21			9,144,750
	3,745			Mood Media Corp., 9.25%, 10/15/20 (a)(b)			3,239,425
	4,671			SFX Entertainment, Inc., 9.625%, 2/1/19 (a)(b)			4,063,770
							35,848,001
				Metals & Mining—2.0%
	6,590			ArcelorMittal, 10.60%, 6/1/19			8,015,087
	3,680			HudBay Minerals, Inc., 9.50%, 10/1/20			3,956,000
				Thompson Creek Metals Co., Inc.,
	8,295			7.375%, 6/1/18			7,258,125
	2,830			12.50%, 5/1/19			2,730,950
							21,960,162
				Miscellaneous Manufacturing—0.7%
	7,350			Harland Clarke Holdings Corp., 9.25%, 3/1/21 (a)(b)			7,046,813
				Oil & Gas—1.7%
	5,055			BreitBurn Energy Partners LP / BreitBurn Finance Corp., 7.875%, 4/15/22			4,473,675
	9,050			Energy XXI Gulf Coast, Inc., 9.25%, 12/15/17			6,221,875
	6,038			United Refining Co., 10.50%, 2/28/18			6,370,090
	1,000			Vanguard Natural Resources LLC / VNR Finance Corp., 7.875%, 4/1/20			985,000
							18,050,640
				Oil, Gas & Consumable Fuels—1.5%
	2,840			Arch Coal, Inc., 9.875%, 6/15/19			639,000
	5,050			EP Energy LLC / Everest Acquisition Finance, Inc., 9.375%, 5/1/20			5,517,125
	5,615			Linn Energy LLC / Linn Energy Finance Corp., 6.50%, 5/15/19			4,871,012
	4,530			Sanchez Energy Corp., 6.125%, 1/15/23			4,326,150
	730			Ultra Petroleum Corp., 6.125%, 10/1/24 (a)(b)			674,338
							16,027,625

---

AllianzGI Convertible & Income Fund

May 31, 2015 (unaudited) (continued)

 

 

Principal Amount (000s)						Value*
				Packaging & Containers—0.7%
	$6,692			Tekni-Plex, Inc., 9.75%, 6/1/19 (a)(b)		$	7,181,386
				Paper & Forest Products—0.3%
	3,000			Louisiana-Pacific Corp., 7.50%, 6/1/20			3,225,000
				Pharmaceuticals—0.6%
	2,290			Endo Finance LLC & Endo Finco, Inc., 5.375%, 1/15/23 (a)(b)			2,244,200
	4,000			Valeant Pharmaceuticals International, Inc., 7.50%, 7/15/21 (a)(b)			4,386,000
							6,630,200
				Real Estate Investment Trust—0.3%
	3,085			Kennedy-Wilson, Inc., 5.875%, 4/1/24			3,146,700
				Retail—0.9%
	9,465			Neiman Marcus Group Ltd. LLC, 8.00%, 10/15/21 (a)(b)			10,198,538
				Semiconductors & Semiconductor Equipment—0.8%
	3,745			Amkor Technology, Inc., 6.375%, 10/1/22			3,852,669
	4,584			Freescale Semiconductor, Inc., 10.75%, 8/1/20			4,910,610
							8,763,279
				Software—1.7%
				First Data Corp.,
	5,645			8.25%, 1/15/21 (a)(b)			6,033,094
	1,834			10.625%, 6/15/21			2,077,005
	9,045			12.625%, 1/15/21			10,616,569
							18,726,668
				Specialty Retail—1.2%
	4,160			Caleres, Inc., 7.125%, 5/15/19			4,326,400
	3,500			Claire’s Stores, Inc., 9.00%, 3/15/19 (a)(b)			3,123,750
	5,500			Conn’s, Inc., 7.25%, 7/15/22 (a)(b)			5,307,500
							12,757,650
				Telecommunications—1.2%
	7,415			Consolidated Communications, Inc., 10.875%, 6/1/20			8,332,606
	5,660			Windstream Corp., 7.50%, 4/1/23			5,108,150
							13,440,756
				Transportation—0.7%
	6,837			Quality Distribution LLC, 9.875%, 11/1/18			7,230,127
				Wireless Telecommunication Services—0.8%
	7,205			Sprint Communications, Inc., 11.50%, 11/15/21			8,772,088
				Total Corporate Bonds & Notes (cost-$467,371,850)			443,114,112
Shares
	CONVERTIBLE PREFERRED STOCK—39.4%
				Aerospace & Defense—1.3%
	239,625			United Technologies Corp., 7.50%, 8/1/15			14,597,955
				Automobiles—1.6%
	532,000			The Goldman Sachs Group, Inc., 8.00%, 12/17/15 (General Motors) (d)			17,812,424
				Banks—4.3%
	9,695			Huntington Bancshares, Inc., 8.50% (e)			13,187,624
	1,064,500			JPMorgan Chase & Co., 8.00%, 9/18/15 (Bank of America) (d)			16,308,140
	13,990			Wells Fargo & Co., 7.50%, Ser. L (e)			16,911,531
							46,407,295
				Diversified Financial Services—1.4%
	13,220			Bank of America Corp., 7.25%, Ser. L (e)			15,143,510
				Electric Utilities—0.4%
	85,390			Exelon Corp., 6.50%, 6/1/17			4,125,191
				Electronic Equipment, Instruments & Components—1.5%
	738,000			Bank of America Corp., 8.00%, 2/17/16 (Corning, Inc.) (d)			15,896,520
				Food Products—1.5%
	326,360			Wells Fargo & Co., 8.00%, 8/28/15 (Archer-Daniels-Midland Co.) (d)			15,998,167

