N-Q 1 a17-28251_3nq.htm QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS

 

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

811-23039

 

AllianzGI Diversified Income & Convertible 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:

October 31, 2017

 

 


 

Item 1. Schedule of Investments

 

Schedule of Investments

AllianzGI Diversified Income & Convertible Fund

October 31, 2017 (unaudited)

 

Principal
Amount
(000s)

 

 

 

Value*

 

CONVERTIBLE BONDS & NOTES - 65.2%

 

 

 

Aerospace & Defense - 0.7%

 

 

 

$1,110

 

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

 

$1,538,044

 

 

 

 

 

 

 

Auto Components - 0.8%

 

 

 

1,700

 

Meritor, Inc., 3.25%, 10/15/37 (a)(b)

 

1,823,250

 

 

 

 

 

 

 

Auto Manufacturers - 1.4%

 

 

 

 

 

Tesla, Inc.,

 

 

 

1,920

 

0.25%, 3/1/19 (g)

 

2,091,600

 

910

 

2.375%, 3/15/22

 

1,106,787

 

 

 

 

 

3,198,387

 

Biotechnology - 4.0%

 

 

 

700

 

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

 

724,500

 

1,290

 

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

 

1,425,450

 

 

 

BioMarin Pharmaceutical, Inc. (g),

 

 

 

770

 

0.599%, 8/1/24

 

737,756

 

820

 

0.75%, 10/15/18

 

868,688

 

740

 

1.50%, 10/15/20

 

843,138

 

1,975

 

Illumina, Inc., 0.50%, 6/15/21 (g)

 

2,277,422

 

800

 

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

 

902,500

 

740

 

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

 

1,436,062

 

325

 

Novavax, Inc., 3.75%, 2/1/23 (a)(g)

 

148,484

 

 

 

 

 

9,364,000

 

Building Materials - 0.5%

 

 

 

1,200

 

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

 

1,280,250

 

 

 

 

 

 

 

Commercial Services - 3.5%

 

 

 

1,440

 

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

 

1,971,000

 

1,150

 

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

 

1,633,000

 

1,040

 

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

 

1,379,950

 

1,190

 

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

 

1,256,938

 

1,065

 

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

 

1,806,506

 

 

 

 

 

8,047,394

 

Computers - 0.8%

 

 

 

1,480

 

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

 

1,883,300

 

 

 

 

 

 

 

Diversified Financial Services - 1.8%

 

 

 

1,560

 

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

 

1,566,825

 

1,645

 

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

 

1,959,606

 

675

 

PRA Group, Inc., 3.00%, 8/1/20 (g)

 

618,891

 

 

 

 

 

4,145,322

 

Electrical Equipment - 0.7%

 

 

 

 

 

SunPower Corp. (g),

 

 

 

1,115

 

0.875%, 6/1/21

 

885,728

 

1,035

 

4.00%, 1/15/23

 

822,825

 

 

 

 

 

1,708,553

 

Electronics - 1.6%

 

 

 

1,685

 

II-VI, Inc., 0.25%, 9/1/22 (a)(b)

 

1,971,450

 

1,720

 

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

 

1,814,600

 

 

 

 

 

3,786,050

 

Energy-Alternate Sources - 2.0%

 

 

 

1,585

 

NextEra Energy Partners L.P., 1.50%, 9/15/20 (a)(b)

 

1,546,366

 

1,285

 

Pattern Energy Group, Inc., 4.00%, 7/15/20

 

1,328,369

 

1,915

 

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

 

1,810,872

 

3,615

 

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

 

76,999

 

 

 

 

 

4,762,606

 

Engineering & Construction - 0.7%

 

 

 

1,355

 

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

 

1,580,269

 

 


 

Healthcare-Products - 1.1%

 

 

 

670

 

Quidel Corp., 3.25%, 12/15/20

 

979,875

 

1,390

 

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

 

1,511,625

 

 

 

 

 

2,491,500

 

Healthcare-Services - 1.7%

 

 

 

425

 

Anthem, Inc., 2.75%, 10/15/42 (g)

 

1,217,625

 

 

 

Molina Healthcare, Inc.,

 

 

 

595

 

1.125%, 1/15/20

 

1,019,309

 

495

 

1.625%, 8/15/44 (g)

 

613,491

 

1,055

 

Teladoc, Inc., 3.00%, 12/15/22 (a)(b)

 

1,140,059

 

 

 

 

 

3,990,484

 

Home Builders - 0.6%

 

 

 

825

 

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

 

1,301,438

 

 

 

 

 

 

 

Insurance - 0.8%

 

 

 

2,510

 

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

 

1,876,225

 

 

 

 

 

 

 

Internet - 7.7%

 

 

 

2,255

 

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

 

3,106,262

 

1,040

 

Ctrip.com International Ltd., 1.25%, 9/15/22 (g)

 

1,085,500

 

1,650

 

IAC FinanceCo, Inc., 0.875%, 10/1/22 (a)(b)

 

1,785,094

 

850

 

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

 

871,250

 

1,270

 

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

 

