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 28, 2014

Date of reporting period: May 31, 2013

 

 

 

---

Item 1. Schedule of Investments

AllianzGI Convertible & Income Fund Schedule of Investments

May 31, 2013 (unaudited)

 

 

Principal Amount (000s)						Value*
	CORPORATE BONDS & NOTES—43.4%
				Advertising—0.6%
	$8,230			Affinion Group, Inc., 11.50%, 10/15/15		$	7,077,800
				Auto Components—0.7%
	5,205			American Axle & Manufacturing Holdings, Inc., 9.25%, 1/15/17 (a)(b)			5,660,437
	1,280			Goodyear Tire & Rubber Co., 8.25%, 8/15/20			1,432,000
							7,092,437
				Auto Manufacturers—0.8%
	7,410			Chrysler Group LLC, 8.25%, 6/15/21			8,410,350
				Commercial Services—4.2%
				Avis Budget Car Rental LLC/Avis Budget Finance, Inc.,
	1,665			9.625%, 3/15/18			1,843,987
	4,000			9.75%, 3/15/20			4,690,000
	11,500			Cenveo Corp., 11.50%, 5/15/17			9,861,250
	5,705			DynCorp International, Inc., 10.375%, 7/1/17			5,876,150
	3,965			Interactive Data Corp., 10.25%, 8/1/18			4,470,538
	6,375			Monitronics International, Inc., 9.125%, 4/1/20			6,916,875
	11,000			National Money Mart Co., 10.375%, 12/15/16			11,838,750
							45,497,550
				Commercial Services & Supplies—0.8%
	5,645			United Rentals North America, Inc., 8.375%, 9/15/20			6,181,275
	2,255			West Corp., 8.625%, 10/1/18			2,486,138
							8,667,413
				Consumer Finance—0.8%
	2,395			SLM Corp., 8.45%, 6/15/18			2,670,425
	5,775			Springleaf Finance Corp., 6.90%, 12/15/17			6,013,219
							8,683,644
				Distribution/Wholesale—0.5%
	5,675			HD Supply, Inc., 10.50%, 1/15/21			5,909,094
				Diversified Consumer Services—0.6%
	6,815			Cambium Learning Group, Inc., 9.75%, 2/15/17			6,201,650
				Diversified Financial Services—1.6%
				Community Choice Financial, Inc.,
	10,085			10.75%, 5/1/19			9,984,150
	7,130			12.75%, 5/1/20 (a)(b)			7,334,987
							17,319,137
				Diversified Telecommunications—1.0%
	10,275			Cincinnati Bell, Inc., 8.75%, 3/15/18			10,583,250
				Electric—0.4%
				Texas Competitive Electric Holdings Co. LLC,
	750			11.50%, 10/1/20 (a)(b)			592,500
	10,800			15.00%, 4/1/21			3,510,000
							4,102,500
				Electrical Components & Equipment—1.3%
	13,585			WireCo WorldGroup, Inc., 9.50%, 5/15/17			14,162,363
				Electronic Equipment, Instruments & Components—0.7%
	7,725			Kemet Corp., 10.50%, 5/1/18			8,014,688
				Electronics—0.2%
	1,700			NXP BV/NXP Funding LLC, 9.75%, 8/1/18 (a)(b)			1,929,500
				Energy Equipment & Services—1.0%
	9,795			Pioneer Drilling Co., 9.875%, 3/15/18			10,725,525
				Food & Staples Retailing—0.5%
	5,000			Rite Aid Corp., 10.25%, 10/15/19			5,756,250
				Health Care Providers & Services—0.9%
	8,875			ExamWorks Group, Inc., 9.00%, 7/15/19			9,806,875
				Healthcare-Products—0.6%
	6,065			Kinetic Concepts, Inc./KCI USA, Inc., 10.50%, 11/1/18			6,595,688
				Hotels, Restaurants & Leisure—1.9%
	9,120			DineEquity, Inc., 9.50%, 10/30/18			10,305,600
	8,405			MGM Resorts International, 11.375%, 3/1/18			10,926,500
							21,232,100
				Household Durables—1.2%
				Beazer Homes USA, Inc.,
	2,945			7.25%, 2/1/23 (a)(b)			3,132,744
	5,045			9.125%, 5/15/19			5,543,193
	3,950			Jarden Corp., 7.50%, 5/1/17			4,512,875
							13,188,812
				Household Products/Wares—0.8%
	7,610			Reynolds Group Issuer, Inc., 9.875%, 8/15/19			8,323,438
				Internet Software & Services—1.1%
				EarthLink, Inc.,
	2,800			7.375%, 6/1/20 (a)(b)			2,772,000
	9,060			8.875%, 5/15/19			9,150,600
							11,922,600
				Iron/Steel—0.6%
	7,305			AK Steel Corp., 8.375%, 4/1/22			6,574,500
				IT Services—0.2%
	2,615			Stream Global Services, Inc., 11.25%, 10/1/14			2,699,988
				Leisure Time—0.8%
	650			NCL Corp. Ltd., 9.50%, 11/15/18			736,125
	8,855			Travelport LLC, 11.875%, 9/1/16			8,434,388
							9,170,513