---

AllianzGI Convertible & Income Fund

May 31, 2015 (unaudited) (continued)

 

 

Shares						Value*
				Health Care Equipment & Supplies—1.7%
	273,890			Credit Suisse, 8.00%, 6/23/15 (Medtronic, Inc.) (d)		$	18,575,220
				Health Care Providers & Services—3.7%
	119,390			Anthem, Inc., 5.25%, 5/1/18			6,499,592
	240,300			JPMorgan Chase & Co., 8.00%, 5/5/16 (HCA Holding, Inc.) (d)			18,760,221
	127,130			The Goldman Sachs Group, Inc., 8.00%, 3/31/16 (Laboratory Corp. of America Holdings) (d)			15,149,828
							40,409,641
				Independent Power & Renewable Electricity Producers—1.0%
	91,960			Dynegy, Inc., 5.375%, 11/1/17			10,297,681
				Internet Software & Services—1.3%
	349,200			Barclays Bank PLC, 8.00%, 10/28/15 (Twitter, Inc.) (d)			14,111,172
				Machinery—1.9%
	171,185			Stanley Black & Decker, Inc., 6.25%, 11/17/16			20,026,933
				Metals & Mining—1.6%
	75,220			Alcoa, Inc., 5.375%, 10/1/17			3,297,645
	792,720			ArcelorMittal, 6.00%, 1/15/16			13,922,145
							17,219,790
				Multiline Retail—1.5%
	258,000			The Goldman Sachs Group, Inc., 8.00%, 1/14/16 (Macy’s, Inc.) (d)			16,627,842
				Multi-Utilities—1.7%
	239,645			AES Trust III, 6.75%, 10/15/29			12,169,173
	128,500			Dominion Resources, Inc., 6.375%, 7/1/17			6,505,955
							18,675,128
				Oil, Gas & Consumable Fuels—0.8%
	14,100			Energy XXI Bermuda Ltd., 5.625% (e)			564,000
	124,235			PetroQuest Energy, Inc., 6.875% (e)			2,655,523
	34,155			Sanchez Energy Corp., 6.50%, 4/6/18 (e)			1,207,379
	85,500			Southwestern Energy Co., 6.25%, 1/15/18			4,723,875
							9,150,777
				Pharmaceuticals—1.3%
	13,080			Actavis PLC, 5.50%, 3/1/18			13,864,408
				Real Estate Investment Trust—4.3%
	439,700			Alexandria Real Estate Equities, Inc., 7.00% (e)			12,929,906
	798,310			FelCor Lodging Trust, Inc., 1.95%, Ser. A (e)			20,556,482
	208,680			Health Care REIT, Inc., 6.50%, 4/20/18, Ser. I (e)			13,368,563
							46,854,951
				Semiconductors & Semiconductor Equipment—3.0%
	246,000			Barclays Bank PLC, 8.00%, 11/9/15 (Lam Research Corp.) (d)			18,622,200
	530,000			Wells Fargo & Co., 8.00%, 6/18/15 (Micron Technology, Inc.) (d)			13,361,300
							31,983,500
				Specialty Retail—1.8%
	13,250			Barnes & Noble, Inc., 7.75%, 8/18/21 (a)(b)			18,979,797
				Technology Hardware, Storage & Peripherals—1.8%
	150,500			Bank of America Corp., 8.00%, 5/10/16 (Apple Inc.) (d)			19,434,065
				Total Convertible Preferred Stock (cost-$413,232,924)			426,191,967
Principal Amount (000s)
	CONVERTIBLE BONDS & NOTES—18.4%
				Capital Markets—3.3%
	$7,740			Ares Capital Corp., 5.75%, 2/1/16			7,981,875
	13,195			BGC Partners, Inc., 4.50%, 7/15/16			14,539,241
	16,490			Walter Investment Management Corp., 4.50%, 11/1/19			12,944,650
							35,465,766
				Commercial Services—1.8%
	20,305			Cenveo Corp., 7.00%, 5/15/17			19,873,519