1,776,412

 

1,310

 

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

 

1,229,763

 

2,625

 

Priceline Group, Inc., 0.90%, 9/15/21

 

3,136,875

 

600

 

VeriSign, Inc., 4.702%, 8/15/37 (g)

 

1,888,125

 

1,205

 

Wayfair, Inc., 0.375%, 9/1/22 (a)(b)

 

1,180,147

 

1,095

 

Weibo Corp., 1.25%, 11/15/22 (a)(b)

 

1,144,275

 

650

 

Zillow Group, Inc., 2.00%, 12/1/21 (a)(b)

 

715,813

 

 

 

 

 

17,919,516

 

Iron/Steel - 0.5%

 

 

 

595

 

Allegheny Technologies, Inc., 4.75%, 7/1/22 (g)

 

1,135,334

 

 

 

 

 

 

 

Lodging - 0.7%

 

 

 

825

 

Caesars Entertainment Corp., 5.00%, 10/1/24 (a)(g)

 

1,623,187

 

 

 

 

 

 

 

Media - 2.6%

 

 

 

 

 

DISH Network Corp. (g),

 

 

 

1,040

 

2.375%, 3/15/24 (a)(b)

 

1,001,650

 

1,965

 

3.375%, 8/15/26

 

2,123,428

 

1,055

 

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

 

1,196,766

 

1,495

 

Liberty Media Corp., 1.00%, 1/30/23 (a)(b)

 

1,790,262

 

 

 

 

 

6,112,106

 

Metal Fabricate/Hardware - 0.7%

 

 

 

1,450

 

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

 

1,608,594

 

 

 

 

 

 

 

Mining - 0.1%

 

 

 

205

 

Royal Gold, Inc., 2.875%, 6/15/19 (g)

 

225,628

 

 

 

 

 

 

 

Oil, Gas & Consumable Fuels - 3.9%

 

 

 

1,670

 

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

 

1,487,344

 

1,185

 

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

 

1,004,288

 

2,620

 

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

 

1,938,800

 

1,050

 

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

 

1,158,937

 

765

 

PDC Energy, Inc., 1.125%, 9/15/21 (g)

 

750,656

 

1,690

 

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

 

1,629,794

 

1,210

 

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

 

1,223,612

 

 

 

 

 

9,193,431

 

Pharmaceuticals - 4.0%

 

 

 

340

 

Array BioPharma, Inc., 3.00%, 6/1/20 (g)

 

532,525

 

650

 

Depomed, Inc., 2.50%, 9/1/21 (g)

 

472,063

 

880

 

DexCom, Inc., 0.75%, 5/15/22 (a)(b)(g)

 

782,650

 

1,350

 

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

 

1,533,931

 

1,360

 

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

 

1,249,500

 

 

 

Jazz Investments I Ltd.,

 

 

 

350

 

1.50%, 8/15/24 (a)(b)

 

334,469

 

1,460

 

1.875%, 8/15/21

 

1,507,450

 

1,580

 

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

 

1,814,037

 

185

 

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

 

222,578

 

 


 

960

 

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

 

847,800

 

 

 

 

 

9,297,003

 

Pipelines - 0.6%

 

 

 

2,120

 

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

 

1,485,325

 

 

 

 

 

 

 

Semiconductors - 7.2%

 

 

 

530

 

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

 

836,738

 

1,460

 

Cypress Semiconductor Corp., 4.50%, 1/15/22 (g)

 

1,967,350

 

1,825

 

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

 

3,972,806

 

2,805

 

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

 

3,546,572

 

2,330

 

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

 

3,623,150

 

1,030

 

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

 

928,287

 

1,400

 

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

 

2,023,875

 

 

 

 

 

16,898,778

 

Software - 11.3%

 

 

 

1,145

 

Citrix Systems, Inc., 0.50%, 4/15/19

 

1,406,919

 

1,630

 

Envestnet, Inc., 1.75%, 12/15/19 (g)

 

1,756,325

 

1,025

 

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

 

1,098,672

 

1,595

 

HubSpot, Inc., 0.25%, 6/1/22 (a)(b)(g)

 

1,802,350

 

1,040

 

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

 

1,386,450

 

1,675

 

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

 

1,935,672

 

 

 

Nuance Communications, Inc. (g),

 

 

 

1,250

 

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

 

1,178,906

 

975

 

1.50%, 11/1/35

 

956,109

 

1,425

 

Proofpoint, Inc., 0.75%, 6/15/20

 

1,842,703

 

1,900

 

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

 

1,662,500

 

1,635

 

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

 

2,014,115

 

1,465

 

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

 

2,254,269

 

2,255

 

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

 

2,539,694

 

935

 

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

 

878,316

 

1,515

 

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

 

1,491,328

 

2,025

 

Workday, Inc., 0.25%, 10/1/22 (a)(b)

 

2,051,578

 

 

 

 

 

26,255,906

 

Telecommunications - 1.5%

 

 

 

555

 

CalAmp Corp., 1.625%, 5/15/20 (g)

 

593,850

 

575

 