---

AllianzGI Convertible & Income Fund Schedule of Investments

May 31, 2013 (unaudited) (continued)

 

 

 

Principal Amount (000s)						Value*
				Lodging—0.8%
	$12,385			Caesars Entertainment Operating Co., Inc., 12.75%, 4/15/18		$	8,731,425
				Machinery—0.5%
	5,755			Navistar International Corp., 8.25%, 11/1/21			5,891,681
				Media—2.8%
	5,545			McClatchy Co., 9.00%, 12/15/22 (a)(b)			6,016,325
	8,220			McGraw-Hill Global Education Holdings LLC/McGraw-Hill Global Education Finance, 9.75%, 4/1/21 (a)(b)			8,579,625
	6,750			Media General, Inc., 11.75%, 2/15/17			7,560,000
	3,745			Mood Media Corp., 9.25%, 10/15/20 (a)(b)			3,688,825
	4,240			Sinclair Television Group, Inc., 9.25%, 11/1/17 (a)(b)			4,547,400
							30,392,175
				Metals & Mining—0.9%
	3,775			ArcelorMittal, 10.35%, 6/1/19			4,690,437
	5,465			Thompson Creek Metals Co., Inc., 7.375%, 6/1/18			4,973,150
							9,663,587
				Miscellaneous Manufacturing—0.9%
	10,150			Harland Clarke Holdings Corp., 9.50%, 5/15/15			10,213,437
				Oil & Gas—1.9%
	9,050			Energy XXI Gulf Coast, Inc., 9.25%, 12/15/17			10,090,750
	9,280			United Refining Co., 10.50%, 2/28/18			10,579,200
							20,669,950
				Oil, Gas & Consumable Fuels—1.9%
	2,840			Arch Coal, Inc., 9.875%, 6/15/19 (a)(b)			2,939,400
	9,890			Endeavour International Corp., 12.00%, 3/1/18			9,346,050
	5,050			EP Energy LLC/EP Energy Finance, Inc., 9.375%, 5/1/20			5,750,687
	2,500			Laredo Petroleum, Inc., 9.50%, 2/15/19			2,843,750
							20,879,887
				Packaging & Containers—0.7%
	6,379			Tekni-Plex, Inc., 9.75%, 6/1/19 (a)(b)			7,176,375
				Retail—0.4%
	3,980			Toys “R” Us, Inc., 10.375%, 8/15/17			4,368,050
				Semiconductors & Semiconductor Equipment—1.2%
	2,580			Advanced Micro Devices, Inc., 8.125%, 12/15/17			2,683,200
				Freescale Semiconductor, Inc.,
	5,035			10.125%, 3/15/18 (a)(b)			5,651,787
	4,345			10.75%, 8/1/20			4,931,575
							13,266,562
				Software—0.6%
	5,670			First Data Corp., 12.625%, 1/15/21			6,222,825
				Specialty Retail—0.4%
	4,160			Brown Shoe Co., Inc., 7.125%, 5/15/19			4,420,000
				Telecommunications—2.5%
	7,420			Clearwire Communications LLC/Clearwire Finance, Inc., 12.00%, 12/1/15 (a)(b)			7,949,046
	5,665			Consolidated Communications Finance Co., 10.875%, 6/1/20			6,571,400
	8,203			ITC Deltacom, Inc., 10.50%, 4/1/16			8,682,465
	5,090			NII Capital Corp., 8.875%, 12/15/19			4,631,900
							27,834,811
				Textiles, Apparel & Luxury Goods—0.8%
	7,540			Fifth & Pacific Cos, Inc., 10.50%, 4/15/19			8,444,800
				Trading Companies & Distribution—0.6%
	6,075			Aircastle Ltd., 9.75%, 8/1/18			6,895,125
				Transportation—1.8%
	9,050			Quality Distribution LLC, 9.875%, 11/1/18			10,158,625
	8,610			Swift Services Holdings, Inc., 10.00%, 11/15/18			9,879,975
							20,038,600
				Wireless Telecommunication Services—0.9%
	6,705			Sprint Nextel Corp., 11.50%, 11/15/21			9,286,425
				Total Corporate Bonds & Notes (cost-$463,699,543)			474,043,380
Shares
	CONVERTIBLE PREFERRED STOCK—34.2%
				Aerospace & Defense—1.1%
	193,595			United Technologies Corp., 7.50%, 8/1/15			11,681,522
				Airlines—1.4%
	313,435			Continental Airlines Finance Trust II, 6.00%, 11/15/30			15,260,367
				Auto Components—1.1%
	233,475			Goodyear Tire & Rubber Co., 5.875%, 4/1/14			11,662,076
				Automobiles—1.5%
	332,430			General Motors Co., 4.75%, 12/1/13, Ser. B			16,225,908
				Biotechnology—1.1%
	219,000			Credit Suisse, 8.00%, 5/9/14 (Gilead Sciences, Inc.) (d)			12,003,390
				Capital Markets—1.0%
	171,470			AMG Capital Trust I, 5.10%, 4/15/36			11,113,400
				Commercial Banks—2.1%
	81,250			Fifth Third Bancorp, 8.50%, 6/30/13, Ser. G (c)			12,837,500
	8,100			Wells Fargo & Co., 7.50%, 3/15/13, Ser. L (c)			10,165,500
							23,003,000
				Commercial Services & Supplies—0.9%
	150,157			United Rentals, Inc., 6.50%, 8/1/28			10,557,914