---

AllianzGI Convertible & Income Fund

May 31, 2015 (unaudited) (continued)

 

 

Principal Amount (000s)						Value*
				Diversified Consumer Services—1.0%
	$13,510			Ascent Capital Group, Inc., 4.00%, 7/15/20		$	11,120,419
				Insurance—0.4%
	3,965			HCI Group, Inc., 3.875%, 3/15/19			3,863,397
				Life Sciences Tools & Services—0.4%
	4,420			Sequenom, Inc., 5.00%, 10/1/17			4,414,475
				Machinery—2.4%
				Meritor, Inc.,
	12,480			4.625%, 3/1/26			12,643,800
	6,975			7.875%, 3/1/26			11,417,203
	2,290			Navistar International Corp., 4.75%, 4/15/19			2,078,175
							26,139,178
				Oil, Gas & Consumable Fuels—2.6%
	17,495			Cobalt International Energy, Inc., 2.625%, 12/1/19			13,613,297
	9,295			Energy XXI Ltd., 3.00%, 12/15/18			3,160,300
	15,890			Goodrich Petroleum Corp., 5.00%, 10/1/32			9,355,237
	1,825			Stone Energy Corp., 1.75%, 3/1/17			1,684,703
							27,813,537
				Personal Products—1.3%
	16,165			Herbalife Ltd., 2.00%, 8/15/19 (a)			14,316,209
				Pharmaceuticals—0.8%
	9,135			IGI Laboratories, Inc., 3.75%, 12/15/19 (a)(b)			8,312,850
				Real Estate Investment Trust—0.6%
	7,070			IAS Operating Partnership LP, 5.00%, 3/15/18 (a)(b)			6,857,900
				Software—1.0%
	10,320			TeleCommunication Systems, Inc., 7.75%, 6/30/18			10,165,200
				Thrifts & Mortgage Finance—0.7%
	6,535			MGIC Investment Corp., 5.00%, 5/1/17			7,413,140
				Tobacco—2.1%
				Vector Group Ltd., (f)
	5,665			1.75%, 4/15/20			6,082,794
	11,865			2.50%, 1/15/19			16,728,772
							22,811,566
				Total Convertible Bonds & Notes (cost-$186,964,102)			198,567,156
	SHORT-TERM INVESTMENT—1.1%
				Time Deposit—1.1%
	11,395			JPMorgan Chase & Co.-Nassau, 0.03%, 6/1/15 (cost-$11,395,473)			11,395,473
				Total Investments (cost-$1,078,964,349) (g)—100.0%		$	1,079,268,708