Ciena Corp., 3.75%, 10/15/18 (g)

 

681,375

 

1,495

 

Gogo, Inc., 3.75%, 3/1/20 (g)

 

1,334,287

 

880

 

Viavi Solutions, Inc., 1.00%, 3/1/24 (a)(b)

 

883,850

 

 

 

 

 

3,493,362

 

Transportation - 1.7%

 

 

 

840

 

Air Transport Services Group, Inc., 1.125%, 10/15/24 (a)(b)(g)

 

880,425

 

810

 

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

 

987,188

 

1,710

 

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

 

2,008,181

 

 

 

 

 

3,875,794

 

 

 

 

 

Total Convertible Bonds & Notes (cost-$158,863,846)

 

151,901,036

 

 

 

 

 

 

 

Shares

 

 

 

 

 

COMMON STOCK - 36.0%

 

 

 

Aerospace & Defense - 0.9%

 

 

 

7,900

 

Boeing Co.

 

2,038,042

 

 

 

 

 

 

 

Automobiles - 0.6%

 

 

 

104,700

 

Ford Motor Co. (g)

 

1,284,669

 

 

 

 

 

 

 

Banks - 1.5%

 

 

 

48,300

 

Bank of America Corp.

 

1,322,937

 

10,600

 

JPMorgan Chase & Co.

 

1,066,466

 

20,300

 

Wells Fargo & Co. (g)

 

1,139,642

 

 

 

 

 

3,529,045

 

Beverages - 0.7%

 

 

 

14,200

 

PepsiCo, Inc.

 

1,565,266

 

 

 

 

 

 

 

Biotechnology - 3.2%

 

 

 

21,600

 

AbbVie, Inc. (g)

 

1,949,400

 

8,700

 

Amgen, Inc. (g)

 

1,524,414

 

4,200

 

Biogen, Inc. (g)(i)

 

1,308,972

 

2,100

 

Bioverativ, Inc. (i)

 

118,650

 

 


 

18,600

 

Gilead Sciences, Inc. (g)

 

1,394,256

 

1,843

 

Regeneron Pharmaceuticals, Inc. (g)(i)

 

742,029

 

3,500

 

Vertex Pharmaceuticals, Inc. (g)(i)

 

511,805

 

 

 

 

 

7,549,526

 

Building Products - 0.5%

 

 

 

30,252

 

Johnson Controls International PLC (g)

 

1,252,130

 

 

 

 

 

 

 

Chemicals - 0.8%

 

 

 

16,600

 

Chemours Co. (g)

 

939,726

 

11,400

 

DowDuPont, Inc.

 

824,334

 

 

 

 

 

1,764,060

 

Construction & Engineering - 0.3%

 

 

 

15,300

 

Fluor Corp. (g)

 

659,277

 

 

 

 

 

 

 

Diversified Telecommunication Services - 0.5%

 

 

 

25,100

 

Verizon Communications, Inc. (g)

 

1,201,537

 

 

 

 

 

 

 

Electronic Equipment, Instruments & Components - 0.4%

 

 

 

9,600

 

Amphenol Corp., Class A

 

835,200

 

 

 

 

 

 

 

Energy Equipment & Services - 0.4%

 

 

 

15,000

 

Schlumberger Ltd. (g)

 

960,000

 

 

 

 

 

 

 

Food & Staples Retailing - 1.6%

 

 

 

8,400

 

Costco Wholesale Corp.

 

1,353,072

 

37,600

 

Kroger Co. (g)

 

778,320

 

22,400

 

Walgreens Boots Alliance, Inc. (g)

 

1,484,448

 

 

 

 

 

3,615,840

 

Healthcare Equipment & Supplies - 0.6%

 

 

 

21,400

 

Baxter International, Inc. (g)

 

1,379,658

 

 

 

 

 

 

 

Healthcare Providers & Services - 1.8%

 

 

 

20,825

 

Envision Healthcare Corp. (g)(i)

 

887,145

 

9,300

 

McKesson Corp. (g)

 

1,282,284

 

9,500

 

UnitedHealth Group, Inc.

 

1,997,090

 

 

 

 

 

4,166,519

 

Hotels, Restaurants & Leisure - 1.5%

 

 

 

9,100

 

McDonald’s Corp.

 

1,518,881

 

19,900

 

MGM Resorts International

 

623,865

 

25,700

 

Starbucks Corp. (g)

 

1,409,388

 

 

 

 

 

3,552,134

 

Industrial Conglomerates - 1.0%

 

 

 

6,500

 

3M Co. (g)

 

1,496,235

 

35,500

 

General Electric Co. (g)

 

715,680

 

 

 

 

 

2,211,915

 

Internet & Catalog Retail - 1.1%

 

 

 

2,250

 

Amazon.com, Inc. (i)

 

2,486,880

 

 

 

 

 

 

 

Internet Software & Services - 2.9%

 

 

 

9,100

 

Alibaba Group Holding Ltd., ADR (i)

 

1,682,499

 

2,500

 

Alphabet, Inc., Class A (g)(i)

 

2,582,600

 

14,200

 

Facebook, Inc., Class A (g)(i)

 

2,556,852

 

 

 

 

 

6,821,951

 

IT Services - 2.0%

 

 

 

7,400

 

International Business Machines Corp. (g)

 

1,140,044

 

28,600

 

Square, Inc., Class A (g)(i)

 

1,063,634

 

22,900

 

Visa, Inc., Class A (g)

 

2,518,542

 

 

 

 

 

4,722,220

 

Machinery - 1.4%

 

 

 

15,000

 

Caterpillar, Inc. (g)

 

2,037,000

 

9,500

 

Deere & Co.