---

AllianzGI Convertible & Income Fund Schedule of Investments

May 31, 2013 (unaudited) (continued)

 

 

 

Shares						Value*
				Communications Equipment—2.2%
	12,015			Lucent Technologies Capital Trust I, 7.75%, 3/15/17		$	11,146,916
	219,090			The Goldman Sachs Group, Inc., 8.00%, 1/15/14 (QualComm) (d)			13,439,200
							24,586,116
				Computers & Peripherals—1.2%
	543,785			JPMorgan Chase & Co., 7.50%, 3/24/14 (EMC Corp.) (d)			12,931,207
				Diversified Financial Services—1.5%
	13,660			Bank of America Corp., 7.25%, 12/31/49, Ser. L (c)			16,228,080
				Electric Utilities—2.3%
				NextEra Energy, Inc.,
	195,425			5.599%, 6/1/15			10,583,241
	25,000			7.00%, 9/1/13			1,395,000
	263,985			PPL Corp., 9.50%, 7/1/13			13,795,856
							25,774,097
				Health Care Providers & Services—1.3%
	11,340			HealthSouth Corp., 6.50%, 12/31/49, Ser. A (c)			13,851,810
				Insurance—2.2%
	344,500			JPMorgan Chase & Co., 7.00%, 3/10/14 (American International Group, Inc.) (d)			14,355,315
	194,050			MetLife, Inc., 5.00%, 3/26/14			10,325,401
							24,680,716
				Internet & Catalog Retail—1.2%
	16,330			Credit Suisse, 8.00%, 5/21/14 (Priceline.com) (d)			13,020,889
				IT Services—0.9%
	167,530			Unisys Corp., 6.25%, 3/1/14			9,890,971
				Machinery—0.3%
	23,595			Stanley Black & Decker, Inc., 4.75%, 11/17/15			3,120,439
				Metals & Mining—1.3%
	227,900			ArcelorMittal, 6.00%, 1/15/16			4,846,430
	315,215			Cliffs Natural Resources, Inc., 7.00%, 2/1/16			6,048,976
	160,000			Thompson Creek Metals Co., Inc., 6.50%, 5/15/15			2,952,000
							13,847,406
				Multi-Utilities—1.1%
	239,645			AES Trust III, 6.75%, 10/15/29			12,015,800
				Oil, Gas & Consumable Fuels—2.9%
	220,325			Apache Corp., 6.00%, 8/1/13			10,309,007
				Chesapeake Energy Corp.,
	119,250			5.00%, 12/31/49 (c)			10,590,890
	1,200			5.75%, 05/17/15 (a)(b)(c)			1,315,050
	124,235			PetroQuest Energy, Inc., 6.875%, 12/31/49 (c)			3,917,279
				Sanchez Energy Corp., (a)(b)(c)
	29,215			4.875%, 12/31/49			1,683,514
	63,305			6.50%, 12/31/49			3,790,387
							31,606,127
				Real Estate Investment Trust—3.9%
	439,700			Alexandria Real Estate Equities, Inc., 7.00%, 12/31/49 (c)			12,377,555
	707,605			FelCor Lodging Trust, Inc., 1.95%, 12/31/49, Ser. A (c)			17,513,224
	208,680			Health Care REIT, Inc., 6.50%, 04/20/18, Ser. I (c)			13,146,840
							43,037,619
				Road & Rail—1.7%
	1,259,980			2010 Swift Mandatory Common Exchange Security Trust, 6.00%, 12/31/13 (b)			18,410,702
				Total Convertible Preferred Stock (cost-$334,404,671)			374,509,556
Principal Amount (000s)
	CONVERTIBLE BONDS & NOTES—20.2%
				Aerospace & Defense—1.1%
	$7,310			GenCorp, Inc., 4.063%, 12/31/39			11,558,938
				Biotechnology—0.6%
	8,910			Dendreon Corp., 2.875%, 1/15/16			6,704,775
				Capital Markets—2.3%
	10,755			Ares Capital Corp., 5.75%, 2/1/16			11,857,387
	13,195			BGC Partners, Inc., 4.50%, 7/15/16			13,722,800
							25,580,187
				Commercial Services—1.0%
	11,795			Cenveo Corp., 7.00%, 5/15/17			10,888,259
				Construction Materials—0.8%
	7,645			Cemex S.A.B. de C.V., 4.875%, 3/15/15			9,231,337
				Electrical Equipment—1.1%
	9,100			EnerSys, 3.375%, 6/1/38 (e)			12,370,358
				Hotels, Restaurants & Leisure—2.0%
	9,075			MGM Resorts International, 4.25%, 4/15/15			10,339,828
	11,940			Morgans Hotel Group Co., 2.375%, 10/15/14			11,641,500
							21,981,328
				IT Services—1.1%
	5,180			Alliance Data Systems Corp., 1.75%, 8/1/13			11,661,475
				Machinery—3.9%
	10,115			Greenbrier Cos, Inc., 3.50%, 4/1/18			10,639,716
				Meritor, Inc.,
	12,480			4.625%, 3/1/26 (e)			12,667,200
	5,655			7.875%, 3/1/26 (a)(b)			7,160,644
	11,335			Navistar International Corp., 3.00%, 10/15/14			11,639,628
	150			Terex Corp., 4.00%, 6/1/15			343,031
							42,450,219