---

AllianzGI Convertible & Income Fund

May 31, 2015 (unaudited) (continued)

 

 

Notes to Schedule 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 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, and has delegated primary responsibility for applying the valuation methods to Allianz Global Investors Fund Management LLC (the “Investment Manager”) and Allianz Global Investors U.S. LLC (the “Sub-Adviser”), an affiliate of 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 instructed by the Board. The Sub-Adviser monitors the continued appropriateness of methods applied and determines if adjustments should be made in light of market changes, events affecting the issuer, or other factors. If the Sub-Adviser determines that a valuation method may no longer be appropriate, another valuation method may be selected or the Valuation Committee will be convened to consider the matter and take any appropriate action in accordance with procedures set forth by the Board. The Board shall review and ratify the appropriateness of the valuation methods and these methods may be amended or supplemented from time to time by the Valuation Committee.

Synthetic convertible securities are valued based on quotations obtained from unaffiliated brokers who are the principal market-makers in such securities. Such valuations are derived by the brokers from proprietary models which are generally based on readily available market information including valuations of the common stock underlying the synthetic security.

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

The prices used by the 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 $144,246,032, representing 13.4% 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. Unless otherwise indicated, these securities are not considered to be illiquid.

 

(c)	In default.

 

(d)	Securities exchangeable or convertible into securities of an entity different than the issuer or structured by the issuer to provide exposure to securities of an entity different than the issuer (synthetic convertible securities). Such entity is identified in the parenthetical.

 

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

 

(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)

At May 31, 2015, the cost basis of portfolio securities for federal income tax purposes was $1,087,101,523. Gross unrealized appreciation was $66,161,321, gross unrealized depreciation was $73,994,136 and net unrealized depreciation was $7,832,815. The differences between book and tax cost basis were attributable to wash sale loss deferrals and the differing treatment of bond amortization.

---

AllianzGI Convertible & Income Fund

May 31, 2015 (unaudited) (continued)

 

 

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 Sub-Adviser’s or Valuation Committee’s own assumptions and single broker’s quote)

The valuation techniques used by the Fund to measure fair value during the three months ended May 31, 2015 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 of input, individually or in aggregate, that is significant to fair value measurement. The objective of fair value measurement remains the same even when there is a significant decrease in the volume and level of activity for an asset or liability and regardless of the valuation techniques used. Assets categorized as Level 1 or 2 as of period end may have been transferred between Levels 1 and 2 since the prior period due to changes in the valuation method utilized in valuing the investments.

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

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

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

Corporate Bonds & Notes—Corporate bonds & notes are generally comprised of two main categories: investment grade bonds and high yield bond. 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 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 are unobservable, the values are categorized as Level 3.

---

AllianzGI Convertible & Income Fund

May 31, 2015 (unaudited) (continued)

 

 

A summary of the inputs used at May 31, 2015 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 5/31/15
Investments in Securities—Assets
Corporate Bonds & Notes		$	—			$	443,114,112			$	—			$	443,114,112
Convertible Preferred Stock:
Automobiles			—				—				17,812,424				17,812,424
Banks			16,911,531				13,187,624				16,308,140				46,407,295
Electronic Equipment, Instruments & Components			—				—				15,896,520				15,896,520
Food Products			—				—				15,998,167				15,998,167
Health Care Equipment & Supplies			—				—				18,575,220				18,575,220
Health Care Providers & Services			6,499,592				—				33,910,049				40,409,641
Internet Software & Services			—				—				14,111,172				14,111,172
Metals & Mining			3,297,645				13,922,145				—				17,219,790
Multiline Retail			—				—				16,627,842				16,627,842
Multi-Utilities			12,169,173				6,505,955				—				18,675,128
Oil, Gas & Consumable Fuels			4,723,875				4,426,902				—				9,150,777
Real Estate Investment Trust			20,556,482				26,298,469				—				46,854,951
Semiconductors & Semiconductor Equipment			—				—				31,983,500				31,983,500
Specialty Retail			—				18,979,797				—				18,979,797
Technology Hardware, Storage & Peripherals			—				—				19,434,065				19,434,065
All Other			78,055,678				—				—				78,055,678
Convertible Bonds & Notes			—				198,567,156				—				198,567,156
Short-Term Investment			—				11,395,473				—				11,395,473
Totals		$	142,213,976			$	736,397,633			$	200,657,099			$	1,079,268,708

At May 31, 2015, securities valued at $67,627,368 were transferred from Level 1 to Level 2. This transfer was the result of securities with exchange-traded closing prices at February 28, 2015, using evaluated mean prices at May 31, 2015.