 

1,262,360

 

 

 

 

 

3,299,360

 

Media - 1.5%

 

 

 

44,000

 

Comcast Corp., Class A

 

1,585,320

 

13,573

 

LiveStyle, Inc. (d)(f)(i)(k)

 

1

 

 


 

18,700

 

Walt Disney Co. (g)

 

1,829,047

 

 

 

 

 

3,414,368

 

Multi-Line Retail - 0.6%

 

 

 

25,100

 

Target Corp. (g)

 

1,481,904

 

 

 

 

 

 

 

Oil, Gas & Consumable Fuels - 0.6%

 

 

 

8,100

 

Occidental Petroleum Corp. (g)

 

523,017

 

10,700

 

Valero Energy Corp. (g)

 

844,123

 

 

 

 

 

1,367,140

 

Pharmaceuticals - 0.5%

 

 

 

20,300

 

Bristol-Myers Squibb Co. (g)

 

1,251,698

 

 

 

 

 

 

 

Road & Rail - 0.7%

 

 

 

14,900

 

Union Pacific Corp. (g)

 

1,725,271

 

 

 

 

 

 

 

Semiconductors & Semiconductor Equipment - 3.3%

 

 

 

7,400

 

Broadcom Ltd.

 

1,952,934

 

27,000

 

Intel Corp. (g)

 

1,228,230

 

10,600

 

NVIDIA Corp.

 

2,192,186

 

17,200

 

QUALCOMM, Inc. (g)

 

877,372

 

15,900

 

Texas Instruments, Inc. (g)

 

1,537,371

 

 

 

 

 

7,788,093

 

Software - 3.0%

 

 

 

9,600

 

Adobe Systems, Inc. (i)

 

1,681,536

 

32,100

 

Microsoft Corp. (g)

 

2,670,078

 

19,300

 

Oracle Corp. (g)

 

982,370

 

3,300

 

ServiceNow, Inc. (i)

 

417,021

 

11,800

 

Take-Two Interactive Software, Inc. (i)

 

1,305,670

 

 

 

 

 

7,056,675

 

Specialty Retail - 0.9%

 

 

 

12,300

 

Home Depot, Inc. (g)

 

2,039,094

 

 

 

 

 

 

 

Technology Hardware, Storage & Peripherals - 1.2%

 

 

 

16,800

 

Apple, Inc.

 

2,839,872

 

 

 

 

 

Total Common Stock (cost-$91,386,775)

 

83,859,344

 

 

 

 

 

 

 

Principal
Amount
(000s)

 

 

 

 

 

CORPORATE BONDS & NOTES - 31.7%

 

 

 

Aerospace & Defense - 1.1%

 

 

 

$

1,000

 

KLX, Inc., 5.875%, 12/1/22 (a)(b)(g)

 

1,050,000

 

435

 

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

 

444,244

 

1,000

 

TransDigm, Inc., 6.50%, 5/15/25 (g)

 

1,033,750

 

 

 

 

 

2,527,994

 

Apparel & Textiles - 0.1%

 

 

 

165

 

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

 

170,569

 

 

 

 

 

 

 

Banks - 0.4%

 

 

 

160

 

CIT Group, Inc., 5.00%, 8/15/22 (g)

 

172,400

 

680

 

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

 

728,592

 

 

 

 

 

900,992

 

Building Materials - 0.3%

 

 

 

565

 

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

 

598,900

 

 

 

 

 

 

 

Chemicals - 1.5%

 

 

 

1,000

 

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

 

1,120,000

 

305

 

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

 

330,925

 

1,000

 

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

 

1,038,750

 

85

 

Trinseo Materials Operating SCA, 5.375%, 9/1/25 (a)(b)

 

89,675

 

540

 

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

 

569,025

 

365

 

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

 

385,988

 

 

 

 

 

3,534,363

 

 


 

Commercial Services - 1.9%

 

 

 

 

 

Cardtronics, Inc. (g),

 

 

 

1,000

 

5.125%, 8/1/22

 

1,025,000

 

190

 

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

 

189,525

 

350

 

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

 

309,750

 

300

 

Gartner, Inc., 5.125%, 4/1/25 (a)(b)(g)

 

318,000

 

365

 

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

 

378,688

 

915

 

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

 

857,812

 

 

 

United Rentals North America, Inc.,

 

 

 

185

 

4.625%, 10/15/25

 

189,856

 

1,000

 

5.50%, 7/15/25 (g)