---

AllianzGI Convertible & Income Fund Schedule of Investments

May 31, 2013 (unaudited) (continued)

 

 

Principal Amount (000s)						Value*
				Media—0.7%
	$4,505			Liberty Interactive LLC, 3.125%, 3/30/23		$	7,650,053
				Oil, Gas & Consumable Fuels—1.0%
	2,300			Endeavour International Corp., 5.50%, 7/15/16			1,355,562
	3,685			PDC Energy, Inc., 3.25%, 5/15/16 (a)(b)			5,112,938
	5,500			Peabody Energy Corp., 4.75%, 12/15/41			4,760,937
							11,229,437
				Road & Rail—0.1%
	550			Avis Budget Group, Inc., 3.50%, 10/1/14			1,136,094
				Semiconductors & Semiconductor Equipment—1.0%
	9,920			SunPower Corp., 4.75%, 4/15/14			10,670,200
				Software—1.4%
	6,335			Nuance Communications, Inc., 2.75%, 8/15/27			7,570,325
	7,490			TeleCommunication Systems, Inc., 7.75%, 6/30/18			7,447,869
							15,018,194
				Thrifts & Mortgage Finance—0.7%
	6,535			MGIC Investment Corp., 5.00%, 5/1/17			7,053,716
				Tobacco—1.4%
	13,060			Vector Group Ltd., 2.50%, 1/15/19 (f)			15,423,599
				Total Convertible Bonds & Notes (cost- $178,679,389)			220,608,169
	SHORT-TERM INVESTMENT—2.2%
				Time Deposit—2.2%
	24,351			Wells Fargo-Grand Cayman, 0.03%, 6/3/13 (cost- $24,351,335)			24,351,335
				Total Investments (cost- $1,001,134,938) (g)—100.0%		$	1,093,512,440

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 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 dealer quotations, or by using the last sale price on the exchange that is the primary market for such securities, or the mean between the last quoted bid and ask price. 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 derivative instruments in circumstances where market quotes are not readily available, and has delegated the responsibility for applying the valuation method to Allianz Global Investors Fund Management LLC (the “Investment Manager”) and Allianz Global Investors U.S. LLC (the “Sub-Adviser”). 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. 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 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 securities 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 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 securities may differ from the value that would be realized if the securities 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 $87,033,484, representing 8.0% 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)	Perpetual maturity. The date shown, if any, is the next call date.