---

AllianzGI Convertible & Income Fund

May 31, 2015 (unaudited) (continued)

 

 

A roll forward of fair value measurements using significant unobservable inputs (Level 3) for the three months ended May 31, 2015, was as follows:

 

		Beginning Balance 2/28/15				Purchases				Sales				Accrued Discounts (Premiums)				Net Realized Gain (Loss)				Net Change in Unrealized Appreciation/ Depreciation				Transfers into Level 3				Transfers out of Level 3				Ending Balance 5/31/15
Investments in Securities—Assets
Convertible Preferred Stock:
Automobiles		$	18,538,604			$	—			$	—			$	—			$	—			$	(726,180	)		$	—			$	—			$	17,812,424
Banks			16,265,560				—				—				—				—				42,580				—				—				16,308,140
Electronic Equipment, Instruments & Components			18,073,620				—				—				—				—				(2,177,100	)			—				—				15,896,520
Energy Equipment & Services			17,643,294				—				(19,489,102	)†			—				—				1,845,808												—
Food Products			15,175,740				—				—				—				—				822,427				—				—				15,998,167
Health Care Equipment & Supplies			19,120,261				—				—				—				—				(545,041	)			—				—				18,575,220
Health Care Providers & Services			20,297,075				34,697,388				(21,035,429	)			—				2,992,332				(3,041,317	)			—				—				33,910,049
Internet Software & Services			16,482,240				—				—				—				—				(2,371,068	)			—				—				14,111,172
Multiline Retail			16,338,624				—				—				—				—				289,218				—				—				16,627,842
Oil, Gas & Consumable Fuels			14,301,428								(14,612,820	)			—				(3,577,006	)			3,888,398				—				—				—
Pharmaceuticals			16,504,768								(19,741,621	)			—				3,039,542				197,311				—				—				—
Semiconductors & Semiconductor Equipment			34,291,700				—				—				—				—				(2,308,200	)			—				—				31,983,500
Technology Hardware, Storage & Peripherals			21,315,600				19,068,350				(20,597,732	)			—				3,862,567				(4,214,720	)			—				—				19,434,065
Totals		$	244,348,514			$	53,765,738			$	(95,476,704	)		$	—			$	6,317,435			$	(8,297,884	)		$	—			$	—			$	200,657,099

 

†	Conversion

The following table presents additional information about valuation techniques and inputs used for investments that are measured at fair value and categorized within Level 3 at May 31, 2015:

 

Ending Balance at 5/31/15

Valuation Technique Used

Unobservable Inputs

Input Values

Investments in Securities—Assets

Convertible Preferred Stock

$

200,657,099

Third-Party Pricing Vendor

Single Broker Quote

$

15.32-$129.13

The net change in unrealized appreciation/depreciation of Level 3 investments held at May 31, 2015 was $(7,394,988).

Glossary :

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 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 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

(a) Exhibit 99.302 Cert.—Certification pursuant to Section 302 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.

 

Registrant: AllianzGI Convertible & Income Fund
By		/s/ Julian Sluyters
		Julian Sluyters,
		President & Chief Executive Officer
Date:		July 23, 2015

 

By		/s/ Lawrence G. Altadonna
		Lawrence G. Altadonna
		Treasurer, Principal Financial & Accounting Officer
Date:		July 23, 2015

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

 

By		/s/ Julian Sluyters
		Julian Sluyters,
		President & Chief Executive Officer
Date:		July 23, 2015

 

By		/s/ Lawrence G. Altadonna
		Lawrence G. Altadonna
		Treasurer, Principal Financial & Accounting Officer
Date:		July 23, 2015