 

1,072,500

 

 

 

 

 

4,341,131

 

Computers - 0.6%

 

 

 

520

 

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

 

574,162

 

500

 

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

 

511,250

 

310

 

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

 

364,560

 

 

 

 

 

1,449,972

 

Distribution/Wholesale - 0.2%

 

 

 

495

 

H&E Equipment Services, Inc., 5.625%, 9/1/25 (a)(b)(g)

 

524,081

 

 

 

 

 

 

 

Diversified Financial Services - 2.4%

 

 

 

1,500

 

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

 

1,335,000

 

1,000

 

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

 

1,166,802

 

1,000

 

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

 

1,023,125

 

1,000

 

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

 

1,040,000

 

1,000

 

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

 

1,005,050

 

 

 

 

 

5,569,977

 

Electric Utilities - 0.8%

 

 

 

1,000

 

NRG Energy, Inc., 6.25%, 5/1/24 (g)

 

1,065,000

 

1,000

 

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

 

870,000

 

 

 

 

 

1,935,000

 

Engineering & Construction - 0.4%

 

 

 

500

 

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

 

554,250

 

435

 

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

 

470,344

 

 

 

 

 

1,024,594

 

Entertainment - 1.0%

 

 

 

185

 

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

 

184,075

 

 

 

Cedar Fair L.P. (g),

 

 

 

750

 

5.375%, 6/1/24

 

793,125

 

190

 

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

 

201,163

 

1,000

 

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

 

1,104,700

 

 

 

 

 

2,283,063

 

Equity Real Estate Investment Trusts (REITs) - 0.1%

 

 

 

 

 

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

 

 

 

210

 

5.00%, 3/15/24

 

220,763

 

60

 

5.375%, 3/15/27

 

64,275

 

 

 

 

 

285,038

 

Food & Beverage - 0.9%

 

 

 

170

 

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

 

160,650

 

380

 

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

 

400,425

 

495

 

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

 

516,656

 

1,000

 

SUPERVALU, Inc., 6.75%, 6/1/21 (g)

 

952,500

 

 

 

 

 

2,030,231

 

Healthcare-Products - 0.1%

 

 

 

260

 

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

 

267,150

 

 

 

 

 

 

 

Healthcare-Services - 1.9%

 

 

 

1,000

 

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

 

735,000

 

310

 

DaVita, Inc., 5.125%, 7/15/24 (g)

 

311,357

 

185

 

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

 

192,631

 

1,000

 

HCA, Inc., 7.50%, 2/15/22 (g)

 

1,137,500

 

1,000

 

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

 

980,000

 

1,000

 

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

 

1,005,000

 

 

 

 

 

4,361,488

 

Home Builders - 0.8%

 

 

 

375

 

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

 

417,637

 

 


 

365

 

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

 

373,669

 

1,000

 

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

 

1,117,500

 

 

 

 

 

1,908,806

 

Internet - 0.2%

 

 

 

305

 

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

 

319,487

 

90

 

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

 

95,063

 

 

 

 

 

414,550

 

Iron/Steel - 0.4%

 

 

 

 

 

AK Steel Corp. (g),

 

 

 

205

 

7.00%, 3/15/27

 

207,563

 

265

 

7.50%, 7/15/23

 

288,187

 

445

 

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

 

486,719

 

 

 

 

 

982,469

 

Lodging - 0.9%

 

 

 

1,000

 

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

 

1,120,000

 

1,000

 

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

 

1,052,500

 

 

 

 

 

2,172,500

 

Machinery-Construction & Mining - 0.2%

 

 

 

360

 

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

 

383,850

 

 

 

 

 

 

 

Machinery-Diversified - 0.1%

 

 

 

250

 

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

 

262,187

 

71

 

Zebra Technologies Corp., 7.25%, 10/15/22 (g)

 

75,127

 

 

 

 

 

337,314

 

Media - 2.6%

 

 

 

1,000

 

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

 

1,110,000

 

 

 

CCO Holdings LLC (g),

 

 

 

125

 

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

 

126,406

 

500

 

5.75%, 1/15/24

 

520,625

 

1,000

 

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

 

1,040,000

 

425

 

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

 

469,625

 

750

 

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

 

757,500

 

500

 

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

 

523,125

 

500

 

McClatchy Co., 9.00%, 12/15/22

 

522,500

 

1,000

 

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

 

1,045,000

 

 

 

 

 

6,114,781

 

Metal Fabricate/Hardware - 0.1%

 

 

 

270

 

Park-Ohio Industries, Inc., 6.625%, 4/15/27

 

294,300

 

 

 

 

 

 

 

Mining - 0.6%

 

 

 

305

 

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

 

340,539

 

560

 

Freeport-McMoRan, Inc., 3.55%, 3/1/22 (g)

 

555,800

 

 

 

Hudbay Minerals, Inc. (a)(b)(g),

 

 

 

80

 

7.25%, 1/15/23

 

86,600

 

270

 

7.625%, 1/15/25

 

299,025

 

 

 

 

 

1,281,964

 