 

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

 

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

 

(g)

At May 31, 2013, the cost basis of portfolio securities for federal income tax purposes was $1,004,129,700. Gross unrealized appreciation was $120,129,876; gross unrealized depreciation was $30,747,136; and net unrealized appreciation was $89,382,740. The difference between book and tax cost basis was attributable to the differing treatment of bond premium amortization and to wash sale loss deferrals.

---

AllianzGI Convertible & Income Fund Schedule of Investments

May 31, 2013 (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 Committees’s own assumptions and securities whose price was determined by using a single broker’s quote)

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 Generally Accepted Accounting Principles.

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

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

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

The valuation techniques used by the Fund to measure fair value during the three months ended May 31, 2013 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 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.

A summary of the inputs used at May 31, 2013 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 5/31/13
Investments in Securities—Assets
Corporate Bonds & Notes			—			$	474,043,380				—			$	474,043,380
Convertible Preferred Stock:
Airlines			—				15,260,367				—				15,260,367
Biotechnology			—				—			$	12,003,390				12,003,390
Capital Markets			—				11,113,400				—				11,113,400
Commercial Banks		$	10,165,500				12,837,500				—				23,003,000
Commercial Services & Supplies			—				10,557,914				—				10,557,914
Communications Equipment			—				11,146,916				13,439,200				24,586,116
Computers & Peripherals			—				—				12,931,207				12,931,207
Health Care Providers & Services			—				13,851,810				—				13,851,810
Insurance			10,325,401				—				14,355,315				24,680,716
Internet & Catalog Retail			—				—				13,020,889				13,020,889
Metals & Mining			9,000,976				4,846,430				—				13,847,406
Oil, Gas & Consumable Fuels			10,309,007				21,297,120				—				31,606,127
Road & Rail			—				18,410,702				—				18,410,702
All Other			149,636,512				—				—				149,636,512
Convertible Bonds & Notes			—				220,608,169				—				220,608,169
Short-Term Investments			—				24,351,335				—				24,351,335
Totals		$	189,437,396			$	838,325,043			$	65,750,001			$	1,093,512,440

At May 31, 2013, there were no transfers between Levels 1 and 2.

---

AllianzGI Convertible & Income Fund Schedule of Investments

May 31, 2013 (unaudited) (continued)

 

A roll forward of fair value measurements using significant unobservable inputs (Level 3) for the three months ended May 31, 2013, was as follows:

 

		Beginning Balance 2/28/13				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 5/31/13
Investments in Securities— Assets
Convertible Preferred Stock:
Biotechnology			—			$	12,124,497				—				—				—				$  (121,107	)			—				—			$	12,003,390
Communications Equipment		$	14,013,654				—				—				—				—				(574,454	)			—				—				13,439,200
Computer Storage & Peripherals			11,138,123				—			$	(14,162,877	)†			—				—				3,024,754				—				—				—
Computers & Peripherals			—				13,019,681				—				—				—				(88,474	)			—				—				12,931,207
Insurance			—				13,596,003				—				—				—				759,312				—				—				14,355,315
Internet & Catalog Retail			—				13,104,825				—				—				—				(83,936	)			—				—				13,020,889
Totals		$	25,151,777			$	51,845,006			$	(14,162,877	)			—				—				$2,916,095				—				—			$	65,750,001

The following table presents additional information about valuation techniques and inputs used for investments that are measured at fair value and categorized as Level 3 at May 31, 2013:

 

Ending Balance at 5/31/13

Valuation Technique Used

Unobservable Inputs

Input Values

Investments in Securities—Assets

Convertible Preferred Stock

$

65,750,001

Third-Party Vendor

Single Broker Quote

$

23.78-$797.36

 

†	Stock conversion.

The net change in unrealized appreciation/depreciation of Level 3 investments, which the Fund held at May 31, 2013, was $(108,659).

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/ Brian S. Shlissel
Brian S. Shlissel President & Chief Executive Officer
Date: July 22, 2013

 

By		/s/ Lawrence G. Altadonna
Lawrence G. Altadonna Treasurer, Principal Financial & Accounting Officer
Date: July 22, 2013

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/ Brian S. Shlissel
Brian S. Shlissel President & Chief Executive Officer
Date: July 22, 2013

 

By		/s/ Lawrence G. Altadonna
Lawrence G. Altadonna Treasurer, Principal Financial & Accounting Officer
Date: July 22, 2013