Miscellaneous Manufacturing - 0.1%

 

 

 

285

 

Koppers, Inc., 6.00%, 2/15/25 (a)(b)

 

306,375

 

 

 

 

 

 

 

Oil, Gas & Consumable Fuels - 4.2%

 

 

 

235

 

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

 

245,575

 

1,000

 

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

 

35,000

 

250

 

Callon Petroleum Co., 6.125%, 10/1/24 (g)

 

261,250

 

560

 

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

 

550,900

 

1,000

 

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

 

1,022,500

 

1,000

 

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

 

1,032,500

 

2,030

 

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

 

2,090,900

 

1,000

 

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

 

1,032,500

 

45

 

Noble Holding International Ltd., 7.75%, 1/15/24

 

40,500

 

1,000

 

Rice Energy, Inc., 6.25%, 5/1/22 (g)

 

1,047,650

 

1,000

 

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

 

840,000

 

1,000

 

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

 

1,067,500

 

320

 

Transocean, Inc., 7.50%, 1/15/26 (a)(b)

 

330,800

 

165

 

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

 

166,237

 

 

 

 

 

9,763,812

 

 


 

Paper & Forest Products - 0.2%

 

 

 

525

 

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

 

557,484

 

 

 

 

 

 

 

Pharmaceuticals - 1.0%

 

 

 

615

 

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

 

498,150

 

1,000

 

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

 

990,000

 

1,000

 

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

 

843,750

 

 

 

 

 

2,331,900

 

Pipelines - 0.9%

 

 

 

1,000

 

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

 

1,090,000

 

1,000

 

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

 

1,121,579

 

 

 

 

 

2,211,579

 

Real Estate - 0.8%

 

 

 

500

 

Equinix, Inc., 5.375%, 1/1/22 (g)

 

523,665

 

1,000

 

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

 

1,038,750

 

360

 

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

 

347,400

 

 

 

 

 

1,909,815

 

Retail - 0.5%

 

 

 

500

 

Dollar Tree, Inc., 5.75%, 3/1/23 (g)

 

528,125

 

1,000

 

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

 

595,000

 

 

 

 

 

1,123,125

 

Semiconductors - 0.9%

 

 

 

1,000

 

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

 

1,035,000

 

500

 

Qorvo, Inc., 7.00%, 12/1/25

 

572,025

 

400

 

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

 

445,500

 

 

 

 

 

2,052,525

 

Software - 0.4%

 

 

 

340

 

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

 

366,350

 

230

 

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

 

242,794

 

290

 

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

 

307,762

 

 

 

 

 

916,906

 

Telecommunications - 3.0%

 

 

 

390

 

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

 

390,000

 

1,000

 

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

 

985,000

 

700

 

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

 

615,790

 

355

 

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

 

379,406

 

1,000

 

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

 

1,126,125

 

500

 

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

 

523,750

 

1,000

 

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

 

1,052,500

 

1,000

 

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

 

1,057,500

 

1,000

 

Windstream Services LLC, 7.50%, 6/1/22

 

750,000

 

 

 

 

 

6,880,071

 

Transportation - 0.1%

 

 

 

200

 

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

 

210,786

 

 

 

 

 

Total Corporate Bonds & Notes (cost-$74,258,484)

 

73,959,455

 

 

 

 

 

 

 

Shares

 

 

 

 

 

CONVERTIBLE PREFERRED STOCK - 9.2%

 

 

 

Banks - 0.9%

 

 

 

1,625

 

Wells Fargo & Co., 7.50%, Ser. L (e)

 

2,128,750

 

 

 

 

 

 

 

Commercial Services & Supplies - 0.6%

 

 

 

23,485

 

Stericycle, Inc., 5.25%, 9/15/18 (g)

 

1,337,236

 

 

 

 

 

 

 

Diversified Telecommunication Services - 0.2%

 

 

 

24,375

 

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

 

484,575

 

 

 

 

 

 

 

Electric Utilities - 0.3%

 

 

 

11,470

 

NextEra Energy, Inc., 6.123%, 9/1/19

 

653,790

 

 

 

 

 

 

 

Equity Real Estate Investment Trusts (REITs) - 1.6%

 

 

 

14,985

 

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

 

1,890,657

 

 


 

1,700

 

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

 

1,869,847

 

 

 

 

 

3,760,504

 

Food & Beverage - 0.7%

 

 

 

10,510

 

Post Holdings, Inc., 2.50% (e)(g)

 

1,651,384

 

 

 

 

 

 

 

Hand/Machine Tools - 0.8%

 

 

 

15,005

 

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

 

1,774,641

 

 

 

 

 

 

 

Healthcare Providers & Services - 0.8%

 

 

 

37,540

 

Anthem, Inc., 5.25%, 5/1/18 (g)

 

2,000,131

 

 

 

 

 

 

 

Healthcare-Products - 1.0%

 

 

 

41,235

 

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

 

2,347,509

 

 

 

 

 

 

 

Independent Power Producers & Energy Traders - 0.2%

 

 

 

6,130

 

Dynegy, Inc., 7.00%, 7/1/19 (g)

 

502,660

 

 

 

 

 

 

 

Oil, Gas & Consumable Fuels - 0.7%

 

 

 

23,355

 

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

 

1,289,196

 

27,685

 

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

 

352,430

 

 

 

 

 

1,641,626

 

Pharmaceuticals - 1.4%

 

 

 

3,895

 

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

 

2,507,173

 

2,310

 

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

 

659,389

 

 

 

 

 

3,166,562

 

 

 

 

 

Total Convertible Preferred Stock (cost-$29,256,740)

 

21,449,368

 

 

 

 

 

PREFERRED STOCK (a)(d)(f)(i)(k) - 0.5%

 

 

 

Media - 0.5%

 

 

 

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)(f)(i) - 0.0%

 

 

 

Commercial Services - 0.0%

 

 

 

37,000

 

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

 

1,436

 

 

 

 

 

 

 

Media - 0.0%

 

 

 

3,000

 

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

 

1

 

Total Warrants (cost-$10,113)

 

1,437

 

 

 

 

 

 

 

Principal
Amount
(000s)

 

 

 

 

 

Repurchase Agreements - 4.1%

 

 

 

$9,467

 

State Street Bank and Trust Co.,
dated 10/31/17, 0.12%, due 11/1/17, proceeds $9,467,032; collateralized by U.S. Treasury Bonds, 3.625%, due 8/15/43, valued at $9,661,168 including accrued interest (cost-$9,467,000)

 

9,467,000

 

 

 

 

 

 

 

Total Investments, before options written
(cost-$365,742,798) - 146.7%

 

341,912,053

 

 

 

 

 

Total Options Written - (0.00)%
(premiums received-$57,226) (i)(j)(l)

 

(70,558

)

 

 

 

 

Total Investments, net of options written
(cost-$365,685,572) (m) - 146.7%

 

341,841,495

 

Other liabilities in excess of other assets - (46.7)%

 

(108,824,754

)

Net Assets - 100.0%

 

$233,016,741

 

 

 


 

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 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 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 $84,601,983, representing 36.3% 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 $81,554,462, representing 35.0% of net assets.

 

(c)                      In default.

 

(d)                     Fair-Valued—Securities with an aggregate value of $1,275,851, representing 0.5% of net assets.

 

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

 

(f)                       Level 3 security.

 

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

 

(h)                     Restricted. The aggregate acquisition cost of such security is $3,475,717. The aggregate value is $76,999, representing less than 0.05% of net assets.

 

(i)                         Non-income producing.

 

(j)                        Exchange traded-Chicago Board Options Exchange.

 

(k)                     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 0.5 % of net assets.

 

(l)                         Exchange traded option contracts outstanding at October 31, 2017:

 

Options written contracts outstanding at October 31, 2017:

 

Description

 

Exercise Price

 

Expiration
Date

 

Number of
Contracts

 

Notional
Amount

 

Market
Value

 

Premiums
Received

 

Unrealized
Appreciation
(Depreciation)

 

Call options:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3M Co.

 

250.00 USD

 

11/17/17

 

(35

)

$(3,500

)

$(350

)

$(1,048

)

$698

 

AbbVie, Inc.

 

100.00 USD

 

11/17/17

 

(55

)

(5,500

)

(522

)

(4,970

)

4,448

 

Alphabet, Inc.

 

1,080.00 USD

 

11/17/17

 

(15

)

(1,500

)

(4,988

)

(6,119

)

1,131

 

Amgen, Inc.

 

192.50 USD

 

11/17/17

 

(45

)

(4,500

)

(337

)

(1,764

)

1,427

 

Caterpillar, Inc.

 

150.00 USD

 

12/15/17

 

(75

)

(7,500

)

(1,988

)

(3,476

)

1,488

 

Chemours Co.

 

65.00 USD

 

11/17/17

 

(85

)

(8,500

)

(1,700

)

(2,690

)

990

 

Facebook, Inc.

 

190.00 USD

 

11/17/17

 

(75

)

(7,500

)

(15,000

)

(8,226

)

(6,774

)

Home Depot, Inc.

 

170.00 USD

 

11/17/17

 

(65

)

(6,500

)

(8,450

)

(8,317

)

(133

)

Intel Corp.

 

47.00 USD

 

12/15/17

 

(160

)

(16,000

)

(9,280

)

(3,036

)

(6,244

)

Microsoft Corp.

 

84.00 USD

 

11/17/17

 

(115

)

(11,500

)

(8,050

)

(2,920

)

(5,130

)

Square, Inc.

 

40.00 USD

 

11/17/17

 

(145

)

(14,500

)

(13,775

)

(2,386

)

(11,389

)

Texas Instruments, Inc.

 

102.00 USD

 

11/17/17

 

(80

)

(8,000

)

(1,240

)

(2,717

)

1,477

 

Union Pacific Corp.

 

125.00 USD

 

11/17/17

 

(75

)

(7,500

)

(600

)

(4,295

)

3,695

 

Valero Energy Corp.

 

81.00 USD

 

11/17/17

 

(54

)

(5,400

)

(1,728

)

(1,726

)

(2

)

Vertex Pharmaceuticals, Inc.

 

165.00 USD

 

11/17/17

 

(10

)

(1,000

)

(450

)

(390

)

(60

)

Visa, Inc.

 

115.00 USD

 

11/17/17

 

(105

)

(10,500

)

(2,100

)

(3,146

)

1,046

 

Total options written contracts

 

 

 

 

 

$(70,558

)

$(57,226

)

$(13,332

)

 

(m)                 At October 31, 2017, the aggregate cost basis of portfolio securities for federal income tax purposes was $366,848,549. Gross unrealized appreciation was $12,016,369; gross unrealized depreciation was $37,023,423; and net unrealized depreciation was $25,007,054. The difference between book and tax cost was attributable to wash sale loss deferrals and the differing treatment of bond premium amortization.

 


 

Notes to Schedule of Investments

October 31, 2017 (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 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 October 31, 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

 


 

Notes to Schedule of Investments

October 31, 2017 (unaudited) (continued)

 

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 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.

 

A summary of the inputs used at October 31, 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
10/31/17

 

Investments in Securities - Assets

 

 

 

 

 

 

 

 

 

Convertible Bonds & Notes

 

—

 

$151,901,036

 

—

 

$151,901,036

 

Common Stock:

 

 

 

 

 

 

 

 

 

Media

 

$3,414,367

 

—

 

$1

 

3,414,368

 

All Other

 

80,444,976

 

—

 

—

 

80,444,976

 

Corporate Bonds & Notes

 

—

 

73,959,455

 

—

 

73,959,455

 

Convertible Preferred Stock:

 

 

 

 

 

 

 

 

 

Food & Beverage

 

—

 

1,651,384

 

—

 

1,651,384

 

Healthcare-Products

 

—

 

2,347,509

 

—

 

2,347,509

 

Pharmaceuticals

 

2,507,173

 

659,389

 

—

 

3,166,562

 

All Other

 

14,283,913

 

—

 

—

 

14,283,913

 

Preferred Stock

 

—

 

—

 

1,274,413

 

1,274,413

 

Warrants

 

—

 

—

 

1,437

 

1,437

 

Repurchase Agreements

 

—

 

9,467,000

 

—

 

9,467,000

 

 

 

100,650,429

 

239,985,773

 

1,275,851

 

341,912,053

 

Investments in Securities - Liabilities

 

 

 

 

 

 

 

 

 

Options Written:

 

 

 

 

 

 

 

 

 

Market Price

 

(70,558

)

—

 

—

 

(70,558

)

Totals

 

$100,579,871

 

$239,985,773

 

$1,275,851

 

$341,841,495

 

 

At October 31, 2017, the Fund had no transfers between levels.

 

A roll forward of fair value measurements using significant unobservable inputs (Level 3) for the nine months ended October 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
10/31/17

 

Investments in Securities - Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Media

 

$1

 

—

 

—

 

—

 

—

 

—

 

—

 

—

 

$1

 

Preferred Stock

 

1,165,086

 

—

 

—

 

—

 

—

 

$109,327

 

—

 

—

 

1,274,413

 

Warrants

 

10,634

 

—

 

—

 

—

 

—

 

(9,197

)

—

 

—

 

1,437

 

Totals

 

$1,175,721

 

—

 

—

 

—

 

—

 

$100,130

 

—

 

—

 

$1,275,851

 

 

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 October 31, 2017:

 

 

 

Ending
Balance
at 10/31/17

 

Valuation
Technique Used

 

Unobservable
Inputs

 

Input Values

 

Investments in Securities - Assets

 

 

 

 

 

 

 

 

 

Preferred Stock

 

$1,274,400

 

Market and Company Comparables

 

EV Multiples

 

0.75x (0.31x-1.23x)

 

 

 

 

 

 

 

Illiquidity Discount

 

20

%

Warrants

 

$1,436

 

Black Scholes Model

 

Volatility

 

71

%

 


 

Notes to Schedule of Investments

October 31, 2017 (unaudited) (continued)

 

The net change in unrealized appreciation/depreciation of Level 3 investments held at October 31, 2017 was $100,130.

 

Glossary:

 

ADR - American Depositary Receipt

 

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 CFR270.30a-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 CFR270.30a-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 Diversified Income & Convertible Fund

 

By:

/s/ Thomas J. Fuccillo

 

Thomas J. Fuccillo

 

President & Chief Executive Officer

 

 

 

Date: December 18, 2017

 

 

 

By:

/s/ Lawrence G. Altadonna

 

Lawrence G. Altadonna

 

Treasurer, Principal Financial & Accounting Officer

 

 

 

Date: December 18, 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 & Chief Executive Officer

 

 

 

Date: December 18, 2017

 

 

 

By:

/s/ Lawrence G. Altadonna

 

Lawrence G. Altadonna

 

Treasurer, Principal Financial & Accounting Officer

 

 

 

Date: December 18, 2017